1. Latin AmericaExpansion StrategyLEAPFROG ENTERPRISES, INC. Presented by:Diana Chen | Patrick Gallagher | Ka-Wai (Gary) Hui | Le-Quyen Le | Amy Liu | Sarah Tate |Eli Wall1

2. TABLE OF CONTENTSINTRODUCTIONABOUT LEAPFROG 2STAKEHOLDER ANALYSIS 3CONSTRAINT ANALYSIS 5STRATEGIC GAP ..6STRATEGIC ISSUESSTRATEGIC PLANNING ISSUES ... 6METHODOLOGY .. 7INTERNAL ANALYSISCORE COMPETENCIES . 7VALUE CHAIN ANALYSIS ... 8FINANCIAL ANALYSIS 10EXTERNAL ANALYSISSIX-FORCE COMPETITIVE MODEL . 11STRATEGIC GROUPS .12EXTERNAL OPERATING ENVIRONMENT ..12ANALYSIS OF STRATEGIC ALTERNATIVESCRITERIA .. 13FIRST ELIMINATION, COUNTRY COMPARISON .. 14COUNTRY PROFILES (SEE APPENDIX FOR MORE DETAILED REPORTS)CHILE .. 15ARGENTINA . 17COSTA RICA 19COLOMBIA . 20VENEZUELA . 22STRATEGIC ALTERNATIVES 24PROJECTIONS .. 27IMPLEMENTATIONTIMELINE .. 28IMPLEMENTATION ISSUES .. 292 3. INTRODUCTIONABOUT LEAPFROGHistory. Michael Wood founded LeapFrog in 1995 to fulfill the markets need for educational toy products.Unlike other toy companies, LeapFrog puts learning first, making its sole focus to develop products that willprovide the most engaging, effective learning experience for all ages, in school or home, around the world.With its Educational Advisory Board, LeapFrog depends on leading experts who specialize in learningmethodologies to guide the development of its products. The Board is responsible for tailoring the LeapFroglearning experience to the latest trends in education. LeapFrog SchoolHouse then develops instructionalprograms for the classroom to enhance the learning process.In 1997 LeapFrog was acquired by Knowledge Kids Enterprises, an affiliate of Knowledge Universe, Inc.The following year the company acquired the assets of Explore Technologies. This secured the proprietaryNearTouch technology that led to the development of the LeapPad system, which is ubiquitous in many ofLeapFrogs products. The company went public in July 2002, raising $115 million through its IPO.Products. Products are sold in three distinct business segments: United States Consumer, International, andEducation and Training. In the United States Consumer segment, LeapFrog reaches the domestic massmarket by selling directly to retail stores, bookstores, and electronics and office supply stores. In theInternational segment, the company reaches consumers by selling directly to overseas retailers in the UnitedKingdom, Canada, France, Mexico, Australia, Japan, and Korea. Finally, in the Education and Trainingsegment, the company reaches the school market by selling directly to educational institutions, teacher supplystores, and through catalogs for educators.Looking to the future, LeapFrog is well-positioned to take on the global educational toy market. It has thebreadth of products to satisfy educational needs all over the world.Mission Statement.Become the leading brand for technology-based educational products for school, work, and home use for all ages around the worldVision. LeapFrog strives to be a company with a reputation for educational effectiveness, innovation and therespect of consumers, educators and business partners. Additionally, LeapFrog will aim to be a widelyrecognized brand name in all of its markets and will be strongly associated with helping people learn ininteractive, interesting ways. Next, LeapFrog will be a company that is closely connected to its customers.This connection will include consumer trust in the quality and effectiveness of LeapFrogs products and thefeeling that the company genuinely cares about the educational health and progress of its customers.LeapFrog products will be known for their educational effectiveness, fun, value, quality and innovation.LeapFrogs operations will be recognized as world class and will include innovative and respected researchand development, content development, manufacturing, distribution operations, innovative marketing, salesservice, timely shipping, and customer service with performance standards and measurement that are leadingin their fields, and all operations will be conducted at the highest level of ethical standards. Finally, LeapFrogwill be associated with helping kids, teens, adults and parents improve their lives by Learning something newevery day. 3 4. Objectives. When considering various market opportunities for LeapFrog, it is crucial to keep LeapFrogs shortrun and long run objectives in sight. These objectives can be separated into internal and external issues: Internal ExternalIncrease revenues and regainPush existing products for greaterinvestor confidencepenetrationShort runShort runStreamline business processes Acquire brand recognition around theCut costs worldImprove financial reportingprocessesExpand on ESL productsDevelop an international presence inFurther develop U.S. Consumer electronic education toys industryLong runLong runline Focus on competitive advantages in light of impending threats from competitorsSTAKEHOLDER ANALYSISIn evaluating the effects of entering the Latin American Market, it is critical to consider the costs, benefits,and risk and time preferences of all key stakeholders. We must assess their interests, and the ways in whichthese interests affect the riskiness and viability of international expansion.Internal StakeholdersShareholders. As a publicly traded company, the companys shareholders are some of the most importantstakeholders. Shareholders will ultimately fund this venture and assume the financial risk of this investment.In the twelve months following April 29, 2004, LeapFrogs stock price dropped from $22.05 to $10.01. GivenLeapFrogs sales slump in 2004, the pressure from shareholders to increase earnings growth has intensified.Shareholders are concerned with short and long-term growth. Successful expansion into Latin America willincrease revenues and potential earning in the long-run. This will help retain investor confidence and facilitatefurther stock appreciation.Corporate Management. Top management must achieve its annual sales and earnings targets. They are importantstakeholders because they have the power to influence the implementation of this venture. As profit-sharingleaders, they also assume financial risk in addition to the responsibility of the outcome. Capitalizing on thisgrowth opportunity will give them a first-to-market advantage in certain areas. Latin American expansion isalso in line with managements short and long-term goals, which are increasing revenues and existing productpenetration, and developing an international presence and expanding ESL products, respectively. This is ahigh priority project for managers since sales growth, profitability, and achieving LeapFrogs mission to 4 5. become the leading brand for technology-based educational products around the world, ultimatelydetermines their success.External StakeholdersRetailers. The primary objective of retailers is to stock their stores with profitable products in high demand.Their time preferences focus on rapid turnover of inventory. Their concern with high profit margins and thehigh price of LeapFrogs products relative to other toys and games in the market increases their risksassociated with purchasing LeapFrogs products. Given the volatile markets in Latin America, this is anextremely high priority risk. Consumer behavior tends to switch to cheaper goods during an economicdownturn, making retailers less likely to stock their shelves with electronic goods. Retailers profit focus couldpossibly conflict with LeapFrogs interests if they attempt to increase profit margins by selling the products athigher prices than suggested by LeapFrog, resulting in a decrease in demand. The retailers power andinfluence stem from their importance to the products success in these new markets since they interfacedirectly with end consumers. Retailers stand to benefit in sales and marketing if they continue to serveLeapFrogs target market. For example, Carrefour is already an established retailer of LeapFrog products.They are also the leading retailer in Argentina. They risk their established relationship with LeapFrog bytaking part in this Latin American expansion and risk decreased demand from consumers during unexpectedeconomic downturns.Distributors. Distributors serve as intermediary stakeholders that enable LeapFrogs products to enter the LatinAmerican market. They are looking for reliable suppliers from which to buy. It takes quite some time todevelop the trust needed to carry a significant amount of a suppliers product. The distributors distributionnetworks and relationships with retailers make them important to the success of LeapFrogs Latin Americanventure. Distributors stand to benefit due to their established distribution channels and the increase inbusiness from LeapFrog. LeapFrog could possibly lead distributors into new markets in which thedistributors will benefit. Expansion and developing strong relationships with suppliers and retailers is of greatimportance to distributors.Competitors. LeapFrog must consider the reaction of competitors if they expand into new markets. Withincreasing technological advances, availability of information and the shared multinational vision of manycompetitors, competitors such as V-Tech are always keeping track of LeapFrogs every move. Entry to LatinAmerican markets is open to competitors as it is open to Leapfrog. Competitors capabilities increase thelikelihood that any strategy LeapFrog tries to implement will be faced with hard competition immediately.Like LeapFrog, competitors risk losing market share if they are slow to enter the market. This is why it iscrucial for LeapFrog to seize the opportunity and move into these markets while they are still unsaturatedwith like products. Leapfrog should also develop competitive strategies to counter possible competition.Consumers. Consumers want to please and educate their children. They want products to be available whenthey need them, in the locations that are most convenient. Latin American consumers, especially children andyoung mothers are increasingly becoming more focused on brands. They are developing brand loyalty as theyhave less children and their standard of living increases. This is why LeapFrog needs to get its name out anddevelop strong brand recognition. Consumers face volatile economies and currencies, especially in Argentina,which makes it difficult for them to afford U.S. imports during economic crisis. As spending behaviorchanges, LeapFrog is not a viable option for them. Consumers stand to gain in the current economic recoveryand promising years to come as inflation stabilizes and purchasing power strengthens. English is extensivelytaught as a second language, so consumers would benefit from ESL products. 