Strategy Project

Camila Cuesta

Alisia Ali

Julissa Ramirez

Luis Rodriguez

BRIC County Strategy Paper Part 1: Strategic Opportunity Assessment

A. Strategic Opportunity Assessment and Analysis

United States

The US automobile industry is among the biggest and most developed in the world. The industry is distinguished by intense rivalry, cutting-edge technology, and substantial R&D expenditures. There are many different types of businesses in this sector, ranging from big, international manufacturers to small vendors and retailers. The projected revenue for 2024 is US$82.8bn an annual growth rate of 18.20% as indicated by Statista (2024).

Key trends and issues

Electrification and Sustainability. Demand from consumers, environmental restrictions, and battery technological developments have resulted in a dramatic move towards electric vehicles. This shift is being led by businesses like Tesla (Statista, 2024). Automobile manufacturers are putting a lot of money into environmentally friendly initiatives, such as developing recyclable substances and using renewable energy in manufacturing. SUVs and crossovers, which account for most sales in the US market, are becoming more and more popular. With substantial investments being made in artificial intelligence (AI) and machine learning to improve automobile performance and security, the field of autonomous vehicle technology is developing at a rapid pace. The sector is being shaped by government subsidies for electric vehicles and stricter pollution requirements (Statista, 2024).

A. The Structure and Trends of the Automotive Industry in Each of the BRIC Countries

Brazil: With substantial manufacturing activities, Brazil is home to several global automotive giants, including Volkswagen, General Motors, and Fiat. Local production and a robust supply base are the main factors driving the industry. The buying power of consumers and car sales are impacted by economic instability and volatile exchange rates. Market trends are impacted by government initiatives such as import tariffs and incentives for domestic manufacturing. There is a lack of connectivity and consumer embrace in the early stages of the electric car market (Statista, 2024).

Russia: Russian car manufacturers like AvtoVAZ and GAZ are part of the country's automotive sector, but there are also foreign businesses operating locally. A strong and heavy concentration on locally built vehicles is a defining feature of the market. The automotive industry is impacted by supply chain disruptions and international penalties (Statista, 2024).

India: India's automotive sector is expanding quickly. The sector is characterised by foreign and indigenous firms like Maruti Suzuki and Hyundai, as well as major local businesses like Tata Motors and Mahindra. To encourage the use of EVs, India has put in place initiatives like the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME) scheme. India is characterised by a poor infrastructure including a scarcity of EV charging stations (Confederation of Indian Industry, 2024).

China: China boasts of being the largest automobile market in the world. The local manufacturers found in China include BYD and Geely. Driven by robust policies and perks, China is the global leader in electric vehicle manufacturing and uptake. Autonomous driving and artificial intelligence (AI) have benefited from substantial investment. Sustainable development and domestic production are encouraged by Chinese policies, which influence the sector (Statista, 2024).

C. The cultural distance of the BRIC countries from the culture of the United States. Use the six Hofstede Cultural Dimensions ratings for the countries.

Country:	Brazil
Cultural Dimension	Score	Comments
Power Distance	69	Has a strong hierarchy view inequality as a norm. Social status and symbols communication respect and power.
Individualism	36	Strong cohesion among families and extended families.
Masculinity	49	As a society, there’s no clear motivation for success.
Uncertainty Avoidance	76	Following most Latin countries, having rules and striving for a safer place.
Long Term Orientation	28	Great concern with traditions and don’t save for the future.
Indulgence	59	Seek to enjoy the moment. Highly optimistic.
Country:	China
Cultural Dimension	Score	Comments
Power Distance	80	Inequality is acceptable, people should not have aspirations beyond their rank.
Individualism	43	Collectivist society where being a part of the out-group can be met with hostility
Masculinity	66	Willing to make many sacrifices to get ahead in life. Leisure time is not too important.
Uncertainty Avoidance	30	Society is comfortable with ambiguity.
Long Term Orientation	77	Pragmatic culture with a strong sense of saving and investment.
Indulgence	24	Restrained society, tend to be pessimistic.

Country:	Sout Africa
Cultural Dimension	Score	Comments
Power Distance	49	Society has a hierarchical order, ideal boss is a benevolent autocrat.
Individualism	23	Collectevist group who believe in helping others. Loyalty to the group overrides most social rules and regulations.
Masculinity	63	People “live in order to work” Conflict are resolved by fighting them out.
Uncertainty Avoidance	49	Relaxed attitude, believes there should be no more rules than necessary.
Long Term Orientation	18	Respect traditions but do not save for the future. Focus on quick results.
Indulgence	63	Optimistic society willing to enjoy the moment.

