Entering the Brazilian Market: A guide for LEAN Consultants : A guide for LEAN Consultants 9783836632737, 9783836682732

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Kristina Erikson

Entering the Brazilian Market

Copyright © 2009. Diplomica Verlag. All rights reserved.

A guide for LEAN Consultants

Entering the Brazilian Market: A guide for LEAN Consultants : A guide for LEAN Consultants, Diplomica Verlag, 2009. ProQuest Ebook Central,

Diplomica Verlag

Kristina Erikson Entering the Brazilian Market: A guide for LEAN Consultants ISBN: 978-3-8366-3273-7 Herstellung: Diplomica® Verlag GmbH, Hamburg, 2009

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Dieses Werk ist urheberrechtlich geschützt. Die dadurch begründeten Rechte, insbesondere die der Übersetzung, des Nachdrucks, des Vortrags, der Entnahme von Abbildungen und Tabellen, der Funksendung, der Mikroverfilmung oder der Vervielfältigung auf anderen Wegen und der Speicherung in Datenverarbeitungsanlagen, bleiben, auch bei nur auszugsweiser Verwertung, vorbehalten. Eine Vervielfältigung dieses Werkes oder von Teilen dieses Werkes ist auch im Einzelfall nur in den Grenzen der gesetzlichen Bestimmungen des Urheberrechtsgesetzes der Bundesrepublik Deutschland in der jeweils geltenden Fassung zulässig. Sie ist grundsätzlich vergütungspflichtig. Zuwiderhandlungen unterliegen den Strafbestimmungen des Urheberrechtes. Die Wiedergabe von Gebrauchsnamen, Handelsnamen, Warenbezeichnungen usw. in diesem Werk berechtigt auch ohne besondere Kennzeichnung nicht zu der Annahme, dass solche Namen im Sinne der Warenzeichen- und Markenschutz-Gesetzgebung als frei zu betrachten wären und daher von jedermann benutzt werden dürften. Die Informationen in diesem Werk wurden mit Sorgfalt erarbeitet. Dennoch können Fehler nicht vollständig ausgeschlossen werden und der Verlag, die Autoren oder Übersetzer übernehmen keine juristische Verantwortung oder irgendeine Haftung für evtl. verbliebene fehlerhafte Angaben und deren Folgen. © Diplomica Verlag GmbH http://www.diplomica-verlag.de, Hamburg 2009

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T ABLE OF CONTENTS 1

INTRODUCTION .............................................................................................1 1.1 OBJECTIVE, RELEVANCE AND RESEARCH QUESTIONS ...........................................1 1.2 STRUCTURE OF THE TOPIC ................................................................................2 1.3 METHODOLOGY ................................................................................................5

2

ECONOMIC OVERVIEW AND BACKGROUND OF BRAZIL .........................7 2.1 MERCOSUR......................................................................................................7 2.1.1 History ...................................................................................................8 2.1.2 Foundation ............................................................................................8 2.1.3 Economic role of the Mercosur..............................................................9 2.2 THE COUNTRY BRAZIL.....................................................................................10 2.2.1 Political and economic history .............................................................11 2.2.2 Economic environment........................................................................13 2.2.3 Political environment ...........................................................................14 2.2.4 Macroeconomic data ...........................................................................15 2.2.5 Social inequality ..................................................................................17 2.2.6 Level of corruption and governance indicators....................................19

3

MARKET EVALUATION ...............................................................................22 3.1 THE “THREE-SECTOR-THEORY” OF BRAZIL ........................................................22 3.2 PRODUCTIVITY ...............................................................................................24 3.3 POTENTIAL MARKETS FOR MANAGEMENT CONSULTING COMPANIES .....................25 3.3.1 Major Brazilian companies ..................................................................26 3.3.2 Strongest regions in Brazil ..................................................................31 3.3.3 Most promising branches ....................................................................34 3.4 CONCLUSION .................................................................................................35

4

LEAN CONSULTING.....................................................................................37 4.1 DEFINITION AND PHILOSOPHY OF LEAN...........................................................37 4.2 TYPICAL PRACTICES APPLIED ...........................................................................39 4.3 DIFFERENCES OF LEAN MANAGEMENT TOWARDS OTHER METHODS ...................42 4.4 MANAGEMENT CONSULTING COMPANIES IN BRAZIL ............................................44 4.4.1 LEAN consulting companies in Brazil..................................................45 4.4.2 The IBCO ............................................................................................47 4.5 REASONS TO CHOOSE AN EXTERNAL CONSULTANCY ..........................................47 4.5.1 Criteria to choose consulting services .................................................48 4.5.2 Average consulting fees ......................................................................48 4.6 CONCLUSION .................................................................................................49

5

MARKET ENTRY STRATEGY ......................................................................51 5.1 OVERVIEW OF THE CLASSICAL MARKET ENTRY STRATEGY ..................................51 5.1.1 Methods for market entry ....................................................................52 5.1.1.1 5.1.1.2

Contractual agreements ....................................................................... 53 Sole Venture ........................................................................................ 54

5.1.2 Influencing factors for the entry mode decision ...................................55

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5.1.3 Special characteristics of services.......................................................56 5.2 MARKET ENTRY STRATEGY INTO THE LEAN CONSULTING MARKET ......................57 5.2.1 Competition .........................................................................................57 5.2.2 Opportunities and threats ....................................................................62 5.2.3 Framework for strategy formulation.....................................................64 5.2.3.1 5.2.3.2 5.2.3.3 5.2.3.4 5.2.3.5

Business communication...................................................................... 65 Starting the business............................................................................ 66 Employing foreign workers ................................................................... 67 Obtaining a credit ................................................................................. 69 Legal constraints .................................................................................. 70

5.2.4 The Delphi Study.................................................................................71

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5.2.4.1 5.2.4.2 5.2.4.3 5.2.4.4 5.2.4.5 5.2.4.6

Reasons to choose the Delphi method ................................................. 73 Limits to the Delphi method .................................................................. 74 Experts................................................................................................. 75 First round ............................................................................................ 76 Second round....................................................................................... 78 Short summary of most important findings............................................ 81

6

CONCLUSION...............................................................................................83 6.1 FINAL RESULTS AND RECOMMENDATIONS .........................................................83 6.2 DIRECT COMPARISON OF THEORY AND EMPIRICISM ............................................86 6.3 FUTURE OUTLOOK ..........................................................................................88 6.4 PROSPECT FOR FURTHER RESEARCH ...............................................................90

7

BIBLIOGRAPHY ...........................................................................................91 7.1 BOOKS ..........................................................................................................91 7.2 ARTICLES/PUBLICATIONS ................................................................................92 7.3 W EBSOURCES................................................................................................94 7.4 FURTHER READING AND EXPERTS ....................................................................97

8

APPENDIX.....................................................................................................98 8.1 DELPHI STUDY – SUMMARY OF FIRST ROUND ....................................................98 8.2 DELPHI STUDY – SUMMARY OF SECOND ROUND ..............................................101 8.3 CONCRETE STEPS FOR STARTING A BUSINESS IN BRAZIL ..................................105 8.4 PAYING TAXES IN BRAZIL ...............................................................................107

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LIST OF T AB LES AND FIGURES

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FIGURE 1: STRUCTURE OF THE STUDY .........................................................................3 FIGURE 2: FRAMEWORK APPLIED (“BOTTOM UP”) ..........................................................4 FIGURE 3: % OF GDP DISTRIBUTION IN LATIN AMERICA ..............................................10 FIGURE 4: INFLATION RATE (1995 – 2007) ................................................................12 FIGURE 5: FDI INTO BRAZIL ......................................................................................14 FIGURE 6: GDP 2005 OF SELECTED COUNTRIES ........................................................16 FIGURE 7: GDP DEVELOPMENT IN BRAZIL (PPP US$)................................................17 FIGURE 8: COMPARISON WITH REGIONAL AVERAGE IN LATIN AMERICA ..........................20 FIGURE 9: COMPARISON WITH GERMANY ...................................................................21 FIGURE 10: PERCENTAGE CHANGE OF INDUSTRIAL PRODUCTION (2005 – 2008)...........24 FIGURE 11: FORBES GLOBAL 2000 – BRAZIL .............................................................27 FIGURE 12: LARGEST COMPANIES IN THE CHEMISTRY AND PETRO CHEMISTRY SECTOR ..28 FIGURE 13: LARGEST COMPANIES IN THE FOOD AND BEVERAGES SECTOR ....................29 FIGURE 14: LARGEST COMPANIES IN THE AUTOMOTIVE AND AIRPLANE SECTOR .............30 FIGURE 15: LARGEST COMPANIES IN THE ENGINEERING SECTOR ..................................31 FIGURE 16: REGIONAL GDP DISTRIBUTION ................................................................32 FIGURE 17: INDUSTRIAL PRODUCTION BY REGIONS AND STATES...................................34 FIGURE 18: TURNOVER IN THE INDUSTRY SECTOR PER BRANCH (2005)........................35 FIGURE 19: THE TOYOTA HOUSE ..............................................................................40 FIGURE 20: LEAN MANAGEMENT: 6 BASIC STRATEGIES .............................................41 FIGURE 21: SIGNIFICATION OF KAIZEN.....................................................................43 FIGURE 22: DIRECT COMPARISON OF INNOVATION WITH LEAN....................................43 FIGURE 23: CRITERIA USED BY CLIENTS TO CHOOSE CONSULTING SERVICES.................48 FIGURE 24: AVERAGE CONSULTING FEES IN BRAZIL ....................................................49 FIGURE 25: STRUCTURE OF MARKET ENTRY ...............................................................52 FIGURE 26: MARKET ENTRY ALTERNATIVES...............................................................53 FIGURE 27: FACTORS IN THE ENTRY MODE DECISION.................................................55 FIGURE 28: FORCES GOVERNING COMPETITION IN AN INDUSTRY .................................58 FIGURE 29: CRITERIA TO CHOOSE CONSULTING SERVICES ..........................................78 FIGURE 30: AVERAGE USE OF MEASURES TO INCREASE LEVEL OF AWARENESS .............81

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LIST OF M AP S

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MAP 1: MAP OF MERCOSUR .......................................................................................8 MAP 2: MAP OF COMPANY LOCATIONS IN THE SOUTH, SOUTHWEST AND NORTHWEST ..33 MAP 3: MAP OF CONSULTING LANDSCAPE IN BRAZIL ...................................................45

IV

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T ABLE OF ABBREVI ATIONS BRIC

Brazil, Russia, India, China

GDP

Gross Domestic Product

IMF

International Monetary Fund

KVP

Kontinuierlicher Verbesserungsprozess

LIB

LEAN Institute Brazil

MIT

Massachusetts Institute of Technology

NAFTA

North American Free Trade Association

OECD

Organisation for Economic Co-operation and Development

PPP

Purchasing Power Parity

PwC

Price Waterhouse Coopers

ROI

Return of Investments

SWOT

Strengths, Weaknesses, Opportunities, Threats

TNC

Transnational Company

TPM

Total Productive Management

TPS

Toyota Production System

UNCTAD

United Nations Conference on Trade and Development

USP

Unique Selling Proposition

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1 INTRODUCTION “Brazil is rich: rich in natural resources, rich in fertile soil, and rich in people” (Walter, 2006). Although the country still shows deficits in different areas, the Brazilian market has attracted large investors and companies especially in the past decade. The country’s potential has been the focus of many analysts and researchers by renowned economic institutes. After years of high inflation and slow growth – especially in the eighties and early nineties – Brazil was able to recover and get back into game with the other global players. From a historic perspective it is to say that the country has gone through large transition periods in the last century. Emerging from being a major coffee exporter until the early 20th century, Brazil now belongs to one of the most industrialized countries in Latin America. Although it is the largest country in the region in terms of population figures and geographical size, its GDP share in Latin America or annual growth rate offer a different conclusion. Nevertheless, the consulting market in Brazil has been growing, in particular during the last ten years. Many European and North American consulting companies have invested into the country, built branch offices and bought local firms. Although the market is still very young, its future potential has clearly been discovered. When thinking of Brazil, the words that tend to enter people’s minds are positive sounding ones such as Samba, Carneval and beautiful beaches which radiate joy and energy. On the other side issues like criminality, poverty and high social inequality are often associated with Brazil as well. Either way, it is almost certain that one will have heard of Brazil. The country manifested itself in the mind of people and has made front page news more than once.

1.1 Objective, relevance and research questions

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The objective of the book is neither to conduct a market evaluation nor to point out the importance and future relevance of Brazil in the world economy. In fact this work is an empirical study on a market entry strategy which can serve as a reference for management consulting companies that want to enter the Brazilian consulting market. Furthermore, the work attempts to deliver a comprehensive picture of this market, with the intention of elaborating on whether it is wise to invest in Brazil, or whether there may be another – more suitable – Latin American country. Yet, the focus lies on the framework for strategy formulation and the

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proposals that will be made thereupon. In order to accomplish this, both a classical and an empirical approach were chosen whose outcomes will be compared to one another in the last chapter. LEAN Management is a booming term in the consulting business. Everybody wants to learn the “LEAN-Thinking” and apply the method to his/her own company. Since the late 1990s LEAN Management is experiencing an upward trend and the word has spread all over the globe to reach Brazil. Consequently, there is a growing demand for LEAN in this country, as evidenced by the number of consulting companies already present in the market and the excellent prospects it shows. The aim of the book is to propose which geographical regions and economic sectors in Brazil may yield attractive prospects for management consulting companies. The information is then used to formulate a market entry strategy for LEAN Consulting in the Brazilian market. In addition, proposals will be made and future scenarios presented to the reader which are augmented by emprircal findings. Based on the introduction and the objective of the topic – giving a perspective of the situation in Brazil – the following two research questions are being raised. •

Is the LEAN market in Brazil a suitable market for a LEAN consulting company to invest in?

•

Which recommendations for an entry strategy can be given when entering the Brazilian LEAN market?

Out of these research questions, a sub-question is derived. •

Can Brazil serve as an entry port to Latin America for LEAN consulting businesses?

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The analysis of these questions will be conducted through a theoretical as well as an empirical approach.

1.2 Structure of the topic After having presented the objective and relevance of the topic as well as the research questions, the author will introduce the structure of the study. Accordingly, to strengthen the arguments that will be highlighted in the conclusion, the study is divided into three parts.

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The first part consists of theoretical results selected from secondary research. Based on the theory, an empirical study is conducted, involving a group of experts who will elaborate on their personal experiences and opinions with regards to the topic. The empirical findings deduced from the study are compared with the theoretical results in order to verify, if there exist a consensus among theory and empiricism. This comparison is then used to build up the third part of the study – the conclusion. Figure 1: Structure of the study

Theory

Empirical study

Conclusion

Source: developed by the author (2009)

In the following the framework of the study is illustrated. It is arranged bottom up, with each element adding additional information to complete the picture. In order to achieve this, it is important to take a look at the history and current economic situation of Brazil and moreover, to gain an insight into the market situation in oder to understand the ideas that compose the strategy proposition. Moreover, an economic overview and a market evaluation provide facts about Brazil and the Mercosur, the productivity level in Brazil and potential markets. Various factors will be taken into consideration such as market size, market share, competition and the level of government regulation. All these metrics serve as indicators for the suitability of the target market for entry of a management consulting company as well as the kind of strategy that will be employed.1 Together with a chapter about LEAN Consulting – in general and in a Brazilian context – this theoretical part leads to the strategy formulation. Integrated in this second part is the classical approach to market entry – including Porter’s FiveForces-Model – and the empirical findings conducted via the Delphi Study.

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Accordingly, the final results are presented, offering several recommendations and discussing future prospects.

1

For simplification the term management consulting company will in spots be reduced to consulting company.

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Figure 2: Framework applied (“bottom up”)

Conclusion and outlook (Chapter 6) • Final results • Recommendations • Future prospect

Strategy Formulation (Chapter 5) • Classical approach to market entry • Porter‘s Five Forces model applied • Delphi Study

Economic overview / Market evaluation (Chapter 2-3)

Lean Consulting (Chapter 4)

• Mercosur and Brazil

•Definition of Lean

• Productivity level

• Consulting landscape in Brazil

• Potential markets

• Different criteria to choose Consulting services

Introduction (Chapter 1) • Structure of the topic and goals of the thesis

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• Research questions • Methodology

Source: developed by the author (2009)

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1.3 Methodology In order to create a solid basis for the strategy formulation chapters two and three provide a brief overview of the economic situation in Brazil – in a Latin American context – from the earliest settlement in the 14th century until today. Furthermore, an evaluation of the market, its productivity and its growth potential, completes the picture. Recent political changes have brought an upwind into the descending system. Since the implementation of the Real Plan in 1994 the country has experienced low inflation, trade liberalization, substantial privatization, increases in import penetration and the expansion of FDI. Thus, Brazil has reason to hope for future in prosperity. The information drawn for this section consists of secondary research, covering literature as well as various online resources and online libraries, to provide an adequate framework. The literature is primarily in English and partly in German or Portuguese language. The term LEAN Consulting is explained in detail in chapter four, in order to understand the impact and relevance of the term in this context. The literature for this part is provided by a consulting company that is working according to the LEAN principles. It consists entirely of secondary research with books and magazines as main sources. The LEAN Consulting market in Brazil has a special importance for the topic and the sources are given by the same consulting company. After having applied the theoretical framework of the study, chapter five provides the framework for the strategy formulation. The basis to this approach is the FiveForces-Model by Michael E. Porter. Since the topic – market entry strategy – is a rather practical issue, the main part consists of empirical findings deducted from a Delphi Study. It is based on expert interviews that were held with a group of initially nine experts from the consulting business in two stages. In the first stage, these experts were confronted with two

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questionnaires – consisting of open and closed questions – which they had to answer based on their personal experience and opinion. The questionnaire in the second round was based on the summarized answers of the first one, raising new thoughts to the topic. The questionnaires were submitted in German, since all of the participants were either native German speakers or had sufficient knowledge of the German language to understand the questions. The aim of this Delphi Study was to gain

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opinions and experiences that can neither be found in books nor in any other relevant literature. Usually, Delphi Studies are used for business forecasting. The author receives new viewpoints that are based on personal experience of the experts by living in Brazil and working in the consulting business during the last decades. The last part of the study draws the conclusion, comparing the classical market entry approach to the empirical findings of the Delphi Study. This then gives a profound basis for constructing strategic recommendations and provides a future

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outlook. It is interesting to see how the experts of the Delphi Study view the future prospect of the consulting business in the country and what should be done to boost economic growth in this area. The book concludes by summarizing all important findings under consideration of the background layed out in the first part of the book.

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2 ECONOMIC OVERVIEW AND BACKGROUND OF BRAZIL Choosing the best way to enter a market is not a simple task. There is no universal strategy that fits all products, companies and markets. However, in order to develop a suitable strategy, a thorough background of the target market needs to be provided to be able to base the decision on actual facts. Therefore an economic overview of Brazil is essential before going into depth with the particular market entry strategy. In the following the historical and political background of the country, including the Mercosur, is presented in order to submit a clear picture to the reader that will be used later on to fill the strategy with the necessary data.

2.1 Mercosur The Mercosur (port.: Mercosul), known as the common market of the south, represents a regional trade agreement between the Argentine Republic, the Federal Republic of Brazil, the Republic of Paraguay and the Eastern Republic of Uruguay, all of which are classified as full members. According to Klonsky and Hanson (2007), the primary interest in establishing the Mercosur was to eliminate any impediments to interregional trade between the member states, such as high tariffs or income inequalities. Bolivia, Chile, Colombia, Ecuador, Peru are stated as associate partners to the Mercosur. In contrast to full members they do not enjoy all voting rights and complete access to markets of the Mercosur. Venezuela is expected to become a full member, as soon as the application for the membership is ratified by Brazil and Paraguay (as of 2008). The Mercosur is comparable to the European Union and the North American Free Trade Association (NAFTA) in that

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it promotes free movement of goods and services, people and currencies (mercosur.int, 2008).

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Map 1: Map of Mercosur

Source: Pnuma.org (2008)

2.1.1 History The Mercosur has its origin in the Latin American Free Trade Association (1960) and the Latin American Integration Association (1980). In 1988 Argentina and Brazil set the goals of eliminating tariff barriers, harmonizing macroeconomic policies and establishing a common market among each other. The arrangement later came to include Uruguay and Paraguay. Since December 2005 Venezuela is granted the status of an “active observer”. Chile, Peru, Colombia, Ecuador and Bolivia became associate members later on and have signed free trade agreements with Mercosur (Federal Reserve Atlanta, 2000).

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2.1.2 Foundation The Mercosur was created by the Treaty of Asunción, signed in March 1991, and constitutes the most important union of these four countries to this day. As provided for in this treaty, a probation period preceeded the establishment of the common market after which the member nations called in a special meeting in order to determine the final institutional structure for the public agencies managing

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the Mercosur. Furthermore, the meeting was held to define the specific functions of each agency and the decision making process (mercosur.int, 2008). The protocol of Ouro Preto, named after the Brazilian city in the state Minas Gerais, established this institutional structure of the Mercosur in December 1994. With this protocol the probation period ended and the fundamental political instruments were put into effect. With this, the member states started a new era of stabilisation and consolidation. The free trade zone and the customs union constitute intermediate steps to achieve a common market that is supposed to generate economic growth and take advantage of increasing specialisation and greater economies of scale (mercosur.int, 2008). 2.1.3 Economic role of the Mercosur With a GDP of more than US$1 trillion in 2006 and a population of over 260 million inhabitants, the Mercosur constitutes the fourth largest economic power in the world. Brazil, with 79%, generates the highest GDP among the member states, followed by Argentina with 18%, Uruguay with 2% and Paraguay with 1%. (EC, 2007, p.9) The trade agreement represents a significant economic presence in Latin America. Combined, the member countries represent more than two-thirds of the population of the Middle- and South American continent altogether. Figure 3 illustrates the GDP distribution of the Latin American countries compared with the member countries of the Mercosur. 43%, which accounts for almost half of the GDP

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generated in Latin America, stems from the Mercosur countries.

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Figure 3: % of GDP distribution in Latin America

50 45

43

40 33

35 30 25 20 15

10

7

10

4

5

3

0 Mercosur

Mexico

Other countries

Venezuela Colombia

Chile

Source: adapted from CEI based on World Bank Atlas (2002)

The ultimate goal of the Mercosur is to create a common market, which allows free mobility of all production factors and goods and services as well as the harmonization of macroeconomic policies and the elimination of all tariff barriers. In addition to being a trading bloc, Mercosur also played an important political role in the region in the past when its member countries acted in unison to oppose military coups in Paraguay and Ecuador (Federal Reserve Atlanta, 2000).

2.2 The country Brazil The Federative Republic of Brazil is the world’s fifth largest nation judged by its geographical size, exceeded only by China, Russia, Canada and the United States.

