AProject Report

On“Country analysis for international business”

BRAZIL BANGLADESH

Master of Management Studies under the University of Mumbai

By

Shweta , Roll No. 11

Hussain Hakeem, Roll No. 12

Rashid Gafoor Kaskar, Roll No. 15

Mohd Mukhtar Kasmani, Roll No. 16

Irfan Faizullah Khan, Roll No. 19

Naqeeb Sakharkar, Roll No. 32

Specialization: FinanceUnder the Guidance of

Prof. Sameer Charania(Lecturer International Business)

Allana Institute of Management Studies and Research

CST, Mumbai-4000012011

Contents

ACC Cements – CORPORATE PROFILE..............................................................3

SUBSIDIARIES AND ASSOCIATES of ACC CEMENTS:-........................................7

Manufacturing process at ACC Cement.........................................................11

Swot Analysis of ACC Cement........................................................................13

Cement Industry A Global Perspective..........................................................15

Overview of Cement Industry - Brazil............................................................19

PESTLE - Brazil...............................................................................................22

Main drivers for doing business in Brazil.....................................................36

Main Challenges of doing Deals in Brazil....................................................37

Different Modes of Setting up Business in Brazil.........................................38

Overview Of Cement Industry - Bangladesh..................................................40

Pest Analysis of Bangladesh..........................................................................46

ACC Cements – CORPORATE PROFILE

ACC (ACC Limited) is India's foremost manufacturer of

cement and concrete. ACC's operations are spread throughout the

country with 16 modern cement factories, more than 40 Ready

mix concrete plants, 21 sales offices, and several zonal offices. It

has a workforce of about 9,000 persons and a countrywide

distribution network of over 9,000 dealers.

Since inception in 1936, the company has been a trendsetter

and important benchmark for the cement industry in many areas

of cement and concrete technology. ACC has a unique track

record of innovative research, product development and

specialized consultancy services. The company's various

manufacturing units are backed by a central technology support

services centre - the only one of its kind in the Indian cement

industry.

ACC has rich experience in mining, being the largest user of

limestone. As the largest cement producer in India, it is one of the

biggest customers of the domestic coal industry, of Indian

Railways, and a considerable user of the country’s road transport

network services for inward and outward movement of materials

and products.

Among the first companies in India to include commitment to

environmental protection as one of its corporate objectives, the

company installed sophisticated pollution control equipment as

far back as 1966, long before pollution control laws came into

existence. Today each of its cement plants has state-of-the art

pollution control equipment and devices.

ACC plants, mines and townships visibly demonstrate

successful endeavors in quarry rehabilitation, water management

techniques and ‘greening’ activities. The company actively

promotes the use of alternative fuels and raw materials and offers

total solutions for waste management including testing,

suggestions for reuse, recycling and co-processing.

ACC has taken purposeful steps in knowledge building. We

run two institutes that offer professional technical courses for

engineering graduates and diploma holders which are relevant to

manufacturing sectors such as cement. The main beneficiaries

are youth from remote and backward areas of the country.

ACC has made significant contributions to the nation building

process by way of quality products, services and sharing

expertise. Its commitment to sustainable development, its high

ethical standards in business dealings and its on-going efforts in

community welfare programmes have won it acclaim as a

responsible corporate citizen. ACC’s brand name is synonymous

with cement and enjoys a high level of equity in the Indian

market. It is the only cement company that figures in the list of

Consumer Super Brands of India.

ACC's brand name is synonymous with cement and enjoys a

high level of equity in the Indian market. Our range of cements

and blended cements is marketed through a countrywide network

of Sales Units, Area Offices, and warehouses. This is backed by a

vast distribution network of over 9,000 dealers who, in turn, are

assisted by their sub-dealers.

ACC’s marketing; sales and

distribution processes are industry

standards. Although we take

immense pride in having supplied

some of India’s most admired

projects, ACC is essentially a people’s

brand of cement with more than 80

per cent of sales made through an extensive dealer network that

covers every state in India. Its customer base represents the

masses of India - individual homebuilders in small towns, rural

and semi-urban India. ACC cement enjoys an image of assuring

consistency and of high quality backed by in-house research and

expertise.

Complementing this is a unique customer services cell

comprising qualified civil engineers, who assist and advice

customers with prior and post sales service. This service begins

with selection of type and grade of cement (where applicable) to

troubleshooting and on-site assistance.

ACC manufactures the various kinds of Portland Cement for

general construction and special applications.

SUBSIDIARIES AND ASSOCIATES of ACC CEMENTS:-

ACC Concrete Limited

ACC set up India's first commercial Ready Mix Concrete (RMX)

plant in Mumbai in 1994 which together with the promotion of

bulk cement has played a key role in redefining the pace and

quality of construction activity in our large cities and mega

infrastructure projects.

The Ready Mix Concrete business of ACC was reorganized as a

separate wholly owned subsidiary which was incorporated as ACC

Concrete Limited with headquarters in Mumbai. Today this

company is one of the largest manufacturers of Ready Mix

Concrete in India with a countrywide network of plants, with

modern equipment and a large fleet of transit mixers.

