Alternative Strategy Solution for Tia

Alternative Strategy Solution for Tia

The objective of this assignment is to offer an alternative strategy solution for the future of Tia. It also aims to present a critical analysis to Francisco de Narvaez’s decision to sell the company, by examining his rationale behind this decision, and by pointing out the reasons that led him not to consider other options.

Alternative Solution: An involvement with a strategic partner would be a feasible alternative solution for Tia.

a) Supporting argument # 1: It would be economically attainable for Tia to sell approximately half of its shares to a strategic partner. The involvement of a business partner would allow the company to deal successfully with the challenges of globalization and to withstand competition on the domestic market. For the purpose of this argument I will consider Wal-mart as a potential strategic partner.

Evidence: Narvaez would need to attract a global operator that has the financial capacity to establish its dominance on Argentina’s retail market. Wal-mart is a good choice because it enters the Argentine market as a powerful American retail giant that has the financial means to tackle the increasing global competition. If Narvaez is to pick up a strategic partner of a smaller scope, the new joint venture faces the risk of assimilation by other competitors. It is implied that with Wal-mart, Tia express stores will be well-financed. The most significant issue to be resolved in this merger would be the stock share. It is quite unlikely that Narvaez will agree to sell the majority of shares. Throughout his whole stay at Tia, Narvaez was never willing to release control. His determination in keeping strategic power is discussed later in the paper, when his decision to sell Tia is evaluated. Under these circumstances, it can be assumed that he would not be willing to sell more than 49% of Tia.

b) Supporting argument #2: If Tia teams up with Wal-mart its best strategy would be to maintain control and concentrate operations mainly in the countryside, and let Wal-mart take over the Tia Express stores in the cities.

Evidence: Empirical evidence (exhibit 4, p. 90) suggests that the population in rural areas accounts to 40% of the whole population in the country. Yet, it brings Tia more revenue than the urban regions (62% in the countryside as opposed to 38% in the cities), and 77% of profit (compared to only 23% in the cities). Also, as Narvaez admits, just before the sale