Lessons learned from Brazilian multinationals’ internationalization strategies

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Lessons learned from Brazilian multinationals’internationalization strategies

Ronaldo C. Parente a,*, Alvaro Bruno Cyrino b, Nicole Spohr b,Flavio Carvalho de Vasconcelos b

aManagement & International Business, Florida International University, 11200 S.W. Eighth Street,RB 339B, Miami, FL 33199, U.S.A.b Fundacao Getulio Vargas - FGV, Escola Brasileira de Administracao Publica e de Empresas EBAPE,Rio de Janeiro, RJ 22250-900, Brazil

1. Is there really something to learnfrom emerging market multinationals?

A recent phenomenon gaining importance in theglobal economy is the internationalization of firmsfrom emerging economies (Gammeltoft, Barnard, &Madhok, 2010; Ramamurti & Singh, 2009). In the

Business Horizons (2013) 56, 453—463

Available online at www.sciencedirect.com

www.elsevier.com/locate/bushor

KEYWORDSBrazilian emergingmultinationals;Emerging markets;Institutions;Global crisis;Internationalizationstrategies

Abstract Internationalization of emerging market multinationals is a recent phe-nomenon gaining importance in the global economy. This foreign expansion of a newbreed of companies has challenged established theories and practices in the field ofinternational business (Cuervo-Cazurra, 2007). This article addresses the issue ofwhether or not there is something to learn from these emerging market companiesand their foreign expansion. Focusing on the international trajectories of four Brazilianmultinationals (i.e., Odebrecht, Embraer, Stefanini, and Marcopolo), this study ana-lyzes their strategies and managerial processes during and after the recent economiccrisis with regards to internationalization. Our qualitative fieldwork suggests that thetrajectories of these Brazilian multinationals are quite unstructured and evolve as areaction to the opportunities they face in international markets. It seems all fourcompanies in our sample shared a strong entrepreneurial spirit and a high motivation toexpand their international operations despite the crisis and the obstacles they faced.Our findings and suggestions in terms of lessons learned should provide valuableimplications for multinational managers from other emerging markets by providing abetter understanding of how Brazilian multinationals expand internationally, deal witheconomic crisis, and manage relationships with local and foreign institutions.# 2013 Kelley School of Business, Indiana University. Published by Elsevier Inc. All rightsreserved.

* Corresponding authorE-mail addresses: [email protected] (R.C. Parente),

[email protected] (A.B. Cyrino), [email protected](N. Spohr), [email protected] (F.C.d. Vasconcelos)

0007-6813/$ — see front matter # 2013 Kelley School of Business, Indiana University. Published by Elsevier Inc. All rights reserved.http://dx.doi.org/10.1016/j.bushor.2013.04.003


past two decades, the world has witnessed the riseof multinationals from emerging economies, partic-ularly those from the BRIC nations: Brazil, Russia,India, China (Fleury & Fleury, 2007; Mathews, 2006).As late movers in global markets, these companies’foreign expansion has challenged established theo-ries and practices in the field of international busi-ness (Cuervo-Cazurra, 2007; Hoskisson, Eden, Lau, &Wright, 2000). Although the global financial crisishas imposed new constraints on the internationali-zation strategies of these companies, many of themhave managed to thrive in the new post-crisis sce-nario and have been able to ‘leapfrog’ certainstages of the internationalization process (Luo &Tung, 2007).

In this article, we broadly address the issue ofwhether or not there is anything new to be learnedfrom these emerging market multinational compa-nies (EMMNCs) compared to the overall body ofknowledge accumulated by developed marketMNCs. By focusing on the international trajectoriesof four Brazilian multinationals, this article ana-lyzes their strategies and managerial processesduring and after the economic crisis of 2008. Thefollowing are some of the more specific questionswe address:

� What internationalization strategies and process-es did these Brazilian multinationals adopt toexpand into international markets?

� What lessons, if any, can managers of multina-tionals learn from the internationalizationprocess of EMMNCs (specifically, Brazilian multi-nationals)?

� Did the global financial crisis and the currentEuropean crisis affect their international posi-tioning? If positively, in what ways?

In order to get a clear picture of the Brazilian MNCs,we conducted in-depth interviews with senior man-agers of four distinctive Brazilian multinationals.Our sample consisted of two manufacturers (i.e.,Embraer and Marcopolo), one construction company(i.e., Odebrecht), and one software/technologyservice firm (i.e., Stefanini). These companies werechosen because they are considered highly interna-tionalized in Brazil. According to Valor Economico(2011), Odebrecht is the 3rd most internationalizedcompany in Brazil, while Stefanini is the 11th,Marcopolo is the 13th, and Embraer is the 15th. Theranking considers the amount of employees, assets,revenues, and investments abroad. In addition toour fieldwork and in-depth interviews, we also col-lected secondary data to guide our analysis from

other prominent Brazilian multinationals, such asGerdau, Metalfrio, Petrobras, and JBS.

