Saputo Inc. is a Canadian company that produces milk products and sells them in over 40 different countries under a variety of brands. It is among the largest dairy producers in the world, with massive production and sales volumes. Saputo’s facilities operate in Canada, the United States, Argentina, Australia, and the United Kingdom. While some commonalities may be found between individual nations in this list, overall, they present a substantially diverse list. Many of the countries on the list are considerably different from Canada, but the company choose to expand into them and succeeded at the task. An analysis of the factors that have enabled it to accomplish these goals is warranted to understand the process. The CAGE framework will be used for this purpose, with each of the four factors listed in turn.
Cultural Distance
Culturally, many of the countries where Saputo operates are considerably similar, owing to their shared English language and history. Canada, the United States, and Australia are former English colonies, and the first and third still maintain a nominal relationship under the Commonwealth of Nations. Canada and Argentina are exceptions, as the former has a large section of French-speaking population and the latter has Spanish as its primary language. However, Canada is a developed Western democracy that has a long historical association with the United States and the United Kingdom. As such, the cultural distance between four of the nations where Caputo operates may be considered low. The company likely chose to expand to these locations because minimal adaptation would be required to succeed there. However, Argentina is a significant outlier in the hypothesis that warrants further investigation.
While England-derived cultures may not be dominant in Argentina, the nation’s residents still largely share a European heritage with the other four countries. Saenz et al. (2017) compare it to the United States using Hofstede’s dimensions and find that it is similar in power distance, masculinity, long term orientation, and indulgence while scoring much lower in individualism and much higher in uncertainty avoidance. With that said, these two differences may be explained by peculiarities of the US culture, which is known for its highly individualistic and risk-taking approach. As such, while there may be significant surface-level cultural differences between Argentina and the other nations where Saputo operates, the country is culturally similar to them when viewed through an applicable framework. There were few barriers to the expansion, though the aspect does not offer a reason to enter some of the markets shown, either.
Administrative Distance
As stated above, Canada, Australia, and the United Kingdom are members of the Commonwealth of Nations. While the organization plays a mostly nominal role without any practical authority nowadays, it is reflective of a long-time association between the countries. While the former two were originally colonies, they eventually obtained their independence peacefully while retaining a friendly relationship with the United Kingdom. The United States got sovereignty through a war, but over the centuries since, its relationship with the United Kingdom has also normalized. The countries have fought together through multiple wars and other conflicts, including both World Wars, and developed a powerful economic partnership. Moreover, the United States, United Kingdom, and Canada are all members of NATO, which creates another association between them and lowers the administrative distance.
With that said, Argentina is once again an outlier, as it was never under British rule and is not a NATO member. Moreover, as recently as 1982, the United Kingdom and Argentina engaged in the Falklands War, and the territory is still under dispute. With that said, Robson (2017) claims that, with recent changes to Argentina’s foreign policy and the United Kingdom’s search for partners to supplement the damage it may take due to Brexit, the relationship between the nations has become closer. Moreover, as a Canada-based company, Saputo Inc does not necessarily have to take this relationship into consideration as much as a British business would. The reason is that, as will be elaborated below, it is unlikely to transport products between the two nations. As such, overall, there were few administrative barriers to the company’s expansion into the countries where it now operates.
Geographic Distance
In terms of geography, the nations in which Saputo produces its products are positioned far apart. While Canada and the United States share a border, the rest are each located on a different continent. With that said, in Saputo’s case, this distance is not necessarily a problem. It uses these countries to produce its dairy products, which it then ships elsewhere, both domestically and internationally. As Milk supply (n.d.) states, freshness is an essential quality for milk that is used for its operations, and it is all sourced locally. As such, rather than geographic distance, the most important factor for the establishment of Saputo’s procedures is the presence of cattle farms that can consistently deliver the required amounts of milk. It can be assumed that each of the nations where it has established operations satisfies this criterion.
With this matter clarified, the positioning of the countries where Saputo operates begins to appear advantageous rather than problematic. The branches in Argentina, Canada, and the United Kingdom can supply South America, North America, and Europe, respectively. The Australian department will presumably produce goods for the nation and likely export to nearby countries such as New Zealand. The United States branch is an exception to this approach of establishing operations in a nation to supply a continent. However, it is likely a sufficiently large market to consume all products manufactured there internally, as will be elaborated upon below. It should be noted that this explanation omits Asia, where Saputo does not have any operation. Many factors can be invoked to explain this discrepancy, but this analysis will mark such a venture as a future possibility.
Economic Distance
With the exception of Argentina, all of the countries where Saputo operates should be considered wealthy, highly advanced economies. With that said, while Argentina is still developing and facing a number of issues, it is a large, robust market. World Bank (2020) places the US, UK, Canada, Australia, and Argentina in the 2nd, 9th, 16th, 18th, and 26th positions, respectively in its purchasing power parity-adjusted GDP rating. All of the nations listed boast economies in excess of 1 trillion dollars, which makes them attractive markets. With that said, the economies of the United Kingdom and Argentina do not necessarily distinguish them from their neighbors such as Germany and Brazil. Those nations have larger economies and largely the same qualities as the ones where Saputo chose to expand its business.
The case of the United Kingdom may be explained by cultural reasons, as it would be easier to operate a branch in an English-speaking nation, among other advantages. Argentina, on the other hand, has to be described in additional detail, as the reasons why it was chosen over Brazil are unclear. The neighboring nation has a larger economy and nearly five times as much population, and Saputo could have capitalized on the market without needing to consider international shipping. However, there is at least one potential explanation that relies on the differences in the economic development of Argentina and other South American nations. Alvaredo et al. (2018) claim that Argentina has been characterized by higher human development index ratings and lower income inequality than its peers. It has struggled to maintain these traits as its growth stagnated recently, but Saputo still may have chosen it for this similarity to the other four countries.
Conclusion
Overall, with the exception of Argentina, the nations where Saputo operates seem like logical choices. They are similar to Canada culturally and economically, and they also have low administrative barriers and trade with each other extensively. The reason for choosing Argentina was most likely geographical, as Saputo presumably wanted to expand its coverage into the South American market. While selecting prospective nations from where it could operate, it then chose Argentina due to its remarkable similarity to the other countries where it has established branch businesses. In terms of cultural dimensions, Argentina is remarkably similar to the United States, there are few administrative barriers, and economically, it is closer to developed nations in terms of income equality and human development index. In the future, the company may consider an additional expansion into Asia if there is a nation that can accommodate it and demand is sufficient.
References
Alvaredo, F., Cruces, G., & Gasparini, L. (2018). A short episodic history of income distribution in Argentina. Latin American Economic Review, 27(1), 1-45.
Milk supply. (n.d.). Saputo Dairy Australia. Web.
Robson, M. (2019). The UK and Argentina: Economic interdependence, informal empire, or just good friends? In E. Duarte & M. C. de Barros (Eds.), Navies and maritime policies in the South Atlantic (pp. 97-124). Palgrave Macmillan.
Saenz, M. G., McGregor, T., & Nguyen, M. (2017). A cross-cultural examination of the United States, Argentina, and Mexico using Hofstede’s dimensions and the world values survey. Humanities and Social Sciences Review, 7(2), 227-236.
World Bank. (2020). Gross domestic product 2019, PPP. Web.