5 6. CONSTRAINT ANALYSISThe constraints that LeapFrog faces from entering Latin American markets, particularly Argentina and Chile,can be divided into external and internal constraints.External ConstraintsDecline in birth-rate in most of the Latin American countries. As children are the ultimate users of LeapFrogseducational learning products, the declining birth rates will directly affect the size of target segments in thetargeted Latin American countries.Low purchasing power of target population. Although most of the countries discussed in this report have decliningpoverty rates, the majority of the target country populations still have low purchasing power. While LeapFroghas relatively heavy monetary and non-monetary investment in product development and marketing, the lowpurchasing power of target market may place high pressure on Leapfrogs pricing strategy.Intense competition. As major competitors (e.g. Vtech, Mattel, Hasbro and Otto Krau) have already startedproviding similar products to the target segment and they have developed a relatively strong brand reputation,these limit Leapfrogs choices in marketing positioning and differentiation to successfully penetrate themarket and gain market share. Also, the strong presence of unbranded low-priced toys also places pressure onLeapfrogs pricing strategy.Internal ConstraintsLack of experience in the targeted Latin American countries. Although LeapFrog has presence in the Mexican market,they have no or relatively little experience in the primary target markets mentioned in this report. This will putLeapFrog in a disadvantaged constrained position in issues of human resources, inventory and publicrelations.High risk of sole focus on educational learning products. Although focusing only on educational learning products mayallow LeapFrog to develop a strong market position in a specific niche market, it also increases the risks offailure (e.g. actual demand is lower than forecasted, shift of consumers buying habits) at the same time.Too broad range of target segments. While LeapFrogs mission is to serve the school and home segments, strongfocus on both target segments at the beginning of market penetration will greatly increase associated risks andcosts. Therefore, it is suggested that LeapFrog focus first on one segment, and then gradually penetrate intothe other segment after gaining market share and brand reputation in one of the segments.Relatively low level of investors confidence. Partially due to the decreasing return on equity and revenue growth,investors may be reluctant to invest in developing new markets. This may increase LeapFrogs financialdifficulty in developing brand reputation and gaining market share.6 7. STRATEGIC GAP ANALYSISThe strategic gap is the discrepancy between a companys internal capabilities and external opportunities. Acompany has a positive strategic gap when there are external opportunities that they are not taking fulladvantage of. A negative strategic gap occurs when a company does not have the internal capabilities to fullycapitalize on all the external opportunities that are available. Both of these strategic gaps can be small or large.Analyzing a companys strategic gap helps us realize potential growth opportunities and areas forimprovement.In analyzing LeapFrogs strategic gap in the Latin American market, we looked at both LeapFrogs currentlyavailable Spanish-language product mix and the existing opportunities in Latin America for the sale anddistribution of those products. We also considered the risk of entering new markets. Current Capabilities Latin American Opportunity Gap Size Existing Spanish-Strong markets in Chile & Argentina PositiveLarge language products Strong relationships withIncreased presence of Walmart inPositiveMedium WalmartLatin America LeapPad sales tapering Untapped market potential forPositiveMedium off in U.S.LeapPad productGrowing demand for English- Available ESL technology PositiveMediumlanguage learning productsFrom this overview, we can see that in terms of the Latin American market opportunity, LeapFrog has amedium positive strategic gap. In order to capitalize on this gap, LeapFrog should look at expanding itsoperations in Latin America, which we have outlined below. STRATEGIC ISSUESSTRATEGIC PLANNING ISSUESCurrently, LeapFrog does not have a strong presence in the Latin American Toys and Games market. Beforeit expands into Latin America, LeapFrog must address a series of strategic issues present in these markets.After conducting research on many Latin American markets, we have identified key strategic issues as follows:1. Political stability This is an especially important issue for entering Latin American developing nations because the political environment strongly affects international business success. Specifically, if the government is supportive of open markets and foreign imports, then LeapFrogs entrance into that given market will be relatively smoother.2. Economic stability Do the consumers in the given target markets have the buying power to purchase LeapFrogs branded products? Can the countrys economic infrastructure support branded recreational products such as LeapFrogs?3. Demographics How do we identify which segments of the market LeapFrog should target? What is the future trend for the future population breakdown? Are birth rates increasing or decreasing? Is GDP per capital increasing or decreasing?4. Demand How much emphasis is placed on education and English as a Second Language (ESL) in the given market? Have consumer habits shifted from generic toys and games products to more branded products and/or electronic products? 7 8. 5. Retail landscape Who are the existing retailers in prospective countries? Which are the bestretailers to target for LeapFrog distribution? 6. Competitors Who is already operating in the given markets? What market share do they hold?What are their best performing products? How should LeapFrog act given that information? 7. Forecasting What are LeapFrogs potential risks and returns from entering given markets? Howwill we mitigate these risks and maximize returns?METHODOLOGYTo tackle these myriad of strategic issues, we conducted in-depth secondary and primary research into targetLatin American markets and identified, to the best of our resources, each countrys profile surrounding thesekey issues. In this process, we used a top-down approach by looking at the overall market conditions beforenarrowing down to industry specifics. From this information, we then extracted information relevant toLeapFrogs market entry and assessed each countrys market potential given this information.We started with all of the countries in Latin America and narrowed them down to 5 countries based on GDPper capita and general economic factors. From there, we identified two primary markets and three secondarymarkets for LeapFrog to seriously consider as viable markets to enter. For the two primary markets, weobtained retailing and market trends information specific to the Toys and Games industry.INTERNAL ANALYSISCORE COMPETENCIESLeapFrog is in a league of its own when it comes to educational toy products. The company positions itself asmore of an educational learning center than a traditional toy company. Education comes first for LeapFrogwhereas its main competitors Fisher Price-Mattel and Hasbro primarily focus on toys and games, and V-Techis primarily a technology company that happened to dabble into educational games.The Design, Development, and Marketing Process. While other toy companies biggest concern is market demand,LeapFrog is preoccupied with creating the most effective learning tool for kids today. Learning always comesfirst at LeapFrog and this is reflected in the unique way products make their way from the design room tomarket. The process starts with a rigorously proven learning methodology developed by LeapFrogs owneducation experts. This content is then delivered as a learning experience in toy-form through the use oftechnology.Education Advisory Board. Sound education principles are the core values of LeapFrogs brands and products.All of LeapFrogs content and curriculum is based on a proprietary method of learning developed by theirown education specialists with the assistance of the Education Advisory Board. These experts help LeapFrogidentify what children are learning currently and how they learn most effectively.International Market English as a Second Language. LeapFrogs unique international consumer strategy includesthe creation of LeapFrog products in foreign languages as well as marketing English-language products as atool for learning English as a Second Language (ESL). Aside from entering the international toy market,LeapFrog is creating its own niche market by offering ESL products for selected countries such as Japan,Korea and Mexico. Not only is LeapFrog aiming for the international consumer market, it also aims todistribute directly to the public and private schools of these countries. Because education is at the heart ofLeapFrogs business concept, it hopes to become an internationally recognized classroom brand for English8 9. as a Second Language learning tools. As our society continues to globalize, there will be increasing pressurefor foreign children to learn English as a skillful asset. International demand for LeapFrog products isexpected to grow as a result of this trend.Education and Training (SchoolHouse Division). Aside from tapping the traditional consumer market to promoteits products, LeapFrog has also developed a SchoolHouse division in 1999 that offers supplemental pre-kindergarten through 8th grade school curriculum programs. These programs incorporate the companysproprietary technology personal learning tools (PLTs) as well as research-based instructional principals. TheSchoolHouse division curriculum provides over 6,000 pages of interactive content that includes instructionsand assessment for subjects such as early literacy, math, science and special education.Advertising and Marketing. LeapFrog has a vision of becoming the brand that parents and educators will seek tosupplement a childs learning needs. In researching target markets, LeapFrog has to investigate the traditionaltoy market as well as consider the education trends of that region. In addition to network and cable televisionadvertisements, LeapFrog also looks to education institutions to establish their brand as an essential tool forclassroom learning.VALUE CHAIN ANALYSISLeapFrogs primary activities involve manufacturing, research and development, distribution, and marketing.LeapFrog is the global leader in educational toy products. The company creates value from its cutting-edgeproprietary technology, an expert education board, as well as creative product designs. LeapFrog has alsostrengthened its business by forming partnerships with popular labels such as Disney and creating brandawareness among the general public through advertising. In addition, LeapFrogs manufacturing operations inChina and Hong Kong produce products at a lower cost, thus giving them a greater margin on sales in the USconsumer market. Furthermore, LeapFrogs current activities involve seeking new products and staying aheadof market demand and competitor advances.9 10. Inbound Logistics. Leapfrogs current manufacturing operations are conducted overseas. The company in-housedeals with logistics primarily associated with technology development, since product transportationprocedures are already taken care of through a carrier service partnership. The procurement departmentworks within LeapFrogs headquarters to coordinate supplementing raw materials