Contents

ABSTRACT................................................................................................................................................ 1
INTRODUCTION ....................................................................................................................................... 1
MODE OF ENTRY TO FOREIGN MARKETS................................................................................................ 3
BARRIERS OF ENTERING INTO BRAZILIAN MARKET ................................................................................ 5
MOTIVATIONS FOR DOING BUSINESS IN BRAZIL .................................................................................... 6
CONCLUSION........................................................................................................................................... 8

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ABSTRACT
The purpose of this research is to analyse numerous international tactics and theories
established by business over the years. The form of business entry into overseas markets, as
well as the numerous barriers and incentives for extending business to foreign markets, are
identified and evaluated.
Expansion into new overseas markets can assist a company in increasing its customer base
and revenue, resulting in overall growth and success. This is because operating in new
markets allows a company to reach a bigger range of potential clients interested in its
products or services.

INTRODUCTION
Globalization has played a significant role in driving progress and prosperity throughout. It
has made it possible for industrialised nations to rely on exports to increase their capacity
for growth. Additionally, it has aided emerging nations in reducing poverty and diversifying
their economies (ÜLGEN, 2022). The universalization of human culture and the formation of
the only global human community we are aware of today are two aspects of the
globalisation process, which is closely related to human growth. (Makarova, 2019)
There are different types of international theories such as the Product Life Cycle Theory
(PLC), Uppsala Model Theory, Eclectic Model Theory and Network Model Theory. For the
purpose of this essay, two international theories are evaluated. Those are:

• Uppsala Model theory

• Eclectic model theory
Uppsala model is based on an analysis of four Swedish manufacturing companies – Sandvik,
Atlas Copco, Facit and Volvo. These businesses had production facilities spread across
several nations and sold more than two-thirds of their total revenue internationally during
this time. This theory discusses how internationalisation works and the challenges
businesses faced while achieving so.
The Uppsala model makes a distinction between the psychological distance chain, which
takes into account market and cultural knowledge, and the establishment chain about the
pattern of internationalisation. They presume that businesses first establish and prosper in
their home markets before beginning to expand elsewhere. Internationalization is the result
of a number of small choices. (Hombrecher, 2014).

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Uppsala model mainly distinguishes four steps of entering an international market. They are:
Step 1: No regular export
Step 2: Export through an independent representative
Step 3: Foreign sales subsidiaries establishment
Step 4: Foreign manufacturing/production (Henrik G.S. Arvidsson, 2019)
The first stage is entering a foreign market without exporting. Market knowledge and
experience are scarce and unintentional.
Phase 2 agents export for the company. This indirect export will provide the company with
consumer market data.
In step 3, a business that wants to export more will buy the middleman's business and do it
alone. The company must know the market and how to operate.
The export market must host the company's production facilities. When the business has
enough information and wants to take advantage of regional advantages, this happens. Of
fact, regulations may demand offshore operations or hedge currency risks.

Figure 1: illustration of the Uppsala Model of Internationalization (DigitPro, 2021)

If unsure about foreign direct investment, companies might use the eclectic model theory,
also known as ownership, location, and internalisation, as a three-tiered evaluation
framework.
Thus, the Eclectic paradigm is sometimes described as three-tiered. Dunning's "OLI
characteristics"—ownership, location, and internationalization—are valued.
Ownership rights and sensitive company information provide a company a competitive
edge. Trademarks, patents, innovation, management, etc.

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FDI-eligible corporate host nations must show quantitative competitive advantages.
Location is a benefit. The location offers cheap workforce, easy access to raw supplies, low
taxes, and customs. Management teams must decide if the market they want to join offers
any of the advantages listed above.
To choose the best investment strategy, management must evaluate internationalization's
benefits.
The company must decide if exploiting ownership advantages internally or outside is better.