We conducted our analysis on the four multina-tionals by examining their motivation and interna-tionalization strategies, the lessons they learnedin the process, the cultural challenges they encoun-tered, and their institutional linkages. Then, weexamined their approach in dealing with crisis sit-uations based on these dimensions while utilizingcurrent theoretical frameworks in order to providemanagerial insights into these Brazilian multina-tionals’ internationalization processes.

Our aim is to contribute to managers’ under-standing of EMMNCs’ internationalization strategiesby providing a better picture of how Brazilian multi-nationals responded to the economic crisis throughtheir internationalization strategies while consider-ing the role institutions played in either facilitatingor hindering the implementation of these strategies.Next, we provide a brief description of the EMMNCswe interviewed and their internationalizationtrajectories.

2. Brazilian emerging multinationals

Brazilian economic development has been character-ized by a number of factors. Throughout the 1960sand 1970s, the government played a central role bothas a promoter of economic development policies andas an entrepreneur through the institution of manystate-owned enterprises (SOEs), particularly duringthe military rule period. State intervention was alsobased on a policy of import substitution to stimulatedomestic industry, which involved raising trade bar-riers and regulating internal competition. While com-panies benefited from this protectionist policy in thedomestic market, it isolated them from internationalcompetition. In order to keep international accountsunder control, the government also created strongincentives for companies to export.

During the late 1980s, Brazilian economic poli-cies changed dramatically. Trade liberalizationand the reduction of the state’s role in the econo-my through the privatization of SOEs resulted inintensified domestic competition. Companies,including multinational subsidiaries, were forcedto increase their productivity and the quality oftheir products and services to compete with im-ports and new entrants in the Brazilian market.These changes in economic policy also motivatedBrazilian companies to reconsider entering inter-national markets.

At the time, some Brazilian companies wereleaders in the domestic markets in which they com-peted fiercely with multinationals from developed

454 R.C. Parente et al.


countries. In order for these Brazilian companiesto grow and remain competitive, they needed toexpand abroad, not only by means of exportationbut also progressively through more committedforms of internationalization (e.g., foreign directinvestments).

The four companies comprising our sample in-creased their international investments to takeadvantage of economies of scale, expand their inter-national portfolio, reduce the risk of dependencyon the Brazilian market, and exploit firm-specificresources and capabilities they developed by operat-ing in the vast and diversified Brazilian market.

2.1. The international strategy ofBrazilian multinationals

In this section, we give a brief overview of thecompanies in our sample and their internationaliza-tion trajectories.

2.1.1. EmbraerWe start with Embraer (Empresa Brasileira deAeronautica), which is one of the leading airplanemanufacturers in the world. The company wasfounded in 1969 and was controlled by the federalgovernment (Embraer, 2012). In 1975, Embraer ex-ported its first aircraft to Uruguay; two years later, itexported aircrafts to France followed by the UnitedStates. In 1979, their first overseas subsidiary wasestablished in the United States with the objectiveof promoting and concentrating sales in the regionas well as offering technical support to clients.

In the case of Embraer, initial forays in interna-tional markets were motivated by expanding down-ward in the value chain, particularly regardingaftermarket and technical support for its clients.As one of our interviewees at Embraer put it, thisstrategy was known as ‘‘follow the aircraft.’’

During the 1980s, Embraer formed several part-nerships and alliances for aircraft manufacturingwith companies from Italy, Ireland, and Argentina.Then, in 1990, the company signed important part-nerships with companies in Belgium, Spain, andChile. In 1997, the company was privatized, withthree financial institutions assuming control ofEmbraer.

Later, in 2000, Embraer entered the Chinesemarket by means of a joint venture with Harbinindustry. The venture was in line with the Chinesegovernment’s policy regarding the military andtechnological mastering of civil and military aero-nautics, and Embraer offered the possibility of de-veloping aircraft for regional markets. However, theproject stalled for years due in part to the model ofaircraft chosen–—the 145. This particular aircraft

proved uninteresting to the market because ofthe high costs of fuel. However, having alreadyinvested in facilities, equipment, and training, Em-braer decided to reconfigure their assets to produceexecutive planes.

In 2008, when Mr. Frederico Curado was namedCEO, Embraer began feeling the effects of the globalcrisis that started in the United States. Consequent-ly, Embraer was forced to lay off 4,500 employees(Attuch, Nicacio, & Gatti, 2009).