for the manufacturingprocess.Operations. Leapfrog employees conduct initial product research and development at the companyheadquarters. The creative design department first manufactures a prototype which is then presented beforethe board for approval. The design team is then either improves the product or sends it overseas to bemanufactured in bulk. LeapFrogs strategy stresses selling an idea within the company first, in order toproduce truly high quality educational toys.Outbound Logistics. The manufacturers in Asia are required to collaborate with LeapFrog, who determineswhich retailers the finished products will go to. LeapFrog is also pursuing its vision of globalization by sellingtheir products in retailers around the world. In order to achieve this goal, the company has equipped itsproducts with foreign-language integration capabilities. By developing existing products in different languages,LeapFrog is able to gain additional value without incurring extra cost when expanding into foreign markets.The company is currently exploring a variety of potential target markets to fully capitalize on its Spanish-Language platform.Marketing and Sales. LeapFrogs product line stresses the importance of Learn Something Everday. Whiledevelopment and manufacturing departments both create a layer of value, sales and marketing teams alsoproduce value by generating product awareness among the respective age-groups. LeapFrog currently sells itsproducts via their online store, as well as through promotional catalogs and television advertising. Byencouraging brand recognition, LeapFrog hopes that its products will come to penetrate every household,creating value not only for itself but for every school-aged child as well.Service. LeapFrog increases product value by providing customer service for its products. Through this process,LeapFrog consumers are not only paying for the value of the product itself, but also for the help-servicesprovided as well. This segment of the business enables the company to gather consumer opinions from theend users and communicate it back to the design or manufacturing rooms. Frequent buyer interactions alsohelp LeapFrog stay ahead of consumer demand, so that it is able to offer successful products.Human Resource Management. LeapFrog management stresses the importance of education to its employees. Inorder to ensure that LeapFrog receives maximum value along its production chain, company employees workas a team to guarantee the quality and content of all LeapFrog merchandise. LeapFrog team members areconstantly reminded of the companys vision to provide educational learning toys to every household aroundthe globe. Because every employee is chosen for their passion for LeapFrog products, they are able to providethe company with extra value by generating enthusiasm and efficiency.Technology development. LeapFrog is the leader in providing cutting-edge educational toys. Constant productinnovation and discrete technological design are two of LeapFrogs strongest competitive advantages. This isa business that seeks value from being an innovator and always staying one step ahead of the game. Sinceproducts in the toys and games industry have a relatively short life cycle, originality becomes especiallyimportant in adding value for the company. With each new product line, LeapFrog gains value from brandrecognition and hyped up consumer demand for its novel technology. 10 11. FINANCIAL ANALYSISTo determine LeapFrogs financial strength, we have analyzed a number of financial ratios. We thencompared and contrasted LeapFrogs ratios with those of Hasbro and Mattel, LeapFrogs two maincompetitors. It is worth mentioning that Hasbro and Mattel are not perfectly comparable to LeapFrogbecause of their respective sizes and breadth of products in the toy market. They are also not directlycomparable because neither of the companies focuses directly on educational toys as LeapFrog does.Ratio LeapFrog Hasbro MattelDiluted EPS 0.53 0.510.56Return on Equity -0.99% 12.59%18.64%Revenue Growth -7.89%0.41% 3.86%Price/Book1.92 2.152.68Diluted Earnings per Share (EPS). EPS is commonly used to evaluate a companys financial performance. Itmeasures the total net income per number of outstanding shares. (Diluted earnings per share considers thetotal number of shares if all convertible securities were exercised.) Because of the potentially volatile natureof EPS, it is important to evaluate its historical movement. Looking at LeapFrogs past quarterly and annualdata, it is apparent that the company is recovering from a dip in earnings in 2004; it has a strong current EPS(3Q 2005) of 0.53, up from 0.33 same time last year. Hasbro currently has an EPS of 0.51 and Mattel has anEPS of 0.56. All three companies find themselves in a comparable range with respect to this measure.Return on Equity (ROE). ROE measures a firms total net income per dollar invested by stockholders. It is usedto evaluate the profitability of a company. LeapFrogs ROE at the end of 2004 was -0.99% while Hasbro andMattel have respective ROE ratios of 12.59% and 18.64%. LeapFrogs low ROE may be a result of its lessthan average earnings performance from the previous year. This ratio alone cannot indicate LeapFrogs long-term success and firm value because it may change once 2005 fiscal data is published. LeapFrog just launchednew products such as the FLY Pen in 2005, and we can expect its revenue to increase from last year. Also,LeapFrog has had a historically strong ROE of around 20% from 2002 to 2004, and this only droppeddramatically after their slow year in 2004.Revenue Growth Rate. Revenues are important indicators of how well a companys sales are doing. It is alsovery important to consider revenue growth rates because they serve as predictors for future growth.LeapFrogs revenue growth rate since the previous year was -7.89%. This is surprising considering that thecompanys 5-year growth rate is 54.87%. LeapFrog experienced a sales slump in 2004, but we do not expectthis slump to continue as LeapFrog enters the 2005 shopping season and releases new products in 2006.Hasbros revenue growth rate since the previous year was 0.41% and Mattels revenue growth rate was 3.86%.These are relatively modest figures for both companies according to historical figures.Price-to-Book Ratio (P/B Ratio). Similarly to the P/E ratio, the P/B ratio measures how aggressively the marketvalues a company. LeapFrogs P/B ratio of 1.92 is significantly lower than both that of Hasbro and Mattel,which are 2.15 and 2.68, respectively. Therefore, either LeapFrog is not seen as performing as well as itscompetitors, or it is undervalued by the market. LeapFrogs P/B ratio was higher in both 2002 and 2003although it has been steadily declining since then. 11 12. EXTERNAL ANALYSISSIX-FORCE COMPETITIVE MODELPotential Entrants(Threat of New Entrants: High)Existing RivalryBuyers Supplier (Market Share &(Bargaining Power of(Bargaining Power: Brand Reputation: Retailers & Ultimate Low)High)Consumers: Medium) Substitutes (Threat of Substitute Products: Low)Suppliers (Bargaining power of suppliers) Low (Leapfrog can get their supplies from a variety of suppliersat a competitive price.)Substitutes (Threat of substitute products) Low (Although there is a variety of toy products available inthe targeted Latin American countries, they may not substitute Leapfrogs products which have a strongeducational emphasis.)Buyers: The Ultimate Consumers (Bargaining power of the ultimate consumers) Medium (Althoughthere are relatively strong competition in Chiles toy market, there are no existing educational toy companiesin Argentina. So if the ultimate consumers want to purchase toys for educational and learning purposes, theymay not have many choices.)Buyers: The Retailers (Bargaining power of retailers) Medium (Although there are many players in thedepartment store and hypermarket industry, not all of them have toy sections or sell childrens products.Therefore, the retailers with experience in selling children products have relatively higher bargaining powerthan other retailers.)Potential Entrants (Threat of new entrants) High (As there is a trend for both high-tech companies andtoy companies to produce educational toys and games, there is a high level of competitive threat from thehigh-tech and toy industries.)Existing rivalry High (Those who have penetrated into the Latin American markets might have alreadyobtained market share and built a relatively strong brand reputation.) 12 13. STRATEGIC GROUPSA strategic group is the collection of firms that operate in the same market environment using similarstrategies, such as product development, target markets, and pricing policies. A firms position within itsstrategic group is based on its core competencies in relation to the group. LeapFrog operates within twodistinct strategic groups which include the toys and games market and the electronics market.Toys and games. In Toys and Games, LeapFrogs top competitors include Mattel and Hasbro. As the top twotoy makers in the world, both Mattel and Hasbro share plenty of shelf space with LeapFrog, utilizing Wal-Mart, Target, and Toys R Us as their main distributors. These two companies began as purely recreationaltoy manufacturers. However, recently they have made advances into the educational sphere as well. Forexample, Mattel has made a strong move into the educational toy market with its new partnership withScholastic Entertainment in early 2005, producing Read With Me DVD! and PowerTouch learning system.This new talking book technology, however, is currently being sued by LeapFrog for patent infringement.Electronics. In the Electronics strategic group, LeapFrogs main competitor is VTech Holdings. Traditionally,VTech has focused its efforts on developing cordless phones, pagers, and personal digital assistants. Recently,it has shifted its focus towards its Electronic Learning Products due to poor performance in itstelecommunication products lines. Although not as large as Mattel or Hasbro, VTech is a strong competitorto LeapFrog because it targets the same infant to high-school market segment with similar technology-basedlearning toys as LeapFrog does. Most recently, VTechs new electronic learning products, V-Smile and V-Pocket, have been well-received by consumers and are viewed as a major threat to LeapFrogs position as theleader in the educational technology sector.Toys & GamesEducationTechnologyMattel & HasbroV-TechLeapFrogRight now, LeapFrog maintains a strong position in both strategic groups by focusing on its electroniceducational toys niche. However, since its three main competitors are moving into the same education sphereas LeapFrog from their respective toys and electronics groups, LeapFrog must recognize these advances aspotential threats and response accordingly to ensure that its competitive advantages are maintained.EXTERNAL OPERATING ENVIRONMENTBefore making any strategic recommendations for LeapFrogs Latin American operations, it is important tofirst understand the external operating environment of the business. One of the key factors in analyzing thisenvironment is assessing to what extent