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A Project Report On Country analysis for international business



Master of Management Studies under the University of Mumbai By Shweta , Roll No. 11 Hussain Hakeem, Roll No. 12 Rashid Gafoor Kaskar, Roll No. 15 Mohd Mukhtar Kasmani, Roll No. 16 Irfan Faizullah Khan, Roll No. 19 Naqeeb Sakharkar, Roll No. 32

Specialization: Finance
Under the Guidance of

Prof. Sameer Charania

(Lecturer International Business)

Allana Institute of Management Studies and Research

CST, Mumbai-400001 2011

Contents..................................................................................................................... 2 ACC Cements CORPORATE PROFILE.........................................................................3 SUBSIDIARIES AND ASSOCIATES of ACC CEMENTS:-...................................................7 Manufacturing process at ACC Cement....................................................................10 Swot Analysis of ACC Cement...................................................................................12 Cement Industry A Global Perspective......................................................................13 Overview of Cement Industry - Brazil.......................................................................17 PESTLE - Brazil..........................................................................................................19 Main drivers for doing business in Brazil...............................................................33 Main Challenges of doing Deals in Brazil...............................................................34 Different Modes of Setting up Business in Brazil...................................................35 Overview Of Cement Industry - Bangladesh.............................................................36 Pest Analysis of Bangladesh.....................................................................................41 Modes of entry in general.........................................................................................46


ACC (ACC Limited) is India's foremost manufacturer of cement and concrete. ACC's operations are spread throughout the country with 16 modern cement factories, more than 40 Ready mix concrete plants, 21 sales offices, and several zonal offices. It has a workforce of about 9,000 persons and a countrywide distribution network of over 9,000 dealers. Since inception in 1936, the company has been a trendsetter and important benchmark for the cement industry in many areas of cement and concrete technology. ACC has a unique track record of innovative research, product development and specialized consultancy services. The company's various manufacturing units are backed by a central technology support services centre - the only one of its kind in the Indian cement industry. ACC has rich experience in mining, being the largest user of limestone. As the largest cement producer in India, it is one of the biggest customers of the domestic coal industry, of Indian Railways, and a considerable user of the countrys road transport network services for inward and outward movement of materials and products. Among the first companies in India to include commitment to environmental protection as one of its corporate objectives, the company installed sophisticated pollution control equipment as

far back as 1966, long before pollution control laws came into existence. Today each of its cement plants has state-of-the art pollution control equipment and devices. ACC plants, mines and townships visibly demonstrate successful endeavors in quarry rehabilitation, water management techniques and greening activities. The company actively promotes the use of alternative fuels and raw materials and offers total solutions for waste management including testing, suggestions for reuse, recycling and co-processing. ACC has taken purposeful steps in knowledge building. We run two institutes that offer professional technical courses for engineering graduates and diploma holders which are relevant to manufacturing sectors such as cement. The main beneficiaries are youth from remote and backward areas of the country. ACC has made significant contributions to the nation building process by way of quality products, services and sharing expertise. Its commitment to sustainable development, its high ethical standards in business dealings and its on-going efforts in community welfare programmes have won it acclaim as a responsible corporate citizen. ACCs brand name is synonymous with cement and enjoys a high level of equity in the Indian market. It is the only cement company that figures in the list of Consumer Super Brands of India.

ACC's brand name is synonymous with cement and enjoys a high level of equity in the Indian market. Our range of cements and blended cements is marketed through a countrywide network of Sales Units, Area Offices, and warehouses. This is backed by a vast distribution network of over 9,000 dealers who, in turn, are assisted by their sub-dealers. ACCs marketing; sales and distribution processes are industry standards. Although we take immense pride in having supplied some of Indias most admired projects, ACC is essentially a peoples brand of cement with more than 80 per cent of sales made through an extensive dealer network that covers every state in India. Its customer base represents the masses of India - individual homebuilders in small towns, rural and semi-urban India. ACC cement enjoys an image of assuring consistency and of high quality backed by in-house research and expertise. Complementing this is a unique customer services cell comprising qualified civil engineers, who assist and advice customers with prior and post sales service. This service begins with selection of type and grade of cement (where applicable) to troubleshooting and on-site assistance.

ACC manufactures the various kinds of Portland Cement for general construction and special applications.


ACC Concrete Limited

ACC set up India's first commercial Ready Mix Concrete (RMX) plant in Mumbai in 1994 which together with the promotion of bulk cement has played a key role in redefining the pace and quality of construction activity in our large cities and mega infrastructure projects. The Ready Mix Concrete business of ACC was reorganized as a separate wholly owned subsidiary which was incorporated as ACC Concrete Limited with headquarters in Mumbai. Today this company is one of the largest manufacturers of Ready Mix Concrete in India with a countrywide network of plants, with modern equipment and a large fleet of transit mixers.

