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2.2_INTERNATIONAL ENTREPRENEURSHIP_Chapter 2 - Copy.pptx
- 1. Skyline University KanoNigeria INTERNATIONAL ENTREPRENEURSHIP Course Code: ENT4311 Fall 2022 Class Venue: C14 chapter 2: Topic: Globalization and International Entrepreneurial Environment Dr. Saidu Nasiru Sulaiman Senior Lecturer: Entrepreneurship and Innovation School of Art, Management and Social Sciences
- 2. Chapter 2: Globalizationand International Entrepreneurial Environment -What is Globalization? -How Globalization Affects International Entrepreneurial Environment -Reason Behind the Growing of Global Entrepreneurs -Reason Behind the Growing of Global Entrepreneurship -Advantages and Disadvantages of Globalization and International Entrepreneurship -International Entrepreneurial Environment -Strategic Effects of Going Global - Strategic Issues and Important Considerations
- 3. What is Globalization? Globalisationis the worldwide trend of economic integration across borders allowing businesses to expand beyond their domestic boundaries. Globalisation is the international trend of the economies of the world becoming borderless and inter- linked. Companies are no longer limited by their domestic boundaries and may conduct any business activity anywhere in the world. Globalisation means companies are likely to compete anywhere in the world (e.g. produce and sell anywhere, source raw materials anywhere, conduct Research and Development anywhere etc.) Globalization of business is the change in a business from a company associated with a single country to one that operates in multiple countries.
- 4. How Globalization AffectsInternational Entrepreneurial Environment Globalization affects entrepreneurship in various important ways: First, globalization facilitates technology entrepreneurship by fostering the rise of innovation ecosystems through out the world. Internet crosses national boundaries with a click of a mouse allowing even the smallest business to go global. Globalization may also create a demand for new, more diversified products through cross-cultural exposures and for higher end goods and services through increased prosperity. This change in demand may help form new market niches and create new entrepreneurial opportunities. Globalization makes trade barriers to be falling and world trade among countries which increased the flow of goods, services, capital, people, and ideas across international boundaries.
- 5. How Globalization AffectsInternational Entrepreneurial Environment Globalization allows companies to find lower-cost ways to produce their products. It also increases global competition, which drives prices down and creates a larger variety of choices for consumers. Lowered costs help people in both developing and already-developed countries live better on less money. Globalization makes money to flow more freely across national borders as companies seek the best rates for financing anywhere in the world and investors look for best returns anywhere in the world. Companies can no longer afford to assume that their success in their home market equates to long term profitability or survival.
- 6. How Globalization AffectsInternational Entrepreneurial Environment Globalization leads to the increased interconnectedness of national economies; it creates more wealth in developing, countries. Entrepreneurship development is the process of enhancing the skills and knowledge of entrepreneurs through different training and classroom programs. Globalization changes the way nations, businesses and people interact. Specifically, it changes the nature of economic activity among nations, expanding trade, opening global supply chains and providing access to natural resources and labor markets.
- 7. Reason Behind theGrowing of Global Entrepreneurs: The research study found that the principal factors influencing the early internationalization of international start-ups are: the international vision of the founders, their desire to become international market leaders, the identification of specific international opportunities, and the possession of international contacts and acquaintances
- 8. Reason Behind theGrowing of Global Entrepreneurship A combination of developments in technology, financing and corporate culture is behind the rising power and leverage of small companies to go global. Seeking of foreign investment by countries: This is because foreign investment boost economic growth by introducing innovative technologies, products, and services. Increasing local competition from entrepreneurs challenges existing firms to become more competitive. International entrepreneurial activity raises the productivity of firms and economies. Often entrepreneurial companies play a significant role in economic development not just on national level, but within the global economy. Moreover, one of the most important aspects of entrepreneurship is that it creates opportunities for employment; therefore it affects local societies in a most positive way.
