INSTITUTE OF EDUCATIONAL EDUCATION AND RESEACH

TRIM -3 2011-2013 INTERNATIONAL BUSINESS ENVIORNMENT

Assignment -1

Porter Model Analysis of International Companies of Argentina

S u b m i t t e d To P r o f. U d d e e p a n Chatterjee

Submitted ByAdityaPratap Singh AnujMehrotra Ravi Kant Sharma

ARGENTINA

Argentina officially the Argentine Republic , is the second largest country in South America by land area, after Brazil. It is constituted as a federation of 23 provinces and an autonomous city, Buenos Aires. It is the eighth-largest country in the world by land area and the largest among Spanish-speaking nations. Argentina's continental area is between the Andes mountain range in the west and the Atlantic Ocean in the east. It borders Paraguay and Bolivia to the north, Brazil and Uruguay to the northeast, and Chile to the west and south
Argentina is the third largest market in Latin America with a GDP of 338 billion dollars, after Brazil and Mexico. It has the potential to be one of the richest countries in the region as well as in the world. In fact, it was among the top ten richest countries of the world in the early twentieth century. It is now in the process of reconfiguring its market and mindset to become a prosperous country again.

COUNTRY SNAPSHOT

 8th largest country in terms of surface area, 2 nd in Latin America.

High level of Human Development (HDI UNDP): 2nd place in Latin America expectancy (15.6 years) in Latin America.

One of the highest rates of literacy (98 %) and school-life English level among the highest in the developing world.

Argentina the Latin American country with the highest number of Nobel prizes in sciences (three), ranking fourth among developing countries. inhabitants): highest in Latin America.

Density of fixed and mobile lines (152 subscriptions per 100

INTRODUCTION OF ARGENTINA

rgentina has a population of 40 million which is a homogeneous stock of European origin

mainly from Spain and Italy- speaking a single language and belonging to one faith (Catholic). There are no ethnic, linguistic, religious strifes. The literacy rate is 97 per cent and the human resources have a range of good quality skills. The Indian companies operating in Argentina employing 1500 Argentines are impressed and happy with the quality of human resources and the range and depth of the Argentine skill sets. There is a strong base of expertise in science and technology including in IT and nuclear energy. Many Multinational Corporations including MTV use Argentina as the centre of creative work and production for the Spanish- speaking world. IBM and other IT companies have established off-shore centres of software development, BPOs and KPOs. Government Type: Republic. Constitution: 1853; revised 1994. Independence: 1816. Branches: Executive--(72-member Senate, 257-member Chamber of Deputies). Judicial-Supreme Court, federal and provincial trial courts. Administrative subdivisions: 23 provinces and one autonomous district (Federal Capital). Political parties: Peronist (Justicialist, PJ), Radical Civic Union (UCR), numerous smaller national and provincial parties. Suffrage: Compulsory for adults aged 18-70; optional for those over 70.

Argentina is the third largest market in Latin America with a GDP of 386 billion dollars, after Brazil and Mexico. It has the potential to be one of the richest countries in the region as well as in the world. In fact, it was among the top ten richest countries of the world in the early twentieth century Argentina was one of the most developed countries in the beginning of the twentieth century. It had the earliest railroads, metro and industrial development. Buenos Aires city was built like the Paris of Latin America with elegant parks, public buildings, apartment blocks, theatres, cafes, restaurants and bars . Even now Buenos Aires stands out as the most well organized, elegant and stylish city of Latin America. Argentina has the most sophisticated and beautiful country clubs and golf and ski resorts in the region.

Selected Economies: GDP growth 2003-2011

Argentina Industries?????

rgentina's economy has traditionally been based on agriculture, but the industrial and

service sectors have also grown in importance in recent years. Livestock (cattle and sheep) and grains have long been the bulwark of its wealth; its cattle herds are among the world's finest. As an exporter of wheat, corn, flax, oats, beef, mutton, hides, and wool, Argentina rivals the United States, Canada, and Australia. Its other agricultural products include oilseeds, lemons, soybeans, grapes, and tobacco. Argentina is the world's largest source of tannin and linseed oil. The Pampa is the nation's chief agricultural area; however, since the 1930s there has been a great rise in production in other areas, especially in the oases of the Monte and the irrigated valleys of N Patagonia.

