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Introduction
Entrepreneurs find it difficult to both manage and expand the venture they created.
To expand a venture, entrepreneurs need to:
Identify opportunities for domestic and international expansion.
Develop different management skills.
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Opening up of controlled economies to market-oriented enterprise.
Self-interest of organizations as well as the impact of external events and forces.
Developing countries need training and education as well as infrastructure to support their development and growth in the next century.
Introduction (cont.)
Opportunity Recognition and the Opportunity Assessment Plan
The key to successful domestic and international entrepreneurship is to develop an idea that has a market with a need for the product or service idea conceived.
Opportunity assessment is often best accomplished by developing an opportunity assessment plan.
An opportunity assessment plan is not a business plan.
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The first section develops the idea, analyzes competitive products and companies, and identifies the unique selling propositions.
The second section focuses on the market—its size, trends, characteristics, and growth rate.
The third section focuses on the entrepreneur’s and management team’s skills and experience.
The final section develops a time line indicating the steps to successfully launch the venture.
Opportunity Recognition and the Opportunity Assessment Plan (cont.)
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Information Sources
General Information
SCORE is a nonprofit organization that provides free online and in-person assistance.
Small Business Development Centers provides counseling, training, and technical assistance on all aspects of managing a new venture.
Plunkett - Industry data, market research, trends, statistics on markets, and forecasts.
Frost and Sullivan - Industry specific information.
Euromonitor – Information on consumer market sizes, marketing parameters, companies, and brands.
Gartner - Information on technology markets.
Gale Directory Library - Industry statistics and information on nonprofit organizations and associations.
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Business Source Complete - Provides company and industry information by scanning the Datamonitor reports.
Hoovers - Provides information on both large and small companies with links to competitors in the same NAICS (North American Industrial Classification System) category.
Mergent - Provides detailed company and product information on U.S. and international companies.
Information Sources (cont.)
Search Engines
There are many key terms for searching the needed industry, market, and competitive information.
Trade Associations
Trade Publications
Provide information and insights on trend, companies, and trade shows from a local perspective of the particular market and market conditions.
Information Sources (cont.)
International entrepreneurship is the process of an entrepreneur conducting business activities across national boundaries.
The activities necessary for ascertaining and satisfying the needs and wants of target consumers take place in more than one country.
With a commercial history of only 300 years, the United States is a relative newcomer to the international business arena.
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The Importance of International Business to the Firm
International business has become increasingly important to firms of all sizes.
A successful entrepreneur must be able to:
Fully understand the difference between domestic and international business.
Respond accordingly thereby successfully “going global.”
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Economics
In a domestic business strategy, the entire country is organized under a single economic system and has the same currency.
Creating a business strategy for a multicountry area means dealing with differences in:
Levels of economic development.
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Stage of Economic Development
Certain factors significantly impact a firm’s ability to successfully engage in international business such as:
Fundamental infrastructures.
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Balance of Payments Current Account
With the present system of flexible exchange rates, a country’s current account (the difference between the value of a country’s imports and exports over time) affects the valuation of its currency.
The valuation of one country’s currency affects business transactions between countries.
International versus Domestic Entrepreneurship (cont.)
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Type of System
Difficulties in doing business in economies that are developing, or in transition.
Use of barter or third-party arrangements in these countries to increase business activity.
Barter - A method of payment using nonmoney items.
Third-party arrangements - Paying for goods indirectly through another source.
International versus Domestic Entrepreneurship (cont.)
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Political-Legal Environment
Political risk analysis - An assessment of a country’s political policies and its stability prior to entry.
Types of political risks:
International versus Domestic Entrepreneurship (cont.)
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Its business practices.
The manner in which business transactions are executed.
The rights and obligations involved in any business transaction between parties.
Critical areas for every entrepreneur:
Property rights.
Contract law.
Product safety.
Product liability.
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Language
One of the biggest problems for the entrepreneur is finding a translator.
Significant problems can occur with careless translation.
Care should be taken to hire a translator whose native tongue is the target language and whose expertise matches that of the original authors.
International versus Domestic Entrepreneurship (cont.)
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The variation and availability of technology are often surprising, particularly to an entrepreneur from a developed country.
New products in a country are created based on the conditions and infrastructure operant in that country.
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Figure 5.1
Available Distribution Systems
Factors to be considered in determining the distribution system for a country:
Overall sales potential.
Cost of the product.
Geographical size and density.
Strategic Effects of Going Global
Physical and psychological closeness to the international market affects the way business occurs.
Cultural variables, language, and legal factors can make a foreign market that is geographically close seem psychologically distant.
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Issues involved in psychological distance:
The distance envisioned by the entrepreneur may be based more on perception than reality.
Closer psychological proximity makes it easier for an entrepreneurial firm to enter a market.
There are more similarities than differences between individual entrepreneurs regardless of the country.
Strategic Effects of Going Global (cont.)
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Develop appropriate indicators.
Analyze the data.
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They can facilitate business transactions and update the entrepreneur on business, economic, and political conditions.
Good partners share the entrepreneur’s vision, are unlikely to exploit the partnership, and can help the entrepreneur achieve his or her goals.
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Established in 1947 under U.S. leadership; includes over 100 nations.
Objective - To liberalize trade by eliminating or reducing tariffs, subsidies, and import quotas.
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Support of GATT resulted in:
Strain on the world trading system and the economic success of countries perceived as not playing by rules.
Establishment of bilateral voluntary export restraints to circumvent GATT.
Trade Blocs and Free Trade Areas
Free Trade Area (FTA).
European Community (EC).
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Trade barriers increase entrepreneurs’ costs of exporting products or semifinished products to a country.
Voluntary export restraints may limit entrepreneurs’ ability to sell products in a country from production facilities outside the country.
Entrepreneurs may have to locate assembly or production facilities in a country to conform to local content regulations.
Barriers to International Trade (cont.)