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OPPORTUNITIES AND PROBLEMS OF NEW MARKETS IN OTHER COUNTRIES, Methods to…
OPPORTUNITIES AND PROBLEMS OF NEW MARKETS IN OTHER COUNTRIES
Home markets might be saturated and these new markets give the chance for higher sales
Trade barriers have been lowered in many parts of the world, making it easier and more profitable now to enter these markets
Countries in different parts of the world are now developing and seeing their populations enjoying rising incomes. This provides opportunities for entering new markets abroad
Import restrictions
: if there are tariffs or quotas on imported products, the prices of these products may be higher than domestically produced goods-reducing sales or profits or both.
Lack of knowledge
: the business may not be aware of competitors or the habits of consumers in these markets. For example, where do most people do their shopping.
There is a wider choice of location to produce products and this encourages businesses to sell as well as produce in these countries.
Increased risk of non-payment
: methods of payment may be different in these new markets and it may be more difficult to be certain of payment for these imported goods,
Cultural differences
: religion or culture means that some products won't sell in another market. For example, alcohol products won't be sold in most Middle Eastern countries.
Exchange rate changes
: if the exchange rate is not very stable, exchange rate changes can mean the prices of imported goods change and become too expensive to sell in the new market.
Increased transport costs
: as products have to be transported over long distances the costs of getting products to market will increase.
Methods to overcome the problems
Joint ventures:
When a business joints venture with other local businesses, it allows the business to gain important local information so that culture and customs can be adapted, enable a more successful entry to the new market.
Main limitations:
Management conflict between the two business; profits shared
Licensing:
The business gives permission to another company in the new market being entered to produce the branded products under license. The products do not have to be physically transported to the new market
Main limitations:
Quality problems caused by an inexperienced licensee could damage brand reputation; Licensee can access to information about how the product is made then develop a better version and become a competitor
International franchising
: foreign franchises are used to operate a business's franchise abroad. For example, Dunkin' Donuts, a US-based baked good and coffee franchise, sold the franchise in the United Arab Emirates so franchisees operate all the outlets. Local knowledge is used to choose the best locations for the outlets.
Main limitations
: Quality problems or poor service offered by franchisee could damage brand image. Franchisor needs to provide training and support.
Localising existing brands
: there is a phrase "thinking global-acting local" which is being used by several businesses. It means that there is still a common brand image for the business but it has adapted to the local tastes and culture, therefore increasing sales.
Main limitations
: May be less successful than a new product made to meet local and market conditions. Expensive to change the packing, promotion, etc for each different market.
Opportunities
Problems