The project report titled "Internationalization of Oberoi Hotels: Key Country Factor Considerations of Uruguay" provides a strategic analysis for Oberoi Hotels' potential market entry into Uruguay. The report evaluates Uruguay’s cultural, political, legal, and economic factors, offering recommendations based on secondary research using frameworks like Hofstede’s cultural dimensions and the CAGE Distance Framework. It highlights Uruguay’s political stability, business-friendly environment, and promising economic indicators, while addressing challenges such as the global recession and COVID-19 impact on tourism. The study concludes that Uruguay presents a viable opportunity for Oberoi Hotels’ international expansion strategy.
Internationalization of Oberoi Hotels: Key Country Factor Considerations of Uruguay
International Business Project - Executive Summary
This report presents the key country factor considerations of Uruguay with the context of Internationalization of Oberoi Hotels and Resorts. Oberoi Hotels which currently operates in 32 countries is presented with opportunities and recommendations for a market entry into the Latin American country of Uruguay (Oberoi Hotels, 2022). Uruguay has a history of political, democratic, and social stability, as well as economic stability. It has solid institutions and ranks highly on all important transparency and ease-of-doing-business measures.
Insights are generated based on secondary research of publicly available data from credible sources. Frameworks like CAGE, Hofstede’s cultural dimensions, Global competitiveness Report, documentation from international organizations etc. is discussed and presented. Based on available details, past trends and the cultural, political, legal and economic factors, it is recommended for Oberoi Hotels to enter Uruguay. However, the timing needs to be considered especially because of the ongoing pandemic and forecasts for an upcoming global recession, both of which are detrimental to hotel industry.
Uruguay's economy is founded on free enterprise principles; however, it does include a number of state-owned enterprises that provide public services and conduct commerce (UNCTAD 2022). Foreign companies and individual investors enjoy the same opportunities as local competitors. The country also offers Free Zones and industrial zones with procedures that provide a suitable foundation for organizing investments in manufacturing, commercial, and service activities with a focus on the international market. Uruguay provides notable benefits to those considering conducting business or investing in this South American country.
1. Introduction
The Oberoi Group's Vision emphasizes the necessity of operating abroad, with a global scope - “We see the world dotted with hotels of The Oberoi Group, in strategic commercial and resort locations” (Oberoi Hotels, 2022a). As per CAGE Distance framework given by professor Pankaj Ghemawat, the cultural, administrative, geographic and economic factors of India and Uruguay are compared. By patterns of trade, capital, information, and people flows from both the countries need to be considered by Oberoi Management for a market entry into Uruguay.
Culturally, majority of Indians speak Hindi and English, while in Uruguay Spanish is the main language. Christianity is the major religion in Uruguay and Hinduism is the major religion for India. Uruguay is a low context culture country against India which is a high context culture country. Administratively, India practices common law based on English model and is a democratic federal republic with rupee as its currency. Uruguay practices civil law, is also a democratic republic and has Uruguayan peso as its currency (1 Uruguayan peso = 1.86 INR).
Economically Uruguay is a developed country (21,630 PPP USD) against India which is a developing country (6,390 PPP USD) (World Bank 2022). Geographically Uruguay is located in temperate zone with a time difference of 8.30 hours behind IST while India enjoys monsoon climate and closely resembles to a tropical climate zone.
As Oberoi Hotels contemplate a market entry, the current situation of Uruguay tourism and hotel industry’s impact due to ongoing covid pandemic is presented along with recession looming globally (Huddleston Jr 2022). Insights from Hofstede’s cultural dimensions, GCR 2019, Uruguay Gov Publications, international org reports etc. are analyzed and presented.
2. Cultural Factors
Cultural factors play a key role in international business decisions and business strategy formulation. For the current report, Geert Hofstede’s 4 workplace values are analyzed namely individualism-collectivism, power distance, uncertainty avoidance, and masculinity-femininity along with long term orientation and indulgence (Hofstede Insights 2022). In comparison to India, Uruguay scores well on Power Distance measurements (61), indicating a hierarchical society with well-defined organizational and societal systems.