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It is by far the largest country in Latin America and borders every South American country except Ecuador and Chile. About 70 percent of the total population, which counts 196 million as the CIA World Factbook (2008) states, is concentrated in the major cities near the costal regions of São Paulo and Rio de Janeiro. On the other hand, the interior of the country is only sparsely settled. This can also be seen in other countries that have a remote countryside, (e.g. Australia). Almost half of Brazil’s territory is covered by the Amazon Region which holds 20 percent of the world’s fresh water and thus has the largest river system in the world (workmall.com, 2002).

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2.2.1 Political and economic history Prior to becoming an independent country in 1822, Brazil was a Portuguese colony for three centuries. This fact contributes to a major part of the country’s history. Unlike the other Latin American countries, which have been divided into twenty different nations after independence from the Spanish crone, Brazil became a single nation with a rich cultural and a diverse ethnical background. Furthermore, as the only Portuguese-speaking country in Latin America it differs from its Hispanic neighbours, and even from Europeans and Northamericans, in various ways (workmall.com, 2002). Hudson (1997a) argues that this seems to result from the peculiar blend of Portuguese, African and Amerindian cultural influences. During the 18th and 19th century the country brought uncounted numbers of slaves from Africa and exploited the natives in Brazil. For many years, the country’s interior remained unexplored because the Portuguese sailors, who first landed in Brazil, were more interested in trading with profitable goods and in expanding their agricultural knowledge rather than exploiting the country. The Hispanic conquerors, on the other hand, were more easily guided by greed and the prospects of glory, as alluded by geographia.com (2006). This changed however during the gold rush in the 18th century, which led to an increase in the number of slaves that were brought into the country from Africa or transferred from the sugar plantations to work in the gold mines. After the gold deposits were depleted, exports declined in the last quarter of the 18th century (Hudson, 1997b). Consequently, from the beginning of the 19th century onwards, the Brazilian economy has been dominated primarily by the coffee sector, accounting for more than half of the country’s exports at its peak (Hudson, 1997c). However, due to the Great Depression in the 1920s and the resulting overproduction, coffee prices in the world market declined sharply and led the country to realize that it could no longer rely solely on the export of primary goods.

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This brought on a significant change to the economy, which manifested itself in the industrial era (Hudson, 1997d). Accordingly, for the next half of a century Brazil struggled with governmental instability, military coups and a fragile economy. The 1980s became known as the “lost decade” in Latin America and, as a result, the stabilization plan, called the “Real Plan”, was implemented in Brazil by the former president Cardoso between 1994 and 1999. Under his presidency, inflation was decreased and the weaked economy revived. In short, this period represented a turning point in the country’s economic history. As explained by Barbara Fritz (1995), the plan focused on the root cause of the hyperinflation in the post-military

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dictatorship. Brazil experienced its peak in the early nineties and introduced the new currency “Real” with a fixed exchange rate to the dollar. This influenced the inflation rate of the country and let it decrease from the incredible high rates of 2,490.2% in 1993 and 929.3% in 1994 to a stable rate around five to ten percent in the subsequent years. 2 Figure 4: Inflation rate (1995 – 2007) 25,00

Inflation rate percentage

20,00

15,00

10,00

5,00

0,00 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Source: adapted from EconStats (2008)

The three pillars of this economic program consisted of a floating exchange rate, an inflation-targeting regime, and prudent fiscal policy – all of which were reinforced by a series of IMF programs. The result was an overvalued currency that let the exchange rate system virtually collapse overnight in January 1999, leaving the Real with one-third of its former value. In the aftermath of this collapse,

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the economy began to slow down again. This happened due to several reasons, including declining terms of trade, the energy crisis in 2001 and the sluggish Argentine demand for Brazilian exports – Argentina was Brazil’s biggest export partner at that time, as examined by the World Bank (2003). Yet, after a few years of financial instability, the economy was able to recover and is now producing current account surpluses (cia.gov, 2008).

2

The years 1993 and 1994 are not displayed in Figure 4 to better visualize the differences in rate during the years from 1995 to 2007.

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2.2.2 Economic environment Brazil is widely regarded as the most industrialized country and the leading economic power in Latin America due to its cheap labour and its abundance of natural resources. The Brazilian economy generates about one third of the total net product in Latin America. Nonetheless, its GDP per capita of US$ 3.460 was below the Latin American average of US$ 4.008 in 2005. In contrast, countries like Mexico and Chile performed far better with US$ 7.310 and US$ 5.870, respectively. Whereas dynamic economies like Chile and Costa Rica reached an average yearly growth rate of 5,6 and 5,0 percent per annum, Sangmeister (2007) points out that Brazil performed much worse with only 2.6 percent in the same period of time. The reason for this lag lies for the most parts in the high growth volatility of the Brazilian economy during the decade between 1991 and 2000. As a result, the country had to deal with a series of domestic and international economic shocks that could only be handled without a major financial collapse due to the strong economic program that was introduced by former president Cardoso and carried on by today’s president Lula da Silva (cia.gov, 2008). However, these shocks took a toll on the economy, stalling it every time it began to recuperate. Nonetheless, the most important driver in the Brazilian economy was without a doubt its export sector, which more than doubled in the period between 1996 and 2005, from US$ 52 to US$ 134 billion. Between 2003 and 2007, Brazil ran record trade surpluses and recorded its first positive current account balance since 1992 (cia.gov, 2008). Currently, products “made in Brazil” are exported to more than 180 countries in the world. In the international context, however, Sangmeister (2007) emphasizes that the significance of this fact pales in comparison to countries such as Germany, which accounts for 17 percent of world trade, while Brazil accounts for less than 2 percent.

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Brazil’s openness to foreign investors has boosted the amount of FDI received, rendering it a major recipient among emerging markets. Currently, it holds the 2nd place in amount of foreign capital invested into the economy, with China placing 1st (unctad.org, 2009). The World Investment Report 2008 by the UNCTAD, illustrated in Figure 5, identifies the Foreign Direct Investment inflows for Brazil during the last years. Noteworthy is the three fold increase during the last three years from 2005 to 2008, partially attributable to the policy change of the Brazilian

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government during the last couple of years, which boosted confidence among foreign investestors to believe in the country’s positive outlook. Figure 5: FDI into Brazil

50.000

45.060

45.000

in millions of dollars

Sou rce: ada pte d fro m UN CT AD, Ban co Ce ntra l do Bra sil,

40.000

34.585

35.000 30.000 25.000 20.000 15.000

18.822

18.146

16.600

15.066 10.100

10.000 5.000 0 2002

2003

2004

2005

2006

2007

2008

IMF (2008)

2.2.3 Political environment The Federative Republic of Brazil has gone through various governmental reforms since the election of the current president Ignacio Lula da Silva in 2003. These reforms were implemented with the approval by the 513-seat Chamber of Deputies (the lower house) and the 81-seat Senate (the upper house). The country can now claim a stable, proactive government and a total of 21 political parties represented in the lower house. Fortunately, there is practically no political instability at the moment. This situation can be ascribed to the former president Cardoso, who brought the country back on track after a period of military dictatorship with detrimental policies implemented by former leaders, and also to the current

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government led by President Lula. In this context, Peter Luff (2007), chairman in the House of Commons Trade Committee, asserts in an interview with John Fitzpatrick: “Brazil is fortunate among developing countries to have benefited from a stable political environment in recent years, and its economic strength today, and continued strength in the future, will depend on continued stability with reforms such as those suggested in the President’s five year growth plan.” As stated by a report of the FCO (2009), Brazil plays a leading role in Latin America because it “has encouraged closer co-operation between the region and

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the Middle East“ (FCO, 2009). Also, the relationship with Africa is a priority for the current government. In general, the country maintains good relationships with its neighbouring countries and its trading partners. 2.2.4 Macroeconomic data The population of Brazil counted a total of 196.3 million people in 2008, with an annual growth rate of 1.2% (cia.gov, 2008). It is the fifth most populated country in the world, only surpassed by China, India, United States and Indonesia. During the last years from 2005 to 2008 the real GDP growth rate was above the global average of 3.8% according to the World Factbook (2008). This shows that the economy grew at a strong pace during the past few years. At the same time, the inflation rate decreased to around 6%, which proves the success of the country’s governmental reforms. Due to Brazil’s enormous potential, strong economic growth is projected for the next decades. Together with the other BRIC countries – the four biggest developing countries comprising of Brazil, Russia, India and China - Brazil is widely regarded as one of the new economic powers in the world (Sangmeister (2007) p.49).

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In international comparison, however, Brazil still lags far behind the major economic powers such as the USA, Japan or Germany, as demonstrated in Figure 6. In 2005, a total of 3 percent of the world’s population lived in Brazil, but contributed only 1.8 percent to global GDP. This is a rather weak performance compared to the industrialized nations.

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Figure 6: GDP 2005 of selected countries

Real GDP (mio. US$)

14 12,455 12 10 8 6

4,506

4

2,782

2,229 2,193

2,11

2

1,723

1,124 1,115 0,794

l Br az i

Ca na da

Sp ai n

ly Ita

Fr an ce

G B

na Ch i

an y

G er m

Ja pa n

US A

0

Selected Countries

Source: adapted from World Bank (2008)

In a worldwide ranking of 225 countries – considering even the smallest of all economies – Brazil’s GPD per capita at purchasing power parity (ppp) ranks with US$ 9.700 only 95th (cia.gov, 2008). This needs to be put in contrast with economies such as the US with US$ 46.000 or Germany with US$ 34.400 The ppp is a theory based on two exchange rates, deriving the purchasing power of different currencies in a nation, assuming that identical products and services in different countries should cost the same. GDP per capita (ppp US$) is calculated by taking the value of all final goods and services produced within a nation and dividing it by the average population, on the basis of the purchasing power parity – compared to US economy. In other words, it is the price of the same product, given in US$, in different countries. This provides a superior measurement of the living standards in different economies than the evalutation of the real GDP

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amount and it is often preferred to the former method (worldbank.org, 2009). Figure 7 exhibits the GDP levels of Brazil during the years of 2000 to 2008. The real value of the nation’s income has been increasing during the last years, mainly due to the monetary programs that were implemented by the Brazilian government.

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Figure 7: GDP development in Brazil (PPP US$)

2000

1.838

1800

1.655

in billion US$

1600 1400 1200

1.057

1.340

1.340

1.375

2002

2003

2004

1.492

1.536

2005

2006

1.130

1000 800 600 400 200 0 2000

2001

2007

2008

Source: adapted from CIA World Factbook (2008)

The total labour force accounted for 100.9 million Brazilians in 2008, with an average growth rate of 4.7% between 2003 and 2008. The substantial increase of 20 million people within only five years can partially be explained by the sharply declining mortality rates since the 1940s (Ramos, 2000, p.58) However, according to the World Bank poverty report (2009) “the participation of children in the labour force in Brazil is at least twice as high as in any other country in Latin America.” On the contrary, this also means that almost half of the entire population – the total population counts 196 million people– is able to work. At the same time, the unemployment rate is at 7.9%, counting about 8 million people – which roughly compares to the total population of Austria (OECD, 2009, p. 252). This leads us to the country’s socio-economic problems – explained in the next

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chapter – which it faces due to its enormous size. A staggering illiteracy rate of 10% in 2007 (not including children under the age of 15) partially explains the unemployment rate by itself. In most rural areas, the importance of education is very difficult to enforce. In today’s knowledge driven society, the chances of a better life grow and fade with education. 2.2.5 Social inequality Despite its vast natural resources and its high growth potential this gigantic country faces various problems. One big problem is Brazil’s social inequality, which excludes large parts of the population from economic progress. Brazil has

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one of the world’s most unequal distribution of wealth, meaning that only a small percentage of the richest in the country own more wealth than all the poor people together. In 2000, only 2.4% of the wealthiest Brazilians accounted for one third of the nation’s wealth. The Gini coefficient 3 in 2007 was measured at 0.53 (World Bank Country Brief, 2008), which represents one of the world’s highest income inequalities – in comparison, Germany for instance has a Gini coefficient of 0.28 (World Development Indicators, 2008). A great part of the Brazilian population lives in low-income communities that are generally characterized by a lack of basic infrastructure services and inadequate housing (port.: Favela). The socio-economic problems that Brazil faces should not be underestimated. Many Brazilians are poor because Brazil has a poor infrastructure system, a medium-range income per capita (as compared with the United States, which is in the high range), and a weak education system (Hudson, 1997e). The high level of inequality is partially the product of various economic crises the country went through during the last decades since its dictatorship, as described earlier. This led to an increasing unemployment rate and missing social security by the government. Many people migrated to the larger cities, hoping to find employment, failed, and now live without any perspective of a better life. It is a downward spiral, maybe even a vicious circle, that affects many Brazilians. The social inequality also has an influence on the country’s criminality rates. People that are unsatisfied or have nothing to lose are more vulnerable to criminal activities than people in a stable social and economical environment (Mendonca, 2003). Sustained growth is a major challenge for the Brazilian economy. Although the macroeconomic performance has improved, it still remains below the global and

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Latin American average. The social inequality has already reached its peak and some progress was made on the microeconomic level during the last years through government reforms that provide for a better educational system. Other iniciatives included infrastructure programs to create jobs and a stable economy to foster Foreign Direct Investments, privatisation and trade liberalisation. The growing middle class is a clear sign of this progress. Nevertheless, the level of 3

The Gini coefficient is an index for measuring income distribution inequality. The values of the coefficient range from 0 to 1, where the value close to 0 indicates perfect equality and close to 1 indicates perfect inequality (Pan American Health Organisation, 2001, p.120).

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inequality remains high and there are still many challenges in this area, but the country is making improvements (World Bank Country Brief, 2008). 2.2.6 Level of corruption and governance indicators Due to the federal structure of the political system companies operating in Brazil have to deal with a wide range of regulatory agencies. The level of corruption is seen as particularly high during the entry period of starting a business. Regulation and taxation are subject to constant change, which makes it difficult for a company to do business in Brazil without support from the inside. The World Bank Institute, in collaboration with other units of the World Bank Group, supports countries in improving governance and controlling corruption (info.worldbank.org, 2008). The Worldwide Governance Indicators project examines various factors and evaluates them in form of a ranking of 212 countries during the period from 1996 to 2007 (the higher the number, the better the country is rated). The ranking considers the following dimensions: •

Voice and Accountability

•

Political Stability and Absence of Violence

•

Government Effectiveness

•

Regulatory Quality

•

Rule of Law

•

Control of Corruption

This ranking only reflects a selected view of the World Bank or the conjecture of one single country. In fact, the aggregate indicators combine the views of a large

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number of enterprise, citizen and expert survey responses in industrial and developing countries (info.worldbank.org, 2008). The country’s percentile rank indicates the rank of the country among all other countries in the world. 0 corresponds to the lowest and 100 to the highest rank. The colours of the graphic represent the percentile rank in comparison with the rest of the world.4

4

In both Figure 8 and 9 the average of the years 1998, 2003 and 2007 are displayed

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As illustrated in Figure 8, within four out of the six dimensions, seen in international context, Brazil reaches an average ranking of more than 50%. In comparison with the regional average in Latin America, Brazil leads the ranking in almost all six categories. Only within the dimension “Political Stability” Brazil lies below Latin American average. Consequently, this means the country’s political risk is categorised as more stable than the rest of Latin America, a factor that can be used as accelerator to attract investors and companies. Figure 8: Comparison with regional average in Latin America

Governance Indicators

Control of Corruption Rule of Law Regulatory Quality

Latin America Brazil

Government Effectiveness Political Stability No Violence Voice and Accountability 0,0

10,0 20,0 30,0 40,0 50,0 60,0 70,0 Percentage rank

Source: adapted from World Bank (2008)

A comparison with Germany on the other hand (see Figure 9) puts Brazil’s benchmark status in the Latin American context into perspective, making it appear far less attractive. Many factors need to be considered before drawing a conclusion here. As argued by Kaufmann, Kraay, Mastruzzi (2008), Brazil is still considered to be a developing country, whereas Germany has been a mature

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industrial nation for many decades. Internationally and in the Latin American context, Brazil performs better than the world average and the country is also leading the BRIC countries in this ranking. Russia, India and China show poorer results according to the World Bank study.

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Figure 9: Comparison with Germany

Governance Indicators

Control of Corruption Rule of Law Regulatory Quality

Germany Brazil

Government Effectiveness Political Stability No Violence Voice and Accountability 0,0

20,0

40,0

60,0

80,0

100,0

Percentage rank

Source: adapted from World Bank (2008)

With respect to various studies and surveys from PwC or Transparencia Brazil, among others, in the years from 2003 to 2008 it was revealed that the level of corruption is by no means higher in Brazil than in any other developed nation like the Netherlands, Germany, US or UK (business-anti-corruption.com, 2008). Evaluating the ranking from both sides – Latin American average and comparison with Germany – leads to two conclusions. One is the positive outcome as the leader in the Latin American comparison and thus providing a relatively more stable political environment for potential marketers. The other one is Brazil as a poor performer compared with Germany, advising companies and investors to refrain from entering the market. However, since the decision to enter a market is not entirely based on the political risk assessment of the country, Brazil’s potential as a growing economy prevails.

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Taking now also into consideration the various studies and surveys that were conducted, the country cannot be evaluated according to its level of corruption. There are many outcomes when it comes to evaluating corruption. The perception, personal experiences, but also whether or not the person or company questioned is willing to say the truth influence the outcomes of those surveys.

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3 MARKET EVALUATION Today’s marketplace is very competitive. In order to successfully place a company or a product in a new market its potential needs to be assessed first. The market evaluation uses information given about the market and helps to determine feasibility of a potential market and the competitive landscape. The aim is to compare different regions and sectors to find the strongest opportunities. This will reveal a strategic roadmap to the market entry. The Brazilian market has an enormous potential and growth is foreseen in the country for the next years. This chapter will provide an overview of the regions and branches in Brazil, pointing out the ones with the highest capability to be the future market for a management consulting company. The industrial sector is the most important one in this country and the focus of the strategy will lie on the branches present in this sector. A market segmentation presenting the biggest companies – measured by revenue – will provide the benchmark for potential growth and allows us to focus on prospective customers.

3.1 The “three-sector-theory” of Brazil According to the “three-sector-theory”, developed by Jean Fourastié (cf. Fourastié, 1952), the economy can be categorised into three different sectors of economic activity: the agricultural sector – the primary sector (commodity producing sector), the industry sector – the secondary sector (or goods-producing sector), and the service sector – the tertiary sector (or non-goods producing sector). The aim of this theory was to explain the transition from the agricultural to the industrial

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society and later on to the post-industrial service society in the 20th century (Pierenkemper, 1994, p.92). It is assumed that the three sectors have different opportunities to adapt to technological progress. Through the application of new technical procedures, the productivity in the primary and secondary sector increases while, at the same time, less manpower is needed and also the demand for these goods decreases with increased productivity. The excess manpower and demand, in turn, will be absorbed by the tertiary sector. The problem is that this theory assumes no influence by outside factors and therefore cannot be applied to any economy without precaution (Hradil, Immerfall, 1997, p.381).

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In 2006, the agricultural sector accounted for 36% of the GDP worldwide, the industry sector for 22% and the service sector for 42% (Magnusson, 2007). In Brazil the distribution in the same year is considerably different, with the agricultural sector accounting for 5.5%, yielding coffee, soybeans, wheat and rice as the main products. The industry accounts for 28.7%, with its main products being textiles, shoes, chemicals, cement and iron ore. The services sector makes up 65.8% of total output (blx.com, 2008). The GDP growth rate by sector in the years from 1997 to 2007 has been subject to fluctuation especially in the agricultural but also in the industry sector. The service sector has been rather stable during this period (bcb.gov.br, 2009). The three-sector-theory is based on the assumption of above-average growth of demand and below-average growing productivity in the tertiary sector. The current situation in Brazil and in the global context shows a strong tertiary sector, followed by the secondary and the primary sector. This supports the three-sector-theory of the shift: agriculture > industry > service sector. Although the service sector is the strongest sector in the economy, both by total GDP and by year-over-year growth rate, it is a non-good producing sector, which makes it uninteresting for a management consulting company as they are concentrating on the industrial sector where production takes place. The theory does not explicitly state the distribution of the different branches among the three sectors. Therefore it can be assumed that some branches that are interesting for the strategy could be assigned to the service sector, although in the following this sector will not be elaborated on. The importance of the industrial sector has been fully recognized by the development studies all over the world. The industrial sector – through its linkages

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with other sectors – plays a very important role in achieving rapid growth and development. Most modern and rich countries have a well developed industrial sector through their early industrial revolution (textbooksonline.tn.nic.in, 2006, p.121). It is the most important driver of the economy and apart from the service sector – the non-goods producing industry – it constitutes the biggest sector and generates the largest profit share out of all. During the last years the industrial production in Brazil was subject to many changes due to the slow growth of the economy. The country has set up an agenda to become a competitive economy that is able to provide qualified goods in sufficient quantity and to create a greater number of high skilled jobs (CNI, 2006,

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p.11). Brazil is on its way to transform into an economy that is included in the knowledge society and recognized as one of the main platforms for the industry worldwide (CNI, 2006, p.13). Figure 10 illustrates that since 2005 the percentage change of industrial production in Brazil was subject to unstable fluctuation and collapsed at last in September 2008 in the midst of the global financial crisis. Yet, the trendline shows a clear upward growth trend in industrial production up to this point, thus explaining the prognosis for future growth that prevailed during the last years. Figure 10: Percentage change of industrial production (2005 – 2008) 12 10

6 4 2 0 20 05 .0 1 20 05 .0 4 20 05 .0 7 20 05 .1 0 20 06 .0 1 20 06 .0 4 20 06 .0 7 20 06 .1 0 20 07 .0 1 20 07 .0 4 20 07 .0 7 20 07 .1 0 20 08 .0 1 20 08 .0 4 20 08 .0 7 20 08 .1 0

Percentage change

8

-2 -4 -6 -8

Source: adapted from IBGE (2009)

3.2 Productivity The level of productivity is a crucial part in the context of this study. It indicates the

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general market growth and its potential for the future. Since management consulting companies will focus on the industry it is important to know, if there is a need to enhance productivity. If so, then this need would likely translate into higher investments in this area and a greater demand for support services from the consulting industry. The level of labour productivity is the primary determinant on the nation’s GDP per capita growth. Brazil’s weak economic growth is due to the relatively slow increase of labour productivity (cf. Elstrodt, Fergie and Laboissiére, 2006, n.p.a.).

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The latest performance study, conducted by the Conference Board, shows a labour productivity growth rate of 1.9% in 2007. Compared to the other BRIC countries, this is the poorest rate. Russia, India and China showed a much better performance with 6.3%, 6.7% and 9.8%, respectively (The Conference Board, 2008, p.12). This can be ascribed to transitional reallocations of employees by large companies into emerging markets that consequently foster productivity growth in the respective country. Especially India and China play a determining role in this context, since wages in these countries are notably lower than in Brazil and also in Russia, hence companies are more likely to turn to the Asian countries to make new investments that lead to job creation (The Conference Board, 2008, p. 8). According to a study on barriers to growth in the Brazilian economy, conducted by McKinsey’s São Paulo office in 2005, there are two major root causes that lead to the relatively slower productivity growth. The first one refers to the modest per capita income, which promotes consumption of the lower-priced products and services. An example is the automotive industry, which produces primarily small and inexpensive cars. For the higher-priced vehicle section it relies on imports from other countries. The second cause is related to the first one – labour is cheaper than capital – which inhibits investment in new machinery that, in turn, would improve productivity levels. These barriers, however, will naturally fade once the government is able to resolve the social and economic problems by a policy shift. Labour and tax laws, price controls, product regulations, trade barriers and subsidies, among others, are present obstacles that limit productivity (cf. Elstrodt, Fergie and Laboissiére, 2006, n.p.a.). Also, the unemployment rate, the level of inequality, the state of the educational system, are all factors that influence productivity levels and play a role in the performance studies.

