MAVES: Strategic alliance

Abstract

In this case, MAVESA, a major Venezuelan agribusiness firm, must decide what actions to take in the face of tumultuous economic and political change. The lowering of trade barriers, the deregulation of the currency, and the promotion of foreign investment have opened the Venezuelan economy to global competition. Political uncertainty in the aftermath of an aborted coup d'état has depressed the Caracas stock exchange and placed financial pressure on the company. The president, Juan Fernando Roche, faces an intimidating array of options that include offers from three multinationals to form different types of alliances. The crisis of a local company facing global competitors in a policy environment of trade liberalization is a story repeated many times in Latin America. The MAVESA case, though, has some unique elements. One such element is innovation. As the case traces the company history from its beginnings in 1949, the reader may detect numerous instances of innovative achievement, from its professional Board of Directors to its marketing strategies. From the outset, it is clear that MAVESA is not just another import-substitution industry, dependent on tariff protection for its survival. Latin American firms, and even those of the United States and Europe, have lessons to learn from the MAVESA experience described in these pages. Another element of the MAVESA case is the interplay that we observe among national policy, industry structure and behavior, and corporate strategy during several distinct periods of Venezuelan history. It is seldom that a company, even in Latin America, is exposed to such wide swings in government policy or to such unexpected events as the aborted coup or the massive housewives' protests against the elected president. The case offers insights into the impact of macro policies on industry behavior. It also enables us to evaluate the evolving strategy of an industry leader. One of the most unique elements of the MAVESA case is the way in which corporate strategy takes advantage of a changing and often hostile political environment. The case centers around MAVESA's search for a strategic partner. This raises the fundamental question of why an innovative, successful company that has dominated its local market for over 40 years should want to share its success with a newcomer to the Venezuelan market. The purpose of strategic alliance is a question that many Latin American and U.S. companies should explore as they “go global.” In evaluating the array of options that confront him, Mr. Roche must of course push the numbers to understand the economic implications of different courses of action. The quantitative analysis required is daunting: operating synergies, discounted cash flows, and projected share prices all come into play. It is clear that the successful Latin American managers of the future must be increasingly sophisticated in the use of analytic techniques as they face the investment bankers from the North. But the responsible managers must also see beyond the numbers, to consider the various stakeholders in the situation. Although the case does not focus on the internal organization, it is clear that MAVESA has a strong corporate culture that has contributed to its success. Could such a culture be preserved under the ownership of a Unilever or a Kraft? How do we assess the operational and financial implications of an eroding culture? The dilemma confronting MAVESA is not an isolated one. As the economies of Latin America are opened to international trade and investment, many companies that previously enjoyed protection in their local markets must compete with, or ally themselves with, the leader multinationals in their industries. Strategic alliances, if forged out of operating synergy and mutual understanding, may bring advantages to both parties.