Post on 02-Dec-2014
AProject Report
On“Country analysis for international business”
BRAZIL BANGLADESH
Master of Management Studies under the University of Mumbai
By
Shweta , Roll No. 11
Hussain Hakeem, Roll No. 12
Rashid Gafoor Kaskar, Roll No. 15
Mohd Mukhtar Kasmani, Roll No. 16
Irfan Faizullah Khan, Roll No. 19
Naqeeb Sakharkar, Roll No. 32
Specialization: FinanceUnder the Guidance of
Prof. Sameer Charania(Lecturer International Business)
Allana Institute of Management Studies and Research
CST, Mumbai-4000012011
Contents
ACC Cements – CORPORATE PROFILE..............................................................3
SUBSIDIARIES AND ASSOCIATES of ACC CEMENTS:-........................................7
Manufacturing process at ACC Cement.........................................................11
Swot Analysis of ACC Cement........................................................................13
Cement Industry A Global Perspective..........................................................15
Overview of Cement Industry - Brazil............................................................19
PESTLE - Brazil...............................................................................................22
Main drivers for doing business in Brazil.....................................................36
Main Challenges of doing Deals in Brazil....................................................37
Different Modes of Setting up Business in Brazil.........................................38
Overview Of Cement Industry - Bangladesh..................................................40
Pest Analysis of Bangladesh..........................................................................46
ACC Cements – CORPORATE PROFILE
ACC (ACC Limited) is India's foremost manufacturer of
cement and concrete. ACC's operations are spread throughout the
country with 16 modern cement factories, more than 40 Ready
mix concrete plants, 21 sales offices, and several zonal offices. It
has a workforce of about 9,000 persons and a countrywide
distribution network of over 9,000 dealers.
Since inception in 1936, the company has been a trendsetter
and important benchmark for the cement industry in many areas
of cement and concrete technology. ACC has a unique track
record of innovative research, product development and
specialized consultancy services. The company's various
manufacturing units are backed by a central technology support
services centre - the only one of its kind in the Indian cement
industry.
ACC has rich experience in mining, being the largest user of
limestone. As the largest cement producer in India, it is one of the
biggest customers of the domestic coal industry, of Indian
Railways, and a considerable user of the country’s road transport
network services for inward and outward movement of materials
and products.
Among the first companies in India to include commitment to
environmental protection as one of its corporate objectives, the
company installed sophisticated pollution control equipment as
far back as 1966, long before pollution control laws came into
existence. Today each of its cement plants has state-of-the art
pollution control equipment and devices.
ACC plants, mines and townships visibly demonstrate
successful endeavors in quarry rehabilitation, water management
techniques and ‘greening’ activities. The company actively
promotes the use of alternative fuels and raw materials and offers
total solutions for waste management including testing,
suggestions for reuse, recycling and co-processing.
ACC has taken purposeful steps in knowledge building. We
run two institutes that offer professional technical courses for
engineering graduates and diploma holders which are relevant to
manufacturing sectors such as cement. The main beneficiaries
are youth from remote and backward areas of the country.
ACC has made significant contributions to the nation building
process by way of quality products, services and sharing
expertise. Its commitment to sustainable development, its high
ethical standards in business dealings and its on-going efforts in
community welfare programmes have won it acclaim as a
responsible corporate citizen. ACC’s brand name is synonymous
with cement and enjoys a high level of equity in the Indian
market. It is the only cement company that figures in the list of
Consumer Super Brands of India.
ACC's brand name is synonymous with cement and enjoys a
high level of equity in the Indian market. Our range of cements
and blended cements is marketed through a countrywide network
of Sales Units, Area Offices, and warehouses. This is backed by a
vast distribution network of over 9,000 dealers who, in turn, are
assisted by their sub-dealers.
ACC’s marketing; sales and
distribution processes are industry
standards. Although we take
immense pride in having supplied
some of India’s most admired
projects, ACC is essentially a people’s
brand of cement with more than 80
per cent of sales made through an extensive dealer network that
covers every state in India. Its customer base represents the
masses of India - individual homebuilders in small towns, rural
and semi-urban India. ACC cement enjoys an image of assuring
consistency and of high quality backed by in-house research and
expertise.
Complementing this is a unique customer services cell
comprising qualified civil engineers, who assist and advice
customers with prior and post sales service. This service begins
with selection of type and grade of cement (where applicable) to
troubleshooting and on-site assistance.
ACC manufactures the various kinds of Portland Cement for
general construction and special applications.
SUBSIDIARIES AND ASSOCIATES of ACC CEMENTS:-
ACC Concrete Limited
ACC set up India's first commercial Ready Mix Concrete (RMX)
plant in Mumbai in 1994 which together with the promotion of
bulk cement has played a key role in redefining the pace and
quality of construction activity in our large cities and mega
infrastructure projects.
The Ready Mix Concrete business of ACC was reorganized as a
separate wholly owned subsidiary which was incorporated as ACC
Concrete Limited with headquarters in Mumbai. Today this
company is one of the largest manufacturers of Ready Mix
Concrete in India with a countrywide network of plants, with
modern equipment and a large fleet of transit mixers.
