Cross Cultural Business Venture

8/7/2019 Cross Cultural Business Venture

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November 10, 200

Global Expansion Project Analysis

Prepared by:Amanda Gaeta

Chance KatzerMonique RiosHarriet SitterDarren Thompson


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Expresiones Entretenimientos

This document is confidential and for information purposes only. Expresiones Entretenimientos reserves all rightsto this document. Any reproduction or distribution of this document without explicit written consent by

Expresiones Entretenimientos is considered illegal.

Table of Contents

Executive Summary3

Introduction..5

Feasibility Analysis..6

Country Overview...6

Cultural Orientation...8

Social and Business Practices.9

Communication Challenges.10

Competitive Environment.12

Conclusions and Recommendations...14

Appendices..16

References17


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The growing economy, the highly urbanized country and heavy population base inBuenos Aires makes this nightlife expansion project a strong investment. A target

market of those 18 years of age and older accompanied by notably later hours ofoperation often until 6:00 or 7:00 am offers a large opportunity. The industry isincredibly diverse with bars and nightclubs offering two distinct arenas to pursue.The largest challenge is the direct competition in Buenos Aires which have strong

market shares and a popular name in the industry. We will work on establishing aniche market by creating specific marketing mixes and developing unique images ofour clients bars and clubs to enhance their popularity and emerging success in theArgentinean nightlife industry.Key Data AnalysisDue to the popularity of the night club industry, Expresiones Entretenimientos will

face direct competition within Buenos Aires with clubs including Clubland, Club 69,and +160. In order to overcome this competition, we will strive to diversify theclubs into a unique, exciting experience. This will be accomplished by targetingniches in order to serve unaddressed or underserved markets including thosebetween the ages of 18-30. Due to our expertise in marketing, we will not onlyexpand Vida de Noches market share through advertising innovations, but solidifythe identity of the company.Recommendations

After this analysis, we believe that pursuing the joint venture with Vida de Noche isan essential step for our company to globalize business. Through this globalization

we will be able to expand our company as well as generate increased revenue in

addition to our already steady income.

Our team has already established goals to complete in the short and long term.

Upon approval of this venture, we immediately intend to infiltrate Vida de Noches

marketing with an interactive website in order to aid in the repositioning of their

flagship club, Museo. Currently the club serves an older market of people in the 30-

35 age range, but with this website we hope to attract a younger demographic. This

would initiate the first major step in the projected 5 year plan with an overall goalof increasing the Vida de Noche market share from the current 10% to 15%. With

your approval, a timeline of approaches to these goals will be drafted.

The success with this venture will allow Expresiones Entretenimientos to expand our

services to locations beyond Buenos Aires. This will enhance our reputation and

credibility as a successful PR company. With this experience and our name


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associated with these successes, opportunities to work with other entertainment

companies will become more easily attainable. This would allow financial growth in

order to begin other expansion projects. Although Buenos Aires would serve as ourcentralized base for initiating global expansion, we would expand to other Latin

American countries such as Brazil. This would parallel future opportunities to

expand domestically to major cities such as Phoenix and Las Vegas.


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Introduction

Expresiones Entretenimientos has experienced tremendous growth over the pastfive years. With increasing importance being placed on globalization, it is vital tothe future growth of this company to enter into the global marketplace. SinceExpresiones Entretenimientos specializes in advertisements and public relationsservices for the Latino market, we believe it is in the best interest of the companyto focus on a Latin American country for our global expansion project.Upon research of Argentinas country profile, history, social and business practices,communication styles, and competitive environment, it has become apparent thatArgentina is the most fitting country for Expresiones Entretenimientos services.There is large cultural focus on the night life in Argentina; thus, we believe there isgreat potential for Expresiones Entretenimientos to grow as a company and

increase their presence in the global market.A joint-venture with a company of similar size and at the same development stagewill be the most successful way to enter into this market. After exploring manyoptions, we are confident that Vida de Noche, the owner of several nightclubs, isthe company that will best match our needs. Through our work with them, we willbe able to showcase our services and talents by promoting theirs. In theinformation that follows we have provided you with more of our research andanalysis that further explains why and how we came to these conclusions.


