Evaluating markets to invest abroad

Evaluating Markets to Invest Abroad Entry of a company to a new market can be challenged by various factors called barriers to entry. A proper analysis of the potential market, especially if foreign need to be conducted to evaluate the viability and chances of success. An institution thus needs to take into account key factors and considerations when evaluating entry into the proposed foreign market (Gitman, Joehnk & Billingsley, 2011). Bertos Financial Services, Inc. (BFSI) which is a big financial institution based in Nashville, Tennessee finds the need to form a subsidiary in different states and sets out to determine which nation had potential. Firstly, Victoria Pernarella will consider the process of internationalization. In this, she evaluates three aspects. First is whether BFSI possesses owner-specific competitive advantage in Tennessee which can be transferred to the potential foreign market based on. This advantage needs to be firm-specific, powerful and transferable.
She also identifies location-specific advantage to determine whether the foreign market has traits that can allow the entrant to exploit its competitive market in the potential market. This focus is on costs- productive labor, unique raw materials, centers of advanced technology, formation of custom unions and regional trading blocs (Gitman, Joehnk & Billingsley, 2011). She evaluates the ability to safeguard competition by control of the complete value chain in the industry which is internalization. This is done through foreign direct investment. Secondly, she considers the model of entry which should be based on the needs of the business clients.
Another key factor is the availability of adequate resources by BFSI as well as the projected volume of international business. Other key considerations relate to knowledge and experience on foreign markets, structure of BFSI, tax considerations, customer profiles and current regulation of market in the target nation. The organizational culture determines the objectives of the firms and the behaviors that need to be set in correspondence to the existing cultures. The experience with foreign markets is an added advantage which helps to determine the relevance and reliability of this market (Gitman, Joehnk & Billingsley, 2011). Does it fluctuate regularly and what effects are observed from these fluctuations. Can is sustain economic growth and what factors lead these fluctuations. The volume of projected international business identifies at what rate the firm may expand upon entry and also the risks that are involved in the venture.
Entry of institutions in foreign markets is exposed to several barriers such cultures that are dominant. This necessitates the need for companies to have proper information on the cultural backgrounds of the communities that exists in the target market. This determines the ethics and behaviors the target market should also have a stable political market so as to boost economic growth of the subsidiary. A situation of chaos and war leads to an imbalanced balance of payments and low profits. The subsidiary should promote socialization and corporate social responsibility so as to cultivate trust and confidence in the society of its location. It also maintains proper public relations with the environment which creates a culture of co-existence (Gitman, Joehnk & Billingsley, 2011). The legal aspects such as tariffs and quotas may impact negatively to new entrants and thus the need to identify aspects of protectionism in the target market.
Gitman, L., Joehnk, M. and Billingsley, R. (2011). Personal Financial Planning, Twelfth Edition, Prentice Hall.