Domestic market

From CEOpedia | Management online

The domestic market is the total of buy and sell transactions taking place in a given country. The domestic market is classified within the geographic scope where, in addition to the domestic market, there are : regional market, local market, international market and global market. In order to protect the domestic market and limit the freedom of foreign competition, customs duties or border taxes are applied.

One of the methods of protection of the domestic market is protectionism, that is, directing all activities to increase the production of national products so that the demand for them will increase maximally and gain foreign markets. These methods can be used thanks to external political programs mainly covering the sphere of trade policy. Many States continue to use this defense in their actions.

Functions of the domestic market

The main functions of the domestic market include, among others:

  • Valuation of various products and economic resources. (the market is an instrument to establish the right price for producers and buyers of various goods),
  • Main source of basic information for business entities. (the market is the main source of information on prices as well as their implementation and information on demand and supply),
  • The market is a necessary condition for the rational use of economic resources (defining the target market and determining the price of a product or services to effectively manage products and services),
  • It is a prerequisite for the proper use of economic resources (by providing economic entities with objective information on prices, inputs and outcomes related to various economic activities enables making rational decisions and encourages entities to save on resources),
  • It facilitates the determination of balance states in the economy (demand and supply on the market as well as the exchange of goods and services and pricing, provide the economic entities with important signals that may contribute to maintaining the balance or may cause a disturbance.
  • It is a determinant of the social usefulness of production, which adapts production to needs, assesses whether a given production will be accepted on the market and will gain its recognition. In order to sell their goods, the seller must adjust the size and structure of production to the demand that he prospers on the market).

Determinants

The factors affecting the position of enterprises on the domestic market are:

  • The level of services and products manufactured,
  • Innovation and the use of modern technologies in the production of products compared to the competition,
  • A wide range of activities aimed at quickly terminating the entire process,
  • Creativity and original approach to customer service, which will be appreciated when resolving unusual consumer issues.

Enterprises taking into account the above-mentioned factors have a better chance of better contacts with customers, achieving higher sales results, as well as broadening contacts with competitors on the domestic and foreign market. These determinants are an important element from the company's point of view and they have a significant impact on the size of the contracts being signed. They strongly influence the company's profits in a given industry.

Conditions for the existence of a mature market

The features of a mature market economy are presented below:

  • Domination of private property and freedom of transfer of property rights (if the scope of public property is wide and the freedom of ownership transfer is smaller, the market has more restrictions),
  • Freedom to run a business (the more restrictions there are in such areas as production and trade in goods, the smaller the possibility of a well-formed market for products and goods),
  • The institutions serving the market must exist and operate efficiently (banks, stock exchanges, securities commissions, insurance companies, brokerage firms must operate and prosper, without them it is difficult to develop the market),
  • Market integrity (that is, mutual dependence of markets),
  • Competition between economic entities.

The domestic labor market

The domestic labor market belongs to the category of the economic market on the territory of a given country. In this market, job searches are carried out by employees, i.e. unemployed people looking for a job, or those who want to change their current place of employment. Entrepreneurs who create jobs also search for a new workforce. These transactions also involve employment agencies that mediate both parties in this search.

The labor market is a place where a combination of labor supply and demand for it takes place. It can be divided due to geographical coverage on the national, regional or local level.

The nationwide labor market refers to the territory of the whole state. In this market, legal regulations standardize the conditions, norms and regulations regarding work for both employers and employees. They define their relations with each other, which in the area of the entire state are largely similar.

The regional labor market concerns the macro region where there are characteristic job search opportunities. They allow you to change your employer without having to move to another place.


Examples of Domestic market

  • Retail: The retail market refers to the sale of goods directly to consumers in small quantities for personal use. Examples include grocery stores, clothing stores, and department stores.
  • Manufacturing: The manufacturing industry involves the production of goods from raw materials or components. Examples include the automotive industry, the food and beverage industry, and the pharmaceutical industry.
  • Service: The service industry involves the provision of services to customers. Examples include banking, accounting, consulting, and transportation.
  • Agriculture: The agricultural sector is responsible for the production of food and other agricultural products. Examples include livestock production, crop production, and aquaculture.
  • Real Estate: The real estate market involves the buying and selling of property. Examples include residential real estate, commercial real estate, and industrial real estate.

Advantages of Domestic market

The domestic market has many advantages for businesses and consumers alike. These include:

  • Knowing how to meet the needs of domestic customers: When a business is operating in a domestic market, they are familiar with the needs and preferences of their customers. This allows them to tailor their products and services to meet these needs.
  • Easier to access capital: When a business operates in a domestic market, they are able to more easily access capital from domestic lenders. This can give them a competitive edge over foreign companies.
  • Easier to understand regulations: When businesses are operating in a domestic market, they are more familiar with the regulations and laws that they must follow. This can make it easier to comply with these regulations and reduce the risk of fines and penalties.
  • Increased profitability: Domestic markets often have higher profit margins than international markets due to the lack of competition from foreign companies. This can help businesses increase their profits and invest in growth opportunities.

Limitations of Domestic market

The domestic market has several limitations that prevent it from growing and competing on an international level:

  • Limited access to resources: Domestic markets typically have limited access to resources, both natural and financial, which limits the potential of businesses in the domestic market to expand their operations.
  • Lack of global recognition: Domestic markets often lack the recognition of global markets, making it difficult for domestic businesses to compete with international businesses.
  • Difficult access to international markets: It is often difficult for domestic businesses to access international markets, due to the higher costs of doing business in these markets compared to the domestic market.
  • Political and social instability: Domestic markets can be affected by political and social instability, which can make it difficult for businesses to thrive due to the lack of predictability and security.
  • Currency fluctuations: Domestic markets can be affected by currency fluctuations, making it difficult for businesses to predict their costs and profits.
  • Limited customer base: Domestic markets typically have a limited customer base, making it difficult for businesses to scale and reach new customers.

Other approaches related to Domestic market

In addition to customs duties and border taxes, there are several other approaches to protect the domestic market:

  • Stimulating domestic production by providing preferential tax treatment and subsidies to domestic producers.
  • Establishing tariffs and quotas on imported goods to protect domestic producers from foreign competition.
  • Establishing import substitution policies to limit foreign competition and foster domestic production.
  • Establishing export promotion policies to increase domestic exports.
  • Encouraging foreign direct investment and technology transfer to increase domestic production.

These approaches can be used in combination to protect the domestic market from foreign competition and increase the competitiveness of domestic producers. Ultimately, these approaches can help to promote economic growth and development in the domestic economy.


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