Business · 3 Marketing

3.3.7 Entering new markets in other countries as a method of growth

Before you start

Businesses can grow internally, for example by developing new products or new markets, or externally through mergers and takeovers (1.3.3). Selling in another country is internal growth into a new market.
New markets are one of the extension strategies for a product in the maturity or decline stage of its life cycle (3.3.1).
Market research (3.2): how a business finds out about customers it does not yet know, and why it costs time and money.
Distribution through agents (3.3.3) — a channel that becomes useful when a business sells somewhere it does not know well.
Revenue, costs and profit: more sales raise revenue, but profit only rises if costs do not rise by more.

Syllabus objectives covered (2)

advantages of entering new markets in other countries, e.g. increase sales, spread risk
disadvantages of entering new markets in other countries, e.g. cultural differences, lack of knowledge, legal requirements

Part 1 of 7

What this method of growth is

A business grows internally when it expands using its own resources rather than by joining with another business. One way is to sell its existing products to a new market. This subtopic is the biggest version of that: selling in another country.
Hold one picture in your head. The business is taking a product that works at home to customers who are not its home customers. Every advantage comes from more customers in more places. Every disadvantage comes from those customers, and that country, being different.
The syllabus names two advantages — increase sales, spread risk — and three disadvantages — cultural differences, lack of knowledge, legal requirements. The 'e.g.' means these are examples, not a closed list. Know those five thoroughly, and have a few more ready for questions that ask for two different points.
The trap throughout is writing about the wrong party. The question asks about advantages and disadvantages to the business. 'People in the new country get more choice' is a benefit to those customers, not to the business entering the market.

Part 2 of 7

Advantage: increase sales

A new country means a whole new group of potential customers. More customers, so more units sold, so higher sales revenue — and higher profit, if costs do not rise faster than revenue.
This advantage is largest when the home market is saturated: most people who want the product already buy it, so sales at home cannot grow much more. Growth has to come from somewhere else.
It links to the product life cycle. A product that is in maturity or decline at home may be new in another country, where it can enter a growth stage. Selling there extends the product's life without the cost of developing a new product.
Selling more units can also lower the average cost of each unit, because fixed costs such as the factory are spread over more output and materials can be bought in larger quantities. Use this as development: 'more units, so a lower cost per unit, so a higher profit margin or room to cut prices'.
Trap: more sales is not the same as more profit. Selling abroad brings new costs — transport, research, adapting the product. If those costs are larger than the extra revenue, profit falls. Say 'revenue' when you mean revenue.

Part 3 of 7

Advantage: spread risk

A business that sells in only one country depends entirely on that country. If something goes wrong there, all of its sales are hit at once.
Things that can go wrong at home, none of which the business controls: an economic downturn so people spend less; a strong new competitor; a change in customer tastes; a new law or tax.
If the business sells in two or more countries, a fall in sales in one market is partly balanced by sales continuing in the others. That is what spreading risk means. The risk does not disappear — it is simply not all in one place.
Write the chain in full to earn analysis: 'if sales at home fall because of a recession, sales in the other country can continue, so total revenue falls by less and the business is more likely to survive'. 'It spreads risk' on its own is knowledge only.
Other advantages you can use when a question needs two different points: a stronger brand image, because an international brand can look more successful and trusted; the new market may have fewer competitors than home; and using spare capacity in a factory that is not producing as much as it could.

Part 4 of 7

Disadvantage: cultural differences

Culture is the shared language, customs, beliefs, religion and tastes of the people in a country. Customers in a new country may want different things, or may understand the same product or advert differently.
What can differ: tastes in food and flavours; which colours, symbols or numbers are thought lucky or unlucky; what is acceptable to show in an advert; the language needed on packaging; religious rules about food or clothing; how and where people usually shop.
The consequence is that the product, its packaging or its promotion may have to be adapted. Adapting costs money and takes time — a new recipe, redesigned packaging, adverts rewritten in another language — so costs rise before any extra sales arrive.
If the business does not adapt, the product may not sell, or an advert may offend people and damage the brand's reputation. So cultural differences cost the business either way: pay to adapt, or risk failing.
Trap: 'cultural differences' is a heading, not an answer. It earns the knowledge mark at most. Say what differs for this product and what that does to the business: 'customers in the new country prefer mild flavours [app], so the spicy chips would need a new recipe, increasing costs [an]'.

