importance of international entrepreneurship,

Outline

• Different types of businesses• Importance of international

entrepreneurship, • Strategic issues in international

entrepreneurship, • Challenges & Opportunities in international entrepreneurship • Dragon Den Episodes

International Entrepreneurship

International Entrepreneurship is the process of an entrepreneur conducting business activities across national boundaries.

Another Definition of IE

The process of creatively discovering and exploiting opportunities that lie outside a firm’s domestic market in the pursuit

of competitive advantage.

Traditional Motivations

Sales to other Markets

Avoid Changing Domestic Conditions

Access to Lower Cost Structures

Importance of International Entrepreneurship

International business has become increasingly important to firms of all sizes

Successful entrepreneur is someone who fully understand International entrepreneurship and differs from purely domestic business and is able to respond accordingly

International Vs Domestic Entrepreneurship

International entrepreneurial decisions are more complex due to uncontrollable factors such as the following;

Economics A domestic business strategy is designed under a single

economic systemCreating a business strategy for multiple countries means

dealing with different levels of economic development and different distribution systems

Political-Legal EnvironmentMultiple political and legal environments are opening

some opportunities while eliminating othersDifferences in Value added-taxDifferences in Advertising campaignDifferences in labeling, ingredients, packaging Laws governing business arrangements also vary greatly

in the 150 different legal systems and sets of national laws

International Vs Domestic Entrepreneurship

Cultural Environment Understanding the local culture is necessary when

developing worldwide plans Language barrier Bribes and corruption culture

Technological Environment Technology varies significantly across countries New products in a country are created based on the

conditions and infrastructure of that countryExample of cars based on roads and price of gasoline

Four Strategic Issues to Consider;

1. The allocation of responsibility between the U.S (host country) and the foreign operation

1. Stage 1. Internationally Centralized business2. Stage 2. Internationally Decentralized business when its

expanding3. Stage 3. Conflicts because of decentralization leads to

pulling back certain level of authority to US head quarter

2. The nature of the planning, reporting, and control system should be used through out international operations

3. The appropriate organizational structure for conducting international operations

4. The degree of standardization possible

Entrepreneurial Entry into International Business

The modes of entering an international business in divided into three categories;

1.Exporting2.Non-equity arrangements3.Direct foreign investment


1. Exporting: selling goods made in one country to another

Indirect exporting involves using a foreign purchaser( or export management firm) in a local market or selling goods to another country through a person in the entrepreneur’s home market

Direct exporting uses independent distributors or selling goods to another country by taking care of the transactionOpening their own overseas office for sales


2. Nonequity arrangement: Doing international business through an arrangement that does not involve any investment

Licensing: Allowing someone else to use something of the Company’s

Entrepreneur who is a manufacturer(Licensee) giving a foreign manufacturer (licensor) the right to use a patent, trademark, technology, production process or product in return for the payment of royalty

Turn-Key Projects: Developing and operationalizing something in a foreign country

Management Contracts: A method for doing a specific international task

Management techniques & skills Acquiring foreign expertise without giving ownership of

resources to foreigner


3. Direct Foreign Investment: the percentage of ownership is related to the amount of money invested, the nature of the industry, and the rules of the host government

4. Minority interests: Having less than 50% ownership position

5. Majority Interest: having more than 50% ownership position

6. Joint Venture: Two companies forming a third company

The joint venture should have synergy!

Synergy means that the whole is greater than the sum of its parts or

The two parties having things in common

1 1 3

Entrepreneurial Entry into International Business4. Mergers: An entrepreneur can obtain 100% ownership

Horizontal Merger: combination of at least two firms doing similar business at the same market level (e.g.; 7 Eleven Stores)

Vertical Merger: Combination of at least two firms at different market level (stabilizes supply & production e.g. walls & polka)

Product Extension Merger: Combination of two firms with noncompeting products (related production/distribution activities e.g. Western publishing (kids books) by Mattel (toys))

Market extension Merger: Combination of at least two firms with similar products in different geographical markets (e.g. Diamond chain: west coast retailer by Dayton Hudson a Minneapolis retailer)

Diversified Activity Merger: Combination of at least two totally unrelated firms (e.g. Hillenbrand (hospital furniture manufacturer by American tourists (a luggage manufacturer))

Organizations overcoming Barriers to International Trade

Trade barriers: Hindrances to doing international business

Some countries (Japan) allegedly present barriers due to their complicated distribution system

GATT (the General Agreement on Tariffs and Trade) seeks to help overcome barriers

FTA’s (free trade agreements) such as NAFTA reduce barriers and encourage investment between countries (in this case the U.S., Canada and Mexico)

Entrepreneurial Partnering is one good strategy of entering international market!!