1. LATAM, the struggle for talent.
In reaching global success Latin American (LATAM) companies need to coup
benefits from the lessons learnt competing in the demanding Latin American
markets and combine them with the type of global corporate practices that will
allow them to scale operations across the globe.
Jorge Martinez Durazo
While reading the article “Building Global Champions In Latin America” I couldn’t help
to think on the title in a broader manner, for I think it is from the same title that the first
premise of the article arises. The use of the verb “Building” implies that while some of
the companies in LATAM have privilege market position to take on challenges abroad
these companies lack the corporate structure/culture to undertake this deeds.
The first challenge that Latin American firms need to
overcome is the tendency to a family-own business
structure within their businesses. In this region a vast “Family businesses often emphasize caring
majority of the leading firms are own and run by the and loyalty, which some talented people
founding family and as family businesses expand from may see as values above and beyond what
their entrepreneurial beginnings, they face unique nonfamily corporations offer”
performance and governance challenges. To deal with The Five attributes of enduring family
this increasing complexity, family run businesses tend to businesses, McKinsey Quarterly, January 2010
develop informal networks in which direct hires from
other companies tend not to be successful, and top
managers are often appointed based on a long history with the company. Herein lies
one of the biggest pitfalls LATAM companies faced when expanding its operations, in
appointing someone to a leadership position Loyalty tends to outweigh Talent.
Aiding this phenomenon is a widespread issue that relates to the perception of threat to
the senior executives from the new hires that leverages the power dynamics in favor of
turning loyalty, to a person and not the company, a customary component.
Yet, as evidence shows, since the second half of 1990’s a growing trend has the
number of family-owned businesses decreasing from the ranks of the top 100
companies –from 70.8 percent (1994) to 57.1 percent (1999) in Mexico and from 24
percent to 18.8 in Argentina1 - in LATAM. This trend signals the need to further
corporatize business practices in our region given the increasing competition from
abroad and the constant deregulation of local markets.
1
All in the Familia, McKinsey Quaterly, December 2001

2. Exhibit 1
Consider the case of a regional firm
wanting to take on the US market as an
expansion strategy. In general, the United
States market could present a hefty
opportunity for expansion for any firm in
the LATAM region. But as Exhibit 1
shows, some industries in the United
States present below average returns on
invested capital (ROIC) for the years
1992-2006. A closer look at the standings,
in terms of considering US as an
expansion market for a regional firm,
would hint that in the industries with higher
than average ROIC present a more
complex market to compete in, as local
players look to restrict access to preserve
the higher margins while risking going to
war at home with an eight hundred pound
gorilla. On the other side of the spectrum,
the industries that present a lower than
average ROIC, we find more regional
players competing for a piece of the pie.
Companies such as Bimbo, Volaris,
Michael Porter, The five competitive forces that shape
Chilean and Argentinean wine industries
strategy, Harvard Business Review January 2008, pg. 6
contend hand to hand with the local
players in each market. At this juncture,
we discover that some of the factors mentioned in the article such as demanding price
sensitive costumers, challenging distribution infrastructure and rampant volatility do
enable some companies to develop competitive advantages that allows the company to
successfully expand into this market.
Furthermore, most of the local moguls in serving the local market develop corporate
cultures that serve well only in the local markets and as the article points out, just a few
of them had global aspirations since their inception. Therefore, the majority of global
companies in the Latin American region have only grown global aspirations after
exhausting its local market. Some of these companies compete in closed industries
where they enjoy a privilege position but lack the incentive to further their expertise and
put in place a corporate structure to take on the global industry.
The case of Elektra’s expansion in the late 1990’s helps exemplify this process2. The
Mexican White Goods giant already enjoy an ample market share due to its proprietary
underwriting and collection process that allow them to serve the under bank and
provide them access to a growing number of products and services via in-house credit.
Initially, the expansion to Central and South America was meant to be a defensive
2
Harvard Business School, Grupo Elektra, 9-502-039