Part 5 of 7

Disadvantage: lack of knowledge

At home, a business usually knows its customers, its competitors, the best shops to sell through and reliable suppliers — often from years of experience. In a new country it may know none of this.
Lack of knowledge leads to poor decisions: the wrong price, the wrong distribution channel, promotion in media the customers do not use, or underestimating local competitors who know the market well.
The business can reduce this by carrying out market research (3.2), or by selling through a local agent who already knows the market (3.3.3). Both help — but both cost money, and an agent takes a share of the revenue.
That is the analysis in one line: lack of knowledge either increases costs (paying for research or an agent) or increases the risk of failure (guessing). A strong answer says which of those applies to the business in the stem.
Distance makes this worse. Managers at home cannot easily see what is happening in another country, may work in a different time zone, and may find it harder to communicate with staff or partners there, so problems are spotted and solved more slowly.

Part 6 of 7

Disadvantage: legal requirements

Every country has its own laws. A product that is legal and correctly labelled at home may not meet the rules of another country.
What can differ: product safety standards and tests; what must be printed on labels, and in which language; what adverts may say or show; licences needed to sell certain products; taxes charged on imported goods.
The consequence: the business may have to change the product or its labels, pay for new tests or licences, or pay for legal advice. All of these raise costs and can delay the launch, so revenue from the new market arrives later.
If the business breaks a law it did not know about, it may be fined or have its products removed from sale, and the bad publicity damages its reputation in a market where it is trying to become known.
Other disadvantages you can use: higher transport and distribution costs over long distances; strong local competitors with loyal customers; exchange rate changes, which can make the product more expensive for foreign customers; and political instability in the new country.

Part 7 of 7

Weighing it up: should this business enter the new market?

An 8-mark part (d) here asks for a decision: should the business enter the market in the other country, or are the advantages greater than the disadvantages? The two developed points (usually one advantage, one disadvantage) earn the knowledge, application and analysis marks; the justified decision earns the evaluation.
The justification must add something new, not repeat an earlier point. The best new material is what the decision depends on, taken from the stem. Ask five questions of any case.
Is the home market saturated, or shrinking? If sales at home are falling, staying at home is itself risky, and the case for going abroad is stronger.
How different is the new country, and does the product need adapting? A product that sells unchanged is far cheaper to take abroad than one needing a new recipe, new labels and new adverts.
Can the business afford it? Research, adapting the product and meeting legal requirements all cost money before any revenue comes in. Look for its size, its profits or its finance in the stem.
What does it already know? Has it done market research, or will it use a local agent? A business with no experience abroad and no research is taking a bigger risk.
How attractive is the new market? A large or growing number of potential customers makes the extra sales more likely to be worth the cost.
A really good justification notices that 'spread risk' and 'lack of knowledge' pull against each other. Going abroad reduces the risk of depending on one country, but adds the risk of failing in a country the business does not understand. Say which of those two risks is larger for this business, and why.

Worked examples

Example 1. Rasa Chai makes bottled spiced tea drinks. It sells 3 million bottles a year, all in its home country, where its sales have not grown for three years. Last year a large rival launched a similar drink in the home country. Rasa Chai is considering selling in a neighbouring country where tea drinks are popular and the population is growing. Explain two advantages to Rasa Chai of selling its drinks in the neighbouring country. [6]

Show the working

Explain, 6 marks, two advantages: knowledge, application and analysis for each. The advantages must be to Rasa Chai.
Pick the two syllabus advantages, because the stem has clear facts for both. 'Increase sales' fits 'sales have not grown for three years' and 'population is growing'. 'Spread risk' fits 'a large rival launched a similar drink'.
Advantage 1. Knowledge: increase sales. Application: home sales flat at 3 million bottles for three years; tea drinks popular next door. Analysis: so its revenue can grow again even though the home market has stopped growing.
Advantage 2. Knowledge: spread risk. Application: the new rival at home could take its customers. Analysis: if home sales fall, sales in the neighbouring country continue, so its total revenue falls by less and it is less dependent on one market.
Check that analysis is a consequence, not a restatement. 'Spread risk, so risk is spread' is circular. 'Spread risk, so total revenue falls by less if the rival takes customers at home' is analysis.

