Inernationalization of UK Businesses in Brazilian Market - Essay Example

ABSTRACT Globalization is a need which cannot be avoided by any company in the world. In order to grow and be successful in the global market, there are many challenges faced by companies. Success factors vary from market to market and country to country. Many companies adopt different strategies in order to grow in the Brazilian market and to successfully achieve the goal of improved bottom line. Brazil is a country which cannot be avoided to do business because of the huge market size. Brazil is the fifth largest country in the world, and it is one of the most populous countries, as well. It has high GDP and legal system, which encourages international companies to tap this market. However, not every company can be successful in the Brazilian market. Size of the country market does not guarantee success in that market. There are many factors, which play a role in the success and failure of international companies. Among such factors, culture has a crucial role. Not only in Brazil but also in every country, culture plays a vital role for success and failure of international companies. This research is done to analyse the cultural factors that have been playing the role in the success and failure of UK companies in Brazil. This research will help in determining the strength of culture and its importance in the Brazilian market. RESEARCH PROBLEM OR QUESTION Globalization is growing becoming an integral part of the business in the business world. It has changed the competitive landscape for doing business in local and international markets as a matter of fact that competitive pressures arise not only from local players but also from the international players. On the other hand, in contrast to the pace of globalization, the success rate of businesses in the international market remains under constant challenges. Examples of global giants such as Wal-Mart’s failure in Mexico (Hoium, 2014), Tesco’s failure in China (Neville, 2013), and IKEA’s failure in Japan (Capell, 2006) are notable. Among most important factors that have played a role in these failures, is researched to be role played by culture (Stevens & Dykes, 2013). As a matter of fact, UK businesses are expanding in Latin American markets and most importantly in Brazil (LatAm, 2014; UK Trade and Investment, 2011). Hence with this landscape at work and the role of culture determined, the research problem set for this proposed study is to explore the impact of culture in the expansion of UK based businesses in Brazilian markets. With this research problem, the proposed study will address the following research questions: What are the factors that have an impact on the internationalization of business? Does the culture have on the internationalization of business? What are the similarities and differences in the cultural factors of UK and Brazil? Does the cultural factors of Brazil favour UK based business for success? What are the cultural challenges faced by UK based businesses in Brazilian market? LITERATURE REVIEW INTERNATIONALIZATION STRATEGY It is practically a sin for business operating in today’s competitive landscape if it ignores internationalization of business (Kim and Hwang, 1992). The answer to “why organizations should go global? “is quite simple; if an organization wants to survive while remaining competitive, it must expand internationally (Tuppura et al., 2008). If the organization ignores such an opportunity, the competitors will surely take advantage of it (Mihhailova, 2006). According to Voss, Buckley, & Cross (2010), the dominant reasons for an organization to expand outside the national boundaries are diversification and financial growth. Bell, Crick, & Young (2004) presented the idea that, through internationalization, an organization is provided with several benefits. Some of the dominant benefits that can help an organization fuel its growth include a significant increase in the number of customers, greater access to quality talent pool, increase in the level of profits, efficiency, better and good quality products, and helps in building existing intellectual property (Bell, Crick, & Young, 2004). There is a combination of tangible and intangible benefits that an organization aims to reap from international market. Some of which are as follows (Heizer and Render, 2013); (Adapted from: Heizer and Render, 2013) But achieving the mentioned benefits requires the organization to survive in the international market. The probability for an organization to survive significantly reduces if it fails to manage the business outside the boundaries of nation (Tallman & Fladmoe-Lindquist, 2002). All these factors in turn have a comprehensive impact on the selection of a strategy while going in any international market (Fernández & Nieto, 2005). Organizations on the basis of different factors adopt strategies from the given below: Global Strategy Through this strategy, an organization tends to provide standardized products across national markets. The flaw of this strategy lies within the local responsiveness level. An organization that focuses upon global strategy often lacks in responding to the local market needs and demands. The global strategy emphasizes on the achievement of economies of scale (Sharma & Blomstermo, 2003). This strategy is dominantly used by organizations including Texas Instruments, Caterpillar, and Otis Elevator (Heizer and Render, 2013). International Strategy International strategy is one focuses on selling goods and services to foreign countries through import and export, licensing and franchising. This international operation strategy has low considerations for cost as well as local responsiveness (Zucchella, Palamara, & Denicolai, 2007). The prominent organizations that use this strategy include U.S. Steel and Harley Davidson (Heizer and Render, 2013). Multinational/Multi-Domestic Strategy As the name suggest, this strategy emphasizes on providing customers with locally tailored products and services to gain acceptance by local customers. This reflects that an organization has different business units that are independent to focus entirely on competition (Andersson, 2004). Organizations that are using multi-domestic strategy include Heinz, McDonalds, The Body Shop and Hard Rock Café (Heizer and Render, 2013). Transnational Strategy According to Hsu & Pereira (2008), transnational strategy is the most dominant strategy out of all the strategies to expand the business in the international market. This strategy emphasizes on achieving both local responsiveness along with cost-efficiency (Hsu & Pereira, 2008). In addition, this strategy is the most difficult one to be achieved due to several restrictions and barriers along with simultaneous requirements including strong hold on the business, superior coordination for the achievement of efficiency, and decentralization to quickly respond to the market needs and wants (Hsu & Pereira, 2008). Transnational strategy is consistently used by organizations like Coca-Cola and Nestle (Heizer and Render, 2013). IMPACT OF CULTURE Universally there is no single agreed upon definition of culture; however, it is a set of verbal and non-verbal factors that determine the lifestyle of people in a particular setting (Johnson, Lenartowicz, & Apud, 2006). According to Leung et al (2005), businesses are giving considerable importance in understanding culture of countries that it intends to enter. Giants have failed in winning success in different countries factors despite experience