the industry, in this case the electronic learning toys industry, isfragmented, emerging, maturing, declining, and/or globalizing.13 14. Category Definition To What Extent? FragmentedThis is an industry in which no firm has overpowering Industrymarket share and can strongly influence the industry outcome. Usually fragmented industries are populated by a large number of small and medium sized firms. Not at allHigh EmergingNewly formed or re-formed industries that have been Industrycreated by technological innovations, shifts in relative cost relationships, emergence of new consumer needs, or other economic and sociological changes that elevateNot at allHigh a new product or service to the level of a potentially viable business opportunity. MaturingIndustries that pass from periods of rapid growth to Industrymore modest growth. The market is totally saturated, demand is limited to replacement demand, and growth is low or zero.Not at allHigh Declining Industries that are treated as those that have Industryexperienced an absolute decline in unit sales over a sustained period, which is characterized by shrinking margins, pruning product lines, falling R&D andNot at allHigh advertising and a dwindling number of competitors. Globalizing An industry in which the strategic positions of Industrycompetitors in major geographic or national markets are fundamentally affected by their overall global positions. Such an industry requires firms to compete on aNot at allHigh worldwide basis or face strategic disadvantages.ANALYSIS OF STRATEGIC ALTERNATIVESCRITERIAIn order to decide which Latin American countries to go into, we assessed each target market based on thefollowing criteria: GDP Per capita economic stability and purchasing powerEducation Levels size of market, key players and EFL age, family size, socioeconomic status Demographics current and future population trends Consumer Behavior buying trends, preferencesRetail Landscapes key players and possible distributors government support of open markets andPolitical Stabilityforeign imports market share, key competitive products Competitor Presence marketing and distribution channels Toys & Games Market Trends Industry size, key players and market share 14 15. FIRST ELIMINATIONTo decide which countries to assess in the first place, we ranked the various countries based on GDP. Then,we chose the countries with the highest GDPs and best business environments to further research.GDP per capita (2004)70006000 US dollars50004000300020001000 0 a aiti la icoi leia aycaasina aguanHaelmaChmb ur Riexgunt razuuy ndsta lo tege M racaneGCoHo uaPaAr Co Ve Ni GThrough this initial analysis, we have identified Chile, Costa Rica, Venezuela, Argentina, and Colombia asgood markets to conduct further analysis on.COUNTRY COMPARISONNext, we looked at the five markets along the main criteria of political stability, economics, demographics,retailers, and competitors. The factors that indicate a strong operating environment are highlighted in green,the medium opportunity factors are in yellow, and the factors with poor implications for LeapFrog arehighlighted in red. Political Stability Economics Demographics RetailersCompetitors Stable govt,High GDP, soundEducational Department Strong existing Chile Chile open market fiscal policiesfocus, improved stores and competitors policy living standardshypermakets Lax govt policy, Improving sinceDecreasing birthWalmart andNo existing Argentina Costa Rica Colombia Venezuela anti-American,2003 rate, increased indigenous educational toy against open mkt toy spendingretailerscompanies Stable govt, Growing GDP, Small affluentWalmart owns Mattel, Corp. de backed by the large national mkt., Western largest retail Supermercados U.S.debt influence market share Unidos (CSU) Relatively high Recovering but Declining birth Department Mattel, corruption, unstable, poverty, rates, increasing stores and unbranded toys, uncertain futureincome inequalityeducation hypermarkets black market Anti-American Non-transparentDeclining birth Shrinking retail Mattel, black sentiments, policies, growingrate, 80% livemkts, growingmarket unstable future govt interference in povertyblack marketFrom this analysis, Chile and Argentina appear to be the most optimistic markets, with Costa Rica coming ina close third. Below are more detailed analyses of these five markets followed by recommendations forLeapFrogs Latin American expansion.15 16. COUNTRY PROFILESCHILEStrengths Weaknesses Open market economy, stable govt Decreasing birth rates 80% of toys and 100% of video Recovering economy games are imported Short product life cycles for toys Growing education awareness Heavy piracy for video/PC games OpportunitiesThreats Retail consolidation led to more credit Highly competitive toys and games Increasing Internet penetration market (both branded & unbranded) More shelf space for toys in both Presence of VTech as strong department stores & hypermarkets competitor in educational learningproducts (ELP)CHILE MARKET OVERVIEWChile proves to be an attractive market for LeapFrog given its reputation for sound regulatory policies, freetrade agreements, growing purchasing power, increasing focus on education, and established retail landscape,as outlined below.ECONOMICS GDP (purchasing power parity per capita): US$ 10,893.46 Annual GDP growth rate: 6% Consumer expenditure on education: US$ 890.64 (highest in LA) Free market orientation Decreasing percentage of population living below poverty Growing upper and middle classes (48% fall into A/B category) Toys and games industry expected to grow 77% between 2003-2008POLITICAL Main political parties committed to integrating Chile into world economyENVIRONMENT through bilateral and multilateral trade agreements Secure contractual agreements (strongest in LA) Few restrictions concerning foreign investments and imports Average import tariff of 2% in 2004 Platform Investment Law: multinational corporations earnings frominternational operations are tax exempt in ChileDEMOGRAPHICS Declining birth rates due to higher living standards and health care Higher education grew 157% from 1999-2003 Education-related spending grew 833.6% (8.6% of household inc. in 2005) 96% of all children enter Chiles education systemEXISTING Branded toys make up 60% of toys and games sales 16 17. COMPETITORS Non-branded toys make up 40% of toys and games sales VTech in market with childrens computers priced from US$38-233 Major competitors (market share):o Mattel (23.2%)o Hasbro (16.8%)o Otto Kraus (6%) Smaller domestic players have adopted niche strategies to stay afloato Otto Kraus: produces toys too expensive for imports, focuses on institutional marketo Ludik: produces wood construction toyso Imexporta: infants educational computer niche, retails VTechs educational computersRETAIL Branded toys mainly sold through department storesENVIRONMENT Department stores accounted for 50% of toys sales value in 2003o Popular because they offer store credito Major department stores are: Falabella Ripley Almacenes Paris La Polar Parque Arauco Hypermarkets accounted for 20% of toys sales value in 2003o Major hypermarkets are: D&S Lider (bought Carrefour): owns 15% market share of toys atretail level Cencosud Many specialized toy stores forced out of business Department stores and hypermarkets try to import directly from manufacturersso they can offer lower prices to consumers Institutional market sells toys directly to corporations that buy toys for theiremployees children as part of compensation package Major cities to target: Santiago, Puente Alto, TemucoTOY MARKET Video games growing rapidly among high-income consumer groupTRENDSo Accounted for 7.8% of toys and games industry in 2003 High prevalence of piracy accounts for 70% of video game sales or anequivalent of US$15.6 million Quality and safety of toy products are of much higher concern now Children are increasingly brand-sensitive about the toys they want Multinational toy brands must engage in heavy television advertising to fight formarket share17 18. ARGENTINAStrengths Weaknesses Recovering economy Stagnant trend for toys Spend on brand name products Low disposable income American and indigenous retailers Social and political instability Parents toy spending increase, Consumers spend for subsistencethough family shrinks OpportunitiesThreats Upper class rapidly increasing Anti-American sentiments More television and internet usage Reluctance to open-trade policies Brand awareness via Book Fair in Peso depreciatesBuenos Aires VTech potentially enter Higher educationARGENTINA MARKET OVERVIEWArgentina has been long inflicted with social, political and economic instability, but there are periods duringwhich Argentina functions like a robust growth country and investment opportunities are nourished. Theinconsistency of its socio-political and economic environment coupled with noticeable potential to growsolicits further analysis before determining whether Argentina is a viable market for Leapfrog.*Data are 2004 figures unless otherwise indicated.ECONOMICS GDP (purchasing power parity per capita): US$ 12,884 Annual GDP growth rate: 9.0% Consumer expenditure on education: US$ 2.16 billion (2005) Moving from free-market orthodox policies Population living below poverty is declining Population of upper class growing fastest Toys/games industry expected to be smaller part of consumption in years 2005-2015POLITICAL Current President pushes for government to be more active in controllingENVIRONMENT economic conditions; departs from free market policies. Differs from IMF on matter of economic policy, but arranging to sign contractsto re-finance majority of public debts Although departing from free trade, President strive to maintain good relationswith US government and BrazilDEMOGRAPHICS Gradually declining birth rates Growing higher education, especially among women18 19. 