ESSENTIALS OF ENTREPRENEURSHIP AND SMALL BUSINESS MANAGEMENT Chapter 15: Global Aspects of Entrepreneurship

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Candice Roberts
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1 Copyright 2016 Pearson Education Inc Section 4: Section Putting 4:

Global Aspects of Entrepreneurship 15-2 Explain why going global has

Describe the principal strategies small businesses have for going

Discuss the major barriers to international trade and their impact on

1 1 Copyright 2016 Pearson Education Inc Section 4: Section Putting 4: the Growing Business the Plan Business to Work: Sources of Funds 15 Global Aspects of Entrepreneurship 15-2 Explain why going global has become an integral part of many small companies marketing strategies. Describe the principal strategies small businesses have for going global. Discuss the major barriers to international trade and their impact on the global economy. Describe the trade agreements that will have the greatest influence on foreign trade in the twentyfirst century

Offset sales declines in the domestic market Increase sales and profits Lower

levels Become more customer-oriented 15-4 Becoming a global entrepreneur requires a

Learning to think globally may be the first and most challenging obstacle an

2 Offset sales declines in the domestic market Increase sales and profits Lower manufacturing costs Lower product cost Improve competitive position Raise quality levels Become more customer-oriented 15-4 Becoming a global entrepreneur requires a different mindset. Learning to think globally may be the first and most challenging obstacle an entrepreneur must overcome on the way to becoming a truly global business. Must have the ability to appreciate, understand, and respect cultural differences

15-7 15-8 It s a low-cost way to be global from

23% of global retail sales will be online by 2015

3 It s a low-cost way to be global from day one. 2.4 billion Web users worldwide: 273 million in United States Nearly 2 billion in other countries 23% of global retail sales will be online by 2015 It s important to think local when creating Web sites to target customers in other countries

4 (continued from 15-7) Trade intermediaries: Domestic agencies that serve as distributors in foreign countries for companies of all sizes. Make the transition to world markets faster and easier for small businesses, but it is important to select an intermediary carefully (continued) Types of intermediaries: Export Management Companies (EMCs) Export Trading Companies (ETCs) Manufacturer s Export Agents (MEAs) Export merchants Resident buying offices Foreign distributors

5 (continued from 15-10) Domestic joint venture: Two or more U.S. companies form an alliance for the purpose of exporting their goods and services abroad. Foreign joint venture: A domestic firm forms an alliance with a company in the target nation. Most important ingredient for success is to choose the right partner Select a partner that shares the company s values and standards of conduct. Define at the outset important issues. Understand your partner s reasons and objectives for forming the joint venture. Spell out in writing exactly how the venture will work and where decision making authority lies. Select a partner with different but compatible skills. Prepare a prenuptial agreement in case of divorce

6 (continued from 15-13) 4. Engage in foreign licensing A relatively simple way for even the most inexperienced business owner to extend his reach into foreign markets. Enter markets quickly and easily with virtually no capital investment. Ideal for companies whose value lies in its intellectual property. Minimize risk by ensuring that proper patents, trademarks, and copyrights are in place (continued from 15-16) 4. Engage in foreign licensing 5. Consider international franchising

7 Steps: 1. Identify the country or countries that are best suited to the franchiser s business concept. 2. Generate leads for potential franchisees. 3. Select quality candidates. 4. Structure the franchise deal. Direct franchising Area development Master franchising (continued from 15-18) 4. Engage in foreign licensing 5. Consider international franchising 6. Use countertrading and bartering Countertrade: A transaction in which a company selling goods in a foreign country agrees to promote investment and trade in that country. Barter: The exchange of goods and services for other goods and services

8 (continued from 15-20) 4. Engage in foreign licensing 5. Consider international franchising 6. Use countertrading and bartering 7. Export Small and medium-size companies account for nearly 98% of the 302,000 U.S. businesses that export, but generate just 1/3 of U.S. exports. Small companies generate $2.1 billion in export sales. Key benefits of exporting: Increased sales and profits. More diversified customer base Do you have a product or service that has been successful domestically? Do you have an international marketing plan? Do you have sufficient production capacity? Do you have sufficient financial resources? Are you committed to developing export markets? Are you committed to serving foreign customers? Do you understand the local market? Do you understand the export payment process?

