Once a business starts considering going international a thorough strategic consideration of the target markets is advisable to gain an idea of risks and opportunities involved (Haines, 1999). This essay considers the international economic development from a 2013-perspective. It discusses and evaluated how markets around the world work and what to consider when planning strategic business approached into them. The insight convers aspects such as economical perspectives, business habits, and particularities of the people. It considers many countries, including those in Europe, but is mainly written from a European perspective.
International Strategic Planning
Heiko Filthuth
Abstract: Once a business starts considering going international a thorough strategic consideration of the target markets is advisable to gain an idea of risks and opportunities involved (Haines, 1999). This essay considers the international economic development from a 2013-perspective. It discusses and evaluated how markets around the world work and what to consider when planning strategic business approached into them. The insight convers aspects such as economical perspectives, business habits, and particularities of the people. It considers many countries, including those in Europe, but is mainly written from a European perspective.
Strategic planning is often seen as the process of generating estimations for a future business development deriving from existing figures combined with known or anticipated changes (Haines, 1999). International strategic planning expands this process and adds a variable of adoption for the international market(s) in question (McDonald & Burton, 2002), coming to a strategic planning by market which can then be consolidated into the corporate strategic planning. In doing so, various tools and approaches can be applied with PEST(EL) analysis, Porter’s Five Forces, and a SWOT-Analysis (Law, 2009) being three examples. International strategic planning can include not only figures but also a Mission Statement, goals (other than financial), target customers and personnel, a competition analysis, and a marketing plan (Lavinsky, 2017).
This essay is about international strategic planning as seen from the year 2013. It considers the international economic situation in 2013 in order to understand the outset and potential triggers for activities in strategic planning. Afterwards, six different aspects are introduced before some of the opportunities and threats to be considered when planning an international venture, will be discussed. Strategic considerations of doing business on six continents are discussed before a brief conclusion sums up the findings.
The Economy in 2013
The world economy is slowly recovering from the recent market downturn of 2011-2012 with the inflation of the Euro due to the Greek crisis, the adjustment of the financial bubble in the United States and the substantially reduced growth pattern of several of the emerging and developing markets in Asia (United Nations Department of Economic and Social Affairs, 2013). In the US, the rate of short-term unemployment is decreasing, and the salaries are growing over inflation, but long-term unemployment remains high and unequal payment continues to increase; the GDP has grown after the decline and some of the key indicators like car sales and residential investment are growing, too (Council of Economic Advisors, 2013). In summary, the world economy is slowly picking-up pace again albeit not in all aspects.
Different aspects of strategic planning: International strategic planning has many aspects, six of which are presented in this essay. They cover marketing and investments, employment and regionality, culture and freedom. In each section, the aspect is explained and discussed in order to make it considerable for the next unit.
Marketing: Every turnover is proceeded by a marketing (i.e. sales and marketing) process; to successfully sell products as part of a strategic process, in difference to sales happening by chance, the following eight steps are recommended (Chan, 2011) when entering a market: Create a company profile that underlines your trustworthiness and underlines your experience and competences; make a target customer list which you can use for all your marketing activities without losing focus; ask your (potential) customers what is important to them to make sure you have the appropriate focus; go and see the (potential) customers to establish a relationship; be fit and truthful to honour their trust; select your method of market approach (agency, distribution, joint venture/subsidiary) and, however you decide, make sure you have a local representative so you gain inside information of the market; and make sure your management really supports the endeavour and understands that it may not be a short one. Although Chan is using the sales of US products into China as the key example in his speech, he underlines that his concept is seen to work in other markets equally. In summary, Chan’s message for international strategic planning is to have the basics in marketing set once you start entering a market.