Figure 2: Eclectic Model three advantages(Businesstoyou, 2016)

IKEA uses the Uppsala model to expand into Brazil, Serbia, and India. The corporation must
analyse its lack of foreign market knowledge and then network with competitors,
customers, government, and suppliers to gain additional customers. It must also moderately
collaborate with other firms to expand and profit. IKEA launched internationalisation
exploratory. Until the 1980s, this technique was used to create the corporation. It then
rapidly replicates its information until the mid-1990s. After then, the company was
adaptable with its replication strategy and codified the IKEA Idea Concept and Concept in
Practise principles enabling easy replication and modification in new markets (Foss, 2011).

MODE OF ENTRY TO FOREIGN MARKETS

How fast an international business unit grows depends on its market entry strategy. Trade,
investment, and contractual access are the main means to reach international markets.
Trade routes penetrate foreign markets via exports. Investing creates overseas subsidiary
units. Foreign direct investment approach. Contractual entrance is used for technology
engagement with host nation business units. This technique transfers management and

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technical expertise from the parent country to the host country. The best approach depends
on resources, risk, tariff and non-tariff barriers from other countries, transportation costs,
infrastructural facilities, management philosophy, and foreign investment inflow and
outflow limits (Enyioko, 2020). In this essay, two entry mode suitable for Uppsala and
eclectic model theory is evaluated.

Exporting is known as the direct sale of goods and/or services to another. It is possibly the
least risky and most well-known way to join a foreign market. Additionally, it can be more
affordable since there won't be a need to invest in manufacturing facilities in your preferred
nation since all goods would still be created in your home nation before being sold abroad.
The cost of exporting will most likely grow in the near future due to increased
transportation costs. The majority of the costs associated with exporting are related to
marketing. Typically, four partners are required: your company, an importer, a transport
company, and the government of the nation you desire to export to.
Licensing lets another company in the target nation to utilize the company’s property. In
most cases, the property in dispute is intangible, such as trademarks, manufacturing
procedures, or patents. The licensee will pay a fee to have the right to utilize the property.
Licensing involves little capital and can yield a substantial return on investment. The licensee
will also bear the costs of manufacturing and marketing in the foreign market.

SWEDEN

Sweden is one of the top 10 largest economies in the world, with a high level of
purchasing power. The country has a GDP of 599.05 billion US dollars (Statista, 2023).

Brazil is a member of MERCOSUR, and the EU-Mercosur agreement will play a significant
role in this development by removing trade barriers and opening new opportunities for
Swedish companies in Brazil.

BRAZIL
Brazil is the world's fifth largest country. It is also the world's fifth most populous country
following China, India, the United States, and Indonesia. By nearly every measure, the
Brazilian economy is massive. Brazil has the world's seventh largest economy in terms of
Gross Domestic Product (GDP) calculated using purchasing power parity (PPP) (International
Monetary Fund, 2023). The country is famous for its extensive biodiversity, abundant
agricultural, mineral, and energy resources and Massive internal growth potential.

