Taj Group is entering the Brazilian hospitality industry by establishing strategic partnerships with local players. Brazil is experiencing significant investment in the hotel sector ahead of major sporting events in 2014 and 2016. A strategic partnership allows Taj to gain market access and share marketing activities while reducing risks compared to wholly owned operations. Taj will selectively target high-end properties in key cities like Sao Paulo and Rio de Janeiro under its Taj Exotica brand. The partnership model provides opportunities for cooperation on sales, promotions, and staff exchanges to establish Taj's presence in Brazil. Market research will investigate the optimal locations, facilities, and marketing approach needed for success. Neighboring countries also offer investment prospects, though some have less favorable conditions than Brazil.

1. Hospitality Industry
Taj Group entering
Brazil

2. Why Brazil?
•
Major Upcoming Global Events
•
FIFA World Cup in 2014
•
2016 Summer Olympic games in Rio de Janeiro
•
Brazilian government expects to invest $ 106 billion in the preparation of the
major events
•
Increased spending by tourists, growth in employment, construction
•
Major infrastructure will be through Public-Private Partnerships under Brazil’s
Growth Acceleration Program
•
Past events in Brazil:
•
Hosted World Military Games & Pan American Meccabi games in 2011
•
FDI in Brazil surpassed US$ 70 billion in 2012, becoming 4th major global FDI destination after US,
China & Hong Kong
•
Rio+20 Global Environmental Sustainability Conference in 2012
•
Hosted World Papal Day & World Youth Day in 2013

3. Why Hospitality?
Increased
tourism &
promising
business
growth rate
Large-scale
international
events set to
happen;
resulting in
higher
demand for
hospitality
REVPAR
(revenue per
available
room)
increasing
YoY since
2005
Outdated
hotel
infrastructure
& facilities
need to be
refurbished in
order to live
up to the
required
standards
“Brazilian
hotel industry
is undergoing
very positive
development”
– Brazilian
Tourism
Ministry

4. Historical factors of Brazil
Brazil was
discovered
by
Europeans
in 1500
From 1930
to 1945 the
country was
subject to
civilian
dictatorship
of Getúlio
Vargas
Declared its
independen
ce from
Portugal in
1822
Became a
Portuguese
colony and
remained
so for over
300 years
A federal
republic
was
proclaimed
in 1889
Democracy
was
restored in
1985
In 1964, new
administration was
established by
military;
considerable
economic growth
and development
was achieved
during the next 20
years

5. Favorable past Factors
Brazil overcame international economic crisis in 2008-9 ; emerged as a stronger
and attractive business destination
First Latin American country to have emerged from the international recession
Prompt reaction by government to crisis , by implementing anti-cyclical
measures to sustain the consumption of durable goods and the flow of credit
Highly diversified economy and diverse trading partners, as well as a solid
financial system
Successful long-term joint public and private growth initiatives in Brazil

6. Geographic factors
•
World’s fifth largest country, occupying an area of 3,287,000 square miles
•
Borders all South American countries except Chile and Ecuador
•
Comprises 26 states and the Federal District of Brasilia, the capital city
•
Five main geographical regions:
o
o
Northeast (East from 46 west Longitude & north from 16 south latitude)
o
Southeast (Coastal states south of the Northeast region)
o
South (State of Paraná southwards)
o
•
North (Mainly Amazon basin)
Central-West (States of Mato Grosso do Sul, Goiás & the Federal District
Over half of Brazil’s landmass lies at about 650 feet above sea level, but only a
fraction of that rises above 3,000 feet

7. Climate & Regional Trends
Climate in Brazil
•
•
•
South - experiences occasional below zero temperatures
North - hot, humid and rainy
Central Plateau - the higher altitude keeps temperatures down
Brazil does not suffer from earthquakes and hurricanes, but rainstorms, drought and frost do occasionally
cause considerable damage
The country boasts some spectacular scenic beauty, particularly along the coastline
Regional trends in Brazil
•
Brazil is experiencing investments in the hotel sector in all regions.
•
Hotel investment projects Primarily focus on the North-eastern part of Brazil, accounts for 48. 2% of new
investment projects and 83.3 % of the invested capital
o
Large volume of public and private investment and increase in hotel demand
o
More than 40,000 rooms required to satisfy the demand during 2016 Olympics
o
Sao Paulo’s current market situation is favourable for investors and owners of hotel units in the city
o
Growing secondary market for condo-hotel rooms; lucrative way to invest in the city’s industry during the
next few years

