Expansion Proposal of Target Australia to Brazil: A Macro Environment Analysis

The report evaluates Brazil as a potential market for Target Australia's expansion proposal. It includes economic, political, legal, and socio-cultural analysis, as well as cultural frameworks and ethical and CSR issues. Brazil's low labour cost and infrastructure make it a viable option for expansion, but cultural differences and environmental concerns must be considered.

Executive summary
The report will reflect the macro environment of Brazil as component of an expansion proposal
to Brazil by Target Australia. It is the well efficient leading retailer chain in Australia. Brazil is
the world’s fifth largest country in the context of area and the sixth largest country in the context
of populations. It would be great opportunity for Target to expand its operation in Brazil as it has
different laws regarding safety and international sports are conducted in this place which
enhances the opportunity of employment. The labour cost of Brazil is low which would be
advantageous for the Company to earn more profits. Australia and Brazil have many differences
in the context of cultural which has been analysed in this paper in depth details. Brazil has
negative influence regarding environment pollution which represents that Target Australia
should good corporate governance practices. It can be concluded that Brazil is viable in terms of
politically and economically for the expansion.

Contents
Executive summary.........................................................................................................................1
Introduction......................................................................................................................................3
Company background......................................................................................................................4
Introduction to the chosen country..................................................................................................5
Economic analysis...........................................................................................................................6
Political and legal analysis...............................................................................................................7
Socio-cultural analysis.....................................................................................................................7
Cultural frameworks........................................................................................................................8
Hofstede’s dimension...................................................................................................................8
Cultural context............................................................................................................................9
Ethical and CSR issues..................................................................................................................10
Conclusion.....................................................................................................................................11
Reference list.................................................................................................................................12

Introduction
This report is focused on Target Australia which is one of the largest retailers in Australia that is
running its business operations with the symbol of Target group which is situated in United
States, but it is possessed by Wesfarmers Limited. The report is made on the proposal to expand
its operation to the Brazilian Market. The description about the company background will be
defined in initial point of the report along with its entire structure. The reason will be mentioned
with justification for choosing Brazil as the overseas market for expansion. Furthermore, the
report will evaluate the Brazil by making depth analysis of its economic, political, and legal and
socio cultural regarding to the retail industry. The cultural framework will be defined through
Hofstede and Corporate Social Responsibility of Brazil will be analyzed in an effective manner.
Conclusions will be drawn on the basis of micro environmental analysis.

Company background
Target Australia is an affordable department store chain possessed by Wesfarmers. It comes
under largest department store in Australia through store number in which it is operating 303
stores all through the country. It has 178 Target stores and 125 Target Countries. It deals with
branded clothing, home wares, cosmetics, fitness, electronics and customer electronics Reyhle &
Nicole, 2014). The national support office of company is situated in North Geelong and it has
been found that it will be located to Williams Landing at the end of 2018. It has been found that
George Lindsay and Alex McKenzie started their first store in 1926. The retailer company was
progressing throughout Victoria (Parker & Justine, 2016).
It is providing services to the middle level of market through its services and products. The
revenue of Target Australia was $3.5 billion and income was $195 million in the year of 2016
(Target Corporation, 2014). The market position of the company is strong in the retail sector of
Australia. The mission of Target is to operate its operation to make the quality, style and fashion
at affordable prices for the family. The slogan of company is “Higher quality, lower prices.” The
company is approaching several strategies such as societal orientations for its products.
Furthermore, it has low cost method approach which is helpful to provide best standards of
products at reasonable rate (Dunning, 2013). Currently, the company has started its online stores
as well which is able to provide the low cost (Target Australia, 2017).

Introduction to the chosen country
Brazil is the largest country of South America as well as Latin America. It is the world’s fifth
largest country in the context of area and the sixth largest country in the context of populations.
Brasília is the capital of Brazil and São Paulo is the most populated city. It can be seen while
comparing the retail industry of Australia and Brazil that the expansion of Target Australia in
Brazil would be effective. However, Brazil has number of top retail stores but the strategy of
Target is different from other stores that may enhance the revenues of the company. There is a
supporting industry such as manufacturer of home wares, toys, clothes in Australia, along with
the effective industries of cloth making will enable target to become successful and cater to the
demand of fifth’s largest country. The progress made in latest years towards the good bonding of
bilateral relations (Pantano, Priporas, Sorace & Iazzolino, 2017). The President Dilma Rousseff
and Prime Minister Julia Gillard agreed to make the relationship between Brazil and Australia
and take it to the level of strategic partnership. Hence, it can be justified that Brazil is viable
country of choice that has been considered by Target to expand its operations.

