EX 6-1 INC 500 FIRMS IN VARIOUS COUNTRIES

INTRODUCTION SMALL BUSINESSES: u Europe, N. American, & Japan, over 98% of businesses are small u Employ more than 50% u Produce nearly 50% of the countries' GNPs u Create more than 2/3 of new jobs

WHAT IS A SMALL BUSINESS? u UN: less than 500 employees u The popular press: less than 100 employees u U.S. Small business administration: definition varies by industry, sales revenue and the number of people

WHAT IS AN ENTREPRENEUR? WHAT IS AN ENTREPRENEUR? u Creates new ventures that seek profit and growth u Faces risk and uncertainty of new and untested business u Risk: outcomes are variable u Uncertainty: impossible to predict variable outcomes

NEW VENTURES u Enter a new market u Offer a new product or service u Introduce a new method technology, or innovative use of raw materials

INTERNATIONALIZATION AND THE SMALL BUSINESS u Small business stage model u Global start-up

THE SMALL BUSINESS STAGE MODEL u Stage 1--passive exporting u Stage 2--export management u Stage 3--export department u Stage 4--sales branches u Stage 5--production abroad u Stage 6--the transnational

GLOBAL START UP u Occur when firms begin as multinationals u Require unique conditions and organizations

SMALL BUSINESS BARRIERS TO INTERNATIONALIZATION u Small Size – Limited financial and personnel resources – Lack of sufficient scale to produce goods or services as efficiently as larger companies

u Managers’ limited international experience = – Negative attitudes – Belief that venture too risky/not profitable – Competition seen as domestic – Ignoring of international opportunities

THE SOLUTION A Global Culture u Values that view strategic opportunities as global u A common language to describe international operations u Owners have a global mind-set u Thinking globally

THE SOLUTION Change Attitudes of Key Decision Makers u Begin close in culture and geography u Overcome skepticism regarding the international markets u Positive attitudes more necessary for global start-ups

EX 6-2 ATTITUDES CONCERNING INTERNATIONALIZATION

INTERNATIONALIZATION EFFECTS ON THE CEO u Increased travel and stress from undertaking a new venture u Can adversely affect family life u Takes away from the daily management u Job of CEO may change

EX 6-3 TRAINING & KNOWLEDGE NEEDS OF SMALL FIRM CEOs

SIZE AND SMALL BUSINESS INTERNATIONALIZATION u Larger firms – More likely to export – More resources to absorb risk u Differ primarily in initial internationalization

THE SMALL BUSINESS ADVANTAGE u Faster innovation – Can change products and internal operations faster u Speed can overcome size disadvantages

THE FUTURE u Falling barriers to small businesses internationalization u More global start-ups u More government programs u Trade agreements a positive force

u Increase in the number of small businesses engaged in international activities – Makes it easier for other businesses to develop a global culture u More managers gain experience in international business

SHOULD A SMALL BUSINESS GO INTERNATIONAL: the questions u Does the company have: – A global product or service? – The managerial, financial, and organizational resources? – The willingness to face the risks of internationalization?

u Is there a country in which we feel comfortable doing business? u Is there a profitable market for our product or service? u Which country should we enter?

u Do we have a unique product or service that is not easily copied by larger companies or local entrepreneurs? u Do location advantages exist upstream in the value chain? u Can we afford not to go global?

EXHIBIT 6-5 STEPS IN PICKING A FOREIGN MARKET u Screen potential markets – Target potential countries – Assess target markets - key trends, competition, potential problems u Draw conclusions--make the choice

PARTICIPATION STRATEGIES u Same participation options as do larger firms u Most often exporting

FINDING CUSTOMERS AND PARTNERS u Trade shows u Catalogue expositions u International advertising agencies and consulting firms u Govt.-sponsored trade missions u Direct contact

SEE EXHIBIT 6-7 FOR INTERNATIONAL TRADE LEADS ON THE WORLD WIDE WEB!

READY TO GO AND CONNECTED u Finding the right overseas partner: the most important step u Find a good wedge to break into a new market

ENTRY WEDGE DEFINED ".. A strategic competitive advantage for breaking into the established pattern of commercial activity" (Vesper)

TYPES OF ENTRY WEDGES

FIRST MOVER ADVANTAGE u Establish the business before other firms can react Must be innovative u Must be comprehensive – Meet customer expectations in areas such as warranty and expected components

FIRST MOVER COMPETITIVE ADVANTAGES u Technological u Access natural or social resources u Develop close relationships with research universities u The best locations - raw materials or proximity to customers

COPY CAT BUSINESSES u The "me too" strategy u Adopt existing products or services u But-- find a niche or slight innovation to attract customers

SUCCESSFUL COPY CAT MOVES u Be the first to a new standard u Go after the toughest customers u Play to different customer needs u Transfer the location u Be a dedicated supplier/distributor u Seek abandoned or ignored markets u Acquire an existing business

SUMMARY AND CONCLUSIONS The Small Business u Key factor in the economies of all nations u Provides jobs, economic growth, innovation u Must face the challenges of entering the international marketplace

u Can go international--through stages or through global start- ups u Have the same multinational and participation strategic options as larger firms u Entering the international market is an entrepreneurial venture