Argentine Market Essay
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The current status of the Argentine Market has remained open to foreign investments. The Argentine market offers a wide array of opportunities which serve as a great factor for attracting American and other foreign investors to invest (“Argentina,” 2007). To invest in the Argentine market, foreign business entities must always be keen the position held by Argentine economists and business people in entering into partnerships with foreign corporations. The government of Argentina, along with the local business entities within the country, has always been protective of the economic status of the Argentine market.
As such, in order to enter the Argentine market and to be able to convince local business entities in forging business partnerships, foreign corporations must realize the need to stress the advantage which can be gained by local Argentine corporations. One of the most important concerns that are to be taken into account is the Argentine government’s policies for protecting its economy. Over the past years, the government of Argentina has worked hard enough to ensure the stability of the Argentine peso as against the United States currency.
This move was made to protect local corporations against hyperinflation.
In addition to this, the government has also adopted an intensive market-based policies which opened its economy towards a more comprehensive and competitive market (“Argentina,” 2007). On the other hand, aside from economic concerns, foreign business entities must also become aware of the cultural and social aspects that are inherent to the Argentine market. In order to successfully penetrate the Argentine market, local producers and consumers as the primary actors in the economy must be regarded with great importance in making deals in the Argentine market.
A brief example of taking into consideration the social and cultural aspects of the Argentine market is the strategy employed by Walt Disney in venturing in the Latin American market. In entering the Latin American market, the Walt Disney Company penetrated the Latin American audience by understanding the people through their culture. As such, Disney produced stories and movies that are relevant to the Latin American culture and those which reflected the lives of the Latin American people (“Disney Latin America,” n.
d). In general, to be able to capture the consumers in the Argentine market, it is important for foreign business enterprises to forge contacts with local entrepreneurs which can briefly guide foreigners in handling local issues and to be able to know the relevant details necessary to understand the culture and needs of the local consumers in Argentina. 2. Identify two of Argentina’s most successful companies and provide an explanation for their successes.
Compare and contrast the strategies of those two organizations (and with a US company if you wish). Two of the most prominent and successful companies in Argentina are Razzani – Vera S. A and the Comidas Gaucho. Both companies are locally owned and operated and at the same time, both were able to sustain the growth of the company with very minimal help from foreign entities until such a given time. Razzani – Vera S. A was an Argentine company founded in 1952 by an Italian immigrant, initially as a supplier of candies and cigarette product into “kiosks.
” After several years of operation, the company consistently grew and the need for reinvestment and expansion became more attainable. Since the inception of the company in 1952, the owners and partners of Razzani – Vera S. A operated independently. Instead of accepting assistance from banks and other companies which viewed Razzani as potential clients and partners, Razzani stood independently, refusing offers for financial assistance. In 1994, under new management, Razzani remained to adhere to the company’s old policies thus avoiding incurring scarce debts.
In this way, Razzani was able to successfully grow and maintain the business with a good credit reputation which allowed satisfactory collection for the company (“Razzani – Vera S. A,” n. d). However, in 1996 at the new changes in the company’s management, the new management resorted to more aggressive plan. In order to administer the new plans set forth by the new management and to fund technology investments, the company availed of mortgage loans from the United States (“Razzani – Vera S. A,” n. d). Alongside the growth of investments in the company, a deficit was also experienced by the new management.
However, Razzani – Vera S. A was still able to cope with such difficulties and were able to procure an alternative solution to strengthen the company’s business. On the other hand, Comidas Gaucho is a local beef processor in Argentina. Comidas Gaucho operated the same way as the start of the Razzani – Vera S. A. Comidas Gaucho opted to run its business with the least intervention and aid possible from foreign entities. The company also showed its reluctance to let foreign enterprise penetrate their business by making ties and alliances.
Gaucho’s decline in the offer by American company Great Plains Food as a business partner is an indication that Gaucho rather chose to operate independent from foreign firms (Rarick, n. d). Despite Comidas Gaucho’s refusal to make partnership with the American company Great Plains Food, nonetheless Gaucho was able to maintain the stability of its business by adhering to the old customs and policies that were inherent to the corporation. 3. What are the challenges facing private firms in Argentina? Are there any advantages for private firms in Argentina?
What are the advantages/disadvantages for state-owned firms in Argentina? The Argentine market offers a vast set of opportunities both for foreign and local business enterprises. However, in order for foreign corporations to make successful business launch in Argentina, there are certain factors that should be given ample consideration by entrepreneurs. One of the most important things that foreign businessmen should do before investing in Argentina is to study the historical background of the Argentine government and market which is essential in determining matters that are crucial to the people in Argentina.
One of the challenges that will be encountered by foreign investors wishing to enter the Argentine market is to penetrate the laws and policies set forth by the government. Dating back from the earlier years, the Argentine government has always been protective of its local economy (Di Tella and Vogel, 2004). Thus in order to penetrate the Argentine market, foreign investors must provide the government, local entrepreneurs and consumers opportunity for growth and a glance to the possible benefits that can be attained from foreign partnerships.
In addition to Argentina’s political background, foreign investors must also be keen in understanding the culture innate with the people in Argentina. For investors to be able to gain the trust of the consumers, they must cope with the customs, beliefs and experiences that are of great importance to the people. Though these factors provide tough challenges for foreign investors, once the Argentine market is penetrated, there are numerous opportunities open to be tapped and developed that are beneficial not only to investors, but as well as the consumers.