Answer: 1. Selling in the neighbouring country would increase Rasa Chai's sales [k]. Its sales at home have been stuck at about 3 million bottles for three years, but tea drinks are popular in the neighbouring country and its population is growing [app], so Rasa Chai could sell more bottles and increase its revenue even though its home market has stopped growing [an]. 2. It would spread risk [k]. A large rival has just launched a similar drink in its home country [app], so if the rival takes some of its customers, sales in the neighbouring country would continue and Rasa Chai's total revenue would fall by less than if it sold in only one country [an].

Example 2. Pawsome Treats makes birthday cakes for dogs and sells them in its home country, where many people keep dogs as indoor pets. It plans to sell in country M, where fewer people keep dogs indoors and all food products must carry labels in the local language. Outline two disadvantages to Pawsome Treats of entering the market in country M. [4]

Show the working

Outline, 4 marks: two disadvantages, each with a point [k] and a stem fact [app]. No development mark, so be brief.
The stem points to two of the syllabus disadvantages. 'Fewer people keep dogs indoors' is a cultural difference. 'Labels in the local language' is a legal requirement. Use the stem's hints — they are there to be applied.
Disadvantage 1. Knowledge: cultural differences may mean lower demand. Application: fewer people in country M keep dogs as indoor pets, so fewer would buy dog birthday cakes.
Disadvantage 2. Knowledge: legal requirements increase costs. Application: all food products must carry labels in country M's language, so packaging must be redesigned.
Check you have not written 'cultural differences' and 'legal requirements' as bare headings — each is tied to a fact only Pawsome Treats has.

Answer: 1. Cultural differences may mean there is less demand for the product [k]: fewer people in country M keep dogs as indoor pets, so fewer customers are likely to buy birthday cakes for them [app]. 2. Legal requirements may increase costs [k]: food products in country M must carry labels in the local language, so Pawsome Treats would have to redesign and reprint its packaging [app].

Example 3. Use the Rasa Chai information from the first worked example. In addition: Rasa Chai has never sold outside its home country and has not carried out any market research in the neighbouring country, and drinks there must show their sugar content on the front of the bottle. Do you think Rasa Chai should start selling in the neighbouring country? Justify your answer. [8]

Show the working

Plan: one advantage and one disadvantage, each developed (up to 2 knowledge, 2 application, 2 analysis), then a justified decision (2 evaluation).
Advantage: increase sales — application: flat home sales, popular tea drinks next door — analysis: revenue grows again.
Disadvantage: pick the one with the richest stem facts. Lack of knowledge: it has never sold abroad and has done no research. Analysis: it could choose the wrong price or channel and the launch could fail, wasting money.
Keep 'sugar content on the front of the bottle' in reserve. It is a legal requirement neither point used — but it is a small cost, so on its own it is unlikely to decide the question. The facts that decide it are the rival at home and the lack of research.
Decide, and give a reason that weighs the two sides. Staying at home is not risk-free: sales are flat and a large rival has just arrived. So the question is not whether to go but how to reduce the knowledge risk — by researching first.
A conditional decision is fine, but it must still be a decision: yes, after market research. Say why the condition matters for this business.

Answer: Advantage: entering the neighbouring country would increase sales [k]. Home sales have not grown for three years, but tea drinks are popular next door and the population is growing [app], so Rasa Chai could increase its revenue again [an]. Disadvantage: Rasa Chai lacks knowledge of the new market [k], because it has never sold abroad and has done no market research there [app], so it could choose the wrong price, flavour or distribution channel, and money spent on the launch could be wasted if the drinks do not sell [an]. Decision: I think Rasa Chai should enter the neighbouring country, but only after carrying out market research [eval]. Staying at home is also risky, because a large rival has just launched a similar drink, so its home sales could start to fall; the research would reduce the biggest risk of going abroad, and meeting the rule on showing sugar content is a small labelling cost compared with a growing market next door [eval].

