Download - International Business Final
-
7/31/2019 International Business Final
1/43
-
7/31/2019 International Business Final
2/43
2
TABLE OF CONTENTS
Company background Universal studio ............................................................... 4
Country overview - Brazil ...................................................................................... 6
Country background - Brazil .................................................................................. 7
Country overview South Korea ........................................................................... 8
Country background South Korea ....................................................................... 9
Policital and legal Environment ........................................................................... 10
Political Stability ................................................................................................................................ 10
Business FreeDom ............................................................................................................................. 11
Trade Freedom ................................................................................................................................... 13
Taxation policies ................................................................................................................................ 14
Effectiveness of Legal Environment ........................................................................................... 15
Economic Environment ....................................................................................... 17
General Economic Indicators ........................................................................................................ 17
Economic Freedom ........................................................................................................................... 19
Tourism Economy ............................................................................................................................. 21
Social Environment ............................................................................................. 23
Ethic Groups and Education .......................................................................................................... 23
Households ........................................................................................................................................... 26
Consumer Behaviour and Lifestyle trends .............................................................................. 27
Choice of Country ............................................................................................... 31
Entry Strategy ..................................................................................................... 36
Conclusion .......................................................................................................... 39
Bibliography and References ............................................................................... 40
-
7/31/2019 International Business Final
3/43
3
LETTER OF APOLOGY
Due to unfortunate circumstances and events, I was unable to submit the assignment
at the deadline. I deeply apologies for my failure action and I promise to fulfill
requirement in the future.
Moreover, I would like to apologies for not conducting full PESTLE analysis. Although
total word count limit is 5,000 words, my assignment was exceeding 10,000 words
(exclude references). Due to this reason, I decided to exclude unimportant part,
which is technological environment. My technological environment analysis,
emphasize on country infrastructure and technological readiness such as availability
of electricity, Internet and latest technology which is essential for the business. After
the analysis both country have the almost identical result. From my prospective, I
think that it dont have much to discuss thus, therefore I decided that the technology
environment is not important. I would like to apologies if my decision went wrong
from your prospective.
-
7/31/2019 International Business Final
4/43
4
INTRODUCTION
COMPANY BACKGROUND UNIVERSAL STUDIO
Universal Studios is the one of the most successful company in the global
entertainment industries. Aside from the film production, company operates four
theme parks under Universal Studio theme park in Florida, California, Japan and
Singapore (Chavis, n.d). All the theme parks have thrill rides, shows and family
entertainment. Many of the Universal Studios attractions are based on classic and
familiar Universal movies.Though four Universal Studios parks, they each offer their
own selection of rides, and they are different experiences.
The history of Universal Studios theme parks began during the early part of the 20th
century. Tours at Universal Studios Hollywood began in 1915. The founder of the
studio, Carl Laemmle, decided to leverage the public interest in the film industry. The
Hollywood location was purchased by MCA in 1962 (Kelly, n.d). Within two years, the
company expanded its tour practices with tram rides and staged demonstrations ofspecial effects. Soon, the staged stunts became the primary feature of the theme
park. The most successful location in the network of Universal Studios theme parks
opened in Orlando, Florida, in 1990. The Orlando location was designed to focus on
the tourist element in an effort to rival Walt Disney World (Kelly, n.d). A Japan
location opened in 2001 and became one of the most successful attractions in the
country, prompting the company to expand into new locations (Kelly, n.d). After brief
analyzing several countries, Brazil and South Korea have most attractive emerging
market for Universal Studios Theme park.
-
7/31/2019 International Business Final
5/43
5
COMPARATIVE ANALYSIS
BRAZIL
VS
SOUTH KOREA
-
7/31/2019 International Business Final
6/43
6
COUNTRY OVERVIEW - BRAZIL
HIGHLIGH AREAS
1. Brazil is a Host country for upcoming of both 2014 FiFA world cup and the
2016 Olympic games.
2. Under ministry of tourism, Plan watercolor 2020 is in progress and expected
to increase in tourism industry.
3. Current president Dilma Rousseff is emphasizing on Brazil s taxation policies
might result in increase share price in some sectors such as steel, TEXTILESand electronics.
TRAVEL AND TOURISM INDICATORS, 2010 ESTIMATED
Percent of
Total
Annual growth
(% Forecast)
Travel and Tourism Industry
GDP US$ millions 258 2.0 4.6
Employment 1000 jobs 6 3.2 2.7
Travel and Tourism Economy
GDP US$ millions 1,464 11.5 4.5
Employment 1000 jobs 25 13.4 2.9
Source; Above this data are acquire from The Travel and Tourism Competitiveness Report 2011,
http://www.weforum.org/issues/travel-and-tourism-competitiveness
Key indicator, 2010 estimated
Population - million 203.9
Surface area square kilometer 8,514,877
GDP trillion (US$) 2.172
GDP per capita (US$) 10,800
Real GDP growth (percent) 7.5
Source; Above this data are acquire from The World Factbook,
https://www.cia.gov/library/publications/the-world-factbook/geos/br.html
http://www.weforum.org/issues/travel-and-tourism-competitivenesshttp://www.weforum.org/issues/travel-and-tourism-competitivenesshttp://www.weforum.org/issues/travel-and-tourism-competitiveness -
7/31/2019 International Business Final
7/43
7
COUNTRY BACKGROUND - BRAZIL
Brazil is the largest and most powerful country in South America and has become
one of the world's most attractive emerging markets in recent years (Mozee, 2008).
Brazil accounts for almost half of South America's total population and landmass and
has established itself as the dominant power in South America (Central Intelligence
Agency, 2011). Moreover, Brazil's rapid economic diversification is allowing it to
transform itself into a modern economy, playing a key role in a variety of industries).
Brazil is a founding member of the United Nations, the G20, Mercosul and the Union
of South American Nations, and is one of the BRIC Countries. Brazil is also home to
a diversity of wildlife, natural environments, and extensive natural resources in avariety of protected habitats (BBC News, 2011). In the Global tourism market, Brazil
is ranked 1st out of all countries for its natural resources and 23rd for its cultural
resources, with many World Heritage sites, a great proportion of protected land area,
and the richest fauna in the world (World Economic Forum, 2011)
The Brazilian tourism industry was enjoying exceptionally good health until 2001.
Starting from late 2002, Brazilians lost buying power as a result of a series of
financial crises, and the slowdown in the countrys economy and it become the
trouble time for tourism market (Slob & Wilde, 2006). According to indexmundi.com,
Brazils GDP grew by a mere 0.5% in 2003. Brazil economy showed the first sign of
recovery in 2004. The country GDP grow 5.3 percent in first quarter of 2004
compared to the same period of 2003. Fortunately, Brazils economy remained in
strong health for 2004 - 2009 (Central Intelligence Agency, 2011). Its estimated
growth rate in 2010 is 7.5 percent, which is the highest for two decades. The
expected average annual growth is 4.1% for year 2011 and 3.6% for 2012 (Ragir,
2011). The greatest driving force for Brazil economy and its tourism industry, isBrazils forthcoming hosting of both the 2014 FIFA World Cup and the 2016 Olympic
games.
-
7/31/2019 International Business Final
8/43
8
COUNTRY OVERVIEW SOUTH KOREA
HIGHLIGH AREAS
1. South Korea industries trends are moving toward medical tourism and 1st
Asia
Medical tourism and global Healthcare congress was recently took place in
Seoul.
2. The Economist Intelligence Unit (EIU) STATES that South Korea economic
outlook will remain relatively stable for until 2015, with the forecast GDP
Growth rate of 3.8 to 4.1 percent annually throughout the five year forecast
period.
3. South Korea government policies are aiming at aiding a steady structural
adjustment of the economy, which include channeling funds into renewable
energy resources and negotiating free-trade agreements
TRAVEL AND TOURISM INDICATORS, 2010 ESTIMATED
Percent of
Total
Annual growth
(% Forecast)
Travel and Tourism IndustryGDP US$ millions 16,237 1.6 3.4
Employment 1000 jobs 561 2.4 0.9
Travel and Tourism Economy
GDP US$ millions 70,795 7.1 4.6
Employment 1000 jobs 1,910 8.1 1.5
Source; Above this data are acquire from The Travel and Tourism Competitiveness Report 2011,
http://www.weforum.org/issues/travel-and-tourism-competitiveness
Key indicator, 2010 estimated
Population - million 48.75
Surface area square kilometer 99,720
GDP trillion (US$) 1.459
GDP per capita (US$) 30,000
Real GDP growth (percent) 6.1
Source; Above this data are acquire from The World Factbook,
https://www.cia.gov/library/publications/the-world-factbook/geos/br.html
http://www.weforum.org/issues/travel-and-tourism-competitivenesshttp://www.weforum.org/issues/travel-and-tourism-competitivenesshttp://www.weforum.org/issues/travel-and-tourism-competitivenesshttp://www.weforum.org/issues/travel-and-tourism-competitiveness -
7/31/2019 International Business Final
9/43
9
COUNTRY BACKGROUND SOUTH KOREA
South Korea's economy ranks 15th in the world by nominal GDP and 12th by
purchasing power parity (PPP) (Central Intelligence Agency, 2011). The South
Korean economy depends heavily on international trade, and in 2009, South Korea
was the eighth largest exporter and tenth largest importer in the world (BBC News,
2011). South Korea's major industries include shipbuilding, production of armaments,
foreign and domestic construction, and production of Automobiles. South Korea has
advanced into a developed economy to eventually attain a GDP per capita of
$30,000 in 2010, almost thirteen times the figure thirty years ago. The whole
country's GDP increased from $88 billion to $1,460 billion in the same timeframe(Central Intelligence Agency, 2011). In 2009, South Korea officially became the first
major recipient of official development assistance (ODA) to have ascended to the
status of a major donor of ODA. Between 2008 and 2009, South Korea donated
economic aid of $1.7 billion to countries other than North Korea. South Korea's
separate annual economic aid to North Korea has historically been more than twice
its ODA.
