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PowerPoint Presentation by Charlie CookPowerPoint Presentation by Charlie Cook

Copyright Copyright © © 2003 South-Western College Publishing.2003 South-Western College Publishing. All rights reserved.All rights reserved.

Global Global OpportunitiesOpportunities

44

Entrepreneurial Strategy

12e

Copyright © by South-Western College Publishing. All rights reserved. 4–2

Looking AheadLooking AheadLooking AheadLooking Ahead

After studying this chapter, you should be able to:

1. Describe the potential of small firms as global enterprises.

2. Identify the basic forces prompting small firms to engage in global expansion.

3. Identify an compare strategy options for global businesses.

4. Explain the challenges that global enterprises face.

5. Recognize the source of assistance available to support international business efforts.


Small Businesses as Global EnterprisesSmall Businesses as Global EnterprisesSmall Businesses as Global EnterprisesSmall Businesses as Global Enterprises

• Globalization–The expansion of international business,

promoted by converging market preferences, falling trade barriers, and the integration of national economies.Size does not limit a firm’s international

activity, and small companies often become global competitors to take advantage of their unique resources.


Questions to Consider Before Going GlobalQuestions to Consider Before Going GlobalQuestions to Consider Before Going GlobalQuestions to Consider Before Going Global

• What are management’s objectives?–reasons, commitment, expected payoff

• How prepared is management to go global?–in-house expertise, responsibility for and time

allocated to international operations, organizational structure.

• Is there sufficient production capacity?–Present capacity, effect of international operations

on local production

• Is there enough financial capacity


Before Going Global Before Going Global Before Going Global Before Going Global

• Decide if firm is up to the task of globalization.• Study the different cultural, political and

business practices in foreign markets.• Be prepared to modify products

to meet design specifications that may vary from county to country.


Forces Driving Global EnterprisesForces Driving Global EnterprisesForces Driving Global EnterprisesForces Driving Global Enterprises

Fig. 4.2

GlobalExpansion

Expanding Markets

Traditional motivation: Extend theproduct life cycle.

EMERGING MOTIVATION: FIND BUYERS FOR HIGHLY SPECIALIZED PRODUCTS.

Cutting Costs

Traditional motivation: Reduce laborand transportation costs.

EMERGING MOTIVATION: OBTAIN TARIFF REDUCTIONS.

Gaining Access to Resources

Traditional motivation: Find rawmaterials.

EMERGING MOTIVATION: OBTAINHUMAN RESOURCES.

Capitalizing on Special Features of the Location

Traditional motivation: Profit from unique local features, such as Italian artisans' flair for design.

EMERGING MOTIVATION: FOLLOW LARGE CLIENT FIRMS THAT LOCATE ABROAD.


Expanding the Market:Expanding the Market:Making the Most of ExperienceMaking the Most of Experience

Expanding the Market:Expanding the Market:Making the Most of ExperienceMaking the Most of Experience

• Experience Curve Efficiencies–Per-unit savings gained from the repeated

production of the same good.

• Learning Effects–Insights gained from experience, that lead to

improved work performance.

• Economies of Scale–Efficiencies that result from the expansion of

production.


Big Emerging MarketsBig Emerging MarketsBig Emerging MarketsBig Emerging Markets

Source: World Bank, “Selected World Development Indicators,” World Development Report 2000/2001, pp. 274–275.

Country Population (in millions)

1999 Wealth (GNP per capita)

1998–1999 Economic Growth

(%)

Argentina 37 7,600 –4.1

Brazil 168 4,420 –3.2

China 1,250 780 7.2

India 998 450 6.9

Indonesia 207 580 1.9

Mexico 97 4,400 4.1

Poland 39 3,960 3.4

South Africa 42 3,160 .8

South Korea 47 8,490 11.0

Turkey 64 2,900 –6.4

World 5,975 4,890 2.7


Strategy Options for Global EnterprisesStrategy Options for Global EnterprisesStrategy Options for Global EnterprisesStrategy Options for Global Enterprises

Fig. 4.3

InternationalStrategic Alliances Importing

InternationalFinancing

ExportingEstablishing an

InternationalPresence

Global

Strategy

Options

ForeignLicensing


Strategy Options for Global FirmsStrategy Options for Global FirmsStrategy Options for Global FirmsStrategy Options for Global Firms

• Exporting–Selling products in the home country to

customers in another country–Trade mission

A trip organized to help small business owners make direct contact with potential buyers abroad

• Importing–Selling goods produced in

another country to buyers in the home country


Strategy Options for Global Firms (cont’d)Strategy Options for Global Firms (cont’d)Strategy Options for Global Firms (cont’d)Strategy Options for Global Firms (cont’d)

• Foreign Licensing–Allowing a company in another country to

purchase the right to manufacture and sell a company’s products in international markets

–LicenseeThe company buying the licensing rights

–LicensorThe company selling the licensing rights

–RoyaltiesFees paid by the licensee to the licensor

for each unit produced under a licensing contract



• International Franchising–Selling a standard package of products, systems,

and management services to a company in another country



• International Strategic Alliances–A combination of efforts and/or assets of

companies in different countries for the sake of pooling resources and sharing the risks of an enterprise



• Establishing an International Presence–Cross-border acquisition

Purchase by a business in one country of a company located in another country

–Greenfield ventureA wholly owned subsidiary formed

“from scratch” in another country


““Country Risk Rankings” Country Risk Rankings” ““Country Risk Rankings” Country Risk Rankings”

Fig. 4.4

Least Risky Moderately Risky Most Risky


Challenges to Global BusinessChallenges to Global BusinessChallenges to Global BusinessChallenges to Global Business

• Political Risk–The potential for political forces in a country to

negatively affect the performance of businessess operating within

• Economic Risk–The probability that a government will mismanage

its economy and thereby change the business environment in ways that hinder the performance of firms operating there.Exchange rates—the value of one country’s

currency relative to that of another country.


Challenges to Global Business (cont’d)Challenges to Global Business (cont’d)Challenges to Global Business (cont’d)Challenges to Global Business (cont’d)

• Managerial Limitations–Product planning–Marketing–Finance–Management–Accounting–Legal issues


Assistance for Global EnterprisesAssistance for Global EnterprisesAssistance for Global EnterprisesAssistance for Global Enterprises

• Analyzing Markets and Planning Strategies–Small Business Administration resources

Office of International TradeU.S. Export Assistance Centers (USEACs)Publications

–Opportunities in Exporting

– SBA Guide to Exporting

–Department of CommerceInternational Trade Administration

–Visit the foreign country


Assistance for Global Enterprises (cont’d)Assistance for Global Enterprises (cont’d)Assistance for Global Enterprises (cont’d)Assistance for Global Enterprises (cont’d)

• Connections With International Customers–Trade Leads–Trade Missions–Trade Intermediaries

Export management companiesExport trading companiesExport agents, merchants,

or remarketersPiggyback marketers


Assistance for Global Enterprises (cont’d)Assistance for Global Enterprises (cont’d)Assistance for Global Enterprises (cont’d)Assistance for Global Enterprises (cont’d)

• Financing–Private banks

Letters of credit—an agreement issued by a bank to honor a draft or other demand for payment when specified conditions are met.

Bill of lading—a document indicating that a product has been shipped and the title to that product has been transferred