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chapter 5.pptx
1. INFORMATION SOURCE
There are many sources of information both on competitive companies
and products/ services and the market size, characteristics, and growth
rate available to the entrepreneur in identifying an appropriate
opportunity.
These will be discussed in terms of general assistance, general
information sources, industry and market information sources,
competitive company and product/service information, government
sources, search engines, trade associations, and trade publications.
2. General assistance
• Information and assistance is readily available for entrepreneurs,
starting or growing a new venture.
• SCORE (www.score.org) is a nonprofit organization that provides free
online and in-person assistance in about 400 chapter locations
throughout the United States.
• The assistance takes the form of training, consulting, and mentoring
provided mainly by retired executives and entrepreneurs.
3. General information source
• The U.S. Chamber Small Business Center (uschamber.com/sb)
provides start-up assistance mainly through Web-based tools and
resources.
• Its start-up toolkit is very helpful in starting a business as it focuses on
everything from evaluating an idea to developing a business plan,
accessing capital, and launching the venture
4. Industry and market information
• There are a wide variety of databases that provide significant information about the
industry and market.
• These include:
1. Plunkett.
Provides industry data, market research, trends and statistics on markets, and forecasts
2. Frost & Sullivan.
Provides industry-specific information on industries such as aerospace and defense,
chemicals/materials, telecom/IT, consumer products, electronics, energy, health care,
industrial automation, and transportation.
3. Euromonitor.
Provides consumer market sizes and marketing parameters as well as information on
companies and brands.
4. Gartner.
Provides information on technology markets.
5. Gale Directory Library.
Provides industry statistics and a directory of nonprofit organizations and associations.
5. Competitive Company and Product/Services
Information
• Besides looking at the various product/service options presently available for
satisfying the market need through Google, several sources supply
product/service information on competing products/services and their
companies:
1. Business Source Complete.
Provides company and industry information by scanning the Datamonitor reports.
2. Hoovers.
Provides information on both large and small companies with links to competitors
in the same NAICS (North American Industrial Classification System) category.
3. Mergent.
Provides detailed company and product information on U.S. and international
companies.
6. Search engine
• There are many key terms for searching for the needed industry,
market, and competitive information such as:
• Search: ______ and statistics
• Search: ______ and market share
• Search: ______ and industry
• Search: ______ and association
Trade Associations
Trade associations in the United States and throughout the world are
also a good source for industry data about a particular country. Some
trade associations do market surveys of their members’ domestic and
international activities and are strategically involved in the international
standards issues for their particular industry.
7. THE NATURE OF INTERNATIONAL
ENTREPRENEURSHIP
• International entrepreneurship
An entrepreneur doing business across his or her national boundary.
THE IMPORTANCE OF INTERNATIONAL BUSINESS
TO THE FIRM
International business has become increasingly important to firms of all
sizes—particularly today, when every firm is competing in a
hypercompetitive global economy. There can be little doubt that today’s
entrepreneur must be able to move in the world of international business.
The successful entrepreneur will be someone who fully understands how
international business differs from purely domestic business and is able to
respond accordingly, thereby successfully “going global.”
8. INTERNATIONAL VERSUS DOMESTIC BUSINESS
• Although both international and domestic entrepreneurs are
concerned with sales, costs, and profits, what differentiates domestic
from international entrepreneurship is the variation in the relative
importance of the factors affecting each decision.
• The four factors that could shape or effect business: economic,
political, technical, and social. This framework has evolved through
various contributions over the years, and today is often referred to as
the PEST analysis. While first identified as a general business strategy,
the PEST analysis is extremely useful when attempting to explore new
opportunities for international business expansion.
9. Political
• As government continues to play a greater role in regulating business activity, it is
important that the entrepreneur understand all the political and legal aspects
that can facilitate or impede business growth. This includes the following:
1. Methods of Enacting Public Policy:
Nearly all countries today have a republic form of government whereby an
executive or head of state works together with a parliament or legislative body to
enact laws. Given this, it might be easy to overlook the other ways that public
policy can be shaped. This includes regulation, treaties, executive orders, and court
decisions
2. Influencers on Policymaking:
Prior to policy entering into force, there are a number of ways it can be influenced.
