International Marketing Report for Soreen Malt Loaf’s Potential Entry to Brazil
Introduction
Soreen Company was established in the 1940’s by a family known as Soreen. Its headquarters is located in Manchester, in the United Kingdom. The company deals with the baking of the Soreen malt loaf, a common snack in the United Kingdom. The bread is comprised of malt and ingredients such as raisins. It has a sweet taste and a chewy texture, which makes it a favorite snack among the United Kingdom population. The bread has been in the market over 75 years and has increased its sales over the years (Doole & Lowe, 2008, p. 2). This report will analyze the expansion of the company in Brazil, determine its probability of flourishing, and possible challenges of the strategy.
Business Environment
Economic Issues
The Brazilian economy is one of the improved economies in South America and Latin America. It has a large and diverse economy which covers almost every sector. The government of Brazil has ensured economic growth and development in the state by allowing privatization of most of the organizations. The privatization of the state owned companies took place in 1998 allowing investment opportunities and increased production in the country. As a result, the country has experienced a constant economic growth. The Brazilian economy has been backed by agriculture and exploration expeditions of natural resources in the region. The Brazilian economy has also been, largely, improved by adequate human capital available in the region.
Since 1960’s, the Brazilian government has embarked on the establishment and development of industries through international aids and loans. Between 1970 and 1980, after the oil crises, Brazil established a sugar cane-alcohol industry, which has improved the economy through the sale of fuel. The most developed regions in Brazil are the south and southeast regions of Brazil. By contrast, the northeast and central west, regions of the country have not yet developed due to the domination of agricultural practices in the regions. The northern region, on the other hand, remains to be less populated because of the Amazon tropical forest (Burns and Bush 2012, p 23).
The Brazilian economy is significantly affected by the availability of minerals and energy resources. For instance, Brazil is endowed with natural resources like iron ore deposits, and gold. The country is recognized for being the largest tin producer in the world. These mineral ores make the country earn a lot of foreign exchange thus improving the country’s economy. Other sectors include agriculture and fisheries, manufacturing, high-tech industries, service industries, transport and communication, and foreign trade. Brazil has a vast land which is suitable for agriculture. Brazil engagement in agriculture has seen its export agricultural produce such as coffee, cocoa, soybeans, and orange juice. There are various manufacturing industries in Brazil including steel, mining, automobiles, and food processing industry. The establishment of high-tech industries and restructuring of the service industry has facilitated economic growth in the region. The economic condition prevailing in Brazil will favor the development of the Soreen malt Bread Company and its further expansion (Christian, 2009, p. 53).
Political Environment
The political arena in Brazil has been serene and conducive for business activities. Over the years, there has been political stability thus the government has diverted its expenditure on development projects. The Brazilian government is divided into states where each state is headed by a governor. The federal government is divided into executive, legislative, and judicial systems through which the state power is shared. The Brazilian government practice democratic regime where all citizens have equal rights and freedom before the law. The legal system in Brazil is dated back from 2002 and is usually slow. The calm political environment in Brazil enables it to be a suitable location for the establishment of the Soreen malt Bread Company. The political serene political climate prevailing in Brazil will facilitate growth of the company (Christian, 2009, p. 8).
Social, Cultural and Demographic Environment
Brazil is composed of various diverse backgrounds of Japanese, east Europe, Portuguese, Africa and Italian immigrants. As a result of the diverse individuals with different cultural background, Brazil offers a broader aspect of social and cultural activities for all citizens irrespective of their differences. There are myriad social facilities which offer sports and other social activities. Most of the cities acknowledge and appreciate the presence of people with diverse cultural background. Establishment of Soreen Company in Brazil cannot be prohibited by cultural differences or social life of Brazilians. By contrast, the company will have a chance to market and sell its products to various individuals from all corners of the country.
The Brazilian official language is Portuguese while English is recognized as a foreign language used in most business entities. The dominant religion in Brazil is Roman Catholicism. There are also many other religions practiced in the region. As a result of the right to religion, the establishment of the Soreen Company in Brazil would positively be affected. Brazilian population has been increasing over the years as a result of the increased immigration in Brazil. According to statistics, the Brazilian population was around 194 million in 2012. The population data shows a considerable growth rate of 1.17 percent annually. The largest populated state in Brazil is the Sao Paulo state with an approximated population of 41.9 million. The Minas Gerais and Rio de Janeiro are the second and third most populated cities with 19.8 million and 16.2 million inhabitants, respectively. The majority of Brazilian inhabitants is from Europe and Africa. The presence of a high population will facilitate the growth of Soreen Company due to high demand for its products (Goldenberg & Muller, 2013, p. 328).
Legal and Regulatory Environment
There are myriad legal policies and regulations concerning the establishment of foreign investment in the country. There are other regulations concerning land ownership and employment in certain businesses. The government of Brazil states that it may not employ foreigners on a permanent basis. The central bank is responsible for formulation of exchange control and foreign investment policies. There are various restrictions imposed on foreign investment. The Brazilian government has the power to act in concession or through an order on certain activities of crucial importance. The federal government in concert with the state government supervises all the development projects and activities carried out by foreign investors.
