International Marketing (Brazil)
Soreen is a company established seventy years ago in the United Kingdom. The brand Soreen originated from the Sorenson family. It has been noted that Inter Link Foods bought Soreen in 2003. The company has a workforce of more than seventy employees at the Manchester factory that serves as the headquarters. Main products sold by Soreen identifies with bread, whereby the brand specializes in fruity malt bread in particular. Soreen malt loaf has gained loyalty among the target market in the United Kingdom. Soreen Malt Loaf is characterized with a chewy texture and a sweet taste. Ingredients making Soreen malt bread is fruits an example being raisins and malt. Soreen malt loaf is eaten with butter while sliced. Soreen malt loaf has seven products offered to the United Kingdom market. Soreen Malt Loaf only operates in United Kingdom, and has interest in the South American region, hence targeting Brazilian market. Preliminary research indicated that Brazil is strategically located as the entry point to the South American nations (Baer, 2001 p. 39). International marketing team is working on the issues of the Brazilian market; this paper reflects on PESTLE (Political, Economic, Sociological, Technological, Legal and Environmental) analysis on Brazil; mainly focusing at Economic issues, Political issues and Social, cultural and demographic issues in Brazil.
Analysis of the Business Environment
The economy of Brazil is the seventh largest in the world considering the nominal Gross Domestic Product (GDP) and also the seventh largest economy reflecting on the purchasing power parity (PPP) according to the surveys done in 2012. Brazil is one of the BRIC group members that support businesses in Brazil, Russia, India and in China. The four nations are considered to be at the same stage of development, South Africa recently joined the BRIC group making it BRICS group (Werner Baer, 2007 p. 303). This is an indication that if Soreen Malt Loaf manages to enter the Brazilian market, then there are high chances of expanding to the nations in the BRICS group with time. BRICS has facilitated the economic global power shift to developing economies away from the G7 economies. G7 economies support developed economies identifying with United Kingdom, United States, Germany, France, Italy, Japan and Canada. The seven nations are the wealthiest nations in the globe considering global net wealth.
The economy of Brazil is fast growing; this is contributed to the economic reforms which has made Brazil to have an international influence and recognition. It has been noted that Brazil’s National Development Bank (BNDES) has been influential in the financial industry, there are diverse financial institutions in Brazil that support fast economic growth. Brazil is a member of CPLP ( Community of Portuguese Language Countries), G20 ( G-20 major economies), United Nations, Latin Union, The Organization of American States, The Organization of Ibero-American States, Union of South American Nations and the Mercosul. Brazilian economy is supported by the seventeen mega diverse nations with natural environments and wildlife in protected habitats. Brazil is one of the emerging global power, and a regional power in Latin America; hence taking a middle position and power in affairs of the world (Baer, 2001 p. 399).
Brazil has vast agricultural resources, although wheat which is a raw material to Soreen Malt Loaf does not do well in Brazil. Wheat is grown in Rio Grande do Sul and in Parana accounting for more than ninety percent of the wheat production in Brazil. Most of the wheat is imported from other nations. Barley in Brazil does not do well in Brazil and it is largely imported.
Brazil is officially known as the Federative Republic of Brazil, it is the largest nation in Latin America and in South America. It has been noted that Brazil is the fifth largest nation in the globe considering population and geographical area. An indication that the market has potential consumers of the Soreen Malt Loaf, Brazil is the largest Portuguese speaking nation in the globe and the only nation speaking Portuguese in America (Roett, 2011 p. 18). Brazil is bordered by Atlantic Ocean, Venezuela, Suriname, Guyana, French Guiana, Columbia, Peru, Bolivia, Argentina, Paraguay and Uruguay. Brazilian territory is made of numerous archipelagos. Brazil borders all South American nations with the exception of Chile and Ecuador, hence a strategically located nation for businesses interested in the South American region (Werner Baer, 2007 p. 187).
Brazil politics takes federal presidential representative democratic republic structure. The president of Brazil is the head of government and the head of state in a multi party system. Administrative and political organization of Brazil is made of the federal district, federal government, municipalities and the states. Central government is controlled by the federal government comprising of judicial, executive and legislative.
