The Brazilian experience - Research Paper Example

? MARKET ENTRY AND SUCCESS ANALYSIS: THE BRAZILIAN EXPERIENCE Part I: Market Success Analysis 1 Market Size  Generally, market size affects real estate business, but in the age of globalization and information revolution distance is no longer a problem. This means there is a wide playing field for organizations to sell their products. Markets sizes are widened as a result of the Internet. This is known as the globalization of markets.1 (Levitt, p. 20) Marketing involves selling, advertising, packaging, transporting, marketing research, product development, wholesaling, retailing, strategic planning and consultancy. A business organization must sell products to survive and to grow. The marketing concept states that an organization should try to provide products that satisfy customers’ needs through a coordinated set of activities. Customer satisfaction is the major aim of the marketing concept. An organization has to find out what will satisfy customers, and create satisfying products. The organization must continue to alter, adapt and develop products to keep pace with customers’ changing desires and preferences. The marketing concept stresses the importance of customers and emphasizes that marketing activities begin and end with them.2 (Jobber & Lancaster, p. 15) In the new business environment, the twenty-first century that is, it is essential to determine the new target market and the potential size. Knowing the number of people that the business is targeting as its potential customers is a primary goal of any business. Although the playing field has been significantly widened by the Internet and information technology for business organizations, still the potential market size has to be pinpointed in the planning and initial stages of the business or even when the operation is thoroughly ongoing. By having a website, an organization can have an idea how the customers respond and patronize their products. New web features enable website and customer interaction. Customers post their inquiries, product opinion and complaints living behind their ideas about the company, which in turn provides information for future business plans and strategies. Websites also ask customer preferences and data. These information inputs provide expert knowledge for target market, size and ‘characteristics’ of regular and potential customers. By knowing who their customers are, business people become creative. The company must encourage its workforce to become creative by asking their opinion, suggestions and ideas for improvement and organizational success. The potential market size and target are important to the real estate business that our organization is planning to implement in the country Brazil. Brazil’s economy is growing fast and there is also a wide playing field. With the help of our website, we can penetrate the areas of the growing middle- and lower-classes of society, and even the rich sector. These different sectors are in need of real estate. Our product – real estate – is still in demand for the growing market. 1.2 Resources The people or employees are an asset to the organization. Commentators suggest that employees or workers are an organization’s greatest asset. They are a part of organizational knowledge and organizations have to invest much on what is called human capital. The 4Ps which is Product, Price, Place, Promotion – and a fifth which is people – are the basis of a marketing strategy employed by most firms for competitive advantage. The marketing mix variables are usually considered internal variables which a manager bases his/her decisions. Strategic human resource provides effective management of the staff, retention, and turnover processes, selection of employees that fit with both the organizational strategy and culture, and cost effective utilization of employees. As an outcome, the firm can have an increased performance, enhanced customer and employee satisfaction and shareholder value. Employees of international organizations have to cope with countless changes in the market. Strategic management is challenged here to conduct needs assessment in order to recruit people who are versatile, can easily detect any change, and incorporate counteractions from those changes right there and then. Organizations succeed through human resource that has strong leadership. Leadership is felt but difficult to achieve in the age of globalization. It is a most powerful force that makes many people and even masses of people move at a particular pace in a particular direction. Leadership needs change, but leadership succumbs to change. And change affects all of us – our thoughts, feelings, activities, and experience. Resources of an organization include human resources, organizational knowledge, and knowledge borne out of years of operation as a business organization. These are important resources termed as tangible and intangible assets. Creativity spawns new ideas, suggestions and variations. Employers want employees who are creative because they can positively contribute their ideas and their inner thinking to the team and the organization. Creative employees help formulate the vision and objectives of the organization. Companies evolve, organizations have to change and introduce innovations. And creative people are needed in this kind of scenario. Employees should “think outside the box”. Human resource is very important to our real estate business in Brazil. They have to be creative to penetrate the different sectors of society. 