Research potential markets and pick your target. 15-25 15-26 (continued from 15-25) 5. Develop a distribution strategy. 6.

9 1. Recognize that even the tiniest companies and least experienced entrepreneurs have the potential to export. 2. Analyze your product or service. 3. Analyze your commitment to developing export markets. 4. Research potential markets and pick your target (continued from 15-25) 5. Develop a distribution strategy. 6. Find your customer. U.S. Department of Commerce International Trade Administration 7. Find financing for export sales. 8. Ship your goods. 9. Collect your money

15-28 (continued from 15-22) 4. Engage in foreign licensing 5.

location can offer numerous benefits including: Lower start-up costs.

10 15-28 (continued from 15-22) 4. Engage in foreign licensing 5. Consider international franchising 6. Use countertrading and bartering 7. Export 8. Establish international locations Having an international location can offer numerous benefits including: Lower start-up costs. Lower labor costs. A better understanding of local customer preferences. A better understanding of local business practices

11 (continued from 15-29) 4. Engage in foreign licensing 5. Consider international franchising 6. Use countertrading and bartering 7. Export 8. Establish international locations 9. Use importing and outsourcing Make sure that importing or outsourcing is right for your business. Establish a target cost for your product. Do your research before you leave home. Be sensitive to cultural differences. Do your groundwork (continued) Protect your company s intellectual property. Select a manufacturer. Provide an exact model of the product you want manufactured. Stay in constant contact with the manufacturer and try to build a long-term relationship

Become an expat entrepreneur 15-34 Expat

12 (continued from 15-31) 4. Engage in foreign licensing 5. Consider international franchising 6. Use countertrading and bartering 7. Export 8. Establish international locations 9. Use importing and outsourcing 10. Become an expat entrepreneur Expat entrepreneurs: Keep their citizenship in their home country but live and run their businesses on foreign soil

13 Domestic Barriers Attitude: My company is too small to export. Lack of information about how to get started. Inability to obtain adequate financing (continued) International Barriers Tariffs: A tax a government imposes on goods and services imported into that country. Nontariff barriers: Governments that protect domestic industries (continued) Quotas: Limits on the amount of a product imported into a country. Embargo: Total ban on imports of certain products. Dumping: Selling large quantities of a product in a foreign country below cost to gain market share

14 (continued) Political barriers: Rules, regulations and political risks. Business barriers: Different cost structures and business practices. Cultural barriers: Differing languages, philosophies, traditions, and accepted practices Major agreements reducing barriers to free trade: World Trade Organization (WTO) North American Free Trade Agreement (NAFTA) Dominican Republic - Central America Free Trade Agreement (CAFTA-DR) Take time to learn before jumping in. Seek out assistance from professionals. Make yourself at home in all three of the world s key markets - North America, Europe, and Asia. Appeal to the similarities in the various regions and recognize the differences in local cultures. Develop new products for the world market. Learn foreign customs and languages

(continued) Glocalize - make global decisions about products, markets, and management and allow local employees to make

Hire local managers to staff foreign offices and branches. Do whatever seems best wherever it seems best.

Evaluate opportunities to become an expat entrepreneur.

15 (continued) Glocalize - make global decisions about products, markets, and management and allow local employees to make tactical decisions. Recruit and retain multicultural workers. Train employees to think globally. Hire local managers to staff foreign offices and branches. Do whatever seems best wherever it seems best. Consider using partners and joint ventures to break into foreign markets. Evaluate opportunities to become an expat entrepreneur Global effectiveness requires entrepreneurs to: Learn about the global market. Seek the assistance of professionals. Recruit and train employees to think globally. Consider using partners and joint ventures. Determine which opportunities best fit your company

CHAPTER 4. Competing in World Markets

CHAPTER 4. Competing in World Markets Chapter Summary: Key Concepts Why Nations Trade CHAPTER 4 Competing in World Markets Importing/exporting International sources of factors of production Size of the international marketplace Major world