CHEERS Beer International Expansion

This assignment examines CHEERS beer's potential international expansion into Brazil and India. It analyzes the market attractiveness of each country based on factors like drinking culture, economic conditions, and regulatory environment. The analysis also evaluates various market entry strategies, recommending franchising for Brazil due to its favorable market conditions and lower investment requirements. Finally, the assignment considers potential risks associated with international expansion.

Running Head: GLOBAL BUSINESS 1
Global Business

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Executive Summary
The present report examines the international marketing expansion strategy of CHEERS, a craft
beer manufacturing organization. The organization has established a niche market share in the
Australian market. However, in the recent years, the company has observed a stagnant growth
and need to expand in the international markets. In this report, the market attractiveness of Brazil
and India has been examined. According to the evaluation, the report has arrived at the
conclusion that Brazilian market is the most suitable for the future expansion of the organization.
The strategy of franchising has been chosen for the international market expansion of the
organization.

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Table of Contents
Introduction......................................................................................................................................4
Analysis of Risks and Opportunities...............................................................................................4
India:............................................................................................................................................5
Brazil:...........................................................................................................................................7
Selected Destination Country..........................................................................................................9
Justification of Proposed Entry for Chosen Country.......................................................................9
Conclusion.....................................................................................................................................11
References......................................................................................................................................12

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Introduction
In 2010, five business graduates opened a craft beer business in Australia after observing
the growing demand of the craft business in Australia. The company grew exponentially due to
heightened demand among the local Australian people as well as the tourists. A small company,
named CHEERS was established, with the initial cost of five hundred thousand Australian
dollars and initially brews three different categories of beers. The demand for the company did
not deter even when the organization kept the price of the product higher than the mainstream
beer and served the niche market of Australia. However, the growth of the organization becomes
stagnant after a few years. It is realized that the organization needs to look for other markets to
maintain the growth momentum of the company. In this regard, the organization will has
shortlisted two potential markets, namely, Brazil and India. The present report will discuss the
potential of these two markets and select the best market for the organization. The report will
also propose an appropriate market entry strategy for the market.
Analysis of Risks and Opportunities
The international expansion plan of an organization is a strategic business management
decision. In this decision, the company has to select the most appropriate and lucrative market
based on several decisions such as economic and the economic factors of the market. In the
present section, the risks and the opportunities for both the markets have been evaluated. Several
factors such as the political factors, legal aspects, government regulations and financial
drawbacks are the risks which can be faced by the government. In contrast to it, the opportunities
faced by the organization can be market size, economic growth and the trade agreements. In the
present section, the risk and the opportunity faced by the organization in two potential markets,

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namely, India and Brazil has been explored. The risk and the opportunities of the country can be
determined with the help of PEST analysis.
India:
Political Factors:
At present, India is considered as one of the major markets in international landscape
both in terms of economic growth and market size. However, liquor market is limited in the
country as drinking beer or liquor is not a part of daily lifestyle of people. It is mainly a religious
country and the people consider drinking beer misconduct. However, there is a significant
portion of the population who consume liquor regularly; but they drink alcohol to get high and
are not concerned with the taste of the beer. Therefore, there is limited potential for the craft beer
in the country. In addition to it, there are several government regulations which prohibit the
consumption of alcohol in the country (Bensoussan & Fleisher, 2008). Alcohol or beer can be
served only in bars or through licensed outlets. Several states have declared themselves as dry
states, which mean that the government charge levy taxes if people buy alcoholic products.
There are several other political factors which may impact on the alcohol business in the country.
The government is highly concerned about binge drinking and anti-social behavior arising from
the increased alcohol consumption among the youth (PESTLE Analysis, 2017). However, the
government has not prohibited the manufacturing and the consumption of alcohol as it is a way
to generate indirect tax revenue for the government. There is no cross-border harmonization or
laws; therefore, alcohol are easily shipped from European countries and consumed here. There
are also tight social policies on alcohol consumption.
Economic Factors:

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The economic landscape of the country is attractive. In the recent years, the country has observed
a substantial growth and the purchasing power of the people is growing substantially. The
spending power of the customers has increased and they are spending on expensive and
luxurious products. The country is good appropriate bilateral relations with Australia and the
company can easily enter the market. Recently, there have several changes in the trade policy of
the country which are directed towards promoting entrepreneurship and new business in the
country (IANS, 2017).
Social Factors:
Previously, the consumption of alcohol was considered a sin in the Indian community;
however, in the recent year, the stigma associate with alcohol consumption has significantly
reduced. The youth of the country are attracted towards the alcoholic beverages and increasing
their overall consumption in the country. Along with it, the cost of beer has also reduced which
has made it accessible to the middle-class markets. The beer consumption has increased and is
more than any other country in Europe (Murray-Webster, 2010). There are several factors which
have increased the beer consumption in the country such as drinking beer is built into the social
fabric of the country. The recent upsurge in the café culture of the country along with increase in
drinking out and overseas holidaying culture has also increased the beer consumption in the
country (Davies, 2017).
Technological factors:
In the recent years, a large number of international beer brewing companies have entered
the Indian markets. These companies have entered with the technical expertise and skills in the
Indian market. With the right technological support and infrastructure facilities, the companies

