This document discusses identifying and analyzing opportunities for domestic and international expansion. It covers developing an opportunity assessment plan with sections on the idea, market, management team, and timeline. Identifying information sources like search engines, trade associations, and publications is also discussed. Going over the differences between domestic and international entrepreneurship includes factors like economics, development stage, currency, regulations and more. Finally, it outlines strategies for foreign market selection and entrepreneurial entry options.

1. Hisrich
Peters
Shepherd
Chapter 5
Identifying and Analyzing
Domestic and International
Opportunities
Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin

2. 5-2
Introduction
 Entrepreneurs find it difficult to both
manage and expand the venture they
created.
 To expand a venture, entrepreneurs need
to:
 Identify opportunities for domestic and
international expansion.
 Develop different management skills.
 Infuse new entrepreneurial spirit
(intrapreneurship).

3. 5-3
 Factors contributing to international
expansion:
 Opening up of controlled economies to market-
oriented enterprise.
 Self-interest of organizations as well as the
impact of external events and forces.
 Developing countries need training and
education as well as infrastructure to support
their development and growth in the next
century.
Introduction (cont.)

4. 5-4
Opportunity Recognition and the
Opportunity Assessment Plan
 The key to successful domestic and
international entrepreneurship is to develop
an idea that has a market with a need for
the product or service idea conceived.
 Opportunity assessment is often best
accomplished by developing an opportunity
assessment plan.
 An opportunity assessment plan is not a
business plan.

5. 5-5
 An opportunity assessment plan has four
sections:
 The first section develops the idea, analyzes
competitive products and companies, and
identifies the unique selling propositions.
 The second section focuses on the market—its
size, trends, characteristics, and growth rate.
 The third section focuses on the entrepreneur’s
and management team’s skills and experience.
 The final section develops a time line indicating
the steps to successfully launch the venture.
Opportunity Recognition and the
Opportunity Assessment Plan (cont.)

6. 5-6
 Search Engines
 There are many key terms for searching the
needed industry, market, and competitive
information.
 Trade Associations
 Good source for country-specific industry data.
 Trade Publications
 Provide information and insights on trend,
companies, and trade shows from a local
perspective of the particular market and market
conditions.
Information Sources (cont.)

7. 5-7
The Nature of International
Entrepreneurship
 International entrepreneurship is the
process of an entrepreneur conducting
business activities across national
boundaries.
 The activities necessary for ascertaining and
satisfying the needs and wants of target
consumers take place in more than one country.
 With a commercial history of only 300
years, the United States is a relative
newcomer to the international business
arena.

8. 5-8
The Importance of International
Business to the Firm
 International business has become
increasingly important to firms of all sizes.
 A successful entrepreneur must be able to:
 Fully understand the difference between
domestic and international business.
 Respond accordingly thereby successfully “going
global.”

9. 5-9
International versus Domestic
Entrepreneurship
 Economics
 In a domestic business strategy, the entire
country is organized under a single economic
system and has the same currency.
 Creating a business strategy for a multicountry
area means dealing with differences in:
 Levels of economic development.
 Currency valuations.
 Government regulations.
 Banking, venture capital, marketing, and distribution
systems.

10. 5-10
 Stage of Economic Development
 Certain factors significantly impact a firm’s
ability to successfully engage in international
business such as:
 Fundamental infrastructures.
 Banking facilities and systems.
 Educational systems.
 Legal system.
 Business ethics and norms.
International versus Domestic
Entrepreneurship (cont.)

11. 5-11
 Balance of Payments Current Account
 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.
 The valuation of one country’s currency affects
business transactions between countries.
International versus Domestic
Entrepreneurship (cont.)

12. 5-12
 Type of System
 Difficulties in doing business in economies that
are developing, or in transition.
 Use of barter or third-party arrangements in
these countries to increase business activity.
 Barter - A method of payment using nonmoney items.
 Third-party arrangements - Paying for goods indirectly
through another source.
International versus Domestic
Entrepreneurship (cont.)

13. 5-13
 Political-Legal Environment
 Political risk analysis - An assessment of a
country’s political policies and its stability prior
to entry.
 Types of political risks:
 Operating risk.
 Transfer risk.
 Ownership risk .
 Conflict and changes in the solvency of the country.
International versus Domestic
Entrepreneurship (cont.)

14. 5-14
 A country’s legal system regulates:
 Its business practices.
 The manner in which business transactions are
executed.
 The rights and obligations involved in any business
transaction between parties.
 Critical areas for every entrepreneur:
 Property rights.
 Contract law.
 Product safety.
 Product liability.
International versus Domestic
Entrepreneurship (cont.)

15. 5-15
 Language
 One of the biggest problems for the
entrepreneur is finding a translator.
 Significant problems can occur with careless
translation.
 Care should be taken to hire a translator whose
native tongue is the target language and whose
expertise matches that of the original authors.
International versus Domestic
Entrepreneurship (cont.)

16. 5-16
Technological Environment
 The variation and availability of technology
are often surprising, particularly to an
entrepreneur from a developed country.
 New products in a country are created
based on the conditions and infrastructure
operant in that country.

17. 5-17
Figure 5.1 - Various Aspects of
Culture
Figure 5.1

18. 5-18
Available Distribution Systems
 Factors to be considered in determining the
distribution 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.

19. 5-19
Motivations 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.

20. 5-20
Strategic Effects of Going Global
 Physical and psychological closeness to the
international market affects the way
business occurs.
 Cultural variables, language, and legal
factors can make a foreign market that is
geographically close seem psychologically
distant.

21. 5-21
 Issues involved in psychological distance:
 The distance envisioned by the entrepreneur
may be based more on perception than reality.
 Closer psychological proximity makes it easier
for an entrepreneurial firm to enter a market.
 There are more similarities than differences
between individual entrepreneurs regardless of
the country.
Strategic Effects of Going Global
(cont.)

22. 5-22
Foreign Market Selection
 One good market selection model employs
a five-step approach:
 Develop appropriate indicators.
 Collect data and convert into comparable
indicators.
 Establish an appropriate weight for each
indicator.
 Analyze the data.
 Select the appropriate market from the market
rankings.

23. 5-23
Entrepreneurial Entry Strategies
 Exporting
 Indirect exporting.
 Direct exporting.
 Nonequity Arrangements
 Licensing.
 Turn-key projects.
 Management contracts.

24. 5-24
Entrepreneurial Entry Strategies
(cont.)
 Direct Foreign Investment
 Minority Interests.
 Joint Ventures.
 Majority Interest.
 Mergers:
 Horizontal merger.
 Vertical merger.
 Product extension merger.
 Market extension merger.
 Diversified activity merger.

25. 5-25
Entrepreneurial Partnering
 Foreign entrepreneurs know the country
and culture.
 They can facilitate business transactions and
update the entrepreneur on business, economic,
and political conditions.
 Good partners share the entrepreneur’s
vision, are unlikely to exploit the
partnership, and can help the entrepreneur
achieve his or her goals.