ACC Mineral Resources Limited

ACC's wholly owned subsidiary, The Cement Marketing Company

of India Limited, was renamed as ACC Mineral Resources Limited

(AMRL) in May 2009 with an objective of securing valuable

mineral resources, such as coal for captive use. ACC Mineral

Resources Limited has already entered into Joint Venture

arrangements for prospecting, exploration and mining coal from

the coal blocks in Madhya Pradesh and West Bengal. The

company is also exploring other opportunities for securing

additional coal and gypsum resources in India and abroad

Bulk Cement Corporation (India) Limited

Situated at Kalamboli, in Navi Mumbai (formerly New Bombay),

this company caters to bulk cement requirements of the city of

Mumbai and its environs. It has two cement storage silos with a

capacity of 5,000 tons each. The plant receives cement in bulk

from ACC plants at Wadi. The plant has its own special purpose

railway wagons and rakes and its own railway siding. The first of

its kind in India, BCCI is equipped with all the facilities required by

increasingly sophisticated construction sites in a bustling

metropolis, including a laboratory, a fleet of specialized trucks

and site silos for the convenience of customers and is capable of

offering loose cement in bulk-tanker vehicles as well as packed

cement in bags of varying sizes from 1 tonne down to 25 kg bags.

BCCI is situated strategically on the outskirts of Mumbai, just off

the new Mumbai-Pune Expressway. It is a landmark structure

spread over 30 acres of land.

Lucky Minmat

ACC acquired 100 per cent of the equity of Lucky Minmat Private

Limited. This company holds limestone mines in the Sikar district

of Rajasthan, and helps supplement limestone supply to the

Lakheri Plant.

National Limestone Company Private Limited

National Limestone Company Private Limited is a wholly owned

subsidiary. The company is engaged in the business of mining

and sale of limestone. It holds mining leases for limestone in the

state of Rajasthan.

Encore Cement & Additives Private Limited

ACC acquired 100 percent of the financial equity of this company

which is a slag grinding plant in Vishakhapatnam in coastal

Andhra Pradesh. This company became a wholly-owned

subsidiary of ACC in January 2010.

Manufacturing process at ACC Cement

Map - Key

00. Limestone Quarry and Crushing 09. Cooler

plant

01.Limestone Stockpile

02.Additives Hopper

03.Additives Storage

04.Raw Mill Building

05.Blending and Storage Silo

06.Preheater

07.Gas Conditioning Tower and

ESP

08.Kiln

10. Deep Bucket Conveyor

11/1

2. 

Clinker/Gypsum Storage

13. Coal Mill Building

14. Cement Mill and Bag

House

15. Cement Storage Silo

16. Packing & Dispatch

17. Central C

PRODUCTS QUALITY:-

Product Development has always been an important activity at

ACC, arising out of a focus on quality and process improvement. It

has been a constant partner, driving research, innovation and

evaluation.

ACC has effectively pledged its reputation as the market leader in

the quality of cement. Maintaining this lead calls for harnessing

the resources and expertise of the company - from applied

research and production to marketing. Accordingly, all ACC

factories are equipped with state-of-the-art process control

instrumentation and associated quality control and testing

laboratories manned by qualified personnel.

As a result of this focus on quality, ACC cement specifications

exceed those set by BIS by a wide margin. Today, all ACC cement

plants have the ISO 9001 Quality Systems certification. This

demonstrates our tradition of providing reliable and consistent

quality through the application of modern technology, and

justifies the preferences of a nationwide customer base.

Swot Analysis of ACC Cement

STRENGTHS:-

1. It is having a good image and brand loyalty among

consumers.

2. Service is good

3. People ask for ACC

4. They have same price prevailing for wholesale at

dealers/stockiest retailers end.

WEAKNESS:-

1. The competitors are doing much promotional activity rather

than ACC Limited that’s why it facing more problems in

selling of product in the market.

2. Lack of awareness program for consumers.

OPPORTUNITY:-

1. Rapid growth is taking place in Bihar and Madhya Pradesh.

2. People are opting for more stable structures and intensive

use of cement is taking place, even government is spending

heavily on infrastructure projects. Thus, this is the right time

to fully tap these markets.

3. As Indian core industry is also growing at rate of nearly 10%

per annum, it is having a good future.

4. Foreign direct investment in infrastructure sector going to

increase in coming years, which will increase the demand of

cement.

5. Roads are undergoing through the transformation process

through which the traditional method of road building will be

replaced by modern concrete roads.

THREATS:

1. Large number of players in cement industry makes it more

competitive for ACC to carefully price its product and at the

same time satisfy its dealers and customers.

2. Players such as Jaypee Cement, Prism Cement, and Birla

Samrat are eating up considerable market share.

3. Due to India exponential growth many new international

cement companies are expected in coming years which will

bring a tide of change and can start price war.

4. The emergence of small players in this market may increase

the competition and start the malpractices, and heavy

discounts to retailers.

Cement Industry A Global Perspective

Global consumption of cement grew 9.9% last year to

continue a strong rebound in demand as construction worldwide

picks up since the economic downturn of 2008, according to a

new report.

The ninth edition of International Cement Review’s Global

Cement Report found that 3,294 million tonnes (Mt) were sold,

topping the 2,998 million tonnes sold in 2009, which was a growth

rate of 5.9%, strongly reversing a slowdown of 2.4% the previous

year. Worldwide cement consumption is forecast to reach a

record 3859Mt by 2012.

Global cement demand will rise 4.1 percent annually through

2013. Gains will be fueled by rising infrastructure investment in

developing countries and improved markets in developed areas.

Blended cement will increase its dominant position over Portland.

Ready-mix concrete will remain the fastest-growing outlet.

This study analyzes the 2.8 billion metric ton world cement

industry. It presents historical demand data for the years 1998,

2003 and 2008, and forecasts for 2013 and 2018 by type (e.g.,

blended, Portland), market (e.g., ready-mix concrete, construction

contractors, consumer, concrete products), world region (e.g.,

Asia/Pacific, Africa/Mideast) and for 46 major countries.

