Institutional environment explains how interaction between institution and organization shapes economic activity, and consequently managerial strategies and performance. It is well established that the availability of information is one of the determinant of efficiency of resource allocation growth and decisions in any economy.
Economic reform has brought about an accelerated urbanization in Brazil since 1980, as it has been manifested in population growth in many cities and in a growing number of cities. In Brazil, investment decisions from private sector are usually influenced by private sector perception of the economy (Coeurderoy & Murray 2008).
Brazil as a country has moved from a nation with great promise to a nation where many investment opportunities are available. A more stable currency and political system, coupled with vast mineral and natural resources wealth have made the country a ‘must’ for all organizations with truly international or global ambitions to invest in the country (Makino, Isobe, & Chan 2004).
With a population of about 194 million people, Brazil is the 5th largest market in the world after India, China, Indonesia and the U.S. According to the International Monetary Fund (IMF) report, the report indicates that the country is a leading one when you compare it with other South American nations in terms of technological and infrastructure development. When you combine these facts with stable political and economic landscape, you see the reason why Brazil attracts a higher percentage of world’s FDI year by year (Makino, Isobe, & Chan 2004).
But when you compare Brazil to Hong Kong, starting or doing business in Brazil can be very difficult (Lumpkin & Dess, 2001). The main cause is the bureaucratic hurdles that are found in almost all government agencies and the accompanying barrier of business regulations. In fact, Brazilians are known as “biting around the bush” (Chandler & Hanks 1993) around the world. Instead, before they do business they would like to know an individual first.
As compared to Hong Kong, Brazil financial is extremely expensive and individual competition is very tough. Therefore, businesses should have their special relations to find better financial loans or get their own financing. The Brazil justice system is also very slow and to some extent it is corrupt but in the last 10 years it has been slowly improving (Chandler & Hanks 1993).
Every manager needs to know the hierarchical business set up that is found in Brazil. “Decision-making in Brazil’s organizational culture is often reserved for senior managers” (Publishing, 2009). Therefore, a manager should take his/her time to build a working relationship with his/her junior staff. In addition, for a foreigner manager it is difficult, so it is important for non-Brazilian to have a third-party introduction when doing business (Publishing, 2009).
A foreign manager needs to realize the importance of each employee’s distinct duties or roles in the company (Morrison 1994). Most Brazilians believe that a supervisor will be chosen because he/she has more experience than the rest of employees under him/her. They also believe it will be inappropriate to consult lower-ranking employees when making a decision (Morrison 1994).
In addition, according to Morrison (1994), “there is a disparity in term of salary or wage differentials, and therefore aspirations and lifestyles, among classes in the country”. Minorities are the ones holding power. This hierarchical nature can be reflected in business situations. Great deference is paid to job function, authority figures, scope of responsibility, and reporting relationships are strictly followed and clearly defined (Publishing, 2009).
Reference List
Chandler, G. N. & Hanks, S. H 1993, ‘Measuring the performance of emerging businesses: A validation study’. Journal of Business Venturing, vol. 8, pp. 391-408.
Coeurderoy, R. & Murray, G 2008,’Regulatory environments and the location decision:evidence from the early foreign market entries of new-technology-based firms’. Journal of International Business Studies, vol. 39 no. 4, pp. 670-88.
Lumpkin, G. T. & Dess, G. G 2001, ‘Linking two dimensions of entrepreneurial orientation to firm performance: The moderating role of environment and industry life cycle’, Journal of Business Venturing, vol. 16 no. 5, pp. 429-51.
Makino, S., Isobe, T., & Chan, C 2004, ‘Does country matter?’ Strategic Management Journal, vol. 25 no. 10, pp. 1027-43.
Morrison, E. K 1994, Leadership skills: developing volunteers for organizational success, Fisher Books Publisher, New York.
Publishing, F 2009, Leadership Skills, Ferguson Publisher, London.