1 To be successful Krispy Kreme must understand and be sensitive to different cultures and societies if they are to initiate and
consummate mutually beneficial exchange relationships with global consumers to include those in Brazil. Why Do business in Brazil A thorough study and analysis of its culture is conducted to identify the values, customs, and cultural symbols of the Brazilian consumers and what might affect a buying behavior in this growing market. Following more than three centuries under Portuguese rule, Brazil gained its independence in 1822, maintaining a monarchical system of government until the abolition of slavery in 1888 and the subsequent proclamation of a republic by the military in 1889. Brazilian coffee exporters politically dominated the country until populist leader Getulio VARGAS rose to power in 1930. By far the largest and most populous country in South America, Brazil continues to pursue industrial and agricultural growth and development of its interior. Exploiting vast natural resources and a large labor pool, it is today South America's leading economic power and a regional leader. Highly unequal income distribution and crime remain pressing problems. Brazilian Family Values The family is the foundation of the social structure and forms the basis of stability for most people. Families tend to be large (although family size has been diminishing in recent years) and the extended family is quite close. The individual derives a social network and assistance in times of need from the family. Nepotism is considered a positive thing, since it implies that employing people one knows and trusts is of primary importance. Customs in Brazil
2 Meeting Etiquette Men shake hands when greeting one another, while maintaining steady eye contact. Women generally kiss each other, starting with the left and alternating cheeks. Hugging and backslapping are common greetings among Brazilian friends. If a woman wishes to shake hands with a man, she should extend her hand first. Brazilians need to know who they are doing business with before they can work effectively. Brazilians prefer face-to-face meetings to written communication as it allows them to know the person with whom they are doing business. The individual they deal with is more important than the company. Since this is a group culture, it is important that you do not do anything to embarrass a Brazilian. Criticizing an individual causes that person to lose face with the others in the meeting. The person making the criticism also loses face, as they have disobeyed the unwritten rule. Due to the Brazilian fluid nature of time, it is important to schedule meetings at least two weeks in advance. It is also common for meetings to run 20 minutes late. While this is expected and common in Brazil, punctuality is still important for a new comer into the country. This fluid and relaxed orientation to time can also cause necessary approvals and decisions to take longer than they normally would. Communication is often informal and does not rely on strict rules of protocol. Anyone who feels they have something to say will generally add their opinion. It is considered acceptable to interrupt someone who is speaking. Face-to-face, oral communication is preferred over written communication. At the same time, when it comes to business agreements, Brazilians insist on drawing up detailed legal contracts. Business Negotiation
3 Expect questions about your company since Brazilians are more comfortable doing business with people and companies they know. Wait for your Brazilian colleagues to raise the business subject. Never rush the relationshipbuilding time. Brazilians take time when negotiating. Do not rush them or appear impatient. Expect a great deal of time to be spent reviewing details. Often the people you negotiate with will not have decision-making authority. It is advisable to hire a translator if your Portuguese is not fluent. Use local lawyers and accountants for negotiations. Brazilians resent an outside legal presence. Brazilian business is hierarchical. Decisions are made by the highest-ranking person. Brazilians negotiate with people not companies. Do not change your negotiating team or you may have to start over from the beginning. Business Meeting Etiquette Business appointments are required and can often be scheduled on short notice; however, it is best to make them 2 to 3 weeks in advance. Confirm the meeting in writing. It is not uncommon for appointments to be cancelled or changed at the last minute. In Sao Paulo and Brasilia it is important to arrive on time for meetings. In Rio de Janeiro and other cities it is acceptable to arrive a few minutes late for a meeting. Do not appear impatient if you are kept waiting. Brazilians see time as something outside their control and the demands of relationships takes precedence over adhering to a strict schedule. Meetings are generally rather informal. Expect to be interrupted while you are speaking or making a presentation. Avoid confrontations. Do not appear frustrated with your Brazilian colleagues.
