Political environment

In the current business scenario, innovation is one of the key sources of gaining competitive advantages in the market. This is due to the reason that, the contemporary business environment is much more competitive in nature, which requires innovative and distinctive products to cut off the competition and to create unique image in the market (Bucherer, Eisert and Gassmann 2012). Accordingly, majority of the startup organizations are opting for innovative business approach in order to gain competitive advantages in the market.

Craft beer is a new sensation among the beer lovers around the world. It provides unique and one of a kind taste and experience compared to the conventional and mainstream products. However, craft beers are being mainly produced by the boutique and independent breweries and it comes with comparatively premium price than the mainstream beers (Murray and O’Neill 2012). The current beer market in the global scenario is witnessing good growth of the craft beer in the market due to their rich and unique taste. Thus, more independent breweries are coming up to introduce craft beer in various variants in the market. CHEERS is an Australian startup set up in 2010 by five business graduates to cater to the market of craft beer. Initially they have started their operation in the Australian market and gained a good market share and goodwill in short span of time. However, with the market growth is becoming saturated, they are looking to enter in the global market in order to enhance their market presence and potentiality. India and Brazil are being shortlisted for entering in the global business.

This report will discuss about the business environment in India and Brazil, which will have impact on the business potentiality of CHEERS. One country will be chosen in terms of the favorable business and market opportunities. An effective entry mode will also be discussed for CHEERS to enter in the chosen country along with discussion of the effective marketing and human resource strategy to be adopted by them.

Political scenario of both Brazil and India is stable and democratic. However, Brazil has seen various political turbulences in the recent past, which are not being witnessed by India. Thus, India is ahead of Brazil in terms of political stability (Lawton, McGuire and Rajwani 2013). However, with governments of both the country are operating in same approach of initiating more investment, both country provides adequate opportunities for business organizations. In terms of the corruption in the mainstream system, both the countries stand at similar positions. According to the transparency international, India and Brazil is having ranking of 40. Thus, both the countries are having same level of corruption in the country.

According to Coface, the country risk of Brazil and India both stands at C and A4 respectively. Thus, the political risk in both the countries is different and political risk of Brazil is more compared to India. CHEERS will face high level of risk in investing in Brazil than in India.  

According to the reports, Brazil is the eighth largest economy in term of foreign direct investment. As of 2015, total inflow of foreign investment stands at US$ 64.6 billion (Export.gov 2017). Thus, it shows a favorable image about the business opportunities in the country. Government of Brazil has initiated tax exemption and financing with low rate of interest for the business organizations. However, foreign investment in Brazil is restricted to only some sectors such as health and telecommunications (Export.gov 2017). Foreign investors in the country are being legally treated in similar way of the domestic investors. Thus, Brazil provides a business friendly approach for the foreign investors such as CHEEERS.

Country risk analysis

On the other hand, India also provides huge benefits in terms of favorable business environment, infrastructure and policies. According to reports, India is one of the leading destinations for foreign investment (Kumar and Dubey 2016). The added advantages for investment in India are the huge number of English speaking population along with low cost of skilled employees. Moreover, government of India has initiated special economic zone, which provides total exemption of tax for the first 5 years and 50 percent tax exemption for the next 5 years. Various other initiatives such as export incentives are also being initiated by the government of India.

Both Brazil and India is having huge population with India is way ahead of the former. This is due to the reason that, total population of Brazil is 204,459 million compared to the 1292,707 billion of India. Thus, the market opportunities in India for CHEERS will be more compared to Brazil. However, in terms of GDP, Brazil is ahead of India. GDP of Brazil stands at US$ 8669 compared to the GDP of US$ 1603 of India. Thus, Brazil is having more enhanced economy compared to India. According to Coface, Brazil is also ahead of India in terms of business climate due to the fact that, ranking of Brazil in terms of business climate is A$ compared to the ranking of C of India. Thus, business organizations will find more favorable business environment in Brazil than in India.

However one of the key social weaknesses in Brazil is the lack of skilled employees and thus, the cost of available employees is high. On the other hand, India is having huge supply of skilled and unskilled employees along with their lower cost. This is mainly due to the presence of huge population in the country.