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Feasibility Analysis

Country ProfileArgentinaB is the second largest country in South America and is the largest amongSpanish speaking nations. It is located between the Andes Mountains to the eastand the Atlantic Ocean to the west. The geography of Argentina consists of fourmajor regions: the central plains of the Pampas, the flat and rolling plateau ofPatagonia, the subtropical flats of the Gran Chaco, and the Andes mountain range.This country of over 40 million is clearly a representation of its European ancestry.CA third of this large population lives in Buenos Aires, the countrys capital. This isadvantageous for EE because all Vida de Noches clubs are located in Buenos Aires.The large population will leave us with countless different markets to tap into.Additionally, Spanish, called castellano, is the official language of Argentina and the

majority of the people are of Spanish and Italian descent. Because all EEsemployees are required to be fluent in Spanish, this will minimize translation andtraining costs for us.

Map of Argentina


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EconomyArgentina has one of South Americas largest economies and grossed approximately

$326.7 billion in 2008 and is the worlds 47

th

wealthiest country. Despite theirrecession in 2001 Argentinas economy continues to rapidly expand. Its grossdomestic profit continues to rise from approximately 6.8%-8% per year. Withincreased GDP comes increased disposable income that Argentineans will be able to

spend for entertainment purposes like cover charges at night clubs. Thus increasedGDP leads to increased revenue for our potential partner VDN and, consequently,us. Also the exchange rate for Argentina is 3.16 pesos for every dollar. Thus,investing in a venture in Argentina will not be as costly compared to other countrieswhere the exchange rate is higher.

MediaAs one of South Americas largest media markets Argentine print, radio, and

television mediums are an important part of daily life. They have one of worldshighest cable television usage rates and over dozens of television stations. Thereare also over 200 daily newspapers and hundreds of commercial radio stationsheard all over Argentina. This large array of media outlets allows for a fast andefficient ways to advertise to the millions of people living in Argentina. Argentinaalso has the second highest number of Internet users in South America, furtherexpanding the means in which advertising can be used.

GovernmentThe government in Argentina has a similar structure to the United Statesgovernment in that there is a separation of powers into executive, legislative, andjudicial branches. There is a presidential democracy and universal suffrage forthose aged 16-70. More emphasis is being put on human rights in an attempt toprogress from its Dirty War LegacyB. The Argentinean Constitution providesfreedom of speech and of the press, freedom of assembly, equal treatment of allcitizens, and prohibits forced labor. Due to this emphasis on human rights thepeople of Argentina can freely choose their own forms of entertainment and whatadvertisements they view, making the market readily accessible.FinanceThe Central Bank of Argentina is comparable to the Federal Reserve in the UnitedStates. The Central Bank of Argentina replaced the Currency Board in 1935 as the

countrys official financial institution. The Bank is run by a board, which contains aGovernor, two Deputy Governors, and eight directors, who all are responsible for

assuring the financial growth of Argentina. Since its establishment, many newcredit regulations have been put in place so that it is not given out too freely, whichwas a major problem with the previous system. The primary role of the bank is tocontrol Argentinas exchange rate, especially with the United States dollar to helpcurb inflation.These new measureswill help create a more stable financial


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environment for businesses in Argentina like VDN which makes our potentialagreement with VDN even more stable short and long term.

