Global Business Analysis: CHEERS Market Entry Strategies (MNG 00723)

This report, prepared for CHEERS by an International Operations Manager, presents a comprehensive analysis of the risks and opportunities associated with expanding the company's operations into the Indian and Brazilian markets. The analysis employs the PESTLE framework to evaluate the political, economic, social, technological, legal, and environmental factors influencing market entry. The report highlights the political and economic instability in Brazil, contrasting it with India's more favorable conditions, despite higher tax rates. It recommends India as the primary target market, emphasizing a pricing strategy tailored to the youth and the southern region of India. The report includes an introduction, detailed PESTLE analyses for both countries, a justification for the proposed market entry strategy, and a conclusion, alongside references and appendices. The core of the report is the comparative analysis, which supports the recommendation of India as the more viable market for CHEERS' expansion, focusing on factors such as economic growth, stable legal environment and consumer behavior.

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Running head: MNG 00723 Assessment 2
GLOBAL BUSINESS

MNG 00723 Assessment 2
Executive Summary
Being an International Operations Manager at CHEERS, it is my sole duty to deliver the
company CHEERS the exact risks and opportunities that can affect the standardization of the
company in the country India and Brazil. For analyzing the risks and opportunities for entering
the new market, I have critically used PESTLE analysis. As it has not only provide the risks and
opportunities that are associated with the countries but has also provided detailed information
about cultural and legal aspects as well as political and technological regulations. The PESTLE
analysis has helped to understand the macro environment of the country as well as Brazil. After
analyzing the risks and opportunities of both the countries, India has the most favorable market
positioning as compared to Brazil. The economic, political as well as legal factors of the country
Brazil is unstable and it is a risk to enter into this market. India might have higher tax rates but
the economic condition, as well as legal factors, are in favor of the company as well as will
flourish successfully in the market. The company must focus on its pricing strategy based on the
consumption of beers for youth generation as well as for starter southern region of India is a best
suited market place for CHEERS. Through this, the company can again gain its momentum as
well as will enhance profit margin for the company.
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Table of Contents
Executive Summary.........................................................................................................................2
Introduction......................................................................................................................................4
Analysis of risks and opportunities..................................................................................................5
The selected destination country- India...........................................................................................9
Discuss and justify the proposed entry for the chosen country.....................................................10
Conclusion.....................................................................................................................................12
References......................................................................................................................................13
Appendices....................................................................................................................................15
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Introduction
In this report, detailed information regarding the market condition of the countries India and
Brazil has been provided. Being the operational manager for the company CHEERS, a critical
analysis of the risks and opportunities that adheres while extending the business in the two
countries have been evaluated. The report contains the PESTLE analysis which provides detailed
understanding of the market position in Brazil and India. An efficient strategy for entering the
new market while considering the risks as well as opportunities factors has also been provided.
The strategy critically contains organizational goals and objectives, resource requirement, degree
of control required and risks in the target market for perfect entering in the new market. The
political, legal regulations, as well as social factors, have also been provided significantly in the
report.
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Analysis of risks and opportunities
PESTLE analysis Brazil
Political factors
The government of Brazil is unstable and there is political instability in the country at present.
The reason behind it is that the history of Brazil reflects that the situation of this country can
change overnight and during elections, the political situations worsen up even more. However,
the country is trying to achieve political stability in the country which requires a significant
amount of time. Corruption is a huge issue in this country and also opening up a brewing
company here will require maximum investment for paying government officials and
representatives (Anderson, 2010, p.219). Due to higher tax rates when the product reaches to the
customers the price of the product gradually increases which critically affects the company
tending people towards substitution at a lower price.
Economic factors
The population of this country is high and the differences between rich and poor are being
steadily removed. Due to this difference, the consumption of alcohol gradually decrease and
critically affect the brewing industry. The exports and imports of the country are adversely
affected when it comes to the dollar (Arora et al. 2013, p.331). Domestic and international
companies are treated equally. However, the tariff rates for importing are quite high as compared
to other countries like Ireland, India, and Greece. Most of the youth generation do not have the
financial potential to buy the high priced product.
Social factors
The economic inequality in this country among the population is quite high and more than 20 per
cent of the population lives under the poverty marginal line. The middle-class people are still
growing and attain low income. This will directly affect the brewing industry. However, this
country positively takes part in FIFA world cup; still, it has to raise its status to compete. The
key market has become much aware of social problems that are related to the consumption of
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alcohol. The reason could be the campaign that is organized by the government against binge
drinking as well as drunken driving (Arrieta et al. 2010, p.645).
