Question

We studied Global Marketing within chapter 8 in you option explain why it’s important for every business today to consider entering into global markets. Identify what steps businesses should consider when they enter into these global markets? Also explain how exchange rates can affect international trade?

Answer 1

1. A business should perform a PESTEL analysis for the evaluation of the external factors before entering the host field for business. The entire PESTEL framework influences a firms international strategy.:
   • Political: Political factors include how regulations and policies imposed by your national or local government might affect the way you conduct your business.
   • Economic: The strength and performance of the local, national and international economy can all impact a business, presenting both opportunities and threats. Different types of taxation and other duties can also hit your bottom line hard, so a deep understanding of the fiscal environment is essential in order to prepare viable financial forecasts.
   • Sociological: Sociological attitudes and profiles are constantly changing. Demographic profile of your consumer base will help you understand what motivates them. Keeping abreast of issues such as gender bias, ethnic origin and religion, as well as being conscious of social norms and lifestyle expectations, can help you decide on your marketing strategy.
   • Technological: With advances in technology, keeping up-to-date with changes could help you develop a market advantage in the face of competition. The marketing strategy is also dependent on the technological competency of the market
   • Legal: Businesses have legal obligations and restrictions depending upon the country which is expected to be penetrated. Some of these have a wider impact on matters as diverse as waste and environmental management, import and export restrictions and or consumer protection laws.
   • Environmental: Environmental concerns have become important in recent years, with the wider impact of doing business increasingly recognized by consumers as a factor in their buyer behavior. Responsible business owners should look for ways to minimize the environmental impact of their operations and work on their product strategy

For an internal strength estimation it should go for a SWOT Analysis. Map it with the PESTEL and see what changes they need to do to enter the market. Use of SWOT analysis will be useful when we

• use a SWOT analysis to distinguish between where we are now and where we wish to be,
• are realistic about your strengths and weaknesses and then analysis is not just superficial,
• Include only key points and issues,
• Focus on critical success factors use your, strengths and weaknesses in competitive terms,
• Keep it simple, and understandable, devoid of jargons and length not more than a page.

Exchange rate can affect the international trade in the following manner:

• Your currency value is high, product created by you will be costly for others to purchase(with low currency value). Hence your business is going to suffer.
• Your currency value is low, you'll need more money to purchase parts for the product. Hence the product will be costly for you to produce. When competing in the international market your competitor may have a cheaper product and hence your product might not have that kind of response you expected.