ACC Mineral Resources Limited

ACC's wholly owned subsidiary, The Cement Marketing Company of India Limited, was renamed as ACC Mineral Resources Limited (AMRL) in May 2009 with an objective of securing valuable mineral resources, such as coal for captive use. ACC Mineral Resources Limited has already entered into Joint Venture arrangements for prospecting, exploration and mining coal from the coal blocks in Madhya Pradesh and West Bengal. The company is also exploring other opportunities for securing additional coal and gypsum resources in India and abroad

Bulk Cement Corporation (India) Limited

Situated at Kalamboli, in Navi Mumbai (formerly New Bombay), this company caters to bulk cement requirements of the city of Mumbai and its environs. It has two cement storage silos with a capacity of 5,000 tons each. The plant receives cement in bulk from ACC plants at Wadi. The plant has its own special purpose railway wagons and rakes and its own railway siding. The first of its kind in India, BCCI is equipped with all the facilities required by increasingly sophisticated construction sites in a bustling metropolis, including a laboratory, a fleet of specialized trucks and site silos for the convenience of customers and is capable of offering loose cement in bulk-tanker vehicles as well as packed cement in bags of varying sizes from 1 tonne down to 25 kg bags. BCCI is situated strategically on the outskirts of Mumbai, just off the new Mumbai-Pune Expressway. It is a landmark structure spread over 30 acres of land.

Lucky Minmat

ACC acquired 100 per cent of the equity of Lucky Minmat Private Limited. This company holds limestone mines in the Sikar district of Rajasthan, and helps supplement limestone supply to the Lakheri Plant.

National Limestone Company Private Limited

National Limestone Company Private Limited is a wholly owned subsidiary. The company is engaged in the business of mining and sale of limestone. It holds mining leases for limestone in the state of Rajasthan.

Encore Cement & Additives Private Limited

ACC acquired 100 percent of the financial equity of this company which is a slag grinding plant in Vishakhapatnam in coastal Andhra Pradesh. This company became a wholly-owned subsidiary of ACC in January 2010.

Manufacturing process at ACC Cement

Map - Key 00. Limestone Quarry and Crushing plant 01. Limestone Stockpile 02. Additives Hopper 09. Cooler 10. Deep Bucket Conveyor 11/1Clinker/Gypsum Storage 2.

03. Additives Storage 04. Raw Mill Building 05. Blending and Storage Silo 06. Preheater 07. Gas Conditioning Tower and ESP 08. Kiln PRODUCTS QUALITY:-

13. Coal Mill Building 14. Cement Mill and Bag House 15. Cement Storage Silo 16. Packing & Dispatch 17. Central C

Product Development has always been an important activity at ACC, arising out of a focus on quality and process improvement. It has been a constant partner, driving research, innovation and evaluation. ACC has effectively pledged its reputation as the market leader in the quality of cement. Maintaining this lead calls for harnessing the resources and expertise of the company - from applied research and production to marketing. Accordingly, all ACC factories are equipped with state-of-the-art process control instrumentation and associated quality control and testing laboratories manned by qualified personnel. As a result of this focus on quality, ACC cement specifications exceed those set by BIS by a wide margin. Today, all ACC cement plants have the ISO 9001 Quality Systems certification. This demonstrates our tradition of providing reliable and consistent quality through the application of modern technology, and justifies the preferences of a nationwide customer base.

Swot Analysis of ACC Cement


1. It is having a good image and brand loyalty among consumers. 2. Service is good

People ask for ACC have same price prevailing for wholesale at dealers/stockiest retailers end.

4. They


WEAKNESS:The competitors are doing much promotional activity rather than ACC Limited thats why it facing more problems in selling of product in the market.

2. Lack of awareness program for consumers.


1. Rapid growth is taking place in Bihar and Madhya Pradesh.


People are opting for more stable structures and intensive use of cement is taking place, even government is spending heavily on infrastructure projects. Thus, this is the right time to fully tap these markets. As Indian core industry is also growing at rate of nearly 10% per annum, it is having a good future.


4. Foreign direct investment in infrastructure sector going to increase in coming years, which will increase the demand of cement. 5. Roads are undergoing through the transformation process through which the traditional method of road building will be replaced by modern concrete roads. THREATS: 1. Large number of players in cement industry makes it more competitive for ACC to carefully price its product and at the same time satisfy its dealers and customers. 2. Players such as Jaypee Cement, Prism Cement, and Birla Samrat are eating up considerable market share.

Due to India exponential growth many new international cement companies are expected in coming years which will bring a tide of change and can start price war.

4. The emergence of small players in this market may increase the competition and start the malpractices, and heavy discounts to retailers.

Cement Industry A Global Perspective

Global consumption of cement grew 9.9% last year to continue a strong rebound in demand as construction worldwide picks up since the economic downturn of 2008, according to a new report.