According to tradingeconomics 2017, GDP growth rate of Brazil was negative in 2016. However, they have shown some positive trend in the early 2017. As of July 2017, GDP growth rate of Brazil is only 0.1 percent, which is lower comparatively lower than other developing countries. On the other hand, India is having good and positive growth of GDP in the recent years.

The above figure shows that, India is having GDP growth rate of 1.4 percent as of July, 2017. Thus, the growth rate of India is more compared to Brazil.

With the growth in the younger population in India, the demand for beer is expected to rise in the following years. Moreover, it is being projected that, the beer market of India will overtake United States within the next 10 years. Thus, for the foreign breweries such as CHEERS, this will be a huge potential for this business. According to (Achanta 2017), India is having huge market potentiality for the craft beers in the following years. According to him, more breweries are coming up in the major cities in India. Thus, the competition is also going to be increase in future.

From the above figure, it is seen that, the consumption of beer in the market of India is going to rise in the future according to the past trend. On the other hand, Brazil poses huge opportunities in the case of beer market (Stack, Gartland and Keane 2016). According to reports, Brazil is the third largest country in the world in terms of beer market and consumption. Moreover, it is also being reported that, the growth in the beer market of Brazil is more than that of the growth in the global market.

Government initiatives for business

The social environment of Brazil towards the consumption of beer is more favorable than that of the India. This is due to the reason that, India culture is traditionally against the alcoholic drinks, while one the other hand, tradition of Brazil is associated with the beer and other alcoholic drinks (Colen and Swinnen 2016). Thus, the social acceptance for the products of CHEERS will be more in Brazil than in India.

Australia and Brazil is having effective and stable bilateral relationship between them. They both are the part of Forum for East Asia Latin America Cooperation (FEALAC). Moreover, they both are having mutual cooperation in the areas of mining, business, science and technology. Australian investment in Brazil amounts to US$ 9.2 billion as of 2016. In addition, free trade agreements are there between the two countries, which further help the business organizations from both the countries to have less regulation in the international business (Medvedev 2012).

On the other hand, India and Australia also shares deep and long mutual understanding with having various trade and other agreements among them. Free trade agreement is also there between India and Australia. The agreement between them is known as Economic Cooperation Agreement, which looks after the investment between the two countries.

The currency of Brazil is known as Real. Current exchange rate of Australian dollar and Real is 2.48 Brazilian Real for 1 Australian dollar. On the other hand, in terms of Indian currency Rupee, 1 Australian Dollar is equal to 49.20 Rupee. Thus, the valuation of the Indian currency is less compared to the Brazilian currency. Thus, operating in India will have favorable implication on CHEERS due to the reason that, they will gain more foreign currency from their investment due to the lower valuation of the Indian currency.

• One of the key risks being identified in the Brazilian market is the lower growth of GDP. This denotes that the economy of the country is not growing as expected (Goedhuys and Veugelers 2012).
• Restrictions of Government in foreign investments.
• More probability of political risk.
• Higher ranking in the corruption index.

• Third largest country in terms of consumption of beers in the world.
• More social acceptance towards alcoholic drinks.
• Business friendly approach of the government.

• Less social acceptance towards the alcoholic drinks.
• Less friendly business climate.
• Higher ranking in the corruption index.
• Regulatory bureaucracy.

• Incentives by government for foreign investment.
• Higher rate of GDP.
• Growing market of beer.
• Less political risk.
• More population means more market opportunities.

From the above discussion between Brazil and India, it seems that India will provide more business opportunities for CHEERS. This is due to the reason that, India is having huge population and a major part of the population is the younger generation. Thus, the target market for CHEERS will be more in India than in Brazil. Though, the market for beer is more in Brazil compared to India, but the market in India is in growing stage, while the market of Brazil is already in the saturated position. Thus, the growth opportunities will be more in India. In addition, CHEERS can think of various variants of their craft beer in order to cut off the social taboo. With the initiation of the business friendly initiatives by the government of India with having special incentives for the producers, India will be the ideal host country for CHEERS.

