Issue
Mabe is one of the largest appliance manufacturers and sellers. Around 2004, Ramiro Perez, the
international vice-president of Mabe, decided to form a joint venture with Spain’s Fagor to capture the
market potential in Russia. Mabe sells appliance, imported from its Central American plants, in
Russia. Currently, under intensive competition and unstable economic situation in Russia, Ramiro
Perez is considering what to do about the joint venture with Fagor. On the one side, manufacturing
locally will be a good way to achieve cost advantage and obtain a higher market share. On the other
side, due to the complex environment in Russia, Ramiro also considers whether Mabe should expand
its business in other countries and withdraw the Russian Market.
Business and corporate Strategy
Corporate strategy: Through forming alliance with GE and other companies, Mabe develops
technology and improves the quality of products. Also exploring Russian market through establishing
partnership with Foagor to reduce risk and increase product offerings.
Business strategy: Mabe uses a brand differentiation strategy to add brand value to obtain a price
premium.
PESTEL Analysis
Political: Different governments have different policies to regulate business activities. In some
countries, the weak legislative, high level of corruption and bribery, and high interference in business
create barriers in doing business. The variation of human rights protection among countries causes
different working conditions for companies. Regional trade agreement influences trade business
greatly.
Economy: Income level and GDP index have influence on consumers’ purchasing power, which
means companies should have different pricing strategies and positionings among countries.
Economic depression and interest rates affect purchasing shifts, from luxury products to medium
products. The exchange rate is a very important factor in international business.
Social: Life expectancy and death rate influence human capital in terms of labor power and buying
power. Also local people hardly trust foreigners, which means it is difficult to establish local partner
relationship. Different cultures and norms cause a great differentiation of consumer behavior. Most
young people are money-oriented and pursue luxury products.
Technology: Innovation and technology development facilitate products research and development. In
addition, Technology improvement in manufacturing and transportation helps to realize the importing
feasibility.
Environment: Russia has large natural resources such as land, gas and oil reserves. People have a
green mind and prefer energy-efficient products
Legal: The Russian government has weak law enforcement and judicial system, which causes
corruption and bribery. Also, the private property right is not protected in some countries.
Strategic application: Based on the analysis of the above, technology is the major driver of products’
quality and design, and economic condition and culture influence consumers’ buying behavior. So
appliance companies should focus on the demands of the market and product research and
development.
Five Forces Analysis
Barriers to entries: To enter into appliance industry, companies should have a large amount of capital
to set up companies and facilities. It is difficult to obtain technology skills in product development
and capabilities to build a distribution system and have customer expertise. The barriers are very high.
The bargaining power of buyers: Most customers are individuals and small segments in the appliance
market. So the power of buyers is very low.
The bargaining power of suppliers: Mabe manufactures its products and operates its business in
several countries, which means it can use resources worldwide Thus, the power of suppliers was quite
low.
Substitutes: The power of substitute none or low. The appliance is necessary for most modern
families. Its rigid demand from customers causes the absence of substitutes.
Industry competitors (Rivalry): The competition is very intensive. Mabe has many strong competitors
like Indesit, Samsung, LG and so on. Mabe just has small market share and its rivals perform well in
Russia.
Strategic application: Mabe’s strategy should concern more about competitors’ action; customer’s
preference and the use of high barriers to prevent the potential rivals. The intensive competition also
requires a high standard of product quality and arises a price war.
VRINE Analysis
Customer network: High customer loyalty could generate stable profit in a long time. However,
Mabe’s market share in Russia only account for 4.9% compared to the other main appliance players
(Indesit 21%, Electrolux 12% and Samsung 11%). It indicates that our customer relationship
management is not rare and imitable.
Strategic Alliance: Appliance industry is a technology-intensive industry which means that R&D and
innovation is significantly important to gain competitive advantage. The company’s partnership with
GE for higher technology backup is rare and difficult to imitate. There is the absence of substitute
resources for the strategic alliance.
Good understanding of local culture: Mabe creates a solid management team to understand a local
culture that does good to expand products there. It is rare and hard to be imitated by competitors in the