Country:	India
Cultural Dimension	Score	Comments
Power Distance	77	Appreciate a hierarchical society. Depend on the boss for direction.
Individualism	24	Has both inidividualistic and collectivist traits.
Masculinity	56	Decisive society, showing off success is normal.
Uncertainty Avoidance	40	Acceptance toward imperfection, somethings will go unexpected.
Long Term Orientation	51	Dominant (long term or short term) preference can’t be determined.
Indulgence	26	Rather restraint society, tend to be pessimistic. Indulging themselves is wrong.

Country:	Russia
Cultural Dimension	Score	Comments
Power Distance	93	Huge power difference between individuals. Behaviors are reflected the status roles of individuals.
Individualism	46	They are overall middle of the road between individualism and collectivism.
Masculinity	36	Talk modestly about themselves and dominant behaviors among peers is not accepted.
Uncertainty Avoidance	95	Ambiguous situations are uncomfortable. Detailed planning is a common occurrence.
Long Term Orientation	58	Pragmatic mindset. Strong propensity to save and invest.
Indulgence	20	Tend to be cynical. Restrained society.

Cultural Dimension	United States	Brazil	Russia	India	China	South Africa
Power Distance	40	69	93	77	80	49
Individualism	60	36	24	46	43	23
Masculinity	62	49	36	56	66	63
Uncertainty Avoidance	46	76	95	40	30	49
Long Term Orientation	50	28	58	51	77	18
Indulgence	68	59	20	26	24	63
TOTAL CULTURAL DISTANCE FROM THE UNITED STATES	0	127	222	70	148	87

The results from this exercise should not come as a surprise; foreign countries scored differently from the US. What was a shock, was India being surprisingly similar with the United States. Culturally a US company would have the least issues expanding to India as they should require the least amount of change to operate effectively. Russia is at the opposite side of the spectrum being the most culturally distinct from the United States. Expanding firms need to do a market research report, review local laws, and take into account cultural and political considerations of the local population.

D. The importance of the BRIC countries to the selected industry. A. Describe the reasons why companies in the selected industry should be considering a BRIC strategy.

The BRIC countries Brazil, Russia, India, and China are significant to the automotive industry for several reasons the first reason is that it produces rapid economic growth and large markets, it increases Urbanization, produces government incentives and investments, creates strategic manufacturing hubs, provides market diversity, rising technological capabilities, and helps with environmental regulations and stabilities.

BRIC countries are characterized by rapid economic growth, leading to an expanding middle class with increasing disposable income. This economic upturn translates into a higher demand for automobiles as more individuals can afford to purchase personal vehicles. The sheer size of the populations in these countries particularly in China and India represents vast, untapped markets for automotive companies, providing immense growth potential compared to more saturated markets in developed countries.

The trend of urbanization in BRIC countries is accelerating, with more people moving to cities where the need for personal and public transportation options is growing. This urban shift results in a higher demand for both private vehicles and public transport solutions, pushing automotive companies to innovate and cater to these emerging urban needs.

Governments in BRIC countries often offer incentives to attract foreign investment in the automotive sector, including tax breaks, subsidies, and infrastructure development. These policies are designed to boost domestic manufacturing capabilities and create jobs, making it financially advantageous for automotive companies to establish operations in these regions.

BRIC countries are becoming key manufacturing hubs due to their relatively lower labor costs, improving infrastructure, and growing expertise in automotive production. Establishing production facilities in these countries allows automotive companies to benefit from cost efficiencies and to better serve regional markets, reducing logistics and transportation expenses.

A BRIC strategy enables automotive companies to diversify their market base, reducing reliance on traditional markets in North America and Europe. This diversification is crucial for mitigating risks associated with economic downturns in specific regions, as the BRIC markets can provide stability and growth opportunities during periods of global economic uncertainty.

BRIC countries, particularly China and India, are investing heavily in technological advancements, including electric vehicles, autonomous driving, and smart mobility solutions. Collaborating with local tech companies and leveraging these advancements allows global automotive firms to stay at the forefront of innovation and remain competitive in the evolving automotive landscape.

There is a growing emphasis on environmental sustainability in BRIC countries, with stricter regulations being implemented to reduce emissions and promote cleaner technologies. Automotive companies that adopt a BRIC strategy can lead in the development and deployment of sustainable automotive technologies, such as electric and hybrid vehicles, to meet these regulatory requirements and cater to environmentally conscious consumers.

