PEST analysis of Brazil

Topics: Brazil, Amusement park, FIFA World Cup Pages: 11 (3413 words) Published: October 26, 2013

This paper will focus on Legoland theme park company possible expansion in Brazil. I will use PEST framework as a guideline for analysis and other analysis methods, such as Porter´s or Hofsted, if needed. First, paper will analyze the external environment that affects decision making and furthermore, provide some internal environment information about Legolands strengths and weaknesses. Brazil is South America's most significant country, an economic giant and one of the world's biggest democracies, with fifth large population in the world (News.bbc.co.uk, 2013). In coming years Brazil will host two huge sport events, World Cup in 2014 and Olympic Games 2016, which have obviously some impact in PEST- analysis areas. When speaking about Brazil it is important to know about Jeito Brasileiro, the Brazilian way of doing things. In business that means that Brazilians prefer go around the rules when an obstacle presents (Morrison and Conaway ,2006). Today LEGOLAND has all together six theme parks located in North America, Europe and Asia. Company is not fully owned by Lego Group itself, rather theme parks are owned and operated by the British theme park company Melin Entertainment, which operates in all parts of the world besides South America. Core values that LEGO want to make universal are Creativity,Imagination, Learning, Fun and Quality (Jones and Shaheen, 2013), (Merlinentertainments.biz, 2013).

2.Political environment
According to Ministery of foreign affairs Danmark, Brazil is a federal republic with a federal government divided into three independent branches - executive, legislative, and judicial. The President has executive power (being both the Head of State and Government) although advised by the Cabinet. Legislative power is at the National Congress, while judicial power lies with the judiciary Supreme Federal Court, and the regional federal courts. The country is a parliamentary democracy with a presidential regime and next presidential, congressional, and gubernatorial elections is to be held in October 2014. 2.1 Political Risk

Data from World Bank (2013) shows that Brazil Political risk has changed a lot in the past decade, but now country is politically stable in the long term view. However massive anti-government protests during July 2013 tell that Brazil is currently experiencing a widespread collapse of its infrastructure. According to Paula Ramón (2013) there are problems with ports, airports, public transport, health and education. Brazilian President Dilma Rousseff even proposed a referendum as a way to place political reform in the public's hands.

2.2 Corruption
The levels of bureaucracy and lack of transparency of rules make Brazil a difficult country to do business in. Violations of law and ethical standards committed by representatives of the legislative and executive power are common. The organization Transparency International's corruption index for 2012 ranks Brazil as number 69 (score 43/100) - ahead of Argentina (102), Columbia (94) and Peru (83) but behind Chile (24) and the U.S (19)- of 180 countries (Transparency International, 2013). Corruption was cited among many issues that provoked the 2013 protests in Brazil (CNN iReport, 2013).

2.3 FDI and business establishing regulations
Policy competition to attract investment was “activated” in Brazil by the dramatic success of the 1994 “Real Plan” in cutting inflation and bringing macroeconomic stability to the country (OECD ,2002). Since then FDI inflows have growing tendency as we can see from the chart. Direct Investment totaled US$ 660.5 billion, equivalent to 30.8% of national GDP (Oecd.org, 2012). As stated in Iab.worldbank.org, 2013 foreign companies establishing subsidiaries in Brazil must have at least 2 shareholders. Executive officers of Brazilian companies must be either Brazilian citizens or foreigners who hold a Brazilian permanent visa. To file with the Commercial Registry, the company may pay an additional fee...
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