Dell’s Dilemma in Brazil

Cheryl CorreaRamya CRhea LockerGitanjali

ContentsCase OverviewListing of ProblemsAvailable OptionsOur AnalysisConclusion

Case OverviewEntry into manufacturing in Latin

America Choice of site in BrazilState incentives to attract FDIWhy Rio Grande do Sul?Change in political atmosphereWhat next for Dell?

Methods of doing business in a foreign countryExport the productAllow local company to produce

product under licenseJoint venture with a local firmWholly owned subsidiary

Listing of ProblemsPolitical opposition to incentives

givenNature of investment promotion

organization in statesState-specific deterrents to

investmentChoice of negotiation strategy

with governor Dutra

Available OptionsExit the countryMove the plant to another stateNegotiate with the governor

Preferred Option - NegotiationPROsBest state for

investment

Good relationship with investment promotion agency

Possible change in the stance of the Governor.

CONsRisky as governor

response cannot be predicted

No guarantee of another political crisis not arising after setting up the plant.

OUR SOLUTION – NEGOTIATION STRATEGY

Investment into

the state

Creation of

more jobs

Better Wage

sBette

r Social Statu

s

Better

standard of living

Better

Purchasing Power

High HDI

Alternative to NegotiationChoose Minas Gerais

PROs Less differences

between political parties.

Additional incentives provided like free land.

Promotion agency is govt+private mix

CONsIncentives are

not as attractive as Sul.

Lesser proportion of skilled labour.

Perceived as a heavy industry belt.

Least Preferred – Exit BrazilPROsCan move to

another Mercosul state.

Investment not made as such. Hence not much financial loss.

CONsLargest growing

economy in the Latin American region.

Favourable demographics of Brazil not present in any other Latin American Country.

CONCLUSIONAwareness 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