Foreign market analysis

Introduction

The marketing experts with strategic ambitions usually view foreign markets as prospective opportunities to intensify their sales as well as profits. Domestic firms are strongly urged by government leaders to operate on an international level for economic growth and creation of jobs. On the other hand, research has revealed that a major restraint to making it to the foreign market from an organization’s perspective is the lack of exposure to foreign market.

Marketing managers are advised by international marketing texts to evaluate the potential of a market basing on the foreign country’s population and income. Usually when organizations decides to operate on an international scale, the foreign markets decision is arrived at with little or no comparative market assessment that is based on research. This paper develops and explicates practical tools for fundamental analysis of United Kingdom as a foreign market. In the recent years, large volumes of information about foreign markets have been all over the web (Mefford, 2009).

Discussion of the topic

It is widely known that selecting the right foreign markets is among the most vital decision that can be taken by a firm in the process of internationalization. However, research indicates that lack of knowledge on foreign market deters many firms in operating from these markets. There is significant evidence that a good number of firms, more so medium and small firms hardly conduct any research. Another strong factor hindering the export behavior seems to be information inefficiencies.

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For those firms that are entering international markets of the UK for the first time, their market selection is usually based on reaction to spontaneous stimulations. They sometimes make decisions in a haphazard manner. Another drawback is the dependency on network of contacts of the senior executives as basis of choosing a market. This in fact replaces entry into partnership with entry into a market.

PESTEL Discussion

PESTEL is an acronym that stands for Political, Economic, Social, Technological and Legal factors. The political factors comprises of government policies which are related to the foreign market, they include; laws and regulation, tariffs and others. The government of the UK practices capitalism and this allows the private ownership of factors of production. The economic factors comprise the entire economic performance which include; the use of Euro currency, inflation, interest rates, economic growth, exchange rate and fiscal policies.

On the other hand, social factors have to be given first priority before a firm goes into the UK market. They relate to cultural matters for example, population growth, health, demographics, and alterations in consumer behavior among others. Technological factors are those that entail adaptation of the advanced technology as well as new ideas such as information technology, automation and the rate at which technology changes. Globalization has come with its impact and now many companies in the UK have embraced internet marketing and e-commerce.

As Buckley (2005) asserts, for a firm to have some significance achievement on the international markets in the UK, it also has to consider some legal factors. The manner in which a firm operates in terms of rule of law and how it copes up with the legal requirements of the UK is very vital it limits conflicts and enhances success of the company. The firm has to be engaged in a business practice that is legal in the UK and which is permitted by the laws of the United Kingdom.

The potential market opportunity is globalization because it assists in opening up new markets in the UK and does away with many barriers of doing business. Another opportunity is the evident economic growth. Because there is an expanding consumer market in the UK it makes it one of the best foreign markets. Major threats are the government policies and competition. Depending on the size of the firm and its competitors, it might face severe competition from others. The government policies also limit the scope of the business.

Market entry method

The best market entry method in the UK is through joint venture. A joint venture is an entity that is made between two or more parties with an aim of undertaking an economic activity together. All the parties contribute equity, and then share expenses and revenues and in the running of the entire firm. The joint ventures are very much common in both local and foreign trade. The only area that they are uncommon is in the gas and oil industries. Therefore firms are strongly recommended for joint ventures if they want to take the UK foreign market by storm (Mullen, 2009).

Pros and cons of joint venture

Joint ventures assist the cooperating businessmen to have reduced costs of advertising, because the involved overhead will be shared by the parties. Through cooperation with other successful parties, one can give discounts that can assist consumers familiarize with ones offerings and thus build reputation for future markets. For a beginner, working together with experienced marketers provides him/her with many gains. However, joint ventures have some drawbacks. For example, beginning a joint venture with an individual who have bad reputation might make one also get the same reputation merely through association (Mefford, 2009).

Conclusion

Foreign market analysis is a wide topic. The first thing that has to be considered while analyzing foreign market is the country or location that a firm plans to start its international business. As explained in the paper, factors like political, economic and social factors are of crucial importance. Above them all is the government policies of the foreign countries because a firm has to abide by the law for it to survive. An essential market entry method is also necessary.

References

• Buckley, F: (2005). Factors Affecting Foreign Markets: Oxford University Press

  Mefford, D: (2009). The Pros and Cons of Joint Venture: retrieved from http://www.edubook.com/the-pros-and-cons-of-joint-venture/9860/ on 04-02-2010.

  Mullen, M: (2009). Foreign Market Analysis: retrieved from http://findarticles.com/p/articles/mi_qa5500/ on 04-02-2010