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Entrepreneurship

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Entrepreneurship ­ MGT602
VU
Lesson 13
INTERNATIONAL ENTREPRENEURIAL OPPORTUNITIES (continued...)
LEARNING OBJECTIVES
1.
To identify the aspects and importance of international entrepreneurship.
2.
To identify the important strategic issues in international entrepreneurship.
3.
To identify the available options for entering international markets.
4.
To present the problems and barriers to international entrepreneurship.
DIRECT FOREIGN INVESTMENT
Majority interest
Another equity method is to purchase a majority interest in a foreign business. The
majority interest allows the entrepreneur to obtain managerial control while maintaining
the company's local identity. In technical sense anything over 50% of the equity of the
firm is majority interest.
100 percent ownership
One hundred percent ownership assures control. One form of 100 percent ownership is
mergers and acquisitions, but the entrepreneur needs to have a general understanding of
the benefits and problems of mergers as a strategic option.
A horizontal merger is the combination of two firms that produce closely related
projects in the same area. A vertical merger is the combination of firms in successive
stages of production. A product extension merger occurs when acquiring and acquired
companies have related production but do not have directly competing products. A
market extension merger is when two firms produce the same products but sell them in
different areas. A diversified activity merger is a conglomerate merger involving the
consolidation of two unrelated firms. Mergers are a sound strategic option for an
entrepreneur when synergy is present. Economies of scale are the most common reason
for mergers. A second factor that causes synergy is taxation, or unused tax credits. The
final factor is the benefits received in combining complementary resources.
BARRIERS TO INTERNATIONAL TRADE
The positive attitude toward free trade began about 1947 with the development of general trade agreements
and reduction of trade barriers.
General Agreement on Tariffs and Trade (GATT)
GATT is a multilateral agreement with the objective of liberalizing trade by eliminating tariffs and import
quotas. In each round, mutual tariff reductions are negotiated between member nations. Members can ask
for investigation of violations. While GATT has helped develop more unrestricted trade, its voluntary
membership gives it little authority.
Increasing Protectionist Attitudes
Support of free trade increased significantly in the 1980s due to the rise in protectionist pressures in many
countries. The persistent U.S. trade deficit has strained the world trading system. The economic success of
a country (Japan) perceived as not playing by the rules has also strained the trading system. In response
many countries have established bilateral voluntary export restrictions.
Trade Blocs and Free Trade Areas
Groups of nations are banding together to increase investment between nations in the group and exclude
others. The North American Free Trade Agreement (NAFTA) between the U.S., Canada, and Mexico
reduces barriers and encourages investment. The Americas, Argentina, Brazil, Paraguay, and Uruguay have
created the Mercosul trade zone, a free trade zone between the countries. The European Community (EC)
is founded on the principle of supra-nationality, with member nations not being able to enter into trade
agreements on their own that are inconsistent with EC regulations.
Entrepreneur's Strategies and Trade Barriers
Trade barriers pose problems for entrepreneurs who want to become involved in international business.
Trade barriers increase the costs of exporting projects to a country. Voluntary export restrictions may limit
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Entrepreneurship ­ MGT602
VU
the ability to sell products in a country from production facilities outside the country. An entrepreneur may
have to locate assembly or facilities in a country to conform to the local content regulations.
KEY TERMS
Management contracts
A method for doing a specific international task
Market extension merger
