Tuesday, January 17, 2012

Tuesday, January 3rd

Tuesday, January 3rd
Today we are going to The U.S. Embassy to hopefully meet the U.S. Ambassador to Argentina. Later in the afternoon we are going to Walmart. Tonight is the tango show and I am very excited to use my new fan!

When we arrived, we had to have our passports checked and we weren’t allowed to bring in cameras or phones. Stanford University also had students there for the presentation. I believe they were all in the MBA program. Two colleagues of the ambassadors came to greet us and began the presentation. I thought it was very insightful about how Argentina’s economy works and how individuals have been successful even during rough periods. The Embassy’s main objective in Argentina is to basically help U.S. companies export products. While there are many employees at The U. S. Embassy, most of them are Argentines rather than Americans. Their website, usda.gov, provides information about internships for college students who are interested in working internationally. They gave a brief overview about their U.S. Foreign and Commercial Services group, which does a lot of research and matching between countries. They have 128 offices in 75 different countries worldwide.

Before discussing politics, they decided to give us a brief overview about Argentina. Argentina has a very unique culture where soccer, tango, and even the drinking styles are different. They are the 2nd largest consumer of beef (1st is Uruguay) and over the past few years their average herd size has decreased. Peron was a large leader in Argentina many years ago and his policies are still used today. During the 90’s, the president changed the policies and focused more on markets. The peso devalued during that time and brought down the economy.

Argentina now has a woman president, Cristina Fern├índez de Kirchner. We learned that you are required to vote in Argentina and she received a large portion of the vote during the last election (obviously). She is very popular. Argentina has a lot of opportunities in the future especially in the agriculture, cars, oil & gas, and human capital industries. Argentina has been growing with natural resources and a high GDP over the past few years. One of the keys to their success has been living by the motto “when doing good, plan for the bad; when bad, plan for the good.”

The main exports from the U.S. are capital, chemicals, and computers while the U.S. imports oil and gas, fruits, vegetables, and wine from Argentina. Some of the challenges in the future for Argentina are going to be financing and trade barriers. The economy in Argentina goes up and down, up and down every few years. They always know it will go up again though within due time. One big thing they are looking into are the production of soybeans. There isn’t a huge tax on those.

Right now there isn’t any formal agreement between the U.S. and Argentina. The overall goal between both parties is to import less than you export. In 2008-2009, the U.S. collapsed but Argentina was still growing due to their high GDP. An example would be if you buy a car in Argentina, it is worth more in a year (appreciates) versus depreciating like it does in the U.S. Inflation isn’t really hurting them and they have money to spend. The problem is that they don’t have a credit and therefore it hurts their market.

Protectionism has been huge in Argentina in the past. Protectionism is when you look at your own interest (for example: buy American!) over other countries. They’ve learned over time, however, that you have to work with other countries. It was interesting to hear how they have evolved. At first, Argentina would just buy/produce items within the country and not export. After awhile, they started to really see the benefits in exporting.

One question that I had was how do multinational companies enter into Argentina without moving too quickly and do the representatives have any advice? They told us that they believe it is important to have local representation and focus on the long term instead of short term results. It is important to act ethically because while there has been corruption in the past, it is not part of their future. Corruption is only really seen in the government. One must be able to understand the local market and even if they suffer at the beginning, they should stay in it because the market will go back up!

We didn’t end up getting to meet the U.S. Ambassador but we were able to get one group photo at The Embassy. I wish I could have met her!

During the afternoon, we had our trip to Walmart where we had 3 different presentations. Our first presentation was about strategic planning and a market overview. Walmart looks for multiple positive macroeconomic indicators instead of just at inflation as a warning sign. Walmart has been growing at 30% per year and they have been looking to expand because the country needs more public social programs available. You have to look at growth volume and sales to find the real numbers.

Walmart employees then described the different types of customers they have. Walmart’s main customer in Argentina is an expert on inflation management (price sensitive), is a multichannel buyer, values time, likes e-commerce, and looks for certain brands. They have conducted various research studies and have found that brands are really important to them. They thought customers would go for product B if it were cheaper during research but they still went and paid for brand A, which was reassuring to them.

Walmart’s vision is to become the fastest growing retailer and be on the path to be a market share leader in Argentina. They have 5 various formats in use. Right now they are fighting COTO for the 3rd place spot in Argentina. Typically in an emerging market, the leader will have 20%+ of the market share, but Argentina has 2 companies that are currently doing that. Some of their goals over the next few years are to have continuous growth, unbeatable prices, improve social responsibility and sustainability, and better their supply chain management. They plan on growing through ecommerce and the production of supermarkets. Their ecommerce project is growing at a rate of 33% (walmartonline.com.ar) and the average ticket price online is $147. Their online customers are women from the capital Buenos Aires ages 26-35 and 36-45.

Walmart makes sure to follow rules and ethics in every country. One example is that they follow the labor laws and don’t have kids working in the factories. They believe that they can push themselves to be a better company if they improve supply chain logistics (therefore reducing costs) and becoming environmentally friendly. Customers also have pushed the company to be better. Their main concerns are about trust and safety online, so Walmart-Argentina has been looking for ways to help them trust the company. In the future, they want to open up the store even more and have photo developments and reach all towns in Argentina and increase the assortment in the stores.