Cultural Orientation

Business EnvironmentIn regard to the business culture of Argentina, there are some major differencesand some similarities to that of the United States. When using Geert Hofstedesmethod of deciphering culture, these similarities are much easier to see.Uncertainty avoidance is very high in Argentina. Assumption of risk by thebusinesspeople of Argentina is not taken lightly, due to their turbulent economicpast. Due to these characteristics, negotiations are often very long, and contractsare very detailed. Argentineans place a lot of value on the written agreement.Also, this uncertainty avoidance has led to stringent rules and regulations regarding

business practices. This causes business transactions to take a long time becauseof its bureaucratic nature. It is quite different from the United States, where risk isconsidered but not avoided by any means. This behavior was apparent in ournegotiation when Vida de Noches representatives asked for a redraft of thecontract in order to review the agreement with their lawyers to assess and avertany future risk. Another difference is Argentinas focus on collectivism in comparison to the UnitedStates where there is much more emphasis on the individual. With regard to theother two elements, power distance and masculine versus feminine values, they arequite similar to the United States but still maintain male dominance. Power distance

is on the lower end of the scale for both nations. Although both are masculinecultures, women have found their place not only in business but also many otherprofessional arenas including the presidential position. In the negotiation, Vida deNoche brought a group of three representatives consisting of two women and amale. Even though the group discussed their opinions the male made and vocalizedthe final decisions.Importance of RelationshipsIn Argentinean culture, there is high importance placed on personal relationships.Before any business can be conducted, a personal relationship much be formed.Developing a strong network of contacts is of high importance to manyArgentineans. Argentineans prefer to do business with those they have a pre-

established relationship. These relationships are essential to develop because ofthe tough nature of Argentinean negotiators. Thus, a strong personal relationshipwill be essential to doing successful business in Argentina. In order to comply withthis cultural aspect, we arranged a dinner to precede and follow the negotiation.

Social and Business Practices


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Argentina has an extremely social and expressive culture. Their formal and informalstyles of communicating do not vary much from one another. As with most Latin

American countries, Argentina has a large machismo aspect to their culture. Whilethere are many women in the work place, the American idea of gender equality isnot as widely accepted; however, this is changing in the bigger cities of Argentina,especially Buenos Aires. Additionally, Argentineans also have a more traditional

view in regards to power structures. There is often a clear hierarchy of power withinbusinesses, organizations, and other groups, and the acknowledgment of thishierarchy is extremely important to most Argentineans.GreetingsIn Argentina a standard greeting consists of a kiss on the cheek. When two womenor two members of opposite sexes first meet this same greeting is used; however,when two men first meet, it is more common to only shake hands, but they will

often kiss on the cheek upon departure. Male friends will kiss on the cheek everytime they greet each other. This is a sign of trust in Argentine culture. Trying toshake hands when someone offers a kiss is considered awkward but is notoffensive.Non-Verbal CommunicationArgentines tend to use their hands significantly more than people from the UnitedStates. The expansiveness of these gestures also tends to be much bigger. Thehigher frequency and size of these movements will often lead Americans tointerpret that person as more irritated or enthusiastic than a fellow Argentinewould.

It is also important to note that personal distance between people communicating ismuch closer in Argentina. On average the personal distance in Argentina is three tofour inches closer than in the United States or Canada. Argentineans also put a lotof importance on touch. Thus, the duration of handshakes when greeting is longer,and it is common to touch ones counterpart on the shoulder or forearm whilegreeting.

Business InteractionsWhile the idea of time is more flexible in Argentina, showing up late for a businessmeeting is considered rude and is uncommon. This is stark contrast to casual socialinteractions where showing up late is extremely common place. Argentine business

behavior is directed by personal interpretation much more than it is in the UnitedStates and even in other Latin American countries. It is of the utmost importancethat a person gains the respect of ones colleagues.Also in contrast to the U.S., Argentineans generally dress much more formal forbusiness interactions. Neatness in dress is emphasized. For example, mostArgentineans would be quick to notice shoes that are not polished or heels that are


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worn down. Poor grooming and un-pressed clothing can also attract negativeattention in the work place.

Argentine culture puts great significance on personal interface and relationships inand out of the workplace. For this reason, it is extremely important that a personlearn how to properly interact with Argentines. IfEE is not aware of these cultural

aspects, our interactions and negotiations will not only be awkward but alsounsuccessful.