Investments: Direct investments into a market, or Foreign Direct Investment (FDI), is one way for a company of entering it by means of investing in extractions, infrastructure, manufacturing, or services; typically, this investment has strong financial aspects (Financial Times Lexicon, 2017). But FDI has both predeterminants and consequences, which can be summarised on three levels (Moran, 2011): Particularly in the extractive sector, transparency and anticorruption are issues which need addressing. For once, several countries taking FDI in this industry are developing or emerging markets which have not embraced a business culture of anticorruption. In addition, extraction deals are often linked to runtimes and amounts of money that are beyond imagination to unexperienced individuals, opening doors for contracts which are not transparent and submissions which are not up to the standards of developed countries. In the manufacturing or assembly sector, FDI should in the future consider operations involving medium-skilled labour rather than sweatshops. In doing so, opportunities can move from simply cheaper to integrated supply-chain projects in which host-market companies align with each other or even parent-market operations to create an entire supply chain for the benefit of the customer. This needing individuals’ trainings it might also require labour market reforms in the host country and, often, international subsidies or credits by transnational organisations such as the World Bank. On a different level, Moran considers the inclusion of public needs and the community in which the plant is located in the host country as an emerging issue. In supporting learning and other employment opportunities as part of a Corporate Social Responsibility (CSR) program, the FDI could in the short-term gain interest and loyalty from both the host country and the community, generating an abundance of willingness to support and adopt to the venture. In the long-term, CSR can lead to micro-suppliers setting-up around the operation, creating new expanded workbenches and new business opportunities for the host market’s company and the foreign investor alike. In summary, Moran’s message for international strategic planning is to make sure, any FDI is addressing the future topics of transparency, diversity with medium-skilled labour, and social responsibility.
Employment: Employment in emerging or developing markets as part of the international strategy planning typically refer to those ventures that intend to setup operations in the market; they will require a workforce that is both willing and able to perform the expected labour under conditions that the investor deems adequate (International Labour Organization, 2014). Good quality jobs play a key role in a successful and sustainable operation, and consequently in the success of an international venture. Under the 2013 market situation, youth unemployment and core labour standards are not sufficiently introduced, and more qualified jobs are urgently needed to meet a) the number of people entering the work-market and b) keep the qualified people from leaving their country and thus reducing the chances for more qualified labour through foreign investments. Developing a diversified production (or assembly or service) portfolio which requires workers to obtain a midlevel profession, which they can reasonably do, over a period of time will benefit employees and investor. Instead of reducing labour standards, these should be strengthened in order to make and keep employment attractive without building an inadequate social protection. In summary, the International Labour Organisation underlines that a more qualified and adequately maintained workforce brings benefits to both the investor and the people in developing and emerging markets.
Regionality: Regionality, in difference to international strategic planning per country, groups a number of closely related countries into one region (e.g. die EU-countries in Europe) and thus considers market developments by region rather than by individual country (Hirata, Kose, & Otrok, 2013). In doing so it becomes visible that business within the regions has become more important over the last decade and that regionality in some instances develops differently to individual countries (positively and negatively), amending traditional business cycles. Particularly regions with strong interregional networks such as trade agreements (the European Union, the NAFTA etc.) are striving much more than the economy from a global view. In summary, Hirata et al suggest considering regionality as an alternative to an approach by country, an aspect which consequently could be considered in strategic planning, too.
Culture: The influence of a country’s culture in international strategic planning has been briefly touched in unit 1.1 already. When analysing the cultural influence on information provided by companies in the World Wide Web as a key information source in 2013, it becomes – based on the Cultural Dimensions Theory (Hofstede, 1991) – visible, how important is it to consider these aspects in international business strategy planning (Marcus & Gould, 2001). On the five dimensions of Power Distance, Individualism vs. Collectivism, Masculinity vs. Femininity, Uncertainty Avoidance, and Long-term vs. Short-term Orientation, it is demonstrated, how different the user-Interface of a website needs to be in order to attract users from different cultures alike. Considering the importance of a website to international market development, a company planning its international business strategy and e.g. applying a model like that of Chan (unit 1.1), the necessity to address this issue appropriately can hardly be overestimated, even in 2013. The question unanswered is, whether one global website or multiple local websites will become the method of choice. In summary, Marcus & Gould’s message for international strategic planning is to consider the cultural aspect of communication most thoroughly.
