Chapter 5: Identifying and Analyzing

Domestic and International

Opportunities
Introduction
}  Entrepreneurs find it difficult to both manage
and expand the venture they created.
}  To expand a venture, entrepreneurs need to:
}  Identify oppor tunities for domestic and
international expansion.
}  Develop different management skills.
}  Infuse new entrepreneurial spirit (Intrapreneurship).
Introduction (cont.)

}  Factors contributing to international

expansion:
}  Opening up of controlled economies to market-
oriented enterprise.
}  Self-interest of organizations as well as the impact
of external events and forces.
}  Developing countries need training and education
as well as infrastructure to support their
development and growth in the next century.
Opportunity Recognition and the Opportunity
Assessment Plan
}  The key to successful domestic and
international entrepreneurship is to develop an
idea that has a market with a need for the
product or service idea conceived.
}  Opportunity assessment is often best
accomplished by developing an opportunity
assessment plan.
}  An opportunity assessment plan is not a
business plan.
Opportunity Recognition and the Opportunity
Assessment Plan (cont.)
}  An opportunity assessment plan has four
sections:
}  The first section develops the idea, analyzes
competitive products and companies, and identifies
the unique selling propositions.
}  The second section focuses on the market—its
size, trends, characteristics, and growth rate.
}  The third section focuses on the entrepreneur’s
and management team’s skills and experience.
}  The final section develops a time line indicating
the steps to successfully launch the venture.
Information Sources
}  General Information
}  SCORE is a nonprofit organization that provides
free online and in-person assistance.
}  Small Business Development Centers provides
counseling, training, and technical assistance on all
aspects of managing a new venture.
}  The U.S. Chamber Small Business Center provides
start-up assistance through Web-based tools and
resources.
}  Other valuable Web sites include: nasbic.org,
n v c a . o r g , n b i a . o r g , w w w. f a s t t r a c . o r g ,
activecapital.org, c-e-o.org, entre-ed.org,
kauffman.org.
Information Sources (cont.)

}  Industry and Market Information

}  Plunkett - Industry data, market research, trends,
statistics on markets, and forecasts.
}  Frost and Sullivan - Industry specific information.
}  Euromonitor – Information on consumer market
sizes, marketing parameters, companies, and brands.
}  Gartner - Information on technology markets.
}  Gale Directory Library - Industry statistics and
information on nonprofit organizations and
associations.
Information Sources (cont.)

}  C o m p e t i t i ve C o m p a ny a n d P ro d u c t
Information
}  Business Source Complete - Provides company
and industry information by scanning the
Datamonitor reports.
}  Hoovers - Provides information on both large and
small companies with links to competitors in the
same NAICS (Nor th American Industrial
Classification System) category.
}  Mergent - Provides detailed company and product
information on U.S. and international companies.
Information Sources (cont.)

}  Government Sources
}  Census reports
}  factfinder.census.gov
}  www.census.gov/ipc/www/idb
}  Export/import authority
}  UN Comtrade
}  www.business.gov/expand/import-export
}  NAICS and Standard Industrial Classification codes
}  www.naics.com/info.htm
}  www.osha.gov/pls/imis/sic_manual.html
Information Sources (cont.)

}  Search Engines
}  There are many key terms for searching the needed
industry, market, and competitive information.
}  Trade Associations
}  Good source for country-specific industry data.
}  Trade Publications
}  Provide information and insights on trend, companies, and
trade shows from a local perspective of the particular
market and market conditions.
The Nature of International
Entrepreneurship
}  International entrepreneurship is the process of an
entrepreneur conducting business activities across
national boundaries.
}  The activities necessary for ascertaining and satisfying the
needs and wants of target consumers take place in more
than one country.
}  With a commercial history of only 300 years, the
United States is a relative newcomer to the
international business arena.
The Importance of International Business to the Firm

}  International business has become increasingly

important to firms of all sizes.
}  A successful entrepreneur must be able to:
}  Fully understand the difference between domestic
and international business.
}  Respond accordingly thereby successfully “going
global.”
International versus Domestic
Entrepreneurship
}  Economics
}  In a domestic business strategy, the entire country
is organized under a single economic system and
has the same currency.
}  Creating a business strategy for a multi-country
area means dealing with differences in:
}  Levels of economic development.
}  Currency valuations.
}  Government regulations.
}  Banking, venture capital, marketing, and
distribution systems.
International versus Domestic
Entrepreneurship (cont.)