Where people go wrong

Mistake: Thinking 'spread risk' means the business now has no risk, or less risk overall.

Instead: Spreading risk means the business no longer depends on one country, so a problem in one market hurts it less. Entering a new country also adds new risks, such as failing through lack of knowledge.

Risk is spread across markets, not removed. The best evaluations weigh the risk reduced against the risk added.

Mistake: Writing 'cultural differences' or 'legal requirements' as the whole point.

Instead: Say what is different for this product in this country and what that does to the business: 'customers there prefer mild flavours, so the recipe must change, increasing costs'.

The heading is only knowledge. Application needs the stem fact, and analysis needs the consequence.

Mistake: Assuming increased sales automatically means increased profit.

Instead: Say 'revenue' for the direct effect of more sales. Profit only rises if the extra revenue is larger than the extra costs of transport, research and adapting the product.

Entering a foreign market has large costs, many of them before any sales arrive. Confusing revenue with profit weakens the analysis chain.

Mistake: Giving advantages to the customers or the new country ('people there get more choice') when the question asks about the business.

Instead: Every advantage and disadvantage must end with a gain or loss to the business entering the market — its sales, revenue, costs, risk or reputation.

The objectives are about entering new markets as a method of growth for the business. A benefit to foreign customers does not answer the question.

Check yourself

State the two advantages of entering new markets in other countries that the syllabus names, and write 'spread risk' as a full chain of reasoning.
Answer
Increase sales; spread risk. Chain: if the business sells in more than one country and sales fall in one of them, sales in the others continue, so its total revenue falls by less and it is more likely to survive.
Explain why entering another country is more attractive for a business whose home market is saturated.
Answer
In a saturated market most people who want the product already buy it, so sales at home cannot grow much more. A new country provides new customers, so the business can keep increasing its sales revenue.
Identify two cultural differences that could affect a food business entering a new country, and state one consequence for the business.
Answer
Any two from: different tastes or flavour preferences; religious rules about food; a different language for packaging; different eating habits or shopping habits. Consequence: the recipe, packaging or promotion may need to be adapted, which increases costs — or, if it is not adapted, the product may not sell.
State two ways a business can reduce its lack of knowledge of a foreign market, and the drawback of each.
Answer
Carry out market research — it costs money and takes time. Sell through a local agent who knows the market — the agent takes a share of the revenue, and the business has less control over how its product is sold.
Identify two legal requirements that might be different in another country, and outline how they affect a business.
Answer
Any two from: product safety standards; labelling rules, including language; restrictions on advertising; licences to sell; taxes on imports. They may force the business to change its product, labels or adverts, or to pay for tests and licences, which increases costs and can delay the launch.
A student ends an 8-mark answer with: 'The advantages are greater because it will increase sales.' Why does this earn little or no evaluation, and how could it be improved?
Answer
It repeats the advantage already given instead of justifying the decision. It could be improved by weighing the two sides using a new fact from the stem, for example: 'The advantages are greater because home sales are already falling, so staying in one country is risky too, and the product can be sold abroad without changing its recipe, which keeps the extra costs low.'

Exam questions

Try each part first. Open the mark scheme after you have written your answer.

Question 1. BrightPlay Ltd is a private limited company that makes wooden educational toys for children aged 2 to 6. It employs 55 people and sells all of its toys in country X, mainly through toy shops. Last year its sales revenue fell by 8% after a large foreign toy company started selling in country X. BrightPlay is considering selling its toys in country Y, where the number of young children is rising and many parents buy toys online. In country Y, all toys for children under 3 must pass a safety test that is different from the one in country X. BrightPlay's managers have never done business outside country X.

