CAIE IGCSE Business Studies 3.3.7 entering overseas markets

Relevant points might include:

Language differences:
- Promotional material may need translation into other languages, increasing costs.
- Instructions for using farming equipment may not be understood, creating health and safety problems.

Lack of knowledge of the market:
- AD may not know the needs of farmers in other countries.
- Equipment may not suit soils in other countries.
- Marketing requirements may be very different, so promotion may not reach the potential market and sales may be low.

Changes in exchange rates:
- If country Z's exchange rate appreciates, AD's exported tractors may have higher prices in other countries, making AD less competitive, reducing sales and making entry harder.

Conclusion - justification may include:
- Language differences can be overcome by paying a business to translate promotional leaflets and instructions; this is a one-off cost. Lack of market knowledge may require expensive research, an agency or a joint venture. Exchange-rate movements are unpredictable and cannot be controlled by AD.
- If AD's equipment suits other countries or can be adapted easily, lack of market knowledge may be overcome and sales should increase.
- Appreciation may make exported equipment more expensive, but AD could reduce its profit margin to keep foreign-currency prices unchanged.