Discuss about the Remittances and Economic Growth.
Craft beer has potential market all across the globe specifically in few nations such as the United States of America, Brazil, Canada and Australia etc. Craft brewers are mainly responsible for large market expansion of Craft beers. They are independent and have traditional style of making raft beers. They understand the needs of local consumers, which is why they are different to large brewers. Interestingly, many large brewers are in hunt to acquire small Craft brewers to redefine their position in the market. They have shown such interest because the demand for craft beers is high in international market. The American Craft brewers interestingly do not wish to export the beers to the international locations because they know that they would not be able fulfil the high demands for Craft beers. It is beyond their capability to meet with the demands (Murray and O'Neill 2012).
This particular assignment is on a small company Cheers based in Australia. Five business graduates of the Southern Cross University started a small business in Australia after identifying the potentiality for the concept in the country. They fetched up good success as well. However, they have been tested in recent times as the profitability of the business has been reduced considerably. They felt that it is better to switch some other potential countries such as India and Brazil, so that, they could become global and enhance the profitability of their business.
The main purpose of this assignment is to analyse the best possible selection for the Craft beer for the Cheers Company. In doing so, this assignment would first analyse the probable risks and opportunities in the target countries. Then it would recommend the best entry mode for the company.
Analysis of risk and opportunities
The expansion of the business in Brazil and India might bring some risks as well along with the probable opportunities in both the countries. The following section would cover the study on the risks and opportunities that might be available for the company in the two selected locations India and Brazil.
Culturally, Brazilians are very sound lover of beers. They learning to drink and understand the beer. They do not just drink it but they want to taste this with their different dish. Microbrewers have created such scenario in the country, which has also forced large brewers to think on their beer making philosophy. In the last two decades, Brazilians have developed themselves not only as a drinker but as a learner as well. The availability of Craft beer is limited, which has also produced an enormous prospect for the product in Brazil. Furthermore, they are learning to understand what they drink, which is another positive aspect that might produce a potential market for the Craft beers. One of the catchiest things about the Brazilians is they use traditional way of manufacturing the Craft beers. It is expensive to have some necessary imported ingredients required while manufacturing the Craft beers. It gives lot of place to accommodate and operate locally. Additionally, Brazilians are fond of beers, which they also reflect through beer festivals. Through this festival, they show their cultural addiction with the beers. They also have a significant Craft beer festival held in Blumenau on yearly basis (Piacentini et al. 2017).
The legal proceedings have also now become favourable for Craft beers in Brazil. This can be easily understood from the fact that using alcohol while during a football match as banned in Brazil. The ban had been lifted in the year 2012 by the local government of Brazil, which means that they have seen some prospects in the beer business. Nevertheless, it is a potential business in many countries, which is hugely influencing the economy of that particular country. This change just shows that this might be an approach towards economic betterment. The ban was imposed after witnessing some cases of violence during the world cup matches. It was just a move to put some limitation on such activities. However, with the effect of FIFA, the local government of the country had lifted such a prolonged ban over the use of alcohol while during the football matches. According to FIFA, world cup without beer is unimaginable. Brazilians have high passion for Football matches, which is why the lifting of ban would open up a huge space to numerous beer manufacturers (Caetano, Pinsky and Laranjeira 2012).
The local government regulations have been in an unregulated form, which can be challenging for a new business in this country. Brazil is the third largest market in the world for beer. This simply tells the fact that beer is highly consumed in Brazil. However, it is also interesting to analyse why the local government of Brazil is so strict with the consumption of beer. Some of the reasons have forced the local government to thing that way. Those reasons are rising accident cases because of drunk drivers, increased consumer’s aggressiveness etc. This is because of such reason the local government of Brazil has always tried to discourage the consumption of beer in the country. They have done so by imposing high taxes on the products and restricting the advertisement of beer. Interestingly, this had occurred with a country, which is one of the largest markets for advertising campaigns (Laranjeira and Mitsuhiro 2012).
Politics is a threat for potential investment in this country. Despite the facts that it is largest exporter of orange juice, coffee, iron ore, sugar, beef and second largest exporter of soybean, the country has become a challenging place for a potential investment. The dirty politics in the country has hampered the investments in big numbers. According to a survey, the Brazilian government’s debt is set to increase, which would produce an uncontrollable situation for the government. In such situation, the Brazil government would leave with very few options to recover from the debts. One of such solutions would be to impose a high tax on business and goods. This means the investments in such circumstances might hamper the gross profitability. Nevertheless, this would be a point of concern for a new foreign business in the country (Forbes.com 2017).
Brazil is one of the biggest markets for beer. They are the third largest markets for beer in the entire world. People living in the country are passionate about beer, which they also show in few beer related cultural festivals in the country. The passion for beer in the country and the lifting of bans on beer consumption has collectively produced a supportive environment for a new beer venture in the country (Cabras, Higgins and Preece 2016).
Real GDP has declined in comparison to 2013 status; however, the inflation has reduced, which would provide a better platform to recover the investment. Trade barriers are still very high; however, some modifications in the government rules might welcome a significant growth for the future business. They are also giving efforts to reduce the strictness of the administrative power. They are also making huge investments in improving the infrastructure, which is a good sign for the foreign investors. Additionally, they are trying to develop the country as a more open economy (Oecd.org 2017).