}  Stage of Economic Development

}  Certain factors significantly impact a firm’s ability to
successfully engage in international business such as:
}  Fundamental infrastructures.
}  Banking facilities and systems.
}  Educational systems.
}  Legal system.
}  Business ethics and norms.
International versus Domestic
Entrepreneurship (cont.)
}  Balance of Payments Current Account
}  With the present system of flexible exchange rates,
a country’s current account (the difference between
the value of a country’s imports and exports over
time) affects the valuation of its currency.
}  The valuation of one country’s currency affects
business transactions between countries.
International versus Domestic
Entrepreneurship (cont.)
}  Type of System
}  Difficulties in doing business in economies that are
developing, or in transition.
}  Use of barter or third-party arrangements in these
countries to increase business activity.
}  Barter - A method of payment using non-money
items.
}  Third-party arrangements - Paying for goods
indirectly through another source.
International versus Domestic
Entrepreneurship (cont.)
}  Political-Legal Environment
}  Political risk analysis - An assessment of a country’s political
policies and its stability prior to entry.
}  Types of political risks:
}  Operating risk.
}  Transfer risk.
}  Ownership risk .
}  Conflict and changes in the solvency of the country.
International versus Domestic
Entrepreneurship (cont.)
}  A country’s legal system regulates:
}  Its business practices.
}  The manner in which business transactions are executed.
}  The rights and obligations involved in any business
transaction between parties.
}  Critical areas for every entrepreneur:
}  Property rights.
}  Contract law.
}  Product safety.
}  Product liability.
International versus Domestic
Entrepreneurship (cont.)
}  Language
}  One of the biggest problems for the entrepreneur
is finding a translator.
}  Significant problems can occur with careless
translation.
}  Care should be taken to hire a translator whose
native tongue is the target language and whose
expertise matches that of the original authors.
Technological Environment
}  The variation and availability of technology are
often surprising, particularly to an
entrepreneur from a developed country.
}  New products in a country are created based
on the conditions and infrastructure operant in
that country.
Various Aspects of Culture
Available Distribution Systems
}  Factors to be considered in determining the distribution
system for a country:
}  Overall sales potential.
}  Amount and type of competition.
}  Cost of the product.
}  Geographical size and density.
}  Investment policies.
}  Exchange rates and controls.
}  Level of political risk.
}  Overall marketing plan.
Motivations to Go Global
}  Profits.
}  Competitive pressures.
}  Unique product(s) or service(s).
}  Excess production capacity.
}  Declining home country sales.
}  Unique market opportunity.
}  Economies of scale.
}  Technological advantage.
}  Tax benefits.
Strategic Effects of Going Global
}  Physical and psychological closeness to the
international market affects the way business occurs.
}  Cultural variables, language, and legal factors can
make a foreign market that is geographically close
seem psychologically distant.
Strategic Effects of Going Global (cont.)

}  Issues involved in psychological distance:

}  The distance envisioned by the entrepreneur may
be based more on perception than reality.
}  Closer psychological proximity makes it easier for
an entrepreneurial firm to enter a market.
}  There are more similarities than differences
between individual entrepreneurs regardless of the
country.
Foreign Market Selection
}  One good market selection model employs a
five-step approach:
}  Develop appropriate indicators.
}  Collect data and convert into comparable
indicators.
}  Establish an appropriate weight for each indicator.
}  Analyze the data.
}  Select the appropriate market from the market
rankings.
Entrepreneurial Entry Strategies
}  Exporting
}  Indirectexporting.
}  Direct exporting.

}  Non-equity Arrangements
}  Licensing.
}  Turn-key
projects.
}  Management contracts.
Entrepreneurial Entry Strategies (cont.)

}  Direct Foreign Investment

}  Minority Interests.
}  Joint Ventures.
}  Majority Interest.
}  Mergers:
}  Horizontal merger.
}  Vertical merger.
}  Product extension merger.
}  Market extension merger.
}  Diversified activity merger.
Entrepreneurial Partnering
}  Foreign entrepreneurs know the country and
culture.
}  They can facilitate business transactions and update
the entrepreneur on business, economic, and
political conditions.
}  Good partners share the entrepreneur’s vision,
are unlikely to exploit the partnership, and can
help the entrepreneur achieve his or her goals.
International Trade Mechanism
}  General Agreement on Tariffs and Trade
(GATT)
}  Established in 1947 under U.S. leadership; includes
over 100 nations.
}  Objective - To liberalize trade by eliminating or
reducing tariffs, subsidies, and import quotas.
Barriers to International Trade
}  Increasing Protectionist Attitudes
}  Support of GATT resulted in:
}  Strain on the world trading system and the economic success of
countries perceived as not playing by rules.
}  Establishment of bilateral voluntary export restraints to circumvent
GATT.
}  Trade Blocs and Free Trade Areas
}  Free Trade Area (FTA).
}  North American Free Trade Agreement (NAFTA).
}  Treaty of Asunción – Mercosur trade zone.
}  European Community (EC).
Barriers to International Trade (cont.)

}  Entrepreneur’s Strategy and Trade Barriers

}  Trade barriers increase entrepreneurs’ costs of
exporting products or semi-finished products to a
country.
}  Vo l u n t a r y e x p o r t r e s t r a i n t s m ay l i m i t
entrepreneurs’ ability to sell products in a country
from production facilities outside the country.
}  Entrepreneurs may have to locate assembly or
production facilities in a country to conform to
local content regulations.