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9B13M042
MABE: LEARNING TO BE A MULTINATIONAL
Jose Luis Rivas and Luis Arciniega wrote this
case solely to provide material for cl
ass discussion. The authors do not intend t
o
illustrate either effective or ineffective handling of a manager
ial situation. The authors may
have disguised certain names and
other
identifying information to protect confidentiality.
Richard Ivey School of Business Foundation
prohibits any form of reproduction, stor
age or transmission without its written
permission. Reproduction of this material is not covered under
authorization by any reproduction rights organization. To order
copies
or request permission to reproduce material
s, contact Ivey Publishing,
Richard Ivey School of Bu
siness Foundation, The Universi
ty
of Western Ontario, London, Ontario, Canada, N6A 3K7; phone (519) 661-3208; fax (519) 661-3882; e-mail [email protected].
Copyright © 2013, Richard
Ivey School of Business Foundation                                                                             Version: 2013-04-09
It was a sunny afternoon in March 2012, and Ramiro
Perez, Mabe’s international vice-president, was
wondering what to do about Mabe’s jo
int venture (JV) in Russia. It ha
d been the firm’s most difficult
market entry in terms of return on time invested
. The timing had certainly not helped, as the JV had
occurred just before Lehman Brothers’ fall in the
summer of 2008. Mabe had chosen Russia based on the
premise that it was the “last frontier,” much like a
Wild West gold-hunting opportunity in 19th century
America. Backed by optimistic predictions of Russi
a’s future, investment bankers and industry players
contributed to fuelling this “wild frontier vision” of
a vast territory boasting one of the world’s largest
populations, a highly educated workforce, an unlimited supply of energy and natural resources, and a
political regime favourable to business. It had all seem
ed like a great idea — until the financial crises hit
and the foundations of this last frontier started fa
lling apart. Expanding Mabe to other Latin American
countries and to Canada had been, to some extent,
so natural and easy that Perez had a difficult time
understanding how he could
have done things differently when the company had entered Russia. Should
Mabe have taken a more aggressive
approach? Had Mabe become arrogant as a result of its past success?
HISTORY
Mabe was founded in 1946 by the Mabardi and
Berrondo families. Although initially dedicated to
building kitchen cabinets, in 1950, the company expande
d to manufacture its first appliance, a stove. By
1968, the company had expanded its
involvement in appliances and it
began exporting fridges and stoves
to Central America and the Caribbean. The first indus
trial plant for manufacturing refrigerators was built
in Queretaro, Mexico, in 1976, the same year the
company began exporting to the United States. By 1980,
Mabe was the market leader of stoves and refrigerato
rs in Mexico. General Elec
tric (GE) acquired 48 per
cent of Mabe in a JV in 1987. As part of the JV
deal, Mabe retained full management responsibility and
would build gas stoves for the U.S. market, in ex
change for receiving U.S. technology and technical
advice. By virtue of this deal, GE had become Ma
be’s main business partner and its largest customer.
In 1989, Mabe acquired Easy, one of the industry’s ke
y players, In 1990, Mabe opened a new stove plant
spanning 1.5 million square feet in San Luis Potosi
, Mexico. The production at this new plant would be
mostly devoted to the U.S. market.
Authorized for use only in the course International Business at Indiana University-Purdue University Indianapolis taught by Darrell Brown  from Jan 13, 2014 to May 07, 2014.
Use outside these parameters is a copyright violation.
Page 2
9B13M042
In 1994, the company decided to embark on an ex
pansion to Latin America, and Mabe’s mission was
redefined to include the label “Leaders in Latin Am
erica” with a focus in the Andean Pact countries —
Venezuela, Colombia, Peru and Ecuador. Mabe ac
quired appliances plants in Ecuador, Argentina and
Colombia. In Venezuela, Mabe decided to compete
using a GE plant and through a joint venture with
Ceteco, a Dutch firm that already had a presence in
the Latin American market
. The purchased plant in
Colombia was bought from Phillips. In Ecuador, Mabe est
ablished a JV with the O
rrantia family through
their Durex brand. In Peru, a representati
on office was opened to import appliances.
In 1998, Mabe acquired the Spanish manufacturer Fa
gor’s operations in Argentina. In 1999—2000 the
U.S. Energy Department issued a regulation requiring
energy consumption to be decreased by 30 per cent.
When GE considered the investment required to sh
ift its U.S. production plant, it decided instead to
source from a new plant to be built in Celaya, Mexico
. Thus, in 2000, a high-end refrigerator plant began
its operations there. The output from this plan
t would cover demand from both the domestic and
international markets under the Mabe and GE brands
. In 1994, a research and development (R&D) centre
opened in the city of Queretaro, Mexico. The centr
e’s main purpose was to decrease reliance on GE for
R&D and to develop higher
and more sophisticated technical skills
to support GE’s technology team in its
R&D and product development efforts. Another goal
was the development of proprietary technology.
Also in 2000, the San Luis Potosi plant was enlarg
ed to accommodate the production of electric stoves for
GE’s U.S. market.
In 2002, Mabe entered Latin America’s main mark
et through two acquisitions
: Dako (GE’s operation in
Brazil) and CCE appliances.
By early 2003, more than a third of all gas and elect
ric ranges and refrigerators sold in the United States
had been manufactured in Mabe plants. Its side-by-side
refrigerators could also be found in one of every
four American homes.
1
In 2005, Mabe’s entered the only North American ma
rket where it did not yet have a presence. Camco
Canada was acquired, and with
this acquisition, Mabe started exporting dishwashing machines and
clothes dryers to the U.S. market.
As part of Mabe’s internationaliza
tion strategy, a brand portfolio was est
ablished with the GE brand in the
upper segment, Mabe in the middle and some regional br
ands, such as Easy, Dako, Patrick and Durex, in
the middle and lower segments.
In 2008, Mabe acquired ATLAS Costa Rica, a manufactur
er of refrigerators and stoves. That same year,
two representation offices were opened: one in Ch
ile and one in Russia. The main purpose of a
representation office was to import appliances from ot
her producing countries. In the case of Russia,
because of the market’s importance and cultural dist
ance, Mabe decided to open the representation office
in a 50—50 deal with Spain’s Fagor.
Due to the financial crisis, in 2008, GE consider
ed selling its appliance business worldwide. Several
bidders expressed interest, includi
ng Mabe. In the end, however, GE’s board decided to keep the
appliance business.
In 2009, Mabe became Brazil’s second industry play
er by acquiring Bosch’s Brazilian operations. With
this acquisition, the Brazilian market also became
Mabe’s number-two worldwide market, after the
United States. The Mexican market at that time was approximately $650 million,
2
while the Brazilian
1
J. David Hunger, “U.S. Major Home Appliance Industry in
2002: Competition Becomes Gl
obal,” in T. Wheelen and J.
Hunger (eds.), Strategic Management and Business Poli
cy, Prentice Hall, Upper Saddle River, NJ, 2003.
2
All currency amounts are expressed in U.
S. dollars unless otherwise indicated.
Authorized for use only in the course International Business at Indiana University-Purdue University Indianapolis taught by Darrell Brown  from Jan 13, 2014 to May 07, 2014.
Use outside these parameters is a copyright violation.