Assume That You Are the Manager of a Small Company Trying to Enter into the International Market Place

Introduction

With the boom in globalization, more and more small and medium enterprises (SMEs) are seizing opportunities to expand their profits and growth by entering into the international market place.

As great differences exist between the market systems of various countries, Robbins and Coulter (2007) propound that the managers of these companies must "recognize these differences if they hope to understand the constraints under which they operate and the opportunities that exist." In order to do so, the company would have to gather enough information to understand the overall business environment of the foreign market it wishes to enter.

Bergevin (2002) proposes that this information can be separated into three main categories - economic, political-legal, and socio-cultural information.

Here we will discuss in further detail the aspects of these three categories of information.

Economic Environment

Robbins and Coulter (2007) suggest that for any company wishing to enter into the international marketplace, intimate knowledge of the country's economic system is essential. This is because the economic system of a country "has the potential to constrain decisions and actions."

Examples of such information include knowledge of the market's growth rate, currency exchange rates, inflation rates, tax policies, level and activities of competition in the industry of interest, and an assessment of risks involved.

Currency exchange rates are important as profits are strongly affected by the strength of a company's domestic currency and the currency of its intended market of entry. Similarly, information on the country's tax policies is important so that management would be able to minimise the tax obligations of their business, ensuring optimum cost efficiency and profits.

Inflation and deflation trends need to be closely monitored as well as it affects a country's interest rates, exchange rates and costs of living. This ensures that management would have the foresight to make better decisions should there be any changes in the country's monetary policies. (Robbins & Coulter, 2007)

By being well-informed of the level of competition and by monitoring the activities of competitors already present in the market of interest, management would have a better understanding of the mechanisms of the market as well as of what to expect. Having knowledge of the respective market shares of potential competitors, as well as careful study of their successes and failures, would be of great advantage to the company seeking entry into a foreign market. (Koch, 2001)

Using information of the market's growth rate and financial information of other businesses in the industry, as well as the average financial figures for that industry, a thorough risk assessment can be made. This would be useful in the short-term and long-term planning and decision-making of the company, and would also help to forecast long-term sustainability and profits. (Koch, 2001)

Political-legal Environment

Robbins and Coulter (2007) identify a need for management to be informed of the specific laws and political stability of the country they