Brazil As An Emerging Market Economy Business Essay

Globalisation has become the order of the day and as multinational companies are scouting for new avenues in the bid to achieve competitive advantage over rivals and have at the same time economic viability of operations, nations too are vying with each other for a significant share of the global economic pie to cater to the development of themselves and take care of the socio-economic conditions prevalent amongst the population. Whilst the dominance of the developed nations persisted for a significant period of time, with political conditions such as the cold-war, division of Germany, and the like, abetting it, the changed political atmosphere worldwide threw up many opportunities and challenges requiring an introspection of policies of the nations and a need for reinventing and refurbishing of existing laws and governing policies to make the nation more dynamic and competitive.

This assignment is sequentially structured to analyse the nature of emerging markets, the role of multinational organisations in emerging markets, Brazil as an emerging economy, the need for cultural familiarisation for working in such an environment. This study also takes into consideration the cultural analysis of Brazil done by the renowned Geert Hofstede in an attempt to familiarise managers with aspects they should expect, and practice whilst in Brazil. These are followed by a PESTLE analysis of Brazil and finally end with a summative conclusion.

Critical Analysis and Discussion

Whilst no one-liner definition exists of emerging market economies (EME), the characteristic features tend to determine what they really are. Rapid economic growth, increased and sustained foreign investment, coupled with significant international political influence are the main markers of this type of economy. These economies are not on par with those of advanced nations due to the difference in the level of development .Very often bad policies namely those that interfere with the efficient performance of economic factors, and fragile institutional structures that place an additional burden of transactional costs for domestic and foreign investors, tend to inhibit potential investors.

The expansion of organisations spanning different countries is centuries old, the expansion of multinational companies and their relevant importance in world trade achieved rapid pace post 1980 era. The propensity of integration with the global economy, together with the decline in the importance of the economic role of the nation led to the tremendous expansion of MNCs, particularly in the developing nations of the world.

The significance of the functions of transnational companies in the shaping of the global economy has manifested, in significant proportions in the 20th century, such that “any of the top 100 or so global firms exceed the GDP of many nations” [18] and as it stands today, multinational companies are responsible for most of the employment and output and t in the world. [19] They have a reciprocal relationship with the globalization process; whilst globalization has contributed to high FDI flows to nations, countries eager to acquire a share of these FDI flows have undertaken significant policy shifts towards liberalisation. [20]Additionally, multinational companies have made it possible for the creation of “the global village” by facilitating international amalgamation of markets.[21]

Need for cultural familiarisation

Globalisation is inherently embedded with cross cultural features, and it is widely perceived that operational practices that are congruent with the prevalent cultural contexts significantly contribute to achievement of business objectives.

Research in this area reveals that businesses selling directly to clients as opposed to those selling to other business organisations tend to exhibit lower sensitivity to cultural differences. Service industries exhibit more sensitivity to cultural differences than businesses focused on trading physical products. Whilst IT service providers tend to be highly sensitive to linguistic differences, industrial machinery manufacturers (that sell to other companies for utilization in their factories) are inclined to be comparatively insensitive to cultural remoteness.

Organisations can operate in the joint venture mode where there would be less expense in terms of time and money for cultural familiarisations. Building up a strong corporate culture and focussing on expansion in locations where there exists a similarity of culture are ways in which organisations can focus on cost cutting features.

Brazil as an Emerging Market Economy

In 1989, Fernando Collor de Mello, on becoming the country’s first democratically elected president after virtually 30 years, adopted liberal international trade practices as lowering barriers for importers and privatising many state owned business organisations. Itamar Franco announced the “Real Plan” where Brazil exhibited the necessary economic discipline required to attract foreign capital that subsequently propelled Brazil’s growth. Due to the reforms of President Cardoso, Brazilian banks, controlled by the one regulator-the central Bank, stood significantly isolated from the effects of the global financial crisis triggered by the U.S. securities market. Brazil posted a low unemployment rate together with a diminished dependence on trade with developed nations. As a result the demand for Brazilian goods remained high with in the country. The increase in trade ti4es with other emerging economies and developed nations helped sustain and stabilise the demand for Brazilian goods.

