Obstacles and Solutions For Offshore Manufacturers in Latin America

Selling into Latin America has been an extremely challenging venture for most offshore consumer product manufacturers.

Because Latin America comprises 18 distinct markets – each with its own political climate, cultural nuances, currency fluctuations, and other influential factors – the complexity and expense of operating in Latin America has proven to be prohibitive, even for major retailers like Wal-Mart.

In the book Redefining Global Strategy by Pankaj Ghemawat, these complicating factors are grouped into four categories, denoted by the CAGE acronym:

Cultural factors that impede the flow of business for offshore manufacturers in Latin America include language/dialect barriers, various ethnicities, religious differences, lack of trust, traditionalism, and regional insularity;

Administrative factors, such as importation issues, lack of common currency, political hostility, corruption, and weak institutions, are pervasive;

Geographic factors include not only distance but border issues, time zones, climates, disease environments, navigability, weak transportation and communication infrastructure, and high transport costs;

Economic factors include currency fluctuations, disparities in local purchasing power, availability of financial resources, and local pricing instability.

Historically, manufacturers have relied on outside, contracted entities such as national distributors to navigate this complex web of factors. While this is a viable route to the consumer, it is inherently risky and expensive for the manufacturer. Both the brand’s integrity and the manufacturer’s bottom line are constantly at risk.

With margins growing thinner every year, manufacturers are recognizing that this risky and inefficient distribution system is inherently flawed. Fortunately, it can be modified, even bypassed.

Many manufacturers are now exploring a new distribution model – an outsourced direct-sales model that effectively navigates the CAGE factors, creates transparency, safeguards brand integrity, minimizes risk and maximizes profit. Thoroughly tested and proven viable by Sharp Electronics, the SDO platform is changing the way business is done in Latin America.

With growing competition, thinning margins and significant risk, it has become clear that the only way to:

  • bridge cultural differences,
  • collect valid market intelligence on the competition,
  • ensure brand integrity and solid customer relations,
  • maintain a consistent supply chain,
  • and maximize sales,

… is to flatten the distribution channel, eliminating the distributor’s role and placing these realms of responsibility – and profit – back in the hands of the manufacturer.

Until recently, the only way to accomplish this was to establish a fully-staffed local office in each major market or region. Under current market conditions, with margins getting tighter every day, this is simply not a viable option for the majority of manufacturers.

Fortunately, with the introduction of Sales Direct Outsource (SDO), manufacturers have a new option to consider.

What Is The SDO Difference?

Instead of outsourcing segments of the process to different entities, SDO gives manufacturers access to a fully assembled, fully integrated platform, ready to facilitate business in Latin America.

SDO is a comprehensive suite of proven services that together comprise a turn-key system for doing business in Latin America – profitably. This tightly integrated network includes customer targeting and acquisition, sales and marketing, product logistics and delivery, and post-sales support teams throughout Latin America. This seamless platform translates into very compelling expense-to-revenue ratios.

The SDO model not only provides the best value in the industry, it also provides an unprecedented level of transparency. Operations are facilitated and tracked through a customized ERP system with real-time data, easily accessed online. From that centralized vantage point, there is no lag time or “smokescreen.” Manufacturers gain direct access to feedback from the channel, and in light of the current economic climate, that has never been more valuable.