ACC Mineral Resources Limited
ACC's wholly owned subsidiary, The Cement Marketing Company
of India Limited, was renamed as ACC Mineral Resources Limited
(AMRL) in May 2009 with an objective of securing valuable
mineral resources, such as coal for captive use. ACC Mineral
Resources Limited has already entered into Joint Venture
arrangements for prospecting, exploration and mining coal from
the coal blocks in Madhya Pradesh and West Bengal. The
company is also exploring other opportunities for securing
additional coal and gypsum resources in India and abroad
Bulk Cement Corporation (India) Limited
Situated at Kalamboli, in Navi Mumbai (formerly New Bombay),
this company caters to bulk cement requirements of the city of
Mumbai and its environs. It has two cement storage silos with a
capacity of 5,000 tons each. The plant receives cement in bulk
from ACC plants at Wadi. The plant has its own special purpose
railway wagons and rakes and its own railway siding. The first of
its kind in India, BCCI is equipped with all the facilities required by
increasingly sophisticated construction sites in a bustling
metropolis, including a laboratory, a fleet of specialized trucks
and site silos for the convenience of customers and is capable of
offering loose cement in bulk-tanker vehicles as well as packed
cement in bags of varying sizes from 1 tonne down to 25 kg bags.
BCCI is situated strategically on the outskirts of Mumbai, just off
the new Mumbai-Pune Expressway. It is a landmark structure
spread over 30 acres of land.
Lucky Minmat
ACC acquired 100 per cent of the equity of Lucky Minmat Private
Limited. This company holds limestone mines in the Sikar district
of Rajasthan, and helps supplement limestone supply to the
Lakheri Plant.
National Limestone Company Private Limited
National Limestone Company Private Limited is a wholly owned
subsidiary. The company is engaged in the business of mining
and sale of limestone. It holds mining leases for limestone in the
state of Rajasthan.
Encore Cement & Additives Private Limited
ACC acquired 100 percent of the financial equity of this company
which is a slag grinding plant in Vishakhapatnam in coastal
Andhra Pradesh. This company became a wholly-owned
subsidiary of ACC in January 2010.
Manufacturing process at ACC Cement
Map - Key
00. Limestone Quarry and Crushing 09. Cooler
plant
01.Limestone Stockpile
02.Additives Hopper
03.Additives Storage
04.Raw Mill Building
05.Blending and Storage Silo
06.Preheater
07.Gas Conditioning Tower and
ESP
08.Kiln
10. Deep Bucket Conveyor
11/1
2.
Clinker/Gypsum Storage
13. Coal Mill Building
14. Cement Mill and Bag
House
15. Cement Storage Silo
16. Packing & Dispatch
17. Central C
PRODUCTS QUALITY:-
Product Development has always been an important activity at
ACC, arising out of a focus on quality and process improvement. It
has been a constant partner, driving research, innovation and
evaluation.
ACC has effectively pledged its reputation as the market leader in
the quality of cement. Maintaining this lead calls for harnessing
the resources and expertise of the company - from applied
research and production to marketing. Accordingly, all ACC
factories are equipped with state-of-the-art process control
instrumentation and associated quality control and testing
laboratories manned by qualified personnel.
As a result of this focus on quality, ACC cement specifications
exceed those set by BIS by a wide margin. Today, all ACC cement
plants have the ISO 9001 Quality Systems certification. This
demonstrates our tradition of providing reliable and consistent
quality through the application of modern technology, and
justifies the preferences of a nationwide customer base.
Swot Analysis of ACC Cement
STRENGTHS:-
1. It is having a good image and brand loyalty among
consumers.
2. Service is good
3. People ask for ACC
4. They have same price prevailing for wholesale at
dealers/stockiest retailers end.
WEAKNESS:-
1. The competitors are doing much promotional activity rather
than ACC Limited that’s why it facing more problems in
selling of product in the market.
2. Lack of awareness program for consumers.
OPPORTUNITY:-
1. Rapid growth is taking place in Bihar and Madhya Pradesh.
2. People are opting for more stable structures and intensive
use of cement is taking place, even government is spending
heavily on infrastructure projects. Thus, this is the right time
to fully tap these markets.
3. As Indian core industry is also growing at rate of nearly 10%
per annum, it is having a good future.
4. Foreign direct investment in infrastructure sector going to
increase in coming years, which will increase the demand of
cement.
5. Roads are undergoing through the transformation process
through which the traditional method of road building will be
replaced by modern concrete roads.
THREATS:
1. Large number of players in cement industry makes it more
competitive for ACC to carefully price its product and at the
same time satisfy its dealers and customers.
2. Players such as Jaypee Cement, Prism Cement, and Birla
Samrat are eating up considerable market share.
3. Due to India exponential growth many new international
cement companies are expected in coming years which will
bring a tide of change and can start price war.
4. The emergence of small players in this market may increase
the competition and start the malpractices, and heavy
discounts to retailers.
Cement Industry A Global Perspective
Global consumption of cement grew 9.9% last year to
continue a strong rebound in demand as construction worldwide
picks up since the economic downturn of 2008, according to a
new report.
The ninth edition of International Cement Review’s Global
Cement Report found that 3,294 million tonnes (Mt) were sold,
topping the 2,998 million tonnes sold in 2009, which was a growth
rate of 5.9%, strongly reversing a slowdown of 2.4% the previous
year. Worldwide cement consumption is forecast to reach a
record 3859Mt by 2012.
Global cement demand will rise 4.1 percent annually through
2013. Gains will be fueled by rising infrastructure investment in
developing countries and improved markets in developed areas.
Blended cement will increase its dominant position over Portland.
Ready-mix concrete will remain the fastest-growing outlet.
This study analyzes the 2.8 billion metric ton world cement
industry. It presents historical demand data for the years 1998,
2003 and 2008, and forecasts for 2013 and 2018 by type (e.g.,
blended, Portland), market (e.g., ready-mix concrete, construction
contractors, consumer, concrete products), world region (e.g.,
Asia/Pacific, Africa/Mideast) and for 46 major countries.
