Atlas EléctricaInternational Strategy

Costa Rica

What is Atlas Eléctrica?

Established in 1961 in Costa Rica as a manufacturer of commercial refrigeration equipment

Is now the largest appliance factory in Central America (mainly focuses on refrigerators and stoves)

Has partnered with international organizations before, but is currently tied with Kelvinator (USA), Benavent (Spain), and Electrolux

The Large Appliance Industry

• Opportunities for growth in less-developed countries• Refrigerators are similar worldwide • Stoves subject to regional differences• Appliances sold through retail stores or directly to homebuilders• After-sale service • Regulatory standards for energy consumption • Assembly-line methods in region in which appliances are sold• Major components subject to economies of scale• Flexible manufacturing systems are allowing for more

customization• Market entry through joint ventures and acquisitions

International Mkt

World demand was projected to increase 3% annually through 2005

European population exceed USA and saturation level for many large appliance

Asian Mkt was expected to consume more appliance than north America and western Europe combine over the next decade.

Latin America also represented and opportunity due to the ongoing industrialization and urbanization of the region

Global CompetitorThe industry consisted of a few large regional players (only 5 significant manufacturers)

AB Electrolux Whirlpool GE appliances Maytag

1999 Sale 14,023 Million $ 10,511 Million $ 5,667 Million $ 4,323 Million $

1999 Profits 490 Million $ 347 Million $ n/a 328 Million $

sales by region

Europe 50% 23% n/a n/aNorth America 40% 58% n/a 89%Latin America 10% 3% n/a 11%Other regions N/A 16% n/a n/a

Sales by segment

Appliances 73% 79% n/a 86%Non-home product 18% n/a n/a n/aProfessional devices 9% n/a n/a 11%Others N/A 21% n/a 0

Numer of employees 92,926 61,000 50,000 20,021

Major brands Electrolux, White Westinghouse, AEG, Frigidaire, Kelvinator,

Volta, Washex, Husqvana

Whirlpool, Admiral, Acros, Kenmore,

KitchenAid, Supermatic, Sears

GE, Monogram, Hotpoint

Maytag, Admiral, Hoover, Norge Dynasty

Market position, 1998 2nd in the world 3rd in USA

1st in the world1st in USA

3rd in the world2nd in USA

7th in the world3rd in USA

Large Appliance Industry in Central America

Background HH :

● Low-income and lower-middle income account for 50% of HH● Middle income account for 30% of HH

50%

Trade Policy :

● Open to regional & global trade by 1. Reduce tariff 18% in 19992. Free trade area (FTAA) in 2005

Consumer behavior refrigerator market :

● Low income customer 7-12 cubic feet ● Middle income customer 13-18 cubic feet● High income customer 18 cubic feet

Low-income & Lower-middle income

30%Middle income

La Indeca

> Based in Maxico> Target Segment : Coverage > Company also imported 1. Refrigerators 5-18 cubic feet capacity 2. Washing Machine 3-10 kilo capacity 3. Stoves 20-30 inches > Strength : Extensive service & Distribution network in Maxico > Company has two technologyIn Maxico for developing product and processes

Competitor in Central American Market

> Based in Maxico > Joint Venture between Grupo Mabe & GE Appliances 49% ownership > Techology & Financial support GE > Product line : Refrigerators , Washing Machine and Stoves> Target segment in upper middle income Sold product more than 40 countries in America, EU and Asian Marketing operations in Guatemaka, El Salvadoe , Costa Rice etc

Established in El Salvador in 1961 and belong to Dutch company Target Segment in middle income & lower middle income Export to other Central American countries in 1977 By late 1990s : leader in Salvador & Guatemala markets , 2nd in Honduras Central American market share : under 20% in 1992 , 26% in 199040% market share in home country.Always Profitable

▪ Operated only in Salvadoran market▪ Small and family own

Prado

▪ Imported brands from Asia ▪ LG and Samsung

Others

1961, produced commercial

refrigeration for Costa Rican Market

and the Central American Common

Market. Regional tariff protection

ranged from 120% to 150%

1964, contract with Admiral (US), started 1st home appliance

production at industrial scale under Admiral

Brand.

1967, terminated contract with Admiral

and have technical licensing agreement with Kelvinator (US) and launched Atlas

Brand.

1970, added gas and electrical stoves based on technical supported from Benavent (Spain).

No local competitor.

1980, expand ed to washing machines, microwave

ovens, Moulinex small appliances

and Ray-Ban eyeglasses.

1989, stopped washing machines, microwave

ovens, Moulinex appliances, Ray-Ban,

commercial refrigeration business due to “not

profitable enough” (10% of company profits).

Atlas Eléctrica

Products and Market

• Refrigerators and stoves are primary product lines.• Middle income segment, but appealed to lower &

higher income segments. • Well price and aesthetically pleasing products.• Regular improvements to product lines for better

models. • Spare-part sales and services available to all of

countries of market area.• Wholesales operations in Guatemala, Honduras,

Costa Rica, Subsidiary in the Dominican Republic.• All customers are top priority.

Operations

• Manufactured external parts and assembled final products, sourced internal components from foreign manufacturers.

• In mid -1990s, invested in flexible manufacture system (FMS).

• Joint ventured with AB Electrolux.• Presence in both Central and South

America by launched at least 3 innovations per year in refrigerators and stoves and attended leading international fairs.

Atlas’s Internationalization Process• 1960s Began exporting refrigeration to Nicaragua

and Guatemala• 1970s Export refrigeration &Stoves in Central

America • 1995s Export to Maxico• 1970s White Consolidated Industry (WCI) License

to Manufacture and Market the White-Westinghouse , Kelvinator

• 1990s Established a joint venture with AB Electrolux

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