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International Entrepreneurship By, Dr. Nina Radojevich-Kelley Metropolitan State University of Denver School of Business Department of Management

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Presentation on theme: "International Entrepreneurship By, Dr. Nina Radojevich-Kelley Metropolitan State University of Denver School of Business Department of Management"— Presentation transcript:

1 International Entrepreneurship By, Dr. Nina Radojevich-Kelley Metropolitan State University of Denver School of Business Department of Management

2 International Entrepreneurship Definition “process of an entrepreneur conducting business activities across national boundaries” (Hisrich, 2013) Exporting, licensing, having a sales office in another country

3 STATS  85% of the world’s population lives in developing countries  infrastructure development is needed  Over half of world’s population lives in Asia  China has 20% of world’s population  India twice the size of Latin America  Many new market opportunities and transitioning countries…huge opportunities exist  Russia, Serbia, China, Malaysia, Peru, Vietnam, Iraq, countries in Africa

4 International Entrepreneurship Many potential markets and prospective countries available Foreign market selection is critical issue Should you… enter the top country, select the largest potential market or one that is easier to navigate? Should you go into a developed market? Or developing market? Decision…. Based on past sales, competitive positioning and assessment of EACH foreign market alternative Collect data on a regional (EU) and country basis (Southeastern China)

5 BEFORE expanding abroad: Entrepreneurs should….. Assess key indicators Collect and analyze data (primary and secondary) Look at stats for 3 year period of time (or more) to see trends Secondary Data NAICS codes- look for equivalent industry reports Doing Business Abroad reports GEM reports STAT-country (STAT-USA) CIA World fact book Index on Economic Freedom Humanitarian Response Index GLOBUS National Trade Database Look at country rankings & cultural perceptions

6 Motivations for GOING International?  Increase profits  95% of world’s population lives outside of USA =$  Competitive pressures  Can’t keep up with low prices…need to manufacture abroad  To avoid increased government regulations  Car manufacturing, chemicals & toxins  Unique product/service  Similar markets elsewhere  Aging population, obesity, autism  Excess production capacity  Have a ton of extra stuff and local market doesn’t want it  Declining home country sales  In latter part of life-cycle  If your technology is obsolete in your country….take it to another country which might see it at revolutionary…new sales opportunities  Take advantage of lower costs  Lower costs in labor, raw materials, manufacturing overhead  Nike, Reebok, Disney  Technological advantage  Tax benefits  Have advantage of having sales office and distribution

7 Things to Consider When Selecting a Country? Language Economy and type of economic system Political and Legal environment Labeling requirements, advertising claims, ingredients, packaging, types of legal ownership, pricing decisions (if Value-Added-Tax) Culture How open is the culture to entrepreneurship? Perceptions of local entrepreneurs How similar/different the culture is from your own Technological Environment Local competitors Opportunity perception Entrepreneurs motivation for expanding international Proximity to customers (physical and psychological closeness) Trade Agreements (regional and free trade) How long does it take to actually form/create a business

8 Best Place for Entrepreneurs to Research Foreign Markets? World Bank Doing Business Abroad Report Ease of doing business Global Entrepreneur Monitor (GEM)

9 Doing Business Abroad World Bank Ranked 185 economies on Ease of Doing Business in 2013 Environment is more or less conducive to starting and operating a business in a given country “TOP” ranked countries have less RED TAPE… More attractive to entrepreneurs…….but is this the complete picture? Concerns with JUST using these reports? Does not take into account the culture, perception among entrepreneurship among citizens, perceived opportunities for starting ventures

10 Doing Business Abroad: Averages a country’s percentile rankings on 10 topics Starting a business # payments, time in days, costs% income per capita, paid-in min. capital (% per capita income) Dealing with construction permits # procedures and # days to obtain permits to build warehouse, cost (% per capita) Getting electricity # procedures and # days to obtain permanent electricity, cost (% per capita) Registering property # procedures and # days required to register property, cost (% per capita) Getting credit degree to which collateral and bankruptcy laws protect the rights of borrowers and lenders and facilitate lending, borrowing history, rules & practices Protecting investors Liability, stakeholder ability to sue directors/officers, transparency of transactions, Paying taxes # payments per year, time it takes to file, % of tax paid on profits, upkeep labor, % tax paid for mandatory contributions (Federal corp income tax, State prop. tax, Sales, federal unemployment tax, other (truck-lease tax, fuel tax) Trading across borders total # documents required per shipment to export/import goods, costs associated with exports/imports (including documents, admin fees for custom clearance, broker fees) Enforcing contracts # of days to resolve dispute, # procedures to enforce contract, and costs of attorney fees and court fees Resolving Insolvency Average time to close a business, average cost of bankruptcy proceedings, recovery rate cents-to-$