The study also considers market environment factors, details
industry structure, evaluates company market share and profiles
34 industry participants, including Lafarge, Holcim and CEMEX.
The report provides statistics for demand for the commodity
in more than 160 countries, along with additional data for clinker
consumption. China dominates world cement statistics, results
show consuming more than a third of global output – or 1,851
million tonnes - in 2010, almost double 2004 levels. India, the
closest rival to China for economic growth was the second-largest
consumer at 212Mt, with the United States, the third-largest
consumer, saw demand fall down to 69Mt.
Turkey is the world's leading export nation of cement and
clinker, with sales of 19Mt in 2010, overtaking China which
recorded close to 17Mt of export sales. Thailand was third with
14Mt of cement and clinker exports.
Bangladesh is the largest cement and clinker importer, with
over 12 million tonnes of deliveries in 2010, followed by Nigeria at
7 million tonnes and the USA at close to 6 million – a sixth of 2006
levels.
Lafarge remains the world’s biggest selling company,
shifting 141.2Mt last year to produce a turnover of EUR 15.8
billion, ahead of Holcim with cement sales of 136.7Mt and a
turnover of EUR15.6 billion, a ahead of Heidelberg Cement.
Holcim still has the largest global cement capacity, at 212Mt,
11Mt higher than Lafarge.
Major Cement Exporting Countries of the World: -
This is a list of top countries by cement production in 2010 based
on USGS Mineral Program Cement Report. (Jan 2011).
While the top 3, China, India and USA, didn't change in the last 5
years, declining US production by 36.5% is noteworthy. The most
progressing countries in terms of ranking are Turkey (10th to
4th), Brazil (13th to 5th) and Vietnam (17th to 9th). All top
European cement producing countries except Turkey lost their
rankings (Spain, Russia, Italy, Germany and France), as a result of
the global financial crisis.
World Cement production in 2010:
Rank Country/Region mil Tonnes
1 People's Republic of China 1,8002 India 2903 Iran 744 United States 63.55 Turkey 606 Brazil 597 Japan 568 Spain 509 Viet Nam 50
10 Russia 4911 Egypt 4812 South Korea 4613 Saudi Arabia 4514 Indonesia 4215 Italy 3516 Mexico 3417 Germany 3118 Thailand 3119 Pakistan 30
Others 5202010 World Production 3,413.5
Overview of Cement Industry - Brazil
This section presents a brief history of cement production and use
in Brazil, a synopsis of the current structure of the sector. and a
summary of the data available at the sector and plant levels on
production processes and GHG emission
1. Background
Cement production is one of the major industries driving Brazil’s
national economy, and production trends within the industry have
Brazil’s Cement Manufacturers
Company Name Number of
Plants
2006 AnnualCapacity
(million metrictons)
Production (thousand metric tons)
2005 2006 2007
Votorantim 19 25 14,472 16,239 19,402
Joãs Santos 10 - 4,974 5,079 5,548
Cimpor 8 6 3,683 3,889 4,393
Holcim 5 5 2,948 3,225 3,591
CamargoCorreia
5 - 2,902 3,013 3,349
Lafarge 5 4 2,500 2,422 2,670
CP Cimento 3 - - - -
Ciplan 1 - 1,137 1,248 1,319
Cimentos Liz 1 - - - -
Itambé 1 - 829 838 938
CCRG 1 - - - -
Other* 6 - 5,164 5,849 5,265
been dynamic throughout the past 30 years. Since 2004 the
country has seen growth in cement production as a
result of decreasing national interest rates and lower retail costs
of cement, factors that encouraged domestic consumption
(Christino, 2008). Today, Brazil has become the largest cement
producer among all Latin American countries, and is ranked 6th in
the world for cement production (Soares, 2010).
2. Current Industry Structure and Outlook.
This section provides an introduction to the key industry players
in Brazil’s cement sector, a discussion of their domestic and
international markets, recent data on production and capacity
levels, and a brief discussion of some of the domestic and
international drivers that could shape the outlook for the industry.
Manufacturers Cement production in Brazil is divided among 11
manufacturing companies. Collectively, this group operates 65
plants located in 22 states across the country. In 2007, Brazil’s
cement producers had a combined output of nearly 46.6 million
tons of cement (SNIC, 2008).
Domestic and International Markets
The cement industry in Brazil accounts for approximately 1% of
Brazilian gross domestic product (GDP) and is strongly correlated
to income levels. Moreover, domestic consumption is highest in
Brazil’s most developed regions where the average income level
is highest. These areas include the Southeast, South, and
Northeast regions. The main end-uses for cement in these regions
are buildings (78%), infrastructure (19%), and agriculture (3%)
(Soares 2008). On average, per capita consumption in Brazil is
approximately 200kg, which is low compared to the world
average of approximately 400kg (Christino, 2007).
Outlook
Reflecting the strong performance of the country’s economy and
civil construction in particular since 2004, domestic cement
production in Brazil has been growing. In 2008, market sources
indicated the emergence of a trend in which smaller economic
groups began entering the market and are now faced with the
challenge of competing with the industry’s major players.
Furthermore, several of the industry’s major manufacturers have
revealed plans to invest in production expansion in the coming
years.
The table below presents available data on production of cement
since 2008.
