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Analysis of Risks and Opportunities

Discuss about the Impact of Emerging Markets on Marketing.

Five business graduates from Southern Cross University analyzed the Australian market and as per their research, they started the business of "CHEERS" beer. They started the business over the Gold Coast as this is very famous place across the local public as well as for tourists too. This place is covered with sandy beaches, theme parks are also situated i.e. dream world, sea world, etc. These people started their business in the year 2010 with the initial capital of $500,000 under which each partners' share was equal. At that time, craft beer was newly launched in the Australia and taking that advantage they set up their start up business by delivering three varieties of craft beer. Their start up business was growing at rapid rate and by the end of the year 2015-2016, turnover of the organization was reached at the level of $30 million and the number of employees was also increased from 8to 28. This was the very big achievement for business graduates but after 2015-2016 financial years, organization's growth didn't increase and it remains constant. To review this, they planned to expand their business in the international market and while reviewing the international market, management of the organization selected India and Brazil as their favorite countries to expand their business. They asked their International Operations Manager which was newly appointed in the CHEERS organization to perform risk assessment and opportunities analysis so that appropriate decision could be taken in relevance with the expansion of the business. 

The risk is the factor which reduces the business' ability to perform certain activities or it increases the chances of losses through performing those activities. Under this scenario, CHEERS organizations’ management has decided to review the market risks and opportunities present in the Indian and Brazilian market. Analysis of potential risk factors will help the organization to reduce the effect of risks factors. Apart from analyzing and reviewing, controlling risks factors should also be determined. Acceptance of risk, transfer of risk and ignorance of the risk are three factors which are also defined as the risk controlling or risk bearing factors. These factors help the business after its commencement (Successive, et. al., 2014).

Indian culture and Brazilian culture are very distinctive from each other. In India, traditionally beer was manufactured from rice and millet but then European beer was introduced in the 18th century and beer is not much famous as the alcoholic drink there in relevance with whiskey. Brazil is known for its huge consumption of beer. It is the third largest beer consuming country across the globe. Whereas, in 2016 both country's beer consumption was analyzed on the basis of per capita consumption of 57 liters of India and 61 liters for Brazil. Indian market is growing rapidly in terms of beer consumption. As per a recent survey report, it is found that beer consumption in Indian market is growing at a growth of 7.5% in next five years except for various hurdles (Sheth, 2011).

Threats of New Entrants

Indian market is full of risk for international brands because their consumption of costly beer is less in respect of cheap beer. Certain obstacles that could be faced by the CHEERS organization is restrictions on licensing, ban on advertising and on promoting the alcoholic products in the whole country. Apart from these risks, local tax rate over alcoholic and tobacco product are huge over there. While comparing Indian breweries' market risks with Brazilian market's risk, it is found that Brazilian market does not have much scope for outside brands in breweries field. Standard Lager beers are very popular over there and this brand occupies approximately 98% of market share. Brazil is also defined as the unregulated alcohol market as there many accidents are recorded in drink and drive basis. A lot of times, policies have been developed in Brazil in relevance with drinking programs but every time, all the methods, policies, techniques adopted resulted in the failure (Bharwani & Mathews, 2012).

The threat of New Entrants: Indian brewery market has various beer brands including international brands and local brands. In Brazilian brewery market, few brands are available and amongst them, Standard Lager beer is very popular and due to this, chances for any other new brand in Brazil are quite low. Chances of entering into Indian brewery market are quite high in respect of this factor (Enderwick, 2012).

The threat of Substitutes: Substitutes for beers are whiskey and all other alcoholic products. Irrespective of any other country, substitutes are available for beer. Consumption of whiskey and other alcoholic drinks are much high in respect of beer in an Indian market. This is because whiskey sounds the bit cheaper than beer. In Brazil, beer is more consumed in respect of any other alcoholic drink. As per this analysis, Brazilian market should be selected for expansion of CHEERS organization’s business (Laïdi, 2014).

