CHEERS: International Business Expansion Strategy for Brazil and India

This report examines the international business expansion of CHEERS, a craft beer producer, focusing on the potential of the Brazilian and Indian markets. The report begins with an executive summary, followed by an introduction to the alcoholic beverage industry and the company's goals. It then analyzes the risks and opportunities associated with expanding into both Brazil and India, considering factors like government regulations, legal aspects, competition, market size, economic conditions, and political and social factors. The analysis concludes that Brazil is the more favorable destination, providing a justification for this decision. Finally, the report proposes different strategic market entry options for CHEERS in Brazil. The report highlights the growing craft beer market and the importance of understanding local market dynamics for successful international business ventures.

Running Head: INTERNATIONAL BUSINESS 1
International Business: CHEERS in Brazil

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Executive Summary
Beer segment is a significant segment of alcoholic beverage industry. There are so many
countries, which are in the top list for manufacturing beer and craft beer. In today’s competitive
business environment, the organizations prefer to choose business expansion to increase its
revenues and profits. It plays an important role in the growth of a business. This report examines
the business expansion of CHEERS in two chosen countries, i.e. Brazil and India. “CHEERS” is
a craft beer producer in Australia that is pursuing its business operations from last six years. In
this time span, the company has experienced a significant growth and profitability. Now, the
company is looking for expanding business operations for maintaining its growth momentum.
This report will help in understanding the risks and opportunities in both countries, i.e. Brazil
and India. Further, Brazil is chosen as best destination for business expansion. At the end,
different strategic market entry options are proposed that can be used by CHEERS while entering
in Brazil.

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Table of Contents
Executive Summary.........................................................................................................................2
Introduction......................................................................................................................................4
Analysis of Risks and Opportunities...............................................................................................4
Brazil................................................................................................................................................4
Risks.............................................................................................................................................5
Opportunities................................................................................................................................6
India.................................................................................................................................................7
Risks.............................................................................................................................................7
Opportunities................................................................................................................................8
The Selected Destination Country (Brazil)......................................................................................9
Proposed Entry in Chosen Country (Brazil)....................................................................................9
Conclusion.....................................................................................................................................11
References......................................................................................................................................12

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Introduction
Alcoholic beverages industry is the oldest industry on the earth and it is divided into three
categories, such as; wine, beer and spirits. Nowadays, there are many changes in the customer
preferences. People are shifting from wines and normal beer to craft beer. In Australia, craft beer
business expanding its area in the brewing industry. There are so many players in the Australian
Beer industry, which are producing the craft beer. CHEERS organization is one of them that
have started a new business in the year 2010. The company is experiencing a considerable
growth during last 6 years. Now, the management team at the company is planning to expand its
business in overseas market. For expansion, the company has selected two emerging markets, i.e.
Brazil and India. This report examines different aspects about analyzing both the markets in
context of expansion of CHEERS. It analyses the risks and opportunities for organization in both
countries. Furthermore, it includes a specific destination for expansion and justifies the decision
for choosing this specific market. At the end, there is the discussion about the proposed market
entry in the chosen market.
Analysis of Risks and Opportunities
Emerging markets are the markets, which are emerging in the developing nations to offer
identifiable business opportunities. These markets present some risks and opportunities for both
small and large corporations, which are looking for acquiring new business and expanding its
existing business in new countries. These risks may arise as these new markets come with the
new expectations and needs and opportunities may arise due to innovation and adoption of new
and effective business processes and systems (Deresky 2017). The organizations need to create a
plan to mitigate these risks.
Brazil
Brazil is an emerging market, where each and every business may grow effectively. There is a
significant growth in some specific Brazilian producers, which currently have major positions in
the country. Brazil is the third largest beer producer in the market and comes in the premium
sector in the industry. The business people are forecasting the growth of 13% in this sector for

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past decade (Gammelgaard & Dorrenbcher, 2013). The market has too much potential that craft
and special beers have attracted the attention of people. In this country, there are some leading
players, which are producing craft beer in Brazil, i.e. AmBev, Wals, Germania, Colonia Pilsen,
New Age etc.
Risks
Risks are the threats, which can come in the way of an organization, when it expands its business
in new and emerging market. As CHEERS is planning to expand its business in Brazil, so it may
confront some threats or risks in this process. The expected and related risks are discussed
below;
Government Regulations
In looking for the overseas market, CHEERS is seeking to expand business in Brazil country.
The organization may face the issues related to government regulations and taxes. The
government regulations and tax system in Brazil are very much complex and it is very important
that CHEERS understand them prior to entering in the market. Brazilian government is making
more money by increasing the taxes. The existing players in the Brazil are facing the issues
related to country’s fiscal complexity. There are eight types of taxes, which are imposed on
drinks logistics and supply chain. The examples are like; federal VAT, State sales tax, ICMS,
profit sharing taxes etc. The government is campaigning against the drinking and levying
penalties, while public drive in drunken state. These risks may influence the business growth of
CHEERS in the Brazilian beer industry. The organization needs to understand before entering in
the Brazilian market (Box 2017).
Legal Aspects
Brazil has complicated labor laws and there are very much restrictions on the location of
alcoholic beverage factories and plants. The country refers a federal law related to drink driving
bans the on-plants operations to offer the alcoholic beverages, if their stores are next to the
highway. There are different restrictions on the import and sale of craft beer and other alcoholic
drinks. It in turn can decline the sales of beer of the company (Hill, 2008). For example; there is
a law, i.e. named as “Lei Seca”, which decreased the consumption of alcoholic products in night
clubs and bars due to strong supervision. The rules and regulations in the communication, like;

