* Universidad Autonoma de Madrid
* Master en Direccion de Marketing
* International Marketing
* Shintaro Okazaki
Case Study 1:
Foreign Market Entry Evaluation:
Foreign Market: Brazil
Brazil Luxury Market
Market Entry Strategy
Foreign Market: Brazil
At this moment Brazil has 190.7 million inhabitants and is the 7th biggest economy in the world, the first in Latin America, with a GDP of approximately 2088 billion dollars2. Its economy has been expanding with the help of booming commodities (meat, cocoa, sugar cane, corn, rice and soya). The biggest Latin American economy currently has a 7,5% GDP growth rate and an increasing 7,3% inflation rate. The increasing inflation rate is linked to food and fuel costs or expectations of price and wage raises. (Employees expect higher prices and demand higher wages). Brazil has a large agricultural and industrial base, but the growing service sector has accounted for over 60 percent of the GDP in recent years. Brazil Luxury Market
It seems paradoxical that a country with so many social problems such as Brazil, where over 20% of the population lives in poverty, can be so appealing for companies offering luxury goods. Compared to other countries in which the tourists are the principal consumers of luxury products, in Brazil these products are almost entirely consumed by local citizens. As the economy grows, wages increase as well and are generating a great opportunity for the premium brands. According to a GFK Consulting study, the reflection of this fact is the consumption of luxury products worth $6,5 billion per year. Moreover, in the last five years this sector grew 60% and in 2010 the invoiced sales of luxury products increased 27% according to the same study. Another study of Goldman Sachs states that in 2025, the luxury market could represent 6% of the global market (approximately $60 billion). SWOT- Analysis
* Brazil’s luxury market is growing fast. The middle and high classes buy a lot of status symbols and sales of luxury goods are high. The demand exists and might grow further. * Brazil imports were worth 20.2 Billion USD in September of 2011. * Unemployment rate gradually decreased the last ten years. In August 2011 it was reported at 6%. * The Brazilian Real exchange rate depreciated 4.08 percent against the US Dollar during the last 12 months. Historically, from 1992 until 2011 the USDBRL exchange averaged 1.78 reaching an historical high of 3.95 in October of 2002. * Consumer confidence is on a high level with 112.4 in September of 2011. * Brazil reduced its poverty during the last 10 years. Even though the poverty headcount ratio is still high, it decreased about 50% since 2000. Together with the increase of higher education it will raise the populations’ ability to produce high valued goods and services, essentially, a country’s earnings. Less poverty lowers the long term cost of welfare to the poor, or to be more specific, general expenses.
* Official data for the last three decades show that Brazil has one of the world's most unequal distributions of income. But the GINI index decreased from over 60 in 1998 to about 55 nowadays and the government continues trying to reduce this inequality. * Brazil reached in 2010 a corruption index score of 3.7. High levels of crime deter foreign investments in a country and increase the cost of business due to bribery and safe concerns of employees. If crime is epidemic, it could also affect laws and judicial procedures that ensure fair treatment for local businesses and foreigners looking to investing with the country. * Although the luxury goods sales increase, it is still difficult to export to Brazil, as the...
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