PORTUGAL:

1
PORTUGAL

• Lien Le Loretta Lee
• Lorraine Leung Woodrow Ho

2
Table of Contents (1/2)

• Map
• Executive Summary
• Country Risk Analysis
• Political
• Economic
• Operational

3
Table of Contents (2/2)

• Demographic and Cultural Trends
• Modes of Market Entry
• Barriers to Entry
• Financing and Exporting Insurance
• Market Potential
• The 4 Ps of Marketing

4
Map
5
EXECUTIVE SUMMARY

• Woodrow Ho

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Executive Summary

• We recommend that McCain enter the Portuguese
• market immediately with the following products
• frozen french fries and vegetables. During the
  first
• year, McCain will test-market by importing the
• products from its processing facility in Spain,
• focusing on the two largest cities in Portugal
• (Lisbon and Porto). If the market is favourable,
  we
• recommend setting up a processing plant in
• Portugal within two years.

7
COUNTRY RISK ANALYSIS

• Lien Le
• Loretta Lee
• Woodrow Ho

8
POLITICAL RISK

• Lien Le and Lorraine Leung

9
Stability of Government

• Govt center-left Socialist Party since 1995
• Prime Minister Antonio Guterres
• Well liked
• Economic growth
• High stability

10
Role of Military

• Civilian rule
• Constitution reduced power
• Small size and budget

11
Relationship with Minorities

• Before
• Small upper class
• Large lower class
• Present
• Growing working class
• Large middle class

12
Relationship with Businesses

• Billions invested in businesses
• Foreign investment
• Promote new areas

13
Portugal's International Relations

• Portugal has exceptionally well relationships
  with all of its neighboring countries and world
  powers.
• These countries include
• Spain
• Morocco
• Africa and South America
• The United States
• NATO
• Canada
• The European Union

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ECONOMIC RISK

• Woodrow Ho

15
Economic Risk

• Balance of Payments positive
• Inflation Rate 2.4
• Corporate Tax Rate 36.5
• Personal Tax Rate 40
• Accounting Standards - Positive

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OPERATIONAL RISK

• Loretta Lee

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Operational Risk

• Portuguese government welcomes foreign direct
  investment
• Foreigners are allowed to establish themselves in
  all economic sectors open to private enterprise,
  however there are some restrictions

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Operational Risk (contd)

• Foreign workers who want to work in Portugal are
  required to obtain a work and residence permit
• Companies employing more than five workers must
  limit foreign workers to 10 of the workforce
• No cases of expropriation of foreign assets or
  companies in Portugal

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DEMOGRAPHIC TRENDS

• Loretta Lee

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Demographic Trends (1/2)

• Estimated 10 million people live in Portugal
• The Portuguese are marrying less and having few
  children
• Vast majority of the population lives in rural
  area
• For the first time in ages, there have been more
  immigrants than emigrants

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Demographic Trends (2/2)

• There is a distinctive north-south social
  division, northerners are more religious and
  conservative than the south who are easy-going
  compatriots
• Portugal has the largest proportion of employees
  with a low level of education in the EU- 75

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CULTURAL TRENDS

• Loretta Lee

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Cultural Trends (1/2)

• Romarias (religious festivals in honor of a
  patron saint) are taken seriously everywhere
• these festivals include folk dancing and take
  place all over Portugal in the spring and summer
• football (soccer) is the only modern activity to
  rival folk dance

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Cultural Trends (2/2)

• the Portuguese are often found in bars and
  restaurants on big match days
• men of all ages spend hours in local cafes
  gossiping over coffee and wine
• city women also have their own afternoon tea
  time

25
Modes of Market Entry

• Sell to food service and retail
• Import from Spain
• Build plant

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BARRIERS TO ENTRY

• Woodrow Ho

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Barriers to Entry (1/3)

• Portugal joined the European Union (EU) on
  January 1, 1986. Its Treaty of Accession required
  Portugal to align its tariffs with the EUs
  Common External Tariff on January 1, 1993.
• Under the terms of Portugal Treaty of Accession
  to the EU, Portugal was obliged to institute the
  VAT.

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Barriers to Entry (2/3)

• This consumption tax is levied on the cost of all
  goods and services rendered.
• The lower rate of tax is 5 (food and other
  essentials), with an intermediate 12 rate (food
  and fuel).
• Special rates of the VAT for Madeira and Azores
  Islands are lower rate 4, intermediate rate 8
  and standard rate 12.

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Barriers to Entry (3/3)

• The Portuguese Customs authorities require
  pre-import/export documentation
• License
• Certificate
• The Single Document (Documento Administrativo
  Único)
• Commercial Invoice.
• Certificate of origin

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FINANCING AND EXPORTING INSURANCE

• Lorraine Leung

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Financing and Export Insurance (1/2)

• Portugal has what is known as a Twin deficit
• Trade and Budget
• Worst of the two is Trade deficit.
• Widen current account deficit to U.S.5.6 Billion
  in 1999.
• Offset by
• Large inflow of worker remittances
• Tourism receipts
• E.U. grants

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Financing and Export Insurance (2/2)

• Record high trade deficit last year estimated 14
  Billion or 13 over GDP.
• Slow legal system.
• Recommendation
• Letter of credit / Irrevocable letter of credit
  (high)
• Receivable insurance

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MARKET POTENTIAL

• Lorraine Leung

34
Market Potential (1/2)

• Very welcoming to international business.
• Increasing role of woman in the business
  industry.
• Potential demand for more convenient foods.
• Especially working mothers.
• Teenagers becoming more westernized.
• More willing to try new products.

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Market Potential (2/2)

• Two-class society
• Middle class 2 groups
• Lower class 4 groups
• Greater population growth in urban areas.
• Lisbon
• Porto
• Target market modernized woman, teenagers in
  urbanized areas

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THE 4 Ps OF MARKETING

• Lien Le and Loretta Lee

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Product

• Frozen french fries and frozen vegetables

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Promotion

• both types of products will be packaged in
  plastic bags
• convenience and easy storage
• variety of package sizes
• coupons will be distributed to homes and placed
  in grocery stores
• include cooking recipes on the package to
  encourage more use of the product

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Place

• grocery stores
• distribute to restaurants
• focus more on major cities, Lisbon Porto

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Price

• Product manufacturing
• Export costs
• Insurance
• Tariffs
• Competitors prices
• Affordable for middle income families

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THE END

• Thank you for your time and attention.