Grupo Beta San Miguel Case

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GRUPO BETA SAN MIGUEL CASE Gnana P. Thallaparthy, Eric J. DeFreitas, Thierry L. Groga-Bada, Kaelynn Lemke SEPTEMBER 26, 2014 THE UNIVERSITY OF TULSA Collins College of Business 1. 2. IF POLYCROM WERE TO INCREASE ITS HOLDINGS IN SUGAR, WAS MEXICO THE BEST PLACE TO DO IT? WHY OR WHY NOT? WHAT ARE THE PRINCIPAL RISKS, AND WHAT CAN BE DONE TO MITIGATE THEM? In recent discussions, Grupo Beta San Miguel has been looking at expanding in the Mexican sugar market. With the government placing nine mills up for auction, the time to make the upward move in the sugar industry would be now. However, after careful analysis our group recommends that Beta San Miguel refrain from bidding on one of these new mills. With a 13.5% share in the sugar market BSM is already a leader in the Mexico. Acquiring a new mill that needs 100 million plus dollars of work with the current threats to the sugar market in Mexico is not recommended. In the paragraphs to follow our decision not to invest in another mill during the government auction will be explained. We will also address the key arguments for the acquisition of another mill and why these factors, while important, were insufficient to support a decision to buy another mill. Instead, we suggest that BSM take the money that would have been used to purchase the new mill and use it to improve their efficiency in the 6 mills they already operate. The leading international competitors, Thailand and Brazil, produce more sugar at half the cost of BSM. With these figures it is evident that there is room for Beta San Miguel to improve their production process. We will wrap up with the suggestions to improve efficiency at the current BSM sugar cane mills. Arguments Against Acquiring Mill To begin we look at the value of the peso. Since January 2000 the peso has appreciated compared to the US dollar from $1=9.28 peso to $1=13.02

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