Buka Bakery: International Strategy and Market Analysis Report

This report provides a comprehensive analysis of Buka Bakery's international strategy, focusing on its expansion into the United States market. It begins with a market analysis, examining both macro factors (political, economic, social, technological, legal, and environmental) and micro factors (suppliers, customers, and competitors) within the US bakery industry. The report then delves into Grupo Bimbo, a key player in the global bakery market, and discusses its international business activities, particularly its market entry strategy through acquisitions. The competitive strategy and marketing mix adopted by Buka Bakery are also explored. Finally, the report identifies potential international market challenges for the company and offers recommendations to overcome them, offering valuable insights for businesses seeking international expansion. This report is designed to provide a strategic understanding of international business operations.

Running head: INTERNATIONAL STRATEGY
Buka Bakery
International Strategy
10/2/2019

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Table of Contents
Introduction................................................................................................................................2
Part 1..........................................................................................................................................2
Market Analysis.....................................................................................................................2
Macros Aspects of USA.........................................................................................................3
Micro Factors.........................................................................................................................5
Part 2..........................................................................................................................................6
Overview of Grupo Bimbo.....................................................................................................6
International Business Activity..............................................................................................7
Market Entry......................................................................................................................7
Competitive Strategy..............................................................................................................8
Marketing Mix.......................................................................................................................8
Part 3........................................................................................................................................10
International Market Challenger..........................................................................................10
Conclusion................................................................................................................................11
References................................................................................................................................12

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Introduction
Expanding business at an international level and designing marketing strategies supports
business in different ways. The first way is that international expansion and marketing
enhance the effectiveness of the product. As the business grows and leads, it becomes more
effective at offering superior services and products. Another feature of international
expansion and international marketing strategy is that it support in establishing a stronger
competitive advantage for the business in the market (Rothaermel, 2013). Several businesses
do not deal with the challenges while operating business in the local market. If the business
does not experience challenges in the local market, then it is an opportunity to enhance its
competitive advantage and take entry into the international market. Competing at
international levels enables customers worldwide to be informed about the services and
products offered by the business (Shenkar, Luo and Chi, 2014). The aim of this study is to
discuss the importance of expanding business at the international level and the way
businesses could do so in order to avail of the benefits of international expansion. The report
is presenting the analysis of different macro and micro factors that are important to consider
while taking entry into the foreign market that is the United States. This report is also being
presented to discuss the importance of marketing strategies and entry strategies that are used
by the bakery company in the US. In the end, the paper is presenting some of the
international market challenges for the company and recommendations for how these could
be overcome.

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Part 1
Market Analysis
The global bakery market is anticipated to experience high growth in the coming eight years
due to increasing awareness of the vigorous, organic, and natural baked products with the
augmented intake of bread in the US, Brazil, China, and Mexico. The availability of the high
amount of raw materials such as starch, dried fruit, flour, gluten, preservatives, vitamins,
emulsifiers, sugar, meat, flavorings, food acids, and additives will drive the growth of the
industry (Global industry analysts, 2019).
The market of the United States is also experiencing the trend of declining demand for baked
products as customers are getting attracted to high fiber, low-carb, and gluten-free options.
Customers are gradually replacing the baked natural, convenience, and healthy options and
customers are substituting backed products with fruit bars, yogurt, and nuts (Grand view
research, 2014). But, for celebrating special occasions, Americans love to intake the
traditional bakery products such as Pie- a hot milk sponge filled with pastry cream and
Boston Cream which are being offered in the market since the mid-1850s. The bakery
industry of the US is one of the vast businesses which make around 2.1% of the country's
GDP as per the American Baker’s Association (Hyslop, 2018).
Macros Aspects of USA
Political - The USA is considered as one of the huge democracy in the world. The nation has
a steady political environment. The country allows several businesses to operate a business in
the country. In fact, the country maintains strong trade relationships with the government of a
different country like the EU, which allows international companies of the countries to
expand operations. However, the government has implemented several policies for avoiding
misconduct with customers or laws. For example, the US Department of Agriculture has

