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Running Head: FOREIGN MARKET ANALYSIS

Foreign Market Analysis

Assessment #2

Frank Beltre

Strayer University
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Foreign Market Analysis

Background

The global marketplace is exponentially bigger than it was two decades ago. The

proliferation of new communication technologies - read Internet- has open new ways of how to

conduct business in a more streamlined and efficient form. One of the main aspects in deciding

to participate in the global marketplace is to research the different variables that influence

commerce in the targeted country or countries, and based on the lessons learned, decide where,

why, how, and when to go there.

As a way to increase revenue while at the same time projecting our services and

capabilities in the global market for medical devices, QDC Biomedical will embark in the

offering of our portfolio of medical equipment solutions to the Latin America market, with initial

emphasis in Brazil. In order to obtain a better understanding of our opportunities to do business

in Brazil, we have conducted research regarding some of the factors that affect the ability to do

business in a foreign country. The intent of this analysis is to peruse our company’s ability to

penetrate and successfully compete in the Brazilian economic arena.

Economic Environment

Reform initiatives put in place by Brazil’s president Lula Da Silva have help in opening

markets for foreign investments in the country.

In terms of market openness, Brazil is a frontrunner in Latin America and a major

recipient of foreign capital. Preliminary figures published by the United Nations

Conference on Trade and Development in January showed that the country received

twice as much foreign direct investment as India in 2007, and its capital inflows grew at a

faster rate than that of Russia or China ( (Business, 2009, p.13).

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Although projections made by economic pundits for 2009 were scaled down due to the

global crisis, the outlook for Brazilian economy is stronger than for most of the world economic

powers. In May 1, 2008 Brazil joined the club of Investment-Grade Economies, which represents

a clear improvement of the country’s resonant economic policies.

The Brazilian economy is barely recognizable to those who knew it more than five years

ago. In those days it was plagued by mountains of debt and boom-and-bust cycles. Now

everything is different…Brazil's gross domestic product increased 4.5%, to $1.3 trillion,

in 2007, and grew by 5.8% in the first quarter of 2008. The country's benchmark stock

index, the Bovespa, is up 5.9% thus far in 2008” (Bogoslaw, 2008, p.1)

Political Environment

President Lula’s administration is steady at keeping open market-friendly policies. New

election regulations prevent those small parties that do not meet the required voter registration

numbers from obtaining federal contributions for election campaigns. Although unpopular, this

is a very important step to prevent the fragmentation of the political union among Brazilian

citizens. While Lula will not be running in the next elections, it is expected for President Lula’s

party to win the next elections in 2010.

Regulatory Environment

The privatization and deregulation born out the sweeping reforms established by

President Lula helped with the removal of several barries of entries for multinational companies,

some of which (Purina, Nokia, GM, etc.) have already establish bases of operations, inclusive

headquarters in Brazil. President Lula’s economic policies are positive for trading and

investments activities. Even some exports goods are exempt from tariffs, and others are exempt

from of taxes.
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According to the CIA website:

Brazil's economy outweighs that of all other South American countries and Brazil is

expanding its presence in world markets…Brazil improved its debt profile in 2006 by

shifting its debt burden toward real denominated and domestically held instruments. Lula

Da Silva restated his commitment to fiscal responsibility by maintaining the country's

primary surplus during the 2006 election. Following his second inauguration in October

of that year, Lula Da Silva announced a package of further economic reforms to reduce

taxes and increase investment in infrastructure (Central Intelligence Agency, 2008).

Technological Environment

Latin America is one of the fastest growing markets in th global medical device industry.

The Brazilian medical market has seen a continuous growth in the last decade. In the last years,

a considerable migration of medical students to universities abroad, are coming back to their

original native cities in Brazil after they complete their studies. This is contributing to an increse

demand for the newest in medical technology equipment. It is estimated that the brazilian

medical market is valued at US$2.6 billion. The increase in demand is being shoulder by the

appreciation of the local currency against the dollar, which in turn, encourages hospital to

modernize their infrastructure and operations, expecially private facilities; this offers positive

inputs, and makes more attractive the market opportunities in a country.

Social/Cultural Environment

Based on personal experience while living in Brazil from 1989-1993, Brazilian culture

and habits have aligned more with European ones than with the rest of Latin America. Brazil

was initially colonized and owned by Portugal. It declared its independence on September 7,
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1822 and it became a constitutional monarchy. Because of being surrounded by Spanish

speaking countries, the majority of the Brazilian population that resides on the borders with its

neighbors speaks Spanish. Crime levels are concentrated in the more populated cities of the

countries. Cities like Sao Paulo, Rio de Janeiro and Belo Horizonte have the highest crime rates

in the country. The main cause of crime in these cities is due to drug trafficking. Prior to the

mid 1980s, Brazilians vacationed and made most of their overseas purchases in European

countries. Immigrants from Brazil living in United States have helped in the curving of this

behavior towards North America.

Economic Strengths

The current government fiscal and monetary initiatives have provided the confidence

necessary for the economy to grow. The newly rating as an Investment-Grade Economy will

instill foreign investors to inject capital inflows into the Brazilian economy for the next few

years. All the past and future infrastructure work done, will create less costly channels of

distribution, and create more accessible markets. The positive political outlook is beneficial for

foreign investments and trade agreements with other countries.

Economic Weakness

The most eminent threat, not only to Brazil, but to the rest of developing economies

around the world, is the weakening global economy. Exports are one of the key sustainers of the

country’s economy. With the decrease in the demands of goods, Brazil economic growth could

stall along with the rest of the world. The stalling or declining economy would more likely

affect our ability to successfully enter the market.

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Market Entry Method

Due to import regulations of medical devices in Brazil, all sales and service are

channeled through distributors already established in the country. Our method of entry will have

to be indirect exporting. Affiliations with one or more distributors in the local market will be

necessary for market entry. The advantages of partnering with a distributor are that they already

know the local laws and regulations related to the industry; they have many years of doing

business in their region and know the practical way of doing things. They can also assist with

breaking the barriers of entry for QDC Biomedical. There are also disadvantages while working

with distributors: distributors tend not to follow procedures for repairs according to the device

specifications, they take shortcuts to solve technical problems. Depending on the business

relationship with the distributor and the Brazilian state’s laws, interaction with between QDC

Biomedical and the end user has to be mediated by the distributor.

Conclusions

Prior experiences gained by living and doing business in Brazil, along with the

developing economy and political stability that the country currently enjoys, provide a positive

outlook regarding market opportunities for QDC Biomedical. Our goal is to position our

company with the necessary resources to provide medical devices; service, planning, and

procurement solutions to hospitals through Latin America. We will start by establishing

operations in Brazil and then, the rest of the South America continent.
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References

Bogoslaw, D. (2008, June 11). Investing: Playing the Brazil Boom. Business Week , p. 1.

Business Monitor International. (2009, February 2). Brazil Business Forecast Report. Business

Monitor International , p. 13.

Central Intelligence Agency. (2008, February 5). CIA - The World Factbook - Brazil. Retrieved

February 5, 2009, from https://www.cia.gov/library/publications/the-world-

factbook/geos/br.html

Frost and Sullivan Research Service. (2004, September 29). Country Industry Forescast -

The Brazilian Healthcare Industry. Retrieved February 03, 2009, from www.frost.com:

http://www.frost.com/prod/servlet/report-brochure.pag?id=4553-01-00-00-00