Unfortunately, this investment carries a lot of risk because Brazil had long had severe difficulties with inflation. Even in the 1980s and early 1990s, Brazilian policymakers did not behave as if they appreciated the connections between (1) a problematic tax system, (2) fiscal deficits, (3) printing of money to pay for what taxation could not, and (4) inflation. Policymakers seemed to perceive inflation as a problem solvable by decree and by indexing the cost of everything from private school tuition to power bills on past price movements.
In their periodic efforts to fight inflation, policymakers would typically freeze wages and prices for a while, stop indexing, and perhaps impose a fixed exchange rate. The unsustainable fiscal deficits behind these problems received less attention. In 1994 Brazil finally initiated an economic stabilization plan that showed appreciation for the linkage between spending, money creation, and inflation. This Real Plan--named after the new currency, whose exchange rate system would be key to inflation-fighting efforts--temporarily involved indexation.
However, the indexation was tied, through the exchange rate, to the number of dollars required to purchase a product rather than to measures of inflation and the currency. Brazil took steps against what had become a large federal deficit problem, although they ultimately were not enough. On the expenditure side, the Congress approved a reduction in the funds the federal government transferred to the states and municipalities. On the revenue side, federal income tax rates were increased. Monetary policy was restrained gradually.
(CIA) Social and Cultural Risks Brazilian government requires that all business transactions be made in Brazilian currency (reais), and all foreign currencies must be converted before any business transactions; therefore, high score to Brazilian legislators. Despite of the Brazilian government efforts to control it's border, such deed has not been satisfactory. It is important to remember that Brazil has borders with 10 other South American countries, and its border extension is around 10,000 miles.
Brazil's border control is a problem because of the smuggling of drugs, money, and arms. First, possible coming from Colombia, drugs enter illegally in Brazil territory, and then they are ship to Europe. In 2003, the Brazilian federal police caught around 7. 3 tons of cocaine, 128 kilograms of crack, and 157. 7 tons of marijuana. Second, Brazilian laws are very strict about gun control; however, one can buy any kind of gun in the black market. In the poorest neighborhoods, called favelas, kids 10 or 12 years old carry gun machines to defend the "boss"--drug lord.
By Brazil's borders or via shipment, illegal guns enter in Brazil territory, and then they are sell in black market; it is not difficult task to buy an illegal gun in Brazil. Third, in Brazilian territory anyone, citizen or not, can open a bank account and deposit huge amounts of cash, without being question about the nature of the money. It is concluded that Brazil has serious problems of smuggling, and such receive a greater attention of Brazilian legislators. (CIA) Political and Legal Risks
The Brazilian legal system is based on codes and legislation enacted by the appropriate legislative power at the federal, state and municipal levels. The basic law of the country is the Brazilian Constitution, which establishes (i) the system of government; (ii) the attribution of powers to the Legislative, Executive and Judiciary branches of government; and (iii) the legislative competence of the federal, state and municipal administrations. Brazil is a civil law jurisdiction and decisions are based on the application of statutory laws.
Where there is no specific statutory provision, the courts may decide on the basis of analogy and general uses and practices, or by applying general principles of law. In general, precedents are not binding but tend to be respected by Lower Courts. Our company is willing and able to abide by all the laws in Brazil and will make sure to follow all the rules of the country. (CIA) Action Plan Our business is willing and able to adjust to all Brazilian culture and practices. We will make it an obligation to abide by all the country’s rules and regulation while maintaining our independence.
Our company is in business. We are aware that every country has its own culture and practices therefore, subway will try its best to establish a business that will be people friendly keeping in mind all the different cultures and the demand of the people. We will use the knowledge gain to provide goods and services that will be acceptable to the Brazilian culture. The Subway chain is the undisputed market leader, with 10 times more locations than any other competitor and more than 75 percent of all United States sub chain outlets.
As of mid-1993, Subway operated 7,825 units worldwide, with about 7,750 units in North America. When it reached 8,400 stores in 1993, Subway was the No. 2 fast-food chain in the United States. The menu, which features a wide selection of fresh-made, oven-warmed subs, is augmented by chef salads, pasta dinners, extras such as soups and desserts, plus special QuizKidz meals. These additions have contributed to a 20 percent gain in unit sales and boosted evening business from 10 percent of volume to 30 percent.
Even with a recession and intense competition, the fast-food and drive-in restaurant category has a bright future. It is popular with consumers mainly because it satisfies their needs for convenient, value-oriented products that taste good. While they may change the mix of the fast foods they consume (pizza versus subs versus burgers), there is not any indication that consumers are about to descend on the supermarkets in mass so that they can go home and cook from scratch. The customer tells the sandwich maker exactly what they want on their sub.
All the vegetables are fresh. The smell of the bread lingers as it is being baked right before your eyes. A customer of Subway can see how clean the preparation area is, unlike many other franchise restaurants that hide behind a wall. Our target market is focus on anybody who wants to eat a healthy affordable and quick meal. Product Life Cycle The economic factor that may affect our business in Brazil is base on the economy of the country. Fast food outlets have become popular with consumers for several reasons.
One is that through economies of scale in purchasing and producing food, these companies can deliver food to consumers at a very low cost. In addition, although some people dislike fast food for its predictability, it can be reassuring to a hungry person in a hurry or far from home. As a cosmopolitan country, the majority of Brazil's main cities offer tourists a wide variety of international cuisines. As it happens, eating out in Brazil is also a very affordable experience, with superb service. Brazilians might have the tendency of sticking to the food of their taste which will have an effect on Subway.
Brazilian culture is a culture of a very diverse nature. An ethnic and cultural mixing occurred in the colonial period between Native Americans, Portuguese and Africans formed the bulk of Brazilian culture. In the late 19th and early 20th centuries Italian, German, Spanish, Arab and Japanese immigrants settled in Brazil and played an important role in its culture. With the presents of Burger King and Wendy’s in Brazil we have came up with a competitive advantage in terms of nutritional valve. Branding And Packaging
A brand name that will create a distinctive identity for our company is “Soya Shack” this brand will provide healthy meals made from Soya products for the people who are vegetarians. Most people in hot countries prefer not eat foods that are high in saturated fats. The legal factor of importing Soya products to Brazil is cheap and the import taxes will be waived. From a business stand point, the only things that can influence packaging of this brand are the locals due our international presents in neighboring countries.
Target Market The target market for the brand is for people who want to live a healthy life style and still enjoy eating Soy as a substitute for meat. This market ranges from ages five to seventy years old. Action Plan The plan is to dominate the Brazilian fast food market with the healthiest sandwiches and fresh salads. We are aware of the product life cycle which we have implemented a strategic plan to keep our competitors out of the market by investing in the planning and marketing department.