97% literacy rate; most people get free primary education Decline in quality of public education fosters growth of private education (25%of students) Over 250,000 children under age 14 participate in labor force The White population (85%) is financially better off than non-whitesEXISTING Peso devaluation makes imports very expensive, leads to exportingCOMPETITORS Increased sophistication of traditional toys; adopt technologies Neighborhood stores became popular because they require less travel Traditional toy retailers gained bargaining power due to good relationship withlocal manufacturers Growing penetration of video games Major competitors (market share in 2003):o Mattel (24.5%) Barbies & Hot Wheelso Hasbro and Lego (9.1% and 4.6% market share before withdrawing in 2003) Small local companies grew as a result of peso devaluationo Ruibal Hnos (10.9%) indoor games similar to Monopolyo Lionels (10%) diversified, including educational toyso Dimare (8.2%) diversified, self-manufactured, importso Antex Andina (7.3%) target older girlso Others: Caupur, Caffaro Hnos, YetemRETAIL Domestic toy specialists account for 50% of market share in toysENVIRONMENT o Consumers are conservative and dont change spending habitso Low penetration rates by supermarkets Supermarkets/hypermarkets/discounters hold 40% market share in 2003; chainsexist in large citieso Carrefouro Wal-marto Toys R Us imports expensive, switching to locally manufactured productso Coto local chain Department stores increase to holding 5% market share in 2003 Large chains like Carrefour, Wal-Mart and Coto allocate 5-12 aisles to toys andgames, depending on the season Supermarkets allocate 2 3 aisles to toys and games, depending on season; offersignificant discount after high season Expensive toys, ranging from US$10-14, are usually bought on short term creditfor lower income groupsTOY MARKET Video games sales increased by 16% in 2003TRENDSo Targets affluent consumers, players 6-years-old to adultso Software piracy extremely prevalent, but there is a lack of government enforcemento Main players: Nintendo leads, followed by Sony and Microsofto Electronic retailers hold 65% of market share; ability to maintain competitive priceso Largest electronic retailers are Fravega and Garbarino Consumers prefer brand name products if they can afford them Pre-school toys projected to increase by 133% by 2008 19 20. Parents want value-added toys, i.e. educational Argentinean childrens consumption pattern likely to reflect that of children in Mexico because television programs are transmitted down from Mexico Retailers continue to increase advertising during Dia de Ahijado in May so sales are less cyclicalCOSTA RICAStrengths Weaknesses Strong emphasis on education Small population: 4.16 million Political stability Past Financial problems: $270M American & European influenceDebt in 2003 and Public Debt High GDP Per Capita: $9,454controlled 55% of the GDP 19% of Costa Ricas population is Consumers spend at subsistencethe 0-9 year-old age bracket level, so prefer inexpensive toysOpportunities Threats Walmart purchased a 33% interest Foreign investors entering within retail chain CARHCO (controls emphasis on technology sector124 CSU chains in Costa Rica) Child preferences change rapidly Mattel/Fisher Price is only main Potential for competitors to entercompetitor in Costa Rica.the market and open relations with established retailers like Wal-mart Reluctance for open-trade policiesCOSTA RICA MARKET OVERVIEWCosta Rica has long been inflicted with financial problems, but beyond its flaws, the country is rapidlyimproving with investment opportunities and a recent emphasis on education. The political stability,unsaturated toy and retail market, and strong Western influence have made Costa Rica a viable market optionfor LeapFrog. The education market in Costa Rica presents a potential opportunity for LeapFrog to enter thecountry. Leapfrog needs to take advantage of its current partnerships to get its products in the biggestretailers with extreme visibility. ECONOMICSGDP (purchasing power parity per capita): US$ 9,454GDP is expected to increase by 3.2% (2005)Annual GDP growth rate: 3.9%Consumer expenditure on education: US$ 400 M (2005), US$ 350 M (2004)The economy is booming; the government has implemented a 7-yr plan with a major focus on the high tech industryImports and exports play a large role; main export and import partners are the United States, Mexico and Brazil. POLITICALPush for government to take more active role in economic conditions and open-20 21. ENVIRONMENTmarket policy High political stability draws foreign investors to the country. Traditionally good ties with the United States Stable democracy since 1948 Significantly reduced duties and import taxes in past decade; tariffs are 0-15%, but luxury items (ie. cars) can be subject to rates up to 80%.DEMOGRAPHICS Poverty rate declined from 32% in 1991 to 18.5% in 2003 Children aged 0 to 9 years comprise 18.75% of total population Birth rate declined from 20.5% in 1999 to 17.4% in 2003 Increased higher education, especially among women 96% literacy rate; most people get free primary education 23% Internet penetrationRETAIL Walmart acquired a 331/3% interest in CARHCO from Dutch retailer Royal AholdENVIRONMENTNV in 2005 o CARHCO is Central Americas largest retailer, with 363 supermarkets in Guatemala, El Salvador, Honduras, Nicaragua and Costa Rica o CARHCO controls 124 retail stores in Costa Rica with its biggest chain being Corporaction de Supermecados Unidos (CSU), which controls all of the stores. CSU operates several retail formats inlduing Mas X Menos and Pali discount stores, La Unin supermarkets, Hiper Ms hypermarkets and warehouse giant, Maxi Bodgea outlets.COLOMBIA StrengthsWeaknessesStrong emphasis on education Small population: 4.16 millionPolitical stability Past Financial problems: $270MAmerican & European influenceDebt in 2003 and Public DebtHigh GDP Per Capita: $9,454controlled 55% of the GDP19% of Costa Ricas population is Consumers spend at subsistence the 0-9 year-old age bracket level, so prefer inexpensive toys OpportunitiesThreats Walmart purchased a 33% interest Foreign investors entering within retail chain CARHCO (controls emphasis on technology sector124 CSU chains in Costa Rica) Child preferences change rapidly Mattel/Fisher Price is only main Potential for competitors to entercompetitor in Costa Rica.the market and open relations with established retailers like Wal-mart Reluctance for open-trade policies21 22. COLOMBIA MARKET OVERVIEWColombias market attractiveness is comparatively lower than the major target markets (i.e. Argentina andChile). Although Colombia has one of the highest GDP growths in Latin America, the uncertainty of itsmajor exports, political instability, and its widespread poverty and income inequality make Colombian a lessfavorable target market. ECONOMICS One of the highest GDP growth in Latin America o 2004 GDP = US$281.1 billion o 2004 GPD per capita = US$6,600 Economic reforms contributed to economic recovery Growth in private consumption = 4.0% Widespread & rising poverty (from 50% to 64% in 1997-2003) &income inequality (Gini Index = 57.6) US as the main partner for Colombian exports (42.1%) and imports(29.1%) Uncertainty of future oil exports and coffee POLITICAL ENVIRONMENT Growing political uncertainty - constitutional ban on Uribes requestfor re-election National corruption = 6.3 (ranked 72nd among 130 countries) DEMOGRAPHICS 2nd largest Spanish-speaking population Relatively young population (50% population under 25; 21%population in the babies & infants category) Decline in birth rate (20.82 per 1,000 population) and fertility rate Relatively high literacy rate (92%) Increased consumer expenditure on sports goods, toys and games Parents tend to spend more on each child TECHNOLOGY Increased emphasis on modern communication services Relatively low PC (5.3%) and Internet (3,585,688 users) penetration Radio has highest penetration among all means of media EXISTING COMPETITORS Mattel/ Fisher-Price is major competitor o Has own offices & warehouses in Colombia o High brand reputation o Different products for children at different ages Other competitors include the black market and unbranded low-priced toys from Asia RETAIL ENVIRONMENT Growing number of national and international retailers Hypermarkets/supermarkets (Exito, Carulla Vivero, Carrefour,Panamericana, Alkosto K-Tronix, La 14 Cacherreria La 14) Department stores (Iserra) Toy specialty stores (Pepe Ganga) MARKETING Radio has most widespread penetration among Colombian population Evening TV and weekend newspaper have high potential as effectivemarketing channels Increase popularity in magazine (e.g. mothers magazine) Sponsorship has shown to be an effective marketing tool (E.g. Malta,Bon Flan and Fruitino) 22 23. VENEZUELAStrengths Weaknesses Toy outlets expected to grow sales Political instability (Chavez) by 60% over the next four years Unemployment is 11.8% (2005) Retailers Makro and Exito already Around 80% of all Venezuelans target younger customers live in poverty; this decreases Parents spend more on children asparticipation in the retail market socio-economic levels rise Lower classes (SEL) are increasingas percentage of the total popln. OpportunitiesThreats Chavez enacted reforms, including Lifted restrictions on black market increasing education spending The retail industry was hit hard by Children are increasingly exposedeconomic pressure in recent years. to mass media, especially television Mattel has ten years of sales in Rising Internet penetrationVenezuela & office in Caracas;distributes straight from Mexico.VENEZUELA MARKET OVERVIEWThe Venezuelan economy is down 25% from 1999 due to recent social and political instability, and the oilcrash in the 1980s. Currently, some financial numbers are improving for the country, but they tend to beunstable in growth. Leapfrog should keep its eye on Venezuela, particularly after the Chavez administrationends in 2006 because Chavez has implemented a number of reforms to help boost the economy. Leapfrogshould wait to enter the Venezuelan market until economic stability has been attained.There are several barriers to entry for Venezuela. One is the dominating competitor Mattel, which has beenpresent in Venezuelan stores for around ten years. Another is the relatively high tax rates, accompanied byanti-US sentiments from the President. Also, the black market has been thriving recently due to increasedpoverty and reduced enforcement of restrictions. This is a large problem for the retail industry becauseVenezuelans can buy imitation products which function just as well as branded products at a highly reducedrate. However, the economy shows signs of future sustainability and political instability should actually beremedied with the conclusion of the Chavez administration. In conclusion, Leapfrog should watch theVenezuelan market to determine the precise moment at which entrance would be most profitable.ECONOMICS GDP (purchasing power parity per capita): US$5,800 (2004) GDP real growth rate was 16.8% in 2004. Venezuelan investments are estimated to be 12.9% of the gross domesticproduct. Education expenditures were US$825 million this year. The composition of the gross domestic product is broken down into threesectors: 0.1% agriculture, 46% industry, and 53% services.23 24. United States accounts for 32.9% of imports and 56.3% of exports. The official monetary unit of Venezuela is the Bolivar and the inflation rate isaround 22.4%. The unemployment rate is relatively high; 11.8% for 2005, although this isdown from a roughly estimated 17% last year. Venezuelan budget includes US$26.97 billion in revenues and US$30.7 billionin expenditure, along with US$2.6 billion in capital expenditures.POLITICAL At the helm of the countrys politics is President Hugo Chavez, a leftistENVIRONMENT populist who has been in power since February of 1999. Relations between the United States Government and the Venezuelan havebeen relatively fragile since the 2002 two-day coup which sought to removeChavez. Chavez is highly critical of the US Free-Trade Area of the Americas. The tax brackets are as follows: 5% for raw materials, 10% for intermediategoods, 15% for capital goods and semi-finished products, and 20% forfinished goods. All imports are assessed a 2% customs-handling charge. Taxes also include a15% Value Added Tax based on the calculation of the CIF import price (cost,insurance, and freight).DEMOGRAPHICS The total estimated population of Venezuela in 2005 was around 25,375,281. In 2005, the population of children ages 0-4 was estimated at 2,846,000(10.78% of total population), the population of children ages 5-9 wasestimated at 2,798,000 (10.6% of total population) and the population ofchildren ages 10-14 was estimated at 2,752,000 (10.42% of total population). Women in Venezuela are typically giving birth at an older age than they usedto. The average age was 22 in 1990 which grew to 26 in 2003. The present birth rate is about 18.79 births per 1000 people. The fertility rateis about 2.4 children born per female. In 2003, 64% of the population over 15 years of age had primary or noeducational attainment at all, 21% of the population over 15 years of age hadsecondary studies and only 15% of the population over 15 years of age hadhigher education. Students enrolled in primary and secondary schooling for the 2002-2003school year numbered 4,786,445 and 512,371 respectively. This was a 3.9%overall growth from the previous school year. The population percentages by ethnicity were as follows for 2003: 66.71%Mestizo (mixed blood from European white, Amerindian and Africanorigins), 20.57% White, 10.35% Black, and 2.37% Indian. Internet penetration in 2005 was about 12.2% of the population; around3,040,000 people are internet users. 