Shawn has a masters of public administration, JD, and a BA in political science.
If you've sold a product on E-bay outside the United States, you sold your product in an international market. In this lesson, you'll learn what an international market is and explore some of its key concepts.
What Is an International Market?
A market can be defined simply or rather complexly. In the simplest terms, a market is a system of institutions, rules and procedures relating to the exchange of goods and services between persons or organizations. Markets can be defined in different ways, including by geography, customer, product or even the behavioral characteristics of consumers.
An international market is defined geographically as a market outside the international borders of a company's country of citizenship. A company, to the extent that it is a legally distinct entity from its owners like a corporation, is usually a citizen of the country where it is organized. IBM, for example, was formed in the United States. Thus, any geographic area outside the territorial boundaries of the United States where IBM conducts business is IBM's international market. The conceptual opposite of an international market is the company's domestic market, which is the geographic region within the national boundaries of a company's home country.
International markets do provide distinct challenges to businesses. Let's take a look at some of the primary challenges.
The preferences, needs, wants and desires of foreign consumers are often different from those of the consumers in the company's domestic market. This means marketing attributes ranging from product development, to advertisement, to distribution may have to vary not only from the domestic market to the foreign market, but even from different foreign markets. In many respects, you need to think of an international market as a group of foreign markets consisting of one or more countries.
For example, some cultures do not do their shopping in supermarkets, so you'll have to place your grocery products in numerous small grocery stores rather than two or three large grocery store chains. You'll also need to be careful with product names. In the past, companies have made embarrassing mistakes by not changing a product name that translates into a 'dirty' slang word or phrase in the foreign tongue.
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The political environment of countries differ. Some may be hostile to your market entrance, and some may even prevent you from entering the market. You will often have to contend with tariffs (taxes on imports), quotas (limits on imports) and other barriers to entry into a particular international market. Moreover, you may have to contend with unstable governments and societies.
Consumers in international markets may not have the same level of disposable income as your domestic market. General economic conditions will also vary and can affect your success. Examples include high rates of inflation, taxes or unemployment.
You also need to realize that legal systems are not consistent across international markets. Sometimes contracts and property rights may not be protected at the level to which you are familiar.
Let's review. A market is a system of institutions, rules and procedures involving the exchange of goods and services between people or organizations. Markets can be defined by geographical region, customer, product or customer behavior. An international market is any geographical region where a company conducts business that is outside the territorial boundaries of a company's home country, while a domestic market is within the boundaries of its home country. Companies face many challenges in pursuing international markets, including cultural, political, economic and legal challenges.
After viewing it, draw upon everything you've learned in this lesson to:
Paraphrase the definition of a market
Differentiate between international and domestic markets
Recognize the challenges faced by companies operating in international markets
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