Considering a BRIC strategy is crucial for companies in the automotive industry due to the significant growth opportunities, economic advantages, and strategic benefits these countries offer. Tesla should be considering a BRIC strategy due to the immense growth potential and strategic advantages these markets offer. China, for instance, is the world's largest market for electric vehicles driven by robust government incentives and a growing environmental consciousness. Tesla's Gigafactory in Shanghai exemplifies the benefits of local production, reducing costs and enhancing market responsiveness. India's rapidly urbanizing population and increasing demand for sustainable transportation present another promising market for Tesla's innovative electric vehicles. Additionally, Brazil and Russia offer emerging opportunities with their expanding middle classes and improving infrastructure. By focusing on BRIC countries, Tesla can diversify its market base, capitalize on economic growth, and solidify its position as a global leader in the electric vehicle industry.

E. Analysis of Strategic Opportunity and Cultural Distance Assessment for BRIC Countries

1. China

Opportunity Assessment:

Market Size and Growth: China is the largest automobile market in the world, providing vast opportunities for growth.

Government Support: Robust policies and incentives favor electric vehicle (EV) production and adoption, making it a prime market for EV manufacturers.

Technological Investment: Significant investments in autonomous driving and artificial intelligence (AI) enhance the development of cutting-edge automotive technologies.

Cultural Distance Assessment:

Business Environment: Although there are challenges such as regulatory complexities and intellectual property concerns, the Chinese market is accustomed to international business practices.

Consumer Preferences: There is a growing demand for high-tech, sustainable vehicles, aligning with global automotive trends.

Priority Recommendation: High

Rationale: China’s substantial market size, supportive government policies, and technological advancements make it the most promising market among BRIC countries. Despite the cultural and regulatory challenges, the opportunities far outweigh the risks.

2. India

Opportunity Assessment:

Market Growth: Rapidly expanding automotive market with a focus on both traditional and electric vehicles.

Government Initiatives: Programs like FAME (Faster Adoption and Manufacturing of Hybrid and Electric Vehicles) support EV adoption.

Manufacturing Hub: India is becoming a strategic manufacturing hub due to its lower labor costs and improving infrastructure.

Cultural Distance Assessment:

Business Environment: Bureaucratic challenges and infrastructure issues are notable, but the market is increasingly opening to foreign businesses.

Consumer Preferences: There is a growing middle class with an increasing demand for affordable and sustainable vehicles.

Priority Recommendation: Medium to High

Rationale: India’s expanding market and supportive government policies make it a significant opportunity. However, infrastructural and bureaucratic hurdles require strategic planning and investment.

3. Brazil

Opportunity Assessment:

Manufacturing Base: Home to major global automotive manufacturers with a strong local production base.

Government Policies: Tariffs and incentives favor domestic manufacturing, providing an advantage for locally produced vehicles.

Economic Instability: Economic volatility and exchange rate fluctuations can impact consumer purchasing power and market stability.

Cultural Distance Assessment:

Business Environment: Familiarity with Western business practices, but economic and political instability pose risks.

Consumer Preferences: Preference for affordable and practical vehicles, with growing interest in sustainable options.

Priority Recommendation: Medium

Rationale: Brazil presents a balanced opportunity with its established manufacturing base and potential for growth. Economic instability and market volatility are significant risks that need to be managed.

4. Russia

Opportunity Assessment:

Local Production: Dominated by local manufacturers with limited foreign presence due to international sanctions and geopolitical risks.

Market Challenges: Supply chain disruptions and penalties impact the industry negatively.

Economic Environment: Market influenced by economic sanctions and political factors, creating a challenging business environment.

Cultural Distance Assessment:

Business Environment: High regulatory barriers and geopolitical risks.

Consumer Preferences: Strong preference for domestically produced vehicles, limiting opportunities for foreign brands.

Priority Recommendation: Low

Rationale: Given the geopolitical risks, economic sanctions, and market challenges, Russia presents the least attractive opportunity among the BRIC countries for automotive expansion.

Overall Recommendation for BRIC Prioritization:

China: Prioritize China due to its vast market size, supportive government policies, and significant technological investments.

India: Focus on India as a secondary priority, leveraging its rapid market growth and strategic government initiatives.

Brazil: Consider Brazil for its established manufacturing base and potential growth, but be cautious of economic volatility.

Russia: Deprioritize Russia due to its high geopolitical and economic risks.

By focusing on China and India first, your client company can capitalize on the significant growth opportunities and supportive environments in these markets, while also considering strategic entry into Brazil as a supplementary market. Russia, due to its numerous challenges, should be approached with caution or potentially deferred until the business environment stabilizes.

References

Confederation of Indian Industry (2024). India’s Booming Electric Vehicle Industry. {Online} Available at: https://ciiblog.in/indias-booming-electric-vehicle-industry/#:~:text=The%20India%20electric%20vehicle%20market,report%20by%20Fortune%20Business%20Insights.

