Introduction
Multinational companies are increasingly getting interested in the emergent markets, especially those that are mushrooming within the developing nations. By 2020, Export.gov (2014) reveals that the global economic research is anticipating that Brazil will be the fifth-biggest consumer in the global market, in front of the United Kingdom and France (Export.gov, 2014). The high and appealing market growth associates with strong product marketing and distribution systems in Brazil (Berger, 2014). This essay seeks to provide an assessment of Rio de Janeiro, as a potential market for manufacturing and distributing Edlebrock high-performance engine parts.
The State of Marketing and Distribution System
Edlebrock parts, which are the United States automotive products, may benefit from the Brazilian economy that seems diversified. The Brazilian market offers the companies of the United States several growths and collaboration opportunities (Berger, 2014). Brazil is an economy that is growing very first and the government is increasingly supporting the growth of the indirect distribution systems, direct distribution systems, and the multi-channel distribution systems. The market for engineering products such as the Edlebrock engines is growing gradually. According to Export.gov (2014), undertaking business in Brazil requires the foreign investors to understand the regional business environment, and the entire costs of operating a company in the Brazilian business hub, the Custo region. According to Export.com (2014), Custo Brazil acts as the center for market distribution, and a place for government procedures.
The Normal Profit Margins in the Firm’s Industry
Profit margin is a financial accounting strategy normally designed to measure the financial stability of an industry (Hornbeck, 2006). In the Brazilian automotive industry, the profit margin is approximately 57% due to the increased prices of raw material, the high exchange rates, high competition from the importers, and the price fluctuations in the supply chain. In 2014, the Brazilian automotive experts estimated the profit margins for each automotive company to be 57%. This profitability is worrying about the majority of the investors. According to Hornbeck (2006), suppliers still acknowledge that the low level of competitiveness that is happening due to the high labor costs, the increasing prices of the raw materials, and the increasing exchange rates. For the Edlebrock parts, the company may have about 40% since it is a beginner.
The Competitive Situation in the Firm’s Industry
As highlighted in Export.gov (2014), Brazil is continually enjoying the growth in the automobile sector. The Brazilian government is currently the largest purchaser of automotive products. Edlebrock as a United States Company may face some transition challenges, especially when considered that the company lacks a significant dominance in Brazil or any collaboration with the Brazilian automotive entities (Hornbeck, 2006). However, the company can rely on its financial resources to respond to the legal challenges and the bureaucratic delays in the Brazilian corporate environment. Presently, the foreign competition stands at 17% and the automotive industry is still relying on the inexperienced manufacturers.
Conclusion
Rio de Janeiro is a potential market for manufacturing and distributing automotive products because Brazil is on a gradual growth, the market is welcoming, foreign competition is still miniature, and the internal engineering companies are still unstable. Although the company expects to experience low-profit margins due to the high taxation, the high prices of the raw materials, the high exchange rates, and inflation of the prices of the automobile products. The market is still young and there are several untapped opportunities. The market is expansive and the low foreign competition can offer an opportunity for the Edlebrock engines to increase their profit margins.
References
Berger, R. (2014). Brazilian Automotive Perspectives 2014. Web.
Export.gov (2014). Helping U.S Companies Export. Web.
Hornbeck, J. (2006). Brazilian Trade Policy and the United States: CRS Report for Congress. Web.