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INTRODUCTION Intelligent Leisure Solutions (ILS) is a group of five companies based in Brazil working to create, implement, and manage intelligent solutions. As a
INTRODUCTION Intelligent Leisure Solutions (ILS) is a group of five companies based in Brazil working to create, implement, and manage intelligent solutions. As a completely technology-based solutions company, ILS is unique in its approach to travel, real estate, technology, and sustainable tourism. With high growth in the tourism industry, Intelligent Leisure Solutions founding entrepreneur, Robert Phillips, is working to find the most appropriate, innovative growth strategy for expansion and sustainability of the business. GEOGRAPHIC BACKGROUND Brazil is located on the Atlantic Coast of South America with a slightly smaller geographic area than the United States (see Exhibit 1). With the fifth largest country population in the world, it is home to more than 200 million Page 469 people. Brazil's economy is larger than that of all other South American countries, characterized by developed mining, manufacturing, agricultural, and service sectors, and is increasing its presence in world markets. After the global recession in 2008, Brazil was one of the first emerging markets to begin recovering with about a 5 percent growth in 2010 (Central Intelligence Agency [CIA], 2010). Brazil's economy is now the eighth largest in the world. It has recently acquired a temporary seat on the United Nations Security Council until the end of 2011 and is seeking a growing international role and geopolitical influence (Economist Intelligence Unit, 2010a). Brazil's government, led by Dilma Rousseff of the Worker's Party, welcomes private sector concessions, although bureaucracy still impairs efficiency. Foreign direct investment is welcomed, although domestic investors receive priority in certain areas, especially in the oil and energy sectors. Development of the export industry continues to be a priority and trade barriers are expected to be lowered. Brazil's tax system is poorly structured and tax evasion is widespread while the tax breaks applied to lessen the burden of the financial crisis of 2008 are scheduled to be lifted; yet, the overall tax burden will continue to be high. Both foreign and national companies spend considerable resources toward managing their tax issues. Compliance with environmental law is a new crucial aspect of doing business in Brazil, and intellectual property rights must be respected (Economist Intelligence Unit, 2010b). The looming 2014 World Cup and 2016 Olympics are expected to bring an increase in public-private partnerships (Economist Intelligence Unit, 2010a). Page 470 Brazil's middle class is expanding due to the prosperity brought about by sound macroeconomic policies since 2000 (Euromonitor International, 2010). For the first time in Brazil's history, 50 percent of its citizens, more than 94 million people, belong to the middle class. Many low-income Brazilians have benefitted from new opportunities for stable jobs in the past decade. Because more people are being hired in the formal economy, access to working benefits such as health care, transportation, and food has increased. The real average monthly income grew 2.3 percent between 2008 and 2009 (Euromonitor International, 2010); this new middle class has access to certain products and services for the first time in their lives and are demanding more products and higher quality of service. Lower fertility rates are also contributing to higher disposable incomes. Brazil's fertility rate of 1.9 children per woman in 2009 has allowed parents to spend more on consumer goods and services (Euromonitor International, 2010). This has also resulted in a rise in demand for travel services, as families are increasingly able to afford vacations. Brazil has a very young population, with 33.2 percent of its population in its twenties and thirties (see Exhibit 2). This segment of the population is technology savvy with financial independence and the means to travel (Euromonitor International, 2010). They tend to travel to different regions of Brazil and to other countries over the holidays, and are looking for comfort and efficiency in their services. The annual disposable income will increase by 2020 (see Exhibit 3). The number of families in the US$75,000 income bracket will more than double from 1.7 million households in 2010 to 3.6 million in 2020 (Euromonitor International, 2010). EXHIBIT 2 Brazil's Consumer Segmentation, 2010- 2020 (in thousands) 2010 2015 2020 Growth (%) Babies/infants (0-2 years) 9,084 8,070 7,656 -15.7 Kids (3-8 years) 20,236 17,859 16,005 -20.9 Teenagers (9-12 years) 13,928 13,490 11,865 -14.8 Teens (13-19 years) 23,347 24,104 23,627 1.2 People in their twenties 35,258 33,749 33,335 -5.5 People in their thirties 29,875 33,207 34,611 15.9 Middle-aged adults (40-64 years) 50,359 56,508 62,662 24.4 The tourism industry in Brazil grew 22 percent from 2003 to 2007, almost 3 percent more than the overall Brazilian economy during that time (Euromonitor International, 2010). Leisure and recreation spending is expected to grow by 65 percent by 2020 (see Exhibit 4) with more Brazilians traveling during Carnival, Christmas, and other vacation times. Many Brazilians are starting to buy vacation packages through travel agencies and airlines that can be paid for Page 471 in installments; the amount spent in this area grew 27.5 percent from 2005 to $5 billion Brazilian reals in 2009 (see Exhibit 5) (Euromonitor International, 2010). People in the upper and upper-middle classes are the primary customers for these packages. Robert Phillips feels that the company can grow through increased operations, new projects, new investors, and increased consulting. To do this, Phillips proposes the following for each of the group's companies (Guthry, 2010). ILSC-To capitalize on opportunities provided by the 2014 Brazil World Cup and the 2016 Summer Olympics, Phillips proposes solidifying the relationships the company has with other international companies, such as Advanced Leisure Services of Spain, Target Euro of Italy, and Gehry Technology of the United States. Additionally, a new website should be created for ILSC using the company's innovative Web marketing techniques. IRES-In this group, a leader needs to be identified to step in and grow the business, finish the IRES website, and begin offering high-end Brazilian properties online. IWS-In this group, a portfolio of success stories needs to be created and a strategy implemented to achieve international recognition and awards, update the website and translate this website into multiple languages to reach new clients, and partner with value-added providers. Additionally, IWS will work to strengthen the Internet Marketing Roadshow, which was put together by IWS to help companies understand what ILS does and why it is needed. ITS-In this group, a complete revision of ITS's existing websites must be done, as well as the creation of a new website structure applying new technologies and trends that have been developed since the site was launched and allowing for rapid expansion into new destination areas and markets by replication. Also, opportunities in the Brazilian tourism industry offered by the 2014 Brazil World Cup and the 2016 Summer Olympics must be capitalized on. ICS-In this group, film, documentary, and training video dubbing and subtitling needs to be developed and offered as part of its service portfolio. Overall-Phillips proposes to continue to maintain the spillover effect between the companies to capitalize on shared knowledge, be up-to-date on trends and developments in tourism and Internet technology through continuous research, maintain the group's financial sustainability, and replicate the group's success stories by applying its successful website business model and operational system to new websites. Also, many of the companies' websites, some more than 8 years old, have not been redone since their initial creation and will be updated shortly. Page 48.
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