International entrepreneurship - 2 - Born Global

Dr Joseph K.K. Ho
Born Global
International
Entrepreneurship

2
©2019DrJosephK.K.Ho
• Rennie, M. (1993)
• Oviatt, B. and McDougall, P. (1994)
• Choquette E. at al. (2017)
Born Global Concept
 Rise of Born Global Firms
 Case Studies – Alibaba, benchmark
with Amazon
 The Top 5 Challenges

Born Global Concept of Rennie, M. (1993)
The BG concept was firstly introduced by
Rennie (1993) in McKinsey Quarterly. It
mentioned a new type of company that
was starting to operate globally in a
short time after their creation (generally
in 6 years).
3
Reference:
Rennie, M. (1993). Global competitiveness: born global. The McKinsey Quarterly, 4(2), 45–52.
https://www.questia.com/library/journal/1G1-15424561/born-global/

• “the "born global" firms -- began exporting, on average, only two years after their
foundation and achieved 76 percent of their total sales through exports.
• Though small, with total average sales of $16 million, these firms are successfully
competing -- and winning -- against larger established players worldwide.
• Despite their relative youth -- their average age is only 14 years -- they are
currently responsible for almost 20 percent of Australia's high-value-added
manufacturing exports.”
4
Reference:

• “Born global firms are important for two reasons. Although small,
they are:
• Strikingly competitive against larger established players, and their
competitiveness has increased significantly in the past two decades.
• Managing profitable, fast-growing global business systems in a way
that was impossible 20 or even ten years ago.”
5
Reference:

Born Global Concept of Oviatt, B. and
McDougall, P. (1994)
After Rennie, Oviatt & McDougall undertook a research of this
phenomenon and defined International New Venture as “a
business organization that, from inception, seeks to derive
significant competitive advantage from the use of resources and the
sale of outputs in multiple countries.”.
6
Reference:
Oviatt, B. and McDougall, P. (1994). Toward a Theory of International New ventures. Journal of International Business Studies, 25(1), pp.45-64.
https://link.springer.com/article/10.1057/palgrave.jibs.8490193

Reference:
Scheela W. (2016). Global Entrepreneurship: Past, Present & Future. Advances in International Management, Edition: Volume 29, Chapter: Born-Global Start-Ups in Emerging
Economies, Publisher: Emerald Group Publishing Limited, Editors: Timothy Devinney, Gideon Markman, Torben Pedersen, Lazlo Tihanyi, pp.147-162
https://www.researchgate.net/publication/304837293_Global_Entrepreneurship_Past_Present_Future
7
Born Global Concept of Oviatt, B. and
McDougall, P. (1994)
ActivitiesCoordinatedAcross
Countries
Few
Few activities
Few countries
Export/Import Start-
up
Few activities
Many countries
Multinational
Trader
Many
Many activities
Few countries
Geographically
Focused Start-up
Many activities
Many countries
Global Start-up
Few Many
Number of Countries Involved
BG firms were divided into four
categories:
• Import-export startup
• Multinational
TradeGeographically focused
startups
• Global startups

Born Global Concept of Choquette E. et al.
(2017)
• BG is more quantitatively defined as
“reach at least 25 per cent foreign
sales (over total sales) within three
years of their inception”.
• having superior turnover,
employment levels and geographic
reach.
8
Reference:
Choquette, E., Rask, M., Sala, D. and Schröder, P. (2017). Born Globals—Is there fire behind the smoke?.
International Business Review, 26(3), pp.448-460.
https://www.sciencedirect.com/science/article/abs/pii/S0969593116302190
Born
Globals
(BG)
Born
Exports
(BE)
Late
Exporters
(LE)
Stay
Locals
(SL)
Export
Activities YES No
Speed
(inception)
Within 3
Years
After 3
Years
Never
Export %
(Total
Turnover)
Over
25%
Less
than
25%
With
Export
No
Export

• Mastery of ideas and technology is not restricted by geography and is
governed by new network economics, in the competition of modern
information age (Aggarwal, 1999)
• Skype, Mojang AB, Spotify, Logitech, HTC ; started their business by
targeting international markets from the very beginning
9
Taylor L. (2017). Explaining the rise of born-global firms: a new
generation of entrepreneur set on global development, The Sociable
https://sociable.co/business/explaining-the-rise-of-born-global-firms-a-
new-generation-of-entrepreneur-set-on-global-development/
Rise of Born Global
Early Internationalization of Technology Firms
Reference:
Aggarwal, R. (1999). Technology and Globalization as Mutual Reinforcers
in Business: Reorienting Strategic Thinking for the New Millennium.
Management International Review 2 (Special Issue), 83-104.
https://www.jstor.org/stable/40835821?seq=1#page_scan_tab_contents

