The Economic Climate Of Rio And Brazil Marketing Essay
Rio De Janiero, the second largest capital city of Brazil with fast-moving economic market, is the chosen location for its potential to boost up foreign investment. Rio is suitable for the company to expand its wings for its strategic place, availability of resources and meets the demand of future growth.
In this report, an analysis of general environments which includes the legal, political, economic, socio-cultural and technology will be conduct along with strategic planning –SWOT analysis. At the end of the report, recommendations will be made based on the SWOT analysis together with a conclusion.
Brazil is under the ruler of Federal Presidential Constitutional Republic (Federal Republic of Brazil n.d.). Political environment is where the government intervention to co-operate with businesses to regulate affairs and ensure reasonable balance between national interest and corporate profit motives (Samson and Daft 2009).
Political risk occurs as the government intervention that could influence the business profitability (Samson and Daft 2009). Political risk in Brazil aroused during the time of general elections and campaign phase every four year terms directly or indirectly could causes disturbance to the market. Nevertheless, this situation is temporally as the government will have to reduce the tensions of any political risk affecting for the sake of economic growth.
As an upper-middle income country, Brazil is truly blessed with bountiful natural resources such as minerals, oils and others (Brazil Natural Resources n.d.).
In 2010, Brazil able to achieve 7.5% GDP, the highest achievement made for the past 20 years regards to its economic activities (brasil.gov.br 2011). However, economy will likely to cool down in the fourth quarter this year but should there be a growth at a rate between 4.5% and 5% (Brazil posts fourth-quarter growth of 5% 2011). Regardless of the slow growth, GDP growth in the fourth quarter may enhance the country’s economic and businesses still can earn their profits (Brazil GDP Growth Rate n.d.).
(Source: Brazil: Economic Outlook and Perspective.pdf)
Availability of resources, either natural or labour, is the most important source to consider surviving in the market. Natural resources such as metal, cement, wood products, and textiles are available for building materials productions (Brazil Natural Resources n.d.). For labour resource, the rate of unemployment has been decline since 2003 to 6.96% in the year 2010 (Brazil: Economic Outlook and Perspective 2010). This indicates that the market has created a lot of job opportunity which contribute to the economic growth of the country.
(Source: Brazil: Economic Outlook and Perspective.pdf)
1 Brazilian Real is approximately worth of $0.6 USD (Universal Currency Converter 2011). In 1994, U.S dollar exchange rate was in equal rate with the Brazilian Real but since then Real has made an outstanding gains against USD of any currency in the world (Brazilian Currency 2010). The gain in exchange rate shows good sign of opportunity.
Based on Samson and Daft (Samson and Daft 2009), they describes socio-cultural environment as a sharing in knowledge, beliefs, values, common behaviour and the ways of thinking among society.
(Source: Geert Hofstede™0
Hofstede analysis indicate that Brazil’s Power Distance Index (PDI) is 69 out of 100, which means that this country has significantly higher believe in power distance via high respect to the above authorities (Hofstede 2009). In business, employee would respect the top supervision for they have the right of their power and it would be easier to employ local workers for their high value of respect.
In terms of individualism and collectivism, Brazil is more prone towards collectivist society where there is moral involvement and emotional dependence between members and organisation (Hofstede 2009). By having collectivist society, every person in an organisation will be working efficiently with teamwork among one another.
Poll on Hofstede shows that 49% Brazilian preferring to masculinity and the rest prefers to femininity (Hofstede 2009). Brazil society respects towards one another especially individual with high power distinct, concerning for racial harmony and quality of life and also places high values on cooperative efforts and service (ELL Assessment for Linguistic Differences 2005).
Brazil is high level in uncertainty avoidance quadrant, indicating society’s lack of intolerance and unwilling to accept any changes as they believe it might be unpleasant (Hofstede 2009). Brazil is attempting to be in control and avoid any unwanted expectations by implementing rules and regulations, policies and the law.
As for time orientation, Brazil is a long-time orientation country (Hofstede 2009). The society is with long-term orientation is associated with prudence and perseverance in their lifestyle (ELL Assessment for Linguistic Differences 2005). Long-term society is respecting their relationship with others through status and modesty.
