The party’s over. The Olympic Games say good-bye to Brazil and soon enough the political and economic crisis will hit the headlines again. The world will soon be reminded of a less united, more convoluted Brazil, the one that has failed to deliver on so much of its potential. There’s a saying that resonates with so many exporters: “Brazil is the country of the future. And it will always be”.
So, game over? Should you just give up on Brazil?
My take on Maracana Stadium (January 2016)
It’s a tough strategic decision and every business already exporting to Brazil or thinking of it, should assess it carefully. To help in that assessment, I’ve come up with a few questions for your next Board meeting…
– why did you target Brazil in the first place?
If it was because it’s a large economy, it still is. If it’s because it was growing, then things have changed.
– how committed are you?
A lot of businesses do rather well in Brazil. And commitment to the country is something that they can offer. The brands and the companies that aren’t there for the bad times can’t expect to be applauded in the good times.
– have you got the cash flow to sustain Brazil?
This is highly interlinked with commitment. Can you commit in the long run? Do you have the cash to invest in Brazil for years on end without seeing any results? Or will you run out of cash after a couple of years?
– have you got the people to sustain Brazil?
It’s a complex country to do business in and you need local people to help you navigate this mind-blowing maze. But you also need the people back home to support them on a day-to-day basis and also strategically and financially.
– can you afford to walk away?
Basically, is the potential reward just too high to ignore? Can you afford to walk away and leave Brazil to your competitors?
– are you doing the right thing?
It’s not just about tackling Brazil, but about doing it smartly. Maybe you need to start thinking about manufacturing locally, even if you’ve never manufactured away from home. Maybe you need to think about joint ventures, or about exploiting certain benefits of Mercosur. Maybe you need to hire a rep rather than trust a distributor. Brazil is unique so it calls for a tailor-made plan.
– what risks are you prepared to take?
Again, this relates to all the questions above. How risk averse you are will basically influence every decision you make: how much money you’re willing to invest, how many resources you’ll devote to the market, the level of corruption you’ll tolerate, the span of your strategy.
– what should your regional and global priorities be?
I’m an economist and I can’t help seeing this decision as a resource-allocation problem. If I’m willing to spend for example USD 50,000 or 100,000 or 1,000,000 in next three years in Brazil, is that money well spent? Or should I be supporting other markets with that investment instead? Or another side of the business such as product development? Only you can tell.
Unfortunately, there is no quick checklist, no flow diagram that will tell you whether or not you should still be targeting Brazil. But considering the questions above will hopefully shed some light into this tough strategic decision. Game over? Your call.
What seat you take is entirely your call (Maracana Stadium, Rio de Janeiro, January 2016)
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