Contents Preface ............................................................................................................................... 1 Acknowledgement ............................................................................................................. 2 Chapter 1: The chosen country: Brazil ...............................................................................

3 Chapter 2: Historical and Geographic Factors .................................................................... 7 Chapter 3: Cultural Factors .............................................................................................. 12 Chapter 4: Political Legal Environment ........................................................................ 16 Chapter 5: Trade Barriers ................................................................................................. 20 Chapter 6: Strategy to Enter the Country ......................................................................... 25 Chapter 7: Market Research ............................................................................................. 26 Chapter 8: Catering to Nearby Countries/Region ............................................................. 30 References ....................................................................................................................... 33

Chapter 1: The chosen country: Brazil

Q1) why was the chosen country selected? Which service would you market in that country and why? Selected Country: BRAZIL The country that we selected for the expansion of our business is BRAZIL. Brazil is among the ten largest economies in the world and the country remains very attractive to foreign investors due to its growth potential, large and competitive market and political stability. Why BRAZIL: It is a special moment for expanding a business in Brazil. Brazil has recently shown the world its time is now when the announcement arrived: after hosting the FIFA World Cup in 2014, Brazil will also host the 2016 Summer Olympics games in Rio de Janeiro. The Brazilian government commissioned a study to quantify the economic rise the two major sports events mean. The first figures forecast a $24.5 billion boost between now and 2027, mainly thanks to increased spending by tourists, growth in employment and construction. Obviously, the choice of Rio for the Olympic Games did not come out of the blue. Brazil has experienced a tremendous economic growth over the past fifteen years, it has one of the most rapidly developing economies in the world and it is responsible for almost half of Latin Americas GDP. Brazil hosted several international mega-events. In 2011, Brazil hosted the World Military Games and the Pan-American Maccabi Games and in 2012, Rio de Janeiro hosted the Rio+20 global environmental sustainability conference. In 2013, Brazil host a papal visit and the World Youth Day event as well as the soccer Confederations Cup. In 2014, twelve Brazilian cities will host the soccer World Cup. The Government of Brazil expects to invest $106 billion in the preparations for these events. These investments, which will include outlays for infrastructure, construction, transportation systems, port improvements, public security, and airport infrastructure upgrades, will present significant commercial opportunities. Most of the major infrastructure upgrades will be carried out through Public-Private Partnerships under Brazils Growth Acceleration Program. Brazil is already a global power in agriculture and natural resource and provides one of the largest workforces and consumers in the Americas. The main sectors on which Brazilian economy relies are agriculture (forestry, logging and fishing), mining, manufacturing and services. The energy market is also developed, being Brazil a leading producer of hydroelectric power. Brazil owns also a sophisticated technological sector and develops projects for submarines, aircraft and equipment for space stations. Major exports include aircraft, automobiles, iron ore, steel, electrical equipment, ethanol, textiles, footwear, corned beef, coffee, soybean and orange juice. Business opportunities in BRAZIL:
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UK companies incorporating or licensing a business in Brazil must know that with an estimated 600,000 foreign visitors expected for the World Cup alone and with 12 host cities to prepare, Brazil is facing a huge challenge. Estimates of the investment in infrastructure required to prepare for 2014 range from 10 billion to 30 billion. This will include: Stadia: construction and modernization Airports: infrastructures expansion and modernization Railways: (long-distance passengers rail, LRV (light rail), Monorail, high speed trains and technological understanding of these technologies Further opportunities will be available as soon as the plans for the Olympics Games will be implemented. Other interesting sectors in which you may find profitable registering a business in Brazil are: Hospitality and hotel (infrastructure and equipment) Logistic Public Security and safety Marketing Public Health Tourism Oil (high sea exploration) and natural gas Heliport infrastructure (new helicopters and new heliports on the coasts) Power and Renewable energy Shipbuilding (construction and maintenance) Water treatment (water, sewage, waste collection and treatment) Housing Program

In 2012, Brazil was the 4th main FDI destination in the world after US, China and Hong Kong. In 2011, FDI in Brazil reached at its high record of US$ 69.5 billion. During the past decade, the country has maintained macroeconomic policies that controlled inflation and promoted economic growth. Inflation was at 6.5% in 2011, and urban unemployment reached a historic low of 6.0%. Interest rates, though high compared to the rest of the world, remained historically low at the Central Bank benchmark rate of 80% as of July 2012. In 2011, the U.S. was Brazils largest source of imports followed by China, Argentina, Germany, and South Korea. U.S. merchandise exports to Brazil in 2011 were US$42.9 billion, and U.S. imports from Brazil were US$31.3 billion. Selected Service in BRAZIL: HOSPITALITY Over the last 20 years, mega sporting projects have experienced substantial change, expanding and reemphasizing the demands so that cities and countries can host these events. In the case of the World Cup, FIFA and 2016 Olympics host cities requires to have a hotel chains apart from sports stadium infrastructure, urban mobility, airports, ports, public security, sanitation, telecommunications, energy and health systems, among many others. Why HOSPITALITY: Brazil in the near future hosts large international events: World Cup 2014 and the 2016 Olympics.

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These events are likely to stimulate demand for a larger hotel infrastructure than the present one. New facilities are being built while older worn down or out dated facilities will have to undertake refurbishment in order to live up to the required standards. The hotel business in Brazil has become increasingly attractive to investors due to increased tourism and promising business growth rates. Indexes such as the REVPAR (revenue per available room), have increased year over year since 2005 in all Brazilian regions. The South, South-eastern and Mid-West regions had outstanding performance with more than 10% growth rates in the same period. However, Brazil still lacks a more consolidated hotel industry, and there are highly attractive markets for entrepreneurial projects in underdeveloped regions, particularly in the northeast. The more developed markets in the south provide good opportunities for niche concepts or more products that require more mature markets. Current investments in this industry in Brazil are primarily done through hotels, condo hotels (condominium based) and mixed-use properties, where the hotels or condo-hotels are developed together with residential, corporate towers and/or shopping malls.

Figure 1: Hotel beds, forecasts for the World Cup

Source: Valor Especial, June 2010

There is a genuine optimistic atmosphere within the Brazilian hotel market. The reason for this, was the expectation of a strong GDP (+5,35%) on a yearly basis, a stable exchange rate (1 US$ = 1 R$ 1,80 at year end), and an increase in the SELIC rate (11% at the years end). FDI for 2010 was the second highest in history (at US$ 37.5 billion). According to an analysis made by the Brazilian Tourist Ministry, the Brazilian hotel industry is undergoing a very positive development. The hotel supply in Brazil has substantially increased in the last few years, but it still remains below the countries potential.