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authorized number of policies related to the quality of the bakery products for the health of
the citizens (The U.S. Department of Agriculture, 2008).
Economic - The economy of the country is considered to be the largest across the world
regarding nominal GDP. The country has produced leading organizations such as
McDonald’s, Apple, Facebook, etc., which are shaping the socio-economic negotiations
across the world (Calmfors and Horn, 2016). The country offers increasing growth
opportunities to new as well as an established business to grow in the market by making
using of advanced infrastructure. Several international bakery brands have gained the
advantage such as Hostess brands, Flowers foods, McKee Foods, etc.
Social – The country is listed as the third most crowded nation across the world 326 million
of the population (Worldometers, 2019). But, with this, the habits and preferences of the
customer are changing that is impacting the demand of international bakery companies.
People are getting attracted to healthy, natural, and organic products which result in
impacting the revenue of international bakery companies. Therefore, in order to survive in the
market, businesses have to get involved in producing healthy bakery products for the
customers.
Technological – Technology and innovation have severely altered the international bakery
industry. New techniques of production, product development, and e-commerce have shaped
the present operations of the company within the industry. Small-scale units of the production
have to develop for the similar function as the large-scale units (Higgins, 2018). This results
in making the retail bakers more competitive with the commercial bakeries since they can
professionally create specialized bread products with the use of an automated system. But,
this can decrease the cost of labor for the business and lead to decreased employment.

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Legal – The production cost of international bakery firms is impacted by the number of
factors. These factors can be raw material quality, production procedure, product nature,
material wastage, transportation cost, legal laws, and regulations, etc. (Vast, 2017). The
government of the country has imposed some requirements such as license, sales permit,
health department permit, fire department permit, etc. The international bakery businesses
have to follow these regulations in order to successfully operate in the country.
Environmental – The government makes use of several means to control environmental
conduct within the region. The US government controls the procedures of bakery products
manufacturing, for instance, they impose necessary permits for the release of pollutants. The
country also regulates which product can be sold and produced and the way it can be utilized
and disposed of (World Bakers, 2016).
Micro Factors
Suppliers – Suppliers can influence an industry's operations through their capability to
increase processor decreases the quality of the purchased services and products. The
supplier's bargaining power in the international bakery industry is relatively low due to the
product's nature. The supplier is lawfully destined by the guidelines of the government to
maintain the FDA standards. Businesses like Companies like Flowers Foods Inc. and Grupo
Bimbo SA are involved in adopting an aggressive attitude with their suppliers such that they
can offer different products to the customer (IBIS World, 2019). The supplier gets no space
to bargain about the prices either due to the augmented competition on the wholesale market.
Customers – Today, customers are educated related to the choices of the food products and
the way they actively select the food products comprising baked goods. This enables
customers the power over the retailer to match their requirement for the preferences as well

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as products. Customers have knowledge related to what they want and at what price.
Customer is regularly shelled with the choices due to the presence of a diverse type of media.
Competitors – The baking industry is considered by a low concentration level, involved with
four top players who account for 35.0% as the revenue of the industry in the year 2013, up
from a projected of 20.3% of the entire industry in the year 2008 (IBIS World, 2019). This
rise came because of the growth of the key players and the increasing number of acquisitions
and mergers. For instance, Grupo Bimbo got involved in the acquisition in order to acquire
Weston Bread Unit in the year 2008 and Sara Lee's North American Fresh Bakery in the year
2011. Both the acquisition helped the company in increasing its market share. Because of the
quick development through acquisitions, Grupo Bimbo is considered to be the biggest
industry player. Besides this, many of the businesses are smaller and are discrete all over the
country, which makes the industry of Bread Production somewhat, fragmented.
Part 2
Overview of Grupo Bimbo
Grupo Bimbo officially known as Bimbo is one of the well-known bakery brands of Mexico
involved in the manufacturing of the bakery products with headquarter in Mexico City. This
company is the largest baking company across the world and runs the biggest bakeries in
Canada, Spain, United States, Columbia, Chile, and Peru. The company has the widest
network of distribution in the United States and Mexico. Besides this, the company is called
as the ninth largest business of Mexico in terms of revenues in the year 2013. Bimbo
Company represented revenue of around US$14.1 billion for 2014. The company has hired
around 138,000 employees, 165 plants for manufacturing products, and 2.5 million sales
centers that are located in 32 nations of Asia, Europe, and America (Grupo Bimbo, 2019b).
Bimbo operates the business with around 100 trademarks, among which some of them are

