South American MARKET RESEARCH

- BRAZIL centered -

2013.01.03 Jason Park/Global strategy Div.

Contents
1. S/A_Overview 2. S/A_Competitiors 3. S/A_Market_Access Strategy 4. Brazil Market - Overview - Investment - Education - Franchise

- Competitors/Target competitor
- O.T.S.U - Marketing

- Possible contact List

5. S/A Market Strategy Conclusion

SOUTH AMERICA_OVERVIEW
Country
Korea Mexico GDP ($) 21 9.9 Pop (M) 48 114 Trade Volume (10Bil) 891 609 Spanish, Korean : 15,000 Portuguese Korean 60,000 Spanish Korean 23,000 Spanish Korean 2,500 Re (Lang./Korean)

Brazil M A I N

12

199

393

Agrenti na

11

40

125

Chile

13

17

130

UNASUR : 12countries
Total

Total Population : Aprox. 3.8 b

Point

Emerging as a new economic development countries Global corporations Rushing to SA market Economy growth rate : 3~6%
3

SOUTH AMERICA_Competitors
COMPETITORS KUMON MANAGEMENT Expanding market through Regional HQ
Brazil centered running Beginning : Mainly Japanese immigrants Present : localization S/A franchise Lank : 2nd.

Country Brazil Argentina Chile Etc Total

Centers 1,802 40~45

Members 100,000~ 110,000 3,000~4,000

Revenue $34 mil (376) (2005) Base

KUMON

Aprox. 150 Aprox. 1,990

15,000

Aprox. 140,000

Implicati on

Main target country : Brazil After launching, expanding the neighboring countries.

LOCAL

Mainly running through the Language scholl and institute. American education_Pearson invested
[Data: kotra franchise list]

S/A MARKET_ACCESS STRATEGEY

Global Corporation _STANDARD
Common Factor

BRAZIL MARKET
(PRORIRTY TARGET)

-Brazil Government: Attracting foreign capital (Privatization) - Main country of MERCOSUR The Bridge of S/A countries, Brand power expanding - Steady growth of GDP rate

Hub & Spoke

Social/Cultural Factor
-High propensity to consume of domestic market -The most population of S/A( 1.9 billion) -The upper 20% of wealth : 50% of total wealth -Sustained growth of Education and related market

Expanding to Neighboring countries

(ARGENTINA, CHILE, PERU,etc)

Location/Law factor
-The half gross area of S/A continent with plentiful raw materials -Geographical proximity with the neighboring countries -Relaxing the regulation of Foreign investment

S/A MARKET_BRAZIL_OVERVIEW The host country of Olympic(2016) and World-cup(2014) The centered country of BRICS market and HQ of S/A market
Item Population Main City Language GDP Growth Rate Inflation Rate Brazil Aprox 1.9bil 0~14 years : 26.2% (aprox. 0.5 bil.) White (48%) Brazilia, Sao Paulo, Rio de Janeiro, Porto Alegre Portuguese $12,374 2.72% (2011) 5.24%

Target location

Unemployment Rate Private Education Urbanization Illiteracy rate Higher education Poor strata Korean

6.5%
GDP 4~5%, Government budget 10% 81.0 (Service industry : 66%) 10% 14% 22.4% Aprox. 60,000

S/A MARKET_BRAZIL_INVESTMENT 1) Type of establishment of company

Branch office Designated representative (Brazil habitant) Stake 51: 49 Payment of capital -> Increasing expenses The permission of federal government (3~6 months) -> Time-consuming, management supervision, HQ joint responsibility Disadvantageous/unfavorable way Incorporation The generous process of foreign corporation No need the permission of government Type: LTDA ()or SA() Mainly establish a corporation sole and management Advantageous way to launch the company Reason : Responsibility separation of HQ, Local capital procurement

