The Rise of the Brazilian Multinationals Corporations - Research Paper Example

Brazalian Multinational Corporations (MNCs) Introduction: The purpose of this research paper is to examine and explain the rise of Brazilian multinationals and compare their development to that of experienced multinationals. The paper examines the competencies and competitive strategies in a number of Brazilian firms. The subsidiaries of a huge number of foreign firms operated in Brazil and they played a key role in the economic development of the country. Brazil had faced a number of political problems with inconsistencies in government rulings etc. due to which economic development was hampered. But today Brazil is an emerging economy with a lot of economic development. The rise of Brazilian multinationals is due to the huge natural resources which the country has and this is converted to MNCs in the form of energy, oil, high tech industry etc. i) The business implications for American (US) firms competing in Brazil The economic relations between Brazil and the US are four dimensional. The first aspect is regarding the development of the Brazilian economy, its consequence in the US and its impact on the US direct investment in Brazil. The second aspect is related to the business connections between the US and Brazil. While Brazil hates the shortage of reciprocity on the part of US policies, US was more concerned with the open market policies and wanted Brazil to deepen its open market policies. The third aspect focuses on the trade disputes between the two countries. The trade disputes between the two countries were solved by the intervention of the WTO which framed a set of rules which both countries had to follow. The fourth aspect is the difference in opinion over the negotiations in the free trade agreement because both Brazil and the US are the foremost market in their sub regional trade and industry integration arrangements. The implementation of a new currency called the “Real” and the high interest rates led Brazil to become an important economy where foreign investments can be made. The US also attained economic growth in its home country because Brazil had a very good economic stability. “The United States and Brazil are deeply linked economically and commercially with a trading relationship valued at more than $46 billion. The United States continues to be the largest foreign investor in Brazil.” (U.S. Brazil commercial dialog deepens trade relations, 2010, para.4) Petrobras is a Brazilian joint stock company and occupies the eighth place in the world in the oil, gas and energy industry. The company has a huge number of energy and oil holdings in a number of countries including North and South America. The company poses as a major competitor to North America in case of the ethanol fuel which is important for the development of the green energy concept. “Brazil’s state-owned Oil and Gas giant, Petrobras, announced Monday a huge plan to invest US$224B by Y 2014.” (BRIC; Brazil’s petrobras announce huge investment plan, 2010, para.1). In the food industry also large multinationals of America face tough competition with their Brazil counterparts especially in the beverage industry (coffee) because agricultural industries play a dominant role in both these countries. ii) The development of Brazilian multinationals strategic/competitive capabilities Brazil has seen a widespread development and the main reason behind the widespread development is due to Brazil’s abundant natural resources and the use of the latest technology by the Brazilian multinationals to survive the competition in the world. Brazil has progressed in all sectors like the oil industry, the telecom industry, the food industry etc. Shell Brazil is one of the Brazilian multinational telecom firm and in order to survive the competition it is offering cost advantages to the customer. “Shell Brazil is one of the many Brazilian multinational companies which offers to its customers highly competitive rates for voice and fax termination to over 300 intra corporate destinations worldwide.” (Polishuk, 2010, p.4). JBS is a Brazilian multinational company which is a leading producer of animal protein in the world. The secret behind the development of this company is also the high technological investment, the appropriate integration of the sales and the distribution sector in the multinational, the cost reduction strategy in the sales and the transport expenses. The JBS stock is booming and the company and the exports of the company has really reached high and the company is generating enormous profits. JBS has brought the stocks of Pilgrim Pride in order to become a more powerful force and survive the competition in the animal protein industry. Thus each of the Brazilian multinationals uses a different strategy and has competitive capabilities to secure their own market place in the world. (iii) Implications of competition with Brazilian firms: Coming to the next aspect of the implications of direct or indirect competition with Brazalian firms, it could be said that these firms have both advantages and disadvantages when compared to global businesses, or even American businesses. For one thing, Brazil occupies a strategic and advantageous position as the gateway to Latin American countries in this region. It is the only country where Portuguese is still spoken, others speak in Spanish “Brazilian law establishes that mergers must be reported, previously or in until 15 useful days of your accomplishment, when the merger results in a market share in excess of 20 percent or when one of the parties had sales in excess of BRL (reais) 400 million in the preceding year. These sales include those of the parent company abroad; pursuant article 54, Law 8884.” (Bagnoli, n.d, p.20). Again, besides the strict legal imposition of country-specific laws, the country also suffers from low infrastructural facilities, exchange rate fluctuations and high cost of capital. iv) Role/impact of Brazilian firms on other firms? Coming to the role/impact of Brazalian firms on non Brazilian ones, it could be said that there are many areas in which Brazalian companies, or Brazalian counterparts of large foreign owned companies perform well in this country. With large proportion of Brazilians now elderly and aging, the health care in Brazil holds immense promise.. Besides, coming to Brazil’s agricultural it is one of the best not only in Latin America, but also against world standards. The sugar cane produced ethanol in Brazil is better than the corn based ethanol produced in the United States. “Brazil is currently the world’s leading producer and exporter of ethanol for fuel. The ethanol industry in the country is based, almost exclusively, on the use of sugar cane.” (Cordonnier, 2009, para.4). Brazil is one of the fastest growing developing economy, and along with their other counterparts, Russia, India and China form part of BRIC nations.” Characterized by large and well-developed agricultural, mining, manufacturing, and service sectors, Brazils economy outweighs that of all other South American countries and Brazil is expanding its presence in world markets.” (The world fact book: Economy, 2010, para.1). Reference List Bagnoli, V. (n.d.). Introduction to the competition law in Brazil. Global Competition forum, p.20. Retrieved July 23, 2010, from http://www.globalcompetitionforum.org/regions/s_america/Brazil/Bagnoli,V._Competition_Law_Brazil.pdf BRIC; Brazil’s petrobras announce huge investment plan. (2010). Live Trading News. Retrieved July 23, 2010, from http://www.livetradingnews.com/bric-brazils-petrobras-announces-huge-investment-plan-15261.htm Cordonnier, V. (2009). Brazilian ethanol policy: Lessons for the United States. Journal of energy security. Retrieved July 23, 2010, from http://www.ensec.org/index.php?option=com_content&view=article&id=179:brazilian-ethanol-policy-lessons-for-the-united-states&catid=92:issuecontent&Itemid=341 Polishuk, B. (2010). Brazil telecom. Information Gatekeepers. Inc, p.4. Retrieved July 23, 2010, from http://books.google.co.in/books?id=2A5qbLK6tmgC&pg=PA4&dq=the+competitive+capabilities+of+Brazilian+multinationals&hl=en&ei=rFFJTMX9O4qGvgPIwtDTAw&sa=X&oi=book_result&ct=result&resnum=1&ved=0CCgQ6AEwADgK#v=onepage&q&f=false The world fact book: Economy. (2010). Central Intelligence Agency. Retrieved July 23, 2010, from https://www.cia.gov/library/publications/the-world-factbook/geos/br.html U.S. Brazil commercial dialog deepens trade relations. (2010). Trade. Retrieved July 23, 2010, from http://trade.gov/press/press-releases/2010/us-brazil-commercial-dialogue-deepens-trade-relations-050410.asp Read More