1.3 Regulations and Procedures There are countries that impose a lot of restrictions on their businesses. The environment can be considered anti-competitive. There are however countries that are considered business-friendly, and among them are the United States and the United Kingdom which are least restrictive in regulating businesses. The business environment created by these regulations enables businesses to have a strong competition. With many restrictions, the businesses tend to shy away. Firms have to cope with government regulations and procedures. In the United States, the Internal Revenue Service has power to collect what is due the government in the form of taxes. When we say it has power, it controls the lives of the Americans and their businesses. Businesses are affected not only by market forces but also by government regulations in the form of taxes. Governments have reasons to collect taxes because it is through these regulations that they survive. But governments also have to protect the consumers and the general public from businesses with high cost and unsafe products.3 (OECD, p. 12) In Brazil, the business environment can be considered friendly and healthy. It encourages business competition and allows foreign businesses to invest in their country. Unlike in other countries that restrict businesses by forcing foreign businesses to form joint ventures with their local firms, Brazil allows smooth entry of foreign investors. This allows for little impact of regulation on foreign businesses. 1.4 Possible Risks There are many risks in the world of business. Organizations have to adapt risk management in their daily operations. It has become a necessity considering that in a world of intense globalization, risks and uncertainties are very common. There are man-made risks (e.g. financial and operational risks) and natural risks (e.g. calamities caused by nature) that threaten tangible and intangible assets of organizations. Risk management is managing events that are about to happen, and these events create risks and uncertainties that become unmanageable if not acted upon on time. The events have to be identified beforehand so that risk management can be applied. This is a challenge on the part of managers to ascertain and identify the risks and more importantly the causes of these risks. If they are identified, plans and strategies should immediately be applied. Another subject on the topic of risks is information technology and the security involved. As we know, technology and the internet have influenced our lives today especially the running and operations of businesses and organizations. Information systems and the information revolution have created more risks and uncertainties in organizations and the workplace. IT infrastructures are targets of attacks by hackers. Technological inventions multiplied risks in the workplace. During the industrial revolution, there were a lot of changes introduced in the workplace and organizations. An example is the construction industry which is filled with various types of risks. Environmental problems, accidents and deteriorating health of workers are some of the risks associated with the construction industry. Workers who are not provided adequate basic necessities perform poorly at work and injure themselves. Although risk management practices have been instituted by construction firms, risks associated with working conditions continue to exist.4 (Gallati, p. 4) When a manager applies risk management, he/she also applying quality management to the company’s products and services. The risk manager has to institute plans to deal with risks and threats in business, in competition or in the organization’s survival. Risk management can also be applied on enterprise risk management which involves dealing with economic crises. ERM is applied with strategic risk management that can enhance competitive advantage in an organization.5 (Fraser and Simkins, p. 31) Part II: Market-Entry Analysis  2.1 Joint Ventures A joint venture is a partnership where the major players are the franchisee and a franchisor. The term international joint venture commences when the location of a party is not the country of origin and this party or firm seeks to do business with a local firm; either one of the firms is not from the country where business is to be built.6 (Wolf, p. 6) In the Brazilian context, joint ventures are formed by two or more companies without necessitating the formation of a new company. The parties concerned work collaboratively the different functions of the corporation. The Brazilian law does not specify or provide specific provisions for the formation of a joint venture but an agreement falls under the provisions of the Brazilian Civil Code which has some restrictions for such an agreement. A typical joint venture agreement under the Brazilian law emphasizes the terms and conditions that the parties are going to carry out or work together including the responsibilities that each party bears.7 (Leite & Rodrigues, p. 3) Globalization has enhanced joint ventures and mergers and acquisitions (M&A). There are those who believe that globalization is for big businesses and organizations. Size matters. But this belief seems to be more of a misconception or a myth. As more firms merge and create new companies, more businesses have collapsed or in near-collapse because of mismanagement. Eight out of ten mergers and acquisitions or joint ventures have failed because of wrong management and planning and wrong perception8 (KPMG Press Release). Another cause is the belief of management that they could dominate the market if they get other companies to join them. But there are negative consequences to their action. Planning and managing M&As involves many things that include cultural factors, employee feelings and attitude, and the technical and financial sides of running the new company. Once a joint venture is about to begin, two and more managements are in