THE BORN GLOBALSRizwan Ahmad Khan

Afsheen AkhtarShazia Naureen

THE BORN GLOBALS

Born Global – SequenceRizwan Ahmed Khan Afsheen Akhter Shazia Naureen

• Concept Success Factors Opportunities• Definition Dimensions Threats• Why & How? UPPSALA Model Survival Capacity• Characteristics International Examples Future Research

• Types Examples from Pakistan Conclusion

Born Global – Concept• Individual, independent companies having vision and

strategy to become global.

• Mostly small technology-oriented companies.

• The time at which they decided to become global, varies from immediate to 3 years.

• The firms having an export share of at least 25% of total sales during, at least 2, of the fist 5 years.

• A minimum 2 number of countries being served outside the home country.

• The company size is irrelevant and whole world is the marketplace.

Born Global – Concept (Contd.)

• These firms start international activities right from their inception and enter very distant markets in multiple countries at once.

• They are quite capable of forming joint ventures without prior experience.

• Such firms are labeled as;

o High Technology Start-up Firmso International New Ventureso Infant-Multinationalso Global Start-upso Instant Internationals oro The BORN GLOBALS

Born Global – Definition

(In fact no single, generally accepted definition of BORN GLOBALS is found in the literature, yet.)

Oviatt and McDougall (1994) defined ‘Born Global’ as;

“A business organization that, from inception seeks to derive significant competitive advantage from the use of resources and the sale of outputs in multiple countries.”

Knight (1997) termed ‘Born Global’ as;“A company which, from or near to its founding, seeks to derive a substantial proportion of its revenue from the sale of its products in international markets.”

Born Global – Why?

The Reasons for Emergence of Born Global Firms

• Globalization of market conditions.• Development of technology.• Capability development of people and small firms.• Home market conditions.• Regulatory environment at home market.• Emergence of innovative products.• BG firms are highly entrepreneurial in their international

activities and not opposed to risk-taking abroad. • Eventually, foreign markets are perceived as more

profitable than domestic.

Born Global – How?

Born Global – Characteristics• There are three main noticeable categories of

Internationalization processes:(a) The traditional exporters, who's internationalization

pattern can be described and explained by traditional stages models of internationalization. (e.g. UPPSLA Model)

(b) The firms that leapfrog some stages, e.g., Late starters that have only domestic sales for many years, but then suddenly invest in a distant foreign markets.

(c) The BORN GLOBAL firms.• Although the BORN GLOBAL firms are smaller in size than

traditional MNEs, yet they incorporate similar characteristics i.e., target international markets and scatter value-adding activities.

• These are relatively young and entrepreneurial (aim to cater international markets from inception), so their revenues are generated mostly in foreign markets rather than in their home market.

Born Global – Characteristics (Contd.)

• Since BORN GLOBALS operate on very internationalized markets, they have to think globally when deciding about their activities; – i.e., they have to incorporate considerations about other foreign markets

when they take decision about one particular foreign market.• Frequently characterized as knowledge-intensive

organizations that sell mainly innovative, self-developed technology-based products.

• Have fewer financial and other resources than traditional MNEs.

• Heavy use of information and communications technologies

Born Global – TypesThe intensity of the way in which these firms take on international business can differ in following ways;

• DYNAMIC BORN GLOBALS - Some firms quickly reach a high level of international activity which continues.

• Others reach the same level just as quickly as the Dynamic ones but then slow down and then stabilize – STEADY BORN GLOBALS.

• VOLATILE BORN GLOBALS - Some experience fluctuations in international activities, but have high levels of internationalization during their early growth phase.

• Some young firms with initial high levels of internationalization activities may voluntarily (or involuntarily) decrease their international business – DECREASING BORN GLOBALS.

Born Global – Success Factors

• The success of Born Global firms could be attributed to a number of factors;

oUniqueness (market niche). oTechnology Development.oCommunication Breakthroughs. oGlobal networking and alliances.

• Success in business is achieved in organizations whose senior management is committed to continuously upgrading their technology strengths through innovations, while realizing their business strategic goals.