South Koreas tourism industry measured in terms of tourism arrivals has expanded
by 8.8% and 9.6% for the years 1998 and 1999. Despite the Asian financial crisis in
1998, the tourism industry had a very good impact on South Koreas crisis-hit
economy. The industry foreign exchange earnings amounted to 85.5% of gross
domestic product in 1999, which is much higher than the electronic industrys
average of 69.1 percent (Korea National Tourism Organization, 2001). The Korea
National Tourism Organization (KNTO) began in 1962 as a government-invested
corporation to assist the promotional efforts of the tourism industry and local
governments. . In 2007, South Korea was ranked 36th of the most visited countries inthe world with an estimated 6.4 million foreign tourists visiting that year. Incheon
International Airport was rated the best airport worldwide consecutively since 2005
by Airports Council International.
-
7/31/2019 International Business Final
10/43
10
POLICITAL AND LEGAL ENVIRONMENT
The political areas have greater impact on the international business. Depend on the
type of the industries and fields of the business; various types of political factors are
needed to analyze. In this analysis, each country of political stability, business
freedom, trade freedom and tax policies will be compare.
Legal Environment analysis will include effectiveness of respective countrys law and
regulation regarding tax, labor, property rights and strength of legal protection for
foreign investors. Measuring the countrys legal effectiveness is extremely difficult
and uncertainty of result is also high. Depend one the individual prospective, the
result might be infinite. Therefore, analysis and comparison will base on ranking from
Global Competitiveness Report 2011, Travel and Tourism Competitiveness Report
2011 and 2011 index of Economic Freedom.
POLITICAL STABILITY
Political stability index - 2010
Indicators Brazil South Korea
Underlying Vulnerability 5.8 4.2
Economic Distress 5.0 6.0
Index Sore 5.4 5.1
Previous Score (2007) 4.4 2.0
Global Rank 165 countries 105th 117th
Sources; Above data are acquire from ViewsWire,http://viewswire.eiu.com/site_info.asp?info_name=social_unrest_table&page=noads&rf=0
Political stability index is arrange from 10 highest to 0 lowest political risk. Compare
to the 2007 score, both countries political risk was increased in 2007. The wall street
journal stated that Brazilian political system was vulnerability because of the election
in 2010 and countrys currency will continue to fluctuate (Lyons, 2010). During the
global financial crisis 2008, Brazil commodity price were declined and the stock
market had declined approximately by 30% and but overall economy are remain
stable (Knowledge@Wharton, 2008) Therefore, increasing the political risk by 1 point
http://viewswire.eiu.com/site_info.asp?info_name=social_unrest_table&page=noads&rf=0http://viewswire.eiu.com/site_info.asp?info_name=social_unrest_table&page=noads&rf=0http://viewswire.eiu.com/site_info.asp?info_name=social_unrest_table&page=noads&rf=0 -
7/31/2019 International Business Final
11/43
11
is acceptable. However South Korea political risk was increased by 3.1 compare to
2007 since country by itself is facing ongoing geo-politic issues with North Korea.
Moreover, Korea economic distress value is larger than Brazil, which is result from
2008 global financial crisis. During 2008 2009 crisis, Korea experience a sharp
reduction in its credit lines, a decline in equity markets and a dollar shortage in
foreign exchange. Moreover, country face largest export decline, which was -34.5
percent in January 2009 (KEI, 2010). Therefore it is safe to assume that Brazil have
the more resistance in economic compare to South Korea. It is indeed South Korea
is the winner in overall ranking however, Brazil is recommended because of the
economic durability and its emerging market potential.
BUSINESS FREEDOM
Business Freedom Comparison Chart 2007 - 2011
Sources; Below data are acquire from Economic Freedom,http://www.heritage.org/index/ranking
0
10
20
30
40
50
60
70
80
90
100
20072008
20092010
2011
54.2 54 54.454.5
54.3
84.3 84.190.4 91.9 91.6
Brazil South Korea
http://www.heritage.org/index/rankinghttp://www.heritage.org/index/rankinghttp://www.heritage.org/index/rankinghttp://www.heritage.org/index/ranking -
7/31/2019 International Business Final
12/43
12
Business Freedom Score Index - 2011
Country Score
Brazil 54.3
South Korea 91.5
Sources; Above data are acquire from Economic Freedom,http://www.heritage.org/index/ranking
SOUTH KOREA
After the 2008 global financial crisis, South Koreas business freedom grows strong
and serves as a source of vibrant economic growth (The Chosunilbo, 2010). The
competitive regulatory framework facilitates dynamic entrepreneurial activity.
Business formation and operating rules are efficient and allow innovation. Bankruptcyproceedings are relatively easy (eStandardsForum, 2010).
BRAZIL
The main barrier in Brazil for the business freedom is their excessive regulations. As
for the foreign organization, this regulatory inflexibility cause unnecessary delay in
order to start the business (World Economic Forum, 2011). Despite some progress
in Brazil, organizing new investment and production remains cumbersome and
bureaucratic. It is costly and time-consuming to launch or close a business.
http://www.heritage.org/index/rankinghttp://www.heritage.org/index/rankinghttp://www.heritage.org/index/rankinghttp://www.heritage.org/index/ranking -
7/31/2019 International Business Final
13/43
13
TRADE FREEDOM
Trade Freedom Comparison Chart 2007 2011
Sources; Below data are acquire from Economic Freedom,http://www.heritage.org/index/ranking
Business Freedom Score Index - 2011
Country Score
Brazil 69.8
South Korea 70.8
Sources; Above data are acquire from Economic Freedom,http://www.heritage.org/index/ranking
SOUTH KOREA
South Koreas weighted average tariff rate was 7.7 percent in 2009 (Heritage
Foundation, 2011). However, nation by itself is straggling with energy crisis and
therefore government recently impose some prohibitive tariffs, import and export
restrictions, services market access barriers, import taxes, use of adjustment tariffs
and taxes, burdensome and non-transparent standards and regulations, and
subsidies add to the cost of trade (World Economic Forum, 2011).
63
64
65
66
67
68
69
70
71
72
20072008
20092010
2011
69.870.8
71.6
69.269.8
69.2
66.4
70.270.8 70.8
Brazil South Korea
http://www.heritage.org/index/rankinghttp://www.heritage.org/index/rankinghttp://www.heritage.org/index/rankinghttp://www.heritage.org/index/rankinghttp://www.heritage.org/index/rankinghttp://www.heritage.org/index/rankinghttp://www.heritage.org/index/rankinghttp://www.heritage.org/index/ranking -
7/31/2019 International Business Final
14/43
14
BRAZIL
Mostly, Brazil and South Korea Trade Freedom are the same. However, cost of trade
which is relatively higher south Korea, are Import bans and restrictions, market
access barriers in services, high tariffs, border taxes and fees, restrictive regulatoryand licensing rules, subsidies, complex customs procedures, and problematic
protection of intellectual property rights (World Economic Forum, 2011).