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Chapter 2: Historical and Geographic Factors

Question 2: Give specific details of the historical and geographic factors on the basis of which this country has been selected. Historical factors of Brazil Inhabited by indigenous people for thousands of years, Brazil was discovered by Europeans in 1500 when the Portuguese navigator Pedro lvares Cabral landed on its coast. Brazil became a Portuguese colony and remained so for over 300 years. Brazil declared its independence from Portugal in 1822, when a constitutional monarchy was established. A federal republic was proclaimed in 1889. Democratic administrations have been interrupted twice since. From 1930 to 1945 the country was subject to the civilian dictatorship of Getlio Vargas. In 1964, following political, economic and social unrest, a new administration was established by the military and considerable economic growth and development was achieved during the next 20 years, although not without political and social repercussions. Democracy was restored in 1985. A new constitution was enacted by Brazils National Congress in 1988, which upheld the presidential system while simultaneously decentralizing political power. The Brazilian constitution is lengthy, consisting of 250 permanent articles and 94 provisional articles. In recognition of possible flaws in the wording, the Constituent Assembly made an express provision for its review. This review is behind schedule. Several amendments have already been approved. Brazils performance during the 2008/2009 international financial crisis Brazil overcame the international economic turbulence and crisis in 2008/2009 and emerged from it stronger and a more attractive place in which to do business. Brazil was the first Latin American country and probably one of the first countries worldwide to have emerged from the international recession. Although the global environment remains difficult and the export sector is therefore continuing to struggle - a fact made more difficult by the strongly appreciated Real - Brazils sheer size (2011 GDP of approximately US$ 2.477 trillion) and the strength of its domestic demand (60% of GDP) have made an economic recovery possible. A highly diversified economy and diverse trading partners, as well as a solid financial system leveraged by active regulators and the Bank - have also helped to counter the effects of the crisis in Brazil. The economic impact of the global financial crisis and falling demand has therefore been less severe for Brazil then for the USA, Europe and Asia. This can also be seen to have been a consequence of successful long-term joint public and private growth initiatives in Brazil. A combination of factors, such as nearly two decades of political and currency stability, the pursuit of fiscal discipline, high international reserves, solid macroeconomic indicators (based on a strong focus on inflation control) and the strengthening of the middle class consumption power, have led Brazil to this enviable position. Furthermore, credit is due to the government for reacting promptly to the crisis, by implementing anticyclical measures to sustain the consumption of durable goods and the flow of credit, particularly for the automotive and construction industries and for households. These measures have contributed to lower unemployment and the economic recovery.1

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Overall, then, there has been increasing recognition worldwide that Brazil was one of the most successful countries in managing the impact of the crisis. Financial and strategic investors are thus aware of the opportunities presented by Brazil in the new economic world we are entering. They realize that Brazil is the place to be. Cross-border merger and acquisitions1 and strong capital markets will play an important role. Witness the fact that Brazil has been chosen as the host nation for the 2014 FIFA World Cup while Rio de Janeiro has also been elected to host the 2016 Olympics. Couple that with the fact that long term strategies and investments are now top of the agenda and Brazil can be seen for what it is: a potential economic powerhouse. Geographic factors of Brazil Brazil is the worlds fifth largest country, occupying an area of 3,287,000 square miles, equivalent to almost half of the entire South American continent. It borders all South American countries except Chile and Ecuador, having a total border length of 9,777 miles. Its coastline runs for more than 4,578 miles, mostly along the South Atlantic Ocean. Brazil comprises 26 states and the Federal District of Brasilia, the capital city. Its comparative landmass is slightly smaller than the USA. Brazil is made up of five main geographical regions: North (mainly the Amazon basin). Northeast (roughly east from 46 west Longitude and north from 16 south latitude). Southeast (the coastal states south of the Northeast region down to So Paulo, plus the state of Minas Gerais). South (from the state of Paran southwards). Central-West (the states of Mato Grosso, Mato Grosso do Sul, Gois and the Federal District). Over half of Brazils landmass lies at about 650 feet above sea level, but only a fraction of that rises above 3,000 feet. The highest peaks have an altitude that is less than 10,000 feet and only six of these exceed 9,000 feet: two in the far North and four in the Southeast.

Population pyramid of Brazil

https://www.pwc.com.br/pt/publicacoes/assets/doing-business-brazil05.pdf

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Climate in Brazil Arable land is found mainly in the Central-West and South regions, but this is changing as a result of the need to develop land for agriculture throughout the rest of the country, particularly in the Central-West and the North. Brazils river system is extensive: the Amazon and its tributaries, which are great rivers in their own right, drain over half of Brazils land mass. Other large rivers include the So Francis co River in the Northeast and the Paran and Paraguay rivers in the Southwest, both of which are tributaries of the River Plate. The equator runs north of the Amazon River and the Tropic of Capricorn crosses the state of So Paulo. Most of Brazil therefore lies in the tropical zone, with only the South lying in the temperate zone. The South experiences occasional below zero temperatures. The North is hot, humid and rainy. Along the coast the tropical heat is tempered by sea breezes and inland, especially along the Central Plateau, the higher altitude keeps temperatures down. Humidity is high all along the coast and rainfall is heavy. The inland Northeast region contains drier land. Brazil has nearly every type of climate, except for harsh wintry weather. The country does not suffer from earthquakes and hurricanes, but rainstorms, drought and frost do occasionally cause considerable damage. The country boasts some spectacular scenic beauty, particularly along the coastline. Regional trends in Brazil Brazil is experiencing investments in the hotel sector in all regions. Hotel investment projects According to Valor Especial the future of the hotel investments will primarily focus on the Northeastern part of Brazil. As seen in the below statistics, the north-east region already accounts for 48, 2% of new investment projects and 83, 3 % of the invested capital. The north east remains underdeveloped for now Around 46.000 rooms are being constructed and it is hard to tell when the market is saturated.

http://www.pwc.com/en_gx/gx/retail-consumer/pdf/brazil.pdf

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FIFA World Cup 2014 host cities The hosting location of the FIFA 2014 world cup can be seen in figure above. The city of Rio de Janeiro has attracted extra attention because it is hosting the Olympic Games in 2016. There is a growing perception that there will be a large volume of public and private investment in the city, and an increase in hotel demand. This perception is based on the following facts: -hosting of the World Cup 2014 , - petrochemical, - transportation and international commerce sectors -real Porto Maravilha Project renewing Rios port area. It is estimated that Rio will need 40,000 more rooms to satisfy the demand during the Olympic Games9. So Paulo will also be one of the hosting cities for the World Cup 2014. In 2010, the expectations were that the demand for hotels will begin to increase, once again reaching 2008 levels. So Paulos current market situation is favourable for investors and owners of hotel units in the city. The secondary market of condo-hotel rooms is growing and can prove to be a lucrative way to invest in the citys industry during the next few years.

Source: Valor Especial: Turismo - June 2010

3Source: http://www.fifa.com/worldcup/brazil2014/destination/cities/index.html

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Chapter 3: Cultural Factors

Question 3: Give specific details of cultural factors which would be favorable for marketing in this country. Social Structure The majority of Brazilians are of European or African descent 4. Apart from the original Portuguese settlers, others who have settled in Brazil and significantly influenced its culture include Germans (mainly in the southern states), Italians and Japanese (mainly in the state of So Paulo).There are many other smaller ethnic communities in the larger cities, representing most nationalities. The jungle regions are populated by indigenous tribes who are few in numbers. With its mixed background of Portuguese, Italian, German, Japanese, East European and African immigrants, Brazil offers a broad spectrum of cultural and social activities, which vary by region. Most major cities support cultural institutions. Leisure and recreational activities take place mainly outdoors, taking advantage of the favorable climate. There are many clubs that offer extensive sports and social facilities. Business Implications of local culture For developments overseas hotel operators should consider local culture and incorporate this into product design and service. Gee (1994) explains 'culture is important within the hotel environment for the following five reasons5: In communicating, transacting business, and negotiating with colleagues from other countries In working for a foreign-based hotel company In managing human resources in another country, whether the employees are indigenous to that country or hired from yet another country In managing foreign born or culturally diverse workers in the domestic hospitality industry In accommodating international guests

Various aspects of Brazilian culture: Knowing the Hofstedes cultural dimensions of Brazil with respect to India would help future hotel operator like Taj group to structure the management style of working over there in Brazil.

