Potential growth strategies for Multinational companies wanting to succeed in the different Brazilian States

The Frontier Strategy Group provides a very comprehensive and interesting article for foreign investors and companies to review when considering entering and/or expanding into the Brazilian market.

Highlighting what the article begins stating, “Among potential growth strategies for Brazil, expansion into new geographies merits special attention given untapped opportunities and shifting market growth dynamics across Brazil’s 27 States. However, sub-national prioritization can be a very arduous process. Here are some of the challenges that companies looking to measure relative opportunity across Brazil are likely to encounter:”

Additional briefs are included below, from the article, regarding some challenges that companies face when looking into Brazil as a business opportunity:

High market diversity

“Brazil’s States vary greatly in terms of the composition of their economies and their dependence on the public sector.”

“Understanding the growth engines of each State and the sources of income of its citizens is of critical importance, as it will dictate how resilient each market is against internal and external shocks, and it will allow multinationals to identify and track the right leading performance indicators for their business as they prioritize among markets in Brazil.”

Shifting sub-national market growth dynamics

“The traditional growth drivers of Brazilian States are evolving as the country faces fiscal adjustment and higher volatility in global markets.”

“For example, the fall in oil prices is dampening growth in the oil-producing municipalities of Rio de Janeiro, Espirito Santo and Sao Paulo. Meanwhile, rising meat prices, driven by changes in dietary habits in China and other emerging markets in Asia, along with resilient demand from developed markets, is boosting the economies of meat producing States like Mato Grosso, Minas Gerais, Mato Grosso do Sul, Goiás, and Pará.”

Choosing the right metrics

“Variations in size, growth, and operating environments make State prioritization even more challenging. Should executives focus more on current size or future growth? Even if size and growth look good, how should companies account for differences in the ease and cost of doing business in each State? What are the right metrics to be used and what weighting should be assigned to each metric?”

“States with the deep operating environment deficiencies and smaller market sizes have tried to attract investment into their markets by offering generous tax incentives, another factor to be taken into account by multinationals as they expand beyond their strongholds in the Southeast and South of Brazil.”

Assessing industry landscape and internal capabilities

“Even if companies succeed at wrapping their heads around market opportunity and operating environment across Brazilian States, they will still need to understand the industry landscape of key selected States and assess their own internal capabilities, which will determine their ability to capture opportunity and gain market share as they expand within Brazil; and more often than not this information is not readily available for most executives.”

“Finally, when assessing internal capabilities, multinationals will need to consider whether their salesforce or distributors have the necessary skills to sell into new States, whether they have the resources to finance additional required investments in working capital, logistics, human capital or eventually local production, whether they will need to adapt their product portfolio and whether they will be able to leverage their existing channel structure in key selected markets.”

To read the entire article, click here.

Occasio team




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