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Entrepreneurship

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Entrepreneurship ­ MGT602
VU
Lesson 12
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
The wholly owned foreign subsidiary has been the preferred mode of ownership for direct investment.
Minority interests
The minority interest provides the firm with either a source of raw materials or a captive
market for products. Entrepreneurs have used minority positions to gain a foothold in the
market before making a major investment.
Joint ventures
Two firms get together and form a third company in which they share the equity. Joint
ventures have been used by entrepreneurs in two situations:
1.  When the entrepreneur wants to purchase local knowledge and an
established facility.
2.  When rapid entry into a market it needed.
The keys to success of joint ventures have not been well understood. Reasons for forming
a joint venture today are different than those in the past. Originally, joint ventures were
used for trading purposes and were one of the oldest ways of transacting business. Joint
ventures in the U.S. took the form of vertical joint ventures used by mining concerns and
railroads.
Motives for the significant increase in the use of joint ventures:
a.  To share the costs and risks of an uncertain project.
b. To gain synergy between the two firms.
c.  To obtain a competitive advantage.
d. To enter markets that pose entrance difficulties.
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.
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Entrepreneurship ­ MGT602
VU
KEY TERMS
Indirect exporting
Selling goods to another country through a system in the entrepreneur's home country
International entrepreneurship
An entrepreneur doing business across his or her national boundary
Joint venture
Two companies forming a third company
Licensing
Allowing someone else to use something of the company's
Majority interest
Having more than 50 percent ownership position
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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