Management 100 - Company Situation Analysis to Expand Overseas

NUFARM Company Situation Analysis

Management 100

Rebecca Licacristi Budianto - 15359111 Curtin University

2011

1.   Introduction

Nufarm Limited Company has been operated since 1950s in Melbourne, Australia. Has expanded and grow from year 1980s to New Zealand, after a fairly successful, it expand to several countries. Now, Nufarm Limited Company rated as the 9^th largest crop protection company in the world. Among the regions market, Brazil was Australia’s largest trading partner. Brazil is the 9^th greatest economy in the world. Many Australian companies are considering Brazil as a market for growth, such as, WMC and Burns Philp.

Brazil is known as agribusiness country, which means agriculture and agro industry. The positive and warm relations between the two countries and due to diversity and economic size, Brazil attempt meaningful potential to Nufarm Limited Company. This report will give the detail about Brazil’s business environment which can be considered as one of advisable place for global locations to Nufarm Limited Company and also the benefits for the company itself.

2.    PESTL Analysis for Brazil Business Environment

2.1. Political Environment

Brazil had independence from Portugal in 1822. The Federal Republic arranges 26 states and also arranges the legislative, judicial and executive branches. Brazil has 81 senators, 513 members of deputies and 19 political parties. From 1990, Brazil opens several chances to international firms. Brazil had through some fall-down situation, several corruptions and some government formation changes were happen under President Lula’s  government.

Brazil has improved on their country’s operations especially for infrastructure expansion, research and technology, reduce government consumption, change the tax system, human capital investments and inviting international competition. High  possibility were grow in some of the world’s greatest company.  Government made some buildup to change the market system in Brazil and decreased the business barriers. Brazil has developed stable and business friendly environment to pull greater local and foreign investments.

2.2. Economic Environment

Variation of marketing structure in every country that occurs makes the foreign company face variable uncontrollable economic situation such as, inflation, interest rates and recession (Bartol et al. 2008, 81). Economic condition in Brazil had affected by several situations in the world, Second World War, terrorist attack in America and economic difficulties in Argentina. After Second World War, with the help from international firms, 30% of Brazil GDP shows increases in agribusiness sector. Australian economic relationship with Brazil has grown especially in mining, services sectors, manufacturing and agribusiness sector.

Australian multinational company’s international budgets and salaries in other countries will be cheapening by the amount of Australian dollar. Brazil has some taxation, rising interest rates and fiscal problems which lead Brazil to conducting tight monetary policy, judicial reform, education improvement, crimes and corruption. Affect the consumer credit accessible, disposable income level and disposition of people to expand the money. According to ABCC (2011), the government arranged an agenda for taxation system, social security, bankruptcy laws and other improvements in financial.

2.3. Socio-Cultural Environment

Social factors such as attitudes, values, beliefs, ethics, and life style affect the firms. People in Brazil are friendly and attainable to new guests, Brazilian people are able to create enjoyable and familiar environment. The people are tolerant to each others, the business involve is adjustable and in open-minded manner. Flexible time and understanding behavior was given to foreign investors. Brazilians trained to be patient when solve the short term problems because they are set to be more focus on the future results of their actions today.

Build a good communication with local people and knows well your Brazillian business partners by spending more time with them personally and professionally would make a great difference. High quality education and a comfortable life normally occur in Brazilians wealthy families. In addition, wear dark suit necessary for business meets, never discuss about politics, and avoid using purple color because it means death.

2.4. Technological Environment

Brazil has several advance technology, such as, specialized and agricultural machinery, packing, irrigation, sugar cane harvesting technology and more. Brazil has appropriate scientific results in the worlds especially for farming, agriculture, software designs and telecommunications. Brazil is growing steadily in the development and absorption of technologies for steels and metallurgical industries.

Brazil Government is finding out a way to work out an environment with more supportive innovation and followed scientific advances to the business environment in order to promote economic growth. Technological progress affects all positively and negatively to the company. Technological forecasting helps in defend and increases the valuable of company in enlarge trades. Revolutions in technology influence competitive business environment and cultures.

2.5. Legal Environment

Brazil is a Federal Republic. Their legal system is based on Roman historic code. Laws are made for public to manage and conduct any form of situations. There are several Codes: Civil Code, made for contracts and obligations problems, Penal Code, made for crimes and punishments, Civil Procedure Code, made for allocate process of law, and Tax Code, made for tax regulations. Important things to be highlighted, Civil and Commercial Law, on certain basic formalities the company have to follow contracts.

Competition law was made to give consumer a fair price for goods and services in rival conditions. Labor law, maintain relationship among employees and give several commission benefits such as social security and pension systems. Favor employees might become a barrier to reach the goal because of disagreement between the managers and the Brazilian employees. Tax system in Brazil is different with several countries. For example, Brazil has applied double taxation treats with several countries, excluding Australia.