Economic analysis
Economy is an important aspect of any country that may influence the retailer like Target
Australia. Brazil is an effective country that has high level of probability for growth because of
its large population and inflow of Foreign Direct Investment. It has been found that the gap is
decreased between poor and rich due to significant growth in middle class. Furthermore, the risk
of currency deflation is reduced by the banks of Brazil, which has managed the inflation rate in
the country. It is the largest land in the South America which stands in 7th world rank in terms of
GDP. The top import list of Brazil entails motor vehicles, petroleum oil, medicines, fertilizers
and vehicle accessories and parts. Target need to promote its business in the retail market of
Brazil to get benefitted of economic situation of Brazil. The infrastructure of Brazil is efficient
which can be the centre of attraction for the tourist (Brainard & Martinez-Diaz, 2009). It has
been found that the Brazilian highway system is one of the largest all over the world. It has been
estimated that approx 1.2 billion people travelling in the highway of Brazil. The air transport
infrastructure of Brazil is comparatively well developed and has about 300 airports, of which
around 50 are commercial ports. There are more than 115 million passengers every year flying
into, out of and around Brazil. In terms of telecommunication, Brazil is well developed where
most people of this country use internet services and the infrastructure of the telecommunication
is quiet modern. The corporate income tax of Brazil is 25% and it has been found that Brazil has
very strict penalty tax rule with a 75% penalty due to fill incorrect tax payments (Meyer, 2010).
There are two major events in the country that being the cause of significant development of the
economy that is World Cup 2014 and Olympic Games. These two events have huge contribution
in boosting up the various infrastructures like the telecommunication, retail market in the
country. More than 2 million jobs created in Brazil due to these events.

It is apparent that Target need to keep focus on various strategies of government regarding tax
which may impact the business of it. Company can earn huge advantages in retail industry as
there are no effective retailers and due to well known retailer company can attain the huge
attention of the potential customers (Vida, 2015).
Political and legal analysis
The government of Brazil is stable and proactive but is hard to assume that how long it will go
with it. As it has been found that Brazil became democracy in 1980 and in 2010 country in which
first female president elected named Rouseff and same got elected in 2014 (Australian Embassy
Brazil, 2012). Rouseff was suspended because of investigation and prosecution and Michael
termer replaced her position that shows there is no stability in the government. Corruption is
considered as the huge concern in the country. It has apparent that even small business has to
make payment to government authorities and officials. It shows that the political factors can be
reason of hurdle for Target Australia. There are two major factors Fluctuations and
transformation which can affect the retail industry (Schneider, 2018).
However, the political term is not in favourable but the government of Brazil has taken various
actions against corruption in which five ministers were fired due to involvement in kickbacks,
bribery and influence peddling. The government of this country is endeavouring to make the
transparency in the law. The local and overseas organizations are treated equally in Brazil and it
has been found that labour cost in Brazil is significantly low which make the favourable
condition for the business expansion of Target (Hill, 2008). However tax rates are comparatively
high in comparison of Ireland and the fixed rate of corporate tax does not have plans of
incentives. Brazil is a civil law country originates by Roman law. This law was executed by the

Portuguese at the time of colonization. The entire system of legal is based on various codes and
legislations that endorsed primarily through the federal legislature power. The legal aspect of the
country is favourable for the new entrants as it helps it in case of any misunderstanding and
issues (Euromonitor, 2017).
Socio-cultural analysis
It has been found that there is economic inequality among people in the country of Brazil and
approx 20% people live under poverty line. There is a high range of middle class people in this
country which would be helpful for the new entrant (Rasella, Aquino & Barreto, 2013). Target
Australia organization is providing various items and services to the people of Brazil at
affordable rate which increase the potential of the organization and increase the revenues. The
effective offer of shopping is being offered by this company to the Brazilians. The knowledge
about fashion and latest trends are very much in the population of Brazil. 80% of people of
Brazil are educated and FIFA World cup 2014 was hosted by this country and a majority of the
population of this country has enough interest in the sports of Football. There are major factors
such as geographic, psychographic characteristics and ageing population that playing the major
role in affecting the demand of the retail products. It has been found that retail store size in
Brazil have been reducing because of ageing population. In the context of extent of demand,
according to the Brazilian Institute of Geography and Statistics, there is a decrement by 4.5% in
the retail volume sales in the year 2015. The foremost shopping malls of Brazil are tackling
reducing tenancy rate over last 2 years (Rohter, 2012).