Walmart is also planning on creating a “dark store”, which is a distribution center for ecommerce customers. When they order something online, it will come directly from this facility. The launch for e-commerce was challenging at first because there are strict regulations in Argentina, which prevent stores from being too big (over 30,000 sq. ft).

One question that came to mind was can Walmart lower prices to drive away competitors? Honestly, it only works to a certain point because suppliers won’t let you cut it really low because they have standards in their own mind and don’t want their products to be sold too cheaply.

The second presentation was about supply chain management. This department uses various performance indicators (ex: fill rate = packs delivered/packs ordered). They are hoping through customer service that they can take their expectations and turn them into great results. The main challenge that they have had is stockouts. This could be due to bad forecasts or bad suppliers. Merchandising, replenishment, and operations teams must work together in order to have a successful purchase. Their motto “Everday low prices (EDLP)” can only be achieved if you have every day low costs (EDLC).

Walmart has a second company called “Changomas” which is a branch of Walmart. They have different clients, products, and supply chains. Changomas is marketed to people who have a lower income and it isn’t associated with Walmart even though it is owned by them. Walmart really doesn’t want to be associated with them because they have different statuses and Changomas is about 5% cheaper than products at Walmart (for the same product). It doesn’t have the same assortment as a Walmart store does and has different branding. Changomas means “more in your cart.” One of the challenges with Changomas is that it doesn’t have a backroom so it is hard to really replenish inventory but not order too much. I thought this was interesting because U.S. Walmart is the super cheap place to go but in Argentina, it is about brands and the experience. It is more of a luxury store.

The store in the north is about 1000 miles away (2.5 days) via truck from the distribution center in Buenos Aires. There are 100 docks at Moreno, Buenos Aires and they are planning on building another distribution center in Argentina to make the process move more smoothly. Within the next year, their main goal is to centralize a plan. Trucks are their method now because trains are very unreliable, but they are always looking for more options.

The third presentation as about targeted areas in Walmart. Walmart has switched gears to focus on specific targeted areas over the last few years. They have focused on their different groups of customers. Walmart customers are women and mothers who have a car, are 30-50 years old, and have a mid to high income. Changomas customers are women and mothers who are younger and are low income areas. Changomas is still very brand oriented and they choose brands because they can’t afford to try something new, not like it, and throw it away.  Price and quality both drive the prices for both Changomas and Walmart.

The advertising for Changomas and Walmart are also different. Changomas uses outdoor advertising in public places, such as public transportion where lower class people would be. They also advertise on TV on certain channels. Walmart advertises on the internet and cable TV because their users can afford those things. They also advertise in the newspapers. I thought it was interesting because Walmart spends less than 1% of their sales on marketing. Competitors nearby use about 1-2.5%. I thought it was also interesting because Walmart doesn’t have public shares in Argentina because it is a branch of Walmart USA.

There are many keys to success in the future for Walmart.

1)   Understand your market
2)   Identify customers’ needs
3)   Build proposal to fit to them
4)   Understand your market

After our business visit, they showed us the Walmart chant for employees and we were able to tour the actual Walmart facilities. Walmart in South America is even different in the layout of the store. Mothers are the people coming to shop (usually with children) so they had items at the front of the store that they would want to purchase. There was a lot of home and kitchen items at the front and, of course, toys for the kids. It was really unique!

Walmart did have a lot of similarities though. They had the rollback deals and the same motto “Save money. Live better.” It was definitely a cool experience!

They showed us their Walmart cheers!
The aisles are HUGE! 

We got back to our hotel and had about an hour to get ready for tango lessons and the show. The tango was a lot harder than it looked! My partner was a student at Stanford and was originally from Russia. Even though we struggled at first, we ended up getting the hang of it in the end. We took lessons for about an hour and then went downstairs for dinner and the show.
 Me and my Russian partner doing the tango.

 Me and my tango fan! Best purchase ever.

I had empanadas for my appetizers at dinner and they were delicious! Definitely something I am going to have to try again. For dinner, I had the “baby beef” and it was absolutely delicious. I now see why Argentina is famous for their beef!  The show began during our dinner. We learned that the tango used to be a low class dance that mixed different types of music together. Now the tango is the most popular dance in Argentina. It wasn’t simply tango—it was telling a story. There was love, hate, happiness, sadness, etc. They had costume changes and some of them even sang. It was a wonderful experience.

 Empanadas. Delicious!

The Stanford group was at the same tango show as us. They were going out to an Argentinian club called Kika to see what it was like and a few of us joined them. We took a cab there and got to the club at about 12:30 am. It seemed late but according to Argentina, we were there very early. They have a completely different schedule than we do. Breakfast is anywhere from 6-10 am, lunch from 12-3 pm, and then dinner is after 9 pm (at the earliest). People go out to the bars and clubs and dancing at about 1 am and don’t get home until the sun rises. People started to come to the club at around 2 am. We met many people from many different countries. Many people who were from Buenos Aires had traveled or studied at the universities in the U.S. It amazed me because so many of them spoke English. It makes me want to pick Spanish back up from high school. I know the basic phrases but not very much. I’d like to challenge myself to at least know all of the basics of Spanish again.

The club was jam packed and it surprised me that many of the songs were in English and were U.S. artists. There was a lot of techno remixes occurring and it was fun. We left the club at around 4 and got back to the hotel at around 4:30 am. It was a really fun night to get to know the locals and see the culture come alive. 

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