2. 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.
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3. Fundamental of Entrepreneurship
Topics Covered
Why going global?
Strategies for going global
International trade
Barrier in international trade
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4. 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
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5. 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?
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6. 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?
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7. Eight Strategies for Pursuing Global Markets
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8. Strategies For "Going Global"
Launching a World Wide Web site
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9. Fundamental of Entrepreneurship
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10. Strategies For "Going Global"
Launching a World Wide Web site
Relying on trade intermediaries
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11. 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
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12. Strategies For "Going Global"
Launching a World Wide Web site
Relying on trade intermediaries
Joint ventures
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13. 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.
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14. Strategies For "Going Global"
Launching a World Wide Web site
Relying on trade intermediaries
Joint ventures
Foreign licensing
International franchising
Countertrading and bartering
Exporting
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15. 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.
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16. Fundamental of Entrepreneurship
Source: Exporter Data Base, U.S. Dept of Commerce, Office of Trade and Economic Analysis, Trade Development/International Trade Agency.
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17. 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.
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18. 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.
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19. 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.
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20. 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
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21. 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.
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22. 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.
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23. 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.
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24. International Trade Agreements
General Agreement on Tariffs and Trade (GATT) and the World Trade Organization (WTO)
North American Free Trade Agreement (NAFTA)
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25. 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.
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26. 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.
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27. 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.
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28. 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.
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29. 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.
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