Demand conditions in the home market is one of the four factors in the Porter’s Diamond Model used for analysing the international environment before formulating an international strategy. The home market determines how firms perceive, interpret and respond to buyer needs.
Required:
Explain THREE home conditions that may put pressure on firms to innovate and provide a launch pad for global ambitions. (6 marks)
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- There are no cultural impediments to communication.
- The segmentation of the home market shapes a firm’s priorities: companies will be successful globally in segments which are similar to the home market.
- Sophisticated and demanding buyers set standards. If the home market sets high standards, achieving these high standards will put a firm in a strong position to be competitive on the international market.
- Anticipation of buyer needs: If consumers needs are expressed in the home market earlier than in the world market, the firm benefits from experience.
- The rate of growth. Slow growing home markets do not encourage the adoption of state of the art technology.
- Early saturation of the home market will encourage a firm to export. (Any 3 points)