MAJOR INDUSTRIES ARE:1. Agriculture Industry 2. Food Processing

3. Natural reserves 4. Manufacturing Industries 5. Chemical And Petrochemical 6. Mining Idustries

AGRICULTURE INDUSTRIES (AGRICULTURE GROWTH)

rgentina is an agricultural power. It produces 100 million tons of food products and exports

more than 50 million tons. Argentina is the second largest producer of agricultural commodities and livestock after USA. It is a large exporter of wheat, soya and meat. It is the worlds largest exporter of soy oil and sunflower oil, the second largest exporter of corn, third largest producer of beef , soyabeans and biodiesel and fourth largest of wheat. Argentina is the fifth largest producer of wine in the world. Argentina is using at present only 34 million hectares for agriculture. They can easily double the area of cultivation and volume of production. Argentina has a large area -almost equal to that of India- with a variety of fertile soils and climates. There are abundant water resources. Agribusiness is the mainstay of the economy and exports. It is modern, large-scale and globally competitive. While in USA and EU, agro-exports are subsidized, the Argentine government imposes an export tax of over 30 per cent for some commodities and still the exports arecompetitive. Argentina has a large area -almost equal to that of India- with variety of fertile soils and climates. There are abundant water resources. The climate is congenial without extremes. It ranges from the warm northern parts to the cold Patagonia in the south lending itself for growing different crops. The famous Pampa region of Argentina , the vast fertile plains, is one of the most productive regions in the world. Most of the farming is done in a commercial scale by large landowners holding thousands of hectares. Most of the farms are managed by professionals who have studied agronomy. They are supported by an excellent network of research and development laboratories.

THE SOYBEAN AGRIBUSINESS SYSTEM IN ARGENTINA:

Soybean and sub-products demand has also been promoted by events concerning European Union public health measures (due to BSE outbreak), which, since 2003, led to banning animal proteins as cattle food. These events determined the fact that the European Union became a major importer of soybean and by-products, especially of protein flours, as well as maize processing

industry product Argentina has become a leading player on a global scale in soybean production (3rd place following the U.S. and Brazil), as well as in its processing, occupying the first place in soy flour and oil exportation. Active policies on biofuels development that other countries are promoting also boosted Argentine soy oil demand.

Companies are.
Futvent Sa Argensoja Sa Argentina Argensoja Sa Argentina Globaltrade Import-Export Argentina Argentina Valor Natural Ltd. Argentina

FOOD PROCESSING
Argentina has developed an efficient infrastructure, logistics and network for transportation and shipping. The river ports around Rosario connect to the grain silos and agro processing plants. The food processing industries of Argentina are one of the most advanced in the world and globaly competitive. For example, the oil crushing capacity of Argentina is the third highest in

the world- even ahead of Brazil- with the latest technology and plants. The commercialization of agribusiness is done by well established Commodity Exchanges specializing in cereals and other agroproducts in Buenos Aires and Rosario. Packing and processing of foodstuffs is the oldest and most important industry in Argentina. Beginning in the last part of the 19th century, the great frigorficos, or meat-packing plants, were founded to prepare beef for export to Europe. In recent times, the Argentine government has entered directly into the meat-processing enterprises, which for many years were under Thus it is evident that Argentina is well-placed to become a global agricultural power in the coming decades in which food shortage is going to be one of the main concerns of the world. Santa Fe, with zinc- and copper-smelting plants, flour mills, and dairy industry

NATURAL RESERVES
Argentina is self-sufficient in energy and a net exporter of oil and gas. It produces 800,000 billion per day of crude oil of which 300,000 bpd is exported. It has two billion barrels of reserves. Off-shore exploration has only now been started and the land area is under-explored.

Argentina is the second largest gas producer (50 billion cubic metres) in Latin America and exports to Chile. Gas and Oil are important resources being increasingly exported to the neighboring countries and to the world market. Together with mining products they make out for 15% of total exports. The Future of Argentina Oil and Gas Industry to 2020- provide a comprehensive overview of the Argentina oil and gas sector, covering the entire value chain of the industry. It analyzes and forecasts each of the oil and gas segments in Argentina including upstream sector, pipeline, refinery, LNG and storage sectors Argentina has significant reserves of gold, silver, zinc, uranium, copper, phosphate and iron. The mineral resources have not yet been fully explored yet.

