BS7312A International Business Environment and Trade Assignment Sample
Introduction
Expansion into foreign markets requires a substantial amount of market research which helps an organisation to identify the opportunities linked with foreign direct investment. This also helps identify the potential of profitability obtained from a foreign investment and the long-term growth opportunity. In this regard the following aims to explore Euro Pharma as a potential organisation for investment from Pfizer and BioNTech.
The study would examine the Brazilian pharmaceutical industry and identify the key opportunities that BioNTech and Pfizer can avoid. Adding to that, it would also evaluate the use of John Dunning’s eclectic Paradigm which can help in justifying the reason for choosing FDI in Brazil.
Discussion and analysis
Background of the deal
The availability of vaccines has once again become a major concern in several nations as the globe prepares again for Omicron wave as well as booster campaigns pick up speed (Khandia et al. 2020).http://BS7312A International Business Environment and Trade Assignment Sample
In this concern, in August 2021, BioNTech and Pfizer, the pharmaceutical corporations, established a partnership with a Brazilian company to produce COVID-19 vaccine doses for Latin America (Pfizer, 2022). http://BS7312A International Business Environment and Trade Assignment Sample
The worldwide COVID-19 vaccine global logistics and production network, which already includes over 20 production sites and spans 4 continents, will be used by Eurofarma to carry out production facilities. This network will be run by Pfizer and BioNTech.
According to the deal, Eurofarma will purchase medication products from American production plants, and final dose production will start in 2022 (Pfizer, 2022). http://BS7312A International Business Environment and Trade Assignment SampleThe average yield is anticipated to surpass 100 million completed doses per year when operating at maximum efficiency (Pfizer, 2022).http://BS7312A International Business Environment and Trade Assignment Sample
Figure 1: Growth of Covid-19 vaccines in a year
(Source: Richter, 2021)
From the above mentioned figure, the necessity and high level of growth in COVID-19 vaccine can be reflected significantly. Thus, it can be comprehended that even though the situation is getting stable; however, the requirement of vaccination is still in demand.
According to the investigation, Pfizer and BioNTech have distributed over 1.3 billion doses of COVID vaccine to even more than 120 nations and territories as world’s acknowledged leaders in COVID vaccine production (Dunleavy, 2021).http://BS7312A International Business Environment and Trade Assignment Sample In terms of the agreement, it has been identified that Pfizer and BioNTech employ a strict process to choose manufacturing activities based on a number of criteria.
Among them, it includes reliability, conformance, security history, innovative internal, volume availability, extremely skilled labour force, management skills, previous working relationships, and dedication to work flexibly throughout a quick programme (Pfizer, 2022).http://BS7312A International Business Environment and Trade Assignment Sample
Furthermore, technological transfer, on-site improvement, and implementation required operations will start right away to make Eurofarma’s engagement in the procedure easier.
