The Depth PESTL Analysis of Brazil - Case Study Example

Executive Summary The Driza- Bone Pty, Ltd. is a company that manufactures not only clothes but also other accessories. The company aims to expand their manufacturing operations to Brazil. The following report outlines an in depth PESTL analysis of Brazil. By analyzing the political, economic, socio-economic, technological and legal issues within Brazil, the report brings into light opportunities and threats the company will face if it expands its business into Brazil. Considering the recent developments and conditions within Brazil, it becomes evident that the company has a greater chance of profit by expanding the services in Brazil. The political as well as economic conditions of Brazil are the major factors that will benefit the company the most. In order to cope up with the threats and weakness of this idea, certain recommendations are also highlighted in the following report. Table of contents 1.0 Introduction 2.0 Political environment of Brazil 2.1 Government stability 2.2 Government relations 2.3 Analysis 3.0 Legal issues in Brazil 3.1 Business laws 3.2 Labor laws 3.3 Analysis 4.0 Economic environment in Brazil 4.1 Currency exchange rates 4.2 Economic trends 4.3 Analysis 5.0 Socio- economic environment of Brazil 5.1 Hofstede’s Cultural Dimensions 5.2 Analysis 6.0 Technological environment 6.1 Technological infrastructure 6.2 Communication networks 6.3 Analysis 7.0 SWOT Analysis 8.0 Conclusion 9.0 Recommendations 10.0 Bibliography Introduction The Driza- Bone Pty, Ltd. formerly known as Armour Driza-Bone Pty Ltd. is based in Eagleby, Australia. The company manufactures not only clothing but also accessories and performance gear. The product categories of the company include pants- shorts, coats-jackets, shirt-tops, accessories along with headwear and coats-jackets. Driza-Bone Pty, Ltd. offers its wide range of products via distributors and agents to a large number of countries across the globe. These countries include New Zealand, Benelux, Poland, Scandinavia, the United Kingdom, Germany, France, United States and Switzerland. This company was incorporated in the 1962 and was a subsidiary of James Halstead plc previously. The products designed at Driza-Bone Pty, Ltd. are a symbol of unique spirit and Australian heritage and are focused for a modern lifestyle. The report explains the fact that whether Driza-Bone should enlarge its business into Brazil or not. Political Environment Government stability From 1995 till present, Brazil has faced three presidents. During the time of President Fernando Henrique Cardoso (199-2002) and Luis Inacio Lula da Silva (2003- 2010), it was indicated that Brazil had a political stability as well as social inclusion. However, during the time of the current president, Rousseff, there has been a lesser degree of political stability in the country. This can be indicated by the mass demonstrations that the country faced in June 2013. the country has been subjected to smaller protests periodically since the month of June 2013. The reason behind the uprising of 2000 people was in opposition to the rise in bus fares. The underlying cause of the demonstrations was none other than the failure of the government to fulfil the rising expectations of the government. Other indicators that state the instability and lack of success for the government of Brazil are that the transportation services, health and public sector have perceived to be low quality (J. Meyer 2014). Government relations International cooperation between Australia and Brazil is sizable. The two countries were a part of the WTO negotiations known as the Doha Development Round and have been leading members of the Cairns Group. The relations between these two countries is stable as indicated by the fact that trade between the countries totalled a $1.321 billion in 2013. Brazil has participated in numerous international groups such as IBSA, BASIC and BRICS indicating that the foreign relations of Brazil are stable with majority of the foreign states (Europaworld.com 2014). Analysis Albeit Brazil is facing demonstrations domestically, there are steps being taken in order to cater the needs of the citizens of Brazil. Also, since Brazil has a stable relation with majority of the foreign country especially Australia, the hometown for Driza-Bone, there is an opportunity for Driza-Bone to expand their business in Brazil. Legal environment Business laws One of the issue against which the mass demonstration occurred in Brazil in 2013 was to end the issue of corruption within the