In Argentina, investors can penetrate various business aspects including franchising, security services, specialized services, legal services, transportation, aviation, education and training, engineering and architectural fields, finance, insurance, healthcare and the tourism services. Within these fields, there is a vast room for development which can greatly benefit consumers and local and foreign business entities. However, although foreign involvement in the Argentine business sector may be greatly advantageous to the country’s economy, state-owned business enterprises also hava advantages.
State control over business corporations can standardize business process thus eliminating excessive competition among various privately owned business entities. This in turn may provide the people and the market with vast opportunity for improvement. However, on the disadvantage, in state-owned and controlled corporations, the state will shoulder the entire expenses needed to finance development and growth projects in order to maintain the stability of the company (Hill, 2007, p. 493).
Failure to provide the financial needs of the company, the state may resort in acquiring debts from international organizations. And in such cases, the government may reach the point of dependency towards in international financial institutions, which in the long run may become detrimental to the growth of the company and the country as well. 4. What are the mechanisms for foreign investment in Argentina? Is there an ideal strategy for foreign investment there? During the past years, foreign investment has always remained open in Argentina.
As such, the growth in Argentina’s Gross Domestic Product in the past years can be attributed to foreign investments made with the Argentine market. In the old Argentine decree governing the market and economic policies of Argentina, foreign investors have been made to enter the Argentine market freely with fewer restrictions imposed. In addition to this, foreign and local investors were provided with equal rights in establishing independent businesses and equal rights in the acquisition of new business enterprises (“Argentina,” 2007).
However, changes in the policies implemented in Argentina provided more restrictions which resulted to a decrease in foreign investment. One of the changes enacted was in June 2003 when the government of Argentina passed a legislation which limited foreign business enterprises from owning “cultural goods. ” These “cultural goods” included the media sector and Internet providers (“Argentina,” 2007). Nonetheless, despite these controls that were set by the government, deregulation in the economy and privatization boosted the foreign investment in Argentina (“Australia – Argentina Relations,” 2008).
The vast richness of raw opportunities waiting to be tapped was the attraction of foreign entrepreneurs in investing in Argentina. The prospect of diversification lured most of investors to penetrate Latin American countries, Argentina in particular. In addition, market inefficiencies during past Argentine governments became an asset rather than a liability to the Argentine market. These market inefficiencies practiced by previous governments was seen as raw resources waiting to be tapped and developed (Deal and Rosso, 2001).
Nearly during the last two decades, alongside the changes made by the government in Argentina’s trade and import policies, the Argentine market made a significant improvement in reducing economic barriers. New trade policies were able to decrease confusion for foreign investors, which resulted to an increase in foreign investments. In particular, during 2003 import exchange controls were abolished and restrictions on certain aspects of foreign trade were removed. Such actions helped in stabilizing the Argentine currency and kept it in pace with other foreign currencies (“Argentina: Foreign Trade Barriers,” 2004).
However, there are no such things as “ideal” in foreign investment. To become successful in venturing in foreign investments, it is only essential to know the necessary details and the factors inherent within the local economic arena. It is important that both foreign and local business entities are adept in understanding market behavior and learn how to adopt in the society and culture of the consumers involved. 5. What challenges would Argentine firms likely face when attempting to build brands at home (or abroad)?
What challenges will overseas firms face when trying to build brands for the Argentine market? In every business enterprise, there are different challenges that are inevitable to foreign and domestic business investors. In the international arena, the competition among different emerging markets is innate and necessary. In order to expand businesses and firms, tough competition must be faced and surpassed (Grosse, 2003, pp. 2-4). In a globalized competition, market expansion is always a step taken by emerging countries. However, success in expanding the market is dependent on certain factors.
First, the type of industry that is pushed for expansion should be relevant and in demand for most countries. Second, the country itself is important in determining the success of market expansions. For example, more developed and powerful countries are more likely to succeed in expanding their market towards less developed countries compared to the possibility that smaller and less able countries will be successful in competitively expand their market towards other foreign territories. Third, the target market for expansion is also relevant in assessing the necessity for expansion (Grosse, 2003, p.
3). Argentina, being a rather less powerful country in the international arena is more likely to have difficulties in penetrating foreign markets. There are more technologically advanced service providers and producers that are more competitive than Argentina, coupled with the reality that politics is an integral factor in gaining an upper hand in the economic playing field. However, in terms of building branches locally, Argentina will relatively gain an advantage as compared to foreign investors entering the Argentine market.
Given the distinct economic, political and social background of Argentina, local consumers will become rather more comfortable and enthusiastic to patronize the brands that they have been accustomed with. In addition, Argentine enterprises are more focused on retail sales and small to middle enterprises which people in Argentina can afford better. Thus, Argentine business enterprises can be more successful in building local branches rather than penetrating foreign markets. On the other hand, for foreign investors wishing to enter the Argentine market, same challenges will apply.
The social and cultural background of the Argentinean consumers will serve as distinct barriers in entering the Argentine market. Although in the past years, foreign investments in Argentina have been successful, it will still be relatively harder for foreign entities to penetrate the Argentine market as long as there are still local small enterprises that can cater better to the needs of the local consumer more affordably. In addition, local enterprises can better cope to the cultural needs and preferences of local consumers.
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