Technological factors
Even though Brazil ranked 53rd in the world for its enhanced IT sector, it still lacks behind due to
poor investment as well as weaker technological infrastructure. Its technological infrastructures
are being developed steadily (Barnard, 2010, p.171). This creates a direct effect on the brewing
industry for the production of alcohol which will lead to huge investments.
Legal factors
The legal restrictions in this country are rapidly growing by closing down the demand for alcohol
in public areas (Fogarty, 2010, p.472). Strategic alliances, acquisitions and licensing have
critically occurred due to the competitors such as Heineken, who want to capture the entire
market of Brazil. However, a slight chance for cross borders acquisitions and mergers has been
growing in the market.
Environmental factors
The gross domestic product of this country is increasing steadily and the rules of
communications have also been enhanced in this country. The Recycle’s law of packages is a
huge initiation towards sustainable environment (Hawkins, 2010, p.141).
PESTLE analysis India
Political factors
India has a federal public government and is the largest democratic country in the world.
However, the country is concerned about antisocial behavior and drinking. The government uses
the enhancing demand for alcohol by citizens for raising the indirect taxes revenues from the
companies. Cross border shopping is allowed and is common in the country due to low
harmonization (Helms and Nixon, 2010, p.249). The duty-free trading has been banned since
1999 which had a very low effect on the brewing industry. The influence of international market
highly influences the domestic markets which enhance the profitability of foreign brewing
companies. However, the country has strict social policies in terms of alcohol consumptions.
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Economic factors
The financial factors in India are enhancing consistently. The Gross Domestic Product is
assessed at 2.965 trillion. It is also estimated that a non-stop development in per capita income.
India's per capita income is relied upon to reach 2000 dollars before the finish of 2017-2018 This
will prompt higher purchasing power in terms of the Indian purchasers. Rising utilization has
been connected to an expansion in the relative moderateness of liquor which in turn will be
affordable to purchase (Khaire and Wadhwani, 2010, p.1301). Price vacillation can be directed
by worldwide item markets which give multinationals an additional advantage towards
increasing cost differential in terms of on and off exchange or trade Asian budgetary crisis.
Social factors
It has also been estimated that there has additionally been a consistent increment in the
utilization of beer in the country India. With an expansion in the buying power, the Indian
purchaser which favored local alcohol which is far less expensive is currently ready to get an
essence of the generally costly brew showcase of beer (Lamertz et al. 2005, p.840). The social
pattern of brew utilization is changing and India has seen an expansion of 96 per cent beer
consumption from the year 2008-2016 (Refer to Appendix A). Recently, there is an upsurge
towards café culture in terms of alcohol consumption. Growing consciousness of health is an
additional advantage as people prefer diet or light beers. Underage drinking is increasing rapidly
which has a huge impact on the brewing industry.
Technological factors
The Indian brew Industry is warming up with a lot of remote players entering the Indian market.
The mechanical skill and mastery will likewise enter the Indian market with an expansion in the
rivalry. For instance, beer fermenting technology major Carlsberg has entered India and has set
up assembling plant in India. Carlsberg Group, headquarters situated in Vesterbro, Denmark, and
Copenhagen, has established the company Carlsberg India. It will begin generation in 2017. This
will help get the innovative ability and increment the generation of beer. SABMiller has quite
recently put in a request for the outline and development of two turnkey plants in India to
Carlsberg (Li and Hitt, 2010, p.826). The new plants are anticipated Sonipat, in Haryana and for
another area close Bangalore. The two bottling works will have a yearly limit of 2 million
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hectolitres each at the outset and may be broadened later. Accordingly, with European
innovation entering the Indian brew showcase expanded generation and bringing down the cost
of creation could assume a noteworthy part in the Indian brew showcase.
Legal factors
The legal factors associated with the brewing industry of the country India are strictly based on
three regulations (Moodie et al. 2013, p.671). Any company that wants to enter the Indian
market has to follow each regulation strictly. The regulations are Licensing Act 2003, Beer
orders and other changes to Competition Law 1990 and Private security industries Act 2003.
Environmental factors
The country is highly focused towards sustainability and follows the agenda in every aspect. It
also associates with corporate social responsibility for making the country more sustainable
(Mussatto et al. 2010, p.829). However, this country compels brewing industry to initiate the
technique of eco-friendly combustion. Hence, opening up a brewing business in this country will
require a huge investment.
