In both school and university settings, we are taught that a solid Entry Strategy always originates from a well-crafted plan.
Make a plan, put resources to it, and then implement!
The process involves devising a plan, allocating resources accordingly, and subsequently putting the plan into action.
However, the reality often diverges from these teachings.
Especially in a place like Brazil, it’s a common occurrence for foreign companies entering the country to prioritize cost efficiency over strategic effectiveness.
Cost efficiency, in this context, pertains to minimizing expenditures.
Strategic effectiveness focuses on achieving the intended objectives.
In the contemporary era of startups, the value of experimentation often outweighs that of meticulous planning.
Planning, unfortunately, often devolves into mere theoretical exercises confined to PowerPoint presentations.
As a consequence, cost efficiency tends to take precedence over any form of strategy.
The Role of Technology
Leveraging technology proves immensely helpful for conducting practical experiments.
Hence, the prevailing approach is to:
“Let’s conduct as many tests as feasible to gain insights. Once we identify the optimal channel, then we can formulate a comprehensive plan.”
I’ve frequently encountered statements from foreign companies entering Brazil, echoing sentiments like:
“Let’s secure our initial sale, and subsequently employ those funds to fuel our broader plan.”
Whether this approach is sound or flawed, it certainly deviates from a structured planning process.
The Agent Approach
Considering that labor costs are on a continuous decline in Brazil (particularly when considering tasks that are susceptible to AI-driven automation), the prevalent approach for foreign companies aiming to penetrate the Brazilian market is the “agent approach”:
“Work on my behalf, facilitate deals, and I will remunerate you based on a percentage of the deal’s success.”
In other words, compensation hinges solely on a successful outcome.
Professionals in Brazil tend to embrace this form of collaboration, not because they wholeheartedly endorse it, but due to a simple rationale:
“If I don’t manage to sell, I haven’t lost anything. However, if I do make a sale, I stand to gain a substantial commission.”
This arrangement appears efficient for both the client and the consultant, doesn’t it?
But, here lies the issue – where does the effectiveness of this approach truly lie?
The Power of Motivation in Securing Deals
For a nascent company in a new market, securing the first deal often demands a significant span of time, and in certain cases, even years.
Understandably, the territorial agent lacks motivation to engage in any efforts that don’t yield immediate results.
In essence, this seemingly efficient approach, more often than not, fails to culminate in the crucial first deal. Eventually, the company may withdraw from the market.
The Ideal Compromise: Efficiency vs. Effectiveness
A balanced strategy emerges as the optimal solution: offering a foundational fixed fee to account for effort and commitment, complemented by a substantial success-based fee linked to accomplished results.
So, the question to ponder becomes:
Are you inclined towards efficiency, or do you prioritize effectiveness?
Feel free to reach out if you’d like to learn more about our offerings for Market Development in Brazil. We’re here to provide you with further information and insights.
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