Rise of Born Global
Early Internationalization of Technology Firms
Conditions favorable to tech companies:
• Domestic markets are not large enough to support the operation scale
• Potential customers are foreign, multinational firms having overseas
operations
• The firm operates in a knowledge-intensive or high-technology sector.
• Competitive advantage: having the most technically advanced offering in the
world
10
Reference:
Taylor L. (2017). Explaining the rise of born-global firms: a new generation of entrepreneur set on global development, The Sociable
https://sociable.co/business/explaining-the-rise-of-born-global-firms-a-new-generation-of-entrepreneur-set-on-global-development/

Rise of Born Global
Internationalization Approach
• Proactive and structured, but flexible in strategy adaption
• Rapid penetration to global niche market; few years of inception
• Focuses on geographically spread lead markets
• Irrelevant of Psychic Distance & Domestic Market
• Strong international outlook & entrepreneurial orientation; take risks
and innovate
11
Reference:
Tanev, S. (2012). Global from the Start: The Characteristics of Born-Global Firms in
the Technology Sector. Technology Innovation Management Review, 2(3), pp.5-8.
https://timreview.ca/article/532
Sarangla P (2017). Born global entrepreneurship, Slide#9, Slideshare
https://www.slideshare.net/PriyaSarangla/born-global-entrepreneurship

Rise of Born Global
Growth Phases (Gabrielsson & Gabrielsson, 2009)
12
Reference:
Gabrielsson, M. & Gabrielsson, P. (2009) Growth phases and survival of international new ventures. Competitive
paper (in electronic proceedings) at 12th McGill International Entrepreneurship Conference. Vaasa, Finland.
Sarangla P (2017). Born global entrepreneurship, Slide#6, Slideshare
https://www.slideshare.net/PriyaSarangla/born-global-entrepreneurship
Introductory
phase
• Developing a
commercially
acceptable product
• Secure financing
• Develop the market
Commercializati
on and foreign
entries
• Enter to foreign
markets
• Increase revenue
volumes
Rapid growth
and foreign
expansion
• Penetrate existing
markets
• Expand to new
continents
Rationalization
and foreign
maturity
• Align operations and
marketing to reach
global synergies

Case Studies – Alibaba
13Reference: Manneherz T. (2018) Internationalization Strategies of "Born Globals" and the Alibaba Group
https://www.grin.com/document/416396
Born Global
Characteristics
Early
Internationalization
2 years after
inception 1999
Aug 2001 - launch of
the ‘International
TrustPass’
•International
Experience of Founders
Well versed in English
1994: Got direct
contacts with foreigners
as a translator
1995: Traveled to U.S.;
developed international
thinking
1998: Worked for Ministry
of Foreign Trade
Strong business
networks
Strong internal networks
(Haibo Network)
External strategic
investments
Alliances with Yahoo!,
Microsoft, Softbank, Auchan,
Ruentex Group, etc.

Case Studies – Alibaba
14Reference: Manneherz T. (2018) Internationalization Strategies of "Born Globals" and the Alibaba Group
https://www.grin.com/document/416396
Born Global
Characteristics
Insufficient
financial
resources
1999: low initial
budget of RMB
500,000
remained tight
until the launch
of the online
shopping
website ‘Taobao’
in May 2003
Cutting edge
products
1999: Alibaba
platforms
developed
2000:
Accredited by
Forbes: a
leading B2B
firm
Differentiation
strategy
• Developing Web
platforms for
industrial trade
Breaking through
from the start in
1999
Advanced information and
communication technology
(ICT)
Communicating with business
partners and consumers via
internet
Web shop for business partners
and direct customers
Starting with the web
frontends and ending with
Alipay

