1. Was Falabella prepared for internationalization in 1991? (Justify your response with the readings).
“Falabella’s aim is to become the leading retail operator in Latin America, both in terms of presence as well as financial results, combing world-class management quality with commitment to local communities”
At that time Chile had a relatively mature and saturated market, so Falabella decided to expand and open their first store in Mendoza, Argentina. As a Chilean company which had been in the market for more than a century, they understood the local market very well and had a value proposition based on local preferences. Falabella knew how to create value for Chileans and thought it would work the same way in Argentina, due to previous experiences with tourists buying in department stores and decided to replicate the same proposition, assuming there would be similar preferences and consumer tastes in both countries.
Falabella was not prepared for internationalization and confronted a completely different environment than the one in Chile. Legal norms, difficulties of importing, consumer preferences and shopping habits turned out to be totally different and were not understood before they decided to internationalize and resulted in lower sales than the expected. Falabella didn’t fully understand the Argentine culture and the importance of the European influence and heritage on their culture. Exclusivity was the most important thing at the time of selecting and buying their clothes, so they preferred to buy in specialized stores and boutiques. They also didn’t realize about the fact that department stores need a lot of people to be profitable, so that it would have been a better idea to open the store in Buenos Aires, where they would have had higher volume sales.
Falabella´s value proposition wasn’t successful as expected, due to lack of local knowledge and