Posted in Marketing and Strategy Terms, Total Reads: 1225
Definition: Seek a Market
The main motive for a firm to engage in foreign market is primarily due to four reasons - seeking natural resource, seeking a market, seeking efficiency and strategic asset seeking. Transportation costs and government regulations are main reasons behind market seeking behavior. Strategic reasons may also be associated with this type of investment for e.g. need to adapt the products to local conditions and tastes or the reduction of transaction costs. This might be realized through joint ventures or acquisitions of an incumbent firm. This activity involves operations based on exploitation of the capabilities and knowledge already held. This motive focuses on the demand aspects.
If the decision makers within an organization acknowledge the importance of accessing specific target markets abroad and believe that a direct presence across international borders is essential for this access their strategy will focus on market seeking motives. Companies that invest in a particular country or region with the intention to supply goods and services are called market seekers.
Firms also invest in foreign markets to promote or exploit new markets. Primary reasons may include the sheer size of the market or an expected growth of the market, indicating that the company may enter and then generate profit. Sometimes a firms’ home market is limited, i.e. by not bringing the firm enough revenues. Such limitations can be a saturated market, a too competitive market, not enough customers, and so on. Many companies there go to other markets, including foreign markets.
Famous examples for market-seeking investments include home appliance and consumer electronics manufacturers such as Haier, TCL, and Huawei Technologies