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You are here: Step 1: Considering exporting > The various environments you will encounter abroad > The economic environment > Competitive and complementary products  
Competitive and complementary products

The current size and future growth of a potential market can be meaningfully evaluated only in relation to the share of the market which a company can reasonably hope to attain. This, in turn, requires that you assess both existing competitors in the foreign market place as well as potential competitors. In order to effectively analyse competition, you need to focus on a number of structural and behavioural determinants of competition, including barriers to entry and exit, the number of competitors, the goals and capabilities of competitors, and the state of evolution of the industry concerned.

The size and distribution of firms will have an important bearing on competitive conditions in the industry concerned. For example, competition in an industry made up of a number of large, well-financed firms is likely to be different from the competition in an industry made up of many medium-sized, expansion-minded firms. In evaluating the potential rivalry from substitute products, you need to consider the goals and objectives of the different competitors, as well as their competitive strengths and weaknesses. Thus, large but relatively complacent firms may offer less competition than smaller, expansion-minded firms may. Since the export firm is often operating (or contemplating operating) in unfamiliar markets, the task of identifying the likely strategies of its overseas competitors may be difficult.

Competition and prices

The extent of competition in the industry or sector will also influence the prices can be obtained for the goods and/or services. For instance, the widespread availability of substitute products makes consumers quite sensitive to price differences in the market place, and this places restrictions on the prices that can be charged without losing a large share of the market. On the other hand, a scarcity of good substitutes presents an opportunity of charging higher prices without suffering a significant decrease in market share.

Availability of complementary products

While it is sometimes overlooked, the availability of complementary products can enhance the economic outlook for a particular product. Complementary products are goods or services used in conjunction with the products that a company is contemplating introducing into foreign markets. For example, video cassettes are complementary to video cassette recorders. The widespread availability of complementary products makes the introduction of any new product in foreign markets a more attractive business opportunity. Indeed, the availability of complementary products may even be essential to the successful launch of a product.

Government policies toward foreign investment

The policies of foreign governments toward international trade and investment constitute one of the most important influences on competitive conditions in foreign markets. Many governments, particularly in developing countries, protect local producers with a combination of tariff and non-tariff barriers. This often enables firms already established in a particular domestic industry to maintain their share of the local market while charging prices substantially higher than the cost of production.

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Step 1: more information

Step 1: Considering exporting
      The various benefits of exporting
      The various drawbacks to exporting
      The difference between domestic and export marketing
      The various environments you may encounter
            The sociocultural environment
            The legal environment
            The economic environment
                  Gross Domestic Product (GDP)
                  Disposable income
                  Demographic factors
                  Competitive and complementary products
                  Industrialised vs developing countries
                  Degree of government intervention
                  Trading blocs
                  International trade agreements
            The political environment
            The technological environment
            The physical environment
      The various barriers you may face

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More information on Step 1
Learning to export... The export process in 21 easy steps
Step 1: Considering exporting
Step 2:Current business viability
Step 3:Export readiness
Step 4:Broad mission statement and initial budget
Step 5:Confirming management's commitment to exports
Step 6: Undertaking an initial SWOT analysis of the firm
Step 7:Selecting and researching potential countries abroad
Step 8: Preparing and implementing your export plan
Step 9: Obtaining financing for your exports
Step 10: Managing your export risk
Step 11: Promoting the firm and its products abroad
Step 12: Negotiating and quoting in exports
Step 13: Revising your export costings and price
Step 14: Obtaining the export order
Step 15: Producing the goods
Step 16: Handling the export logistics
Step 17: Export documentation
Step 18: Providing follow-up support
Step 19: Getting paid
Step 20: Reviewing and improving the export process
Step 21: Export Management
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