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the warnings about drinking and driving and selling the beer products to under age population
can increase the time spent and cost of advertising in Brazil.
Competition
Furthermore, CHEERS may face the risks due to strong players in the beer industry. As
mentioned above, Brazil is third largest beer producer in the world that already has well-
established players in this alcoholic beverage industry. In the industry, AB InBev is the biggest
competition that is popular as largest beer producer in the world (Hadi, 2015). This Brazilian
Brewery is dominating the entire beer industry in the country.
Opportunities
The organization may have various opportunities by entering into Brazil beer industry, which are
stated below;
Market Size
As per the Kirin Holdings Report, 2013, Brazil was the third largest nation in the world by the
consumption of alcoholic beverage products. It is behind United States and China. The country
has held 6.6% of the global market share. The demand and preferences of consumers are shifting
from the mass consumption of the beer to the craft beer consumption (Kipley & Jewe, 2014). It
can assist CHEERS in increasing market size in new country.
Growth of Business
In Brazil, CHEERS may have the opportunities to grow its business in competitive beer industry.
The organization can grow its business in the country by offering the craft beer with different
varieties and flavors. Brazil hosts various sports events, like; Summer Olympics and World Cup.
The company can take its advantage to grow the business and generate the revenues.
Additionally, the organization can sponsor these events. By doing this, company can make and
develop a strong brand name, reputation, image among people. In this industry, there is a higher
growth and lower failure (Landrum, Gardner & Boje, 2014).
Increased Gross Domestic Product

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One of the major factors that can develop opportunities for CHEERS is Gross Domestic Product
(GDP). The GDP of country is increasing continuously, so the people have higher purchasing
power and capacity to spend money on leisure. So, it will be beneficial for the organization to
expand business in this country. It can increase the sales and revenues of CHEERS in emerging
market.
India
The beer market in India is expanding in different countries all over the world. Beer consumption
in the country is increasing at the rate of 12%. There are many international players, who are
creating a competitive business environment for new players. Carlsberg is one of these players.
Indian beer industry has been increasing rapidly over last 10 years because of expected changes
and demographic trends (Laufs and Schwens, 2014).
Risks
“CHEERS” is planning to expand its business in Indian market. In this process, the organization
may face some risks, which can have impact on its business.
Political and social factors
India is the biggest democracy in the world. There are some political and social factors, which
may cause threat or risk for the organization. The political scenario in India is very different
from rest countries in the world. Any organization, which is venturing in Indian market, will
need to study its political environment deeply. In India, different states have different rules and
regulations for alcoholic beverages. Some of the states like; Gujrat are labeled as Dry states,
where sales and distribution of beer or craft beer is totally banned. In this country, the
advertisement and promotion of the alcoholic beverage is also banned. So, CHEERS may face
these political and social risks in India (Madonna, 2014). The government is very much
concerned about anti-social behavior and binge consumption of beer and other alcoholic
products. Moreover, there are various tight social policies on the consumption of alcoholic
beverages. This can decrease the sales and overall performance of CHEERS.
Competitive Pressure

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Competition is one of the major forces that can pose threat to the business of CHEERS in India.
The country already has some international players. There are so many competitors in Indian
Beer industry, such as; Carlsberg, Budweiser, Corona, Heineken etc. In India, industry rivalry
may create an entry barrier for the company to successfully establish its business in the country
(Machado at el, 2017).
Legal and Regulatory Aspects
Moreover, CHEERS may face the risks related to the legal and regulatory issues. As discussed
above, alcoholic beverages are fully banned in some of the states of country. There are different
acts and laws, which need to understand in making entry in this brewing industry, such as;
Licensing act, 2003, Private Security Industries Act etc. As the laws and regulations are different
in different parts of the country, so the organization needs to play smartly in advertising and
promoting its products in the country (Piekkari, Welch and Welch, 2014). It can influence the
business of organization.
Opportunities
In India, the organization may have opportunities, which may enhance its business operations in
the country’s market. These opportunities are stated below;
Market Size
By expanding its business in India, CHEERS can increase its market size in India and its home
country. The consumption of alcoholic beverages in India is very high; it will assist CHEERS to
cover a huge market share in the production of craft beer. Microbreweries may have higher
growth opportunities in India (Sankrusme, 2011).
Economic factors
Economic conditions in India are enhancing continuously. The Gross Domestic Product is
forecasted 2.965 trillion. Country has a continuous growth in its Per Capita Income. The buying
power of Indian customers is very high. It is causing increase in the consumption of beer in
country. CHEERS can take advantage of this economic factor in India and expand its business. It
can increase the sales of CHEERS’s craft beer in India (Schmitt, 2011).