The rapid increase in the economy of India will also have favorable and positive impact on the business profile of them (Tej Adidam, Banerjee and Shukla 2012). The business opportunities of them will get enhanced with the increase in the economy of the country. Another key advantage that they will gain is the less valuation of the Indian currency. The above evaluation of the currency of both the countries shows that, Indian currency is much lower valued compared to the Brazilian currency. Thus, CHEERS will earn more foreign currency if they invest in the Indian market. Hence, India is being chosen as the destination country for them.  

Socio-cultural environment

The proposed entry strategy for CHEERS will be the initiation of joint venture in India. This is due to the reason that, joint venture will have various advantages for them in operating in the market of India (Holtbrugge and Baron 2013). The following section will discuss about the various advantages that can be gained by them by initiating joint venture in India.

• Joint venture in India will help them to gain the incentives from the government. This is due to the reason that, in the earlier section it is being discussed government of India have promoted the idea of special economic zone in order to provide benefits for the investors. Thus, CHEERS can avail this incentive by investing through joint venture in the Indian market.
• Joint venture in the Indian market will help them to regulate the price of their craft beers. This will be an important element for CHEERS in enhancing their business potentiality in the market. This is due to the reason that, Craft beers of CHEERS already carries premium price tag compared to the conventional beers. Thus, it is important for them to maintain the price in order to cater to the target segments. In case of other market entry strategies such as exporting, the price of the products will further get increased due to the involvement of various tax and tariffs, which will enhance the end price of the beers.
• Having joint venture in the Indian market will help them to invest less capital compared to the direct investment (Sun and Lee 2013). Amount of capital for investment is also important due to the reason that, CHEERS is a startup organization and they have just incorporated in 2010. Thus, it will be difficult as well as risky affair for them to invest in the Indian market with the initiation of the direct investment market entry strategy. In the case of joint venture, the amount required for investment will be less and thus, it will be beneficial for them to enter.
• Another advantage that can be gained from the initiation of the joint venture is effective determination of the domestic market. Though, CHEERS will offer their existing product portfolio in the Indian market, but the products should be amended according to the domestic taste and preference pattern of the Indian customers (Killing 2012). This will help them to effectively cater to the domestic customers.

The aftermaths of entry in the host country is also important to determine the competency due to the reason that, the effectiveness of the market entry strategy can only be determined with initiation of the efficient marketing strategy to operate in the host country. One of the marketing strategies to be used is the product adaptation strategy. This will help them to modify and offer their existing products according to the taste and preference pattern of the Indian customers. Moreover, it will also help to introduce newer variants in the Indian market. Another marketing strategy that can be initiated is the premium pricing strategy. This will be beneficial for them due to the reason that, craft beer should be positioned as premium alternative to the conventional beers (Davcik and Sharma 2015). Thus, it will create distinctive image in the market and will have separate operating space among the competition.

In the case of the distribution strategy, selective distribution strategy will be initiated. This is due to the reason that, selective distribution will help CHEERS to offer their products from selective retail outlets. Thus, it will help them to maintain the exclusivity and premium positioning of the craft beer of CHEERS.

CHEERS should initiate the strategy of geocentric approach of staffing. This is due to the reason that, initiation of this strategy will enable them to hire employees according to the job requirement and skills of the candidates regardless of the nationality of the employees. Thus, it will help them to have right employees for the right job. Moreover, it will also help them to maintain the existing organizational culture and value in the Indian subsidiary also.

Conclusion 

Thus, from the above discussion, it can be concluded that, India will be the ideal destination country for CHEERS to operate. Various elements of both Brazil and India are being discussed in this report. It proved that, India will provide more market opportunities for CHEEERS compared to Brazil. Though, it is seen that Brazil is ahead of India in some aspects, but India will have holistic benefits for CHEERS in the long run. In addition, various strategies ranging from marketing, distribution and human resources are being discussed in this report. It is being expected that, the effective implementation of the strategies being discussed in this report will help them to efficiently operate in the Indian market.

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