The study also considers market environment factors, details

industry structure, evaluates company market share and profiles

34 industry participants, including Lafarge, Holcim and CEMEX.

The report provides statistics for demand for the commodity

in more than 160 countries, along with additional data for clinker

consumption. China dominates world cement statistics, results

show consuming more than a third of global output – or 1,851

million tonnes - in 2010, almost double 2004 levels. India, the

closest rival to China for economic growth was the second-largest

consumer at 212Mt, with the United States, the third-largest

consumer, saw demand fall down to 69Mt.

Turkey is the world's leading export nation of cement and

clinker, with sales of 19Mt in 2010, overtaking China which

recorded close to 17Mt of export sales. Thailand was third with

14Mt of cement and clinker exports.

Bangladesh is the largest cement and clinker importer, with

over 12 million tonnes of deliveries in 2010, followed by Nigeria at

7 million tonnes and the USA at close to 6 million – a sixth of 2006

levels.

Lafarge remains the world’s biggest selling company,

shifting 141.2Mt last year to produce a turnover of EUR 15.8

billion, ahead of Holcim with cement sales of 136.7Mt and a

turnover of EUR15.6 billion, a ahead of Heidelberg Cement.

Holcim still has the largest global cement capacity, at 212Mt,

11Mt higher than Lafarge.

Major Cement Exporting Countries of the World: -

This is a list of top countries by cement production in 2010 based

on USGS Mineral Program Cement Report. (Jan 2011).

While the top 3, China, India and USA, didn't change in the last 5

years, declining US production by 36.5% is noteworthy. The most

progressing countries in terms of ranking are Turkey (10th to

4th), Brazil (13th to 5th) and Vietnam (17th to 9th). All top

European cement producing countries except Turkey lost their

rankings (Spain, Russia, Italy, Germany and France), as a result of

the global financial crisis.

World Cement production in 2010:

Rank Country/Region mil Tonnes

1  People's Republic of China 1,8002  India 2903  Iran 744  United States 63.55  Turkey 606  Brazil 597  Japan 568  Spain 509  Viet Nam 50

10  Russia 4911  Egypt 4812  South Korea 4613  Saudi Arabia 4514  Indonesia 4215  Italy 3516  Mexico 3417  Germany 3118  Thailand 3119  Pakistan 30

 Others 5202010 World Production 3,413.5

Overview of Cement Industry - Brazil

This section presents a brief history of cement production and use

in Brazil, a synopsis of the current structure of the sector. and a

summary of the data available at the sector and plant levels on

production processes and GHG emission

1. Background

Cement production is one of the major industries driving Brazil’s

national economy, and production trends within the industry have

Brazil’s Cement Manufacturers

Company Name Number of

Plants

2006 AnnualCapacity

(million metrictons)

Production (thousand metric tons)

2005 2006 2007

Votorantim 19 25 14,472 16,239 19,402

Joãs Santos 10 - 4,974 5,079 5,548

Cimpor 8 6 3,683 3,889 4,393

Holcim 5 5 2,948 3,225 3,591

CamargoCorreia

5 - 2,902 3,013 3,349

Lafarge 5 4 2,500 2,422 2,670

CP Cimento 3 - - - -

Ciplan 1 - 1,137 1,248 1,319

Cimentos Liz 1 - - - -

Itambé 1 - 829 838 938

CCRG 1 - - - -

Other* 6 - 5,164 5,849 5,265

been dynamic throughout the past 30 years. Since 2004 the

country has seen growth in cement production as a

result of decreasing national interest rates and lower retail costs

of cement, factors that encouraged domestic consumption

(Christino, 2008). Today, Brazil has become the largest cement

producer among all Latin American countries, and is ranked 6th in

the world for cement production (Soares, 2010).

2. Current Industry Structure and Outlook.

This section provides an introduction to the key industry players

in Brazil’s cement sector, a discussion of their domestic and

international markets, recent data on production and capacity

levels, and a brief discussion of some of the domestic and

international drivers that could shape the outlook for the industry.

Manufacturers Cement production in Brazil is divided among 11

manufacturing companies. Collectively, this group operates 65

plants located in 22 states across the country. In 2007, Brazil’s

cement producers had a combined output of nearly 46.6 million

tons of cement (SNIC, 2008).

Domestic and International Markets

The cement industry in Brazil accounts for approximately 1% of

Brazilian gross domestic product (GDP) and is strongly correlated

to income levels. Moreover, domestic consumption is highest in

Brazil’s most developed regions where the average income level

is highest. These areas include the Southeast, South, and

Northeast regions. The main end-uses for cement in these regions

are buildings (78%), infrastructure (19%), and agriculture (3%)

(Soares 2008). On average, per capita consumption in Brazil is

approximately 200kg, which is low compared to the world

average of approximately 400kg (Christino, 2007).

Outlook

Reflecting the strong performance of the country’s economy and

civil construction in particular since 2004, domestic cement

production in Brazil has been growing. In 2008, market sources

indicated the emergence of a trend in which smaller economic

groups began entering the market and are now faced with the

challenge of competing with the industry’s major players.

Furthermore, several of the industry’s major manufacturers have

revealed plans to invest in production expansion in the coming

years.

The table below presents available data on production of cement

since 2008.