2) Korean company investment

Item
Trend Incorporation/Amounts Main company Korean Franchise Morana

Contents
The continuous growth : Car, Chemistry, Electronics industry Total 22 companies/$7.3bil Samsung, LG, POSCO, CJ, Hyosung, Hyundae, Doosan,etc Accessory store : Located in the most of main shopping centers in Sao Paulo -30 franchise in the 15 states -Investment: 70,000 R$, Franchise fee : 20,000R$ -Revenue per month : Aprox. 40,000 R$(2,000)

S/A MARKET_BRAZIL_EDUCATION
course
Pre-School (Pre-Escola) Kindergarten (Educacao Infantil)

Period
0~6years 5years

contents
Basic Alphabet Compulsory education system 95.7% enrollment : Bright future and big market volume Holdover rate : 53% General/vocational

Students

Primary (Primeiro Grau)

Elementary/Middle (Ensnio Fundamental)

7~14
(8years Mandatory)

55,942,047

Second grade
(Segundo Grau) Higher Grade (Facodade)

Highschool
(Ensnio Medio) College/University

15~17
3 years Over 4 years

8,906,820

Enrollment Less than 20%

Education Policy : Expanding the investment plan of education : GDP 7% [4.5% (05) -> 5.0%(06) -> 5.2% (07)] Minimum wage to 600R$ ($400) for the low income earner Providing the opportunity of basic education Appearing the new consuming trend of middle class : Government assistant policy

Rising the education fever as the growth of middle class

2003~2009 years : the middle class = aprox. 320mil population 2014~ : the middle class will be aprox. 700mil population Standard : Average income $,2,000~$3,000

S/A MARKET_BRAZIL _FRANCHISE MARKET

FRANCHISE INDUSTRY : $22.5 bil ( 23) Company : 1800, Stores : 90,000 F/C
100000 90000 80000 70000 service 31% grocery 90000 61458 62564 furniture 5% education cleaning 600 2001 971 2005 company 1013 2006 stores 1800 2012 1% computer 1% hotel photo 2% 3% 11% sports 15% 17% auto 4% accessory cloth 6% 4%

Category of Franchise

60000
50000 40000

30000
20000 10000

51000

Foreign company: 11%

Point

Increasing 3 times for 10 years Education industry 11% of total franchise business

S/A MARKET_ Brazil_Competitors Global education rush_ KUMON, PEARSON + Local franchise
Analysis of F/C 11% of total franchise market ( 45 R$/2 )
no 1 2 3 4 5 6 7 8 company KUMON WIZARD FISK CCAA MICROLINS CAN YAZIGI CDI centers 1802 1210 930 843 645 442 380 310 field Edu Lan Lan Lan Lan Lan Lan Edu

Location : Mainly located in the center of Sao paulo, Rio de Janeiro

SKILL INGLES

291

Lan

Growth Rate : 10% per year (total 140 companies) Point : Kumon ranked 1th, the last mainly running for English teaching

S/A MARKET_ Target Competitors

KUMON_ BRAZIL MANAGEMENT

Item

Details Kumon Instituto de Educacao Ltda. (www.kumon.com.br) R.Tomas Carvalhal, 686, Paraiso, CEP04006-002, SP 55-11-3059-3700

Subjects

Portuguese, Math, English, Japanese 25~50 years old women Person in the higher education level At least visiting 3 times working days per week Instructing education required 80R$ (\43,000) 133R$/per subject(\ 72,000) Investment : 8,000R$~14,000R$ (400~800) Capital : Over 1,000R$ Franchise fee : $2,300 (Including 44 hours education) Royalty : Enrollment 50% + Tuition 45% Monthly revenue : R$6,900 (60 members) 360 Earning rate : R$3,600 (55% ) Contract terms: 2years Visiting 2 times per 1week 1~2 hours : Question, Answer, Homework