Combination of at least two firms with similar products in different geographic markets
Minority interest
Having less than 50 percent ownership position
Nonequity arrangements
Doing international business through an arrangement that does not involve any investment
Product-extension merger
Combination of two firms with noncompeting products
Synergy
Two parties having things in common
Third-party arrangements
Paying for goods indirectly through another source
Trade barriers
Hindrances to going international business
Turn-key projects
Developing and operationalizing something in a foreign country
Vertical merger
Combination of at least two firms at different market levels
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Table of Contents:
  1. THE NATURE AND IMPORTANCE OF ENTREPRENEURSHIP:DEFINITION OF ENTREPRENEUR
  2. THE NATURE AND IMPORTANCE OF ENTREPRENEURSHIP:Possibility of New Venture Formation
  3. ENTREPRENEURIAL PROCESS/START UPS:GOVERNMENT AS AN INNOVATOR
  4. THE ENTREPRENEURIAL AND ENTREPRENEURIAL MIND:ENTREPRENEURIAL PROCESS
  5. THE ENTREPRENEURIAL AND ENTREPRENEURIAL MIND (continued…)
  6. THE ENTREPRENEURIAL AND ENTREPRENEURIAL MIND (continued…):CLIMATE FOR ENTREPRENEURSHIP
  7. THE ENTREPRENEURIAL AND ENTREPRENEURIAL MIND (continued…):PROBLEMS AND SUCCESSFUL EFFORTS
  8. THE INDIVIDUAL ENTREPRENEUR:ENTREPRENEURIAL BACKGROUND AND CHARACTERISTICS
  9. THE INDIVIDUAL ENTREPRENEUR (continued…):Personal Values, Work History, MOTIVATION
  10. THE INDIVIDUAL ENTREPRENEUR (continued…):ROLE MODELS AND SUPPORT SYSTEMS
  11. INTERNATIONAL ENTREPRENEURIAL OPPORTUNITIES:INTERNATIONAL ENTREPRENEURIAL OPPORTUNITIES, Minority interests
  12. INTERNATIONAL ENTREPRENEURIAL OPPORTUNITIES (continued…):DIRECT FOREIGN INVESTMENT
  13. INTERNATIONAL ENTREPRENEURIAL OPPORTUNITIES (continued…):BARRIERS TO INTERNATIONAL TRADE
  14. INTERNATIONAL ENTREPRENEURIAL OPPORTUNITIES (continued…):ENTREPRENEURIAL PARTNERING
  15. INTERNATIONAL ENTREPRENEURIAL OPPORTUNITIES (continued…):SOURCES OF NEW IDEAS
  16. CREATIVITY AND THE BUSINESS IDEA:METHODS OF GENERATING NEW IDEAS, CREATIVE PROBLEM SOLVING
  17. CREATIVITY AND THE BUSINESS IDEA:PRODUCT PLANNING AND DEVELOPMENT PROCESS
  18. LEGAL ISSUES FOR THE ENTREPRENEUR:NEED FOR A LAWYER, PATENTS
  19. LEGAL ISSUES FOR THE ENTREPRENEUR:TRADEMARKS, LICENSING
  20. LEGAL ISSUES FOR THE ENTREPRENEURS:PRODUCT SAFETY AND LIABILITY, INSURANCE
  21. CREATING AND STARTING THE VENTURE:WHAT IS THE BUSINESS PLAN, PRESENTING THE PLAN
  22. CREATING AND STARTING THE VENTURE (Continued….):WRITING THE BUSINESS PLAN
  23. CREATING AND STARTING THE VENTURE (Continued….):
  24. CREATING AND STARTING THE VENTURE (Continued….):WHY SOME BUSINESS PLANS FAIL, MARKETING PLAN
  25. THE MARKETING PLAN:MARKET RESEARCH FOR THE NEW VENTURE
  26. THE MARKETING MIX:STEPS IN PREPARING THE MARKETING PLAN
  27. THE ORGANIZATIONAL PLAN:DEVELOPING THE MANAGEMENT TEAM, LEGAL FORMS OF BUSINESS
  28. THE ORGANIZATIONAL PLAN (Continued….)
  29. THE ORGANIZATIONAL PLAN (Continued….):THE LIMITED LIABILITY COMPANY
  30. THE FINANCIAL PLAN:OPERATING AND CAPITAL BUDGETS
  31. THE FINANCIAL PLAN (Continued….):PRO FORMA INCOME STATEMENTS, PRO FORMA CASH FLOW
  32. PRO FORMA SOURCES AND USES OF FUNDS:PERSONAL FUNDS, FAMILY AND FRIENDS
  33. PRO FORMA SOURCES AND USES OF FUNDS:COMMERCIAL BANKS
  34. BANK LENDING DECISIONS:SMALL BUSINESS ADMINISTRATION LOANS
  35. SOURCES OF CAPITAL:GOVERNMENT GRANTS
  36. SOURCES OF CAPITAL:PRIVATE PLACEMENT, BOOTSTRAP FINANCING
  37. CAPITAL SOURCES IN PAKISTAN:PROVINCIAL LEVEL INSTITUTIONS, FINANCIAL INSTITUTIONS
  38. PREPARING FOR THE NEW VENTURE LAUNCH: EARLY MANAGEMENT DECISIONS (Continued….)
  39. PREPARING FOR THE NEW VENTURE LAUNCH: EARLY MANAGEMENT DECISIONS (Continued….)
  40. PREPARING FOR THE NEW VENTURE LAUNCH: EARLY MANAGEMENT DECISIONS (Continued….)
  41. PREPARING FOR THE NEW VENTURE LAUNCH: EARLY MANAGEMENT DECISIONS (Continued….)
  42. PREPARING FOR THE NEW VENTURE LAUNCH: EARLY MANAGEMENT DECISIONS (Continued….)
  43. NEW VENTURE EXPANSION STRATEGIES AND ISSUES:JOINT VENTURES, ACQUISITIONS
  44. NEW VENTURE EXPANSION STRATEGIES AND ISSUES (Continued….):DETERMINING THE PRICE FOR AN ACQUISITION
  45. ENTREPRENEURSHIP & PAKISTAN:GENDER DEVELOPMENT STATUS WOMAN AS AN ENTREPRENEUR IN PAKISTAN