Monday 9th January, 2023

International Economics and Business Markets

Chapter 2: INTERNATIONAL MARKETS

2.1 SELECTION OF MARKETS

Businesses establish themselves in foreign countries seeking resources, efficiency, innovation

or market.

Resource seeking firms - Firms that work with natural resources such as oil or minerals, or
renewable resources such as agricultural produce or timber, are very keen to secure access to
them.

Efficiency seeking firms - Firms can make their operations more efficient by reducing labor
costs, the costs of raw materials or the cost of getting their goods to market. They may enter a
foreign market to take advantage of lower costs for resources or higher availability of those
resources.

Innovation seeking firms - Innovation seeking firms are looking for new ideas and technologies
that will give them an advantage. They want to stay in touch with the latest developments in their
industry and develop their own innovations as quickly as possible.

Market seeking firms - Many firms invest in a foreign country to take advantage of bigger
markets for their goods or services. Sure, they could just export their goods, but setting up
production locally will save the costs of serving the market from a distance.

GROWTH MARKETS have rapidly growing middle classes which consume more household
goods, clothing, food , vehicles, etc. and as a result, attract multinational enterprises (MNEs).

BRICS countries: Brazil, Russia, India, China (and South Africa as of 2010) are the world’s
main emerging economies and house 40% of the world’s populations and 30% of the worlds
GDP.

MINT/MIST countries: There terms were coined by Jim O’Neill and represent Mexico
Indonesia, Nigeria and Turkey or Mexico Indonesia, South Korea and Turkey. These
countries have relatively smaller, but growing economies.

LDCs are less developed countries or developing countries with usually faster growth rates than
developed countries due to its people’s frequent transitions from traditional to modern lifestyles.
 RESEARCHING MARKETS

When selecting a country to conduct business in, there must be something that attracts a
company. However a business must conduct research in order to thoroughly analyze the risk and
rewards associated with investing in a foreign country.

There are two kinds of research:

1. DESK RESEARCH: Much of the information we need to conduct research into an

international market is available to us through the internet, published documents or by
communicating with people via email or over the telephone. This research can be carried
out from a desk and is referred to as desk research. (Study Guide) Research from a
country’s population can be obtained from the central statistical office (CSO), central
bank, and commercial banking system. This is a form of secondary data. Investopedia
and Wikipedia are not sights to be referenced as these sights can be edited and are not
acceptable for tertiary level writing. However, Investopedia can be used for personal
research and explanations.

Advantages of desk research:

a. Information is easily accessible.

b. Convenient.
c. Increasingly standardized (there are set guidelines for data published).
d. Relatively low cost.
e. It may help clarify research questions.

Disadvantages of desk research:

a. Incomplete information (some information can be priced and only small extracts are
available).
b. Timeliness.
c. Relevance (secondary data might not directly relate to research questions; on its own,
desk research can be misleading).
d. Relatively weak quality.

2. FIELD RESEARCH: Field research usually involves going to the country to observe, ask
questions or conduct experiments such as test marketing products or services. This is a
form of primary data. If you are planning to sell a particular type of product, it is a good
 idea to talk to the people that you hope will be your customers and ask them questions
such as:

• Would you buy this product?

• How many would you buy and how often?
• How would you use this in your home or business?
• How could this be changed to better suit your needs?
• What would you expect to pay for this?
• Whom would you expect to buy this from?

NB. It is important to understand a country’s distribution channel in order to determine

the most effective way to enter the market and to determine the best method of selling
your product.

Disadvantages of desk research:

f. Information is not easily accessible.

g. Inconvenient.
h. Not standardized.
i. Relatively high cost.

Advantages of desk research:

e. Complete information
f. Relevance
g. Relatively high quality.

CHAPTER 2.2: ASSESSING THE MAIN MARKET ENTRY METHODS