11 Top 10 Countries for Entrepreneurship Economy Ease of Doing Business Rank Starting a Business Dealing with Construct Permits Getting Electricity Register Property Getting Credit Protecting Investors Paying Taxes Trading Across Borders Enforcing Contracts Resolving Insolvency Singapore Hong Kong, China New Zealand United States Denmark Norway United Kingdom Korea, Rep Georgia Australia Finland

12 Top 10 Countries for Entrepreneurship Economy Ease of Doing Business Rank Starting a Business Dealing with Construct Permits Getting Electricity Register Property Paying Taxes Trading Across Borders Enforcing Contracts Resolving Insolvency Singapore Per Capita $ 42,930 3 days 3 proced.6% Cost per capita 26 days 11 proced 16.7% cost 36 days 4 proced 28% cost 21 days 5 proced 2.9% cost 5 pymtsYR 82 hrs/yr 6% profit tax 27.6% total Tax4 docu Exprt $ days 21 proced.8 years Cost 1% estate Hong Kong, China Per Capita $ 35,160 3 days 3 proced 1.9% Cost per capita 67 days 6 proced 16.3% cost 41 days 4 proced 1.6% cost 36 days 5 proced 4% cost 3 pymtsYR 78 hrs/yr 17% profit tax 23.% total Tax 6 docu Exprt $ days 27 proced 1.1 years Cost 9% estate New Zealand Per Capita $ 36,648 1 days 1 proced.4% Cost per capita 89 days 6 proced 29.8% cost 50 days 5 proced 76.1% cost 2 days 2 proced.1% cost 8 pymtsYR 152 hrs/yr 28.8% profit tax 33.5.% total Tax 5 docu Exprt $ days 30 proced 1.3 years Cost 4% estate

13 Top 10 Countries for Entrepreneurship Economy Ease of Doing Business Rank Starting a Business Dealing with Construct Permits Getting Electricity Register Property Paying Taxes Trading Across Borders Enforcing Contracts Resolving Insolvency United States Per capita $48, days 6 proced 1.4% Cost per capita 27 days 15 proced 14.4% cost 68 days 4 proced 16.1% cost 12 days 4 proced 3.5% cost 11 pmtsYR 175 hrs/yr 27.6% profit tax 46.7% total Tax 4 docu Exprt $ days 32 proced 1.5years Cost 7% estate Denmark Per Capita $ 60,390 6 days 4 proced.2% Cost per capita PLUS 24.2% capital saved 68 days 8 proced 57.1% cost 38 days 4 proced 119.6% cost 10 days 3 proced.6% cost 10 pymtsYR 130 hrs/yr 20% profit tax 27.% total Tax 4 docu Exprt $ days 35 proced 1 years Cost 4% estate United Kingdom Per Capita $ 37, days 6 proced.7% Cost per capita 99 days 9 proced 62.4% cost 105 days 5 proced 108% cost 29 days 6 proced 4.7% cost 8 pymtsYR 110 hrs/yr 22% profit tax 35.5.% total Tax 4docu Exprt $ days 28 proced 1 years Cost 6% estate

14 Top countries Can’t just take top 10 countries and go forward Doing Business Abroad does not tell entire story Must look at culture (fear of failure), perception among entrepreneurship among citizens, perceived opportunities for starting ventures Funding opportunities (VC, Angel investors) Opportunity for women in entrepreneurship GDP per capita (strength of the economy) Free Trade Agreements Immigration laws Workforce-strength, skills, age Size of market Cultural support Some of the largest countries are the best countries for entrepreneurs, but some of the smaller economies made the list (New Zealand, Chile) Some of the smallest HAVE the great opportunities WITH LESS competition

15 Remember Just because it is easy to start a business in a country does not mean that small businesses are being started Example: Japan, France Always rank in top 20% of countries to start a business in Yet have low rates of entrepreneurship Fear of failure Not supported by culture