Uruguay, with a low score of 36 for individualism, leans toward a collectivist (group-oriented) culture, whereas India has both collectivist and individualist characteristics. Uruguay has a low masculinity score of 38, suggesting a highly feminine society. This implies that, in contrast to India's more visible displays of achievement and power, society is motivated by a certain level of modesty and justice. This is also good news for the hotel and hospitality industries. Uruguay receives a high score of 98 on Uncertainty Avoidance, indicating that the country recognizes strategies to prevent ambiguity. People are resistant to change and fear taking risks. There are established rules, codes, regulations, and procedures. In order for Oberoi hotels to function, they must emphasize precise written and thorough rules and procedures in all interactions with clients and other stakeholders.
The low score of 26 for long-term orientation Uruguay is a normative country with a strong desire to establish ultimate truth. They prefer rapid results and do not preserve much for the future. This is also good news for the hotel business, since more people prefer to stay in hotels and rent residences rather than buy properties as long-term investments. With an intermediate score of 53, Uruguay has no apparent preference between excess and restraint when it comes to indulgence. This is higher than India, which has a score of 26, indicating that it is a restrained culture. A high indulgence score is very beneficial to the hotel and healthcare sector, especially in the premium class.
Uruguay is a low context culture where people convey information in a straightforward, plain, and exact manner. Major religion is Christianity with 57.0% of the population, 37% having no religion and 6% in other / unspecified category (Uruguay 2020). Spanish is the official language and Uruguayan Portuguese is the regional language with a literacy rate of 98.77 percent (US Gov 2020). On the 150th birth anniversary of Rabindranath Tagore, Uruguay has issued a postal stamp in his honor (UNESCO 2016).
Many of the reputed international hospitality and hotel brands have their presence in Uruguay. To name a few among them Hyatt, Regency, Radisson, Ibis, Hilton and Aloft. Also, to be noted that most of them are concentrated in the capital city of Montevideo (Trip Advisor 2022).
3. Political Factors
Uruguay is a Democratic Constitutional Republic currently having National Party in power which has a center-right position in the political spectrum. The other prominent parties in the country are Broad Front and the Colorado Party which is power for most of the time. Political environment of Uruguay is stable making it a favorable factor for business and hotel industry. Next general election is scheduled on Sunday 27 October 2024. The political party system is one of the most stable and institutionalized in the world. The country continues to have the greatest level of citizen support for democracy among Latin American countries. Uruguay is among the highest in regional rankings in comparative public opinion polls such as Latinobarómetro and LAPOP (BTI 2022). Natural disasters, prolonged pandemics, or extreme poverty are not important structural constraints in Uruguay. The country has a favorable geographic position with a populace that is educated and generally wealthy (BTI 2022).
The Corruption Perceptions Index which rates 180 nations throughout the world according to their degrees of public sector corruption, with scores ranging from 0 (extremely corrupt) to 100 (least corrupt / very clean) has ranked Uruguay at 18th position in 2021 with a score of 73 (Transparency International 2021).
Holy week in Uruguay which is also called as the Tourism Week (March 1st to April 17th) had zero VAT rate to hotels to encourage more business (National Turk 2022). Such government support schemes in a country favors a market entry. However as per GCR 2019 with burden of Government regulation Uruguay is ranked at 111 which is on a higher scale (Klaus Schwab 2019). Also, to note that 50% of the Tourism traction comes from the neighboring country Argentina. Being a smaller country Uruguay is a highly reliant country that seeks to collaborate, despite the fact that international collaboration is not a must for its success. The top personal income tax rate is 36%, while the top corporation tax rate is 25%. Value-added and capital gains taxes are examples of other taxes. The entire tax burden amounts to 29.0% of total domestic income (Foreign & Commonwealth Office 2017).