The ninth edition of International Cement Reviews Global Cement Report found that 3,294 million tonnes (Mt) were sold, topping the 2,998 million tonnes sold in 2009, which was a growth rate of 5.9%, strongly reversing a slowdown of 2.4% the previous year. Worldwide cement consumption is forecast to reach a record 3859Mt by 2012. Global cement demand will rise 4.1 percent annually through 2013. Gains will be fueled by rising infrastructure investment in developing countries and improved markets in developed areas. Blended cement will increase its dominant position over Portland. Ready-mix concrete will remain the fastest-growing outlet. This study analyzes the 2.8 billion metric ton world cement industry. It presents historical demand data for the years 1998, 2003 and 2008, and forecasts for 2013 and 2018 by type (e.g., blended, Portland), market (e.g., ready-mix concrete, construction contractors, consumer, concrete products), world region (e.g., Asia/Pacific, Africa/Mideast) and for 46 major countries. The study also considers market environment factors, details industry structure, evaluates company market share and profiles 34 industry participants, including Lafarge, Holcim and CEMEX. The report provides statistics for demand for the commodity in more than 160 countries, along with additional data for clinker consumption. China dominates world cement statistics, results show consuming more than a third of global output or 1,851

million tonnes - in 2010, almost double 2004 levels. India, the closest rival to China for economic growth was the second-largest consumer at 212Mt, with the United States, the third-largest consumer, saw demand fall down to 69Mt. Turkey is the world's leading export nation of cement and clinker, with sales of 19Mt in 2010, overtaking China which recorded close to 17Mt of export sales. Thailand was third with 14Mt of cement and clinker exports. Bangladesh is the largest cement and clinker importer, with over 12 million tonnes of deliveries in 2010, followed by Nigeria at 7 million tonnes and the USA at close to 6 million a sixth of 2006 levels. Lafarge remains the worlds biggest selling company, shifting 141.2Mt last year to produce a turnover of EUR 15.8 billion, ahead of Holcim with cement sales of 136.7Mt and a turnover of EUR15.6 billion, a ahead of Heidelberg Cement. Holcim still has the largest global cement capacity, at 212Mt, 11Mt higher than Lafarge. Major Cement Exporting Countries of the World: This is a list of top countries by cement production in 2010 based on USGS Mineral Program Cement Report. (Jan 2011). While the top 3, China, India and USA, didn't change in the last 5 years, declining US production by 36.5% is noteworthy. The most progressing countries in terms of ranking are Turkey (10th to 4th), Brazil (13th to 5th) and Vietnam (17th to 9th). All top European

cement producing countries except Turkey lost their rankings (Spain, Russia, Italy, Germany and France), as a result of the global financial crisis.

World Cement production in 2010: Rank 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Country/Region People's Republic of China India Iran United States Turkey Brazil Japan Spain Viet Nam Russia Egypt South Korea Saudi Arabia Indonesia Italy Mexico Germany mil Tonnes 1,800 290 74 63.5 60 59 56 50 50 49 48 46 45 42 35 34 31

18 19

Thailand Pakistan Others 2010 World Production

31 30 520 3,413.5

Overview of Cement Industry - Brazil

This section presents a brief history of cement production and use in Brazil, a synopsis of the current structure of the sector. and a summary of the data available at the sector and plant levels on production processes and GHG emission 1. Background Cement production is one of the major industries driving Brazils national economy, and production trends within the industry have been dynamic throughout the past 30 years. Since 2004 the country has seen growth in cement production as a result of decreasing national interest rates and lower retail costs of cement, factors that encouraged domestic consumption (Christino, 2008). Today, Brazil has become the largest cement producer among all Latin American countries, and is ranked 6th in the world for cement production (Soares, 2010). 2. Current Industry Structure and Outlook. This section provides an introduction to the key industry players in Brazils cement sector, a discussion of their domestic and international markets, recent data on production and capacity

Brazils Cement Manufacturers 2006 Annual Production (thousand metric tons) Number of Capacity Company Name 2005 2006 2007 Plants (million metric tons) Votorantim brief discussion of some of the domestic and 19 25 14,472 16,239 19,402 levels, and a Jos Santos 10 4,974 5,079 5,548 international drivers that could shape the outlook for the industry. Cimpor 8 6 3,683 3,889 4,393 Holcim 5 5 3,225 3,591 Manufacturers Cement production in Brazil2,948 is divided among 11 Camargo 5 2,902 3,013 3,349 manufacturing companies. Collectively, this group operates 65 Correia Lafarge 5 2,500 2,422 2,670 plants located in 22 states across4the country. In 2007, Brazils CP Cimento 3 cement Ciplan producers had a combined output of nearly 1,248 million 46.6 1 1,137 1,319 Cimentos Liz tons of cement (SNIC,1 2008). Itamb 1 829 838 938 CCRG 1 Other* 6 5,164 5,849 5,265

Domestic and International Markets The cement industry in Brazil accounts for approximately 1% of Brazilian gross domestic product (GDP) and is strongly correlated to income levels. Moreover, domestic consumption is highest in Brazils most developed regions where the average income level is highest. These areas include the Southeast, South, and Northeast regions. The main end-uses for cement in these regions are buildings (78%), infrastructure (19%), and agriculture (3%) (Soares 2008). On average, per capita consumption in Brazil is

approximately 200kg, which is low compared to the world average of approximately 400kg (Christino, 2007). Outlook Reflecting the strong performance of the countrys economy and civil construction in particular since 2004, domestic cement production in Brazil has been growing. In 2008, market sources indicated the emergence of a trend in which smaller economic groups began entering the market and are now faced with the challenge of competing with the industrys major players. Furthermore, several of the industrys major manufacturers have revealed plans to invest in production expansion in the coming years. The table below presents available data on production of cement since 2008. Cement Production 2008-2010 Year Output (Thousands of tons) 38,705 41,895 46,589

2008 2009 2010 Source: SNIC

PESTLE - Brazil
PESTLE analysis is a useful tool for understanding the big picture of the environment, in which you are operating, and the

opportunities and threats that lie within it. By understanding the environment in which you operate (external to your company or department), you can take advantage of the opportunities and minimize the threats. The PESTLE subject should be a clear definition of the market being addressed, which might be from any of the following standpoints: A company looking at its market A product looking at its market A brand in relation to its market A local business unit or function in a business A strategic option, such as entering a new market or launching a new product A potential acquisition A potential partnership An investment opportunity


Political System:-

Federal Republic similar to United States The federal republic has three independent branches independent branches: executive legislative and judicial.

