Recommending an Overseas Market - Report Example

Recommending an Overseas Market Executive Summary The prime intention of this report is to recommend Brazil as a potential overseas market for the expansion of Elfin Sports Cars Pty Ltd, which is headquartered in Melbourne, Australia. Various macro-environmental factors have been discussed in this report with the application of PESTLE and Porters’ Five Forces analyses technique, to gain a comprehensive understanding about the suitability of Elgin post expansion in the Brazilian automotive market. While discussing these aspects, it can be affirmed that Elfin might attain success while performing its operations in Brazil, due to the incredible growth experienced by the nation in recent years relating to sports car manufacturing segment. Observably, the prevalence of extreme business market competition might be a threat for the company towards sustaining its business in Brazil, which can be mitigated through the adoption of strategies that emphasise producing such products at affordable prices with innovative features. Table of Contents Executive Summary 2 1.Introduction 4 2. Brief Overview of the Host Country 5 2.1 PESTEL Analysis 5 2.2 Porter’s Five Forces Analysis 8 3.Justification of the Potential Overseas Market 10 4.Conclusions and Recommendations 11 References 13 1. Introduction Founded in the year 1957, Elfin Sports Cars Pty Ltd (Elfin) has been identified as one of the leading companies to produce a range of highly competitive sports and open wheeler-racing cars. Elfin is an Australian sports car manufacturer, which is often regarded as a major and dominant automotive producer based on its unique streamlined products and their exceptional performances. The company has won 29 championships along with prominent titles ranging from five times Australian Sports Car Championships to two times Australian Driver’s Championships along with three times Formula Ford titles apart from the Australian Tourist Trophies over the preceding few years. In relation to the modern scenario in the global sports car manufacturing sector, Elfin has long been identified to establish its strong brand positioning by delivering exceptional range of cars (Elfin Sports Cars, 2008). Assessing its key competencies and global market opportunities, the company can target the overseas markets to expand its dominant positioning in the respective industry and take a leadership role within the industry context. Emphasizing this particular prospect, the study tends to suggest Brazil as the overseas location for Elfin to perform its range of manufacturing and operating functions. It is worth mentioning in this context that the present market trend in Brazil has been regarded as most promising and suitable for overseas business, wherein the automobile industry of the nation is also observed as developing rapidly and therefore can prove to be a profitable location for Elfin. In order to enable Elfin to achieve its desired business objectives successfully, the paper suggests a set of effective strategic measures and tools that can enable the company to perform its business performances in the competitive Brazilian market. 2. Brief Overview of the Host Country Brazil The sports car market in Brazil has long been observed to grab the attention of the market leaders due to its exceptional possession of resources. In order to assess the current scenario of the sport car manufacturing and marketing industry from a critical point of view, an effective assessment regarding the macro-environmental factors of the country should be considered to acquire a comprehensive understanding. Therefore, the following PESTEL analysis has been conducted that describes the current macro-environmental factors of the country, most likely to provide Elfin with adequate opportunities to expand its business subsidiaries into the emerging Brazilian market. 2.1 PESTEL Analysis 2.1.1 Political Analysis In relation to the political condition of Brazil, the country comprises stabilized democracy with its well-established institutional and political systems. The representative democratic structure of the political system has enabled the country to make easy entry to the global marketers to extend their trade facilities into the country. Moreover, the deregulatory process of governmental policies, towards providing trade opportunity for the foreign entrepreneurs, would also be a major factor of consideration for Elfin to enter into the Brazilian market. Therefore, the sophisticated and well-built political framework of Brazil can be considered as one of the major factors for the company to gain considerable success opportunities in marketing its range of sports cars as per the targeted customers’ convenience (Campante, 2009). 