Global Market Research & Analysis Brazil

Brief
Base in the U.S.: McCarran International Airport.
The city and country selected: San Paulo, Brazil.
Introduction
Brazil remains one of the most influential countries in South America. Its economy has been rising over the last few years and the country continues to be regarded as one of the largest democracies in the world. The country has in place a democratic federal republic form of government and its current president is Michael Temer. It is important to note that although the country still experiences a wide gap between the rich and the poor, various policies have been adopted by the government in recent times to remedy the situation. With a population of 208 million, the country ranks as number 5 in a country comparison index - according to population comparison estimates done by the Central Intelligence Agency (CIA) - effectively making it one of the most populous countries in the world.
PEST Analysis
In basic terms, “PEST analysis concentrates on four important factors in an environmental scan – Political, Economic, Social and Technological factors” (Walters, 2006, p. 208).
Political Factors
It is important to note, from the onset, that corruption has been an issue of concern in the country. Subsequent governments have attempted to slay this particular dragon but it seems the political will to do so has not been strong enough. The country has not experienced serious political turmoil/instability in recent times but it should be noted that it remains prone to politically instigated violence. There have been instances of protesters clashing with the police in the streets but the situation has not spiraled out of control.
Economic Factors
Being the 8th largest economy in the world and thanks to a large population and a huge workforce, the country has potential for growth. Data from the Organization for Economic Co-operation and Development (2018) indicates that the county’s economy has started to rebound after experiencing a decline in 8 consecutive quarters. Last year’s foreign direct investments figure for the country fell by 10% in comparison to that of 2016 (Trading Economics, 2018). However, in comparison to countries in the same region, the FDI figure for Brazil is still impressive. The relevance of FDI inflows cannot be overstated to the country especially when it comes to the enhancement of productivity growth.
Social Factors
The country still has a significant gap between the rich and the poor, but the government has in recent times been battling the income inequality by adopting a fiscal policy stance. The country has a rich ethnic and religious composition, and Portuguese is both the most spoken and official language. It is important to note that although the country has one of the largest populations in the world, the population growth rate has been slowing since the 1960s (CIA, 2018). This has been attributed to the country’s “rapid fertility decline since the 1960s” (2018). The median age of the country is 32 years (for both sexes), and the urban population is estimated at 86.2% of the country’s total population (CIA, 2018). It should be noted that the company has a stably growing middle class.
Technological Factors
In recent times, the country has experienced what appears to be a technology boom, after a slump. In essence, the country’s IT sector is projected to experience significant growth in the current year. Heng, Heermann, Samaranayake, and Sath (2018) point out that there has been sustained push for the setting up of technology centers across Brazil by elected officials. This will further promote the country’s standing as far as technological advancement is concerned.
Five Forces Analysis
In conducting the Five Forces analysis, within Brazil’s airline industry, we shall be seeking to understand the various factors that are likely to affect the airline’s profitability. In that regard, therefore, this analysis will come in hand as a strategy tool.
Competitive Rivalry
Some of the major players in the Brazilian airline market include Latam and Avianca Airlines. Others players include Virgin America, JetBlue, Gol and Azul Airlines. It is important to note that the country’s airline has in recent times been focused on consolidation. This is more so the case given that the two largest players are a consequence of mergers, rebranding, and acquisitions - with Latam having come about after Brazil’s TAM merged with LAN Airlines from Chile; and Avianca (previously OceanAir) having been a consequence of a rebranding undertaking after its parent company merged TACA Airlines with its Columbian Airline company named Avianca. Going into the future, we are likely to have very few large airlines operating in this space – perhaps two or three. These will largely compete in the traditional competition modes, i.e. low fare and full service. We shall avoid competing along those categories.
