Ch4 International Entrepreneurial Opportunities

8/12/2019 Ch4 International Entrepreneurial Opportunities

1/20

International EntrepreneurialOpportunities

Chapter :4

3/15/2014 1Entrepreneurship -6th Edition -Lecture prepared by Madam Amina

Sadaf


2/20

Opening Profile

A. Malachi Mixon, III.

Creativity, risk taking and innovation inentrepreneurship are essential not only to theinception of new products and ventures, but also to a

firms successful transition into global markets. Invacare traces its existence in 1895

The firm was involved in manufacturing business ofvehicles especially designed for the physicallychallenged.

The case of Mal Mixons notable revitalization of tinyInvacare Corporations exemplifies the connection ofglobalization.

Page 83


Sadaf


3/20

The nature of InternationalEntrepreneurship

What is an InternationalEntrepreneurship? An entrepreneur doing business across

his or her national boundary. It may consist of exporting, licensing,

opening a sales office in another country,or something as simple as placing a

classified advertisement in anothercountrys newspaper.

Page 86


Sadaf


4/20

The importance of Internationalbusiness to the firm

International business has becomeincreasingly important to firms of all sizesparticularly when every firm is competing in

a hypercompetitive global economy. The successful entrepreneur is someone

who fully understands how internationalbusiness differs from purely domestic

business and to respond accordingly. Page 86


Sadaf


5/20

International Versus DomesticEntrepreneurship

International decisions are more complex due to such uncontrollable factorsas economics, politics, culture and technology. Economics

In a domestic business, a single country, single and local currency. Internationalbusiness is more multitasking i.e currency valuation, government rules, banking,marketing, distribution system etc.

Stage of Economic development

It will be difficult for entrepreneur when a country will be in the process ofdevelopment.

Balance of payment The trades status between countries is known as balance of payment.

Type of System There are many difficulties in doing business in developing and transition

economies.

Problem reflect gaps business plans, product promotion, marketing, accountingsystems etc. Barter trading or Third party arrangements.

Page 87-88


Sadaf


6/20

International versus domesticEntrepreneurship

Political- Legal Environment

The political and legal environments inthe international market creates vastly

different problems, opening somemarket opportunities for entrepreneursand eliminating others.

Page 88


Sadaf


7/20


Cultural Environment

The impact of culture on entrepreneursand strategies is very important

Important aspect of the culturalenvironment in some countries concernsare bribes and corruption.

Page 88


Sadaf


8/20


Technological Issues

Technology varies significantly acrosscountries.

Example U.S cars designers can assumewider roads and less expensive gasolinethan European designers.

Page 90


Sadaf


9/20

Strategic Issues

Four strategic issues are of importance toan entrepreneur going international:

The allocation of responsibility between the local

and foreign operations. The nature of planning, reporting and control

system to be used throughout the internationaloperations.

The appropriate organizational structure forconducting international operations.

The degree of standardization possible.

3/15/2014 9Entrepreneurship -6th Edition -Lecture prepared by Madam AminaSadaf


10/20

Strategic Issues

Problems of allocation of responsibility betweenheadquarters and subsidiaries concern the degree ofdecentralization. This responsibility occurs in 3 stages: Stage 1:

Making his first movements in the international business , anentrepreneur typically follows a highly centralized decision-making.

Stage 2: When the business is successful, entrepreneur decentralizes the whole

operations.

Stage 3: The process of decentralization becomes intolerable once further

success is attained. How ?

Business operations in the different countries end up in conflict witheach other. The balance is maintained when headquarters (base) have reasonable

control over major strategic marketing and in-country have theresponsibility of tactical implementing strategy. Page 90



11/20

Strategic Issues

What is required to for effectiveplanning, reporting and control ininternational operations.

Environmental Analysis.

Strategic Planning.

page 90-91



12/20

Strategic Issues

The appropriate organizationalstructure.

Organization level.

Human resources and skilled labour.



13/20

Strategic Issues

Operational planning

What products should be marketed, atwhat price, through what channels.

Controlling the market programme

How does the company measures andmonitor the plans performance.

Page 91



14/20

Entrepreneurial Entry intoInternational Business

The modes of entering and engagingin international business can bedivided into three categories:

Exporting.

Non-equity arrangements.

Direct Foreign Investment.

Page 92



15/20


Exporting Selling goods made in one country to another

country.

There are two general classifications of exports:

Indirect Exporting Selling goods to another country through a person in

the entrepreneurs home country.

Direct Exporting Selling good to another country by taking care of the

transaction. Page 92-93



16/20


Non-Equity Arrangements

Doing international business through an arrangementthat does not involve any investment.

There are three types of non-equity arrangements:

Licensing Allowing someone else to use something of the companys.

Turn-key projects Developing and operationalizing something in a foreign

country.

Management contracts

A method for doing a specific international task. Page 93-94



17/20


Direct Foreign Investment the percentage of ownership obtained in the foreign

venture by the entrepreneur is related to the amountof money invested, the nature of the industry, andthe rules of the host government.

There are three methods for making directinvestment. Minority interests

Having less than 50% ownership position. Japanese companies have been frequent users of the

minority.

Joint ventures Two companies forming a third company. Concept of synergy?

Two parties having things in common.



18/20


Majority interest Having more than 50% ownership position. Mergers

If entrepreneur has the capital, technology, marketing skills ---- successful entry in the market, which may increase 100%sales and profit occurs.

Horizontal mergers

Combination of atleast two firms doing similar business at thesame market level.

Vertical mergers

Combination of atleast two firms at different market levels.

Product extension mergers

Combination of two firms with noncompeting products.

Market extension mergers

Combination of atleast two firms with similar products indifferent geographic markets.

Diversified activity mergers

Combination of atleast two totally unrelated firms.

Page 95-96



19/20

Barriers to International Trade

General Agreement on Tariffs andTrade (GATT).

GATT is a multilateral agreement withthe objective of liberalizing trade byeliminating or reducing tariffs, subsidiesand import quotas.

Page 96-97-98

Reading



20/20

Reading on the following topicsover the weekend

Increasing protectionist attitudes.

Trade blocs and free trade areas.

Entrepreneurship strategy and tradebarriers.

Entrepreneurial partnering.


Ch4 International Entrepreneurial Opportunities

Documents

Transcript of Ch4 International Entrepreneurial Opportunities