What is the domestic market? Definition and meaning
The domestic market, also known as the internal market or home market, is where goods and services are bought and sold within the borders of a country. It is a much smaller market than the international, external, foreign or global markets.
There is considerably less competition in the UK’s domestic market, for example, than in the European or global markets.
In a domestic market, all the companies face a similar set of economic, social, competitive, market and technological challenges.
Some businesses opt to concentrate just on the domestic market, while others choose to expand into other countries.
If XYZ Ltd. had relied on just its domestic market, its sales would have been much smaller.
‘Domestic market’ in French is marché intérieur, Spanish & Portuguese – mercado doméstico, Italian – mercato domestico, German – Binnenmarkt, Russian – внутренний рынок, Japanese – 国内市場, and Chinese – 国内市场.
Domestic market may be the only choice
In some cases, the domestic market is the only one available for a specific product.
A Spanish company that makes and sells, for example, bullfighter’s outfits, will generate sales in its domestic market, but virtually none in neighbor France, the rest of Europe, or anywhere else in the world, with the exception perhaps of Mexico and some Latin American countries.
According to Cambridge Dictionaries Online, the domestic market is:
“The number of customers who buy or may buy products and services offered by companies within their own country.”
Many Swiss multinationals generate more sales in their US and EU markets than in their domestic market.
Domestic market may be too small
Some types of companies must expand abroad and cannot depend entirely on their domestic markets, because the customer base in that country is far too small.
A Swiss company that makes a unique, unrivaled, state-of-the-art prosthetic leg which allows the user to walk and run like people with natural legs, cannot focus just on the domestic market. Switzerland, with a population of just 8 million, simply does not have a large-enough customer base.
Demand globally for its unique new prosthetic leg is big enough for the company to make a profit after recouping its research and development costs.