Guinness’ Market Entry to Peru

The next assignment is targeted to assess the potential appeal to the Peru market as an entry point for Guinness Breweries. Irish Company, Guinness Breweries.

Utilizing the approach using the method International Market Selection market will analyze according to the systematic approach as well as the method referred to as Analytic Hierarchy Process (AHP) We will evaluate the three major factors: Political, Economic, and Cultural.

Based on the results of the study, we’ll recommend that the business either that the market is attractive or not to join.

Guinness was created in Dublin in 1759. The first time it was brewed, was in 1759 by Arthur Guinness. This was a relatively brand-new beer, distinguished by its dark color, which was due to the roasting of barley that was used in the fermentation process.

In just the span of 10 years Guinness Extra Strong Porter was exported to England. It was renamed Guinness Stout as a strong porter was also known as a stout. In the 19th century, Guinness concentrated its brewing operations exclusively on stout. The expansion to foreign markets was a priority under the direction of Arthur’s three sons, who succeeded Arthur in the family business.

At the close of the 1920s, Guinness moved into advertising through the placement of ads in the newspapers and the launch of a public relations campaign. Due to the growing demand for Guinness, the Guinness product there was a new brewery opened in Park Royal, London in 1936. The brewery was changed to Arthur Guinness Sons & Co (Park Royal) in 1952.

The highest point of Guinness the company’s extensive research was in the shape of Draught Guinness in cans first introduced within the UK in 1989. This included Guinness’ prize-winning Guinness widget, which represented Guinness’ innovative method of improving technology and re-creating the flavor of Draught Guinness in a can.

Guinness Limited now has breweries in 51 countries around the world. Guinness Stout is drunk in more than 150 countries. More than Ten million glass of Guinness stout is consumed daily across the world.

Beginning business operations overseas is a complicated and arduous procedure. It involves making decisions on many different, yet related questions. The results of these decisions can affect the effectiveness and success of a business.

The identification of a “right” international market is among the most crucial choices companies face when they are interested in international commerce. Whatever its significance it is true that the methods employed by many companies in determining viable and sustainable markets in international markets tend to be based on random decisions and views instead of a formalized attempt to align the organization’s capabilities to those of pertinent foreign markets.

Once a company has made the decision to expand internationally the company will be faced with the option of choosing the target market (European Commission 2014). According to Marchi and colleagues. (2014) The international market choice (IMS) is a key factor in determining a company’s success in the international market. It is the International Markets Selection is an essential aspect of the evaluation of the foreign entry strategies (Papadopoulos and colleagues. 2002). IMS is the creation of effective and efficient methods to select a foreign target market(s.) Denis and Papadopoulos (1988).

Two different, conventional methods of international market selection are described (Papadopoulos and Denis 1988): (1) A systematic approach, utilizing an established decision-making process, which includes various statistical techniques to evaluate the potential of markets targeted; (2) an unsystematic approach that recommends the application of rules of thumb, such as the selection of foreign markets that decrease the perceived psychic distance.

Globalization of companies can be triggered by various reasons however the most common goal is to expand the business. Bradley (2005:2) provides a myriad of reasons to go international and some of them include better opportunities in foreign markets as well as reducing time-to-market cycles for technology and products as well as the desire to reduce the burden of customers and rivals in other countries.

Guinness Brewery, want to expand its global reach within Peru (South-South America). Guinness Company has been successful across 51 countries. For instance, the country of Nigeria Guinness Nigeria has been successful in 1963. It was the first time Guinness arrived in Nigeria

If a company wants to expand its operations to overseas markets, a range of strategic decisions have to be assessed ( Gorecka and Szalucka 2013,) Also, the business must determine the time of entry (when) and also the mode of entry (how) (Gorecka and Szalucka 2013,)

Evaluation Criteria

Inflation

Peru has been among the fastest-growing economies of the region in the past decade with an average rate of 5.9 percent within a backdrop that has moderate inflation (averaging 2.9 percent). Positive external conditions coupled with prudent macroeconomic policy and structural reforms in various sectors have resulted in an environment of high growth with low inflation. After reaching a peak in the range of 4.6 percent at the start of the calendar year the headline inflation rate decreased and was at 2.9 percent in August, which is just below the upper limit of its range for target inflation.

