Memo 2 - advantages and disadvantages in entering the brazilian economy PDF

Preview

Summary

advantages and disadvantages in entering the brazilian economy...

Description

MGMT1101

Words: 498

Brazil is the second largest emerging economy in the world and an appealing investment for companies who are in search for a rapid growing market, cheap labour and the benefits as a ‘first mover’. Although it is too late to be the first automobile industry to enter into Brazil, I still highly recommend that the company establish a plant within this growing economy, and produce cars for the local market.

After experiencing one of their worst economic recessions in the late 1980s, the government have actively reduced the economy’s reliance on industrial imports through the import substitution strategy. This proved successful for companies such as Embraer where they are the country’s largest exporter (Hill, et al., 2017). Despite being in an economy where the export sector was predicted to perform below the expected, they still managed to succeed in the highly competitive industry. Under the circumstances, I suggest that the most effective way for our company to enter into the Brazilian market is to establish a manufacturing plant as a horizontal foreign direct investment. The Brazilian government have created certain markets to be reserved purely for its own products, this entry mode will allow us to manufacture goods that will better suit these policies and allow us to serve the market directly from Brazil.

Brazil is one of the fastest growing countries and a member of the BRIC nations for their wide range of natural resources such as minerals, foodstuffs and vegetable products, which all account for 51.3% of their exports (Hill, et al., 2017). The country is also the worlds second largest producer of iron-ore and have an extensive source of offshore oil fields. These factors can be beneficial for our international investment as there will be low costs for the production of our cars and the labour that provides these services. The interdependence of

MGMT1101

Words: 498

Brazil’s rich variety of natural resources and our production of cars can potentially lead us to partnerships with large oil producers such as Petrobras.

However, compared to the anticipated of an upper-middle class income country, they have a decline in their share of high-technologies and relatively low levels of trade flows that are also rising in costs. This suggests their incapability to fully succeed the economic development of international trade. Nevertheless, although the country has faced harsh economic turmoil and even lived through a military dictatorship they still manage to see its gross domestic product (GDP) from $15 billion in the 1960s rise to $2 trillion by 2011 (Kuepper, 2018). This proves Brazil’s high level of economic resilience and how that has contributed to their popularity to foreign investors despite the risks.

Finally, I suggest that to bring new innovative products into the market, the company should be focused on integration and networking, particularly when investing in riskier economies such as Brazil. Having well known partners and networks of knowledge or technological innovation can provide the necessary resources that will ease the process of production, marketing and overall achieve our investment goals.

MGMT1101

Words: 498

Reference list Seeking Alpha. 2017. Why You Should Care About Investing in Brazil. [ONLINE] Available at: https://seekingalpha.com/article/4110219-care-investing-brazil. Accessed 12 April 2018].

The Balance. 2018. The Advantages of Investing in Brazil. [Online] Available at: https://www.thebalance.com/the-ultimate-guide-to-investing-in-brazil-1979061. [Accessed 11 April 2018].

Hill, C., Hult, T., Wickramasekera, R., Liesch, P., & Mackenzie, K. (2017). Global Business Today. Asia-Pacific Perspective. 4th Edition. McGraw-Hill....