Freedom: Economic freedom is defined as the freedom of the individual to act in his/her own will and with the target to gain prosperity (Miller, Holmes, & Feulner, 2013). Economic freedom as an aspect in international strategic planning considers the empowerment of the individual who is free in his/her decision, who is not discriminated, and who is able to live and work at his/her own choice. The heritage Foundation (Miller, Holmes, & Feulner, 2013) measures and compares economic freedom in (almost) each country based on ten aspects which are grouped in Rule of Law, Limited Government, Regulatory Efficiency, and Open Markets. In doing so, it underlines the importance of the individual as a multiple market participant: As a buyer, as a seller, and as a consumer. With regards to international strategic planning, economic freedom demands to consider how far a country in question is in this respect and decide on business expansion accordingly. In summary, Miller et al underline that economic freedom should be a pillar of modern international strategic planning.
Planning a Business Venture in 2013
When planning an international business venture based on the previously described aspects, a company in 2013 could have followed this approach: It should consider the market: Is it really the country or rather the region that is worth approaching? Opportunities from considering the region might include a wider market and a spread of chances. Threats could be the downturn of a much bigger venture if the region declines and the missing of addressing aspects of different cultures within one region (e.g. in Europe). It should consider the culture: How should the market be addressed and what efforts need to be taken to meet its needs? Opportunities in markets with a different culture might include new uses and aspects of existing products and services (the insulating flasks that keeps not only warm but also cold), and an independency from developments in the home market which are ignored in a different culture. Threats could be the own ability to handle a different culture with existing interacting staff and the lack of identifying appropriate help. It should consider the approach: What is the best way to enter the desired market – investment, agency, or distribution? If FDI is the way of choice, opportunities may lie in the working conditions which, even if not exploited, go along with lower costs, or in building-up an own plant and community which operate exactly to ones needs. Threats could be the amount and duration necessary to get a return on the investment, and the dependency on the changing country’s government and regulations along with other imponderability. When deciding for an operation that does not require an own workforce in the target market, opportunities might be act and amend quicker, whereas one threat would be the limited amount of utilising the market’s opportunities. And it should keep going: Once the market, the culture and the approach is decided, Chen’s eight steps to enter a market could be a guidance for a successful approach, no matter what year it is.
Strategic Business Planning for Asia
Discussing strategic considerations of doing business in Asian countries requires a short definition in beforehand: Asian countries in this essay mean (from northeast to southwest) Japan, South Korea, China, Philippines, Vietnam, Laos, Cambodia, Myanmar, India, Thailand, Brunei, Malaysia, Singapore, and Indonesia. This selection is made by adding to those countries joint in the ASEAN group (Association of Southeast Asian Nations, 2017) the four major economies of the Asia-Pacific region (Central Intelligence Agency, 2017) and thus comprising the regional area that will be considered in this essay. It is recognised that this selection does not comply with the geographical definition of Asia and is not complete with regards to the Asia-Pacific region.
Areas of Strategic Consideration: When making strategic considerations of doing business abroad, key areas of interest should be, in no particular order and without completeness: The market’s potential for the own products or services; the price level; the regulatory situation; local customs, language and culture; and the options of entering the market (Chase J.P.Morgan, 2017; Jackson, 2017). These are the areas which will be considered and critically discussed by country in the following units.
China: When doing business in China, one of the considerations could be, whether the country will have its own full setup of the company in the form of a widely independent and complete subsidiary, or if the venture should focus on selected tasks to be fulfilled for the entire company worldwide (Cleverly, 2011), as it was setup as a Global Integrated Enterprise in China by IBM. In doing so, the importance of adopting to the local culture and business habits were cleverly underlined, particularly for the leadership team, in order to match these with the needs of a global customer base. He identifies relationships as a core part of business development in China and argues, that even difficult areas such as the protection of intellectual property could be overcome if working in China includes collaboration and partnerships e.g. on innovative products. If this partnership is fair and of mutual benefits, according to Cleverly, the interest in counter feigning is very limited. With regard to partnerships when entering China, he strongly recommends considering this in order to overcome the initial obstacles of language and procedures. Business in China itself is another trigger for going there, which can equally apply to multiple different industries (Glowacki, 2011). In doing so, a company should, however, be aware that China is not so much one market but an accumulation of many markets – or regions – which might work quite differently, depending on their status of development. When entering the Chinese market, Glowacki recommends being aware of the huge influence of the government, which he deems quite ambiguous. A central government can push topics it wants through very quickly but can also delay issues as it interferes with the smallest local transactions. To overcome negative influence, from government and local business partners alike, Glowacki recommends preparing every deal in a way that all partners benefit from it. Preventing disappointments if Chinese businesses or people to not react as enthusiastic as expected, he underlines that from a US point of view China is the major business partner whereas the US for China is just one of many partners. China is linked in many minds to product piracy, which to overcome companies going to China need to be creative (Cheng, 2011). One example may be to actually provide the service (e.g. music, video) for free but generate revenues from included commercials. Cheng also sees political issues between China and the US, originating from the fight between communist and democratic systems. In his view, the Chinese have overcome this dimension much quicker, investing in countries with any political systems. He, too, warns to overestimate the interest of China in US products and services: China has a huge own and massive neighbouring markets which are far easier to reach and, in some instances, culturally much close and easier to handle than the US. Planning in the long-term and looking for mutual benefits is what Cheng recommends to those considering doing business in China.