4 5

Doing Business and investing in Brazil , PWC report, 2013, p 16 Gee, Chuck Y. 1994. International Hotels; Development and management. United States. Educational Institute of the American hotel & motel association

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Figure: Comparison of Geert-Hofstedes cultural dimensions of Brazil and India

Source: http://geert-hofstede.com/brazil.html

Power Distance Index: With a high score of 69 Brazil reflects a society that believes hierarchy should be respected and inequalities amongst people are acceptable. In companies there is one boss who takes complete responsibility. This means that it is quite widely accepted in Brazil that superiors are above their subordinates and a considerable dependence exists between them. In some cases, contribution to decisionmaking process is fairly limited, and done by a select group of high-ranking officials. For a foreign hotel operator from India, which is also having high PDI as Brazil, it would be easier to maintain the hierarchy in an organization. Individualism versus collectivism: Similar to India, Brazilian society is also a collectivist society where family is the center of the society structure .They give importance to the relationships more than anything else. While doing business in Brazil it is important to build up trustworthy and long lasting relationships: a meeting usually starts with general conversations in order to get to know each other before doing business. Since Brazilian structure is more collectivistic (A Hofstede Individualism score of 38 only), it is imperative that you do nothing to publicly mortify a Brazilian. Criticizing an individual meeting member in work settings causes both that person and you to lose face with the rest of the members in the formal meeting. Masculinity versus femininity: Brazil is also a moderately male-dominated (Hofstede Masculinity score of 49) society. Gender inequality is a major concern in Brazil (only 39% of the workforce comprise of working women). Workplace safety and job security are the issues important to Brazilians. Uncertainty avoidance: Uncertainty avoidance is the important factor which should be taken care of when an Indian company like Taj group is entering Brazil. At 76 Brazil scores high on UAI indicating societys low level of tolerance for uncertainty. In an effort to minimize or reduce this level of uncertainty, strict rules, laws, policies, and
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regulations are adopted and implemented. The ultimate goal of this population is to control everything in order to eliminate or avoid the unexpected. Where as in India, UAI is very low where no strict rules and policies are followed. So this important cultural factor should be kept in mind while entering Brazil as the society does not readily accept change and is very risk adverse. Long term orientation: At a score of 65, Brazil places itself amongst the long term oriented societies as the only non-Asian society. Like Asians the Brazilians accept more than one truth. Brazilians easily accept change as a part of life. Favorable cultural Factors For a foreign hotel operator like Taj group, favorable cultural factors for marketing in Hospitality sector in Brazil are as follows: In Brazil, restaurant entertainment prevails over home entertainment. Giving a gift is not required at a first business meeting; instead, buy lunch or dinner. Leisure and recreational activities take place mainly outdoors, taking advantage of the favorable climate.

Brazilian business culture is depicted below that has to be taken into account for business activities.

Brazil is a big country home to a variety of different cultures. However, when doing business in Brazil a few general rules of thumb apply:

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Introduction to Brazilian business culture6 Be prepared to commit long term resources (both in time and money) toward establishing strong relationships in Brazil. This is the key to business success. Make appointments at least two weeks in advance. Avoid improvised calls to business or government offices. Some regions have casualness about both time and work. In So Paulo and Rio De Janeiro business meetings tend to start on time, though minor delays are accepted. Business meetings normally begin with casual chatting. Let the host decide when it is time to talk business. In Brazil, restaurant entertainment prevails over home entertainment. Giving a gift is not required at a first business meeting; instead, buy lunch or dinner. Handshaking, often for a long time, is common. Shake hands for hello and goodbye; use good eye contact; when leaving a small group, be sure to shake hands with everyone present. When women meet, they exchange kisses by placing their cheeks together and kissing the air. First names used often, but titles are important. Music and long, animated conversation are favorite Brazilian habits. When conversing, interruptions viewed as enthusiasm. Brazilians enjoy joking, informality, and friendships.

The Brazilian Hotel Sector , The Danish Consulate General and the Embassy of Denmark, So Paulo, August 2010, p 22

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Chapter 4: Political Legal Environment

Q 4) Analyze the impact of political-legal environment of doing business in Brazil. The federal republic has three independent branches: executive, legislative and judicial. The President heads the executive branch and oversees a number of executive departments, the heads of which are appointed and are known collectively as the Cabinet. The Cabinet is answerable to the President. Unlike in many parliamentary democracies, the Cabinets members need not be members of the legislative branch. Besides the executive departments, there are a number of independent agencies, many of which are regulatory. Legislative power is exerted by a National Congress consisting of a Senate and a House of Representatives. There are 81 senators, three from each state and from the Federal District of Brasilia. The total membership of the House of Representatives totals 513 representatives. The number of representatives per state is determined by the size of its population. Voting is compulsory at the age of 18, but 16- and 17-year-olds, the over-70s and the illiterate are free to choose whether to vote or not.7 The judicial branch consists of a system of federal, state and local courts throughout the country, headed by the Federal Supreme Court. The federal courts rule on the constitutionality of laws and, on appeal, decisions of those lower courts to which the Federal Union is party. The Supreme Courts decisions are final and cannot be appealed. The state and municipal courts act independently of the federal courts, within the bounds of the Constitution. State governments follow a pattern similar to that of the federal government. Each state has a governor who is its chief executive, and power is divided among the states executive, legislative and judicial branches. Brazil is governed under a democratic regime in which the head Executive and Legislative positions are occupied by peoples representatives elected by direct voting. Candidates applying for positions in the Executive and Legislative are organized in political parties of a wide range of ideological lines. Brazil is a federative republic with 26 states and a capital district. It has a vigorous multi-party system with 20 parties represented in its congress. Present President is Dilma Rousseff since 1st January, 2011. The principal source of Brazilian civil law is the Civil Code, which dates from 2002, and subsequent legislation. All the corporations setup in Brazil is guided by civil law. The legal system is slow and cumbersome. Investment Sentiments:

https://www.pwc.com.br/pt/publicacoes/assets/doing-business-2013.pdf

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The Brazilian constitution states that foreign investment should be in the national interest and is welcome provided it represents a long-term commitment to economic development, particularly in those areas that are high on the governments list of priorities. These include the development of agriculture, technology, healthcare service and labor-intensive industries and the manufacture of goods that are currently imported and goods that will increase exports. Foreign direct investments have seen a considerable rise in the last decade with the figures as shown in the table below:

Source: Doing Business and Investing in Brazil 2013, PWC For entering into hotel business, Rio de Janeiro City as the Brazilian city is considered to be most attractive option, with the largest amount of year round tourists in the hotel and tour industry in the country. Most of the major 5 star hotel chains have a hotel in the city (including the Sheraton, the Marriott, the Othon, the Sofitel and the InterContinental), which are largely located towards the beach areas of the south zone (Zona Sul). These are complemented by a range of mid-range options as well as youth hostels spread across the city. The city centre has a number of choices (which largely cater to business visitors) and there are a growing amount of 3/4 star hotels, boutique-sytle pousadas and youth hostels located in the traditional and culturally rich area of Lapa.8 Acquisition Law of Coastal property by a foreign firm: Brazilian law provides for severe restrictions on the acquisition of properties within coastal and frontier areas, for national security reasons. The Brazilian law either foreigner or Brazilian national, does not acquire property of real estate located within coastal areas but only the right to use. All the properties located in coastal area are subject to payment of specific taxes called foro and laudemio. Foro is an annual tax to the use of the property and is levied on the rate of 0.6% over the value of the right of use. The laudemio is paid when the right of use of the property is transferred and is levied on the rate of 5% over the value of the property buildings and improvements.9 Regulations to be followed by foreign players to establish hotel business in Brazil: The National Monetary Council (Conselho Monetrio Nacional - CMN) is the exchange control and foreign investment authority. Foreign-exchange policy is controlled and supervised by the Central Bank. Exchange-control and foreign-investment policies are established by the National Monetary Council, the president of which is the Minister of Finance. The basic legal concepts regulating foreign capital in Brazil are defined in Laws 4,131 of 1962 and 4,390 of 1964, which were regulated by Decree 55762 of 1965.10 The concept of foreign capital under Brazilian law is defined by law 4.131/62 and its amendments. The legislation together with Regulamento do Mercado de Cmbio e Capitais Internacionais foreign