Name

Qualification

Address

Enrollment Tuition fee

President Established Centers/ members

Mr. Tatsuo Miyakoshi 1977 1,654/aprox. 120,000 Invest Contract

Revenue

$34 mil ( 376) 2005

Manage

S/A MARKET_BRAZIL_O.T.S.W

Opportunities
Increasing of middle class Increasing Education needs Immigrants having the interests of private education(Japanese, Chinese, Korea, European, etc) Olympic, World-cup marketing and brand

Threats

The lack of culture, regulation, experience KUMON market volume The lack of localization strategy Being corruption The reliable partnership

Few competitors: infant education -Increasing of Anti-kumon customers Increasing the favor of Foreign Education The biggest market volume Government increases the foreign investment

O T S W

-The low brand image against Kumon The poor education environment Indifference of private education The complicated taxation

Strength

Weakness

S/A MARKET_BRAZIL_MARKETING
POLICY Product : Instructing English based Learning Center : Enhancing the educational method against Kumon Premium L/C interior

PREMIUM

Anti-Kumon

Pricing

Premium Pricing

Target class : Over middle class

Over 10% higher price than Kumon - Present Kumon tuition fee: R$133(\70,000) Education ERP localization

Self_direted

Math/English Focused

Present needs : English based Differentiate Math and English Self directed and instructed

Experienced

American HQ support : Education, Advanced skill

Reflecting the Education policy Highly experienced instructor recruiting

Localization

Instructor Edu-Ministry

S/A MARKET_Possible Contact List

Education company
Item company address Person in charge E-mail information employee source POSITIVO (www.positivo.com.br) R.Major Heitor Fguimaraes, 174, Seminario, CEP 80440 T: 55 41 3312 3671 Mr. Carlos Eduardo Motter Ms. Sivlana Mattos silvanamattos@educacional.com.br Established in 1972, The first leading education business Education software, dictionary, computer sales 3500 Details Divertire Editora Ltda. (www. divertire.com.br) Av. Nove de Julho, 5.435-1, Andar Sao Paulo, SP, CEP 01407-200 T: 55-11-3168-4660 Mr. Norair Marques Norair.marques@divertire.com.br Established in 1998 Education software for infant and elementary English publishing 50

Sourced by KOTRA in 2008/contact for the possibility for Joint business or what else

Wish List
Item Brazil Argentina Chile Etc Name
Sara.Carneiro

E-mail
carneiro.parrode@gmail.com

contents

hernan.ladeuix
ADOLFO DIAZ CARRERAS

hernan.ladeuix@gmail.com
adolfo.diaz@ies.cl

Received the wish mail and market research

Experienced Korean contact list / Korean franchise (ex: Multiexpress Represtacoes)

S/A MARKET_BRAZIL_STRATGEY CONCLUSION

ITEM

STRATEGY

REASON

Strategic Approach

Main city : Sao Paulo MFC or FC trail market Expanding and HQ establish

The biggest market volume (Kumon) Pilot test market before HQ Reliable partnership searching

Management

Managed by reliable women (Kumon) Experienced manager and Korean

To decrease the Risk of management - The experienced manager or Korean (Opinion of KOTRA) Reliable business partner who experienced the foreign company and business

Marketing

Premium PRICING, PRODUCT Differentiate marketing against Kumon

Emphasis the importance of education Regular PR and education policy Aggressive marketing : English, Math

S/A MARKET_BRAZIL_WORK PLAN

The detailed market research The segmentation of possible company and person The approval after trial management
1M 2M 1M 1M

MARKET RESEARCH

Market Segment

Select Possibility

Approval

Contract Trail market

Analysis Target location competitors possible contact list

Report the ongoing process Modification the strategy The specific market report

Possible person searching

Report the plan Pilot market

Location research Contract Marketing and

Possible company searching Discussion and adjustment The plan approval Final decision for the launching

Education strategy

E.O.D Q&A

Exchange rate : $1 = R$1.80 (Present : R$2.00) Reference : ABF statistics, Economy DCI, KOTRA