Cement Production 2008-2010

Year Output (Thousands of tons)

2008 38,705

2009 41,895

2010 46,589

Source: SNIC

PESTLE - Brazil

PESTLE analysis is a useful tool for understanding the “big

picture” of the environment, in which you are operating, and the

opportunities and threats that lie within it. By understanding the

environment in which you operate (external to your company or

department), you can take advantage of the opportunities and

minimize the threats.

The PESTLE subject should be a clear definition of the

market being addressed, which might be from any of the

following standpoints:

A company looking at its market

A product looking at its market

A brand in relation to its market

A local business unit or function in a business

A strategic option, such as entering a new market or

launching a new product

A potential acquisition

A potential partnership

An investment opportunity

A. Political System:-

Federal Republic similar to United States

The federal republic has three independent branches independent

branches: executive legislative and judicial.

The President heads the executive branch. Under the President

are a number of executive departments, the heads of which are

appointed and are known collectively as the cabinet. Unlike those

in many parliamentary democracies, its members need not be

members of the legislative. Besides the executive departments,

there are a number of independent agencies many of which are

regulatory.

Legislative power is exerted by Congress consisting of a Senate

and house of Representatives. There are 81 senators, three from

each state and the federal District of Brasila. The total

membership of the House is 513, the number of representatives

from each state depending on its population. Voting is

compulsory at the age of 18 but 16 and 17 year-olds, 70 years

or older and illiterate can opt to vote.

The judicial branch consists of a system of federal, state and local

courts throughout the country, headed by the Federal Supreme

Court.

i. Law

Brazilian law is based on Roman-Germanic traditions and

civil law concepts prevail over common law practice. Most of

Brazilian law is codified, although non-codified statutes also

represent a substantial part, playing a complementary role. Court

decisions set out interpretive guidelines; however, they are

seldom binding on other specific cases. Doctrinal works and the

works of academic jurists have strong influence in law creation

and in law cases.

B.Economic- The local, national and world economy

impact

i. Economy of Brazil

Brazil is the largest national economy in Latin America, the

world's tenth largest economy at market exchange rates and the

ninth largest in purchasing power parity (PPP), according to the

International Monetary Fund and the World Bank. Its GDP (PPP)

per capita is $10,200, putting Brazil in the 64th position according

to World Bank data. It has large and developed agricultural,

mining, manufacturing and service sectors, as well as a large

labor pool.

Brazilian exports are booming, creating a new generation of

tycoons. Major export products include aircraft, electrical

equipment, automobiles, ethanol, textiles, footwear, iron ore,

steel, coffee, orange juice, soybeans and corned beef. The

country has been expanding its presence in international financial

and commodities markets, and is one of a group of four emerging

economies called the BRIC countries.

Brazil pegged its currency, the real, to the U.S. dollar in

1994. However, after the East Asian financial crisis, the Russian

default in 1998 and the series of adverse financial events that

followed it, the Central Bank of Brazil temporarily changed its

monetary policy to a managed-float scheme while undergoing a

currency crisis, until definitively changing the exchange regime to

free-float in January 1999.

ii. Key industries

Key industries are textiles, shoes, chemicals, aviation,

cement, agriculture, motor vehicles and parts, other machinery

and equipment. Major export products include aircraft, coffee,

vehicles, soybean, iron ore, orange juice, steel, textiles, footwear

and electrical equipment.

iii. FDI

Brazil is generally open to and encourages foreign

investment. Brazil is the largest recipient of foreign direct

investment (FDI) in Latin America, and the United States is

traditionally the number one foreign investor in Brazil. Since

domestic savings is not sufficient to sustain long-term high

growth rates, Brazil must continue to attract FDI. In order to

attract increasing levels of FDI, many business groups and

international organizations have highlighted the need for Brazil to

improve its regulatory environment for investments and to

simplify the tax code. Brazil does not have a bilateral tax or

investment treaty with the United States. Legislation promoting

public-private partnerships, a key effort to attract private

investment to infrastructure, was passed in 2004. In 2007, the

Government of Brazil initiated an ambitious infrastructure

development program, known as the Growth Acceleration

Program (PAC), to address the country’s significant road, rail,

energy supply, and other infrastructure needs.

C.Sociological- The ways in which changes in society

affect business

Brazil’s inequality levels remains among the highest in the

world. Millions of people still live in poverty; social exclusion is

quantitatively and qualitatively pronounced and structurally

ingrained. But during the last several years, poverty reduction

and income distribution indicators have dramatically improved.

The full poverty rate fell from 34% of the population in 1995 to

25.6% in 2006.

Brazil still shows one of the worst values of income

distribution worldwide. About 45% of the national wealth is

concentrated in the upper 10% of the income pyramid, while the

lower 20% control just over 2.4% of the wealth. Brazil exhibits a

medium level of development according to key indicators, but

national mean values mask the great disparities between the

relatively developed southern and southeastern regions, where

conditions resemble those in industrialized countries to some

extent, and the socioeconomically disadvantaged northern and

northeastern regions.

i. Culture

The core culture of Brazil is derived from Portuguese culture,

because of its strong colonial ties with the Portuguese empire.