- 9. Advantages and Disadvantagesof Globalization and International Entrepreneurship Advantages As a result of globalization, we all enjoy many advantages. these are- 1. Transfer of Technology 2. Better Services 3. Standardization of Living 4. Development of Infrastructure 5. Foreign Exchange Reserves 6. Economic Growth 7. Affordable Products 8. Contribution to World GDP Growth Rate 9. Extensions of Market Disadvantages The globalization impacts us in multidimensional way. So it has some disadvantages also. These are- 1. Growing Inequality 2. Increasing of the Unemployment rate 3. Trade Imbalance 4. Environmental Loots
- 10. International Entrepreneurial Environment Aninternational entrepreneurial environment refers to the atmosphere in which international companies run their businesses. International entrepreneurial environment is the foreign countries where international entrepreneurs operate. The international entrepreneurial environment serves as an avenue for international entrepreneurs to earn foreign income outside their country of existence. In short, international entrepreneurial environment can be refers to as foreign or global operations.
- 11. International Entrepreneurial Environment Entrepreneursall over the world seek ways of introducing their products to international markets; unfortunately, the international entrepreneurial environment poses a lot of opportunities and threats to foreign entrants. The cultural, political, economic and technological environments act as determinant factors in entrepreneurial success in global markets. As such, international entrepreneurial environment comprises the followings: • International Political/legal Environment • International Economic Environment • International Technological Environment • International Socio-Cultural Environment
- 12. International Entrepreneurial Environment •InternationalTechnological Environment : International entrepreneurial environment has many positive aspects in spite of various issues, such as it contributes new technology, infrastructure development, managerial skills, creating jobs, providing better services, and bringing in investment capital from other countries by exporting products. •International entrepreneurs have to deal with the technological advances that are changing the nature of their products and services and requiring them to operate imaginatively and effectively in the foreign markets.
- 13. International Entrepreneurial Environment •InternationalPolitical and Legal Environment : International entrepreneurial environment is multidimensional including the political risks, exchange risks, legal & taxation issues. •Therefore, International political environment comprises the political risk, political institutions, government policies, tax, legal system etc. •Political risk is threat from social, legal political or economic factors in a foreign country may affect the operation and profitability of an organization's global operation. •Tax rate also play significant role in attracting or otherwise of foreign entrepreneurs. •Some countries limit foreign ownership in particular industries. The imposition of quotas, tariffs, local content requirements can also be issues to international entrepreneurs. •Legal system represents unique system of regulations, rules and law of a country. Different countries have different legal system (i.e. common law, civil law, sharia law etc.) • There are a number of laws that regulate the conduct of businesses that cover such matters as standards of products, packaging, promotion, protecting consumer interests and local industries, protecting the environment, due to globalisation regulations have become stronger in many countries. •Government policies such as the industrial policy, fiscal policy, and tariff policy; these changes often have profound impacts on businesses especially entrepreneurs; however, some policies create opportunities as well as threats.
- 14. International Entrepreneurial Environment •InternationalSocio-Cultural Environment : this involves pervasive national socio-cultural factors such as norms, values, roles that guide people in a particular way in a particular society. It tells you what behaviors appropriate, what is not. •International entrepreneurship deals not only with cross borders, they also deals with cross cultures. Culture profoundly influences how people think, communicate, and behave. It also affects the kinds of transactions they make and the way they negotiate them. •Culture can manifest itself in various ways. This is why understanding of national culture is necessary for any international entrepreneur. •Through understanding culture, international entrepreneurs can manage diversity in their organisations. •Understanding culture can be a source of competitive advantage, because can create something to fit the cultural values. •The socio-cultural fabric is an important environmental factor that must be analyzed while formulating international business strategies.
- 15. International Entrepreneurial Environment •InternationalEconomic Environment : this involves economic system that guide the system of production (capitalist, socialist or mixed economy). •Economic system has implication for international entrepreneurship. A policy of a free international trade environment strengthens the economies of all countries. •The competition from imports and exports leads to lower prices, better quality of products, wider selections and improved standards of living. •Factors like economic policies, economic condition (i.e. purchasing power, income, consumption and savings), economic resources (i.e. capital, raw materials, infrastructures),. •Economic factors like inflation, deflation, unemployment, exchange rate fluctuations, interest fluctuations, can affect the operations of international entrepreneurs
- 16. International Entrepreneurial Environment •International entrepreneurs/managers must understand how these environments are changing and the impact of those changes on the business. • This is because these environmental factors are unpredictable, uncontrollable and in most times form the basis for decision for local entrepreneurs to break into new markets. • Therefore, it is mandatory for the people at the entrepreneurial/managerial level to work on the factors that comprise of International Entrepreneurial Environment.
