Academic literature on the topic 'International Market Entry Mode'

Purpose The purpose of this study is to explore market entry strategies in a high-tech successive generations (HTSGs) market, by investigating entry mode via entry timing and path differentiation and the performance outcomes of entry mode. Design/methodology/approach The methodology of building a theory from a longitudinal case study is adopted by using useful cases in a HTSGs market after constructing an integrated research framework to explore market entry mode. Different entry modes were investigated by studying entry timing and migration path of three firms’ case in logic semiconductor market. In addition, performance outcomes of different entry modes were measured and correlated with each other. Findings The results identified three major entry modes suitable for a HTSGs market. The three firms differentiated their entry modes by exploiting different entry timings from the earliest to the last and different migration paths including switching, leapfrogging and new entrance path to enter a market. First mover advantage also exists in a HTSGs market, and it was found uniquely that the financial performance denoted by entry mode outcomes was correlated with technological knowledge. Research limitations/implications This study extends the theory of extant entry strategy from general consumer or industrial market to HTSGs market, in which intense competition exits and technological innovation is important. Moreover, this study verified that the causality between early entry and positive performance was also effective in HTSGs market with a shorter duration of early entry advantage. Practical implications This study has managerial implications for firms to establish market entry strategy in HTSGs market and other markets. To become a product leader, a fast follower or a late follower, firms can differentiate their entry mode by adjusting the entry timing and migration path in the context of market and technology. Originality/value This study examined market entry strategies suitable for HTSGs market based on its unique characteristics and extended relevant theory into HTSGs market. Further, an integrated research framework, which explores the market entry mode, was constructed to facilitate further exploration of entry mode into other markets.

Recent studies highlighted the need for multi-perspective research on the internationalization and performance of emerging market multinational enterprises (EM-MNEs) and revealed why many EM-MNEs perform negatively when they respond to the host-country environment. Using a sample of listed Chinese manufacturing firms from 2003 to 2014, this study examines the relationship between entry mode choice, which is driven by different environmental response patterns, and firms’ innovation performance. We further analyze the moderating role of market selection on the relationship between host-country institutional factors and firms’ innovation performance. The results show that the international breadth of firms and the economic stability and investment protection of the host country significantly promote firms’ innovation performance. While the entry mode is unilaterally driven by the host-country response, early international experience and the international depth of firms have significant negative effects on firms’ innovation performance. The level of economic development in the invested area plays a moderating role in the relationship between the host-country institutional factors and firms’ innovation performance. Our findings enrich the literature on the relationship between internationalization and EM-MNE performance, and provide inspiring and straightforward empirical evidence.

PurposeThe purpose of this paper is to examine the role that different collaborative entry modes play in how international new ventures (INVs) expand into international markets.Design/methodology/approachThe paper’s arguments are based on the INVs and social network literatures. In order to investigate the entry modes adopted by British and Indian small and medium information and communication technology (ICT) firms into each other’s markets, the paper outlines the results of qualitative semi-structured interviews with the key decision makers of ten British and ten Indian ICT firms.FindingsThe findings contribute to the relatively under-researched area of how INVs enter foreign markets through collaborative entry mode. The findings suggest that INVs utilize both equity and non-equity modes of collaboration to expand their international operations. The findings also indicate that financial and non-financial resources always limit the market expansion and internationalization of such companies. Against this background, the INVs rely on building collaboration as one of the safest methods for foreign market expansion and successful internationalization. The collaborative entry mode is enhanced by entrepreneurs’ prior experience, social ties and knowledge of the foreign market.Research limitations/implicationsSet against the backdrop of an ever-increasing trend of internationalization of small and medium enterprises (SMEs), the paper offers important implications for understanding the conditions and factors behind the choice of collaborative and non-collaborative entry modes by INVs in particular and SMEs more broadly.Originality/valueThe paper is one of the few studies that have examined the role of collaborative entry modes choice adopted by INVs from two of the largest economies – the UK and India.