8 9

www.brazilinvestmentguide.com/.../brazil-hotel-industry-investment-guide. th Legal guide: Business in Brazil Coordinated by Durval de Noronha Goyos, Jr. 8 Edition, 2011. 10 https://www.pwc.com.br/pt/publicacoes/assets/doing-business-2013.pdf

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investment and repatriation of profits abroad, giving foreign capital invested in Brazil identical treatment and equal conditions as domestic capital.11 Political Risk in Brazil: During the appointment of present President Dilma Rousseff, Brazil has faced high profile corruption charges which have led to delay in infrastructure delay for football world cup of 2014. Other risks include an apparent lack of interest in long-term structural reforms, pressure to heighten public spending, and renewed intervention in currency markets.12 According to Transparency International in the year 2013 Brazil ranks at 72 positions in terms of corruption index throughout the world.13 Foreign Corrupt Practice Act Compliance Procedure: In order to carry out the business procedures without any hurdles, compliance of FCPA is evident for foreign companies to implement in their respective organizations. The Securities and Exchange Commision (SEC) and Department of Justice (DOJ) have both indicated that a statement in a companys code of ethics, without more, is not a sufficient FCPA compliance program. Following set of minimum compliance regulations need to be implemented in the company: Establish a compliance code that clearly prohibits bribes and other forms of corruption: Companies should develop clearly articulated corporate policies requiring compliance with the FCPA, including the establishment of compliance standards and procedures to be followed by all directors, officers, and employees, as well as all business partners. Establish an independent compliance Force: A top corporate officials should be responsible for implementation and oversight of all regulatory and compliance policies, standards, and procedures, including with respect to the FCPA. Implement an effective FCPA training program: Companies must ensure that all of their directors, officers, employees, agents, and business partners are aware of and understand their compliance policies and procedures regarding the FCPA. Establish a system for reporting potential violations: Companies should implement a reporting system for directors, officers, employees, agents, and business partners for reporting suspected violations of company policies, or suspected criminal conduct. Take appropriate remedial action if violations occur: Companies must respond appropriately to actual or suspected violations of the FCPA or compliance programs. This includes taking appropriate disciplinary action against employees, and terminating relationships with agents and business partners that commit such violations. Conduct thorough due diligence of all agents and business partners: Companies should establish policies requiring extensive pre-retention due diligence of all agents and business partners. These policies should include a detailed, step-by-step vetting process, as well as post-retention oversight of the agent or business partner.

11 12

Legal Guide: Business in Brazil Coordinated by Durval de Noronha Goyos, Jr. http://www.reuters.com/article/2011/08/02/brazil-risks-idUSRISKBR20110802 13 http://www.transparency.org/cpi2013/results

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Contracts with third-parties should require compliance with the FCPA: All contracts with agents and business partners should be in writing and require compliance with the FCPA. Impose appropriate internal controls: Companies should establish financial and accounting procedures designed to ensure proper maintenance of a system of internal accounting controls and accurate books, records, and accounts in compliance with the FCPA. Conduct internal FCPA compliance audits: Companies should conduct audits at regular intervals to ensure that their compliance programs, including their anticorruption provisions, are effective and implemented properly.14

A new Brazil Clean Companies Act has been approved by the Brazilian government in order to implement anti-bribery laws in a more stringent ways and this new law will be applicable from January 29, 2014.15 Future Trends on Foreign Investments: Government permission is required before company can begin operating in certain sectors like healthcare service, banks and financial institutions, mining companies, oil refineries, maritime companies, road and air transport companies. Tight exchange and foreign-investment controls remained practically unchanged for many years, but since 2005 there has been a gradual relaxation of controls and restrictive and protectionist practices. Foreign ownership up to 100% is allowed in hospitality sector. There has been a clear preference for foreign companies to establish themselves through subsidiaries and joint ventures rather than simply exporting to Brazil and this is likely to continue in future. Foreignexchange transactions are controlled, Stock markets are active and reasonably developed, but stock ownership is not widespread, patent, trademark and copyright protection is available which would further attract foreign investments in Brazil.

14

http://www.policymed.com/2012/08/foreign-corrupt-practices-act-brazil-and-the-pharmaceutical-sector.html

15

http://www.pillsburylaw.com/siteFiles/Publications/Alert20131031LitigationPreparingforBrazilsNewAntiCorruption.pdf

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Chapter 5: Trade Barriers

Question 5: What all specific Trade barriers have been considered in Brazil? Brazil ranks 130 out of 183 countries in the World Banks 2012 Doing Business Report. Although Brazil has made substantial progress in reducing traditional border trade barriers (tariffs, import licensing, etc.), tariff rates in many areas remain high and continue to favour locally produced products. As Brazil has implemented the Brasil Maior (Greater Brazil) plan, we have seen a rise in trade protections such as tax breaks to benefit local manufacturers, increased tariffs, and local content requirements. Indian companies need to find strategic Brazilian partners and find ways to show that they are doing more than selling their products in Brazil and then going home. Indian companies may face market access challenges in Brazil over the next several years, such as increasing pressures on the GOB to raise tariffs and impose non-tariff barriers. Brazils Buy Brazil policy is one such measure. Brazil's trade relations with India have witnessed a ten-fold increase in the last decade and expected to reach $ 15 billion by 2015, with exports of $5.04 billion and imports of $5.58 billion close to 10 times increase in the last ten years.16 India Brazil bilateral trade 2007-2012 (US$ million) Indias Exports Indias Imports Balance of Trade for India 2008 2009 2010 3,564 2,191 4,242 1,102 3,415 3,492 2,461 -1,224 750 4,666 5,605 7,734 Growth 49.23 20.12 37.97 Total trade %

2011 2012

6,081 5,043

3,201 5,577

2,880 -534

9,282 10,620

20 14.41

Indias main exports to Brazil : Diesel oil, coke of coal, lignite or peat, equipments related to wind energy, engineering and electrical equipment, cotton and polyester yarns, naphtha, pigments, medicines and chemicals.

16

http://www.indianexpress.com/news/brazils-trade-relations-with-india-have-witnessed-a-tenfold-increase-in-the-lastdecade/1092381/

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Indias main imports from Brazil :Crude oil, copper sulphates, soya oil, Raw sugar, denatured alcohol, other minerals of copper and its concentrates, asbestos, valves, motor pumps, airplanes, wheat, precious and semi-precious stones, etc. There has been two-way investment between India and Brazil. While the Brazilian companies have invested in automobiles, IT, mining, energy, biofuels, footwear sectors in India, the Indian companies have invested in such sectors as IT, Pharmaceutical, Energy, agri-business, mining, engineering/auto sectors. India and Brazil have formed a bilateral Trade Monitoring Mechanism (TMM) for periodic consultations. India signed a framework agreement with MERCOSUR17 in June 2003. The India Mercosur PTA entered into force on 1st June 2009 under which 450 items from each side will have duty reductions of 10% to 100%. Efforts are underway to broaden and deepen the India-Mercosur PTA and to link it, under IBSA to SACU as well. Import Tariffs Imports are subject to a number of taxes and fees in Brazil, which are usually paid during the customs clearance process. There are three taxes that account for the bulk of import costs: the Import Duty (II), the Industrialized Product taxes (IPI) and the Merchandise and Service Circulation tax (ICMS). In addition to these taxes, several smaller taxes and fees apply to imports. Brazil and its Southern Common Market (Mercosul) partners, Argentina, Paraguay, and Uruguay implemented the Mercosul Common External Tariff (CET) on January 1, 1995. Venezuela became a full member of Mercosul in 2012. Each country maintains a separate exceptions list of items for tariffs.18 The Brazilian Government established a computerized information system to monitor imports and to facilitate customs clearance known as the Foreign Trade Integrated System (SISCOMEX). SISCOMEX has facilitated and reduced the amount of paperwork previously required for importing into Brazil. Brazilian importers must be registered in the Foreign Trade Secretariats (SECEXs) Export and Import Registry and receive a password given by Customs to operate the SISCOMEX. The SISCOMEX online registry creates electronic import documents and transmits information to a central computer. Import Duty The Import duty is a federally-mandated product-specific tax levied on a CIF (Cost, Insurance, and Freight) basis. In most cases, Brazilian import duty rates range from 10% to 35%. Industrialized Product Tax (IPI) The IPI is a federal tax levied on most domestic and imported manufactured products. It is assessed at the point of sale by the manufacturer or processor in the case of domestically produced goods, and at the point of customs clearance in the case of imports. As part of the federal governments efforts to support local producers, IPI rates between imported and domestically produced goods within the same product category may differ. The IPI tax is not considered a cost for the importer, since the value is credited back to the importer. Specifically, when the product is sold to the end user, the importer debits the IPI cost.

