Dell’s Dilemma in Brazil: Negotiating at the State Level

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  • Topic: Rio Grande do Sul, Minas Gerais, States of Brazil
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  • Published : October 30, 2012
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Dell’s Dilemma in Brazil: Negotiating at the State Level

Wednesday, October 3, 2012

Introduction
Keith Maxwell is the Vice President in charge of Worldwide Operations, for Dell Computer Corporation. Dell Computer’s was founded in 1984 by Michael Dell in his University of Texas dorm room, and by 1999 the company grew to market over $98Billion. Dell was the second growing largest personal computer manufacturers, just behind Compaq in the growing PC industry. Dell attributed its success mostly to its revolutionary business approach, which was known as the Direct approach. Dell had eliminated the middleman completely, by selling and shipping their computer’s directly from their factories from all over the world.(1)

Problem Statement
Should Dell stay with the original agreement they had in Rio Grande Do Sul, even though the Government has changed hands and the deal could potentially fall through, or should they look at the other opportunities they had in other States in Brazil that were offered to them?

Analysis (See Exhibit 1)
Judging from the SWOT analysis, I believe that Dell in an excellent position. With our strength’s and opportunities placing us with a competitive edge in funds, personnel, marketing, experience, and low cost we will thrive and dominate any market we so choose to venture in. This case being, the market in Rio Grande do Sul, Brazil. The Opportunities for this State and us are tremendous, we will offer this State joint research and development projects with local universities that could exceed in the R$100 million or more. Our weakness’ are that we wish to proceed to quickly on projects, and the threats are the new government change in Rio Grande Do Sul that could jeopardize the deal we already had in place with the previous government.(2) We could very well lose part or all of the Latin American Market depending what we decide to do with this information.

(See Exhibit 2)
Judging by our PEST analysis Rio Grande Sul has a low crime rate, such as theft and hijacking. Which means transports of our goods will be an extra cost we will have to factor in. The Political change does worry us a tad though, because this government now feels strongly against TNC’s benefits. The growth and prosperity we could achieve in Rio Grande do Sul is endless, with the already modern infrastructure, the number of well-regarded Universities and the wealth of the well-educated people Rio Grande do Sul has to offer are all very supportive. Socially Rio Grande do Sul is one of the best States for our company to be in, our executives have mentions already they feel safe and comfortable to live and thrive in. Finally, Technologically Rio Grande do Sul has the most efficient phone line installed compared to the rest of Brazil, which would do wonders for our headquarters and marketing department, not to mention that General Motor (GM) established a state of the art plant in Rio Grande do Sul in 1995.(3)

Alternative #1
Dell could simply leave Brazil altogether.

PROS
* Not have to deal with political unrest.
* Extra cost for hiring security specialist teams we will need to ship and receive our goods.(4) * Not have to worry about an unstable, still growing society.

CONS
* Lose the opportunity to open a factory directly in Brazil at that moment. * Lose 0 Tariffs if we did not produce in Brazil.(5)
* Means more cost to ship out product to our South American clientele. * Extra time to get our product to our South American clientele. * Finding new shipping route to get our product out to our clients in Brazil....
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