24 25. RETAIL Roughly 80% of Venezuelans live in poverty and this drastically reduces theENVIRONMENTamount of people who participate in the retail market. Mattel has a sales and marketing office in Caracas, which decides which distributors to sell to, and how to target different regions of Venezuela. The largest retailer, Makro, controlled around 60% of the total sales for hypermarkets in Venezuela in 2003. A marketing technique used by Makro is a flyer sent in the mail to all of their customers which shows some specials the company will be offering that month. Exito is a distant second to Makro, but is the only significantly large competitor. They have recently been gaining market share in the industry and they plan to open outlets in less densely populated, rural parts of the country to target a new class of Venezuelans. A new mall called El Centro Comercial El Tolon opened in 2003 in Las Mercedes. This mall is five stories, created 1,000 new jobs at inception, has a large food court, and enough parking for 1,500 cars.STRATEGIC ALTERNATIVESAfter evaluating our target countries based on the strategic issues that impact market entry decisions, we havenarrowed down three viable strategies for LeapFrog in the Latin American market:Strategy 1: Stay out of Latin AmericaStrategy 2: Go into all five countriesPreferred Strategy: Go into Chile & Argentina now and the others laterBelow we have outlined the three options and weighed each strategy based on the level risk of following thatstrategy and the potential return that could be generated by that strategy.StrategyRiskReturnStay out of Latin America LowHigh LowHighEnter all five target marketsright away LowHigh LowHighEnter Chile & Argentina nowWatch other marketsLowHigh LowHighIf LeapFrog is extremely risk averse, it could choose to stay out of the Latin American market altogether andjust continue its operations in Mexico. However, this also means that it is forgoing a large opportunity tocapture market share in Latin America and a source of potentially large revenues. On the other hand, ifLeapFrog chooses to pursue all five target markets at this time, there is a high level of risk associated with thatexpansion and the potential return is uncertain due to fluctuating political and economic conditions in somecountries. However, we have identified that the best strategy for Leapfrog at this time is to enter Chile andArgentina first, because we have identified through our analysis of key strategic issues that these two countrieshave the highest market potential for LeapFrog.25 26. STRATEGY 1: STAY OUT OF LATIN AMERICAThe strategy to stay out of Latin America altogether (except Mexico) would produce less than optimal results.This is because LeapFrog already has the existing Spanish-language platforms developed that can betransferred to the Latin American market at a low cost. If LeapFrog forgoes this opportunity just to reducerisk, then it will lose out on a very large potential market, especially since Latin America is rapidly growingeconomically. Therefore, we have decided that the disadvantages of this strategy outweigh the potentialadvantages, and LeapFrog should, in fact, enter Latin America.Advantages DisadvantagesPayoff Low risk incurred Saturation of current Losing large revenue No additional market markets potential in order toentry costs Forgoing large market decrease risk Focus on existing marketsopportunity for existing Possibility of improving Use resources toward Spanish-languageproduct developmentresearch and development platformsfor new products Inconsistent with vision of becoming global leader in education toy market Competitors gain edge by advancing into Latin America firstSTRATEGY 2: ENTER ALL FIVE TARGET MARKETSIf LeapFrog decides to enter all five markets at once, it would be expending a large amount of resources intomarkets that have uncertain futures. This is extremely risky because the large investment may not bringoptimistic returns. Also, if LeapFrog focuses its attention solely on Latin America, it may be cause a burdenon other areas of the business that require attention. As a result of putting all its efforts into Latin America,LeapFrog might also overlook other foreign markets which may have stronger potential.Even though LeapFrog could gain first-mover advantage by entering all five markets now, the risks incurredby this strategy far outweigh expected returns. A better strategy would be to enter the stronger markets firstand then wait and see how the other markets stabilize within the next five years. At that time, LeapFrog canmake a decision on whether or not these countries are viable markets to enter. Advantages DisadvantagesPayoff Take advantage of existing High risk incurred due to Bearing high risk in returnSpanish-language productsunstable political andfor potential for uncertain Create brand recognition economic conditions inrevenue gain and global Fulfill globalization vision target countriesname recognition Stay on par with or ahead Large costs for entering Focus on investing in newof our competitors five marketsmarkets could mean Capitalize on first-moverssimultaneouslyoverlooking otheradvantage No retail infrastructure in business processes that all of the target countries could be improved Neglect other potential markets (opportunity cost)26 27. PREFERRED STRATEGY ENTER CHILE & ARGENTINA NOWGiven that staying out of Latin America is forgoing a large opportunity and that going into all five targetmarkets is too risky, then going into the strong markets of Chile and Argentina first is a happy mediumbetween the two more extreme alternatives. LeapFrog can reconsider entering the other markets in the futureafter assessing LeapFrogs performance in Chile and Argentina and observing changing political andeconomic conditions over the next five years.Advantages DisadvantagesPayoff Gaining foothold in Latin Incur some level of risk Test out strong LatinAmerican market due to uncertainty American markets while Venturing into new, Strong competitors incurring some riskunsaturated marketalready exist in these associated with market Capitalizing on existingmarketsentrySpanish-language Increase brand recognitiontechnology by expanding into new Target markets havemarketsestablished retail channels Test product success inmore stable countries Save resources for othermarkets and fordeveloping new products27 28. PROJECTIONSWe made projections on the performance of LeapFrog in Chile and Argentina according to our strategy. Thisrevenue projection is based penetration ranging from 0.55% to 1.10% of the current markets in Chile andArgentina within five years, assuming that LeapFrog enters the markets by 2006. Based on these assumptions,we designed a sensitivity analysis with respect to three varying levels of penetration. The more aggressiveLeapFrogs marketing strategies are, the more likely it will successfully penetrate the two Latin Americanmarkets and be able to obtain a larger market share.Another assumption used is the fact that successful penetration during the first year will cause a sudden jumpin revenue as shown in the graph, but revenue in the years thereafter will increase at a more moderate rate andgrowth will eventually plateau. The reason is that it will become more difficult to capture market share at thesame rate as in the initial years because competition will grow while the number of consumers will remainrelatively constant. For each country, the projection assumes that the countrys economic, social and politicalarenas will be relatively sound with no shock strong enough to deter further investment in that market. Chile & Argentina: Projected Revenue 2006-2010765Revenue (Millions of Dollars)4 Optimistic Medium Pessimistic32102006 20072008 20092010 YearIn the optimistic case, we assumed that we would be able to capture 1.1% share of both Chile and Argentinamarkets. The base case (medium) projection is based on if we capture 0.70% in each market. In a pessimisticscenario, we will have captured only 0.55% of market share in both markets. These projects were based onLeapFrogs performance in the Mexican market and assumptions formed using the limited financialinformation we had. These revenues may vary, and LeapFrog may not achieve the same penetration in boththe Chilean and Argentinean markets. 