Assessment of a country as a market 4.2.2

Question 1

What are the 5 factors you need to consider when selling in international markets?

Answer 1

1. Levels of growth and disposable income
2. Ease of doing business
3. Infrastructure
4. Political stability
5. Exchange rates

Question 2

Why might a business assess a country’s levels of growth and disposable income?

Answer 2

• A customer must have the money to spend on a good or service so it is important for a business to evaluate whether the consumers in a particular country currently have sufficient disposable income.
• They might want to check a country’s disposable income is steady and preferably growing and therefore would make the market more attractive

Question 3

What is disposable income?

Answer 3

The amount of money that a person has left over after they have paid their taxes, national insurance and other deductions.

Question 4

What might a falling level of disposable income mean?

Answer 4

• That people with low incomes are struggling to pay for what they consider minimum standard of living.
• Those on higher income are reducing expenditure on luxuries or necessity items.
• As a result people will be consuming less, total expenditure in markets may be falling and there is likely to be reduced savings.

Question 5

Why is ease of doing business an important factor when assessing a country as a market?

Answer 5

If a business faces problems with its good entering the country, it is likely to look at alternatives

• These problems are likely to cause delays in sales, increasing costs and parts of the business in the distribution chain

Question 6

What is ease of doing business?

Answer 6

How accessible markets are for a business.

Is there excessive bureaucracy - rules & regulations? (increases time)

Question 7

Why Is infrastructure an important factor when assessing a country as a new market?

Answer 7

Communication and adequate transportation links are needed for sales and if this isn’t adequate it can add to a businesses production and operating costs.

Question 8

What is infrastructure?

Answer 8

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.

Question 9

Why is political stability an important factor when assessing a country as a new market?

Answer 9

• Political decisions and events can have a significant effect on a country business environment and can cost investors some or all of the value of their investment.
• So it is necessary to evaluate the political climate.

Question 10

Why is exchange rate an important factor when assessing a country as a new market?

Answer 10

• A currency can appreciate or depreciate against other currencies.
• This can have a large impact on a business that is operating internationally.

Question 11

What is exchange rate?

Answer 11

The price of one currency against another.

Question 12

How might a business protect itself from adverse movements in the price of currencies?

Answer 12

• Taking out insurance to protect it from financial loss.
• Using financial instruments, such as hedging, to try and hedge against the financial risks.