MANUFACTURING INDUSTRIES
The Argentine manufacturing industry is relatively large and diversified. It is strong in food processing, automobiles, auto parts, engineering, metallurgy, pharmaceuticals and biotechnology. Argentina is a pioneer in the world in the development and use of CNG technology. Some Argentine companies are globally competitive in pharmaceuticals, biotechnology, CNG technology, hydroelectric power machinery and niche engineering fields. Among Argentinas manufacture goods are processed food, textiles, clothing, metallic and nonmetallic mineral products, wood products, paper, pharmaceutical products, chemicals and petrochemical products, aluminum, steel, cars, electrical machinery and appliances, machine tools, turbines, cranes, agriculture machinery, and space and nuclear products. Construction, engineering and consultancy activities have developed to an important stage, extending to the Latin-American market and other countries.

INDUSTRIAL INDUSTRIES

Crdobais Argentina's major industrial center. It is the center of metalworking, especially

for motor vehicle production. Argentina's other principal industrial enterprises are heavily concentrated in and around the city of Buenos Aires. The plants are close to both the many raw materials imported by ship and the vast productive area of the pampas. The major industries in Buenos Aires are food processing, motor vehicles, consumer durables, textiles, chemicals and petrochemicals, printing, metallurgy, and steel. Other industrial areas include Rosario, with important steel-producing plants and oil refineries, tractor and meat-packing plants, and chemical and tanning industries

MINING INDUSTRIES
THE ANDEAN MOUNTAINS PROVIDE ARGENTINA WITH RICH MINERAL DEPOSITS. SOME OF THE MINERALS WHICH ARE BEING MINED AT PRESENT ARE, COPPER, TIN, LEAD, ZINC, GOLD, SILVER, AND URANIUM. THE MAIN EXPLOITATION OF COPPER AND GOLD, MINERA DE LA ALUMBRERA, IN THE PROVINCE OF CATAMARCA, IS AN AUSTRALIAN VENTURE.

TOBACCO INDUSTRIES
The tobacco industry of Argentina produced 157,294 tons of tobacco harvest, most of which (93,327 tons) was exported. The planted area was 831.75 km, of which 776 were harvested. The tobacco industry is dominated by two transnational companies: Messalina Particulars S.A. (a subsidiary of Philip Morris International, which sells the Marlboro brand, and which in turn is associated with Tabacos Norte S.A.) and Nobleza Piccardo (a subsidiary of British American Tobacco, which sells international brands such as Lucky Strike, Viceroy and Camel, as well as national ones like Jockey and Derby).

Tobacco plays an important role in the economy of the producing areas, which are comparatively poor provinces. The Argentine tobacco industry employs 500,000 people, about half of them directly involved in the planting and harvesting, only about 2% in the manufacturing of the derived products, and the rest in distribution and sales. Therefore, despite the fact that the consequences of smoking are a major health issue in Argentina, the national government supports the producers by means of a Tobacco Special Fund (Fondo Especial del Tabaco, FET), which consists in a subsidy plus easier access to credit in order to modernize the industry.

TRANSPORTATION
The most widely-known national airline is Aerolineas Argentinas which has been operating for more than 60 years. It covers nearly all the domestic routes and has also an important continental

and inter-continental network. There are also other private airlines that have been growing in recent years. Aerolineas Argentinas offers three direct flights a week between Sydney and Buenos Aires, with a short stopover in Auckland, New Zealand.

Chemical and Petrochemical Industry of Argentina

Total annual production of chemical and petrochemical industry of Argentina is estimated at 5.5 mln. tons in 2006, with 40% of them being the products of basic chemistry, 30% - semiproducts and components, 30% - ready-made materials and finished products The country has favourable prerequisites to develop its chemical and petrochemical industry: availability of different kinds of chemical raw materials, oil self-sufficiency and discovering of large natural gas deposits, relatively extensive network of pipelines, launching, with participation of the government, a range of petrochemical centers (poles) to produce basic hydrocarbons. Chemical enterprises and affiliates of the leading foreign companies are mainly concentrated in gas and oil producing provinces (Buenos-Aires, La-Plate, Cordoba, Santa-Fe, Campana, Neuken). Smaller oil refineries, with prevailing trend being primary distillation, are located in extraction sites: San-Lorenzo, Campo-Duran, Plaza Huincul, Rio-Grande, Lujn de Cuyo

In a Nut Shell various industries of Argentina according to sector are

Agribusiness
Largest agro-commodity exporters are:
1. 2. 3. 4.

Cargill-18 million tons, Bunge-14 m tons, Dreyfus-9 m tons, AGD-6.5 m tons, Molinos -5.5 m tons.
Argentina has an international reputation for thoroughbred and polo horses. The horse population is 3.3 million.

