Market Entry Advantages And Disadvantages

Globalization means the world becomes closer. The reasons why cause globalization is the companies want to leverage core competencies, acquire resources, seek new markets, better compete with competitors, and political environment and technological changes (Griffin and Pustay, 2013). Due to the globalization, the traditional markets want to expand and seek new markets, so there are many opportunities in the emerging markets. Brazil is a major economy country in the big ten emerging markets. Brazil has the fifth largest land area, the fifth largest population, the eighth largest economy in the world (Bodman et al., 2011). Brazil has trade relationships with over 100 countries, the main countries are America, United Kingdom, and China (Junior

In Appendix, Table 1 compares the major advantages and disadvantages of five different market entry modes. Foreign direct investment (FDI) is the most appropriate market entry strategies for Brazil market. FDI is foreign company directly through the ownership of the production or facilities and control their assets in investment country to earn an outside profit (Griffin and Pustay, 2013). FDI plays a growing role in the global market, because it gives the company new market, cheaper production facilities, cheaper labor, rich resources and skills (Blaine, 2009). Graph 2 shows the foreign direct investment in Brazil from 2006 to 2014. FDI in 2014 is $ 6,000,000,000 and the highest is $ 8,000,000,000 in 2009 and 2011. From 2011 to 2013, the FDI has a little decreasing, but after 2013 the general trend of Brazil FDI is rising. It means in the long term, more and more foreign direct investment will come to

Labor system is controlled by the Consolidation of Brazilian Labor Laws (CLT), due to high protection and requirements of CLT, it becomes the major reason why labor is so costly in Brazil. The company have to pay the labor an additional cost, such as, a thirteenth salary (an additional month’s salary per year), taxes, meal, transportation, and health insurance, as a result the total of the additional cost can over 70% of base salary (James, 2011). And if the company breaks the labor law, they will get an expensive punishment. For example, Samsung be sued by Brazil government for $ 108,000,000 fines, because Samsung’s factory let labors continuous 15 hours working and without breaks (theguardian, 2013). And in 2011, the Samsung had been fined about $ 200,000 for bad working conditions (theguardian, 2013). Therefore, the labor issue will be a challenge for new entry company, because of high level protection and the requirement of Brazil government. What is more, Brazil is quite shortage of highly skilled labor, and is very lack of middle level worker, such as technician, expert, supervisor, and manager (Ernst & Young Terco, 2011). Brazil’s economy of central and northern areas is underdeveloped, which leads the workers in these areas need a lot of training to achieve a satisfied skill level. The last common reason that could cause the joint venture fails is the partner disagreement, between two