As per GCR 2019, organized crime, terrorism is less in the country and scored well in having independent judiciary, high freedom of press, IP protection. All these are favorable conditions for a market entry. Uruguay's government works hard to support OECD standards. The country was placed 15th out of 167 countries in the Economist Intelligence Unit's Democracy Index in 2020 (Foreign & Commonwealth Office 2017). Strong institutional performance in areas like government trust, low corruption, a consensus-based political approach, and a strong commitment to institutional strengthening provides the country with a solid foundation for renewing its social contract and establishing policies to address current constraints and leverage future opportunities.
4. Legal Factors
Uruguay practices Civil law system based under the 1967 Constitution of the country. The country's legal system is effective, and standards and norms for intellectual property protection are in place. The Judicial Branch also has a significant degree of freedom. The country is known for its legislative clarity and strong institutional growth, both of which are important factors in investment decisions. Uruguayan labour law aims to safeguard employees while also addressing market demands. Uruguay provides legal protection to anybody who reports suspicious activities. Corporations (Sociedad Anónima) and Limited Liability Partnerships (LLPs) are the two most common legal entities (Sociedad de Responsabilidad Limitada) (Gov UY 2021). The Branch is commonly utilized by international investors and is governed by the same law as governs local businesses. The investor must apply to the Bureau of Investor Assistance, which oversees the project review process. The Investment Law and the Free Zone Law are the two primary mechanisms that provide tax benefits for foreign investors in the nation. The Investment Law Enforcement Commission, or COMAP (Comisión de Aplicación de la Ley de Inversiones), can provide more information (Dossena & James 2014).
A key aspect to note with Uruguay is that equal conditions exist for foreign and local investors. Foreign investors (including people and businesses) can start firms in Uruguay without having to go through any additional paperwork or obtain special government permission. Sector-specific legislation may need to be evaluated on an individual basis. Any currency can be used to invest. Shareholders, partners, and managers of enterprises in Uruguay might be Uruguayans or foreigners, as well as residents or non-residents. This will help foreign companies and individuals to have a level playing field against local competitors. All of these factors make it highly attractive for Oberoi hotels to expand into Uruguay (World Bank 2022).
Employees who disobey the law or participate in corruption face harsh penalties under the law. Uruguay has done a good job of curbing corruption. Since 1998, the country has had an anti-corruption law. There have been no allegations of corruption by members of the judiciary (Transparency International 2021). There are regulations in place to avoid monopolistic arrangements. The Investment Promotion Law 16.906 (1998) and Decree 455/007 (2007) have had a significant impact on FDI growth. Since 2000, the country has also had an environmental protection statute.
Uruguay is a member of World Intellectual Property Organization (WIPO) which ensures common standards and information sharing, safe guarding public interest, ease of collaboration with IP offices, protocols, standards and services. Regulatory and Control Unit of Personal Data, which is under the scope of AGESIC ensures IP rights are protected and maintained as per international norms (WIPO 2022). Uruguay's National Intellectual Property Directorate (DNPI) is in charge of enforcing and overseeing the country's IP laws.
As per GCR 2019 on property rights for intellectual property, quality of land administration Uruguay is ranked 35 among all the countries. The cost of starting a business is comparatively higher as seen in the ranking of 110, while time to start a business is lesser with a rank of 39 among all the countries.
5. Economic Factors
Uruguay is an egalitarian society with a high per capita income, low levels of inequality and poverty, and almost no extreme poverty. The economic indicators over the past years till the start of pandemic and recently in 2021 have shown stable and favorable conditions for business. The Uruguayan economy increased slightly throughout the last half-decade, from 2017 to 2019, before declining in 2020. In 2021, growth resumed (UNCTAD 2022). Uruguay has a well-educated workforce and an export-oriented agriculture industry. Tourism and banking are other significant industries, with Uruguay serving as a regional financial and tourism center. Social spending in the country is likewise high.