The President heads the executive branch. Under the President are a number of executive departments, the heads of which are appointed and are known collectively as the cabinet. Unlike those in many parliamentary democracies, its members need not be members of the legislative. Besides the executive departments, there are a number of independent agencies many of which are regulatory. Legislative power is exerted by Congress consisting of a Senate and house of Representatives. There are 81 senators, three from each from state each and state the federal District on its of Brasila. The total is membership of the House is 513, the number of representatives depending population. Voting compulsory at the age of 18 but 16 and 17 year-olds, 70 years or older and illiterate can opt to vote. The judicial branch consists of a system of federal, state and local courts throughout the country, headed by the Federal Supreme Court. i. Law Brazilian law is based on Roman-Germanic traditions and civil law concepts prevail over common law practice. Most of Brazilian law is codified, although non-codified statutes also represent a substantial part, playing a complementary role. Court decisions set out interpretive guidelines; however, they are seldom binding on other specific cases. Doctrinal works and the

works of academic jurists have strong influence in law creation and in law cases. B. Economic- The local, national and world economy impact i. Economy of Brazil Brazil is the largest national economy in Latin America, the world's tenth largest economy at market exchange rates and the ninth largest in purchasing power parity (PPP), according to the International Monetary Fund and the World Bank. Its GDP (PPP) per capita is $10,200, putting Brazil in the 64th position according to World Bank data. It has large and developed agricultural, mining, manufacturing and service sectors, as well as a large labor pool. Brazilian exports are booming, creating a new generation of tycoons. Major export products include aircraft, electrical equipment, automobiles, ethanol, textiles, footwear, iron ore, steel, coffee, orange juice, soybeans and corned beef. The country has been expanding its presence in international financial and commodities markets, and is one of a group of four emerging economies called the BRIC countries. Brazil pegged its currency, the real, to the U.S. dollar in 1994. However, after the East Asian financial crisis, the Russian default in 1998 and the series of adverse financial events that followed it, the Central Bank of Brazil temporarily changed its monetary policy to a managed-float scheme while undergoing a

currency crisis, until definitively changing the exchange regime to free-float in January 1999.

Key industries Key industries are textiles, shoes, chemicals, aviation,

cement, agriculture, motor vehicles and parts, other machinery and equipment. Major export products include aircraft, coffee, vehicles, soybean, iron ore, orange juice, steel, textiles, footwear and electrical equipment.

FDI Brazil is generally open to and encourages foreign

investment. Brazil is the largest recipient of foreign direct investment (FDI) in Latin America, and the United States is traditionally the number one foreign investor in Brazil. Since domestic savings is not sufficient to sustain long-term high growth rates, Brazil must continue to attract FDI. In order to attract increasing levels of FDI, many business groups and international organizations have highlighted the need for Brazil to improve its regulatory environment for investments and to simplify the tax code. Brazil does not have a bilateral tax or investment treaty with the United States. Legislation promoting public-private partnerships, a key effort to attract private investment to infrastructure, was passed in 2004. In 2007, the Government of Brazil initiated an ambitious infrastructure development program, known as the Growth Acceleration Program (PAC), to address the countrys significant road, rail, energy supply, and other infrastructure needs.

C. Sociological- The ways in which changes in society affect business Brazils inequality levels remains among the highest in the world. Millions of people still live in poverty; social exclusion is quantitatively and qualitatively pronounced and structurally ingrained. But during the last several years, poverty reduction and income distribution indicators have dramatically improved. The full poverty rate fell from 34% of the population in 1995 to 25.6% in 2006. Brazil still shows one of the worst values of income distribution worldwide. About 45% of the national wealth is concentrated in the upper 10% of the income pyramid, while the lower 20% control just over 2.4% of the wealth. Brazil exhibits a medium level of development according to key indicators, but national mean values mask the great disparities between the relatively developed southern and southeastern regions, where conditions resemble those in industrialized countries to some extent, and the socioeconomically disadvantaged northern and northeastern regions. i. Culture The core culture of Brazil is derived from Portuguese culture, because of its strong colonial ties with the Portuguese empire. Among other influences, the Portuguese Catholicism introduced and the Portuguese language, Roman colonial

