Final answer:
The purpose of entering a foreign market is to tap into new customer bases, diversifying a company's revenue and fostering economic growth. It can also offer opportunities through interconnected global markets, but comes with challenges related to competition, regulatory discrepancies, and environmental concerns.
Step-by-step explanation:
Importance of Entering to Foreign Market
The purpose of entering a foreign market often revolves around tapping into new sources of demand, diversifying sales, and growing revenue beyond a company's domestic borders. This move can be fundamental for business growth, as foreign demand for exports can contribute substantially to a country's aggregate demand. When U.S. businesses, for instance, penetrate international markets, they are not just providing their goods and services but are also contributing to the national economy through growth in sales and jobs.
Diversification through foreign market entry is also crucial for businesses to hedge against economic downturns in one particular market by balancing their presence across various economies. Moreover, by venturing into international trade, businesses and countries can benefit from the interconnectedness of markets, which presents significant opportunities for those who can effectively compete globally. However, there are also challenges associated with international markets, including competition with foreign businesses, potential overreliance on key imports, and encountering different regulatory environments, among other risks.
Environmental regulation discrepancies, for example, lead to concerns that companies may relocate production to countries with lax pollution standards, sacrificing environmental quality for cost savings. To counter such threats and to safeguard national interests such as businesses, jobs, and security, governments may implement import restrictions, advocating for the need to understand the demand and supply model within the context of international trade.