International expansion opportunities in Brazil
Brazil is one of the basic four “BRIC” nations, which were predicted to control the world market by 2050 (Newland Chase, 2018).http://BS7312A International Business Environment and Trade Assignment Sample The Brazilian economy is actually the largest in Latin America as well as the 9th largest in the world, per the International Monetary Fund (IMF) (Newland Chase, 2018). http://BS7312A International Business Environment and Trade Assignment Sample
Brazil has made real progress toward creating a more welcoming business climate, and every year, a large number of new American businesses succeed in exporting to the nation. From the information, it has been acknowledged that 7 industries with a high export possibility have been given priority by the Commercial Service Brazil (CS Brazil) (Trade Gov, 2022).http://BS7312A International Business Environment and Trade Assignment Sample
The industries that have high prospects of growth include energy, infrastructural facilities, general well-being, chemical products, defence and aerospace, communications companies, and information and communication technologies (ICT) (Trade Gov, 2022). The pharmaceutical market in Brazil achieved its largest value in recent times in 2019 with 1.8% of global sales in 2020 (Mendoza, 2021).http://BS7312A International Business Environment and Trade Assignment Sample
Figure 2: Brazil’s GDP
(Source: Trading economics, 2022)
According to verified World Bank statistics, Brazil’s Gross Domestic Product (GDP) was approximately $1608.98 billion in 2021. Apart from this, Brazil’s GDP contributes 1.20% to the global economy (Trading economics, 2022).http://BS7312A International Business Environment and Trade Assignment Sample
However, as mentioned in the figure above, it can be understood that the GDP of Brazil has seen a huge downfall from $2456.04 billion to $1608.98 billion (Trading economics, 2022).http://BS7312A International Business Environment and Trade Assignment Sample In contrast,
it has been stated that the possibility of expanding and having partnership with Brazilian company Eurofarma, will not be a disaster for BioNTech and Pfizer as the innovation level of the country seems to be increasing with 34.2 points in 2021 (The Global Economy, 2022).http://BS7312A International Business Environment and Trade Assignment Sample
In this relation, from the above analysis and understanding, the partnerships and expansion into Brazil can be collaborated with Porter’s Diamond Model, an excellent approach by Michael Porter’s. This model is sometimes referred to as the Theory of National Advantage, to determine the international competitive environment (Erboz, 2020). http://BS7312A International Business Environment and Trade Assignment Sample
Through the help of this theory, organisations can better comprehend the relative strengths of one business compared to the other owing to this approach. This theory has four common stances including, firm strategy, structure and rivalry, demand conditions, related and supporting industries and factor conditions (Dawut and Tian, 2021).http://BS7312A International Business Environment and Trade Assignment Sample
Figure 3: Porter’s Diamond Model
(Source: Erboz, 2020)
Firm strategy, structure and rivalry
This is the context in which businesses operate has a significant impact on how such businesses are founded, run, and controlled. It also has an impact on their strategy and internal organisation (Tsai et al. 2021).http://BS7312A International Business Environment and Trade Assignment Sample
Domestic competition also helps organisations build distinctive and long-lasting strengths and competencies, which is essential for global competitiveness. In this connection, it has been found that there is a high level of rivalry in Brazil with top 4 pharmaceutical companies such as “Ache” with annual sales totalling $996.5 million, “EMS Pharma” with $849.1 million sales (Pharmaboardroom, 2022).http://BS7312A International Business Environment and Trade Assignment Sample
Apart from this, the other two are “Neo Química” with $390.8 million and “Mantecorp Farmasa” with $362.9 million sales (Pharmaboardroom, 2022).http://BS7312A International Business Environment and Trade Assignment Sample Additionally, Brazilian businesses typically follow a rigorous hierarchical structure, with information moving in a very organised manner vertically and horizontally through various lines of authority (Dau et al. 2021).http://BS7312A International Business Environment and Trade Assignment Sample
Demand conditions
Demand factors always refer to home demand, that has an impact on how successfully a particular industry performs within a given country. Strong domestic demand for industries in their very own countries expands their markets and offers them chances to expand (Zhang et al. 2021). http://BS7312A International Business Environment and Trade Assignment SampleLocal customers’ complex demand circumstances also encourage business expansion, innovation, and quality improvement.
In this context, the pharmaceutical industry in Brazil is found to be the biggest in Latin America and one of the increasing regions with substantial intellectual property (IP) improvements made in recent years (Pharmexcil, 2022).http://BS7312A International Business Environment and Trade Assignment Sample
Moreover, the government is taking steps to bring the pharmaceutical regulatory structure into compliance with the international requirements. In accordance with a prediction, it will likely reach $6.5 billion by 2022 with a growth rate of 4.5% (Pharmexcil, 2022).http://BS7312A International Business Environment and Trade Assignment Sample Apart from this, Brazilian pharmaceutical sales are anticipated to reach $11 billion by 2022 (Pharmexcil, 2022).http://BS7312A International Business Environment and Trade Assignment Sample
Related and supporting industries
This stance of this model contends that a given company’s level of performance can be correlated with the performance of its associated and auxiliary businesses (Tsai et al. 2021).http://BS7312A International Business Environment and Trade Assignment Sample The function of “suppliers” is essential in today’s economies. Through the use of collective resources, including technological as well as other assistance, these providers contribute to the advancement of innovative processes.