2.1.2. Construtora Norberto Odebrecht(Odebrecht Engineering)Our next Brazilian multinational operates in theconstruction industry. Norberto Odebrecht foundedOdebrecht in 1944 as an engineering and construc-tion company. For many years, the company focusedon the northeastern region of Brazil and had Petro-bras as a client. By the late 1960s, the companystarted to expand its activities to the south andsoutheastern regions of Brazil. By the 1970s, thecompany was contracted to work on a range ofprojects that involved complex and sophisticatedtechnologies, including subways, nuclear powerplants, submarines, airports, and bridges. Fromthe late 1970s through the 1980s, the company’sstrategy was focused on simultaneously diversifyingits activities and engaging in international expan-sion. Beginning in 1979, Odebrecht started operat-ing in countries geographically close such as Peruand Chile.

Odebrecht’s initial internationalization was mo-tivated by the shrinking investment capability of theBrazilian government. Strongly dependent on stateinfrastructure projects, Brazilian contractors hadto diversify to accommodate other markets and de-velop new capabilities to compete internationally.An Odebrecht executive stated, ‘‘Our main motiva-tion in this process [of internationalization] wastwofold: first, the need to diversify into new marketsegments in order to reduce the volatility risk inthe Brazilian market at the time; second, we neededto develop new competences to serve as sourcesof advantage and to give us a better competitiveposition.’’

As part of its diversification strategy, Odebrechtexpanded its engineering and construction opera-tions in 1990 to several Latin American countries,including Peru, Venezuela, Chile, Mexico, andColombia.

In 2002, Odebrecht founded Braskem, a subsidi-ary company that became the leader in the petro-chemical industry in South America. Thediversification strategy initiated in the 1970s re-sulted in Odebrecht establishing a presence in sev-eral markets and industries, such as energy

Lessons learned from Brazilian multinationals’ internationalization strategies 455


generation, construction, industrial engineering,infrastructure, oil and gas, real estate investments,and environmental engineering, making Odebrechtthe seventh largest conglomerate in Brazil.Recently, in the beginning of 2010, Odebrechtbegan refocusing on the domestic market.

2.1.3. MarcopoloMarcopolo was founded in 1949 and pioneeredmethods for manufacturing bus frames, whichwere initially made of wood (Marcopolo, 2012).The growth of the automobile segment as wellas increased road infrastructure helped the compa-ny expand internally. In 1961, Marcopolo startedto export to Uruguay and, in the next year, toParaguay.

In 1971, the company became the first to selltechnology in the bus industry and beganmanufacturing frames in Venezuela. In 1988, theyentered the North American market through ex-ports. In the beginning of the 1990s, their interna-tionalization was furthered through the acquisitionof a Portuguese enterprise. Marcopolo saw anopportunity that motivated them to enter thesoon-to-be-created European Union by establishinga subsidiary in Portugal. The choice of Portugal wasbased on cultural and language similarities. A Mar-copolo executive stated, ‘‘Our initial motivation toexpand overseas was to take advantage of the freetrade opportunities of the new-born EuropeanUnion. With that in mind, we acquired our firstoverseas company in Portugal in 1991. We suspectedat the time that if we did not move fast enough, [theEuropean market] would be closed to us.’’

In 1999, Marcopolo initiated operations in Mexicoand, in the years that followed, in Colombia andSouth Africa as well. In 2006, the company intensi-fied its strategy of producing components throughpartnerships (Naiditch, 2006), such as the creationof a joint venture in India and then Russia. Two yearslater, the company was able to do the same in Egypt.By 2009, with three manufacturing plants in Brazil,12 abroad, and more than 13,000 employees, itsproducts had spread to more than 100 countries(Marcopolo, 2012).

2.1.4. StefaniniStefanini started its activities in 1987 as a trainingcompany, but three years later, it began developingand maintaining systems (Stefanini, 2012). In 1996,it started its internationalization by opening a sub-sidiary in Argentina; in following years, it expandedto Mexico and Chile. Stefanini initiated its inter-national forays by following their clients whostarted to internationalize. According to one ofthe directors, ‘‘Our starting point was our close

relationship with clients who started to opensubsidiaries abroad. . . . We first followed our cli-ents in Latin America and then in Europe.’’

In 2001, it expanded its operations to the UnitedStates and then to Europe in 2003. The company wasaccredited with certifications, such as CapabilityMaturity Model Integration (CMMI) Level 5 andMPS in 2005 and 2009. In the same year, StefaniniDocument Solutions was created through the acqui-sition of Callere. In 2010, the acquisition of theAmerican Tech Team was very important for en-abling international expansion. With a presence in30 countries in 2012, the company was consideredthe third most internationalized organization amongBrazilian multinationals (Assis, 2012).

2.2. Common features in theinternationalization strategies of BrazilianMNCs

In general, when asked about their current interna-tionalization strategies, representatives from thefour Brazilian multinationals revealed that theytend to expand to foreign markets where they be-lieve they will have the necessary competence orcompetitive advantage to succeed. The four focalfirms tend to have a long-term vision associated withtheir internationalization strategies. As mentionedby one of our interviewees, ‘‘When we are looking ata potential new market, we look inside to match ourcompetences with the market potential to makesure we will have competitive advantage. . . . Thisis very important for us before we make any locationdecision since we have a long-term vision for ourforeign investments.’’ Similar statements weremade by all interviewees.

