Nestle S Term Paper

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fragility of the Argentinean economy has been making headlines since the early eighties. Despite the reduced labor costs associated with the region, many obstacles are still solidly implanted before the foreign investor. With or without some of these obstacles the foreign market within Argentina would require considerable business skill and unceasing attempts to balance the situation to meet profitability standards. As a foreign investor in a volatile economic country the responsible reaction to the rapid changes within the fiscal situation of SANPA and Fruticon would be to remain within the country and continue to make constant attempts to regain control over the situation. Yet, this is not always the most prudent business decision.

In my opinion the marketing increase that occurred at the end of the 1979 business year placed to large a burden on the profitability of the market. Though the marketing expenditures, would seemingly be observed due to the projected growth resulting from the increased marketing, the business situation did not allow such an occurrence. The company market seems to have been borrowing to increase revenue and simply responding with an inability to recover from the debt, as accounts receivable was delayed beyond an absorbable level. (Liabilities totals from 39,224 pesos million at year end in 1977 to 568,596 pesos million at year end 1980)

The sales and profit ratios for the final three months of 1979 did show some improvement in the situation the, debtors value of 107, 309 in October, 135, 574 in November and 151, 720 in December far overshadow gains and exceed the reasonable level of absorption of such risk. The debtors levels broken down and compared gives an even more alarming picture: 1977 total debtors (A/R) 9,458 (Pesos Millions) compared to 1980 debtor level 199, 175 (Pesos Millions). The devaluation that started to increase as early as September should have been addressed by a Centre visit long before the December visit of zone controller Keller.

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The debt ratio is clearly a cause for alarm and intervention regardless of the instability of the market. Additionally, the amount of that debt that exceeds the 40 day standard grew steadily throughout the year of 1979 from 12,666 to 68,773. with the challenges in the economy these trends should have been answered for far before they were, as 1980 seemed to continue at the same alarming rate.

The findings of Keller also lend serious questions to the responsibility of the distribution capabilities of the company. "During my visit to out major distribution center on December 5, I came across an anomaly in the delivery of ordered goods; there was a delivery on that of and order invoiced November 11. The manager of the distribution center admitted he had several such undelivered invoices; the goods had not been shipped because they were physically not available." (809) Products should clearly be paid for prior to delivery and production should be stepped up to meet the demand of the upcoming sales season. The additional remarks by Keller of the storage of goods for high volume customers, further increasing the delay of the payment for these large orders is also a good indicator that the company needed internal audit and assistance.

The company center has had clear indications since the beginning of 1979 that the pressure associated with the fragility of the market and the necessity for careful and accurate projections and balances was beyond the reach of the current Argentinean administrative staff. A more team-centered approach should have been employed and staff should have been sent to assist the staff to meet the demands of the situation. As a responsible foreign investor the visitations and reviews as well as a constructive assistance, rather than simple urges by Smith should have been employed. The delay in reporting should have given the Centre some reasonable clue as to the serious state of the administrative conditions.....

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