Question

MekTech is a U.S.-based electronics company. It is planning to introduce a new home theatre system in a foreign country. It has identified Mexico and Canada to be the easiest foreign markets to enter; however, it only wants to launch the system in one country. Which of the following parameters should the company most likely consider to determine the growth potential of these foreign markets?A) Purchasing power
B) Political uncertainty
C) Expropriation potential
D) Sociocultural differences

Answer 1

Answer:

A) Purchasing power

Explanation:

The answer here is quite simple because Canadians have an average GDP per capita US $46.233, while Mexicans GDP per capita is only US $9.673. Even though Mexico has a much larger population than Canada, the average Canadian has a much higher purchasing power than the average Mexican.

Home theater systems are not basic necessities, they can actually be considered luxury goods since a TV is a normal purchase but a whole home theater system is much more expensive. Luxury or expensive goods are generally sold in larger quantities where people have more money.

If the company decides to sell its product in Canada, they can sell it at a Walmart, but if they want to sell it in Mexico they would need to find upscale stores that would be willing to sell them to a small amount of wealthy customers.

Answer 2

Answer:

A. Purchasing power

Explanation:

In trying to choose between two countries concerning the potential of foreign markets, MekTech should look at the purchasing power parameters. Purchasing power describes the quantity of goods that can be purchased or bought with a unit of a currency. It is the face value of a currency expressed in terms of the number of goods and services that value can afford. Purchasing power is used by businesses to know the growth potential in a given locality.