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Posted on May 1st, 2014, by

Brazilian market is one of the most attractive markets in the world: it is one most powerful emerging economy which is expected to become fifth largest by nominal GDP. It offers all required resources for Hard Rock Café’s successful business launch. The booming economy guarantees the demand for the hotel’s services. In addition it needs to be reminded that Rio De Janeiro is also one of the top tourist destinations.

The article Brazilian hotels posting double-digit performance growth’ (2011, Web) explains that Brazil possesses solid long-term fundamentals, a rapidly growing middle class, rising demographic trends, a diversified list of trading partners and tepid supply pipeline. It resulted in the significant improvement in Brazil’s hotel industry performance in 2011 that demonstrated the double-digit mark. This market is extremely attractive for investors nowadays, therefore the competition becomes fierce.

In accordance with the country’s entry assessment scheme, Brazil beats the majority of other emerging countries. The National Business Environment of Brazil may be defined as extremely positive: Brazil has a free market economy which is inward-oriented.  In terms of political and legal, social and cultural factors, country image and even logistics it is one of the best possible markets for Hard Rock Café entry, because Brazil has liberalized and opened economy, and relatively safe environment for private business development.  (Brazil Overtakes UK’, 2011, p.8) Therefore, Hard Rock Café may enter Brazilian market as a joint venture or even as a wholly owned subsidiary because the level of control in these cases will be high but the level of risk for the business launch in Brazil will be relatively low.

Another perspective that may be suggested as an option for the further international expansion of Hard Rock Café is the opening of Hard Rock Café in Wellington (New Zealand).

Lanza (2000, P. 65) describes New Zealand as a small open economy operating on free market principles but dependent on international trade. This author adds that free-market reforms of recent decades have removed many barriers to foreign investment.  (Lanza, 2000, P. 65) New Zealand was also named the most business-friendly country in the world in 2005 in accordance with the ranking by the World Bank. Besides, New Zealand has one of the lowest levels of corruption. Analysis shows that legislative environment of New Zealand is very positive, but this country depends on other economies and its economy not in the best situation at the moment Besides, it has to be mentioned that the market environment in Wellington is extremely competitive, because it is a well known culinary centre famous for our tucked-away bars (with award-winning bartenders), quirky cafes, award-winning restaurants, curly fries and really good coffee. (Eckert 1997, p.1)  Therefore franchising mode would be the most appropriate form of launching the new business in Wellington.

Overall, taking into account the analysis of the current state of Brazilian economy and business conditions, the conclusion could be made that based on the Entry Mode Grid’, the Hard Rock Café entry to Brazil will receive maximum points for the six entry mode criteria including degree of control, resource commitment, risk, speed, opportunity availability, and expected return. As for New Zealand’s project, it will be assessed not as positive as Brazilian, because its more risky, less speedy, with less opportunities available and lower expected return due to the complicated economic situation and high level of competition in the local restaurant sector.

The recommended entry-mode strategy for Brazilian market is the joint venture while the business in New Zealand will be launch through the use of franchising to avoid possible economic risks.

Regarding the exit strategies, the exit from Brazilian market would involve the sale of the part of the business to other investor, while the exit from New Zealand’s project would be made in accordance with the conditions of the franchise agreement. In New Zealand’s case the common type of franchise agreement may be used. It allows terminating the franchise agreement under a certain set of circumstances.

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