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http://commerce.nic.in/flac/india_mercosur_pta.htm http://export.gov/brazil/static/CC_BR_DoingBusiness_CCG_PDF_Chap5_TradeRegulations_Latest_eg_br_034997.pdf

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The Government of Brazil levies the IPI rate by determining how essential the product may be for the Brazilian end-user. Generally, the IPI tax rate ranges from 0% to 15%. In the case of imports, the tax is charged on the product's CIF value plus import duty. A products IPI rate is directly pr oportional to its import tariff rate. As with value-added taxes in Europe, IPI taxes on products that pass through several stages of processing are reduced to compensate for IPI taxes paid at each stage. Brazilian exports are exempt from the IPI tax. Merchandise and Service Circulation Tax (ICMS) The ICMS is a state government value-added tax applicable to both imports and domestic products. The ICMS tax on imports is assessed ad valorem on the CIF value, plus import duty, plus IPI. Although importers have to pay the ICMS to clear the imported product through Customs, it is not necessarily a cost item for the importer because the paid value represents a credit to the importer. When the product is sold to the end user, the importer debits the ICMS, which is included in the final price of the product and is paid by the end user. Effectively, the tax is paid only on the value-added; the tax is generally passed on to the buyer since it is included in the price charged for the merchandise. The ICMS tax due to the state government is based upon taxes collected on sales by a company, minus the taxes paid in purchasing raw materials and intermediate goods. The ICMS tax is levied on both intrastate and interstate transactions and is assessed on every transfer or movement of merchandise. The rate varies among states: in the State of So Paulo, the rate varies from 7% to 18%. On interstate movements, the tax will be assessed at the rate applicable to the destination state. Some sectors of the economy, such as mining, electricity, liquid fuels and natural gas can be exempt from the ICMS tax. Most Brazilian exports are exempted. Import Requirements and Documentation Exporters and Brazilian importers must register with the Foreign Trade Secretariat (SECEX), a branch of the Ministry of Industrial Development and Commerce (MDIC). Depending on the product, Brazilian authorities may require more documentation. For instance, the Ministry of Health controls all products that may affect the human body, including pharmaceuticals, vitamins, cosmetics and medical equipment/devices. Such products can only be imported and sold in Brazil if the foreign company establishes a local Brazilian manufacturing unit or local office, or the foreign company appoints a Brazilian distributor who is authorized by the Brazilian authorities to import and distribute medical products. Such products must be registered with the Brazilian Ministry of Health. Temporary Entry Since 2000, the Government of Brazil has made an allowance for temporary importation of products that are used for a predetermined time period and then re-exported. Brazil has already ratified the International Convention for the Temporary Admission of Goods. Under Brazils temporary import program, the II and IPI are used to determine the temporary import tax. Products must be used in the manufacture of other goods and involve payment of rental or lease fees from the local importer to the international exporter. The Brazilian Government is studying the adoption of the ATA Carnet, an international customs document that allows importers to temporarily import goods up to one year without payment of normally applicable duties and taxes, including value-added taxes. The adoption of ATA Carnet use in Brazil would have a huge impact on customs clearance for trade show exhibitors that currently face difficulties and delays in getting these temporary imports into Brazil. Brazil is expected to come on board prior to the soccer World Cup in 2014.
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The 2016 Olympic Organizing Committee has received approval from the federal and state government that no taxes will be levied on products and services that will be temporarily imported into Brazil for the Olympics. Prohibited and Restricted Imports The Brazilian Government has eliminated most import prohibitions with certain exceptions. In general, all used consumer goods are prohibited from being imported. Used capital goods are allowed only when there is no similar item produced locally. Aviation parts, for example, are one of the few used products allowed to enter Brazil. The country prohibits the imports of beef derived from cattle administered with growth hormones, fresh poultry meat and poultry products coming from the U.S. and colour prints for the theatrical and television market. Compliance Concerns for entering Brazil are1. Brazil Lacks a Place of Business Concept From an organizational and logistical standpoint, Brazil is one of the few countries that lack recognition of a place of business. While in the majority of countries and regions around the globe businesses can enter and visit with relative freedom to research the viability of a business or market, Brazils strict requirements stifle the establishment of ground teams or pop-up operations. Instead, foreign business entities must exercise a lease on premises from day one just in order to initiate business dealings within Brazil. Further, while Brazil does allow branches, the setup of a branch office requires presidential approval, with the only viable option to setup a subsidiary even if only to hire one employee. This requirement demands that businesses be very certain and very prepared for the expense of establishing a presence in Brazil before ever setting foot in the country. 2. Fulfilling the Sociedade Limitada (LTDA) Requirements As mentioned above, foreign entities seeking to establish their presence in Brazil have been forced to set up a subsidiary even if just to enter the state. The most common business entity is the Limitada. Yet, while this is touted as the simplest office to establish in Brazil, it is by no means a simple and flexible process to create. Organizations must contend with a labyrinth of steps (17 in all) to create one, which together can take between 90 to 152 days to complete. To make things more complicated, these steps and time estimates may differ from state to state, although the process is essentially the same across Brazil. One reason the process can take so long is that the filing requirements are spread out across various governmental agencies, both federal and state. In Brazil the bureaucracy is so thick that it can take an average of 4 years to legally shut down a Limitada. 3. Corporate Tax Filings Not too long ago, Brazil attempted to transform their tax code to better protect small companies but the result was precisely the antithesis. Today, Brazil has different categories of indirect taxes, both federal and state thus VAT, sales and taxes meet multiple filings requirements making expert accounting help a key consideration for any organization setting up shop in Brazil. To make matters more complex these filings do not occur in concurrence or in consideration of corporate calendars. Instead, filings for different states have different deadlines. In addition, for companies setting up cost centres in Brazil, the regulators do not recognize the generally accepted OECD cost plus model for intercompany agreements. The result: Brazil is an accountants dream and a business owners nightmare so brush up on this subject. 4. Employment Law
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Employment represents another myriad of regulations for foreign entities in Brazil. Organizations seeking to establish a presence in Brazil are wise to closely study employment laws in the country, as they will inevitably find themselves tethered to a number of complex national-to-foreign worker ratio requirements, unemployment insurance regulations, social security taxes, termination restrictions and payroll laws. When hiring in Brazil, it pays to be very certain of the employees brought on board to a new company, as termination is very difficult. Add to this the concept of the 13th and 14thmonth(s) of yearly employment where employees are compensated not on a 12-month calendar, but for two additional months every year. 5. FCPA Regulations Pay attention to the Foreign Corrupt Practices Act (FCPA).These programs are implemented by Brazilian subsidiaries to provide more security to investors and help avoid reputational damage. Last year legislation was introduced in Brazil designed to require Brazil to comply with international agreements for combating bribery (to which Brazil is a signatory). This legislation designed to bring Brazil directly into the international mainstream regarding legislation to prevent bribery and corruption addresses civil and administrative liability for corporations for corrupt acts relating to Brazils national and foreign public administration.