Among other influences, the Portuguese introduced the

Portuguese language, Roman Catholicism and colonial

architectural styles. The culture was, however, also strongly

influenced by African, indigenous and non-Portuguese European

cultures and traditions. Some aspects of Brazilian culture were

influenced by the contributions of Italian, German and other

European immigrants who arrived in large numbers in the South

and Southeast of Brazil. The indigenous Amerindians influenced

Brazil's language and cuisine; and the Africans influenced

language, cuisine, music, dance and religion.

ii. Language

The official language of Brazil is Portuguese which is spoken

by almost all of the population and is virtually the only language

used in newspapers, radio, television, and for business and

administrative purposes. The exception to this is in the

municipality of São Gabriel da Cachoeira where Nheengatu, an

indigenous language of South America, has been granted co-

official status with Portuguese. Brazil is the only Portuguese-

speaking nation in the Americas, making the language an

important part of Brazilian national identity and giving it a

national culture distinct from those of its Spanish-speaking

neighbors.

iii. General Attitude

Brazilians are warm, fun-loving, and free-spirited. They are

also outgoing and enjoy being around others. At the same time,

they are hardworking. Brazilians are proud of their country's

natural resources and diverse culture. One point of pride is the

“Brazilian way”—their ability to find creative ways around

seemingly insurmountable problems. Brazilians often are

opinionated and will argue for their convictions with vigor. In spite

of economic difficulties, most Brazilians are hopeful about their

country's future.

iv. Personal Appearance

In general, Brazilians are fashionable and like to dress

according to the latest styles. People in urban areas like to wear

brand-name clothing. People in the warmest and most humid

regions dress more casually, and colors are lighter and brighter

year-round. In rural regions, more traditional clothing is common,

especially among the native peoples.

D.Technological- How new and emerging technology

affects business?

Brazil is a leader in science and technology in South America

and in some fields a global leader, such as biofuels, agricultural

research, deep-sea oil production, and remote sensing. U.S.

Government, private sector, and academic researchers have

extensive ties with Brazilian counterparts, and the extent of

bilateral scientific and technological cooperation is expanding.

The Brazilian Government seeks to develop an environment that

is more supportive of innovation, taking scientific advances from

the laboratory to the marketplace.

i. Technological Research

Technological research in Brazil is largely carried out in

public universities and research institutes. But more than 73% of

funding for basic research still comes from government

sources. Some of Brazil's most notable technological hubs are

the Oswaldo Cruz Institute, the Butantan Institute, the Air

Force's Aerospace Technical Center, the Brazilian Agricultural

Research Corporation and the INPE. The Brazilian Space

Agency has the most advanced space program in Latin America,

with significant capabilities in launch vehicles, launch sites and

satellite manufacturing.

ii. Information Technology

The Brazilian IT market is the largest in Latin America and

spending on IT products and services is forecast to pass US$25bn

in 2010 and US$30bn by 2012. BMI has downwardly revised its

five-year forecast, due to the economic situation, but IT spending

is still expected to increase to remain in positive territory in 2009,

and to grow at a CAGR of 12% over the forecast period. This

makes Brazil's one of the fastest growing global markets. The

overall outlook remains constructive for growth in IT spending,

with an expanding economy lifting millions into a middle class for

whom computers are no longer beyond reach.  Brazil’s IT services

market is expected to continue to grow strongly in 2010, with

total spending of around US$9.4bn as the economy continues to

bounce back from recession. For a developing market, the

percentage of Brazil IT market revenues generated by services is

high at around 38%, which corresponds more to developed

market levels. 

iii. R & D

Most of Brazil's research and development activities take

place in its main public universities. Brazil, in particular, is an

interesting country to consider, as scientific growth is in the

beginning stages and offers tremendous future potential.

Brazil’s GDP declined in 2009 by 0.7%, with an equal drop in its

R&D investment for that year. Its GDP and R&D are both expected

to increase in 2010 by about 3.5%, to $2,048 billion and $18.637

billion respectively, from its 2009 levels. Brazil’s R&D as a share

of its GDP is about 0.91%.

Brazil’s share of the world’s 7.1 million researchers increased

from 1.2% in 2002 to 1.7% in 2007. According to UNESCO, Brazil

has about 625 researchers for every million citizens of Brazil.

So Brazil has great potential in growing the number of scientific

papers its researchers publish, but is starting from a relatively low

base.

iv. Technology policy in Brazil: Old approaches to a

new situation

In 1990, the government has radically changed the

framework conditions for industrial development. Acknowledging

that the import substitution model had run into a dead end, it

opted for a policy of gradually opening the market to foreign

competitors, thus creating an environment that requires

international competitiveness and thereby forces companies to

attain international levels of quality and efficiency. This has been

accompanied by a number of technology and industrial policy

programmes. However, they were either not implemented, or only

after long delays, or have had little impact so far because the

recession inhibited private sector investments. Even the Quality

and Productivity Program that has pursued an innovative

approach (mainly trying to build a consciousness for quality issues

inside firms) and got a lot of publicity in Brazil apparently has only

had a limited impact.

v. Brazilian industry and technology

Brazil got off to a late start in its process of industrialization,

which began in the 1930s. Despite the accelerated pace of growth

witnessed up until 1980, the level of development in the country

still falls way below the levels reached by developed countries.

Industry, which directs itself essentially to attending the demands

of the internal market, is made up of a steady stream of

embodied and disembodied external technology flows. Even so,

Brazilian industry has been making considerable efforts in

technology directed towards, in most cases, adapting the flow of

external knowledge to its local context. These efforts have also

been brought on by local technological demands that the external

flow of technology has been unable to meet. Up until now, rare

have been the cases of sectors in which firms generate flows of

new knowledge in order to gain dynamic competitive advantages.