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The Selected Destination Country (Brazil)
For overseas market, CHEERS should select Brazil as a destination country. It will be beneficial
for the organization in the future (Successive, Collin, Johnson and Hillexplore, 2014). The
beverage industry in Brazil has a significant importance for the national economy, not only in the
value of production, but also because of innovation, which the industries in Brazil have currently
experienced. The company should choose Brazil over India, because the situations are more
positive in this country. The political and social factors are major forces, which can affect the
business of CHEERS and its revenues. This decision can be taken by the company by
considering the fact that there are more opportunities for the company. In this craft beer industry,
the risks are also fewer (Davies, 2010). Currently, Brazil is the eighth largest economy in the
world and it is estimated to grow to become fifth largest in some years. So, it will be beneficial
for the organization to survive in this economy. Domestic output and performance of the nation
is also very strong, so it will be good for an organization to expand business operations in Brazil
country.
Proposed Entry in Chosen Country (Brazil)
When an organization enters into a new market, it looks for a specific set of customers to
increase its overall customer base and diversify its business operations. An effective market
penetration strategy depends on the aptitude of the company to fulfill the needs and demands of
customers. The decision of how to enter in an emerging market may have a considerable impact
on the outcomes of expansion. Entry in the international markets can be attained by using
different market entry modes. There are some major entry modes, which can be adopted by the
organization while entering into foreign market, such as; joint venture, exporting, sole venture,
licensing and exporting and merger and acquisition (KPMG, 2017). Choice of entry mode plays
an important role in process of business expansion in international market. After understanding
the goals and objectives of the organization, it should choose the entry mode.
Location advantage of Brazil, such as market size, Brazil is one of the biggest beer producers in
the world and contributes to the national economy. In this analysis, it is suggested that CHEERS

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should go with the licensing agreement (Vashishth & Tripathi, 2016). This is the most
appropriate mode of entry for CHEERS in Brazil.
The organization can adopt licensing model to expand the business in Brazil. Under this market
entry strategy, CHEERS can sign a licensing agreement with Brazilian companies to brew its
craft beer locally and offer marketing assistance. In Brazil, CHEERS can make agreement with
Ambev Brewery that can offer the company distribution and sales assistance. This market
strategy can be used by the organization to develop a strong presence in huge and high demand
market, like; Brazil. Licensing agreement can give CHEERS the opportunity to strengthen its
international presence by establishing centers of impact on the regional extent (KPMG, 2017).
This entry mode appears most preferable mode, when CHEERS looks the requirement to enter in
overseas market, like; Brazil. In the process of this model, it needs to consider the political and
legal requirements of both host and home country.
As CHEERS is operating its business in Australia only, it is first time when it is expanding its
business in foreign market. So, there be need of agreement with the leading players, who are
experienced, knowledgeable and well-established in Brazil. It is essential to reduce the
requirement for conducting research in Brazilian market. Along with this, the company can
employ joint marketing strategies. With these joint marketing strategies, CHEERS can expand its
business activities in Brazil and survive in new market. These strategies will assist the
organization in fulfilling the resource requirement in the host country (Warner, 2010).
Thus, these are the proposed market entry options and strategies, which CHEERS can adopt
while entering into chosen destination country, i.e. Brazil. These entry modes will assist the
organization in successfully entering the market and surviving in Brazilian beer market. There
are some other beer companies, like; Anheuser-Busch, which have already entered in Brazil with
the licensing agreement and making equity investment. If the company chooses other modes of
entry, they will be expensive in comparison to licensing agreement. Making partnership and
mergers is very expensive for the company (Vashishth & Tripathi, 2016). So, the organization
should focus on choosing this entry mode. In this way, CHEERS can also make these types of
agreements in the country to establish international presence.
Conclusion

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From the above report, it can be concluded that it is a good decision of CHEERS to expand its
business in other countries. Although, both India and Brazil offer opportunities to the company,
but Brazil is the best destination market for CHEERS to enter in the international market. The
organization may have various opportunities in this market, which have positive impact on
overall growth of beer business in both host and home country. There are so many reasons
behind the fact that company should choose to enter in the Brazilian beer market. It will enhance
the performance of the company like it has during last five years. By this expansion, the
organization will be able to achieve its predetermined objective in this competitive business
environment. The above analysis about CHEERS indicates that it should focus on some specific
mode of entry, which can assist the organization in surviving in new merging market.
References

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