Introduction
The hospitality industry is highly competitive with new players coming up and old ones developing new working strategies or approaches; to be competitive in the industry mostly in an international market, then there is need to have strategic decisions and ensure that scientific methods of decision-making are adopted (Schrage 2010). Latin American countries are offering a good market for the hospitality industry thus Burswood Entertainment Company, an Australian base entertainment company wishes to venture in Brazil.
In Brazil, the Burswood may offer Casinos, Sauna, massage parlours, restaurants, Gyms, bars, hotel, golf course, day spa, and nightclubs among others. Brazil is the largest economy in Latin America and offers low barriers to entry. Despite the favourable entry environment in the country; a market entry strategy need to be developed; an effective entry strategy assists a company tap the new market potential successfully.
When developing an internal marketing entry strategy, a company need to undertake an external environment analysis using situational analysis tools like P.E.S.T.L.E, which includes Political, Economic, Socio-cultural, Technological and Legal environment of the country within which the business operates and an internal analysis using analysis tools like S.W.O.T. It involves critical identification Strengths, weaknesses, opportunities and threats of a company.
The analyst then develops strategies of converting weaknesses into strengths. Through pursuance of the opportunities for the business, the analysis reduces prospective threats of the company.
This paper undertakes a P.E.S.T.L.E. analysis of Brazilian market and S.W.O.T. analysis of Burswood Entertainment for the purposes of the company’s expansion. Burswood Entertainment is an Australian based entertainment industry that has various entertainment industry modern facilities, they include Casinos, Sauna, massage parlours, restaurants, Gyms, bars, hotel, golf course, day spa, night clubs among others; it is situated in Swan River near the city of Perth, Western Australia.
The company has a strong brand name and wishes to diversity its services and line of business to Brazil. When in Brazil, the company will aim at offering similar services but will be offered by Brazilians who have undergone training and hand on experience in Australia; however for the introduction stage of the venture, Australians will be the main service provider so as they can set pace for the business.
In order to reduce cost of labour however, the company will deploy the local Brazilians in both non-managerial and non-technical positions. Within a considerable time of operation in Brazil, the company will train the locals in order to equip them with relevant skills for the business and enable them to take up these positions to reduce cost of importation of human resources.
Political Environment
Government stability
The country has a democratic governance policy with three main arms of the government, the States, the Municipalities and the Federal District, each of the arms work for the general good of the country. The country has all its executive and legislative members elected while the judiciary members like judges are appointed after passing an exam.
Brazil has presidential form of government with the president elected by the people. With a female president, political analysts project that the countries’ situation in terms of politics is likely to remain stable for over a considerable time (Magdalena, Eugenia and Oana 2008).
Government and contribution
When it comes to business, the administration of the country has made policies to facilitate fair trade among domestic and international companies. There are some businesses that are given incentives when venturing the market while others only enjoy industrial deduction relieve from taxes payable.
The growth of the country population and need for social amenities have necessitated the government to attract international hospitality industries entertaining companies; it does this through incentives like easy licensing, tax relieves and tax holidays and intellectual rights protection (Magdalena, Eugenia and Oana 2008).
Analysis
With the situation expected to remain stable, most businesses from all over the world will be confident to invest in Brazil. Political stability guarantees peace and security and hence increases the people’s need for recreation amenities.
The result is high market for Burswood Entertainment, which further will dictate the company to expand its resources in terms of quantity and quality for competence and customer satisfaction in Brazilian entertainment sector. Extremely this will affect the companies’ strategic planning and management as it will have to formulate strategies applicable in the new market (Brazilian market).
Legal Environment
Regulatory framework
The country supreme source of law is the constitution, which every person is expected to respect: it supports respect of human rights in fields like employment, retirement and environment. The Brazilian framework is rigid which has rendered the country reluctant to constitutional changes (Lora 2007).
Business laws
Like the other laws in Brazil, business laws particularly import and export laws are stringent and to some extend unfavourable to foreign companies. The constitution expects the foreign countries to work with the local companies maybe in form outsourcing other services. The foreign companies are disadvantaged, as they do not benefit from the government incentives. These legislations however, are meant to facilitate free and fair trade among different players in the country (Lora 2007).
Labour laws
The law spell out the rights and freedoms of the workers. For international companies, the laws provide that at least 25% of the employees should from Brazil, with some in management and technical responsibilities. The constitution provides for formation of trade unions; for instance, the hospitality industry has a union where it advocates for its rights and the rights of employees (Lora 2007).
Taxation laws
Taxation laws are flexible in the country and have numerous deductions. Taxation laws govern the importation, daily operation and ownership of the property of the foreign companies within the country (The Brazilian Institute of Geography and Statistics (IBGE) 2011).