Primarily this involves lobbying and interest groups, which have strong ties to
government officials. Interest groups in the United States such as the National
Association of Manufacturers or the Chamber of Commerce are often staffed with
former government officials and, likewise, government officials may have prior
experience on the outside having worked for interest groups. For this reason, they
play a valuable role in serving as a voice for a particular industry.
10. 3.Wars and Conflicts
Conflicts and changes in the solvency of the country are major risks to an
entrepreneur in a particular country. This can take such forms as guerilla,
warfare, civil disturbances, and even terrorism. Conflicts may target a company’s
employees as well as creating a delay or total block in the free flow of a company’s
goods and services. While most entrepreneurs prefer to do business in stable and
freely governed countries, good business opportunities often occur in different
conditions.
4. Government Stability and Risk
A final political analysis to understand is the likelihood of how long a government
will be in power and the political risk associated with that stability. While there is
some political risk in every country, the range varies from country to country
significantly, and even in a country with a history of stability and consistency, these
conditions could change. There are three major types of political risks that might be
present: operating risk (risk of interference with the operations of the venture),
transfer risk (risk in attempting to shift assets or other funds out of the country),
and—the biggest risk of all—expropriation risk (risk where the country takes over
the venture’s property and employees).
11. Economic
• A country’s political environment is inextricably tied to the economic
environment, especially when issues of taxation and trade are
concerned. These and the following listed below are some of the
important factors to consider when conducting a proper economic
environment analysis:
1. Taxation and Trade
Taxation has two key components: general and specific. General
taxation may refer to the overall tax that is imposed on products,
services income, and property, to name a few. For example, pricing
decisions in a country that has a value-added tax (VAT) will differ from
pricing decisions made by the same entrepreneur in a country with no
value-added tax. Trade policy can act as a form of taxation as well,
especially if countries impose tariffs on goods that a company is often
forced to then pass along to a consumer in the form of higher prices.
12. 2.Monetary Policy Monetary
policy refers to interest and exchange rates that further have an impact on
inflation. A country’s past and future outlook on inflation plays a significant
role in product affordability. In addition, it has an impact on currency
exchange rates. With the present system of flexible exchange rates, a
country’s current account (the difference between the value of a country’s
imports and exports over time) affects the valuation of its currency.
3.Distribution
One final economic analysis relates to market routes and distribution. The
United States is an industrially developed nation with regional variances.
4.Trends
No market entry strategy is without risk. But, an entrepreneur can mitigate
that risk by understanding data and market trends. Trends can be influenced
by celebrities, word of mouth, media, lifestyle, seasonality, and technology,
just to name a few. One of the best times to enter a new market is when the
entire market or product category is nascent. This is because consumer
preferences on factors such as brand and pricing are just being formed,
which gives an entrepreneur an opportunity to test different strategies for
market acceptance.
13. Social
• Trends are closely related to social influencers that should be analyzed to ensure
your product has market appeal. Four types of social factors include:
1.Psychographics
Psychographics refer to interests, activities, and opinions and help explain what
consumer value is and how they make their choices. Psychographics exist within
demographics.
2. Language
Sometimes, one of the biggest problems for the entrepreneur is finding a
translator and having an appropriate translation of the message.
3.Ethics
Spoken language, even when not translated, can impact another social factor:
ethics. Cultural ethics deals with the values and morals of a society and how they
translate to societal acceptance.
4.Major Events
Major events can create sudden shifts in public opinion or new buying markets
overnight. For example, after the September 11 terrorist attacks, the Airports
around the United States made significant investments in security scanning
technology.
14. Technological
• Technology, like social factors, varies significantly across countries.
The rate of technology adoption (such as the Internet connection
speed) and general technology maturity and availability are often
surprising, particularly to an entrepreneur from a developed country.
While U.S. firms produce mostly standardized, relatively uniform
products that can be sorted to meet industry standards, this is not the
case in many countries, making it more difficult to achieve a
consistent level of quality.
15. CULTURE
• While culture has been defined in many different ways, the term generally
refers to common ways of thinking and behaving that are passed on from
parents to children or transmitted by social organizations, developed, and
then reinforced through social pressure. Culture is a learned behavior and
the identity of an individual and society.
Language
Language, sometimes thought of as the mirror of culture, is composed of
verbal and nonverbal components. Messages and ideas are transmitted by
the spoken words used, the voice tone, and nonverbal actions such as body
position, eye contact, and gestures.