Communication Challenges

LanguageThe most prominent communication issue to be addressed is language. Althoughthe official language of Argentina is Spanish, the country houses a variety of people

from other language backgrounds including Italian, Arabic, German, and French.This trend is especially common in Buenos Aires, where Vida de Noche is located.Despite this mix in the population, knowledge of the English language is quitecommon due to its connection to the business world. Thus, it has become acharacteristic of the middle class, a large portion of Vida de Noches target market.This should allow Entertainment Expressions to communicate fairly easily with thepublic; yet, the diversity in languages is something to attend to while presentingadvertising strategies.Collective versus IndividualAs a collectivist culture, Argentina will send groups to important meetings such as

the negotiation in order to obtain views from different sectors. This practice ensuresa more participative approach to management and that one person does notdetermine the fate of the company. In order to adjust to this business practice,

Entertainment Expressions should prepare a formal meeting group to attendedfuture meetings.Gender RolesCurrently less than half of the women in Argentina work. Due to the lesser presenceof women in the workplace, businesses do not have the heightened experience ofworking with them in contrast to the experience business people in the UnitedStates have. This differing perception of women paired with the countrys focus onhierarchy, where men usually stand on top, will present itself as a challenge.

In order to tend to this, it will be necessary for men to attend business meetingsand make major decisions for the venture. Simultaneously, they perform and stressgender based behavior including having men hold doors open for women as a partof displaying respectable business manners. Therefore, this difference in perceptionshould be kept in mind throughout all business interactions.


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Establishing RelationshipsAlthough establishing relationships with future business partners is practiced

minimally in the United States, it is necessary before any business is initiated inArgentina. It is essential for Entertainment Expressions to contact corporate officersof Vida de Noche, because of the aforementioned stress on hierarchy. Werecommend that when a meeting is scheduled, plan for a friendly dinner with our

new partners to precede and follow the meeting. This is a perfect illustration of howprofessional and personal lives intertwine within Argentinean culture. On the otherhand, focusing on these relationships hinders the overall progression due to thetime commitment and diversion of focus from our priority-the venture itself.Flexible TimeArgentina also has a flexible view of time which directly opposes the American wayof being early or on time all the time. This has a higher presence in social

gatherings versus business meetings for it is still seen as rude to show up late.Thus, there needs to be a way in which to communicate all of our information andmaintain deadlines for the venture, including the process of scheduling a time forthe negotiation. Argentineans prefer to take control of finishing projects due to theirsimilar focus on deadlines; therefore, Entertainment Expressions will grant themthis power after approving their final action plans.Overview versus DetailsWhen in the negotiation, instead of being direct and focusing on the details of theagreement as American culture is comfortable with, there had to be an adjustmentallowing an overview of the project. This included the use of graphs to convey

information to the Argentineans. When predicting VDNs expansion of market share,it should not be explained through numbers but through graphical depictions. It isnecessary to focus on the EEs success and emphasize the fact that this partnershipwill aid both of our companies. It helps in establishing a sense of pride in the jointventure and coincides with the Argentinean value of focusing on the group.


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Competitive Environment

Economic OverviewCurrently, Argentinas economy is one of the richest in Latin America. This diverseand emerging power of the 41 million person population is a great opportunity forexpansion and investment. The World Bank classifies Argentina as an emergingmarket which translates to explain their rapid economic growth andindustrialization.Approximately 92% of Argentina is urbanK with most of the population living inBuenos Aires. This will help strengthen our marketing strategies because of theheavily concentrated population and potential client base in Buenos Aires. As of2008 their Gross Domestic Product was composed of 9.9% Agriculture, 32.7%Industry and 57.4% Services. Our focus is certainly the services sector which

houses 76% of the labor force.Despite the global economic crisis, Argentina has continued to retain stability. Theyhave experienced difficulties with the obvious economic slowdown and thestrengthening of the peso, the currency for several of their main trading partners.Overall, they have responded positively and the government is taking several stepsto ensure continual growth and economic strength. Furthermore, there is a 32billion public works program planned for 2009-2010 along with $4 billion in new taxcuts and subsidies to further their economic progress and strengthen theenvironment for businesses such as VDN and EE to grow and expand.S

