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TRANSCRIPT
Peru’s PPP Per Capita GDPIn terms of U.S. Dollars
PPP = Purchasing Power Parity. The value of all final goods and services produced within a country in a given year divided by the average population.
Peru interest rates
Lower interest rates make it easier to get money, but also depreciates the currency, and raises inflation.
Inte
rest
Pe
rcenta
ge
Percent of Unemployment in Peru
1999 2001 2003 2005 2007 2009 20117
7.5
8
8.5
9
9.5
10
Unemployment in Peru
Unemployment
The US is ay 8.3 %
Economic and Financial Risks
The Country is rated as an A4 country. There is a shaky political system and economic outlook in the long run
Relatively volatile trends in the business world
Lack of reliability in corporate financial information
Lack of infrastructure such as roads and utilities
Peru does have a bad ranking on the corruption scale (3.4), but as you can see by the color coding below, it is average for Southern America.
POLITICAL - LEGAL ENVIRONMENT
Government
Presidential Representative Democratic
President, Ollanta Humala
He led a rebellion around 6 years ago
Humala wants to distribute wealth from country’s key natural resources
Business
Rank in the world41st overall
24th getting credit
17th protecting investors
22nd registering property
The Bad111th enforcing contracts
101st construction permits
100th resolving insolvency
Tariffs
In 200625% on food
Caused lack of trade
In 2009U.S. exports were duty free to Peru on 90% of trade
All tariffs with the U.S. will be phased out soon
Under ATPDEA legislation 99% of Peru’s exports to the U.S. will be duty free
Religion & Language
90% of the country is Roman Catholics
80% of the country speaks Spanish
16% speaking Quechua
Relationships and Respect
Peru is a group-oriented culture, where the collective group is deemed more important than self
Business is built on personal relationships, which have been established over a long period of time
Business in Peru only proceeds after both parties have good working relationships and feel comfortable with each other
Business relationships in this country exist between people, not necessarily companies
There is great value placed on conducting yourself in every situation with: tact, diplomacy, sincerity, integrity, and sociability
Negotiation Tips
Do’s
Build Relationship
Be Persistent
Move at their pace
Show interest in Culture
Emphasis what you can do for each other
Be honest
Don’t’s
Be Aggressive
Be Loud
Be Pushy
Be late for appointments
Use their negotiation tactics
Hofstede DimensionsPDI-Power DistanceIDV-IndividualismMAS-Masculinity/Femininity UAI-Uncertainty AvoidanceLTO-Long Term Orientation
Consumer Culture
Religious practices
It is a democratic republic, where they elect a president and members of congress every five years. 90% of the country is Roman Catholics and 80% of the country speaks Spanish, then 16% speaking Quechua as the other dominating language.
Attitudes toward the U.S. & Shopping behaviors if different from the U.S.
The typical Peruvian consumer has considerably evolved over the last decade. The consumer is more interested in the components of a product before they purchase. If the product does not meet their expectations, they are more inclined to complain today, even if this attitude is still a very marginal phenomenon. They also view American products to be of superior making and are willing to spend top dollar on those items. They are still known to do the bulk of their leather and shoe buying from less expensive surrounding countries.
Product # 1 - Cyanide Leaching Fields
Some large companies but large population of illegitimate small miners
Currently use a mercury amalgam mix in order to separate Gold from ores
Mercury Burned in gold shops and produces high quantities of mercury vapor exposing many to health risks
Solution is to bring alternative process to extracting Gold from ores
Cyanide Leaching fields require a lot of capital up front and large plots of land that smaller miners don’t have capability to build
For mining Gold, not killing
Competition
Large corporations use this technique all over the world including U.S.
Opportunity: Normally they use it for their own mining purposes.
Threat: it would be easy for a large company to open operations for small miners.
Product # 2 -BioFuel Producing Algea
Some large companies but large population of illegitimate small miners
Currently use a mercury amalgam mix in order to separate Gold from ores
Mercury Burned in gold shops and produces high quantities of mercury vapor exposing many to health risks
Solution is to bring alternative process to extracting Gold from ores
Cyanide Leaching fields require a lot of capital up front and large plots of land that smaller miners don’t have capability to build
Mining large industry in Peru
Competition
Lots of biofuel companies in the world
Threat: A highly innovative technology, requires constant new developments
Opportunity: can license technology from Joule Unlimited
Renewable energy technology is not being used in developing countries
Market
Peruvian population had shown an increasing interest in the use of cell phones.
The market for it has been growing over time with an amazing speed. “The cell phone market during 2006 exceeded the growth rates in recent years, which had a direct impact in increased coverage nationwide,” says the author, “Since 1998 the market showed further growth as the year 2006, an increase of 68.99%.”
There are 3 companies that sell mobile service; Telefonica Movistar, Claro, and Nextel del Peru.
Logistics
Equipment sold is not the latest technology, even though people are willing to pay in order to get it
Rural populations are increasingly using cell phones (from 1.1 in 2001 to 29.4 in 2008)
Peruvians love Americans and products imported from there as well
Direct competitors are small import companies listed in MercadoLibre.com (Craigslist or Amazon model)
Our plan: Get advantage of their high prices and/or narrow selection to offer quality equipment at reasonable prices. Also, work with cell phone companies to sell their services as third party, similar to Best Buy
Plan to serve two segments of the market; the high end that is attracted by exclusive last generation cell phone equipment, and the middle class with affordable second generation cell phones.
Their advantage: Well established in the Peruvian market and dominate the cell phone service segment; therefore, loyalty
Also, they have offices all around the country.
Vulnerabilities: Lack of first generation technology equipment at a reasonable price like in the US, and narrow selection of products.