TAXATION POLICIES
Tax Rate Comparison Index 2011
Indicator Brazil South Korea
Income Tax 27.5 38.5
Corporate Tax 34.0 24.2
Tax Burden %GDP 34.4 26.6
Sources; Above data are acquire from Economic Freedom,http://www.heritage.org/index/ranking
SOUTH KOREA
In South Korea, a foreign corporation is liable to pay corporation tax only on the
income derived from sources within Korea. However, no corporation tax is levied on
the liquidation income of a foreign corporation.According to Marco-Economic Datathat available from Heritage.org, South Korea foreign direct investment corporate
rate is 24.2%. Taxation policy in Korea is politically not very important since SouthKorea is the one of the OECD (Organization for Economic Co-operation and
Development) country with the lower Tax burden, low share of income tax revenue,
fixed local tax rates and lenient tax administration (OECD, 2011). However, due to
recent Asia financial crisis and increasing governments welfare expenditure, income
tax will be increase to 9.2% until 2013 and tax burden also expected to rise in future
(Xinhua, 2009)
http://www.heritage.org/index/rankinghttp://www.heritage.org/index/rankinghttp://www.heritage.org/index/ranking -
7/31/2019 International Business Final
15/43
15
BRAZIL
Brazil's combined corporate tax rate for 2011 is 34%. The tax consists of a basic tax
of 15%. There is also a surtax of 10% for annual income of over BRL 240,000, about
US$ 110,000. Additional 9% are added for social contribution on net profits. Theworst aspect of the Brazilian tax system from the standpoint of a foreign investor is
extreme complexity (Melo et al., 2010). During the 2010 election, Jose Serra from
PSDB (Partido Da Social Democracia Brasileira) stated that Brazil has highest tax
burden in the developing in the world and current president Rousseff supported his
statement (Ottens, 2010). There are approximately 52 separate taxes, imposts,
duties, compulsory loans, withholdings and other charges and fees imposed by
federal and municipal governments (Melo et al., 2010). After the 2010 presidential
election, it was surprised that the issue of tax reform has a very low profile in the
agendas of president.
EFFECTIVENESS OF LEGAL ENVIRONMENT
Effectiveness of Legal Environment 2011
Indicators
Global Ranking
Brazil South Korea
Strength of Investor protection 59 th 59 th
Protection of Minority Shareholders interests 64 th 102nd
Property right 72 th 54 th
Efficiency of legal Framework 71st 87 th
Intellectual property protection 89 th 44 th
Legal right index 103th 39 th
Burden of customs procedures 122
nd
47
th
Burden of government Regulation 139th 108th
Number of procedures required to start a business 132th 73 th
Time required to start a business 135th 52 th
Source; Above data are acquire from Global Competitiveness Report 2009 - 2010,
http://www.weforum.org/s?s=Global+competitiveness+report
http://www.weforum.org/s?s=Global+competitiveness+reporthttp://www.weforum.org/s?s=Global+competitiveness+report -
7/31/2019 International Business Final
16/43
16
SOUTH KOREA
In Overall ranking, South Korea is the legal environment is relatively stronger than
Brazil. Global competitiveness report 2011 state that property right is secure and
expropriation is highly unlikely but the justice system can be inefficient and slowerthan Brazil. Although intellectual property protection ranking is higher than Brazil,
2011 index of Economic Freedom suggest that the protection of intellectual property
rights need to be improved, as piracy of copyright materials is significant. According
to Travel and Tourism Competitiveness Report 2011, South Korea ranks a dismal
124th with respect to labor market flexibility and business leaders express dismay at
the difficulty of hiring and firing employees because of the Korea labor law. The
World Bank estimates that the average severance pay for dismissing an employee is
equivalent to 91 weeks worth of salary (The World Bank, 2011). This leads
companies to resort extensively to temporary employment, thus creating precarious
working conditions and giving rise to tensions.
BRAZIL
2011 index of Economy point out that, Brazils judiciary is inefficient, subject to
political and economic influence, and lacks resources and staff training (Heritage
Foundation, 2011). Court decisions and legal processing for business cases can take
years, and judgments by the Supreme Federal Tribunal are not automatically binding
on lower courts. Moreover, most of the politicians have greater influence on its
judicial system. Protection of intellectual property rights has improved compare to
2008, but piracy of copyrighted material persists (Heritage Foundation, 2011). Legal
barrier to the foreign direct investment are the taxation and labor law. The worst
aspect of the Brazilian tax system from the standpoint of a foreign investor is extreme
complexity. There are approximately 52 separate taxes, imposts, duties, compulsory
loans, withholdings and other charges and fees imposed by federal and municipal
governments (FIAS, 2001). The Brazilian labor law tends to be generous to
employees and paternalistic. Firing an employee will almost inevitably lead to a
lawsuit seeking back pay for overtime, alleging failure to pay equal remuneration for
equal work, etc. (FIAS, 2001). Therefore, The present structure imposes rigidities
and high labor costs to investors, making it difficult to employ Brazilian workers.
-
7/31/2019 International Business Final
17/43
17
ECONOMIC ENVIRONMENT
Analyzing the countrys economic is much more complex than other factors from
Marco-environment. Form the business prospective, countrys economic is the major
player in PESTLE analysis since it have the greater influence on countrys political,
social, Technology, even countrys legal system. As for instance, when a country
facing economy downturn, direction of its politic, consumer spending pattern,
technology development, and its regulations and certain law have to be adjust. Brazil
politic directions are heading to energy investment due to global energy crisis. South
Korea government is promoting medical tourism due to the shift in economic
direction. Therefore, economic environment is complexity because of theinterrelationship with other factors. Moreover, analysis result may be infinite depend
on what type of topic is choose to be analyze. This analysis will try to include as
many factors as possible such as general economic indicators, economic freedom
and tourism economy. Each country consumer behavior and spending pattern will
discuss more in social environment.
GENERAL ECONOMIC INDICATORS
General Economic Indicators 2010 EST.
Indicator Brazil South Korea
GDP - trillion 2.172 1.459
GDP Growth Rate 7.5% 6.1%
GDP Per Capita US $ 10,800 30,000
FDI Contribution to its GDP 18.5% 28.7%
Inflation Rate 4.9% 3%
Unemployment Rate 7% 3.3%
GDP Composition by Service Sector 67.5% 57.6%
Labor Force - million 103.6 24.62
Labor Force in Service Sector 66% 68.4%
Sources; Above data are acquire from The World Factbook;https://www.cia.gov/library/publications/the-
world-factbook/
https://www.cia.gov/library/publications/the-world-factbook/https://www.cia.gov/library/publications/the-world-factbook/https://www.cia.gov/library/publications/the-world-factbook/https://www.cia.gov/library/publications/the-world-factbook/https://www.cia.gov/library/publications/the-world-factbook/https://www.cia.gov/library/publications/the-world-factbook/ -
7/31/2019 International Business Final
18/43
18
SOUTH KOREA
At the initial development of South Korea economy, Living standard and the
individual income was almost the same with poorer countries of Africa and Asia
(Central Intelligence Agency, 2011). After 1960s, South Korea had gained aremarkable record of economic development after adopting the high-tech
industrialized economy. In 2004, South Korea total GDP was exceed over trillion-
dollar, and entering into the world's 20 largest economies (KEI, 2010). Initially, a
system of close government and business ties, including directed credit and import
restrictions, made this success possible. The government promoted the import of raw
materials and technology at the expense of consumer goods, and encouraged
savings and investment over consumption (KEI, 2010). The Asian financial crisis of
1997-98 exposed longstanding weaknesses in South Korea's development model
including high debt/equity ratios and massive short-term foreign borrowing (Central
Intelligence Agency, 2011). GDP plunged by 6.9% in 1998, and then recovered by
9% in 1999-2000. Korea adopted numerous economic reforms following the crisis,
including greater openness to foreign investment and imports (KEI, 2010). Growth
moderated to about 4-5% annually between 2003 and 2007. With the global
economic downturn in late 2008, South Korean GDP growth slowed to 0.2% in 2009
(KEI, 2010). In the third quarter of 2009, the economy began to recover, in large part
due to export growth, low interest rates, and an expansionary fiscal policy, and
growth exceeded 6% in 2010 (Central Intelligence Agency, 2011). The South Korean
economy's long-term challenges include a rapidly aging population, inflexible labor
market, and overdependence on manufacturing exports to drive economic growth.
BRAZIL
Brazil economy showed the most significant development among South American
nations, characterized by large and well-developed agricultural, mining,
manufacturing, and service sectors. Although country itself is full with colorful
economic history, Brazil has steadily improved its macroeconomic stability, building
up foreign reserves, and reducing its debt profile by shifting its debt burden toward
real denominated and domestically held instruments after 2003 (BBC News, 2011).
In 2008, Brazil became a net external creditor and two ratings agencies awarded
investment grade status to its debt (Central Intelligence Agency, 2011). After record
-
7/31/2019 International Business Final
19/43
19
growth in 2007 and 2008, the onset of the global financial crisis hit Brazil in
September 2008. During the recession, as global demand for Brazil's commodity-
based exports dried up and external credit was vanished (Bloom, 2009). However,
Brazil was one of the first emerging markets to begin a recovery. Consumer and
investor confidence revived and GDP growth returned to positive in 2010, boosted by
an export recovery (BBC News, 2011). Brazil's strong growth and high interest rates
make it an attractive destination for foreign investors. Large capital inflows over the
past year have contributed to the rapid appreciation of its currency and led the
government to raise taxes on some foreign investments (Central Intelligence Agency,
2011). President Dilma ROUSSEFF has pledged to retain the previous
administration's commitment to inflation targeting by the Central Bank, a floating
exchange rate, and fiscal restraint.