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The selected destination country- India
It is evident from the PESTLE analysis that the country India is best suited for the company to
expand its market into the international market. The pace the company CHEERS is moving in
the Australian market can be enhanced by entering into the market of India. The level of
economic integration between home and host country will be smooth as the trade on and off
between the countries will be at a reasonable cost due to price fluctuations in the host country
(Pai et al. 2015, p.1422). The political environment of the country India is democratic and stable.
Even cross border shopping is allowed in the country due to low harmonization as well as the
impact on international brands over the domestic market is huge and well accepted. However, the
taxation rate is high as the government of India takes the advantage of higher consumption rate
of alcohol. This is the only drawback but this can be overcome as the profits that will be earned
from this country will be huge. The legal environment of India is stable enough to enter the
market as the brewing industries of India require only three licenses which can be obtained
following the procedures of India (Pantani et al. 2012, p.1390). Therefore, India is the best-
suited option for CHEERS to attain their momentum again as well as to flourish the market of
India.
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Discuss and justify the proposed entry for the chosen country
It has been evident from several case studies that International beer companies stand a better
place in a country like India. Countries like Brazil are in a state of decline and have a flat
marketing system in the country. The proposed plan for enhancing the growth of the business
CHEERS should be based on pricing strategy. The craft beer brand should be introduced in the
market at a reasonable and premium price for a starter to compete for the local brands as well as
existing international brands (Phylipsen et al. 2002, p.672). The company CHEERS has to
segment the Indian market based on each class present in the economy in India. Even though the
customers avail international brand rather than the cheapest alcohol brand, CHEERS must focus
on its pricing strategy as it will significantly have many rivals in the brewing industry. Southern
India is the major consumer of alcoholic beverages in comparison to north, west and east regions
(Perkmann and Spicer, 2010, p.271). Most of the brewing companies have maintained and
captured the market of north, west and east regions. Therefore, the initial strategy of CHEERS
should focus to tap the market of the south and eventually untapped the market of north and east.
As the company CHEERS has critically sustained the Australian market within a few years, it
will not be hard to capture the Indian market.
Demographically, India is becoming younger and its age is changing rapidly. It is estimated that
the youth population of India is raising day by day (Talbot, 2010, p.269). Hence, the company
CHEERS must focus on the youth generation of the country. Most of the youth of India prefer
diet beer or light beer which the company has to consider. It must ferment beer into two
categories. The first category will be based on the people who prefer light or diet beer and the
other category can be for the people who prefer strong beer or higher amount of alcohol. The
pricing strategy will be based on the two categories which will be equivalent with the
competitors for a starter. The income rate of the urban middle class is also rising. Therefore, the
company can fix the rate strategically based on each income group so that each class of people
can purchase.
The lifestyle, culture as well as personality of the people of India are changing rapidly. People at
present tend to purchase things that contain the tag of the international brand (Veliyath and
Brouthers, 2010, p.3). Therefore, in terms of psychograph, the company is safe to enter the
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market of India at ease. In terms of long term strategy, the company CHEERS can plan to deploy
a portfolio with brands in terms of new craft beer segments at various pricing strategy. The
organizational goal and objective of the company CHEERS are to deploy its company in the
overseas market India as it has the best marketing position other than Brazil. The company can
uphold its position and momentum again with increasing profit margin. As the economic
condition of India is not higher, therefore the company will have to invest much less as
compared to Brazil or other countries. Even the workforce of this country can be hired and
trained as required at a very reasonable investment. The tax rates of this country are high and the
political condition is very much stable (Warner, 2010, p.31). However, the degree of control
required is high as Indian market gathers a huge attention from various industries due to its
political as well as economic stability. Every country has its own risks in its own ways.
However, the risks in the target market of India are low as compared to Brazil even if it has
higher political sensibility. The risks can be removed only if the company CHEERS strategically
implement its procedures as well as considers the external environment of the country India.
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Conclusion
In this report, is the operational manager for the company CHEERS, each detail about the
external environment of the countries India and Brazil have been provided. However, after
analyzing the market condition of each country, it has been observed that India is the best-suited
place for the company CHEERS to enter and flourish its business. Even though the taxation rate
is a serious issue, the company still has a huge opportunity to gain a large amount of customers.
This, in turn, will critically enhance the profitability as well as sustainability of the company. A
useful recommendation has also been provided which can help the company to form an
appropriate strategy before entering the market. The company must mainly focus on its pricing
strategy as well as delivering the product which will be accepted by the youth. The company
must also focus on its brewing categories of beer for better acceptance in the market. There are
huge opportunities in the market of India as the economic as well as sociological factors are in
favor towards the entry of the company. However, the company must also consider the possible
threats which will significantly arise due to the existing companies of the brewing industry.
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