This document provides an analysis of entering the Brazilian market for Amazon.com. It begins with an assessment of Brazil's economy and market potential, noting growth in GDP, internet/mobile users, and the expanding middle class. A SWOT analysis identifies strengths like reputation but also threats such as high taxes. Market entry strategies are considered, along with the competitive e-commerce landscape and risks involved in operating in Brazil. Recommendations include addressing trust issues, further market research, and location feasibility studies to help Amazon.com successfully enter this emerging market.

1. Fernando Bez, Lisa O’Brien
David Broderick & Michael de Korte

2. Emerging Market Entry
A Strategic Analysis of Brazil
Fernando Bez, Lisa O’Brien
David Broderick & Michael de Korte

3. Agenda
• Brazil’s Market Assessment/Economic Profile
• SWOT Analysis
• Market Entry Strategy
• E-Commerce in Brazil / Competitors
• Risk Analysis
• Conclusion
• Recommendations

4. The Brazilian Market
• Brazil is the 5th most populated and largest geographical country
• 200 Million people
• Brazil took over the United Kingdom in terms of GDP, now raking as
the 5th position in the world
• During the past decade, 35 million people in Brazil have moved from
the poverty to the middle class. There are 16 million people living in
poverty which represents 8% of the country

5. Brazil’s Economic Profile
GDP Growth reached 7.5% in 2010, however GDP Growth fell to 2.5% in 2011
and it is predicted to reach 2.5% in 2012
Brazil GDP Growth
8%
7%
6%
5%
4%
3%
2%
1%
0%
2007 2008 2009 2010 2011 2012
-1%

6. Amazon.com 4 Smiles of Brazil’s Market Demand Attractiveness
Brazil’s Population
200 million
Population with Internet
78 million
Population buying online
32 million
Population with Smartphone
100 million (2015)
Amazon potential market
$12 billion

7. Brazil’s Growing Population and Demand
Total % of population
Population in Brazil (Millions) 200 100%
Population who has access to the internet 78 39%
Number of People who buy through the internet 32 16%
Number of People who has access to the internet but do not buy 46 23%
Number of People who do not buy through the internet because
they do not trust in the payment 32.2 16%
Number of People who do not buy through the internet because
they do not rely on the products they will receive 13.8 7%
Mobiles in Brazil in 2012 232 116%
Mobiles in Brazil with internet access by 2015 100 50%
2010 2011 2012
E-Commerce total Revenue in Brazil
(Billions of Dollars) 8.4 10 12.7

8. Why Brazil?
• Natural resources
– Vast amount of natural resources
– No need to import large quantities, good local availability of key
resources
• Human resources
– Labor market is relatively cheap & motivated
– Provision of training might be required
– Melting pot of cultures and people
• Infrastructure and support industries
– UPC and DHL well established in Brazil
– Urbanization of population
– Quality of the roads and transports

10. Amazon.com to Brazil SWOT Analysis
STRENGTHS
• Amazon has been named the 3rd most innovative company in the
world by Forbes magazine 2012 list
• Fast Delivery & Customer Service
• Global Reputation
• Automatically identifiable to Brazilian Population
THREATS
• Potential expensive operating costs
WEAKNESSES
• Computer Hardware subject to high
taxes • Difficulty in replicating
current model with high
• Consumer growth has slowed labour costs and taxes
• Poor infrastructure – difficult for
distribution
OPPORTUNITIES
• Retail market to grow by 25% in 2012
• UPS announcement of expansion into
Brazil
• Internet Usage to reach 77million in 2012

11. Market Entry Theory
• Location costs, cultural factors – such as trust and psychic distance,
financial variables, market structure and competitive factors are all
taken into account when choosing a market entry strategy
• ‘Psychic Distance’ – Why do some methods offer lower costs than
others?
• Circumstances will prefer one method over another
– Cost-based view: A company requires a ‘compensating advantage’ to overcome
the ‘cost of foreignness’ = ‘Firm specific advantages’
• Direct foreign investment is the most risky form of entry – carries
highest capital risk – Joint venture is a preferred route initially
• Exporting and licensing don’t allow for quick reaction to competitor
moves

12. Market Entry Strategy
• Direct Imports
– From the world market place
– Creating a center of distribution in order to deliver world-wide
products to South America
• Direct Exports
– Distribution to the whole of South America
• Partnerships and Alliances
– Strategic choices of key market players
– Building upon existing partnerships and alliances
– Increasing the market reach of existing relationships

13. E-Commerce in Brazil
14
12
10
8
12.7
6 10
8.4
4 6
2
0
2009 2010 2011 2012
E-Commerce total Revenue in Brazil (Billions of Dollars)

14. Competitors in Brazil E-Commerce
Market Leader in Brazil Turnover – 4.4 Billion in 2010
5 Billion in 2011

15. Amazon.com Risk Analysis
POLITICAL RISKS
Shareholder Exposure Employee Exposure Operational Exposure
Distribution Center Destruction Kidnapping Market disruption
Poverty Shortages
ECONOMIC RISKS COMPETITIVE RISKS
Growth is slowing & 5 main competitors
volatile
Corruption
Variability in the market
Networks and Cartels
Currency exchange rates
Opportunity cost of not
going
Cost of distribution
OPERATIONAL RISKS
Infrastructure Regulations
Transport Population national preferences
Telecommunication Regulations constraints
Suppliers Taxes

16. Amazon.com Market & Industry Opportunities
MARKET
Growth in GDP, Internet & Mobile users
Population of 200 Million
RESOURCES Customers are in maturing market
Available skilled Increase of middle class
personnel
COMPETITION
Rich in natural materials
5 main competitors
Need of distribution
Government, regulations, exist
center
ing industry entry barriers
Investment of Data
Bargaining powers local
Centers
suppliers
UPC & DHL operating as support Long-term profitability
providers forecasted
Strategic location in reaching
Southern America’s countries
INCENTIVES
Creating of local jobs
Presence would increase competitiveness
Reaching out to larger customer base

17. Recommendations
• Pursue a Marketing strategy that allays the fears of the
Brazilian population in terms of trust and reliability of their
service
• Conduct in-depth interviews with key players in the market
• Conduct comparative analysis with local competitors
• Do a feasibility study and research locations
• Verify if desk research corresponds reality in Brazil