Benchmark – Amazon vs Alibaba
15Reference: Laboe D. (2019) Alibaba Vs. Amazon: Who Will Take Over the World First, ZACKS
https://www.zacks.com/stock/news/372664/alibaba-vs-amazon-who-will-take-over-the-world-first
2018
Finance
Data
Amazon Alibaba
Revenue US$232bn US$53bn
Bottom-line US$10.1bn US$9.2bn
Net Margin 4.3% 17%
Top-line
Growth
over past 5
years
27% 44%
P/E 68x 36x
P/E-to-
growth
(PEG)
1.95 1.29
• AMZN’s revenue in 2018 is more than 4 times
than BABA over the same period, whilst their
bottom-lines were less than US$1bn apart.
• BABA’s net margin is nearly 4 times higher
than AMZN’s, associated with different
business models and geographical locations
in their operations.
• BABA is trading at much cheaper multiples,
and showing more aggressive annualized top-
line growth over the past 5 years than AMZN.
• Keeping the revenue growth at current paces,
BABA would not catch up AMZN until 2040

16
0
20
40
60
80
100
120
140
160
180
200
2012 2013 2014 2015 2016 2017 2018
US$bn
Rolling 12 months Revenue
Amazon Alibaba
Source: https://www.theatlas.com/charts/S1OzhtnUQ

17Reference: Laboe D. (2019) Alibaba Vs. Amazon: Who Will Take Over the World First, ZACKS
https://www.zacks.com/stock/news/372664/alibaba-vs-amazon-who-will-take-over-the-world-first
2018
Finance
Data
Amazon Alibaba
Market Cap US$788bn
(31 Dec
2018)
US$365bn
(31 Dec
2018)
Number of
Employees
647,500
(2018)
66,421
(Mar 31
2018)
Domestic
e-commerce
market
share
49.1%
(Jul 2018)
58.2%
(Jun 2018)
• In terms of Market Cap and Number of
Employees, AMZN is much bigger than BABA,
due to difference in business model and
AMZN’s five years’ earlier start than BABA.
• BABA has shown higher dominance than
AMZN in total domestic e-commerce market.
• BABA captured 636 million annual customers
in 2018, up a whole 23% from the previous
year.
• BABA is growing at an exponential rate and is
striving to continue until their total
addressable market (US$5tn, which makes up
China’s overall retail industry) is reached.

18
1.1%
1.2%
1.2%
1.2%
1.3%
1.5%
3.7%
3.9%
6.6%
49.1%
10. Wayfair
9. Costco
8. Macy's
7. QVC Group
6. Best Buy
5. The Home Depot
4. Walmart
3. Apple
2. eBay
1. Amazon
Top 10 U.S. E-commerce market share
eMarketer, July 2018
0.1%
0.2%
0.7%
0.7%
0.7%
1.8%
1.9%
5.2%
16.3%
58.2%
10. Jumei
9. Dangdang
8. Yihaodain
7. Amazon China
6. Gome
5. Vip.com
4. Suning
3. Pingduoduo
2. JD.com
1. Alibaba
Top 10 China E-commerce market share
statista, Jun 2018

Benchmark– Amazon vs Alibaba
19
Amazon Alibaba
Inception 1994 1999
Born Global Since inception - shipping good
internationally
Internationalized 2 years after inception
(2001)
Vision and Goal “Our vision is to be earth's most customer-
centric company; to build a place where
people can come to find and discover
anything they might want to buy online”
“Our goal is to create the future of trade
infrastructure. We anticipate that our
customers will know, work and live in
Alibaba, and that will be a company that
will last at least 102 years”
Regional Offices More than 30 countries 12 countries
International Sales • International: 31.23%
• Domestic: 68.77%
(2018 Net Sales Mix)
• International: 10.56%
• Domestic: 89.44%
(2018 Net Sales Mix)
Reference: Manneherz T. (2018) Internationalization Strategies of "Born Globals" and the Alibaba Group https://www.grin.com/document/416396

20
Amazon Alibaba
Revenue • 71% from online sales (2018)
• B2C through extensive warehouse
• product margins
Other Revenue:
• web services (AWS)
• advertising revenues
• 86% from core e-commerce business
(2018)
• middleman between merchants and
consumers
• Merchant fee which places sellers’
products higher up on search lists
Other Revenue:
• cloud computing
• subscription entertainment services
Cost Disadvantages
• extensive warehouse network
• storage costs of inventory
Advantages
• connects buyers and sellers
• operates with much less overhead
Strength • Grow aggressively even by keeping a
tight margin
• Higher diversification of revenue
• Margins being 4x that of Amazon
• China has had the largest eCommerce
market in the world
Reference: Laboe D. (2019) Alibaba Vs. Amazon: Who Will Take Over the World First, ZACKS https://www.zacks.com/stock/news/372664/alibaba-vs-amazon-who-will-take-over-the-world-first

