Disco Supermercado
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Salient Problem:
Disco requires development of a marketing strategy to determine the next step when considering growth of the Disco supermarket chain. Consequently a decision needs to be made as to whether to reinforce existing operations in Argentina and Uruguay where the company already has an established foothold. Or whether to expand regionally and if so through which mode, possibilities exist in the form of an acquisition of Santa Isabel or a joint venture with Royal Ahold.
Recommendation:
Disco is recommended to concentrate on operations within Argentina and Uruguay through the joint venture with Ahold. The stable economy, increasing population and increasing GDP in Latin America make the continent an attractive expansion destination for foreign investment. With Argentina being one of the more attractive destinations within the continent Disco should anticipate imminent competition from rival international supermarket chains. Therefore, an alliance with a multinational corporation such as Ahold will provide protection from such competitors through the greater resources available. A strategic alliance with Ahold will also provide greater funding and expertise for any further regional expansion into Chile or Brazil. At the current time a failed regional expansion combined with the imminent competitive threat from international firms in Argentina could send Disco into financial difficulty. However, the financial resources that Ahold brings means that a failed expansion can be absorbed. Additionally Ahold has expertise in expansion into foreign markets and in combination with the experience and model produced by Disco for the Latin America market, the probability of a successful expansion in the future is increased. There is also a greater opportunity for future international expansion if allied with a multinational corporation such as Ahold.