E. Legal- How local, national and world legislation

affects business

i. The Brazilian legal system

It is based on Civil Law tradition. The Federal Constitution, in

force since October 5th, 1988, is the supreme rule of the country

and is the characterized by its rigid written form. The Constitution

organizes the country as a Federative Republic, formed by the

indissoluble union of the states and municipalities and of the

Federal District. The 26 federate states have powers to adopt

their own Constitutions and laws; their autonomy, however, is

limited by the principles established in the Federal Constitution.

ii. Municipalities

It enjoy restricted autonomy as their legislation must follow

the dictates of the Constitution of the state to which they belong,

and consequently to those of the Federal Constitution itself. As for

the Federal District, it blends functions of federate states and of

municipalities, and its equivalent to a constitution, named Organic

Law, must also obey the terms of the Federal Constitution.

The powers of the Union, as defined within the Constitution,

are the Executive, the Legislative and the Judiciary, which are

independent and harmonious amongst them. The head of the

Executive is the President of the Republic, which is both the Chief

of State and the Head of Government and is directly elected by

the citizens. The Legislative, embedded in the form of National

Congress and consists of two houses: The Chamber of Deputies

(lower house) and the Federal Senate (upper house), both

constituted by representatives who are elected by the citizens.

The Judicial powers are vested upon the Federal Supreme Court,

the Superior Court of Justice, the Regional Federal Courts and

Federal Judges. There are also specialized courts to deal with

electoral, labor and military disputes.

F. Environmental- The local, national and world

environmental issues

Brazil holds about one-third of the world's remaining

rainforests, including a majority of the Amazon rainforest. Due to

the vastness of the Amazon rainforest, Brazil's average loss of

34,660 square kilometers of primary forest per year between

2000 and 2005 represents only about 0.8 percent of its forest

cover. Nevertheless, deforestation in Brazil is one of the most

important global environmental issues today. Research led by the

Woods Hole Research Center and the Carnegie Institution's

Department of Global Ecology found that each year the amount of

forest degraded is roughly equivalent to the amount of forest

cleared. The finding is trouble to ecologists because degraded

forest has lower levels of biodiversity and is more likely to be

cleared in the future. Further, degraded forest is more susceptible

to fires.

A large portion of deforestation in Brazil can be attributed to

land clearing for pastureland by commercial and speculative

interests, misguided government policies, inappropriate World

Bank projects, and commercial exploitation of forest resources.

For effective action it is imperative that these issues be

addressed. Focusing solely on the promotion of sustainable use

by local people would neglect the most important forces behind

deforestation in Brazil.

Brazilian deforestation is strongly correlated to the economic

health of the country: the decline in deforestation from 1988-

1991 nicely matched the economic slowdown during the same

period, while the rocketing rate of deforestation from 1993-1998

paralleled Brazil's period of rapid economic growth. During lean

times, ranchers and developers do not have the cash to rapidly

expand their pasturelands and operations, while the government

lacks funds to sponsor highways and colonization programs and

grant tax breaks and subsidies to forest exploiters.

The Future

It seems likely that deforestation will continue in the Brazil

Amazon for the foreseeable future. This author personally expects

at least half the Amazon to be converted for agriculture or

otherwise degraded by 2050. While this is discouraging, there is

hope that improved agricultural techniques—perhaps based on

research into how pre-Colombian societies managed these forests

—could maybe increase productivity on already affected areas

and reduce the need for further forest clearing.

It is important to recognize that Brazil is a sovereign state

with its own rights to develop its economy. How it chooses to do

so will likely be influenced by economic factors which may include

how western countries value the services (especially climate

moderation and biodiversity preservation) provided by forests. If

Western countries begin to place greater value on these services,

then the protection of Brazil's rainforests can likely be

"purchased" via the open market. While right now the

environment for such a scenario is not favorable, this author

believes it will become more so in the next few years. Scientists

will play an important role in disseminating the value of these

forests to policymakers and the media.

Main drivers for doing business in Brazil

Brazil has the 10th largest economy and a population of

more than 194 million.

Many local companies are undervalued and in need of

restructuring, capital and technology

Growth potential and consumer market

Broad industrial base and infrastructure, and a diversified

economy

Abundant agricultural, mineral and energy resources and

potential

Established transportation networks (railways, highways,

ports) and distribution channels in most industrialized areas

Privatization in late stages and follow-on transactions still in

development

Increasing globalization and international trade, with

Government policies favoring exports

Goodwill generally tax deductible

New regulations favoring minority shareholders.

Main Challenges of doing Deals in Brazil

Complex tax and employee related regulatory environment,

with high taxes and social charges on payroll, sales and

income

Multiple taxes with fast changing legislation affecting

business plans and increasing risks of contingencies

Economic environment still considered volatile as compared

to more stable economies

Fast-changing business conditions

Complex transfer pricing and foreign capital registration

rules

Difficulties in reorganizing companies quickly, including high

costs for employee terminations

High demand for investments in the distribution channels

and infrastructure

Semi-skilled and unskilled labor in certain developing areas

Social extremes with unequal distribution of wealth - a

significant portion of the population not participating in the

consumer market

Different Modes of Setting up Business in Brazil

MODES OF SETING

UP A BUSINESSDEFINITION

Joint Stock Company

or Corporation

(Sociedade Anônima

- S/A)

The capital stock of the company is

divided in shares, and the firm must

necessarily aim at profits. It is always

regarded as a trading company, no matter

what its objectives, and can be considered

open or closed, depending on whether or

not the securities it issues are traded on

the stock exchange.

Limited Liability

Company (Sociedade

A private limited company may

engage in commercial, industrial and

MODES OF SETING

UP A BUSINESSDEFINITION

por Quotas de

responsibilidade

limitada - Ltda)

service activities and has its bylaws

registered with the Board of Trade. It has

to be established by at least two partners.