GDP growth

Slightly progressed slightly to 3.3 percent during 2015 and the minimum for six years in the range of 2.4 percent in 2014. In 2016, the economy is anticipated to be similar to levels in 2015, but returning to an average of 3.8 percent through 2017-2018. Over the next two to three years, major mining projects are anticipated to start construction, and increased public and private investment into infrastructure development projects is expected to boost general demand. In addition, the country will continue to make structural changes to boost confidence among private investors.

Exchange rate:

Peru is a country with a free-floating exchange rate system and the government is not regularly intervening in order to stabilize the rate. At the time of 2013, Nuevo Sol was the Nuevo Sol is one of the currencies that are least volatile worldwide, showing stability in the face of the global market and currency volatility. In addition, the Central Reserve Bank of Peru (BCRP) provides the fiscal stimulus and liquidity-control measures to control liquidity.

Political

Stability

The general stability and solid performance have enabled the government to boost its revenues, and consequently, it is able to balance its budget. President Pedro Pablo Kuczynski, who was inaugurated in July of 2016 plans to boost public infrastructure investment and has stated that Peru is likely to raise funds through global financial markets to fund these projects.

Since 1998, when the nation barely avoided bankruptcy after entering into an arrangement with IMF, Peru has followed the safe route of fiscal consolidation. The fiscal balance has recorded just four years of deficits over the past decade, and these deficits have not exceeded 1.3 percent of GDP. In addition, the public debt was reduced by half, from 44.3 percent of GDP that was recorded in 2004 to 23.3 percent of GDP in 2015.

Market Economy

Market economies are built on the notion of demand and offer and allow businesses to thrive or fail with no involvement from the government. A market-based economy that is completely independent isn’t feasible to put into practice, as the majority of market economies across the world are influenced by a portion of influence from the government.

The reforms that were in place removed some of the barriers for private businesses to run. With no minimum capital requirement in the present, it takes less than seven steps to begin a business. The regulations for labor are changing. The government controls the price of fuel and food items and partially subsidizes electricity but at the end of 2014, it was ruled out the reduction of taxes or introducing subsidies to encourage investment and protect export industries from the current slump in prices of products.

Culture

Peruvians have their national identity that is backed up by a number of common characteristics like the language. Hofstede models are used to evaluate the appeal to the marketplace. The six dimensions of Ireland and Peru the two countries are compared.

Both countries share a commonality in the Long-term direction, as well as the scores, are extremely low, with Ireland 24, and Peru 25. This means that this dimension is a measure of the long-term planning of the government is not present. The two countries are different in other five dimensions, including distance Power individualism, masculinity, avoidance of uncertainty and indulgence, and masculinity.

Analyzing the three major factors: political, economic, and cultural, in light of the data available for each we classify them as fallow by the political in the top position as being the most crucial. Economic is regarded as lesser importance, since, Political and economic are highly interconnected. On the other hand, indecision that is associated with a volatile political climate could reduce investment and slow the speed of growth. However, the poor performance of the economy could cause government collapse and political instability.

While analyzing the Incentives parameter of the Peru market and analyzing the results, we discovered several macro greenfield elements that could be enabling factors for Guinness Beer approval. These include political (such as the government ) as well as economic factors (GDP increasing each year) Based on our analysis using our built IMS model we consider that the Peru market offers a variety of favorable conditions

Analyzing Sub Criteria

Based on the information above on each sub-criterion that makes up the economy criteria we can rank the most crucial sub-criterion as inflation. It is more significant than the exchange rate. When inflation is high in value, that means the value of a currency is reduced, and consequently, it will increase the rate of exchange. Furthermore, countries with low inflation tend to experience an increase in the price of the currency.

