Business Studies – 3.3.7 Entering new markets in other countries as a method of growth | e-Consult

Businesses often decide to enter new international markets for a variety of reasons, driven by the desire for growth and increased profitability. The potential advantages are significant and often outweigh the disadvantages, although careful consideration must be given to the risks involved.

Advantages include:

• Increased Sales Revenue: Accessing a larger customer base directly translates to higher sales volumes and increased revenue. This is particularly important for businesses approaching market saturation in their domestic market.
• Increased Profitability: New markets may offer higher price points due to less competition or greater demand. Lower production costs in some countries can also improve profit margins.
• Spread Risk: Diversifying operations across multiple countries reduces reliance on a single market. If one market experiences a downturn, the business can still rely on sales from other markets.
• Economies of Scale: Increased production volume to meet demand from new markets can lead to economies of scale, reducing average costs.
• Access to Resources: New markets may provide access to cheaper raw materials, labour, or other resources.
• Enhanced Brand Image: Expanding internationally can enhance a company's reputation and brand image, projecting an image of success and global reach.

However, there are also disadvantages to consider, such as cultural differences, political instability, and logistical challenges. The decision to enter a new market is a complex one that requires careful analysis of both the potential rewards and the risks.