1 ENTREPRENEURSHIP, 4/e By Lambing and Kuehl PRENTICE HALL ©2007 by Pearson Education, Inc. Upper Saddle River, NJ Chapter 11: Global Business

2 ENTREPRENEURSHIP, 4/e By Lambing and Kuehl PRENTICE HALL ©2007 by Pearson Education, Inc. Upper Saddle River, NJ Learning Objectives To become convinced that small firms should consider exporting and importing To appreciate the range of approaches that may be used to enter foreign markets To know that there are widely accepted procedures for reducing the risk of doing business with an individual or firm in another country To be aware of the wide range of government programs to assist entrepreneurs interested in exporting

3 ENTREPRENEURSHIP, 4/e By Lambing and Kuehl PRENTICE HALL ©2007 by Pearson Education, Inc. Upper Saddle River, NJ Trade Barriers Measures by which a country discourages or prohibits goods from other countries entering its markets

4 ENTREPRENEURSHIP, 4/e By Lambing and Kuehl PRENTICE HALL ©2007 by Pearson Education, Inc. Upper Saddle River, NJ Tariffs A tax levied on imports, often to discourage importation

5 ENTREPRENEURSHIP, 4/e By Lambing and Kuehl PRENTICE HALL ©2007 by Pearson Education, Inc. Upper Saddle River, NJ Factors Improving Free Trade Among Countries Low tariffs (below 4 percent) Technological change

6 ENTREPRENEURSHIP, 4/e By Lambing and Kuehl PRENTICE HALL ©2007 by Pearson Education, Inc. Upper Saddle River, NJ International Trade Deficit Amount by which a country’s imports of goods and services exceeds its imports The United States Consumes more than it produces Growing international trade deficit

7 ENTREPRENEURSHIP, 4/e By Lambing and Kuehl PRENTICE HALL ©2007 by Pearson Education, Inc. Upper Saddle River, NJ Reasons to Start Exporting 95 percent of the world’s population is outside the United States Explosive growth of international trade Exporting is easier due to Efforts of the World Trade Organization Treaties such as the North American Free Trade Agreement (NAFTA)

8 ENTREPRENEURSHIP, 4/e By Lambing and Kuehl PRENTICE HALL ©2007 by Pearson Education, Inc. Upper Saddle River, NJ Why Companies Export Use excess capacity Offset decline in domestic market Offset seasonality of sales Reduce dependence on U.S. markets Take advantage of growth in developing countries

9 ENTREPRENEURSHIP, 4/e By Lambing and Kuehl PRENTICE HALL ©2007 by Pearson Education, Inc. Upper Saddle River, NJ Dumping A company sells its products inter- nationally For less than its costs or Below what the company charges in home markets Practice is illegal Often occurs

10 ENTREPRENEURSHIP, 4/e By Lambing and Kuehl PRENTICE HALL ©2007 by Pearson Education, Inc. Upper Saddle River, NJ Why Firms Don’t Export Have not yet sold products to all states in the United States Lack of knowledge about exporting

11 ENTREPRENEURSHIP, 4/e By Lambing and Kuehl PRENTICE HALL ©2007 by Pearson Education, Inc. Upper Saddle River, NJ Export Plan Document that includes: International markets that will be targeted Products it will export How it will reach the markets Export objectives

12 ENTREPRENEURSHIP, 4/e By Lambing and Kuehl PRENTICE HALL ©2007 by Pearson Education, Inc. Upper Saddle River, NJ Two Approaches to Exporting Indirect Involves another company or individual Direct Company exports on its own

13 ENTREPRENEURSHIP, 4/e By Lambing and Kuehl PRENTICE HALL ©2007 by Pearson Education, Inc. Upper Saddle River, NJ Indirect Exporting Export Management Company (EMC) An export specialist that acts as the international marketing department for a company May specialize by industry, geographic area, or both

14 ENTREPRENEURSHIP, 4/e By Lambing and Kuehl PRENTICE HALL ©2007 by Pearson Education, Inc. Upper Saddle River, NJ Indirect Exporting (cont.) International Trading Company Provide broader array of services than EMC Capabilities in Transportation Financing Production Marketing

15 ENTREPRENEURSHIP, 4/e By Lambing and Kuehl PRENTICE HALL ©2007 by Pearson Education, Inc. Upper Saddle River, NJ Indirect Exporting (cont.) Other methods Companies that act as finders for overseas customers Buyers for foreign users Export merchants who buy and ship products in their name Manufacturers who sell products of other companies

16 ENTREPRENEURSHIP, 4/e By Lambing and Kuehl PRENTICE HALL ©2007 by Pearson Education, Inc. Upper Saddle River, NJ Direct Exporting  Company markets its own products in foreign markets  Sales representatives that work for commission pay  Contract with a distributor in a foreign country  Sales directly to foreign retailer  Sales directly to foreign customer such as governments, schools, hospitals

17 ENTREPRENEURSHIP, 4/e By Lambing and Kuehl PRENTICE HALL ©2007 by Pearson Education, Inc. Upper Saddle River, NJ Getting Paid Letter of Credit Document issued by the bank of an international buyer Sent to bank of seller Assures payment when sale is satisfactorily completed

18 ENTREPRENEURSHIP, 4/e By Lambing and Kuehl PRENTICE HALL ©2007 by Pearson Education, Inc. Upper Saddle River, NJ Government Assistance International Trade Administration Export Assistance Centers District Export Councils Office of International Trade

19 ENTREPRENEURSHIP, 4/e By Lambing and Kuehl PRENTICE HALL ©2007 by Pearson Education, Inc. Upper Saddle River, NJ Government Assistance for Financing and Insurance Ex-IM Bank Small Business Administration Department of Commerce Department of Agriculture Trade Development Agency Overseas Private Investment Corporation

20 ENTREPRENEURSHIP, 4/e By Lambing and Kuehl PRENTICE HALL ©2007 by Pearson Education, Inc. Upper Saddle River, NJ Importing Sourcing Uncover sources of a product that offer lower cost or superior quality Opportunity Spotting Identifying an item not available in the United States

21 ENTREPRENEURSHIP, 4/e By Lambing and Kuehl PRENTICE HALL ©2007 by Pearson Education, Inc. Upper Saddle River, NJ Importing Goods Entry Inspection Appraisal Classification Liquidation