(a) Identify two advantages to a business of entering new markets in other countries. 2 marks No calculator

Mark scheme

pt1 First valid advantage, e.g. increase sales / spread risk / extend the product life cycle / lower average costs from larger output / stronger brand image / fewer competitors in the new market. Only award the first two answers given.
pt1 Second valid advantage. Do not credit a repeat of the first answer in different words. Accept all valid responses.

(b) Outline two disadvantages to BrightPlay of selling its toys in country Y. 4 marks No calculator

Mark scheme

k1 First disadvantage identified, e.g. legal requirements / lack of knowledge / cultural differences / higher transport costs / competition from local businesses.
app1 Relevant application of the first disadvantage, e.g. toys for under-3s must pass a different safety test / managers have never done business outside country X / many parents in country Y buy online, but BrightPlay sells mainly through toy shops.
k1 Second, different disadvantage identified.
app1 Relevant application of the second disadvantage. The reference must make sense in relation to the point being made. Accept all valid responses.

(c) Explain two advantages to BrightPlay of selling its toys in country Y. 6 marks No calculator

Mark scheme

k1 First advantage identified, e.g. increase sales / spread risk / lower average costs / stronger brand image.
app1 Relevant application of the first advantage, e.g. the number of young children in country Y is rising / revenue fell by 8% in country X / a large foreign competitor in country X / wooden educational toys.
an1 Relevant development of the first advantage, e.g. so revenue could recover from the 8% fall / so BrightPlay is less dependent on country X if the competitor takes more customers.
k1 Second, different advantage identified.
app1 Relevant application of the second advantage.
an1 Relevant development of the second advantage, e.g. more output from the 55 employees lowers the cost of each toy, so profit margins rise. Do not credit the same point twice. Accept all valid responses.

(d) Do you think BrightPlay should start selling its toys in country Y? Justify your answer. 8 marks No calculator

Mark scheme

k2 Up to 2 marks for identification of relevant points. Advantages, e.g. increase sales / spread risk. Disadvantages, e.g. legal requirements / lack of knowledge / cultural differences / costs of entering the market.
app2 Up to 2 marks for relevant application, e.g. wooden educational toys / children aged 2 to 6 / 55 employees / private limited company / 8% fall in revenue / large foreign competitor / rising number of young children in country Y / parents buy online / different safety test / no experience outside country X. The reference must make sense in relation to the point being made.
an2 Up to 2 marks for relevant development, e.g. higher revenue / less dependence on one market / higher costs and a delayed launch from the safety test / wrong decisions and wasted money through lack of knowledge.
eval2 Up to 2 marks for a justified decision about whether BrightPlay should sell in country Y, which does not repeat earlier points. E.g. Yes: revenue is already falling at home because of a large competitor, so staying only in country X is also risky, and a rising number of young children makes country Y a growing market; the safety test is a one-off cost that applies only to toys for under-3s. OR No, not yet: its managers have no experience abroad and it sells mainly through toy shops while country Y's parents buy online, so it should research the market and set up online selling first. Accept all valid justified decisions.

Question 2. Fuego Snacks makes very spicy corn chips in country P, where it has a 30% market share. It plans to sell its chips in country Q. In country Q, most snack buyers prefer mild flavours, and every snack packet must show its ingredients in two languages.

(a) Explain two disadvantages to Fuego Snacks of entering the market in country Q. 6 marks No calculator

Mark scheme

k1 First disadvantage identified, e.g. cultural differences / different tastes.
app1 Relevant application of the first disadvantage, e.g. most snack buyers in country Q prefer mild flavours, but Fuego makes very spicy chips.
an1 Relevant development of the first disadvantage, e.g. so sales may be low unless it develops a milder recipe, which increases costs / so the success of its 30% share in country P may not be repeated.
k1 Second, different disadvantage identified, e.g. legal requirements / lack of knowledge / transport costs.
app1 Relevant application of the second disadvantage, e.g. every packet must show ingredients in two languages.
an1 Relevant development of the second disadvantage, e.g. so packaging must be redesigned and reprinted, increasing costs and delaying the launch. Accept all valid responses.

