1. 1 ENTREPRENEURSHIP, 4/e By Lambing and Kuehl PRENTICE HALL ©2007 by Pearson Education, Inc. Upper Saddle River, NJ 07458 Chapter 11: Global Business

2. 2 ENTREPRENEURSHIP, 4/e By Lambing and Kuehl PRENTICE HALL ©2007 by Pearson Education, Inc. Upper Saddle River, NJ 07458 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. 3 ENTREPRENEURSHIP, 4/e By Lambing and Kuehl PRENTICE HALL ©2007 by Pearson Education, Inc. Upper Saddle River, NJ 07458 Trade Barriers Measures by which a country discourages or prohibits goods from other countries entering its markets

4. 4 ENTREPRENEURSHIP, 4/e By Lambing and Kuehl PRENTICE HALL ©2007 by Pearson Education, Inc. Upper Saddle River, NJ 07458 Tariffs A tax levied on imports, often to discourage importation

5. 5 ENTREPRENEURSHIP, 4/e By Lambing and Kuehl PRENTICE HALL ©2007 by Pearson Education, Inc. Upper Saddle River, NJ 07458 Factors Improving Free Trade Among Countries Low tariffs (below 4 percent) Technological change

6. 6 ENTREPRENEURSHIP, 4/e By Lambing and Kuehl PRENTICE HALL ©2007 by Pearson Education, Inc. Upper Saddle River, NJ 07458 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. 7 ENTREPRENEURSHIP, 4/e By Lambing and Kuehl PRENTICE HALL ©2007 by Pearson Education, Inc. Upper Saddle River, NJ 07458 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. 8 ENTREPRENEURSHIP, 4/e By Lambing and Kuehl PRENTICE HALL ©2007 by Pearson Education, Inc. Upper Saddle River, NJ 07458 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. 9 ENTREPRENEURSHIP, 4/e By Lambing and Kuehl PRENTICE HALL ©2007 by Pearson Education, Inc. Upper Saddle River, NJ 07458 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. 10 ENTREPRENEURSHIP, 4/e By Lambing and Kuehl PRENTICE HALL ©2007 by Pearson Education, Inc. Upper Saddle River, NJ 07458 Why Firms Don’t Export Have not yet sold products to all states in the United States Lack of knowledge about exporting

11. 11 ENTREPRENEURSHIP, 4/e By Lambing and Kuehl PRENTICE HALL ©2007 by Pearson Education, Inc. Upper Saddle River, NJ 07458 Export Plan Document that includes: International markets that will be targeted Products it will export How it will reach the markets Export objectives

12. 12 ENTREPRENEURSHIP, 4/e By Lambing and Kuehl PRENTICE HALL ©2007 by Pearson Education, Inc. Upper Saddle River, NJ 07458 Two Approaches to Exporting Indirect Involves another company or individual Direct Company exports on its own

13. 13 ENTREPRENEURSHIP, 4/e By Lambing and Kuehl PRENTICE HALL ©2007 by Pearson Education, Inc. Upper Saddle River, NJ 07458 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. 14 ENTREPRENEURSHIP, 4/e By Lambing and Kuehl PRENTICE HALL ©2007 by Pearson Education, Inc. Upper Saddle River, NJ 07458 Indirect Exporting (cont.) International Trading Company Provide broader array of services than EMC Capabilities in Transportation Financing Production Marketing

15. 15 ENTREPRENEURSHIP, 4/e By Lambing and Kuehl PRENTICE HALL ©2007 by Pearson Education, Inc. Upper Saddle River, NJ 07458 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. 16 ENTREPRENEURSHIP, 4/e By Lambing and Kuehl PRENTICE HALL ©2007 by Pearson Education, Inc. Upper Saddle River, NJ 07458 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. 17 ENTREPRENEURSHIP, 4/e By Lambing and Kuehl PRENTICE HALL ©2007 by Pearson Education, Inc. Upper Saddle River, NJ 07458 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. 18 ENTREPRENEURSHIP, 4/e By Lambing and Kuehl PRENTICE HALL ©2007 by Pearson Education, Inc. Upper Saddle River, NJ 07458 Government Assistance International Trade Administration Export Assistance Centers District Export Councils Office of International Trade

19. 19 ENTREPRENEURSHIP, 4/e By Lambing and Kuehl PRENTICE HALL ©2007 by Pearson Education, Inc. Upper Saddle River, NJ 07458 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. 20 ENTREPRENEURSHIP, 4/e By Lambing and Kuehl PRENTICE HALL ©2007 by Pearson Education, Inc. Upper Saddle River, NJ 07458 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. 21 ENTREPRENEURSHIP, 4/e By Lambing and Kuehl PRENTICE HALL ©2007 by Pearson Education, Inc. Upper Saddle River, NJ 07458 Importing Goods Entry Inspection Appraisal Classification Liquidation