POPULATION

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The federal republic of Brazil has the largest economy in Latin America, is the fifth-largest
country in the world in terms of size at 3.288 million square miles, and has 214 million
people, making it the sixth-most populous nation in the world (WorldMeter, 2023)
(TheWorldBank, 2023). Brazil is one of the biggest democracies in the world, which results in
a larger domestic consumer market for the nation. One of the world's largest local
marketplaces is available as soon as the company start doing business in Brazil.
In comparison to other nations, Brazil 2022 offers significant business potential due to the
sheer size and diversity of the consumer market.
COMPETETION
Brazil's SMEs, which account for 62% of all employment and 50% of national value added,
are crucial for economic expansion and social inclusion. SMEs are the country's most
important employment creators, and their share of GDP in Brazil has consistently increased
from 21% in 1985 to 23,2% in 2001 to 27% in 2011. Their annual growth rate has also
increased, from 0.14 to 0.4%. They handle more over half of retail (53%), 35% of services,
and 22% of industrial production (Petra Smits, 2018).
GOVERNMENT POLICIES
Brazil's SME policy is outlined in the Federal Constitution of 1988, which gives micro and
small businesses preference in a number of policy areas. (e.g., tax and labor law) (OECD,
2020).
The major federal SME policy is Simples Nacional, a favorable tax and regulatory system,
although Brazil also runs a lot of tailored projects for SMEs. This paper offers policy
recommendations to improve the performance of Brazil's SMEs and entrepreneurs,
including those related to innovation policy, export support, financial access, and women's
entrepreneurship (OECD, 2020).
With the introduction of the aforementioned “Lei de Inovação” (Innovation Law) -
instruments to stimulate innovation - and the “Lei do Bem” (Law of Good) - fiscal policies to
stimulate innovation - between 2004 and 2006 by the Prime Minister and the Ministry of
Economics, Brazil set the foundation for stimulating innovation among companies through:
• Incentivizing R&D expenditure; • Stimulating venture capital and angel investing; • Fiscal
incentives such as extra tax exemptions and reductions. • The introduction of the new
‘Simples Nacional’ for SMEs implied less complicated and less bureaucratic tax payments.
Instead of paying twelve different taxes to the government 3 and states, SMEs can choose
to pay taxes on their revenue only once (Netherlands Enterprice Agency, 2019).

BARRIERS OF ENTERING INTO BRAZILIAN MARKET

Complex tax system: The complexity of taxes and bureaucracy continues to place heavy
demands on organizational and financial resources. SMEs must submit reports to the
federal, state, and local governments in addition to being required to join unions and
associations. Large documentation requirements and hefty interest rates of, on average,

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30,6% per year limit access to capital. The majority of SMEs require management and
experienced personnel. Additionally, the entrepreneur in Brazil faces personal risk due to
the fact that tax debts and litigation involving the labor force are linked to the individual and
are not covered by bankruptcy. Innovation presents a problem for SMEs as well. In
comparison to other nations, the Brazilian market is relatively closed implying that there is
less competition, which may influence innovation (Netherlands Enterprice Agency, 2019).
According to the World Bank's Doing Business report for 2020, it was ranked 184 out of 190
nations in terms of how easy it was to pay taxes. Even the most seasoned businesses find it
difficult to navigate Brazil's domestic tax system due to its complexity, which includes many
cascading levies and tax conflicts between the various states (WorldBank, 2020).
Other non-tariff barriers include a complex regulatory system, a lack of adequate or
effective intellectual property protection and enforcement, and Brazil-specific standards
with little to no recognition of the international standards, in addition to a complex tax and
tariff system. Businesses must manage a complicated network of national, state, and local
laws that affect their products. Additionally, businesses need to be ready to adhere to
norms and technical specifications that differ from those in Brazil, where the items are
sold(International Trade Administration, 2023).
Logistical Costs and Delays: Brazil is ranked 108th out of 190 countries in the World Bank's
2020 Doing Business Report for ease of cross-border trade. Getting products to a
destination might frequently take longer than many exporters are used to experience due to
underdeveloped infrastructure and ineffective customs procedures. Due to a complex tax
system, cumbersome customs processes, and poor infrastructure, businesses should be
ready to deal with significant expenses and delays when bringing products to market.
However, over the past few years, Brazil has made a commitment to upgrading its
infrastructure and administrative inefficiencies; as a result, clearance overhead time and
costs are decreasing (Gov.uk, 2017).
The high direct and indirect costs of conducting business in Brazil, also known as the "Custo
Brasil" or "Brazilian Cost," necessitate in-depth familiarity with the regional environment.
Brazil is ranked 124th out of 190 nations in the World Bank's Doing Business 2020 survey,
down from number 109 in 2019 despite significant beneficial economic measures. For
assistance through Brazil's complicated legal and regulatory framework, businesses looking
to join the Brazilian market need find local partners (Gov.uk, 2017).

