ESSENTIALS OF ENTREPRENEURSHIP AND SMALL BUSINESS MANAGEMENT ● 6E Chapter 15: Global Aspects of Entrepreneurship CHAPTER Why “Go Global?” 15 In addition to the text Global Aspects of Entrepreneurship Copyright © 2011Pearson Education, Inc. Publishing as Prentice Hall Offset sales declines in the domestic market Increase sales and profits Extend products’ life cycles Lower manufacturing costs Lower product cost Improve competitive position Raise quality levels Become more customer-oriented Ch. 15: The Global Aspects of Entrepreneurship Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 15 - 2 Nine Strategies for Going Global Strategies For “Going Global” Creating a Web Site Relying on Trade Intermediaries Establishing International Locations Create a presence on the Web Importing & Outsourcing Creating Joint Ventures Exporting Foreign Licensing Countertrading & Bartering International Franchising FIGURE 15.1 Ch. 15: The Global Aspects of Entrepreneurship Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 15 - 3 Ch. 15: The Global Aspects of Entrepreneurship Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 15 - 4 The Web’s Global Reach Available 24 hours a day to anyone anywhere in the world. 1.60 billion Web users worldwide Asia 41.2% Ch. 15: The Global Aspects of Entrepreneurship Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 15 - 5 220 million in U.S. Nearly 1.4 billion in other countries Customers who live outside the U.S. account for more than 50% of all online sales by U.S. companies 54% of eBay transactions take place outside the U.S. Ch. 15: The Global Aspects of Entrepreneurship Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 15 - 6 1 ESSENTIALS OF ENTREPRENEURSHIP AND SMALL BUSINESS MANAGEMENT ● 6E Chapter 15: Global Aspects of Entrepreneurship Trade Intermediaries Strategies For “Going Global” (continued) Create a presence on the Web Rely on trade intermediaries Domestic agencies that serve as distributors in foreign countries for companies of all sizes. Types of intermediaries: Ch. 15: The Global Aspects of Entrepreneurship Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 15 - 7 Export Management Companies (EMCs) Export Trading Companies (ETCs) Manufacturer’s Export Agents (MEAs) Export merchants Resident buying offices Foreign distributors Ch. 15: The Global Aspects of Entrepreneurship Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 15 - 8 Joint Ventures Strategies For “Going Global” (continued) Create a presence on the Web Rely on trade intermediaries Form joint ventures Ch. 15: The Global Aspects of Entrepreneurship Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 15 - 9 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. Use the joint venture as a learning process. Ch. 15: The Global Aspects of Entrepreneurship Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 15 - 10 International Franchising Strategies For “Going Global” (continued) To expand internationally, franchisers should: Create a presence on the Web Rely on trade intermediaries 1. Identify the country or countries that are best Form joint ventures 2. Generate leads for potential franchisees. Engage in foreign licensing Consider international franchising suited to the franchiser’s business concept. 3. Select quality candidates. 4. Structure the franchise deal. Ch. 15: The Global Aspects of Entrepreneurship Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 15 - 11 Direct franchising Area development Master franchising Ch. 15: The Global Aspects of Entrepreneurship Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 15 - 12 2 ESSENTIALS OF ENTREPRENEURSHIP AND SMALL BUSINESS MANAGEMENT ● 6E Chapter 15: Global Aspects of Entrepreneurship Strategies For “Going Global” (continued) Copyright Ch. 6: Franchising and the Entrepreneur © 2011 Pearson Education, Inc. Publishing as Prentice Hall 15 - 13 Rely on trade intermediaries Form joint ventures Engage in foreign licensing Consider international franchising Use countertrading and bartering Export Ch. 15: The Global Aspects of Entrepreneurship Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 15 - 14 2. Analyze your product or service. 3. Analyze your commitment to developing export markets. Significant impact: Small companies generate $1.1 billion each day in export sales! © 2011 Pearson Education, Inc. Publishing as Prentice Hall 1. Recognize that even the tiniest companies and least experienced entrepreneurs have the potential to export. Small business accounts for 90.7% of all companies involved in exporting, but they generate just 21% of the dollar value of the nation’s exports. Copyright Create a presence on the Web Steps to Successful Exporting Exporting Ch. 15: The Global Aspects of Entrepreneurship 4. Research potential markets and pick your target. 15 - 15 Ch. 15: The Global Aspects of Entrepreneurship Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 15 - 16 Steps to Successful Exporting (continued) 5. Develop a distribution strategy. 6. Find your customer. U.S. Department of Commerce International Trade Administration 7. Find financing for export sales. 8. Ship your goods. 