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3.3 Potential markets for management consulting companies After having identified the target sector and the level of productivity in the country, the next important step to defining a suitable market entry strategy is to determine specific markets in Brazil that yield the best prospects. Three different variables will influence the decision-making. These are the major Brazilian companies, the strongest regions and the most promising branches that are interesting for a management consulting company. Consequently, this will then lead to the establishment of the target branches as well as companies for LEAN business in Brazil and serve as a basis to formulate the entry strategy.

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3.3.1 Major Brazilian companies The largest Brazilian companies are measured according to size, ranking and profit margin by renowned institutes such as the American Forbes Magazine or the Brazilian Exame. Every year, such institutes issue various rankings like the Forbes global 2000 of the year 2008 for instance. “The Forbes global 2000 are public companies with the top composite scores based on their rankings for sales, profits, assets and market value. Our justification for using a composite ranking is simple: One metric alone can give a false impression about corporate size. In total, the global 2000 companies now account for $30 trillion in revenues, $2.4 trillion in profits, $119 trillion in assets and $39 trillion in market value. Around the world, 72 million people work for these companies” (forbes.com, 2008). According to the Forbes Global 2000 by Forbes Magazine, 34 Brazilian companies rank among the top 2000 of the world (forbes.com, 2008). The industries that are most represented according to this ranking are materials and utilities, having listed 7 companies in the ranking, followed by 6 companies in the banking sector.

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The most successful Brazilian company is Petrobras Petróleo Brasileiro S.A. – the biggest oil and gas company in South America. In the Forbes Global 2000, it is listed on rank 29. With sales amounting to US$ 87.52 billion, they have a market value of US$ 236.6 billion. The company produces 1.918 barrels of oil and 382.000 barrels of oil equivalent of natural gas daily and has reserves over 11.7 billion barrels of oil and gas equivalents (petrobras.com.br, 2007).

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Figure 11: Forbes Global 2000 – Brazil

Rank 29

Country

PetrobrasPetróleo Brasil Vale Banco Bradesco

Industry

Sales ($BIL)

Profits ($BIL)

Assets ($BIL)

Marketvalue ($BIL)

Brazil

Oil & Gas

87,52

11,04

129,98

236,6

Brazil

Material

33,23

10,26

74,70

161,3

Brazil

Banking

36,12

4,11

192,65

59.8

Brazil

Banking

28,61

2,60

202,00

41,5

Brazil

Banking

28,97

2,05

167,06

28,2

Brazil

Banking

15,29

1,94

84,04

27,3

Brazil Brazil

Utilities Materials Telec. Services

9,20 5,82

0,54 1,18

56,62 8,63

18,0 19,1

7,90

0,61

12,36

11,6

Brazil

Materials

11,03

0,63

12,39

8,1

Brazil

Materials

4,23

0,55

11,52

28,8

897

Itaúsa Unibanco Group Eletrobrás Usiminias Tele Norte Leste Metalurgica Gerdau CSN-Cia Siderurgica Cemig

Brazil

4,53

0,81

10,81

9,0

987

Brasil Telecom

Brazil

6,21

0,38

9,07

9,8

1065 1091

CPFL Energia Braskem

Brazil Brazil

4,18 9,07

0,66 0,28

6,15 20,89

10,5 3,9

1308

Redecard

Brazil

0,73

0,39

7,53

10,3

1345

Embraer

Brazil

Materials Telec.Serv ices Utilities Chemicals Business Services Aerospace & Defense

3,91

0,29

7,47

8,3

Brazil

Banking

4,32

0,17

26,65

1,5

Brazil

Material

1,80

0,47

6,52

6,3

Brazil

Utilities

2,59

0,41

8,31

5,4

Brazil

Banking

2,07

0,51

11,51

2,5

Brazil

Materials

1,88

0,42

4,62

8,4

1,64

0,36

3,66

9,1

0,97

-0,06

8,89

8,5

4,84

0,39

4,54

3,8

2,52

0,58

5,43

4,5

6,50

0,04

5,07

4,9

1,32

0,33

2,38

6,9

10,23

0,09

5,19

2,0

2,11

0,27

2,74

8,3

0,20

0,13

0,73

11,0

76 85 132 175 233 492 736 760 766 809

1428 1487 1499 1501 1519

Banco de Brasil

Banco Nasso Caixa Votorantim C P SabespSaneamento Basico Banrisul Aracruz Celulose

Brazil

1548

Bradespar

Brazil

1646

CESP

Brazil

1733

Sadia

Brazil

1740

Copel CBD-Brasil Distribuicao

Brazil

1789

CCR

Brazil

1790

Ultrapar Participacoes

Brazil

1824

WEG

Brazil

1932

Bovespa Holding

Brazil

1782 Copyright © 2009. Diplomica Verlag. All rights reserved.

Company

Brazil

Diversified Financials Utilities Food Drink & Tabacco Utilities Food Markets Transporta tion Oil & Gas Operations Capital Goods Diversified Financials

Source: adapted from Forbes Magazine (2008)

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According to the magazine “Exame” – the most important business magazine in Brazil – the biggest sector in the Brazilian market is the chemistry and petro chemistry sector. The total turnover in this sector was US$ 109.017 million in 2005. Most of the companies are located in the state of São Paulo as well as in Rio Grande do Sul and Bahia. The Brazilian company Braskem is by far the biggest enterprise in this sector as per turnover in this year, followed by Copesul – a rather small company with relatively large turnover. Braskem is also listed on the Forbes Global 2000 of 2008 on rank 1091. Big international companies of this sector have a presence in the market, too. Among them are the Dutch company Bunge and BASF from Germany. Both are very strong in terms of turnover, number of employees as well as production plants. Figure 12: Largest companies in the chemistry and petro chemistry sector

Name

Turnover Mio US$

# employees

Brazil

$6.467,30

3.124

Brazil

$3.094,20

940

Origin

Netherlands

$2.144,90

3.436

Germany

$2.043,80

3.118

USA

$1.612,40

959

France

$1.162,30

2.793

Product category

Location (and no. Of Plants)

Petrochemistry 13

Petrochemistry

1

Sao Paulo, Rio Grande do Sul, Bahia, Alagoas Rio Grande do Sul

Sao Paulo, Minas Gerais, Santa Catarina, Rio Fertilizer 38 Grande do Sul, Bahia, Goias Sao Paulo, Rio de Janeiro, Plastics, varnish Paraná, Rio Grande do Sul, 9 agriculture Bahia, Pernambuco, Mato Grosso Petrochemistry 11

Petrochemistry

5

Sao Paulo, Bahia

Sao Paulo

Source: adapted from Exame (2008)

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Within the food and beverages sector – also includes cigarette manufacturers – the companies AmBev and Cargill play the leading role in Brazil, employing about 20.000 people, most of whom are located in the Americas. The total turnover in this sector was US$ 61.842 million. Figure 13 depicts the most important ficures. Although not many big international companies can be found in this sector it is still one of the largest in Brazil.

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Figure 13: Largest companies in the food and beverages sector

Name

Origin

Turnover Mio US$

# employees

Branch

Location (Plant)

Brazil

5.219,90

18.120

Beverages

Brazil, Latin America, USA, Canada

USA

5.095,30

23.000

Basic food

Everywhere

Source: adapted from Exame (2008)

In the following, the third largest industry in Brazil, the automotive and airplane industry, will be delineated. In 2005, this industry generated a total turnover of U$ 60.625 million. The most profitable companies in this sector were without doubt Volkswagen and General Motors – together these two companies generated almost one third of total turnover. One of the world’s largest aircraft manufacturers is the Brazilian company Embraer. It operates four plants in the São Paulo region and has been Brazil’s largest exporter between 1999 and 2001 and the second largest in 2002, 2003 and 2004. The company currently employs more than 17.389 people, 87.7% of whom are based in Brazil (embraer.com, 2009).

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Almost all of the companies listed in Figure 14 have a subsidiary or plant in São Paulo, some of them also in other Brazilian states like Rio de Janeiro or Minas Gerais. They work either in the automobile, trucks, motorcycles and auto parts or in the airplane industry. Altogether, this sectors yields a high potential for business consultancy ventures, especially with this many multinationals in the market.

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Figure 14: Largest companies in the automotive and airplane sector

Name

Origin

Turnover Mio US$

# employees

Product category

Location (and no. Of Plants)

Germany

$8.590,80

24.327

Automobile, trucks

5

Sao Paulo, Rio de Janeiro, Paraná

USA

$7.007,90

21.100

Automobile

3

Sao Paulo, Rio de Janeiro

Italy

$5.609,20

8.506

Germany

$3.932,00

N/A

Brazil

$3.386,20

USA

Automobile, trucks 1

Minas Gerais

Automobile, trucks

3

Sao Paulo, Minas Gerais

12.622

Airplanes

4

Sao Paulo

$3.080,00

9.521

Automobile, trucks

2

Japan

$2.172,00

6.968

Motorcycles

1

Germany

$1.994,00

11.838

Auto parts

9

Japan

$1.930,00

2.452

Automobile

2

Sao Paulo, Bahia Amazonia Sao Paulo, Paraná, Santa Catarina, Bahia Sao Paulo

Source: adapted from Exame (2008)

Figure 15 shows the engineering sector, which, on the other hand, generated a turnover of only US$ 4.696 million in 2005. This makes it one of the smallest sectors in the market, but, as illustrated in chapter 3.3.3., it also generates the highest growth rates. The Brazilian companies Weg and Embraco have the highest turnover in the engineering industry and maintain branches all over the world. Also, large European companies such as Atlas Schindler from Switzerland, Metso Minerals from Finland and Voith from Germany, play an important role in

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the sector and contribute a large share to total turnover. Brazil is well positioned in this booming industry and provides a proportionate number of employees.

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Figure 15: Largest companies in the engineering sector

Name

Turnover

Product category

Location (and no. Of Plants)

Mio US$

# employees

Brazil

$1.095,70

12.136

Brazil

$590,40

5.401

Compressors

6

Switzerland

$401,30

4.168

Elevators and maintenance

2

Sao Paulo, Paraná

Finland

$400,50

1.274

Mining technology

3

Sao Paulo

Germany

$330,10

N/A

Facilities for paper industry

2

Sao Paulo

Brazil

$319,90

2.891

Metalwork

1

Minas Gerais

Brazil

$263,80

2.330

9

Sao Paulo

Origin

Electrical engines, 12 facilities

Tools

Sao Paulo, Santa Catarina, Argentina, Mexico, Portugal, China Santa Catarina, Eslovaquia, China, USA

Source: adapted from Exame (2008)

In accordance with the UNCTAD country profile of Brazil, the largest home-based TNCs were Petrobras, Grupo Gerdau and Companhia Vale do Rio Doce-CVRD in the industries petroleum, metal and mining and quarring respectively, in 2002. Subsequently, the largest affiliates of foreign TNCs in Brazil were Albras-Aluminio Brasileiro from Japan, Volkswagen do Brasil from Germany and Grupo Royal Dutch Shell from the Netherlands/UK 3.3.2 Strongest regions in Brazil Brazil can be divided into five distinct macro regions - North, Northwest, Southwest, South and Central. Due to geographical reasons that made settlement in some regions rather impossible and led to migration to the coast line, the population concentrates around the South and Southwest regions of the country. The Equatorial line cuts through the state of Amapa in the North. The coastline

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stretches over almost 7400 km (Baedeker Brasilien, 2006, p. 26). The GDP distribution in Figure 16 clearly shows that the South and Southwest of the country are the strongest economic regions. In total Brazil is divided into 27 states – including federal district Brasília – that collectively form the Federal Republic of Brazil. The Southern states are Rio Grande do Sul, Paraná and Santa Catarina and the South Western states are São Paulo, Rio de Janeiro and Minas Gerais. In the year 2005, 18.6% of the total GDP originated in the South.

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Figure 16: Regional GDP distribution

South 1 8,6%

55 ,2 %

Southwest

Northwest

13 ,8 % 7,5%

Central

5% North

Source: adapted from IBGE (2009)

The distribution by state is as follows: •

Rio Grande do Sul (8.2%)

•

Paraná (6.4%)

•

Santa Catarina (4.0%)

With 55.2%, the biggest part of the country’s GDP, however, is generated in the Southwest: •

São Paulo (31.8%)

•

Rio de Janeiro (12.2%)

•

Minas Gerais (9.3%)

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The main reason for this can be attributed to geographical population dispersion. The most populous states – as of 2008 – are São Paulo (37,032,403), Minas Gerais (17,891,494) and Rio de Janeiro (14,391,282), followed closely by Bahia (13,070,250), Rio Grande do Sul (10,187,798) and Paraná (9,563,458). The relatively high density of companies in these areas explains that Brazil’s industry sector is concentrated here. As it can be seen on Map 2 the major Brazilian companies that were identified in chapter 3.3.1. are mostly located in the states of São Paulo, Minas Gerais, Paraná, Santa Catarina and Bahia. Many of them are international companies that have a

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subsidiary or plant that is placed in Brazil. The other two regions, North and Central, are only scarcly settled by firms. They are rural areas that provide poor infrastruture and an insufficient education system, both factors that are unattractive for companies. Map 2: Map of company locations in the South, Southwest and Northwest

Bahia Bosch Automotive

Ford

Automotive

Braskem Chemicals Dow Chemicals

Minas Gerais

Paraná

Bosch Automotive

Renautlt/ Nissan

Automotive

Sta. Catarina

Fiat

Volkswagen

GM

Automotive

Automotive

Sao Paulo

WEG

Usiminas Metal-mechanic

Electro-mechanic

Embraco

BASF

Compressors

Automotive

Chemicals

Embraer Aviation

Volkswagen Automotive

Bosch

Petrobrás Petroleum and Gas

Automotive

Sadia Food and Beverages

Daimler Chrysler Automotive

Source: adapted from Automotive Business (2008)

The economic indicators of industrial production derived from Brazil’s Central Bank are visualized in the Figure 17. It clearly pictures that São Paulo and Minas Gerais have generated more industrial products in 2008 than Rio de Janeiro and the Northeast region. In November 2008, the overall production already decreased which was due to the global financial crisis. Because of the country’s good

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economic standing and its relative immunity to US market behaviour, Brazil has not been hit as hard by the crisis as most of the other regions of the world. Production has been highest at last in the Northeast region, which can be attributed to the fact that most international and international operating companies are located rather in São Paulo, Rio de Janeiro and Minas Gerais and therefore had to suffer the consequences of the crisis.

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Figure 17: Industrial production by regions and states

160,00

Basis 2002 = 100

140,00 120,00 Sao Paulo

100,00 80,00

Rio de Janeiro

60,00

Minas Gerais

40,00

Northeast region

20,00 0,00 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan 2008

2009

Period

Source: adapted from Banco Central do Brasil (2008)

3.3.3 Most promising branches Considering the importance of the industrial sector the focus is held on the branches that operate here. As one of the most advanced industries in the Americas the Brazilian industry sector is very diverse. As already roughly established in chapter 3.3.1. and now displayed in figure 18, the major industries according to turnover are chemicals, food and automotives. The total turnover in the chemical sector amounted to US$ 109.017 billion in 2005. The food industry showed a slight upward trend with a turnover of US$ 61.842 billion and the automotive industry achieved a turnover of US$ 60.625 billion. On the other hand, this observation only reflects the total turnover, but does not account for the growth rate of each sector. In this respect, the telecommunications, electronics and engineering industry also play an important role in the country, although being the smallest ones. In fact, engineering and electronics generated the highest growth rate in the industry sector in 2005 with 18,3% and 12,4%, respectively. On the other hand, chemistry and petro chemistry – the biggest branch in the sector – Copyright © 2009. Diplomica Verlag. All rights reserved.

generated a negative growth rate at -9.2% (Exame, 2008).

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Figure 18: Turnover in the industry sector per branch (2005)

120.000,00 109.017,40 100.000,00

in billion US$

80.000,00 60.624,60

61.842,00

60.000,00 45.410,30 40.000,00 21.935,10 20.000,00 4.695,60 0,00 Engineering

Electronics

Telecommunication Automotive and Airplanes

Food

Chemistry and Petrochemistry

Source: adapted from Exame (2008)

3.4 Conclusion After having evaluated the Brazilian market an overall estimation as to the volume of the market can be made and hence deliver the revenue it might generate for a management consulting company. Since there is no exact data available it can only be an estimation, based on the turnover of the industry sector. In order to break even on the operating cash flow a company will have to invest about two years with ongoing activities in the market. This means with about two to three projects of an average duration of two years it is possible for a start-up consultancy to finance itself out of its operating cash flow. This appraisal has been given by the experts of the Delphi Study and will further be elaborated on in chapter five. Of course, it always depends on the strategic goal of the consultancy as well as the availability of its capital resources. Therefore a quantitative evaluation at this point is not feasible within the range of this study.

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It is important to notice that many international companies that play a role in this industry are present in Brazil. The acquisition of projects for international companies might be easier for a management consulting company, since those companies show openness towards foreign markets and therefore also to foreign products and services. However, this does not mean that local Brazilian companies are not willing to buy consulting services or are not open minded towards them. For an international consultancy it might be easier though to adress the internationally operating firms.

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The strongest regions in the country are the South and Southwest regions where most of the industrial production is concentrated. Growth in the industrial sector has been reasonable in the last years and the most important branches are engineering, electronics, automotive and chemistry. Although the turnover in the Engineering and Electronics sector is not as high as in the others, the growth rate is the highest in this industry. The most important companies in these branches are mostly Brazilian, like Braskem, Copesul or AmBev. The findings presented in the third chapter are relevant for providing an answer to the sub research question. Can Brazil serve as an entry port to Latin America for LEAN consulting businesses? In comparison with the other Latin American countries, Brazil stands out in multiple ways. Not only its geographical size but also its economic power dominates the region. It generates more than one third of the total GDP in Latin America, its labour force is steadily growing and the rate of corruption is lower than the Latin American average. Although the productivity level is by far lower than in the other BRIC countries, current governmental reforms lead towards market liberalization which in turn will be conducive to reach higher productivity levels. Yet the focus lies not on the BRIC countries, but on Latin America. Brazil is the leader of the Mercosul region, in size, productivity and market growth. Therefore, it would be the ideal entry port into the Latin American market. However, cultural and linguistical differences tend to isolate Brazil from the rest of Latin America and in general the country is not seen as a role model of a perfect economy. All these factors are important when considering investment opportunities to enter this market. Further elaboration on this sub research

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question and a comprehensive answer will follow in chapter six, after having conducted the empirical research via the Delphi Study which will provide more detailed information to this topic.

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4 LEAN CONSULTING "Give a man a fish, and you feed him for a day. Teach him how to fish and you feed him for a lifetime." (Lao Tzu) This citation reflects the typical consulting approach which is to support companies in their daily operations, helping them understand what they are doing and how to use their capacity and resources in a more efficient way. Through experience in a wide range of industries and geographical regions, consultants are able to identify performance issues and weaknesses with an outside-in perspective into the business with the aim to provide an approach to eliminate specific problems (gemba.com, 2007). This chapter is dedicated to the general definition of LEAN and its philosophy. Moreover, the differences and specialities of LEAN management in comparison with other consulting approaches are highlighted as well as any resulting implications.

4.1 Definition and Philosophy of LEAN The term LEAN is very broad and can be applied to various areas. The idea behind LEAN is a different way of thinking. The LEAN principles are understood as a philosophy and a way of thinking rather than a set of tools. They have to be fully understood in order to be implemented accurately. LEAN consulting companies offer expertise in the field of LEAN production which originates within the production plant and identifies and eliminates any waste. Consulting companies that operate according to the LEAN principles generally specialized in the production area (LEAN production), but many of them also have expertise in other

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areas of the organization (LEAN enterprise). After the oil shock in the fall of 1973 when OPEC quadrupled the price of crude oil practically overnight (Powell, 2003), the automobile industry was in crisis mode. As a result, the Toyota Motor Corporation developed a system that is known today worldwide as the Toyota Production System (TPS) or LEAN Production. “The main purpose of the system is to eliminate – through improvement activities – various kinds of waste thate is concealed within the company. Taiichi Ohno (Toyota)

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revealed seven kinds of waste, which lead a production company to lose money. They became known as “The 7 wastes”:

1. Overproduction: Producing ahead of what’s actually needed by the next process or customer. The worst form of waste because it contributes to the other six. 2. Waiting: Operators standing idle as machines cycle, equipment fails, needed parts fail to arrive, etc. 3. Conveyance: Moving parts and products unnecessarily, such as from a processing step to a warehouse to a subsequent processing step when the second step could be instead located immediately adjacent to the first step. 4. Processing: Performing unnecessary or incorrect processing, typically from poor tool or product design. 5. Inventory: Having more than the minimum stocks necessary for a precisely controlled pull system. 6. Motion: Operators making movements that are straining or unnecessary, such as looking for parts, tools, documents, etc. 7. Correction: Inspection, rework, and scrap. (LEAN Enterprise Institute, 2003, p.71) “Even during periods of slow growth, Toyota could still make a profit by decreasing costs through a production system that completely eliminated excessive inventory and work force” (Monden, 1998, p. 1). This could only be realised by the LEAN philosophy that demands to correct mistakes immediately before going on to the

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next production phase. Therefore costly rework in the end can be avoided. Stopping the line to eliminate mistakes right away is less costly and more importantly it makes the workers work even more carefully by letting them know that a mistake caused by them might stop the whole line. In contrast to this there is the mass production where the line has to be kept going under any circumstances and all errors will be corrected in the end. This leads to repeated errors and a massive amount of rework. The advantages of LEAN production are: •

Waste is substantially reduced or eliminated

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•

Costs fall, leading to higher profits

•

The work area is cleaner, less cluttered, and easier to operate in

•

There is less damage to equipment, and stocks

•

There are fewer accidents at work

(thetimes100.com.uk, 2009) The Toyota Production System has been copied as a role model throughout the world under various different names. The term “LEAN Production” was characterized by Womack, Jones and Ross from the MIT (Massachusettes Institute of Technology) in their study “The Machine that Changed the World” in 1990. The study intensified the understanding of the system by collecting data from the different automobile plants worldwide and elaborating the differences in production. In this way, it became more applicable to the automobile producers throughout the world. The data deducted from the study reflected the main features of the TPS and as a result became known under the term “LEAN Production”, oftentimes equated to Japanese production management (Bellmann, Haak, 2005, p. 197)

4.2 Typical practices applied In order to be able to communicate the essence of the Toyota Production System to employees and suppliers, Taiichi Ohno and Eiji Toyoda invented the Toyota House. They chose a house as a symbol because it had a familiar shape to everyone and also mediated stability. The roof of the house states the primary goals of the TPS: best quality, lowest costs and most reliable delivery by reducing waste (TMB, 2009). The two main pillars of the house are Just in Time and Jidoka.

