FEMSA: opportunity knocks twice.

Watching anxiously as the North American Free Trade Agreement neared passage, Fomento Economico Mexicano (FEMSA), Mexico's fifth largest consumer company, saw lots of opportunity. And lots of peril.

NAFTA would open up brand-new markets throughout North America, FEMSA reasoned. FEMSA's beers -- Bohemia, Carta Blanca, XX Lager, Sol, and Tecate -- which already dominated 47 percent of the Mexican beer market, could grace tables from Maine to Los Angeles, from Vancouver to Nova Scotia.

But NAFTA also offered the threat of increased competition on FEMSA's home turf. Without NAFTA, FEMSA had something of a lock on its market -- especially critical since the company's main target, the population between 20 and 45, was about to gain 11 million new members. With NAFTA, the road was open for some hefty, primarily American, competitors such as Anheuser-Busch to head south, cutting dramatically into FEMSA's market share.

For FEMSA's top management, the path, and the challenge, was clear. If the company was to seize the opportunities NAFTA offered -- and reduce the risk -- it had no choice but to become a fierce, determined global competitor. To do that, the company had to strengthen operations, upgrade systems, and "empower" its staff. The company brought together its top executives and some advisers from Andersen Consulting and began mapping out a plan.

At first, FEMSA felt upgrading information technology was the top priority and assigned a team, drawn from administration, information services, and human resources, to develop a strategy to achieve that. But the team soon realized the necessary changes ran much deeper than just IT; they extended into many of the company's core operations. As a result, the plan the team presented, and top management approved, called for change initiatives in departments ranging from manufacturing to distribution to accounting.

The team identified managers in key areas of the company and, to ensure widespread leadership for the plan, established a system of direct, continuous contact with them. Working with these managers, the team created an information-technology infrastructure that a number of different divisions could access. Departments were able to coordinate their operations more efficiently. Forecasting, for example, could work closely with logistics; and manufacturing with centralized cash management. The export and communications functions benefitted as well.

Ultimately, this new infrastructure provided employees with tools to improve individual and team performance, as well as to boost the company's overall efficiency. To see how well the new systems, business processes, and staff worked, the team met with employees to establish realistic, measurable goals.

Along the way, FEMSA management realized the company had to look at its operations more broadly and even redefine some jobs. As a result, the team revised many human resources policies, including compensation and recruiting structures -- and found some extra benefits in the package. By establishing performance-based incentives, for example, FEMSA began to attract the talent it needed for its new role as a global competitor. By instituting stricter work hours, the company helped employees develop a stronger sense of accountability and personal productivity.

An extensive education and communication campaign helped give the employees a sense that they "owned" the change initiative, and this, in turn, reduced their resistance to changes in the work environment.

The lesson for FEMSA was that paying close attention to the people while overhauling infrastructure and processes allowed the company to achieve its business goals more quickly -- and with less disruption.

Today, as expected, Mexico has been flooded with North American beers, all competing for the market FEMSA has long dominated. But FEMSA, strengthened by its successful management of change, has met the challenge. Not only is it holding on to Mexican market share, it's making successful inroads into new territories, as well.