Purpose The purpose of this paper is to examine the theories used to study the international equity-based entry mode strategies of emerging market multinationals (EMMs) and the contribution of these studies to extant literature. Design/methodology/approach The authors conducted a systematic review of the literature. A total of 73 articles were identified from key management, international business and international marketing journals published between 2000 and June 2015. Articles were analysed according to the theory(ies) used, thematic area, methodology, home/host countries studied and findings. Findings Despite the great interest around the topic of how the antecedents and outcomes of EMMs’ international entry mode strategies may challenge and amend existing theories, the findings that come out of this research mirror patterns observed in the entry mode literature in general. Whilst traditional perspectives such as internalisation theory and the OLI paradigm remain prevalent, a growing number of studies draw on institutional theory and combine multiple theoretical perspectives. Newer theories developed specifically to study EMMs (e.g., the springboard perspective) are used in only five studies and challenged to differentiate their theoretical underpinnings from extant literature. Overall, the theoretical contribution of EMM studies is simply a change in emphasis from the role of firm-specific factors towards the influence of home country institutions on entry mode strategies. The authors conclude that the literature has only made tweaks at the edge of theories with no significant changes to extant theorisations. Originality/value This is the first systematic review of the literature focusing specifically on the international equity-based entry mode strategies of EMMs.

Purpose Literature on modes of entry has focussed on firm-level strategies. The predominant theories used are institutional theory and the resource-based view. Using an alternate approach – network theory – this paper aims to demonstrate an additional mode of entry: multiple firms entering together as an extension of an existing loose network, known as a bridging network. The extension of an external network across borders is an appropriate mode of entry in emerging markets, with no pre-existing networks or existing networks within a market that are weak, immature or missing. Design/methodology/approach A conceptual review, which develops four propositions, demonstrating that market entry with bridging networks may be the preferred mode of entry in the presence of institutional voids. Alternative modes may not be viable because of costs and risks associated with overcoming such voids. Findings Existing theory and case examples support the contention that market conditions facilitate firms to enter as networks rather than as singular entities. These conditions are found in markets with institutional voids and explain the dominant form of business groups in many countries and the operation of loose strategic alliances in emerging markets. Network entry facilitates market access speed may allow for local ties to remain undeveloped or be a first step in building in-country networks. Originality/value This paper heeds to the call for a network ecosystem approach to market entry, arguing that firms may enter as a collective in subsistence and emerging markets, which would explain the preponderance of business groups and loose alliances found.

This article focuses on the operation method (or entry mode) that a company utilizes in developing its involvement in a foreign market. An overview and critique of ‘economics’ and ‘process’ approaches to this issue is undertaken. It is argued that both approaches use relatively constrained frameworks of influences on mode choice, and have yet to come to terms with the frequent reality of operation modes in combination. Methodological and conceptual issues arising out of the analysis are considered as a basis for moving forward the research in this area.

Today’s market environment is increasingly growing due to the economical globalization; with international trade, financial transfers and foreign direct investments the economy is becoming highly interconnected. The advances in communication and transportation technology combined with free-market ideology, have given products and services remarkable mobility. Nowadays, international companies are focusing on opening the world markets to their goods especially in emerging markets in order to take advantage of these markets opportunities and be part of its developing and growing infrastructure. In order for international companies to enter foreign markets, there are a variety of factors to consider while planning a strategic approach to reach new customers and differentiate their products and services from national and international competitors within the chosen market. This thesis will focus on featuring the significant factors that could affect companies entering new markets; the study is a qualitative single case study of IKEA, it will specifically investigate IKEA’s franchising in the Moroccan market and forms of internal and external factors that could affect IKEA’s entry into the market as well as it will highlight the main concepts that managers should consider when planning to enter the Moroccan market. The study was based on theoretical framework combined with empirical findings that were collected from secondary data such as annually reports and trade documents as well as through conducting in-depth interviews with IKEA’s managers to increase the study reliability and validity. According to the study findings and analytical results, the conclusion is that IKEA will not face major internal and external obstacles that would affect their operations significantly. There are few factors that could arise while entering the Moroccan market but from a holistic view this minor interferences can be overcame through IKEA’s full awareness of the market and their application of a vigorous, flexible and convenient strategic approach.

A Work Project, presented as part of the requirements for the Award of a Masters Degree in Management from the NOVA – School of Business and Economics
This Work Project studies the internationalization of non-profit organizations and applies it by developing recommendations for Social Entrepreneurship Institute‟s (IES) first international venture. A model of foreign market selection was used to choose among eight foreign potential markets based on a proximity approach. A market analysis on the selected market was performed to obtain the best decision regarding entry mode. This study concludes that Spain is the market considered to have more proximity with Portugal and therefore less risk for an international expansion. In the case analyzed, a non-equity joint venture is pointed as the safest entry mode.