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Chapter 6: Strategy to Enter the Country

Q.6. What would be the strategy to enter this country? Why? Give specific details pertaining to the mode of entry

Market Entry Strategy: Strategic partnership with local players

We would like to recommend strategic partnership route to enter Brazil by Taj Group wherein marketing alliance with big local players/developers in key market would bring substantial value to the table. Brazils business culture relies heavily on the development of strong personal relationships. Companies need a local presence and must invest time in developing relationships in Brazil. It should be strongly encouraged for companies visiting Brazil to meet one-on-one with potential partners. One of the best ways for companies like Taj Group to enter the Brazilian market is by participating in local trade shows through which they can meet with pre-screened potential clients or partners. It is essential to work through a qualified representative when developing the Brazilian market.

Reasons of mode of entry in Brazil

Carefully analysing literature regarding mode of entry in foreign region we have found following aspects: Assuming that there is no regulation regarding entry modes, companies can choose between nonequity and equity entry modes (figure below) when going abroad:

Figure : The choice of entry modes: A hierarchical model, Source: Peng (2006: 231)

As illustrated in the hierarchical model, non-equity modes include exports and contractual agreements, while equity modes include Joint Ventures and wholly owned subsidiaries (WOS).
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A further comparison of the different entry modes is shown in below table.

Source: Lasserre (2007: 209)

Reasons for choosing particular strategy for mode of entry are as follows, which is strongly supported by literature as well19: In particular when dealing with emerging markets, issues like political and economic instability need to be considered carefully, and might be the reason for not choosing WOS as an entry mode (Pelle, 2007). Regarding emerging markets, Zang and Wang (2006) suggest JV as the preferred entry mode since it gives the opportunity to establish a business operation in a foreign country where WOS is too expensive, risky or not feasible due to other reasons. This is because emerging markets have high political and economic uncertainty, poorly developed legal and institutional frameworks and there is a lack of market information and communication systems. By choosing a JV, companies can better overcome these challenges and reduce transaction costs (Zang and Wang, 2006).

With marketing alliance partner Taj Group are able to: Reach out their customers in their market
19

Ovcina Dino. The Dynamics of Market Entry and Expansion Strategy in Emerging Markets , Sheffield Business Schoolm, 9-20

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Undertake certain marketing activities and conduct road shows Co-host certain events at trade fairs and other international forums Have reciprocal reservation services and loyalty programmes Undertake food promotions and talent exchanges with each other Have overall exchange of ideas and information These localized alliances would eventually move forward to provide global coverage of customers which can be used as an effective tool for competitive advantage. Such alliances not only allow for cross promotion of hotels with alliance partners, but also allow members of corresponding loyalty programmes to avail of special amenities and privileges at participating hotels20.

Details of Mode of Entry

Specific details of mode of entry are as follows: Strategy of Taj group should be in line of activities to selectively enter key gateway cities around Brazil (Sao Paulo, Rio de Janero, Salvador etc.) and look at opportunity only in high end of the market, under the Taj Exotica Resort and Spa Brand. Going forward strategy of Taj Group should be focused in three key areas21: 1. Strengthen the brand by investing in key locations on a sustained basis 2. Roll out the brand architecture with clearly defined luxury, premium and gateway brands and standards 3. Address brand stretch by restricting the use of the Taj brand across various organisational entities Taj Group should sign a strategic marketing alliance with renowned hotel group likes of Atlantica Hotels International (Brazil) or Carlson Rezidor Hotel Group, The marketing alliance will enable both the hotel groups to harness each others strengths in their respective stronghold markets, through cross promotion of Taj Luxury hotels and local players hotels. In addition, several partnerships should enter into with international and domestic airlines for cross promotions with key customers and package tours. Through marketing alliance, both entities should develop reciprocal and joint marketing activities that include joint participation in trade shows, sales events, culinary promotions and niche marketing programmes. Furthermore, the companies should also assist each other in exchanging sales leads and conducting roadshows across India and Brazil.

20 21

The Indian Hotels Company Ltd, Taj Hotels Resorts and Palaces Report Bickson Raymond .Gateway to luxury, TATA Review 2008

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To diversify its presence in the hospitality business, Taj Group should venture beyond hotels and expand its presence in airline catering, operating private jets and yachts, service apartments, spas and wildlife lodges in Brazil in future course of time.

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Chapter 7: Market Research

Question 7: Give specific details of the market research which would be done before marketing the products/ services in Brazil. Importance of Market Research before going to Brazil: "Failure to do market research before you begin a business venture or during its operation is like driving a car from Texas to New York without a map or street signs," says William Bill of Wealth Design Group LLC in Houston. "You have to know which direction to travel and how fast to go. A good market research plan indicates where and who your customers are. It will also tell you when they are most likely and willing to purchase your goods or use your services."22 We cannot depend on just secondary data. Throughout the market research process, our goal would be to gather as much first-hand information as possible. So our more focus would be on the primary research. Secondary data are absolutely necessary when seeking out potential markets but they only indicate overall economy health and not the receptivity of your specific product/service offering. Any decision in any business is taken based on the information. These information needs range from the general data required to assess market opportunities to specific market information for decisions about product, promotion, distribution and price.23 We will have to take care of the following common Marketing Research mistakes: 1. Using only secondary research Of course, the secondary research is useful but it doesnt give you the full picture. The secondary research might not incorporate all the features of research which are required to our business. 2. Using only web resources When we use common search engines (like Google) to gather information, we get only data that are available to everyone and it is not necessarily fully accurate. We will be interviewing various experts from Brazil so that we get to know better understanding of the country and accordingly we will design our service offering. 3. Surveying only the people you know Friends and family are often not the best respondents. We sometimes interview only family members and close colleagues when conducting research. That is not going to be useful always.
22

Lesley S.P.(2010) How to Do Market Research-The Basics, available at: http://www.entrepreneur.com/article/217345#ixzz2pA9z55K6 (Accessed 30 December 2013) 23 Philip R. Cateora, John L. Graham and Prashant Salwan (2013), Developing a Global Vision through Marketing Research, in Mc Graw Hill Education, International Marketing, pp. 258-293

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To get the most useful and accurate information, you need to talk to real customers about their needs, wants and expectations. 4. Using same method for all countries Market researchers cannot simply apply the same techniques as they would do for home countries, but instead they need to understand the demographic makeup of the people theyre researching. They also need to gain their trust before they can start extrapolating rich insights. Marketing Research for Taj Hotels in Brazil: Interestingly, according to Raymond N. Bickson, Managing Director & Chief Executive Officer, Taj Hotels Resorts and Palaces, As of now, we plan to grow only in the luxury segment. In future, we might as well diversify into the Upper Up-scale with Vivanta by Taj. We are now targeting emerging markets like Singapore, China (Shanghai and Beijing), Tokyo, Frankfurt, Madrid, Paris, Los Angeles, Rio de Janeiro, Jakarta and Melbourne.24 The above mentioned sentence says that The Taj Group has already decided the place if they are going to Brazil in near future. And the place is Rio de Janeiro. There is a wide scope for research even when we have decided the Market for our operations in the country. These are some of the basic questions which would be answered by various researches: (Not exhaustive) Which location should we choose in Rio de Janeiro? Why? (Interior, Beach-side etc.) Information related to all the stakeholders including local partners & other competitors. The naming of the hotel for Brazil: Should we promote them as Indians or should we promote as a Brazilian hotel? What should be the optimum number of rooms in the hotel by keeping 2016 Olympics in mind? What should be the proper mix of Marketing? Which dimension should be focused more? What are the other facilities they need in hotels? Availability of manpower suitable to the organization. How will we need to adapt to the local culture & laws? How are we going to overcome the language barriers? How will we transfer profits out of the country? What are the business antiquates need to be taken care of?