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can use their technical expertise to develop large plants for the company (Vashishth, & Tripathi,
2016).
Brazil:
Political Factors:
It is a new and emerging economy with the ever-growing number of middle-class. The Brazilian
market proposes an enticing proportion for the company. However, there are several other
aspects such as operational issues, taxation, intellectual property and employee remuneration.
There has been rapid increase in the market potential as a due to increase in the competitiveness
of the market and a large number of government initiatives. It is an attractive market for the craft
beer industry as a significant amount of population consumes alcohol regularly. It is a part of the
daily life of the people and the people are concerned about the taste and the choice of the
alcohol. The government also has flexible policies regarding the alcohol consumption. Alcoholic
drinks and the similar beverages are easily available at different outlet of the country. The people
commonly consume alcohol and they are familiar with the taste of the drink and are attracted
towards different luxury drinks.
Economic factors:
The economic conditions of the country are also good. In the recent years, the company has
observed drastic growth and the purchasing power of the people have increased significantly.
The government has also made several reforms and changes its international business policies.
As a result, it has become easier for the companies to enter the local market of the country.
Brazil has large population and FDI inflow; therefore, the potential for economic growth of the
country is high. With the economic growth of the country, the difference between the rich and

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the poor is declining and the proportion of middle-class is growing substantially. The Central
Bank of Brazil has also reduced the risk of currency devaluation by introducing better strategies
and economic policies (Qin, 2010). The inflation rate of the country is also under control. The
labor cost in the country is considerable low; therefore, the foreign companies entering the
Brazilian market can benefit a lot from the process. However, the taxation rate is considerable
high in the country. In 2014, Brazil was the third largest beer producer in the world and brewed
approximately 14 billion liter beer in the year. The alcohol or the beer industry is responsible for
2% growth from GDP as it employs over 2.7 million people in both direct and indirect jobs in the
country.
Social factors:
The social factors refer to the lifestyle factors and the behavioral aspect of the consumer
market which can impact negatively on the decision. Although the country has observed
immense economic growth in the recent years, the economic disparity or growth is high in the
country. Approximately, 20% of the population of the country lives below the poverty line.
However, beer drinking and consumption is popular in all the income segments of the country.
The Bohemian beer of the country is popular in both local as well as international markets. Due
to its immense popularity, the segment of premium and super-premium beer has grown
substantially and has increased by 15% per year. The Brazilian beer market is subject to
seasonality with high consumption in summer whereas declined consumption during winters. In
the last decade, several micro-breweries and craft breweries have also developed in the country
(Flander Investment and Trade, 2015).
Technological Factors:

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Although the country has developed a lot in the recent years, in terms of technology, it still lags
behind majority of developed as well as developing economies. The local infrastructure supports
only a few small and medium sized companies. It is important that the country support the
growth of the company and new harvesting and production technologies have been identified to
increase the efficiency sand continued growth of the organization.
Selected Destination Country
In the above section, an analysis has been conducted on the Indian and the Brazilian
market to evaluate the market attractiveness of both the countries. With the present research, it
can be stated that Brazilian market can be considered as the most suitable option for the
company. The country of Brazil has been selected for the further expansion of the company. The
country is chosen as there is culture of drinking in the country. As such, the company can easily
establish a market niche in the market of Brazil. Moreover, the company is also observing a
phenomenal economic growth and the middle-income group of the country is constantly rising.
The target market of the company is middle-class market; therefore, Brazil is a chosen market for
the organization.
Justification of Proposed Entry for Chosen Country
The target country of Brazil is chosen for the future expansion of the company. However,
with this strategic decision comes the question regarding the market entry strategy of the
organization. The market entry strategy refers to the method through which an organization can
appropriately deliver goods and services to a new foreign market. There are a large number of
possible market entry strategies, namely, licensing, franchising, exporting, direct export and join
venture. In the present case, the market entry strategy of franchising will be selected. In this