This turnaround for Brazil was achieved because of the strict adherence to the policy of the government with regards to:

a) Infrastructure: The Growth Acceleration Plan together with other policies, helped develop the infrastructure such as good roads, sufficient sea ports and introduction of the latest technology required for accelerating economic growth.

b) Reduction of Poverty and Inequality: was achieved through the “Bolsa Familia”program which helped reduce poverty and increased participation in the economic activities by the population.

c) Improved perception of Global Trade: New foreign investment and international trade policies helped Brazil augment its economic status significantly. The overall import system was modernised and import tariffs were lowered, making it easy and cheap for other nations and multinationals to trade their products in Brazil

d) Institutional Reform: Concerted efforts were made to improve governmental institutions in order to make them more efficient and conducive for Brazilian as well as for foreign investors. Judicial expeditiousness was constitutionally guaranteed and the Federal Supreme Court was endowed with precedential value whereby an issue once decided need not have to be decided over and over again.

Hofstede’s Analysis of Brazil

Hofstede propounded the five cultural dimensions that are Power Distance Index, Individualism, Masculinity, Uncertainty Avoidance and Long Term Orientation. An understanding would help in minimising of misunderstandings that essentially stem from cultural differences and increase effective communication. This is essential for those aspiring for managerial positions in order to be successful and popular in the team.

Power Distance Index (PDI). This relates to the centralisation of power in a organisation. It reveals how people recognise power differences and the way they acknowledge the distance from power and that of decision making. A low PDI relates to consultative processes in operations whilst a high PDI is indicative of corruption and bribery. Brazil has a High score of 69 on 100.

Recommendation: A manager is expected to be authoritative and have a assertive communication style. Indulgence in consultative processes may be seen as a sign of weakness. One is expected to emphasise the status held through the display of expensive objects, branded personal items and making oneself heard and felt around the place. It is expected that the manager brings in a positive and encouraging atmosphere by being tough and with clearly defined barriers yet at the same time being able to collectively achieve target with the full support of the team. Devolution of knowledge processes has to be undertaken carefully as the authority of the manager has to be maintained while encouraging decision making processes.

Individualism Index: Brazil has a low score of 38 out of 100 which reveals that individuals will exhibit strong group cohesion are more likely to be interested in the well being of the team. A high score on this aspect reveals mobility amidst social classes lacking interpersonal connection and minimal sharing of responsibility.

Recommendation: A manager is expected to boost collective team spirit through efforts as chit-chatting, making jokes and the like. Individual actions like emails and phone calls should be avoided. There should be concentration on team targets, individual strengths and weaknesses are best not highlighted. Traditions should be respected and change brought in gradually.

Masculinity Index: Masculine cultures lay a lot of stress on assertiveness, ambition and materialism. They are high on competition and strongly emphasise gender roles. Feminine cultures on the other hand prefer equality in treatment and value quality of life. They consider sharing and personal development very important. Brazil has a score of 49 on a 100 scale.

Recommendation: Humility is not tolerated. Managers are expected to be proud and assertive of the knowledge and expertise they possess. Face time as it is known is high appreciated and the more time spent in office equals being available for the team and consequently for decision making. On the happy side the job also includes socialising after work hours with the team for a drink. Due to the fact that gender differences exist, very few female managers are credited with absolute decision making powers.

Uncertainty Avoidance Index: Reveals the degree of anxiety that members of the society experience in unknown or uncertain situations. Brazil ranks high on this aspect with a score of 76 out of 100.As there is avoidance of ambiguous situations, the members of this type of society prefer governance by rules and orders.

Recommendations: Consistency in the issuance of instructions is very important as is the delegation of tasks rather than authority. A manager is expected to be abreast of all current laws and regulations and be advised by a competent advisor as labour-market regulations are tremendously rigid and tend to favour employees in most situations.

Long Term Orientation Index: Brazil is the only non Asian society to have such a high score of 65 on a 100 scale which reveals the magnitude of the pragmatic and future oriented perspective a society exhibits.

Recommendation: Managers would do well to accept change, and ardently respect the “jeitinho” which is descriptive of the way discovered by the Brazilian to move out of a tricky situation.

It is thus apparent that cultural differences are for a better part of time sources of conflict rather than synergies and so understanding these differences minimise misunderstanding. It is undoubtedly a very satisfying and enriching experience to survive and be appreciated in a foreign culture which is worth the hard work of understanding the cultural implications prior to embarking on an assignment.

Pestle Analysis of Brazil

Political

There are three distinct entities that comprise the political setup in Brazil. They are The States, The Municipalities and The Federal District. The Federation has the five principles firmly entrenched which are sovereignty, dignity of human beings, citizenship, freedom of enterprise and the values of social labour, and political pluralism. The Executive, Legislature and Judiciary are all formally established by the Constitution. The legislative and executive are organized independently in the three branches of government, the judiciary is organized at the Federal and State sphere.