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Born Global – Success Factors (Contd.)

• In addition, the entrepreneur is singled out as the most significant actor within any Globalization.• The characteristics of entrepreneurs and their related attributes

like;oGlobal vision oManagerial commitment oInternational experience andoPersonal relationships are relevant variables for understanding BG firms.

• Due to the lack of tangible resources, Born Globals control their other intangible resources, these include;

oStrategies.oMarketing orientations.oSkills, know-how andoPrevious experiences.

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Born Global - Dimensions

Starting Time

Scale of Internationalization

Market Scope

Mode of Entry

Born Global – Dimensions• Starting Time: The Product may be innovative, but not the only

venture on earth that is offering a service that solves a given problem. The decision on how you will manage your market entry depends on the magnitude of internal resources (financial and organizational)

• Scale of Internationalization: How big has the market entry to be? It is not only a question of liquid resources but more importantly there are many strategic effects behind a large or small scale market entries.

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Born Global – Dimensions (Contd.)• Market Scope: What kinds of products have global market

potential. They must have a “Distinct Differentiation Strategy” as compared to products that are already on the market. oSuch products must have either unique technology and/or

superior design or unique product/service.oThe know-how, the systems or other highly specialized

competence, including new production methods.

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Born Global – Dimensions (Contd.)Entry ModeThe six major modes of international business are :

1. Imports and exports, 2. Tourism and transportation, 3. Licensing and franchising,

4. Turnkey operations, 5. Management contracts, and 6. Direct and portfolio investment

Born Global – Vs. UPPSALA Model

• phenomenon of ‘Born Global’ firms contradicts the UPPSALA gradual process of internationalization. • It is now presumed that ‘‘gradual internationalization is dead’’.• the shorter product life cycles and the emergence of global

demand cause ‘born global’ firms to adopt an international perspective regardless of age and size .• The need to reach markets of sufficient size and exploit first

mover’s advantages are motivation for firms to internationalize rapidly.

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Born Global – Straight Examples

• F-Secure Corporation: An anti-virus content and computer security company based in Finland. It has 20 country offices and presence in more than 100 countries, with Security Lab operations in Finland and Malaysia. F-Secure claims that it was the first antivirus vendor to establish a presence on the World Wide Web. http://www.f-secure.com/en/web/home_global/home

• Amazon: Online shopping portal for Electronics, Apparels, Computers, Books, DVDs & more (http://www.amazon.com/) Amazon started off as a BORN GLOBAL and used the Internet to grow very fast. It is now even leveraging its customer base by ‘‘renting’’ its customers to affiliates and partners.Amazon Pakistan: http://www.amazon.com/b?ie=UTF8&node=4907 is an online portal for shopping variety of books in Pakistan.

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Born Global – Straight Examples (Contd.)

• Stonesoft Corporation: A publicly owned vendor of network security solutions based in, Finland. Its product portfolio include firewall/VPN devices, IPS (Internet Detection & Prevention Systems) etc. http://www.stonesoft.com/en/

• Other famous Examples Include:

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Born Global – Treaty ExamplesLicensing: A focal firm that grants the right to the foreign partner to use certain intellectual property in exchange for some royalties.

• Mega Bloks (Canadian toymaker) signed an agreement with Disney that gives it the right to manufacture toys that feature Disney characters like Winnie the Pooh, Power Rangers etc.

• Franchising: A Focal firm grants the right to the foreign partner to use an entire business system in exchange for fees and royalties.

• For firms like Subway or KFC, it’s an efficient way to internationalize. In China, Subway is the third-largest U.S. fast-food chain.

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Born Global – Examples from Pakistan

• Founded in 2009 • Head office is in Lahore, Pakistan. • Offers products and services including CRM solutions, web

solutions and mobile software solutions.• Providing its products and services in Australia, Europe and

America. • Annual turnover rate is PKR 32.54 M.• At present 9 employees are working in the company.

