What is a Domestic Market?

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.

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.