Another motivation for internationalizationshared by all companies seems to be the need tobecome more competitive in global markets. One ofthe executives stated, ‘‘Now our main objective is tocombine our competences, the availability of funds,and strategic alliances with local partners to leverageour competitiveness in addition to having access tonew markets.’’ Acquisitions and joint ventures inforeign markets seem to be the main entry modeamong Brazilian multinationals. In 2009, Stefaniniacquired an American company, which allowed themto increase their workforce by 40% and helped themreinforce their presence in markets in which theywere small. One Marcopolo executive stated, ‘‘Wehave formed a few joint ventures recently withcomponent suppliers mainly for plastic parts, airconditioning, foam, and electronics, for which wedo not have a competence but have huge volume.’’

Some multinationals see themselves as becomingtruly global companies, as stated by one executive



at Embraer: ‘‘Today all areas in our business–—ourbusiness units and our functional areas–—are lookingfor arbitrage opportunities in other countriesand for opportunities to be competitive in othercountries. . . . We believe we are transitioning frombeing a large exporter to becoming a truly globalbusiness.’’

Geographic diversification appears to be an im-portant issue. An executive at Marcopolo stated,‘‘International expansion is a way to diversify ourrisk. That is why we are always thinking that weshould have a presence in more countries–—to diver-sify our risk. A practical example is that now we haveEgypt bringing some losses, while we have Indiagenerating huge profits. Can you imagine if we werepresent only in Egypt?’’

As a rule, Brazilian multinationals tend to be verycautious in their internationalization process. Somemay take more than two years conducting viabilitystudies before making any commitment. Most of ourinterviewees agreed they need to very carefullyanalyze all of the factors involved in international-izing, such as a particular market’s key players,suppliers, institutions, and laws. In other words,they evaluate the country’s attractiveness first.After that, they look to their own capabilities andcompetitiveness to make sure they will be able toface the competition and create value by entering anew market. Finally, the companies assess andweigh the political risk. Only then can a final deci-sion be made on whether or not to enter the market.All focal firms make sure they perform all viabilitystudies and analyze all the risks involved beforestarting any foreign project. For example, an exec-utive at Odebrecht stated, ‘‘We are not the type ofcompany that arrives in a foreign country and buysthe newspaper to look for bidding opportunities tomake quick money.’’ The projects need to bealigned with the company’s overall strategic goalsas well as with the potential economic growth of thetarget country. As stated by another respondent atMarcopolo, ‘‘We align our objectives with thegrowth potential of each country with a long-termvision. In order for us to be successful, it takes timeand effort to understand the market, move peopleoverseas, understand the culture and the institutionrelationships, and then ride up the learning curve.’’For an Embraer executive, there are also severalstages of discussion and negotiation in the interna-tionalization process. As stated, ‘‘In some cases, theviability studies may conclude that it is best forsome functions to be concentrated domesticallyand then abroad.’’

Another interesting finding from the interviewdata is that Brazilian multinationals do not tend tolocate their subsidiaries based on purely commercial

reasons. For instance, Embraer operates in Portugaland France to have access to the European marketand also to be in contact with the ongoing technologyresearch programs in Europe. ‘‘The fact that Europehas advanced technologies and we have a physicalpresence there allows us to participate in their proj-ects, making our presence there strategic.’’ Follow-ing the same rationale, another respondent stated,‘‘Some of our operations are strategic in nature toalign with our internationalization strategies. . . . Wehave a presence in Switzerland because most of theheadquarters of major multinationals in pharmaceut-icals, chemicals, etc., are located there, and it iswhere decisions are made.’’

Next, we will try to make sense of our analysis ofthe focal Brazilian multinationals and suggest somemanagerial implications of our study in the contextof emerging market multinationals and their inter-nationalization strategies.

3. Understanding Brazilianmultinationals’ internationalizationstrategies: What are the lessonslearned?

3.1. Lessons learned by Brazilianmultinationals

Despite the differences among these companies interms of their industry affiliation, governance pat-terns, and modes and timing of entry in foreignmarkets, these Brazilian companies’ internationalexperiences in the international markets allowedthem to accumulate lessons learned during theprocess.

� Align your internationalization initiatives withyour company’s corporate purpose and strategy.

All of the companies in our sample consider theirinternationalization moves an important part oftheir corporate growth and geographic diversifi-cation strategy. As such, they regard internation-alization as a necessary means to implement theoverall strategic plan of their companies. Oneexecutive stated that ‘‘some [Brazilian] multina-tionals out there like to brag that they operate in‘n’ countries and have ‘n’ foreign employees andthat this is compatible with their core business,but this is not our case. Although we have oper-ations in 60 countries, internationalization is themeans and not an end in itself for us; therefore,the decision to expand internationally orthe internationalization strategy is part of thediscussion and assessment of our overall strategic



planning, our business model, our boundaries,and our decision of outsourcing (make or buy).’’