Title: The influence of culture on the selection process of international market and entry mode. Level: Master Thesis in Business Management Authors: Samed Zaatra & Nabil Al-Taji Supervisor: Professor Ehsanul Huda Chowdhry, Ph.D. Examiner: Professor Maria Fregidou-Malama, Ph.D. Date: June 2017 Aim: The study aims to investigate the influence of cultural similarities when business entities decide to expand their business and enter a new market and it also focuses on the selecting process of the entry modes in regard to the cultural similarity. Methodology: Qualitative case study conducting semi-structured interviews as a main source for the primary data and support it with the pervious and current theoretical framework as the secondary data collection.  Findings: Many factors have an influence on the selection process of entry mode, and they are all connected to each other in some way. The main important factors are the level of risk and level of commitment. The cultural differences and similarities have an influence on the selection process of entry mode, which the more similarities, the lower risk, and vice versa. Contribution: This Study provides better understanding of the effect of culture similarity & entry modes. This study also contributes to the general business environment by which, all companies despite the fact of the size or the product line they have, they all should be aware of many opportunities and threats surrounding them when deciding to enter a new market. The study generates a viewpoint of using the similarity as a motivation for starting a business in a similar market.    Result & Conclusions:  We figured out in this research that the culture similarity has no influence on the motive behind expanding and entering new markets since the motive for companies to expand is the growth of market share, sales, and profit. On the other hand, cultural similarities and low physical distance along with an opportunity in the market is a significant motive that pushes companies toward expanding, and it will increase the companies’ experiences and the possibility of success in the culturally different market and a market with a high physical distance. Limitations: This study approach is qualitative, i.e. a limited number of companies are investigated. On the other hand, the small amount of the secondary data that was available in regards the topic was rear. Also, regarding the geographical distance between the country that we conducted the study at ‘Sweden’ and ‘Egypt’ where the headquarter of Dawlia21 is, also we only Skype interviews, it would be more reliable if it were face to face interviews. Suggestions for future research: Cultural similarity would be the main topic to consider in the field of investigation as long as there are not too many academic articles about it, so we suggest for more focus on the area of cultural similarities. The second part that would be an interesting to study would be the African market as a general and each country as accurate because we believe as researchers that the time will come, and this market will improve and get better on the economic and business levels.

Abstract Thesis title: The selection of entry mode when penetrating a foreign market Author: Annica Gunnarsson  Tutor: Åsa Devine Course: Marketing, advanced level, spring term 2011, Linnaeus University   Entering a new market is always a risky business, with a big potential of failure. To research the options of entry strategy can help in determine which strategy to use. The international market of education has changed during the last years, and in Sweden we just had one big change when the introduction of tutoring fees was determined. This has forced the universities out on unfamiliar territory.  This new territory consists of competing on a much bigger market than before and the need to develop a new international marketing strategy has occurred. The research on entry modes from a manufacturing perspective is extensive and therefore this research deals with the entry modes from a service perspective. The aim of this study is to gain better understanding of the selection of entry modes from a service institutes perspective. Furthermore the research is limited to investigating the education sector and how they use entry mode when wanting to establish them on a new market. The research is done through seven different interviews. The universities are located both in Sweden and abroad. This method where chosen because the goal is to find out how the universities is enter new markets.    The findings are based on the factors that determined international marketing strategy and how the respondents have answered the questions. How the universities work with the changes they experience is also a factor in the decision making process on which international strategy to use. The main findings of the study are that the entry mode education institutes most often use is some sort of international joint venture.

The purpose of this thesis is to conduct an international market selection which will result in a suitable choice of market for an SME that is about to place offshore production in an emerging market. A focus during the thesis is directed towards potential risks that may occur and how SMEs can manage these. In order to fulfill this purpose the authors have developed two main research questions:How can an SME use the IMS-framework to select an emerging market for offshore production?How can an SME manage potential risks when placing offshore production in an emerging market?The theoretical framework consists of the description of the international market selection process that is relevant as it is the framework from which the selection of a target market originates. Further, a description of theories on entry modes and risk management is presented in order to provide insight on how SMEs can manage risks when placing production in an emerging market. The empirical chapter consists of interviews from a case company as well as Business Sweden and is structured in accordance to the theoretical chapter.In the analysis the theoretical frameworks are discussed and connected to the empirical findings. In the initial part of the analysis the international market selection is presented and discussed before it culminates in the authors chosen target market. The latter part of the analysis addresses the risk management SMEs is faced with when placing offshore production in an emerging market.The conclusion provides the reader with the chosen target market for the case company. It also shows that SMEs ought to apply a risk averse mindset when placing their production in an emerging market. The authors finally present suggestions for further research regarding SMEs ventures to place production in emerging markets.

