Brazilian Offshoring Sector - Essay Example

?(Add (Add (Add Information) (Add Brazilian Offshoring Sector The following part examines the Brazilian offshoring sector in terms of six categories of determinants of entrepreneurial performance. Access to Capital In term of access to capital, the Brazilian offshoring sector offers competitive opportunities to clients. According to the Milken Institute’s latest Capital Access Index, Brazil has improved capital access for its entrepreneurs with the intent to stimulate the nation’s economic growth (LBC para. 1). In addition, the Brazilian offshoring sector is characterized by better access to human capital. The case study clearly indicates that the country’s ICT-related technical and graduate courses generate nearly 100,000 graduates annually. According to official data, Brazilian universities produced over 220,000 graduates in 2008. Access to R&D and Technology The Brazilian government gives special concessions to the country’s R&D and technology sectors. To illustrate, the government provides companies with 50% excise tax reduction to purchase R&D equipment and 100% reduction to import software development materials. Brazil’s R&D expenditure in the 1997–2002 period was greater than that of India. The Brazilian Federal Government gives particular attention to technology and considers software and IT services industry as strategic. In addition, the Brazilian Development Bank offers extensive credit facilities to foster technology projects. Capabilities Brazil has a fast growing economy capable of making the country an attractive destination for global investors. Information technology has been well developed in Brazil and it represents approximately 7% of the country’s GDP. The country possesses highly automated banking facilities and it would meet the interests of outsourcing firms. Another potential capability of Brazil is that it has advanced telecommunication and financial networks. Such competencies may contribute to outsourcing companies’ operational efficiency. Finally, Brazilian firms have the potential to understand western corporate cultures easily. Market Conditions Software products and IT services play a crucial role in determining Brazilian market trends. In the online business sector, Brazil is the largest market in Latin America and the country’s online market grew by 20% over the last year to 40.5 million users (European Travel Commission para. 11). The case study reflects that the country’s total ICT market reached $139.1 billion in 2008. The Brazilian market is export oriented and pays specific attention to global brand performances. The government places great emphasis on the country’s domestic market so as to ensure the sustainability of its traditional industrialists. Regulatory Framework While analyzing the country’s regulatory framework, it seems that Brazil adopts a friendly approach to foreign companies. The case study notes that Brazil has the highest Regulatory Quality index as compared to other emerging economies such as India and China. This situation provides outsourcing firms with a favorable business environment in the country. In addition, the country’s lowest FDI Restrictive Index Scores claim that it is one of the most open economies for FDI. Culture While considering Brazilian culture, it is observed that many Brazilian companies face challenges in handling the country’s English proficiency. This situation persuades Western companies to refrain from outsourcing jobs and businesses to Brazil. From the case study, it is clear that the Brazilian culture attaches great importance to teamwork in software development projects. In addition, Brazilian culture is closer to that of the West in terms of race, religion, and family lifestyle. Hence, Brazilians can better understand Western business rules and market environments (Case Study 8). 2. Unlike the case of India, Brazil developed its software sector mainly to meet the needs of its domestic firms. Evidence suggests that Brazilian IT companies have been serving the country’s sophisticated domestic market for the last 50 years, and this trend has developed externalities and linkages for the offshoring sector. While considering BRIC economies, Brazil has the highest per capita domestic spending in personal software and application. Hence, the country’s domestic market is obtaining several positive externalities from governmental policies. Technology seems to be the major source of a range of externalities in the country. To illustrate, Brazil introduced electronic voting machines and online tax return filing mechanisms relatively earlier. In addition, the country’s manufacturing sector is promoting noticeable IT growth. These types of practices have generated a set of externalities. Operational activities of foreign multinational companies including IBM, HP, Dell, Intel, and Accenture can be considered as a potential source of externalities for the Brazilian offshoring sector. Export orientation of Brazilian industries also forms a key source of externalities. This practice has fuelled the country’s productivity needs and the situation, in turn, improved the Brazilian employment rate. Evidently, the export orientation enhanced the growth of many other related industries in the country. Surveys identify that Brazil has better product/service quality, which is increasingly significant in outsourcing business practices. Brazil’s expertise in offering high quality products/services also generates a set of important externalities. 