4 Dress Etiquette Brazilians pride themselves on dressing well. Men should wear conservative, dark colored business suits. Three-piece suits typically indicate that someone is an executive. Women should wear suits or dresses that are elegant and feminine with good quality accessories. Manicures are expected. Symbolism Most Brazilians would agree that the symbols that best characterize their nation are the exuberant revelry of the pre-Lenten celebration of carnival and the wildly popular sport of soccer, called futebol in Brazil. Carnival is a four-day extravaganza marked by parades of costumed dancers and musicians, formal balls, street dancing, and musical contests, a truly national party during which Brazilians briefly forget what they call the "hard realities of life." Carnival is symbolic of the national ethos because it plays to many of the dualities in Brazilian life: wealth and poverty, African and European, female and male. The key to carnival's popularity is its break with and reversal of the everyday reality. Through the use of costume—notably called fantasia in Portuguese—anyone can become anybody at carnival time. Class hierarchies based on wealth and power are briefly set aside, poverty is forgotten, men may dress as women, leisure supplants work, and the disparate components of Brazilian society blend in a dizzying blaze of color and music. Brazilians are passionate about soccer and are rated among the best players of the sport in the world. Every four years when the world's best teams vie for the World Cup championship, Brazil virtually shuts down as the nation's collective attention turns to the action on the playing field. And when Brazil wins the World Cup—as it has on more occasions than any other country —the delirium of the populace is palpable. Brazilian flags are hoisted aloft, everyone wears
5 green and yellow (the national colors), and thousands of Brazilians, seemingly intoxicated with pride, take to the streets in revelry. Brazil has a large acculturation of other ethnic groups. The country’s tourism well developed, has beautiful beaches, and famous carnivals. Lots of tourists choose Brazil to have fun. Therefore tourism has an important and large placement in country’s economy. To successes in Brazil, Krispy Kreme has to tailor its product to satisfy the needs and wants of a Brazilian people. Breakfast items consist of many fruits and sweets Age structure: 0-14 years: 26.7% (male 27,092,880/female 26,062,244) 15-64 years: 66.8% (male 65,804,108/female 67,047,725) 65 years and over: 6.4% (male 5,374,230/female 7,358,082) (2009 est.) Population growth rate: 1.199% (2009 est.) Ethnic groups: White 53.7%, mulatto (mixed white and black) 38.5%, black 6.2%, other (includes Japanese, Arab, Amerindian) 0.9%, unspecified 0.7% (2000 census) Languages: Portuguese (official and most widely spoken language); Less common languages include Spanish (border areas and schools), German, Italian, Japanese, English, and a large number of minor Amerindian languages With both the area and population each being the fifth largest in the world, Brazil also happens to be the largest country in South America. It borders every country on the continent except for Chile and Ecuador. Officially known as the Federative Republic of Brazil, the country is also the only Portuguese speaking country in South America. The country’s flag is
6 “green with a large yellow diamond in the center bearing a blue celestial globe with 27 white five-pointed stars (one for each state and the Federal District) arranged in the same pattern as the night sky over Brazil: the globe has a white equatorial band with the motto ORDEM E PROGRESSO (Order and Progress).” Although the country can be considered multi-cultural, ethnic groups are primarily made up of white groups (53.7%) and mixed black and white groups (38.5%). From a religious perspective, almost 74% of the country is Roman Catholic. Once ruled by Portugal, Brazil gained its independence on September 7th, 1822. Brazilians tend to get close to each other when a conversation is taking place, no matter what the relationship is between them. Between 30 and 40 cm is an average distance, and this is also true in other situations, such as standing in line, walking in a crowded place, or browsing in a shop. Over the past fifteen years Brazil has made remarkable transformations from economic isolation to global integration to becoming a leading market. Some high points in the development include the privatization program started in 1990, extensive import tariff reform during the early 1990s, external debt re-negotiation completed in 1994, and the termination of the Asuncion treaty (which allowed for more exclusive trade in South America). Then, Mercosur began on January 1, 1995. Control of inflation was perhaps the single most important development contributing to Brazil’s recent economic and political stabilization. By containing inflation and promoting fiscal reform, the Brazilian Government inspired domestic and foreign investor confidence and spurred internal consumption and foreign investment levels. Extensive legal reforms followed to help Brazil’s legal framework keep pace with rapidly changing economic realities, particularly enhancing foreign investment opportunities.