double time. They have to prepare and commit themselves to activities and events they do not really know. In fact, they are unprepared for the eventualities. And instead of doing the regular business of the day, they become more preoccupied with the new activities of an entirely new company. And there will be more and more jobs to be done. Management and employees become preoccupied with new things instead of their usual job. One issue that should be dealt with immediately after a takeover is the management of a new organization. This is just one of the many disadvantages of a joint venture. The initial stages and the planning take a long time. 2.2 Franchising Franchising is considered a combination of a big corporation and several other small businesses. An individual or small business puts its power of business using its resources for a large business. Large firms use this method to expand their business without using much of their inside resources in terms of capital and human resources.9 (Nieman, p. 2) A main characteristic of franchising is that the major player or stakeholder is an entrepreneur who is known as the franchisor that has earned a good reputation and distinct business. The franchisor grants the franchisee/s the right to use the company name, logo and methods of doing business. The terms and condition of agreement is contained in a manual which is a legal document to be followed by both parties in the operation of business. The advantage for this kind of business strategy is that the franchisor acquires profits without using its own resources. The franchisee agrees to pay the franchisor a certain capital just for starting the business using the name and logo of the latter. Other fees the franchisee has to incur include the royalty that should be paid as the operation and contract take effect. The royalty is a payment for management and advertising. The franchisee however does not own the trademark but just leases it during the duration of the contract. But the profits go to the franchisee. In Brazil, franchising is not as dominant as in the United States. Franchising business is governed by the Civil Code of Brazil which includes 2000 regulation articles pertaining to business corporations, real estate and other laws.10 (Ziegenfuss, p. 93) Franchisees use the name and reputation of the franchisor to advance in their chosen field. 2.3 Exporting  Exporting is an important business strategy that provides profits to firms if managed properly. This strategy can be done in the domestic market or in the international scene. Export products have to be applied with the greatest quality in order to be competitive. With globalization, exports have a lot of competition. Export planning have to be accomplished with several phases in order to be effective. It has to be applied with export policy, added with export audit, followed by planning, and the last which is roll-out.11 (Leeman, p. 48) There are many business activities that should be done in exporting which are not found in ordinary, local business. A lot of country analysis, SWOT, and marketing mix have to be studied and added in the business processes in order for exporting to be successful. Products may have to be adapted to different cultures. Standardized products are common in the global market. We cannot use exporting in real estate as there are no products involved except the lands that are in the local markets. But we can use the business strategies in penetrating the local market. Some of our strategies may be applicable to the local scene but others have to be discarded. Part III: Market-Entry Implementation Strategy  The strategic importance of joint ventures cannot be taken for granted when conducting business in Brazil. The business atmosphere in this country is very competitive that we have to be meticulous in our planning. Joint venture with a local real-estate firm in Brazil is our first target as we penetrate the local market. We don’t need to form a new company because that would entail a great amount of resources. The mechanics of the joint venture can be stated in our contract that we can conduct business as partners without necessitating the forming a new company. We can use the resources of our local partners; they know the local market. We can also use our expertise in international business. In a joint venture, we don’t need to take over a company as in a merger and acquisition. In merger and acquisition, you need a new management for a new organization. In order to have a smooth flow of market entry, we just have to partner with a local company that can help us in our market entry. Joint ventures have been successful in other countries, for example in China and other Asian countries. This is because in a very large market like China, the government requires foreign firms to have 50-50 business ownership with a local firm before they can conduct business in the country. But in Brazil, they welcome and encourage foreign investors. Brazil, like the United States, has a democratic form of government which is also least restrictive when it comes to foreign business. There is also much to tap in the local market of Brazil. Its vast natural resources that cover land and forests can be tapped for real estate. This can only be done with the help of a local firm that has expert knowledge and advice to our organization. Cultural aspect is another relevant factor. A joint venture with a local company in Brazil will create a culture by itself and will also have to cope with the existing culture of the country. Organizational culture is different from the existing national culture. A study by Hofstede12 (cited in Franke et al., p. 12) revealed that certain characteristics of national culture were associated with economic