Cement Production 2008-2010
Year Output (Thousands of tons)
2008 38,705
2009 41,895
2010 46,589
Source: SNIC
PESTLE - Brazil
PESTLE analysis is a useful tool for understanding the “big
picture” of the environment, in which you are operating, and the
opportunities and threats that lie within it. By understanding the
environment in which you operate (external to your company or
department), you can take advantage of the opportunities and
minimize the threats.
The PESTLE subject should be a clear definition of the
market being addressed, which might be from any of the
following standpoints:
A company looking at its market
A product looking at its market
A brand in relation to its market
A local business unit or function in a business
A strategic option, such as entering a new market or
launching a new product
A potential acquisition
A potential partnership
An investment opportunity
A. Political System:-
Federal Republic similar to United States
The federal republic has three independent branches independent
branches: executive legislative and judicial.
The President heads the executive branch. Under the President
are a number of executive departments, the heads of which are
appointed and are known collectively as the cabinet. Unlike those
in many parliamentary democracies, its members need not be
members of the legislative. Besides the executive departments,
there are a number of independent agencies many of which are
regulatory.
Legislative power is exerted by Congress consisting of a Senate
and house of Representatives. There are 81 senators, three from
each state and the federal District of Brasila. The total
membership of the House is 513, the number of representatives
from each state depending on its population. Voting is
compulsory at the age of 18 but 16 and 17 year-olds, 70 years
or older and illiterate can opt to vote.
The judicial branch consists of a system of federal, state and local
courts throughout the country, headed by the Federal Supreme
Court.
i. Law
Brazilian law is based on Roman-Germanic traditions and
civil law concepts prevail over common law practice. Most of
Brazilian law is codified, although non-codified statutes also
represent a substantial part, playing a complementary role. Court
decisions set out interpretive guidelines; however, they are
seldom binding on other specific cases. Doctrinal works and the
works of academic jurists have strong influence in law creation
and in law cases.
B.Economic- The local, national and world economy
impact
i. Economy of Brazil
Brazil is the largest national economy in Latin America, the
world's tenth largest economy at market exchange rates and the
ninth largest in purchasing power parity (PPP), according to the
International Monetary Fund and the World Bank. Its GDP (PPP)
per capita is $10,200, putting Brazil in the 64th position according
to World Bank data. It has large and developed agricultural,
mining, manufacturing and service sectors, as well as a large
labor pool.
Brazilian exports are booming, creating a new generation of
tycoons. Major export products include aircraft, electrical
equipment, automobiles, ethanol, textiles, footwear, iron ore,
steel, coffee, orange juice, soybeans and corned beef. The
country has been expanding its presence in international financial
and commodities markets, and is one of a group of four emerging
economies called the BRIC countries.
Brazil pegged its currency, the real, to the U.S. dollar in
1994. However, after the East Asian financial crisis, the Russian
default in 1998 and the series of adverse financial events that
followed it, the Central Bank of Brazil temporarily changed its
monetary policy to a managed-float scheme while undergoing a
currency crisis, until definitively changing the exchange regime to
free-float in January 1999.
ii. Key industries
Key industries are textiles, shoes, chemicals, aviation,
cement, agriculture, motor vehicles and parts, other machinery
and equipment. Major export products include aircraft, coffee,
vehicles, soybean, iron ore, orange juice, steel, textiles, footwear
and electrical equipment.
iii. FDI
Brazil is generally open to and encourages foreign
investment. Brazil is the largest recipient of foreign direct
investment (FDI) in Latin America, and the United States is
traditionally the number one foreign investor in Brazil. Since
domestic savings is not sufficient to sustain long-term high
growth rates, Brazil must continue to attract FDI. In order to
attract increasing levels of FDI, many business groups and
international organizations have highlighted the need for Brazil to
improve its regulatory environment for investments and to
simplify the tax code. Brazil does not have a bilateral tax or
investment treaty with the United States. Legislation promoting
public-private partnerships, a key effort to attract private
investment to infrastructure, was passed in 2004. In 2007, the
Government of Brazil initiated an ambitious infrastructure
development program, known as the Growth Acceleration
Program (PAC), to address the country’s significant road, rail,
energy supply, and other infrastructure needs.
C.Sociological- The ways in which changes in society
affect business
Brazil’s inequality levels remains among the highest in the
world. Millions of people still live in poverty; social exclusion is
quantitatively and qualitatively pronounced and structurally
ingrained. But during the last several years, poverty reduction
and income distribution indicators have dramatically improved.
The full poverty rate fell from 34% of the population in 1995 to
25.6% in 2006.
Brazil still shows one of the worst values of income
distribution worldwide. About 45% of the national wealth is
concentrated in the upper 10% of the income pyramid, while the
lower 20% control just over 2.4% of the wealth. Brazil exhibits a
medium level of development according to key indicators, but
national mean values mask the great disparities between the
relatively developed southern and southeastern regions, where
conditions resemble those in industrialized countries to some
extent, and the socioeconomically disadvantaged northern and
northeastern regions.
i. Culture
The core culture of Brazil is derived from Portuguese culture,
because of its strong colonial ties with the Portuguese empire.
