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AIRTEL IN
BRAZIL
MembersSantonu Chatterjee
Sossamma George
Swastyayan SenguptaUtpalBowmick
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Agenda Introduction
Why Telecom ?
Why Airtel?
Understanding Brazil
Demography Religion
Language
Food
Lifestyle
Cultural Tips
Telecom in Brazil
Environment Assessment
Internal analysis
Competitive analysis
Entry Strategy2
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Introduction
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Objective is to present an entry strategy for anIndian firm into Brazil
Options
Telecom
Automobile parts
Services..ITES
Decided to go with Telecom
Bharti Airtel has been chosen as the company
An detailed entry strategy is prepared
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Why Telecom?
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The Indian telecom industry has undergone a seachange
Has been growing at a very brisk rate, but..
13 players
H index is less than 0.2!!
Cut throat competition of the industry
Dwindling profitability
Experts expects a imminent shake-out / consolidation
High time for Indian telecom big players to ventureinto other markets to ensure balanced growth andhedge risk.
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Why Airtel?
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The Indian Market has become highly
competitive
The company is financially sound and hasdeep pockets-$1.7 Billion Cash in its books
Intent of Top Management to expand
operations to international markets.
It has been scouting for telecom assets across
the world but not that successful
Emerging Markets are the only opportunities.
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Brazil
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Demographics
146 Million people concentrated on its two hundred milesof east coast
Diverse population: Europeans (55%), Africans (6%) ,Amerindians (1%) & Asians
Brazil has many mixed races: Mulattos (mix ofWhite/European & Black/African), Caboclos (mix ofnative/aboriginal & White/European)
Brazilians refer to these multiracial people as Pardo (brown)
Melting pot of cultures, races, education & economy
Brazil has the highest degree of intermarriage in the world Brazil has the largest Japanese population outside of Japan
Nearly 50 percent of the population is under twenty yearsof age
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Some History
16th century Europeans, notablyPortuguese to colonize
1850 Africans brought in as slaves to workin cotton & sugar plantations until the end of
slave trade
19th & 20th century Japanese, Chinese &
Koreans arrived looking for work
19th & 20th century People from Germany,
Italy & Spain arrived looking for work
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Religion Roman Catholics more than 75%
Largest Roman Catholic population in the world Others several Christian/ Protestant
denominations, Islam, African religions, Judaism &Buddhism.
Largest Buddhist population
in LatinAmerica,
due to high
#of Japanese
Immigrants.
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Languages
Official language Portuguese
Virtually the only medium used for schools,newspapers, media, TV, and for alladministrative & business purposes
English is part of school curriculum in mostBrazilian states
Very few Brazilians are fluent in English.
Spanish is understood by many Brazilians, esp.states bordering the hispanic countries (Colombia, Argentina, Paraguay, Uruguay, Peru)
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Lifestyle
Warm, friendly & free-spirited
Spend a lot of time socializing & view time
more as a sequence of events rather thanwhat is run by the clock
At work not lot of stress. Brazilian chat overcoffee & socialize first, business comes
second Apart from their work-life, Brazilians find
time for music & sports (football/soccer beingthe most popular sport)
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Hofstede Dimensions
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Hofstede Dimensions - 2
Uncertainty Avoidance (UAI) high (76) lowlevel of tolerance for uncertainty, does not
readily accept change and is very risk adverse Individualism (IDV) high 38 compared to the
average Latin population score of 21
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Culturaltips - 1
When you call someone on the phone, chat first andtalk business second
Do not bee too aggressive & try to 'get straight to
the point. Socializing, getting acquainted &comfortable with each other are important
Do not stick to rigid schedules & when schedulingmeetings/appointments, always allow for tardiness.
Unless invited to do so, do not go on first name
basis. Usually have to prefix o senhor for men & 'osenhora' for women before their names.
It is very common from male bosses, executives, anyhigher ranking officials or bureaucrats to be called'doutor' (doctor).
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Culturaltips - 2
The colors of the Brazilian flag are yellow andgreen. Avoid wearing this combination in anyfashion
Purple flowers are extensively used at funerals Touching arms and elbows and backs are very
common
Use handshakes in business meetings. May getkissed on your cheeks or in the air as a greetingby the opposite sex
Avoid Bad conversation topics: Argentina,politics, poverty, religion, and Rain Forest
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Brazilataglance
The land of. Samba.Soccer.Pele
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Brazilataglance
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The Federative Republic of Brazil
Situated in South America
The largest country in South America
The only Portuguese-speaking country
in the America
The fifth largest country by geographical
area and the fifth most populous country
in the world
Brazil is the world's eighth largest economyby nominal GDP
Very rich wildlife, natural environments
and extensive natural resources
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TelecominBrazil
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Internet Broadband Fixed Line in
Services
Mobile Telephony
Subscribers
2008 2009 2008 2009 2008 2009 2008 2009
Total Subscribers
(Million)
50.2 60 10.01 11.45 41.02 41.5 150.64 173.20
Penetration Rate 28.7% 30.7% 5.2% 5.9% 21.2% 21.2% 78% 88.5%
Annual Change 12% 20% 30% 40% 4.4% 1.2% 25% 15%
Monthly ARPU of operators in Brazil is 28BRL( approx
INR 700)
Broadband operators have problems of systems
overload.Operators offer triple pay solutions that include
broadband, telephony and pay TV.
