The Walt Disney World, opened by Walter Elias Disney in 1955, started on a few acres of land in Florida and has now expanded to other parts of the United States, Paris and Asia. The company now offers various products including theme parks, television programs, sports and broadcasting. Brazil offers a good site for business expansion due to its growing economy. CIA Worldbook observed that the economic recession of 2013 led to a strain on the Brazilian government’s budget but the economy is recovering and experienced a 1.4% growth in the fourth quarter of 2017. Brazil has a floating exchange rate which is set on an anchor so as to avoid sudden inflations or sharp declines. Due to the higher exchange rate of the dollar, Walt Disney would make an influx in revenue if it exchanged currency in Brazil. Despite these challenges within the Brazilian economy, the country would make a good international market for Walt Disney Company.
The product of choice for the Brazil market by Walt Disney Company is a theme park. The capital base of the company is made up of liabilities and common stock. The proposed source of funding for the business expansion is through the portfolio of debt and equity. Rahman (2015) proposed investment of most company activities through equities as the prevailing interest rates may be higher than the profits. Current assets can be financed through short-term debt. Through debt and equity to finance the new business ensures the company has control of the startup, higher profit margins by the company, drives aggressive growth of the startup especially with low interest rates, improves company credit rating and provides capital to plough back into the company and diversify its operations (Rahman, 2015). The approach also offers long term approach for investors who don’t expect immediate returns and give the business legitimacy as a result of networking with the investors.
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TMF Group (2018) observed that corruption and bribery are rampant within the country. As the company seeks to expand to Brazil, it is important for the company to look at this issue. The company needs to observe the regulations in the United States concerning corruption and the regulations in Brazil and the risks and consequences of violating these policies.
The unemployment rate in Brazil is nearly 12% while the cost of labor is falling (TMF Group, 2018). Walt Disney Company needs to decide which remuneration approach for the workers in Brazil it will be adopt, either the American or the Brazilian rates. The Company needs to assess whether there is need to use the local labor force or those from the United States. Minimum acceptable standards should be set that safeguard the basic rights and dignity of the employees.
Most of the businesses that move to Brazil partner with a local company and are therefore not transparent in their dealings (TMF Group, 2018). The company will need to analyze its moral obligations to the Brazilian community. While the company may be uplifting the economic sector of the country, the government can adapt repressive policies such that these benefits do not trickle down to the community. The company will therefore need to identify its corporate responsibility to the community.
Despite the economic challenges that Brazil has faced, it possesses the potential to provide a good market for Walt Disney Company. Through debs and equities, the company can be able to secure startup capital to establish a theme park in Brazil and plough back the profits for business expansion. The company will be economically secure due to the economic strength of the American dollar, the floating exchange rate and long term invest approach of the investors. An investment by Walt Disney Company will see rise in the company profit through profits made in Brazil.
References
Rahman, N. (2015), Corporate Finance , North Ryde: McGraw-Hill Australia
TMF Group (2018), Top challenges of doing business in Brazil, retrieved from https://www.tmfgroup.com/en/news-insights/articles/top-challenges/doing-business-in-brazil/
The World Factbook: UNITED STATES (2018, May 01). Retrieved from https://www.cia.gov/library/publications/the-world-factbook/geos/us.html