Statista (2024). Electric Vehicles – Brazil. {Online} Available at: https://www.statista.com/outlook/mmo/electric-vehicles/brazil

Statista (2024). Electric Vehicles – China. {Online} Available at: https://www.statista.com/outlook/mmo/electric-vehicles/china

Statista (2024). Electric Vehicles – Russia. {Online} Available at: https://www.statista.com/outlook/mmo/electric-vehicles/russia

Statista (2024). Electric Vehicles – United States. {Online} Available at: https://www.statista.com/outlook/mmo/electric-vehicles/united-states

Country comparison tool. Hofstede Insights. (2023, October 16). https://www.hofstede-insights.com/country-comparison-tool?countries=brazil%2Cchina%2Csouth%2Bafrica%2Cunited%2Bstates

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Group BRIC Country Strategy Assignment – Part II

 

Part 2 Instructions

Learning Goals of Part 2

 

The learning goal Part 2 is to provide an opportunity to learn about the kinds of “country risk” that companies are exposed to if they do a foreign direct investment into another country, and how these risks can be assessed, rated and understood. In this regard, the following definition of country risk is used.

· “The risk to the assets or expected earnings of assets invested by companies in countries other than their own, due to various political, economic, financial and cultural environments and events.”

 

 

 

For a more recent commentary on the BRIC countries view the following: Goldman Sachs | BRICs Videos and Stories

Examine each of the BRIC countries to determine their projected economic growth, country business environment and country risk. We have gathered assessments of the Country Risk from the Economist Intelligence Unit, which are available in the FIU Online Library. You will be provided a large amount of country and industry data to get you started, however, additional library research is encouraged.

As a result of this research, write a report following the following outline, which will incorporate the various tables above.

Strategic Risk Assessment Report

A. Detailed country risk assessments for the following countries.

1. Brazil

2. Russia

3. India

4. China

5. United States

B. Comparative country risk assessments showing all the countries.

C. Comparative Risk Scenario Watchlists showing all the countries.

D. Conclusions

ECONOMIST INTELLIGENCE UNIT COUNTRY RISK REPORTS

COUNTRY	EIU COUNTRY RISK REPORT
BRAZIL	EIU BRAZIL COUNTRY RISK REPORT 2022
RUSSIA	EIU RUSSIA COUNTRY RISK REPORT 2022
INDIA	EIU INDIA COUNTRY RISK REPORT 2022
CHINA	EIU CHINA COUNTRY RISK REPORT 2022
UNITED STATES	EIU UNITED STATES COUNTRY RISK REPORT 2022

Read the rationale behind these ratings and dig deeper by reading other EIU news stories about the political, economic, financial, business and regulatory environments in each country.

For each of the BRIC countries plus the United States, summarize the EIU Risk Reports using the following table. Then discuss the implications of the major risks on your client company operating in the country.

COUNTRY RISK

COUNTRY	RISK RATING	COMMENTS
RISK RATINGS
OVERALL
Security Risk
Political Stability Risk
Government Effectiveness Risk
Legal and Regulatory Risk
Macro-economic Risk
Foreign Trade and Payments Risk
Financial Risk
Tax Policy Risk
Labor Market Risk
Infrastructure Risk

COUNTRY RISK COMPARISON

COUNTRY	OVERALL RISK RATING 2021	COMMENTS
BRAZIL
RUSSIA
INDIA
CHINA
UNITED STATES

Also, examine the specific risk scenario watchlist provided by the EIU and their likelihood of happening, the degree of harm to multinational companies operating in the country if they did happen and the resulting overall intensity of the scenario. Use the following table to present this analysis.

RISK SCENARIO WATCHLIST

COUNTRY	SCENARIO	CATEGORY	PROBABILITY	IMPACT	INTENSITY	COMMENTS
Scenario 1
Scenario 2
Scenario 3
Scenario 4
Scenario 5
Scenario 6
Scenario 7
Scenario 8
Scenario 9

COMPARISON OF MAJOR RISK SCENARIOS

COUNTRY	MOST INTENSE RISK SCENARIO	COMMENTS
BRAZIL
RUSSIA
INDIA
CHINA
UNITED STATES

As a result of this research, write a report following the following outline, which will incorporate the various tables above.

Strategic Risk Assessment Report

E. Detailed country risk assessments for the following countries.

6. Brazil

7. Russia

8. India

9. China

10. United States

F. Comparative country risk assessments showing all the countries.

G. Comparative Risk Scenario Watchlists showing all the countries.

H. Conclusions