What is a Domestic Market?

Mary McMahon
Mary McMahon

A domestic market is a financial market within a given country for products and services. Also known as an internal market, it has a more limited scope than international markets, usually with reduced competition. Some companies choose to focus on doing business domestically, while others may expand to external markets in order to capture more market sectors and access additional trading opportunities. Most nations keep statistics on their domestic markets for the purpose of tracking economic health.

Within domestic markets, both domestic and international companies can be found trading.
Within domestic markets, both domestic and international companies can be found trading.

In a domestic market, companies can operate across multiple sectors, as seen for example with a company that manufactures scientific instruments and medical supplies. Certain areas of the market may include niches unique to a nation, exploited by companies that want to take advantage of them. Interest in various products and services waxes and wanes between different countries, such as markets for specific culinary ingredients. A company making maple syrup, for example, could take advantage of the considerable domestic market for this product in the United States, but might find fewer buyers in Afghanistan.

Within domestic markets, both domestic and international companies can be found trading. Many nations want to promote their domestic business sectors and tend to create incentives for domestic companies to do business. Foreign companies may have to pay taxes and tariffs, or face other regulatory barriers. Domestic companies can receive assistance like tax credits for manufacturing or creating jobs within their home nations. Countries must balance their desire to promote the domestic economy with treaties and trade agreements with other nations, some of which insist on removing barriers to trade to allow international companies to operate more freely.

The domestic market also includes trade on stock exchanges and other financial markets. In these markets, many people trade heavily in domestic companies, although international corporations can also usually apply for listings. Activities on these markets can be an indicator of overall economic conditions. When trading is high, it is indicative of confidence on the part of traders. Sluggish or falling trading suggest uncertainty and can be a warning of economic troubles to come.

Statistics about domestic market performance are usually published in financial and trade publications in addition to being released by the government when they are collected. People can look at archived material to track trends and changes over time, and can also compare performance with markets in other nations to see how well a country is doing economically.

Mary McMahon
Mary McMahon

Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a wiseGEEK researcher and writer. Mary has a liberal arts degree from Goddard College and spends her free time reading, cooking, and exploring the great outdoors.

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Discussion Comments

anon332335

What are the disadvantages of the domestic market?

bear78

@alisha-- I know that domestic and home market are the same. Sometimes, home market is used to talk about the local market, like the town's, city's, or state's market. But domestic market is always used to talk about the whole country's market.

I'm not too knowledgeable about the other two, I have heard of onshore companies and offshore companies but not markets.

As far as I know, onshore means that a company is physically located in the country where it does business. Offshore means that the company is located elsewhere but does business here. A lot of the foreign companies in our domestic market are offshore. Their facilities are back in their home country but they are selling their products here in our market.

Does that make sense?

discographer

Hi, thanks for this article. It's very helpful. I'm trying to finish an assignment and I'm a little confused with the terms home market, off-shore market, on-shore market and domestic market.

I think I understand what domestic market means but I don't understand what the difference is between domestic, home, and on-shore. Can you help me?

SteamLouis

I think the question of whether international companies should be allowed to trade in the country's domestic market is always going to be controversial. It comes up again and again in the US and any policy changes in this area is definitely going to impact how some people vote and which representative they will support.

I understand where both sides are coming from. There are both advantages and disadvantages to allowing foreign companies to enter our internal market. If they do, as a customer, I will have more options and may save money. But as an American, I know that my domestic businesses are going to lose money and might even have to leave the market, in which case Americans will also lose jobs.

Whether you decide to open up the market to foreigners or not, there is always going to be some benefit and some loss. I personally don't prefer either or and would want the government to do what seems most reasonable. Convincing the American public in general about these decisions are a whole other matter though.

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