Question

Assuming you are the CEO of the firm you chose in week 1, you are considering to enter the foreign markets. What are some challenges you might encounter in entering the foreign markets? What additional factors are encountered in international as compared with domestic financial management? Discuss each briefly with examples?

Answer 1

As we know that in present time every firm want to do business in domestic market and in international (foreign market) as well because due to globalization a lot of opportunties are available for every businessman.

But practically we see that there are several challenges in entering in foreign market. So these are additional factors that need to be considered in case of foreign market in compare to domestic market.

Let’s discuss these challenges or factors;

1. Foreign laws & regulations;

In compare to domestic market, a firm has to face severe problem of foreign laws & regulations because a new firm may not be in position to fulfill all legel requirements of foreign market.

2. International financial reporting system;

A firm can fulfill financial reporting requirements easily in own country but in case of foreign market a different type of international financial reporting system will be needed hence it will be a big problem.

3. Global pricing strategy;

For capturing a share in global market a firm need to adopt good pricing strategy but when a new firm enters into foreign market then that firm have to adopt a new pricing policy hence it is also a new challenge.

4. Universal payment methods;

Foreign market requires a unique & standard payment system hence a new firm has to adopt this new system of payment.

5. Currency fluctations;

This is very crucial problem for a firm in foreign market because earned profits in foreign market depends on the real currency rates thus fluctations in currency rates is a chellenge.

6. Communication related issues;

Communication is very key element in trade & business but as the level of businenss increases from domestic to foreign then complexities in communication also widen.

7. Cultural issues;

Every firm operates in social environment hence societal cultures must be meet out effectively otherwise business can not survive. So when we enter into foreign market then such cultural issues increases.

8. Political challenges;

In case of domestic market a firm only has to face poltical turmoils of particular country but in case of foreign market firm has to face poltical challenges of various countries,

9. Dynamic nature of market;

Market always remains dynamic but international market highly dynamic hence stable policy of a firm can not work in international market for a long-time,

10. Problem of reliable partner in foreign market;

Every firm needs a reliable partner in a foreign market but profit motive has become more important hence most of the firms search for a chance of earning high amount of profits. Thus finding a good & reliable partner is a very crucial matter.

11. International taxation problem;

In case of foreign & international market a firm has to face taxation problem because every country want to generate higher tax revenue hence such taxation issue are bigger problem.

12. Level of competition;

In case of foreign market we see high level of competition, so for a small level firm it is not easy to find it proper place due to this high level of competition.