Copyright 2008 Prentice Hall Publishing Company 1 Chapter 15: Global Global Aspects of Entrepreneurship

1Chapter 15: Global Copyright 2008 Prentice Hall Publishing Company

Global Aspects of

Entrepreneurship

Global Aspects of

Entrepreneurship


Why “Go Global”?Why “Go Global”? Offset sales declines in the Offset sales declines in the

domestic marketdomestic market Increase sales and profitsIncrease sales and profits Extend products’ life cyclesExtend products’ life cycles Lower manufacturing costsLower manufacturing costs Lower product costLower product cost Improve competitive Improve competitive

positionposition Raise quality levelsRaise quality levels Become more customer-Become more customer-

orientedoriented


Nine Strategies for Going Nine Strategies for Going Global Global

Creating a Web site

Relying on trade intermediaries

Creating joint ventures

Foreign licensing

International franchising

Countertrading and bartering

Exporting

Establishinginternationallocations

Importing andoutsourcing


Strategies for “Going Strategies for “Going Global”Global”

Create a presence on the WebCreate a presence on the Web

Internet Users Worldwide

Africa2.3%

Asia/Pacific Rim37.4%

Europe28.5%

Middle East1.8%

Canada/United States22.2%

Latin America7.8%

Source: Adapted from E-Commerce and Development Report 2003, United Nations Conference on Trade and Development (New York and Geneva: 2003), pp.2-4.


The Web’s Global ReachThe Web’s Global Reach Available 24 hours a day Available 24 hours a day

to anyone anywhere in to anyone anywhere in the world.the world.

1.02 billion Web users 1.02 billion Web users worldwideworldwide

227 million in U.S.227 million in U.S. 795 million in other 795 million in other

countriescountries 49 percent of eBay users 49 percent of eBay users

live outside the U.S.live outside the U.S.


Create a presence on the WebCreate a presence on the Web Rely on trade intermediariesRely on trade intermediaries



Trade IntermediariesTrade Intermediaries

Domestic agencies that serve as Domestic agencies that serve as distributors in foreign countries for distributors in foreign countries for companies of all sizes.companies of all sizes.

Several types:Several types: Export Management Companies (EMCs)Export Management Companies (EMCs) Export Trading Companies (ETCs)Export Trading Companies (ETCs) Manufacturer’s Export Agents (MEAs)Manufacturer’s Export Agents (MEAs) Export merchantsExport merchants Resident buying officesResident buying offices Foreign distributorsForeign distributors



Form joint venturesForm joint ventures

Create a presence on the Web Create a presence on the Web Rely on trade intermediariesRely on trade intermediaries


Joint VenturesJoint Ventures Domestic joint ventureDomestic joint venture – two or more U.S. – two or more U.S.

companies form an alliance for the purpose companies form an alliance for the purpose of exporting their goods and services abroad.of exporting their goods and services abroad.

Foreign joint ventureForeign joint venture – a domestic firm forms – a domestic firm forms an alliance with a company in the target an alliance with a company in the target nation. nation. Most important ingredient: choosing the right Most important ingredient: choosing the right

partnerpartner Use the joint venture as a learning processUse the joint venture as a learning process



Engage in foreign licensingEngage in foreign licensing Consider international franchisingConsider international franchising

Create a presence on the WebCreate a presence on the Web Rely on trade intermediariesRely on trade intermediaries Form joint venturesForm joint ventures


International International FranchisingFranchising

To expand internationally, To expand internationally, franchisers should:franchisers should:

1.1. Identify the country or countries that Identify the country or countries that are best suited to the franchiser’s are best suited to the franchiser’s business concept.business concept.

2.2. Generate leads for potential franchisees.Generate leads for potential franchisees.

3.3. Select quality candidates.Select quality candidates.

4.4. Structure the franchise deal.Structure the franchise deal. Direct franchisingDirect franchising Area developmentArea development Master franchisingMaster franchising



Use countertrading and barteringUse countertrading and bartering ExportExport

Create a presence on the WebCreate a presence on the Web Rely on trade intermediariesRely on trade intermediaries Form joint venturesForm joint ventures Engage in foreign licensingEngage in foreign licensing Consider international franchisingConsider international franchising


ExportingExporting Small companies account for Small companies account for

97 percent of all companies 97 percent of all companies involved in exporting, but involved in exporting, but they generate just 29 they generate just 29 percent of the dollar value of percent of the dollar value of the nation’s exports. the nation’s exports.

Only 12 percent of all of Only 12 percent of all of exporting small companies exporting small companies actively market their actively market their products and services products and services regularly in foreign markets. regularly in foreign markets.

Small Business ExportingNumber of Countries Small Exporters Sell To

One19.5%

Two14.6%

Three15.5%

Four or Five23.8%

Six to Ten17.7%

More than Ten8.8%

Source: NFIB National Small Business Poll: Interntational Trade, National Federation of Independent Businesses, Volume 4, Issue I, 2004, p. 3.


Steps to Successful Steps to Successful ExportingExporting

1. Recognize that even the tiniest 1. Recognize that even the tiniest companies and least companies and least experienced entrepreneurs have experienced entrepreneurs have the potential to export.the potential to export.