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Toyota’s definition of Just in Time is “making only what is needed, when it is needed, and in the amount needed" (toyota.co.jp, 2009). This “can eliminate waste, inconsistencies, and unreasonable requirements, resulting in improved productivity” (toyota.co.jp, 2009). The second pillar of the Toyota House is Jidoka, a term that can be defined as “automation with a human touch” in this context (toyota.co.jp, 2009). Toyota uses machines with a build-in device that can decide on its own to stop the machine in case errors occur. Via a monitor one single operator can have visual control over many machines at the same time. It is important to visualize problems in order to better identify them at a glance and eliminate them directly. The two systems – JIT and Jidoka – stand for the

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Japanese business culture of continuous improvement. At the bottom of the Toyota House is the operational stability, including the supporting techniques such as Heijunka, Standard Work, TPM and Value Chain. Heijunka is a Japanese term and means “production levelling”. It can best be used when the fluctuation of demand is predictable and the idea behind it is to balance the production over a period of time in order to reduce waste. It is a very common LEAN manufacturing technique and sets the basis for all the other techniques which would not be successful without Heijunka (hubpages.com, 2009). Standard Work means to define the most efficient standards to produce a product in order to reduce scrap and rework. TPM is short for Total Productive Management and is best described as a method for detecting simple errors in production lines or product handling and eliminate them accordingly. The last term that is important for the operational stability is called Value Chain. This is a chain of activities that ensures a stable production process and guarantees sustainable quality. Figure 19: The Toyota House

Highest quality, low est cost, shortest lead tim e by elim inating wasted tim e and activity Jidoka

Just in tim e (JIT) •Takt tim e •One-piece flow •Pull system

Culture of continuous im provem ent

•M anual or autom atic line stop •Seperate operator and m achine activities •Errorproofing •Visual control

Operational Stability

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Heijunka

Standard W ork

TPM

Value Chain

Source: adapted from TMB (2009)

The application of these LEAN principles and the implementation of its philosophy lead to “more responsive manufacturing operations, shorter lead times, better

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customer service, improved cash flow and enhanced profitability” (QAD, 2005, p.6). LEAN Management can be applied to all areas of a company such as production, research and development, procurement, sales and marketing, human resources and even finance. Six basic strategies build the centrepiece of LEAN Management, around which everything is concentrated. Those six strategies embody sample solutions for the most important internal tasks of the organisation. Figure 21 highlights the six basic strategies of LEAN Management. Figure 20: LEAN Management: 6 basic Strategies

LEAN Management: 6 basic Strategies

Customer-oriented, lean manufacturing

Organisational quality in all areas

Constant material flow (Just in Time, Kanban)

Comprehensive Quality Management

Fast, safe development and implementation of new products

Acquire and preserve customers

Simultaneous Engineering

Proactive Marketing

Harmoniously intergrate the company into the society

Ability to grow and conquer

Company as a family

Strategic use of capital

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Source: adapted from Bösenberg and Metzen (1992)

The lead, almost all Japanese companies are following until today, is the “Never Ending Improvement on the Shop-Floor” (Wildemann, 1993, p. 154), which represents the official call for continuous improvement. The range of tools and techniques used in implementing the LEAN principles is wide and would require further explication. However, for the sake of answering the research questions of this study other topics also need to be considered.

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4.3 Differences of LEAN Management towards other methods The objective to increase efficiency within the company is the same all over the globe. The differences can be found in the approaches to enhance the performance of the organisation. The strategy of Western companies towards improvement within the organisation and in the production area has been technology-oriented. While Japanese companies assume the principle of Zero Defects and Zero Buffer, Western companies tried to compensate the competitive advantage of the Japanese by using computer-driven manufacturing technologies. The objective was to automise to the limits of what is technically and economically feasible. Thereby, the economic problems of the production and automation efforts were underestimated. In some areas, the approaches to improvements such as flexible manufacturing systems showed good results, but were not effective enough for the market. The problem of Western manufacturers was the attempt to perfect the system at once and not to proceed step by step. First, processes have to be facilitated and controlled before starting to automatise them and at last integrate them into the company’s information technology (Wildemann, 1993, p.204ff.). Innovation is the catchword of the Western economy. It aims at offering the best and most advanced products to the customer through reengineering and reinventing the wheel every time again. The difference of LEAN Management is the evolutionary as opposed to the innovative approach. Like already pointed out, small, controlled steps differentiate this way of thinking from others. The idea is to evolve existing concepts and schemes rather than to reinvent them. Through simplifications that are implemented once, other useful and efficient production advantages can be drawn. All these little improvements are called KAIZEN – Japanese for improvement. Figure 22 helps to understand the meaning of the

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word for the Japanese.

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Figure 21: Signification of KAIZEN

KAI = Change

ZEN = Good (to the better)

KAIZEN = Change to the better

Source: adapted from Porsche Consulting (2008)

LEAN Management approaches can be seen as more sustainable as others. The philosophy of evolutionary development clearly shows a reference to the nature of all beings. In its contrast stand reengineering and innovations which are radical change approaches including massive organizational reconstruction. “Lean thinking depends on and gives priority to building knowledge and capability, which directly contrast with forms of reengineering that discount or disregard such factors.” (Murman, 2002, p. 110f.) Figure 23 depicts the direct differences between the LEAN Management approach towards the traditional, innovative one. Figure 22: Direct comparison of Innovation with LEAN

Continuous improvements in small steps

Innovative improvements in big steps Improve ment

Improve ment

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Time

Time

Source: adapted from Porsche Consulting (2008)

The criticisms of innovative improvements in big steps include a long planning horizon, high investments, little integration of workmen, big steps, and often missing objectives. On the other hand, continuous improvements in small steps, applied within LEAN Management benefit from a shorter planning horizon, only

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small or zero investments, intensive teamwork efforts with the workforce, small steps that leave the possibility for amendments, and a continuous course of action towards the objective. The practice of KAIZEN can be characterized by five important features: •

Improvement out of the product’s perspective

•

Value adding and waste are separated

•

Standards are the basis for improvements

•

The downstream process is the customer

•

Crisis are seen as a chance

Having elaborated on the special character of the LEAN philosophy, the following chapter leads to the LEAN business in Brazil. This will then be reflected later on in a more thorough response to the research question.

4.4 Management consulting companies in Brazil The growth rate of the Brazilian consulting market can be associated with the growing trend of the private sector to outsource activities in order to reduce labour costs. Also the need to achieve global performance levels by small and medium sized companies that face growing competition in their home markets is an important factor (Rocha, 2003, p. 2). Through the privatization boom in the nineties and the commitment towards growth and efficiency, more and more companies decided to hire an external consultancy in an effort to boost output. Consultancies usually have a wider range of experience through various projects in different companies and branches which helps to know where to look for problems. They also have the distance to foster decisions that the management board would not have taken.

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Map 3 pictures the Consulting landscape in Brazil, displaying Brazil’s most important regions for the industry sector. The concentration of consultancies in São Paulo is striking, albeit not surprising. Also, the similarity of company locations to the ones of the industry sector (s. Chapter 3.3.2) is interesting to notice. A plausible explanation would be strategic planning and study of the market by consulting companies prior to opening their business.

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Map 3: Map of Consulting landscape in Brazil

6

1

Porto Alegre

2

Curitiba

3

Sao Paulo

4

Rio de Janeiro

5

Belo Horizonte

6

Brasilia

5

3

4

2

1

Source: adapted from Porsche Consulting (2008)

4.4.1 LEAN consulting companies in Brazil After the proven success of the LEAN production system by Toyota and later on by other car manufacturers throughout the world, the approach became more and more popular with companies, outside of the automobile sector. The system can be applied to various areas like finance, human resources or sales and marketing (LEAN enterprise). Waste can be found anywhere in a company and not only in the production unit. It is not easy to identify waste as it requires experience and indepth knowledge of the topic and many companies are not able to adapt to the LEAN principles on their own initiative. They need support by external consultancies that specialise in this area can therefore identify and eliminate the problems in a short period of time.

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Until the late nineties, not one European consulting company had entered the Brazilian market (Rocha, 2003, p. 2). Privatization had already begun as a response to the fiscal pressures on the public sector. By this, the burden on the public sector was reduced, at the same time increasing the tax revenues when businesses performed well. Governmental reforms and privatisation pushed the market forward and led to an increase in the number of consulting companies in the country.

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LEAN consulting in Brazil is still a rather small market. However, almost all big consulting companies throughout the world have a subsidiary in Brazil. Some of the most competitive management consulting companies that offer LEAN consulting in Brazil are: •

LEAN Institute

•

CGE

•

Hominiss

•

GS Consulting Service

•

Gemba Research Consulting

•

LEAN Consultores

•

Taktica

•

Nortegubisian

•

TBM Brasil

•

Honsha

•

LEAN Way Consulting

•

Hinshitsu

Some of these are Brazilian consulting companies, like “Hominiss” or “LEAN Consultores”, but most of them operate internationally. Nonetheless, all these companies are offering LEAN Consulting services in the Brazilian market. They are primarily located in São Paulo and sometimes also in other cities in Brazil. The range of services covers training and research of LEAN thinking regarding settingup and planning of production, logistics and supply chain management, KAIZEN and change management workshops, KVP and TPM training and introduction into the TPS principles and the LEAN Six Sigma. The target industries in which these companies operate are textile, autmotive, engineering, chemistry, retail and the food industry. However wide the range of services reaches, the only company that additionally offers training via a LEAN academy is the LEAN Institute Brasil (LIB). A LEAN academy is the place where a consultancy offers professional workshops and

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trainings. All kinds of special equipment for the simulation of the various methods and tools can be found in there. There are 16 institutes that offer similar services like the LIB around the globe, which united in 2007 to create the Lean Global Network (LGN). Its aim is to develop and optimize the LEAN Management concept and tools further, in order to apply the methods also to other branches and processes such as services and administration. Furthermore, LNG wants to disseminate the LEAN thinking through various activities that promote the idea, such as workshops or congress (lean.org.br, 2009). Thus the LEAN training market in Brazil is still very small and could offer opportunities for a management

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consulting company. In addition to consulting services, training programs could be offered, which may lead to follow up projects. 4.4.2 The IBCO The IBCO (Instituto Brasileiro dos Consultores de Organizaçao) is a non-profit institute that was founded in order to promote ethical standards and quality in the Brazilian consulting business. Its members compromise of management consultants and institutional members who finance the activities of the IBCO throughout the country. Before becoming a member of the IBCO, a company must undergo various tests to verify their proficiency, experience and practices. The organization has high standards and strict guidelines as well as a code of ethics, which restricts the companies to certain actions (ibco.org.br, 2008). The IBCO is still in expansion as it is a rather young institute. According to a study of the IBCO that was conducted in 2002 with a participation of 118 Brazilian consultancies, 86% of them agreed that the competition in the consulting market increased lately and 82% stated that the pressure to lower their prices rises steadily. Profit margins decrease (77%) and quality and ethics have become a very competitive factor (80%). However, less than half of the respondents (48%) agreed that age and experience would be a decisive factor for their clients as well as senior consultants (48%) (Rocha, 2003).

4.5 Reasons to choose an external consultancy A company can only perform as much as its employees. But sometimes abilities are limited and there is the need to seek external help. Consultants are experts in various areas like finance, law or IT and they can train the staff especially in areas where a new software or a new system is involved, for instance.

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It is often more cost-effective for a company to hire an expert for a short period of time to train the staff than to put someone on full-time payroll. Also an external point of view is helpful to take objective decisions that involve admitting that something was going wrong beforehand. Consultants are more objective since they are not directly involved in the company’s success or failure. Internal problems are usually better resolved by external consultants, as they serve as an unbiased party with the interest to come to mutually agreeable solution. In times of crisis consultants are often called for damage control in situations that the staff would not be able to handle adequately on its own (Mattern, 2006).

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4.5.1 Criteria to choose consulting services In order to enter a market, it is important to know what the potential clients look for. Adapting to the client’s needs can already be the entrance into the market. Once the decision to hire a consulting company is taken there are still many steps involved until the contract is signed. Companies base their decision for choosing a particular consulting company on various criteria. According to a poll at the IBCO, conducted in 2002, the most important criterion for firms when hiring a consulting company is upon recommendation with 72.03%, followed by technical skills (44.07%), credibility/ market image (43.22) and fees (32.2%). Working methods with 5.08% and consultant’s expertise with 3.39% are rather unimportant for the decision-making. Figure 23: Criteria used by clients to choose consulting services

Consultants expertise

3,39

Criteria

Working methods

5,08 32,2

Fees Credibility/ Market image

43,22

Technical skills

44,07 72,03

Upon recommendation 0

10

20

30

40

50

60

70

80

% Source: adapted from the IBCO (2002)

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However, the data used in these studies is not entirely reliable. Collecting data in this area is extremely difficult and despite the efforts of the IBCO the polls represent only a small sample (Rocha, 2003, p. 1). 4.5.2 Average consulting fees Hiring a consulting company is costly. Not only regarding the fee that companies pay for consulting services, but also the time they have to spend for workshops and trainings and, if necessary, for restructuring their workplace. Employees that would have to fulfill other tasks need to be available and economic opportunity loss has to result in a higher profit in the end.

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The consulting fees vary according to company size and expertise of the consultant. In Brazil, a senior consultant in an international consulting company costs around 1.300€ per day, whereas a junior consultant in a small national company costs only around 250€ per day. Figure 24: Average consulting fees in Brazil

1400

1300

1200 1000

900

in €

800 800 600 600 400

Smaller companies (up to 50 employees) Global companies (more than 100 employees)

500 250

200 0 Junior Consultant

Consultant

Senior Consultant

Source: adapted from the IBCO (2002)

As we learned, a company will consider consulting services only on fourth place according to its fees. A suggestion by an acquaintance is most important for the decision making and also technical skills and market image play a role. Having decided to hire an external consultancy, the company already made the decision to invest money into progress and improvement. Therefore, the selected management consulting company can charge a higher fee, as long as it provides for good services on a high level of quality that is then spread by word of mouth. This is the best marketing tool that can be used in this business.

4.6 Conclusion

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This chapter aimed at giving the reader an idea of the LEAN philosophy and the excitement with which it captures its environment. It is a complete different approach in oder to enhance efficiency in an organization and this is the specialty about it. LEAN management is applicable in all areas of operation, not only in the production, and thus it is able to address a wide range of companies in various branches.

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The examination of the LEAN market has shown that it has been growing and developing in the past decades, but is still very young and in progress. All branches that are interesting for a management consulting company are present in Brazil and have demonstrated significant growth lately (as of 2008). Some Brazilian companies have even developed to market leaders in their section and many European and American consulting companies have already expanded into the Brazilian consulting market. The IBCO is still in the development phase, but can already be used as a helpful source for explicit information. Within a few years this organization might be the first adress for consultancies in Brazil. Furthermore it could be identified that only one of the LEAN consulting companies is dealing with training instead of consulting services. Thus there is only low competition present in the market for a LEAN academy or any other consulting service that provides training and this market might have growth potential.

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Concluding this chapter, on the basis of the facts presented the LEAN market is definitely a suitable market to invest in. The consulting landscape is still growing and competition present but not too strong. As a global player in the LEAN market the appropriate fees can be charged and since generally many companies are willing to work according to the LEAN philosophy and are seeking for help the market will continue to grow in the future.

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5 MARKET ENTRY STRATEGY The previous chapters have built the theoretical framework for the topic. The following section develops the market entry strategy, which constitutes the main part of the book. A market entry strategy is a strategic plan that involves different steps and serves to enter a new or existing market. It involves an evaluation of the target market and a thorough analysis of the potential competitors and possible customers. This chapter is divided into two parts. The first part will concentrate on the classical theory of market entry. The second part will deal with empirical findings that are collected via a Delphi study. This study is the crucial section of the study and contributes to the strategy formulation. The classical approach is compared to the empirical findings in order to identify differences and similarities between the two approaches.

5.1 Overview of the classical market entry strategy The classical approach of market entry is to follow a specific structure and guidelines to develop a strategy that is suitable for the company and its products. Lymbersky argues that “effective international strategic management enables a company to compete successfully in foreign markets and is a comprehensive framework for achieving a firm’s fundamental goals.” (Lymbersky, 2008, p.34). A typical structure for market entry involves the analysis of the foreign market that the firm is planning to enter. The market has to be segmented and its opportunities need to be identified and analysed. A thorough analysis is followed by the strategy development, whereby the entry strategy has to be decided and the product portfolio determined. During this phase a country’s specific suitability has to be

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taken into consideration before any decision can be made. Added value has to be built via communication distribution and pricing. Hereby, enabling technologies offer helpful supporting tools.

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Figure 25: Structure of market entry

Structure Analysis

§ Understand the environmental influences on a firm‘s international markets § Segment international markets, identify and analyse opportunities

Strategy Development

§ Develop appropriate international marketing strategies § Decide on market entry strategies and determine product portfolio

Implementation

§ Build added value through communication, distribution and pricing § Using enabling technologies

Source: adapted from Doole and Lowe (2007)

5.1.1 Methods for market entry As explained previously, a company that plans to enter a foreign market has to make certain preliminary strategic decisions on which entry mode to use for the market. The most frequent modes of foreign market entry are exporting, licensing, joint venture and sole venture. According to Agarwal and Ramaswami the factors that influence the decision making in this process can be classified into three categories. One is the ownership advantages of a firm, the second is the location advantages of the market and the third one is the internationalization advantages of integrating transaction (Agarwal, Ramaswami, 1992, p.1). Each of these

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categories have to be analysed and evaluated. Often, companies seek to make a decision without prior formulation of the actual objective and vision. This can be problematic and in some cases lead to mismanagment and false desicion-making. Figure 26 explains further differentiation among the market entry modes. Exporting is the only entry mode that allows for production in the home country, hence, utilizing only low resource development. At the same time the control and foreign market presence is also very low. The contrasting entry mode is acquisition or wholly-owned subsidiaries, which require high resource development as well as offering high control and foreign market presence.

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Figure 26: Market Entry Alternatives

high

Control and Foreign market presence

Joint Ventures

Acquisition/ Wholly-Owned Subsidiary

Francising Licensing Direct Exporting Indirect Exporting

Production in the Home Market

low low

Production Abroad

Resource Development

high

Source: Adapted from Lechner/Müller-Stewens (1997)

Exporting appears in two different forms, namely direct exporting and indirect exporting. It is a form of market entry and means producing a certain product and transport it to a foreign country in order to sell it. Direct exporting is used for a reasonably accessible market. The product is directly promoted to the client via direct marketing and communication channels. On the other hand, indirect exporting is normally used to enter new markets. In order to sell a product, a company enters into an agreement with a distributor, an agent or a trading house. These intermediates provide support to sell the product in the target market. The

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advantages of exporting are minimized risk and investment through the use of existing facilities and a high speed of market entry. On the other hand, trade barriers and tariffs as well as transportation all add costs and the company disposes of only limited access to local information (Kotler, 1994, p. 416). 5.1.1.1 Contractual agreements Contractual agreements between two companies located in two different countries are long-term, nonequity associations. They include licensing, franchising and joint ventures (Cateora, Graham, 2002, p. 332).

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When deciding for licensing, the company that wants to enter a target country is granted a license or permission to use intellectual property rights of the licensor. This property is intangible and involves trademarks, patents or production techniques. The company, the licensee, pays a fee or royalty that entitles it to use the intangible property (quickmba.com, 2009). These fees range from 5% to 25% of the wholesale price. It is often used by manufacturers who want to enter foreign markets in which they do not possess any expertise. In addition to the advantages provided by exporting, licensing also has the benefit of delivering a high ROI in a relatively short amount of time. However, two negative aspects have to be taken into account. The licensee may become a competitor and the lack of control over the use of assets. Another disadvantage is the limited period of license validation that can cause problems to the licensor (quickmba.com, 2009). The European Franchise Federation (EFF) describes franchising as "a mode of distributing goods or services based on a network of independent partners” (efffranchise.com, 2009). A franchise agreement specifies the tangible and intangible goods the franchisee attains exclusive control over, as well as the extent to which the franchisee will be supported by the franchisor. Usually, national or international advertising, training and other support services are made available by the franchisor. Two or more parties entering a temporary partnership or a conglomerate is called joint venture (JV). The parties enter into a contractual agreement to share profit, loss and control as well as risk. Joint ventures are usually formed when opening up new markets and for the development of new technologies that would otherwise not be financially feasible. In some cases, there are government restrictions on foreign ownership, but these can be overcome within a joint venture. Additionally, the local company can provide skills, resources, distribution network and its brand name and in total there will be a combination of the resources of two

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companies. This in turn requires less investment than exporting or licensing. Nevertheless, there are also disadvantages of a joint venture. Due to dilution of control it is difficult to manage and despite the lower cost of investment it contains more risk than exporting or licensing. When knowledge spills over the alleged partner might become a competitor (Cateora, Graham, 2002, p. 336). 5.1.1.2 Sole Venture A sole venture is a 100 percent affiliate of the company. It may be realized either through the acquisition of an existing entity or the establishment of a new

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enterprise. Resources like capital, technology and personnel are transferred to the target country. “Direct ownership provides a high degree of control in the operations and the ability to better know the consumers and competitive environment” (quickmba.com, 2009). It minimizes the risk of knowledge spillover and the company can be seen as an insider. Specialized skills can be applied in a better way and the political risk can be kept low. Nonetheless, a sole venture carries higher risk than the other entry modes. It requires more resources and commitment by the management and local resources may be difficult to manage. 5.1.2 Influencing factors for the entry mode decision The choice of a company to enter a certain market or target country is preceded by the analysis of a number of internal and external factors like designated in the Figure 27. Figure 27: Factors in the Entry Mode Decision External Factors

Target Country Market Factors

Target Country Environmental Factors

Target Country Production Factors

Home Country Factors

Foreign market entry mode decision Company Resource/ Commitment Factors

Company Product Factors

Internal Factors

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Source: adapted from Root (1994)

The external factors market, production and environment in the target as well as in the home country are usually not affected by management decisions. They are seen as parameters for the entry mode decision, but remain external to the company. The target market is categorized into its size, competitive structure and the availability and quality of the local marketing infrastructure. All three are important regarding the entry mode decision. For a small market usually an entry

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mode with a low break even sales volume is chosen, e.g. an agent or a licensing agreement, whereas for a larger market an entry mode with high break even sales volume, such as a branch or subsidiary can be justified. Production factors play a role for the decision making with regards to the quality, quantity and cost of raw materials, labor, and energy. Furthermore, the cost and quality of economic infrastructure, such as port facilities or communication are decisive. Environmental factors in the entry mode decision are for instance governmental policies and regulations, geographical and cultural distance, economic size and performance level as well as the country’s external economic relations. Depending on the internal factors product and resource/commitment the company will respond differently to the external factors. The product may be highly differentiated or technologically intensive. In case the product is a service, such as management consulting, the product cannot be produced in one country and exported to another. Therefore, the company must perform the service in the target country. This can be done by training local companies, using the franchising model, or by setting up branches and subsidiaries. Resource and commitment are joined together, because without the necessary commitment a company can have numerous amounts of resources but still have the willingness to use them (Root, 1994, p. 8ff.). 5.1.3 Special characteristics of services The topic of the book is formulated for a management consulting company, offering services for the foreign market Brazil. This chapter points out the special characteristics and differences of the service business towards the product business.

