Copyright © 2016 Pearson Education, Inc. Global Aspects of Entrepreneurship 15 15-2 Section 4: Putting the Business Plan to Work: Sources of Funds Section

Copyright © 2016 Pearson Education, Inc.

Global Aspects of Entrepreneurship

1155

15-2

Section 4: Putting the Business Plan to Work: Sources of Funds

Section 4: Growing the Business

Explain why “going global” has become an integral part of many small companies’ marketing strategies.

Describe the principal strategies small businesses have for going global.

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 in the twenty-first century.

15 - 2Copyright © 2016 Pearson Education, Inc.

Offset sales declines in the domestic marketIncrease sales and profitsLower manufacturing costsLower product costImprove competitive positionRaise quality levelsBecome more customer-oriented


Becoming a global entrepreneur requires a different mindset.

Learning to think globally may be the first – and most challenging – obstacle an entrepreneur must overcome on the way to becoming a truly global business.Must have the ability to appreciate,

understand, and respect cultural differences.



1. Create a presence on the Web



It’s a low-cost way to be global from day one.2.4 billion Web users worldwide:

273 million in United StatesNearly 2 billion in other countries

23% of global retail sales will be online by 2015

It’s important to “think local” when creating Web sites to target customers in other countries.


1. Create a presence on the Web

2. Rely on trade intermediaries


(continued from 15-7)

Trade intermediaries: Domestic agencies that serve as

distributors in foreign countries for companies of all sizes.

Make the transition to world markets faster and easier for small businesses, but it is important to select an intermediary carefully.


Types of intermediaries:Export Management Companies (EMCs)

Export Trading Companies (ETCs)Manufacturer’s Export Agents (MEAs)Export merchantsResident buying officesForeign distributors


(continued)

1. Create a presence on the Web2. Rely on trade intermediaries3. Form 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 for success is to

choose the right partner.


Select a partner that shares the company’s values and standards of conduct.

Define at the outset important issues.Understand your partner’s reasons and objectives

for forming the joint venture.Spell out in writing exactly how the venture will

work and where decision making authority lies.Select a partner with different but compatible

skills.Prepare a prenuptial agreement in case of divorce.


1. Create a presence on the Web2. Rely on trade intermediaries3. Form joint ventures4. Engage in foreign licensing



A relatively simple way for even the most inexperienced business owner to extend his reach into foreign markets.Enter markets quickly and easily with

virtually no capital investment.Ideal for companies whose value lies in its

intellectual property.Minimize risk by ensuring that proper

patents, trademarks, and copyrights are in place.


1. Create a presence on the Web2. Rely on trade intermediaries3. Form joint ventures4. Engage in foreign licensing 5. Consider international franchising



Steps: 1.Identify the country or countries that are

best suited to the franchiser’s business concept.

2.Generate leads for potential franchisees.3.Select quality candidates.4.Structure the franchise deal. Direct franchising Area development Master franchising


1. Create a presence on the Web2. Rely on trade intermediaries3. Form joint ventures4. Engage in foreign licensing 5. Consider international franchising6. Use countertrading and bartering



Countertrade:A transaction in which a company selling

goods in a foreign country agrees to promote investment and trade in that country.

Barter: The exchange of goods and services for

other goods and services.


1. Create a presence on the Web2. Rely on trade intermediaries3. Form joint ventures4. Engage in foreign licensing 5. Consider international franchising6. Use countertrading and bartering7. Export



Small and medium-size companies account for nearly 98% of the 302,000 U.S. businesses that export, but generate just 1/3 of U.S. exports.Small companies generate $2.1 billion in

export sales.Key benefits of exporting:Increased sales and profits.More diversified customer base.


Do you have a product or service that has been successful domestically?

Do you have an international marketing plan?Do you have sufficient production capacity?Do you have sufficient financial resources?Are you committed to developing export markets?Are you committed to serving foreign customers?Do you understand the local market?Do you understand the export payment process?


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.



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.




1. Create a presence on the Web2. Rely on trade intermediaries3. Form joint ventures4. Engage in foreign licensing 5. Consider international franchising6. Use countertrading and bartering7. Export 8. Establish international locations



Having an international location can offer numerous benefits including: Lower start-up costs. Lower labor costs. A better understanding of local

customer preferences. A better understanding of local

business practices.


1. Create a presence on the Web2. Rely on trade intermediaries3. Form joint ventures4. Engage in foreign licensing 5. Consider international franchising6. Use countertrading and bartering7. Export 8. Establish international locations 9. Use importing and outsourcing



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.


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.


(continued)

1. Create a presence on the Web2. Rely on trade intermediaries3. Form joint ventures4. Engage in foreign licensing 5. Consider international franchising6. Use countertrading and bartering7. Export 8. Establish international locations 9. Use importing and outsourcing10.Become an expat entrepreneur



Expat entrepreneurs: Keep their citizenship in their home

country but live and run their businesses on foreign soil.


Domestic Barriers

Attitude: “My company is too small to export.”

Lack of information about how to get started.

Inability to obtain adequate financing.


International BarriersTariffs:A tax a government imposes on goods

and services imported into that country.Nontariff barriers:Governments that protect domestic

industries.


(continued)

Quotas:Limits on the amount of a product

imported into a country.

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.


(continued)

Political barriers:

Rules, regulations and political risks.

Business barriers:

Different cost structures and business practices.

Cultural barriers:

Differing languages, philosophies, traditions, and accepted practices.


(continued)

Major agreements reducing barriers to free trade:

World Trade Organization (WTO)

North American Free Trade Agreement (NAFTA)

Dominican Republic - Central America Free Trade Agreement (CAFTA-DR)


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.


“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.Evaluate opportunities to become an expat

entrepreneur.


(continued)

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Copyright © 2016 Pearson Education, Inc. Global Aspects of Entrepreneurship 15 15-2 Section 4: Putting the Business Plan to Work: Sources of Funds Section