Fundamental of Entrepreneurship

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Presentation transcript:

Fundamental of Entrepreneurship Objectives At the end of lecture students should be able to: Explain why "going global" has become an integral part of many small companies’ strategies. Describe the eight principal strategies small businesses can use to go global. Explain how to build a successful export program. 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. BENTR2101 Fundamental of Entrepreneurship

Fundamental of Entrepreneurship Topics Covered Why going global? Strategies for going global International trade Barrier in international trade BENTR2101 Fundamental of Entrepreneurship

Fundamental of Entrepreneurship Why “Go Global?” Offset sales declines in the domestic market Increase sales and profits Extend products’ life cycles Lower manufacturing costs Improve competitive position Raise quality levels Become more customer-oriented BENTR2101 Fundamental of Entrepreneurship

Questions to Consider Before Going Global Is there a profitable market in which our company has the potential to be successful over the long run? (see Table 12.1) Do we have and are we willing to commit adequate resources of time, people, and capital to a global campaign? Are domestic pressures forcing our company to consider global opportunities? BENTR2101 Fundamental of Entrepreneurship

Questions to Consider Before Going Global Do we understand the cultural differences, history, economics, values, opportunities, and risks of conducting business in the country we are considering? Is there a viable exit strategy for our company if conditions change or the new venture does not succeed? Can we afford not to go global? BENTR2101 Fundamental of Entrepreneurship

Eight Strategies for Pursuing Global Markets BENTR2101 Fundamental of Entrepreneurship

Strategies For "Going Global" Launching a World Wide Web site BENTR2101 Fundamental of Entrepreneurship

Fundamental of Entrepreneurship BENTR2101 Fundamental of Entrepreneurship

Strategies For "Going Global" Launching a World Wide Web site Relying on trade intermediaries BENTR2101 Fundamental of Entrepreneurship

Fundamental of Entrepreneurship Trade Intermediaries Export Management Companies (EMCs) Export Trading Companies (ETCs) Manufacturer’s Export Agents (MEAs) Export merchants Resident buying offices Foreign distributors BENTR2101 Fundamental of Entrepreneurship

Strategies For "Going Global" Launching a World Wide Web site Relying on trade intermediaries Joint ventures BENTR2101 Fundamental of Entrepreneurship

Fundamental of Entrepreneurship Joint Ventures 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: Choosing the right partner. Another key to success: Establishing common objectives. BENTR2101 Fundamental of Entrepreneurship

Strategies For "Going Global" Launching a World Wide Web site Relying on trade intermediaries Joint ventures Foreign licensing International franchising Countertrading and bartering Exporting BENTR2101 Fundamental of Entrepreneurship

Fundamental of Entrepreneurship Exporting Small companies account for 97% of all companies involved in exporting, but… They generate just one-third of the U.S. export sales. Only 1% of all small and medium-sized businesses export; twice as many are capable of exporting but are not doing so. BENTR2101 Fundamental of Entrepreneurship

Fundamental of Entrepreneurship Source: Exporter Data Base, U.S. Dept of Commerce, Office of Trade and Economic Analysis, Trade Development/International Trade Agency. BENTR2101 Fundamental of Entrepreneurship

Steps to Successful Exporting 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. BENTR2101 Fundamental of Entrepreneurship

Steps to Successful Exporting 5. Develop a distribution strategy. 6. Find your customer. U.S. Department of Commerce International Trade Administration Find financing for export sales. SBA, EX-IM Bank, OPIC, and others 8. Ship your goods. 9. Collect your money. BENTR2101 Fundamental of Entrepreneurship

How a Letter of Credit Works. Seller Buyer Foreign buyer agrees to buy products; seller agrees to ship goods if buyer arranges a letter of credit. Seller ships goods to buyer according to letter of credit’s terms and submits shipping documents to bank issuing letter of credit. Seller’s Bank Buyer's Bank $ $ $ 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). Buyer’s bank makes payment to seller’s (confirming) bank. Confirming bank then pays seller amount specified in letter of credit. BENTR2101 Fundamental of Entrepreneurship

Strategies For "Going Global" Launching a World Wide Web site Relying on trade intermediaries Joint ventures Foreign licensing International franchising Countertrading and bartering Exporting Establishing international locations BENTR2101 Fundamental of Entrepreneurship

Barriers To International Trade Domestic Barriers: Attitude - "My company is too small to export." Lack of information about how to get started. Lack of export financing. BENTR2101 Fundamental of Entrepreneurship

Barriers To International Trade International Barriers: Tariffs - Taxes a government imposes on goods and services imported into that country. Quotas - Limits on the amount of a product imported into a country. Embargoes - Total bans on imports of certain products. BENTR2101 Fundamental of Entrepreneurship

Barriers To International Trade International Barriers: Dumping - Selling large quantities of a product in a foreign country below cost to gain market share. Political barriers - rules, regulations and risks. Business barriers – business practices and laws. Cultural barriers - Differing languages, philosophies, traditions, and accepted business practices. BENTR2101 Fundamental of Entrepreneurship

International Trade Agreements General Agreement on Tariffs and Trade (GATT) and the World Trade Organization (WTO) North American Free Trade Agreement (NAFTA) BENTR2101 Fundamental of Entrepreneurship

Guidelines For Success In International Markets Make yourself at home in all three of the world's key markets - North America, Europe, and Asia. Appeal to the similarities within the various regions in which you operate but recognize the differences in their particular cultures. Be willing to commit the necessary resources to make your global efforts successful. Develop new products for the world market. BENTR2101 Fundamental of Entrepreneurship

Guidelines For Success In International Markets Use the many resources available to research potential markets and to determine the ideal target for your products. Familiarize yourself with foreign customs and languages. Learn to understand your customers from the perspective of their culture, not your own. BENTR2101 Fundamental of Entrepreneurship

Guidelines For Success In International Markets "Glocalize" - Make global decisions about products, markets, and management, but allow local employees to make tactical decisions about packaging, advertising, and service. Make positive and preferably visible contributions to the local community. BENTR2101 Fundamental of Entrepreneurship

Guidelines For Success In International Markets Train employees to think globally, send them on international trips, and equip them with state-of-the-art communication technology. Hire local managers to staff foreign offices and branches. BENTR2101 Fundamental of Entrepreneurship

Guidelines For Success In International Markets Do whatever seems best wherever it seems best, even if people at home lose jobs or responsibilities. Consider using partners and joint ventures to break into foreign markets you cannot penetrate on your own. BENTR2101 Fundamental of Entrepreneurship