ECONOMIC FREEDOM
There is no definite definition on the economic freedom, however, in general some
evidence show that there are strong relationships between economic freedom and
quality of life (EcnomicFreedom.org, 2011). Countrys economic freedoms are
determined by inflation and income per person. As for an instance, most free
countrys economy provides better income level, better civil right, lower corruption,
and lower unemployment rate.
SOUTH KOREA
According to 2011 index of economic freedom, South Koreas have the 35th freest
economy in the world with the economic freedom score of 69. Moreover South Korea
is ranked 8th out of 41 countries in the AsiaPacific region. Inflation rate is stable at
3% and unemployment rate is relatively as low as 3.3%. According to The World
Fact Book 2011 index, South Korea standard of living is high with the approximately
US $ 30,000 income per capital. South Koreas dynamic economy successfully
survived the global economic recession and demonstrated a considerable level of its
economy strength. In order to promote as one of the worlds premier trading nations,
-
7/31/2019 International Business Final
20/43
20
the country recently signed a free trade agreement with the European Union (KEI,
2010). South Korea is attractive place for entertainment industries due to the
existence of higher-level quality of live. However, rigidity of the labor market and
lingering corruption continue to hold back overall economic freedom (The World
Bank, 2011).
BRAZIL
Brazils economic freedom score is 56.3, making its economy the 113th freest in the
world (Heritage Foundation, 2011). Brazil is ranked 21st out of 29 countries in the
South and Central America/Caribbean region, and its overall score is below the
regional and world averages. Inflation rate is higher than South Korea, which is
stable at 4.9% for past two year (Central Intelligence Agency, 2011). Unemployment
rate is 7% and income per person is US $ 10.800. Overall quality of live is
significantly lower than South Korea. The Brazilian economy has been expanding
with the help of booming commodity exports. Over the past decade, economic
growth has averaged around 4 percent, accompanied generally by low inflation
(Ragir, 2011). Brazil has a large agricultural and industrial base, but a growing
services sector has accounted for over 60 percent of GDP in recent years (Central
Intelligence Agency, 2011). The global financial and economic turmoils impact has
been moderate.
The states role in the economy has been heavy and even increasing. However, the
efficiency and overall quality of government services remain poor despite high
government spending as a percentage of GDP (FIAS, 2001). Barriers to
entrepreneurial activity include burdensome taxes, inefficient regulation, poor access
to long-term financing, and a rigid labor market (IFC, 2011). The judicial system
remains vulnerable to political influence (possible high corruption).
-
7/31/2019 International Business Final
21/43
21
TOURISM ECONOMY
Tourism Economy Indicator - 2010 est.
Percent ofTotal
Annual growth(% Forecast)
Travel and Tourism industry
Korea Brazil Korea Brazil Korea Brazil
GDP US$ millions 16,237 1.6 3.4
258 2.0 4.6
Employment 1000 jobs 561 2.4 0.9
6 3.2 2.7
Travel and Tourism Economy
GDP US$ millions 70,795 7.1 4.6
1,464 11.5 4.5
Employment 1000 jobs 1,910 8.1 1.5
25 13.4 2.9
Source; Above this data are acquire from The Travel and Tourism Competitiveness Report 2011,http://www.weforum.org/issues/travel-and-tourism-competitiveness
SOUTH KOREA
South Korea travel and tourism economy alone contribute 79,795 million to its GDP.
According to travel and tourism competitiveness report 2011, South Korea rank 15 th
out of 50
countries for the premium international arrivals (World Economic Forum,2011). Annual forecast growth is expected to 4.6% for up coming year because of
the aggressive promotion on medical tourism. South Korea is emerging as a popular
destination for medical tourism especially among the tourists from the US, Japan and
China, says a new research report Emerging Medical Tourism in South Korea by
RNCOS. In 2008, the country received around 25,000 foreign medical tourists, an
impressive increase of more than 56% from year 2007 (RNCOS, 2010). It is
expected that the medical tourist arrivals in South Korea will grow at a CAGR of
around 42% during 2011 to 2012. Medical tourists prefer South Korea not just for the
http://www.weforum.org/issues/travel-and-tourism-competitivenesshttp://www.weforum.org/issues/travel-and-tourism-competitiveness -
7/31/2019 International Business Final
22/43
22
lower costs of treatment, but also for its advanced technology and better healthcare
infrastructure.
BRAZIL
Compare to South Korea, Brazil tourism economy is the significantly smaller.
However, 2014 FIFA World Cup is set to be a huge draw for visitors and the addition
of the 2016 Olympics in Rio de Janeiro will further boost the industry (Exact Invest,
2010). In January 2010, the government said it would invest 1 million Brazilian reals
to improve facilities throughout the country before of the World Cup. Inboundvisitor numbers had been growing but the industry could benefit from greater stability.
While arrivals rose from 4.7 million in 2001 to 7.2 million (about a 65% increase) in
2008, the report estimates a fall in that number in 2009 because of the impact on
developed countries of the global financial crisis (Exact Invest, 2010). The recovery
should be relatively quick, with a forecasted increase of tourist arrivals of 9.2 million
by 2014. The number of Brazilians looking to travel within their own country and that
can afford to do so is growing. According to Instituto Brasileiro de Turismo
(Embratur) president Jeanine Pires, the revenue generated by tourism in 2008 was
nearly 17% higher than in 2007, which was the best year on record (Exact Invest,
2010). Sector growth appears to be building up momentum as the globaleconomy recovers. Renovations are a positive area for investment in Brazils tourism
infrastructure. A lack of infrastructure has held the sector back to date but this looks
set to change as investment increases over the coming years.
-
7/31/2019 International Business Final
23/43
23
SOCIAL ENVIRONMENT
Social Environment analysis will briefly discuss about each country demographic,
consumer behavior, trends and culture. Culture is the main factors for behavioral
practice affecting on business. Depending on the culture different, consumer
behavior and lifestyle trends are different in each country (D. Daniels et al., 2011).
ETHIC GROUPS AND EDUCATION
SOUTH KOREA
Demographic (2011/2010 est.)
Indicator
Population 48.7 million (2011 est.)
Urban Population 83%
Urbanization Rate per annual 0.6%
Ethic Groups Homogeneous
Religions
Christian 26.3%
Buddhist 23.2%
None 49.3%
Literacy 97.9%
Male 99.2%
Female 96.6%
Sources; Above data are acquire from The World Factbook;https://www.cia.gov/library/publications/the-
world-factbook/
It is important to understand the national ethic groups in order to identify the
requirement of countrys social environment. Nature of Universal Studio Themes
Parks business model require higher living standard. Literacy rate is one of the
https://www.cia.gov/library/publications/the-world-factbook/https://www.cia.gov/library/publications/the-world-factbook/https://www.cia.gov/library/publications/the-world-factbook/https://www.cia.gov/library/publications/the-world-factbook/https://www.cia.gov/library/publications/the-world-factbook/ -
7/31/2019 International Business Final
24/43
24
factors that contribute to living standard. The higher the literacy rate, the higher the
living standard will be (D. Daniels et al., 2011). The Ethic groups of South Korea are
homogeneous where culture and language areconcerned except for about 20,000Chinese. All South Koreans speak the same language and share a common
culturalheritage (CIA, 2010). Literacy rate of the South Korea is 97.9%, which isrelatively higher than Brazil. Education is highly regarded by the South Korean
government and supported by the parents. According to the CIA World Fact Book, in
2010 South Koreans attended school on average for 17 years. The average for
males is 18 years, while for females is 15 years. English is widely taught in junior and
high school.
BRAZIL
Demographic (2011/2010 est.)
Indicator
Population 203.4 million (2011 est.)
Urban Population 87%
Urbanization Rate per annual 1.1%
Ethic Groups 2000 Census
White 53.7%
Mulatto (mixed White and Black) 38.5%
Black 6.2%
Others 0.9%
Unspecified 0.2%
None 7.4%
Religions
Roman Catholic 73.6%
Protestant 15.4%
Spiritualist 1.3%
Bantu/Voodoo 0.3%
Others 1.8%
Unspecified 0.2%
None 7.4%
-
7/31/2019 International Business Final
25/43
25
Literacy 88.6%
Male 88.4%
Female 88.8%
Sources; Above data are acquire from The World Factbook;https://www.cia.gov/library/publications/the-world-factbook/
Due to the ethnic diversity, need, wants and consumer preferences may vary across
country. It is important to understand those peculiarities in order to better identify
niche markets and target consumer groups. Races and ethnicities vary across Brazil.
Most Brazilians are descendants of colonial settlers, with strong Portuguese paternal
ancestry. In the late nineteenth and early twentieth centuries, after numerous
multiracial marriages between settlers, native Indians, Spanish, Italian, German,
Japanese and Black Africans, the Brazilian population developed unique
characteristics (Instituto Brasileiro de Geografia e Estatsticas, 2007).