Shares represent the participation of

each partner in the company’s capital,

with the partners’ liability limited to the

value of their shares or quotas.

Simple partnership

(Sociedade Simple -

S/S)

A special form of the Ltda that can

be utilised by partnerships without

commercial activities or whose object is

the exercise of the intellectual, scientific,

literary or artistic professions.

In this type of partnership, the

partners are jointly and severally

responsible for the company’s debts

should the company’s assets be

insufficient to pay them.

Individuals Made up of a single individual that

gives his or her name to the firm, making

himself or herself responsible for all the

company’s acts that involve economic

activities such as the production and

MODES OF SETING

UP A BUSINESSDEFINITION

circulation of goods and services.

This type of legal entity applies to

industrial, commercial and service

activities.

Source: Investing in Brazil

Overview Of Cement Industry - Bangladesh

The development of cement industry in Bangladesh dates

back to the early-fifties but its growth in real sense started only

about decade or so. Bangladesh has been experiencing an

upsurge in the use of cement in recent years. Increase in demand

for cement has soared mainly due to the property sector boom

and infrastructure development concentrated in the Dhaka

Metropolitan area and other major urban areas of the country.

The infrastructural development at grass root level has led to an

increased demand for cement at an average rate of 8% per

annum during the past decade.

Existing industry Structure:

The Cement industry involves a huge outlay for setting up of the

plant, developing the infrastructure facilities and also for creating

a large sales network throughout the country. Due to higher

profitability of the local cement manufacturers, more than 23

companies in the private and public sector are operating in the

country.

Existing Cement Manufacturing Units of the country and their production capacity

SL. Name of the Company Installed Production Capacity (In

MT)

1 Chittagong Cement Clinker 9,00,000

2 Confidence Cement,

Chittagong

480,000

3 Mongla Cement, Khulna 390,000

4 Meghna Cement 1,000,000

5 Holcim Cement, Dhaka 1,100,000

6 Modern Cement, Dhaka 30,000

7 Chhatak Cement,

Sunamgonj

267,000

8 Ayeenpur Cement, Sylhet 23,000

9 Doel Cement, Pabna 90,000

10 Niloy Cement, Jessore 200,000

11 Diamond Cement,

Chittagong

660,000

12 Ahad Cement, Jessore 180,000

13 Aramit Cement, Chittagong 210,000

14 M I Cement 180,000

15 Eastern Cement, Dhaka 180,000

16 Seven Ring Cement 550,000

17 Mollah Cement 180,000

18 Saiham Cement 180,000

19 Madina Cement 180,000

20 S Alam Cement 450,000

21 A R Rahaman Cement 200,000

22 Padma Cement 210,000

23 Royal Cement 540,000

  TOTAL 8,380,000

Units under Multinational Giants:

Among the Multinational giants, CEMEX, Scancem, Holder bank,

Emirates Cement and Lafarge are most important. Due to

environmental hazard and health consciousness, the developed

countries, especially the Europe, these groups are in favour of

setting up of cement factories in the developing regions like

Bangladesh.

Estimated Supply situation of Cement in Bangladesh:

The state owned Chhatak Cement Factory and Ayeenpur Cement

Industries Limited in private sector are two basic cement factories

in the country, which uses limestone to produce cement, while

the rest of the factories simply import cement clinkers, crush the

same, mix them with gypsum and put them into bags with a

marginal value addition. The 24 units currently produce 5.4

million MT of cement, utilising on an average, 65% of their

installed capacity. The volume of annual import of bagged cement

in the country was around 3.5 million MT till 1995-96, but

presently hardly any import of cement is being made.

The major reasons behind the decreasing demand for the

imported cement are as below:

a. Diminishing strength of imported cement due to long time

span between production and usage (120 days on an

average).

b. Increasing supply of quality cement from the local

manufacturers.

c. Continuous devaluation of local currency has put the

imported cement in severe price competition with local

products.

d. At present Import duty and Tax on clinker and finished

cement are 40.5% and 68% respectively, which makes local

production more attractive. 

On the basis of the capacity utilization and the future

expansion programmes of the existing units, and also the

production capacity of the under implementation units, our

projection of supply of cement in the country during the next

five years stands as below:

Estimated Demand for Cement in Bangladesh:

Increase in demand for cement is dependent on the growth

of property sector and infrastructure development of the country.

With the introduction of the National Housing Policy and

expansion schemes of the House Building Finance Corporation

(HBFC) and other house finance agencies, the demand for cement

is expected to grow further in future It is expected that the

Demand for cement would grow at around 10% per annum, while

production is expected to grow at a higher rate from the year

2003 onwards with the completion of a few under construction

factories.  

Potentiality of Cement Export from Bangladesh:-

The local production scenario demonstrates that it would not

only be able to meet the entire domestic demand but also export

to the developed countries, the Middle East and other markets.

The fear of environmental hazard, health consciousness etc of the

developed countries and the low cost of labour, favorable tariff

policy and better infrastructural facility of Bangladesh likely to

help us to make an inroad in the international market. 

Possibility of market dominance by the Giant Multinational

Companies

The multinational companies, who have set up plants in the

country, believe that the local production would be more than

sufficient to meet the domestic demand and they would soon be

able to dictate the market price as well as supply of cement

through controlling the source of procurement of clinker as well

as the network of distribution of finished cement. In

apprehension, there is a number of locally established cement

factories who are planning to get out of the business by way of

selling to the giant operators. It is anticipated that by the year

2004, the cement market shall be dominated by major giants

leaving some of the left-out small producers to continue to

operate in their controlled market. This integration will continue

to take place and the on-going process of acquisition and its

acquisition cost of the existing facility will determine justification

of future establishment of a brand new factory.

