International Market – Lucrative But Challenging As Well

A market is a system of institutions, which are governed by the rules and procedures related to the exchange of goods and services between those institutions or people. Markets are categorized in several ways, like industry, consumer, product, geography and more. On the basis of geography, a market is categorized as either national (or domestic market) or international market.

An international market is basically the market outside the company’s country of citizenship. All companies have a home country, i.e., the country where they are formed. For instance, Apple Inc. is a U.S. based company. So, any country outside the U.S. where Apple operates is Apple’s international market.

Importance of International market

A company usually expands to the international market, if the domestic market is saturated. If a company feels that it won’t be able to accelerate its growth in the home market, it then feels the need of tapping outside the market. Another reason is if the company is confident that it has a product, which has a demand overseas as well. Is such a case also, the company goes for the foreign market.

In all, the international market has the potential to increase a company’s revenue to unprecedented levels. A company can enter a foreign market in many ways, like Export, Licensing, Contract Manufacturing, Joint Venture or Direct Investment.

Several reasons have led to the rapid development of the International market. First, is the increased accessibility, all thanks to the development in the communication technology. The technology nowadays allows anyone to chat, call, video call or even conference with others in any part of the world.

Second, is the rise in the local free deal areas, like ASEAN, NAFTA, APEC and more. Third, increased availability of capital and labor in most of the countries has improved purchasing power. High purchasing power is a major attraction for global companies. For instance, rising middle class in India is a major reason why global companies are entering the Indian market.

International Market

Challenges in the International market

There are several challenges that a company face when it tries to expand overseas.

Foreign laws and regulations

To successfully penetrate the foreign market, it is essential that a company gets familiar with the local laws and regulations. A company must be through with the trading laws, employment, labor requirements, etc. Such knowledge could help the company to easily and cost-efficiently launch a business in the International market.

International accounting

A clear accounting strategy is crucial for maximizing revenue. However, different countries have different accounting rules, and by not following those, a company’s tax liability may rise. Further, varying tax systems, rates, and compliance requirements could make accounting a headache for a multinational organization.

Cost calculation and pricing strategy

It is normal that a company’s cost of production will rise in a foreign market. However, it must know how much the product exactly costs and what should it’s price be to remain competitive. For instance, Swedish furniture giant Ikea initially struggled in China because of the cheaper products from the local vendors.

Ikea later tweaked its strategy by relocating production for the Chinese market and using more of locally sourced materials. Such a strategy helped Ikea to lower its prices and boost sales as well.

Currency fluctuations

It is a major factor that can impact the profit for a multinational company. An adverse currency rate could lower the profits. Moreover, it is difficult to forecast currency fluctuations as well. Though there are ways to mitigate currency risk, like forwarding contracts, it lowers the chances of generating greater profits as well.

Cultural differences and communication gap

Communication across cultures could prove a real challenge for an organization. Proper and clear communication with colleagues, clients, and customers is crucial for the success of international business. Therefore, a company must be well-versed with the different cultural values and norms, acceptable business etiquette abroad, religious and cultural traditions of the country that it is planning to enter.

International marketing – how it can help?

One can overcome many of the challenges discussed above with effective planning and implementation, including proper application of marketing principles across national borders, a concept that is called International marketing. International marketing is basically an extension of a company’s local marketing strategy with a focus on the international market. Similar to the local marketing strategy, a company’s international marketing strategy include market identification, targeting, and decisions.

Even though the international market presents its own challenges, it could prove very profitable as well provided the company has a proper plan and implements it successfully. China, for instance, is one of the most important markets for Apple.

Last updated on : October 19th, 2018
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