The Southeastern area, which includes highly populated cities such as Sao Paulo
and Rio de Janeiro, concentrates people with European, Black African and native
Indian backgrounds. In 2011, the population of Brazil was composed of 53.7%
whites, 6.2%% Black Africans, 38.5% Mulatto, and 0.9% others (Central Intelligence
Agency, 2011).
From a sociological standpoint, ethnicity plays an important role in influencing
consumers expenditure and spending pattern. Historically, the spending pattern in
Brazil developed through the influence of colonial settlers and has undergone
transformations as the different ethnicities commingled. Due to the diverse cultural
and ethnic backgrounds, Brazilians have an innovative and inquisitive attitude toward
new products and services. Brazilians are open to try both new products and
services (Instituto Brasileiro de Geografia e Estatsticas, 2007).
Brazilians are becoming more educated, which have an impact spending patterns.
Higher education is usually associated with the higher income. Instituto Brasileiro de
Geografia e Estatsticas (2006-2007) indicate that the level of education has
increased overall in Brazil and that the literacy rate increased 0.4% between 2006
and 2007. Current literacy rate is 88.6% with the average of male 88.4 % while
female is 88.8% (Central Intelligence Agency, 2011). Female have higher levels of
education, especially those residing in urban areas (Instituto Brasileiro de Geografia
https://www.cia.gov/library/publications/the-world-factbook/https://www.cia.gov/library/publications/the-world-factbook/https://www.cia.gov/library/publications/the-world-factbook/https://www.cia.gov/library/publications/the-world-factbook/https://www.cia.gov/library/publications/the-world-factbook/ -
7/31/2019 International Business Final
26/43
26
e Estatsticas, 2007). Ernst & Young forecasts that by 2030 the level of education of
the Brazilian workforce will increase by 30%, going from 7.8 years to 11.3 years of
schooling.
HOUSEHOLDS
SOUTH KOREA
Statistics Korea (2009) indicates that while the number of ordinary households1 hasincreased from 6.6 million in 1975 to 14.3 million in 2000 and 15.9 million in 2005,
the average number of household members has decreased from 5.0 in 1975 to 4.5 in
1980, 3.1 in 2000 and 2.9 in 2005. This is expected to further decrease to 2.7
persons by 2020. The number of households with less than 3 persons will increase,
while those with more than 4 will decrease.The biggest change is expected to see inthe number of one-person households, which are forecast, to account for one out of
every five households in 2015 (Park, Kim and Ko, 2002). Two-generation households
still remain the most common type. One-generation or one-person households are
rapidly increasing, while the number of three-generation households is declining
steadily. Euro-monitor International attributes some of this change to higher divorce
rates. Its data indicates that the number of divorced persons increased by almost
59% between 2000 and 2007 (Euro-monitor, January 2009).The changes in household structure are also affected by a trend towards later
marriage. South Koreans are waiting longer to marry for the first time the average
age of women was 27.9 years in 2007 increasing from 25.4 years in 1995, while men
were 30.7 years of age in 2007 up from 28.4 years in 1995 (Euromonitor, January
2009).
-
7/31/2019 International Business Final
27/43
-
7/31/2019 International Business Final
28/43
28
72,000 Won per annual, most of the South Korean spend more on entertainment
industries because of their stress related issue. Moreover, Referring to 2004/2005
Global Retail & Consumer Study from Beijing to Budapest, Continuous
westernization of South Korea lead to increased interest in fashion, well-being,
shopping, time for and expenditure on leisure actives. Therefore, it is not surprising
that for 52% of South Koreans, theme parks are viewed as a major considerationintheir choice of destination for their leisure time (Datamonitor, September 2009).
BRAZIL
2010 estimated GDP per capita for Brazil is $10,800. Income per capita in Brazil has
increased during the past years and is expected to continue to grow in the medium
term, as a result of the expected economic growth (Central Intelligence Agency,
2011). GDP per capita varies by regional. Some of the researcher suggest that
purchasing power of Brazil will also grow as a consequenceof the decrease in theinterest rates and of credit expansion (World Economic Forum, 2011).
According to research conducted by Instituto Target/FGV (2009), in the next 5 years
the Brazilian s to grow its share in the consumer market by 5.6 points, from 60.8% -
66.4% of the total consumption. For this research, middle class is defined as having
household/family income between BRL 2,230 and BRL 3,750 per month, in addition
to other characteristics such as level of education, consumption pattern, occupation,
etc. The number of urban households among middle class is expected to increase by
7.9% over 2012. Except from 87% of the Brazilians live in urban areas, this apparent
uniformity does not reflect homogenous consumption habits.
Population below poverty line in 2008 is 26%, which is relatively higher than South
Korea. Moreover, gap between income and consumption by percentage his high,
which is 1.1% lowest and highest 4.3% (Central Intelligence Agency, 2011). Those
facts reflect the inequality between populations. As for large country, income
distribution also varies depend on different regional setting. As stated above, a result
of a historical inequality in income distribution, different classes of consumers are
encountered in the Brazilian consumer market, as for instance, the typical basic
needs patterns in lower income classes, where household spending is higher on food
-
7/31/2019 International Business Final
29/43
29
and beverage items, or the ascendant middle class pattern that normally shows an
increase in the participation of expenditure in transport and communications. Upper
classes reveal an increase in the share of goods and services, like durable goods,
leisure activities, education and healthcare, and expenditure with luxury items (K.
Miller, 2009).
The entertainment industries currently target each of these groups in the Brazilian
consumer market, as long as they are sizeable and have a significant consumption
potential likely to grow both in volume and value (A. hudson, 2009).
Consumer behaviors are unstable due to the technology shock. Rapid changes in
technology and culture such as globalization, communication and Internet have
unstable impact in consumer habits. In Brazil, trends connected with the principles of
quality of life, convenience, price-consciousness, brand loyalty and others are very
present in the market (Developers Diversified Realty, 2010).
In fact, many companies in Brazil already provide products and services that meet
the consumer needs derived from those trends. For instance, Nestl has announced
another new unit in the North of the country, for the demand of the lower income
(C/D/E) classes, which will probably include the development of new products to
meet their specific needs (K. Miller, 2009). Shopping is definitely integrated into the
lifestyle of the Brazilian urban population, as a usual and necessary activity and as
an entertainment programmed. Shopping malls, outlets, hypermarkets, supermarkets
and convenience stores have been designed to fit the profile of the relevant customer
(Developers Diversified Realty, 2010). Regardless of whether the consumers profile
is of high or low consumption, quality-service or price-oriented, or attracted to
branded or private labels, in most developed cities it is possible to find places that
best meet these characteristics. Many of these places are designed to offer a wide
range of services (for example, restaurants, coffee shops, fitness centers, beauty
parlors, shoe repairs, post offices, bank services and dry-cleaners among others)
and to provide some entertainment with cinemas, cyber-cafs and play areas for
children.
The Brazilian consumers distinguish products by the brand, associating them with
concepts of high quality, trust, loyalty and status (Developers Diversified Realty,
2010). The Brazilian consumer market has plenty of examples of local or
-
7/31/2019 International Business Final
30/43
30
international brands that have historically maintained a significant market-share.
Despite the fact that Brazilian consumers recognize distinct brands, they are
influenced by those brands in their purchasing decisions, and eventually contribute
as opinion makers to attract new consumers to the brands, it is important to point out
that there has been a real increase of price-conscious customers in Brazil. Most of
the entertainment industries, such as cinema and resort have been decisive in
stimulating this consumer behavior, through an aggressive implementation of
discount format and by expanding the portfolio of private label products and services.
-
7/31/2019 International Business Final
31/43
31
CHOICE OF COUNTRY
Country Competitiveness Score
Indicator Brazil South Korea
Global Ranking (out of 139) 58 22
Global Competitiveness Index 5
Basic Requirements 4.3 5.4
1stpillar: Institutions 3.6 4.0
2nd Pillar: Infrastructure 4.0 5.6
3rd Pillar: Macroeconomic Environment 4.0 5.8
4th Pillar: Health and Primary Education 5.5 6.3
Efficiency Enhancers 4.4 4.8
5th Pillar: Higher education and training 4.3 5.4
6th Pillar: Goods market efficiency 3.7 4.5
7th Pillar: labor market efficiency 4.1 4.3
8th Pillar: Financial Market development 4.4 4.0
9th Pillar: Technological readiness 3.9 5.0
10th Pillar: Market Size 5.6 5.6
Innovation and Sophistication factors 4.0 4.8
11th Pillar: Business sophistication 4.5 4.8
12th Pillar: Innovation 3.5 4.8
Sources; Above data are acquire from The World Economic Form; Global Competitiveness Report
(2010-2011,).
Note; Score are arrange form 1 to 7, the higher the number is the higher the rank will be.
