Chapter 12: International 1Copyright 1999 Prentice Hall Publishing Company International Opportunities for Small Business

Chapter 12: International 2Copyright 1999 Prentice Hall Publishing Company Why “Go Global?” l To offset sales declines in the domestic market l To increase sales and profits l To extend products’ life cycles l To lower manufacturing costs l To improve competitive position l To raise quality levels l To become more customer-oriented

Chapter 12: International 3Copyright 1999 Prentice Hall Publishing Company Questions to Consider Before Going Global l Are we willing to commit adequate resources of time, people, and capital to an international campaign? l Can we make money there? l If so, can we get it out? (Is the currency convertible?) l Will we feel comfortable doing business there? (Are we sensitive to the cultural differences of conducting international business?) l Can we afford not to go global?

Chapter 12: International 4Copyright 1999 Prentice Hall Publishing Company Strategies For "Going Global" l The World Wide Web l Relying on Trade Intermediaries. l Joint ventures. l Foreign licensing. l Franchising. l Countertrading and Bartering. l Exporting. l Establishing international locations.

Chapter 12: International 5Copyright 1999 Prentice Hall Publishing Company Four Steps to Conducting Global Business on the WWW 1. Connecting to Building an informational Web site. 3. Conducting international market research electronically. 4. Establishing a secure ordering and payment system for on-line customers.

Chapter 12: International 6Copyright 1999 Prentice Hall Publishing Company Trade Intermediaries l Export Management Companies (EMCs) l Export Trading Companies (ETCs) l Manufacturer’s Export Agents (MEAs) l Export merchants l Resident buying offices l Foreign distributors

Chapter 12: International 7Copyright 1999 Prentice Hall Publishing Company Foreign Joint Ventures l Most foreign joint ventures fail. The average success rate is just 43%. l The most important ingredient in creating a successful joint venture is choosing the right partner. l Each partner must work toward establishing common goals and a relationship based on trust.

Chapter 12: International 9Copyright 1999 Prentice Hall Publishing Company Steps to Successful Exporting l Recognize that even the tiniest companies and least experienced entrepreneurs have the potential to export. l Analyze your product or service. l Analyze your commitment to developing export markets. l Research potential markets and pick your target.

Chapter 12: International 10Copyright 1999 Prentice Hall Publishing Company l Develop a distribution strategy. l Find your customer. l Find financing for export sales. l Ship your goods. l Collect your money. (Continued) Steps to Successful Exporting

How a Letter of Credit Works. How a Letter of Credit Works. $ Foreign buyer agrees to buy products; seller agrees to ship goods if buyer arranges a letter of credit. Buyer requests that his bank grant a letter of credit, which assures exporter payment if she presents documents proving goods were actually shipped. Bank makes out letter of credit to seller and 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. $ Letter of Credit Seller’s BankBuyer's Bank Buyer’s bank makes payment to seller’s (confirming) bank. Confirming bank then pays seller amount specified in letter of credit. $ BuyerSeller $

Chapter 12: International 12Copyright 1999 Prentice Hall Publishing Company Barriers To International Trade l Attitude - "My company is too small to export." l Lack of information about how to get started. l Lack of export financing. Domestic Barriers:

Chapter 12: International 13Copyright 1999 Prentice Hall Publishing Company Barriers To International Trade l Tariffs - Taxes a government imposes on goods and services imported into that country. l Quotas - Limits on the amount of a product imported into a country. l Embargoes - Total bans on imports of certain products. International Barriers:

Chapter 12: International 14Copyright 1999 Prentice Hall Publishing Company l Dumping - Selling large quantities of a product in a foreign country below cost to gain market share. l Political barriers - rules, regulations and risks. l Business barriers - business practices and regulations in foreign lands can be very different. l Cultural barriers - Differing languages, philosophies, traditions, and accepted business practices. Barriers To International Trade International Barriers:

Chapter 12: International 15Copyright 1999 Prentice Hall Publishing Company International Trade Agreements l General Agreement on Tariffs and Trade (GATT) - includes 124 countries in an agreement to reduce tariffs among member nations. l North American Free Trade Agreement (NAFTA) - unified the United States, Canada, and Mexico in a free trade area designed to knock down trade barriers.

Chapter 12: International 16Copyright 1999 Prentice Hall Publishing Company Guidelines For Success In International Markets l Make yourself at home in all three of the world's key markets - North America, Europe, and Asia. l Develop new products for the world market. l Familiarize yourself with foreign customs and languages. l "Glocalize" - make global decisions about products, markets, and management, but allow local employees to make tactical decisions about packaging, advertising, and service.

Chapter 12: International 17Copyright 1999 Prentice Hall Publishing Company l Train employees to think globally, send them on international trips, and equip them with state-of-the- art communication technology. l Hire local managers to staff foreign offices and branches. l Do whatever seems best wherever it seems best, even if people at home lose jobs or responsibilities. l Consider using partners and joint ventures to break into foreign markets you cannot penetrate on your own. Guidelines For Success In International Markets