Power of the Suppliers
It should be noted that unlike is the case in other industries, supplier power in this particular industry is significant. The situation is no different in Brazil. This is more so the case given that the industry’s three primary inputs, i.e. labor, aircraft body and parts, and fuel are often significantly impacted upon by forces beyond the industry’s control. While labor unions in Brazil have significant sway when it comes to bargaining for better pay and allowances, fuel price is impacted upon by unpredictable market forces, and aircraft body and parts come from Boeing and Airbus - effectively meaning the industry has to choose from only two suppliers.
Power of the Buyers
Price wars are commonplace in this industry, with the other players in the industry (apart from the big two) seeking to compete on the basis of cost. It should also be noted that thanks to multiple ticket booking channels, customers effectively have the motivation to engage in price discovery. Currently, online ticketing and distribution systems are rather popular and it seems intermediaries are slowly being edged away.
Substitutes
At present, the industry is under no direct threat from substitutes. This is more so the case for international flights.
Barriers to Entry
It is important to note that the industry is tightly regulated and, therefore, gaining the approval of regulators could be an intensive and time consuming process. Further, the capital outlay could be significant, especially with the niche we intend to target.
City Selection
Brazil’s three largest cities are: San Paulo, Rio de Janeiro, and Salvador. San Paulo happens to be the most populous city. Also, in addition to being the country’s economic powerhouse, the city also happens to have the most amazing nightlife and has a large number of cultural centers and museums. In that regard, therefore, San Paulo offers the best market potential for our proposed scheduled air service. Our base city in the U.S. will be Las Vegas. In addition to being an accomplished economic hub, Las Vegas has a global reputation for its rich nightlife. It offers a wide range of entertainment options to fun lovers, from nightclubs to theme parks and gambling spots. Our target being fun loving young travellers, San Paulo seems to be the ideal place to set up operations. The cities will complement each other in that our target customers will find it fun to shuffle between two major entertainment hubs. As it has been pointed out elsewhere in this text, young urban professionals are known to be fun loving and they constantly look for ways and means to ease the pressures of work during the weekends or when on holiday. Offering them the convenience of shuffling from their work cities to a place they can relax and spend their hard earned cash is likely to be a mutually beneficial engagement.
Airport Analysis
Guarulhos International Airport in San Paulo not only offers the appropriate infrastructure, but it also provides the right set up to accommodate our international airline. Our operations are not likely to be affected by the airports 45 operations/hour slot restrictions. Guarulhos has in place a total of three passenger terminals, with one terminal (i.e. terminal 3) dedicated solely for international flights. There are no long-haul aircraft restrictions, with the international flights terminal being able to handle a wide range of aircrafts including, but not limited to Airbus A380. It should also be noted that plans are in place to further enhance the infrastructure at the airport, with a multimillion maintenance hangar expected to be built within the next two years, in what is a partnership between American Airlines and Guarulhos International Airport.
Conclusion
Young urban fun-loving professionals work hard and want to have fun so as to rewind. They are accustomed to formal settings and want to break away from the said norm. On the other hand, hip and fun loving persons who include individuals working in the creative industries want a setting that is not only artistic but also non-restrictive. Our airline will offer what the big-boys cannot offer. It will offer an accommodating environment in every sense to this target clientele – from stylish designer-clad flight attendants to a selection of inflight music categories that reflect their tastes. It is this innovative spirit that will set us aside from the other players in the industry.
References
CIA. (2018). South America: Brazil. Retrieved from https://www.cia.gov/library/publications/the-world-factbook/geos/br.html
Heng, A., Heermann, J., Samaranayake, C. & Sath, L. (2018). Technology Trends in Latin America. Retrieved from https://cs.stanford.edu/people/eroberts/cs181/projects/2010-11/TechnologyTrendsLatinAmerica/brazil.html
Organization for Economic Co-operation and Development. (2018). Brazil – Economic Forecast Summary (November 2017). Retrieved from http://www.oecd.org/eco/outlook/brazil-economic-forecast-summary.htm
Trading Economics. (2018). Brazil Foreign Direct Investment. Retrieved from https://tradingeconomics.com/brazil/foreign-direct-investment
Walters, D.J. (2006). Operations Strategy. New York, NY: Thomson.