Chief executives and management teams of large retail organisations and other type of firms acknowledge that globalization is the most critical challenge they face today. They are also keenly aware that it has become tougher now to identify internationalization strategies and to choose which countries to do business with. While some have stuck to the strategies they have traditionally deployed, which emphasize standardized approaches to new markets, others have operated with a few local twists. As a result, many multinational corporations are struggling to develop successful strategies especially in emerging markets. Retail entry into the developing Nigerian market has been seen to be particularly challenging as a result of the absence of specialized intermediaries, regulatory systems, and contract-enforcing mechanisms - "institutional voids," which hamper the implementation of company strategies. Using a multiple case study of twelve retail firms in the Nigerian market, this study assesses the entry mode strategies used by foreign retail firms in Nigeria. It draws on both the Institutional theory and the Transaction cost theory. The present study reveals that both internal and external factors (firm specific and host market environmental factors) influence the entry strategies adopted by foreign firms in the Nigerian market. These include unique brand concept, international experience, product/company reputation, firm size/ market resource commitment, cost of operation, network relationships in the market, as well as company habits, market population and wealth, close retail market distance, regulatory, legal, political and economic systems in the host Nigerian market, etc. The cost of operation and network relationships in the market directly relate to the transaction cost perspective while the formal and informal classifications of the institutional theory cover such other areas as: regulatory, legal, political and economic systems in the host Nigerian market, unique brand concept, international experience, product/company reputation, firm size/ market resource commitment, as well as company habits, market population and wealth, and close retail market distance. This study is one of the foremost to consider these two important perspectives in the context of a developing market like Nigeria. This study has several implications for the companies and their managers and also implications for the underpinning theories of transaction cost and institutional theory. Several recommendations are provided some of which are that: international retail firms should consider granting greater autonomy in decision making and use of networks to the subsidiaries in Nigeria because this increases their ability to learn from the foreign market and to realise innovation advantages associated with linkages to valuable sources of information and knowledge. The firms should better understand the characteristics of the various ent ry modes open to them and align these with their company strategies. The host Nigeria government is also called upon to improve the various institutional frameworks to boost FDI into the retail sector of the economy.

Throughout the years, different theories and models have been developed regarding multi-national enterprises' (MNEs') entry into foreign markets. One such model is the Organisational Model, identifying three different types of enterprise, each selecting a different mode of market entry during foreign market expansion. These are: massproduction enterprises, disaggregate-production enterprises and project-based enterprises. This model was based on studies focusing mainly on the US, Europe and Asia. Research indicates, however, that MNEs increasingly identify sub-Saharan Africa (SSA) as a region for possible expansion. In view of persistent risk within the SSA region, this study's focus is on determining which entry modes MNEs use when entering a perceived high-risk market in SSA. This research study focused on MNEs that have expanded or are currently expanding into a perceived high-risk country in SSA. A qualitative research design was selected, applying an in-depth case study analysis to six different MNEs two MNEs representing each type of enterprise as categorised by the Organisational Model. Semi-structured personal interviews were conducted with each participant. Each interview focused on elements relating to the MNE's perception of, and approach to selecting entry mode into, high-risk markets. Findings predominantly did not find support for the Organisational Model, indicating that MNEs entering perceived high-risk markets in SSA preferred different entry mode strategies and approached risk consideration differently. Some findings did confirm the literature, by indicating that MNEs consider country risk when entering a foreign market in SSA.
Dissertation (MCom)--University of Pretoria, 2016.
Business Management
MCom
Unrestricted

Restoration of independence of Lithuania in 1990 led to highly successful transition from centrally planned economy to market economy within only two decades. New challenges for domestic companies came up, to be a part of internationalization and globalization. It became necessary to develop strategies for national companies to enter international markets and to make the optimal choice of entry mode. The main emphasis is put on the choice between traditional modes of market entry as casual export and new possible entry modes. Typical factors as emigration, intercultural differences etc. are analysed to show how to use domestic market weaknesses to create strengths for entry strategies.

