INTERNATIONAL ENTREPRENEURIAL OPPORTUNITIES
To identify the aspects and importance of international entrepreneurship.
To identify the important strategic issues in international entrepreneurship.
To identify the available options for entering international markets.
To present the problems and barriers to international entrepreneurship.
THE NATURE OF INTERNATIONAL ENTREPRENEURSHIP
As more countries become market oriented and developed, the distinction between foreign and domestic
markets is becoming less pronounced. International entrepreneurship is the process of an entrepreneur
conducting business activities across national boundaries. It is exporting, licensing, or opening a sales office
in another country. When an entrepreneur executes his or her business in more than one country,
international entrepreneurship occurs.
THE IMPORTANCE OF INTERNATIONAL BUSINESS TO THE FIRM
International business has become increasingly important to firms of all sizes. The successful entrepreneur
will be someone who understands how international business differs from domestic business and is able to
INTERNATIONAL VERSUS DOMESTIC ENTREPRENEURSHIP
Whether international or domestic, an entrepreneur is concerned about the same basic issues-sales, costs,
and profits. What varies is the relative importance of the factors being considered. International
entrepreneurial decisions are more complex due to uncontrollable factors such as the following.
A domestic business strategy is designed under a single economic system. Creating a business strategy for
multiple countries means dealing with different levels of economic development and different distribution
Balance of Payments
A country's balance of payments affects the valuation of its currency. This economic variable will affect
how companies do business in other countries.
Type of System
Barter or third-party arrangements have been used to increase business activity with the Commonwealth
of Independent States, the former U.S.S.R. There are still many difficulties in doing business in developing
and transition economies due to:
a. Gaps in the knowledge of the Western system regarding business plans,
marketing, and profits
b. Widely variable rates of return.
c. Non-convertibility of the ruble.
d. Differences in the accounting system.
e. Nightmarish communications.
Multiple political and legal environments create different business problems. Each element of the
international business strategy can potentially be affected by multiple legal environments. Laws governing
business arrangements also vary greatly in the 150 different legal systems and sets of national laws.
The impact of culture on entrepreneurs and strategies is significant. Understanding the local culture is
necessary when developing worldwide plans.
Technology varies significantly across countries. New products in a country are created based on the
conditions and infrastructure of that country.
Four strategic issues are important to the international entrepreneur:
1. The allocation of responsibility between the U.S. and foreign operations.
2. The nature of the planning and control systems to be used.
3. The appropriate organizational structure for conducting international operations.
4. The degree of standardization possible.
With experience in international operations, entrepreneurs tend to change their approach to responsibility.
Stage 1: In the first stages the entrepreneur typically follows a highly centralized decision-making process.
Stage 2: When success occurs, it is no longer possible to use completely centralized decision-making
Stage 3: Decentralization is scaled back and major strategic decisions are again centralized.
To understand what is required for effective planning, reporting, and control, the entrepreneur should
1. Environmental analysis.
2. Strategic planning.
4. Operational planning.
5. Controlling the marketing program.
The first step in identifying markets is to analyze data in the following areas:
1. Market characteristics.
2. Marketing institutions.
3. Industry conditions.
4. Legal environment.
6. Political environment.
ENTREPRENEURIAL ENTRY INTO INTERNATIONAL BUSINESS
The choice of entry method depends on the goals of the entrepreneur and the company's strengths and
As a general rule, an entrepreneur starts doing international business through exporting.
Indirect exporting involves a foreign purchaser in the local market or using an export
management firm. For certain commodities, foreign buyers seek out sources of supply.
Export management firms, another indirect method, are located in many commercial
Direct exporting through independent distributors or through one's own overseas
sales office is another entry method. An independent foreign distributor directly
contacts foreign customers and takes care of all technicalities. Entrepreneurs who do
not wish to give up control over marketing can open overseas sales offices and hire
their own salespeople.
Non equity arrangements
Non equity arrangements allow the entrepreneur to enter a market without direct equity investment in the
Licensing involves a manufacturer giving a foreign manufacturer the right to use a
patent, trademark, or technology in return for a royalty. This arrangement is most
appropriate when the entrepreneur has no prospect of entering the market through
exporting or direct investment. The process is usually low risk and an easy way to
generate incremental income. Without careful analysis, licensing arrangements have
Lesser-developed countries are able to obtain manufacturing technology without
surrendering economic control through turn-key projects. A foreign entrepreneur
builds a facility, trains the workers, and trains the management to run the installation.
Once the operation is on line, it is turned over to local owners. Initial profits can lead to
follow-up sales. Financing is often provided by the local company or government.
Entrepreneurs can contract their management techniques and skills, often following a
turn-key project. The management contract allows the purchasing country to gain
foreign expertise without turning ownership over to a foreigner.
Direct Foreign Investment
The wholly owned foreign subsidiary has been the preferred mode of ownership for direct investment.
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.
Two firms get together and form a third company in which they share the equity.
Balance of payments
The trade status between countries
A method of payment using no monetary item
Selling goods to another country by taking care of the transaction
Diversified activity merger
Combination of at least two totally unrelated firms
Selling goods made in one country to another country
Combination of at least two firms doing similar businesses at the same market level
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