-
7/31/2019 International Business Final
32/43
32
The most problematic factors for doing business in Brazil
Indicator Brazil South Korea
Tax regulations 19.3 8.1
Tax Rate 17.7 3.9
Inadequate supply of infrastructure 13.8 5.5
Restrictive labor regulation 12.9 12.7
Inefficient government bureaucracy 11.3 15.3
Corruption 6.9 5.9
Access to financing 5.6 15.3
Inadequately educated workforce 5.1 7.7
Crime and theft 2.2 0.3
Foreign currency regulations 1.7 2.4
Policy instability 1.7 15.2
Poor public health 0.8 0.2
Inflation 0.5 3.7
Poor work ethic in national labor force 0.5 2.4
Government instability 0.2 1.5
Sources; Above data are acquire from The World Economic Form; Global Competitiveness Report
(2010-2011,).Note; Higher score is most problematic
Remark; According to world economic form, above15 factors conducted based on domestic population.
Therefore domestic population based factors may varies from global prospective.
-
7/31/2019 International Business Final
33/43
33
Country competitiveness Charts The most problematic factors
It is obvious that South Korea have the higher global ranking comparing to Brazil.
However, global ranking alone cannot determine the country potential for the
Universal Studio business. It is necessary to determine the future potential and some
certain aspects that related to the companies business. After the analysis, it was find
out that both countries have their own weakness and strength for business. In case
of tax regulations and tax rate, South Korea is much more attractive and flexible than
Brazil. Restrictive on labor regulation is almost the same for both countries.
According to global competitiveness report 2011, Brazil has more efficient
government bureaucracy than South Korea (World Economic Forum, 2011).
0 5 10 15 20 25
Tax regulations
Tax Rate
Inadequate supply of infrastructure
Restrictive labor regulation
Inefficient government bureaucracy
Corruption
Access to financing
Inadequately educated workforce
Crime and theft
Foreign currency regulations
Policy instability
Poor public health
Inflation
Poor work ethic in national labor force
Government instabilityKorea
Brazil
-
7/31/2019 International Business Final
34/43
34
Moreover, South Korea has a little troublesome foreign currency regulation than
Brazil. In term of policy stability, Brazil is a winner however South Korea has more
government stability and low corruption compare to Brazil.
Upcoming FIFA and Olympic is the great opportunity to introduce Universal ThemePark and Resort in Brazil. However, weak government support on tourism industries
and burdensome rules and regulations are the problematic factors to do business in
Brazil. Compare to Brazil, South Korea have less opportunity. Strong government
support on medical tourism, flexible rule and regulations are the attractiveness
factors to do business in South Korea.
Strength and Weakness of Brazil and South Korea
Brazil South Korea
Strength
Efficient Government Bureaucracy
WeaknessForeign Currency Regulation
Policy Stability
Weakness
Tax Regulation
StrengthTax Rate
Corruption
Government Stability
Moreover, South Korea is the attractive place to invest from country economic point
of view. Unlike Brazil that has the double unemployment rate (7%), South Korea
unemployment rate is only 3.3%. According to D. Daniels et al., 2011, unemployment
account in major factors that depress the economic growth. Although unemployment
factors alone cannot project the countrys economic growth, it possible to consider asthe fraction of countrys insurance for business in economic environment while
comparing between two countries. In overall quality of life, living standard and
tourism economy, South Korea showed the better result than Brazil. South Korea
economy future potential is the medical tourism.
Although Brazil shows the significant lower result, it has the ongoing potential as an
emerging market and one of the BRIC countries. Unemployment rate is significantly
higher than South Korea. However, another factors to consider are the size of the
-
7/31/2019 International Business Final
35/43
35
countrys population while comparing unemployment rate. The total population size
of Brazil is three times bigger than South Korea. As for large and spawning
population rate, unemployment rate 7% is acceptable. Unlike South Korea which
majority of service sectors is matured, Brazil service industries are still growing and
less competitive. Brazil is the more suitable for the organization that can withstand
first mover disadvantages.
As stated in the previous section, nature of universal business require higher social
environment. In general, it is possible to assume that higher density of population
refer to larger market size. However, some other factors need to be considering,
such as poverty rate, inequality, income distribution, tourism economy and national
economy. As a large country, Brazil has the obvious advantages on population on
South Korea. However, the gap between social standard is high and so do in income
distribution. According to research conducted by Instituto Target/FGV (2009), higher
income level family only represent 47.6% of Brazil population. Therefore, the volume
of Brazil consumer halved to half of its total population. Unlike Brazil, South Korea
has advantages in lower inequality, well-distributed income and higher living
standard compare to Brazil. Although the countrys population is lower than Brazil,
South Korea has significant potential in both consumer value and volume.
Another factors need to be considering is the future potential of inflow and out flowof tourism economy. Both countries have the future potential in tourism economy.
The only different between two countries is stable and dramatic tourism. Brazil
tourism will have dramatic tourism due to up coming Olympic and FIFA events.
However, tourism economy may unstable due to the result of after effect. For
example, one country has to push forward not only their infrastructure but also the
social standard if there is up coming dramatic changes. Especially while
consideration tourism economy, rapid change of government rules, regulation and its
policy. After the dramatic change, country will have to face adjustment periods orexhausted stage. Dramatic investment in country infrastructure and social standard
may have negative effect on national savings and countrys debts. Moreover,
inequality and income distribution may disturb by regional setting. During exhausted
stage, citizens spending pattern may change or disposal income may decline. Unlike
Brazil, South Korea is likely to have the steady growth in tourism economy because
of the nature of medical tourism.
Above of all reasons, South Korea should be the choice of the country for UniversalStudio.
-
7/31/2019 International Business Final
36/43
36
ENTRY STRATEGY
ENTRY MODE
Entry method into the South Korea should consider joint venture in order to
overcomes the ownership restrictions and cultural distances. Although South Korea
consumers are homogeneous, Datamonitor Consumer Surveys (April/May, 2009)
stated that most of the consumers in consumer are favorable to local brand. It is the
great risk for a company to use the direct investment methods. By adopting the Joint
Venture methods, company will benefit from the certain advantages such as less
investment, potential for learning about domestic market, reduce political risk andviewed as insider. Although, Knowledge spillovers, manage and control difficulty are
disadvantages for the company, the benefit of the advantages outweigh the
disadvantages.
DEALING WITH CONSUMER DIVERGENCE
As for a local brand oriented country, consumer preferences, culture, consumptionpattern may vary from Universal Theme Park business model. Current popular figure
of the Universal Studio theme park is Harry Porter however, adopting its as the figure
for theme park model might result as the Euro Walt Disney. Korea entertainment
industry becomes widely popular in Asia especially in movie and music production.
Integration Universal film production with local entertainment industry may necessary
for future potential of all the theme park in Asia.
-
7/31/2019 International Business Final
37/43
37
ANSOFF MATRIX STRATEGY
Ansoff Matrix Strategy enables four options for Universal Studio while company
seeks for increasing sales and creating growth at Korea (Ansoff, 1957). The four
options are market penetration, product development, market development anddiversification. As for Universal Company, it will be suitable to adopt market
penetration and diversification strategy. Market penetration strategy is suitable to use
when product or services and its market already exists. Diversification strategy
stands apart from the other three strategies. The first three strategies are usually
pursued with the same technical, financial, and merchandising resources used for
the original product line, whereas diversification usually requires a company to
acquire new skills, new techniques and new facilities. As mention in suppressing
consumer divergence, it is necessary for a company to develop new figure for
Universal Studio Theme Park.
NewExisting
New
Marketpenetration
ProductDevelopment
MarketDevelopment
Diversification
Existing
Market
Products/Services
New
-
7/31/2019 International Business Final
38/43
38
MARKET PENETRATION
Among the four options, Universal Studio intends to enter into new markets, which is
South Korea, by using penetration strategy. Company will need to create new value
to the competition to increase sales and capture new market shares in Brazil (Kotler,et.al. 2009; Richards & Media, 2011). The penetration strategy will allow the
company to attract customers from the new market as well as help the company to
reduce or eliminate risk to internationalize its business (Ansoff, 1957). The main
reason of conducting this strategy is to secure its target market for Universal Studio.
However, the company cannot only rely on this strategy for its sustainable growth.
DIVERSIFICATION
Diversification is a form of corporate strategy for a company. It seeks to increase
profitability through greater sales volume obtained from new products and new
markets (Ansoff, 1957). Under diversification, there are different types of strategies
such as concentric diversification, horizontal diversification etc. Horizontal
diversification is suitable Universal Studio. Horizontal diversification is mainly use
when company adds new products or services that are often technologically or
commercially unrelated to current products but that may appeal to current customers.
