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Home Depot's Failure in Chile

In this particular review, we are going to vividly highlight a well-publicized IJV failure in Latin America – well-known case of Home Depot’s expansion into Chile via a partnership with a major local retailer, Falabella, as a tool to explore some basic do’s and don’ts when dealing with IJVs.

Home Depot first entered the Chilean market with quite aggressive growth expectations built around the assumption that this high volume US model would work effectively abroad. As some researchers state, when sales failed to meet market expectations, Home Depot tried to force the issue by simply adopting an arrogant negotiating style with suppliers also and turning away Falabella’s efforts to provide advice on rescue measures.

Falabella appeared to be extremely unhappy with Home Depot’s overall performance and even tried to take part in in their decision-making several times, though without any result. Home Depot kept reminding their partner that they were the best home improvement retailer in the world, and management decisions need to be taken by them.

As the case study keeps unrolling to describe, Home Depot became quite insular in its decision-making. The company was eager to hold private board gatherings, excluding Falabella from participating altogether. Eventually, facing up to three years of consistent as well as deep losses, Home Depot suddenly abandoned the Chilean market by simply selling its 66% stake in the IJV to Falabella.

While the Home Depot/Falabella case study offers several international expansion lessons, it feels like that IJV appears to be the most important lesson. Well, if you are all geared up to enter a market with an experienced local partner, you require making the most of the partner’s local expertise. While it’s clear that Falabella was brought to the partnership mostly because it provided Home Depot with access to Falabella’s two million credit card customers, it’s also evident that, having the skin of one of Chile’s most effective companies in the game, Home Depot took minor initiative to get the local market expertise of its partner. If it had taken a more inclusive approach, Home Depot would have probably enjoyed a better chance of getting strategic benefits such as more accurate data on buying patterns of Chileans, information about counterparts, access to local management, not to mention better supplier management practices.

In this particular review, we are going to vividly highlight a well-publicized IJV failure in Latin America – well-known case of Home Depot’s expansion into Chile via a partnership with a major local retailer, Falabella, as a tool to explore some basic do’s and don’ts when dealing with IJVs.

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Assignment ID
100001384
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CREATED ON
August 27, 2016
COMPLETED ON
August 28, 2016
Price
$5
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