Page 198 - Cambridge IGCSE Business Studies

Cambridge IGCSE Business Studies Section 3 Marketing

people, such as Indonesia, will have different needs and wants from countries where

the population has a higher proportion of older people, such as the UK.

Differences in legal controls to protect consumers
As mentioned above, countries have their own laws and regulations to protect

consumers from unfair or dangerous business activity. These might be very diff erent
from the legal controls in the business’s own country. Before a business decides to
enter foreign markets it must make sure that its products and the way it conducts
business satisfy the laws of the countries it is looking to expand into. This may mean

changing its product, packaging or advertisements, all of which increase costs.
Lack of market knowledge
Entering new markets for the first time presents two problems for most businesses:

■ The business does not know the market.
■ The market – consumers – does not know the business.

Some of the ‘missing’ knowledge relates to the factors discussed above. However,
knowledge about market size, competitors, brand image and customer loyalty to
existing products, consumer tastes and preferences, sources of media for promotion and
channels of distribution is essential knowledge about the country and its markets.

These problems need to be fully understood if a business is to succeed when
entering a new market in another country. A good example of how a business
which is very successful in its home market might fail to succeed in entering foreign
markets is the UK leading supermarket retailer Tesco.
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Tesco profi ts fall as supermarket pulls out of US

The UK’s biggest supermarket, Tesco, has confi rmed that it is pulling out
of the US. As a result, the company’s annual profi ts have fallen for the fi rst

time in nearly 20 years.
Tesco is exiting its US chain of 199 Fresh & Easy shops, which have never
made a profi t, at a cost of £1.2bn.
Tesco is also exiting Japan, and plans to take a more measured approach to
its growth in China.
A spokesperson for Cass Business School has said that Tesco’s failure to
understand the differences between the retail landscapes of the UK and US
is at the heart of the problem.

Source: Adapted from www.bbc.co.uk/news/business-22179255
Methods to overcome problems of entering foreign markets
Many of the problems that a business may face when entering new markets in
another country can be overcome by detailed market research. However, this can
be costly.
Other options for expanding into international markets include:

■ franchising
■ licensing
■ joint ventures.