Nova Energy Drink Case Study
Case Study
Introduction
The increasing level of competition in the global business environment and the need for organizations to increase their market share has led to the expansion of companies in the foreign markets. Nova Energy Drink as a leading producer of beverage manufacturers and distributors throughout the United States is interested in expanding to Latin America. Currently, the company is based in Oregon in the United States and thus needs to assess the global business environment to enable it to develop effective business strategies to ensure its success in the international markets. As a result, the company needs to assess it’s major factors that can affect its operation in the foreign markets and adapt strategies to ensure its success. The two countries selected for Expansion include Brazil and Peru both located in South America. The report analyzes the marketing environment in Peru and Brazil to introduce its products into these market segments. It assesses various global business environmental factors such as cultural dimension, barriers to entry, social corporate responsibility, currency exchange, and company management and infrastructure.
Hofstede’s Cultural Dimensions
Hofstede’s Cultural Dimensions is a theoretical framework developed to help understand the differences between different cultures across countries. It is important in providing insights on how businesses are conducted across different cultures. Hofstede’s Cultural Dimensions is primarily used to distinguish the differences in the dimension of culture, differences in the national culture, and the impact on the organization (Kim, 2017). Hofstede’s Cultural Dimensions is used to assess the national culture in Brazil and Peru as the potential markets for Nova Energy Drink.
Hofstede’s Cultural Dimensions is used to assess the national culture of Brazil-based on six dimensions that include the power distance, Collectivism vs Individualism, uncertainty avoidance, femininity vs masculinity, short-term vs long-term orientation and restraints vs indulgence.
Power Distance
The power distance cultural dimension determines inequality in societies. It is the extent degree by which the less powerful individuals accept that power is unequally distributed in organizations or societies (Rao-Nicholson & Khan, 2017). The high power distance is an indication that the prevailing culture accepts power differences and inequality. This implies that it encourages bureaucracy and demonstrates high respect for authority and rank. On the other hand, the low power distance suggests that a given culture supports a flat organizational structure and is characterized decentralized decision-making process, power distribution, and participative management style.
Brazil has a high power distance which shows that its national culture accepts hierarchy and inequalities. The difference in power distribution indicates that power holders benefit more than less powerful individuals in society. In Brazilian culture, it is important to respect the elderly. Similarly, the bosses of the companies take complete responsibility for the management and decision making.
Peru has a high power distance score and this indicates that they have inequality in power distribution. At the organization level, the country is believed to score high with regards to the power distance index. The majority of the organizations in the country have centralized organizational arrangements with wage differentials and supervisory personnel. The subordinate perceive superiors as difficult to consult and access.
Individualism
Individualism addresses the fundamental issue concerning the extent of interdependence that a given society has among its members. In a society with an individualist cultural dimension, people look after themselves and the immediate family only. On the other hand, collectivist societies are where people live as a group and normally take care of each other (Kim, 2017). Brazil is a collectivist society where the people are integrated into cohesive and strong groups. This proves a critical element in the workplace environment where the employees work as a team to achieve a common objective.
Peru also demonstrates elements of the collectivism just as the majority of the Latin American countries. People normally prefer to work in large companies and embrace the spirit of collaboration and team. The problem experienced in these organizations is addressed through cooperation and consultation with the workforce irrespective of the status and seniority in the job.
Masculinity
The masculinity is a cultural element that indicates that the society is mainly driven by success, achievement, and competition. A low score on the masculinity dimension implies that dominant values involve caring for each other as well as the quality of life (Kim, 2017).
Brazil has a moderate score on masculinity which shows that there is a balance between competition and caring for each other. It implies that Brazilians both believe in competition as the reason behind success as well as caring for each other to ensure quality life.
Peru scores low with regards to masculinity and this demonstrates that feminine society. The trait has led to several cultural misunderstandings and clashes. As an example, expatriates and locals often experience conflicts given the locals have weaker achieve motivation as opposed to the foreigners.