GDP growth isn’t a crucial sub-criteria although it is an essential sub-criterion, the rate of growth is increasing year on year. The importance of the exchange rate is greater in comparison to GDP, which the former is adjusted to the rate of inflation. If inflation is lower it means that the country is more competitive.

In the possible entry market that could be the Peru Market, inflation is very low (averaging 2.9 percent) and Peru is more appealing as a potential market for entry.

In the political guidelines, The most significant sub-criteria is Stability. It is influenced by Regulation and lastly, Market Economic. Stability in the political sphere is an essential element of a democratic society. For investors, it is essential to have a certain level of peace of mind regarding the stability of the political system in the country in which they plan to invest and a political climate instability could affect the capacity of a particular region or country to draw investors.

Peru is a stable country in terms of its political stability. The Constitution of Peru stipulates that presidents are not able to be elected for a second term. The constitution provides that a traditional President and Vice-President for five years.

The president picks the prime minister, who presides over the remaining ministers that make up the cabinet. If the country is stable in its political stability and has a stable economy, it is able to regulate itself. is constantly implementing structural changes to ensure trust among private investors.

In relation to the cultural similarities, both Ireland and Peru differ in their cultural practices. However, this does not necessarily mean that the Peru market cannot be an entry point for an Irish business. The cultural similarity factor isn’t the only factor in this scenario that can influence the choice to enter a market. In addition, Ireland is doing business with South American countries, such as Chile. In analyzing Chile’s Hofstede of Ireland and Chile cultural affinities results in that both countries are completely different with respect to this aspect, however, their companies are operating.

Between the months of January and August in this calendar year, the number of Peruvian beer imports increased by 35 percent over the same timeframe in the previous year, as per the Foreign Trade Center (CCEX) of the Chamber of Commerce of Lima.

Between 2012 and 2016, the imports of this product decreased by 1.4 million liters, however, the growth in this area is creating an optimistic outlook for the revival in consumption of this product “said Carlos Garcia, manager of CCEX-CCL.

At the beginning of the year, the value-added was more than the US $5 million and entered our country 5.6 million liters of lager.

The main suppliers are discovering Mexico with 58% of our share as the primary source of Corona beer. Next is Colombia (18 percent) which provides us with the majority of Miller beer.

Below these countries is that of the Netherlands having a 9 percent share. This is a country that provides us with Heineken as well as Grolsch beers. In addition, Germany provides us with the Erdinger Weissbier, Bear Beer, Oettinger, Bitburger, Classe Royale, and Phoenix brands. Meanwhile, Argentina offers us Stella Artois and Quilmes and Japan beers from the Sapporo and Kirin Ichiban beers

Based on the study of a potential entry market, based on the methodology to International Markets Selection at Evaluating the appeal to Peru market as a market to enter for Irish company A”Guinness Breweries A”.

Based on the Systematic Approach and the Analytic Hierarchy Process (AHP), we’ll weigh three primary factors: Political, Economic, and Cultural.

Peru is among those countries of Latino America that the economy is growing more rapidly year on year. Inflation is very low levels. The most important factor and the most crucial factor for an individual who decides whether or not to nor not being POLITICAL,

The government of Peru has promoted integration into the world economy through entering into 17 trade deals with 52 countries and including the US-Peru trade promotion agreement (while U.S. exports to Peru increased between USD 4.9 billion up to 8.8 billion (an improvement of 79 percent). The year 2015 saw exports increase 23.5 percent while imports fell 10.9 percent. Peru recorded a USD 13 million trading surplus during April which was the first month in the calendar year. Peru’s preferentiaPTPA) came to force on February 9, 2009.

Trade agreements have been signed with Argentina, Brazil, Bolivia, Chile, China, Colombia, Ecuador, the European Union, Iceland, Japan, South Korea, Lichtenstein, Mexico, Norway, Panama, Paraguay, Singapore, Switzerland, Thailand, and Thailand, the United States, and Uruguay.

Based on the results of our Pairwise comparisons, we have calculated the weights of the Sub and Main criteria at 77%. What does is the significance of that? Peru Market is attractive to the market for entry (70 – 79 not as favorable and still a developed economy)

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