country. The fact that Brazil scored 43 on the 2012 Corruption perceptions Index indicates that corruption is a leading issue for the country. Brazil’s most-favored nation (MFN) applied tariff was 13.7 in 2011, rising from 11.5 per cent in 2008 and 10.4 per cent in 2004. Brazil decreased its highest duty rates from 55 per cent in 2004 to 35 per cent in 2008 and introduced a number of export insurance, finance and guarantee measures aimed at aiding the producers and exporters to access credit. Brazil has also expedited customs clearance procedures and sought to simplify its import licensing regime. In opposition to corruption, the foreign investment law of Brazil has indicated that the business law within the country is stable (Dfat.gov.au 2014). Labor laws In Brazil, according to the labor laws, no one can work for more than 44 hours per week from Monday to Saturday and the benefits provided by the companies are also promising. The labor laws of Australia as well as Brazil are not entirely similar. For example, in Australia, the minimum wage for 40 hours per week is of $528.40 per week while in Brazil, it is $310 per week. This indicates that the labor laws of Brazil have certain alterations when compared to the Australian labor laws (The Economist 2014). Analysis Albeit Brazil has indeed a well established foreign law, the level of increasing corruption accompanied with the difference in the labor laws of both countries, the Driza-Bone company might find it unsuitable to expand a business in this country. Economic Environment Currency exchange rate In the current times, the real is has headed back towards the lows. The indication that the central bank cut the interest rates immediately as the inflation started prevailing in Brazil in the hopes of turning it down. The central bank however, delayed the raising of the interest rates. This results in the real plunging. Considering the Australian dollar and Brazilian real, 1 Australian dollar equals to 2.10 Brazilian real (Austrade.gov.au 2014). Economic trends The Brazilian economy has expanded at about 2% annually from the year 2011 to 2013. The economy is predicted to grow by a rate of 2.3% in 2014. Brazils unemployment rate arrived at the midpoint of around 5.5 percent in 2013, about 15 million new formal employments have been made lately and the amount of accessible credit is presently more than five times higher than in 2002. The World Economic Forum Global Competitiveness Index for 2012-13 positioned Brazil 48 out of 144 nations and the World Banks 2014 rankings for ease of doing business put Brazil 116 out of 189 (Austrade.gov.au 2014). Analysis Today, Brazil is a more open economy, with a developing customer and industrial base. Brazil has is now outward-looking as it is establishing new markets and expanding its imports and exports. It is likewise empowering more prominent commercial cooperation with world class firms to give new innovations. The currency rate between Australia and Brazil is stable and favorable for the Driza-Bone to expand its business in Brazil. Socio-economic Environment Hofstede’s Cultural Dimensions Hofstede’s Cultural Dimensions Australia Brazil Managerial implications Collectivism vs. Individualism Employee is thought to take initiate and be self reliant Collectivism is appreciated + Power Distance Hierchy created only for convenience, manger and employee relation is participative and informal Power is of importance, At work the boss takes responsibility X (no effect of outcome) Uncertainty avoidance Some workers are considered to avoid unknown situations while others just let it happen Mostly people are threatened and thus there are strict laws and rules - Indulgence People tend to be optimistic People tend to be optimistic + Femininity vs. Masculinity Masculine society, at work, the behavior of employees depends on the value that “the winner takes all” (Geert-hofstede.com 2014) Moderately feminine as well as masculine - Analysis Considering the managerial implications, it can be stated that according to Hofstede’s Cultural Dimension, there are a 50% chance that Driza-Bone would expand in Brazil without any threat but there is a chance that the company will face threat. Technological environment Technological infrastructure Brazil has an advancing textile industry at present. The latest state of the art machinery in fabric cutting, finishing, sewing and fusing is present in the industry thus resulting in a efficient productivity (Textilesintelligence.com 2014). Communication networks The communication networks within Brazil such as mobile and