In a competitive environment, this form of diversification is desirable if the present
customers are loyal to the current products and if the new products have a good
quality and are well promoted and priced. Moreover, the new products are marketed
to the same economic environment as the existing products, which may lead to
rigidity and instability. In other words, this strategy tends to increase the firm's
dependence on certain market segments. For example, Universal Studio may add
the new figure from Korea cultural Aspect instead of using only on its original figure.
However, adopting diversification strategy may require the attractiveness test and the
cost-entry test
-
7/31/2019 International Business Final
39/43
39
CONCLUSION
Attractive country for Universal Studio has a choice of expanding into Brazil and
South Korea. Both countries have certain weakness and strength. The
characteristics of Brazil are that they record extraordinary economic growth and that
they have high potential to become the next global economic leaders. However,
unique requirement of business model match in South Korea rather than Brazil. For
example, requirement of social standard, disposal income, etc. Thus, it is very
important for Universal Studio to gain a foothold in markets and for future sustainable
growth. Upon tourism analysis, it was found that South Korea have is a more stable
tourism economy for investment in the long term. Certain factors such as policy
instability and inefficient government bureaucracy are most problematic factors to
start the business in South Korea. Those factors may result in delay of construction,
difficulty in acquisition of land, delay of approval from government bureaucracy while
starting the business. However, it is safe to assume that certain advantages such as
tax rate, tax regulations and access to financing outweigh its advantages. With South
Korea chosen as the destination, the entry method will be via joint venture with a
local partner. Furthermore, market penetration strategy will be initially adopted,
followed by diversification strategy.
-
7/31/2019 International Business Final
40/43
40
BIBLIOGRAPHY AND REFERENCES
World Economic Forum, 2011. ISBN-13: 978-92-95044-87-6 The Global
Competitiveness Report 2010-2011. Global Competitiveness Report. Switzerland:
SRO-Kundig press World Economic Forum.
World Economic Forum, 2011. Travel and Tourism Competitiveness. [Online] World
Economic Forum Available at:http://www.weforum.org/issues/travel-and-tourism-
competitiveness[Accessed 27 May 2011].
Xinhua, 2009. S Korea seeks tax increase in 2011-2013. [Online] Available at:
http://business.globaltimes.cn/world/2009-10/476573.html[Accessed 16 June 2011].
A. hudson, R., 2009. Brazil. [Online] United State Available at:http://countrystudies.us/brazil/19.htm[Accessed 10 June 2011].
Ansoff, H.I (1957), Ansoff Matrix, Harvard Business Review, pp 1-4.
BBC News, 2011. Brazil country profile. [Online] Available at:
http://news.bbc.co.uk/2/hi/europe/country_profiles/1227110.stm[Accessed 27 May
2011].
Bloom, K., 2009. Brazil's Economic Maricle What SA can Learn from a Nation That's
Headed in the Right Direction?[Online] Enterpreneur Media Inc. Available at:
http://www.entrepreneurmag.co.za/advice/doing-business-in-sa/business-
landscape/brazils-economic-miracle-what-sa-can-learn-from-a-nation-thats-headed-
in-the-right-direction/[Accessed 10 June 2011].
Central Intelligence Agency, 2011. The World Factbook - Brazil. [Online] Available at:
https://www.cia.gov/library/publications/the-world-factbook/geos/br.html[Accessed
27 May 2011].
Chavis, J., n.d. Universal Studios Theme Park History. [Online] Available at:
http://traveltips.usatoday.com/universal-studios-theme-park-history-21718.html
[Accessed 27 May 2011].
Exact Invest, 2010. Economic Analysis of Brazil - Q2 2010. [Online] Available at:
http://www.exactgroup.dk/filer/sys/dropdownmenu/pdf/exact%20artikler/Economic%2
0Analysis%20Q2%202010.pdf[Accessed 3 June 2011].
http://www.weforum.org/issues/travel-and-tourism-competitivenesshttp://www.weforum.org/issues/travel-and-tourism-competitivenesshttp://www.weforum.org/issues/travel-and-tourism-competitivenesshttp://www.weforum.org/issues/travel-and-tourism-competitivenesshttp://business.globaltimes.cn/world/2009-10/476573.htmlhttp://business.globaltimes.cn/world/2009-10/476573.htmlhttp://countrystudies.us/brazil/19.htmhttp://countrystudies.us/brazil/19.htmhttp://news.bbc.co.uk/2/hi/europe/country_profiles/1227110.stmhttp://news.bbc.co.uk/2/hi/europe/country_profiles/1227110.stmhttp://www.entrepreneurmag.co.za/advice/doing-business-in-sa/business-landscape/brazils-economic-miracle-what-sa-can-learn-from-a-nation-thats-headed-in-the-right-direction/http://www.entrepreneurmag.co.za/advice/doing-business-in-sa/business-landscape/brazils-economic-miracle-what-sa-can-learn-from-a-nation-thats-headed-in-the-right-direction/http://www.entrepreneurmag.co.za/advice/doing-business-in-sa/business-landscape/brazils-economic-miracle-what-sa-can-learn-from-a-nation-thats-headed-in-the-right-direction/http://www.entrepreneurmag.co.za/advice/doing-business-in-sa/business-landscape/brazils-economic-miracle-what-sa-can-learn-from-a-nation-thats-headed-in-the-right-direction/https://www.cia.gov/library/publications/the-world-factbook/geos/br.htmlhttps://www.cia.gov/library/publications/the-world-factbook/geos/br.htmlhttp://traveltips.usatoday.com/universal-studios-theme-park-history-21718.htmlhttp://traveltips.usatoday.com/universal-studios-theme-park-history-21718.htmlhttp://www.exactgroup.dk/filer/sys/dropdownmenu/pdf/exact%20artikler/Economic%20Analysis%20Q2%202010.pdfhttp://www.exactgroup.dk/filer/sys/dropdownmenu/pdf/exact%20artikler/Economic%20Analysis%20Q2%202010.pdfhttp://www.exactgroup.dk/filer/sys/dropdownmenu/pdf/exact%20artikler/Economic%20Analysis%20Q2%202010.pdfhttp://www.exactgroup.dk/filer/sys/dropdownmenu/pdf/exact%20artikler/Economic%20Analysis%20Q2%202010.pdfhttp://www.exactgroup.dk/filer/sys/dropdownmenu/pdf/exact%20artikler/Economic%20Analysis%20Q2%202010.pdfhttp://traveltips.usatoday.com/universal-studios-theme-park-history-21718.htmlhttps://www.cia.gov/library/publications/the-world-factbook/geos/br.htmlhttp://www.entrepreneurmag.co.za/advice/doing-business-in-sa/business-landscape/brazils-economic-miracle-what-sa-can-learn-from-a-nation-thats-headed-in-the-right-direction/http://www.entrepreneurmag.co.za/advice/doing-business-in-sa/business-landscape/brazils-economic-miracle-what-sa-can-learn-from-a-nation-thats-headed-in-the-right-direction/http://www.entrepreneurmag.co.za/advice/doing-business-in-sa/business-landscape/brazils-economic-miracle-what-sa-can-learn-from-a-nation-thats-headed-in-the-right-direction/http://news.bbc.co.uk/2/hi/europe/country_profiles/1227110.stmhttp://countrystudies.us/brazil/19.htmhttp://business.globaltimes.cn/world/2009-10/476573.htmlhttp://www.weforum.org/issues/travel-and-tourism-competitivenesshttp://www.weforum.org/issues/travel-and-tourism-competitiveness -
7/31/2019 International Business Final
41/43
41
EcnomicFreedom.org, 2011. Economic Freedom and Quality of Life. [Docunment]
Available at:http://www.youtube.com/user/EconFree#p/u[Accessed 7 June 2011].
eStandardsForum, 2010. Insolvency Framework; South Korea. [Online] Available at:
http://english.chosun.com/site/data/html_dir/2010/01/21/2010012100281.html[Accessed 10 June 2011].
D. Daniels, John, H. Radebaugh, L.ee & P. Sullivan, Daniel, 2011. International
business; Environments and Operations. 13th ed. Upper Saddle River, New Jersey,
United State: Prentice Hall.
Developers Diversified Realty, 2010. Developers Diversified Realty 2014- 2020.
[Online] Alexander Babbage and Developers Diversified Reality Available at:
http://www.ddr.com/media/docs/2014_2020/DDR2014_2020PresentationSummary.p
df[Accessed 6 June 2011].
FIAS, 2001. Volume 1 Legal, Policy and Administrative Barriers to Investment in
Brazil. Analysis. Brazil: FIAS Press Foreign Investment Advisory Service.
IFC, 2011. ISBN: 978-0-8213-7960-8 Doing Business 2011; Brazil. Country Report.
The World Bank Press.
Heritage Foundation, 2011. 2011 index of Economic Freedom. [Online] HeritageFoundation and The Wall Street Journal Available at:
http://www.heritage.org/index/explore?view=by-region-country-year[Accessed 6
June 2011].
