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OLevel

Business Studies - 7115

Opportunities and Problems of Entering Foreign Markets

Paper 1 & 2

Opportunities and Problems of Entering Foreign Markets

Growth Potential Of New Markets In Other Countries 

It is a common trend in all multinational business organizations that they want to expand their network globally.  They try to find out more opportunities in other countries and regions on a regular basis. We can have examples of McDonald's, KFC, Pepsi, and Coca-Cola, etc. that can be found in every corner of the world. There are some opportunities for entering new markets is discussed below in detail.

There is growth potential in new markets as different countries in the world are developing their economy is growing so that there is a chance for high-profit margins.

Sometimes it is also observed that the local or home markets are saturated. This saturation gives opportunities to international players to enter the market.

There could be a better option for an organization to start a business in any other country. The new location, new people, and the new markets may help the business organization to grow rapidly in a new region.   

As far as trade barriers are concerned, they are being lowered in different countries of the world. 

These were some opportunities to enter new markets. Besides these opportunities, there are some problems as well. 

Problems of Entering Foreign Markets 

When business organizations enter new markets, there are some problems that are commonly faced by them.

Lack of Knowledge

Most of the time, the business organizations that entered a new market don’t know the consumption of the people. What people eat and drink. What they like in food or clothing.

Cultural Difference

Religion or cultural difference may prohibit to enter in many businesses. There is an example of alcohol that is not allowed to be sold in various middle eastern countries.    

Exchange Rate

If there is no stable exchange rate or there is more fluctuation in it, it may cause loss to the business.   

Import Restrictions

In some countries, there are some import duties that allow the local industry to compete with international business organizations. With the help of these duties, the local industry gives a tough time to the international business organizations that work in that country. 

Increased Transport Cost

Transport cost is also an important factor to remember while doing business, especially at the international level. Importing goods and delivering at consumers’ doorstep costs a lot that increases the value of the goods. 

Benefits and Limitations


Joint Ventures

We can have an example of an international fast food restaurant that enters the local market of another country. To enter another country, the top management of that restaurant first comes in a joint venture with a local restaurant. There is a big benefit for an international restaurant to learn what the local consumers want. They may modify their products according to the taste of the local consumers. 

Licensing

In licensing, the international firm allows the local licensees to prepare products locally with the same brand name. The branded or patient products are made under license. With the help of that, no physical movements of goods are required and transportation cost is saved.  

International Franchising

It is a common practice in international food chains that they start a business in other countries through franchises. They sell their franchises to a local business with the authority to use their names. We can have an example of McDonald's and Dunkin Donuts that are being operated in different countries through international franchising. 

Localizing Existing Brands

To make the business foundation strong, sometimes existing brands are slightly changed according to the tastes and choices of consumers. This change is required to increase the sale of a particular product.

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