International Entrepreneurship Opportunities - nubacad

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International Entrepreneurship Opportunities - nubacad Powered By Docstoc
        The Nature of International
n   International entrepreneurship is the process of
    an entrepreneur conducting business activities
    across national boundaries.
n   An entrepreneur entering international business
    must answer the following questions:
n   Is managing international business different from
    managing domestic business?
n   What are the strategic issues to be resolved in
    international business management?
n   What are the options available for engaging in
    international business?
n   How should one assess the decision to enter into
    an international market?
      International vs. Domestic
     Entrepreneurship: Economics
n   Creating a business strategy for a
    multi-country area means dealing
    with differences with the following
n   Levels of economic development
n   Currency valuations
n   Govt. regulations
n   Banking, economic, marketing and
    distribution systems
         International vs. Domestic
    Entrepreneurship: Stage of Economic
n   Roads
n   Electricity
n   Communication systems
n   Banking facilities and systems
n   Adequate educational systems
n   Banking facilities and systems
n   Adequate educational systems
n   A well-developed legal system
n   Established business ethics and norms
        International vs. Domestic
       Entrepreneurship: Balance of
n   A country’s balance of payments
    affects the valuation of its currency.
n   The valuation of one country’s
    currency affects how business of that
    country do business in other
n   Again, devaluation of one currency
    means that the export potential of
    that country is increased.
        International vs. Domestic
    Entrepreneurship: Type of system
n   Instead of using the traditional franchise
    bottling, Pepsi used a barter type
    arrangement that satisfied both the
    socialized USSR and capitalist US.
n   In return for receiving technology and
    syrup from Pepsi, the former USSR
    provided the company with Soviet Vodka
    and the right to distribute it in the US.
n   There are structural differences in
    transition, developing, and developed
International vs. Domestic Entrepreneurship:
         Political-Legal Environment
n   Pricing decisions in a country that has a value
    added tax are different from those decisions
    made by the same entrepreneur in a country with
    no value added tax.
n   Advertising strategy is affected by the variations
    in what can be said in the copy in different
n   Product decisions are affected by legal
    requirements with respect to labeling,
    ingredients, and packaging.
n   The laws governing business arrangements also
    vary greatly in over 150 different legal systems
    and national laws.
International vs. Domestic Entrepreneurship:
            Cultural Environment
n   Entrepreneurs must make sure that each
    element in the business plan has some
    congruence with the local culture.
n   In some countries, POP displays are not
n   Bribes and corruption: how should an
    entrepreneur deal with these situations
    when it may mean losing the business?
International vs. Domestic Entrepreneurship:
         Technological Environment
n   The variation and availability of
    technology is often surprising.
n   New products in a country are
    created based on the conditions and
    infrastructure operant in that
International vs. Domestic Entrepreneurship:
               Strategic Issues
n   Four strategic issues are of immense
n   The allocation of responsibility between
    the domestic and foreign operations.
n   The nature of the planning, reporting and
    control systems to be used throughout
    international operations.
n   The appropriate organizational structure
    for conducting international operations.
n   The degree of standardization possible.
  Strategic Issues: Analyzing data of each
     country on the following six areas:
Market characteristics:
n Size of the market, rate of growth

n Stage of development

n Stage of product life cycle;
  saturation levels
n Buyer behavior characteristics

n Social/cultural factors

n Physical environment
 Strategic Issues: Analyzing data of each
    country on the following six areas:
Marketing institutions:
n Distribution systems

n Communication media

n Marketing services (advertising and
Industry conditions:
n Competitive size and practices

n Technical development
  Strategic Issues: Analyzing data of each
     country on the following six areas:
Legal environment
n Laws, regulations, codes, tariffs and taxes

n Personnel (availability, skill, potential and
n Money (availability and cost)