Some companies like Odebrecht seem to fol-low a slower internationalization path possiblybecause of the size and scale of their interna-tional projects and the huge investments that arenecessary. This same orientation holds true forthe other companies. Stefanini has learned that‘‘The speed of expansion must increase onlyaccording to the established contracts in thecountry. We learned the hard way that marketpotential per se is not the most important thing.If it does not fit our follow-the-client strategy, itdoesn’t work.’’ It is less risky for a company toexpand only based on closed contracts than onpotential clients, as they did in the past. Theproblem is that without a large client base andvolume, the company might end up exposed totoo much risk, and once investments in telec-ommunication and equipment have been made,there is no turning back. Once a specific initialinvestment is made, it needs to be depreciatedover a long period of time. In order to reduce thisrisk, Stefanini developed its internationalizationthrough its network of clients.

In their search for international advantage,Embraer and Marcopolo look for arbitrage effectsall over the world; however, they nurture anddevelop their core competences in R&D and prod-uct development in their headquarters. In thecase of Embraer, one of company’s main strengthslies within its engineering and product develop-ment capabilities, which are centralized in theheadquarters in Brazil. As a core competence, it isshared with the three business units (i.e., com-mercial, executive, and military) and has one ofthe best product lead times when compared to itscompetitors in the segments in which they oper-ate. As stated, ‘‘We are able to develop and bringto market a new product in five years, while ourcompetitors take seven years. . . . We are alwayslearning, with our engineers making one airplaneper year. On top of that, the same departmentdevelops aircrafts for all segments in whichEmbraer plays. In our model, we centralize ourR&D and engineering, and at the front end, wecustomize according to the markets we serve.This is what guarantees our competitiveness. Thismodel is unique in our industry and gives uscompetitive advantage.’’

� Know your competitive advantages and stick tothem.

Internationalization strategies tend to exploredifferent capabilities, but this was not true in

our case analysis. Companies were very careful toevaluate their strengths before committing to aspecific market. As one executive put it, ‘‘We onlyenter markets in which we are sure we can obtainand sustain competitive advantages. We tried toenter Chile twice, and we discovered that despitethe proximity, we didn’t have the capabilitiesrequired to operate.’’

Some of these capabilities are worth mention-ing. As leaders in the Brazilian market, the com-panies have developed and refined specificresources and capabilities they tried to leverageto international markets. Some of them can beconsidered a direct consequence of the Braziliancultural, institutional, and business environmentin which they were forged. As a relational culture,Brazilians are very open and can easily adapt tothe customs and habits of other cultures. Many ofthe expatriates are themselves descendants ofEuropean and Asian parents and grandparents asthe southeastern and southern regions of Brazilreceived a strong influx of immigrants in the 19th

and early 20th centuries. In addition, Braziliansare usually stereotyped as a friendly people. Thiscultural heritage, in conjunction with the strongpresence of the state in the economy, has helpedBrazilian managers develop strong capabilities ofnegotiation and adaptation to different and am-biguous situations. ‘‘We are conscious that wehave something to learn from the locals; weare more open to adaptation, and our culture ismore about working together than commanding.As Brazilians, the level of rejection is very low.’’

For example, when Odebrecht entered Angola,it was clear the locals had a lot of sympathy forBrazilians. One Odebrecht executive stated,‘‘The people from Angola love Brazilians; theysee Brazil as their older brother who became verysuccessful, and they look up to us. We felt verywelcome by the locals.’’ An executive at Embraerstated, ‘‘Another advantage we have is that thereis very little rejection of Brazilians. I am nottalking only about Embraer, but as a country ingeneral, Brazilians seem to be welcome every-where we go.’’

As stated by another executive, ‘‘We tend tounderstand very clearly that we have a lot tolearn from the locals. This is clear in the caseof Marcopolo. In general, we are open and flexi-ble, willing to adapt to different contexts. . . .Brazilians have a greater willingness to worktogether than to be in charge.’’ The initial chal-lenges Stefanini faced operating abroad weresolved due to this flexibility. One of our inter-viewees stated, ‘‘One of our challenges hasbeen the cultural distance and the challenge of



building new relationships in new markets. Wehave been able to deal with that because of ourflexibility and willingness to adapt, which is typi-cal from Brazilians.’’