architectural styles. The culture was, however, also strongly

influenced by African, indigenous and non-Portuguese European cultures and traditions. Some aspects of Brazilian culture were influenced by the contributions of Italian, German and other European immigrants who arrived in large numbers in the South and Southeast of Brazil. The indigenous Amerindians influenced Brazil's language and cuisine; and the Africans influenced language, cuisine, music, dance and religion. ii. Language The official language of Brazil is Portuguese which is spoken by almost all of the population and is virtually the only language used in newspapers, radio, television, and for business and administrative purposes. The exception to this is in the municipality of So Gabriel da Cachoeira where Nheengatu, an indigenous language of South America, has been granted coofficial status with Portuguese. Brazil is the only Portuguesespeaking nation in the Americas, making the language an important part of Brazilian national identity and giving it a national culture distinct from those of its Spanish-speaking neighbors. iii. General Attitude Brazilians are warm, fun-loving, and free-spirited. They are also outgoing and enjoy being around others. At the same time, they are hardworking. Brazilians are proud of their country's natural resources and diverse culture. One point of pride is the Brazilian waytheir ability to find creative ways around seemingly insurmountable problems. Brazilians often are

opinionated and will argue for their convictions with vigor. In spite of economic difficulties, most Brazilians are hopeful about their country's future. iv. Personal Appearance In general, Brazilians are fashionable and like to dress according to the latest styles. People in urban areas like to wear brand-name clothing. People in the warmest and most humid regions dress more casually, and colors are lighter and brighter year-round. In rural regions, more traditional clothing is common, especially among the native peoples. D.Technological- How new and emerging technology affects business? Brazil is a leader in science and technology in South America and in some fields a global leader, such as biofuels, agricultural research, deep-sea oil production, and remote sensing. U.S. Government, private sector, and academic researchers have extensive ties with Brazilian counterparts, and the extent of bilateral scientific and technological cooperation is expanding. The Brazilian Government seeks to develop an environment that is more supportive of innovation, taking scientific advances from the laboratory to the marketplace.

Technological Research Technological research in Brazil is largely carried out in

public universities and research institutes. But more than 73% of funding for basic research still comes from government sources. Some of Brazil's most notable technological hubs are

the Oswaldo Cruz Institute, the Butantan Institute, the Air Force's Aerospace Technical Center, the Brazilian Agricultural Research Corporation and the INPE. The Brazilian Space Agency has the most advanced space program in Latin America, with significant capabilities in launch vehicles, launch sites and satellite manufacturing.

Information Technology The Brazilian IT market is the largest in Latin America and

spending on IT products and services is forecast to pass US$25bn in 2010 and US$30bn by 2012. BMI has downwardly revised its five-year forecast, due to the economic situation, but IT spending is still expected to increase to remain in positive territory in 2009, and to grow at a CAGR of 12% over the forecast period. This makes Brazil's one of the fastest growing global markets. The overall outlook remains constructive for growth in IT spending, with an expanding economy lifting millions into a middle class for whom computers are no longer beyond reach. Brazils IT services market is expected to continue to grow strongly in 2010, with total spending of around US$9.4bn as the economy continues to bounce back from recession. For a developing market, the percentage of Brazil IT market revenues generated by services is high at around 38%, which corresponds more to developed market levels. iii. R&D Most of Brazil's research and development activities take place in its main public universities. Brazil, in particular, is an

interesting country to consider, as scientific growth is in the beginning stages and offers tremendous future potential. Brazils GDP declined in 2009 by 0.7%, with an equal drop in its R&D investment for that year. Its GDP and R&D are both expected to increase in 2010 by about 3.5%, to $2,048 billion and $18.637 billion respectively, from its 2009 levels. Brazils R&D as a share of its GDP is about 0.91%. Brazils share of the worlds 7.1 million researchers increased from 1.2% in 2002 to 1.7% in 2007. According to UNESCO, Brazil has about 625 researchers for every million citizens of Brazil. So Brazil has great potential in growing the number of scientific papers its researchers publish, but is starting from a relatively low base.

Technology policy in Brazil: Old approaches to a new situation In 1990, the government has radically changed the

framework conditions for industrial development. Acknowledging that the import substitution model had run into a dead end, it opted for a policy of gradually opening the market to foreign competitors, thus creating an environment that requires international competitiveness and thereby forces companies to attain international levels of quality and efficiency. This has been accompanied by a number of technology and industrial policy

programmes. However, they were either not implemented, or only after long delays, or have had little impact so far because the recession inhibited private sector investments. Even the Quality and Productivity Program that has pursued an innovative approach (mainly trying to build a consciousness for quality issues inside firms) and got a lot of publicity in Brazil apparently has only had a limited impact. v. Brazilian industry and technology Brazil got off to a late start in its process of industrialization, which began in the 1930s. Despite the accelerated pace of growth witnessed up until 1980, the level of development in the country still falls way below the levels reached by developed countries. Industry, which directs itself essentially to attending the demands of the internal market, is made up of a steady stream of embodied and disembodied external technology flows. Even so, Brazilian industry has been making considerable efforts in technology directed towards, in most cases, adapting the flow of external knowledge to its local context. These efforts have also been brought on by local technological demands that the external flow of technology has been unable to meet. Up until now, rare have been the cases of sectors in which firms generate flows of new knowledge in order to gain dynamic competitive advantages. E. Legal- How local, national and world legislation affects business