Bargaining power of customers: This option is available to consumers when a lot of choices are available in front of consumers. In respect of Indian market, there are many brands are available who are producing ad delivering beer and they all selling their products at different rates. Hence, a consumer has the choice of adopting one of them as per their pocket power. In Brazil, this option is not available to the consumer because 98% of market share is covered by only one beer brand i.e. Standard Lager beer (Flynn, 2011).

Bargaining power of Suppliers: This is the same situation as bargaining powers with consumers; the basic difference is, in this scenario, powers are available with suppliers. This is effective when a number of suppliers are less or they only supplier is selling the raw material required for producing the final product. In the scenario for brewery market, alcohol is required which is available from the government only and for that appropriate license is required. Hence, no supplier can implement bargaining strategies (Somdaka, 2014).

Industrial Rivalry: These are risk factors involved in every type of industry and in every country. Competition, innovation, promotional expenses, etc. are some of the techniques which are involved in this scenario. As in Indian market, there are large numbers of producers and distributors are available for beer. They all use the different type of promotional strategies and due to ban for advertising alcoholic products in India, companies’ use other products manufactured under the same name to promote beers. In Brazil, there are no limitations on the advertisement of alcoholic drinks but tough competition may be faced by the CHEERS organization in Brazil.

Threat of Substitutes


Apart from these risks factors, CHEERS organization has some opportunities strengths, weaknesses and threats too which need to be analyzed separately as per the market conditions. Below is the SWOT analysis of CHEERS organization:

Strengths

·       CHEERS organization has achieved targets and goals set up by their management in the very short period of time.

·       CHEERS beer is the type of craft beer and they are dealing with three types of beers.

·       This type of beer is liked and demanded by local as well as tourists (Seidenstricker, Linder & Schmitz, 2014).

·       By the end of 2015, organization achieves the turnover of $30 million in just five years.

Weaknesses

·       Lack of international market’s experience.

·       Lack of knowledge of demand of craft beer in other parts of the globe.

·       Lack of capital which does not allows the organization to promote its products aggressively (Kim & Mauborgne, 2014).

Opportunities

·       CHEERS organization has the opportunity to establish its position in the aggressive type competition place of the Indian market.

·       The Brazilian market is more challenging because there is only one beer brand, which occupies biggest market share.

·       Apart from being the competitive and challenging market, a demand of CHEERS' beer is very high in various parts of the globe and it will gain its position soon through promotion and advertisement techniques (Haimes, 2015).

Threats

·       In the Indian market, a ban on promoting alcoholic products is the biggest threat.

·       In Brazilian market, market share is covered by only one beer brand i.e. Standard Lager (Binod, et. al., 2013).

The appropriate country for expansion of the CHEERS organization’s business would be Brazilian brewery market. The scope for CHEERS has much more there because there is only one beer brand exists since a very long period. Due to this, consumers are also seeking for a change in the taste. They are looking for cheaper prices because Standard Lager beer has adopted the policy of monopoly market due to non-presence of any other organization in the industry (Wheelen & Wheelen, 2011).

It is observed from the above discussion that both the destinations are full of risk factors as well as of opportunities. Whereas, Indian market, various beer brands available, In Brazil, only one beer brand is available and other brands are not able to develop their distinctive identity. From the perception of CHEERS organization which is looking for market expansion, Brazilian market will be found effective. It is due to chances of setting up their distinctive image in the brewery market is much more in comparison to the Indian market where already various brands are involved in this industry. Irrespective of holding whole market share by Standard Lager beer in the Brazilian market, CHEERS have the opportunity to set up their position because aggressive competition will not be present (Holden, 2011).

Before developing the proposed market entry strategy for the CHEERS beers in the Brazilian brewery market, certain rules and regulations need to determine. The most crucial policies are legal, political, competitors’ information, trading barriers, etc. before entering into a new market and especially before entering into an international market for selling alcoholic products, various requirements of the host country needs to be fulfilled. CHEERS beers need to submit an application to the government of the Brazil with all documents including a budget of the organization for entering into the Brazilian brewery market in respect to expand their business and to achieve certain set goals and objectives. As they are dealing in the alcoholic drinks i.e. beer, hence; various types of formalities need to fulfilled such as taking the license for selling alcoholic drinks, etc. All these formalities need to be fulfilled in respect of selling the products in the international market (Bourke, et. al., 2012). These formalities, rules and other procedures consist the one method for entering the international market for trading activities. 