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Born Global – Examples from Pakistan

• Software company situated in Lahore, Pakistan.

• Founded in 2009 and serving the markets in Australia, Thailand and United Arab Emirates.

• Currently 8 employees are working with annual turnover of PKR 10.57 M.• Products and services are related to web designing and web

development.

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Born Global – Opportunities• Because of their young age, BORN GLOBALS tend to be

mainly micro or small enterprises. • Entrepreneurs and staff in born globals are highly skilled

and educated, particularly in their knowledge of technology and languages.

• Due to their relationships with other firms and their way of doing business (e.g., outsourcing) their products/services have global reach which creates large enough revenues and cash flows rapidly, to flourish and grow.

• Their business strategies that are not arrogant, but confident and cautious.

• Born global firms are swift learning organizations.

Born Global – Opportunities (Contd.)

• Build new markets by serving unmet needs or specialist niches.

• Geographic distance can become an advantage through the smart application of information and communications technologies and by taking advantage of world time zones.

• Born Globals offer an avenue for new venture success in rapidly globalizing industries.

Born Global – Threats• The pioneering character in terms of young age and lack

of established presence on the market presents significant challenges for the capacity of Born Globals to survive.

• They not only have to master the development of an innovative product suitable for international markets, but also to do it rapidly.

• This requires high levels of technical and managerial expertise, familiarity with procedures and markets and a high level of commitment and engagement.

• Furthermore, a comparatively high level of capital is needed to achieve these multiple tasks.

• Since BGs don’t possess sufficient resources at start-up time to stand up to a serious business mistake, any such mistake heavily damages their personal asset base.

• Consequently, born globals tend to be vulnerable to economic developments and need government support to realise their full potential.

Born Global – Threats (Contd.)

• In theory, any risk-averse firm would not commit its resources to international markets until it reaches a degree of maturity in its home market. However, the home market is frequently negligible for ‘born globals’, as many of them sell their first product in foreign markets.

• Global start ups are riskier than domestic startups.

Born Global – Survival Capacity• The survival of born globals depends on how quickly they

manage to make a profit while at the same time needing to get investment in untested products or processes.

• The establishment of internationally oriented business incubators can provide a comprehensive set of services, including business networking, training, peer review opportunities, and sometimes even with access to potential investors.

• Other examples are granting tax incentives or premiums in public tenders if they outsource some of their business functions to born globals.

Born Global – Survival CapacitySocial Networking Capital:

• A generally accepted characteristic of born globals is that the founder and management team have international networks which play a crucial role in the design and implementation of the business model and create social capital for the firm.

• Consequently, the social capital through networks not only triggers rapid internationalization but also enables continuation and further development of international activity

• As born global enterprises lack abundant tangible capital compared to large MNEs, they may compensate for this via intangible capital through their existing networks

Born Global – Future Research• In the future researchers should the first attempt to be

made is to reach a generally accepted definition of the Born Globals to be studied. As we have seen, the same phenomenon has been given many different names, of which we have adopted the name Born Global in this article.

• For many Born Globals it is a special challenge that they often have to choose hybrid forms of governance structures in their export channels.

• An interesting research question is certainly to analyse how even small firms may make effective use of strategic alliances and networking activities on a worldwide scale. Clearly, this is not an easy task and hence it is a very important managerial issue.

CONCLUSION• While the phenomenon of ‘born global’ firms is

becoming increasingly common, a comprehensive theory explaining its existence is still lacking. o Some scholars focus on international mobility of

know-how and on entrepreneurial vision and capabilities.

o others highlight the importance of informal networks as a catalyst for internationalization.

o while still others suggest combining various schools of thought.

• To create a global mindset among future entrepreneurs, educational initiatives that familiarize the young people with the importance of foreign trade for the national economy will be helpful.

QUESTIONS?

Contacts

Communicate @ EmailRizwan Ahmad Khan rizwan.ahmed.khan@live.co.uk

Afsheen Akhtar sheenriaz1@gmail.com

Shazia Naureen shazianoreen@hotmail.com

Thanks