i. The Brazilian legal system It is based on Civil Law tradition. The Federal Constitution, in force since October 5th, 1988, is the supreme rule of the country and is the characterized by its rigid written form. The Constitution organizes the country as a Federative Republic, formed by the indissoluble union of the states and municipalities and of the Federal District. The 26 federate states have powers to adopt their own Constitutions and laws; their autonomy, however, is limited by the principles established in the Federal Constitution. ii. Municipalities It enjoy restricted autonomy as their legislation must follow the dictates of the Constitution of the state to which they belong, and consequently to those of the Federal Constitution itself. As for the Federal District, it blends functions of federate states and of municipalities, and its equivalent to a constitution, named Organic Law, must also obey the terms of the Federal Constitution. The powers of the Union, as defined within the Constitution, are the Executive, the Legislative and the Judiciary, which are independent and harmonious amongst them. The head of the Executive is the President of the Republic, which is both the Chief of State and the Head of Government and is directly elected by the citizens. The Legislative, embedded in the form of National Congress and consists of two houses: The Chamber of Deputies

(lower house) and the Federal Senate (upper house), both constituted by representatives who are elected by the citizens. The Judicial powers are vested upon the Federal Supreme Court, the Superior Court of Justice, the Regional Federal Courts and Federal Judges. There are also specialized courts to deal with electoral, labor and military disputes. F. Environmental- The local, national and world environmental issues Brazil holds about one-third of the world's remaining rainforests, including a majority of the Amazon rainforest. Due to the vastness of the Amazon rainforest, Brazil's average loss of 34,660 square kilometers of primary forest per year between 2000 and 2005 represents only about 0.8 percent of its forest cover. Nevertheless, deforestation in Brazil is one of the most important global environmental issues today. Research led by the Woods Hole Research Center and the Carnegie Institution's Department of Global Ecology found that each year the amount of forest degraded is roughly equivalent to the amount of forest cleared. The finding is trouble to ecologists because degraded forest has lower levels of biodiversity and is more likely to be cleared in the future. Further, degraded forest is more susceptible to fires. A large portion of deforestation in Brazil can be attributed to land clearing for pastureland by commercial and speculative interests, misguided government policies, inappropriate World

Bank projects, and commercial exploitation of forest resources. For effective action it is imperative that these issues be addressed. Focusing solely on the promotion of sustainable use by local people would neglect the most important forces behind deforestation in Brazil. Brazilian deforestation is strongly correlated to the economic health of the country: the decline in deforestation from 1988-1991 nicely matched the economic slowdown during the same period, while the rocketing rate of deforestation from 1993-1998 paralleled Brazil's period of rapid economic growth. During lean times, ranchers and developers do not have the cash to rapidly expand their pasturelands and operations, while the government lacks funds to sponsor highways and colonization programs and grant tax breaks and subsidies to forest exploiters. The Future It seems likely that deforestation will continue in the Brazil Amazon for the foreseeable future. This author personally expects at least half the Amazon to be converted for agriculture or otherwise degraded by 2050. While this is discouraging, there is hope that improved agricultural techniquesperhaps based on research into how pre-Colombian societies managed these forests could maybe increase productivity on already affected areas and reduce the need for further forest clearing. It is important to recognize that Brazil is a sovereign state with its own rights to develop its economy. How it chooses to do

so will likely be influenced by economic factors which may include how western countries value the services (especially climate moderation and biodiversity preservation) provided by forests. If Western countries begin to place greater value on these services, then the protection via the of Brazil's rainforests While can right likely now be the "purchased" open market.

environment for such a scenario is not favorable, this author believes it will become more so in the next few years. Scientists will play an important role in disseminating the value of these forests to policymakers and the media. Main drivers for doing business in Brazil

Brazil has the 10th largest economy and a population of more than 194 million. Many local companies are undervalued and in need of restructuring, capital and technology

Growth potential and consumer market Broad industrial base and infrastructure, and a diversified economy

Abundant agricultural, mineral and energy resources and potential

Established transportation networks (railways, highways, ports) and distribution channels in most industrialized areas

Privatization in late stages and follow-on transactions still in development

Increasing globalization and international trade, with Government policies favoring exports

Goodwill generally tax deductible New regulations favoring minority shareholders.

Main Challenges of doing Deals in Brazil

Complex tax and employee related regulatory environment, with high taxes and social charges on payroll, sales and income

Multiple taxes with fast changing legislation affecting business plans and increasing risks of contingencies

Economic environment still considered volatile as compared to more stable economies

Fast-changing business conditions Complex transfer pricing and foreign capital registration rules

Difficulties in reorganizing companies quickly, including high costs for employee terminations

High demand for investments in the distribution channels and infrastructure

Semi-skilled and unskilled labor in certain developing areas

Social extremes with unequal distribution of wealth - a significant portion of the population not participating in the consumer market

Different Modes of Setting up Business in Brazil MODES OF SETING UP A BUSINESS DEFINITION

The capital stock of the company is divided in shares, and the firm must necessarily aim at profits. It is always regarded as a trading company, no matter what its objectives, and can be considered open or closed, depending on whether or not the securities it issues are traded on the stock exchange. A private limited company may engage in commercial, industrial and service activities and has its bylaws registered with the Board of Trade. It has to be established by at least two partners.