Among other influences, the Portuguese introduced the
Portuguese language, Roman Catholicism and colonial
architectural styles. The culture was, however, also strongly
influenced by African, indigenous and non-Portuguese European
cultures and traditions. Some aspects of Brazilian culture were
influenced by the contributions of Italian, German and other
European immigrants who arrived in large numbers in the South
and Southeast of Brazil. The indigenous Amerindians influenced
Brazil's language and cuisine; and the Africans influenced
language, cuisine, music, dance and religion.
ii. Language
The official language of Brazil is Portuguese which is spoken
by almost all of the population and is virtually the only language
used in newspapers, radio, television, and for business and
administrative purposes. The exception to this is in the
municipality of São Gabriel da Cachoeira where Nheengatu, an
indigenous language of South America, has been granted co-
official status with Portuguese. Brazil is the only Portuguese-
speaking nation in the Americas, making the language an
important part of Brazilian national identity and giving it a
national culture distinct from those of its Spanish-speaking
neighbors.
iii. General Attitude
Brazilians are warm, fun-loving, and free-spirited. They are
also outgoing and enjoy being around others. At the same time,
they are hardworking. Brazilians are proud of their country's
natural resources and diverse culture. One point of pride is the
“Brazilian way”—their ability to find creative ways around
seemingly insurmountable problems. Brazilians often are
opinionated and will argue for their convictions with vigor. In spite
of economic difficulties, most Brazilians are hopeful about their
country's future.
iv. Personal Appearance
In general, Brazilians are fashionable and like to dress
according to the latest styles. People in urban areas like to wear
brand-name clothing. People in the warmest and most humid
regions dress more casually, and colors are lighter and brighter
year-round. In rural regions, more traditional clothing is common,
especially among the native peoples.
D.Technological- How new and emerging technology
affects business?
Brazil is a leader in science and technology in South America
and in some fields a global leader, such as biofuels, agricultural
research, deep-sea oil production, and remote sensing. U.S.
Government, private sector, and academic researchers have
extensive ties with Brazilian counterparts, and the extent of
bilateral scientific and technological cooperation is expanding.
The Brazilian Government seeks to develop an environment that
is more supportive of innovation, taking scientific advances from
the laboratory to the marketplace.
i. Technological Research
Technological research in Brazil is largely carried out in
public universities and research institutes. But more than 73% of
funding for basic research still comes from government
sources. Some of Brazil's most notable technological hubs are
the Oswaldo Cruz Institute, the Butantan Institute, the Air
Force's Aerospace Technical Center, the Brazilian Agricultural
Research Corporation and the INPE. The Brazilian Space
Agency has the most advanced space program in Latin America,
with significant capabilities in launch vehicles, launch sites and
satellite manufacturing.
ii. Information Technology
The Brazilian IT market is the largest in Latin America and
spending on IT products and services is forecast to pass US$25bn
in 2010 and US$30bn by 2012. BMI has downwardly revised its
five-year forecast, due to the economic situation, but IT spending
is still expected to increase to remain in positive territory in 2009,
and to grow at a CAGR of 12% over the forecast period. This
makes Brazil's one of the fastest growing global markets. The
overall outlook remains constructive for growth in IT spending,
with an expanding economy lifting millions into a middle class for
whom computers are no longer beyond reach. Brazil’s IT services
market is expected to continue to grow strongly in 2010, with
total spending of around US$9.4bn as the economy continues to
bounce back from recession. For a developing market, the
percentage of Brazil IT market revenues generated by services is
high at around 38%, which corresponds more to developed
market levels.
iii. R & D
Most of Brazil's research and development activities take
place in its main public universities. Brazil, in particular, is an
interesting country to consider, as scientific growth is in the
beginning stages and offers tremendous future potential.
Brazil’s GDP declined in 2009 by 0.7%, with an equal drop in its
R&D investment for that year. Its GDP and R&D are both expected
to increase in 2010 by about 3.5%, to $2,048 billion and $18.637
billion respectively, from its 2009 levels. Brazil’s R&D as a share
of its GDP is about 0.91%.
Brazil’s share of the world’s 7.1 million researchers increased
from 1.2% in 2002 to 1.7% in 2007. According to UNESCO, Brazil
has about 625 researchers for every million citizens of Brazil.
So Brazil has great potential in growing the number of scientific
papers its researchers publish, but is starting from a relatively low
base.
iv. Technology policy in Brazil: Old approaches to a
new situation
In 1990, the government has radically changed the
framework conditions for industrial development. Acknowledging
that the import substitution model had run into a dead end, it
opted for a policy of gradually opening the market to foreign
competitors, thus creating an environment that requires
international competitiveness and thereby forces companies to
attain international levels of quality and efficiency. This has been
accompanied by a number of technology and industrial policy
programmes. However, they were either not implemented, or only
after long delays, or have had little impact so far because the
recession inhibited private sector investments. Even the Quality
and Productivity Program that has pursued an innovative
approach (mainly trying to build a consciousness for quality issues
inside firms) and got a lot of publicity in Brazil apparently has only
had a limited impact.
v. Brazilian industry and technology
Brazil got off to a late start in its process of industrialization,
which began in the 1930s. Despite the accelerated pace of growth
witnessed up until 1980, the level of development in the country
still falls way below the levels reached by developed countries.
Industry, which directs itself essentially to attending the demands
of the internal market, is made up of a steady stream of
embodied and disembodied external technology flows. Even so,
Brazilian industry has been making considerable efforts in
technology directed towards, in most cases, adapting the flow of
external knowledge to its local context. These efforts have also
been brought on by local technological demands that the external
flow of technology has been unable to meet. Up until now, rare
have been the cases of sectors in which firms generate flows of
new knowledge in order to gain dynamic competitive advantages.