9. Collect your money. FIGURE 15.4 Small Business Exports: Number of Countries to Which Small Companies Export Ch. 15: The Global Aspects of Entrepreneurship Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 15 - 17 Ch. 15: The Global Aspects of Entrepreneurship Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 15 - 18 3 ESSENTIALS OF ENTREPRENEURSHIP AND SMALL BUSINESS MANAGEMENT ● 6E Chapter 15: Global Aspects of Entrepreneurship Strategies For “Going Global” FIGURE 15.5 Establish a presence on the Web Rely on trade intermediaries Form joint ventures Engage in foreign licensing Consider international franchising Use countertrading and bartering Export Establish international locations Use importing and outsourcing How a Letter of Credit Works Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch. 15: The Global Aspects of Entrepreneurship Steps to Successful Importing or Outsourcing Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 15 - 20 Steps to Successful Importing or Outsourcing (continued) Make sure that importing or outsourcing is right for your business. Establish a target cost for your product. Do your research before you leave home. Be sensitive to cultural differences. Do your groundwork. Ch. 15: The Global Aspects of Entrepreneurship Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 15 - 21 Barriers To International Trade Protect your company’s intellectual property. Select a manufacturer. Provide an exact model of the product you want manufactured. Stay in constant contact with the manufacturer and try to build a long-term relationship. Ch. 15: The Global Aspects of Entrepreneurship Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 15 - 22 Barriers To International Trade International Barriers Domestic Barriers Government imposed barriers. Attitude: “My company is too small to export.” Lack of information about how to get started. Ch. 15: The Global Aspects of Entrepreneurship Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 15 - 23 Tariff – A tax a government imposes on goods and services imported into that country. Nontariff barriers – Governments that protect domestic industries Quotas - Limits on the amount of a product imported into a country. Ch. 15: The Global Aspects of Entrepreneurship Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 15 - 24 4 ESSENTIALS OF ENTREPRENEURSHIP AND SMALL BUSINESS MANAGEMENT ● 6E Chapter 15: Global Aspects of Entrepreneurship Barriers To International Trade Barriers To International Trade (continued) (continued) International Barriers International Barriers Embargo - Total ban on imports of certain products. Dumping - Selling large quantities of a product in a foreign country below cost to gain market share. Ch. 15: The Global Aspects of Entrepreneurship Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 15 - 25 Political barriers - Rules, regulations and political risks. Business barriers – Different cost structures and business practices. Cultural barriers - Differing languages, philosophies, traditions, and accepted practices. Ch. 15: The Global Aspects of Entrepreneurship Major Agreements: World Trade Organization (WTO) North American Free Trade Agreement (NAFTA) Dominican Republic - Central America Free Trade Agreement (CAFTA-DR) Ch. 15: The Global Aspects of Entrepreneurship Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 15 - 27 Take time to learn before jumping in. Seek out assistance from professionals. Make yourself at home in all three of the world’s key markets - North America, Europe, and Asia. Appeal to the similarities in the various regions and recognize the differences in local cultures. Develop new products for the world market. Learn foreign customs and languages. Ch. 15: The Global Aspects of Entrepreneurship Guidelines For Success In International Markets “Glocalize” - make global decisions about products, markets, and management and allow local employees to make tactical decisions. Recruit and retain multicultural workers. Train employees to think globally. Hire local managers to staff foreign offices and branches. Do whatever seems best wherever it seems best. Consider using partners and joint ventures to break into foreign markets. Ch. 15: The Global Aspects of Entrepreneurship Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 15 - 26 Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 15 - 28 Conclusion (continued) © 2011 Pearson Education, Inc. Publishing as Prentice Hall Guidelines For Success In International Markets International Trade Agreements Copyright 15 - 29 Global effectiveness requires entrepreneurs to: Learn about the global market Seek the assistance of professionals Recruit and train employees to think globally Consider using partners and joint ventures Determine which opportunities best fit your company Ch. 15: The Global Aspects of Entrepreneurship Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 15 - 30 5 ESSENTIALS OF ENTREPRENEURSHIP AND SMALL BUSINESS MANAGEMENT ● 6E Chapter 15: Global Aspects of Entrepreneurship All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America. Ch. 15: The Global Aspects of Entrepreneurship Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 15 - 31 6
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