Key Economic Indicators of Uruguay in 2020 show GDP of 2020 of 53.63 billion USD, GDP per capita is 15,438.4 USD, GDP Growth of -5.9, Inflation of 7.7 and unemployment rate at 10.4%. To be noted here is the impact of Covid 19 Pandemic. Recent development and infrastructure projects have boosted the economy, which is reliant on exports of milk, cattle, rice, and wool. For the past year’s details, please refer appendix for charts on key indicators (Gov UY 2021). As per Statista 2022, the GDP, GNI and Investments are forecasted to increase as US$66.42bn, US$55.96bn and US$11.58bn by 2025.
The startup ecosystem along with digital innovation is making rapid strides in Uruguay which can be seen in Gov impetus to digital programs. Government organizations, such as ANII and ANDE helping startups with various benefits for new companies to launch in Uruguay.
As per Global Competitiveness Report 2019, Uruguay has been ranked 54th among 141 nations (Klaus Schwab 2019). The country has ranked highest at 14 for ICT adoption which stands for Information and Communication Technologies. It has also been ranked well in macroeconomic stability, health, infrastructure, soundness of banks, financing SMEs and skills which are very positive signs for an entry in hotel industry. However, inflation levels are high are country is ranked at 121.
Figure 1 Uruguay Score & Rankings GCR 2019
Montevideo, the capital city of Uruguay is the largest and most prominent city for business travel and tourism. TCS Global Delivery Centre at Zonamerica which started in 2002 is of significant importance for India Uruguay business relations. The growing number of foreign aircraft arrivals at Carrasco International Airport, as well as cruises and ferries arriving in Montevideo's port, is a positive sign for Oberoi's market debut.
Management of Oberoi Hotels also need to consider the timing of market entry into Uruguay in the light of ongoing covid19 pandemic and signs of an upcoming global recession towards second half of 2022 and 2023 (Huddleston Jr 2022). Hotel and Tourism industry are some of the first industries which can be impacted if an economic recession takes place (Huddleston Jr 2022).
6. Recommendations
As seen with the cultural, political, legal and economic factors, a market entry for Oberoi hotels into Uruguay would be a good proposition. As per Hofstede’s cultural dimensions Uruguay and India differ considerably in uncertainty avoidance, Indulgence and long-term orientation, while comparatively close in power distance, individualism and masculinity. All these conditions are culturally favorable for the hotel industry indicating Oberoi Hotels to enter Uruguay.
Democracies attract investment. Uruguay is a Democratic Constitutional Republic country with a stable political system, independent judiciary, fair competition for foreigners wishing to set up a business, government incentives etc (Hill 2021). The country has good purchasing power of power, high per capita, increasing GDP and other positive economic indicators all of which are good for the hotel industry to perform well. As per GCR 2019, Uruguay is ranked highest with ICT adoption among all the 12 competitiveness pillars. High digital literacy and Gov digital initiatives are good for the hotel industry to give better customer experience, reduce costs with use of technology and gain more traction with digital marketing. Capital city of the country Montevideo (Trip Advisor 2022) is a promising place for Oberoi group to consider an entry given the strategic business location and tourism potential the city holds.
Along with the above factors, timing of the entry needs to be given due diligence, especially because of the on going pandemic, unrest in Europe and possibilities of an upcoming global recession. All the key country factors are summarized in the Appendix B. Key Country Factor Considerations for quick reference.
7. References
Aswan (2004) Elephantine, Oberoi Hotel by Night [photo], accessed 14 May 2022. Available under Attribution-NonCommercial-NoDerivs 1.0 Generic (CC BY-SA 1.0).
BTI 2022, BTI 2022 Uruguay Country Report, BTI 2022, viewed 14 May 2022, <https://bti-project.org/en/reports/country-report/URY#pos6>.
Dossena, C & James 2014, Doing Business in Uruguay.