In this context, with the support of an abundance of supplies Brazil accounted for 1.9% of all clinical trials conducted globally in 2019 and almost 7000 clinical trials had been registered as of June 2019 (Mendoza, 2021).http://BS7312A International Business Environment and Trade Assignment Sample
Due to the high prevalence of pharmaceutical suppliers industry, 33% are fully immunised, and about 66% of citizens have gotten the first dosage of the vaccine (Trade Gov, 2022). http://BS7312A International Business Environment and Trade Assignment SampleThe immunisation campaign was launched in Brazil with imports from Pfizer and BioNTech as well as Janssen along with the imports of products made locally by AstraZeneca and Coronavac (Trade Gov, 2022).http://BS7312A International Business Environment and Trade Assignment Sample
Factor conditions
The various resources that really are detectable inside a country are referred to as factor conditions. Among the resources, availability of specialised and competent knowledge and expertise, the accessibility of capital, technology and innovation (Zhang et al. 2021).http://BS7312A International Business Environment and Trade Assignment Sample
Specialised resources are primarily required for both Pfizer and BioNTech to operate successfully in the marketplace of Brazil. In this connection, it has been acknowledged that Brazil employs over 100 million people (World Bank, 2022).http://BS7312A International Business Environment and Trade Assignment Sample It would appear to be a competitive edge, yet their labour practices are restrictive.
There are severe selection and recruitment processes, labour laws for employment, which serve as hurdles to keep employees in departments with poor productivity. Additionally, a shortage of educated or trained workers has been caused by the government’s unwillingness to improve education (Cerna and Czaika, 2021).http://BS7312A International Business Environment and Trade Assignment Sample
Market entry mode
In international business expansion market entry mode becomes an essential strategy that determines the organisation’s successful operations and growth. In this regard, the different market entry modes can be taken into consideration by both BioNTech and Pfizer respectively.
Organisations can primarily opt for a joint venture which would effectively increase the overall profitability of the business venture (Monticelli and Wegner, 2022). http://BS7312A International Business Environment and Trade Assignment SampleAdding to that the demand for covid-19 vaccines is substantially high and would continue to grow in the next few years considering the fact that the entire population of the world would need vaccination.
This means that Pfizer and BioNTech would need to manufacture vaccines in billions and as a result including Europharma in the organisation’s operations and manufacturing process can significantly boost the capability to serve demand in the market (Paranhos et al. 2019).http://BS7312A International Business Environment and Trade Assignment Sample
Foreign direct investments made by established companies into foreign markets are a matter of risk that most markets in this strategy require FDI. Hence based on the market opportunities present in Brazil it can be stated that BioNTech and Pfizer both have a substantial amount of opportunity linked with making a profit by including the Europharma covid-19 vaccine manufacturing process.
The markets of Brazil, unlike any other developing nation, have the desired infrastructure that can help in mass-producing vaccines (Perin and Paranhos, 2022). http://BS7312A International Business Environment and Trade Assignment SampleNot only that, but investment from foreign sources can further increase the capability of Europharma in the vaccine manufacturing process. In this regard, the available options that BioNTech, Pfizer and Europharma have are joint venture, merger and acquisition, and licensing.
All these market entry modes have their own set of advantages and disadvantages however considering the fact that Europharma is going to be included as a manufacturing unit for the Covid-19 vaccine joint venture would be the most feasible solution. This would also require the organisation to negotiate the requirements and conditions which would profit all three companies as well as the stakeholders.
John Dunning’s eclectic paradigm
The John Dunning’s eclectic Paradigm implicates the justification and Organisation Undertakes for a particular FDI decision-making process. There are three stages to this framework which help in making the decisions related to FDI more effectively.
