Grupo Elektra entered the new millennium keen on rapid diversification. One option was to extend its mass-market retail interests. Though it did expand prudently in South America, it rejected retail store development in the United States, despite a large potential Hispanic market especially in California. Instead, it diversified, notably into television and telecommunications. Examine this 2000 strategic decision critically from the vantage point of decision makers.

Question

What will be an ideal response?

Answer 1

Grupo Elektra has chosen to expand prudently in South America and to extend its mass-market retail
interests, but not in the USA, despite a large potential Hispanic market especially in California. Instead,it diversified, notably into television and telecommunications. From the vantage point of decision
makers, this 2000 strategic decision:
- Shifts Grupo’s interests into sectors with high growth potential especially in Mexico and the USA
- Builds on the goodwill of native Spanish speakers towards Grupo
- Allows Grupo to promote its retail interests selectively via its media.
However, the risks are considerable:
- Major investments required with uncertain financial returns
- Little prior expertise, resources or reputation in TV, mobile phone and internet operations, or in
serving the more sophisticated US consumer
- Synergy between retail and media interests may be an illusion
- Diverting attention may leave existing business areas more vulnerable to competition
Overall, these moves might be considered a huge ‘bet the company’ gamble that Grupo did not have to
take. Options it might have preferred include:
- Continued growth of its electrical goods and financial services businesses in Mexico by acquiring
current competitors
- Continued growth of its electrical goods business and/or financial services by acquiring existing
retailers and/or joint ventures in:
• Other South American countries (e.g. Brazil and Argentina?)
• North American states, ideally with plenty of Spanish speakers, e.g. California, possibly Texas,
Louisiana and Florida