Copyright © 2016 Pearson Education, Inc. Global Aspects of Entrepreneurship 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 Copyright © 2016 Pearson Education, Inc.

 Offset sales declines in the domestic market  Increase sales and profits  Lower manufacturing costs  Lower product cost  Improve competitive position  Raise quality levels  Become more customer-oriented Copyright © 2016 Pearson Education, Inc.

 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 Copyright © 2016 Pearson Education, Inc.

Copyright © 2016 Pearson Education, Inc.

1.Create a presence on the Web Copyright © 2016 Pearson Education, Inc.

Copyright © 2016 Pearson Education, Inc.

 It’s a low-cost way to be global from day one.  2.4 billion Web users worldwide:  273 million in United States  Nearly 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 Copyright © 2016 Pearson Education, Inc.

1.Create a presence on the Web 2.Rely on trade intermediaries Copyright © 2016 Pearson Education, Inc. (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 Copyright © 2016 Pearson Education, Inc.

 Types of intermediaries:  Export Management Companies (EMCs)  Export Trading Companies (ETCs)  Manufacturer’s Export Agents (MEAs)  Export merchants  Resident buying offices  Foreign distributors Copyright © 2016 Pearson Education, Inc. (continued)

1.Create a presence on the Web 2.Rely on trade intermediaries 3.Form joint ventures Copyright © 2016 Pearson Education, Inc. (continued from 15-10)

 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 Copyright © 2016 Pearson Education, Inc.

 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 Copyright © 2016 Pearson Education, Inc.

1.Create a presence on the Web 2.Rely on trade intermediaries 3.Form joint ventures 4.Engage in foreign licensing Copyright © 2016 Pearson Education, Inc. (continued from 15-13)

 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 Copyright © 2016 Pearson Education, Inc.

1.Create a presence on the Web 2.Rely on trade intermediaries 3.Form joint ventures 4.Engage in foreign licensing 5.Consider international franchising Copyright © 2016 Pearson Education, Inc. (continued from 15-16)

 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 Copyright © 2016 Pearson Education, Inc.

1.Create a presence on the Web 2.Rely on trade intermediaries 3.Form joint ventures 4.Engage in foreign licensing 5.Consider international franchising 6.Use countertrading and bartering Copyright © 2016 Pearson Education, Inc. (continued from 15-18)

 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 Copyright © 2016 Pearson Education, Inc.

1.Create a presence on the Web 2.Rely on trade intermediaries 3.Form joint ventures 4.Engage in foreign licensing 5.Consider international franchising 6.Use countertrading and bartering 7.Export Copyright © 2016 Pearson Education, Inc. (continued from 15-20)

 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 Copyright © 2016 Pearson Education, Inc.

 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? Copyright © 2016 Pearson Education, Inc.

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 Copyright © 2016 Pearson Education, Inc.

Copyright © 2016 Pearson Education, Inc.

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 Copyright © 2016 Pearson Education, Inc. (continued from 15-25)

Copyright © 2016 Pearson Education, Inc.

1.Create a presence on the Web 2.Rely on trade intermediaries 3.Form joint ventures 4.Engage in foreign licensing 5.Consider international franchising 6.Use countertrading and bartering 7.Export 8.Establish international locations Copyright © 2016 Pearson Education, Inc. (continued from 15-22)

 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 Copyright © 2016 Pearson Education, Inc.

1.Create a presence on the Web 2.Rely on trade intermediaries 3.Form joint ventures 4.Engage in foreign licensing 5.Consider international franchising 6.Use countertrading and bartering 7.Export 8.Establish international locations 9.Use importing and outsourcing Copyright © 2016 Pearson Education, Inc. (continued from 15-29)

 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 Copyright © 2016 Pearson Education, Inc.

 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 Copyright © 2016 Pearson Education, Inc. (continued)

1.Create a presence on the Web 2.Rely on trade intermediaries 3.Form joint ventures 4.Engage in foreign licensing 5.Consider international franchising 6.Use countertrading and bartering 7.Export 8.Establish international locations 9.Use importing and outsourcing 10.Become an expat entrepreneur Copyright © 2016 Pearson Education, Inc. (continued from 15-31)

 Expat entrepreneurs:  Keep their citizenship in their home country but live and run their businesses on foreign soil Copyright © 2016 Pearson Education, Inc.

 Domestic Barriers  Attitude: “My company is too small to export.”  Lack of information about how to get started.  Inability to obtain adequate financing Copyright © 2016 Pearson Education, Inc.

 International Barriers  Tariffs:  A tax a government imposes on goods and services imported into that country.  Nontariff barriers:  Governments that protect domestic industries Copyright © 2016 Pearson Education, Inc. (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 Copyright © 2016 Pearson Education, Inc. (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 Copyright © 2016 Pearson Education, Inc. (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) Copyright © 2016 Pearson Education, Inc.

 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 Copyright © 2016 Pearson Education, Inc.

 “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 Copyright © 2016 Pearson Education, Inc. (continued)