The capacity for rapid response and flexibility,which is extremely useful in contexts character-ized by crisis, was developed by becoming accus-tomed to working in the turbulent economic andbusiness environment of the 1980s, which wascharacterized by hyperinflation and macro-economic and institutional instability. As oneexecutive put it, ‘‘These relational and net-work-building competences were reflected inthe strategies of the companies analyzed.’’ Ste-fanini has developed its international strategybased on the creation of what it calls ‘‘networkcapillarity.’’ As soon as they get a contract with amultinational subsidiary locally, they carefullybuild a relationship in order to get to the partner’sheadquarters, where the decision-making processoccurs. Based on their high level of service, theyare usually asked to expand service throughoutother subsidiaries around the world. Then, oncethey expand in their client’s network aroundthe world, they search to develop new clientsin the countries where they have a presence andagain move up to the headquarters and down tothe subsidiaries, offering all kinds of services. Inother words, they internationalize by networkcapillarity. As stated, ‘‘When we approach aninternational client, we focus on providing ser-vice for their entire network. Today we have 35global clients (clients for whom we provide ser-vices to their whole network around the world),and we plan to increase this number in the yearsto come.’’

One of our findings is that the focal Brazilianmultinationals do not consider the low-cost capa-bilities usually associated with multinationalsfrom emerging countries a strength. In fact, asone executive mentioned, customer intimacy andwillingness to adapt to local requirements seemto be as important as low prices. As a result, thesecompanies focus on best-value strategies: ‘‘Ourcompetitive advantage comes from our ability toquickly understand clients’ needs while offeringservice for a reasonable price. We have the abilityto offer reasonable prices anywhere in theworld.’’ The same holds true for Marcopolo, whichis able to adapt its model to customers’ require-ments and the technical specifications of themarkets in which it operates. According to aMarcopolo representative, ‘‘We do not seem tohave any special advantage; what we have is acombination of several things. We do wellin several areas, such as quality, processes,

technology, design, funding, etc., but we are notthe best in the market in any of these particularareas; it is their integration as a whole that givesus synergy and advantage.’’

� Stay committed to your international goals, butbe flexible to adapt your strategies.

Due to the saturation of or limitations in theirdomestic market, most of the focal Brazilian multi-nationals had to commit to international strategiesto maintain a profitable growth. Once the focalBrazilian firms decided to internationalize, theystayed committed to their strategies even with theunfolding international and European crisis. How-ever, this did not preclude fine-tuning and rapidlyand creatively adapting their strategies to newconditions whenever needed.

When managers for the Embraer plant in Chinadiscovered there was little demand for their re-gional jet (the ERJ 145), they decided to adaptthe plant to produce executive planes, a burgeon-ing market for wealthy Chinese entrepreneursand business people. Embraer also discoveredin the executive plane assembly that some oftheir value chain could be performed better ina more decentralized way. Thus, the companycreated a U.S. unit specializing in plane interiordesign, an activity that has to be developed inclose interaction with the client.

Stefanini has also adopted a strategy for en-tering the information technology (IT) servicesbusiness in the United States. Since it has a hugeplatform based on one global enterprise resourceplanning (ERP) player, it decided to install asubsidiary in India to customize the software tocompanies’ specific needs. Since the Indian engi-neers had a great deal of experience with this kindof service, it made sense to draw on their baseof specialized low-cost manpower rather than de-velop these competences at another subsidiary.

After its initial attempt to enter the Europeanmarket through the Portuguese venture,Marcopolo came to the conclusion that due tothe specific institutional and competitive marketconfiguration, it would be more interesting tofocus assembly operations in Eastern Europe.

The willingness to adapt their product andprocesses is also important for Marcopolo. Theboard sees the ability to develop products accord-ing to very different markets as a competitiveadvantage. One Marcopolo executive stated,‘‘Each of our operations has some peculiarities.In Australia, for example, we need a very sophis-ticated product that sells for U.S. $500,000, whilein India the same product sells for U.S. $42,000. It



is the same size bus but with different specifica-tions and upgrades. This requires a lot of flexibili-ty to go from such a high-tech product in Australiato a low-tech product in India.’’

� See risk as an opportunity.

Since the decision to enter an international mar-ket always involves several risks, internationali-zation should be seen as an entrepreneurialdecision. The proliferation of risk-assessmenttools and the resilience of the crisis has createda risk-aversion propensity, particularly regardingforeign direct investments from developing coun-tries. Several multinationals from developedcountries have withdrawn their operations inplaces considered too risky.

While country risk differentials are generallyconsidered a threat in developed financial mar-kets, they are almost a natural condition inemerging economies due to the natural volatilityand turbulence of their business, economic, andinstitutional environments. For the internation-alization of the focal Brazilian companies, al-though considered part of the assessmentregarding entry decisions, they do not assumethe same proportions. As one international exec-utive explained, ‘‘Country risks are to be man-aged, not avoided.’’

Marcopolo is a good example of the risk-propensity approach. As one Marcopolo represen-tative put it, ‘‘Once, a former president of BNDESsaid that Marcopolo has no race, belief, religion,or political party since it established subsidiariesin the most diverse countries. When we decide toenter [a foreign market], we do not fear theconsequences. We know that sooner or later,the demand for public transportation will surge,even in now-complicated countries like Egypt andArgentina.’’