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Marinela Wonder, Bimbo, Mrs. Baird's and Oroweat, Tia Rosa, Sara Lee, and Barcel. In
addition to this, the company has a broad network of distributors across the world with over
52,000 routes (Grupo Bimbo, 2019b). Bimbo runs the business in the scheme of recurring
sales channels sights, which results in making three daily visits to a similar establishment.
Since 1980, the company is listed on the stock exchange of Mexico and is a basic of the IPC,
the key index of stocks of Mexico. In the year 2016, Forbes provided #986 rank to the Grupo
Bimbo on the Forbes Global 2000. The company was introduced in 1945 in Mexico.
International Business Activity
Market Entry
Market entry strategy is considered as the strategic delivery as well as distribution techniques
of products to the new target segment. Under the export and import of the products, it is
considered as the introduction and establishment of the agreements in the international
market (Glowik, 2016). The market entry strategy that Grupo Bimbo adopted in order to
expand business operations in the United States market is an acquisition. An acquisition takes
place when a firm buys a maximum or all the shares of another company firm in order to get
the complete control of that firm. Purchasing more than 50% of the shares of the selected
company and other different assets enable the acquirer to make the decisions related to the
newly acquired assets deprived of approval of the shareholders of the firm. Acquisitions are
considered to be general who can take place after the approval of the target firm or in spite of
its disapproval. With the approval, the contract does not have any such no-shop clause. An
acquisition is considered to be a transaction under which a company gets the control of
another company by buying its stock, exchanging the shares for its own or, in the private
firm’s case, the purchase price is paid to the owner (Snow, 2018).

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Bimbo bakeries started operating its business in the USA in 1994, when the Bimbo which is
the largest baking company of Mexico with business in 19 nations, purchased a gorilla
company based in California. In addition to this, this company entered the bread market of
the USA in 1997 by acquiring Pacific pride in Bakeries of San Diego. The company again
expanded its business in 1998 by purchasing Mrs. Baird's Bakeries in Texas which at the time
was considered to be the biggest family-owned brand of the US (Grupo Bimbo, 2019c).
Competitive Strategy
Competitive strategy is considered as the long-term plan of a business that is focused on
attaining competitive advantage over the competitors after accessing their strengths,
weaknesses in the industry and comparing it with its strengths and weakness. According to
Michael Porter, the Harvard professor introduced the concept of competitive strategy
(Farooq, 2018). He represented four competitive strategies that are adopted at the global
level. The four strategies are cost leadership strategy, differentiation leadership strategy, cost
focus strategy, and differentiation focus strategy. The competitive strategy that is adopted by
Bimbo Company to survive in the US market is Differentiation. This strategy helps
businesses in developing a competitive advantage by providing the access of the product and
marketing it in a unique manner – a product or service that is diverse from the services or
products offered by the competitor (Boehe and Cruz, 2010). Bimbo Company is the largest
bakery brand in Mexico with the biggest distribution network in the US. This company is
with time differentiating its offerings and marketing tactics to gain a competitive advantage
against its competitors and be the leading organization of bakery in Mexico as well as the US.
In addition to this, the company has established a world-class distribution network that allows
the company to get connect with different countries for the distribution of its products (Grupo
Bimbo, 2019d).