2. Analyze your product or service.2. Analyze your product or service.

3. Analyze your commitment to 3. Analyze your commitment to developing export markets.developing export markets.

4. Research potential markets and 4. Research potential markets and pick your target.pick your target.


Steps to Successful Steps to Successful ExportingExporting

5. Develop a distribution strategy.5. Develop a distribution strategy.

6. Find your customer.6. Find your customer. U.S. Department of CommerceU.S. Department of Commerce International Trade International Trade

AdministrationAdministration

7. Find financing for export sales.7. Find financing for export sales.

8. Ship your goods.8. Ship your goods.

9. Collect your money.9. Collect your money.

(Continued)(Continued)

How a Letter of Credit How a Letter of Credit Works.Works.

$

Foreign buyer agrees to buy products;seller agrees to ship goods if buyerarranges a letter of credit.

Buyer requests that his bank grant aletter of credit, which assures exporterpayment if she presents documents proving goods were actually shipped.Bank makes out letter of credit to sellerand sends it to seller’s bank (called the confirming bank).

Seller ships goods to buyer according to letter of credit’s terms and submits shipping documents to bank issuing letter of credit.

$Letterof Credit

Seller’s Bank Buyer's Bank

Buyer’s bank makes payment to seller’s (confirming) bank. Confirming bank then pays seller amount specified in letter of credit.

$

BuyerSeller

$



Establish international locationsEstablish international locations Use importing and outsourcingUse importing and outsourcing

Establish a presence on the WebEstablish a presence on the Web Rely on trade intermediariesRely on trade intermediaries Form joint venturesForm joint ventures Engage in foreign licensingEngage in foreign licensing Consider international franchisingConsider international franchising Use countertrading and barteringUse countertrading and bartering ExportExport


Steps to Successful Steps to Successful Importing or OutsourcingImporting or Outsourcing Make sure that importing or Make sure that importing or

outsourcing is right for your outsourcing is right for your business.business.

Establish a target cost for Establish a target cost for your product.your product.

Do your research before you Do your research before you leave home.leave home.

Be sensitive to cultural Be sensitive to cultural differences. differences.

Do your groundwork.Do your groundwork.


Steps to Successful Steps to Successful Importing or OutsourcingImporting or Outsourcing Protect your company’s Protect your company’s

intellectual property. intellectual property. Select a manufacturer.Select a manufacturer. Provide an exact model of Provide an exact model of

the product you want the product you want manufactured.manufactured.

Stay in constant contact with Stay in constant contact with the manufacturer and try to the manufacturer and try to build a long-term build a long-term relationship.relationship.


Barriers to Barriers to International TradeInternational Trade

Attitude: “My company is too Attitude: “My company is too small to export.”small to export.”

Lack of information about how Lack of information about how to get started.to get started.

Lack of export financing.Lack of export financing.

Domestic Domestic

BarriersBarriers::


Barriers to International Barriers to International TradeTrade

TariffsTariffs - Taxes a government - Taxes a government imposes on goods and services imposes on goods and services imported into that country.imported into that country.

QuotasQuotas - Limits on the amount of a - Limits on the amount of a product imported into a country.product imported into a country.

EmbargoesEmbargoes - Total bans on imports - Total bans on imports of certain products. of certain products.

International International

BarriersBarriers::


Barriers to International Barriers to International TradeTrade

DumpingDumping - Selling large quantities - Selling large quantities of a product in a foreign country of a product in a foreign country below cost to gain market share.below cost to gain market share.

Political barriersPolitical barriers - rules, - rules, regulations, and risks.regulations, and risks.

Cultural barriersCultural barriers - Differing - Differing languages, philosophies, traditions, languages, philosophies, traditions, and accepted business practices.and accepted business practices.

International International

BarriersBarriers::


International Trade International Trade AgreementsAgreements

Major Agreements:Major Agreements: World Trade World Trade

Organization (WTO)Organization (WTO) North American Free North American Free

Trade Agreement Trade Agreement (NAFTA)(NAFTA)

Central America Free Central America Free Trade Agreement Trade Agreement (CAFTA)(CAFTA)


Guidelines for Guidelines for Success inSuccess in

International International MarketsMarkets Make yourself at home in all three of the Make yourself at home in all three of the

world’s key markets - North America, world’s key markets - North America, Europe, and Asia.Europe, and Asia.

Appeal to the similarities in the various Appeal to the similarities in the various regions in which you operate but recognize regions in which you operate but recognize the differences in local cultures. the differences in local cultures.

Develop new products for the world market.Develop new products for the world market. Familiarize yourself with foreign customs Familiarize yourself with foreign customs

and languages.and languages. ““Glocalize” - make global decisions about Glocalize” - make global decisions about

products, markets, and management, but products, markets, and management, but allow local employees to make tactical allow local employees to make tactical decisions about packaging, advertising, and decisions about packaging, advertising, and service.service.


Recruit and retain multicultural workers Recruit and retain multicultural workers who can give your company meaningful who can give your company meaningful insight into the intricacies of global insight into the intricacies of global markets.markets.

Train employees to think globally, send Train employees to think globally, send them on international trips, and equip them them on international trips, and equip them with state-of-the-art communication with state-of-the-art communication technology.technology.

Hire local managers to staff foreign offices Hire local managers to staff foreign offices and branches.and branches.

Do whatever seems best wherever it seems Do whatever seems best wherever it seems best, even if people at home lose jobs or best, even if people at home lose jobs or responsibilities.responsibilities.

Consider using partners and joint ventures Consider using partners and joint ventures to break into foreign markets you cannot to break into foreign markets you cannot penetrate on your own.penetrate on your own.

Guidelines for Success inGuidelines for Success inInternational MarketsInternational Markets

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Copyright 2008 Prentice Hall Publishing Company 1 Chapter 15: Global Global Aspects of Entrepreneurship