Social
Structure Social structure and institutions are also aspects of culture. An
entrepreneur needs to recognize that social structure including family,
economic class, and people that a customer associates with have an impact
on employee relations and buying decisions.
16. Education
Entrepreneurs are educators. When introducing a new product or
service into a new market, they have to educate consumers on its value
and how to use it. So, it is important that an entrepreneur understand
how both formal and informal education affect the culture and the way
it is passed between generations.
Manners and Customs
Understanding manners and customs is particularly important for the
entrepreneur in key business transactions such as negotiations, dining,
and gift giving. In negotiations, entrepreneurs can come to an incorrect
conclusion because their interpretations are based on their own frame
of reference—not the frame of reference of the culture. For example,
aggressively demanding last-minute changes is a mannerism used by
Russian negotiators.
17. FOREIGN MARKET SELECTION
• With so many prospective countries available, two critical issues for the
entrepreneur are foreign market selection and market entry strategy. Should you
enter the top market prospect or should you employ a more regional focus?
Should you choose the largest market possible or one that is easier to understand
and navigate? Is a foreign market that is more developed preferable to one that is
developing? These are just some of the questions confronting the entrepreneur
in deciding which market to enter. The market selection decision should be based
on both past sales and competitive positioning as well as an assessment of each
foreign market alternative. Data needs to be collected on a systematic basis on
both a regional and country basis.
• While there are several market selection models available, one good method
employs a five-step approach:
(1) develop appropriate indicators,
(2) collect data and convert into comparable indicators,
(3) establish an appropriate weight for each indicator,
(4) analyze the data
(5) select the appropriate market from the market rankings.
18. ENTREPRENEURIAL ENTRY STRATEGIES
• There are various ways an entrepreneur can market products
internationally. The method of entry into a market and the mode of
operating overseas are dependent on the goals of the entrepreneur and
the company’s strengths and weaknesses. The modes of entering or
engaging in international business can be divided into three general
categories: exporting, nonequity arrangements, and direct foreign
investment.
• Exporting
The sale and shipping of products manufactured in one country to a
customer located in another country. There are two forms of exporting:
indirect exporting In international business, involves having a foreign
purchaser in the local market or using an export management firm.
direct exporting Involves the use of independent distributors or the
company’s own overseas sales office in conducting international business
19. • Nonequity arrangement
A method by which an entrepreneur can enter a market and obtain
sales and profits without direct equity investment in the foreign
market. An entrepreneur can enter into international business by one
of three types of nonequity arrangements: licensing, turn-key projects,
and management contracts.
licensing Involves giving a foreign manufacturer the right to use a
patent, technology, production process, or product in return for the
payment of a royalty.
turn-key projects A method of doing international business whereby a
foreign entrepreneur supplies the manufacturing technology or
infrastructure for a business and then turns it over to local owners
management contract A nonequity method of international business in
which an entrepreneur contracts his or her management techniques
and skills to a (foreign) purchasing company
20. • Direct Foreign Investment
While the wholly owned foreign subsidiary has been a preferred mode
of ownership for entrepreneurs using direct foreign investment for
doing business in international markets, joint ventures and minority
and majority equity positions are also methods for making direct
foreign investments. The percentage of ownership obtained in the
foreign venture by the entrepreneur is related to the amount of money
invested, the nature of the industry, and the rules of the host
government.
minority interest A form of direct foreign investment in which the
investing entrepreneur holds a minority ownership position in
the foreign venture
joint venture The joining of two firms in order to form a third company
in which the equity is shared
majority interest The purchase of over 50 percent of the equity in a
foreign business
21. Mergers
• Mergers An entrepreneur can obtain 100 percent ownership to ensure
complete control. Many U.S. entrepreneurs desire complete ownership and
control in cases of foreign investments. If the entrepreneur has the capital,
technology, and marketing skills required for successful entry into a market,
there may be no reason to share ownership.
horizontal merger A type of merger combining two firms that produce one
or more of the same or closely related products in the same geographic area
vertical merger A type of merger combining two or more firms in successive
stages of production
product extension merger A type of merger in which acquiring and acquired
companies have related production and/or distribution activities but do not
have products that compete directly with each other
market extension merger A type of merger combining two firms that
produce the same products but sell them in different geographic markets
diversified activity merger A conglomerate merger involving the
consolidation of two essentially unrelated firms