� When evaluating distance, take a closer look.

According to behavioral theories of internationali-zation, this process tends to be incremental, mov-ing from markets that are geographically,culturally, and institutionally closer to the compa-ny and then to more distant countries. Most of thecompanies we analyzed began their international-ization process by entering Latin American mar-kets. Embraer was an exception, with its firstimportant foreign entry being in the United States.However, the perception that neighboring coun-tries’ markets are easier to access may proveelusive in reality. While Brazilian companies sharemany commonalities regarding habits, language,

and common Iberian institutions, there aredifferences that sometimes create great obstaclesfor entering new markets. This is often referred toin the literature as the psychic distance paradox(O’Grady & Lane, 1996).

For example, Odebrecht tried to enter theChilean market twice and was not successful.Our fieldwork suggests that the business andcompetitive environment, not cultural or institu-tional issues, were major obstacles to exploitingthe company’s capabilities.

In one of its first international initiatives,Marcopolo–—as with many other Brazilian compa-nies–—tried to enter the European market throughPortugal only to discover that cost structure,customer preferences, and differences in thelaws and union practices rendered their ventureunprofitable.

� Exploit institutional voids for growth opportuni-ties.

Emerging economies are generally characterizedby a lack of mature market institutions. Usually,they lack well-developed labor markets and capi-tal markets; have excess bureaucracy and redtape; and lack legal mechanisms supporting mar-kets, such as courts, training facilities, etc. These‘institutional voids’ are often considered a bur-den by most developed multinationals.

In the case of the Brazilian companies weexamined, institutional voids are frequently re-garded as opportunities and as a way of develop-ing close relationships with local governmentsand communities, particularly in developingcountries. A company’s ability to interact withthe local community in which it operates seems tobe a main source of competitive advantage. Thefocal Brazilian multinationals tend to have a poli-cy of training locals in several job specialties aswell as developing clear communication channelswith local stakeholders, ensuring they are sociallyresponsible in their activities. As stated by anOdebrecht representative, ‘‘It is part of our busi-ness strategy to develop a healthy interactionwith the locals and to train local labor in thetraits we need since we plan to stay for a longtime. Integrating with the local community, un-derstanding their culture, and being socially re-sponsible is of ultimate importance to us.’’

Odebrecht has developed close links with fi-nancial institutions and the Brazilian governmentin order to include them as part of their offer ininfrastructure projects. One of the main ‘voids’confronting Odebrecht’s clients overseas is a lackof funding for infrastructure project investments



for their clients, who are usually emergingcountries’ governments. To cope with this prob-lem, the company needs to help these clientsraise funds for their projects, many timesthrough development banks around the world.In the case of Angola, the Brazilian governmentagreed to fund the first construction there inexchange for oil, which is one of the main inputsof their petrochemical branch. The case of An-gola is illustrative of the company’s ability to fillvoids and integrate with local governments andcommunities. In addition, Odebrecht has helpedinstall a supermarket chain in Luanda and is apartner in diamond-mining operations.

Home governments also are an important forcethat can play a decisive role in leveraging Brazil-ian multinationals’ firm-specific capabilities.Both Odebrecht and Embraer consider their linkswith the Brazilian government and their supportto be very important in their internationalizationtrajectories. In other words, the dependence oninstitutions is higher for these companies in com-parison with others. As stated by an Odebrechtrepresentative, ‘‘In every country we have en-tered, we have done it in alignment with theBrazilian government. This is common practice.The geopolitics of Brazil, as well as governmentsupport in financing and prioritizing Braziliancompanies’ expansion into Latin America andPortuguese Africa, have leveraged our competi-tive advantage in these regions, but do not seemto aggregate any value in North American expan-sion investments.’’ As for Embraer, they believegovernment support could be more effective inthe case of Europe and the United States: ‘‘Only inthe last five or six years has the Brazilian govern-ment decided to support export and foreign in-vestment initiatives in our area. In Europe and theUnited States, the institutions that support thiskind of initiative are very strong and have beenaround for many decades. For example, the roleof embassies as a support arm for businesses isvery new in Brazil, but it is a common practice inEurope and the United States.’’

One of the main lessons learned by emergingBrazilian multinationals is that when entering

a foreign market, multinationals should makesure to align their current capabilities with thepotential use and value of those capabilitiesin the target market in order to have competitiveadvantage. An Odebrecht executive stated,‘‘It was always clear to us that we should onlyenter countries where we can leverage ourcompetences.’’

In summary, Brazilian multinationals have differentdegrees of dependence on institutions based ontheir business type, as seen in Table 1. In the nextsection, we explore how the focal Brazilian MNCsdealt with the financial crisis.