3. Entrepreneurial ecosystem simply refers to the environment influencing local entrepreneurship. Many better performing schools, colleges, and universities shape the Brazilian entrepreneurial ecosystem. Evidently, the country has a qualified and potential IT workforce. The case context says that Brazil has IT experts of roughly 1.7 million people. In addition, tens of thousands of graduates are produced by the country’s universities annually. According to a Time magazine report by Ioannou, Brazil’s 400 incubators and 123 national institutes of science represent major ingredients of the Brazilian entrepreneurial ecosystem (para. 6). Although the country’s entrepreneurial ecosystem is placed behind other BRIC countries, various reports indicate that it has been growing tremendously over the last decade. It seems that India’s entrepreneurship is centered on the retail sector. As Ramdorai notes, India has nearly 13 million retail shops and 78% of which are family owned (para. 2). In addition, a number of world class universities are emerging in countries such as India and China. While analyzing the Indian education sector, it seems that students enrolling for graduate courses are increasing. The same trend is also visible in Russia. When traditional and technological industries influence regional entrepreneurship in India and China, aircraft and automotive industries shape the Russian entrepreneurial ecosystem. While Indians have a better “academic understanding of products,” Brazil has competitive efficiencies in some industries such as aerospace (Case Study para. 6). As compared to other BRIC economies, Brazil’s expertise in aerospace industry is far higher. However, the country is struggling to perform sophisticated technical work due to lack of adequate manpower. In contrast to this, Russia has competitive capabilities in performing sophisticated technical work at reasonable costs. While considering the number of people engaged in R&D activities, Brazil performs better than India, even though it underperforms in relation to Russia and China. 4. For entrepreneurship in the offshoring sector, Brazil is most similar to China, India, and Russia in terms of many factors. Like these countries, Brazil is one of the fast growing countries in the world. The EIU forecasts that Brazil will be ranked as the third fast developing economy over the period of 2010 and 2020 (Case Study 2). While considering IT outsourcing capabilities, Brazil is very similar to India and China. As we discussed earlier, the Brazilian call center industry has undergone tremendous changes over the past years and this industry is currently able to compete with that of India and China. Similarly, Brazil is similar to Russia and China in terms of its structural composition. Most of the Brazilian companies are ranked behind their Indian counterparts in terms of size; therefore, these companies’ ability to manage large outsourcing projects is limited. To illustrate, Politec, the biggest IT organization in Brazil, had only 15 branch offices, 15 technology centers, and 7,000 employees in 2009 (Case Study 4). Like the Chinese policy, Brazilian software sector is particularly focusing on meeting the needs of the country’s domestic firms. Both China and Brazil have become manufacturing centers for consumer durable goods including televisions, computers, and cars. While taking overall economic freedom into account, the Brazilian economy is very close to the Indian economy. In addition, Brazil is very similar to China in terms of English proficiency. In case of annual GDP per capita growth rate at constant prices, the Brazilian economy closely resembles the Russian one. 5. Although the Brazilian outsourcing industry has many competitive capabilities, it still underperforms that of other emerging countries such as India and China. The first thing the country has to improve is its English capabilities. The case study indicates that many Brazilian firms face difficulties in handling English. Development of English proficiency may be necessary for the Brazilian government to attract more global clients. It is recommendable for the Brazilian government to focus on more export orientation as this policy would assist the country in meetig the increasing needs of foreign outsourcing firms. The case scenario clearly indicates that Brazil’s infrastructural facilities such as highways, ports, railroads, and power generation have not been adequately developed yet. As multinational companies greatly consider a country’s infrastructural development before making an outsourcing decision, it is advisable for the Brazilian government to quickly improve its infrastructural facilities. In order to effectively compete with the Indian offshoring sector, Brazilian firms have to develop their size. Otherwise, they cannot handle large outsourcing projects. It is also advisable for the Brazilian government to liberalize its immigration laws so as to find adequate workforce for performing its highly sophisticated technical works. Finally, the government has to immediately improve its cost dimension performance so as to gain a competitive edge over its counterparts. Works Cited Case Study. “Entrepreneurship in the Brazilian Offshoring Industry.” (n.d.): 1–12. European Travel Commission. “Latin America.” New Media Trend Watch. 2012. Web. 09 September 2012. . Ioannou, Lori. “Brazil’s Start-up Generation.” Time Magazine. 2010. Web. 09 September 2012. . LBC: Latin Business Chronicle. “Capital access: Brazil, Chile Improve.” 2010. Web. 09 September 2012. . Ramdorai, S. “Emerging entrepreneurial ecosystem in India.” Siliconindia. Web. 09 September 2012. . Read More