In 1979, Grupo Odebrecht completed an expansion of its construction and engineering business, supported mainly by the Brazilian domestic market. At the time, that market seemed to lack the size, experience and technology needed to further grow its businesses, Odebrecht CEO, Marcelo Odebrecht, told Latin Trade. This limitation drove the company’s decision to explore new markets abroad. “We thought that internationalization would not only facilitate economic growth, but growth in competences that were not easily gained on our home turf,” he said.
The company began its internationalization with Chile and Peru, and initiated a process that has taken the conglomerate to 26 countries. Odebrecht entered Africa in 1984 with the Capanda hydroelectric project in Angola. “We went to Africa because we found opportunities, just like the ones we had in the United States. Africa is a great continent. There is a lot to do in a massive market like that one.”
In 1988, Odebrecht acquired Portuguese José Bento Pedroso & Filhos, which was renamed Bento Pedroso Construções. This firm became the flagship for Odebrecht’s European operations. In 1990, the conglomerate partnered with Petrobras on a Singapore project, spearheading its foray into Asia.
This international expansion made it easier to weather the recent recession of the developed world. “We have been very lucky. We concentrated in Latin America and Africa, two areas which have grown and will continue to grow in the coming years.”
Back in 1979, the group made another key decision: to diversify. Odebrecht transformed itself from a construction and engineering company, into a diversified conglomerate operating in oil and gas, petrochemicals, infrastructure, real estate, transportation, logistics and investment funds which, for instance, invest in mining and agriculture in Africa.
Multilatinas in general initiated their geographic expansions in the late ‘80s and ’90s. Odebrecht’s early lead on internationalization was instrumental in making it the ninth-largest company in Latin America with posted revenues of $37.3 billion in 2012. It could jump higher in the ranking: it recently announced a $20 billion global investment plan for the next three years focusing on Peru and Mexico.
The company’s expansion in the last 20 years demonstrates discipline and consistently good execution. They have made mistakes, but never a major one. “It’s always better to make a decision than to never make it. A bad decision is an opportunity to learn,” Odebrecht said. Its clean record could be explained by the fact the company abides by strongly-held principles, a constant reminder of its family-owned past.
The company is very conservative when moving into a new business, making an extra effort to have the resources required. “Not only the capital, but the people,” Odebrecht said. It is not a matter of having the skill to run a new firm. The condition is to have the helmsmen in-house. “Not only to have the competence, but the people in the company.”
Surprisingly, the company has opted to grow organically. “Acquisition is not a part of our strategy. We never contemplate acquisitions as part of our strategy,” Odebrecht said. But when they decide to acquire, they act on another principle: “Odebrecht is not a financial investor. We want to control companies.”
Long-term actions and daily operations are guided by the Tecnologia Empresarial Odebrecht (TEO), six principles written by Marcelo’s grandfather, Norberto Odebrecht, which are the company’s cultural and ethical foundations. “The TEO emphasizes the willingness to serve, the capacity and desire to evolve and the will to surpass expected results. It also involves a planned delegation process, one based on trust and partnership between the leaders and the led,” reads an explanation of the principles by the group’s affiliate Braskem. “These are standards we preserve and always practice,” Odebrecht said.
An orderly, disciplined, principled growth process seems to be the lesson to be learned from this multilatina that led the pack of the internationalization of Latin American companies. Expect other teachings as it opens new avenues for expansion over the next decade.
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