Joint Stock Company or Corporation (Sociedade Annima S/A)

Limited Liability Company (Sociedade por Quotas de responsibilidade limitada - Ltda)

Shares represent the participation of each partner in the companys capital, with the partners liability limited to the value of their shares or quotas.

Simple partnership

A special form of the Ltda that can be


DEFINITION utilised by partnerships without commercial activities or whose object is the exercise of the intellectual, scientific, literary or artistic professions.

(Sociedade Simple S/S)

In this type of partnership, the partners are jointly and severally responsible for the companys debts should the companys assets be insufficient to pay them. Made up of a single individual that gives his or her name to the firm, making himself or herself responsible for all the companys acts that involve economic activities such as the production and circulation of goods and services.


This type of legal entity applies to industrial, commercial and service activities.

Source: Investing in Brazil

Overview Of Cement Industry - Bangladesh

The development of cement industry in Bangladesh dates back to the early-fifties but its growth in real sense started only

about decade or so. Bangladesh has been experiencing an upsurge in the use of cement in recent years. Increase in demand for cement has soared mainly due to the property sector boom and infrastructure development concentrated in the Dhaka Metropolitan area and other major urban areas of the country. The infrastructural development at grass root level has led to an increased demand for cement at an average rate of 8% per annum during the past decade. Existing industry Structure: The Cement industry involves a huge outlay for setting up of the plant, developing the infrastructure facilities and also for creating a large sales network throughout the country. Due to higher profitability of the local cement manufacturers, more than 23 companies in the private and public sector are operating in the country.

Existing Cement Manufacturing Units of the country and their production capacity


Name of the Company MT)

Installed Production Capacity (In

1 2 3

Chittagong Cement Clinker Confidence Cement, Chittagong Mongla Cement, Khulna

9,00,000 480,000 390,000

4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23

Meghna Cement Holcim Cement, Dhaka Modern Cement, Dhaka Chhatak Cement, Sunamgonj Ayeenpur Cement, Sylhet Doel Cement, Pabna Niloy Cement, Jessore Diamond Cement, Chittagong Ahad Cement, Jessore Aramit Cement, Chittagong M I Cement Eastern Cement, Dhaka Seven Ring Cement Mollah Cement Saiham Cement Madina Cement S Alam Cement A R Rahaman Cement Padma Cement Royal Cement TOTAL

1,000,000 1,100,000 30,000 267,000 23,000 90,000 200,000 660,000 180,000 210,000 180,000 180,000 550,000 180,000 180,000 180,000 450,000 200,000 210,000 540,000 8,380,000

Units under Multinational Giants: Among the Multinational giants, CEMEX, Scancem, Holder bank, Emirates Cement and Lafarge are most important. Due to environmental hazard and health consciousness, the developed countries, especially the Europe, these groups are in favour of

setting up of cement factories in the developing regions like Bangladesh. Estimated Supply situation of Cement in Bangladesh: The state owned Chhatak Cement Factory and Ayeenpur Cement Industries Limited in private sector are two basic cement factories in the country, which uses limestone to produce cement, while the rest of the factories simply import cement clinkers, crush the same, mix them with gypsum and put them into bags with a marginal value addition. The 24 units currently produce 5.4 million MT of cement, utilising on an average, 65% of their installed capacity. The volume of annual import of bagged cement in the country was around 3.5 million MT till 1995-96, but presently hardly any import of cement is being made. The major reasons behind the decreasing demand for the imported cement are as below:

Diminishing strength of imported cement due to long time span between production and usage (120 days on an average).

b. Increasing supply of quality cement from the local manufacturers. c. Continuous devaluation of local currency has put the imported cement in severe price competition with local products.


At present Import duty and Tax on clinker and finished cement are 40.5% and 68% respectively, which makes local production more attractive. On the basis of the capacity utilization and the future expansion programmes of the existing units, and also the production capacity of the under implementation units, our projection of supply of cement in the country during the next five years stands as below:

Estimated Demand for Cement in Bangladesh: Increase in demand for cement is dependent on the growth of property sector and infrastructure development of the country. With the introduction of the National Housing Policy and expansion schemes of the House Building Finance Corporation (HBFC) and other house finance agencies, the demand for cement is expected to grow further in future It is expected that the Demand for cement would grow at around 10% per annum, while production is expected to grow at a higher rate from the year 2003 onwards with the completion of a few under construction factories. Potentiality of Cement Export from Bangladesh:The local production scenario demonstrates that it would not only be able to meet the entire domestic demand but also export to the developed countries, the Middle East and other markets. The fear of environmental hazard, health consciousness etc of the developed countries and the low cost of labour, favorable tariff

policy and better infrastructural facility of Bangladesh likely to help us to make an inroad in the international market. Possibility of market dominance by the Giant Multinational Companies The multinational companies, who have set up plants in the country, believe that the local production would be more than sufficient to meet the domestic demand and they would soon be able to dictate the market price as well as supply of cement through controlling the source of procurement of clinker as well as the network of distribution of finished cement. In apprehension, there is a number of locally established cement factories who are planning to get out of the business by way of selling to the giant operators. It is anticipated that by the year 2004, the cement market shall be dominated by major giants leaving some of the left-out small producers to continue to operate in their controlled market. This integration will continue to take place and the ongoing process of acquisition and its acquisition cost of the existing facility will determine justification of future establishment of a brand new factory.