- 17. Other Strategic Issues •Moving your business to an International location can sound like a desirable prospect at first glance. There might be better opportunities, better living conditions, or perhaps the city may be more aligned with your political and social convictions. • Going global is the company’s effort to expand its business reach throughout the world. It not only talks about the customer base but also the production facilities, decision making, management, and revenue. • Therefore, there are other strategic issues: -Tax consideration -Overhead costs -Hidden costs -Growth possibilities -Impact on customers -Logistics
- 18. Stages of GoingGlobal The level of business participation in the global economy usually goes through stages: • Domestic: The entrepreneur’s operations are limited to the domestic market where local or national markets are the main target of the company. Likewise, raw materials and labor usually rely on local supplies, though not always. • International: The entrepreneur started to enter the international market by exporting its products to various countries. • Multinational: the entrepreneur operates production facilities abroad by building factories in various countries. The company has a centralized structure, with the head office in the country of origin. The head office makes decisions about what products are produced and developed. They create special offers for markets in each country. • Global: Global companies invest and are present in numerous countries. They market a consistent product image and the same brand for various countries, emphasizing volume, cost management, and efficiency. The head office is responsible for global strategy. • Transnational: Transnational business is far more complex. Companies invest in foreign operations and delegate decision making, R&D, and marketing for each foreign subsidiary. They have an efficient and integrated global strategy while maintaining responsiveness to local and regional markets.
- 19. Strategic Effects ofGoing Global Two Major Issues: 1. Physical Proximity To Customers 2. Psychological Proximity To Customers
- 20. Physical Proximity ToCustomers This involves physical closeness •Proximity paradox: Sometimes a foreign market that is geographically close may inhibit the perceived psychological closeness of a market Eg. Canada and USA
- 21. Psychological Proximity ToCustomers This involves psychological closeness 1. perception vs. reality •Perception of closeness/distance may be perceived rather than real, e.g. Canadian and Australian entrepreneurs focus too much on the similarities their countries have with the USA rather than the vast differences 2. Closer psychological proximity makes it easier for an entrepreneur to enter a market 3. All entrepreneurs are basically alike regardless of country
- 22. Strategic Decision Processof Going Global 1. Stage 1: First Movements •Highly centralized decision-making process 2. Stage 2: Successful Business •Decentralize decision-making 3. Stage 3: Longer term success •Centralize some decision-making process
- 23. 7 Strategic Keysto Going Global Global entrepreneurs need to be ready to address a number of challenges to make a success of it. Below are some specific challenges of going global. 1. Learn the legal systems where you intend to open up 2. Alter your pricing model as you learn 3. Empower regional leaders 4. Be prepared to just be international, not multinational 5. Accept local business customs, don't fight them 6. Profit is sanity, revenue is vanity 7. Make sure you enjoy the journey
- 24. Entry Strategies intoInternational Entrepreneurial Market • International market entry strategies provide businesses with a roadmap to enter into foreign markets. Because there are many methods companies can use to sell their goods globally, they will choose the best approach based on their goals and target market. • Understanding market entry strategies and their differences can help you decide which strategy offers the most benefits to your company, in a given country at a given time.
- 25. Entry Strategies intoInternational Entrepreneurial Market • Exporting – Indirect & Direct Exporting • Non equity arrangements – Licensing, mgmt. contracts, turnkey projects • Direct foreign Investment • Minority interest • Majority Interest • Joint ventures • Mergers and acquisition Horizontal merger, vertical merger, product extension merger, market extension merger, Diversified activity merger.
- 26. Strategic Issues andImportant Considerations There are two types of strategic issues; external and internal. External strategic issues arise due to factors beyond your control. Internal strategic issues are ones which your organization faces because of internal factors. Entrepreneurial partnering is good strategy of entering into international market. Trade barriers Complicated distribution system GATT (General Agreement on Tariff and Trade) FTA (Free Trade Agreement) NAFTA(US, Canada, Mexico trade agreement)