IKEAs Environment and Activities in Brazil - Case Study Example

Ikea in Brazil Name Institution IKEA in Brazil Introduction Ikea, a Swedish firm that has got subsidiaries in most of the European countries wants to venture into the Brazilian market. It is therefore imperative for the company to assess the business environment of a market before venturing into it. For the case of Ikea, they have to do a scan of the business environment factors that prevail in the Brazilian market. These variables include; the socio-cultural environment, economic environment, political and technological environment. All these factors will have a great impact on the firm’s day to day running of their business in the Brazilian market. Ikea will have to determine their SWOT analysis and an analysis of the business environment for them to come up with the right decisions concerning the new market. The scanning of the environment is commonly known as PEST analysis. Doing a scan of the environment is indispensable for a business such as Ikea and for any other firm that wants to venture in to a new market (Scully, 2004). Ikea Company Summary Ikea is a Company that was started in Sweden in the 1940s by a man called Ingvar Kamprad. Ingvar started venturing into business by buying and reselling matches to his neighbors at a profit and later sold fish and stationeries. Using a present from his father, Ingvar started Ikea which he named using short forms of his names and those of his village and the name of the company “Ikea”. Ikea focused mainly on production of furniture and this was well received by the locals. The company specializes in ready-to- fit together furniture such as beds, chairs and other household equipments. The firm is currently the leading supplier of furniture products in the world. This also made the founder to be among one of the richest personalities in the world. The company is considered to be environment friendly due to its easy to package products and constant improvement of its products (King, 2011). The company currently has subsidiaries in about 40 countries which are mostly in Europe. The company currently has around twelve thousand product range on its web page. The firm is third in the consumption of wood in the world. The firm has stores in countries such as China, Germany, Sweden, Netherlands, the United Kingdom among many other markets spread all over the world. Ikea serves a wide range of market segments that range from individual households, large companies, small businesses, government institutions and education institutions such as colleges and schools. Their customers are spread all over the world and this is enhanced by their online sale of their products through their websites and their stores in subsidiaries in different countries (King, 2011). The Brazilian Business Environment Brazil is a federal republic and the biggest country in South America and number five in the world in terms of area and the population which stands at more than 190 million. Brazil borders all the South American countries with the exception of Chile and Ecuador. The country is a former colony of the Portuguese and it attained its independence in the year 1822. The country has got the 7th biggest national income and also the 7th in terms of its power to purchase. It is among the countries with rapid growing economy. Brazil is also a host to a variety of biodiversity, wild animals and natural ecosystem (Hansegard, 2011). Brazil’s Political Environment Brazil has got a federal system of government and where the laws are set by the government and the local authorities. The law in Brazil is Roman-based. The law in Brazil is mainly derived from the country’s constitution. The constitution spells out the basic rights and warranties and the different levels of authority. It also outlines the labor rights, taxation system and other regulatory issues to do with business, and property rights. Brazil is also known for corruption issues especially by the country’s politicians. This has led to the country not addressing fundamental issues affecting the society such as security, poverty, urban development and economic discrepancies. The country has got no restrictions on the products that can be imported and exported to and from the country. The government has put in place some incentives to encourage foreign investment in the country and these incentives include tax waivers. Brazil has got good trade relations with other countries hence encouraging hence encouraging investors to venture into the country (Sorensen, 2012). Brazil also has no trade barriers to foreign investors hence this is best for a company such as Ikea that wants to enter into the market. This encourages foreign investors to venture into country as they no restrictions. However, the country has got no firm law on intellectual property hence foreign companies in the country have previously made huge losses due to piracy and copyrighting. Nevertheless, the government is trying to put in place measures to curb this menace. Social and Cultural Environment in Brazil Brazil has got a diverse kind of socio-cultural environment that has got a multiplicity of cultures due to early intermarriages during colonial periods between Africans, Americans and the Portuguese including Asian and Europeans. Brazil adopted mainly the culture of its colonizers, the Portuguese especially in their language and other cultural practices. This also includes religion as a majority of the country’s population is Roman Catholic. Portuguese is the country’s National and official language and the dialect that is spoken by a majority of the populace. The Brazilian society is famous for its love for football. Most of the world’s best footballers come from Brazil. Soccer is highly valued in Brazil and it forms the life of every child in Brazil. Brazilians also place a high significance on family-life and relationships. The family is key in the society and family relationships are taken seriously. Another aspect of the Brazilian culture is their love for music. Samba is the style of music that Brazil is best known for all over the world. Brazil also has traditional festivals that are held annually such as the Carnaval festival. The country has got a diverse cuisine due to its multiple cultural orientations. Economic Environment of Brazil The economy of Brazil is considered to be among one of the rapidly growing economies in the world. Brazil is member to a number of economic associations such as the World trade Organization and the G20. Brazil is considered as the top country in terms of competitiveness all over the world. Brazil has got the most developed agriculture, mining and manufacturing industries in South America. The country has got a labor force of more than hundred million and an unemployment rate of six percent. Brazil is sufficient in terms of energy because it has got a robust hydro-electric power system. Technological Environment of Brazil Brazil is well-developed in terms of technology. Research and development in Brazil is most done by institutions of higher learning such as colleges and universities. This is usually funded by the government so as to encourage the development in technology and the transfer of technology. Other private entities such as IBM have also set-up centers in the country so as to carry out research. However, the country still has a huge digital divide and a larger part of the population does not have access to technology. References Hansegard, J. (2011). Corporate News: Early Frugal Nature Guides IKEA's Innovations. The Wall Street Journal Asia, p. 22. King, P. (2011). Lost in the supermarket.(Grids+Guides)(Obsessions)(store layouts of furniture chain Ikea). Print, 65(4), 20. Scully, J. (2004). Ikea. Time, p. 16 Sorensen, C. (2012). Ikea's cold war controversy. Maclean's, 125(19), 52. Read More