Chapter ppt_16.pptx

Section 4:
Putting the Business Plan to Work
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved

Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved.
Essentials of Entrepreneurship and Small
Business Management
Ninth Edition
Chapter 16
Global Aspects of
Entrepreneurship

Learning Objectives
1. Explain why “going global” has
become an integral part of many small
companies’ marketing strategies.
2. Describe the principal strategies small
businesses can use for going global.
3. Discuss the major barriers to
international trade and their impact on
the global economy.
4. Describe the trade agreements that
will have the greatest influence on
foreign trade in the twenty-first
century.

Why "Go Global?"
• Offset sales declines in the domestic market
• Increase sales and profits
• Lower manufacturing costs
• Lower product cost
• Improve competitive position
• Raise quality levels
• Become more customer-oriented

Think Globally!
• Becoming a global entrepreneur requires a different
mindset.
• Learning to think globally may be the first – and most
challenging – obstacle an entrepreneur must overcome on
the way to becoming a truly global business.
– Must have the ability to appreciate, understand, and
respect cultural differences.

Figure 16.1 Ten Strategies for Going Global

Strategies for Going Global (1 of 10)
Create a presence on the Web

Figure 16.2 Internet Users Worldwide
Source: Based on “Internet Users in the World, by Regions, 2017 Q1,” Internet World Stats, March 31,
2017, www.internetworldstats.com/stats.htm.

The Web’s Global Reach
• It’s a low-cost way to be global from day one.
• Nearly 4 billion Web users worldwide:
– 320 million in United States
• Global ecommerce retail sales will reach $4 trillion by
2020.
• It’s important to “think local” when creating Web sites to
target customers in other countries.

1. Create a presence on the Web
2. Rely on trade intermediaries

Trade Intermediaries (1 of 2)
• Trade intermediaries:
– Domestic agencies that serve as distributors in foreign
countries for companies of all sizes.
 Make the transition to world markets faster and
easier for small businesses, but it is important to
select an intermediary carefully.

Trade Intermediaries (2 of 2)
• Types of intermediaries:
– Export Management Companies (EMCs)
– Export Trading Companies (ETCs)
– Manufacturer’s Export Agents (MEAs)
– Export merchants
– Resident buying offices
– Foreign distributors

3. Form joint ventures

Joint Ventures
• Domestic joint venture:
– Two or more U.S. companies form an alliance for the
purpose of exporting their goods and services abroad.
• Foreign joint venture:
– A domestic firm forms an alliance with a company in
the target nation.
• Most important ingredient for success is to choose the right
partner.

Choosing a JV Partner
• Select a partner that shares the company’s values and
standards of conduct.
• Define at the outset important issues.
• Understand your partner’s reasons and objectives for
forming the joint venture.
• Spell out in writing exactly how the venture will work and
where decision making authority lies.
• Select a partner with different but compatible skills.
• Prepare a prenuptial agreement in case of divorce.

4. Engage in foreign licensing

Foreign Licensing
• A relatively simple way for even the most inexperienced
business owner to extend his reach into foreign markets.
– Enter markets quickly and easily with virtually no
capital investment.
• Ideal for companies whose value lies in its intellectual
property.
• Minimize risk by ensuring that proper patents, trademarks,
and copyrights are in place.

5. Consider international franchising

International Franchising
Steps:
• Identify the country or countries that are best suited to the
franchiser’s business concept.
• Generate leads for potential franchisees.
• Select quality candidates.
• Structure the franchise deal.
– Direct franchising
– Area development
– Master franchising

6. Use countertrading and bartering

Countertrade and Barter
• Countertrade:
– A transaction in which a company selling goods in a
foreign country agrees to promote investment and
trade in that country.
• Barter:
– The exchange of goods and services for other goods
and services.

7. Export

Exporting
• Small and medium-size companies account for nearly 98%
of the 304,000 U.S. businesses that export, but generate
just 1/3 of U.S. exports.
– Small companies generate 1/3 of U.S. export sales.
• Key benefits of exporting:
– Increased sales and profits.
– More diversified customer base.

Assessing Exporting Potential
• Do you have a product or service that has been successful
domestically?
• Do you have an international marketing plan?
• Do you have sufficient production capacity?
• Do you have sufficient financial resources?
• Are you committed to developing export markets?
• Are you committed to serving foreign customers?
• Do you understand the local market?
• Do you understand the export payment process?