Culturally, Indians are now getting used to beer consumption. They are now learning the ways to understand the different taste of beers. One thing is very interesting in this country, which is a creative bonding between the beer companies and the home brewers. This is such a collaboration, which the local brewers have never imagined. This would provide an exploring capability to the Craft brewers. People living in bigger cities in India have now put demand on different taste of beer. They are ready to taste the different taste, which is a very good sign for someone that has unique range of Craft beer flavours. Culturally, the country has opened up its arms for the Craft beers (thehindu.com 2017).
Legally, India is one of the most unfavourable countries in the world. Some places have permission for allowing the consumption of beers while some do not. The same issue persist even with the metropolitan cities. A weird state government rule has made such thing to happen in this country. Literally, the local government of the country has no open thoughts on the consumption of beers. Most people still have beliefs that it should never be consumed. This is one of such reasons, which has restricted the openness of the local government (Roever 2016).
The government policies in India can be divided into two sections such as central policies and state policies. State politics have interestingly high control on every proceeding in the state areas. One of such examples is of a ban, which was imposed on the alcohol consumption in one of its state Bihar. The entire activity does support a fact that central government of India do not have a direct control on things, which have been initiated by the state government. However, the central government of India literally support such businesses, which are potential options for an improved economy (Grant 2013).
One of the challenging issues is the imposing of high taxes on beer and other alcoholic items, which makes this much costlier than most other parts of world. Currency hit the lowest ever mark in the year 2013 when it reached a record low. The value of one dollar then reached to the lowest ever of 68.865. The risk of currency is of minimal degree, which is good for the investors (Raj 2014).
It is still an expanding market for beer. People have thronged to the concept. The Millennials have comparatively higher addiction to the beer. They search for reason to have a mini party, which would include beer as a compulsory thing. Foreign investors would find large areas to accommodate as it is still under developing zones.
India is one of the fastest growing economies in the world. In GDP growth, it is the world’s sixth largest country. On the other hand, in purchasing power parity (PPP), it is the world’s third largest country. The growing economy of the country has already attracted many giants such as Walmart. The forecast has been even brighter for the country as it has been assumed that by the end of 2050 both China and India would become bigger economic power. Exchange behaviour in the country is quite stable. The inflation rate in India is on a low side, which is good for the investors to regain their investments. An increased capital in banks is another good sign for the investors, as this would help them get debts. Foreign investors can recover their investment at a comparatively easier rate (Siddique, Selvanathan and Selvanathan 2012).
Trade between India and Australia
A free trade act (FTA) is already in progress in between India and Australia. Australian government has shown their interest in having a free trade relationship with India. The rising potentiality of the country has attracted many countries. Australia is not any different country (Williams 2013).
Politically Brazil would be most feasible as India is politically very unstable. Additionally, Craft brewing is still a growing concept for the country, which means it has no established rules & policies of the local government in support of the business. One of the best examples is of Bihar where alcoholism has been recently banned. Investment recovery is in the favour of India. However, the recent GST imposed on alcoholic products might not encourage people for Craft beers. Despite the second largest population in the world, people in this country would majorly prefer to stick with the taste they had with the existing range of beers (Majaro 2013).
Recommended entry mode
For medium sized companies as such of Cheers, it is highly recommended that it work with the local distributors in the country. Partnership working in Brazil is of high values to the success. There are ample of benefits of working in collaboration of local distributors. They are an intermediary link between the manufacturers and the end user. Nevertheless, they have better understanding of the changing customer’s behaviour, which is very important for the manufacturers as they would be able to respond in real time. This is also very necessary for raising the customer service standard. Following are some advantages that a collaborative work with distributors can produce (Gupta and Singh 2015):
- The primary function of a distributor is to reach the product to the right hand. This is extremely important for Cheers, as their hired distributors would help them reach to their target market.
- They can easily help in promoting the products by sending it to the targeted retailers
- They can also provide customer service support to the customers. Some distributors do also opt to have customer service facility where they provide customers the line of contact to solve their query. It depends entirely on the company whether it want to keep the customer service support with it or it allows the distributors for the same.
- One of the most effective works, which the distributors do, is the market research. They can have data on market behaviour even more than the company can. They are closer to the customers. Their market research is helpful for the company.
- Some distributors do also finance for attracting the customers. Those who are financially stronger can even pay for customers for offering them attractive rates for the products. This is another important move, which would potentially improve the sales performance. Moreover, this is very necessary for a new venture that it mints huge sales.
Interestingly, distributors are connective links between the customers and the companies. Manufacturers need some accurate data on the customer’s behaviour. This is because it helps to understand the actual requirement of the target customer. This reduces the flaws in manufacturing and helps to enhance the customer service standard. An enhanced customer service is a valuable asset for the manufacturers. This helps in gaining good revenues, which is necessary for a business in new market.
Craft beer is a potential option to start with. Brazil on the other hand is a potential place for the Craft business. The cultural awareness of Brazilians for beer would be an advantageous option for the Cheers Company. Brazil is one of the emerging economies in the world, which means it would provide a powerful purchasing capability to its people. The local government rules and policies have also become favourable to some extent. Keeping apart the little negativity such as the trade barriers, Brazil would be the potential market for the Cheers Company.
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