Digital Equipment for Movie Exhibition in Brazil: A Strategic Reference, 2006
ICON Group International, July 2007, Pages: 256
How to Strategically Evaluate Brazil
Perhaps the most efficient way of evaluating Brazil is to consider key dimensions which themselves are composites of multiple factors. Composite portfolio approaches have long been used by strategic planners. The biggest challenge in this approach is to choose the appropriate factors that are the most relevant to international planning. The two measures of greatest relevance to digital equipment for movie exhibition are “latent demand” and “market accessibility”. The figure below summarizes the key dimensions and recommendations of such an approach. Using these two composites, one can prioritize all countries of the world. Countries of high latent demand and high relative accessibility (e.g. easier entry for one firm compared to other firms) are given highest priority. The figure below shows two different scenarios. Accessibility is defined as a firm’s ease of entering or supplying from or to a market (the “supply side”), and latent demand is an indicator of the potential in serving from or to the market (the “demand side”).
Framework for Prioritizing Countries
Demand/Market Potential Driven Firm
Relative Accessibility
Accessibility/Supply Averse Firm
In the top figure, the firm is driven by market potential, whereas the bottom figure represents a firm that is driven by costs or by an aversion to difficult markets. This report treats the reader as coming from a “generic firm” approaching the global market - neither a market-driven nor a cost-driven company. Planners must therefore augment this report with their own company-specific factors that might change the priorities (e.g. a Canadian firm may have higher accessibility in Canada than a German firm).
Latent Demand and Accessibility in Brazil
This report provides a detailed overview of factors driving latent demand and accessibility for digital equipment for movie exhibition in Brazil. Latent demand is largely driven by economic fundamentals specific to digital equipment for movie exhibition. This topic is discussed in Chapter 2 using work carried out in Brazil on behalf of American firms and authored by the United States government (typically commercial attachés or similar persons in local offices of the U.S. Department of State). I have included a number of edits to clarify the information provided. Latent demand only represents half of the picture. Chapter 2 also deals with micro-accessibility for digital equipment for movie exhibition in Brazil. I use the term “micro” since the discussion is focused specifically on digital equipment for movie exhibition.
Chapter 3 is also a stand-alone report that I have authored. It covers proxy pro-forma financial indicators of firms operating in Brazil. I use the word “proxy” because the provided figures only cover a “what if” scenario, based on actual operating results for firms in Brazil. The numbers are only indicative of an average firm whose primary activity is in Brazil. It covers a vertical analysis of the maximum likelihood balance sheet, income statement, and financial ratios of firms operating in Brazil. It does so for a particular Standard Industrial Classification (SIC) code. That code covers “motion picture theaters”, as defined in Chapter 3. Again, while “motion picture theaters” does not exactly equate to “digital equipment for movie exhibition”, it nevertheless gives an indicator of how Brazil compares to other countries for a proxy adjacent category along various dimensions.
Chapter 4 deals with macro-accessibility and covers factors that go beyond digital equipment for movie exhibition. A country may at first sight appear to be attractive due to a high latent demand, but it is often less attractive when one considers at the macro level how easy it might be to serve that entire potential and/or general business risks. While accessibility will always vary from one company to another for a given country, the following domains are typically considered when evaluating macro-accessibility in Brazil:
Openness to Trade in Brazil
Openness to Direct Investment in Brazil
Local Marketing and Entry Strategy Alternatives
Local Human Resources
Local Risks
Across these domains, a number of not-so-obvious factors can affect accessibility and risk. These are covered in the Chapter 4, which is a general overview of investment and business conditions in Brazil. Chapter 4 is also presented from the perspective of an American firm, though is equally applicable to most firms entering Brazil. This chapter is also authored by local offices of the U.S. government, as is Chapter 2. Likewise, I have included a number of edits to clarify the provided information as it relates to the general strategic framework mentioned earlier.