E. Legal- How local, national and world legislation
affects business
i. The Brazilian legal system
It is based on Civil Law tradition. The Federal Constitution, in
force since October 5th, 1988, is the supreme rule of the country
and is the characterized by its rigid written form. The Constitution
organizes the country as a Federative Republic, formed by the
indissoluble union of the states and municipalities and of the
Federal District. The 26 federate states have powers to adopt
their own Constitutions and laws; their autonomy, however, is
limited by the principles established in the Federal Constitution.
ii. Municipalities
It enjoy restricted autonomy as their legislation must follow
the dictates of the Constitution of the state to which they belong,
and consequently to those of the Federal Constitution itself. As for
the Federal District, it blends functions of federate states and of
municipalities, and its equivalent to a constitution, named Organic
Law, must also obey the terms of the Federal Constitution.
The powers of the Union, as defined within the Constitution,
are the Executive, the Legislative and the Judiciary, which are
independent and harmonious amongst them. The head of the
Executive is the President of the Republic, which is both the Chief
of State and the Head of Government and is directly elected by
the citizens. The Legislative, embedded in the form of National
Congress and consists of two houses: The Chamber of Deputies
(lower house) and the Federal Senate (upper house), both
constituted by representatives who are elected by the citizens.
The Judicial powers are vested upon the Federal Supreme Court,
the Superior Court of Justice, the Regional Federal Courts and
Federal Judges. There are also specialized courts to deal with
electoral, labor and military disputes.
F. Environmental- The local, national and world
environmental issues
Brazil holds about one-third of the world's remaining
rainforests, including a majority of the Amazon rainforest. Due to
the vastness of the Amazon rainforest, Brazil's average loss of
34,660 square kilometers of primary forest per year between
2000 and 2005 represents only about 0.8 percent of its forest
cover. Nevertheless, deforestation in Brazil is one of the most
important global environmental issues today. Research led by the
Woods Hole Research Center and the Carnegie Institution's
Department of Global Ecology found that each year the amount of
forest degraded is roughly equivalent to the amount of forest
cleared. The finding is trouble to ecologists because degraded
forest has lower levels of biodiversity and is more likely to be
cleared in the future. Further, degraded forest is more susceptible
to fires.
A large portion of deforestation in Brazil can be attributed to
land clearing for pastureland by commercial and speculative
interests, misguided government policies, inappropriate World
Bank projects, and commercial exploitation of forest resources.
For effective action it is imperative that these issues be
addressed. Focusing solely on the promotion of sustainable use
by local people would neglect the most important forces behind
deforestation in Brazil.
Brazilian deforestation is strongly correlated to the economic
health of the country: the decline in deforestation from 1988-
1991 nicely matched the economic slowdown during the same
period, while the rocketing rate of deforestation from 1993-1998
paralleled Brazil's period of rapid economic growth. During lean
times, ranchers and developers do not have the cash to rapidly
expand their pasturelands and operations, while the government
lacks funds to sponsor highways and colonization programs and
grant tax breaks and subsidies to forest exploiters.
The Future
It seems likely that deforestation will continue in the Brazil
Amazon for the foreseeable future. This author personally expects
at least half the Amazon to be converted for agriculture or
otherwise degraded by 2050. While this is discouraging, there is
hope that improved agricultural techniques—perhaps based on
research into how pre-Colombian societies managed these forests
—could maybe increase productivity on already affected areas
and reduce the need for further forest clearing.
It is important to recognize that Brazil is a sovereign state
with its own rights to develop its economy. How it chooses to do
so will likely be influenced by economic factors which may include
how western countries value the services (especially climate
moderation and biodiversity preservation) provided by forests. If
Western countries begin to place greater value on these services,
then the protection of Brazil's rainforests can likely be
"purchased" via the open market. While right now the
environment for such a scenario is not favorable, this author
believes it will become more so in the next few years. Scientists
will play an important role in disseminating the value of these
forests to policymakers and the media.
Main drivers for doing business in Brazil
Brazil has the 10th largest economy and a population of
more than 194 million.
Many local companies are undervalued and in need of
restructuring, capital and technology
Growth potential and consumer market
Broad industrial base and infrastructure, and a diversified
economy
Abundant agricultural, mineral and energy resources and
potential
Established transportation networks (railways, highways,
ports) and distribution channels in most industrialized areas
Privatization in late stages and follow-on transactions still in
development
Increasing globalization and international trade, with
Government policies favoring exports
Goodwill generally tax deductible
New regulations favoring minority shareholders.
Main Challenges of doing Deals in Brazil
Complex tax and employee related regulatory environment,
with high taxes and social charges on payroll, sales and
income
Multiple taxes with fast changing legislation affecting
business plans and increasing risks of contingencies
Economic environment still considered volatile as compared
to more stable economies
Fast-changing business conditions
Complex transfer pricing and foreign capital registration
rules
Difficulties in reorganizing companies quickly, including high
costs for employee terminations
High demand for investments in the distribution channels
and infrastructure
Semi-skilled and unskilled labor in certain developing areas
Social extremes with unequal distribution of wealth - a
significant portion of the population not participating in the
consumer market
Different Modes of Setting up Business in Brazil
MODES OF SETING
UP A BUSINESSDEFINITION
Joint Stock Company
or Corporation
(Sociedade Anônima
- S/A)
The capital stock of the company is
divided in shares, and the firm must
necessarily aim at profits. It is always
regarded as a trading company, no matter
what its objectives, and can be considered
open or closed, depending on whether or
not the securities it issues are traded on
the stock exchange.
Limited Liability
Company (Sociedade
A private limited company may
engage in commercial, industrial and
MODES OF SETING
UP A BUSINESSDEFINITION
por Quotas de
responsibilidade
limitada - Ltda)
service activities and has its bylaws
registered with the Board of Trade. It has
to be established by at least two partners.