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Market strategies for services are more difficult to manage. In the product business, the product is a tangible good that is usually standardized, thus facilitating production. The consumer then sees the product, buys it and leaves. In the service business though there are more elements attached to it. The customer can only see the physical environment such as the building, equipment or a contact person. The whole organization system and production process that is standing behind the service remains invisible. Also production and consumption of the service occur almost simultaneously. Thus the outcome of the service is difficult to measure as it depends on various factors. This has to be taken into consideration regarding various decisions like product pricing, advertising strategy, quality formulation or entry mode decisions.

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With reference to Cateora and Graham (2002), the chosen entry mode for most service companies is licensing, franchising or direct investment. The creation and .

consumption of a service cannot be separated and therefore those are the only suitable alternatives for market entry. Furthermore trade in services usually involves personal contacts, hence culture plays a more important role in this business sector than in merchandise trade. The service market is extremely dynamic, due to the movement towards globalization, but also because of the increasing number of services offered in the market which leads to higher demand of quality and service range from the customers. The service is chosen on the basis of perceived service and expected service. “If the perceived service falls below the expected service, customers lose interest in the provider (Kotler, 1994, p. 474). On the other hand if the perceived service is on the same level or even higher than the expected service, the customer might use the service provider again or also make recommendations by word of mouth. Concluding it can be said that services have to be treated differently in some areas of strategy development than products. When operating in the service business other entry modes become relevant and also the service marketing differs from the product marketing in various ways such as pricing decisions or the use of advertising.

5.2 Market entry strategy into the LEAN consulting market In this part of the book, Brazil as the foreign market has already been analysed, segmented and its potential identified. In the following the possible market entry modes will be presented and Porter’s Five-Forces Model will help determining the competition and product portfolio by analysing the so called Five Forces that influence competition in the market. The country specific business culture, as well as some issues that have to be taken into consideration before entering the

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market, help formulating the strategy and already give ideas on how to implement them. 5.2.1 Competition “The essence of strategy formulation is coping with competition” (Porter, 1991, p.11). According to Porter the state of competition in an industry depends on five basic forces (Porter, 1998, p.21). As crucial part of a market entry strategy, competition analysis means knowing ones competitors, especially theirs strengths

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and weaknesses. This is essential before taking steps into the market. In today’s marketplace competing with one’s counterparts becomes more relevant each day. Companies expand, grow and enter new markets and competition is increasing as host countries are invaded by foreign companies. The five forces established by Porter’s model are the threat of new entrants, the bargaining power of customers, the bargaining power of suppliers, the threat of substitute products of services and the industry itself, herewith jockeying for a positions among current competitors, as displayed in Figure 28. The opportunity for superior performance grows, the weaker these forces are altogether. The goal of company should be to defend itself against these forces, or to find a position where it can influence them best in its own favour. In order to be successful a good strategist has to conduct an in-depth analysis of each single source (Porter, 1991, p.12). This sub-chapter will concentrate on each of these five forces with regards to the LEAN consulting market in Brazil and hereby analyse its strengths and weaknesses. Figure 28: Forces Governing Competition in an industry

Bargaining Synchronisation power of customers

Threat of new Wertorientierung entrants The industry

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Bargaining power of suppliers Transparenz

Kernelemente Jockeying for position among eines Schlanken current Unternehmens competitors

Threat of subsitute products or Perfektion services

Source: adapted from Porter (1991)

The threat of new entrants can be determined by looking at the barriers that exist in the market and how a potential newcomer will react upon them. There are

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different approaches on how to define barriers to market entry. Bain, who is one of the pioneers in industrial economy, argues that barriers to market entry are “the extend to which, in the long run, established firms can elevate their selling prices above the minimal average costs of production and distribution (those costs associated with operation at optimal scales) without inducing potential entrants to enter the industry” (Bain, 1968, p. 252) The problem of Bain’s definition is that if looked at it from a practical angle it can be problematic to talk about long term. In sectors that are characterized by rapid changes there will always be market entry and exit. He also tried to define market entry barriers by the results they should generate. In fact, this should rather be seen as a definition of the level of market entry rather than the barriers themselves (Borrmann, Finsinger, Zauner, 2003, p. 128). Even though there are numerous approaches to this topic, in order to keep the length of the book within a reasonable scope, for the competition analysis Porter’s Five-Forces Model will be utilized. The model is used here as a framework with crucial structural features that determine the nature of competition within the consulting industry in Brazil. Porter argued that there are six major sources of barriers to entry, which will be applied in the following. •

Economies of scale do not play a role in this case. As consulting is project work, each client receives an individual and customized service. Although economies of scale can not only be used in the field of production, but also in almost every part of a business, it is no key factor of success that can create an advantage in this business area.

•

Product differentiation on the other hand plays a major role. Consulting companies offer various different services and thus distinguish from one

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another. To differentiate from the competitors and possible new entrants the management consulting company has to build up brand identification. This creates an automatic barrier by forcing their competitors to find ways to compete customer loyalty - thus spending a lot of money. Especially in a business where confidential data are handled and the customer reveals a lot of personal information about the company it is important to build on customer care and to establish a network of loyal and satisfied clients who are willing to recommend one’s services. LEAN Management can be seen as the USP of the company and thus clearly differenciate from other

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management consulting companies. The booming market of LEAN in Brazil offers a huge advantage in this kind of product differenciation. •

Capital requirements create a barrier to entry in so far as there is the need to invest large amounts of money in order to be competitive in the market. Entering the Brazilian consulting market does require some capital, but it depends on the mode of entry, chosen by the Management Board, how much it will be. For a consulting company there is no need to build a factory for production and it also does not make a lot of sense to acquire large office buildings, equipment and staff at the beginning. There are of course costs involved in opening a business, but the level of investment can be kept rather low.

•

Cost disadvantages are determined by e.g. favourable locations, government subsidies, proprietary technology or the effects of the learning curve of a company. Those advantages or disadvantages are independent from the size of the company. Some of them can be enforced by law and some of them are subject to good networking and friends, money and also a certain amount of luck. In this context a clear statement cannot be made.

•

Access to distribution channels – distribution channels are ways on which a certain product or service enters a specific market. Large and complex products are often supplied directly to the customer. In this case any other choice of distribution, for instance via an intermediary such as a retailer, would not be useful. A consulting company may use a partner as intermediary for market entry support. Determinant factors such as costs and capacity decide on the level of access to this kind of distribution channel.

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•

Government policies can be a limitation or even prevention to business entry. Depending on the industry, limited access to raw materials or certain license requirements can have a devastating effect on the new entrant. The consulting business requires, despite from a business licence and a working allowance, no further regulations. However, without a legal guide no newcomers should start a business in Brazil. This will be elaborated further in one of the following chapters.

Should some of these conditions change, the threat of entry also changes. A market is always moving and new technologies or the introduction of new methods can lead the market to change even faster. Further to note is “the potential rival’s

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expectations about the reaction of existing competitors” (Porter, 1991, p.15). If they expect their competitors to fight back by excessive production, price reduction or unused marketing channels they are less likely to enter the market. The next force defined by Porter is the bargaining power of customers. Customers are able to compete with the industry by demanding higher quality, more service or by forcing down prices. Customers are usually segmented into different groups, each group having a relative importance of their purchasing power to the industry. A company seeks to find the buyer group who possesse the least power to influence the industry, hence buyer selection. In the consulting business not a high number of customers count but rather the amount each single customer is spending on a project. This decision is based on various criteria, like already established in a former chapter of this book (s. 4.4.1.). According to that study, the most important criteria for a customer to choose consulting services is upon recommendations given by former customer, colleagues or friends. This criterion is followed by credibility/market image and technical skills. This will also later be elaborated on in the Delphi Study, coming to the same conclusion. Customers are making their choice according to references. And in order to gain these references a consulting company must offer very good service of superior quality to an unbeatable price. The customer has the power to decide whether or not to hire the consultancy. In this context networking plays an important role. Like also further explained in the chapter “Business communication”, the business in Brazil is based on personal relationships and networking. The force governing this competition is the customer’s power and the key to winning the customer is building up a solid relationship and network. Bargaining power of suppliers – Porter distinguishes between strong suppliers

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and strong buyers, who both can exert power on the industry. Suppliers can do so by raising their prices, thus making it difficult for companies to keep their prices for a product, or having to reduce the quality of purchased goods and services. Therefore they are able to affect a whole industry. For the entry decision of a consulting company the bargaining power of suppliers plays a minor role. The consulting company is not working with any kind of suppliers. The only effect suppliers could have on them would be their power to influence a whole industry, therefore forcing prospective clients to cost reduction and leading to a decrease in acquisition for new projects.

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The threat of substitute products or services should not be underestimated. Substitute products are able to limit the potential of a whole industry, decreasing earnings and growth. Unless the substitute product is of the same or higher quality or can differentiate it in any way there will be a substantial effect on the industry. A collective response of all industry participants to those kinds of products – such as quality improvement or marketing efforts – might be effective in this case. Jockeying for position among current competitors – or in other words rivalry – uses certain tactics to compete, such as heavy advertising or price competition (Porter, 1991, p.20). In order for rivalry to be present some factors have to be fulfilled. The number of competitors has to be high as well as they should be equally balanced in size and power. Furthermore the industry needs to show slow growth which “turns competition into a market share game” (Porter, 1998, p. 18). High fixed or storage costs force companies to price cuts in order to fill their capacity. If the product or services offered lack of variation, consumers do not have many choices and make their decision based on quality, service and price. This can also result in heavy price battles. Overcapacity resulting from augmentation in large increments – economies of scale - leads a company to drop their prices. Another factor that determines rivalry is the diversification of the competitors who show different strategies, origins and personalities. Those diverse competitors add interesting methods of competition to the “game”. Rivalry becomes even stronger when companies have to achieve strategic goals. In order to achieve these goals some firms are partly using extreme tools. Those tactics are usually not common within the consulting business. Consultancies win their customers over with their excellent service and professional work they deliver. Besides, most customers chose consultancies on the basis of recommendations, like already mentioned. In the end this is the most useful marketing tool. 5.2.2 Opportunities and threats

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These five forces definded by Porter influence the strategy formulation of a consulting company that wants to enter the Brazilian market. Once the forces have been diagnosed the company finds itself in a position to identify its strengths and weaknesses relatively to the industry. From a strategic standpoint these strengths and weaknesses are to be found vis-á-vis the underlying causes of each force (Porter, 1991, p.21). This means after a closer look on each single of these five forces a company is able to establish which of them strength is and which counts as weakness. “An effective competitive strategy takes offensive or defensive

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action in order to create a defendable position against the five competitive forces.” (Porter, 1998, p.28), I.e., the company’s strategic objective should be to position itself in the best possible way within an industry in order to defend itself against these forces. A SWOT analysis following the Porter model would not be suggestive here, as a company’s internal environment – its strength and weaknesses – has to be established in direct relation to a specific company. As for the external environment, its opportunities and threats can be identified. After the collection, analysis and evaluation of all previous data, facts and figures from Brazil it is now time to assess the opportunities and threats which a business start-up might face. The opportunities of the LEAN consulting market in Brazil have already been established. It is a specialized product and a growing market. The tendency of the industry towards external consultancies has shown an increasing trend in the past two decades and also the growth of FDI into the market can be interpreted positively by all means. On the other side there are the external environmental threats. The following question will guide through the elaboration of these threats. •

What obstacles do you face?

Obstacles to face are regulations of the Brazilian law when opening the business, especially the Brazilian labour law since it is a rather intransparent system. •

What is your competition doing that you should be worried about?

Competiton has already been elaborated on via Porter’s Five-Forces Model. A short input on this matter at this point would be the rather inagressive way consulting companies are currently competing on the market. Good quality work and the right business partner is the key to success.

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•

Is changing technology threatening your position?

Of course it is important to have the latest technological advances at hand when operating in multinational companies. Computer, email and mobile phones are a must in today’s business world without which no businessman or -woman can interact with the client in a proper way. The service that is offered by the Consultancy can thus be conducted more easily and efficiently. However, expertise and professionalism are indispensable and the latest

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technologies cannot cover their lack. Technology as a product itself does not threaten the position of the service provider management consultancy. •

Do you have bad debt or cash flow problems?

Obviously this question cannot be answered since in the context of the study at hand no specific consulting company is mentioned. Nevertheless it shall be mentioned that with bad debt or cash flow problems a company should consider not taking the step into internationalisation at first. Other factors to be considered might be currency fluctuations that influence the investment decision or certain taxation restrictions through passes of legislations by the government’s monetary policy that in turn reduce the earnings of the company. At the moment the inflation rate is at a moderate level with 4.2% and is expected to fall to 3.5% by year-end (economist.com, 2009). The current country risk report by the Economist Intelligence Unit shows stable figures for the country’s sovereign, currency and banking sector risks (EIU, 2008, p.1). 5.2.3 Framework for strategy formulation Implementing the strategy is about the development of necessary tactics to achieve the explicated goals. (cf. Lymbersky, 2008, p.34). The goals regarding the topic of this book have been formulated in the preceding chapter. The focus lies on a strategy formulation for the LEAN market in Brazil. In this context a framework will be provided, under which a company can formulate its very own specific market entry strategy. Like previously established the LEAN market in Brazil offers already a range of competitive firms. National as well as international companies which are offering consulting services according to the LEAN principles are present in the market. They offer a wide range of services in trainings of LEAN thinking tools for various different branches. Also the LEAN academy mentioned earlier is an idea that could

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be continued, since there exist only one company that disposes of such an academy in Brazil. For the acquisition of a new project nothing is more important than personal business contacts and networking. Through associations and organizations like the IBCO for instance, contacts to other Consultancies can be established, leading to probable further business contacts. Also important for consultancies to establish a network is presence in the desired market. This can be reached by screening the

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market for interesting companies and subsequently visiting these companies at fairs where they are exhibiting. The internet website www.eventseye.com is the most reliable and complete free web source for displaying exhibitions and trade shows worldwide. They can be searched by name, theme, date, location, organizer or by keyword. Interesting companies for LEAN are the ones located in the industry sector like engineering, electronics or automotives. In chapter three specific branches in the industry sector and their respective companies have already been listed. Especially interesting in the context of LEAN is the immense presence of Japanese population in São Paulo. Since their arrival in Brazil about a century ago the country is now, with more than 1.5 million people, home to the largest Japanese community outside of Japan. Most of them are living and working in São Paulo. This gives rise to the thought turning to them for support and partnership regarding LEAN consulting. Since the philosophy originates in Japan, some of the knowledge might have been brought along with them. In 2008 there took place a Brazil-Japan Cultural Week in São Paulo, which offered amongst a variety of workshops, symposiums and Japanese art also a special speech about LEAN production (centenario2008.com.br, 2008). Contacts with the right people in the business can be made here, for instance in order to offer a Japan Seminar or Round Table discussions. 5.2.3.1 Business communication Doing business in Brazil is different than in other countries. The Brazilians are described as very expressive and passionate speakers. They are proud of their country and “consider themselves as independent from the rest of South America” (Acuff, 2007, p.220). In fact they might feel offended when referring to them as South or Latin American. Reason for this reaches as far back as the 15th century.

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During this time the newly discovered land was divided between the two powers Spain and Portugal and sealed by the Treaty of Tordesillas, ratified in Spain in 1494. The land was split in half along a North-South meridian, 370 leagues West of the Cape Verde islands. All land on the west hand side of the meridian would belong to Spain, whereas all land east of the meridian would belong to Portugal (about.com, 2009). This Treaty set already the basis for future conflicts between these two nations and the geographical development in South America. In the 18th century then the Portuguese conquerors explored the huge territory which lied West of the meridian and belongs to today’s Brazil. The Spaniards let this happen,

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expecting Portugal to stand by their side during the war of succession of the Habsburg (from 1701 to 1713). But the Portuguese declared war towards the Spaniards and thus introducing future conflicts between those two nations which developed and shaped during the last centuries and partly explain the root cause of the cultural differences today. (Wöhlcke, 2000, p. 47) Quite different as well has to be seen their use of time. Frank Acuff (1997) describes very accurately that “the typical Latin American sees time as abstract – more a series of events than in terms of hours or minutes”. The reason for this can be found in their different perception of time. They lack the ability to think in a structured way and to plan ahead. Another important aspect to be considered when doing business in Brazil or Latin America is the “concept of machismo” (Acuff, 2007, p. 210). These masculine business men can be found often in those countries and are characterized as very self-confident, open and during negotiations usually take ad hoc and free-wheeling decisions. Personal relationships are essential in negotiations and “[...] take priority over institutions, laws and regulations (Acuff, 2007, p. 212). 5.2.3.2 Starting the business According to the latest Doing Business Report by the World Bank (2009), taking into account various indicators for business start-up by using set of data from 181 economies all over the world; Brazil ranks place 125 for economies on the ease of doing business. The country is far off from its neighbours Chile (rank 40), Mexico (rank 56) and Argentina (rank 113). The first rank in this indicator goes to Singapore. In the category business start-up Brazil ranks on place 127. Chile, Mexico and Argentina show a slightly different performance than before with rank 55, 115 and 135 respectively.

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In total it requires 18 procedures to start a business in Brazil, it takes 152 days and costs 8.17% GNI per capita. Good practice economies such as Denmark or New Zealand for instance require only one step within one day to start a business. The steps involved for opening a business are listed in the following: 1. Check company name with State Commercial Registry Office 2. Pay registration fees 3. Register with the commercial board of the state where the main office is located and obtain identification number (NIRE)

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4. Register for federal and state tax (Secretaria da Receita Federal do Ministério da Fazenda, SRF/MF), obtain the CNPJ number, which also registers employees with the National Institute of Social Security (Instituto Nacional da Seguridade Social, INSS) 5. Confirm INSS enrolment 6. Receive state tax inspection 7. Get the authorization to print receipts/invoices from the Secretaria da Fazenda Estadual 8. Register with the Municipal Taxpayers’ Registry (Secretaria Municipal de Finanças) of the City of São Paulo 9. Pay TFE to the Municipal Taxpayers’ Registry 10. Get the authorization to print receipts/invoices from the Secretaria Municipal de Finanças 11. Order receipts/invoices (notas fiscais) with CNPJ numbers from authorized printing companies 12. Obtain fire brigade license from the State of São Paulo 13. Inspection from the Fire Brigade 14. Apply to the municipality for an operations permit (Alvará de Funcionamiento) 15. Register the employees in the social integration program (Programa de Integração Social, PIS) 16. Open a special fund for unemployment (FGTS) account in bank 17. Notify the Ministry of Labor (Cadastro Geral de empregados e desempregados, CAGED)

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18. Registration with the Patronal Union and with the Employees Union. (For more detail see appendix 8.3) 5.2.3.3 Employing foreign workers Foreign workers who plan to work in Brazil need a work authorization in form of a visa. The responsible institution for issuing visas in Brazil is the Immigration

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General Coordination. Defined by Brazilian law there are different types of visa, depending on each specific situation and purpose of the trip. The most common types are the tourist, temporary and the permanent visa. Other kinds are the transit, courtesy official and diplomat visa. To keep the relevance of the topic to this book only the most common types will be elaborated on, since the remaining ones are most unlikely to be used in a business situation in Brazil. With the visa for short term business visitors the applicant is not allowed to work or yield any kind of technical assistance. The applicant will be referred to as he in the following. He is also prohibited from receiving any kind of remuneration for services in Brazil. When travelling to Brazil on a business visa, the applicant is allowed to participate in conferences, meeting, fairs and seminars. He may also visit potential clients or research the market. Should the applicant impinge against these regulations and work nonetheless the company will have to pay a fine and the foreigner is to be deported. If the applicant is visiting another country after his stay in Brazil for which a visa is required then that visa must already be included in the passport before applying for the Brazilian one. Usually this type of visa is issued within 24 hours and has a validation of 90 days upon arrival in the country. During that period multiple entries are permitted, but the number of days present in Brazil may not exceed 90. In total the foreigner is allowed in the country for 180 days within a 360 days period (not calendar year). If the applicant wishes to extend the visa for a further period of up to three months this may be granted by the Immigration Authorities only prior to the expiration of the visa.

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Temporary work visas are divided into six different categories. Brazil provides different visas for professionals, technicians, artists and sports persons, foreign journalists, crew members under charter, service rendering contracts and lease agreements as well as for research scientists. Before applying for any of these visas the applicant needs to obtain a work authorization from the Brazilian authorities. As soon as the work authorization is approved it will be published in the Federal Official Gazette and the designated Consulate is notified. Thereupon the foreigner is allowed to apply for a visa issuance.

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Students, trainees or foreigners doing an internship program receive a temporary visa for a maximum period of one year which does not allow to work in Brazil or to receive and kind of remuneration from a Brazilian source. The same process as for the temporary work visa shall be applied. The permanent employment visa will only be granted under two circumstances. One is if the applicant holds a family relation to a Brazilian citizen through marriage or children. In this case the candidate will have to apply for the visa at the Ministry of Justice, or if the candidate is still abroad at the Brazilian Consulate in his country. The second case under which this type of visa may be granted is the nomination as statutory director of a Brazilian company. Does a foreign company, which has a branch office or subsidiary in Brazil, want to transfer a statutory director or manager they are only allowed to apply for a visa if they have at least US$ 200.000 invested in Brazil and registered within the Central Bank of Brazil. Spouses and children are permitted in the country as long as the visa of the applicant is valid. During this time they are not allowed to work or to receive any kind of remuneration in Brazil as long as they remain in the country on a temporary basis. However, as soon as their temporary visa is converted into a permanent one, they are authorized for employment. Important to add in this context is the Brazilian labour law regulation which demands that a consulting company, about to start its business, must employ three to four Brazilian workers towards one foreign worker. This can have a negative impact on a foreign consultancy when planning to enter the market fast. But also when time is given it might be problematic since the host countries professionals could be sceptical towards a foreign startup business that has not yet asserted itself on the market. Further details on the employment provisions for Brazilian workers can be found in the appendix 8.4.

