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

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

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

6. NEW VENTURES Enter a new marketEnter a new market Offer a new product or serviceOffer a new product or service Introduce a new method technology, or innovative use of raw materialsIntroduce a new method technology, or innovative use of raw materials

7. INTERNATIONALIZATION AND THE SMALL BUSINESS Two modelsTwo models –small business stage model –global start-up

8. THE SMALL BUSINESS STAGE MODEL Stage 1--passive exportingStage 1--passive exporting Stage 2--export managementStage 2--export management Stage 3--export departmentStage 3--export department Stage 4--sales branchesStage 4--sales branches Stage 5--production abroadStage 5--production abroad Stage 6--the transnationalStage 6--the transnational

9. GLOBAL START UP Occurs when firms begin as multinationalsOccurs when firms begin as multinationals Requires unique conditions and organizationsRequires unique conditions and organizations

10. SMALL BUSINESS BARRIERS TO INTERNATIONALIZATION Liabilities of newness and sizeLiabilities of newness and size –limited financial and personnel resources –lack of sufficient scale to produce goods or services as efficiently as larger companies

11. Barriers to Internationalization, continued M anagers’ limited international experience =M anagers’ limited international experience = Negative attitudesNegative attitudes –belief that venture too risky/not profitable –competition seen as domestic –ignoring of international opportunities

12. THE SOLUTION A Global Culture Values that view strategic opportunities as globalValues that view strategic opportunities as global A common language to describe international operationsA common language to describe international operations Owners have a global mind-setOwners have a global mind-set Thinking globallyThinking globally

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

14. Exhibit 10.1 Attitudes Concerning Internationalization

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

16. Exhibit 10.2 Training & Knowledge Needs of Small Firm CEOs

17. SIZE AND SMALL BUSINESS INTERNATIONALIZATION Larger firmsLarger firms –more likely to export –more resources to absorb risk Differ primarily in initial internationalizationDiffer primarily in initial internationalization

18. THE SMALL BUSINESS ADVANTAGE Faster innovationFaster innovation –can change products and internal operations faster –speed can overcome size disadvantages

19. THE FUTURE Falling barriers to small businesses internationalizationFalling barriers to small businesses internationalization More global start-upsMore global start-ups More government programsMore government programs Trade agreements a positive forceTrade agreements a positive force

20. The future, continued Increase in the number of small businesses engaged in international activitiesIncrease in the number of small businesses engaged in international activities –makes it easier for other businesses to develop a global culture More managers gain experience in international businessMore managers gain experience in international business

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

22. The questions, continued The questions, continued Is there a country in which we feel comfortable doing business?Is there a country in which we feel comfortable doing business? Is there a profitable market for our product or service?Is there a profitable market for our product or service? Which country should we enter?Which country should we enter?

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

24. Exhibit 10.4 Steps in Picking a Foreign Market Screen potential marketsScreen potential markets –target potential countries –assess target markets - key trends, competition, potential problems Draw conclusions--make the choiceDraw conclusions--make the choice

25. PARTICIPATION STRATEGIES Same participation options as larger firmsSame participation options as larger firms Most often exportingMost often exporting

26. FINDING CUSTOMER AND PARTNERS Trade showsTrade shows Catalogue expositionsCatalogue expositions International advertising agencies and consulting firmsInternational advertising agencies and consulting firms Govt.-sponsored trade missionsGovt.-sponsored trade missions Direct contactDirect contact

27. See exhibit 10.6 for international trade leads on the world wide web!

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

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

30. TYPES OF ENTRY WEDGES

31. FIRST MOVER ADVANTAGE Establishes the business before other firms can reactEstablishes the business before other firms can react Must be innovativeMust be innovative Must be comprehensiveMust be comprehensive –meet customer expectations in areas such as warranty and expected components

32. FIRST MOVER COMPETITIVE ADVANTAGES TechnologicalTechnological Access natural or social resourcesAccess natural or social resources Develop close relationships with research universitiesDevelop close relationships with research universities The best locations - raw materials or proximity to customersThe best locations - raw materials or proximity to customers

33. COPY CAT BUSINESSES The "me too" strategyThe "me too" strategy Adopt existing products or servicesAdopt existing products or services But-- find a niche or slight innovation to attract customersBut-- find a niche or slight innovation to attract customers

34. SUCCESSFUL COPY CAT MOVES Be the first to a new standardBe the first to a new standard Go after the toughest customersGo after the toughest customers Play to different customer needsPlay to different customer needs Transfer the locationTransfer the location

35. Successful copy cat moves, continued Be a dedicated supplier/distributorBe a dedicated supplier/distributor Seek abandoned or ignored marketsSeek abandoned or ignored markets Acquire an existing businessAcquire an existing business

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

37. Summary and conclusions, continued Can go international--through stages or through global start- upsCan go international--through stages or through global start- ups Have the same multinational and participation strategic options as larger firmsHave the same multinational and participation strategic options as larger firms Entering the international market is an entrepreneurial ventureEntering the international market is an entrepreneurial venture