Shares represent the participation of
each partner in the company’s capital,
with the partners’ liability limited to the
value of their shares or quotas.
Simple partnership
(Sociedade Simple -
S/S)
A special form of the Ltda that can
be utilised by partnerships without
commercial activities or whose object is
the exercise of the intellectual, scientific,
literary or artistic professions.
In this type of partnership, the
partners are jointly and severally
responsible for the company’s debts
should the company’s assets be
insufficient to pay them.
Individuals Made up of a single individual that
gives his or her name to the firm, making
himself or herself responsible for all the
company’s acts that involve economic
activities such as the production and
MODES OF SETING
UP A BUSINESSDEFINITION
circulation of goods and services.
This type of legal entity applies to
industrial, commercial and service
activities.
Source: Investing in Brazil
Overview Of Cement Industry - Bangladesh
The development of cement industry in Bangladesh dates
back to the early-fifties but its growth in real sense started only
about decade or so. Bangladesh has been experiencing an
upsurge in the use of cement in recent years. Increase in demand
for cement has soared mainly due to the property sector boom
and infrastructure development concentrated in the Dhaka
Metropolitan area and other major urban areas of the country.
The infrastructural development at grass root level has led to an
increased demand for cement at an average rate of 8% per
annum during the past decade.
Existing industry Structure:
The Cement industry involves a huge outlay for setting up of the
plant, developing the infrastructure facilities and also for creating
a large sales network throughout the country. Due to higher
profitability of the local cement manufacturers, more than 23
companies in the private and public sector are operating in the
country.
Existing Cement Manufacturing Units of the country and their production capacity
SL. Name of the Company Installed Production Capacity (In
MT)
1 Chittagong Cement Clinker 9,00,000
2 Confidence Cement,
Chittagong
480,000
3 Mongla Cement, Khulna 390,000
4 Meghna Cement 1,000,000
5 Holcim Cement, Dhaka 1,100,000
6 Modern Cement, Dhaka 30,000
7 Chhatak Cement,
Sunamgonj
267,000
8 Ayeenpur Cement, Sylhet 23,000
9 Doel Cement, Pabna 90,000
10 Niloy Cement, Jessore 200,000
11 Diamond Cement,
Chittagong
660,000
12 Ahad Cement, Jessore 180,000
13 Aramit Cement, Chittagong 210,000
14 M I Cement 180,000
15 Eastern Cement, Dhaka 180,000
16 Seven Ring Cement 550,000
17 Mollah Cement 180,000
18 Saiham Cement 180,000
19 Madina Cement 180,000
20 S Alam Cement 450,000
21 A R Rahaman Cement 200,000
22 Padma Cement 210,000
23 Royal Cement 540,000
TOTAL 8,380,000
Units under Multinational Giants:
Among the Multinational giants, CEMEX, Scancem, Holder bank,
Emirates Cement and Lafarge are most important. Due to
environmental hazard and health consciousness, the developed
countries, especially the Europe, these groups are in favour of
setting up of cement factories in the developing regions like
Bangladesh.
Estimated Supply situation of Cement in Bangladesh:
The state owned Chhatak Cement Factory and Ayeenpur Cement
Industries Limited in private sector are two basic cement factories
in the country, which uses limestone to produce cement, while
the rest of the factories simply import cement clinkers, crush the
same, mix them with gypsum and put them into bags with a
marginal value addition. The 24 units currently produce 5.4
million MT of cement, utilising on an average, 65% of their
installed capacity. The volume of annual import of bagged cement
in the country was around 3.5 million MT till 1995-96, but
presently hardly any import of cement is being made.
The major reasons behind the decreasing demand for the
imported cement are as below:
a. Diminishing strength of imported cement due to long time
span between production and usage (120 days on an
average).
b. Increasing supply of quality cement from the local
manufacturers.
c. Continuous devaluation of local currency has put the
imported cement in severe price competition with local
products.
d. At present Import duty and Tax on clinker and finished
cement are 40.5% and 68% respectively, which makes local
production more attractive.
On the basis of the capacity utilization and the future
expansion programmes of the existing units, and also the
production capacity of the under implementation units, our
projection of supply of cement in the country during the next
five years stands as below:
Estimated Demand for Cement in Bangladesh:
Increase in demand for cement is dependent on the growth
of property sector and infrastructure development of the country.
With the introduction of the National Housing Policy and
expansion schemes of the House Building Finance Corporation
(HBFC) and other house finance agencies, the demand for cement
is expected to grow further in future It is expected that the
Demand for cement would grow at around 10% per annum, while
production is expected to grow at a higher rate from the year
2003 onwards with the completion of a few under construction
factories.
Potentiality of Cement Export from Bangladesh:-
The local production scenario demonstrates that it would not
only be able to meet the entire domestic demand but also export
to the developed countries, the Middle East and other markets.
The fear of environmental hazard, health consciousness etc of the
developed countries and the low cost of labour, favorable tariff
policy and better infrastructural facility of Bangladesh likely to
help us to make an inroad in the international market.
Possibility of market dominance by the Giant Multinational
Companies
The multinational companies, who have set up plants in the
country, believe that the local production would be more than
sufficient to meet the domestic demand and they would soon be
able to dictate the market price as well as supply of cement
through controlling the source of procurement of clinker as well
as the network of distribution of finished cement. In
apprehension, there is a number of locally established cement
factories who are planning to get out of the business by way of
selling to the giant operators. It is anticipated that by the year
2004, the cement market shall be dominated by major giants
leaving some of the left-out small producers to continue to
operate in their controlled market. This integration will continue
to take place and the on-going process of acquisition and its
acquisition cost of the existing facility will determine justification
of future establishment of a brand new factory.