India: India is a growing market, second biggest economy in Asia and has, in difference to some of its neighbouring countries, already a long culture of international trade on today’s standards (Crowe-Nandi, 2009). The number of prospective business areas is high, and companies should consider both the local market and production for export as well as international services as targets in India. In doing so, it is, according to Crowe-Nandi, important to bear in mind, that the growing middle class in India is not what is considered middle class in the US but well below their standards. Consequently, what is regarded a suitable price level differs equally and should be carefully considered when looking at business opportunities in India. One of the key advantages of India is the widespread knowledge of English as it is the only language in which people from the different regions on India can communicate with one another. Price, presence, patience, and payment are the four dominants that Crowe-Nandi sees for success in India: Prices suitable for business in India (or for exporting Indian-made products), presence to make sure the venture develops as required, patience because India is not only a big country but has an equally big bureaucracy, and payment in the sense of making sure to be paid. Amongst the challenges of doing business in India, the government interference at all levels of business and contradicting legislation combined with specific taxes for foreign companies are those that need the most consideration (Shaikh, 2009). Investment restrictions can be identified well before considering India as a target market, but corruption and the lack of (enforced) intellectual property rights might only appear once a venture gets going. Regarding the ease (or unease) of business, the burden of documents is one of them, India ranks in the bottom quarter, despite positive reforms and a decreasing time to export (The World Bank, 2017).
Japan: Business in Japan is completely different to business in China or India and for several reasons: Loyalty is one of the key marks of business, education levels are extremely high, and quality and service play an important role in consumers awareness (Schwartz & Yamamoto, 1994). The culture, much older than anything in the US, plays an important role in Japanese business and besides keeping the face true the loyalty to a brand, an employee, a company is vital to business. In recognising this, Schwartz & Yamamoto recommend being careful when considering business opportunities in Japan as potential partners are unlikely to shift suppliers if not for a very good reason; on the upside, once a partner is found, he might remain equally loyal to his new international vendor. Another topic raised is that of adoption to the local market: Despite being a relatively small country, English is not widely accepted as the language of local communication; consequently, brochures, manuals, and communication need to be adopted to Japanese, let alone technical products which need to run on the local power system and (if computers) deal with the complex Japanese type font system. Schwartz & Yamamoto also realise the importance of an own presence in the Japanese market to address both the aforementioned issues, to underline the commitment to Japan, and to maintain and develop the important relationships. Besides these challenges, they acknowledge the structured and efficient bureaucracy and the solid and transparent patent, intellectual property, and legal system.
Korea: Japan and Korea are traditional enemies but still have a number of things in common when it comes to considerations of international business ventures (Samil PricewaterhouseCoopers, 2012): The high education level, the skilled labour force, the relatively high price level, the awareness for quality, brands and service, and the similarity of the writing are only some of them. In their study about doing business and investing in Korea, Samil, the Korean subsidiary of PricewaterhouseCoopers, underline the excellent technical and physical infrastructure in Korea as well as the openness of both the government and the businesses to international partners, since Korea’s dependence on international trade is high. Traditionally, Korea’s business environment consists of both large diversified groups of companies, predominately in shipbuilding, in automotive, and in steel making, and small family business. Service plays an important role, so companies considering Korea as a target market (and some even use Korea as a test market) should bear in mind the need for local amendments of their products. Depending on the type of business venture, Samil sees language no so much of an issue when it comes to communication on a commercial level but holds it vital once the area of consumer goods is entered. The influence of the government in Korea is judged huge, albeit quite positively: Green products and technologies and strongly wanted and efforts are taken to encourage companies with these portfolios to invest in Korea. The link to the countries culture of long-lasting relationships shines through when amongst the requirements for these businesses not only economy and technology, but also employment is mentioned.
