Targeting Emerging Markets 20 Marker
To what extent is targeting emerging markets for sales the best way for businesses to achieve a major growth in their profits?
An emerging market can be defined a new market structures arising from globalisation that are shifting the balance of economic power from the sellers to the buyers. In such market information is freely and widely available, and is almost instantly accessible.
For a business to target emerging markets for sales can be seen as a very strong way for a business to achieve a large increase in profits as the risk of failure compared to domestic markets is spread out and reduced. For example, external factors such as the economy can be very fatal for a business’s profits, due to events such as a recession in the domestic market, which leads to a decrease in customer spending. Land Rover encountered this as sales in China increased by 36% due to a 7.7% economic growth. This increase has meant that customers have a larger amount of disposable income, meaning they were willing to pay for more expensive luxury good due to their positive income elasticity of demand. In this example the emerging market had a greater number of sales compared to the domestic market, resulting in a major growth in their profits. This shows that targeting emerging markets for sales can reduce the risk of failure of events such as economically disruption in domestic markets.
A second advantage of targeting emerging markets for sales is that domestic markets may be too saturated. For example Tesco has 28.7% of market share in the UK and due to government restrictions, they have been restricted from increased expansion. Tesco have however decided to enter the Chinese market, which is expected to increase their annual sales by $4 billion in the next 5 years. This shows that targeting emerging markets enables a business to be free from government restrictions, and can take full advantage of this like Tesco has. Profitability has also grown, and shows a major growth in profits.
An emerging market can be defined a new market structures arising from globalisation that are shifting the balance of economic power from the sellers to the buyers. In such market information is freely and widely available, and is almost instantly accessible.
For a business to target emerging markets for sales can be seen as a very strong way for a business to achieve a large increase in profits as the risk of failure compared to domestic markets is spread out and reduced. For example, external factors such as the economy can be very fatal for a business’s profits, due to events such as a recession in the domestic market, which leads to a decrease in customer spending. Land Rover encountered this as sales in China increased by 36% due to a 7.7% economic growth. This increase has meant that customers have a larger amount of disposable income, meaning they were willing to pay for more expensive luxury good due to their positive income elasticity of demand. In this example the emerging market had a greater number of sales compared to the domestic market, resulting in a major growth in their profits. This shows that targeting emerging markets for sales can reduce the risk of failure of events such as economically disruption in domestic markets.
A second advantage of targeting emerging markets for sales is that domestic markets may be too saturated. For example Tesco has 28.7% of market share in the UK and due to government restrictions, they have been restricted from increased expansion. Tesco have however decided to enter the Chinese market, which is expected to increase their annual sales by $4 billion in the next 5 years. This shows that targeting emerging markets enables a business to be free from government restrictions, and can take full advantage of this like Tesco has. Profitability has also grown, and shows a major growth in profits.