Entry into manufacturing in Latin America – globalization of marketsTHEORY:Changing world order – rise of Latin AmericaDeclining barriers in free flow of goods, services and capital.Globalization of productionDifferences in cost and quality of factors of productionDecline in protectionism for computer manufacturersWhy brazil – population, import tariffs, mercosul
Intro into state -> job -> better wages -> better purchasing power -> better standards of living -> better social status -> Happy people -> high human development index Pro’s of Minas Gerais: less differences between political parties, incentives provided like free land, promotion agency is govt+private mixCon’s of moving out of Brazil: largest growing economy in Latin America, favorable demographics not present in other Latin American countries
Public opinion may change the governors stiff stance.
Dell provides jobs to people and improves their standard of living
Companies – must have backup plan, must be aware of socio-cultural and economic conditions, maintain cordial relations with ruling and opposition parties (union-leaders),
Dell’s Dilemma in Brazil Cheryl Correa Ramya C Rhea Locker Gitanjali
Contents Case Overview Listing of Problems Available Options Our Analysis Conclusion
Case Overview Entry into manufacturing in Latin America Choice of site in Brazil State incentives to attract FDI Why Rio Grande do Sul? Change in political atmosphere What next for Dell?
Methods of doing business in aforeign country Export the product Allow local company to produce product under license Joint venture with a local firm Wholly owned subsidiary
Listing of Problems Political opposition to incentives given Nature of investment promotion organization in states State-specific deterrents to investment Choice of negotiation strategy with governor Dutra
Available Options Exit the country Move the plant to another state Negotiate with the governor
Preferred Option - NegotiationPROs CONs Best state for Risky as governor investment response cannot be predicted Good relationship with investment No guarantee of promotion agency another political crisis not arising Possible change in after setting up the the stance of the plant. Governor.
OUR SOLUTION – NEGOTIATION STRATEGY Investment Creation of Betterinto the state more jobs Wages Better Better Better Social standard of Purchasing Status living Power High HDI
Alternative to NegotiationChoose Minas GeraisPROs CONs Less differences Incentives are not between political as attractive as Sul. parties. Lesser proportion Additional of skilled labour. incentives provided Perceived as a like free land. heavy industry belt. Promotion agency is govt+private mix
Least Preferred – Exit BrazilPROs CONs Can move to Largest growing another Mercosul economy in the state. Latin American region. Investment not Favourable made as such. demographics of Hence not much Brazil not present financial loss. in any other Latin American Country.
CONCLUSION Awareness of political situation important in investment decisions Intra-country competition for investments has both opportunities and risks Companies must have backup plan Maintain good relations with all important political parties in the state