Steps to Successful Exporting (1 of 3)
1. Recognize that even the tiniest companies and least
experienced entrepreneurs have the potential to export.
2. Analyze your product or service.
3. Analyze your commitment to developing export markets.

Figure 16.3 Length of Time Small Business
Owners Invest Before Exporting
Source: Based on data from “Infographic: Small Business, Big Trade,” Service Corps of Retired Executives, March 7,
2017, https://www.score.org/resource/infographic-smallbusiness-big-trade.

1. Recognize that even the tiniest companies and least
experienced entrepreneurs have the potential to export.
2. Analyze your product or service.
3. Analyze your commitment to developing export markets.
4. Research potential markets and pick your target.

Figure 16.4 Number of Countries to which U.S.
Small Businesses Export
Source: Based on data from “2016 Small Business Exporting Survey,” National Small Business Association and Small
Business Exporters Association, p. 6.

5. Develop a distribution strategy.
6. Find your customer.
– U.S. Department of Commerce
– International Trade Administration
7. Find financing for export sales.
8. Ship your goods.
9. Collect your money.

Figure 16.5 How a Letter of Credit Works
Source: A Basic Guide to Exporting, 10th ed. (Washington DC: U.S. Department of Commerce,
International Trade Administration, 2008), p. 5.

7. Export
8. Establish international locations

Establishing International Locations
• Having an international location can offer numerous
benefits including:
– Lower start-up costs.
– Lower labor costs.
– A better understanding of local customer preferences.
– A better understanding of local business practices.

7. Export
9. Use importing and outsourcing

Steps to Successful Importing or
Outsourcing (1 of 2)
• Make sure that importing or outsourcing is right for your
business.
• Establish a target cost for your product.
• Do your research before you leave home.
• Be sensitive to cultural differences.
• Do your groundwork.

Steps to Successful Importing or
Outsourcing (2 of 2)
• Protect your company’s intellectual property.
• Select a manufacturer.
• Provide an exact model of the product you want
manufactured.
• Stay in constant contact with the manufacturer and try to
build a long-term relationship.

7. Export
9. Use importing and outsourcing
10.Become an expat entrepreneur

Expat Entrepreneurs
• Expat entrepreneurs:
– Keep their citizenship in their home country but live and
run their businesses on foreign soil.

Figure 16.6 Most Frequently Encountered
Impediments to International Trade
Source: U.S. International Trade Commission, Small and Medium-Sized Enterprises: Characteristics and
Performance, Publication 4189, November 2010, pp. 6–8.

Barriers to International Trade (1 of 4)
• Domestic Barriers
– Attitude: “My company is too small to export.”
– Lack of information about how to get started.
– Inability to obtain adequate financing.

• International Barriers
– Tariffs:
 A tax a government imposes on goods and services
imported into that country.
– Nontariff barriers:
 Governments that protect domestic industries.

• Quotas:
– Limits on the amount of a product imported into a
country.
• Embargo:
– Total ban on imports of certain products.
• Dumping:
– Selling large quantities of a product in a foreign country
below cost to gain market share.

• Political barriers:
– Rules, regulations and political risks.
• Business barriers:
– Different cost structures and business practices.
• Cultural barriers:
– Differing languages, philosophies, traditions, and
accepted practices.

International Trade Agreements
• Major agreements reducing barriers to free trade:
– World Trade Organization (WTO)
– North American Free Trade Agreement (NAFTA)
– Dominican Republic - Central America Free Trade
Agreement (CAFTA-DR)

Guidelines for Success in International
Markets (1 of 2)
• Take time to learn before jumping in.
• Seek out assistance from professionals.
• Make yourself at home in all three of the world’s key
markets – North America, Europe, and Asia.
• Appeal to the similarities in the various regions and
recognize the differences in local cultures.
• Develop new products for the world market.
• Learn foreign customs and languages.

Guidelines for Success in International
Markets (2 of 2)
• “Glocalize” – make global decisions about products,
markets, and management and allow local employees to
make tactical decisions.
• Recruit and retain multicultural workers.
• Train employees to think globally.
• Hire local managers to staff foreign offices and branches.
• Do whatever seems best wherever it seems best.
• Consider using partners and joint ventures to break into
foreign markets.
• Evaluate opportunities to become an expat entrepreneur.

Conclusion
• Global effectiveness requires entrepreneurs to:
– Learn about the global market.
– Seek the assistance of professionals.
– Recruit and train employees to think globally.
– Consider using partners and joint ventures.
– Determine which opportunities best fit your company.

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