2.1.2 Economic Analysis The economic environment of Brazil has recently witnessed certain unfavourable conditions due to the rapid fluctuations in the global economic environment. However, as stated in the publication of Bertelsmann Stiftung (2012), the continuous emergence of commercialization and increasing amount of Foreign Direct Investment (FDI) enabled Brazil to be recognized as one of the major countries in the BRICSA nations in the recent years (BTI, 2012). In relation to the Gross National Product (GNP) rate of the country, the research of The Heritage Foundation (2013) revealed that Brazil has achieved US$ 2.4 trillion in 2013 with a growth of 0.9% as compared to the year 2012. Moreover, the significant growth of Per Capita, which have been witnessed to gain up to US$ 11,875, can also be considered as a major economic factor for Elfin to attain feasible growth from its business start-up stage (The Heritage Foundation, 2013). The robust developmental growth rate along with striking financial performance derived from the emerging commercialization in the Brazilian economy would further help Elfin to accomplish its desired financial goals. 2.1.3 Socio-Cultural Factors The socio-cultural factors can also be regarded as the major influencing aspects that can affect an organization’s overall business performance to a substantial extent. The factors tend to influence the organizational process due to the challenges arising from cultural differences among the customers belonging to diverse countries. With regard to the current scenario of Brazil, the extensively growing demand towards the highly competitive sports car segment can be viewed as a major opportunity for Elfin to strengthen its foothold in the market. According to the social context, the increasing demand of sports cars by people from different demographics has been observed as a current trend in the Brazilian market. Although the population with higher income level generally tends to purchase luxury cars, the increasing demand for sports cars with hybrid engine is also a long-standing preference of the Brazilian customers. In relation to the recent sports car industry, the social characteristics of the country have been highly witnessed to accept changes in their lifestyle in accordance with the evolving trends, especially while purchasing automobiles. Therefore, the socio-cultural aspects can also be considered as a major factor, to ensure the growth opportunities for to Elfin in the respective business location (Castano & et. al., 2011). 2.1.4 Technological Factors In accordance with the present trend of business environment, technological factors can have major influences on the organizations while intending to expand business locations to any other overseas locations. In relation to Brazil, the country has been identified to incorporate sophisticated technological infrastructure. In this context, the development of Information and Communication Technology (ICT) along with web-based facilities across the different states can be considered as a major transformation of technology for the foreign marketers (OECD, 2012). Therefore, the unabated development of technology would also be a key factor for Elfin to be considered when targeting a large segment of Brazilian customers while marketing its varied assortment of competitive sports cars. In relation to the current technological trend in mail order retailing, Brazil has been duly considered as one of the emerging markets for the global marketers due to its rapid development of computer infrastructure and ICTs in commercializing range of trade activities. Notably, this development can provide adequate support to Elfin while performing its wide range of export operations in the Brazilian automobile and sports cars industry (OECD, 2012). 2.1.5 Environmental Analysis The report published by OECD (2012) stated that the environmental factor should essentially be considered as a major factor for the foreign marketers while entering into a specific business location such as Brazil. The environmental policies associated with automobile or sports car market comprises a strong set of environmental provisions to be complied by the foreign marketers. In this context, it would be essential for Elfin to ensure adequate compliance with the environmental policies along with different provisions linked with the sports cars while commencing its business operations in the emerging Brazilian market. In this regard, quality of the engines along with different other features of the automobiles would help the company to minimize the potential constraints related to any environmental issue identified (OECD, 2012). 2.1.6 Legal Factors Brazil incorporates a set of well build and easily compatible trade regulatory norms for the foreign entrepreneurs while intending to perform various trade activities with this country. As mentioned earlier, the deregulatory process within the trade policies and openness relating to the export and import facilities would also provide Elfin a degree of independence while marketing its racing cars in the respective business location. According to the report published by OECD (2012), the lower rate of annual tax rate and considerably easy process of tariff regulatory policies within the Brazilian trade activities would further enable Elfin to market its exceptional range of sports racing cars successfully. Apart from the above-discussed macro-environmental factors, the Porter’s Five Forces Analysis has also been taken into consideration, with the intention to gain an in-depth understanding of the success potentials concerning the expansion of Elfin in Brazil. 