and strong financial muscles on ignoring cultural aspects (Tihanyi, Griffith, & Russell, 2005). According to Johnson, Lenartowicz, & Apud (2006), before entering a foreign market, the organizations of the contemporary world also conduct comprehensive research regarding the cultural values and tradition to gain significantly level of awareness. Pothukuchi et al (2002) are of the idea that, understanding of the cultural factors is critical for the organization in making necessary changes in the operations meet the differences in culture to fuel the growth and success of the organization. According to Steenkamp (2001), organizations have also been found to take effective measures to eliminate the difference in culture. For instance, the organizations adopt strategic options such as developing relationship with the respective overseas partners with expertise in the industry. This plays an important role in building blocks of a successful organization in across the border markets as the local players can leverage knowledge about the key cultural success factors in their respective markets (House et al., 2002). Importantly, organizations in the contemporary world of competition also have constant eye on competitors and ensure to learn from the mistakes of others (Leung et al., 2005). Evaluation of aspects where others went wrong, and what must be done to overcome the mistakes of others also plays a role in the determination of an internationalization strategy of the organization (Leung et al., 2005). Ricks (2009) put this strategic factor as: “Learning from the mistakes of others is a dominant rule of survival. An organization must tend to evaluate the mistakes of others rather than to wait for a mistake to occur” (Ricks, 2009). Customers of the other countries are driven by culture. Organizations tend to change its operations to meet the demand of the local customers rather than forcing customers to purchase standardized products. Effective and efficient strategizing of the cultural factors also enables the organization to change the cultural practices of the customers (Leung et al., 2005). For example, Starbucks have managed to change the tea orientation of the Chinese market towards coffee while competitors failed (Burkitt, 2012). RESEARCH METHODS Research methodology is plan used to find out the answers of the questions discussed in the research problem section. It gives a framework how research will be conducted. There are many research methods which can be used to perform this research, but mainly there are two categories (Saunders, Thornhill, & Lewis, 2009). First is primary research while the other is secondary research. Primary research is performed when the data to be collected is not available, and no work is already done in that specific direction (Patton, 2002). Secondary research is performed when there is already information available on the subject and can be utilized to analyse the research questions. In secondary research, analysis is done based on the information already available and based on the already research done by others (Maylor & Blackman, 2005). This section will provide a complete plan on how to carry out the research for the effect of the Brazilian culture on the success and failure of UK companies. RESEARCH STRATEGY Since this research is on a narrow topic, so there is a need to do qualitative research in order to understand the topic and do analysis on it. Qualitative research will help in better understanding of the factors involved, and if there is strong impact of culture of Brazil on the success and failure of UK companies it that market. Quantitative research is not helpful for this type of subject and research problem. CASE STUDY DESIGN A research design tells how to carry out a research in order to find out results to conclude the research. There are several things that are usually outlined in a research deign (Sekaran, 2006). A design outlines the type of study that will be carried out and what methods will be used (Jankowicz, 2005). This is a qualitative study which will be carried out to analyse the effect of culture of Brazil for United Kingdom companies. Case study design will be used in this research in order to evaluate the factors involved for the business of UK companies in the Brazilian market. A case study will help in finding and researching the subject in depth without involving statistical and quantitative surveys, which are not appropriate for this type of research. This type of research only requires details in depth in order to analyse and conclude on the research problem stated. SELECTION OF APPROPRIATE RESEARCH METHODS There two types of methods to carry out a research one is the primary method and other is secondary method. If primary approach was used, then interview were to be arranged from management of UK companies, which are working in Brazil. Primary research is not appropriate as the cultural factors can be analysed on companies who have been already successful or have failed in the Brazilian market. INSTRUMENTS The research will be carried out with the help of information available in the library and on the internet. Internet will help find out the statistical data and related data which will help connect the dots between success factors to cultural factors. Two companies will be used to analyse the factor. One company will be selected which has been successful in the Brazilian market. The strategies used by the company will be analysed to find out the reason for their success and if it has a connection to the cultural factors. Another company will be selected which had failed in the Brazilian market and has been pushed out of it. The failure factors of the company will be determined and analysed to find its connection with culture of the Brazil. The research information about the two companies will be collected from the internet. ANALYSIS Answers of the research questions will be determined by the case studies selected from the UK companies operating in the Brazilian market. Firstly success factors of Company one will be analysed. In the next step, the failure factors of the company two will be analysed. Then the factors will be matched and compared in order to find the relationship between those factors and their connection with the culture of the Brazil. Connection between these factors will help in concluding if there is strong impact of culture on the business of United Kingdom companies in the Brazil. IMPLICATIONS OF RESEARCH The research will provide a framework for companies operating in Brazil. The research will be helpful and will provide significant insight to the following. Companies operating in Brazil can improve their strategies. Researchers who want to study on the subject and analyse the factors for their own research. Students who want to find out cultural difference between UK and Brazil. Managers of the United Kingdom companies will have an idea of the cultural aspects, and they will know where there is margin of improvement for being successful in the Brazilian market. List of References Andersson, S. (2004). Internationalization in different industrial contexts. Journal of Business Venturing, vol. 19, no. 6, pp. 851-875. Bell, J., Crick, D., & Young, S. (2004). Small firm internationalization and business strategy an exploratory study of ‘knowledge-intensive’and ‘traditional’manufacturing firms in the UK. International Small business journal, vol. 22, no. 1, pp. 23-56. Burkitt, L. (2012). Starbucks plays to local Chinese tastes. 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