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Marketing Mix
The marketing mix is said to be the set of strategies that are adopted by the businesses for
promoting its services and products in the market. This marketing concept is encompassed of
the detailed description of 4Ps that are a promotion, price, place, and product (Richter, 2012).
Product – Product is the item that is provided by the business to its customers in exchange
for money. Grupo Bimbo Company is involved in providing a varied range of bakery
products to its target audience with high quality. Some of the product range is comprised of
bread, pastries, cookies, etc. under the brand Sara Lee, The Rustik Bakery, Thomas, Tia
Rosa, Vital, Marinela, Bimbo, etc. (Grupo Bimbo, 2019a)
Price – Price is the amount charged by the business in exchange for services or products from
the customers. Grupo Bimbo has adopted the focused cost leadership strategy which requires
competing based on price for targeting a narrow market. The company follows this not to
charge the lowest prices. In its place, the company charges low prices in comparison to its
rivals that compete in the US as the target market (Schroeder, 2016).
Place – Place is the point of sale where a business sells its services or products. The place
also includes the distribution network of the company. Grupo Bimbo has established a strong
and largest distribution network in Mexico and the United States for delivering its wide range
of products to that all the targeted customers. The company manages around 57,000
distribution routes worldwide (Grupo Bimbo, 2019d). The company sells its products through
supermarkets, specialized stores, and its brand store.
Promotion – Promotion is the activity that is undertaken by the business to the aware
customer about the product or service (Codita, 2011). Grupo Bimbo is involved in the
aggressive promotion of its services in order to reach a maximum number of customers and
increase brand recognition (Schroeder, 2016). The company promotes its products through

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some of the promotional mix elements such as advertisement, public relations, direct
marketing, and digital marketing.
Advertisement – For the advertisement of the products the company uses television, radio,
billboard, hoardings, etc.
Public Relations – Under this, the company promotes its products and services with a third
party. It is comprised of free publicity and paid efforts to encourage discussion and interest
for the product among the target audience.
Direct Marketing – Grupo Bimbo has adopted this strategy through which it promotes the
services through emails and instant messages by communicating diverse discounting offers to
the patrons.
Digital Marketing – The Company has also designed its website in order to provide
thorough information regarding the products of the business and allowing them an online
medium to place the order.
Part 3
International Market Challenger
One of the international market challengers that can compete with the Grupo Bimbo in the
United States market is Buka Bakery. Buka Bakery is one of the largest, oldest, and
successfully bakery brand of Kosovo. The company regularly increases its profits in spite of
the disturbance created by external factors like political instability and economic crisis in the
region (Postarch, 2012). The business has a diversified portfolio as it is involved in the
production of different and unique bread products. The company is positioned in the market
as the customer-centric business under which it focuses on meeting the demand of the
customer and providing the best services.

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Buka Bakery can effectively compete with the Grupo Bimbo in the United States market
through its customer-centric approach where it can shift its major focus towards the demand
and desires of the customer by offering high quality and cost-effective bakery products.
As stated above, the customer in the United States market is changing their preference and
moving towards more healthy and organic food products. Therefore, in order to compete with
the Grupo Bimbo, Buka Bakery has to get involved in the manufacturing of the healthy and
organic ingredient products that can attract health-conscious customers in the market and
eventually help in increasing the sales.
In addition to this, Grupo Bimbo has a wide distribution network and uses aggressive
promotion strategies for increasing the reach of the business and increase brand recognition.
Hence, in order to compete with this company, Buka has to restructure its distribution
network such that it can help it in reaching the maximum number of customers. Besides this,
the company is also recommended to make use of digital marketing, direct marketing, and
advertisement for the promotion of its services.
Conclusion
The above report has provided a detailed analysis of the United States Bakery market and
revealed that the demand for healthy and organic products its increasing due to which the
sales of the bakery products are declining. In order to maintain the market share, businesses
are adopted health ingredients in their manufacturing process and increasing the promotion
intensity. Besides this, the government of the country has implemented different policies for
the safety and health of the resident that needs to be followed by the businesses. Other factors
that impact the performance of the businesses in this market are suppliers, customers, and
competitors. One of the key players of the US bakery market is Grupo Bimbo which is