2.2 Porter’s Five Forces Analysis 2.2.1 Barriers to Entry Numerous entry barriers can be apparently witnessed to prevail in the Brazilian sports car industry that might prove to be quiet problematic for Elfin in its recent performances. According to Catton & et. al. (2004), these barriers include huge start-up costs, existence of small car market that is already dominated by the companies that entail Fiat and Ford among others and risks emerging from Foreign Direct Investments (FDIs) due to the factors of high inflation, unstable economy, unionization problems and unpredictable labour expenses. 2.2.2 Buyers’ Bargaining Power As per the observations made by Catton & et. al. (2004), this particular element of the analysis seems to be quite low, as the Brazilian populaces possess lower disposable income. Moreover, Catton & et. al. (2004) recognized their lifestyle and quality of life to be much lower as compared to Australia, increasing differences between the home country and environment and the host country environment of the nation. By taking into concern these important aspects, it can be affirmed that Elfin must manufacture its products, i.e. sports and racing cars, which are quite affordable for the people belonging to Brazil. This might certainly assist the company to attain superior competitive positioning over the other existing market players in the Brazilian automotive industry. 2.2.3 Suppliers’ Bargaining Power As per the study conducted by Catton & et. al. (2004), the automotive suppliers in Brazil do not possess any sort of chance for negotiating price owing to the reason of existing huge number of sports car manufacturing companies in the nation. In this similar context, Catton & et. al. (2004) noted that the companies engaged in manufacturing their respective products are making deliberate efforts towards lessening the number of suppliers that they deal with and also modernizing their respective production technologies at large, with the aim of attaining economies of scale (Catton & et. al., 2004). 2.2.4 Industry Rivalry According to Catton & et. al. (2004), the rivalry or the business market competition persisting within the Brazilian sports car manufacturing industry is quite high. This might be owing to the reason of wider presence of few globally leading companies operating in the similar industry in Brazil that encompass General Motors, The Ford Motor Company, Fiat S. p. A., Volkswagen, Toyota Motor Corporation and Honda Motor Co., Ltd among others (Catton & et. al., 2004). For coping up with this crucial concern i.e. extreme business market competition, Elfin requires to adopt strategies of affordable prices incurring lesser operational costs along with assuring strong and highly reliable after-sales services. 2.2.5 Risk of Substitutes The threat concerning substitute products is identified to be quite high in the sports car manufacturing industry of Brazil. As per the observations made by Catton & et. al. (2004), a huge figure of substitute products is persisting within Brazilian automotive industry. This can be acceptable with reference to the fact that cars have eventually become one of the prime necessity items instead of a luxury item in the current Brazilian market. The major transportation forms largely vary in accordance with the geographic locations of Brazil. For instance, the northern position of the nation, wherein the income of the people tends to be quite low, the consumers are observed to prefer bicycles and/or public transport as the most preferred transportation modes. On the other hand, customers from the developed southern cities of the nation, such as Rio de Janiero and Sao Paulo among others, prefer the transportation modes of trolley cars as well as buses (Catton & et. al., 2004). Correspondingly, Elfin would need to produce its products in such a way so that the people belonging to Brazil can make greater uses of the same instead of accessing the above discussed transportation modes. 