Question 3. Hillmist Tea Ltd grows and packs green tea in country A and employs 90 people. Last year its sales revenue was $4.2 million, but its sales in country A have grown by only 1% a year for the last three years. 70% of its revenue comes from two supermarket chains. Its managers have never sold tea outside country A. The business has $250 000 of retained profit to spend on growth, and it plans to start selling its tea in one other country.

(a) Explain two advantages and two disadvantages to Hillmist Tea of selling its tea in another country. 8 marks

Mark scheme

k1 First advantage identified, e.g. increase sales / spread risk / less dependence on a few customers / extend the product life cycle / lower average costs from larger output. Award 1 mark for each advantage (max. 2 advantages).
app1 1 mark for an explanation of the first advantage applied to Hillmist Tea, e.g. sales in country A have grown by only 1% a year, so new customers abroad could make revenue grow by more than about $42 000 a year (1% of $4.2 million).
k1 Second, different advantage identified (as above).
app1 1 mark for an explanation of the second advantage applied to Hillmist Tea, e.g. 70% of its revenue comes from two supermarket chains, so selling in another country means losing one of those chains would do less damage / packing more tea for a second country spreads the costs of its 90 employees over more output.
k1 First disadvantage identified, e.g. lack of knowledge of the market / cultural differences / legal requirements / higher transport costs / strong local competitors. Award 1 mark for each disadvantage (max. 2 disadvantages).
app1 1 mark for an explanation of the first disadvantage applied to Hillmist Tea, e.g. its managers have never sold tea outside country A, so they may choose the wrong price or retailers and waste part of the $250 000.
k1 Second, different disadvantage identified (as above). Do not credit mirror statements of an advantage.
app1 1 mark for an explanation of the second disadvantage applied to Hillmist Tea, e.g. customers in another country may not drink green tea, so sales may be lower than expected / labels or food laws may be different, so its tea packs must be changed, adding cost and delay. Accept all valid responses.

(b) Consider the following three countries Hillmist Tea could start selling its tea in. Which country should Hillmist Tea choose? Justify your answer. Country B: next to country A and speaks the same language; tea sales are growing by 2% a year; one local tea brand has a 45% market share. Country C: tea sales are growing by 9% a year; most people drink black tea with milk and sugar rather than green tea; tea packs must be labelled in a different language. Country D: incomes are high and green tea is popular; it is 6 000 km away; all imported food must pass a health inspection that costs $15 000 and takes 12 weeks. 12 marks

Mark scheme

Level 3 (9,12 marks): Excellent knowledge and understanding of relevant business concepts using appropriate terminology in context. Detailed discussion of two or more countries. Well-justified recommendation. Candidates discussing all three countries in detail, in context and with a well-justified recommendation including why the alternative countries were rejected should be rewarded with the top marks in the band.
Level 2 (5,8 marks): Good knowledge and understanding of relevant business concepts using appropriate terminology in context. Detailed discussion of at least one country. Judgement with some justification / some evaluation of choice made. Candidates discussing two or more countries in detail and in context should be rewarded with the top marks in the band.
Level 1 (1,4 marks): Limited knowledge and understanding of relevant business concepts in context. Limited ability to discuss the countries with little/no explanation. Simple judgement with limited justification / limited evaluation of choice made. Candidates outlining all three countries in context should be rewarded with the top marks in the band.

Indicative content:

Country B, advantage: the same language and a short distance mean few cultural differences, no new labels and low transport costs, so managers with no experience outside country A are less likely to make costly mistakes.
Country B, disadvantage: tea sales grow by only 2% a year, not much more than the 1% in country A, and one local brand already has 45% of the market, so Hillmist may win only a small share and its revenue may still grow slowly.
Country C, advantage: tea sales are growing by 9% a year, much faster than in country A or country B, so there is room for a new brand to win customers, increase sales and spread risk away from the two supermarket chains that provide 70% of its revenue.
Country C, disadvantage: most people drink black tea with milk and sugar, not green tea — a cultural difference — so Hillmist may have to change its product or spend heavily on promotion to change habits; labelling packs in a different language adds costs, and its managers have no experience of such a different market.
Country D, advantage: green tea is already popular and incomes are high, so Hillmist can sell its existing product without changing it, possibly at a high price, giving a high profit on each pack.
Country D, disadvantage: the $15 000 health inspection uses 6% of the $250 000 before any tea is sold, the 12-week wait delays revenue, and transporting tea 6 000 km raises costs, reducing profit on each pack.
A recommendation could be, e.g.: country D, because customers there already want green tea, so managers new to selling abroad do not also have to change the product, and the inspection costs only 6% of the money available; country B is rejected because a local brand with 45% of the market and 2% growth leave little room to grow, and country C because changing a black-tea habit would be slow and expensive. Any country can be recommended if it is well justified.