3G a success, 4G(LTE) to be auctioned in 2010.
Four major operators(Vivo, Claro, TIM Brasil andOi)
control the entire market
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Environmentassessment PoliticalStability
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Extremely important parameter for any
Good laid down system to ensure governance. A President is elected by the people for a four-year term to
lead the Brazilian government The Congress consists of an 81-member senate representing
the 26 states and a 513-member Chamber of Deputies.
Brazil also has a strong judicial system However, arty-hopping was rampant > unstable legislative > ll
banned in 2007 by
Wining of President Luiz Incio Lula da Silva (Lula) hasprovided stability through leadership Criminal activity is on the rise in major cities
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Environmentassessment Economicstability
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Pre-recession, Brazil witnessed solid global demand,
massive capital inflows
Economy has been hit by the global economic slowdown
However, domestic consumption alone has potential to grow theGDP at 5.0% in 2010 and 5.2% in 2011 respectively.
The Central Bank of Brazil has injected money and eased rates
Government expenditure has increased, leading to higher fiscal
deficit though
The government needs to prevent the formation of asset bubbles in
the economy
Major change in exchange rate (1999) > Pegging to USD is
removed > relief on exchange rate pressure.
In the medium term the prospect of the Brazilian economy
is looking positive.
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Environmentassessment Nationalism
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Another important parameter to consider by foreign
companies
Brazilian nationalism is now approaching its 120th birthday
Not very strong feelings of unity Except for carnivals and soccer !!
No process of nation building has occurred. > no solid
nationalist culture > influenced by outsiders.
In the near future, we dont foresee any strong move by theGovernment to panic MNCs.
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Environmentassessment Internationalcompetition
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One of the favorite destinations of foreign players in many sectors.
Brazilian Telecom market will continue to accelerate in
brisk rate in cellular and broadband services ( @ CAGR of
12.8% over the next 5 years) Lot of FDIs are expected in this sector
However, the market has already started to see serious
price war in all segments.
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Environmentassessment Environmentalscanning
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Understanding Brazil against the backdrop of other Latin American countries.
Despite significant progress in the liberalization of the foreign exchange
regime, important residual controls remain with Brazil in many a economic
activity
Brazilian regulatory agencies are weak and the bureaucracy is very
cumbersome. Procedural requirements to start a business in Brazil take 120 days ! (world bank survey)
Increasingly negative view of Brazil in the Latin American countries. Paraguayan peasants have been threatening to drive Brazilians out of the country.
Petrobras , a Brazilian company was forced to sell two refineries at below-market prices in Bolivia
Many a smaller country in the region is losing their trust in Brazil.
Stumbling blocks of Regional integration in Latin America!
No serious threat to Airtel to venture in to the country.
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Internalanalysis 1/2
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Resources
Tangible( Financial, Technological, Organizational)
Intangible(HR, Innovation & Reputation)
Capabilities
Customer Service team focuses on creating
customer delight.
Strong Distribution Network Marketing.
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Internalanalysis 2/2
Core Competencies
Airtel Mantra Focus on Core Competencies and outsource the
rest.
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CoreCompetencies
ProductInnovation
VAS
Marketingand
Branding
Pricing
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Competitiveanalysis
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Telecom Model
Objective
Reduce Costs and increaseO
perating Efficiencies
Operations
Strategy Outsourcing
NetworkOperations
IT / ITES Call Center
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Competitiveanalysis
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NetworkOutsourcing
Managed capacity model Network/Services/Ops
Benefits: Better Network Management
Rapid upgrade to new technologies
Generate Short term cash
Focus on key projects Known Vendors for Managed Services
Ericssons / NSN / Huwaei
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Competitiveanalysis
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ITOutsourcing
IT Enterprise Applications / Infrastructure Mgmt
Benefits: Predictable IT Spending
Optimizes the use of technology resources
Improves Cash Flows
Possible Vendors / Alliances Airtel already has an alliance with IBM
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Competitiveanalysis
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Call CenterOutsourcing
Outsourcing Call center and Business Processes
Benefits: Per call based pricing model
Payments linked to performance
Access to World Class Capabilities
Reduces man power attrition risk Possible Vendors / Alliances
Call centers can be outsourced to Indian vendors
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Entry strategy (1)
Entry through the acquisition of Claro.
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Parameters Vivo Claro TIM Brasil Oi
Customer base/Market
Share (%)29.8 25.7 24.2 19.9
No of services offered 4 4 1( Only Mobile) 4
Present in no of countries 1 6 1 1
ARPU(Currency-BRL) 26.1 24.9 29.79 21.2
Financials(Operating
Revenues)-USD Billion16.46 12.61 6.64 16.01
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Entry strategy(2)
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Advantages
Part of the Mexican Telecom Group-Amrica Mvil ,
4th largest telecom provider in the world.
Only player to have presence in 6 Latin American
countries(Paraguay, Peru, Uruguay, Brazil,
Argentina, Chile)
Unlike JV, all revenues will be realised.
Entry into an established an emerging market
Technology and skill base protected
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OBRIGADO!
THANK YOU!