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Following decades of struggle, Brazil’s emergence onto the global stage has been astounding both in terms of its timing and its impact. However, Brazil’s strong performance over the past decade has not concealed the economy’s structural shortcomings, which pose a threat to long-term growth and global competitiveness.
Brazil today is the world’s seventh largest economy, its total export value having more than quadrupled since 2000. Yet, notwithstanding a handful of exceptional Brazilian multinationals, the country’s firms have struggled to establish a strong presence beyond national borders.
Research conducted by the Accenture Institute for High Performance offers insight into why the long-term competitiveness of the Brazilian economy depends on the ability of the country’s firms to supply, partner and compete with the world’s best companies.
Key metrics indicate that, overall, Brazilian companies are falling behind in their engagement with the global economy. For example, Brazilian exports are lower than those of several other emerging markets, including Russia, India and China. And Brazilian companies have also started fewer greenfield projects overseas than their BRIC peers over the last decade.
Crucially, going global is no longer only a bid to grow new markets. It is increasingly about achieving competitiveness. Our research highlights how Brazilian companies are facing increasingly intense and direct global competition, especially from dynamic emerging markets. Brazilian firms of all sizes have the opportunity to access skills, technology and resources from around the world to improve their competitiveness. These capabilities are increasingly essential to survive and thrive in the domestic market, as well as acting as a springboard to operate more actively across global markets.
Given the high potential rewards of action and costs of inaction, why have Brazilian companies been relatively slow to seek opportunities abroad? Firms in the country often point to the domestic policy environment as a critical obstacle to their global expansion, citing factors such as high taxes and credit constraints.
Yet not all hurdles are external. Our research uncovers important cultural traits within Brazilian companies that serve to discourage greater global participation. For example, we find that Brazilian executives are far less confident than their peers in Germany, Russia, the UK, the US, China, India and South Africa when it comes to possessing a strong “global mindset.” They have the lowest confidence that their top leadership teams, their high-potential managers and even employees whose roles span multiple countries possess such a mindset.
So what concrete steps can Brazilian firms take? After all, internationalization is not an easy path, and indeed even accomplished multinationals constantly need to reassess the evolving business environments, opportunities and challenges in different parts of the world. There is no one roadmap to international success, but all firms choosing the global route will need to ask themselves fundamental questions, such as:
How to evaluate which markets to enter, when, and the method of entry.
How to design an international operating model that aligns the firm’s strategy with its global model of governance.
How to maintain the agility and flexibility to respond to continual change in the business environment, technology and competition.
Armen Ovanessoff is a senior research fellow for the Accenture Institute for High Performance, where his focus is on macro-economic, geo-political and business trends in emerging economies.
Athena Peppes is a thought leadership research associate manager for the Accenture Institute for High Performance in London.
Carolin Puppel is a strategy senior manager with the Rio De Janeiro team in Brazil.
February 26, 2014
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