3.   SWOT Analysis for Nufarm Limited Company

SWOT analysis help in understanding and make sure the capability of the company to invest in Brazil, also to reconsider its objectives and responsibility.

Strengths

Strong brand name and reputation is the first strength of Nufarm Limited Company. According to Johnston (2007), Nufarm has create high position for manufacturing products which fit with climate and weather conditions in Australia and lead the crop manufacturer protection products in Australia. Firm’s positive honor might become a source of sustained competitive advantage.  In Brazil, Nufarm will have exclusive access to natural environment as Brazil has Amazon rainforest, most percentage of forests in the world. Favorable and easy access to distribution networks makes almost every country has invested and using the products because they provide many products which fulfilled customer’s needs and wants.

Weaknesses

High cost structure, for example, the largest money spent was for upgrading the fire water rings, firefighting equipment, research and development for the product improvements itself. Odour emissions, might disturbed the community and cause some complaints.

Opportunities

Arrival of new technology, Johnston (2007) claimed that Triflur Xcel is a Nufarm proprietary formulation and a world first technology that provides broad-spectrum weed control. Removal of international trade barriers might develop markets by different brands. Moving into new attractive markets segments in Brazil. Both of countries are masculine. Easy of labour supply, moreover, the company might get more informations and experience by the knowledge of local employees there. Choose people who competent with the strategy and society of the team and not people who come to be super proficient.

Threats

Market taste, consumer tends to use something that they already recognize. Foreign company must know their competitors so that they can compete especially with company that sale same kind of products. New regulations might be barrier, for example, do not make any wastes to obtain authorization with government. Goals might not attain because of possible misunderstanding inside the company and the competitors might get opportunities from internal company factors.

4.   Recommendations

According to the report above, it would be better if the company familiar with Brazil’s rules and regulations. A foreign company open a branch in Brazil with Brazil’s government permission. The company must have supported documents, such as, the evidence that the foreign company is organized and in existence in country origin itself. Most business entities have to pay corporate income taxes that calculated over estimated income.

The company also required to pay their social security system. That is from companies that own licenses, acquire technological knowledge, render technical services and administrative assistance. Taxes and respective rates established based on the size of the company. The financial statements concerning operations of the branch must be prepared according to the Brazillian law and approved by the federal government.

Due to a large population in Brazil, they may need different things to be full filed, especially for basic needs such as food, clothes and more. Agriculture is important for every country which grows crops, include Brazil, because they have many population, they will grow crops by themselves. The production costs might be less expensive than in Australia. Nufarm Limited Company will get many opportunities from this factors, the probability to get more profits is rising.

Moreover, today the world are having food crisis due to changes in climate. Brazil has a large land to grow crops, so that FAO or Food and Agriculture Organization are choosing Brazil as one of barns crops world.  It must be a good decision to invest our company products in Brazil because people will definitely need the raw materials that Nufarm Company provides.

5.  References

ABCC: The Australia Brazil Chamber of Commerce Inc. 2011. http://www.australiabrazil.com.au/index.php?option=com_content&task=view&id=20&Itemid=35

Bartol, Kathryn, Margaret Tein, Graham  Matthews, and Bishnu Sharma. 2008. Management: a Pacific Rim Focus. Australia: McGraw-Hill.

Birkinshaw, Julian. 2004. Strategic Management: Volume 1. Massachusetts: Edward Elgar Publishing Limited.

Certo, Samuel C, and J. Paul Peter. 1990. Strategic Management: a Focus On Process. Singapore: McGraw-Hill.

Hanson, Dallas, Peter J. Dowling, Michael A. Hiff, R. Duane Ireland, Robert E. Hoskisson. 2008. Strategic Management: Competitiveness and Globalization. South Melbourne: Nelson Australia Pty Limited.

Hodgetts, Richard M, Fred Luthor, and Jonathan P. Doh. 2006. International Management: Culture, Strategy, and Behaviour. New York: McGraw-Hill/Irwin.

Hutzschenreater, Thomas and Julian Horstkotte. 2010. “Knowledge transfer to partners: a firm level perspective” Journal of Knowledge Management 14 (3): 2010.

Johnston, Kathryn. 2007. Media Release. Accessed March 18, http://www.nufarm.com/Assets/210/1/RDWaggastory.pdf.

McKenna, Richard. 1999. New Management. Australia: McGraw-Hill Book Company Australia Pty Limited.

Mutjaba, Bahaudin G. and Randolph Pohlman. 2010. “Value Orientation of Indian and U.S. Respondents: A Study of Gender, Education, and National Culture” Sam: Advance Management Journal 75 (4): 2010.

Nufarm Limited. 2008. Accessed March 18, http://www.nufarm.com/OurHistory

Pearce, John A., and Richard B. Robinson. 2009. Formulation, Implementation, and Control of Competitive Strategy. New York: McGraw-Hill/Irwin.