As we saw earlier, we cannot depend on just one method of research; we have classified the marketing research in following ways: Secondary vs. Primary: We can use various reports of various research companies like Deloitte, PWC, and JLL etc. This will be the secondary data for us. Now either we, ourselves, can conduct

24

Anu B. (2012), In the next 48 months we would have 43 more hotels in India taking us to almost 200 hotels, available at: http://www.indiahospitalityreview.com/interviews/next-48-months-we-would-have-43-more-hotels-india-taking-us-almost200-hotels-and-20000-r (Accessed 30 December 2013)

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research in Brazil or we can make some other research company to conduct research for us. That is primary research. In-house vs. Outsourcing: Now if we are doing primary research, we have 2 options of either inhouse research or outsourcing the research. Whenever we want to do research on a larger scale, we should go for outsourcing of research because we do not have competency. So it is better to utilize our time on some other important stuff.

Now, we can classify various information needs into each category and based on that the research will be done: 1. Secondary Data: The following information requirement can be taken from the secondary sources like mentioned earlier a. General Information about the country: This kind of information can be varied from sources to sources. So instead of relying on only one secondary data source, we will be using 2 or more data source for secondary data. We can also find during which period, there are more people who come to hotel for a stay etc. b. Legal Information: Various laws will be available to us from secondary sources but sometimes it is difficult to comprehend the meaning of the law, so in this case, interviewing the local experts will be helpful.(mentioned in the primary data) c. Competition Information: From various researches, the exact situation of the industry can be found. The parameters can be number of rooms in a luxury hotels, rates of the rooms, vacant rooms 2. Primary Data: As discussed earlier, we can gather primary data in 2 ways. We will be using the combination of both the ways. Some information will be gathered in-house and remaining will be outsourced. a. In-house: We will be sending our higher management staff to Brazil for hands on experience with the country. The main purpose of this visit will be to interact with the experts of the country and to gather the information from their experience. It will be more helpful in designing the service offering and also various other parameters like location etc. b. Outsourcing: The research from which we want information about the ultimate consumers, it will be outsourced to an outside research agency which can conduct research based on our requirements. By doing this, we will be able to save our time on something with which we are not so good. This research will be helpful in analyzing the culture of the country and various other aspects which cannot be seen directly from the already available report. Obviously, the agency will be charging some amount, but that will be much more advisable than regretting later on when we fail in business.

The methodology will be the combination of the following two approaches:

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1. Macro top-down approach: This would be done through investigating experiencing of industry in the home country and extrapolating to Brazil. This would help in estimate the reasonable magnitude and broad overview of the industry. 2. Micro bottom-up approach: In this approach, the future demand is calculated with the help of specific research and all micro variables will be included Reconcile output: Hence, by a top-down and bottom-up analysis, we will be converging macro and micro data points to assess the markets real opportunities over the next decade which will be very helpful in making decision. Things to know before we do market research in Brazil:25 Brazilians are very willing to give their opinions but they dont just give it to anyone. They dont trust people they dont know and its especially difficult to get inside peoples home, or even stop them on the streets. Violence is a reality and you dont want to scare your respondents, right? So make sure you plan your panel recruitment carefully and gain their trust. In Brazil, the way you conduct research has to be quick, precise and convenient for the respondent. On the go, anonymous and really fast are words that might convince them to answer your questions. Mobile and online surveys are good because theyre quick and there is no issue with personal safety. The incentives also need to be very good to persuade people to take part in research. Once you have gained their trust Brazilians are really keen to give them your opinions. Especially if you tell them how important their opinions are - Brazilians love to feel important. If you become a friend, they will tell you everything, even if its a really long survey or your incentives are not that good.

25

Sarah Q. (2012), Conducting market research in Brazil? Top tips from an insider, available at: http://ondeviceresearch.com/blog/conducting-market-research-in-brazil-we-have-some-tips-from-an-insiders-perspective(Accessed 30 December 2013)

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Chapter 8: Catering to Nearby Countries/Region

Question 8: Would entry into Brazil enable the Taj Hotels to cater to nearby countries/regions to expand your business? Why/ why not? Brazil covers nearly half of South America and is the continent's largest and most populous nation. With its vast natural resources and a large labor pool, it is today South America's leading economic power, a regional leader and one of the first in the area to begin an economic recovery[ 26]. The country is actively involved in leading global activities and is set to host the FIFA World Cup in 2014 in 12 cities, and The Olympic Games in 2016 in Rio De Janeiro, one of Brazils most populous and prosperous states[27]. Seeing these prospects, the Taj Hotels can enter and actively invest in the nations top cities like Sao Paolo and Rio de Janeiro, following which the conglomerate can spread its reach to nearby countries like Argentina, Columbia etc. Brazil is also an active member of the Southern Cone Free Trade Area aka Mercosur, one of the most influential and successful free trade areas in South America as well as the third largest free trade area in the world. Powered by a market of more than 220 million people and a combined GDP exceeding $1 trillion, Mercosur region offers great opportunities for investment and growth[28].

[Image URL: http://www.publications.parliament.uk/pa/cm200607/cmselect/cmtrdind/208/20804.htm]

Based on similar developments happening in other countries, the hospitality industry of South America is experiencing a surge in growth. Reports suggest that based on trends seen in developed economies, Latin American countries like Mexico, Brazil, Columbia and Peru are set to register disproportionate demand

26

Central Intelligence Agency (2013): The World Factbook: South America: Brazil available at https://www.cia.gov/library/publications/the-world-factbook/geos/br.html (accessed on 30th December 2013) 27 Australian Trade Commission (2013): 2014 Brazil FIFA World Cup and 2016 Rio Olympic Games available at http://www.austrade.gov.au/Export/Export-Markets/Countries/Brazil/Industries#.UsQ3gfQW2m0 (accessed on 30th December 2013) 28 Philip R. Cateora, John L. Graham and Prashant Salwan (2013): Multinational Market Regions and Market Groups, Chapter 10, P g.359, International Marketing, 13th Edition (accessed on 30th December 2013)

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growth throughout the next decade, driven to a great extent by infrastructure investment, economic growth and transfer of technology and know-how among many other factors[29].

The above data depicts the growth potential of hotel rooms as well as the macroeconomic trends in Brazil, Columbia and Peru. In all three countries, there has been a consistent rise in the services sector to an average of around 60% of the economic activity. There is also a projected CAGR of nearly 5% in the nations with respect to the hotel industry. Several factors contribute to these relatively positive trends: Pent-up demand - decades of unsatisfied demand for virtually every class of real estate, along with falling cost of capital, rising incomes, increased corporate activity and travel in these nations. Stratified ownership model - relative lack of long-term commercial debt financing has constrained supply and impeded the natural recycling of functionally obsolete real estate,

29

Jones Lang LaSalle (2013): Economic Transformation Drives Latin Americas lodging industry available http://www.joneslanglasalle.com/ResearchLevel1/JLL-Latin-America_White-Paper_Sep2013.pdf (accessed on 30th December 2013)

at

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including hotels. As long-term financing becomes increasingly available via a variety of sources, it will become relatively easier for new players to enter the market. Emerging market growth rates - with some fluctuations, aggregate growth in emerging markets is expected to be more than three times that of mature markets, leading to an estimated inversion of balance in economic power from 30.0% today to 70.0% by 2050. Economic catch-up - globalization, technology diffusion, instantaneous capital flows, lessons learned in the political economy has reduced the economic development cycle times. Uneven growth - even within countries, emerging regions like the northeast of Brazil are experiencing double digit growth rates, while more industrialized regions of the southeast more akin to the global norm. Explosion of consumer class - Latin Americas total GDP is expected to grow by just over five percent annually during our forecast horizon. At the same time, GDP generated by the consumer class within the regions is expected to grow by over 7%, and more than double from $2.4 trillion to $5.2 trillion by 2022.