Technology pervasive development affecting the people and in business are bringing about improved productivity (Deresky 2000). Rio, has concentrated efforts on technology sector, vital for the progression of a country (Australian Government 2010). For the upcoming international events, capital cities of Brazil are improving the infrastructures, transportation and communication for the events. Ministry of Sport studied that the impact on country’s GDP would increase about 11 billion and this creates 121000 jobs availability in seven years period(Australian Government 2010).
Legal system is a set of laws and regulations enacted and enforced by the government and the ways in which the courts hold parties accountable for their actions (Wild, Wild and Han 2009).
Brazil has amended the Foreign Capital Law for any foreign investment (Pinheiro Neto Advogados 2002). The law stated important guidelines and some restrictions for foreign investor to comply with. It is essential for international business to acknowledge the foreign capital law in Brazil as not every country have the similar sets of commandment.
All the rights and duties of the company and its worker are set out in the Consolidate Labour Laws (CLT), includes bargaining of agreement, labour convention and as well as specific law on other issues (Pinheiro Neto Advogados 2002). By having CLT, companies need to be aware of the labour rights as country like Brazil is very strict in protecting their workers under any circumstances.
All the company sets in Brazil, either foreign or local companies are levied with the standard rate 15% of income tax (Pinheiro Neto Advogados 2002). The taxable income is determined by deduction of expense and cost of production per year’s earning obtains from company’s core (Pinheiro Neto Advogados 2002). Businesses are required to pay tax in order for the government to aid for country’s development.
Strategic planning – SWOT analysis consist Strengths and Weaknesses as the internal factors while Opportunities and Threats as the external factors, mainly used as an evaluation for business venture (Ebert and Griffin 2007).
Most of CSR products are made for environmentally response materials. CSR has worked with Good Environment Choice Australia (GECA) to conduct a lifecycle assessment (CLA) and the results satisfy all key environment criteria (Hebel® and the Environment n.d.). Environmental conscious societies can give contribution towards environment by buying CSR products
CSR brands have been awarded with ISO certifications, an International Standard that gives requirements for an organisation’s quality management system (QMS) (ISO n.d.). CSR productions are very strict in its quality controls at every stage of processing its products (sucrogen n.d.).
The weakness of CSR Limited would be the company’s wide product range. CSR have a four segments of production; building products, sugar, aluminium and property. Having multiples product line can be a hassle as the company is still new in Brazil and needed a lot of work to organise. This limitation should be handled to avoid business failure.
According to (brasil.gov.br 2011), Brazil has shown a tremendous increment of its economic growth. Brazil industrial-sector activities contributed 10.1%, the most active and major sector that boost the economic development (brasil.gov.br 2011). Abundant building resource materials in Brazil make it easier and cheaper to produce required materials for industry development in Brazil.
The political instability in Brazil could disrupt the country’s economic usually during election of the new government. Foreign investor is expected to understand the political issues to rise and affecting the market (Political Risk To Rise In 2010 2009). Thus, foreign investor will have to be prepared to juggle between investing company and political instability.
CSR Limited has been awarded with various certifications and well recognised among eastern countries. Thus, CSR has the potential to develop their business in Brazil. Concerning on their weakness, CSR should overcome their weak spot by focusing on products management. This will be best for the consumer not having difficulties and confusion of the products.
CSR Limited can earn benefits from the opportunities offered by the country. Brazil is blessed with abundant resources surrounding the country and recent achievement of the country’s rapid growth. This added advantage to the company to expand their productions in Brazil. Looking at the threats, although political risk and competitors will affects the foreign company to invest, having good connections among the society can prevail over what threatens the business.
The government should take the initiative to improve its management, so that political issues can reduce. Although slight decrease in economics GDP, supporting foreign investment may enhance future growth. The strong state of socio-cultural environment leads to high in self-esteem which is a plus for foreign business. Technologies in Brazil have drastically improved in line with the country’s growth which facilitates the companies in the country to achieve for the better performance. Derived from SWOT analysis, CSR Limited has the potential to be a success foreign company in Brazil as long as the company internally and externally able to adapt, improve and implement their strategy.
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