Cultural frameworks
The cultural determinants is entire different in Brazil in comparison of Australia in many ways.
There is a high psychic distance in both countries due to dissimilarity in religion, politics,
language and social structures (Hawthorne, 2010). To define the cultural framework of both
countries, Hofstede’s Dimension tool is effective.
Hofstede’s dimension
Power distance
The power distance dimension shows the attitude of the society towards the inequality. The score
of Australia in this dimension is low that is 36, with a score of 69, Brazil reflects the respect
towards the society and accepts the inequalities.
Individualism
There is a big gap in the dimension of individualism as Brazil scores 38 and Australia has high
score of 90. In contrast to the Australian employee who is initiative, Brazilian employees tend to
work in family oriented and groups. Internal strategies such as creating team based performance
schemes in against to individual performance schemes might be advantageous in encouraging the
Brazilian workers who will be recruited by Target Australia.
Masculinity
The score of masculinity dimension of Australia is 61 while the score of Brazil is 49 that reflect
there are many workers who are enthusiastic and give priority to the work. It would be
advantageous point for Target Australia as the workers will be dedicated towards the work.
Uncertainty avoidance

With the score of 76 of Uncertainty Dimension, laws and rules have huge importance in the
country to make the world safer. On the other hand the score of Australia is 51 which show that
it would be great opportunity for the Target Australia to expand its operation in Brazil as it
provides the high rate of safety.
Long term orientation
Brazil is having a score of 44 is considered to be medium long term oriented. However, the
tendency of this country in saving for future is quiet low but new entrant can overcome this
situation by developing its image in an efficient manner. The score of Australia is 21 which are
lower in comparison of Brazil.
Indulgence
Australia has a high score of 71 in comparison of Brazil that scores 59 marks in this dimension.
The society of Brazil as well as Australia has optimistic and positive attitude which is good for
the Target Australia.
Cultural context
The culture of Brazil Country is majorly western but it presents the diverse nature. The cultural
context of Brazil is high which reflects that Brazilians place a firm highlights on how message
should be perceived sooner than on the words used alone. Business people of this country are
more literal. On the other hand the cultural context of this country is low, where what is said it is
what it is and it should be in black and white with clear definition. The difference between
cultural contexts of both countries can bring issues. It is vital for the Target Australia to provide
the proper training to the employees of the company in the context of communication mechanism

so that the confusion could not take place (Hofstede, Garibaldi de Hilal, Malvezzi, Tanure &
Vinken, 2010).

Ethical and CSR issues
The role of business ethics is vital in the Brazilian Corporate World and the value of trust is prior
in comparison of any other agreement of businesses. Brazilian Corporate World is more effective
and companies of this country are following the different laws related to maintain the ethics
within the organization. There is a major aspect of environmental pollution as it has been
analyzed that the environmental issues in Brazil involve illegal wildlife trade, water pollution,
degradation of land and deforestation in Amazon. However, the government of Brazil has taken
various steps to reduce the impact of it but it is essential for Target Australia to practice good
corporate governance (Valenti & McGlashan, 2017).
It has been found that many residents of Brazil are utilizing their power of buying to make
change thus enhancing conscious customers in answer to the social concerns in Brazil. It shows
the effective movement of people observe the way to make affirmative purchasing decisions,
Ones that are conscious regarding environmental and ethical. This power of groups is
represented in Brazil by buying trends. There were more than 55% of customers eager to spend
more on products and services from those companies who are socially responsible. Furthermore,
82% of customers in Latin America has trust that companies must be included in developing
quality of life and people’ wellbeing but only there were 46% people that thinks is different and
give credit to brands for attaining it (Zendesk, 2014).

Conclusion
In the limelight of above discussion, it can be concluded that it is hard to expand business in
other country but it can be done in an efficient manner by taking consideration of various aspects
such as cultural dimensions, environmental aspect, political aspect and economic aspect. There
are various positive factors have been found from the research that Target Australia can be
benefitted to expand its operation in Brazil due to political stability, economic condition and
efficient laws. World Cup 2014 and Olympic Games are major two events that contributed in
huge manner to develop country. It has been analyzed that the growth rates of Brazil are high and
buying behaviour of customers are increased rapidly. The strategy of offering products at
affordable piece would be effective for the company as it has been found that the percentage of
middle income level is high in Brazil in comparison of other income levels.

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