Executive Summary
The analysis of the Brazilian market shows that it offers more benefit than challenges to this Canadian firm. It will be appropriate for this Canadian firm to expand its operations to the country. When making the entry, the management will need to incorporate the locals at the managerial positions to ensure that the firm remains conscious of the local environmental forces that affect operations in the country.
Country’s Macro Environment
Brazil is one of the emerging economies in the world. It is one of the leading economies in South American continent with a population of over 200 million people. This makes it the most populous country in the continent. The country is one of the most attractive markets in South America for multinational corporations. This firm should consider making an entry into this country because of a number of factors. Below are some of the factors that were considered.
Political environment
Brazil is a federal republic and is considered one of the leading democracies in the world. According to Mia and Araujo, the country has enjoyed a long period of political stability.1 Although some minor riots were witnessed recently due to what many considered poor leadership in the country, no wanton destruction of property was witnessed. The political stability in the country has helped promote peace and security in Brazil. This firm will be assured of its security as it moves to the Brazilian market. The political leaders are also known to avoid any interference with private businesses, which is another added advantage to this firm.
Economic environment
The economy of Brazil has experienced massive growth over the past decade. The data presented in Appendix 2 and 3 show the country GDP, per capita and private consumption growth from 2006 to 2012.2 It confirms the fact that people in Brazil have a strong purchasing power, a factor that is very important for this firm as it moves to the new market. It will be important to note that a large section of this society is very poor and may not afford some of our firm’s products. According to data from World Bank, although the per capita in Brazil is increasing, some Brazilians still live in object poverty.3 This means that this firm cannot assume that the entire population of over 200 million people will have the capacity to purchase our products.
Socio-cultural environment
Brazil is home to about 204 million people, making it the firth most populous country in the world. As shown in appendix 1, this population has been increasing consistently. Most of the Brazilians are Whites. The socio-cultural diversity in this country is expected to pose a challenge to this firm. The social structure and cultural beliefs in the country is different from that in Canada. This means that the firm will have to spend in research to understand this social structure before officially launching operations. The dominant language in the country is Portuguese, and this may be considered a barrier to successful entry into the market. However, the skilled workforce in the country will be of great benefit to the firm
Technological environment
Brazil, just like Canada, has become a technological hub. Majority of the adults in the country have some form of post-secondary education.4 Emerging trends such as e-marketing is becoming very popular in the country. This technological environment will be helpful to the firm in terms of product promotion and regular communication with relevant authorities.
Ecological issues
The Brazilian government and the general public are increasingly becoming sensitive over issues of environmental protection. Presence of strong environmental activists in the country will force this firm to minimize its carbon emission and manage its effluents effectively to avoid any negative publicity in the new market.
Legal environment
The country has legal structures meant to protect businesses, customers, and the government. This firm will have to understand and follow these laws to avoid any confrontation with authorities. It is worth noting that the level of corruption in the country is higher than that in Canada, and this may affect this firm negatively.
Factor Endowments
The endowment factors in this country may influence a firm’s decision when planning to expand operations to the region. The first endowment factor is the country’s massive population.5 This population would translate to a bigger market than what the firm has in the home country. The huge population will also provide this firm with a relatively cheap labor. The government has also improved transport and communication infrastructure, making it easy to conduct business in the country. The country is one of the major tourists’ destinations in the region because of its magnificent flora and fauna. According to International Monetary Fund, Brazil also boasts of rich oil reserves which reduce its dependency on imported oil.6
Analysis
Benefits
From the analysis of the macro-environment of Brazil, it is clear that moving to a Brazilian market may bring a number of benefits to this firm. The huge population will not only offer this firm huge market for its products, but also a cheap source of labor. This firm may even find it more convenient to move its production plants to Brazil because of the reduced cost of operations. The security in the country and limited political interference will also provide a good environment for operations. The country also has one of the best transport and communication infrastructures that will be of benefit to this firm. Emerging technologies in the country may simplify management process.
Challenges
A number of risks have been identified and the management will have to find ways of dealing with them. The issue of corruption in the country may lead to unnecessary expenses for the firm, especially at the initial stages of the entry when the firm has to get approval from various authorities. The diversity in the country also means that the firm will have to take time to understand the Brazilian community. The language barrier may force this firm to hire specific locals who can speak both English and Portuguese.
Conclusion and Recommendation
The critical analysis done above demonstrates that Brazil is a market that is worth moving into for this Canadian firm that is seeking to expand its operations to the global market. The benefits that the country offers outweigh the risks or challenges that the firm will have to face. To ensure that its entry is successful, the following recommendations should be observed.
- Regular market research after making the entry will enhance understanding of the local forces.
- The management will need to hire host country nationals who understand the local language and socio-economic and political forces.
- A new strategy of operations management will be necessary in this new social and economic setting.
- The management will need to embrace the use of emerging technologies in its promotional campaigns.
Bibliography
Ada, Pellegrini. “Brazil: The Globalization of Class Actions.” Annals of the American Academy of Political and Social Science 622 (2009): 63-67.
International Monetary Fund. “Reigniting Strong and Inclusive Growth in Brazil.”
Mara Richard. “Brazil: Locals and Cosmopolites.” The Antioch Review 71 (2013): 251-262.
Mia, Irene, and Mairina Araujo. “The Brazilian Competitive Report.” World Economic Forum 12 (2015): 1-8. Web.
Nocera, Joe. “A Silver Lining to Brazil’s Troubles.” New York Times, 2015.
World Bank. “Brazil Overview.”
Appendix
Footnotes
- Irene Mia and Araujo Mairina, “The Brazilian Competitive Report,” World Economic Forum 12 (2015): 6, Web.
- Joe Nocera, “A Silver Lining to Brazil’s Troubles,” New York Times, Web.
- World Bank, “Brazil Overview,” Web.
- Pellegrini Ada, “Brazil: The Globalization of Class Actions” Annals of the American Academy of Political and Social Science 622 (2009): 65.
- Richard Mara, “Brazil: Locals and Cosmopolites,” The Antioch Review 71 (2013): 256.
- International Monetary Fund, “Reigniting Strong and Inclusive Growth in Brazil,” Web.