Brazil Political Factors

PESTLE

Political Factors

Brazil has traditionally been a leader in the inter-American community. It has played an important role in collective security efforts, as well as in economic cooperation in the Western Hemisphere (GlobalEDGE, 2015). As Brazil's domestic economy has grown and diversified, the country has become increasingly involved in international economic and trade policy discussions (ibid). In addition, the legacy of decades of central planning, state meddling in economic activity continues even where it has demonstrably failed, and the weak rule of law further undermines economic progress (Heritage, 2016).

However, the prospects of a rapid improvement of the fiscal balance have deteriorated, which led to Brazil’s sovereign debt being downgraded below investment grade in 2015. Consequently, rebuilding confidence in macroeconomic policies remains the priority even though the recession makes fiscal tightening very difficult (GlobalEDGE, 2015).

In conclusion, the political environment accepts foreign enterprises investment such as IKEA in Brazil to improve the fiscal balance.

Economic Factors

Economic growth will need to come increasingly from productivity, as demographic changes will make raising labour participation increasingly more difficult. The industrial sector, where a few key structural reforms could unleash significant unexploited potential, can play a leading role in this respect. Currently, a fragmented indirect tax system, insufficient infrastructure, weak competitive pressures and low integration into international trade are holding back Brazil’s industry, which has not benefited enough from the global trends that have shaped industrial production elsewhere (OECD, 2015). 

Social Factors

As the largest country in South America, Brazil have a variety of culture and the diversity of human species. In spite of this, all the Brazilians are nominally Catholic and the Brazilian sharing all kinds of culture; it makes Brazil a true sample of unity in diversity (Brazil, 2016). In view of the Brazilian society has a variety of cultural exchange, the premise of IKEA do not need to worry about the exclusion of cultural barriers after into Brazil market. In addition, Brazil's official language is Portuguese, thus IKEA need make products localization in language aspect. According to the World Bank (2016), Sao Paulo is Brazil's richest state and is the state has most populous (19.9 million people), therefore if IKEA want to enter Brazil should first site selection and set up shop in Sao Paulo. Brazilian love festival and this country famous for football (Brazil, 2016), IKEA can be based on these two points selling products in some festival events or launch some football related products to attract customers.

Brazil still has 20% of the population live below the poverty line, it is country has a big gap between the rich and poor; however, the middle class is growing with the development of Brazil (World Bank, 2016). This was good information for IKEA, IKEA's products positioning in the middle-income and low-income people (Elg et al, 2008), this was meet with the income level of the Brazilian and the situation of the growing middle class. According to the CIA (2015), Brazil don't have the aging of the population problem, its citizens, age distribution is shown below.