Uncertainty Avoidance
The cultural dimension of uncertainty avoidance concerns the way society deals with an unknown future. It gives how different societies deals with anxiety and indicates how members of a culture feel threatened by unknown or ambiguous situations (Rao-Nicholson & Khan, 2017).
Brazil has a high score concerning uncertainty avoidance. It has strong rules and a comprehensive legal system to avoid uncertainty. As a result, bureaucracy, rules, and laws play a critical role in ensuring that businesses avoid risks.
Peru also scores high based on uncertainty avoidance and this means that there are strong rules and legal systems to help avoid business uncertainty. However, the individuals are reluctant to obey these rules leading to bureaucracy and corruption. These are seen to be detrimental to the operation of businesses in the country.
Long-Term Orientation
The long-term orientation is a dimension describing how a society maintains links with its past while at the same time addressing the current and future challenges (Rao-Nicholson & Khan, 2017). The society with a low score in this dimension prefers in maintaining time-honored norms and traditions and considers societal changes as suspicious. On the other hand, those with high scores normally take a pragmatic approach and encourage efforts and thrift in education as the best way to prepare for the future.
Based on long-term orientation Brazil is considered as average and balances both the normative and programmatic approach. This means that they both consider education as the key to success while at the same time focus on the traditions. Peru, on the other hand, has a low score and this shows that it is a normative country. As a result, People in Peru have a strong concern with the establishment of the absolute truth.
Barriers to Entry
Barriers to entry refer to the hindrances or obstacles that offer a challenge or make it difficult for new firms to enter a foreign market. The barrier to entry can include several factors that range from the cultural differences to the government legislations (Rao-Nicholson & Khan, 2017). As firms attempt to enter new markets, they should assess the existing barrier to entry to develop appropriate entry mode that can make them successful in such markets. Nova Energy Drink’s intention to expand into foreign markets that include Brazil and Peru can be influenced by several barriers to entry. As a result, it should be able to assess the barriers to entry in each of these markets to adopt an effective globalization strategy.
Brazil Barriers to Entry
Brazil is emerging as an important market for many global companies from the United States and different countries across the globe. However, the country is known for several barriers to entry that hinders the success of many foreign firms. The major barriers to entry in Brazil include high taxes, bureaucracy, and social inequality.
High taxes
The government of Brazil has high taxation policy as compared to many countries in Latin American. As compared to the United States, Brazil’s tax policy is unfavorable and high and this reduces the income of companies. As a result, Nova Energy Drink can incur a high cost of operation in Brazil due to high taxation and this can reduce its profitability.
Bureaucracy
The other barrier of entry in Brazil is associated with the bureaucracy. Red tape is common in Brazil as many companies engage in different forms of bureaucracy which affects the effectiveness of organizations. There are several incidences of corruption in the country as the government lacks an appropriate structure to deal with such issues. This makes it difficult for a foreign country such as Nova Energy Drink to operate in the country.
Social Inequality
Social inequality is another barrier to entry that Nova Energy Drink can face when entering the Brazil market. Social inequality defines the income gap between different social groups in the country. There is a wide gap between the poor and the rich in Brazil and this can have a significant impact on the purchasing decision of consumers. In essence, it can reduce the sales of Nova Energy Drink since the majority of the Brazilians are poor with only a few rich people.
Peru
Peru is considered one of the potential markets in Latin American that attracts attention to many foreign companies. As new firms attempt to enter this market, they should be aware of certain barriers of entry that can impact the business operation. The notable barriers to entry that Nova Energy Drink can face in Peru include the high level of bureaucracy and language differences.
Bureaucracy
Bureaucracy is common in Peru and many leading institutions. The government procurement process is inefficient and fails to consider international standards for Procurement. In essence, the country depends on the government to government form of procurement which can hinder the entry of many foreign brands in the market since it does not allow companies to participate in some areas of trade negotiations. Furthermore, business owners can find it challenging to resolve pertinent disputes with the government thus hinders their operation in the market.
