Introduction

Companies enter international market for varied reason, the mainly because they are finding a new market for its products or services, in order to survive or grow companies are forced to seek and exploit opportunities in new markets. There are two main reasons companies go international, the first being pro-active due to a firms profit advantage, technological advantage, economies of scales and other positive factors. The second motive an organisation would go international is the re-active which may be brought about due to overproduction, competitive pressure, declining domestic sales and all negative factors. Together with the management team we decided to trade in Brazil as it was the country with the least risk, as a director I will be discussing on the best entry strategy method suitable for Tesco’s PLC setting up a new business in Brazil’s vastly growing market.

Brazil’s risk assessment

Brazil is a country with enormous potential with many impressive advantages such as a large economy and population; it still has the largest in Latin America on both counts and huge natural resources, including iron ore, soya beans and coffee (). After an into depth research on each country in the Latin America and a detailed risk assessment, we decided to select Brazil as the best country to set up the business, we selected Brazil based on various factors firstly we compared its strengths and weaknesses over Chile and Argentina, we concluded brazil had the lowest risk and had more market potential in comparison to the other two, listed below are the factors/strengths we looked at before selecting Brazil as the country suitable for our business to set up.

  • Brazil boasts abundant and varied natural resources and a relatively diversified economy compared to Argentina were they partially depend on raw materials and Chile’s economy remains dependent on copper as its main exports.
  • Manufactured products constitute a growing proportion of production and exports.
  • The country has increased its economic and financial stability and its capacity to withstand international financial market volatility.
  • The policy of preserving fundamental macroeconomic equilibrium should stay on track.
  • Brazil's domestic market potential and favourable labour costs have tended to enhance its attractiveness to foreign investors.
  • The capacity to cope effectively with international financial market volatility has increased.

In addition to the above factors Brazil’s domestic demand remain its main economic engine growth in this sector has remained strong as of last year (2008), overall Brazil’s export performance has allowed it to maintain it’s trade and current account surpluses which has brought about a sharp reduction in its external financial needs unlike Argentina who’s foreign debts are still high. Chile’s income gap is still among the world’s highest due especially to disparities in the education system. After detailed analysis of the risk assessment on all three countries we concluded Brazil’s was the best country to set up the business, it had the least risk out of all 3 countries in the region, its strengths over looked it weaknesses and brazil also has high visibility for business to investor in due to growing demand of its domestic products.

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Tesco’s overview

Tesco PLC is a British based international grocery and general merchandising chain. Originally specialising in food and drinks when it first set up, it has since diversified into areas such as consumer electronics, financial services, clothing, telecoms, health, internet services, music downloads, car insurance, optician, petrol and many more.

 In 2005 it overtook Sainsbury to become the British largest retailer by both global sales and domestic market share with profits exceeding £2billion approximately £5.4million profit a day. (). Tesco is Europe's second largest supermarket after the French firm Carrefour, and according to Mintel market ...

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