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There are many external environmental factors that can affect the market of Piatex if it

decides to market Piatex to Brazil. However as a marketing manager, it is common and


necessary to assess each of these factors closely. The aim is always to take the best or at least
better decision for the firms progress.
Political factors are the degree that the government intervenes in the economy. This can affect
the tax policies, labor laws and whether certain goods can be provided within the country.

Political Factors:
Political system and Government stability
Brazil is the fifth most populous country in the world. After enduring centuries of political unrest
and discrimination, Brazil is now enjoying political rule of a Democratic government. This
means that the party in power is elected by the votes of the residents of the country. Brazilian
citizens are obliged to vote and thus they take part in decision making and governance process
through elected representatives. Brazil is a constitutional democracy with a presidential system
divided into three branches: executive, legislative and judicial.
Political instability is nothing new in Brazil. Since 1926 when Arthur Bernardes completed his
term as President of the republic,
no democratically elected president
has managed to hand-over power to
his successor at the same term as he
started and ends his term in office
(Machado, 2016). Even recently,
following the impeachment of
President Dilma Rousseff on
August 31st, 2016, former vice
president Michel Temer took office
as the new president of Brazil.
We can see from chart that
Brazilian politics is pretty much unstable and according to a study by World Bank it is ranked
124th among 194 countries around the world (-2.5 weak Unstable; 2.5 strong Stable)
(Political stability - country rankings, n.d). But the positive thing is that the new president has
promised to reestablish and restore the favorable investment environment.

Trading Agreements:
Brazil is a global player. It is a member of a number of key
international groupings, including the G20, the WTO, BRICS,
IBSA and etc.
Brazils membership of Mercosur (Argentina, Brazil, Paraguay,
Uruguay and Venezuela) is a key part of its regional leadership. It
is an economic and political bloc. The participant countries have
free trade agreement among them.
Tax System:
Taxation in Brazil occurs at three levels of the government- Federal, State & Municipal. The
current maximum consolidate tax rate is 34%. It is
a result of two main direct taxes; income tax and
social contribution tax. A foreign corporation
must create a registered subsidiary branch or
permanent establishment to operate in Brazil. The
taxation of partnerships and joint ventures are
similar to the corporate taxation.
Foreign merchandise entering Brazil must pay import duties ranging from 0% to 30%. The
general tax rate for export is 30% and this may be reduced or increased to a maximum of 150%.

Bureaucracy and Corruption:


Bureaucracy in Brazil is so widespread and extensive that a term was created to denote the
difficulties and delays businesses face in the country, Custo Brazil (Brazil Cost) (Flueckiger,
2015). A new study by World Bank confirms the efficiency problem, showing that Brazilian
companies need 15 times longer to pay tax authorities than the European counterparts. It needs
the longest period of time for both trademark & patent registration and construction license.

Image source: Motta for Brazilian Management Institute

This poor rank of Brazil is only because of the poor leadership function of the government.
However over the last few years the government
has been working to reduce the bureaucracy and
speed-up the processes and encourage the foreign
investments.
One of the other problems in doing business in
Brazil is corruption. Corruption is widespread
throughout Brazilian culture, both nationally and
organizationally (Moran, Abrahamson, & Moran, 2014). The above chart signifies an indicator
of public sector corruption (100 = no corruption). Brazil is ranked 79th among 173 countries
(Corruption perceptions - Transparency International - country rankings, n.d).

Legal system
Brazil is a civil law country and the legal system is codified. The federal government, states, and
municipalities, each within its own sphere of authorities do issue laws. Laws change frequently
Brazilian court system is also very slow. Brazil is a heavily unionized country and the
employment laws are very rigid and formalistic (Brazil Market Entry Guide, March 2017). There
is no general restriction on foreign investments.

Intellectual Property:
Brazil has strict rules regarding the protection of intellectual property. It has a prominent
international position in IP protection. Breaking the rule of IP rights are crimes under the
Brazilian Criminal Code. The Industrial Property Act prescribes penalties for those who break
industrial property laws, including fines and imprisonment. However, implementation of these
laws is being seen very rarely.

Implications:
In terms of marketing Piatex, some of these political factors are advantageous and some of
them are not. Below the opportunities and threats are being determined with their level of
significance in terms of marketing Piatex in Brazil:

Opportunities Rating** Threats Rating**


Consolidated democracy 5 Bureaucracy and Corruption 5
Intellectual Property Rights 4 Government instability 4
Protection
Tax System 3
Legal system 2

References:
Daniels J.D., Radebaugh L.H. & Sullivan D.P. (2015). International Business: Environments and
Operations, Fifteenth Edition, Essex: Pearson Education Limited.

HIJOSA C.A.A., Piatex, the Design Development of a New Sustainable Material. PhD Thesis.
Royal College of Art. December 2014. Retrieved November 10, 2017.
Agergaard M.B., How to Ensure A Successful Entrance to the Brazilian Market. Masters Thesis.
Centre for Industrial Production at Aalborg University. June 3rd, 2010. Retrieved November 6,
2017

Political stability - country rankings (n.d.). Retrieved November 4, 2017 from


http://www.theglobaleconomy.com/rankings/wb_political_stability/

Flueckiger, L (2015, August 6). Brazil Cost Bureaucracy Continues to Hinder Business.
Retrieved November 4, 2017 from The Rio Times/Brazil News Agency, Inc.

Corruption perceptions - country rankings (n.d.). Retrieved November 4, 2017 from


http://www.theglobaleconomy.com/rankings/transparency_corruption/

Machado A.P. (2016). The Temer Era: The End of Political Instability in Brazil? Retrieved
November 5, 2017 from http://www.arthurpinheiromachado.com.br/en/clippings/the-temer-era-
the-end-of-political-instability-in-brazil/

Brazil Market Entry Guide, March 2017, p-14

Competitive forces

Competitors Competing products


AMCM Leather Upholstery, Footwear
Couros Bom Retiro Ltda Upholstery, Footwear, Accessories
LoLo Accessories
Fuga Couros S/A Upholstery, Accessories

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