1.1 Macroeconomic summary Economic recovery has consistently outperformed the technical staff’s expectations following a steep decline in activity in the second quarter of 2020. At the same time, total and core inflation rates have fallen and remain at low levels, suggesting that a significant element of the reactivation of Colombia’s economy has been related to recovery in potential GDP. This would support the technical staff’s diagnosis of weak aggregate demand and ample excess capacity. The most recently available data on 2020 growth suggests a contraction in economic activity of 6.8%, lower than estimates from January’s Monetary Policy Report (-7.2%). High-frequency indicators suggest that economic performance was significantly more dynamic than expected in January, despite mobility restrictions and quarantine measures. This has also come amid declines in total and core inflation, the latter of which was below January projections if controlling for certain relative price changes. This suggests that the unexpected strength of recent growth contains elements of demand, and that excess capacity, while significant, could be lower than previously estimated. Nevertheless, uncertainty over the measurement of excess capacity continues to be unusually high and marked both by variations in the way different economic sectors and spending components have been affected by the pandemic, and by uneven price behavior. The size of excess capacity, and in particular the evolution of the pandemic in forthcoming quarters, constitute substantial risks to the macroeconomic forecast presented in this report. Despite the unexpected strength of the recovery, the technical staff continues to project ample excess capacity that is expected to remain on the forecast horizon, alongside core inflation that will likely remain below the target. Domestic demand remains below 2019 levels amid unusually significant uncertainty over the size of excess capacity in the economy. High national unemployment (14.6% for February 2021) reflects a loose labor market, while observed total and core inflation continue to be below 2%. Inflationary pressures from the exchange rate are expected to continue to be low, with relatively little pass-through on inflation. This would be compatible with a negative output gap. Excess productive capacity and the expectation of core inflation below the 3% target on the forecast horizon provide a basis for an expansive monetary policy posture. The technical staff’s assessment of certain shocks and their expected effects on the economy, as well as the presence of several sources of uncertainty and related assumptions about their potential macroeconomic impacts, remain a feature of this report. The coronavirus pandemic, in particular, continues to affect the public health environment, and the reopening of Colombia’s economy remains incomplete. The technical staff’s assessment is that the COVID-19 shock has affected both aggregate demand and supply, but that the impact on demand has been deeper and more persistent. Given this persistence, the central forecast accounts for a gradual tightening of the output gap in the absence of new waves of contagion, and as vaccination campaigns progress. The central forecast continues to include an expected increase of total and core inflation rates in the second quarter of 2021, alongside the lapse of the temporary price relief measures put in place in 2020. Additional COVID-19 outbreaks (of uncertain duration and intensity) represent a significant risk factor that could affect these projections. Additionally, the forecast continues to include an upward trend in sovereign risk premiums, reflected by higher levels of public debt that in the wake of the pandemic are likely to persist on the forecast horizon, even in the context of a fiscal adjustment. At the same time, the projection accounts for the shortterm effects on private domestic demand from a fiscal adjustment along the lines of the one currently being proposed by the national government. This would be compatible with a gradual recovery of private domestic demand in 2022. The size and characteristics of the fiscal adjustment that is ultimately implemented, as well as the corresponding market response, represent another source of forecast uncertainty. Newly available information offers evidence of the potential for significant changes to the macroeconomic scenario, though without altering the general diagnosis described above. The most recent data on inflation, growth, fiscal policy, and international financial conditions suggests a more dynamic economy than previously expected. However, a third wave of the pandemic has delayed the re-opening of Colombia’s economy and brought with it a deceleration in economic activity. Detailed descriptions of these considerations and subsequent changes to the macroeconomic forecast are presented below. The expected annual decline in GDP (-0.3%) in the first quarter of 2021 appears to have been less pronounced than projected in January (-4.8%). Partial closures in January to address a second wave of COVID-19 appear to have had a less significant negative impact on the economy than previously estimated. This is reflected in figures related to mobility, energy demand, industry and retail sales, foreign trade, commercial transactions from selected banks, and the national statistics agency’s (DANE) economic tracking indicator (ISE). Output is now expected to have declined annually in the first quarter by 0.3%. Private consumption likely continued to recover, registering levels somewhat above those from the previous year, while public consumption likely increased significantly. While a recovery in investment in both housing and in other buildings and structures is expected, overall