Politics in Brazil heavily rely on monetary policies, Brazil is constantly facing food supply shortages as the human population continue to increase, there are high chances that Soreen Malt loaf will be influential in supplying more food in the target market. The government of Brazil has developed growth acceleration programmes in Brazil, with a constant improvement in the transport system in encouraging international investors in the region. Brazil face moderate cases of corruption (Baer, 2001 p. 205), Soreen Malt Loaf will be prepared to pay a number of bribes in getting contracts and supplies to the government related systems.
Social, Cultural and Demographic Issues
Brazil is characterised with a high middle class in the society, an indication that the consumer demand is high. High class constitutes eleven percent, formal middle class constitutes seventeen percent, informal middle class constitutes fifty percent and the lower class constitutes twenty two percent of the Brazilian population. Brazil has an illiterate population of twenty percent although the government has developed models of dealing with the social issues (Levine & Crocitti, 2009 p. 291).
The world is facing changes and becoming flatter with modernization and socialization. Companies are forced to form channel strategies in reflection of the local basis, regional basis and to the global basis. It has been noted that economic, legal and cultural issues vary with jurisdiction, hence the importance for Soreen Malt Loaf to perform research before entering the new market. One of the critical issues affecting businesses in Brazil is the aspect of the ‘Brazilian Cost’. Doing business in Brazil is very expensive basing on the diversity of the social, cultural and demographic issues.
Brazilian cost is characterized with high taxation, logistic costs, infrastructure inefficiencies and issues of workers benefits among others. Brazilian cost will be a burden to Soreen Malt Loaf which has a high possibility of discouraging foreign investment in Brazil. The advantage is based on the fact that the Brazil market is always ready to consume the products and services produced by diverse companies, hence generating opportunities and at the same time creating a competitive edge (Brainard & Martinez-Diaz, 2009 p. 27).
Brazilian cost is facilitated by costs of importing materials from the developing nations, which are the raw materials among others. Local industries face the heat of the Brazilian cost that could hinder fast development of the Soreen Malt Loaf in the region since raw materials will be imported. More than fifty two percent of the Brazilian population is considered at the socio-economic level, with the highest number of the populations being the middle class earners that constitute majority of the consumers in the region. Middle class earners have made Brazilian market complex and sophisticated. Telephone penetration in Brazil is estimated to stand at ninety eight percent while the internet penetration is estimated to stand at eighty percent of the population (Rohter, 2012 p. 144).
Brazilian market is the fourth reflecting at the automobile market in the world, the government of Brazil facilitates domestic producers, an indication that if Soreen Malt Loaf develops a local industry, there will be incentives from the government that will support the local industry. Brazilian market has a ready market, and despite the high costs of business operations, there are high chances of great ROI (Returns on Investments), basing on the fact that Brazil has gained stability over the years (Roett, 2011 p. 73).
Surveys have indicated that most of the consumers in Brazil are brand oriented; this is an indication that once Soreen Malt Loaf has gained control over the Brazilian market, there will be high chances of building a brand loyalty that will ensure sustenance of the company. Brands such as Coca-Cola has a penetration rate of more than ninety percent of the beverage industry, in the same way, Soreen Malt Loaf will develop strategies of building brand loyalty in the nation.
Analysis of potential Soreen consumers in Brazil
Brazilian market welcomes products and services of high technology, in the same way, Soreen Malt Loaf must engage high technology in producing their products in meeting the needs and wants of the target market. There are a number of companies in bread making industry in the region that are well established. Brazilian entrance does not call for a rigid approach, it just requires a standard approach (Roett, 2011 p. 160), although Soreen Malt Loaf must be prepared for high taxation regimes in the region. Soreen Malt Loaf will have to develop close relationships with the local distributors and also sales teams in facilitating the entry into the new market.
Brazil is a consumer market and targeted by many multinational organizations. It has been noted that Brazil is fast growing serving more than one hundred and ninety eight million people. Surveys done in the past five years indicated that more than twenty four million has shifted from the poverty line to middle class earners that constitutes majority of the consumers in Brazil. More than twenty seven million persons are classified as in classes A, B and C. Inflation in Brazil is moderate, hence high confidence rates among the investors in the region. Wages in Brazil are constantly rising, meaning that people have more cash to spend (Brainard & Martinez-Diaz, 2009 p. 101).