Analysis
Since Burswood has to adhere to the rule of law of Brazil for business survival, it will have to train Brazilians in Australia for the relevant skills of its business in order to ensure at least 25% Brazilian employees at the onset of its operations. In its strategic planning, it will have to review its financial allocation to meet the taxation requirements in Brazil. In fact, it is essential for the company to contract services of local legal experts to acquaint their operations with the laws of Brazil.
Economic Environment
Interest rates
The interest benchmark in Brazil last showed an interest rate of 11.75%. Since 1999 to 2010, the COPOM has recorded an average interest rate of 17.22%. This in overall indicates a growth rate of 0.70% (IBGE 2011).
Inflation rates
Having recorded a change in trend in 2008 where the government reported an inflation of 5.9% and less in 2009, the economic growth rate was expected to grow at a rate of 7% in 2010. Since the inflation rates are gradually falling, the people’s purchasing power is also increasing and needs beyond necessities are growing (IBGE 2011).
Currency exchange rate
In Brazilian currency market, 1 US dollar costs 0.599136 BRL and sells at 1.66907 BRL. This indicates that Brazilian currency is among the strongest in terms of US dollar exchange 4.4 Free-market/command /mixed economies.
Brazil is a mixed economy country with the country’s economy driven by export sector, which is well developed, and deals with items like iron, aircrafts and foodstuffs. The country has well developed telecommunication and transport system with the internet and mobile communication rated as one of the most efficient (Kotabe and Kristiaan 2004).
Economic trends/forecasts
With the Real Plan of 1994 in place, the economy of Brazil has grown from three-figure inflation rates in 1994 to a projected growth of 7% in 2010. The continued forecasts on future political stability progressively provide a positive prediction in growth of the Brazilian economy (Lora 2007).
Tax policies
Series of changes in tax policies in Brazil have resulted into rise in tax burden for both businesses and individuals. By 2010, the country saw a rise in tax beyond 37 points, which is the largest in Latin America (IBGE 2011).
Analysis
With the economic situation, Burswood Entertainment is likely to enjoy a well-developed infrastructure, which will enhance its business operations such as advertisement and communication. The projected economic growth rate in Brazil offers the company a bright future. Since economic growth means expansion of international trade and growth in consumption, the companies’ profits in the foreign country, Brazil, will therefore increase and hence its overall business will expand.
Socio-cultural Environment
Hofstede’s Cultural Dimensions
Uncertainty avoidance
The society is classified to have a low tolerance to uncertainty; in the past, the country has had a high Uncertainty Avoidance (UAI) of 76; this means that the people are risk averse; they are guided by laws and have high value for truth. High UAI means that the Brazilian society is reluctant to change (Brazil Federative Republic of Brazil 2011).
Power Distance Index (PDI)
In families, the noblest element of a society and the society itself, there is high levels of inequality in power distribution; Power Distance Index (PDI) is high with a score of above 80. This means that head of the family, the man has control over all other members of the family and further means that there is a great inequality in Brazil; the powerful stringently segregated from their followers (Geert Hofstede –itim 2009).
Collectivism Vs Individualism
The people of Brazil have minima ties among them, they interact for particular reasons and hardly do they stay in groups; it is an Individualism (IDV) country. It has high IDV in which individuals should independently look into their issues.
In collectivism, the society consists of cohesive groups in which the individuals are integrated in blood relationships. The country has men as the dominant group, they are perceived to be superior to women; their roles are different from those of men, because of their perceived Masculinity (MAS); Brazil has high MAS (Geert Hofstede –itim.2009).
Time orientation
The county has a Long-Term Orientation (LTO); this means it aims at respecting their tradition today as they prepare future generation to adopt and respect the cultural practices taught (Geert Hofstede –itim.2009).
Analysis
As long as Burswood entertainment adheres to the laws of Brazil and with high UAI, it is likely to capture a good niche of the market. The company should take advantage of the vast inequalities within the society and provide services for all levels of people in this society. This will require the management to design a variety of services to suit all levels of people. Since Brazil has high LTO the entertainment, Burswood should provide services, which promote and enhance culture among the generations. The success of the entertainment industry is indeed dependent on the prevailing social economic situation in the market.
Technological Environment
Technological infrastructure
Scientific invention and innovation has lead to new hardware and software that assist in business operation. Brazil strategically situated in respect to US enjoys access to computer softwares and systems for effective operations of businesses. Like any other country, Brazil is constantly investing in innovation of its systems. Brazil has the infrastructures and human resources to develop in-house software for the benefit of Burswood Entertainment, which depends on modern technology for its operations (Brazil Federative Republic of Brazil 2011).
Communication networks
As mentioned, Brazil has well-developed communication systems in mobile and internet communication systems.