investment levels in this case likely continued to be low, and gross fixed capital formation is expected to continue to show significant annual declines. Imports likely recovered to again outpace exports, though both are expected to register significant annual declines. Economic activity that outpaced projections, an increase in oil prices and other export products, and an expected increase in public spending this year account for the upward revision to the 2021 growth forecast (from 4.6% with a range between 2% and 6% in January, to 6.0% with a range between 3% and 7% in April). As a result, the output gap is expected to be smaller and to tighten more rapidly than projected in the previous report, though it is still expected to remain in negative territory on the forecast horizon. Wide forecast intervals reflect the fact that the future evolution of the COVID-19 pandemic remains a significant source of uncertainty on these projections. The delay in the recovery of economic activity as a result of the resurgence of COVID-19 in the first quarter appears to have been less significant than projected in the January report. The central forecast scenario expects this improved performance to continue in 2021 alongside increased consumer and business confidence. Low real interest rates and an active credit supply would also support this dynamic, and the overall conditions would be expected to spur a recovery in consumption and investment. Increased growth in public spending and public works based on the national government’s spending plan (Plan Financiero del Gobierno) are other factors to consider. Additionally, an expected recovery in global demand and higher projected prices for oil and coffee would further contribute to improved external revenues and would favor investment, in particular in the oil sector. Given the above, the technical staff’s 2021 growth forecast has been revised upward from 4.6% in January (range from 2% to 6%) to 6.0% in April (range from 3% to 7%). These projections account for the potential for the third wave of COVID-19 to have a larger and more persistent effect on the economy than the previous wave, while also supposing that there will not be any additional significant waves of the pandemic and that mobility restrictions will be relaxed as a result. Economic growth in 2022 is expected to be 3%, with a range between 1% and 5%. This figure would be lower than projected in the January report (3.6% with a range between 2% and 6%), due to a higher base of comparison given the upward revision to expected GDP in 2021. This forecast also takes into account the likely effects on private demand of a fiscal adjustment of the size currently being proposed by the national government, and which would come into effect in 2022. Excess in productive capacity is now expected to be lower than estimated in January but continues to be significant and affected by high levels of uncertainty, as reflected in the wide forecast intervals. The possibility of new waves of the virus (of uncertain intensity and duration) represents a significant downward risk to projected GDP growth, and is signaled by the lower limits of the ranges provided in this report. Inflation (1.51%) and inflation excluding food and regulated items (0.94%) declined in March compared to December, continuing below the 3% target. The decline in inflation in this period was below projections, explained in large part by unanticipated increases in the costs of certain foods (3.92%) and regulated items (1.52%). An increase in international food and shipping prices, increased foreign demand for beef, and specific upward pressures on perishable food supplies appear to explain a lower-than-expected deceleration in the consumer price index (CPI) for foods. An unexpected increase in regulated items prices came amid unanticipated increases in international fuel prices, on some utilities rates, and for regulated education prices. The decline in annual inflation excluding food and regulated items between December and March was in line with projections from January, though this included downward pressure from a significant reduction in telecommunications rates due to the imminent entry of a new operator. When controlling for the effects of this relative price change, inflation excluding food and regulated items exceeds levels forecast in the previous report. Within this indicator of core inflation, the CPI for goods (1.05%) accelerated due to a reversion of the effects of the VAT-free day in November, which was largely accounted for in February, and possibly by the transmission of a recent depreciation of the peso on domestic prices for certain items (electric and household appliances). For their part, services prices decelerated and showed the lowest rate of annual growth (0.89%) among the large consumer baskets in the CPI. Within the services basket, the annual change in rental prices continued to decline, while those services that continue to experience the most significant restrictions on returning to normal operations (tourism, cinemas, nightlife, etc.) continued to register significant price declines. As previously mentioned, telephone rates also fell significantly due to increased competition in the market. Total inflation is expected to continue to be affected by ample excesses in productive capacity for the remainder of 2021 and 2022, though less so than projected in January. As a result, convergence to the inflation target is now expected to be somewhat faster than estimated in the previous report, assuming the absence of significant additional outbreaks of COVID-19. The technical staff’s year-end inflation projections for 2021 and 2022 have increased, suggesting figures around 3% due largely to variation in food and