Lesson 9

Entry into Foreign Marketplaces

Lesson Introduction

Foreign Marketplaces

Business is truly global. More so than ever we live in a global world where international business is unavoidable and many business markets are already very dependant upon one another. Although many businesses are already deeply involved in international trade and international business, there are many other businesses that are seeking to expand into even more countries or to expand out of their home marketplace for the first time. It is important to be able to recognize how businesses go about expanding into a new marketplace and how the environmental factors of any country outside of your own can seriously affect your business. Every country has its own language, culture, history, habits, infrastructure, laws, and unique way of doing business and when entering into a foreign marketplace a company must be very aware of what they are getting themselves into. Whether the company is a global giant like Microsoft or a small, family owned company the differences that exist in a foreign marketplace must be researched and the necessary changes must be made in order to ensure the success of the company’s future operations in its new market.

In-Class Reading Exercise: Barham, John. Dell Tries to crack South America. The Financial Times, Pearson Education Limited, 2001

Dell Tries to crack South America

Dell computers, the Texas-based computer-maker that was among the pioneers of online ordering, is preparing to attack the difficult Latin American market. Soon, Dell will start making computers at a new factory in the small, southern Brazilian city of Eldorado in its first manufacturing venture in South America. With a few hours flying time of Eldorado lie four of the continent’s main metropolitan regions-Buenos Aires, Rio de Janeiro, Sao Paulo and Santiago- which generate about half the region’s wealth and where most of the computer-using populace is concentrated. Dell hopes to serve all these markets- including more distant regions in northern Brazil and the Andean countries-from Eldorado.

According to Dell’s plan, aircraft from Miami will land at a nearby international airport carrying computer components that will be sent straight to Dell’s factory. Together with parts delivered from suppliers in Brazil, they will be assembled to order, packed and delivered to consumers across the continent.

The challenge for Dell is not only to mount an effective marketing campaign to educate customers about online ordering, it must also manage a complex logistics system and deal with the problems of unreliable road and air networks. And it must operate in half a dozen volatile Latin countries, with unpredictable governments and consumers as well as well-established competitors.

Dell could not afford to ignore the South American market much longer. It currently exports computers to a few Latin American countries such as Mexico and Colombia, but has never sold to markets in Argentina or Brazil. Latin American consumers last year bought 5 million PC’s and demand is growing at 15 per cent a year. Growth is likely to remain strong for some time to come: in Brazil, the region’s largest market, only 3-4 percent of the population owns a PC.

Dell is not the first company to view South America as a single market. For a decade, Ford and Volkswagen and many other multinational companies have operated in the region’s main countries as if they formed one integrated market. That was a natural reaction to falling import tariffs and consolidation of the Mercosur customs union linking Argentina, Brazil, Paraguay, and Uruguay. However, the distances, the red tape, and the animosities between national governments often make fulfillment of this strategy difficult.

Dell decided to locate in Brazil because it is the region’s biggest market and because the government gives computer companies substantial tax incentives as part of its plan to develop local high technology industries. If Dell meets Brazilian local content criteria and attains agreed production volumes, its products are considered to be 100 percent locally made and automatically gain duty-free access to Mercosur countries.

However, there is little Dell can do about the internal transport networks in Brazil or the bureaucracy in neighboring countries. Although roads, air transport and delivery systems are tolerably efficient in south eastern Brazil and parts of Uruguay, Chile, and Argentina, Dell may still find it is struggling to co-ordinate operations and sales over a vast region.

In-Class Exercises

Exercise A: These phrases summarize the main idea of each paragraph. Match each phrase to the correct paragraph.

1) the challenge for Dell a) paragraph 1

2) reason for choosing Brazil b) paragraph 2

3) an overview of Dell’s intentions c) paragraph 3

4) reason to enter the South American market d) paragraph 4

5) how Dell’s plan will work e) paragraph 5

6) other companies’ experiences f) paragraph 6

7) problems Dell may face in Brazil and elsewhere g) paragraph 7

8) advantages of Eldorado’s location h) paragraph 8

Exercise B: Find a word or phrase in the text that has a similar meaning.

1) one of the first to do something (paragraph 1)

P_ _ _ _ _ _ _

2) buying something through the internet (paragraph 1)

O ____________ O _____________

3) business activity with some element of risk (paragraph 2)

V _________________

4) general population in a country (paragraph 2)

P _________________

5) a difficult task which needs skill and determination (paragraph 4)

C _________________

6) describes something or someone that can change quickly and suddenly (paragraph 4)

V__________________

7) lots of rules and regulations, which often seem to have no purpose (paragraph 6)

R _________________ T ________________

8) strong dislike between people or groups (paragraph 6)

A _________________

9) reach or achieve an objective (paragraph 7)

A__________________

10) trying very hard to do something under difficult conditions (paragraph 8)

S______________________

Exercise C: For each part match the words on the left to their pairs on the right.

Part A- Match these nouns as they occur together in the text.

1) tax a) venture

2) manufacturing b) incentives

3) import c) system

4) customs d) tariffs

5) production e) volumes

6) logistics f) union

Part B-Match these verbs as they occur together in the text.

1) mount a) access

2) serve b) criteria

3) generate c) a campaign

4) gain d) a market

5) meet e) wealth

Exercise D: Use an appropriate phrase from Exercise C to complete each sentence.

1) Many countries offer companies ___________ to encourage inward investment.

2) When we launch our new internet service we will need to __________ a big marketing

___________.

3) In order to be successful, the new manufacturing plant will have to reach target ______

within six months.

4) Assembling to order and delivering to each customer means managing a complex

______________.

5) When importing is expensive due to high ________ the alternative is to manufacture

locally.

6) In order to have free access to other EU market, Japanese car manufacturers in the UK

need to _________ minimum content ___________.

7) In some countries the only way to _______ well is to have local production.

8) Most countries in Europe are now a part of a ________ which allows free movement

of goods.