Wine
The total number of vineyards are 27000 and wineries 1500. The industry was earlier focussed on domestic consumption which is 40 litres per head per year, sixth in the world ahead of Spain. Wine exports have been increasing in recent years, reaching 1 bn dollars in 2010. Besides wine, Argentina exports Must and table grapes.

Malbec is the signature wine of Argentina.

Energy
Repsol and Petrobras are the major oil producers. It is the second largest gas producer (50 bn cu mts) in Latin America. Total reserves are estimated to be 620 bn cu mts. It exports gas to Chile. Argentina has the world's third largest shale gas reserves of 774 tcf

Argentina is a pioneer and largest user of CNG technology. Argentine companies have been exporting CNG conversion kits and technology to many countries. Galileo, a leader in Argentina in CNG sector has supplied technology and equipments to India.

Minerals

Argentina has significant reserves of gold, silver, zinc, uranium, copper and iron. Mineral

exports are around 3.6 billion Industries are:1. 2. 3. 4. 5.

Aluminio Argentino S.A.I.C. (ALUAR), Borax Argentina S.A., Cementos Loma Negra C.I.A.S.A

Pharmaceutical The Argentine pharmaceutical market is valued at 4.7 billion dollars. There are 110
laboratories in the country, of which 17 are international laboratories and the rest are national. Market

leaders are Bayer, Bag and Roemmers.

The top ten pharma companies are :

1. 2. 3.

Roemmers,4.Elea, Bag, Ivax Argentina, Gador, 5.Sanofi Aventis, 6 Montpellier,

PORTERS GENERIC STRATEGY

ichael Porter has described a category scheme consisting of three general types of

strategies that are commonly used by businesses to achieve and maintain competitive advantage. These three generic strategies are defined along two dimensions: strategic scope and strategic strength. Strategic scope is a demand-side dimension (Michael E. Porter was originally an engineer, then an economist before he specialized in strategy) and looks at the size and composition of the market you intend to target. Strategic strength is a supply-side dimension and looks at the strength or core competency of the firm. In particular he identified two competencies that he felt were most important: product differentiation and product cost (efficiency).

He originally ranked each of the three dimensions (level of differentiation, relative product cost, and scope of target market) as either low, medium, or high, and juxtaposed them in a three dimensional matrix

PORTERS DISTINGUISHES 3 SEGMENTS

Cost Leadership Strategy

1.

This strategy involves the firm winning market share by appealing to cost-conscious or pricesensitive customers. This is achieved by having the lowest prices in the target market segment, or at least the lowest price to value ratio (price compared to what customers receive). To succeed at offering the lowest price while still achieving profitability and a high return on investment, the firm must be able to operate at a lower cost than its rivals. There are three main ways to achieve this. The first approach is achieving a high asset turnover. In service industries, this may mean for example a restaurant that turns tables around very quickly, or an airline that turns around flights

very fast. In manufacturing, it will involve production of high volumes of output. These approaches mean fixed costs are spread over a larger number of units of the product or service, resulting in a lower unit cost, i.e. the firm hopes to take advantage of economies of scale and experience curve effects
2.

Differentiation Strategy

Differentiate the products in some way in order to compete successfully. Examples of the successful use of a differentiation strategy are Hero Honda, Asian Paints, HLL, Nike athletic shoes, Perstorp BioProducts, Apple Computer, and Mercedes-Benz automobiles. A differentiation strategy is appropriate where the target customer segment is not price-sensitive, the market is competitive or saturated, customers have very specific needs which are possibly under-served, and the firm has unique resources and capabilities which enable it to satisfy these needs in ways that are difficult to copy
3.

Segmentation Strategy

In adopting a narrow focus, the company ideally focuses on a few target markets (also called a segmentation strategy or niche strategy). These should be distinct groups with specialized needs. The choice of offering low prices or differentiated products/services should depend on the needs of the selected segment and the resources and capabilities of the firm.

Argentina Industries Based On Porters Model

Argentina Industries based on Porter Stategy Narrow Market Scope

Segmentation Strategy Pharmaceutical

Chemical and Petrochemical Plastic Industries Differentiation Strategy Broad Market Scope Wine Energy Minerals Reserves Agriculture Industries Natural reserves Banking Food Processing Manufacturing Industries Transportation Low Cost Competency

Cost Leadership

Uniqueness Competency

Thanking You