Thus, a combination of these factors has the potential to cause growth in services-oriented activities, especially the hotel industry in the three countries within a short span of time, opening a vast array of opportunities for Taj Hotels to successfully launch its flagship hotels and resorts in these countries and lap up a niche share of the growing demand. Another country seeing a booming hotel industry is Brazils Mercosur neighbour: Argentina. According to reports, there is a rise in a variety of hotels developing in the country, with the city of Buenos Aires being the hottest market to invest having more than 15 pipeline hotel projects[30]. Taj Hotels can gain from investing in projects in Argentinas competitive yet promising market and target high -end customers through establishing boutique hotels and resorts. Based on all of the above information, it can be inferred that there are ample growth prospects for Taj Hotels to capitalize by investing in Brazil and then moving on to expansion in countries like Columbia, Peru, Argentina and other promising South American nations.

References
References: (Ch.1)

30

Gateway To South America (2012): Buenos Aires Booming Hotel Industry available at http://www.gatewaytosouthamericanewsblog.com/gtsa-general/argentina-general-en/argentina-lifestyle/buenos-aires-booming-hotel-industry/ (accessed on 30th December 2013)

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1. Olsen, Jimmy (2010), The Brazilian Hotel Sector, in Olsen, Jimmy, The Danish Consulate General and the Embassy of Denmark, Sao Paulo, August 2010, pg6-12. 2. Deloitte (2010), Brazil 2015_Ingles.pdf, by Deloitte, pg18-21. 3. Brazilian Chamber of Commerce in Great Britain, available at http://www.startupoverseas.co.uk/expanding-a-business-in-brazil/entering-the-market.html (accessed31 on 01Jan, 2014). 4. Doing Business in Brazil prepared by Ernst & Young Terco in 2011 available at http://www.ey.com/Publication/vwLUAssets/Doing_business_in_Brazil_2011/$FILE/Doing%20B usiness%20in%20Brazil%202011.pdf (accessed on 01 January, 2014) 5. Foreign Trade and Direct Investment (FDI) Brazil-USA, prepared by Ministry of External Relations, Department of Trade and Investment Promotion in November, 2013, available at http://www.brazilcouncil.org/sites/default/files/Itamaraty_Presentation%2011-7-2013.pdf (accessed on 1 January, 2014). References: (Ch.2) 6. https://www.pwc.com.br/pt/publicacoes/assets/doing-business-brazil05.pdf January, 2014). (accessed on 1

7. http://www.fifa.com/worldcup/brazil2014/destination/cities/index.html (accessed on 1 January, 2014). References: (Ch.3) 8. Gee, Chuck Y. 1994. International Hotels; Development and management. United States. Educational Institute of the American hotel & motel association 9. Doing Business and investing in Brazil, PWC report, 2013, p 16 10. The Brazilian Hotel Sector , The Danish Consulate General and the Embassy of Denmark, So Paulo, August 2010, p 22 11. http://geert-hofstede.com/brazil.html (accessed on 29th December,2013) 12. http://www.cyborlink.com/besite/brazil.htm (accessed on 29th December,2013) References: (Ch.4) 13. Doing Business and Investing in Brazil prepared by PWC in March 2013 available at https://www.pwc.com.br/pt/publicacoes/assets/doing-business-2013.pdf (accessed on 22 December 2013). 14. Brazil Hotel Industry Investment Guide prepared by Brazil real Estate Partners (2011) www.brazilinvestmentguide.com/ (accessed on 29 December 2013) 15. Legal guide: Business in Brazil Coordinated by Durval de Noronha Goyos, Jr. 8th Edition, 2011. 16. Reuters (2011) FACTBOX-Key political risks to watch in Brazil http://www.reuters.com/article/2011/08/02/brazil-risks-idUSRISKBR20110802 available at

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17. Transparency International Corruption http://www.transparency.org/cpi2013/results

Perception

Index

2013

available

at

18. Policy and Medicine (2012) available at http://www.policymed.com/2012/08/foreign-corruptpractices-act-brazil-and-the-pharmaceutical-sector.html 19. William M. Sullivan Jr., Peter A. Baumgaertner, Ryan R. Sparacino, Paulo H.C. Varnieri, and Kristen E. Baker (2013) Preparing for Brazil's New Anti-Corruption Law: What In-House Counsel Should Know available at http://www.pillsburylaw.com/siteFiles/Publications/Alert20131031LitigationPreparingforBrazilsN ewAntiCorruption.pdf References: (Ch.5) 20. Doing Business and Investing in Brazil prepared by PWC in March 2013 available at https://www.pwc.com.br/pt/publicacoes/assets/doing-business-2013.pdf (accessed on 22 December 2013). 21. http://export.gov/brazil/doingbusinessinbrazil/eg_br_023967.asp (accessed on 22 December 2013). 22. http://strategy.consiliumglobalbusinessadvisors.com/blog/bid/313876/Brazil-s-Trade-Barriersovercoming-tariffs-for-biz-dev-success (accessed on 22 December 2013). References: (Ch.6) 23. Ovcina Dino. The Dynamics of Market Entry and Expansion Strategy in Emerging Markets, Sheffield Business Schoolm, 9-20 24. Bickson Raymond .Gateway to luxury, TATA Review 2008 25. The Indian Hotels Company Ltd, Taj Hotels Resorts and Palaces Report References: (Ch.7) 26. Lesley S.P.(2010) How to Do Market Research-The Basics, available http://www.entrepreneur.com/article/217345#ixzz2pA9z55K6 (Accessed 30 December 2013) at:

27. Philip R. Cateora, John L. Graham and Prashant Salwan (2013), Developing a Global Vision through Marketing Research, in Mc Graw Hill Education, International Marketing, pp. 258293 28. Anu B. (2012), In the next 48 months we would have 43 more hotels in India taking us to almost 200 hotels, available at: http://www.indiahospitalityreview.com/interviews/next-48-months-wewould-have-43-more-hotels-india-taking-us-almost-200-hotels-and-20000-r (Accessed 30 December 2013) 29. Sarah Q. (2012), Conducting market research in Brazil? Top tips from an insider, available at: http://ondeviceresearch.com/blog/conducting-market-research-in-brazil-we-have-some-tips-froman-insiders-perspective- (Accessed 30 December 2013) References: (Ch.8) 30. Central Intelligence Agency (2013): The World Factbook: South America: Brazil available at https://www.cia.gov/library/publications/the-world-factbook/geos/br.html (accessed on 30th December 2013)
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31. Australian Trade Commission (2013): 2014 Brazil FIFA World Cup and 2016 Rio Olympic Games available at http://www.austrade.gov.au/Export/ExportMarkets/Countries/Brazil/Industries#.UsQ3gfQW2m0 (accessed on 30th December 2013) 32. Philip R. Cateora, John L. Graham and Prashant Salwan (2013): Multinational Market Regions and Market Groups, Chapter 10, Pg.359, International Marketing, 13th Edition (accessed on 30th December 2013) 33. Jones Lang LaSalle (2013): Economic Transformation Drives Latin Americas lodging industry available at: http://www.joneslanglasalle.com/ResearchLevel1/JLL-Latin-America_WhitePaper_Sep2013.pdf (accessed on 30th December 2013) 34. Gateway To South America (2012): Buenos Aires Booming Hotel Industry available at http://www.gatewaytosouthamerica-newsblog.com/gtsa-general/argentina-general-en/argentinalifestyle/buenos-aires-booming-hotel-industry/ (accessed on 30th December 2013)

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