Global Challenges

Summary

This risk analysis report discusses the risk analysis results of Ideal Tiles Inc., a US based tiles manufacturing company for a market expansion project in two new countries. A qualitative risk analysis procedure is used whereby the political, social and economic factors of the two countries are defined and the extent of the vulnerabilities determined. The attractiveness of each of the two countries is then assessed based on their detailed analysis and the vulnerabilities determined. 

Company profile

Ideal Tiles Inc. Company is a US company based in Tennessee that manufactures tiles and provide floor fittings and coverings solutions to all building and living requirements to the wellness, residential, medical and leisure industries. It manufactures Italian floor tiles and porcelain tiles for flooring and walls for interior design and architecture. Being a medium sized company, Ideal Tiles Inc. markets its products locally in Tennessee and in neighboring states including Arkansas, North Carolina, Kentucky and Georgia. 

Project scope

In this market expansion project, Ideal Tiles Inc. Company plans to extend its operations and sell its products abroad in two new countries. The company plans to invest in France and Brazil, a developed and emerging country respectively. In France, the company plans to market and sell porcelain tiles for flooring and walls. In Brazil, the company plans to market and sell both Italian floor tiles and porcelain tiles. The focus in France will be targeting the interior design and architecture industries that are already established and have a high demand for the luxurious custom made luxurious porcelain tiles for both floors and walls. Brazil is an emerging market and so corporate profits for the architecture industry are likely to grow as fast as the economy. Investment in both France and Brazil is intended to introduce Ideal Tiles products to new markets and increase revenues. 

Risk factors in France and Brazil

The political system in France is very supportive as the government considers foreign investment as a way of stimulating growth and create jobs. There are simple investment regulations and the government is currently offering financial incentives for foreign investors. However, the French mission to end Islamist domination in Mali has raises concerns on security threats by al Qaeda-linked militants. Economically, France has survived through the economic crisis mainly because of domestic consumer spending resilience, a large public sector and minimum exposure to the downturn of global demand. It is also a member of the European Union and firms owned or controlled by American citizens who have some legal residence of the EU will be considered as EU residents in France. France has high security levels ideal for investment (Irish, 2010). 

Brazil is an emerging market that is experiencing rapid industrialization and has a high level of economic growth. The country has a stable political and economic environment. The levels of political risks in Brazil by the end of 2013 were far much lower than a decade ago and in the Latin America region. However, the country faces corruption, bureaucracy and high taxes.  Some of the tax rules are complex and the government has a slow legal process. Economically, Brazil is relatively open market for foreign companies and the market size is growing rapidly. There is an increasing population of skilled labor the country has weathered the economic recession well and has maintained a continuous growth momentum. However, high tax and interests rates are a key concern for any foreign investor.  Socially, personal security and crime rate is a major concern. However, crimes have been reduced in major cities that our company is planning to start operations in (Alves, 2013). 

The political climate in France is ideal to market and sell our products that will include porcelain tiles for flooring and walls. The simple investment regulations and financial incentives by the French government will make it easy to explore the French market. The EU membership will also increase market scope for our products and it will then be easier to venture into a new market in the EU region. With the high security situation in France, terrorist threat is not a major concern. The investment analysis of France will therefore focus more on the current economic and market cycle and what will favor the interior design and architecture industries (Irish, 2010). 

Brazil is also an ideal country with a large market for Italian floor tiles and porcelain tiles. With a now more stable political situation, it will be wise to invest in the new market. The strong economic growth will translate into higher investment returns more so in the architecture and interior design industries that are rapidly growing. With the capacity to resist the economic external shocks like the recession, the survival of a foreign company in Brazil is ensured. The growing social stability is also complementing the already economic stable environment, which is ideal for investment (Alves, 2013). 

Conclusion

In conclusion, the key factors to look at while expanding markets in France and Brazil will be economic factors that are essential for the growth of market and revenues for Ideal Tiles Inc.’s products. France is a developed country that has one of the largest and most industrialized economies in the world while Brazil demonstrates exceptionally high economic growth.  Because the company is targeting the interior design and architecture market, the economic stability of these two countries will ensure that company operations run smoothly. 

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