16 GEM Report Looks to understand societal attitudes, participant levels, characteristics of entrepreneurs, etc. Entrepreneurship is a good career choice In the EU only 50% of respondents agreed that entrepreneurship was a good career choice In Latin America/Caribbean, the Middle East/North Africa (MENA) and Sub-Saharan Africa regions, over 75% of respondents considered entrepreneurship to be a good career choice Asia Pacific/South Asia region estimated 30% of the population saw opportunities for entrepreneurship Only 17% intended to actually start a business in next 3 yrs

17 Fear of Failure Sub-Saharan Africa exhibited the lowest levels of fear of failure. Only 24% of all respondents indicated that fear of failure would prevent them from starting a business. Latin American and Caribbean economies (28%) had fear of failure which would prevent them from starting a venture Fear of failure generally increases as one moves from early- stage to advanced development levels Greece (61%) and Italy (58%) showed the highest fear of failure levels

18 Perceived Opportunities factor-driven economies (those relying on agriculture or extraction businesses with a heavy reliance on (unskilled) labor and natural resources) had highest perceptions of opportunities for entrepreneurship and intention to start business Middle East & North Africa Algeria, Egypt, Iran, Palestine Sub-Saharan Africa Angola, Botswana, Ethiopia, Ghana, Malawi, Nigeria, Uganda, Zambia Asia Pacific & South Asia (Pakistan) 70% of sub-Saharan African economies had high perceptions about the presence of good opportunities AND 76% believed they have the skills and knowledge to start a business Sub-Saharan Africa reports high levels of entrepreneurship

19 Entrepreneurship Intention The intention to start a venture in next 3 years Factor-driven economies (48%) Middle-East and North African countries, Sub-Saharan Africa Iran, Egypt, Ethiopia, Ghana, Nigeria Efficiency driven economies (26%) European Union (Hungary, Romania, Poland, Lithuania), Non- European union (Croatia, Serbia, Russia, Turkey), Asia Pacific & South Asia (China, Thailand, Malaysia), Latin America & Caribbean (Argentina, Brazil, Chile, Costa Rica, Peru, Panama) Innovation-driven economies (11%) North Africa & Middle East (Israel), South Asia & Asia Pacific (Japan, Singapore, Taiwan), European Union (Austria, Belgium, Denmark, Germany, France, Ireland, Greece, Spain, UK, Sweden, Slovakia, Portugal), non-European Union (Norway, Switzerland), United States

20 Economy ortium.org Perceived Opportunity Perceived Capability Fear of Failure Entrepreneur Intention Good Career Brazil52%54%31%36%86% Nigeria China Japan Singapore Rep. of Kor UK New Zealand Australia Denmark NA Greece Croatia Russia USA

21 Economy ortium.org Total Entrepreneur Rate (18-64 yrs) Necessity Driven Opportunity Driven Brazil Nigeria35 53 China Japan42166 Singapore Rep. of Kor73546 UK91843 New Zealand Australia Denmark5871 Greece73032 Croatia83436 Russia43631 USA132159

22 Conclusion: Top Countries New Zealand Australia Denmark Republic of Korea Canada Singapore Chile UK South Korea Look at Doing Business Abroad Ease of starting business Culture (fear of failure), perception among entrepreneurship among citizens, perceived opportunities for starting ventures (GEM) Funding opportunities (VC, Angel investors) Opportunity for women in entrepreneurship GDP per capita (strength of the economy) Free Trade Agreements Immigration laws Workforce-strength, skills, age Size of market Cultural support

23 Top Countries New Zealand Fast to start (1 day, 1 procedure, costs $ 127), strong GDP ($ 162 Bill), maintained high percentage of companies started annually, strong opportunity driven, strong perceptions, good angel/VC. Stable business climate, good personal freedom, lacks red tape and corruption, corporate tax (28%), good FDI Australia Fast to start (2 days, 2 procedures), strong GDP ($ 1.1 Trill), maintained high percentage of companies started annually, strong opportunity driven, strong perceptions, good angel/VC, Negatives—high tax rates (47.7%), but 50% believe there is excellent opportunity, Australian Free trade Agreement, strong personal freedom and strong business climate Canada Fast to start (5 days, 1 procedure, costs $ 195), strong GDP ($ 1.6 Trill), maintained high percentage of companies started annually, strong opportunity driven, strong perceptions, good angel/VC, low tax rates (28.8% on profits versus USA 46.7%), NAFTA, not many Canadians starting businesses. But lacks innovation, but has strong investor protection

