BTEC L3 Extended Dip In Business Yr2 Gp1
Unit 39: International Business
(D1) Evaluate the potential problems faced by businesses that trade internationally when entering
new markets.
Intro
In this assignment I will evaluate the potential problems that could be faced by businesses trading
internationally. There are many challenges a business goes through to establish itself in a new
market, facing a whole new target market, culture, law and an economy.
Culture
Each country has a different culture that has been there for centuries. Businesses operating
internationally can find it quite challenging to adapt its business and products/services to the culture
of an international market. A business puts itself at risk by entering a new market and introducing
the same products as it sells domestically as there can be a lack of demand and the company will
simply not make enough profit and will have to pull out of the market, leading to a lot of expenses.
A recent example of such a cultural problem could be – Tesco having to pull out of America due to
lack of success. Tesco has recently made a decision to close its 200 store chain called ‘Fresh and
Easy’ in America. The withdrawal of the business has cost Tesco £1.2billion, due to which Tesco’s
profits have dropped by 51%. This shows the amount of money lost if a business does not succeed in
an international market because it failed to meet customer needs. To prevent such a problem a
business planning to enter a new market must ensure that it carries out all the required research
and measure the potential success if it enters that new market, this will help the business make a
decision of whether to enter the market at all or rather to develop the existing stores and expand
domestically.
Human Resources
Human resources is a very important aspect of any business, however when entering a new
international market managing human resources could be quite complex. It is much more
reasonable to employ local labour when entering international markets, rather than transfer
employees from the domestic countries and find replacement for such employees. One of the
problems that could be faced by an international company is the lack of skills needed for the job
tasks. If a country lacks skills needed for the running of daily business activities, local employees
hired by the company will have to undergo training – which would lead to further expenses and
would hold the business back from starting making profit in the new market.
Another problem that could occur in human resources is; local employees not being able to adapt to
the way the company operates. What could be good management style in the UK could not be
suitable for another country. An example of this could be the Hofstede scale where it shows how
employees in the UK don’t like to be directed and told what to do, they prefer to be treated equally,
the same as the management, whereas employees in India like to be told what to do and given
orders and deadlines by when the task has to be completed.
Law and Economy
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