Logistics networks
With highly developed road network, Road transport is the major means of transport in Brazil. Air transport, sea and railways are also other transport means available for businesses in Brazil (Brazil Federative Republic of Brazil 2011).
Analysis
Developed networks of transport and communication will enable Burswood to administer efficiently its operations in Brazil. Recruitment of qualified personnel requires effective transport and communication systems. With developed technology in computer systems, Burswood will be able to benefit from advantages of e-business.
SWOT Analysis
Strengths
In the entertainment industry, Burswood Entertainment is one of the most renowned restaurants that offer quality and competitive products and services; it thus has taken strong roots in the industry. Its brand strength can be seen from the growing numbers of executives, business people, politicians and international customers continued support to the company.
To maintain the high quality and not to disappoint their customers, the restaurant have embarked on quality foods, high tech Casinos, pleasant environments, high tech customer service and always aims at giving its customers a memorable experience.
Other than employees, the company has vision-ally management teams willing and with the knowledge and expertise to drive the company to a completely new level. Financially the company has a strong financial base and good credit policy; this will assist the company access to loan facilities to finance its diversification (Burswood Entertainment Company Official website 2011).
Weakness
Though the entertainment industry is as old as humanity, the target customers that the company has are only the high-class people in the society: it thus loses market of the greatest population, middle and lower class people. Secondly, the company is skewed to one line of business, entertainment. It misses an opportunity to enjoy the goodies that are brought about by other sectors like accommodation (Burswood Entertainment Company Official website 2011).
Opportunities
The main opportunity that Brazil presents to Burswood is the increasing world living standards, people are developing fast and the demand for recreational services is on the rise. In Brazil, the countries high youthful population will offer market for the company’s products.
The most important thing in the market is to differentiate ones products among the many players. Cheap labour from the most educated youth in Brazil provides an opportunity for low cost operation of Burswood Entertainment. The country’s high technological advancement provides an opportunity for Burswood betterment of its services (Zahra, Ireland and Hitt 2000).
Threats
The world is recovering from financial crisis that started in 2007, Brazil is not an exemption to these effects and as a result, it is experiencing a slowed growth. The hospitality industry in Brazil, specifically the entertainment industry is undergoing massive changes, innovations and inventions: this has created an increase in competition in the industry, as companies search for competitiveness strategies.
Because of projection of economic growth and political stability in Brazil, analysts predict that more players in entertainment sector are likely to invest in Brazil and hence Burswood faces threat of being edged from the market. The growing technology is also a source of threat to Burswood business as it is likely to make its traditional entertainment systems obsolete and outdated, hence future risks of losing market (Hooley and John 1993).
Analysis
Burswood Entertainment financial standing, reputation and its brand name are strong elements that it can ride on in its expansion strategy, when these internal forces are tapped to take advantage of opportunities in Brazil, and then the company is likely to benefit a successful venture and an increased business.
The company has little to do to eliminate threats by the external world but can develop strategies to mitigate any losses. With expansion, the company can develop products targeting the middle and lower class so as it can enjoy an increased market.
Recommendations
From the analysis conducted, Brazil has an untapped market that Burswood Entertainment. The most important thing that the company should have is an effective market entry strategy and should have an open-mind: being open-minded will assist it adjust its strategies to fit the needs of the Brazilian market. Success in the entertainment industry depends with the quality of services that the company will offer as well as how its services will be updated.
In order to competent satisfactorily within this market, Burswood Entertainment should consider the following recommendations:
- It should vastly invest in research and innovation in order to reduce chances of being squeezed off the market by technologically advanced modern entertainment companies.
- Train as many local Brazilians as possible to take up most positions of the company. This will ensure the company’s products and services are in phase with the society needs.
- Since Brazil is a diversified society with all levels of social settings, Burswood should provide innovative wide range of services, which suits all in terms of cost and quality.
- Finally, Being a new company, then research should be embarked on to assist in product development and differentiation. Burswood Entertainment has minimal pollutants however manageable it at all they exist, so this factor cannot limit the company’s development. In close consideration of the above recommendations, the management should go ahead and expand its business to Brazil.
Conclusively, to develop an effective market entry strategy as well as making business strategic decisions, Burswood Entertainment needs to understand its internal strengths and weaknesses. The Understanding will help it tap opportunities offered by Brazilian market as it mitigates against possible threats in the market, Using management tools for internal analysis (S.W.O.T.) and external analysis (P.E.S.T.L.E.), will assist the management make sound decisions.
Brazilian P.E.S.T.L.E. analysis revealed that the country has a potential in the entertainment industry which Burswood Entertainment, on the other hand Burswood Entertainment has a strong financial standing and a strong brand name that can assist it enter the market effectively. Internal weakness can be solved through research and development whereas strategic measures are developed to mitigate external environment threats.
References
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