Network Perspectives: ASEAN is the Association of Southeast Asian Nations and comprises of ten countries: Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Vietnam (Association of Southeast Asian Nations, 2017). Founded in 2009, the countries strive to build an economic zone comparable to the European Union. In considering the ASEAN perspective, the writer addresses the aforementioned issue of considering Asia both as one and as multiple markets. The ASEAN countries aim to become more competitive and more resilient within their network and towards other countries by connecting on political-security, economical, and socio-cultural levels (Association of Southeast Asian Nations, 2012). In setting-up their Connectivity Roadmap they have created a framework in which they provide financial support and organisational coordination for infrastructure development, institutional exchange, and people empowerment. In doing so, they intend to raise their attractiveness as a market to foreign investors who strategically consider doing business in Asia. In offering a commodious setting alongside their group of markets, they aim to be considered rather as one single market, thus becoming more attractive. According to the association, the topics to be addressed in the network are: The installation of a ASEAN-wide connected network of road, rail, air, and sea transport to make transport issues both to and within the ASEAN countries substantially easier. The creation of a sufficient network of electronic and communication infrastructure to hook-up all cities to the global network of ICT systems. The institutionalised and harmonised setting of customs and trade conditions to enable the seamless flow of people and goods across boarders within the ASEAN zone. The mutual recognition of education and professions to create vice-versa transfers both for learning and for working. And the encouragement of infrastructure funds and Public Private Partnerships to attract investors from all over the world to use the ASEAN market setting. The association recognises that in doing so, it will also become attractive for international crime but sees the positive aspects widely overwhelming; it will, however, maintain coordination instances and committees to monitor all developments in the ASEAN community.
Trade Agreement Perspectives: Sometimes time overruns agreements, as has happened with the Trans-Pacific Partnership (TPP), a trade agreement launched, among other reasons, with the implication to prevent marginalisation of the US in the Asia Pacific region; as of January 2017, the US signed a decree to leave the partnership (Siddiqui & Rushe, 2017). In building a free-trade zone between the US and Canada, Peru, Chile and Mexico, Australia and New Zealand, Vietnam, Malaysia, Singapore and Brunei, and later including Japan in negotiations, the TPP strived to gather up to 1/3 of the global trade into one commercial region (Solis, 2013). Setup not as a pure tariff or trade agreement, TPP had deep political involvement, too, in order to address subjects such as labour standards, environmental issues, and protection of intellectual property. But this wide array is what, in the view of Solis, triggers the challenge of the TPP. Particularly the adding of Japan, which marks a huge positive expansion from the US point of view, also adds disputing views and expectations which she expected to arise during negotiations (the interview was in 2013). Generally, Solis questions the advantages of such a wide approach against relatively simple bilateral agreements: She sees the seamless, efficient, and integrated trade between the countries in contradiction to the national interests when it comes to issues other than pure trade, where national protectionism overrides the greater idea. When considering the TPP area for an international business venture (in Asia), it does, however comes with the benefits of a huge trade zones – and the risk, that some of the aspects which might have triggered expansion into other markets (e.g. easier labour or environment conditions) may be found in the new markets, too.
Conclusions: Considering doing business in Asian countries has many aspects, as has been shown in this essay. The attraction of huge new economies, be they for selling or for manufacturing, stands against the efforts that might be needed to adopt to completely different culture and, hence, ways to do business. The method of market entry may level some of these difficulties as may the general perception of the company’s stakeholders towards such a venture along with previous experiences. Depending on the products or services at stake, a company may choose equally wise the one or the other way.