3.2. Dealing with crisis

When asked about the global crisis, Odebrecht’sexecutives stated that the crisis’ damage to thecompany was relatively small considering theyhave relatively low exposure in Europe. They wereonly affected in their small operations in Portugal.Since they are concentrated in Africa and LatinAmerica, the crisis was not a problem to them.An executive from Stefanini, on the other hand,stated, ‘‘Of course the crisis affected us, mainly inEurope and the United States, but the negativeeffects were offset by our operations in Mexico,Latin America, Brazil, and the Asia-Pacificregions. . . . However, these setbacks were notenough for us to change our expansion strategyconcerning internationalization.’’

Marcopolo seems to be more familiar with dealingwith crisis since they have recently coped withissues in Russia, Mexico, Argentina, and Egypt. Theyhave been having difficulties in Egypt after a hugeinvestment in 2008 was followed by the politicalinstability in 2010. Their executives mentioned thatgreat opportunities for growth still remain andthat they will maintain their plant there. As oneMarcopolo executive stated, ‘‘Our plant there is in agood location in terms of logistics [as we are] nearthe Suez canal–—5 km from the port–—with a very lowcost of operation there. We think we have a goodfuture there because of the low cost, allowing us tosell at competitive prices through the free trade


Table 1. Brazilian EMMNCs’ degree of dependence on institutions

Type of Business

Service Manufacturing

Dependence on Government Institutions High Odebrecht Embraer

Low Stefanini Marcopolo


agreement with Saudi Arabia, North Africa,and Eastern Europe.’’ In their business, a uniquecharacteristic is Egypt’s aging bus fleet. Even ifclients do not buy many products during the crisis,they will have to do so at some point in the future.This is why it is important for Marcopolo to stay incountries during economic downturns and politicalturmoil and just wait for opportunities to return.‘‘We believe Egypt is very important for us,’’ saidone Marcopolo executive. ‘‘Even though we havebeen losing money there for over a year now, wehope that things will change in 2014 since transpor-tation needs in the region will not go away. They willonly get worse, and we will be there to provide.’’

We observed one interesting trend in regard tothe workforce in the focal Brazilian multinationalsafter the crisis: a reduced number of Brazilianexpatriates in operations abroad. In the pastfew years, Odebrecht, Marcopolo, Embraer, andStefanini all started training and employing localsfor work in overseas operations. Odebrecht’s ex-ecutives declared it was too expensive to sendBrazilian employees abroad, so they went from100% of their management positions being filledwith expatriates five years ago to about 80% now.At Stefanini, due to training problems and thedifficulty of sending executives and their familiesto countries like Russia and India (which are verydifferent from Brazil culturally), the company isimplementing a new model. One Stefanini execu-tive commented, ‘‘In the past, our vision was thatwe needed Brazilian managers who would stay atthe foreign location, but then we started sendingimplantation teams. The teams trained the localworkforce and then slowly returned to Brazil.

These training periods at the foreign locationsresulted in many problems, however, so now ourstrategy is to bring the locals to Brazil for trainingbefore we start operations. Our goal is to use locallabor as much as possible.’’

4. Conclusion

In sum, our sample suggests that the trajectories ofthe focal Brazilian EMMNCs are quite unstructuredand evolve as a response to the opportunities thesecompanies faced in the international market. Asummary of their motivation to internationalize aswell as their current internationalization strategies,strengths, and visions for the future are provided inTable 2.

In the case of Embraer, the current internation-alization strategy is to try to open a protectionistmarket, while for Stefanini, the aim is to ‘crawl’into the clients’ networks throughout the world.Marcopolo is nurturing its current investments incrisis areas in order to reap rewards in the future,and Odebrecht is trying to find locations in which toapply their excess resources originating from theirstrong support from local institutions.

It seems what these companies have in common istheir entrepreneurial spirit and high motivation toexpand their international operations despite thecrisis and the obstacles they have faced. In ourqualitative analysis, it is clear these multinationals’motives and the dynamics of their internationaliza-tion do not follow traditional theories. Emergingmarket internationalization appears to occur as areaction to unique opportunities.


Table 2. Brazilian EMMNCs’ strategies for internationalization, strengths, and visions for the future

Company Initial Motivation toInternationalize

CurrentInternationalization

Strategy

Strength Vision for the Future

Embraer Provide technicalsupport for sales;

‘follow the aircraft’

Globally diversify:Exploit defense andexecutive market

Quick productdevelopment

Global leadershipin all segments

Odebrecht Diversify and developcompetences

Rebalance portfolioand leveragegovernmentsupport

Source of fundingfor clients

Deepeninternationalizationand develop people

Marcopolo Access the EuropeanUnion markets

Acquisitions, jointventures, and

diversification ofactivities

Willingness toadapt the product

Focus on emergentmarket

Stefanini Follow the client ‘Network capillarity’ Exploit newopportunities incurrent clients

Globally balancecapabilities andopportunities


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Lessons learned from Brazilian multinationals’ internationalization strategies

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