3. strategy to La Curacao initiative to expand to the Mexican territory. Elektra’s first store
abroad was open in Guatemala. Within the year, it expanded to El Salvador,
Guatemala, Honduras and Dominican Republic. At first glance, Elektra’s credit model
could may as help the entire under banked population across the continent. Yet, as
Elektra’s executive team later learnt, in spite of symmetry of its market segment
throughout the continent, its credit model perform poorly in some countries and had to
withdraw from Dominican Republic and El Salvador.
Currently Elektra holds a competitive position in Latin America and has expanded its
operations to Venezuela, Brasil, Panama and United States and remains as the main
provider of white goods in Mexico in spite of raising competition in its industry. Elektra’s
strong performance has come only after years of transitioning from a family-own
business to integrate a corporation with its own culture and values. The company has
also made a point of hiring young talent that they scout and attract from top business
schools. Understanding that in the competitive landscape were Elektra competes,
talent is king, and top talent…well, you get the idea.
But the search for talent is not exclusive of the business world. If there is another realm
where talent is king that would be the world of sports. For decades, the top teams of
the world in every discipline have fought over who hires and retains the best talent.
The sort of talent that will allow them to reign over their sport and pound their
archrivals. But accomplishing this feat is not an easy task and therefore the teams that
accomplish it and reach the peak of excellence are forever remember. Such examples
date from decades but recent sports history provide us with examples such as the
1980’s Lakers, Michael Jordan’s Bulls, John Madden’s Raiders, 1990’s Dallas
Cowboys, Tom Brady’s Patriots, 1990’s Atlanta Braves and Joe Torre’s Yankees. But
in a world where free agency, salary caps and steep signing bonuses are abundant,
dynasty team are increasingly hard to come by. Yet , the best example and most
applicable for the purpose of this article is that of FC Barcelona.
Futbol Club Barcelona (FCB), also known as Barcelona is a professional football
club, based in Barcelona, Catalonia, Spain. Founded in 1899 by a group of Swiss,
English and Catalan footballers led by Joan Gamper. The club has become a symbol of
Catalan culture and Catalanism, hence the motto "Més que un club" (More than a
club)3. From 1997-2007 Real Madrid’s, Spain’s most iconic football club, success had
cast a long shadow over FC Barcelona, who has lose competitiveness and struggle to
keep up with the big budget acquisitions of his rival. During that time, FC Barcelona
parted ways with high salary caps and envision a football organization centered in
pursuing football’s sangrial, total football. Total football is a playing philosophy that
emphasizes ball management and speed over individual talent or physical qualities. In
total football, the ball is view more as an experience rather than as a possession.
Barcelona took this idea to heart and adopted it as a core value during the 90’s. Its
football academy, known as “La Masia” took a central role in finding and developing
3
Wikipedia, http://en.wikipedia.org/wiki/Fc_barcelona

4. FC Barcelona World Class Football Academy, La Masia
players that will fit that model. In these trenches, FC Barcelona started procuring the
talent needed to pursue this model and win over their dreadful rivals. In opposition to
standard practice, La Masia nurtures and develops children from all around the world
as young as 9 years old. Most of these kids posses paramount skills for their age and
left home for the dream to become professional athletes. La Masia is the key to FC
Barcelona grand success; finding and developing the best possible talent in the world
and bringing them in-house to grow them within the demands of their football
philosophy (corporate culture), total football.
The same tenet could prove true for corporations. Finding and retaining prime talent is
an important and central task in order to overtake the competition. But in order for firms
in the LATAM region to compete on a global scale, talent will have to be scouted on a
local, regional and global level from the leading academic faculties. Although feasible,
this practice remains unapplied at large mainly because of the absence of commitment
from the corporate offices and the lack of consideration of recruiting as a key
component of strategic planning.
But as competition becomes ferocious in the business world, firms across the globe are
look for an edge that will provide them with the upper hand. Across the organization
recruiting the right kinds of talent can provide such edge.

5. Yet, in some areas of the Exhibit 2
regions the challenge to
integrate the right people
becomes very specific. In
a global survey
conducted with
executives around the
world by McKinsey in
2010, respondents cite
Recruiting talent from
emerging markets as their
second activity in
importance to achieve
success, just behind
developing a local
presence4. The same
document outlines that in functions such as Management, R&D and Strategy the talent
shortfalls are sizeable across all regions.
In summary, I believe that the nature of Latin American markets provide a fertile ground
in some industries for companies to enhance their operations and develop systems and
procedures that could grant a competitive advantage when expansion is at hand. In
other industries, the lack of regulation, unsophisticated demand and meager buying
power deter the growth of competitive firms to stand challenge in the global arena. In
my opinion, successful expansion abroad depends not only on having clear global
aspirations with systematic ways to develop their talent and integrate cultures and
organizations but also being in an industry in which operating in the region hones its
core capabilities and grant a competitive advantage when expanding into new markets.
4
Five forces reshaping the global economy, Mckinsey & Company