Report of fortescue metals group ltd

FMG ( Fortescue Metals Group Ltd ) which is Australia ‘s 3rd largest Fe ore exporter, was founded in 2003. Since its constitution, with its 300 million Australian dollars of market value and successful operation continues to turn repute at an amazing velocity and makes FMG go a new force in Fe ore and a really of import Fe ore exports company in Australia. Its Fe ore are chiefly exported to China ( Corporate Overview 2011 ) . In order to run into the increasing planetary market ‘s demand, Group Company plans to spread out its investing in Brazil, a state rich in mine resources to increase its one-year end product. As the international investing is really complex, this study will analyze the PESTL environments and farther measure its SWOT to run in the foreign state. At the terminal of the study, based on the findings, some recommendations will be concluded to work out the identified jobs.

Political environment

Government stableness

Brazil has merely gone through the regular exchanging authorities with result of bing authorities led by Labour Party, Dilma Rousseff in the beginning of 2011 and ended 8-year governed by Lula ( Raul Zibechi 2010 ) . Brazil authorities remains comparatively stable as in the last few old ages led by Labour Party the state ‘s economic system has developed really fast and political environment remains stable without large public violences happen. The freshly elite authorities will go on to hike and intensify the policies applied by the formal authorities and take Brazil to be comfortable.

Government and part

Brazil authorities under Lula applies a flexible diplomatic dealingss with other states. Lula authorities has established a good foreign relationships and attempts to avoid differences and struggles with both developed and developing states. Brazil positively participates in globalisation. Brazil encourages foreign investing, and while foreign investors are given national intervention, certain limitations do use to some Fieldss. Brazil Government is seeking to extinguish domestic poorness, strengthen instruction, sanitation, public security etc. to advance its stableness ( Alberto and Bandeira 2006, 20 ) .


Under a stable political environment with promoting foreign investing, it has built a general sound external environment to Fortescue Metals Group Ltd to put in Brazil in footings of its secure working status in the foreign state.

Legal environment

Regulatory model

Brazil has established a set of ordinances for foreign investing. It has extended the range of foreign investing including crude oil, natural gas, mine development Fieldss. Brazil has established relevant excavation policies ( Mining Act ) which must be followed by mine investors. Harmonizing to the Act, investors must obtain the Exploration License, Exploitation License, Operation License and Local Permission etc.

Business Torahs

Brazil has been prosecuting a policy of trade liberalisation and go progressively unfastened to assorted imports and exports. With the development of universe economic system, the demand of international markets is spread outing, Brazil ‘s trade to other states besides increases a batch.

Labour Laws

“ Consolidation of Brazilian Labour Laws — CLT ” is issued in 1943 to modulate labour rights in Brazil. Companies in Brazil should follow the regular process to engage an person through the constitution of an employment relationship under the CLT ‘s regulations and ordinances. It has regulated 8 on the job hours per twenty-four hours and 44 hours per hebdomad in private houses ( Labor Law in Brazil 2011 ) .

Taxation Torahs

Brazil has assorted sorts of revenue enhancements which are by and large divided into federal revenue enhancement, province revenue enhancement, metropolis revenue enhancement degrees. Brazil has favourable Taxation Torahs to foreign investors. In Brazil, there are chiefly two revenue enhancements act uponing fabrication concerns including Income Taxes: Corporate Income Tax ( revenue enhancement rate: 15 % +10 % supertax ) , Social Security Tax ( 9 % of Company nonexempt income ) and Operation Taxes: Federal import revenue enhancements, Federal Consumption Tax, Gross saless and Servicess Tax ( Johnson 2005, 220 ) .


In Brazil, the legal policies for foreign investing is rather favourable. However, there are still some weak policies which investors should pay attending to, such as the labor jurisprudence is non rather perfect, revenue enhancement Torahs are really complicated. Therefore, before puting in Brazil, one should carry on a elaborate analysis on the relevant legal systems.

Economic environment

Interest rates

Bralian Central Bank announced to keep 10.75 % as the bench involvement rate in Dec. , 2010. But in Mar. , 2011, the Central Bank increased the benchmark involvement rate to 11.75 % ( Brazil Interest Rate 2011 ) .

Inflation rates

Harmonizing to relevant statistics, rising prices rate in Brazil is 5 % in last twelvemonth and in Mar. , 2011 the rising prices rate is reported at 6.01 % ( Brazil Interest Rate 2011 ) . If Brazilian currency continues to appreciate and rising prices rate continues to lift, it will greatly endanger Brazilian stable economic system growing.

Currency exchange rate

The current currency exchange rate of BRL to USD is 1.67 to 1 ( Brazil Interest Rate 2011 ) . The exchange rate to USD has increased by 30 % since 2009. It has already affected the Brazilian exports concerns.

Economy type

Brazil is a market-based economic system and is the largest economic system in South America. Brazilian industrial sector is among the best developed in the part.

