Once a company has a strong foothold in its native market, the question of expansion inevitably arises. Is it better for a company to expand within its existing ecosystem of products and services, or to expand beyond its borders to other countries? Choosing wisely can be the difference between success and failure.
On this episode of Fool Live, which aired on Nov. 23, Motley Fool co-founder David Gardner and Fool.com contributor Danny Vena are joined by Federico Sandler, MercadoLibre's (MELI +2.41%) head of investor relations, who explains the company's expansion strategy and why it matters.
David Gardner: But that also then flips to this question, which is MELI [MercadoLibre] playing offense if you will. The very next question from Richard O, says, "Well, what are the new geographic frontiers for MercadoLibre? Any interests in the U.S. Hispanic markets, many thanks." So have you ever looked at Southeast Asia? (laughs).
Federico Sandler: Yeah. Look, I think one of our biggest advantages is that we have been pioneers and operators in the region for 20 years. This is our stronghold and there's so many things that we still need to do across many countries. We're just starting to invest more aggressively in Chile and Colombia. When you look at the proportion of our gross merchandise volume, they're certainly under-indexed to GDP [gross domestic product] of the region. There is phenomenal growth there. The GDP per capita in Chile and in Colombia is higher than Argentina.
I wouldn't expect [MercadoLibre] either going to Southeast Asia or the U.S. We had a unsuccessful stint very early in MercadoLibre's history. But I think one of our competitive advantages is that this region is geographically complex from a regulation standpoint it's a nightmare, but we figured it out, so that's already a competitive advantage. We have very close contact with regulators, with all multiple players that, is very difficult to stay in Latin America.
But there's so many things that we have to do here that I would say because we have a limit in talent and in capital allocation, we need to be intelligent. Now, having said that, because I spoke to Danny, I think and it goes onto the execution question. Yes, we've gotten into more complex things, but our market cap has grown, our ability to hire top talent has grown. I think we also feel pretty confident that as a consequence of having better talent and better hiring capacity, we can actually move into multiple fronts across the region and execute with excellence, but Latin America.
David Gardner: That sounds great and I totally agree with this strategy. I'm glad to hear that you recognize the great complexities of just your continent and also the great potential. That's very promising.
