Question

There are many barriers to entry when it comes to entering a foreign market, but the top three include monopolies, poor or inadequate legal protection, and corruption.

please explain in further detail

Answer 1

Companies entering foreign markets might face problems or increased costs because of the business environment and the way in which companies operate. For example, marketing services might be prohibitively expensive. The banking system might be undeveloped, and certain payment mechanisms may be unavailable. Letters of credit might be unreliable or difficult to obtain.

1. Monopolies A monopoly situation represents a very serious entry barrier. A monopoly occurs when one company is the main provider of a product or service in a market. Monopolies might be state owned or can be created through takeovers of competing companies.
One example of a monopoly-type situation is the provision of Internet services in North America. Because of the way Internet signals are carried (through cable or phone lines), consumers usually only have one of two choices for how they obtain their Internet service: through their phone company or through their cable provider. In rural areas where cable has not been installed, the phone company will be the only provider of Internet services for most customers. If entering companies cannot access an efficient or cost-effective distribution system because incumbent companies control distribution networks, their goods or services are unlikely to be successful.

2. Legal protection Poor legal protection available to foreign companies also acts as a barrier. If a company cannot assume protection of its intellectual property (copyrights, patents, trademarks) and fair and effective dispute settlement mechanisms, it is likely to suffer losses in the market. In some countries, resorting to legal action over a commercial dispute can be futile, because neither the law nor the courts favour the foreign exporter.

3. Bribery and corruption In many countries, business activities are commonly sped up or made possible through the payment of bribes. In other cases, key officials and decision makers will demand some form of payment to allow a transaction to proceed. Although public opinion in the target country may be against such practices, they remain a reality. While local companies in such countries treat bribes as an everyday business occurrence, foreign companies can face severe civil and criminal penalties for paying bribes. This puts them at a disadvantage in the market.