Ownership
In the ownership stage of the framework, the organisation aims to evaluate the current competitiveness present in the market which helps in understanding if it is profitable to enter the foreign market or to remain domestic (Rahman et al. 2018).http://BS7312A International Business Environment and Trade Assignment Sample
Based on this, the research conducted by the organisation on the external market environment of Brazil has helped in identifying that the GDP and economic condition of Brazil is a positive indicator for expanding into the Brazilian market. Adding to that, there is also a lack of significant competitors in the Brazilian market especially linked with the manufacture of Covid-19 vaccines.
Furthermore, the innovation index of the country is another significant indicator of expanding into the Brazilian market which can help in achieving fruitful results.
Locational
The second stage of the other framework requires another set of decisions regarding the competitive advantages of entering the foreign market. In this context, it can be stated that the advantages that FDI holds in the Brazilian market are better than any other country in South America (Yugue et al. 2018).http://BS7312A International Business Environment and Trade Assignment Sample
One of the key competitive advantages that the organisations can gain from investing in Brazil in the market is access to a prime Geo location. The United States of America and the European countries are the potential target market of Pfizer and BioNTech, and Brazil is located in a strategic position where exports and imports can be easily done to both these markets.
Adding to that Brazil also holds a huge plethora of natural resources and that can substantially boost the organisation’s capacity and capability to manufacture large volumes of vaccines in the country (de Freitas Lisbo and da Silva, 2022). http://BS7312A International Business Environment and Trade Assignment Sample
Similarly, it has also been seen that the pharmaceutical resources that any organisation requires for the manufacture of Covid-19 vaccines are much more easily available in the Brazilian market due to which setting up a manufacturing plant for Covid-19 vaccines is a wise decision. Adding to that the labour and cost of operation in Brazil are much lower than in any other market which again increases the organisation’s competitive advantage and profitability in the long run.
Internalising production
The third stage of this paradigm framework implicates upon the production capability of the food and market and as discussed above it is highly profitable to manufacturers of Covid-19 vaccines in Brazil.
The country has all the access to resources and infrastructure that can help to manufacture large volumes of vaccines in a short period of time (Wagner, 2020).http://BS7312A International Business Environment and Trade Assignment Sample Moreover, manufacturing vaccines in Brazil would allow the organisation to implement cost optimisation techniques which can effectively help to a profitable business proposition.
This also indicates that the organisation would not need to license their operations in Brazil which means that the organisation would be directly involved in the manufacturing process therefore a higher focus on quality can be assured.
Conclusion and recommendation
Based on the findings it can be concluded that Brazil is a potential location for investment, especially in the pharmaceutical industry. The above study has identified sample justifications for entering the Brazilian market which can help in yielding profitable results for both Pfizer and BioNTech.
This also reflects that entering the Brazilian market would not only benefit these organisations but would also benefit the stakeholders involved in the expansion process. These justifications are based on the analysis of the John dunning eclectic paradigm model. However, the operations can further benefit by utilising the following recommendations.
Financial support
Since the organisation would be investing heavily in the foreign market of Brazil it would require a substantial amount of financial support from its investor and shareholders.
Therefore it would be essential to hold board meetings as well as shareholder meetings with all the investors before investing in the markets of Brazil to avoid any kind of internal conflicts or fall out in the company’s board.
Setting up location
Brazil is known for its natural resources and forests and as a result, setting up industrial operations in such areas can attract criticism from environmentalists.
Therefore it would be essential for the organisation to choose a location that does not harm the environment as well as the natural ecology of Brazil. Adding to that, it would also be essential for the organisation to maintain their operations in a sustainable manner.
Continuous research and development
The organisations involved in this project need to significantly continue the research and development process.
Covid-19 is continuously mutating and changing forms therefore there might be instances where the company might need to make changes to the vaccine and therefore the manufacturing plant should be ready for any changes in the manufacturing process.
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