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5.2.3.4 Obtaining a credit According to the World Bank “firms consistently rate access to credit as among the greatest barriers to their operation and growth.” (World Bank Doing Business, 2009, p.24). There are two main factors that are taken into consideration when assessing the ability of the economy being flexible in the credit markets. One is the credit registries and the other one are the legal rights of borrowers and lenders, which take into account the degree to which bankruptcy and collateral laws protect

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those rights and herewith facilitate the lending procedure. Credit registries can be very helpful for lenders to assess risks and allocate credits by collecting and distributing credit information. Further the lenders do have to rely solely on personal relationships to receive a credit. The World Bank Doing Business Report illustrates these factors in form of indexes that have been measured and compared with other countries. Globally Brazil is ranked 84 for obtaining credit. Best practice economies are Malaysia or Japan in this context. Particularly for both factors that have been considered (legal rights and credit information) countries like Argentina, Chile and Mexico show a better performance than Brazil. In general, the obstacle to obtaining a credit in Brazil ranks within the average of the world. The latest Febraban Report by the Central Bank Brazil (2008) states that especially within the last four years there has been a remarkable evolution of credit transactions with free funds. These are credits that banks offer to individuals and companies using various types of products, not taking into consideration government-directed credit. From June 2000 to April 2008 the share of those free funds has risen from 51.1% to 71.3% and shows that credits from banks are widely utilized in Brazil. Also important to note is the expansion in terms of credit transaction that occurred in the industry and commerce sector with 35.5% and 30.9% respectively. 5.2.3.5 Legal constraints Clearly when doing business in a foreign country in most cases there also exist different legal regulations than in the home country. For new entrepreneurs who want to enter the Brazilian market it is advisable to seek for professional support, such as a lawyer specialised in the field of business formation. However, some legal issues are presented here in order to give an overview on the aspects that have to be considered in this context.

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Labour law in Brazil is very complex and should only be dealt with professional help. The primary legal system that rules labour relationships, the consolidation of the Brazilian Labour Laws (CLT), accounts for more than 900 articles. Supplementary to the CLT new labour rights were created during the time, adding a number of new regulations and rights to the already existing law and thus making it even more complex.

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Another legal issue that needs to be considered is the decision which form of legal entity to choose. The types of companies that exist under Brazilian law are the Unlimited Partnership "Sociedade em Nome Coletivo", General Partnership "Sociedade em Comandita Simples", Unlimited Partnership between Capital and Labor "Sociedade de Capital e Indústria", Limited Partnership "Sociedade em Comandita por Ações", Limited Liability Companies by Quotas "Sociedade por Quotas de Responsabilidade Limitada" and Corporations "Sociedades Anônimas". Those companies become legal entities upon foundation seperate from their participants. According to Brazilian commercial law, associations such as joint ventures or consortiums do not receive legal status separate from their participants. Thus they do no merge into one legal entity but rather continue to contract rights and obligations individually. This might be important information which has to be considered when deciding upon the form of legal entity. Consequently, when operating in the Brazilian market the company has to pay taxes. This is just a short overview of the relevant points in this context. The Federal government raises taxes for import duties; export duties; income and capital gains tax; tax on industrialized goods; tax on credit and exchange transactions, on insurance and on securities; tax on rural land and tax on large fortunes. Corporate income taxes are assessed on the basis of net profits and capital gains of the company that are generated by operations within Brazil as well as abroad. Additionally there are a number of social programs to which the Federal government may levy social contributions upon the corporation. With respect to the country’s tax laws governing international trade relations, Brazil signed and ratified a number of bilateral international double taxation agreements in order to avoid the double taxation of income (Cesa Legal Guide, 2006.). Most European countries entered into such an agreement with Brazil already in the 1970s and 1980s. In internation context, Brazil is ranked on place 145 upon the indicators number of tax payments, the time it takes to prepare and file tax returns and the total tax rate. Further details on all taxes and mandatory contributions a

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medium-size company must pay in Brazil are provided in the appendix. 5.2.4 The Delphi Study In contrast to the classical approach there is also be an empirical approach to the topic. The classical and empirical findings are afterwards being compared with each other. To establish the empirical findings the author made use of the Delphi method – a method for estimation or prediction that involves a group of experts

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who are questioned with regards to a certain topic. The empirical findings are important for undermining the conclusion of the study and to give support by answering the research question. They reflect a real-world perspective that is set in contrast to something that is deducted from the classical theory. The Delphi method has its name from the Oracle of Delphi, the famous and most important oracle in the classic Greek world. In recent times the first reference of the use of the name appears in 1948. It is said that the technique was used to predict the outcome of dog or horse races. Later on it became publicly known by the RAND Corporation and their “Report on a Long Range Forecasting Study (Gordon/Helmer 1964)” that was used for long-term forecasting of scientifically and technical developments (Häder, 2002, p.15). Today the Delphi Study is a method used primarily for business forecasting, but can also be used in other areas of forecasting. The method comprises a group of experts who dispose of knowledge about a specific topic. Questionnaires and background information will be send out to the pre-selected group of panellists who state their thoughts on the topic, reporting them back to the facilitator. “The researcher or facilitator will then compile these ideas to develop a concrete proposal, set of guidelines, or wording for an agreement, and will send this out again for comment” (State of Victoria, 2007). Hereby the group does not physically meet – unlike in a focus group – nor interchanges its ideas with one another. After each round of questionnaires the answers will be collected by the facilitator and summaries of the results are analysed and communicated back to the participants. “Through a series of surveys they share and generate new ideas based on an emerging consensus among the panel members” (State of Victoria, 2007) and the answers to a complex problem will be elaborated on. Hence, the aim is to achieve a consensus among the panellists. The outcome should be new ideas or recommendations that every participant agrees upon.

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“Fowles (1978) describes the following ten steps for the Delphi method: •

Formation of a team to undertake and monitor a Delphi on a given subject.

•

Selection of one or more panels to participate in the exercise. Customarily, the panellists are experts in the area to be investigated.

•

Development of the first round Delphi questionnaire

•

Testing the questionnaire for proper wording (e.g., ambiguities, vagueness)

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•

Transmission of the first questionnaires to the panellists

•

Analysis of the first round responses

•

Preparation of the second round questionnaires (and possible testing)

•

Transmission of the second round questionnaires to the panellists

•

Analysis of the second round responses (Steps 7 to 9 are reiterated as long as desired or necessary to achieve stability in the results.)

•

Preparation of a report by the analysis team to present the conclusions of the exercise” (iit.edu, 2009)

Following each of these steps the Delphi Study was conducted. It is important to abide by certain guidelines and to structure the approach in order to achieve valuable empirical results. 5.2.4.1 Reasons to choose the Delphi method According to Adler and Ziglio (1996, in iit.edu) there are three questions that need to be ask before deciding whether to choose the Delphi method as a suitable tool to develop empirical findings. The first one is what kind of group communication process is desirable in order to explore the problem at hand. For the study it was important to see different opinions and points of view that have not been discussed beforehand. By approaching each individual of the group without allowing communication among them the result offers a far clearer picture since every single participant is only arguing its very own positionality. A common stand towards a question of the Delphi method generally proves the validity of the answer. Nevertheless this needs to be handled with care and should not be taken for granted under any circumstances. Many renowned economists claim that Brazil

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is a country with high prospects. Many companies are investing into the market and the Brazilian consulting business is growing. In the context of this book it is important to know the viewpoint of people who are actually working in this business and who know the market not only by numbers and figures. This leads to the second question which regards the panellists that have been chosen for the Delphi Study. Do they dispose of expertise on the problem and where are they located. In a following chapter more details regarding the choice of experts will be given. They have been chosen with diligence to deliver beneficial and valuable results.

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The third question to be answered in order to establish whether to use the Delphi technique would be what kind of alternative techniques there are available and what results can reasonably be expected from their application. An alternative to the Delphi technique are expert interviews. These however can only deliver first results and a first impression towards the topic and are not being developed any further. Single expert interviews are also more time consuming, whereas with the Delphi method a single round of questionnaires can be distributed to a number of experts at the same time and thus delivers a wider range of results. Furthermore the experts might answer the questions more freely when they have more time to think about each single one and also when they do not feel observed by the interviewer. All three questions have been answered positively towards the Delphi method, thus giving enough reason to utilize the tool for the study at hand. However there are also limitations in the use of this method which will be described in the following chapter. 5.2.4.2 Limits to the Delphi method The method is used to tackle complex issues that require the input of expert opinions. However there are limits to the Delphi Study. Criticism has been aroused on the fact that sometimes even experts are not able to pose a clear statement about events in the future that relate to their field of knowledge. It can be questioned whether it makes sense to conduct Delphi Studies or not. But, “the problem is not to forecast what might happen, but rather to decide what should happen (Overbury 1969:76)” (Häder, 2002, p.27). Therefore it has to be clarified right from the beginning where the limits to the Delphi Study are set. It is merely important to gather current viewpoints of the future or of certain problems from competent experts and to evaluate these in order to draw respective conclusions

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out of this for the development of appropriate strategies (Häder, 2002, p.28). Another important aspect in this context is the existence and difference between self-fulfilling and self-destroying prophecies. A self-fulfilling prophecy is a (at first sight wrong) prophecy that leads to a certain action which in turn leads to the fulfilment of this very prophecy – e.g. the (wrong) announcement of the decreasing supply of a certain good leads to increased demand which in turn fulfils the prophecy. On the other hand a (at first sight right) prophecy – e.g. an environmental disaster – that leads to countermeasures that successfully prevent this disaster and disprove the prophecy is called a self-destroying prophecy. The

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aim of prophecies is oftentimes not the realisation of the forecasted situation, but rather to take preventive action or develop a strategy upon the conclusions (Häder, 2002, p.29). The following chapter deals with the choice and selection mode of the group of experts for the Study. 5.2.4.3 Experts Following the ten steps described by Fowles in order to conduct the Delphi Study a total number of nine experts was carefully chosen from different business areas. These experts were able to answer the rounds of questionnaires that led to the empirical findings. Certain criteria had to be fulfilled in order for someone to be announced as expert. The person had to dispose of general entrepreneurial skills as well as of knowledge of the Brazilian market – the LEAN consulting market in particular, but not necessarily. Each expert was contacted individually via email and provided with general information on the Delphi Study as well as the study approach. The contact details of the participants were submitted by the GermanBrazilian chamber of commerce upon request. All experts possessed of a general knowledge of the Brazilian market and were capable of answering the questions upon their personal experience. Most of them operated in the Brazilian consulting business, thus being ideal candidates for answering the questionnaires. The whole group was located in Brazil or at least frequently travelling to Brazil during the duration of the study. They had no possibility to contact each other during the study period and discuss the questions in a group. The anonymity of the participants led them to freely express their opinions and encouraged open critique without dominating others. The number of contestants decreased during the study. Originally starting off with

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nine experts, only six experts responded to the questionnaires after the first round. The three missing participants however had no effect on the outcome. To perform a valid study a total number of minimum five experts is needed. After the second round the number of contestants descended to five, which is still a valid group. The combined answers have been manifold and the decreasing number of experts in the duration of the study had no effect whatsoever on the outcome. Based on the method of the Delphi Study the outcome is valid to reflect and overall opinion (cf. Schwand, 2009).

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5.2.4.4 First round In total the Delphi Study has been conducted with two rounds of questionnaires. The first questionnaire consisted of 13 open questions that were directly related to the topic. The tenor was to establish first thoughts on the topic from the experts and hereby to see their tendency towards the Brazilian market in general, also particularly regarding the consulting market, as well as their ideas towards an entry strategy. After the return of the questionnaires the facilitator created a summary, based on the answers given (see Appendix). It was interesting to see how many questions have been answered with an absolute consensus, considering the fact the participants had no contact to each other in any way. In total the first round already delivered quite a clear picture. Questions towards the economic situation in general – also taking into account the current financial crisis – as well as the market situation concerning the consulting market have been answered very positively. Despite the current events in the world market and the down slow of the world’s economy as result of the crisis everyone has been in agreement with the opinion that there should still be made investments into the Brazilian market to secure the future. Especially now it should be invested since Brazil has not been hit as hard as other countries and regions in the world. As soon as the world economy will start to ascend again, these investments will pay off. There has also been a strong consensus on the regional priorities. First of all, São Paulo has been named by each single expert at least once – either in the context of high concentration of competition or as a suggestion for an entry port. As form of market entry the almost unanimously suggested form was cooperation with a Brazilian partner or company. At this point the importance of networking and contacts in Brazil was emphasized various times. Without networking many

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business contacts would not even exist, since Brazilians do business mainly via personal relationships as already pointed out in an earlier chapter. Relevant branches for consultancies that are operating in the field of process optimization such as LEAN production are by far the engineering industry, followed by the consumer goods industry, retail, logistic companies and also banks. Corruption in Brazil does not play a major role and is not seen as in any way more dramatic than in other countries. It should not play a role in making business decisions. On the other hand very important for making business is the knowledge

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of the Portuguese language. Preferably the “Brazilian Portuguese” which differs from the Portuguese spoken in Portugal in terms of pronunciation, vocabulary and slight grammatical variations. Although most Brazilians in upper positions possess of knowledge of the English language, the communication becomes a lot easier and also the respect towards the foreigner grows when speaking the language of the host country. It has to be added that within the consulting business, especially regarding areas like production or logistic, the staff consists mostly of blue collar workers with a rather low level of education and in these cases the knowledge of Portuguese is indispensable. The only problem mentioned, which might occur when employing Brazilians, are possible communication problems within the foreign company regarding mentality differences. Relating to the average consulting fee that is paid in Brazil no consensus could be made. All experts mentioned a different amount or no amount at all, which let not even to see a tendency. The last question dealt with the study conducted by the IBCO illustrated in chapter three. The query demanded an evaluation of the criteria to choose consulting services. The experts were ask the exact same question except in this case the participants came from consultancies and do not deliver the point of view of a potential client. The most important criteria for the participants of the Delphi Study was technical skills, followed closely by expertise of the consultants and upon recommendation. The poll conducted by the IBCO delivered only a slightly different picture. Upon recommendation and qualification were named here as most important criteria, followed directly by market image. In the Delphi Study

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market image plays a rather insignificant role. Regarding consulting fees and working methods, both cases present the same picture. Within the ranking they are placed on rank four and five / six respectively.

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Figure 29: Criteria to choose consulting services

Working methods

Criteria

Credibility/ Market image Fees Upon recommendation Consultants expertise Technical skills

0,0

1,0

2,0

3,0

very important

4,0

5,0

not important

Source: developed by the author (2009)

The conclusion that can be drawn out of these two comparative studies is again the importance of networking and contacts within the consulting business. Of course without a certain degree of qualification and expertise no recommendation will be made. However, knowing the right people always plays a role in Brazilian business life. 5.2.4.5 Second round After the completion of the first round interesting outcomes could already be seen. Nevertheless there were still questions open for discussion and clarification. The upside of the Delphi Study is the possibility to demand further details regarding some issues. This could have not been done with only expert interviews. Those

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interviews picture a certain outcome in the end, but do not offer the opportunity to elaborate on this outcome. Upon the empirical findings of this first round a second questionnaire was created, consisting of further detailing questions as well as completely new questions. This questionnaire was then distributed to the panellists and opened the second round of the Delphi Study. The first question demanded further detail on the destination São Paulo, whether this destination would be in fact the best option for a start-up or whether competition in this region is too high for a newcomer. The experts agreed upon the fact that São Paulo is the biggest market in Brazil and if a company does not succeed here then it probably will not succeed anywhere else in Latin America.

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Especially because there exist so much competition in São Paulo it is the best place to open a business. At the same time the city has the highest density of national and international companies. Consequently networking is done best here where everything is concentrated. At the same time this led again to the outcome that without any kind of business contact and support from another party that is familiar with the country an entry into the Brazilian market is nearly impossible. The experts vindicated the point of view that it will take up to at least two years with two to three projects before a new company is able to finance itself out of the operative cash flow. Of course this is only an average estimation, in particular cases it can also take more or slightly less time. Furthermore the participants were ask whether companies that are not growing strongly anymore and are already in the consolidation phase are more open to consulting support. The opinion to this question was parted. On the one hand the experts agreed on this statement, on the other hand however they argued that the decision towards a consultancy does not depend on the market and that companies which have a general averse opinion towards consulting companies will not change their mind based on current market situations. The fourth question regarded the market in Brazil. The participants agreed that the branches such as mechanical and plant engineering, crude steel production, electronics and electrical engineering as well as the textile and consumer goods industry are currently not growing. The opinions towards the automobile industry were two folded. Some assumed this industry is suffering from the crisis whereas others held the opinion it would continue to grow. On the other hand the construction industry as well as oil and gas and agriculture have been attributed to substantial growth.

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The following question asked for clarification and more detail concerning reference projects. The importance of those kinds of projects has been emphasised already in the first round, yet the question remains how to pull off such a project. Like already emphasised various times before, the importance of networking and personal business contacts was again the most given answer. The focus should be at first on German companies rather than on Brazilian ones, since this approach is more likely to be successful for an outsider. Primarily suitable for reference projects are the bigger German companies, but also a Brazilian company with a good standing in the market could be valid. Once a potential project is in sight, it depends on the negotiation skills of the participating parties.

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For a reference project a price deduction is likely to be the price that has to be paid for the market entry. The performance of the project should contrast strongly with that of other consultancies and show potential for the Brazilian market, hence generate demand in the consulting market for the company. With regards to the previous question the outcome led to ask for a prime example of a reference project in the area of process optimization, like for instance a certain industry out of which follow up projects are easy to obtain. The answer here clearly showed that there is no such a prime example. However the company should concentrate primarily on German companies, since those are probably easier to be contracted. Also a project for a good, solid Brazilian company can serve as a reference project. Abraçem is an association of Brazilian consultancies and independent consultants which, according to the experts opinion, seems to be an important source for networking that should be kept in mind. The Brazilian association of business consultants and professionals is offering programs for professional training and certification, to improve technical skills and behaviour of members. Its mission is to focus on the expertise of professional challenges and alternatives to business, targeted at the areas of consultancy, advisory and business development (abracem.com.br, 2007). The reason to join such an umbrella organization is – according to the experts – primarily the chance for doing networking. Nevertheless, some of these organizations demand horrendously high premiums and in turn offer only little service or even none at all. The ninth question dealt with the role of tender procedures and how companies assign their projects in general. The answer was clear. Despite the clear importance of networking to generate a new project in the Brazilian market there

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exists also bidding on the market. Generally speaking, the larger the company, the more professional and transparent should the tender procedure be. Projects from public or governmental institutes are nearly always given out via a tender procedure. However, the requirements here are very complex and almost impossible for foreigners to fulfil. In order to increase the level of awareness of the company there were a couple of suggestions made during the first round. In this phase now it should be established which of the options are more likely to be successful. The suggestions have been a good reference project, networking and advertising/sponsoring. The experts were asked to evaluate their importance on a scale of a total of 100%,

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distributing this value on the three pieces. After evaluating all answers the average outcome clearly showed that 50% of the experts held the opinion that a reference project is most important to increase the level of awareness. Second with 35% came networking, which is surprising when looking at the emphasis that was made on networking during earlier questions. The less important tool has been advertising/ sponsoring with 13%. Figure 30: Average use of measures to increase level of awareness

Advertising/ Sponsoring of events

13

35

Networking

50

Reference project

0

10

20

30

40

50

60

in % Source: developed by the author (2009)

5.2.4.6 Short summary of most important findings After the two rounds of expert interviews via anonymous questionnaires there are three major outcomes that can be used for substantiate the market entry strategy. First of all it is clear that despite macro economical data and its economic history which show that Brazil does not deliver the best performance compared with a few

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other Latin American and BRIC countries, still all experts agree upon the fact that Brazil offers a high potential for new investors. Because of the country’s independence from the US market it has not been hit as hard during the ongoing global crisis as other countries in the world. Therefore especially now investments should be made and are more likely to pay off in the future. The second major outcome of the Delphi Study was the enormous popularity of the region São Paulo, which was named by every single participant. The city disposes of the highest density of companies in Brazil and herewith also offers the greatest competition in the consulting market. Most big international consultancies

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have a subsidiary in São Paulo and also many smaller Brazilian consulting companies present themselves as important player in the market. Especially striking was the emphasis on the importance of networking for business in Brazil. Somehow many questions have been answered always relating to the role personal relationships and business contacts play in the country. Whether when launching a business, or searching for a good reference project to be recommended to others, - networking is the tool that should be used in Brazil in orer to conduct good business opportunities. This outcome led to another question during the second round which was whether tender procedures and bidding would play a role at all for the acquisition of a new project. In fact there are tender procedures, though mainly for public or governmental projects and for those it is very hard to compete with as a foreigner. Apart from these three major findings there have also been a number of other interesting outcomes such as the irrelevant role of corruption in Brazilian business life as well as the fact that there exists no major awareness of an organisation or association supporting consulting activities in Brazil. The IBCO was completely unknown to the panellists. There was only one organisation that was named by some experts and this was the association Abraçem. Another interesting outcome was the result of the poll conducted by the IBCO asking potential customers about their preferred criteria to choose consulting services. This poll has then been transferred to the Delphi Study, this time presenting the point of view of consultancies. Interesting to see was here that the

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answers were basically the same, only varying slightly. Qualifications, consultant’s expertise and recommendations were most important for the participants of both studies.

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6 CONCLUSION The Austrian writer Stefan Zweig once called Brazil “a land of the future” (1941). Shortly after, the Brazilians added a supplement to his phrase: “and always will be” (Luján-Zilbermann, 2006, p. 18). More than half a century and many economic highs and lows later, this proverb is even more applicable than ever before. For years the country’s future prospects have been extoled as the promised land of the Americas. Now, in the aftermath of the worldwide financial crisis, energy shortages and inefficient reforms does the country still prove to be a land of the future? And if so, the obvious question is whether it will ever arrive there. When looking at the Brazilian LEAN market experts and economic indicators agree that the consulting business in Brazil definitely has a future and it can be said that an investment is worthwhile. At present, Foreign Direct Investments into the market will accelerate growth and deliver high returns as soon as the world’s economy has recovered.

6.1 Final results and recommendations Having a short glance back to the structure of the study, the theory was followed by an empirical study that now leads to the conclusion of the topic. This last part of the study shall open the discussion and present the final results that give the answer to the research question and its sub-question. Moreover, it compares the theoretical approach to market entry with the empirical findings, thus supporting the answer to the research question. By evaluating the Brazilian LEAN consulting market and afterwards deducting the Delphi Study with the support of a representative number of experts, the conclusion can be drawn and recommendations given.