7 This paper will explore the unique historical, cultural and economic aspects of Brazil that have contributed to its maturity and have made the country a positive foreign investment in today’s competitive global market. Brazil’s current GDP growth is mainly comprised of expanding labor force, real wages growth, and credit expansion. According to the CIA Fact book, GDP of Brazil is ranked 10th in the world and 1st in the entire South American continent. For the past three years, the GDP is on the rise as can be seen in Table 1. This is an excellent indicator for the chosen country. The real growth rate also rose till 2007 but was negatively affected by global recession and the rate declined sharply. From the beginning of this year, Brazil started recovering from the recession and growth rates are again on the rise. Table 1: Economic Indicators of Brazil. Year GDP(PPP) 2009 US dollars $2.024 trillion $2.022 trillion $1.924 trillion 10th GDP (Real Growth Rate) 0.1% 5.1% 6.1% 106th GDP /capita (PPP) 2009 US dollars $10,200 $10,300 $9,900 103th
2009 2008 2007 Country Comparison to the world
The currency of Brazil has gone through changes several times because of very high inflation during the 1980s and early 1990s. Currently, Brazil’s currency is Real. It can be exchanged for about half a dollar with present exchange rates (1 Brazil real = 0.54 USD, as on 02/10/10). Due to inflow of foreign investments, the Real will appreciate marginally during 2010 and weaken slightly in 2011 against USD.
8 Entry and other barriers Entry barriers for businesses wanting to conduct business must be identified to effectively screen and analyze the political and legal forces within Brazil. Entry barriers into Brazil include the devaluation of the REAL, government control of certain sectors of the economy such as the telecommunications and electrical energy sectors, and the lack of competition. Other barriers such as: unemployment, political violence and crime also exist. In 1999 there was a devaluation of the REAL brought on by deficits in the budget, which created problems within the Mercosur and the trading block for Brazil. Brazil then introduced emergency taxes to cut the national debt, which exceeded 50% of the GDP. Brazil was then on its way to recovery repaying a $41 billion dollar IMF loan and the debt began to decrease. In 2001 however, Argentina defaulted on its international debt, which led investors to feel uncertain about Brazil’s economy. A new US backed IMF loan of $30 billion dollars came as a result in 2002. President Lula in 2003, facing issues such as poverty, inflation, and unemployment has had to pull money from the Brazils social security program. (Countrywatch.com, 2003) Each US dollar is worth 3 Brazilian REAL, and companies contemplating entry into Brazil may see this as a barrier. The entry strategy must focus long-range future profits as opposed to immediate profits. In 2006, 36million domestic tourists travelled in their country spending approximately US$ 5 Billion, while 6million foreign visitors have spent the same amount of money (see appendix 10). UNWTO has been forecasting that by the year 2020 international arrivals worldwide should exceed 1, 6 billion, while out that 1, 2 billion should be intraregional and the rest 378 million will consist out of long-haul travelers Marketing Mix
9 An initial plan will start with the World Cup and Olympics, to provide superior quality and service at a lower cost to local consumers and sport spectators. This will enable the company to introduce its products locally with spectators acceptance, and to have the ability to extend its offerings and products past the games (i.e. past 2016) and keep a continued partnership with the country’s’ local companies, whether they are private or be other governments. Product To serve the demand of Brazils market, Krispy Kreme uses original donuts recipe used in United States. Franchising method is a strategy oriented to investors with working capitals. Franchising Joint-ventures is a method to establish a brand image Price Exchange rate can impose a financial risk on Krispy Kreme. With a poorly taxation structures system, the Brazilian tax system is among the most complex and burdensome