regulated items prices. The projection for inflation excluding food and regulated items also increased, but remains below 3%. Price relief measures on indirect taxes implemented in 2020 are expected to lapse in the second quarter of 2021, generating a one-off effect on prices and temporarily affecting inflation excluding food and regulated items. However, indexation to low levels of past inflation, weak demand, and ample excess productive capacity are expected to keep core inflation below the target, near 2.3% at the end of 2021 (previously 2.1%). The reversion in 2021 of the effects of some price relief measures on utility rates from 2020 should lead to an increase in the CPI for regulated items in the second half of this year. Annual price changes are now expected to be higher than estimated in the January report due to an increased expected path for fuel prices and unanticipated increases in regulated education prices. The projection for the CPI for foods has increased compared to the previous report, taking into account certain factors that were not anticipated in January (a less favorable agricultural cycle, increased pressure from international prices, and transport costs). Given the above, year-end annual inflation for 2021 and 2022 is now expected to be 3% and 2.8%, respectively, which would be above projections from January (2.3% and 2,7%). For its part, expected inflation based on analyst surveys suggests year-end inflation in 2021 and 2022 of 2.8% and 3.1%, respectively. There remains significant uncertainty surrounding the inflation forecasts included in this report due to several factors: 1) the evolution of the pandemic; 2) the difficulty in evaluating the size and persistence of excess productive capacity; 3) the timing and manner in which price relief measures will lapse; and 4) the future behavior of food prices. Projected 2021 growth in foreign demand (4.4% to 5.2%) and the supposed average oil price (USD 53 to USD 61 per Brent benchmark barrel) were both revised upward. An increase in long-term international interest rates has been reflected in a depreciation of the peso and could result in relatively tighter external financial conditions for emerging market economies, including Colombia. Average growth among Colombia’s trade partners was greater than expected in the fourth quarter of 2020. This, together with a sizable fiscal stimulus approved in the United States and the onset of a massive global vaccination campaign, largely explains the projected increase in foreign demand growth in 2021. The resilience of the goods market in the face of global crisis and an expected normalization in international trade are additional factors. These considerations and the expected continuation of a gradual reduction of mobility restrictions abroad suggest that Colombia’s trade partners could grow on average by 5.2% in 2021 and around 3.4% in 2022. The improved prospects for global economic growth have led to an increase in current and expected oil prices. Production interruptions due to a heavy winter, reduced inventories, and increased supply restrictions instituted by producing countries have also contributed to the increase. Meanwhile, market forecasts and recent Federal Reserve pronouncements suggest that the benchmark interest rate in the U.S. will remain stable for the next two years. Nevertheless, a significant increase in public spending in the country has fostered expectations for greater growth and inflation, as well as increased uncertainty over the moment in which a normalization of monetary policy might begin. This has been reflected in an increase in long-term interest rates. In this context, emerging market economies in the region, including Colombia, have registered increases in sovereign risk premiums and long-term domestic interest rates, and a depreciation of local currencies against the dollar. Recent outbreaks of COVID-19 in several of these economies; limits on vaccine supply and the slow pace of immunization campaigns in some countries; a significant increase in public debt; and tensions between the United States and China, among other factors, all add to a high level of uncertainty surrounding interest rate spreads, external financing conditions, and the future performance of risk premiums. The impact that this environment could have on the exchange rate and on domestic financing conditions represent risks to the macroeconomic and monetary policy forecasts. Domestic financial conditions continue to favor recovery in economic activity. The transmission of reductions to the policy interest rate on credit rates has been significant. The banking portfolio continues to recover amid circumstances that have affected both the supply and demand for loans, and in which some credit risks have materialized. Preferential and ordinary commercial interest rates have fallen to a similar degree as the benchmark interest rate. As is generally the case, this transmission has come at a slower pace for consumer credit rates, and has been further delayed in the case of mortgage rates. Commercial credit levels stabilized above pre-pandemic levels in March, following an increase resulting from significant liquidity requirements for businesses in the second quarter of 2020. The consumer credit portfolio continued to recover and has now surpassed February 2020 levels, though overall growth in the portfolio remains low. At the same time, portfolio projections and default indicators have increased, and credit establishment earnings have come down. Despite this, credit disbursements continue to recover and solvency indicators remain well above regulatory minimums. 1.2 Monetary policy decision In its meetings in March and April the BDBR left the benchmark interest rate unchanged at 1.75%.