Establishment of a business activity or entity in Brazil requires permission from the government. The Soreen Company is required to request a business operating permit from the respective government body. Establishment of foreign business in Brazil is allowed with a 100 percent ownership. All businesses are equally treated despite origin or any other considerations. The Brazilian government advocates for partnership with the local business partners for the provision of the necessary expertise and contacts. Over the years, there have been stern regulations and policies concerning foreign investment in Brazil. By contrast, the policies have become flexible with time in order to allow foreign companies to establish their subsidiaries (Glowik & Smyczek, 2009, p. 97).
Technology and Infrastructure
Brazil is endowed with high technology advancement which has affected economic growth positively in the region. High technology has been deployed in manufacturing industries, infrastructure, and in communication. Expansion of infrastructure and communication services has been a major government project since the initiation of the National Privatization Program. There has been significant investment in railroad networks. Improvement of transport and communication network will facilitate the efficient transportation of the Soreen products to the designated customers (Christian, 2009, p. 18). The modern transport network has been established in the southern eastern and southern part of Brazil.
The north and central regions are yet to be restructured though plans are underway for their reconstruction. The communication service will allow contact between the company and customers thus increase production capacity and profitability status of the company. The airline network has been developed effectively to enable quick transport of products. The government has, over the years, controlled the postal services. The government is gradually handing over the postal service to private entrepreneurs who have offered excellent service across the world. Privatization of the telecommunication sector has ensured efficiency in communication within and outside the country. The aforementioned factors will positively impact the establishment of a Soreen Company in Brazil(Doole & Lowe, 2008, p. 74).
Potential Soreen Consumers in Brazil
Consumption of Soreen malt bread can do well in Brazil with the increased population growth anticipated annually. Demand for Soreen malt bread and other products will directly increase as the population increases. The most targeted customers should be college students, and young children. As a snack, all the population age sets can consume the products. Soreen Company can thus target the densely populated region in the country to ensure high sales and profitability of the company. There are a myriad of factors to consider when establishing the company in the region. For instance, the surrounding area should be densely populated to ensure high sales, the region should have modern and improved transport system and infrastructure, and proximity of a company producing substitute products. All the aforementioned factors will facilitate proper and effective operations of the company (Christian, 2009, p. 75).
The company can strategically target certain groups of individuals in order to establish firm grounds for sales. A good starting point could be around a densely populated education institution in order to target college students. According to statistics, college students are heavy consumers of snacks and quick foods. The establishment of the company is based on various factors depending on the company’s goals and objectives. The company’s management can strategically locate the business entity where there is a suitable environment for investment.
Recommendations and Risks
It is advisable for Soreen Company to establish a subsidiary in Brazil since the environment is suitable for investment. The company can make a lot of income from the country due to the high demand for their products. Establishment of a company or business entity requires authorization from the government. The Soreen Company should request for a business permit of investing in the region before proceeding with any other step. There are other barriers and restrictions involved in the establishment of a foreign company in Brazil. For instance, the establishment of some industries in Brazil may be prohibited by the government. Establishment of businesses such as banks, mining companies, financial institutions, maritime, road and transport companies, health products companies, and oil refinery companies is prohibited by the Brazilian government. The Soreen Company does not fall into either of the aforementioned categories (Burns & Bush, 2012, p. 44). Nevertheless, the main impetus for the establishment of Soreen malt bread industry could be permission from the government.
Recommendation for Further Research before Final Decisions
The report has shown that the establishment of the Soreen business enterprise in Brazil is an excellent idea due to the anticipated return out of the investment project. The aforementioned factors regarding social, economic, and political spectrum have proved a suitable environment for foreign investment of the Soreen Company in Brazil. There are other factors such as ethics of doing business in Brazil, greetings, and other business ethic practices which the foreign investor should be aware before the establishment of business enterprise in Brazil. In this regard, the company should have established contacts in Brazil in order to gain the necessary expertise. The report, however, may have failed to consider other factors that adversely affect foreign investment in Brazil. On this front, a further research can be conducted to attest to the report.
Conclusions
Soreen company strategy to make foreign investment in Brazil will work effectively if permission from the Brazilian government is granted. The company is expected to benefit from myriad positive factors encouraging growth and expansion of the company. As a result of various and diverse cultures in the country, there will be no social and cultural issues among the consumers. Consumption of bread and other bread substitutes are not affected by cultural beliefs or norms thus the company will sell its product universally to all people.
Reference List
Burns, A. C., & Bush, R. F. (2012). Marketing Research. London: Pearson Education.
Christian, F. (2009). Strategic Management in Crisis Communication: A Multinational Approach. London: Diplomica Verlag.
Doole, I., & Lowe, R. (2008). International Marketing Strategy: Analysis, Development and Implementation. London: Cengage Learning EMEA.
Glowik, M., & Smyczek, S. (2009). International Marketing Management: Strategies, Concepts and Cases in Europe. London: Oldenbourg Verlag.
Goldenberg, J., & Muller, E. (2013). Research in marketing. International Journal of Research in Marketing , 323-434.
