MNC ANALYSISVenezuelaMark, Mike, Zaneta, Will

Labor Force• Agriculture: 7.3% • ( Corn, Sugarcane, Rice, Vegetables, etc.)

• Industry: 21.8%• (Petroleum, Textiles, Steel, etc.)

• Services: 70.9%• ( Public services, Electric, Maids, etc.)

Exports/Imports• Main Imports: Agricultural products, Raw materials,

Machinery, medical equipment and chemicals.

• Main Exports: Petroleum, Aluminum, Minerals, Basic manufactures.

Exports/Imports Cont.• 40% of Venezuelan exports go to the United States.

• 10.5% of exports go to China

• 95% of export earnings are oil

Unemployment/Poverty• In 2011 Venezuela’s unemployment rate was 8.2%

• In 2011 the World’s average unemployment rate was 8.5%

• Although unemployment is lower than average, 27.4% of Venezuelans live below the poverty line.

GDP• GDP is approximately $12,700. U.S. dollars per capita.• Earning a higher yearly wage than 12,700 would require

obtaining a high-stress job in the capital of Caracas• Lately, minimum wages have been risen in order to boost the

economy; causing a 28% inflation rate in Venezuela.

Overview of AES• Founded January 28, 1981• AES originally stood for Applied Energy Services • One of the worlds largest power companies• In 2010 total revenue was 16.6 Billion U.S. Dollars

AES’s Entrance into Venezuela • AES purchases Electricidad de Caracas in 2001 • Controlled 14% of the electricity consumed in Venezuela • Supplied 1 million customers in Caracas • Company was fully staffed, inserted CFO Andres Gluski

(Venezuelan)

Reason for purchase • AES saw Venezuela as a market saturated with talent• Also saw potential growth from the economy • Lower income families could provide a large customer base • Applied same strategies to Sal Palo Eclectic company and a

Cameron Electric company

Marketing and Production • Negotiated initial prices with regulators upon acquisition.• Production of Electricity in five main plants • All coal Fired plants • Had a production capability of 2,616 megawatts • AES refereed to Electricidad de Carcass as ECD

Human Resources • Venezuelan’s who were in place before Chavez proved to be

extremely well qualified • Almost all had transferable skills around the world• American companies saw this as a reason to invest • Chavez fired many of these employee’s who fled to other

MNCs

Exit strategy • In 2005 AES began to apply it’s exit strategy to the Venezuelan

market • To diversify its investor base they offered stock on the

Venezuelan stock exchange • One year later they applied the same tactic and sold stock on

the Spanish Stock exchange. • When PDVSA became nationalized sped up plan

Cont..• As AES sold stock also began to move essential personal out of

Venezuela and into other countries • This included Andres Gluski, who is now the current CEO of

AES • Once Verizon lost its investment AES went to the government

to negotiate their sale• Sold company to PDVSA of 739 billion US dollars

Intro to PepsiCo• US Conglomerate• Formed in 1902• 300,000 employees

worldwide• Distributed to over 200

countries • Net revenue 43.3 billion• Entered VZ in 1939• VZ headquarters: Caracas

Marketing http://www.youtube.com/watch?v=tEmLedmcTVo

• A marketing push in 1969 gained PepsiCo the majority• That majority was greatest in 1985 when Pepsi controlled 85%

of the Venezuelan soft drink market• Currently PepsiCo reaches its VZ consumers by promoting

blackberry giveaways, music contests, and baseball.

• Additionally Pepsi recently marketed the Miss Venezuela pageant on its soda cans.

VZ vs. US Pepsi ProductsPepsi/ Pepsi Light7 Up/ 7 Up LightGatoradeLipton Ice TeaYukery (orange juice)Evervess (club soda)Aquakina (gingerale)Ad-rush (energy drink)H2OH

Pepsi/ Diet Pepsi

Sierra MistGatoradeLiptonTropicanaNakedIzzeStarbucks drinks

Mountain Dew

AMPDole JuiceSobeAuquafina

Venezuela’s Food & Drink Risk/Reward Rating

• Venezuela is ranked 11th and thus last in BMI’s Risk/Reward Ratings matrix for the main markets of Latin America.

• The country’s composite score is just 41.6, well below the average for the region.

• Both foreign and domestic companies face a number of challenges in Venezuela’s food and drinks marketplace

Top 3 in VZ Drink Market

Empresas Polar is the VZ company that PepsiCo has a partnership with.

Pros and Cons for Pepsi in VZ• Sales of alcohol and soft drinks are expanding rapidly, driven

by increased consumer spending in recent years.• High per capita consumption of coffee, beer and soft drinks.

• Since 2003, the food and drink industry has endured price controls introduced by the government at the retail level, as well as from agreements on guaranteed prices for primary producers, with both measures endangering margins.

• Foreign investors are likely to remain cautious about entering the Venezuelan market until the political situation stabilizes and the business environment improves.

• Bolívar devaluation will continue to undermine companies

References • Jay Kloosterboer, Executive Vice-President of Business

Excellence ( At the time) • "Venezuela and Verizon Reach Deal." Los Angeles Times. Los

Angeles Times, 13 Feb. 2007. Web. 13 Nov. 2012. http://www.latimes.com/

• "AES to Collect USD 98.6 Million in Profits from Electricidad De Caracas." EL Universal. N.p., 1 Mar. 2007. Web. 13 Nov. 2012. <http://www.eluniversal.com/2007/03/01/en_eco_art_01A840179.shtml>.

• Venezuela food & drink report - Q1 2012. (2012). (). London, United Kingdom, London: Business Monitor International.