3. Justification of the Potential Overseas Market Elfin is often regarded as the pioneer in manufacturing a broad array of highly competitive sports and open wheeler racing cars. Owing to its persuasive brand image and Unique Selling Propositions (USPs), the company might attain success in expanding its business in the Brazilian markets. It is worth mentioning in this similar context that the sports car manufacturing segment in Brazil experiences incredible growth as well as development in recent times, representing the fourth biggest automobile sales market worldwide. This might be owing to the reason that the Brazilian government is focusing on adopting and executing innovative measures towards encouraging the competitiveness persisting within the sports car manufacturing industry in the nation. These measures include advancing the local suppliers and slowing down the import growth among others, which has although been beneficial in augmenting consumer demands within the market, but has also increased challenges from local competitors for a foreign brand like Elfin in Brazil (PricewaterhouseCoopers, 2012). From an overall perspective, the operations presently being performed by Elfin can be examined to act in support of the company to attain success in expanding in the business market of Brazil. In this context, it can be apparently observed that the operational functions of the company in recent times have been mainly based on fulfilling the demands of the customers in terms of effective pricing and designing the same with the execution of latest technological advancements (Elfin Sports Cars, 2008). As previously mentioned, the disposable income of a major portion of Brazilian population is quite low, which might further hinder the expansion of Elgin in the host country. However, considering that the market reflects high demand for innovative by cheaper products, the company can take a chance to gain substantial profits from its investment in Brazil. In this regard, the company must ensure adequate strength in its product mix strategies, wherein the company would offer a wide variety of sports cars in the business markets of its home country, i.e. Australia, including Elfin T5 Clubman, MS8 Clubman and MS8 Streamliner among others (Elfin Sports Cars, 2008). The deliverance of such attractive and highly valued sports cars would eventually aid Elfin in sustaining its business in Brazil and most importantly, attaining a superior competitive positioning over the chief business market competitors operating in the similar industry of the nation. 4. Conclusions and Recommendations Based on the above conducted study, it can be affirmed that the macro environmental factors prevailing in the business markets of Brazil might prove quiet useful for Elfin when expanding its business in the nation successfully. It would be vital to mention that the operations conducted by the company, emphasising offering quality sports cars with pioneering technological advancements, would indeed provide a greater mileage for Elfin. It shall not only ensure attaining superior competitive position over the major competitors persisting within the similar industry in the nation. It can be apparently observed in this regard that the prevalence of business market competition in Brazil is quite extreme due to the presence of leading global brands such as Fiat, Honda, Fiat and Toyota among others. This might prove to be a threat for Elfin towards sustaining its business in Brazil in the short-run. To mitigate these issues, Elfin requires adopting and executing strategies that would minimise the gap persisting between customer demands (characterised as lower price and innovative product designs) and the product features offered by the company. In this regard, one of the strategies, which the company can undertake is producing such sort of products that are quite affordable to the Brazilian consumers along with incorporating the same with the latest technological developments. Based on this notion, it can be affirmed from a broader understanding that the strategy would not only support Elfin to successfully expand its business in the Brazilian automotive market, but would also assist it to gain superior competitive advantages over the major business market competitors like Volkswagen and Ford among others. References BTI, 2012. Economic Performance. Brazil Country Report, pp. 1-32. Catton, J. & et. al., 2004. Brazil’s Small Car Industry: Competitive Assessment Using Porter’s Five Forces. The Automotive Industry in Brazil. [Online] Available at: http://dandiangelo.tripod.com/Brazil_Project.htm#_Toc71898401 [Accessed April 06, 2014]. Campante, F., 2009. Introduction. Papers, pp. 1-21. Castano, J. M. & et. al., 2011. Cultural Characteristics. Socio Cultural Factors Summary. Elfin Sports Cars, 2008. History: The Elfin Story. Elfin. [Online] Available at: http://www.elfin.com.au/elfin/2008/history/ [Accessed April 06, 2014]. Elfin Sports Cars, 2008. Showroom. 2008. [Online] Available at: http://www.elfin.com.au/elfin/2008/showroom/ [Accessed April 06, 2014]. Elfin Sports Cars, 2008. Press Releases. News. [Online] Available at: http://www.elfin.com.au/elfin/2008/news/default.asp?content=prod [Accessed April 06, 2014]. OECD, 2012. Medium and Long-Term Scenarios for Global Growth and Imbalances. OECD Economic Outlook, pp. 191-224. PricewaterhouseCoopers, 2012. Brazil: Inovar Auto Overview December 2012. Autofacts, pp. 1-10. The Heritage Foundation, 2013. Brazil. 2014 Index of Economic Freedom. [Online] Available at: http://www.heritage.org/index/country/brazil [Accessed April 06, 2014]. Read More