in the world. Accountants estimate it would take 2,600 hours for a firm in Rio de Janeiro to comply with the tax system. Rio de Janeiro even holds the world record for the highest taxes. Brazil has comprehensive labor legislation, primarily in the Consolidated Labor Law (CLT), which governs most occupations. Labor rights and benefits are clear in principle, but compliance has presented increasing complications over time. Wages are freely negotiable and widely set by annual collective agreements. Labor Force and related Labor Laws In addition to basic pay, employees have a mandatory entitlement to substantial paid benefits, the most significant of which are: Doing business in Brazil comes with a lot of overhead, the need for patience, the ability to grow relationships and the potential for growth. Brazil is a country that is just coming into its own on the global stage. For a number of years the country was in political turmoil with military
10 coups and experienced constant political turnover. Recently, in 1988 the country ratified a constitution and has had a stable federative republic since that time. The Government has worked to grow and strengthen the Brazilian economy and make it easier for foreign businesses to invest and conduct business in Brazil. Conducting business in Brazil is hampered by an excessive governmental oversight. Brazil is ranked 119 out of 155 countries on the ease of doing business by the International Finance Corporation. Some reasons for this include the lack of oversight of the necessary steps and cost for single regulation, multiple municipals require separate individual approvals, and the time it takes to obtain an operational license or necessary approval. Brazil is a South American country that places an emphasis on relationships and has a fluid sense of time. Because of this, it is important to take the time to establish relationships well in advance of embarking on a business partnership. Establishing the right relationships can help ease the bureaucratic process involved in many aspects of establishing a business in Brazil and deals can often be struck with no more than a hand shake. The majority of Brazil’s GDP is comprised of the services sector (mail, telecommunications, banking, energy, commerce, and computing). The two major components of the sector are the banking and energy components. During the early 1990s, the banking sector accounted for as much as 16% of the nations GDP. The San Paulo and Rio de Janeiro stock exchanges are undergoing a consolidation and the reinsurance sector is about to be privatized. Economy Characterized by large and well-developed agricultural, mining, manufacturing, and service sectors, Brazil’s economy outweighs that of all other South American countries and Brazil is expanding its presence.
11 In Brazil, grocery stores and pastry shops sell ball-shaped doughnuts popularly known as "sonhos" (lit. dreams). The dessert was brought to Brazil by Portuguese colonizers that had contact with Dutch and German traders. They are the equivalent of nowadays "bolas de Berlim" (lit. Berlin's balls) in Portugal, but the traditional Portuguese yellow cream was substituted by local dairy and fruit products. They are made of a special type of bread filled with "goiabada" (guava jelly) or milk cream, and covered by white sugar.
References Harrison, Selina. “Infrastructure Investment in Brazil.” Financier Worldwide. January 2010. Kerin, R., Hartley, S., & Rudelius, W. (2007). Marketing: The core (2nd ed.). NY: McGraw-HillIrwin Peter, J. P., & Donnelly, J. H., Jr. (2007). Marketing management: Knowledge and skills. (8th ed). New York: McGraw-Hill/ Irwin. CIA Fact book
12 https://www.cia.gov/library/publications/the-world-factbook/geos/br.html http://en.wikipedia.org/wiki/Politics_of_Brazil http://en.wikipedia.org/wiki/Luiz_In%C3%A1cio_Lula_da_Silva http://www.mongabay.com/brazil.html http://www.financierworldwide.com/article.php?id=5678&page=2 http://www.tesouro.fazenda.gov.br/english/hp/downloads/Nota_Investment_Grade.pdf http://www.edc.ca/promotions/english/docs/FINANCING_INVESTMENTS_IN_BRAZIL__Ciao_Azevedo.pdf http://www.articlesbase.com/international-business-articles/communication-in-a-global-market1922330.html