28 29. IMPLEMENTATIONThe implementation scheme is based on our recommendations. Implementation begins with entrance into theChilean and Argentinean markets, followed by a period of observation for possible problems that arise inthose markets. These two markets are favored as the first Latin American markets to enter because of theirpotential to be strong market bases in Latin America. Furthermore, if penetration in these markets does notfavor Leapfrog, we can conclude that entrance into other secondary Latin American markets will likely fail.Thus, it is pertinent that careful observations be made and alternatives are prepared for these two countriesbefore Leapfrog enters other Latin American markets.Once Leapfrog has a strong revenue base in these two countries, it can expand product offerings in thosemarkets. Although product line expansion may occur simultaneously with expansion into the secondarymarkets, the time for product expansion is contingent on how strong Leapfrogs consumer base, brandawareness and brand image in the Chilean and Argentinean markets. Since Leapfrogs product may havesaturated the target market in these countries, introducing more products may not increase sales revenuesignificantly, especially if gain in sales result mostly from cannibalization of its own products.Finally, implementation leading up to this point in the Chilean and Argentinean markets means thatLeapfrogs strategy is overall very successful. Based on the return to investment so far, further observation isnecessary to come up with new strategies to strengthen Leapfrogs presence in Chile and Argentina.IMPLEMENTATION TIMELINEEnter Chile & Argentina markets Expand Product Line Observe Latin America Market, Landscape and Future Strategic ImplicationsEnter Costa Rica, Colombia, and Venezuelan markets Observe Market, Make Necessary Changes, View Other Potential Markets2006 20072008 2009 2010 29 30. IMPLEMENTATION ISSUESThere are several problems that can emerge when implementing these market entry strategies: Bad reception: Consumers in Argentina may not respond positively due to the anti-American capitalistsentiments, or parents may perceive educational toys to be unimportant. To account for this, LeapFrogcould: o Enter market via channels that are accepted by domestic consumers. Distribution via indigenous retailers will implicitly signal to domestic consumers that LeapFrog is non- threatening and works to cooperate with domestic retailers. Changes in economic policies: Policy changes can easily disrupt regular business activities, whichusually adversely affect sales of high-priced imports. o If changes in policies can be forecasted, it is in LeapFrogs best interest to lobby to government officials on the basis that LeapFrogs products improve the countrys overall education level. Also, be prepared to accept the worse case scenario.30 31. APPENDIX TABLE OF CONTENTSPROJECT OUTLINEORIGINAL PROJECT PROPOSAL .. 31RESEARCH INFORMATIONCONSULATES 33BUSINESS COMPANIES ..33RESEARCH QUESTIONS ..34COMPETITOR INFORMATIONMATTEL .35VTECH . 37HASBRO .. 39RETAILERSSEARS .. 40WAL-MART ...41CARREFOUR .44OTHER (TOYS-R-US, TARGET) .. 45COUNTRY PROFILESCHILE .. 46ARGENTINA . 56COLOMBIA . 69COSTA RICA 78VENEZUELA .. 84INTERNET STATS . 90ORAL PRESENTATION attached 31 32. LEAPFROG PROJECT PROPOSALLeapFrog Enterprises, Inc. (NYSE: LF) is a leading designer, developer and marketer of innovative,technology-based learning products and related proprietary content, dedicated to making learning effectiveand engaging for all ages, at home and in schools, around the world. LeapFrog has developed a family oflearning platforms that come to life with more than 100 interactive software titles, covering importantsubjects such as phonics, reading, writing, math, music, geography, social studies, spelling, vocabulary andscience. In addition, the company has created more than 35 stand-alone educational products for childrenfrom birth to 16 years. LeapFrogs award-winning U.S. consumer products are available in six languages atmajor retailers in more than 25 countries around the world.LeapFrog started our Spanish product business in 1999 with a Spain distributor partnership. In 2003, welaunched an affiliate office in Mexico City. Currently our line consists of 60+ Spanish and bilingual items(SKUs), which can be leveraged and sold into Central and South America. Our business model in LatinAmerica is distributor based; however, LeapFrogs International Spanish Business unit would like to researchthe possibility of taking over the Latin American business. Currently we are distributing heavily in Chile,Venezuela, Colombia, Panama, Peru, Nicaragua and Costa Rica.Business Plan will recommend key markets to target in Latin America and focus on four key areas of business: Target Market - Overview of the markets selected and why? o Market overview Population age breakdown Birth trends Technology trends Computer penetration Internet Usage WIFI/Connectivity o Economic overview GDP/GDP Per capita Consumption/Investment Unemployment o Consumers profile Socioeconomic Purchasing Power o Education overview Public vs private schools EFL (English as a Foreign Language) Education industry and key players Size of market 32 33. Toy Industry Trends o Size of the toy industry o Competition Key Players and share of market Sales and distribution o Retail landscape o Competitive distributor models o Import duties (Manufactured in China) Marketing and promotion o Media landscape Pay TV Penetration o Competition SOV (share of voice) 33 34. RESEARCH INFORMATIONThe Team was responsible from finding information for each of the respective countries, which includedgetting outside research from EuroMonitor, consulates, competitors and annual reports on the toy industryspecifically in Latin America Countries. This required the team to call, email and research information on thecontacts in Latin America, whom we presented a list of questions for finding out additional information.CONSULATE CONTACTS Chile Consulate General In San Francisco. 870 Market Street Room 1062 San Francisco, CA94102 Telephone: (415) 982-7662 FAX: (415) 982-2384Argentina Consulate General In Los Angeles. 5055 Wilshire Blvd Suite 210 Los Angeles, CA90036 Telephone: (213) 739-5959 Costa Rica Consulate General In San Francisco. P.O. Box 7643 Fremont, CA 94537 Telephone: (510)790-0785 Fax:(510) 792-5249 Email: consulsfo@hotmail.com Colombia Consulate General In San Francisco. 595 Market St., Suite 2130, San Francisco CA 94105.Telephone: (415) 795-7195 Republic of Venezuela Consulate General In San Francisco. 311 California Street, Suite 620, SanFrancisco CA 94104 Telephone: (415) 955-1982 and (415) 955-1987 and (415) 955-1987 and (415)955-1989 and (415) 955-1970BUSINESS COMPANY CONTACTSInvestment BanksMorgan Stanley Dean Witter: Argentina; Guillermo Madariaga, Executive Director and Head of the Argentina Office. Telephone: (212) 761-4000Goldman Sachs Argentina; Avda. del Libertador, 498 1001 Buenos Aires, 19th Floor, Argentina. Tel: 54-11-4323-0500Merrill Lynch Argentina S.A.; Bouchard 547, 23rd Floor, 1106 Capital Federal Buenos Aires. Tel:+54- 11-4317-7600 and Fax:+54-11-4317-7623Merrill Lynch Pierce Fenner & Smith de Argentina S.A. Tel:+54-11-4317-7500, Fax:+54-11-4317- 7583. 34 35. RESEARCH QUESTIONSConsulatesHi, my name is ___. I am a Berkeley undergraduate student, doing a research project on the Latin AmericanToy Market. I am hoping to speak with someone who is in charge of your economic/business specialists? Go down research outline Ask government regulation specificso Import policies? Is the government subsidizing for internet/communication infrastructure? Is the government supporting foreign investments?RetailersHi, my name is ___. I am a Berkeley undergraduate student, doing a research project on the Latin AmericanToy Market. I am hoping to speak with someone who is in charge of your Latin American operations. Which countries are you in right now? Why are you there? What is the retail environment in that country? Who are your main competitors? Whos products do you carry in Latin America? How does that differ from your American stores? Ifdifferent, why? What brands have been most successful and why? Where do you think the market trend is going in terms of what kind of products people are buying?CompetitorsHi, my name is _____. I am a Berkeley undergraduate student, doing a research project on the LatinAmerican Toy Market. I am hoping to speak with someone who is in charge of your Latin Americanoperations. I am interested in finding out what you are currently doing in Latin America What countries are you in? What stores are you in? How are you distributing to these countries? Whatdistribution model do you use? Do you know who else in the market? What do you think the market there looks like now? Are you successful in these countries? Whichcountries are doing well? What is your best market or best distribution channel? Have you run into any problems? Country specific problems? Government regulation problems? How are you marketing in each of these countries? 4 Ps (Price, Product, Place, Promotion)35 36. COMPETITOR INFORMATIONMATTELMattel, Inc. engages in the design, manufacture, and marketing of various toy products worldwide. Itsportfolio of brands and products include Mattel Brands, such as Barbie fashion dolls and accessories; PollyPocket and Disney Classics; Hot Wheels, Matchbox, and Tyco R/C vehicles and playsets; and Harry Potter,Yu-Gi-Oh, Batman, Justice League, Megaman, and games and puzzles; Fisher-Price Brands, which includeFisher-Price, Little People, Rescue Heroes, BabyGear and View-Master, Sesame Street, Barney, Dora theExplorer, Winnie the Pooh, InteracTV and See N Say, and Power Wheels; and American Girl Brands,including American Girl Today, The American Girls Collection, and Bitty Baby. The company sells itsproducts to retailers, including discount and free-standing toy stores, chain stores, department stores, otherretail outlets, and wholesalers in the United States. It sells its products directly to retailers and wholesalers inEurope, Latin America, Canada, and Asia Pacific. The company was co-founded by Ruth Handler, ElliotHandler, and Harold Matt Matson in 1945. Mattel is headquartered in El Segundo, California.International SegmentProducts marketed by the International segment, with the exception of American Girl Brands, are generallythe same as those developed and marketed by the Domestic segment, although some are developed oradapted for particular international markets. Mattels products are sold directly to retailers and wholesalers inCanada and most European, Asian and Latin American countries, and through agents and distributors inthose countries where Mattel has no direct presence. Products within the International segment are solddirectly to retailers and wholesalers in Canada and most European, Asian and Latin American countries, andthrough agents and distributors in those countries where Mattel has no direct presence. Mattel also has retailoutlets in Latin America and Europe as an outlet for its products.Mattels International segment revenue represented approximately 42% of consolidated gross sales in 2004.Within the International segment, Mattel operates in four regions that generated the following gross salesduring 2004 (in millions): Region Europe Latin AmericaCanadaAsia Pacific Amount % 60%22%9%9% Gross Sales$1.410 $524,000 $197,600$203,000Million Total: $2.336 Million in Gross Sales During 2004, Mattels three largest customers (Wal-Mart at $1.0 billion, Toys R Us at $0.8 billionand Target at $0.5 billion) accounted for approximately 46% of consolidated net sales in the aggregate.Within countries in the International segment, there is also a concentration of sales to certain largecustomers that do not operate in the US.Latin America Locations: Argentina, Chile, Colombia, Costa Rica, Guatemala, Peru, VenezuelaMain Distributor/Retailer: Mexico: Importado y distribuido por Mattel de Mxico, S.A. de C.V., Insurgentes Sur # 3579, Torre 3,Oficina 601, Col. Tlalpan, Delegacin Tlalpan, C.P. 14020, Mxico, D.F. MME-920701-NB3. 