what other variables or considerations should matter to a bu

what other variables or considerations should matter to a business for entry decisions into a market besides regulatory environment and political risk?

Solution

The considerations for entry into a new market should include factors including the a) macro environment considerations, b) industry environment considerations and c) resource-based considerations. The mentioned two risks - political and regulatory risks come under the macro environment.

Macro environment - Macro environment constitutes of forces and risks such as the socio-economic factors including the GDP, interest rate, inflation, unemployment, foreign exchange rate, openness, etc. The cultural factors of the market should be in sync with the company\'s strategy. They include values, norms, meanings, attitude and lifestyle, aspiration; e.g. lifetime employment/loyalty, entrepreneurial mindset existing in the market. Technological factors are also important while taking an entry decision. These factors include prevailing/emerging technologies, aggregate technological capability, national innovation system, patent regime, innovation ecosystem and so forth. Other crucial factors include the overall demographic variable of the market.

Industry environment - When it comes to the industry environment, the entry decisions should be made based on Porter\'s five force factors - the forces from barriers of new entry existing in the market, the bargaining power of the buyer, that of the suppliers, the threat from substitute product in the market, and the intensity of rivalry among the existing competition. These forces will influence the entry decision in a more complex and interdependent manner.

Resource-based consideration - According to the resource-based view, the entry decision should be made on the basis of the resources and capabilities the firm have. For example, the resources and capabilities of the firm should complement the needs and wants of the customers existing in the market and they should be valuable, rare, inimitable, and non-substitutable (VRIN) in nature. The firm should identify such resources and capabilities and make the entry in a market where the resources and capabilities will be valued by the customers.