How this is examined

Choosing which of three named countries a business should enter, and saying why the other two lose.: A 12-mark Paper 2 case-study part (b), in the specimen's wording: 'Consider the following three … [business] could … Which … should [business] choose? Justify your answer.' The specimen marks these by levels of response (Level 3 9–12, Level 2 5–8, Level 1 1–4), not by adding up points. For each country, an advantage (e.g. faster market growth, a product customers already want) and a disadvantage (e.g. cultural differences, legal requirements, distance, a strong local competitor), each tied to a case fact and followed through to sales, costs or profit. Outlining all three countries with a case fact but no consequence tops out at Level 1 (4). Detailed discussion of at least one country plus a judgement with some justification is Level 2; two or more countries discussed in detail and in context reach the top of Level 2 (8). Level 3 needs detailed discussion of two or more countries and a well-justified recommendation, and the top of Level 3 goes to an answer that discusses all three in detail and in context, then says why each of the other two was rejected for this business — e.g. 'not the fastest-growing market, because customers there want a different product, so the business would have to change what it sells'.
Deciding whether a particular business should enter a market in another country.: An 8-mark part (d): 'Do you think [business] should start selling in country Y?' or 'Do you think the advantages of entering the new market are greater than the disadvantages? Justify your answer.' One developed advantage and one developed disadvantage, each tied to a stem fact and a consequence for revenue, costs or survival. Then a decision justified with something new from the stem — whether the home market is saturated or shrinking, whether the product needs adapting, whether the business has done research or can afford the costs. 'Yes, because it will increase sales' repeats the advantage and earns no evaluation.
Why selling abroad helps this business grow — more sales and less dependence on one country.: A 6-mark 'Explain two advantages to [business] of entering the market in country Y'. For each: the advantage [k], a stem fact such as flat home sales, a new competitor at home or a growing population abroad [app], and the consequence [an] — 'so revenue can grow again', 'so total revenue falls by less if home sales fall'. The two advantages must be genuinely different.
What could go wrong for this business in a country it does not know.: A 4-mark 'Outline two disadvantages to [business] of…', or a 6-mark Explain version. The stem often contains one fact about the other country's culture and one about its laws. The disadvantage [k] plus the stem fact that shows it [app]: 'cultural differences [k] — most customers in country Q prefer mild flavours, so its very spicy chips may not sell [app]'. For Explain, add what it does to the business — higher costs, lower sales, delay, damaged reputation [an].
The main advantages and disadvantages, named.: A 2-mark 'Identify two advantages / disadvantages of entering new markets in other countries'. Advantages: increase sales, spread risk, extend the product life cycle, lower average costs, stronger brand image. Disadvantages: cultural differences, lack of knowledge, legal requirements, transport costs, strong local competitors, exchange rate changes. Only the first two answers are marked.

Words to know

Internal growth: Growth using a business's own resources, for example by developing new products or entering new markets, rather than by merging with or taking over another business.
Spread risk: Reduce dependence on one market by selling in several, so a fall in sales in one is partly balanced by sales in the others.
Saturated market: A market in which most people who want the product already buy it, so sales can grow very little.
Cultural differences: Differences in language, customs, beliefs, religion and tastes between countries that may require a product or its promotion to be adapted.
Legal requirements: The laws a business must meet to sell in a country, such as safety standards, labelling rules and advertising restrictions.
Agent: A person or business that sells products on behalf of another business, often used where the business lacks local knowledge.

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