Foreign & Commonwealth Office 2017, Overseas Business Risk - Uruguay, GOV.UK.
Gov UY 2021, Economic structure and activity (1), viewed 13 May 2021, <http://deuda.mef.gub.uy/innovaportal/file/6473/1/economic-indicators-november-2021.pdf>.
Hill, C.W.L & Hult, G.T.M. (2019), International Business: Competing in the global marketplace, 12th Ed, New York, McGraw-Hill, Irwin. Chapter 2.
Hofstede Insights 2022, Country Comparison - Hofstede Insights, Hofstede Insights.
Huddleston Jr, T 2022, Bill Gates sees a ‘pretty strong argument’ for a global economic slowdown hitting this year — here’s why, CNBC, viewed 14 May 2022, <https://www.cnbc.com/2022/05/10/bill-gates-sees-a-strong-argument-for-a-global-economic-slowdown.html>.
Klaus Schwab 2019, The Global Competitiveness Report 2019, https://www3.weforum.org.
National Turk 2022, Uruguayan tourism at full steam during Holy Week, www.nationalturk.com.
Oberoi Hotels, (2022) About us, retrieved 14th May 2022. (https://www.oberoihotels.com/about-us/)
Statista 2022, Economy - Uruguay | Statista Market Forecast, Statista, viewed 16 May 2022, <https://www.statista.com/outlook/co/economy/uruguay#:~:text=The%20GDP%20(gross%20domestic%20product>.
Transparency International 2021, 2021 Corruptions Perceptions Index, Transparency.org.
Trip Advisor 2022, The 10 Best Hotels in Montevideo 2022 (with Prices) - Tripadvisor, www.tripadvisor.in, viewed 14 May 2022, <https://www.tripadvisor.in/Hotels-g294323-Montevideo_Montevideo_Department-Hotels.html>.
UNCTAD 2022, Foreign direct investment in Latin America plunges by 45% amid pandemic | UNCTAD, unctad.org.
UNESCO 2016, Uruguay, uis.unesco.org.
US Gov 2020, Uruguay, United States Department of State.
WIPO 2022, Information by Country: Uruguay, www.wipo.int, World Intellectual Property Organisation, viewed 13 May 2022, <https://www.wipo.int/members/en/details.jsp?country_id=180>.
World Bank 2022, Uruguay | Data, Worldbank.org.
8. Appendix
A. Uruguay Key Economic Indicators Trends
Figure 2: Nominal GDP
Figure 3 GDP Per Capita (nominal USD)
Figure 4 Consumer inflation (% change, YoY)
Figure 5 Unemployment rate (% of labor force)
Figure 6 Tourism Services (million USD)
Source: Government of Uruguay 2021.
B. Summary of Opportunities & Recommendations
Uruguay Key Country Factor | Outlook for Hotel Industry |
Democratic Republic Country | Positive |
Low Context Culture | Neutral / Needs a strategy in place |
Developed Country | Positive |
Temperate zone location | Positive |
Ongoing Covid Pandemic | Negative |
Global Recession | Negative |
Well defined organizations | Positive |
Feminine society | Positive |
Avoids ambiguity and uncertainty | Neutral / Needs a strategy in place |
Less on long term orientation | Positive |
Other hotel brands presence | Positive |
Political Stability | Positive |
Educated and wealthy population | Positive |
Less corruption | Positive |
Higher taxes | Negative |
Strong institutional performance | Positive |
Equal footing for foreigners and locals | Positive |
Anti-corruption laws and penalties | Positive |
Member of WIPO | Positive |
GCR 2019 Performance | Positive |
High per capita income | Positive |
No extreme poverty | Positive |
Current Raising Inflation | Negative |
Current Raising Unemployment | Negative |
ICT Adoption | Positive |
Table 1 Key Country Factor Considerations
Note: This is a summary of the International Business Project findings, individual sources and are added in the report main body as and when cited.
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