Pest Analysis of Bangladesh

Political

Environmental issues

Environmental dreadful conditions and depletion of

natural resources are often observed in Bangladesh due

to poverty, over-population and lack of awareness on

the subject. It is manifested by deforestation,

destruction of wetlands, depletion of soil nutrients, etc.

Natural calamities like floods, cyclones and tidal-bores

also result in severe socio-economic and environmental

damage.

Legislation

The existing Bangladeshi legislation in this area,

however, dates mostly from the period of British rule.

The legislation in force are as follows:

Patent and Design Act of 1911

Patent and Design Rule of 1933

Trademark Act of 1940

Copyright Act of 1999

Government policies for Foreign Investments

The stated policy of the government of Bangladesh

(BDG) is to pursue foreign investment actively, and it

has enacted a number of policies to this end. There are

no distinctions between foreign and domestic private

investors regarding investment incentives or export and

import policies. Incentives for investors include: 100%

ownership in most sectors; tax holidays; reduced import

duties on capital machinery and spares; duty-free

imports for 100% exporters; and tax exemptions.

Economic

Economy situation

The economy of Bangladesh is constituted by that of

a developing country. Its per capita income in 2009 was

est. US$1,500 (adjusted by purchasing power parity)

significantly lower than India, Pakistan, both which are

also lower than the world average of $10,497.According

to the gradation by the International Monetary Fund,

Bangladesh ranked as the 48th largest economy in the

world in 2009, with a gross domestic product of

US$224.889 billion. The economy has grown at the rate

of 6-7% p.a. over the past few years. More than half of

the GDP belongs to the service sector; nearly half of

Bangladeshis are employed in the agriculture sector,

with RMG, fish, vegetables, leather and leather goods,

ceramics, rice as other important produce.

Bangladesh Corporate Tax Rates

The standard rate of corporate tax in Bangladesh

is 27.5% in 2008 - 2009 tax years. This is the standard

corporate tax rate applicable to publicly traded

companies in Bangladesh, a list including tax rates for

other corporations are as follows:

Publicly Traded Company                                    

27.5%

Non-publicly Traded Company                             

37.5%

Bank, Insurance & Financial Company                  

45%

Mobile Phone Operator Company                         

45%

If any publicly traded company declares more than 20%

dividend, 10% rebate on total tax is allowed.

Seasonality/Weather Issues

Bangladesh is a country crisscrossed with rivers, and

thus uses a wide network of water-based public

transportation.  Ferries and other boats compete with

the railroads as a major means of public transport. 

Typically overloaded and top-heavy, ferries do capsize,

particularly during the monsoon season from May to

October or during unexpected thunderstorms or

windstorms.  Every year there are dozens of fatalities

resulting from ferry accidents.

Social

Companies are facing the challenges of adapting

effectively to the changing environment in the context

of globalization and in particular in the export sector in

Bangladesh. Although Consumer Rights Movement,

enforcement of government regulations and a

structured view regarding the economic importance of

Social responsibility are not yet so widespread in the

corporate world in Bangladesh, companies have

gradually attaching more importance to Social

responsibility in the local market as well. They are

increasingly aware that Social responsibility can be of

direct economic value. Companies can contribute to

social and environmental objectives, through

integrating Social responsibility as a strategic

investment into their core business strategy,

management instruments and operations. This is an

investment, not a cost, much like quality management.

So, business organizations can thereby have an

inclusive financial, commercial and social approach,

leading to a long term strategy minimizing risks linked

to uncertainty.

Technological

The need for faster technological development is

increasingly felt in Bangladesh. Development plans of

Bangladesh have emphasized science and technological

research to develop technologies through adoption of

imported technology as well as development of

indigenous technologies.

As the country is heavily dependent on imported

technologies, proper planning is required for its

effective transfer through acquisition, assimilation and

adoption. 

A National Science and Technology Policy has been

formulated and adopted by the Government. It has laid

down the directions for S and T activities and research,

institutional and manpower development.

Dissemination and documentation facilities. The

National Council for Science and Technology (NCST)

determines S and T policies, reviews the activities of

different institutions and provides direction towards S

and T research and activities. 

Modes of entry in general

We found that cross border M&A is always the optimal entry mode under both greenfield investment and export credible threats. If the greenfield investment entry mode is viable, the multinational firm acquires the firm with low productivity when the ability of integration is

strong and the gap of technology is sufficiently small; multinational firm has interest to by

contrary acquire firm with high productivity when the ability of integration is sufficiently weak and the gap is comparatively large and cross border M&A could be the most welfare-enhancing entry mode when the technology gap is very large. Under an export credible threat, the variation of transport cost can alter the choice of target firm through the influence of price acquisition, and either greenfield investment or export option can be the most welfare-enhancing entry mode in case of medium ability of integration.

If there is maximum ability in the host country, not only the M&A of low-technology firm but also the acquisition of high-technology firm can enhance more the welfare compared to the other entry modes.

Recently, the attention shifted to the composition of FDI as firms can choose between different types of FDI. One potential entry mode is to acquire an existing foreign firm via a cross border M&A, the second option is to build a new firm abroad, which is usually referred to as greenfield investment. As well as seeing an increase in total FDI, people have also seen cross-border M&A increasing in importance relative to greenfield investment