K. Miller, R., 2009. Consumer Behaviour 2010. New York, United State America:
Richard K Miller & Associates.
KEI, 2010. Korea's Economy 2010. [Online] (Volume 26) Available at:
http://www.keia.org/Publications/KoreasEconomy/2010/LeeJK.pdf[Accessed 16
June 2011].
Kelly, C., n.d. Universal Studios Theme Parks. [Online] Available at:
http://traveltips.usatoday.com/universal-studios-theme-parks-3693.html[Accessed 27
May 2011].
Knowledge@Wharton, 2008. Feeling the Pain: How the Financial Crisis is Affecting
Brazil, Russia, India and China. [Online] Available at:
http://www.youtube.com/user/EconFree#p/uhttp://www.youtube.com/user/EconFree#p/uhttp://www.youtube.com/user/EconFree#p/uhttp://english.chosun.com/site/data/html_dir/2010/01/21/2010012100281.htmlhttp://english.chosun.com/site/data/html_dir/2010/01/21/2010012100281.htmlhttp://www.ddr.com/media/docs/2014_2020/DDR2014_2020PresentationSummary.pdfhttp://www.ddr.com/media/docs/2014_2020/DDR2014_2020PresentationSummary.pdfhttp://www.ddr.com/media/docs/2014_2020/DDR2014_2020PresentationSummary.pdfhttp://www.heritage.org/index/explore?view=by-region-country-yearhttp://www.heritage.org/index/explore?view=by-region-country-yearhttp://www.keia.org/Publications/KoreasEconomy/2010/LeeJK.pdfhttp://www.keia.org/Publications/KoreasEconomy/2010/LeeJK.pdfhttp://traveltips.usatoday.com/universal-studios-theme-parks-3693.htmlhttp://traveltips.usatoday.com/universal-studios-theme-parks-3693.htmlhttp://traveltips.usatoday.com/universal-studios-theme-parks-3693.htmlhttp://www.keia.org/Publications/KoreasEconomy/2010/LeeJK.pdfhttp://www.heritage.org/index/explore?view=by-region-country-yearhttp://www.ddr.com/media/docs/2014_2020/DDR2014_2020PresentationSummary.pdfhttp://www.ddr.com/media/docs/2014_2020/DDR2014_2020PresentationSummary.pdfhttp://english.chosun.com/site/data/html_dir/2010/01/21/2010012100281.htmlhttp://www.youtube.com/user/EconFree#p/u -
7/31/2019 International Business Final
42/43
42
http://knowledge.wharton.upenn.edu/article.cfm?articleid=2079[Accessed 16 June
2011].
Korea National Tourism Organization, 2001. Visitor Arrivals, Korean Departures,
International Tourism Receipt and Expenditures. [Online] Available at:http://www.knto.or.kr/english/index.html[Accessed 3 June 2011].
Lyons, J., 2010. Brazil's Surging Currency Figures in Election. [Online] Available at:
http://online.wsj.com/article/SB10001424052748704029304575525843350635582.ht
ml[Accessed 10 June 2011].
Lee, S.H., 2007. A new lifestyle in South Korea: First Weekends, and Now Brunch.
The New York Times - Seoul Journal.
Melo, M., Pereira, C. & Souza, S., 2010. The Political Economy of Fiscal Reform in
Brazil; The Rationale for the suboptimal Equilibrum. [Online] IDB Available at:
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1817184#%23[Accessed 16
June 2011].
Mozee, C., 2008. Move over China: Brazil is largest emerging market. [Online]
Available at:http://www.marketwatch.com/story/brazil-becomes-worlds-biggest-
emerging-market[Accessed 27 May 2011].
OECD, 2011. Tax Policy Analysis. [Online] Available at:
http://www.oecd.org/statisticsdata/0,3381,en_2649_34533_1_119656_1_1_1,00.html
[Accessed 16 June 2011].
Ottens, N., 2010. The Challenges Lula left. [Online] Available at:
http://atlanticsentinel.com/2010/10/the-challenges-lula-left/[Accessed 16 June 2011].
Slob, B. & Wilde, J., 2006. Tourism and sustainability in Brazil. [Online] SOMO -
Centre of Research on Multinational Corporations Available at:
http://somo.nl/html/paginas/pdf/Tourism_in_Brazil_oct_2006_EN.pdf[Accessed 27
May 2011].
Ragir, A., 2011. IMF Cuts Brazil GDP Forecast to 4.1% in 2011, 3.6% for 2012.
[Online] Available at:http://www.bloomberg.com/news/2011-06-17/imf-cuts-brazil-
gdp-forecast-to-4-1-in-2011-3-6-for-2012.html[Accessed 27 May 2011].
RNCOS, 2010. Emerging Medical tourism in South Korea. Analysis Report. RNCOS
press.
http://knowledge.wharton.upenn.edu/article.cfm?articleid=2079http://knowledge.wharton.upenn.edu/article.cfm?articleid=2079http://www.knto.or.kr/english/index.htmlhttp://www.knto.or.kr/english/index.htmlhttp://online.wsj.com/article/SB10001424052748704029304575525843350635582.htmlhttp://online.wsj.com/article/SB10001424052748704029304575525843350635582.htmlhttp://online.wsj.com/article/SB10001424052748704029304575525843350635582.htmlhttp://papers.ssrn.com/sol3/papers.cfm?abstract_id=1817184#%23http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1817184#%23http://www.marketwatch.com/story/brazil-becomes-worlds-biggest-emerging-markethttp://www.marketwatch.com/story/brazil-becomes-worlds-biggest-emerging-markethttp://www.marketwatch.com/story/brazil-becomes-worlds-biggest-emerging-markethttp://www.marketwatch.com/story/brazil-becomes-worlds-biggest-emerging-markethttp://www.oecd.org/statisticsdata/0,3381,en_2649_34533_1_119656_1_1_1,00.htmlhttp://www.oecd.org/statisticsdata/0,3381,en_2649_34533_1_119656_1_1_1,00.htmlhttp://atlanticsentinel.com/2010/10/the-challenges-lula-left/http://atlanticsentinel.com/2010/10/the-challenges-lula-left/http://somo.nl/html/paginas/pdf/Tourism_in_Brazil_oct_2006_EN.pdfhttp://somo.nl/html/paginas/pdf/Tourism_in_Brazil_oct_2006_EN.pdfhttp://www.bloomberg.com/news/2011-06-17/imf-cuts-brazil-gdp-forecast-to-4-1-in-2011-3-6-for-2012.htmlhttp://www.bloomberg.com/news/2011-06-17/imf-cuts-brazil-gdp-forecast-to-4-1-in-2011-3-6-for-2012.htmlhttp://www.bloomberg.com/news/2011-06-17/imf-cuts-brazil-gdp-forecast-to-4-1-in-2011-3-6-for-2012.htmlhttp://www.bloomberg.com/news/2011-06-17/imf-cuts-brazil-gdp-forecast-to-4-1-in-2011-3-6-for-2012.htmlhttp://www.bloomberg.com/news/2011-06-17/imf-cuts-brazil-gdp-forecast-to-4-1-in-2011-3-6-for-2012.htmlhttp://www.bloomberg.com/news/2011-06-17/imf-cuts-brazil-gdp-forecast-to-4-1-in-2011-3-6-for-2012.htmlhttp://somo.nl/html/paginas/pdf/Tourism_in_Brazil_oct_2006_EN.pdfhttp://atlanticsentinel.com/2010/10/the-challenges-lula-left/http://www.oecd.org/statisticsdata/0,3381,en_2649_34533_1_119656_1_1_1,00.htmlhttp://www.marketwatch.com/story/brazil-becomes-worlds-biggest-emerging-markethttp://www.marketwatch.com/story/brazil-becomes-worlds-biggest-emerging-markethttp://papers.ssrn.com/sol3/papers.cfm?abstract_id=1817184#%23http://online.wsj.com/article/SB10001424052748704029304575525843350635582.htmlhttp://online.wsj.com/article/SB10001424052748704029304575525843350635582.htmlhttp://www.knto.or.kr/english/index.htmlhttp://knowledge.wharton.upenn.edu/article.cfm?articleid=2079 -
7/31/2019 International Business Final
43/43
The World Bank, 2011. ISBN: 978-0-8213-7960-8 Doing Busines 2011; Korea, Rep.
Country Report. Washington: World Band Group Press International Finance
Corporation.
The Chosunilbo, 2010. S.Korea's Economic Freedom Ranking Climbs 9 Notches.[Online] Available at:
http://english.chosun.com/site/data/html_dir/2010/01/21/2010012100281.html
[Accessed 16 June 2011].
http://english.chosun.com/site/data/html_dir/2010/01/21/2010012100281.htmlhttp://english.chosun.com/site/data/html_dir/2010/01/21/2010012100281.htmlhttp://english.chosun.com/site/data/html_dir/2010/01/21/2010012100281.html