There are increasing legislations for increased involvement of the nation in international trade and economic activities. Brazil has been the leader of the G-20 Group of Nations and due to its dynamic rise as an emerging market economy is given the first place in the BRIC consortium.

Brazil also has reinforced its commitment to non proliferation by ratifying the Nuclear Non-Proliferation Treaty (NPT), it is a signatory to a full-scale nuclear safeguard agreement of the International Atomic Energy Agency (IAEA). Brazil has acceded to the Treaty of Tlatelolco and has joined the Nuclear Suppliers Group and the Missile Technology Control Regime (MTCR)

Economic

In Latin America, Brazil has the largest national economy, it is the world’s tenth largest economy when considered at market exchange rates, and is the ninth largest when measured by the purchasing power parity (PPP),according to the World Bank and the International Monetary Fund. As revealed by World Bank data, Brazil ranks 64th as due to its GDP per capita being $10,200. It has huge and developed mining, agricultural, , service and manufacturing sectors, coup[led with a large labour pool. The primary markets for Brazilian exports are The U.S., Western Europe, and Japan .They are also the sources for foreign lending and investment. China is a also emerging as a growing market for Brazilian exports.

Social

The core cultural aspect is a Portuguese derivative due to the strong colonial ties with Portugal. The official language is Portuguese and is used for all communication including for all business and administrative purposes.

Brazilians are warm, free spirited and fun-loving, very outgoing and gregarious. They are very hard working and take great pride in their countries natural resources and diversity of culture.

The dress code is fashionable and usually according to the latest styles.

Technology

Brazil is a recognised leader in science and technology with regard to South America and especially in fields as agricultural research, remote sensing, bio fuels, and deep-sea oil production. Over 73% of research funding is government sponsored through various sources. The IT market being the largest in South America was forecast to be in the region of 30bn.US$ in 2012.

Legal

There exists a well established legal system with powers devolved to states and the municipalities. The federal Constitution is supreme and all decisions are taken in consonance with the articles enshrined in it. The Three Branches of Government are separate and independent yet are harmonious with each other. The Judiciary is organised at the State and Federal Level. The municipalities have to resort to the State or Federal level as the case may be.

Environment

As Brazil possesses virtually one third of the world’s rainforest which is inclusive of the Amazon rainforest, deforestation is a major issue. Most of the deforestation that occurs is attributed to land clearing which is for speculative interests, misguided government projects and commercialisation of forest resources together with inappropriate World Bank projects. However a large part of deforestation also occurs for planting of grass for cattle feed .Road construction for access to mining and other sites lead to tremendous exploitation of the poor farmer.

What managers need to know

*For effective business deals it is important to build strong rapport between business partners which gives a sense of genuineness of intentions.

*Interruptions in the course of dialogue are common and are not to be interpreted as rude behaviour.

*Beginning of meetings is generally centered on light conversational topics like weather or soccer.

* Pre-nominal form Senhor (for men) or Senhora (for women) together with the last name and are generally used in the first time an address is and followed by informality and use of the first name.

*Impromptu calls are not well taken and it would be prudent to make an appointment at least two weeks in advance.

*Three-piece suits have an “Executive” connotation while conservative attire is the norm for women in business.

*Business success hinges on the commitment of long term resources in time and money aimed at establishing strong business ties in Brazil.

*Sao Paulo and Rio do not follow the norm of casualness when it refers to business matter and meetings generally start on time.

*Bad topics for conversation are those centred on Argentina, poverty, politics, religion and Rain Forest.

Conclusion:

From the analysis, it is proper to conclude that with globalisation and the need for competitive advantage, a lot of expansion has occurred in various regions around the world have diverse cultural contexts. It is therefore necessary for those aspiring to work positions in countries other than their own in the work context, to familiarise themselves with the cultural features and thus be in an advantageous position and be appreciated in a foreign land.

[18] Arthurs,H. (2006) ‘Who’s Afraid of Globalization? Reflections on the Future of Labour Law’, in J.Craig & S.Lynk (ed), Globalization and the Future of Labour Law. Cambridge: CUP, p. 55.

[19] Floyd, D., Summan S., (2008), ‘Understanding the main motives for foreign direct investment, an East-West country contrast: is the host country legislation an important factor?’, Corporate Governance, 8(5), p.665

[20] IMF,op cit., p. 10

[21] IMF,op cit., p. 10