Pest Analysis of Bangladesh
Political
Environmental issues
Environmental dreadful conditions and depletion of
natural resources are often observed in Bangladesh due
to poverty, over-population and lack of awareness on
the subject. It is manifested by deforestation,
destruction of wetlands, depletion of soil nutrients, etc.
Natural calamities like floods, cyclones and tidal-bores
also result in severe socio-economic and environmental
damage.
Legislation
The existing Bangladeshi legislation in this area,
however, dates mostly from the period of British rule.
The legislation in force are as follows:
Patent and Design Act of 1911
Patent and Design Rule of 1933
Trademark Act of 1940
Copyright Act of 1999
Government policies for Foreign Investments
The stated policy of the government of Bangladesh
(BDG) is to pursue foreign investment actively, and it
has enacted a number of policies to this end. There are
no distinctions between foreign and domestic private
investors regarding investment incentives or export and
import policies. Incentives for investors include: 100%
ownership in most sectors; tax holidays; reduced import
duties on capital machinery and spares; duty-free
imports for 100% exporters; and tax exemptions.
Economic
Economy situation
The economy of Bangladesh is constituted by that of
a developing country. Its per capita income in 2009 was
est. US$1,500 (adjusted by purchasing power parity)
significantly lower than India, Pakistan, both which are
also lower than the world average of $10,497.According
to the gradation by the International Monetary Fund,
Bangladesh ranked as the 48th largest economy in the
world in 2009, with a gross domestic product of
US$224.889 billion. The economy has grown at the rate
of 6-7% p.a. over the past few years. More than half of
the GDP belongs to the service sector; nearly half of
Bangladeshis are employed in the agriculture sector,
with RMG, fish, vegetables, leather and leather goods,
ceramics, rice as other important produce.
Bangladesh Corporate Tax Rates
The standard rate of corporate tax in Bangladesh
is 27.5% in 2008 - 2009 tax years. This is the standard
corporate tax rate applicable to publicly traded
companies in Bangladesh, a list including tax rates for
other corporations are as follows:
Publicly Traded Company
27.5%
Non-publicly Traded Company
37.5%
Bank, Insurance & Financial Company
45%
Mobile Phone Operator Company
45%
If any publicly traded company declares more than 20%
dividend, 10% rebate on total tax is allowed.
Seasonality/Weather Issues
Bangladesh is a country crisscrossed with rivers, and
thus uses a wide network of water-based public
transportation. Ferries and other boats compete with
the railroads as a major means of public transport.
Typically overloaded and top-heavy, ferries do capsize,
particularly during the monsoon season from May to
October or during unexpected thunderstorms or
windstorms. Every year there are dozens of fatalities
resulting from ferry accidents.
Social
Companies are facing the challenges of adapting
effectively to the changing environment in the context
of globalization and in particular in the export sector in
Bangladesh. Although Consumer Rights Movement,
enforcement of government regulations and a
structured view regarding the economic importance of
Social responsibility are not yet so widespread in the
corporate world in Bangladesh, companies have
gradually attaching more importance to Social
responsibility in the local market as well. They are
increasingly aware that Social responsibility can be of
direct economic value. Companies can contribute to
social and environmental objectives, through
integrating Social responsibility as a strategic
investment into their core business strategy,
management instruments and operations. This is an
investment, not a cost, much like quality management.
So, business organizations can thereby have an
inclusive financial, commercial and social approach,
leading to a long term strategy minimizing risks linked
to uncertainty.
Technological
The need for faster technological development is
increasingly felt in Bangladesh. Development plans of
Bangladesh have emphasized science and technological
research to develop technologies through adoption of
imported technology as well as development of
indigenous technologies.
As the country is heavily dependent on imported
technologies, proper planning is required for its
effective transfer through acquisition, assimilation and
adoption.
A National Science and Technology Policy has been
formulated and adopted by the Government. It has laid
down the directions for S and T activities and research,
institutional and manpower development.
Dissemination and documentation facilities. The
National Council for Science and Technology (NCST)
determines S and T policies, reviews the activities of
different institutions and provides direction towards S
and T research and activities.
Modes of entry in general
We found that cross border M&A is always the optimal entry mode under both greenfield investment and export credible threats. If the greenfield investment entry mode is viable, the multinational firm acquires the firm with low productivity when the ability of integration is
strong and the gap of technology is sufficiently small; multinational firm has interest to by
contrary acquire firm with high productivity when the ability of integration is sufficiently weak and the gap is comparatively large and cross border M&A could be the most welfare-enhancing entry mode when the technology gap is very large. Under an export credible threat, the variation of transport cost can alter the choice of target firm through the influence of price acquisition, and either greenfield investment or export option can be the most welfare-enhancing entry mode in case of medium ability of integration.
If there is maximum ability in the host country, not only the M&A of low-technology firm but also the acquisition of high-technology firm can enhance more the welfare compared to the other entry modes.
Recently, the attention shifted to the composition of FDI as firms can choose between different types of FDI. One potential entry mode is to acquire an existing foreign firm via a cross border M&A, the second option is to build a new firm abroad, which is usually referred to as greenfield investment. As well as seeing an increase in total FDI, people have also seen cross-border M&A increasing in importance relative to greenfield investment