International Entrepreneurial Opportunities

Chapter :4

3/15/2014

Entrepreneurship -6th Edition Lecture prepared by Madam Amina Sadaf

Opening Profile
A. Malachi Mixon, III. Creativity, risk taking and innovation in entrepreneurship are essential not only to the inception of new products and ventures, but also to a firms successful transition into global markets. Invacare traces its existence in 1895 The firm was involved in manufacturing business of vehicles especially designed for the physically challenged. The case of Mal Mixons notable revitalization of tiny Invacare Corporations exemplifies the connection of globalization. Page 83
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The nature of International Entrepreneurship

What is an International Entrepreneurship?
An entrepreneur doing business across his or her national boundary. It may consist of exporting, licensing, opening a sales office in another country, or something as simple as placing a classified advertisement in another countrys newspaper. Page 86
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The importance of International business to the firm

International business has become increasingly important to firms of all sizes particularly when every firm is competing in a hypercompetitive global economy. The successful entrepreneur is someone who fully understands how international business differs from purely domestic business and to respond accordingly. Page 86
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International Versus Domestic Entrepreneurship

International decisions are more complex due to such uncontrollable factors as economics, politics, culture and technology.
Economics
In a domestic business, a single country, single and local currency. International business is more multitasking i.e currency valuation, government rules, banking, marketing, distribution system etc. It will be difficult for entrepreneur when a country will be in the process of development.

Stage of Economic development

Balance of payment

The trades status between countries is known as balance of payment.

Type of System

There are many difficulties in doing business in developing and transition economies. Problem reflect gaps business plans, product promotion, marketing, accounting systems etc. Barter trading or Third party arrangements.
Page 87-88

3/15/2014

Entrepreneurship -6th Edition Lecture prepared by Madam Amina Sadaf

International versus domestic Entrepreneurship

Political- Legal Environment
The political and legal environments in the international market creates vastly different problems, opening some market opportunities for entrepreneurs and eliminating others.
Page 88

3/15/2014

Entrepreneurship -6th Edition Lecture prepared by Madam Amina Sadaf

International versus domestic Entrepreneurship

Cultural Environment
The impact of culture on entrepreneurs and strategies is very important Important aspect of the cultural environment in some countries concerns are bribes and corruption.
Page 88

3/15/2014

Entrepreneurship -6th Edition Lecture prepared by Madam Amina Sadaf

International versus domestic Entrepreneurship

Technological Issues
Technology varies significantly across countries. Example U.S cars designers can assume wider roads and less expensive gasoline than European designers.
Page 90

3/15/2014

Entrepreneurship -6th Edition Lecture prepared by Madam Amina Sadaf

Strategic Issues
Four strategic issues are of importance to an entrepreneur going international:
The allocation of responsibility between the local and foreign operations. The nature of planning, reporting and control system to be used throughout the international operations. The appropriate organizational structure for conducting international operations. The degree of standardization possible.

3/15/2014

Entrepreneurship -6th Edition Lecture prepared by Madam Amina Sadaf

Strategic Issues
Problems of allocation of responsibility between headquarters and subsidiaries concern the degree of decentralization. This responsibility occurs in 3 stages:
Stage 1:
Making his first movements in the international business , an entrepreneur typically follows a highly centralized decision-making. When the business is successful, entrepreneur decentralizes the whole operations. The process of decentralization becomes intolerable once further success is attained. How ? Business operations in the different countries end up in conflict with each other. The balance is maintained when headquarters (base) have reasonable control over major strategic marketing and in-country have the responsibility of tactical implementing strategy.
Page 90

Stage 2:

Stage 3:

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Entrepreneurship -6th Edition Lecture prepared by Madam Amina Sadaf

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Strategic Issues
What is required to for effective planning, reporting and control in international operations.
Environmental Analysis. Strategic Planning. page 90-91

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Entrepreneurship -6th Edition Lecture prepared by Madam Amina Sadaf

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Strategic Issues
The appropriate organizational structure.
Organization level. Human resources and skilled labour.

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Entrepreneurship -6th Edition Lecture prepared by Madam Amina Sadaf

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Strategic Issues
Operational planning
What products should be marketed, at what price, through what channels.

Controlling the market programme

How does the company measures and monitor the plans performance.
Page 91

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Entrepreneurship -6th Edition Lecture prepared by Madam Amina Sadaf

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Entrepreneurial Entry into International Business

The modes of entering and engaging in international business can be divided into three categories: Exporting. Non-equity arrangements. Direct Foreign Investment.
Page 92

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Entrepreneurship -6th Edition Lecture prepared by Madam Amina Sadaf

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Entrepreneurial Entry into International Business

Exporting
Selling goods made in one country to another country. There are two general classifications of exports: Indirect Exporting
Selling goods to another country through a person in the entrepreneurs home country.

Direct Exporting
Selling good to another country by taking care of the transaction. Page 92-93

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Entrepreneurship -6th Edition Lecture prepared by Madam Amina Sadaf

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Entrepreneurial Entry into International Business

Non-Equity Arrangements Doing international business through an arrangement that does not involve any investment. There are three types of non-equity arrangements:
Licensing
Allowing someone else to use something of the companys. Developing and operationalizing something in a foreign country. A method for doing a specific international task. Page 93-94

Turn-key projects Management contracts

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Entrepreneurship -6th Edition Lecture prepared by Madam Amina Sadaf

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Entrepreneurial Entry into International Business

Direct Foreign Investment the percentage of ownership obtained in the foreign venture by the entrepreneur is related to the amount of money invested, the nature of the industry, and the rules of the host government. There are three methods for making direct investment.
Minority interests
Having less than 50% ownership position. Japanese companies have been frequent users of the minority.

Joint ventures

Two companies forming a third company. Concept of synergy? Two parties having things in common.

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Entrepreneurship -6th Edition Lecture prepared by Madam Amina Sadaf

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Entrepreneurial Entry into International Business

Majority interest
Having more than 50% ownership position. Mergers If entrepreneur has the capital, technology, marketing skills --- successful entry in the market, which may increase 100% sales and profit occurs. Horizontal mergers Combination of atleast two firms doing similar business at the same market level. Vertical mergers Combination of atleast two firms at different market levels. Product extension mergers Combination of two firms with noncompeting products. Market extension mergers Combination of atleast two firms with similar products in different geographic markets. Diversified activity mergers Combination of atleast two totally unrelated firms. Page 95-96

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Entrepreneurship -6th Edition Lecture prepared by Madam Amina Sadaf

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Barriers to International Trade

General Agreement on Tariffs and Trade (GATT).
GATT is a multilateral agreement with the objective of liberalizing trade by eliminating or reducing tariffs, subsidies and import quotas.
Page 96-97-98 Reading

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Reading on the following topics over the weekend

Increasing protectionist attitudes. Trade blocs and free trade areas. Entrepreneurship strategy and trade barriers. Entrepreneurial partnering.

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Entrepreneurship -6th Edition Lecture prepared by Madam Amina Sadaf

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