5-2Introduction Entrepreneurs find it difficult to bothmanage and expand the venture theycreated. To expand a venture, entrepreneurs needto: Identify opportunities for domestic andinternational expansion. Develop different management skills. Infuse new entrepreneurial spirit(intrapreneurship).
5-3 Factors contributing to internationalexpansion: Opening up of controlled economies to market-oriented enterprise. Self-interest of organizations as well as theimpact of external events and forces. Developing countries need training andeducation as well as infrastructure to supporttheir development and growth in the nextcentury.Introduction (cont.)
5-4Opportunity Recognition and theOpportunity Assessment Plan The key to successful domestic andinternational entrepreneurship is to developan idea that has a market with a need forthe product or service idea conceived. Opportunity assessment is often bestaccomplished by developing an opportunityassessment plan. An opportunity assessment plan is not abusiness plan.
5-5 An opportunity assessment plan has foursections: The first section develops the idea, analyzescompetitive products and companies, andidentifies the unique selling propositions. The second section focuses on the market—itssize, trends, characteristics, and growth rate. The third section focuses on the entrepreneur’sand management team’s skills and experience. The final section develops a time line indicatingthe steps to successfully launch the venture.Opportunity Recognition and theOpportunity Assessment Plan (cont.)
5-6Information Sources General Information SCORE is a nonprofit organization that providesfree online and in-person assistance. Small Business Development Centers providescounseling, training, and technical assistance onall aspects of managing a new venture. The U.S. Chamber Small Business Centerprovides start-up assistance through Web-basedtools and resources. Other valuable Web sites include: nasbic.org,nvca.org, nbia.org, www.fasttrac.org,activecapital.org, c-e-o.org, entre-ed.org,kauffman.org.
5-7Information Sources (cont.) Industry and Market Information Plunkett - Industry data, market research,trends, statistics on markets, and forecasts. Frost and Sullivan - Industry specificinformation. Euromonitor – Information on consumer marketsizes, marketing parameters, companies, andbrands. Gartner - Information on technology markets. Gale Directory Library - Industry statistics andinformation on nonprofit organizations andassociations.
5-8 Competitive Company and ProductInformation Business Source Complete - Provides companyand industry information by scanning theDatamonitor reports. Hoovers - Provides information on both largeand small companies with links to competitors inthe same NAICS (North American IndustrialClassification System) category. Mergent - Provides detailed company andproduct information on U.S. and internationalcompanies.Information Sources (cont.)
5-9 Government Sources Census reports factfinder.census.gov www.census.gov/ipc/www/idb Export/import authority UN Comtrade www.business.gov/expand/import-export NAICS and Standard Industrial Classificationcodes www.naics.com/info.htm www.osha.gov/pls/imis/sic_manual.htmlInformation Sources (cont.)
5-10 Search Engines There are many key terms for searching theneeded industry, market, and competitiveinformation. Trade Associations Good source for country-specific industry data. Trade Publications Provide information and insights on trend,companies, and trade shows from a localperspective of the particular market and marketconditions.Information Sources (cont.)
5-11The Nature of InternationalEntrepreneurship International entrepreneurship is theprocess of an entrepreneur conductingbusiness activities across nationalboundaries. The activities necessary for ascertaining andsatisfying the needs and wants of targetconsumers take place in more than one country. With a commercial history of only 300years, the United States is a relativenewcomer to the international businessarena.
5-12The Importance of InternationalBusiness to the Firm International business has becomeincreasingly important to firms of all sizes. A successful entrepreneur must be able to: Fully understand the difference betweendomestic and international business. Respond accordingly thereby successfully “goingglobal.”
5-13International versus DomesticEntrepreneurship Economics In a domestic business strategy, the entirecountry is organized under a single economicsystem and has the same currency. Creating a business strategy for a multicountryarea means dealing with differences in: Levels of economic development. Currency valuations. Government regulations. Banking, venture capital, marketing, and distributionsystems.
5-14 Stage of Economic Development Certain factors significantly impact a firm’sability to successfully engage in internationalbusiness such as: Fundamental infrastructures. Banking facilities and systems. Educational systems. Legal system. Business ethics and norms.International versus DomesticEntrepreneurship (cont.)
