International franchising strategy important to Totvs of Brazil

International franchising is alive and well in Brazil. 

Brazilian software development group Totvs(Bovespa: TOTS3) will hone its 2011 international expansion plans on Argentina, Mexico, Colombia and Peru, but will employ different strategies in each market, the company's executive VP Jose Rogerio Luiz told BNamericas.

Totvs has both direct offices and franchise networks in Mexico and Argentina, and will be looking to grow inorganically to give its presence in those countries a shot in the arm.

Meanwhile, Totvs will lay the groundwork for a network of franchises in Colombia, though Luiz noted that the company is considering offices in that country.

"We are eyeing growth trends in Colombia, which could present such opportunities for Totvs," he said. "We should make a decision towards the end of the first half of the year [in 2011], depending on the evolution in the analyses that we are carrying out."

Finally, the Brazilian firm will make its foray into Peru strictly through franchises.

Despite the different strategies, Luiz said all four countries are significant for Totvs due to their high GDP growth and volume of SMEs.

The executive also underscored the importance of electronic billing regulations in Mexico. Totvs has racked up 20% year-over-year revenue growth in that country so far this year, and is expected to maintain double digit increases due to the new laws.

"As the government increases pressure for more efficient tax collection, then companies will face a greater need for technology," he said. "This will play into the hands of a company like Totvs, which provides management software solutions."

"This will drive Mexico's IT sector during the next 3 or 4 years."

The executive added that Totvs will finance its international growth plans through cash on hand, though the company is open to other alternatives such as loans or debentures.

Totvs posted net profits of 33.0mn reais (currently US$19.3mn) in the third quarter 2010, up 6.8% from the year-ago quarter. Global revenues during the same period jumped 20% to hit 303mn reais.

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