CHAP 85 ATTRACTIVENESS OF INTERNATIONAL MARKETS

MARKET SIZE AND GROWTH RATE:

-The bigger the market, the greater the potential profits 

-Makes bigger markets look more attractive than smaller markets 

-E.g average American spends £35 a year on chocolate

ECONOMIC:

-Purchasing power of local population. Determined by average incomes, best measure is GDP per person.

-Tax levels. E.g Scandanavian countries, taxes on incomes and goods are high

-Economic forecasts

THE REGULATORY ENVIRONMENT:

-Government use laws and regulations to stop firms making high profits affecting society

-E.g. dumping waste rather than treating it with machinery 

-E.g. absence of labour market, entrepeneurs might resort to child labour

-Some firms prefer minimal government intervention to avoid minimum wages and maximum prices

TECHNOLOGICAL ENVIRONMENT:

-Access to specialised components or infastructure needed to supply a good or service

-E.g. Netflix depends on number of people

POLITICAL AND SOCIAL:

-Adopting business friendly policies attract businesses

-E.g. Irish government cutting corporation tax, attracted Dell and HP

-Shareholders want to avoid tax

-General public suffer because public services have to be cut in line with lower tax revenue

-Level of corruption can affect attractiveness

QUALITY OF LOCAL INFASTRUCTURE:

-Basic facilities needed by households and firms

-E.g. railways and reliable national systems for supply of telecommunication, electricity, sanitation, fresh drinking water.

-E.g. supply of electricity unreliable in Nigera, pushes productivity down and unit costs up

-If eductational standards low, business needs to spend more on training

ECONOMIC GROWTH: Annual percentage increase in country's output

EXTRAPOLATION: Forecasting techinque based of assumption that trends of the past will carry forward into the future. E.g. if a firms sales have risen by 10% over last five years the management of the firm might use extrapolation to predict sales will rise again by the same amount over the next five years.

UNSATURATED MARKET: Market that offers excellent growth potential because majority of households don't own your product, but likely to want to do so.

SANCTIONS: Used by politicians to punish actions of foreign governments who have done wrong. Inolve banning sales of exports, restricting international trade between countries.

FOREIGN DIRECT INVESTMENT: When a foreign firm buys assets in another country, such as factories, shops and offices.

COLLUSION: Anti-competitive agreements made between firms operating in the same market to collectively reduce market supply in order to force prices and profits up.