Lada de Brasil Case
Lado do Brazil is struggling to remain a profitable importer of cars in the Brazilian market. To remain profitable LDB needs to increase its sales and maintain its efficient cost structure. The recession, regulatory uncertainty, and increased competition are all factors that are reducing and threatening the sales and profitability of the company.
In order to counter these threats and increase sales, LDB needs a more aggressive sales strategy, needs to continue to leverage its existing relationships with dealers, local parts manufacturers, and the local government, and should solely focus on being a low cost provider. This should allow LDB to maintain profitability throughout the recession, and continue to be the import leader in a growing and underserved Brazilian auto market.
Although the relationship with the Russian auto supplier (VAZ) is not the primary focus of our analysis, it is important to note that VAZ is in the midst of an uncertain economic and political period. Their ability to provide LDB with cars could be jeopardized, thus, a contingency plan is essential. LDB should explore partnerships with other automakers, Toyota or Hyundai.
CURRENT CHALLENGES
The most pressing challenge faced by Lada is declining sales. In the second half of the year, sales declined consistently. LDB’s market share declined in Q4, indicating its competitive edge is diminishing. Mitigation of the challenges below is imperative.
Market
The Regulatory Environment is a hindrance to our price competitiveness and profitability. The primary issues are high tariffs and potential price freezes, but constantly changing rules (ex. tax exceptions, rate changes) threaten our competitiveness.
High inflation and Foreign exchange risk are both consistent threats to our ability to compete in Brazil. High inflation leads to constant re-pricing and decreases the availability of financing. It also leads to cruzerio devaluation relative to the dollar and has caused us to lose money on
In order to counter these threats and increase sales, LDB needs a more aggressive sales strategy, needs to continue to leverage its existing relationships with dealers, local parts manufacturers, and the local government, and should solely focus on being a low cost provider. This should allow LDB to maintain profitability throughout the recession, and continue to be the import leader in a growing and underserved Brazilian auto market.
Although the relationship with the Russian auto supplier (VAZ) is not the primary focus of our analysis, it is important to note that VAZ is in the midst of an uncertain economic and political period. Their ability to provide LDB with cars could be jeopardized, thus, a contingency plan is essential. LDB should explore partnerships with other automakers, Toyota or Hyundai.
CURRENT CHALLENGES
The most pressing challenge faced by Lada is declining sales. In the second half of the year, sales declined consistently. LDB’s market share declined in Q4, indicating its competitive edge is diminishing. Mitigation of the challenges below is imperative.
Market
The Regulatory Environment is a hindrance to our price competitiveness and profitability. The primary issues are high tariffs and potential price freezes, but constantly changing rules (ex. tax exceptions, rate changes) threaten our competitiveness.
High inflation and Foreign exchange risk are both consistent threats to our ability to compete in Brazil. High inflation leads to constant re-pricing and decreases the availability of financing. It also leads to cruzerio devaluation relative to the dollar and has caused us to lose money on