8. Favourable Cultural Factors
Majority of
Brazilians are
of European or
African descent
Mixed background
of Portuguese,
Italian, German,
Japanese, East
European and
African
immigrants
Major cities
support cultural
institutions
Moderately
maledominated;
Gender
inequality is a
major concern
Social Structure
Restaurant entertainment
prevails over home
entertainment
Giving a gift is not required
at a first business meeting;
instead, buy lunch or dinner
Leisure and recreational
activities take place
mainly outdoors, taking
advantage of favorable
climate ; many clubs offer
extensive sports and
social facilities
Favourable factors

9. Comparing Hofstede’s cultural
dimensions of Brazil and India
•
Hierarchy is respected, decision-making process is fairly limited and done by select group of high-ranking
officials
•
Collectivist society, while doing business in Brazil it is important to build up trustworthy and long lasting
relationships
•
Moderately ambitious society, avoids conflict, consensus within parties important
•
Adopts strict rules, laws, policies and regulations in order to avoid uncertainty unlike India
•
Only non-Asian nation amongst the long-term oriented societies

10. General Thumb Rules for Doing Business
Be prepared to commit long term resources (both in time and money) toward
establishing strong relationships; This is the key to business success
Make appointments at least two weeks in advance; Avoid improvised calls to
business or government offices
Some regions have casualness about time and work; minor delays are
accepted
Business meetings normally begin with casual chatting; host decides when
it is time to talk business
Shake hands for hello and goodbye; use good eye contact; when leaving a
small group, be sure to shake hands with everyone present
First names used often, but titles are important
Music and long, animated conversation are favorite Brazilian habits;
Brazilians enjoy joking, informality, and friendships

11. Political and Legal Environment
Federal republic has three independent branches: executive, legislative and judicial
Federative republic has 26 states and a capital district; vigorous multi-party system with
20 parties represented in its Congress
Executive branch headed by President; oversees head of executive departments
Legislative power is exerted by a National Congress consisting of a Senate and a
House of Representatives
Judicial branch consists of a system of federal, state and local courts; headed by the
Federal Supreme Court
All corporations’ setup in Brazil is guided by civil law , which dates from 2002

12. Regulations for establishing business
All the properties located in coastal
area are subject to payment of
specific taxes called foro and
laudemio
Foro is an annual tax to the use of
the property and is levied on the rate
of 0.6% over the value of the right of
use
Laudemio is paid when the right of
use of the property is transferred
and is levied on the rate of 5% over
the value of the property buildings
and improvements
The National Monetary Council (Conselho
Monetário Nacional - CMN) is the
exchange control and foreign investment
authority; all the foreign investment
guidelines must be approved by it

13. Political Risk
•
According to Transparency International in the 2013 Brazil ranks at 72 in
terms of corruption index throughout the world
•
Brazil has faced high profile corruption charges which have led to delay in
infrastructure delay for football world cup of 2014
•
FCPA compliance has been strictly enforced on any foreign companies
establishing their business in Brazil
•
A new Brazil Clean Companies Act has been approved by the Brazilian
government in order to implement anti-bribery laws in a more stringent
ways and this new law will be applicable from January 29, 2014

14. Trade Barriers
•
Ease of Doing Business Rank: 130 out of 183
•
Import Tariffs
o
o
Industrialized Product Tax:- Levied on domestic and imported manufactured
goods.Government levies IPT rate by determining how essential the product may be for the
Brazilian end-user.
o
•
Import Duty:-Federally mandated product specific tax levied on Cost, Insurance, Freight basis.
Ranges from (10 – 35) %
Merchandise and Service Circulation Tax:- value-added tax applicable to both imports and
domestic products. Tax is levied on both intrastate and interstate transactions and is assessed
on every transfer or movement of merchandise. The rate varies from 7% to 18%
Import Requirements and Documentation:- Register with Foreign Trade Secretariat

15. Trade Barriers (Cont.)
•
Since 2000,Government has made an allowance for temporary importation of products that are used
for a predetermined time period and then re-exported
•
India signed a framework agreement with MERCOSUR17 in June 2003. The India Mercosur PTA
entered into force on 1st June 2009 under which 450 items from each side will have duty reductions
of 10% to 100%
Compliance Concerns
•
Lacks “Place of Business”:- Brazil’s strict requirements stifle the establishment of ground teams or
pop-up operations
•
Corporate Tax Filings:- different categories of indirect taxes, both federal and state
•
Employment Law:- Complex national-to-foreign worker ratio requirements, unemployment insurance
regulations, social security taxes, termination restrictions and payroll laws
•
FCPA Regulations:- Strict regulations to provide more security to investors and help avoid
reputational damage