Economic trends/forecasts

Since the consciousness of protecting natural and energy resources is progressively focused by public, Brazil as a state rich in resources besides starts to change over to low-carbon economic system as the future economic development tendency.


Economic environment is really of import for investors to see when planning to put in foreign states. By and large talking, Brazil ‘s economic environment is suited for investing. But investors should besides carefully watch the economic elements during the investment procedure.

Social-cultural environment

Hofstede ‘s Cultural Dimensions

Brazil is a multi-racial state with white and black races, and assorted races with diversified civilizations. It stresses individuality concentrating on single involvements. Brazilian people accept inequality in power in organisations, which shows Brazil is a high power distance society. Brazil has a low uncertainness turning away because people are prepared to confront the changing or unpredictables. In Brazil, Women ‘s societal place is non every bit high as work forces. It could be recognized as a maleness state. Brazil Government is doing attempts to do better readying for national hereafter development, so Brazil holds a high long term orientation ( Fang 2003, 358 ) .


Social-cultural envrionment is different from state to state. For foreign investors, such as Fortescue Metals Group Ltd, have to follow the corporate schemes to accommodate the society environment in which to run. It is besides a great challenge for Fortescue Metals Group Ltd to pull off and unite cultural, civilization and gender diverseness in work force.

Technological environment

Technological substructure

Brazil is doing attempts to hone and reenforce its technological direction, invention systems. The Science & A ; Technology Department has established the “ Strategic program ” and “ Innovation Act ” for Science & A ; Technology development. In add-on, the state attach great importance to keep senior originative endowments so as to better its technological substructure and service for industries better.

Communication webs

Brazil has the universe ‘s most advanced Telecommunication equipment and web. The nomadic communicating system is besides developing really fast. Its web is besides going mature. Brazil Government has formed “ National Communication Plan ” to recognize countrywide communicating web ( Brisolla and Etzkowitza 1999, 345 ) .

Logisticss webs

Brazil has the undermentioned disadvantages in logistics web: unequal substructure, slow-development of port system. Presently Brazilian ports are saturated with out-of-date equipment.


Fortescue Metals Group Ltd as a big excavation company, engineering is recognized as the anchor for its operation. Therefore, the engineering environment including basic technological substructure, communicating system, web, logistics in the foreign state are rather of import for Fortescue Metals Group ‘s investing.

SWOT analysis


Fortescue Metals Group Ltd has the undermentioned internal strengths: strong market business, concentrating on mineral geographic expedition, enlargement of market portion ( Herod, McGrath-Champ and Rainnie 2010, 150 ) . In add-on, Fortescue Metals Group Ltd adopts advanced development engineerings and skilled work force which contribute to a high fabrication efficiency.


The internal failings faced by Fortescue Metals Group Ltd are by and large reflected in the undermentioned facets: recent lessening in Fe mines globally, inexperient operation in Brazil, Financial Crisis remains.


Political stableness, economic growing, favourable foreign investing policy in Brazil gives Fortescue Metals Group Ltd a good chance to put in Brazil ‘s mine industry. Foreign-funded endeavors enjoy national intervention in Brazil. Brazil is rich in energy resources, Fe mine, which will ensue in high end product and run into the Fe mine demands of South America and Middle East markets.


There are several menaces for Fortescue Metals Group Ltd to spread out its operation including continual planetary economic recession, exchange rate hazard, addition of labour cost, lessening in demand of steel, increasing costs for operation in foreign states ( Munck 2004, 150 ) . Poor conveyance installations and high transit cost additions production cost. Too many and complicated ordinances, legislative acts and sometimes, impermanent ordinances are enacted. In add-on, new entrants ( investors ) /competitors with strengths will present serious menaces to Fortescue Metals Group Ltd to spread out in Brazil.


Sing the failings and menaces faced by Fortescue Metals Group Ltd Rio Tinto, the undermentioned recommendations are listed to work out the state of affairs.

First, Fortescue Metals Group Ltd can seek to collaborate with other mining Companies to beef up its funding capableness and heighten its competitory advantages.

Second, Fortescue Metals Group Ltd can better or upgrade its direction system to be more flexible since it may run in a new environment which requires the direction system to be more adoptable. To run in foreign environment, it is ineluctable to confront some hazards such as assets damage, safety accidents, environment devastation, etc. ensuing in lessening of Company repute. Therefore, to beef up the direction is the cardinal step to heighten Group Company ‘s image and keep a sustainable growing.

Fourthly, confronting the immense labor cost, Fortescue Metals Group Ltd should develop a better salary & A ; public assistance program to keep employees and better employee ‘s trueness or seek to put in states with lower labor costs.

Last, Fortescue Metals Group Ltd should carefully analyze the related Torahs, ordinances before spread outing the operation in foreign states so that it will cut down the farther penalty charges by go againsting relevant Torahs or ordinances.