Language Barrier
Language is another cultural barrier that can offer a barrier to entry for foreign companies. Spanish is the official and widely spoken language in Peru. This is as opposed to the United States where English is the main and widely spoken language. As a result, it can prove difficult for Nova Energy Drink to adopt appropriate branding strategies to boost its performance in the market.
Social Corporate Responsibility
There is an increase in the attention of companies to engage in practices that ensure they are socially responsible. According to Zaveri & Amin (2019), corporate social responsibility is a regulatory business model that businesses use to become socially accountable to its stakeholders and the general public. Nova Energy Drink needs to engage in activities that are socially responsible when operating in foreign markets. The company will use several strategies to ensure that it engages in activities that improve the welfare of the relevant stakeholders.
As a socially responsible company, Nova Energy Drink will use a triple bottom line framework to address the environmental and social concerns in both Brazil and Meru. The ripple bottom line framework focuses on three main elements that include people, profit, and the planet. Concerning people, the company should emphasize improving the welfare of its stakeholders that include the employees, customers, suppliers, and the community. It should ensure that the employees are motivated by creating a suitable working environment. The community should also be engaged in various activities such as protecting their interest (Kim, 2017). To improve the welfare of the community, the company should engage in various projects such as sponsoring the needs students, sponsoring the sporting activities, and reducing the rate of environmental pollution. Furthermore, the company should engage in initiatives that promote the welfare of the suppliers. It should emphasize on purchasing the raw materials from the domestic suppliers.
The company should also ensure that its operation and business activities add value to its shareholders. This can be accomplished by ensuring that it is profitable. The profitability of the company can be achieved by introducing effective marketing strategies to promote the sales of its products to domestic consumers.
Currency Exchange
The currency exchange can also have a significant impact on the operation of companies in the international markets (Rao-Nicholson & Khan, 2017). Different markets have varying rates of currency exchange. As compared to both Peru and Brazil, the United States currency is stringer in value. This implies that Nova Energy Drink has a favorable currency exchange that can support its operation in the two countries. For instance, the export of Brazil will be expensive as compared to the imports from these countries. The cost of doing business in these two countries is cheap as compared to Brazil given its strong currency. Due to this, Nova Energy Drink can find it cheap to operate in the selected Latin American countries due to the low cost of production which can lead to an increase in its profitability.
Company Management and Infrastructure
Given the current competitive business environment, Nova Energy Drink needs to adopt an appropriate infrastructure that can help it earn sustainable profit in the country. The company should recruit local employees to ensure that it accommodates the national culture of foreign countries. Arguably, the local employees are aware of the needs of domestic customers and can develop appropriate marketing strategies to ensure that it is successful in these markets. The company should also create an open working environment that creates innovation and motivates employees. It should ensure that there is a centralized governance structure to maintain the same standards in all markets where it operates. It is also important that the corporate structure of the company aligned to the culture that prevails in the domestic market to ensure that it become prosperous in the market. This can include developing a new mission and value of the company to suit the local needs of the stakeholders.
References
Kim, S. (2017). National culture and public service motivation: investigating the relationship using Hofstede’s five cultural dimensions. International Review of Administrative Sciences, 83(1_suppl), 23-40.
Rao-Nicholson, R., & Khan, Z. (2017). Standardization versus adaptation of global marketing strategies in emerging market cross-border acquisitions. International Marketing Review.
Vasile, A. C. (2016). Hofstede’s cultural dimensions and management in corporations. Cross-Cultural Management Journal, 18(01), 35-46.
Zaveri, B. N., & Amin, P. D. (2019). Global Marketing Strategy in the Digital Era: Global Online Presence. In Breaking Down Language and Cultural Barriers Through Contemporary Global Marketing Strategies (pp. 103-112). IGI Global.