Strategy to Move from Exporter to Multinational Organisation

Analysis of PESTEL factors’ influence on BRF’s domestic and international* strategies:

*Strategy to move from exporter to multinational organisation

Political

Domestic:

• President Silva encouraged the BRF merger, demonstrating governmental support to increase national brands’ global success.
• The raised the cost of business, caused by corruption, poor infrastructure and excessive regulation, is limiting the effective competitiveness of exports (CS-4)

International:

• The Middle East’s political volatility determines that it is not a viable option for expansion (CS-11).
• Corruption and Government interference in the Consumer Goods sector will determine BRF’s ability to expand elsewhere. High international trade tariffs and tax regulations could also negatively impact BRF.

Economic

Domestic:

• Positive economic growth, investment capital and disposable income growth (CS-2).
• Brazil’s strong currency threatens to undermine manufacturing and export competitiveness.

International:

• The proximity and successful implementation of distribution networks in Argentina and Chile show that Latin America is a fruitful option for BRF internationalisation.
• China’s ability to match only 4% of consumer demand creates high opportunity levels for BRF
• Product costs too high for African expansion (CS-11)

Sociological

The most influential factors were addressed within Stage 1’s Wiki (Appendix 1)

Further factors include:

• Low unemployment and growing middle-class increase the market size for BRF’s mid-market and premium priced product mix
• Social media plays a critical role in influencing the public opinion. BRF can leverage this trend to build efficient marketing network.

Technological

• BRF employed a sophisticated (IT) system to provide a consistent study and analysis of the market – this network ensures up-to-date competitor information to provide flexibility for BRF to adapt their product and pricing strategies (CS-6).
• However, further focus should be placed on using technology to lower production costs and to connect with consumers (eg. social media) for optimum operations outputs.

Environmental

Domestic:

• Brazil has the world’s largest renewable water supply and significant room to expand: currently utilizing only using 50 of its 300-400 million hectares of arable land
• BRF’s makes environmental investments to mitigate their environmental impact, including Investments in Forestry Plantations (BRF-46).

International:

• Paris Climate Agreement (2016) will increase the financial impact on BRF’s production processes. Environmental pollution (air, land and water) regulations must be tightened under the agreement.
• Latin America’s climate is most similar to Brazil and therefore easier to transfer BRF’s current agricultural capabilities making it a viable expansion option.
• Africa’s arable land equates to only 9.6% thus limiting agricultural expansion (Gillison, A).

Legal

Domestic:

• Anti-trust law limits domestic market growth for BRF

International:

• Intellectual property and patent laws will impact BRF if protection is limited.
• The impact of labour laws – e.g. minimum wage and working hours

Opportunities

• BRF’s technology provides a greater customer service and thus will increase brand loyalty
• Latin America provides a viable international expansion route. The proximity, cultural and climatic similarities will enable BRF to transfer their domestic experience.
• China’s inability to meet consumer demands.
• Economic growth increases consumer spending

Threats

• Online consumer buying behaviour could threaten the existing physical distribution infrastructure.
• Paris agreement (2016) could threaten existing production processes
• Anti-trust law limits domestic growth.

Word Count: 499

References:

Bell, D. Kindred, N. (2012) Brasil Foods, Harvard Business School