Retail sales in Brazil are ever high with the rise of the middle classes, the domestic market is fast expanding, which is critical in sustaining businesses in the region, Brazil was least affected by the global financial crisis. The booming consumer market in Brazil is an indication that Soreen Malt Loaf has high chances of making a hit in the target market. McKinney Consulting Group in Brazil has referred the nation to be the country to invest in at the moment (Levine & Crocitti, 2009 p. 219).
Most of the Brazilians are in the region are middle class earners, which means that they are spending more and more, even after the 2009 financial crisis. Private consumption in Brazil has remained as high as two point six percent, with promises of high projections within a decade. Growth in Brazil is broad based, which has facilitated fast growth in the region. Households are smaller with an average of 3.4 people, this is a drop from previous decades; this is an indication that the population is becoming more and more individualized in consumption and ignoring the mass consumption models.
Brazilian markets over the decades have no problem accepting European products and services. It has been noted that Brazilian economically active individuals constitute fifty six percent while Europe constitute forty five percent of the individuals. Brazil has lower retirees constituting eight percent as compared to Europe which has twenty two percent. Targeting Brazilian market is easy since majority of the consumers have disposable income (Rohter, 2012 p. 250), an indication that Soreen Malt Loaf will have ready and supportive market, as long as the products meet the needs and the wants of that particular market.
Brazilian market has an equal distribution reflecting at the target consumers, lower income consumers shop at the smaller stores in the country while the richer consumers tend to prefer hypermarkets and supermarkets. Soreen Malt Loaf will target at the lower income consumers and at the richer consumers in maximizing sales and building a brand loyalty, and also adapting the products according to the target market.
Recommendations on whether to take Brazilian market
Soreen Malt Loaf must be prepare a long term strategy depending on the market research, while at the same leveraging the experience of Soreen Malt Loaf in the United Kingdom and the similarity of the market to that of the Brazil. If the time left for the Soreen Malt Loaf to enter the Brazilian market is limited, then the desired entry form is to venture into an arrangement with local distributors, local representative firms or another company in similar market segment. The contracts must touch on local production through joint venture or new plant or through acquisition.
Soreen Malt Loaf should research more on the risks involved in the Brazilian market. Some of the outright risks are associated with the high Brazilian cost of operation that can derail production and distribution of the products. It is worth doing a comprehensive research on Brazilian cultural knowledge and Brazilian market knowledge (Rohter, 2012 p. 192). Soreen Malt Loaf will face corruption in Brazil, since some government services face those challenges. Importation of wheat will be another challenge since Brazil does not produce enough wheat. This paper supports entry into the Brazilian market upon close analysis of the diverse risk factors that could derail the company.
Recommendation for further research
Soreen Malt Loaf is expected to research on the image and worth of companies they wish to partner with, since in many cases they tend to overestimate their worth and image in the Brazilian market. Contract must be performed with due diligence assessment including channel analysis and customer analysis. Ignoring due diligence assessment will result to investment disaster on the part of Soreen Malt Loaf. Brazil has been a target for foreign owned companies due to the high profitability rates as long as they ask and answer the right questions as pertaining to the market segment (Brainard & Martinez-Diaz, 2009 p. 157).
List of References
Baer, W (2001). The Brazilian Economy: Growth and Development. 5th ed. Westport, Connecticut: Greenwood Publishing Group. 23-407.
Baer, W (2007). Brazilian Economy: Growth and Development. Boulder, Colorado: Lynne Rienner Publishers. 129-406.
Brainard, L. & Martinez-Diaz, L (2009). Brazil as an Economic Superpower?: Understanding Brazil’s Changing Role in the Global Economy. 3rd ed. Washington, D.C.: Brookings Institution Press. 23-199.
Levine, R. & Crocitti, J (2009). The Brazil Reader: History, Culture, Politics. 6th ed. Durham, North Carolina: Duke University Press Books. 199-301.
Roett, R (2011). The New Brazil . 2nd ed. Washington, D.C.: Brookings Institution Press. 13-169.
Rohter, L (2012). Brazil on the Rise: The Story of a Country Transformed. 3rd ed. Basingstoke: Palgrave Macmillan. 129-258.
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