growth. Applying this on the particular culture and economic growth of Brazil, we can say that its national culture and economic growth reflect its history and the characteristics of the Brazilian people. While it is not for this paper to dig deeper on the history and psyche or national character of the people, it is enough to state their background. Brazilians are democracy loving people. This trait will reflect in the way they conduct business with other nationalities. In penetrating the Brazil market, we can choose different orientations which are: ethnocentric, polycentric, geocentric and regiocentric.13 (Harzing, p. 21) A company using the ethnocentric staffing policy appoints parent country nationals (PCN) to head its subsidiaries abroad. In other words, if our head office or parent country is the United States, top positions in Brazil will be occupied by American nationals. Moreover, a company that follows a polycentric staff would appoint host country nationals (HCN) or Brazilian citizens, while a company with a geocentric staffing policy appoints the best person, regardless of nationality. Another staffing procedure is known as the regiocentric in which managers are moved on a regional basis and often forms a mid-way station between a pure polycentric/ethnocentric approach and a truly geocentric approach. In our local firm in Brazil, we can choose a Brazilian manager to head the new operations in real estate business. End Notes: 1. Theodore Levitt, The marketing imagination, (new expanded edition), (New York: The Free Press, 2010) p. 20. 2. David Jobber & Geoffrey Lancaster, 2003, Selling and sales management (sixth edition), (England: Pearson Education Limited), p. 15. 3. Organisation for Economic Co-operation and Development, Businesses’ views on red tape: administrative and regulatory burdens on small- and medium-sized enterprises (United States of America: OECD, 2001), p. 12. 4. Reto R. Gallati, Risk management and capital adequacy (New York: McGraw Hill Publishing, Inc., 2003), p. 4. 5. John Fraser & Betty Simkins, Enterprise risk management: today’s leading research and best practices for tomorrow’s executives (Hoboken, New Jersey; Canada: John Wiley & Sons, Inc., 2010) p. 31. 6. Ronald Charles Wolf, Effective international joint venture management: practical legal insights for successful organization and implementation (United States of America: M.E. Sharpe, Inc., 2000), p. 6. 7. Guilherme Leite & Talita Alves Rodriguez, Brazil, In International joint ventures, Issue 2008 (The Netherlands: Kluwer Law International, 2001), p. 3. 8. KPMG Press Release, KPMG identifies six key factors for successful mergers and acquisitions; 8% of deals fail to enhance shareholder value. Retrieved 20 August 2011 from: http://www.riskworld.com/PressRel/1999/PR99a214.htm. 9. Gideon Nieman, The franchise option: how to franchise your business (United States of America: Juta & Co. Ltd., 1998), p. 2. 10. James T. Ziegenfuss (2004), Business, politics, science, and vice versa: an institutional history of Brazilian medical journalism. Academic Journal, 11(1) 93-107. 11. Joris J. A. Leeman, Export planning: a 10-step approach (United States of America: Institute for Business Process Management, 2010), p. 48. 12. Franke, R., Hofstede, G., and Bond, M. H. (2002). National culture and economic growth. In M. Gannon and Newman, K. (eds.) Handbook of cross-cultural management. Oxford, UK: Blackwell Publishers Ltd. 13. Harzing, A. (2004). Composing an international staff. In A. Harzing and Ruysseveldt, J. V. (eds.) International human resource management (2nd ed.). London: Sage Publications Ltd. Bibliography Franke, R., Hofstede, G., and Bond, M. H. (2002). National culture and economic growth. In M. Gannon and Newman, K. (eds.) Handbook of cross-cultural management. Oxford, UK: Blackwell Publishers Ltd., p. 12. Fraser, J. and Simkins, B. (2010). Enterprise risk management: today’s leading research and best practices for tomorrow’s executives. Hoboken, New Jersey; Canada: John Wiley & Sons, Inc. Gallati, R. (2003). Risk management and capital adequacy. New York: McGraw Hill Publishing, Inc. Harzing, A. (2004). Composing an international staff. In A. Harzing and Ruysseveldt, J. V. (eds.) International human resource management (2nd ed.). London: Sage Publications Ltd. Jobber, D. and Lancaster, G. (2003). Selling and sales management, Sixth Edition, England: Pearson Education Limited. KPMG Press Release (2008). KPMG identifies six key factors for successful mergers and acquisitions; 8% of deals fail to enhance shareholder value. Retrieved 20 August 2011 from: http://www.riskworld.com/PressRel/1999/PR99a214.htm. Leeman, J. J. A. (2010). Export planning: a 10-step approach. United States of America: Institute for Business Process Management. p. 48. Leite, G. & Rodrigues, T. A. (2001). Brazil. In D. Campbell, A. Netzer, & Center for International Legal Studies, International joint ventures, Issue 2008. The Netherlands: Kluwer Law International. Levitt, T. (1986). The marketing imagination (new expanded edition). New York: The Free Press. p. 20. Nieman, G. (1998). The franchise option: how to franchise your business. United States of America: Juta & Co. Ltd. p. 2. Organisation for Economic Co-operation and Development (2001). Businesses’ views on red tape: administrative and regulatory burdens on small- and medium-sized enterprises. United States of America: OECD. Wolf, R. (2000). Effective international joint venture management: practical legal insights for successful organization and implementation. United States of America: M.E. Sharpe, Inc. Ziegenfuss, J. T. (2004). Business, politics, science, and vice versa: an institutional history of Brazilian medical journalism. Academic Journal, 11(1) 93-107. Read More