After getting the permit of entry as well as the permit for performing trading activities in the Brazilian brewery market, CHEERS organization needs to analyze the market research activity in relevance with reviewing the adequate and proposed entry in the new marketing conditions. Brasilia is the capital of the country and this will be the adequate place from which CHEERS organization could take the entry for the purpose of expansion and growth in Brazil. Brasilia is the state where consumption of beer is much high in comparison with the other states of the Brazil. CHEERS organization needs to adopt certain unique methods for promoting their beer for developing an effective goodwill in the new market. Apart from this, offers could also be given to the customers such as by reducing prices of their products by a certain rate which does not affect the profitability of the organization (Saad?Filho, 2015).

Conclusion

Under this report, analysis of risks factors and opportunities available in the Indian and Brazilian market were discussed for expanding the CHEERS organization’s business. Prior to the expansion of the organization management realizes that for achieving higher growth, expansion of the organization will be required. Hence, expansion was selected in the Brazilian brewery market for achieving the desired goals and objectives of the organization. In evaluating the adequate market amongst the India and the Brazil, Porter’s five forces and SWOT analysis was conducted to select the adequate destination for achieving to the next level of the growth as well as for the expansion of the organization.

References

Bharwani, S. & Mathews, D., 2012, “Risk identification and analysis in the hospitality industry: Practitioners' perspectives from India”, Worldwide Hospitality and Tourism Themes, 4(5), pp.410-427.

Binod, P., Palkhiwala, P., Gaikaiwari, R., Nampoothiri, K.M., Duggal, A., Dey, K. & Pandey, A., 2013, “Industrial Enzymes-Present status and future perspectives for India”.

Bourke, L., Humphreys, J.S., Wakerman, J. & Taylor, J., 2012, “Understanding rural and remote health: a framework for analysis in Australia”, Health & Place, 18(3), pp.496-503.

Enderwick, P., 2012, “Routledge”, Understanding emerging markets: China and India.

Flynn, M., 2011, “Corporate power and state resistance: Brazil’s use of TRIPS flexibilities for its National AIDS Program”, Intellectual Property, Pharmaceuticals and Public Health: Access to Drugs in Developing Countries, pp.149-177.

Haimes, Y.Y., 2015, “John Wiley & Sons”, Risk modeling, assessment, and management.

Holden, S.S., 2011, “Three cheers for new beers: Marketing insights from the birth of boutique brewing in Australia”.

Kim, W.C. & Mauborgne, R.A., 2014, “Harvard business review Press”, Blue ocean strategy, expanded edition: How to create uncontested market space and make the competition irrelevant.

Laïdi, Z., 2014, “Towards a post-hegemonic world: The multipolar threat to the multilateral order”, International Politics, 51(3), pp.350-365.

Saad?Filho, A., 2015, “Social policy for neoliberalism: the Bolsa Família programme in Brazil”, Development and Change, 46(6), pp.1227-1252.

Seidenstricker, S., Linder, C. & Schmitz, M., 2014, “Diversification in Emergent Markets: Possibility for Transferring Technological Core Competencies”, South Asian Journal of Business and Management Cases, 3(2), pp.187-194.

Sheth, J.N., 2011, “Impact of emerging markets on marketing: Rethinking existing perspectives and practices”, Journal of Marketing, 75(4), pp.166-182.

Somdaka, M.M., 2014, “Doctoral dissertation, University of Cape Town”, Motivating factors behind mergers and acquisitions in emerging markets: analysis of activities in Brazil, South Africa and Russia

Successive, U.K., Collin, J., Johnson, E. & Hillexplore, S., 2014, “Government support for the alcohol industry: promoting exports, jeopardising global health?”, BMJ, 348, p.19.

Wheelen, T.L. & Hunger, J.D., 2011, “Concepts in strategic management and business policy. Pearson Education India”.

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