24 Top Countries Denmark GDP is one of highest in world ($59, 684 versus USA $ 48,442)(World Bank, 2012), business-friendly climate, easy to start and run businesses and strong opportunity perceptions, good angel/VC opportunities Chile More VC/angel funding available, growing economy, is one of least restrictive systems in South America for starting a business, good perception for opportunity Start-up Chile- programs created by government to promote innovation..provides $40,000 equity (seed-capital) and a 1 year temporary visitor visa. Tax rate is 25% (lowest of all OECD nations) Singapore Good perceptions and opportunities, economy depends on exports, trade surplus (24% of GDP), BUT scores low on personal freedom, easy to start and run business

25 Top Countries UK Trying to lure entrepreneurs with new type of visa, hard to get a bank loan (only 64% success rate), can settle into UK with in 2 years…depending on how much money you inject into economy, good VC/Angel opportunities, easy to start business, good business climate. Costs $ 257 to start business, takes 13 days, 6 procedures South Korea Fast to start (7day, 5 procedures, $36 dollars), strong GDP ($ 1 Trill), cheap and easy to start, fear of failure is biggest concern (45%), 40% of Koreans work for companies with employees

26 TOP Countries USA??? Fell a little…but still top 10 Still very open to FDI, good opportunities for women, and to entrepreneurs in general, great VC/Angel investor potential, minimal red tape, but……tax rates dampen the business interests (highest statutory tax rate in the world-46% which is the published rate—effective rate is lower), strong business climate, little corruption, good protection on IP, complexity of the tax code is troublesome Good personal freedom and monetary freedom

27 Conclusion: Worst Countries Philippines lowest ranked Asian country and most difficult places to do business in. Low FDI, slow economic growth, unstable legal system, violence and bureaucracy Venezuela Bottom when it comes to ease of paying taxes, getting credit, investor protection laws, and cross-border trading, nationalization of the economy makes it hard for business., hard to withdraw money from your bank, inflation (26%) Nigeria Africa’s largest oil producer, but huge political unrest, growing ethnic tensions, religious tensions make it hard to do business, high corruption, ranks among the lowest in the world for getting electricity (3months) and registering property. Violence, poverty, pollution, political instability

28 Worst Countries Russia Is one of the world’s fastest growing economies, but also one of most difficult places to do business in. One of toughest places in the to get an electricity connection, (9.5 months). Major power outages and lack of investment in power sector. Trade is slow..takes 3x longer compared to other OECD nations Argentina It takes 1 year to get a construction permit, compared to 7 months for Latin American countries. Starting a business takes 26 days. They scared off FDI by defaulting on debt in 2002 Indonesia One of most difficult to start a business. Need 1.5 months to launch a business in Indonesia, hard to get electricity. 15 million households have no access to electricity. Want FDI to provide 2/3 of $ 150 billion needed for infrastructure development in the next five years

29 Step to Expanding Internationally  Research, research and research (see next slide)  Choose an entrepreneur-friendly environment.  Look at the countries that are the most and least friendly to small business.  Turn to Uncle Sam.  Your local U.S. Export Assistance Center (USAEC) can help you with tasksU.S. Export Assistance Center (USAEC)  such as finding pre-screened partners, agents and distributors; conducting background checks and market research; and tracking down relevant trade events in 85 countries.  Investigate suppliers thoroughly.  Use sourcing sites such as Alibaba.com to search for suppliers by country and product (or service).  Avoid placing orders before you have traveled to meet potential new suppliers and tour their factories.  Do references checks BEFORE you sign a deal.  Hit the trade show circuit.  Participants of shows are well-established suppliers of goods /services or logistics experts, such as freight-forwarders and customs brokers  For leads on reputable trade shows, consult your industry association  U.S. Department of Commerce for non-food related businessesU.S. Department of Commerce  U.S. Foreign Agricultural Service, which have offices focused on global trade events.U.S. Foreign Agricultural Service

30 Places to look for Data? Other places to research STAT-country (STAT-USA) CIA World fact book Index on Economic Freedom Humanitarian Response Index GLOBUS National Trade Database Doing Business Abroad GEM


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