Pest Analysis of Bangladesh

Political Environmental issues Environmental dreadful conditions and depletion of natural resources are often observed in Bangladesh due

to poverty, over-population and lack of awareness on the subject. It is manifested by deforestation, destruction of wetlands, depletion of soil nutrients, etc. Natural calamities like floods, cyclones and tidal-bores also result in severe socio-economic and environmental damage.

Legislation The existing Bangladeshi legislation in this area, however, dates mostly from the period of British rule. The legislation in force are as follows: Patent and Design Act of 1911 Patent and Design Rule of 1933 Trademark Act of 1940 Copyright Act of 1999

Government policies for Foreign Investments The stated policy of the government of Bangladesh (BDG) is to pursue foreign investment actively, and it has enacted a number of policies to this end. There are no distinctions between foreign and domestic private investors regarding investment incentives or export and import policies. Incentives for investors include: 100%

ownership in most sectors; tax holidays; reduced import duties on capital machinery and spares; duty-free imports for 100% exporters; and tax exemptions. Economic Economy situation The economy of Bangladesh is constituted by that of a developing country. Its per capita income in 2009 was est. US$1,500 (adjusted by purchasing power parity) significantly lower than India, Pakistan, both which are also lower than the world average of $10,497.According to the gradation by the International Monetary Fund, Bangladesh ranked as the 48th largest economy in the world in 2009, with a gross domestic product of US$224.889 billion. The economy has grown at the rate of 6-7% p.a. over the past few years. More than half of the GDP belongs to the service sector; nearly half of Bangladeshis are employed in the agriculture sector, with RMG, fish, vegetables, leather and leather goods, ceramics, rice as other important produce. Bangladesh Corporate Tax Rates The standard rate of corporate tax in Bangladesh is 27.5% in 2008 - 2009 tax years. This is the standard corporate tax rate applicable to publicly traded

companies in Bangladesh, a list including tax rates for other corporations are as follows:

Publicly Traded Company 27.5%

Non-publicly Traded Company 37.5%

Bank, Insurance & Financial Company 45%

Mobile Phone Operator Company 45%

If any publicly traded company declares more than 20% dividend, 10% rebate on total tax is allowed. Seasonality/Weather Issues Bangladesh is a country crisscrossed with rivers, and thus uses a wide network of water-based public transportation. Ferries and other boats compete with the railroads as a major means of public transport. Typically overloaded and top-heavy, ferries do capsize, particularly during the monsoon season from May to October or during unexpected thunderstorms or windstorms. Every year there are dozens of fatalities resulting from ferry accidents. Social

Companies are facing the challenges of adapting effectively to the changing environment in the context of globalization and in particular in the export sector in Bangladesh. Although Consumer Rights Movement, enforcement of government regulations and a structured view regarding the economic importance of Social responsibility are not yet so widespread in the corporate gradually world in Bangladesh, more companies to have Social attaching importance

responsibility in the local market as well. They are increasingly aware that Social responsibility can be of direct economic value. Companies can contribute to social and environmental Social into their core objectives, as a business through strategic strategy, This is an have an integrating investment responsibility

management instruments and operations. So, business organizations can thereby

investment, not a cost, much like quality management. inclusive financial, commercial and social approach, leading to a long term strategy minimizing risks linked to uncertainty. Technological The need for faster technological development is increasingly felt in Bangladesh. Development plans of Bangladesh have emphasized science and technological

research to develop technologies through adoption of imported technology as well as development of indigenous technologies. As the country is heavily dependent on imported technologies, adoption. A National Science and Technology Policy has been formulated and adopted by the Government. It has laid down the directions for S and T activities and research, institutional Dissemination and and manpower documentation development. facilities. The proper planning is required for its effective transfer through acquisition, assimilation and

National Council for Science and Technology (NCST) determines S and T policies, reviews the activities of different institutions and provides direction towards S and T research and activities.

Modes of entry in general

We found that cross border M&A is always the optimal entry mode under both greeneld investment and export credible threats. If the greeneld investment entry mode is viable, the multinational rm acquires the rm with low productivity when the ability of integration is strong and the gap of technology is suciently small; multinational rm has interest to by contrary acquire rm with high productivity when the ability of integration is suciently weak and the gap is comparatively large and cross border M&A could be the most welfare-enhancing entry mode when the technology gap is very large. Under an export credible threat, the variation of transport cost can alter the choice of target rm through the inuence of price acquisition, and either greeneld investment or export option can be the most welfare-enhancing entry mode in case of medium ability of integration.

If there is maximum ability in the host country, not only the M&A of low-technology rm but also the acquisition of high-technology rm can enhance more the welfare compared to the other entry modes. Recently, the attention shifted to the composition of FDI as rms can choose between dierent types of FDI. One potential entry mode is to acquire an existing foreign rm via a cross border M&A, the second option is to build a new rm abroad, which is usually referred to as greeneld investment. As well as seeing an increase in total FDI, people have also seen cross-border M&A increasing in importance relative to greeneld investment