Outline• Different types of businesses• Importance of international entrepreneurship,• Strategic issues in international entrepreneurship,• Challenges & Opportunities in international entrepreneurship• Dragon Den Episodes
International EntrepreneurshipInternational Entrepreneurship is the process of an entrepreneur conducting business activities across national boundaries.
Another Definition of IE The process of creatively discovering and exploitingopportunities that lie outside a firm’s domestic market in the pursuit of competitive advantage.
Traditional Motivations Sales to other Markets Avoid Changing Domestic Conditions Access to Lower Cost Structures
Importance of International EntrepreneurshipInternational business has become increasingly important to firms of all sizesSuccessful entrepreneur is someone who fully understand International entrepreneurship and differs from purely domestic business and is able to respond accordingly
International Vs Domestic EntrepreneurshipInternational entrepreneurial decisions are more complex due to uncontrollable factors such as the following;Economics A domestic business strategy is designed under a single economic system Creating a business strategy for multiple countries means dealing with different levels of economic development and different distribution systemsPolitical-Legal Environment Multiple political and legal environments are opening some opportunities while eliminating others Differences in Value added-tax Differences in Advertising campaign Differences in labeling, ingredients, packaging Laws governing business arrangements also vary greatly in the 150 different legal systems and sets of national laws
International Vs Domestic EntrepreneurshipCultural Environment Understanding the local culture is necessary when developing worldwide plans Language barrier Bribes and corruption cultureTechnological Environment Technology varies significantly across countries New products in a country are created based on the conditions and infrastructure of that country Example of cars based on roads and price of gasoline
Four Strategic Issues to Consider;1. The allocation of responsibility between the U.S (host country) and the foreign operation 1. Stage 1. Internationally Centralized business 2. Stage 2. Internationally Decentralized business when its expanding 3. Stage 3. Conflicts because of decentralization leads to pulling back certain level of authority to US head quarter2. The nature of the planning, reporting, and control system should be used through out international operations3. The appropriate organizational structure for conducting international operations4. The degree of standardization possible
Entrepreneurial Entry into InternationalBusinessThe modes of entering an international business in divided into three categories;1. Exporting2. Non-equity arrangements3. Direct foreign investment
Entrepreneurial Entry intoInternational Business1. Exporting: selling goods made in one country to another Indirect exporting involves using a foreign purchaser( or export management firm) in a local market or selling goods to another country through a person in the entrepreneur’s home market Direct exporting uses independent distributors or selling goods to another country by taking care of the transaction Opening their own overseas office for sales
Entrepreneurial Entry into InternationalBusiness2. Nonequity arrangement: Doing international business through an arrangement that does not involve any investment Licensing: Allowing someone else to use something of the Company’s Entrepreneur who is a manufacturer(Licensee) giving a foreign manufacturer (licensor) the right to use a patent, trademark, technology, production process or product in return for the payment of royalty Turn-Key Projects: Developing and operationalizing something in a foreign country Management Contracts: A method for doing a specific international task Management techniques & skills Acquiring foreign expertise without giving ownership of resources to foreigner
Entrepreneurial Entry into InternationalBusiness3. Direct Foreign Investment: the percentage of ownership is related to the amount of money invested, the nature of the industry, and the rules of the host government4. Minority interests: Having less than 50% ownership position5. Majority Interest: having more than 50% ownership position6. Joint Venture: Two companies forming a third company
The joint venture should have synergy! Synergy means that the whole is greater than the sum of its 1+1= 3 parts or The two parties having things in common
Entrepreneurial Entry into InternationalBusiness4. Mergers: An entrepreneur can obtain 100% ownership Horizontal Merger: combination of at least two firms doing similar business at the same market level (e.g.; 7 Eleven Stores) Vertical Merger: Combination of at least two firms at different market level (stabilizes supply & production e.g. walls & polka) Product Extension Merger: Combination of two firms with noncompeting products (related production/distribution activities e.g. Western publishing (kids books) by Mattel (toys)) Market extension Merger: Combination of at least two firms with similar products in different geographical markets (e.g. Diamond chain: west coast retailer by Dayton Hudson a Minneapolis retailer) Diversified Activity Merger: Combination of at least two totally unrelated firms (e.g. Hillenbrand (hospital furniture manufacturer by American tourists (a luggage manufacturer))
Organizations overcoming Barriers toInternational Trade Trade barriers: Hindrances to doing international business Some countries (Japan) allegedly present barriers due to their complicated distribution system GATT (the General Agreement on Tariffs and Trade) seeks to help overcome barriers FTA’s (free trade agreements) such as NAFTA reduce barriers and encourage investment between countries (in this case the U.S., Canada and Mexico)
Entrepreneurial Partnering is onegood strategy of enteringinternational market!!