ituationBuenos Aires is among the worldwide leaders in nightlife which differs vastly to thatof the United States. The drinking age is 18 in Argentina which attracts many youngAmerican tourists to the bar and the club scene. The nightlife timescale is muchdifferent than that of the United States. While many pubs and bars are open duringthe day, many night clubs are not highly occupied until 2 am and partyingcontinues until 6:00 or 7:00 am. This is an important aspect to understand in orderto have a successful business.The nightlife of Buenos Aires is incredibly diverse. There are several distinctmarkets that have potential for good returns and are among our focus throughpromotional activities. Bars and nightclubs are the two main markets in Buenos

Aires. Bars typically are open earlier and are often the focus of an older crowd. Barsusually have live music, a large part of Argentine culture. It usually consists oftango, classical, jazz and blues. On the other hand, nightclubs often do not openuntil midnight or 1:00 am and often stay open until sunrise. They attract a youngercrowd and the electronic music is often DJed. It is important to know thedifferences as we work towards increasing market share and awareness of Vida deNoche in Argentina.


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ChallengesThe biggest challenge is the direct competition in Buenos Aires. The popularity of

nightlife makes for a plethora of clubs, bars and pubs to compete with. Among thelargest and most popular nightclub competitors are Clubland, Club 69, and +160.These are large scale clubs that hold a large share of the weekend traffic. Amongthe more successful bar and pubs are Beckett, MaxXximo Bar, La Cigale and

Voodoo. These bars experience heavy pre-club traffic and hold a key segment ofthe market. The challenge is to diversify the clubs or bars into a unique, excitingexperience. We are striving to create unique identities for all of Vida de Nochesproperties and possibly focus on finding a niche market for smaller clubs. We feelthat the utilization of a specific marketing mix for a particular segment of themarket will enhance our performance.The majority of Argentinean clubs and bars use do their own in-house marketing

plans. Our expertise in promotion and marketing will enable Vida de Noche toexpand their market share and increase revenues. This will provide us acompetitive advantage and will increase the reputation ofEE in Argentina. We aretruly setting the precedence of an American marketing firm providing services tothe Entertainment and Nightlife Industry in Argentina. We look forward to thechallenge of this unique industry.


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Conclusions and Recommendations

Expresiones Entretenimientos has decided to pursue the joint-venture with Vida deNoche. Right now, Vida de Noche is a midsize firm in Buenos Aires. However, afterour aggressive marketing plan is enacted, we foresee Vida de Noche doubling insize within ten years. Through strong brand development, the clubs that are partof the VDN family will become instantly recognizable to the Buenos Airespopulation.One fundamental aspect on this plan is the repositioning of VDNs flagship club,Museo. Right now, Museo is positioned as an upscale night club popular with thosewith ages ranging from 30 to 35. Expresiones Entretenimientos has proposedrepositioning Museo as a trendier club for a younger crowd from ages 18 to 24.This repositioning strategy will allow VDN to take advantage of the growing student

population in Buenos Aires. In addition to the domestic student population, VDNwill be able to grow their international student market as well. This will also bevital for a strong VDN presence in the tourism industry. The repositioning of Museowill take place over the course of the next two years.Another important part of this joint venture includes improving the market share ofVida de Noche. Right now, VDN has a market share of 10%; within 3 years, wehope to increase that to at least 15%. Furthermore, by the end of the 5 yearcontract, we intend to increase the VDN market share to 20%. We plan toaccomplish this through the introduction of a VDN website to publicize the clubs andevent that VDN hosts. We feel that by utilizing the internet, VDN will be able to

