Key Idea: Selling abroad can open a much bigger market, but everything that worked at home has to be checked again. This topic is how businesses enter other countries, what can go wrong, and how to decide.
Ways in
- Exporting and e-commerce: sell from home, low cost and low control.
- Franchising and joint ventures: share the risk and the reward with a local partner.
- Direct investment: own shops or a factory abroad, full control and full risk.
Opportunities
- More customers and faster growth when home sales are mature.
- Economies of scale and a longer product life cycle.
- Spreading risk across more than one market.
Threats
- Culture, language, law and taste: the mix may need adapting.
- Tariffs, exchange rates and strong local rivals.
- Distance: harder to control quality and people.
The words to know
| Word | Means | Do not confuse with |
|---|---|---|
| Exporting | selling goods made at home to customers in another country | direct investment, which produces abroad |
| Foreign direct investment | a business setting up or buying operations in another country | exporting |
| Joint venture | a new business owned by two partners for a shared project | a franchise, where one side licenses its brand |
| Tariff | a tax on imported goods | a quota, which limits the amount imported |
| Hofstede's cultural dimensions | a way of comparing national cultures, such as individualism and uncertainty avoidance | a market research method |
Pick the way in the case describes, then weigh its opportunities against the threats, using the figures given: tariffs, prices, market size, exchange rates. End with a judgement that says what it depends on.
Exam-style question
Lena's Bakery Ltd sells 18,000 packets of crackers a year at home, where sales have levelled off. A wholesaler in Seren, Marovia, offers to sell them across the country; Marovia charges a 20% tariff and the local market leader's crackers are cheaper. Discuss whether Lena's Bakery Ltd should sell its crackers in Marovia.
Model answer plan
See the mark-by-mark plan — for / against / judgement, with marking guidance — in study mode.
Important: A Discuss that lists only opportunities, or only threats, is capped. Weigh both, with the case's figures, and then decide. And say which way into the market you mean: exporting and a joint venture carry very different risks.
Tap each card to check yourself.
Lowest risk way to test a foreign market? Exporting or e-commerce: no investment abroad, and easy to stop.
One advantage of a joint venture abroad? The local partner brings knowledge of customers, suppliers and law.
Why might a product need adapting abroad? Different tastes, languages, laws or customs: dark seeded bread sells better than white in Marovia.
What does a 20% tariff do to an exporter? It raises the price in the foreign market, or cuts the exporter's margin if the price is held.
One opportunity for a product in maturity at home? A new market abroad can restart growth and extend the product's life cycle.
Why use Hofstede's dimensions? To see how customers in another culture may respond differently to the same promotion or service.
Exam tips
- Name the way into the market before judging it.
- Weigh opportunities against threats with the case's own figures.
- Culture, law and taste can each force a change to the mix: say which P and how.
- Tariffs and exchange rates change the price or the margin: show which.
- A Discuss needs a judgement that says what it depends on.