MOTIVATIONS FOR DOING BUSINESS IN BRAZIL

AVAILABILITY OF RAW MATERIALS
Brazil is known as one of the world giants in the agriculture, mining and manufacturing
industries. Brazil is also the leading producer of various ores and metals that are used in the
production of electronics, automobiles and consumer goods. It is also the world’s primary
orange and coffee exporter which shows the extensive reserve that Brazil owns. Given the
ease of access of raw materials for the business operations, starting a business in Brazil can

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be beneficial. The extensive manufacturing and raw material supply in the country removes
the concern regarding the supply of raw materials (Tetra Consultants, 2023).

INTERNATIONAL TRADE AND BUSINESS ALLIANCES:

Brazil is a member of varying international trade and business alliances hence, starting
business in Brazil gives easy access to nearby markets. Brazil is a member of MERCOSUR,
also known as the Southern Common Market, creates strategic benefits for doing business
in Brazil. Through non-tariff measures and the exclusion of customs charges, the trade
organization MERCOSUR permits the free circulation of products and services. This makes it
simpler to run a business throughout the member nations, expanding your reach to other
trading nations as well. Brazil-based corporations can anticipate having direct access to
connected MERCOSUR trading partners like Uruguay, Argentina, and Paraguay. Another
trade organization that Brazilian investors may anticipate seeing increased cooperation
among the various countries as they act in each other's best interests is the BRICS (Brazil,
Russia, India, China, and South Africa) acronym. Low workforce costs, excellent customer
demographics, and an abundance of natural resources are all assets of the BRICS trade bloc.
Brazil 2022 benefits from good economic conditions because to the MERCOSUR and BRICS
trade blocs because of its extensive international links (International Trade Administration,
2023).

Openness to Foreign Investments:

Brazil is a nation that encourages business incorporation and foreign investment. Brazilian
law permits firms to be owned entirely by foreigners. Additionally, local business
incorporation can be started and finished from overseas without the need for the
proprietors to travel to Brazil; instead, the procedures can be finished through their legal
representation there.
The Brazilian government encourages international investment and has made conscious
efforts to lower entry barriers, particularly in the stock market. It was thought that Brazil
had deregulated many industries, making it simpler for international companies to operate
there. Doing business in Brazil 2022 is a realistic option due to the country's openness to
foreign businesses (World Business Culture, 2023).

OPPARTUNITIES OF GROWTH IN EMERGING MARKETS

While Brazil, like China, has traditionally focused on its domestic economy, its economic and
business focus has shifted dramatically. Brazil's economy is currently the eighth largest in
the world, but it is expected to increase to the fifth largest in just a few decades. Currently,
a substantial portion of Brazil's exports are raw commodities, giving entrepreneurs with a
tremendous economic opportunity to grow on these exports and diversify. Indeed, Brazil
and the United States have attempted to improve economic and corporate cooperation on

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key issues such as innovation, trade facilitation, green technology, and business
development, particularly for small and medium-sized firms. As a result, these coordinated
efforts, together with the circumstances of an emerging market provides fertile ground for
successful business expansion or even initiation (Department of foreign affairs and trade,
2019).

CONCLUSION
To be successful in international business, the organization must begin with a clear plan that
highlights short-term and long-term growth objectives. When a company fully understands
the prospective places for expansion, it can seize the best possibilities. A new business
model is also required in a new field.
Internal strategy and intrinsic awareness of the company's strengths and limitations are also
essential for conducting an effective competition analysis. Opportunities alter at different
moments of time, just as strengths and weaknesses do.
Globalization is risky, no matter what. Failure to take the necessary procedures early on can
result in a far speedier collapse in overseas markets than we would see in domestic markets.
In conclusion, a company is ready to grow its business internationally when it is
experiencing constant profitability, verifiable demand, and consumer clamor in the new
market, as well as having a solid corporate foundation. Furthermore, the company must
completely understand the local characteristics of the international market it intends to
enter and be prepared to localize.

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