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4.2.2 Assessment of a Country as Market - Coggle Diagram
4.2.2 Assessment of a Country as Market
Key Terms
Disposable Income - The amount of money that a person has left over after they have paid their taxes, national insurance and other deductions
Infrastructure - The basic systems, facilities, services and capital equipment required for a country’s economy to function, which might include its roads, communication systems and power services
Exchange Rate - The price of one currency against another
Sports Industry Examples
Commonwealth Games
£1bn GDP boost for previous host cities/regions
25% increase in tourism
23.5% decrease in unemployment (Manchester 2002)
Factors to Consider
Disposable Income
A falling level of disposable income may mean that people with low incomes are struggling to pay for what they consider a minimum standard of living, and those on higher incomes are reducing expenditure on luxuries or unnecessary items
As a result, people will be consuming less, total expenditure in markets may be falling and there is likely to be reduced savings
A business looking to expand into a market wants to ensure not only that consumers have sufficient disposable income to purchase its goods or services, but also that the country's level of disposable income is at least steady and preferably growing over time
Disposable income - the amount of money that a person has left over they have paid their taxes, national insurance, and other deductions
Ease of Doing Business
The ease with which a company can do business is an important factor to consider when evaluating a country as a potential market
If a business faces problems with its goods entering a country, setting up premises or dealing with everyday trading activities in a particular country, it is likely to look at alternative locations or markets
Such problems with the ease of doing business are likely to cause delays in sales, increasing costs and potentially affect other parts of the business in the distribution chain
Infrastructure
The quality of a country's infrastructure is an important factor in any decision to move into a new market
Goods and services must be made and delivered to the buyer, and this requires a certain level of communication and adequate transportation - Many developing countries have underdeveloped and unreliable transportation infrastructure and this can add significantly to a company's production and operating costs
A delay or failure to deliver due to poor infrastructure can lead to lost sales and increased costs, which can make a market less attractive to a business
Political Stability
Political decisions and events can have a significant effect on a country's business environment and can cost investors some or all the value of their investment
A country with a calm political climate can minimise uncertainty, which might make that country attractive as a potential market to businesses
Political Factors
The government's legal orientation and approach to regulation and taxation
The possible political risks that may emerge in the near future
The nature of the government and its relationship with business + international institutions
Exchange Rates
Changes in exchange rates can have a very large impact on a business that is operating internationally
A business looking to expand abroad would want to think about the relationship between its home currency and the currency of the country or countries with which it is trading
If a business wants to buy or build a factory in another country, the cost of the purchase or construction may be lower over time if the pound appreciates