Entering Foreign Markets
Business: Cambridge International GCSE (2027 Exams), topic 3.3.31
Entering Foreign Markets
Entering new markets presents opportunities. However, businesses have to overcome several barriers to enter a new market.
Opportunities of entering a new market
- Companies have the potential to grow in foreign markets.
- Markets at home may be saturated (all the potential customers is buying).
- There may be a wider choice of where to produce products.
- Spreading risk: operating in multiple markets reduces reliance on a single market, lowering overall business risk.
Problems of entering a new market
- A company may lack understanding of the market.
- Cultural differences may present problems.
- Exchange rates may damage profitability.
- Businesses may pay high transport costs.
- Businesses may not be as profitable because of trade barriers.
Ways to overcome barriers to enter a new market
- A joint venture with a local company in the new market may mean a company has greater knowledge and can overcome cultural differences.
- A company can use franchising. This expands the brand into new markets without the original company having to use lots of capital.
Test yourself on Entering Foreign Markets
Why might a company expand into a foreign market?
Which of the following are barriers to international expansion?