Strategic Business Planning for Latin America
Latin America is neither one country nor part of one continent; it is sometimes considered one region or a cultural entity (Mignolo, 2005) and it may include the Caribbean and Puerto Rico – or it may not (Spillan, Virzi, & Garita, 2014). When defining Latin America, the language family – Spanish and Portuguese - may possibly be the best criteria to find a common base (Kästle, 2017) for Argentina, Bolivia, Brazil, Chile, Colombia, Costa Rica, Ecuador, El Salvador, Mexico, Nicaragua, Panama, Peru, Uruguay, and Venezuela. And although the name Latin America origins from the 19th century to define those countries with settlements from the southwest of Europe is has never included the French dominions (Bilbao, 2017). The biggest economies in Latin America today are Brazil, Mexico, Argentina, and Chile (International Monetary Fund, 2017).
Levels of Strategic Consideration: Of the multiple ways to strategically consider business opportunities, the Three Level Strategy (Mintzberg, Lampel, & Ahlstrand, 1998) was chosen to adopt for this essay. It is not specifically designed for this purpose but was deemed suitable as being a structured and slightly different approach to the topic of consideration on doing business in Latin America. The Three Level Strategy considers a corporate level, a competitive level, and a functional level. The corporate level is adopted when discussing those issues that relate to the set business surrounding in Latin America. The competitive level is chosen to consider the market situation from a competitive point of view. On the functional level, practical challenges and opportunities arising with business ventures in Latin America are considered.
Corporate level consideration: Considering doing business in Latin America has - on a corporate level - economic, political, and cultural aspects, amongst others (International Bar Association, 2017). From an macroeconomically point of view, Latin America is a growing region, driven by its peoples’ want for less inflation and more stability (Loser, 2012). Its growth is substantial albeit reducing over the last periods and is some countries economic fundamental are not yet fully embraced (Griffin, 2010), leading to repeated currency crises. In difference to China, Latin America is sometimes described as being less in peoples’ minds as a substantial and growing economy, hence major business opportunities are not taken (Loser, 2012). This is particularly striking, since its North American neighbours are engaged deeply with both economic and political activities (Spillan, Virzi, & Garita, 2014). The progress of economic development is seen to be quite different from country to country although the general direction is shared (International Bar Association, 2017). From an overall perspective of competitiveness and productivity, innovation and diversification, Latin America is often seen rather a mid-range than a top performer (van Agtmael, 2012). On a micro economical level, the costs of doing business in Latin America exceed those of other workbench regions such as China for the lack of sufficient transportation infrastructure, the higher labour costs, and corruption expenses, something which can only partly be compensated by the physical closeness to the United States as one major importer of Latin American made products (International Bar Association, 2017). Amongst the Latin American Countries, Brazil shows a higher economic growth than its neighbours, attracting the highest Foreign Direct Investments (Garcia & Martinez, 2012), whereas Chile and Mexico are considered the most liberal markets, encouraging investors to setup businesses on their soils, but with less overall growth (Urquiola, 2011). Particularly the unofficial side of the economy influences in several countries the official economy severely, making it not only an economic (e.g. drug trafficking), but also a competitive (e.g. black market) issue (Garcia & Martinez, 2012; Spillan, Virzi, & Garita, 2014). Politically, Latin America has been influenced in recent decades from two sides: North-American governments have supported various Latin American governments (Dinges, 2011) striving to have political and economic systems similar to their own (Spillan, Virzi, & Garita, 2014), thereby sometimes generating violence and instability bringing the contrary effects. Economist are often seen as the other party of influencers (Urquiola, 2011) who, wanting to help the emerging economies, have strongly influences the countries eco-political developments in striving for countries that work in accordance with political and economic theory (Calvo, 2011), finding, that theory and praxis did not match. The resulting instability is still today one of the key obstacles of doing business in Latin American countries (Urquiola, 2011) along with the constant failure of governments (Dill, 2017). Looking at Latin America’s biggest economies, political influence has generated substantial bureaucracy and laws as well as substantial taxation in Brazil, making it on the one hand one of the countries which are considered most difficult to enter business with but providing on the other hand a high degree of certainty for business ventures (Garcia & Martinez, 2012). Mexico, in comparison, has been led to a high level of bureaucracy and corruption, making business ventures more uncertain but at the same time much easier to initiate (Garcia & Martinez, 2012). The cultural aspects concerned when considering business in Latin America are closely linked to considerations on a functional level; culture dominated what people do and how they behave (Spillan, Virzi, & Garita, 2014). On a corporate level, however, culture still can be a major decision point since a compatibility between the host and the home country’s culture can be seen as essential (International Bar Association, 2017). One cultural aspect is that of inequality between man and women, poor and rich, which has remained high in Latin America despite the economic and political influence from western countries (Milanich, 2011). Many parts of Latin America are still men dominated, governed by small groups of wealth and well-connected people (Bianchi, 2006). Education is another important aspect and one, in which the regions in Latin America do differ: Whereas Brazil is developing a middle-class despite the high poverty (which is in common for all Latin American countries), Mexico is suffering from crime as a result of a lack of education (Garcia & Martinez, 2012), and Chile successfully offers for decades already free education to everyone – but still suffers from human rights issues (Dinges, 2011). Concluding on the above, considering business in Latin America on a corporate level shows an attractive rise of growth in all countries albeit on very different levels and with different stances. Depending on the political influence, doing business is easier but connected with more risks in some countries than in others. A high poverty and a culture of domination by a few individuals are aspects to be considered both from economical and from ethical points of view.