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strategy, a firm distributes the right to use the business model or the brand name of the company
for a specific period of time. The franchisor can benefit from the process as they can avoid
investment and liabilities arising from extended operations.
The franchisee can have immediate stake in the marketplace. However, the reputation of
franchisor is dependent upon the operations of the franchisee. It is the system in which semi-
independent owners pay fees and royalties to the parent company and in lieu of that get the right
to use the brand name and the products and services of the organization. It is a mutual agreement
between franchisor and franchisee and is generally for a longer duration than licensing
agreement. Franchising offers a broad right of resources which includes equipment, managerial
system, training, operational technology and other support deemed necessary to establish a
successful branch. It is different from licensing agreement as the licensing focuses on intellectual
property and trade secrets whereas franchising focuses on trademarks and technological
knowledge. The advantages of international franchising is that it has low political risk, low cost,
assist the organization in simultaneous expansion in several regions, increase financial
investment and managerial capabilities of the organization (Hoy & Stanworth, 2014). However,
there are also certain disadvantages of franchising model; for instance, it will be difficult for the
parent company to control the franchisee. Moreover, it is highly possible that there will be legal
disputes in the organization and it will be difficult to maintain the image of the organization in
foreign market. The franchisees can benefit from acquired knowledge and become the
organization’s competition in future.
In the present case, the franchising should be used as the company can enter into a foreign
market with minimal investment. The organization can enter into the foreign market of Brazil
with minimal investment. Over the years, the CHEERS beer has developed technical expertise

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and knowledge regarding brewing small-scale beer with unique taste. It is the intellectual
property of the organization and based on the technical expertise of the production and
manufacturing facilities. In the present case, the same information can be transferred to the
franchisee and a beer manufacturing facility can be initiated in Brazil. The organization can
operate with its name and brand. Other market entry modes such as exporting are not chosen for
the organization as it will increase the production and distribution cost of the organization. The
taste of the beer will also change due to prolonged transportation; therefore, it is important that
the organization develop a manufacturing facility in the targeted country. There are several
options through which an organization can launch a production facility in the country. For
instance, licensing, franchising, strategic alliance and joint venture can be used for the
international expansion. However, with licensing, the foreign firm can gain access to confidential
information of the organization and can become a future competitor. Similarly, joint venture and
strategic alliance will need huge financial investment from the company.
Conclusion
It can be concluded that CHEERS beer is an innovative craft beer organization which
needs to expand its operations in foreign countries. In this regard, two countries have been
chosen for the future expansion of the company which are Brazil and India. The company will
select the country according to the market attractiveness which can be determined on the basis of
certain factors. According to the analysis, it has been identified that Brazil in the most
appropriate market for the organization as there is drinking culture in the country as well as the
economic conditions of the country are getting better. The foreign market entry strategy of
franchising has been chosen for the country. It is an appropriate strategy as the company will be
able to enter the new market with minimal investment.

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References
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environment. 50 Minutes.
Applegate, E., & Johnsen, A. (2007). Cases in Advertising and Marketing Management: Real
Situations for Tomorrow's Managers. Rowman & Littlefield.
Bensoussan, B.E., & Fleisher, C.S. (2008). Analysis Without Paralysis: 10 Tools to Make Better
Strategic Decisions. FT Press.
Davies, W. (2017). India’s days as a beer-drinking lightweight may soon be over. Livmint.
[Online] Available at: http://www.livemint.com/Industry/EzTfs9Ar2qksXQWSSFGitO/Indias-
beer-market-set-to-soar-on-culture-change-growing-m.html [Accessed on: 26 August 2017].
Flander Investment and Trade. (2015). Beer Sector In Brazil.
https://www.flandersinvestmentandtrade.com/export/sites/trade/files/market_studies/
800151125155419/800151125155419_10.pdf
Hoy, F., & Stanworth, J. (2014). Franchising: An International Perspective. Routledge.
IANS. (2017). India’s economic success vital for global economy: UK envoy. [Online] Available
at: http://economictimes.indiatimes.com/news/economy/policy/indias-economic-success-vital-
for-global-economy-uk-envoy/articleshow/60211247.cms [Accessed on: 26 August 2017].
Murray-Webster, R. (2010). Management of risk: guidance for practitioners. The Stationery
Office.

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PESTLE Analysis. (2017). PESTLE Analysis of India in five Steps. [Online] Available at:
http://pestleanalysis.com/pestle-analysis-india/ [Accessed on: 26 August 2017].
Qin, Z. (2010). Introduction to E-commerce. Springer Science & Business Media.
Vashishth, A., & Tripathi, N. (2016). Study on Market Analysis of Indian Beer Industry.
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