21
Amazon Alibaba
Strategies in
Expansion
Acquisition: Amazon has acquired 5X more
companies than Alibaba
Investment: Alibaba has taken a minority
stake in twice as many companies as
Amazon
Similarity Looking for ways to diversify revenue across different geographies
Investing considerable resources in going global, Economist (Oct 26th 2017)
• Amazon has spent over US$5bn in India
• Alibaba invested US$500m into an Indian digital-payments company
Differences • Globalizing branded Marketplace
• Spending billions of dollars over the next
decade to bring its model of low prices, vast
selection, and fast delivery to the world
• Expanding logistics network around the
world
• Piecing together subsidiaries to connect
the world’s e-commerce markets
Reference: CBINSIGHT (2018): Alibaba Vs. Amazon: How The E-Commerce Giants Stack Up In The Fight To Go Global https://www.cbinsights.com/research/amazon-alibaba-international-expansion/

The Top 5 Challenges
22
• Lack of financial assets
• Lack of human capital
• Lack of knowledge
• Creating competitive advantage
• Lack of Control
Reference:
FireMatter (2015) Born Globals: The Top 5 Challenges, Medium.com
https://medium.com/firematter/born-globals-the-top-5-challenges-d430cad303c7

23
• Financial Assets
 vulnerable and new businesses rely on founders, family and friends,
or ex colleagues acting as business angels, at the start up
 Funding from external entities: are needed to stretch the firm cross
borders and focus on research and development; innovation
development to go global
Reference:

24
• Human Capital
 Related with Financial Assets needed to hire competitive staff
members and gain critical market information
 Lack of right internationalization skills restrict international
expansion capabilities; Cheap human resource is not the solution for
born global SMES (Madsen and Servais, 1997)
Reference:
Madsen, T. K., & Servais, P. (1997). The Internationalization of Born Globals - an
Evolutionary Process? International Business Review , 6 (4), 561-583.
https://www.sciencedirect.com/science/article/abs/pii/S0969593197000322

25
• Knowledge
 Essential knowledge include market information, knowledge about
foreign government’s policy & market experience; Larger firms can
tackle the lack of skills through mergers and acquisitions
 Developing a system to rapidly acquire the right knowledge is a
must for born global SMEs
Reference:

26
• Competitive advantage
 R&D Development, upgrading products with skilled human resource
management, sufficient resources, innovative knowledge
 Covering niche markets, born global firms need to be efficient to
gain competitive advantage to avoid competitive challenges.
Reference:

27
• Control
 Born Global Dilemma: Trade-off Between Rapid Growth and Control,
confronted by global competition and constrained by born global’s
resources (Solberg, 2012)
 Avoid overdependence on one partner without having an option to
build up later control; Carefully consider the timing of inviting
external investors into the venture to enable effective growth
Reference:
Solberg, C.A. (2012), The born global dilemma: trade-off between rapid growth and control, pp. 57-70, published in
Gabrielsson, M., Kirpalani, V.H.M. (2012), Handbook of Research on Born Globals (2012), Edward Elgar Publishing Limited
https://www.elgaronline.com/view/9781848449534.00014.xml

28
Born Global Firms
https://www.youtube.com/watch?
v=5UllXWffsPU
Born Global - Launch your new business idea globally
https://www.youtube.com/watch?v=61er2_KHQ8A

29
Tom Hillman Talks Startups Born Global
https://www.youtube.com/watch?v=5l4Qh
hwY-_w
Factors Behind Born Globals
https://www.youtube.com/watch?v=k4rLWvYHaJs

30
Alibaba’s Global Expansion
https://www.youtube.com/watch?v=U6Wn
zy5YZUI&t=33s
Jack Ma interview - future of online trade and
globalization | 2019
https://www.youtube.com/watch?v=Bs_VFaTaHsk

31
Amazon Vs Alibaba, Ep1 of China VS. the
World series
https://www.youtube.com/watch?v=RGuP
pSjj-0U
Challenges in Born Global BusinessPlanning for
International Firm Growth
https://www.youtube.com/watch?v=ikMmjSSljP8&t=
459s

What’s more in
International
Entrepreneurship?
• How Global?
• Think Global!
32

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International entrepreneurship - 2 - Born Global

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