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Is the LEAN market in Brazil a suitable market for a LEAN consulting company to invest in? Consolidating the results of the fourth chapter, the LEAN market is still a small but growing market in Brazil. Many international companies have already expanded into the country, thus competition does exist but is not too strong. The market shows growth potential since more and more international companies are opening a subsidiary or production facilities in Brazil. Consequently, the market is growing, offering an increasing demand especially in the field of LEAN consulting. Since

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privatization was pushed forward by a number of governmental reforms especially in the 1990s the number of private enterprises increased steadily and brought about the need for consulting companies. Especially the LEAN philosophy has been spread around the world during the past decade. The term itself already evolved with the publication by Womack, Jones and Ross from the MIT (Massachusettes Institute of Technology) “The Machine that Changed the World” in 1990. But since the success of the Toyota Motor Company, the Japanese are seen as the “leading group of the 21st century”, according to an article of the journal Manager Magazin (2004). The interest in their formula to success led at first many automobile producers to copy the Toyota Production System (TPS), and later on other branches began to adapt their organisation to the LEAN principles. Supported by the empirical findings of the Delphi Study which distinctly ascertain the prospects of the Brazilian market by the group of experts participating in the study it can be said that the LEAN market is a suitable market for a LEAN consulting company to invest in. With regards to to the second research question – which recommendations for an entry strategy can be given when entering the Brazilian LEAN market? – and the market entry strategy that should be chosen the outcome can be summarized as follows. The most important aspect that shall be considered when doing business in Brazil is the relevance of networking. The so called practice cold calling is very unlikely to be successful in this country. Without a partner who is familiar with the specialities of the market and its people the risk of investing into the market should not be taken. The membership or cooperation with relevant associations that work in the consulting business such as Abraçem or LIB can help to build up a network and level the way to enter the market. As established by the

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empirical study the most important tool to increase the level of awareness of the company is definitely the acquisition of a follow up project upon recommendation by a prior client. However, in order to pull off a very first project, networking and contacts are indispensible. This has already been mentioned various times, yet this fact cannot be more emphazised. Additionally, advertising and sponsoring of events may support the start-up business to set up contacts and build a network in the market. Visiting potential clients at exhibitions and trade fairs is also a suitable and useful method, especially in a business environment like Brazil, where personal contacts play the most important role within negotiations.

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The number of procedures when opening a business in Brazil is 18 and it takes up to 152 days until the applications are approved, which is almost half a year. In contrast to other countries like Germany or the US with 9 and 6 steps respectively an entrepreneur has to take in order to launch its business and only 18 or 6 days this procedure takes, this is quite a long time a company has to take into account within their business startup calculation. The appendix of this book provides for an outline of each single step, including their processing time as well as the costs included. It is only recommendable to use a legal advisor who is specialized or at least familiar with the procedures and who knows what further steps have to be taken. The Brazilian tax system is quite complex and foreign companies are obliged to pay high prices for their market entry. In this matter, double taxation is unconstitutional. As it has been said in a previous chapter, the chosen entry mode for most service companies – such as a consulting company – is licensing, franchising or direct investment. This decision depends entirely on the internal and external factors of the company and its environment, as already explained in detail in chapter 5.1.2. The most interesting sector for management consulting companies applying LEAN principles in the area of process optimization is the industry. Many large multinational companies as well as some important Brazilian firms have production facilities in the regions of São Paulo, Minas Gerais, Rio de Janeiro, but also some in the North Eastern and Southern regions of the country. The engineering industry, followed by the consumer goods industry, retail, tranportation and also banks are very interesting branches for Consultancies that are operating in the field of process optimization such as LEAN production. Approaching now at the sub-question which is evolved out of the main research questions: Can Brazil serve as an entry port to Latin America?

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Brazil has a unique standing in Latin America. Brazilians do not speak of themselves as Latin Americans, but rather independent and distinctive from their neighbours. This can be attributed to their history and the country’s development which distinguishes Brazil from the rest of Latin America in various ways. It is the only Portuguese speaking country in the region and due to the manifold influences from European and African culture, resulting in an interesting mixture from immigration and slavery during many decades; the country developed a special character that cannot be found in the other Latin American countries.

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The country Brazil as a market place in general can be seen as among the most important locations in Latin America, if not even THE most important location. The most relevant region for a start-up business is São Paulo, because the city disposes of the highest density of companies. At the same time it is the economic and financial capital of the country and offers great prospects for newcomers. Other relevant regions are Minas Gerais, Paraná and Rio Grande do Sul. As illustrated in chapter three of this book, most international and also large national companies are present in those regions. It was also determined that a number of international consulting companies are already present in these areas. However the number of businesses is still small and not all of them are operating in LEAN Management. Of course, competition is nowhere higher than in São Paulo, but as already pointed out at the same time the city shows the highest growth rate. Through the empirical findings of the Delphi Study this outcome can be substantiated and thus the answer can be drawn. The importance of the business location São Paulo for Brazil was the most given answer by the experts. In this respect some experts posed the opinion that São Paulo is even the most important region for the whole of Latin America. Not being successful in São Paulo means that most probably there is no chance of being successful anywhere else in Latin America. Apart from that it was stated that the country shows excellent prospects, despite the worldwide financial crisis and some economic indicators such as GDP growth in Latin American context. Investments shall be made now, in order to harvest the earnings as soon as the economy is recovering. Hence Brazil is the entry port to Latin America, more specifically the city and region São Paulo. Having now answered the research questions of this study there are still a few issues that have to be tackled in order to round up the topic which will be adressed in the next chapter.

6.2 Direct comparison of theory and empiricism

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In interpreting the data assembled for the research it was found that some theoretical ideas are not fully confirmed by the empirical results. The market evolution for instance identified that Rio de Janeiro generates almost half of the GDP as São Paulo and more than the regions Minas Gerais and Paraná. Many companies have their seat or at least a subsidiary in Rio de Janeiro and thus the region plays an important role in the country’s economy. However according to the empirical findings it seems to be of only rather minor importance. The experts

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named primarily other regions that according to their personal opinion were of more importance to the Brazilian consulting market. Furthermore, in Brazil the role of corruption plays only a minor role with respect to the empirical outcome. All experts clearly stated that corruption has no relevance for conducting business. However, according to the Worldwide Governance Indicators established by the World Bank, the control of corruption in Brazil differs widely from the German average, although in Latin American context the country performs best. At least a minor awareness of corruption in business was expected to be identified by the empiricism. On the other side this study is only based on personal opinions and experience by the interviewed experts rather than on data and facts. As learned during the study, according to the expert’s opinion the engineering and electronics industry are passing through a period of slow growth. This seems striking since in fact engineering, electronics and also automotives showed the highest growth rate as of 2005. Newest data should be taken into account at this point, since the experts are most probably influenced by the current proceedings on the world market. The last major disparity between theory and empiricism has been that none of the interviewed experts were aware of the existance of the IBCO – the Instituto Brasileiro dos Consultores de Organizaçao –, a non-profit organization of management consultants who support ethics and quality in management consulting activities (ibco.org.br, 2009). Although the institute seems to be of importance to the business, the empirical results offer a fairly different picture. Instead of the IBCO, some panellists named the organisation Abraçem which is also quite a young institute (abraçem.com.br, 2007). This association of Brazilian

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consultancies and independent consultants is regarded as an important source for networking. They are offering programs for professional training and certification, to improve technical skills and behaviour of members. For the purpose of establishing new business contacts it is only advisable to join such an organisation. However, those memberships should always be made with care since some of them promise more than they can keep. Concluding the final results management consulting companies should now be able to assess their entry strategy, being guided by the recommendations derived from the theoretical analysis as well as from the empirical findings of the Delphi Study.

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6.3 Future outlook The turbulent worldwide economic situation at the moment will effect the investment decisions of companies also in the future. The financial crisis has already introduced the shift of global powers and the new world order; the USA is no longer seen as the worldwide superpower. According to the economist (2009) the EU is the world’s biggest economy and China is on the edge of turning into a developed market. The country will reach the Western level in about 20 years, with a purchasing power growth rate of 1000% during the last 25 years. Despite those developments Brazil still disposes of a robust constitution of its economy. Although the country also felt the impacts of the international crisis, the economic indicators certify a positive future prospect. The country shows favourable domestic growth dynamics, as well as improvement in its macroeconomic management and its external-solvency ratios which result in reduced vulnerability to external shocks. Even though some weaknesses persist, public debt still remaines high and exposes to domestic interest rate trends, although their maturity is still too short. The structural reforms that would be substancial for the country’s education system, social security, job market, and tax and regulatory systems have failed because of lack of official commitment and political interest. The absence of investments in energy, rail, road and port infrastructure have resulted in major deficits in these areas. (cf. countries.bridgat.com, 2008) „Years of public underinvestment in infrastructure, persistently high real interest rates and a burdensome tax regime continue to contribute to the high cost of doing business in the country” (newwavemarkets.com, 2008). The Brazilians themselves show undefeated optimism towards the future development of the country and according to the current country report of the AWO (2008) the president’s approval ratings are still record-high despite the

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substandard reforms of the government. Foreign direct investments into the country have been increasing impressively, even more than doubled from 2005 to 2007. The trend towards FDIs seems to surge upwards, reaching an annual record for FDI of US$ 45.1 billion in 2008, although the Western countries and also some Asian countries are suffering from the impact of the worldwide financial crisis. Altamir Lopes from the Central Bank Brazil states that “foreign investors have a long-term perspective. They are looking at the fundamentals of Brazil’s economy and are seeing positive perspectives.” (cf. Bloomberg, 2009). A determining factor that contributes to the still rather stable Brazilian economy is the lack of dependency on the US market; a fact that saved the country from the worst. One

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does not wonder that in 2007 the majority of EU foreign investments went to Brazil, not to China. The tendency towards FDIs will also have a positive effect on the consulting market in Brazil. Companies are expanding, building subsidies or new production plants. With this a growing market potential for the consulting business can clearly be pictured. Although currency fluctuations are hard to predict for the future, companies are investing now and expecting a high return of investment (ROI) for the next years. Despite the current projections for a decrease in global growth which in turn forced to downgrade the expected growth rate of the Brazilian economy, overall positive feelings persist (economist.com, 2009). Obstacles to FDIs may only be the underdeveloped transport infrastructure which reduces the attrativeness for investors as well as the slow implementations of necessary reforms in the country. Brazil certainly is following the right track, but should not be

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resting on its current positive indicators. According to today’s forecasts, in about 30 years the country will belong to one of the world’s five biggest economies and also grow in political power. Brazil seems to have crossed the verge and goes towards being – pursuant to Stefan Zweig’s prognosis – a land of the future.

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6.4 Prospect for further research The research for this topic was divided into two parts. In order to establish the answers to the research questions, an analysis of the Brazilian LEAN consulting market was essential. Furthermore a summary of economic indicators served as a basis of the topic. The theoretical part comprises of secondary research material, conducted from the Brazilian Central Bank or Consulting associations and the economic indicators have been derived from international institutes like the World Bank or the IMF. Especially on the data about the LEAN consulting business cannot entirely be relied and empirical probability might be constrained, despite efforts to detect the most accurate sources. Furthermore the financial crisis and its severe effect on the world’s economy have led to disparities in some points between the outcome of the study and the market evalution. Latest data of economic indicators has only been available up to the time before the crisis and the experts opinions were already influenced by the current worldwide economic situation.

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The Delphi Study was a helpful tool to forecast the business development in the Brazilian consulting market as well as to give recommendations on the strategy formulation for a management consulting company. Even so, it was no suitable tool for detecting reliable information about the LEAN consulting market in Brazil. For further research a third or even a fourth round may be performed. Also other empirical methods might be utilized, which are more suitable for tackling this specific area. This can then also reflect new perspectives of the topic, other than already related to, such as the impact of the financial crisis on the budget planning of large multinationals for external Consultancies.

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7 BIBLIOGRAPHY 7.1 Books Accuff, F.L. (1997). How to negotiate anything with anyone around the world. (2nd ed.). New York: Amacom Argawal, S., Ramaswami, S. N. (1992). Choice of Foreign Market Entry Mode: Impact of Ownership, Location and Internalization Factors. Palgrave Macmillian Journals Baedeker, Allianz Reiseführer (2006). Brasilien. Verlag Karl Baedeker Bain, (1968), p. 252. Borrmann, J. Finsinger, J. Zauner, K. (2003). in Nutzinger, H. G., „von“ Weizsäcker, C.C.. Regulierung, Wettbewerb und Marktwirtschaft. (128). Vandenhoeck & Ruprecht Bellmann, K., Haak, R. (2005) Management in Japan: Herausforderungen und Erfolgsfaktoren für deutsche Unternehmen in einer dynamischen Umwelt. Verlag DUV Bösenberg, D., Metzen, H. (1992). Lean Management. Vorsprung durch schlanke Konzepte. Landsberg/Lech: Verlag Moderne Industrie Borrmann, J., Finsinger, J., Zauner, K. (2003). in Nutzinger, H. G., „von“ Weizsäcker, C.C.. Regulierung, Wettbewerb und Marktwirtschaft. (128). Vandenhoeck & Ruprecht Bruhn, M., Georgi, D. (2006). Services Marketing. Pearson Education Cateora, P, Graham, J. (2002). International Marketing. (11th ed.). New York: McGraw-Hill Doole, I., Lowe, R. (2007). International Marketing Strategy: Analysis, Development and Implementation. (5th ed. Illustrated). Cengage Learning EMEA

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Elstrodt, H., Fergie, J., Laboissiére, M. (2006) in Farell, D., McKinsey Global Institute. The Productivity imperative: wealth and poverty in the global economy. Harvard Business Press Fourastie, J. (1952). Die große Hoffnung des 20. Jahrhunderts. (3rd ed.). Paris. into German by Lutz, B. Köln-Deutz Fritz, B. (1995). Stabilisierung in Brasilien: Eine Zwischenbilanz des Plano Real. Institut für deutsche Wirtschaftsforschung Häder, M. (2002). Delphi-befragungen: Ein Arbeitsbuch. VS Verlag Hradil, S., Immerfall, S. (1997). Die westeuropäischen Gesellschaften im Vergleich. VS Verlag

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Kaufmann, D., Kraay, A., Mastruzzi, M. (2008). Governance Matters VII: Governance Indicators for 1996-2007, World Bank Kotler, P. (1994). Marketing Management. Analysis, Planning, Implementation, and Control. (8th ed.). Prentice-Hall, Inc. Lean Enterprise Institute (2003) Lean Lexicon – A graphical glossary for Lean Thinkers. Massachusetts: Lean Enterprise Institute Lymbersky, C. (2008). Market Entry Strategies: Text, Cases and Readings in Market Entry Management. Hamburg: Management Laboratory Press Monden, Y. (1998). Toyota Production System. (3rd ed.). Georgia: Institute of Industrial Engineers Murman, E. (2002). Lean Enterprise Value: Insights from MIT's Lean Aerospace Initiative. (ed. : illustrated). Palgrave Pan American Health Organization, Pan American Sanitary Bureau, InterAmerican Development Bank, World Bank (2001). Investment in Health. Social and Economic Returns. Pan American Health Org Pierenkempter, T. (1994). Gewerbe und Industrie im 19. und 20. Jahrhundert. Oldenbourg Wissenschaftsverlag Porter, M. E. (1991). Strategy: seeking and securing competitive advantage. (1st ed.). Harvard Business Press Porter, M. E. (1998). Competitive Strategy. Techniques for Analyzing Industries and Competitors. (1st ed.). Free Press Porter, M., E. (1998). On Competition. (ed. : illustrated). Harvard Business Press Sangmeister, H. (2007). Brasilien - Großmacht in Lateinamerika. Chapter: Brasiliens neue Rolle in der Weltwirtschaft. Institut für Iberoamerika-Kunde Wildemann, H. (1993). Lean Management. Strategien zur Erreichung wettbewerbsfähiger Unternehmen. Frankfurt a. M.: Edition Blickpunkt Wirktschaft Wöhlcke, M. (2000). 500 Jahre Brasilien. Die Entstehung einer Nation. Freistadt: Vier-Viertel-Verlag

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World Bank (2003). Brazil: Equitable, Competitive, Sustainable, Contributions for Debate. (ed. Illustrated). Washington: World Bank Publications

7.2 Articles/Publications Bloomberg (2009). Brazil’s Foreign Direct Investment Surged in December (Update 1). Access on 25 March, 2009 on http://www.bloomberg.com/apps/news?pid=20601086&sid=aq5VZCR2S2MY &refer=news

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CEI – Centro de Economia Internacional (2002). Mercosur Outlook. Access on 15 October, 2008 on http://www.cei.gov.ar/serie/pdf/mer2002.pdf Central Bank Brazil (2008). Febraban Report. Access on 21 January, 2009 on http://www5.bicbanco.com.br/eng/download/Febraban_Report_04_08.pdf CESA – Centro de Estudos das Sociedades de Advogados (2006). Legal guide for foreign investors in Brazil. Access on 20 March, 2009 on http://www.cesa.org.br/arquivos/guialegal_en06.pdf CNI – National Confederation of Industry (2006). Growth. The industry’s vision. Access on 21 January, 2009 on http://www.cni.org.br/portal/main.jsp?lumPageId=4028808115EC919A0115E DA544AB32CD&itemId=8A9015D01AB7B928011AC02D89FA786C#downlo ads Conference Board (2008). Performance 2008: Productivity, Employment, and Growth in the World's Economies. Access on 15 January, 2009 on http://www.conference-board.org/publications/describe.cfm?id=1445 Europäische Kommission (2007). Mercosur, Regionales Strategiepapier. Access on 8 October, 2008 on http://ec.europa.eu/external_relations/mercosur/rsp/07_13_de.pdf Exame (2008). Most successful companies in Brazil. (ed. April 2008) Freitag, M. (2004). Formel Toyota. In Manager Magazin, December 2004 (72-83) Hanson, S., Klonsky, J. (2007). Mercosur: South America’s Fractious Trade Bloc. Councial on Foreign Relations. Access on 7 January, 2009 on http://www.cfr.org/publication/12762/ Kalache, A., Ramos, L. R, Veras, R. (1987). O envelhecimento da população mundial. Um desafio novo. Rev. Saúde Pública vol.21 no.3 São Paulo June 1987. Access on 21 January, 2009 on http://www.scielo.br/scielo.php?pid=S003489101987000300005&script=sci_a rttext&tlng=en

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Luján-Zilbermann, J. (2006). Country Focus. A land of the future? Meat international. Agriworld.nl, Vol. 6, No. 4. Access on 29 March, 2009 on http://www.agriworld.nl/public/file/pdf/20060927-18_brazil.pdf Mendonca, M. (2003). Criminality and Social Inequality in Brazil. Access on 5 January, 2009 on http://papers.ssrn.com/sol3/papers.cfm?abstract_id=431860 QAD (2005). Empowering the Lean Supply Chain. Access on 15 October, 2009 on http://www.leanqad.com/resources/d4d/empowering_lean_supply_chain.pdf Ramos, L. (2000). Ageing in Developing Countries. In Ageing International. Springer New York. Access on 21 January, 2009 on http://www.springerlink.com/content/xq455fp2fg6ktn3d/

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Rocha, E., IBCO (2003). The Brazilian Consulting Market. Access on 15 October, 2009 on http://www.ibco.org.br Root, F. R. (1994). Entry Strategies for International Markets. San Francisco: Jossey-Bass Textbooks Online (2006). Industrial Sector. Access on 15 January, 2009 on http://www.textbooksonline.tn.nic.in/Books/11/Econ-EM/Chapter_07.pdf Walter, N. (2006). Tudo bem, Brasil? – Brasilien, alles klar?. Beitrag für "Die Welt". Access on 5 January, 2009 on http://www.dbresearch.de/servlet/reweb2.ReWEB?addmenu=false&documen t=PROD0000000000200246&rdLeftMargin=10&rdShowArchivedDocus=true &rwdspl=0&rwnode=DBR_INTERNET_DEPROD$FM&rwobj=ReDisplay.Start.class&rwsite=DBR_INTERNET_DEPROD World Bank (2008) World Development Indicators. Access on 21 January, 2009 on http://siteresources.worldbank.org/DATASTATISTICS/Resources/WDI08sup plement1216.pdf World Bank (2009). Doing Business Report 2009. Access on 15 March, 2009 on http://www.doingbusiness.org/Documents/CountryProfiles/BRA.pdf World Investment Report 2008 (2008). Access on 15 March, 2009 on http://www.unctad.org/sections/dite_dir/docs/wir08_fs_cn_en.pdf

7.3 Websources About.com. Encyclopaedia Britannica (2009). Brazil. Access on 5 January, 2009 on http://history1900s.about.com/gi/dynamic/offsite.htm?site=http://www.britanni ca.com/bcom/eb/article/6/0%2C5716%2C108686%2B1%2B106095%2C00.h tml Abraçem (2007). Associação Brasileira de Consultores Empresariais e Profissionais Liberais. Access on 25 March, 2009 on http://www.abraçem.com.br/quem_somos.htm

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Banco Central do Brasil (2009). Economic Indicators. Access on 17 March, 2009 on http://www.bcb.gov.br/?INDICATORS Banco Latinoamerican de Exportaciones (2009). Brazil Statistics. Access on 15 January, 2009 on http://www.blx.com/paginasInfoLatam.aspx?PAG_ID=23&CAT_ID=5#informa cion_economica Business Anti-Corruption Portal (2008). About Corruption. Access on 7 January, 2009 on http://www.business-anti-corruption.com/ Centenario 2008 (2008). Brazil-Japan Cultural Week. Accessed on 25, March 2009 on

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http://www.centenario2008.org.br/semana/index.php?option=com_content&t ask=view&id=83&Itemid=88 CIA

World Factbook (2008). Brazil. Access on 5 January, 2009 https://www.cia.gov/library/publications/the-world-factbook/geos/br.html

EconStats (2008). Brazil. Access on http://www.econstats.com/weo/CBRA.htm

30

September,

2008

on on

European Franchise Federation (2009). What is meant by “franchising”?. Access on 22 March, 2009 on http://www.eff-franchise.com/spip.php?rubrique6 European Intelligence Unit (2008). Country Risk Report. Accessed on 30 September, 2008 on http://countryanalysis.eiu.com/ FCO (2009). Foreign and Commonwealth Office. Country Profile Brazil. Access on 15 January, 2009 on http://www.fco.gov.uk/en/about-the-fco/countryprofiles/south-america/brazil?profile=all Federal Reserve Bank of Atlanta (2000). Mercosur: Back on Track?. Access on 8 October, 2008 on http://www.frbatlanta.org/invoke.cfm?objectid=87B682906666-11D5-93390020352A7A95&method=display Forbes Magazine (2008). Forbes Global 2000 list. Access on 21 January, 2009 on http://www.forbes.com/lists/2008/18/biz_2000global08_The-Global2000_Counrty.html Gemba Research LLC (2007). Consulting. Access on 21 January, 2009 on http://www.gemba.com/consulting.cfm Geopraphia (2006). Brazil. Access on 5 http://www.geographia.com/brazil/brazihistory.htm

January,

2009

on

Hub Pages (2009). Production Leveling. Access on 27 March, 2009 on http://hubpages.com/hub/Production-Leveling Hudson, R., Countrystudies (1997a). The Brazilian Way. Washington: GPO for the Library of Congress. Access on 5 January, 2009 on http://countrystudies.us/brazil/

