Etymology[ edit ] The word bankruptcy is derived from Italian banca rotta, meaning "broken bank", which may stem from a widespread custom in the Republic of Genoa of breaking a moneychanger's bench or counter to signify his insolvency, or which may be only a figure of speech. In Ancient Greecebankruptcy did not exist.
It has become imperative for most companies to market their products and services outside their domestic markets. But all markets are not equally attractive nor are the companies competent enough to pursue all markets.
A company has to be wise in selecting markets where its foray would be successful. Not all countries will be attractive for all companies. Some companies may discover that some markets cannot afford the products that they sell and they should refrain from entering those markets, whereas there may be some markets which would readily accept a slightly different version of their existing product.
India has a large middle class but if a US company assumes that the spending power of a middle class family in US and India would be same, it can make strategic blunders by over-investing in India. Many companies made such mistakes in the early nineties in their first forays in India.
Companies need to deliberate about the real economic potential of a market before they decide to commit resources. But it would not be viable to market to such small country markets. A company can explore the possibility of creating an infrastructure to serve a region constituting of such small country markets.
Most western multinational corporations will realize that the huge markets of the developing countries are not for the products that they are selling at home, but for a far less sophisticated version at far less a price. An entirely new set-up of marketing and manufacturing may have to be established to serve such markets.
This can be risky but it would be better than serving third world country markets with old products from their portfolio. A company should not be content with studying national indices like gross national product and per capita income.
It should delve deep into the data to find the number of people who can afford to buy its products. A company looking for a viable market should let its economists and marketers stay in the prospective markets for a long time. They will understand if enough people have enough disposable income to buy the product the company proposes to sell.
Besides looking at the ability of customers to pay for the product, the company also has to assess the economic conditions and economic stability of the country where it plans to run its operations.
Studying the balance of payments situation, GDP, trade patterns and currency stability will give an idea about the economic prosperity and well being of the country.
These are important indicators of the level of risk associated with the country which is being viewed as a prospective market. Social and Cultural Factors: Countries are different from one other in terms of language spoken, religion practiced, food eaten and in many other ways.
These differences are very real and significant, and marketers should consider how these differences can hinder or facilitate the marketing efforts of the company in the new market.
Even marketing and other business practices may have to be tailored to suit the social and cultural nuances of the country. A company would do well to pack a troop of sociologists and anthropologists into the target market before it sends its product developers and marketers.
Some marketers initially sell their products to markets that are culturally similar, while some may look for similarities among consumers across various countries where they operate.
But in most cases, differences in socio-cultural settings have forced marketers to adapt their marketing mix. These may be simple changes such as translation of messages into different languages, or can involve creating completely different marketing mixes for various markets that the company operates in.
Political and Legal Factors: It is important to know the attitude of the government and the people of the host country before a company decide to commit resources.
Nationals of countries who have been dominated by foreign powers in the past are wary of anything foreign. Multinational companies should have patience and demonstrate long term interest among people of the country by becoming actively involved in their well being, besides selling products to them.
Political stability and attitude towards foreign investment also matter a great deal in encouraging participation of multinational corporations.
Political stability indicates continuance of policies. Changes in government policies could spell difficulties for the profitability potential of the firm.Legal factors can decide whether or not there is a business behind selling a certain product (perhaps drugs, or sharp objects), and can also affect the mechanisms through which a company stocks their inventory or interacts with the customer.
A significant change in legal factors or in the business climate that could affect an asset’s value, including an adverse action or assessment by a regulator (such as if the EPA rules that a company is polluting a stream and must change its manufacturing process, thereby decreasing the value of its .
In a concentration strategy of foreign expansion. page ) short competitive lead time. there is high sales stability in each market and a long competitive lead time b. a. rapidly into a few foreign countries with many of its products c. a company would go to _____.
and high economies of scale in distribution b. page ) c. Explain The Legal Factors That Must Be Considered When A Company Decides To Locate Its Operations In A Foreign Country There Are Several Theories That Seek to Explain Why Fdi Takes Place.
These Theories Try to Explain Why Firms Go to the Trouble of Acquiring or Establishing Operations Abroad. Smaller gifts, of a size that would not normally influence a major decision, are considered ethical in some societies and may be legal under local and U.S.
laws. To assist the trade community in its evaluation of how the WTO should respond to the growing importance of FDI, the WTO Secretariat today (16 October) launched a page report on "Trade and Foreign Direct Investment" focusing on the economic, institutional and legal .