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'A-Mart' is a department store that provides daily needs, FMCG, includes merchandise such as kitchenware, confectionery, home entertainment, books , furniture, electronics, etc. The first store opened in Victoria on April 24, 1995. It has now 150 stores spread across Australia. With a total revenue of A$ 200 million, 'A-Mart' now wishes to expand in other countries as well, with BRIC nations being the choice.
For expansion in the foreign country, the key criteria considered is the economic growth. Other determinants include economic climate, the market structure, government policies, number of population and the expected growth. The actual number of buying consumers should be taken into account, while expansion. The focus should be on growth and profit. With 'A-Mart', the revenues are stable, the profits have become stagnant. Thus in search of a new market, which will increase the revenue for 'A-Mart' and increase its brand value, it is considering to get established in a foreign country with favorable conditions. Since the US and UK are already established in retail sectors, the company wants to explore the untapped markets of BRIC – Brazil, Russia, India, and China. These nations have lots of opportunities to be explored and with their growing economies, investment in these countries may result in growth and a substantial increase in profits.
The determining factors for expansion are,
(Uduak S. Akpan, 2014)
Along with these, the FDI pattern in the retail industry and the risks and opportunities in each of the BRIC needs to be analyzed.
The enormous growth of the economy is observed in BRIC in recent times and the global financial crisis impact was very less in comparison to other countries. These countries have a large number of affluent middle-class consumers which contribute to a large section of the market.
An overview of BRIC Nations with respect to socio-economic, geographical and environmental characteristics.
3.1 Opportunities
Brazil is the fifth most populous nation and it has the seventh largest economy in the world. The growing demands of marketplace help in the development of the enhanced economic condition. Trade relations are strong with most of the foreign countries. It has a strong banking system and high liquidity. People respond to direct mail marketing offers helping companies to make direct sales and improve brand awareness.
3.2 Risks
In Brazil, the disproportion of economic distribution Provides critical impact on the foreign investors will have markets full of competition. The informal economy in urban and rural area limits the sales potential. The legal and regulatory environment is very supportive in Brazil. Transportation and Logistics are yet to be organized. The rules in Brazil are strict and difficult to deal with issues related to employment or defective products. (Thorton, 2012) (Wade, 2013)