5-15 Balance of Payments Current Account With the present system of flexible exchangerates, a country’s current account (thedifference between the value of a country’simports and exports over time) affects thevaluation of its currency. The valuation of one country’s currency affectsbusiness transactions between countries.International versus DomesticEntrepreneurship (cont.)
5-16 Type of System Difficulties in doing business in economies thatare developing, or in transition. Use of barter or third-party arrangements inthese countries to increase business activity. Barter - A method of payment using nonmoney items. Third-party arrangements - Paying for goods indirectlythrough another source.International versus DomesticEntrepreneurship (cont.)
5-17 Political-Legal Environment Political risk analysis - An assessment of acountry’s political policies and its stability priorto entry. Types of political risks: Operating risk. Transfer risk. Ownership risk . Conflict and changes in the solvency of the country.International versus DomesticEntrepreneurship (cont.)
5-18 A country’s legal system regulates: Its business practices. The manner in which business transactions areexecuted. The rights and obligations involved in any businesstransaction between parties. Critical areas for every entrepreneur: Property rights. Contract law. Product safety. Product liability.International versus DomesticEntrepreneurship (cont.)
5-19 Language One of the biggest problems for theentrepreneur is finding a translator. Significant problems can occur with carelesstranslation. Care should be taken to hire a translator whosenative tongue is the target language and whoseexpertise matches that of the original authors.International versus DomesticEntrepreneurship (cont.)
5-20Technological Environment The variation and availability of technologyare often surprising, particularly to anentrepreneur from a developed country. New products in a country are createdbased on the conditions and infrastructureoperant in that country.
5-21Figure 5.1 - Various Aspects ofCultureFigure 5.1
5-22Available Distribution Systems Factors to be considered in determining thedistribution system for a country: Overall sales potential. Amount and type of competition. Cost of the product. Geographical size and density. Investment policies. Exchange rates and controls. Level of political risk. Overall marketing plan.
5-23Motivations to Go Global Profits. Competitive pressures. Unique product(s) or service(s). Excess production capacity. Declining home country sales. Unique market opportunity. Economies of scale. Technological advantage. Tax benefits.
5-24Strategic Effects of Going Global Physical and psychological closeness to theinternational market affects the waybusiness occurs. Cultural variables, language, and legalfactors can make a foreign market that isgeographically close seem psychologicallydistant.
5-25 Issues involved in psychological distance: The distance envisioned by the entrepreneurmay be based more on perception than reality. Closer psychological proximity makes it easierfor an entrepreneurial firm to enter a market. There are more similarities than differencesbetween individual entrepreneurs regardless ofthe country.Strategic Effects of Going Global(cont.)
5-26Foreign Market Selection One good market selection model employsa five-step approach: Develop appropriate indicators. Collect data and convert into comparableindicators. Establish an appropriate weight for eachindicator. Analyze the data. Select the appropriate market from the marketrankings.
5-29Entrepreneurial Partnering Foreign entrepreneurs know the countryand culture. They can facilitate business transactions andupdate the entrepreneur on business, economic,and political conditions. Good partners share the entrepreneur’svision, are unlikely to exploit thepartnership, and can help the entrepreneurachieve his or her goals.
5-30Barriers to International Trade General Agreement on Tariffs and Trade(GATT) Established in 1947 under U.S. leadership;includes over 100 nations. Objective - To liberalize trade by eliminating orreducing tariffs, subsidies, and import quotas.
5-31 Increasing Protectionist Attitudes Support of GATT resulted in: Strain on the world trading system and the economicsuccess of countries perceived as not playing by rules. Establishment of bilateral voluntary export restraints tocircumvent GATT. Trade Blocs and Free Trade Areas Free Trade Area (FTA). North American Free Trade Agreement (NAFTA). Treaty of Asunción – Mercosur trade zone. European Community (EC).Barriers to International Trade (cont.)
5-32 Entrepreneur’s Strategy and Trade Barriers Trade barriers increase entrepreneurs’ costs ofexporting products or semifinished products to acountry. Voluntary export restraints may limitentrepreneurs’ ability to sell products in acountry from production facilities outside thecountry. Entrepreneurs may have to locate assembly orproduction facilities in a country to conform tolocal content regulations.Barriers to International Trade (cont.)