Vasiliki Kontanis,
Mary Kate Manganiello,
Kelsey Swierczek, and
Maria Tropiano
Monday, November 11, 2013
Anheuser-Busch International, Inc.: Making Inroads into Brazil and Mexico 1. What were the major challenges facing Anheuser-Busch in entering the Brazilian market? In entering the Mexican Market?
The export.gov website describes several market challenges that a company encounters when doing business in Brazil. These challenges include: 1) an intimate knowledge of the local environment, including the explicit as well as the implicit costs of doing business (the “Custo Brazil”); 2) Logistics, given infrastructure limitations posed by a decade of economic expansion; and 3) Tariffs and a complex customs and legal system (www.export.gov 1).
The vscgrowth.com website lists the following market challenges for Brazil: 1) The language – Most professionals in Brazil will need an interpreter because English is not widely spoken in Brazil; 2) Time zones and distance – Being on the other side of the world there is no overlap in business hours meaning holding phone or video conferences will have one party up very early or late; 3) Business culture tends to be “laisse a faire” or “introspective” and the different cultural background means priorities don’t always coincide with the US business psyche; and 4) Brazilian infrastructure needs improvement so as to support and capitalize on growth opportunities (www.vscgrowth.com 1).
The startupoverseas.co.uk website discusses the following challenges in entering the market in Mexico: 1) cultural and language differences; 2) the Mexican bureaucracy and a complicated tax regime; 3) the labor law; 4) Mexicans prefer to speak to a human being as opposed to doing business over the Internet; 5) Mexicans do not use voice-mail systems; and 6) Mexicans take their time when making a decision (www.startupoverseas.co.uk 3). In addition, The Harvard Business Review reports that “potholed highways, commonplace corruption, environmental messes, and a history of deep state involvement in the economy” can also present challenges when entering the market in Mexico (hbr.org 1). 2. Describe and compare the entry strategies used by Anheuser-Busch in entering the Brazilian and Mexican markets. Comment on Anheuser-Busch’s success in entering these two markets.
Entry strategies for Brazil:
Direct investment – Anheuser-Busch made a direct investment in a production unit in a foreign market. The case states that “Anheuser-Busch International made an initial investment of 10 percent in a new Antarctica subsidiary in Brazil” (687).
Licensing/Joint Venture – The firm gives the licensee patent rights, trademark rights and copyrights. In return the licensee produces the licensor’s products, markets the products in an assigned territory, and pays the licensor royalties (Entry Strategies in Foreign Markets 5).
Joint Venture – A partnership between host and home country is formed, usually resulting in the creation of a third firm (Entry Strategies in Foreign Markets 5).
The case states that “The second component of the partnership was a licensing agreement in which Antarctica would brew Budweiser in Brazil. The joint venture would be 51 percent owned and controlled by Anheuser-Busch, 49 percent by Antarctica” (687).
Direct investment involves 100% ownership (greatest commitment), whereas with licensing there are two partners which limits the degree of risk, and with joint ventures there are three partners which share the risk.
Entry strategies for Mexico:
Indirect Export – The export tasks are delegated to others. The firm is indirectly involved in marketing and has no control over pricing.
The case states that: “Anheuser-Busch will share responsibility for Budweiser’s marketing with each of its Central American partners” (688) and “Anheuser-Busch does not have control over pricing” (688).
Direct Export – Modelo (Mexico’s largest brewer) is directly involved in marketing its products in foreign markets.
The case states that “Mexico is Modelo’s largest export market” and that Modelo is involved in both import and export activities.
The case states that Modelo engages in both indirect export of products and direct export of products. Indirect export offers Anheuser-Busch the lowest level of risk but the least market control. Direct export gives the firm market control over market contact, market research, physical distribution, export documentation, and pricing. However, direct export entails greater risks and demands more corporate resources than indirect export (Entry Strategies in Foreign Markets 3).
Foreign Manufacturing – The firm manufactures in foreign markets in order to sell there (Entry Strategies in Foreign Markets 3).
The case states that Anheuser-Busch purchased Grupo Modelo in Mexico to produce beer to sell exclusively in Mexico, such as the popular Corona brand.
Direct Investment – The case states that “Anheuser-Busch purchased a 37 percent direct and indirect equity interest for $980 million in Grupo Modelo (located in Mexico City) and its subsidiaries” (687).
Anheuser-Busch’s success in entering the Brazilian and Mexican markets:
Brazil – After the partnership of Antarctica/Anheuser-Busch ended, Anheuser-Busch was forced out of the Brazilian market by the partnership that was created between Antarctica and Brahma, another Brazilian brewery (687). Later, in 2008, InBev acquired Anheuser-Busch, and InBev became the global leader in the beer industry (687), further forcing Anheuser-Busch out of Brazil. Therefore, Anheuser-Busch is no longer present in Brazil.
Mexico – As a result of the purchase of Grupo Modelo, Anheuser-Busch’s sales volume saw double-digit growth in 2003 (688). The case also informs that the “Modelo agreement is significant because beer consumption has grown 6.5 percent annually in Mexico in the past few years” (688) and that “in 2002, net income for the company’s international beer operations rose 6.3 percent due to the performance of Grupo Modelo” (688). In addition, because of the acquisition of Grupo Modelo, Anheuser-Busch has now expanded its operations throughout Central America.

Works Cited
Export.gov. 9 November 2013. http://export.gov/brazil/doingbusinessinbrazil/index.asp.
Hbr.org. 9 November 2013. http://hbr.org/1993/07/managing-risks-in-mexico/ar1.
Kotabe, Masaaki, and Kristiaan Helsen. “Global Marketing Management.”
Lambin, Jean-Jacques. “Entry Strategies in Foreign Markets.”
Startupoverseas.co.uk. 9 November 2013. http://www.startupoverseas.co.uk/expanding-a-business-in-mexico/entering-the-market.html.
Vscgrowth.com.au. 9 November 2013. http://www.vscgrowth.com.au/news/127-considering-new-markets-what-about-brazil.