The document discusses Dell's dilemma in establishing a manufacturing plant in Brazil. It analyzes Dell's options of exiting the country, moving to another Brazilian state, or negotiating with the governor of Rio Grande do Sul. The document recommends negotiation as the preferred option, as it allows Dell to maintain its relationship with the promising investment location while potentially changing the governor's stance, though there are risks if political issues reemerge. Maintaining good relations with all political parties is also advised.
3. Case Overview
Entry into manufacturing in Latin
America
Choice of site in Brazil
State incentives to attract FDI
Why Rio Grande do Sul?
Change in political atmosphere
What next for Dell?
4. Methods of doing business in a
foreign country
Export the product
Allow local company to produce
product under license
Joint venture with a local firm
Wholly owned subsidiary
5. Listing of Problems
Political opposition to incentives given
Nature of investment promotion
organization in states
State-specific deterrents to investment
Choice of negotiation strategy with
governor Dutra
6. Available Options
Exit the country
Move the plant to another state
Negotiate with the governor
7. Preferred Option - Negotiation
PROs CONs
Best state for Risky as governor
investment response cannot be
predicted
Good relationship
with investment No guarantee of
promotion agency another political
crisis not arising
Possible change in after setting up the
the stance of the plant.
Governor.
8. OUR SOLUTION –
NEGOTIATION STRATEGY
Investment Creation of Better
into the state more jobs Wages
Better Better
Better Social
standard of Purchasing
Status
living Power
High HDI
9. Alternative to Negotiation
Choose Minas Gerais
PROs CONs
Less differences Incentives are not
between political as attractive as Sul.
parties. Lesser proportion
Additional of skilled labour.
incentives provided Perceived as a
like free land. heavy industry belt.
Promotion agency
is govt+private mix
10. Least Preferred – Exit Brazil
PROs CONs
Can move to Largest growing
another Mercosul economy in the
state. Latin American
region.
Investment not Favourable
made as such. demographics of
Hence not much Brazil not present
financial loss. in any other Latin
American Country.
11. CONCLUSION
Awareness of political situation
important in investment decisions
Intra-country competition for
investments has both opportunities
and risks
Companies must have backup plan
Maintain good relations with all
important political parties in the state
Notes de l'éditeur
Entry into manufacturing in Latin America – globalization of marketsTHEORY:Changing world order – rise of Latin AmericaDeclining barriers in free flow of goods, services and capital.Globalization of productionDifferences in cost and quality of factors of productionDecline in protectionism for computer manufacturersWhy brazil – population, import tariffs, mercosul
Intro into state -> job -> better wages -> better purchasing power -> better standards of living -> better social status -> Happy people -> high human development index Pro’s of Minas Gerais: less differences between political parties, incentives provided like free land, promotion agency is govt+private mixCon’s of moving out of Brazil: largest growing economy in Latin America, favorable demographics not present in other Latin American countries
Public opinion may change the governors stiff stance.
Dell provides jobs to people and improves their standard of living
s
Companies – must have backup plan, must be aware of socio-cultural and economic conditions, maintain cordial relations with ruling and opposition parties (union-leaders),