Political environment
n Current govt. policies and attitudes

n Long range political environment
        Entrepreneurial Entry Into
    International Business: Exporting
n   Export normally involves sale and shipping of products
    manufactured in one country to a customer located in
    another country.
n   Indirect exporting involves having a foreign purchaser in
    the local market or using an export management firm.
n   Direct exporting takes place through independent
    distributors or the company’s own overseas sales office.
n   As more business is done in the overseas sales in the
    foreign market, warehouses are usually opened, followed
    by a local assembly process when sales reach a high
n   The assembly operation can eventually evolve into the
    establishment of manufacturing operation in the foreign
n   Entrepreneurs then export the output from these
    manufacturing operations to other international markets.
      Non-equity Arrangements
n   This involves doing international business
    through an arrangement that does not
    involve any investment.
n   There are three types of non-equity
    arrangements: licensing, turn-key projects
    and management contracts.
n   Entrepreneurs who either cannot export or
    make direct investments still can do
    international business through non-equity
n   This involves an 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
    a loyalty.
n   Bata is selling Hush Puppies shoes in
    its store through an agreement.
             Turn-Key Projects
n   The underdeveloped countries need
    manufacturing technology and infrastructure and
    yet do not want to give up substantial portions of
    their economy to foreign ownership.
n   One solution to this dilemma has been to have a
    foreign entrepreneur build a factory, train the
    workers to operate the equipment, train the
    management to run the installation and then turn
    it over to local owners once the operation starts.
n   Financing is often provided by the local company
    or the govt. with periodic payments being made
    over the life of the project.
       Management Contracts
n   It involves entering international
    business by contracting management
    techniques and managerial skills.
n   These contracts sometimes follow a
    turn-key project where the foreign
    owner wants to use the management
    of the turn-key supplier.
FDI (Foreign Direct Investment)
n   Joint ventures, minority and majority
    equity positions are methods for making
    foreign direct investments.
n   Entrepreneurs have used minority
    positions to gain a foothold to acquire
    experience in a market before making a
    major commitment.
n   When the minority shareholder has
    something of strong value, the ability to
    influence the decision making process is
    often far in excess of the shareholding.
              Joint Ventures
n   Here, two firms get together and form a
    third company in which they share the
    equity. It is used in two situations:
n   When the entrepreneur wants to purchase
    local knowledge as well as an already
    established marketing or manufacturing
n   When rapid entry into a market is needed.
    Motives for forming Joint Ventures
n   Sharing the costs and risks of a project
n   Synergy between firms: synergy in the form of
    people, customers, inventory, plant or equipment
    provides leverage for the joint venture.
n   Obtaining a competitive advantage: a joint
    venture can pre-empt competitors, allowing an
    entrepreneur to access new customers and to
    expand the market base.
n   Joint ventures are used by entrepreneurs to enter
    markets and economies that pose entrance
            Majority Interest
n   Having more than 50% ownership
n   While entering a volatile international
    market, some entrepreneurs take a
    smaller position, which they increase
    up-to 100% as sales and profits
                 100% Ownership
n   If the entrepreneur has the capital, technology and marketing
    skills required for successful entry into a market, there may be no
    reason to share the ownership.
n   There are five types of merger: horizontal, vertical, product
    extension, market extension and diversified activity.
n   A horizontal merger is the combination of two firms that produce
    one or more of the same or closely related products in the same
    geographic area.
n   A vertical merger is the combination of two or more firms in
    successive stages of production.
n   A product extension merger occurs when acquiring and acquired
    companies have related production or distribution activities but do
    not have products that competes directly with each other.
n   A market extension merger is the combination of two firms
    producing the same products but selling them in different
    geographic markets.
n   The diversified activity merger is a conglomerate merger involving
    the consolidation of two essentially unrelated firms.
         Motivations for Merger
n   Economies of scale: economies of scale can occur
    in production, coordination and administration,
    sharing central services such as office
    management and accounting, financial control
    and upper-level management.
n   Unused tax credits: corporate income tax
    regulations allow the net operating losses of one
    company to reduce the taxable income of another
    when they are combined.
n   Benefits received in combining complementary
    resources: entrepreneurs merge with other firms
    to ensure a source of supply for key ingredients,
    to obtain a new technology or to keep the other
    firms product from being a competitive threat.
     Barriers to International Trade:
n   Established in 1947 under US leadership.
n   GATT is a multilateral agreement with the
    objective of liberalizing trade by
    eliminating or reducing tariffs, subsidies,
    and import quotas.
n   GATT membership includes over 100
    nations and has had eight rounds of tariff
    reductions, the most recent being the
    Uruguay round that lasted from 1986-93.

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