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Hudson, R., Countrystudies (1997b). The Eighteenth-Century Gold Rush. Washington: GPO for the Library of Congress. Access on 5 January, 2009 on http://countrystudies.us/brazil/ Hudson, R., Countrystudies (1997c). The Coffee Economy. 1840-1930. Washington: GPO for the Library of Congress. Access on 5 January, 2009 on http://countrystudies.us/brazil/ Hudson, R., Countrystudies (1997d). A period of sweeping change. Washington: GPO for the Library of Congress. Access on 5 January, 2009 on http://countrystudies.us/brazil/

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Hudson, R., Countrystudies (1997e). The labor force and income levels. Washington: GPO for the Library of Congress. Access on 5 January, 2009 on http://countrystudies.us/brazil/ IBCO (2008). About us. Access on 15 http://ibco.org.br/conteudo.asp?cod_conteudo=3

October,

2008

on

IBGE – Instituto Brasileiro de Geografia e Estatística (2009). Economia. Access on 21 January, 2009 on http://www.ibge.gov.br/home/mapa_site/mapa_site.php#economia Illinois Institute of Technology (2009). The Delphi Method. Definition and historical background. Access on 21 February, 2009 on http://www.iit.edu/~it/delphi.html Lao

Tzu (2009). Access on 5 January, 2009 http://www.brainyquote.com/quotes/quotes/l/laotzu121559.html

on

Lean Institute Brasil (2009). O que somos. Access on 15 October, 2008 on http://www.lean.org.br/o_que_somos.aspx Luff, P. (2007). Interview by John Fitzpatrick. Access on 15 January, 2009 on http://www.brazilpoliticalcomment.com.br/content/view/188/63/lang,en/ Mattern, J. (2006). Five reasons companies hire consultants. Access on 16 February, 2009 on http://www.associatedcontent.com/article/88070/five_reasons_companies_hir e_consultants_pg2.html?cat=31 Petrobras Brasileiro (2009). Petrobras in Numbers. Access on 21 January, 2009 on http://www2.petrobras.com.br/portugues/ads/ads_Petrobras.html Pnuma (2008). Access on 15 October, www.pnuma.org/informacion/pnumanuevas/pn1105e.htm

2008

on

Powell, B. (2003). The Oil Shocks of the 70s. Access on 22 January, 2009 on http://www.exponentialimprovement.com/cms/oilshock.shtml Quick MBA (2009). Foreign Market Entry Modes. Access on 15 March, 2009 on http://www.quickmba.com/strategy/global/marketentry/

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Secretaria del Mercosur (2008). Access on 8 October, 2008 http://www.mercosur.int/msweb/portal%20intermediario/es/index.htm

on

State of Victoria (2007). Delphi Study. Access on 21 February, 2009 on http://www.dse.vic.gov.au/DSE/wcmn203.nsf/LinkView/D7B9E063A2B4FFAF CA25707E00248822EBB2EB2F9035229BCA257091000BF7A6 The Economist (2009). Country briefings Brazil – Forecast. Access on 25 March, 2009 on http://www.economist.com/countries/Brazil/profile.cfm?folder=ProfileForecast

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The International Guide to Management Consultancy, Von Barry Curnow, Jonathan Reuvid The Times 100 (2009). Lean Production. Access on 22 January, 2009 on http://www.thetimes100.co.uk/theory/theory--LEAN-production--252.php TMB Consulting Group (2009). The Toyota House. Access on 27 March, 2009 on http://www.tbmcg.com/de/about/ourroots/house_toyota.php Toyota Motor Company (2009). Production System. Access on 27 March, 2009 on http://www.toyota.co.jp/en/vision/production_system/index.html Workmall (2002). Brazil History. Access on 5 January, 2009 http://www.workmall.com/wfb2001/brazil/brazil_history_introduction.html

on

World Bank (2008). Worldwide Governance Indicators (WGI). Access on 7 January, 2009 on http://info.worldbank.org/governance/wgi/index.asp World Bank (2009). Brazil: A Poverty Assessment. Access on 11 January, 2009 on http://web.worldbank.org/WBSITE/EXTERNAL/TOPICS/EXTPOVERTY/EXT PA/0,,contentMDK:20206734~isCURL:Y~menuPK:435735~pagePK:148956 ~piPK:216618~theSitePK:430367,00.html World Bank (2009). Brazil Country Brief, Advances in Development. Access on 5 January, 2009 on http://web.worldbank.org/WBSITE/EXTERNAL/COUNTRIES/LACEXT/BRAZI LEXTN/0,,menuPK:322351~pagePK:141132~piPK:141107~theSitePK:32234 1,00.html

7.4 Further reading and experts Biehal, F. (1993). Lean Service. Dienstleistungsmanagement der Zukunft für Unternehmen und Non-Profit-Organisationen. Wien: Manz Curnow, B., Reuvid, J. (2003). The International Guide to Management Consultancy. (ed. 2: illustrated). Kogan Page Publishers Fowles, J. (1978). Handbook of Futures Research. Greenwood Press Lettau, H.-G. (1993). Grundwissen Marketing. (5th ed.). München: Wilhelm Heyne Verlag

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Schwand, C. (2009). Meeting concerning the Delphi Study. IMC Krems Zhang, J. Q. (2002). Market entry of Red Bull in Taiwan. Analysis of the marketing environment and design of a market entry concept. IMC Krems

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8 APPENDIX 8.1 Delphi Study – Summary of first round 1) Sehen Sie Brasilien als Eintrittsland in den Lateinamerikanischen Markt? Diese Frage wurde im Allgemeinen einstimmig mit Ja beantwortet. Im Einzelnen wurde mehrfach darauf hingewiesen dass Brasilien eher als Eintrittsland für den südamerikanischen Raum als für Mittelamerika zu sehen ist. 2) Wie sieht Ihrer Meinung nach die Marktsituation in der brasilianischen Beratungsbranche momentan aus (Wettbewerb, Nachfrage, Konzentration in bestimmten Regionen)? Ein Markt für die Beratungsbranche ist in Brasilien ohne Zweifel vorhanden. Die Meinungen gingen hier auseinander – einerseits dass sich der Wettbewerb eher unter den brasilianischen Unternehmen abspielt und andererseits dass internationale Unternehmen ebenfalls eine große Rolle spielen. Nachfrage besteht vor Allem im Bereich Prozessoptimierung. São Paulo also wichtiger Standort der momentanen Marktsituation wurde von fast allen Teilnehmern genannt. Ebenso Rio de Janeiro, Belo Horizonte, Porto Alegre und Brasilia kamen mehrfach in den Antworten vor. 3) Ist es angesichts der Finanzkrise und bei Betrachtung der wirtschaftlichen Lage empfehlenswert (derzeit/ in den nächsten 2 Jahren) in den brasilianischen Markt zu investieren? Auch diese Frage wurde einstimmig mit Ja beantwortet. Gerade in der jetzigen Situation sollte man investieren, denn Brasilien ist weitaus weniger betroffen als andere Länder und Regionen. Sobald es wieder einen Aufschwung der

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Weltwirtschaft gibt werden sich diese Investitionen auszahlen. 4) Welche Form des Markteintrittes Beratungsfirma empfehlen?

würden

Sie

einer

europäischen

Die Antworten zu dieser Frage haben teilweise variiert. Am häufigsten genannt wurde der Markteintritt mittels einer Kooperation mit einem brasilianischen Partner/ Unternehmen. Auch die Möglichkeit der Gründung einer GmbH wurde erwähnt, sowie die Meinung dass ein Markteintritt momentan nicht durchführbar ist.

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5) Welche Bundesstaaten sind Ihrer Meinung nach am besten für die Eröffnung einer Tochterfirma/ Zweigstelle einer europäischen Unternehmensberatung geeignet? Ohne Zweifel ist hier São Paulo die meistgenannte Antwort, gefolgt von Minas Gerais, Paraná und Rio Grande do Sul. Vereinzelt wurde auch Rio de Janeiro genannt. 6) Welche Branchen sind für eine Unternehmensberatung, die im Bereich Prozessoptimierung tätig ist, interessant? Auch diese Frage wurde mit großer Übereinstimmung beantwortet. Die Fertigungsindustrie wurde mit Abstand am häufigsten genannt. Auch Konsumgüter, Einzelhandel, Banken und Logistikunternehmen waren unter den Antworten. 7) Kennen Sie das IBCO? Wenn ja, denken Sie dass das IBCO ein anerkanntes und nützliches Institut ist um Beratungsunternehmen in Brasilien zu unterstützen? Keinem der befragten Experten war das IBCO ein Begriff. IBCO steht für „Instituto Brasileiro de Consultores de Organização” (http://ibco.org.br/) und ist eine brasilianische Organisation die ethische und qualitative Grundsätze im Beratungsgeschäft vertritt. Sie scheint allerdings (noch) keine große Rolle zu spielen. 8) Welche Vorgehensweise (z.B. herantreten an Institutionen) empfehlen Sie hinsichtlich der Unterstützung beim Markteintritt (in rechtlicher, finanzieller etc. Hinsicht)? Die Rolle des so genannten „Networkings“ spielt in Brasilien eine tragende Rolle und darf nicht unterschätzt werden. Über persönliche Kontakte kommen die meisten Geschäfte überhaupt erst zustande. Dies sollte auch Verbände/

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Mitgliedsvereine (keine Namen genannt) umfassen. Für professionelle Angelegenheiten sollte auf jeden Fall die Hilfe eines spezialisierten Unternehmens in Anspruch genommen werden. 9) Inwiefern denken Sie dass Korruption eine Rolle spielt und problematisch sein kann für den Start eines Unternehmens in Brasilien?

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Es wurde einstimmig geantwortet dass Korruption kein großes Thema in Brasilien und in der Beratungsbranche ist. Es sollte dem keine größere Bedeutung beigemessen werden. 10) Welche Möglichkeiten schlagen Sie vor um den Bekanntheitsgrad der neu gegründeten oder vor dem Markteintritt stehenden Unternehmensberatung zu erhöhen? Öfters genannt wurde ein aussagekräftiges Referenzprojekt mit dem man die Möglichkeit hat sich einen Namen zu machen. Auch die Bedeutung von Networking wurde wieder betont. Als weitere Möglichkeiten wurden Anzeigenschaltung und das Sponsoring von punktuellen Veranstaltungen aufgezeigt. 11) Welchen Vor- bzw. Nachteil kann der Einsatz von brasilianischen Beratern, bzw. portugiesisch sprechenden Beratern, für ein ausländisches Unternehmen haben das in Brasilien ansässig ist? Die einstimmige Meinung zu dieser Frage war dass portugiesisch in Brasilien unerlässlich im Beratungsgeschäft ist. Es müssen nicht unbedingt Brasilianer sein, denn die Tatsache dass ein Ausländer portugiesisch beherrscht spricht dafür dass sich das Unternehmen auf den ausländischen Markt vorbereitet hat. Allerdings sollte das brasilianische Portugiesisch dem portugiesischem vorgezogen werden. Einziges Problem welches auftreten kann ist dass die Kommunikation mit der ausländischen Firma darunter leiden kann, bzw. dass Mentalitätsprobleme auftreten können, wenn brasilianische Berater eingesetzt werden. 12) In welcher Größenordnung bewegt sich der durchschnittliche Tagessatz für einen Junior Berater/ Berater/ Senior Berater in Brasilien? Nicht eine Antwort glich hier der anderen, es konnte noch nicht einmal eine Tendenz erstellt werden.

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13) Nach welchen Kriterien würden Sie als Geschäftsführer eine externe Beratungsfirma engagieren? Ordnen Sie die folgenden Kriterien von 1-6, wobei 1 am wichtigsten und 6 am unwichtigsten ist. Schreiben Sie die Zahl einfach hinter den jeweiligen Begriff.

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Entering the Brazilian Market: A guide for LEAN Consultants : A guide for LEAN Consultants, Diplomica Verlag, 2009. ProQuest Ebook Central,

                     &&

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Der angegebene Wert ist jeweils der Mittelwert mit zugehörigem Streuungsmaß. Es ist deutlich zu sehen dass Qualifikation und Expertise der Berater die wichtigsten Kriterien sind um eine bestimmte Beratungsfirma auszuwählen. Dicht gefolgt ist auch das Kriterium „auf Empfehlung“. Weniger wichtig bei der Entscheidung sind das Honorar, Marktimage und die Arbeitsmethoden.

8.2 Delphi Study – Summary of second round 1) Das Ergebnis der letzten Runde hat klar hervorgehoben dass in São Paulo am meisten Wettbewerb herrscht und auch dass man sich dort am ehesten ansiedeln sollte. Ist São Paulo wirklich so ein günstiger Ort wenn man als Ausländer ohne jegliche Kooperation/Partner in den Markt eintreten möchte und wie sollte man dies dann am besten durchführen?

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Die Antworten aller Teilnehmer haben einstimmig ergeben dass São Paulo der geeignetste Ort ist um eine Unternehmensgründung durchzuführen. Wenn man hier nicht erfolgreich ist dann höchstwahrscheinlich auch nirgends sonst in Latein Amerika. Gerade weil hier so viele Unternehmen ansässig sind ist dies der ideale Ort um Networking zu betreiben und potentielle Kunden zu akquirieren. Es ist der größte Markt in Brasilien und liefert somit auch das höchste Potential.

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Ohne jegliche Kooperation oder einen Partner ist dieser Einstieg allerdings unmöglich. Es gibt Unternehmensberater mit viel Erfahrung die bei Gründungen und beim Markteinstieg behilflich sein können. Auch Rechtsanwälte sind nötig um bei den notwendigen Formalitäten zu unterstützen. In jedem Fall muss es sich um eine Vertrauensperson handeln die sich mit dem Markt auskennt. 2) Welchen Zeithorizont sollte man einplanen bis man in der Lage ist sich aus dem operativen Cashflow zu finanzieren? Alle Antworten unterm Strich gerechnet liegt die Schätzung bei um die 2 Jahre bis sich ein Unternehmen selber tragen kann. Allerdings hängt dies offensichtlich auch immer von verschiedenen Faktoren ab. 3) Stimmen Sie damit überein dass Industrien, die nicht mehr so stark wachsen und sich in der Konsolidierungsphase befinden, offener für Beratungstätigkeiten im Bereich Prozessoptimierung sind? Die Antworten zu dieser Frage waren zweigeteilt. Auf der einen Seite wurde zugestimmt dass Unternehmen beginnen sich nach neuen Möglichkeiten umschauen wenn der Markt nicht mehr so viel hergibt und daher generell auch Hilfe von aussen suchen. Auf der anderen Seite steht die Meinung dass die Entscheidung für ein Beratungsunternehmen nichts mit dem Markt zu tun hat und Unternehmen die generell nicht pro Beratungsunternehmen eingestellt sind auch bei schwieriger Marktlage ihre Meinung nicht ändern werden. 4) Welche Branchen in Brasilien unterliegen momentan keinem starken Wachstum? (Auf Grund der Finanzkrise hat sich das Bild natürlich wesentlich verändert, aber versuchen Sie trotzdem eine Tendenz zu entdecken) Die Antworten haben sich insgesamt zu folgendem Gesamtbild ergänzt:

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Keinem starken Wachstum unterliegen momentan Maschinenbau, Anlagenbau, Rohstahlproduktion, Elektronik und Elektrotechnik. Ausserdem die Textil- und Konsumgüterindustrie. Lediglich bei der Automobilproduktion gingen die Aussagen auseinander. Die Baubranche, Öl- und Gasförderung sowie die Landwirtschaft wurde stärkerem Wachstum zugeschrieben. 5) Die Wichtigkeit von Referenzprojekten wurde bereits herausgestellt. Wie bringt man ein entsprechendes Referenzprojekt zustande?

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Ihre Antworten haben wieder die Bedeutung von Networking herausgestellt. Um ein entsprechendes Referenzprojekt zu akquirieren sollte man versuchen durch vorhandene Kontakte an neue Kunden und zu vergebene Projekte zu kommen. Dabei sollte man sich auch auf den einschlägigen Veranstaltungen in Deutschland und Brasilien umschauen. Weiteres unterliegt dann dem Verhandlungsgeschick der Berater (bzw. der Geschäftsführer) und mit Sicherheit auch dem Preis. Unter Umständen muss man beim ersten Projekt etwas nachgeben mit dem Preis, wenn das Projekt das Potential hat Folgeprojekte akquirieren zu können – dies ist dann der Preis für den Markteinstieg. Beim Networking sollte man sich vielleicht auch erstmal an deutsche bzw. heimatliche Unternehmen halten bevor man sich in fremde Gewässer vorwagt. Die erbrachte Leistung sollte sich in jedem Fall von der Menge abheben und Potential für den brasilianischen Markt aufweisen, also Nachfrage generieren. 6) Gibt es eine Paradebeispiel das man als Referenzprojekt im Bereich Prozessoptimierung nennen kann, z.B. einen gewissen Sektor aus dem heraus man leicht überall Folgeprojekte akquirieren kann? Angesichts Ihrer Antworten gibt es kein spezielles Paradebeispiel. Allerdings sollte man sich auf große und angesehene Unternehmen konzentrieren. Primär deutsche, da diese u.U. leichter zu akquirieren sind, aber auch ein Projekt für ein angesehenes brasilianisches Unternehmen kann als gutes Referenzprojekt dienen. 7) Gibt es einen Dachverband von Beratungsfirmen in Brasilien der Ihnen bekannt ist? Mehrfach und ausschliesslich genannt wurde ABRAÇEM – Associação Brasileira de Consultores Empresariais e Profissionais Liberais – www.abracem.com.br.

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8) Zur vorherigen Frage: Aus welchem Grund würden Sie eher so einem Dachverband beitreten? Um Networking zu betreiben oder um einen gewissen Qualitätsstandard zu wahren der durch den Beitritt gegeben wäre. Ganz klar ist die Antwort hier Networking gewesen. Allerdings sollte man auch aufpassen was für Arten von Organisation das ist. Manche Verbände verlangen horrende Beiträge und erbringen im Gegenzug sehr wenig bis gar keine Leistung. 9) Wie wird die Mehrzahl der Projekte von den Firmen vergeben? Hauptsächlich durch Networking oder gibt es auch ein Bidding am Markt?

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Es gibt definitiv auch ein Bidding am Markt. Aufträge von öffentlichen und staatsnahen Unternehmen werden hauptsächlich durch Ausschreibungen vergeben. Die Bedingungen hierfür sind hochkomplex und für Ausländer nahezu unerfüllbar. Im Allgemeinen gilt je größer das Unternehmen umso professioneller und transparenter sollte die Vergabe sein. Als Ausländer in Brasilien sollte man sich allerdings an Kontakte halten und diese pflegen, vor allem mit deutschen Firmen bzw. brasilianische Firmen mit deutschem Kapital, denn Kaltakquisition bei brasilianischen Unternehmen ist nahezu unmöglich. 10) Im ersten Fragebogen wurde die Frage gestellt welche Möglichkeiten Sie vorschlagen den Bekanntheitsgrad zu erhöhen. Drei unterschiedliche Möglichkeiten wurden vorgeschlagen: Referenzprojekt, Anzeigen /Sponsoring und Networking. Verteilen Sie nun bitte die Gewichtigkeit auf 100%. (Z.B.: Referenzprojekt 40%; Networking 30%; Anzeigen/Sponsoring von Veranstaltungen 30%). Das Ergebnis stellt sich in der folgenden Grafik dar. Durchschnittliche Präferenz von Maßnahmen zur Erhöhung des Bekanntheitsgrades

Anzeigen/ Sponsoring von Veranstaltungen

13

Networking

35

Referenzprojekt

50

0

10

20

30

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in %

Source: developed by the author

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40

50

60

8.3 Concrete steps for starting a business in Brazil This table summarizes the procedures and costs associated with setting up a business in Brazil (Doing Business 2009, p. 52f.). * Takes places together with another procedure

No.

Procedure

Time to complete

Cost to complete

1

Check company name with State Commercial Registry Office Pay registration fees

1 hour

No charge

1 day 1 day

5*

Register with the commercial board of the state where the main office is located and obtain identification number (NIRE) Register for federal and state tax (Secretaria da Receita Federal do Ministério da Fazenda, SRF/MF), obtain the CNPJ number, which also registers employees with the National Institute of Social Security (Instituto Nacional da Seguridade Social, INSS) Confirm INSS enrollment

see following procedures R$59.06 registration + $100 (expediting fee)

6*

Receive state tax inspection

2 3

4

7

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8*

9*

Get the authorization to print receipts/invoices from the Secretaria da Fazenda Estadual Register with the Municipal Taxpayers’ Registry (Secretaria Municipal de Finanças) of the City of São Paulo Pay TFE to the Municipal Taxpayers’ Registry

About 22 days (including inspection visit)

no charge

1 day (simulaneous with previous procedure) 1 day (simulaneous with previous procedure) 1 day

no charge

5 days ( Simultanous with procedure 5)

no charge

1 day (simultaneous with Procedure 5)

R$ 300 (for retailing business), may vary in accordance with the company’s activities

105

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no charge

no charge

10

Get the authorization to print receipts/invoices from the Secretaria Municipal de Finanças 11 Order receipts/invoices (notas fiscais) with CNPJ numbers from authorized printing companies 12 Obtain fire brigade license from the State of São Paulo procedure 12-14 13 * Inspection from the Fire Brigade

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14 * Apply to the municipality for an operations permit (Alvará de Funcionamiento) 15 * Register the employees in the social integration program (Programa de Integração Social, PIS) 16 * Open a special fund for unemployment (FGTS) account in bank 17 * Notify the Ministry of Labor (Cadastro Geral de empregados e desempregados, CAGED) 18 * Registration with the Patronal Union and with the Employees Union.

1 day

no charge

3 days

R$ 600 (R$0.6 per page, assume printing 1000) no charge

Takes 120 days

included in the previous procedure * included in the previous procedure * 1 day, simultaneous with Procedure 14

no charge

1 day, simultaneous with Procedure 14 1 day (trivial) , simultaneous with Procedure 14 5 days, simultaneous with Procedure 14

no charge

106

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no charge

no charge

no charge

Annual fee to be paid depending on the Union

8.4 Paying taxes in Brazil

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Tax or mandatory contribution Vehicle tax

No. of payments

Time (hours)

Statutory tax rate

Tax base

1

1.5%

Tax on interest

o

20%

Municipal services tax Financial transactions tax (CPMF) Property tax

1

5%

1

0.38%

1

2.5%

Social contribution (CSLL) Severance contributions (FGTS) Payroll tax

1

9%

0

8.5%

Gross salaries

8.86

1

8.8%

9.18

Corporate income tax (IRPJ)

1

736

Gross salaries Taxable profit

Social security contributions (INSS) PIS/COFINS (similar to VAT) Value added tax (IPI)

1

491

ICMS (similar to VAT)

1

15%+10% (surcharge applies on annual taxable income exceeding R$ 240 thousand) 20%

Market value of vehicle Interest income Price of service Bank transactions

Total tax rate (% of profit) 0.13

Market value of property Taxable profit

0.51 0.88 2.8

3.7 5.63

15.64

Gross salaries

22.56

1

9.3%

Value added

39.12

1

20%

Value added (including taxes) Value added (including taxes)

84.59

1374

18%

107

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