telephones are up to date as well as reliable. The regions in the north west of the country, however, are even deprived of basic analog PSTN telephone lines. Analysis Both the infrastructure and reliability of communication network in Brazil are indicators that the Driza-Bone can expand its manufacturing in Brazil. SWOT analysis Strengths: already expanded business across the globe, a wide range of performance categories, strong brand identity and product perception, Strict quality control policies reflect the importance that Driza-Bones customers place on attention to product quality and detail Weaknesses: Niche business continuing within Australia, no innovation in ideas Opportunities: Political environment: 1. Foreign relation between brazil and Australia is beneficial for Driza-Bone to expand its business in brazil. Economic environment: 1. The stable currency rate of brazil 2. The reasonable exchange rate between bpoth countries resulting in less labor costs 3. Brazil is undergoing an economy bloom. This will aid in the business expansion. Technological environment: 1. The garment manufacturing industry of brazil is well equipped with the mkdern infrastructure 2. Majority of the country has reliable communication networks Threats: legal environment: 1. The corruption rate of brazil is high 2. The difference in labor laws between the two countries Hofstede’s Cultural Dimensions 1. A major difference seen in power distance 2. Brazilians are subjected to more laws and rules in comparison to Australians Conclusion The country report on Brazil above mentioned thus shows that Driza-Bone should take the steps towards expanding its business in Brazil. There are variable amounts of factors that go in support of this statement while only a few that contradict it. The current political situation, economic condition as well as technological infrastructure of Brazil highly support the company’s decision to expand in Brazil. A company that already has a brand name in Australia and provides good quality products to its customers can cross other barriers with ease. Since corruption is a big threat, the Brazilian government is trying to cope up with this issue and is adamant to reduce the high corruption rates. By considering all the opportunities that lie in Brazil for Driza-Bone, it can be concluded that they can expand their business there. Recommendations Incorporate. The foreign relation between the two countries has always been stable. The company should make use of this relation and combine with its brand name and name for quality. Opportunities flourish across a range of sectors where Australia has considerable expertise and experience. The skill of Australian companies already active in the market indicates that Brazilians are receptive to Australian products and services. The garment manufacturing sector can easily flourish and bloom. Utilize the time. A decade of market reform and the emergence of greater consumer demand have created a wide range of market opportunities for Australian know-how. However, time is of the essence. Many major European and North American firms are busy reinforcing commercial roots in Brazil since they believe that it is the right to take advantage of the enormous potential offered by Brazil. Give time. One of the major factors that might prevent the company from thriving in Brazil is the rate of corruption. However, the president of Brazil has been giving her attention to this issue. She is working on the anti corruption policies which with time will surely reduce this threat. Bibliography J. Meyer, Peter. 2014. Brazil: Political And Economic Situation And U.S. Relations. Austrade.gov.au,. 2014. Market Profile – Brazil – For Australian Exporters - Austrade. Accessed August 20 2014. http://www.austrade.gov.au/Export/Export-Markets/Countries/Brazil/Market-Profile#.U_PZlKN0Z9E. Dfat.gov.au,. 2014. Brazil Country Brief - Australian Government Department Of Foreign Affairs And Trade. Accessed August 20 2014. http://www.dfat.gov.au/geo/brazil/brazil_brief.html. The Economist,. 2014. Employer, Beware. Accessed August 20 2014. http://www.economist.com/node/18332906. Geert-hofstede.com,. 2014. Brazil - Geert Hofstede. Accessed August 20 2014. http://geert-hofstede.com/brazil.html. Europaworld.com,. 2014. Europa World Online : Home. Accessed August 20 2014. http://www.europaworld.com. Textilesintelligence.com,. 2014. Textiles Intelligence || Textile Outlook International. Accessed August 21 2014. https://www.textilesintelligence.com/tistoi/index.cfm?pageid=3&repid=TISTOI&issueid=153&artid=1735. . Read More