1 INTRODUCTION & METHODOLOGY 1
1.1 What Does This Report Cover? 1
1.2 How to Strategically Evaluate Brazil 1
1.3 Latent Demand and Accessibility in Brazil 3
2 DIGITAL EQUIPMENT FOR MOVIE EXHIBITION IN BRAZIL 5
2.1 Latent Demand and Accessibility: Background 5
2.2 Latent Demand: Market Composition 5
2.2.1 The Film Industry 5
2.2.2 Distribution 8
2.2.3 Traditional Technology Equipment 9
2.3 Market Trends 10
2.3.1 Digital Systems 10
2.3.2 Digital Equipment 10
2.4 Import Climate 11
2.4.1 Movie Equipment 11
2.5 Accessibility: Key Factors 12
2.6 Key Contacts 12
2.6.1 Exhibitors 12
2.6.2 Overseas Manufacturers 14
2.6.3 Motion Picture Associations 15
2.6.4 Festivals 15
3 FINANCIAL INDICATORS: MOTION PICTURE THEATERS 17
3.1 Overview 17
3.1.1 Financial Returns and Gaps in Brazil 18
3.1.2 Labor Productivity Gaps in Brazil 20
3.1.3 Limitations and Extensions 21
3.2 Financial Returns in Brazil: Asset Structure Ratios 22
3.2.1 Overview 22
3.2.2 Assets - Definitions of Terms 22
3.2.3 Asset Structure: Outlook 25
3.2.4 Large Variances: Assets 26
3.2.5 Key Percentiles and Rankings 29
3.3 Financial Returns in Brazil: Liability Structure Ratios 44
3.3.1 Overview 44
3.3.2 Liabilities and Equity - Definitions of Terms 44
3.3.3 Liability Structure: Outlook 46
3.3.4 Large Variances: Liabilities 47
3.3.5 Key Percentiles and Rankings 50
3.4 Financial Returns in Brazil: Income Structure Ratios 63
3.4.1 Overview 63
3.4.2 Income Statements - Definitions of Terms 63
3.4.3 Income Structure: Outlook 65
3.4.4 Large Variances: Income 66
3.4.5 Key Percentiles and Rankings 69
3.5 Financial Returns in Brazil: Profitability Ratios 82
3.5.1 Overview 82
3.5.2 Ratios - Definitions of Terms 82
3.5.3 Ratio Structure: Outlook 84
3.5.4 Large Variances: Ratios 85
3.5.5 Key Percentiles and Rankings 88
3.6 Productivity in Brazil: Asset-Labor Ratios 103
3.6.1 Overview 103
3.6.2 Asset to Labor: Outlook 104
3.6.3 Asset to Labor: International Gaps 105
3.6.4 Key Percentiles and Rankings 108
3.7 Productivity in Brazil: Liability-Labor Ratios 123
3.7.1 Overview 123
3.7.2 Liability to Labor: Outlook 123
3.7.3 Liability and Equity to Labor: International Gaps 124
3.7.4 Key Percentiles and Rankings 127
3.8 Productivity in Brazil: Income-Labor Ratios 140
3.8.1 Overview 140
3.8.2 Income to Labor: Outlook 141
3.8.3 Income to Labor: Gaps 142
3.8.4 Key Percentiles and Rankings 145
4 MACRO-ACCESSIBILITY IN BRAZIL 158
4.1 Executive Summary 158
4.1.1 Government Role in the Economy 158
4.1.2 Infrastructure 159
4.2 Political Risks 159
4.2.1 Economic Relationship with the United States 159
4.2.2 The Political System 159
4.3 Marketing Strategies 160
4.3.1 Distribution Channel Options 160
4.3.2 Agents and Distributors 160
4.3.3 Franchising 161
4.3.4 Direct Marketing Options 161
4.3.5 Joint Ventures and Licensing Options 162
4.3.6 Creating a Sales Office 163
4.3.7 Selling Factors and Techniques 163
4.3.8 Advertising and Trade Promotion 163
4.3.9 Pricing Issues 165
4.3.10 After Sales Service and Customer Support 165
4.3.11 Selling to the Government 165
4.3.12 Intellectual Property Risks 166
4.3.13 Hiring Local Counsel 171
4.3.14 Performing Due Diligence and Checking Bona Fides 172
4.4 Import and Export Regulation Risks 172
4.4.1 Taxes and Fees Assessed on Imports 173
4.4.2 Customs Regulations 176
4.4.3 Import Licenses 176
4.4.4 Export Controls 177
4.4.5 Documentation Required for Trade 177
4.4.6 Temporary Goods Entry Requirements 177
4.4.7 Labeling and Marking Requirements 178
4.4.8 Restrictions on Imports 179
4.4.9 Standards 179
4.4.10 Free Trade Zones and Warehouses 182
4.4.11 Membership in Free Trade Arrangements 184
4.5 Investment Climate 184
4.5.1 Openness to Foreign Investment 184
4.5.2 Conversion and Transfer Policies 185
4.5.3 Expropriation and Compensation 186
4.5.4 Dispute Settlement 186
4.5.5 Political Violence 186
4.5.6 Performance Requirements and Incentives 186
4.5.7 Right to Private Ownership and Establishment 187
4.5.8 Protection of Property Rights 187
4.5.9 Transparency of the Regulatory System 188
4.5.10 Bilateral Investment Agreements 188
4.5.11 OPIC and Other Investment Insurance Programs 189
4.5.12 Labor 189
4.5.13 Capital Outflow Policy 190
4.5.14 Major Foreign Investors 190
4.5.15 Efficient Capital Markets and Portfolio Investment 191
4.6 Trade and Project Financing 192
4.6.1 Banking System 192
4.6.2 Foreign Exchange Controls Affecting Trade 193
4.6.3 General Availability of Financing 193
4.6.4 How to Finance Exports and Methods of Payment 194
4.6.5 Availability of Project Financing 197
4.6.6 Banks with Correspondent Banking Arrangement 198
4.7 Travel Risks 199
4.7.1 Travel Advisory and Visas 199
4.7.2 Infrastructure for Conducting Business 200
4.7.3 Country Data 201
4.8 Key Contacts 201
4.8.1 Brazilian Government Contacts 201
4.8.2 Brazilian Trade Associations and Chambers of Commerce 207
4.8.3 Market Research Companies 232
4.8.4 Commercial Banks 236
4.8.5 U.S. Mission in Brazil 238
4.8.6 Attorneys in Brazil 239
4.8.7 U.S. Government Agencies 243
5 DISCLAIMERS, WARRANTEES, AND USER AGREEMENT PROVISIONS 247
5.1 Disclaimers & Safe Harbor 247
5.2 Icon Group International, Inc. User Agreement Provisions 248
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