Competitive level consideration: Depending on the nature of a market entry, be it for manufacturing or assembly purposes, as direct investor, or as supplier to the market, competitive issues have to be regarded differently. Latin America has been seen as a primary commodities supplier to Asia over the last many years thereby profiting substantially from the rise of China as an economy (Loser, 2012). This relationship is now shifting, and Asia is expected to compete with Latin America on business investments which may give Latin America a regional competitive advantage in North America. Within Latin America, Brazil is the country with the highest growing domestic consumption (Garcia & Martinez, 2012), offering another benefit to investors. From a manufacturing point of view, Mexico has the broadest range of both advanced and outmoded industries, making it attractive for all different sorts of business ventures (Garcia & Martinez, 2012) whereas Chile boosts a strong agricultural sector as a competitive advantage (Goddart, 2011). On the downside of competition, investors in Mexico might encounter dominant local players as well as a substantial informal economy which they may not be able to understand and compete with (Garcia & Martinez, 2012), something which can equally be assumed for Brazil where the local players are replaced by more government regulations but with the same effect. The example of Home Depot trying to enter the Chilean market (Bianchi, 2006) also shows that local competition is able to undertake joint activities to block international competition, particularly if this is seen to ignore cultural habits. Summarising, considering business in Latin America on a competitive level shows political, economic, and cultural obstacles which may apply to both investors/manufacturers and sellers alike. But as in many cases, a substantial awareness of the competition highly increases the chance to successfully deal with it.
Functional level consideration: When it comes to actually operating in Latin America, corporate and competitive aspects of economy, politics, and culture mix: Western self-consciousness and Latin American complacency are a mixture which is bound to generate functional problems (Loser, 2012), as is the western understanding of human rights and the practical world of poverty and exploitation which still can be found in Latin America (Dinges, 2011). And although the ignorance of local habits is not a US-Latin American specific (Bianchi, 2006), recognising the internal and sometimes to outsiders invisible structures of power in a country can substantially improve the functional and thus operational success (Spillan, Virzi, & Garita, 2014), as can the realisation that structures of decision making can be very complex in Latin America. On the financing side, some Latin American countries like Brazil have a convincingly well controlled banking system but lacks on savings and investments which may become a problem for local financing (Loser, 2012). And where some markets may offer a fast and attractive entry through very liberalised conditions others may be advantageous to those who look for a more long-termed reliable venture the start of which might be more difficult but also more calculable (The World Bank, 2017).
[...]
- Quote paper
- Heiko Filthuth (Author), 2017, International Strategic Planning, Munich, GRIN Verlag, https://www.grin.com/document/541352
-
-
-
-
Upload your own papers! Earn money and win an iPhone X. -
-
Upload your own papers! Earn money and win an iPhone X. -
-
Upload your own papers! Earn money and win an iPhone X. -
-
Upload your own papers! Earn money and win an iPhone X. -
-
Upload your own papers! Earn money and win an iPhone X. -
-
Upload your own papers! Earn money and win an iPhone X. -
-
Upload your own papers! Earn money and win an iPhone X. -
-
Upload your own papers! Earn money and win an iPhone X. -
-
Upload your own papers! Earn money and win an iPhone X.