36 37. MATTEL INTERVIEWInterview with:Joleen JacksonDirector of investor relationsMattel Inc.We have integrated manufacturers, distributors, and sales offices in Latin America. We manufacture largeamounts in Mexico, (2 factories) and this product is shipped to Mattel-owned marketing affiliates/distributioncenters in Latin America, and then finally transferred to retailers. We have offices in Chile, Venezuela,Argentina, and Colombia which are mainly sales and marketing. These offices make the decisions of who tosell to and which parts of their respective countries to target. Native employees give a big competitiveadvantage as they have experienced all of the retail outlets first hand. In targeting certain populations, wehave noticed that as Latin American countries become more developed they tend to become much morebrand oriented. We are doing quite well in Mexico and the Chilean market is growing fairly well, along withArgentina. In the scheme of things, Colombia and Venezuela are too small to have much influence onMattels overall performance. We consider Hasbro, vetch, and leapfrog to be some of our biggestcompetitors. Wherever Wal-Mart is we like to be as well. We like for a market to display strong retailpresence before we even consider entrance. 37 38. VTECHVTech is one of the worlds largest suppliers of corded and cordless telephones and a leading supplier ofelectronic learning products. It also provides contract manufacturing services. Founded in 1976, VTechsmission is to be the most cost effective designer and manufacturer of innovative, high quality consumerelectronics products and to distribute them to markets worldwide in the most efficient manner. Withheadquarters in the Hong Kong Special Administrative Region and state-of-the-art manufacturing facilities inmainland China, VTech currently has a presence in 10 countries and approximately 22,700 employees,including around 880 R&D professionals in R&D centers in Canada, Hong Kong SAR and mainland China.This network allows VTech to stay abreast of the latest technology and market trends throughout the world,while maintaining a highly competitive cost structure. Additionally, VTech has license agreements with Disney,Warner Brothers, Marvel, Nickelodeon, Sesame Street, HIT Entertainment and Joester Loria - AmericanGreetings that allow it to use well-known childrens characters in the cartridges for its popular V.Smileproduct range. Target by age: 0, 6 months, 1-8 (each as its own product group), 9+ (as a group).There has been an increase in revenue in electronic learning products business recorded a 66.8% increase,following the success of its revamped product line, especially the well received TV Learning System, V.Smile,which helped the electronic learning products business gradually to regain shelfspace for VTech products inNorth America and buoyed Group profits in the first half of financial year 2005. Furthermore, In thefinancial year 2004, the electronic learning products business focused on implementing cost rationalisationinitiatives while in the financial year 2005, it targeted growth in which selling and distribution costs rose.Spanish-Language Based Locations:Mexico: Sales and Marketing Office for Telecommunication Products Puerto Bello # 1594 Int.3 Col. Providencia, Guadalajara, Jalisco, Mexico CP 44630Spain: Sales & Marketing Office for Electronic Learning Products, Avda.de Aragon 336 c/v Yecora Oficina 1, (Pol. Las Mercedes) 28022 Madrid. Tel : (34) 91-312-0770, Fax : (34) 91-747-0638, Website : http://www.vtech.es.V-TECH INTERVIEWVtech (Phone Interview)Contact Person: Jean Pau(011) 33 373 81 39 941) What kind of products are you selling in Latin America?oLearning-computer productsoMajor products: Video learning games (biggest)oProduct Emphasis: High quality, high-feature valuesoMajor Target-segment: 10-year-old children38 39. 2) What countries are you in? Who is the retailer? How are you distributing to these countries? What distribution model do you use?o Not in Brazil, Argentinao Major market: Mexicoo Major retailer in the major market: Wal-Marto Distributors: Not in the major market (directly deal with retailer); but in other countries, sometimesdistributors are used (the distributors may sometimes have contact the consumers directly)3) Do you know who else in the market (Competitor)?o Direct competitor: (Same as those in the US market) E.g. Leapfrog, Oregon Scientifico Not concern much about low-quality product competition (As Vtect emphasizes high-quality)4) What do you think the market there looks like now? Are you successful in these countries? Which countries are doing well? What is your best market or best distribution channel?o Difficult to evaluate market shareo Latin America is not an easy marketo Reason: Comparatively weak sense of professionalism and commitment in the target marketso Reason: Issue of economyo Reason: Relatively high custom duties5) Any country specific problems? E.g. Government regulation problems?o Comparatively lack of organizations of companies (e.g. take time to prepare documents)o Government regulations not a problem for VTech6) How are you marketing in each of these countries? 4 Ps (Price, Product, Place, Promotion)o High-value productso TV promotions (Mexico)o Not presence in toy specialty toy storeso Yes Department stores7) Are you concerned about potential entrants?o Potential Entrant: Not for VTecho Not concerned low price products, as VTech differentiates itself as high quality. 39 40. HASBROHasbro, Inc. provides childrens and family leisure time entertainment products and services worldwide. Thecompany engages in designing, manufacturing, and marketing games and toys. It offers various games,including traditional board and card games, hand-held electronic games, trading card games, and roleplayinggames, as well as electronic learning aids and puzzles. Its toy products include boys action figures, vehiclesand playsets, girls toys, electronic toys and plush products, preschool toys and infant products, childrensconsumer electronics, electronic interactive products, and creative play and toy related specialty products.Hasbro also licenses certain of its trademarks, characters, and other property rights for use in connection withconsumer promotions and the sale of non-competing toys and non-toy products. It offers its products underthe Playskool, Tonka, Super Soaker, Milton Bradley, Parker Brothers, Tiger, Wizards of the Coast, and otherbrand names. Hasbro sells its products to various customers, including wholesalers, distributors, chain stores,discount stores, mail order houses, catalog stores, department stores, and other retailers, as well as Internet-based e-tailers. The company was founded in 1923 by Henry Hassenfeld and Helal Hassenfeld under thename Hassenfeld Brothers. It changed its name to Hasbro Industries in 1968 and then to Hasbro, Inc. in1985. Hasbro is headquartered in Pawtucket, Rhode Island.Latin America Locations: Chile 40 41. RETAILER INFORMATIONSEARS INTERNATIONALLatin America Stores:Guatemala Homemart S.A., 8a Calle 27-00 Zona 11 Parque Comercial, Las Majadas, Guatemala City Guatemala, C.AHonduras Sears, Ave. Circunvalacion 13 Calle, S.O., San Pedro Sula, Honduras Sears, Ave. Roble Colonia Florencia Norte Plaza America Tegucigalpa, Honduras. 41 42. WAL-MART INTERNATIONALWal-Mart became an international company in 1991 when a SAMS Club opened near Mexico City. Just twoyears later, Wal-Mart International was created to oversee the growing opportunities for the companyworldwide. Since then, the International segment has enjoyed rapid growth and consumer acceptance. Today,customers at more than 1,700 units in nine countries prove Wal-Marts Every Day Low Price promise is amessage clearly understood in any language. Wal-Mart International employs more than 400,000 associates inArgentina, Brazil, Canada, China, Germany, Korea, Mexico, Puerto Rico and the United Kingdom. Wal-Martalso owns a 42% interest in Seiyu, Ltd., a leading Japanese retailer and a 33 1/3% interest in Central AmericanRetail Holding Company (CARHCO) with stores in Costa Rica, El Salvador, Guatemala, Honduras andNicaragua.Development OpportunitiesOur global expansion has been achieved through a combination of building new stores from the ground upand a series of acquisitions where our customers want to see us. These strategies have given the companyexcellent market penetration and positioned the company for future development. The company sees itsdevelopment throughout North America, Latin America, Asia and Europe as a solid foundation with manypromising areas for further growth.Financial ResultsWhile store development and expansion has experienced significant growth, it is not the only measure ofsuccess. The division has posted impressive financial results as well. Wal-Mart International announced that2005 fiscal year end sales reached $56.2 billion, an 18.3 percent increase over the previous year, and thatoperating profit rose to $2.9 billion, an increase of 26.1 percent over the prior year.Global Strategy, Local FocusDespite obvious cultural and business challenges, Wal-Mart International has experienced success because ofits ability to transport the companys unique culture and effective retailing concepts to each new country. Thedivision makes a concerted effort to adapt to local cultures and become involved in the local community.Associates respond to customer needs, merchandise preferences and local suppliers. By serving eachhometown in the same way, Wal Mart International has realized significant growth with potential for muchgreater development worldwide. In 2006, Wal-Mart International plans to open 220 to 230 units in existingmarkets. Relocations or expansion of existing stores will account for approximately 35 of these units, whilethe remainder will represent new operating units for the company.Latin America Locations: Argentina Costa Rica El Salvador Guatemala Honduras Nicaragua Mexico 42 43. WAL-MART ARGENTINAArgentina Fact Sheet: November 2005 Wal-Mart Supercenters: 11 Associates: 4,573HistoryWal-Mart Argentina started its operations in August 1995, opening a Sams Club in Avellaneda in the greaterBuenos Aires area. The first Supercenter was built in November 1995 in Avellaneda, Province of BuenosAires. In 2002, Wal-Mart Argentina remodeled 10 of its 11 stores and expanded its distribution center inBuenos Aires Province to include fresh food in addition to general merchandise. In 2003, Wal-Mart enteredin the drugstore business, opening 2 drugstores.RecognitionWal-Mart Argentina is the first and only supermarket recognized by National Presidency as a "Business thattakes care of the customers pocket and the Argentine Economy." Wal-Mart Argentina was ranked 29 on a"Great Place to Work" poll and the "Best Retailer to Work" for by Clarn, a national newspaper. Wal-MartArgentina was ranked the 11 th Best Company to Work for in Argentina by Apertura Magazine. Wal-MartArgentina received special mention among the 100 "Best Image Companies" by Apertura Magazine.Community Involvement In 2004, Wal-Mart Argentina raised and contributed over US $219,000 to supportlocal communities including: * Best Neighbor Contest: An initiative that awards the outstanding community work performed individuals in the community. * Wal-Mart Teacher of the Year Award: Recognizing teachers who have been crucial to the positive learning experience of their students. * Wal-Mart Argentina p rovided food and funding to feed 1,500 people at 17 public soup-kitchens run by Caritas Argentina, Obra del Padre Mario and the Cooperadora del Hospital Alassia de Santa Fe. * Wal-Mart Golf Tournament to benefit the Argenti