4.2.2 Assessing a Country as a Market

Question 1

What does a business have to consider before entering new countries?

Answer 1

• When businesses are considering new markets, they have to consider the attractiveness of the market
• This will involve businesses carrying out extensive market research & using models such as the Boston Matrix & PESTLE

Question 2

What are the actual factors to consider when entering new markets abroad?

Answer 2

• Ease of doing business
• Infrastructure
• Political Stability
• Exchange Rates
• Levels & Growth of Disposable Income

Question 3

Why should you consider infrastrucutre before entering new countries?

Answer 3

• Infrastructure considers factors such as roads, transportation & communication (mobile coverage/internet)
• Good infrastructure improves production process & delivery of goods & services to customer, which reduces costs & increases sales

Question 4

Why should a business consider the ease of doing business?

Answer 4

• Rules & regulations involved in establishing a business in a particular market ay be relatively simple or extraordinarily hard
• Issues to consider include accessing credit, registering properties & enforcing contracts
• If businesses face significant challenges setting up a business- may lead to delays in operations & the business generating sales

Question 5

Why should a business consider levels of growth & disposable income?

Answer 5

• Disposable income is the income individuals have left after paying direct taxes (e.g. income tax) & other deductions (e.g. pension contributions)

Selling products in a country w higher disposable income is likely to lead to more sales

Selling in a country w lower disposable income is likely to lead to slower sales growth

Businesses should look at trends in income levels over time to see if there is potential growth in sales in the future

Question 6

Why should a business consider exchange rates?

Answer 6

• An exchange rate is price of one currency in terms of another, e.g. £1 = $1.10
• Exchange rates can be subject to extreme fluctuations due to external factors
  Businesses should look at historical trends of the currency of country
• Businesses moving to countries with stronger currencies can import raw materials & components for production at a lower price
• Exports from this country will be more expensive to customers abroad

Question 7

Why should a business consider political stability?

Answer 7

• Businesses may be at risk of not gaining a return on their investment in a country w political instability
• A country w political instability will be subject to corruption, lack of law enforcement & higher levels of crime

It is more likely to have disruption to trading

An economy w a stable economy & government is seen as a less risky investment for business