16. Strategy to Enter the Country
Market Entry
Strategy: Strategic
partnership with
local players
• Strategic partnership route to enter Brazil by Taj Group
wherein marketing alliance with big local players/developers in
key market would bring substantial value to the table.
Reasons of
choosing
• JV as the preferred entry mode since it gives the opportunity to
establish a business operation in a foreign country where WOS is too
expensive, risky or not feasible due to other reasons.
• By choosing a JV, companies can better overcome these challenges and
reduce transaction costs (Zang and Wang, 2006).
• Lack of market information and communication system

17. Advantages of mode of Entry
Reach out
their
customers in
their market
Undertake
certain
marketing
activities and
conduct road
shows
Co-host
certain events
at trade fairs
and other
international
forums
Have
reciprocal
reservation
services and
loyalty
programmes
Undertake
food
promotions
and talent
exchanges
with each
other
Have overall
exchange of
ideas and
information

18. Details of Mode of Entry
Selectively enter key gateway
cities around Brazil (Sao Paulo,
Rio de Janero, Salvador etc.) and
look at opportunity only in high
end of the market, under the Taj
Exotica Resort and Spa Brand.
Sign a strategic marketing
alliance with renowned hotel
group likes of Atlantica Hotels
International (Brazil) or Carlson
Rezidor Hotel Group
Assist JV partner in exchanging
sales leads and conducting
roadshows across India and
Brazil.
Several partnerships with
international and domestic
airlines for cross promotions with
key customers and package tours
To diversify its presence in the
hospitality business, venturing
into airline catering, operating
private jets and yachts, service
apartments, spas and wildlife
lodges in Brazil in future course
of time.

19. Market Research: Objectives
Location in Brazil? Why?
Stakeholder Information(partners, competitors etc.)
Naming of the hotel for Brazil
No. of rooms while 2016 Olympics
Proper mix of Marketing? Which dimension should be focused more?
Other facilities needed in hotel
Availability of manpower

20. Information Gathering
General Information about
the country: 2 or more data
sources for secondary data
to avoid dependency
Legal Information: Various
laws will be available to us
from cited secondary
sources
Competitive Information:
From various researches,
the exact industry situation
can be found
Secondary Data
In-house: Sending
higher management staff
to Brazil for hands-on
experience; main
purpose is to interact
with local experts and
gather information from
their experience
Outsourcing:
information about the
ultimate consumers will
be outsourced to local
research agencies which
can conduct research
based on our
requirements
Primary Data

21. Methodology
• Investigating industry in
India and extrapolating
to Brazil’s industry
• Estimate reasonable
magnitude and broad
overview of the industry.
1. Macro “topdown” approach:
2. Micro “bottomup” approach:
• Future demand is
calculated with the help
of specific research on
micro elements
• Converging macro and
micro data points to assess
the markets’ real
opportunities over the next
decade which will be helpful
in decision making
3. Reconcile
output:

22. Entry Into Neighboring Countries
 Brazil
is surrounded by 10 countries: Argentina, Bolivia, Colombia, French Guiana,
Guyana, Paraguay, Peru, Suriname, Uruguay, and Venezuela
 Best
mode of entry; Foreign Direct Investment
 Good
 In
foreign investment prospects: Peru, Colombia and Argentina
comparison, countries like Bolivia, French Guiana, Guyana, Paraguay,
Suriname, Uruguay, and Venezuela do not have good prospects for foreign
investment

23. Favorable Conditions
Pent-Up Demand - decades of
unsatisfied demand for real
estate, along with falling cost of
capital, rising incomes, increased
corporate activity and travel
Economic Catch-Up globalization, technology
diffusion, instantaneous capital
flows, and political changes have
reduced the economic
development cycle times
Real Estate Upheaval - relative
lack of long-term commercial
debt financing constraints lead to
recycling of functionally obsolete
real estate, including hotels
Emerging Market Growth aggregate growth expected to be
more than thrice that of mature
markets like USA, leading to an
estimated inversion of balance in
economic power from 30% today to
70% by 2050
Uneven Growth - emerging
regions in these countries are
experiencing double digit growth
rates, while more industrialized
regions are similar to the global
trends
Explosion of Consumer Class GDP generated by the consumer
class within the regions is
expected to grow by over 7%,
more than double from $2.4
trillion to $5.2 trillion by 2022

24. Unfavorable Conditions
Government
Restrictions
• Relatively stricter government rules & regulations
as compared to Brazil regarding foreign investment
like French Guiana, Suriname
Stagnant
Tourism
Industry
• Tourism industry and hospitality industry are
interlinked; in these nations tourism is not as
thriving as compared to Brazil , thus affecting
foreign investment
Lagging
Economic
Growth
• Moderate economic growth in these countries; lot
of scope to continue growing and ultimately
revitalize a healthy investment climate