THE LATIN AMERICAN ENTRY

The Latin American Entry

In the later part of the 1990, Dell was engaged in an intense globalization effort by installing factories in strategic parts of the globe. As noted in the case study, the company was intent of breaking into the Latin American market. Similarly, the case study also mentioned that upon acquiring a spot in the Brazilian market, there is a huge possibility that markets in Argentina, Uruguay and Paraguay as they are members of Mercado Comun do Sul along with minor members like Chile and Bolivia. The top management and executives have clearly indicated that they are determined to take on Brazil as its main center of operations in South America. Basically, the company has finalized plans in Brazil and has carried out negotiations with the individual states of the federation. The Brazilian market has been chosen by Dell because of the potential of its market in Sao Paolo and the other top cities in the country. At the same time, they have shown their interest in the country for their operations as the states are offering appealing deals with regards to them installing a plant. For instance, financial incentives and free lands were among the elements that were offered by the individual states.  

Negotiating With the Brazilians

As indicated in the case study, in dealing with Brazilian states as comparable to the ones made by Dell, one has to expect to deal with specific private firms that represent the states. One also has to expect that the states will be constantly vying for investment () which means that the bargaining power is inclined predominantly with the investors. In the same regard, it would also be advisable to employ a local executive to transact with the Brazilians authorities and their representatives like what Dell did with Fernando Loureiro. However, one must also take into consideration the security of the construction and consequent operations of the plant particularly with regards to the roads on which materials and products are to be transported with, basically because Brazil has this reputation of rebel insurgents that hijacks loads of TNC’s inventories.  

Lessons of the Dell Case

The Dell case in Brazil has manifested the need of a company to carry out research, forecasting, and planning in looking for a particular market. As seen in the case study, Dell has obviously taken steps to establish what the current settings in the Brazilian market, including the offers of the individual states in the federation. However, it appears that they have failed to recognize the importance of the political environment in their planning process. It is indeed surprising that a top company like Dell could miss such important information. In the same regard, the case study has also indicated the importance of having a good standing relationship with the authorities as well as the private companies in the area. This is to ensure that the transactions will essentially go in favor of the company. Essentially, the lesson learned in the Dell case of Brazil is the importance of the company being closely acquainted with the host country which they want to gain entry. In this manner, they could promptly adjust their positions and strategies to a meet the demands of a constantly changing environment.  

 

Apparent Problems for Dell

The major problem of Dell is that the most ideal location for them, being Rio Grande do Sul, shown signs of rescinding the agreement as a result of change in leadership in the state. Based on the case study, it was implied that the security and proximity of the roads to their target market of Sao Paolo has been the keys in making Rio Grande do Sul the perfect place.  

Options for Dell

Actually, Dell may well consider this problem with the Rio Grande do Sul authorities as a minor problem basically because they have several options to consider. For instance, they have the option to take a look at other countries in South America like Argentina, Uruguay and Paraguay which also are members of Mercado Comun do Sul. Similarly, Dell could also take on the initiatives shown by Ford Motors and look at other states in the country. In the case of Ford Motors, they have chosen Bahia. And lastly, they could still hope to find a change of heart on the part of Dutra, the socialist leader of Rio Grande de Sul.

Recommendation for Michael Dell

It is recommended that Michael Dell sanction the renegotiation processes in Rio Grande de Sul. As indicated in the discussions above, the company as an investor has the bargaining power in this scenario. There is a huge possibility that the company could take on a really favorable response from Dutra as he received massive criticism from the public after Ford turned to Bahia. In the end of the day, Dutra is still a politician and he regard votes and the public’s favor highly. Michael Dell should thus consider this recommendation.

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