Published by MBA Skool Team, Last Updated: September 17, 2021
What is Domestic Market?
Domestic Market is a market which is within the geographical borders of the country (or region) which is same as that of the manufacturer as well as the paying customers. Domestic Market encompasses only one set of customers and firms deal with the same. Such markets may be small in terms of potential when compared to global international markets.
Companies in Domestic Markets are generally provided with tax credits for employment generation and government of the country tries its level best to let domestic companies make trade agreements with foreign companies by removing barriers (regulations). Sometimes within a country also, there might be lots of variations and within a domestic market, there can be multiple markets which may not be all serviced or targeted by an organization to sell products.
Trading in domestic market is done in two ways:
1. Wholesale Trade: Purchasing goods from manufacturers in bulk and selling them to intermediaries or end customers. 2. Retail Trade: Purchasing goods from wholesalers and selling them to consumers in small quantities.
Not every product is designed to be sold internationally. Many products are sold only in smaller markets within geographical borders. Niche products or local products are good examples where domestic market is very very important. As the target market is limited to people who all reside in a geographical region then it makes perfect sense to sell it specific to those markets. We see such trend in local cuisine or country specific foods and apparel. Sometimes popular products in the domestic market may become very famous across the globe but still their availability would be in the same domestic market.
Hence it not mandatory that each product has to be sold in global markets, they can be viable and feasible in domestic markets. Such markets might be cheaper and may require fewer resources to earn revenue and profit.
Advantages of Domestic Market
1. Firm can easily predict consumer preferences and can understand its own market niche 2. Can be cautious by predicting economic downturns of the domestic economy 3. Easy communication between workers due to same culture and language 4. Low taxes to be paid compared to foreign investing companies
Disadvantages of Domestic Market
1. Limited target market size when compared to international markets 2. Limited availability of resources as local labor and resources can only be used by the company. 3. A company may not know the full potential of the product until it launches it in global or multiple markets.
Example of a Domestic Market
Netherlands or France can be defined as domestic markets when compared to European Union as a whole. There are many products which are sold across Europe and world but there might be some products which are sold just within France. A local croissant manufacturer will have goal to serve the domestic market rather than focusing on global markets to earn revenue.
Hence, this concludes the definition of Domestic Market along with its overview.
This article has been researched & authored by the Business Concepts Team. It has been reviewed & published by the MBA Skool Team. The content on MBA Skool has been created for educational & academic purpose only.
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