reach a much broader audience than they have previously through the sole useprint media.Although our immediate goal is to improve the position of both VDN andExpresiones Entretenimientos in the near future, EE is looking to expand pastBuenos Aires. Initially,EE will be working exclusively with Vida de Noche for thefirst five to seven years. Then, depending on the position ofEE in Buenos Aires, wemay decide to expand to other emerging South American markets. For example,EE is looking at Brazil as potential market for entry. IfEE is as successful inArgentina as we hope it will be, we see many opportunities throughout SouthAmerica; Brazil is just one example. South America is home to many emergingmarkets, which provides our company with many opportunities for future

successes. EE will be using this partnership with VDN as a trial run to see how wecan perform in an international market.In addition to expanding internationally, we look to expand EE domestically as well.We plan to use the experience we gain in Buenos Aires to expand EE to the Phoenixand Las Vegas areas. With experience in a large city like Buenos Aires, we will beable to easily navigate the larger clubs and events that we will encounter in theselarge markets. We would likeEE to become well-established in the Southwest


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within 3 years. IfEE does find success in these markets, we would like to enter theLos Angeles market within 6 years. The experience with VDN in Buenos Aires will

allow us to understand the complexities of larger cities with greater ease.

EE has grown significantly in Tucson area, and we are excited to take EE abroadand use our advertising and public relations expertise to aid Vida de Noches

expansion. We are looking forward to the opportunities that this partnership willprovide in both the short and long term. We strongly believe this expansion willgive EE the opportunity and resources needed to be successful internationally.


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Appendices

A: Although Argentina is progressive in Latin American terms, they do not have the

focus on pure equality as we do in the United States.

B: The Dirty War Legacy stems from an era in Argentinean history which many

innocent people vanished and basic rights were oppressed. This still conjures

extremely negative connotations for Argentineans.

C: Argentina is a representation of its European ancestry. While many LatinAmerican countries have a large mestizo influence, Argentina had held on to itsEuropean roots, which are mostly Spanish and Italian. Over 95% of the populationis ofEuropean descent. Urban centers, such as the nations capital Buenos Aires,are actually influenced very little by the mestizo culture. Although Spanish is the

official language of Argentina, there are still some people that speak indigenouslanguages. In addition to the native languages and Spanish, there are also manythat speak Italian, German, and English. Because of Argentinas guarantee ofreligious freedom, other religions beyond Roman Catholicism are finding a home inArgentina. Generally, when compared to a nation like the United States, Argentinais a very homogenous nation.D: Urbanization-Argentina is an extremely urbanized nation. In fact, over half of

the population lives in Argentinas ten major cities and 92% of the population isurban. About 3 million people live in the city of Buenos Aires and 12.8 million inthe Greater Buenos Aires area, which makes it one of the largest metropolitan

areas in the world. The urban areas are also highly influenced byEuropean culture.A reason for this being that many of the European immigrants in Argentina settledin large cities due to the availability of jobs. The lay-out of the cities also has aParisian influence and a Spanish grid style as well, further reflecting the Europeaninfluences.E: Culturally, the custom of taking an afternoon siesta helps Argentineans tomaintain this routine of late nights and early mornings.


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i i i i id d ill l

References

"Argentina- Language, Culture, Customs and Etiquette."Kwintessential. Web. 20Oct. 2009. .

"Argentina."Argentina. The World Bank. Web. 19 Oct. 2009.

.

Argentina. The World Factbook. Web. 21 Oct. 2009.

.

"Culture of Argentina - History and ethnic relations, Urbanism, architecture, and the

use of space."Countries and Their Cultures. Web. 20 Oct. 2009..

"Hofstede Scores."Welcome to Spectrum, the Academic World Wide Web Server atTroy University. Web. 20 Oct. 2009..

Nightlife in Buenos Aires. All About Argentina. Web. 30 Oct. 2009..

Thomas, Jane. Guide to Managerial Persuasion and Influence. 8th ed. Upper Saddle

River, NJ: Pearson: Prentice Hall, 2008. 73-93. Print.Victor, David. "Argentina, Doing Business In."Encyclopedia For Business. 2nd ed.

IL: Advameg, 2009. Web..

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Cross Cultural Business Venture