Section 2

From Idea to
Opportunity

Chapter 5
Identifying and Analyzing Domestic
and International Opportunities

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• Introduction
In order to expand a venture, the entrepreneur should identify
opportunities for domestic and international expansion.

The distinction between foreign and domestic markets is

becoming less pronounced.

The pressure to internationalize is being felt in virtually every

organization, including entrepreneurships.

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• Opportunity Assessment Plan
The key to a profitable domestic and international venture is to
develop an idea that has a large, reachable market.
An opportunity assessment plan differs from a business plan.
• Shorter than a business plan.
• Focus is on the opportunity, not the venture.
• The plan has no pro forma financial statements.
• It is the basis of the decision to act on a opportunity or wait.

An opportunity assessment plan has four sections – two major

sections and two minor sections.

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• Opportunity Assessment Plan – Major
Sections
The first major section includes
the following:
The second major section
• A description of the product. includes the following:
• The market need for the • The market need filled.
product or service.
• The social condition
• Specific aspects of the underlying the market need.
product or service.
• Any available data to describe
• Products currently filling the this market need.
need, features and prices.
• Size, trends, characteristics of
• Competitive companies in the the market.
industry.
• Growth rate of the market.
• Unique selling propositions of
the product.

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• Opportunity Assessment Plan – Minor
Sections
A third section answers the
following questions:
• Why does this opportunity
excite you?
• How does the product idea fit
into your background and
experience?
• What business skills do you
have?
• What business skills are
needed?
• Do you know someone who
has these skills?
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The final section is a time line
focusing on the following:
• Identifying each step.
• Determining the sequence of
activities.
• Identifying what is
accomplished in each step.
• Determining time and money
needed at each step.
• Determining total time and
money needed.
• Identifying the source of this
needed money.
• Information Sources
SCORE is a nonprofit providing free online and in-person
assistance through training, consulting, and mentoring.

Small Business Development Centers provide counseling,

training, and technical assistance when starting a new venture.

General information sources include the

U.S. Chamber of Commerce Small Business Center.

Many other valuable websites exist including

The Small Business Investor Alliance ,
National Venture Capital Association, and the
Collegiate Entrepreneurs Organization.

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• Industry and Market Information
Plunkett provides industry data, market research, trends and
statistics on markets, and forecasts.

Frost and Sullivan provides very industry specific information.

Euromonitor provides information on companies and brands as

well as consumer market sizes and marketing parameters.

Gartner provides information on technology markets.

Gale Directory Library provides industry statistics and a directory

of nonprofit organizations and associations.

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• Competitive Company and Product
Information
Business Source Complete has company and industry
information through their Datamonitor reports.

Hoovers provides information on both large and small

companies with links to competitors in the NAICS category.

Mergent has detailed company and product information on U.S.

and international companies.

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• Government Sources and Other Information Sources
Government sources include the following:
• Census reports.
• Export/import authority.
• NAICS and SIC codes.

Use search engines and pairs of key terms to find general online
information.

Some trade associations do market surveys and are involved in

international standards issues.

Trade publications provide interesting information and insights

on trends, companies, market conditions, and trade shows.

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• The Nature and Importance of International Business
International entrepreneurship is the process of conducting
business across national boundaries.
• It may consist of exporting, licensing, or opening a sales office in
another country.

The U.S. is a relative newcomer to international business.

• Foreign investors helped build much of the early U.S. industrial base.
• The future commercial strength of the U.S. depends on entrepreneur’s
success in markets outside the U.S.

International business is important to firms of all sizes.

Successful entrepreneurs understand how international business
differs from domestic business and responds accordingly.

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• International Versus Domestic
Entrepreneurship Political.
All entrepreneurs are
concerned with – sales, costs,
and profits.
• What varies is the relative
importance of the factors.
• Decisions are complex due to
uncontrollable factors.
Conducting a P.E.S.T. analysis is
useful when exploring
international business
opportunities.
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• Public policy, who influences
policymakers, wars, and
government stability.
Economic.
• Taxation, monetary policy,
distribution, and trends.
Social.
• Language, psychographics,
ethics, and major events.
Technical.
• Technology varies by country
and products should reflect
the country’s infrastructure.
• Culture
Culture refers to common ways of thinking and behaving.

Culture is learned behavior, identifying an individual and society.

Cultural aspects that may prove difficult include:

• Language.
• Social structure.
• Religion.
• Politics.
• Education.
• Manners and customs.
• Aesthetics.

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• Available Distribution Systems
Distribution channels within the targeted country is a challenge.

To select the best channel of distribution, consider the following:

• Overall sales potential.
• Amount and type of competition.
• Cost of the product.
• Geographic size and density of the country.
• Investment policies of the country.
• Exchange rates and monetary controls.
• Level of political risk.
• The overall marketing plan.

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• Motivations to Go Global
Profits are the most significant reasons for going global.
• Profitability is lowered due to costs of preparing to go global,
underestimating the costs involved, and losses due to mistakes.

Sales to other markets is another reason to go global.

• The domestic market may be leveling or even declining.

Entrepreneurs may move to international markets to avoid

industry regulations, or societal concerns about the product.

When the entrepreneur’s technology is obsolete in the domestic

market, there may be sales opportunities in foreign markets.

Going global may take advantage of lower costs in foreign

countries for labor, overhead, and raw materials.

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• Strategic Effects of Going Global
One major effect centers on the concept of proximity to the
firm’s customers and ports.
Some factors can make a foreign market that is geographically
close seem psychologically distant.
• The distance envisioned by the entrepreneur may be more a matter of
perception than reality.
• Closer psychological proximity makes it easier to enter a market.
• There are more similarities than differences between individual
entrepreneurs, regardless of the country.

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• Foreign Market Selection
Base the market selection on past sales and competitive
positioning and assess and rank each foreign market alternative.
One method 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.

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• Entrepreneurial Entry Strategies
Exporting.
• Indirect exporting involves the least amount of risk using an export
management firm, or purchasing offices for commodities.
• Direct exporting through independent distributors or an overseas sales
office requires little financial commitment.

Nonequity arrangements.
• Licensing is used when there is no intent to export or directly invest.
• Turn-key projects are facilities built in a foreign country and turned over to
local owners for operation.
• Management contracts allow entrepreneurs to contract their
management techniques and skills to a foreign purchasing company.

Direct foreign investment.

• Ownership percentage hinges on amount of money invested, the nature
of the industry and the rules of the host government.
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• Direct Foreign Investment
Minority interests allows an entrepreneur to gain a foothold or
acquire experience in a market before committing.

Joint ventures are used to purchase local knowledge or an

established facility, or when rapid entry is needed.

Majority interest is the purchase of over 50% equity in a firm.

Mergers are often difficult to assess.

• Horizontal mergers are motivated by economies of scale.
• A vertical merger offers control over supply and production.
• In a product extension merger the acquired firm has related activities.
• A market extension merger combines skills of the acquired firm.
• In a diversified activity merger, the acquiring firm does not run the
new company.

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• Entrepreneurial Partnering
One of the best entry methods is partnering with an
entrepreneur in the targeted country.

Foreign partners know the culture and can facilitate business

transactions and keep the entrepreneur current on conditions.

A good partner can help the entrepreneur achieve their goals.

Good partners should share the entrepreneur’s vision and will

then be unlikely to exploit the partnership for their own benefit.

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• Aspects of International Trade
General Agreement on Tariffs and Trade (GATT).
• A multilateral agreement liberalizing trade by eliminating tariffs,
subsidies, and import quotas.

Trade agreements and free trade areas.

• Free trade areas (FTA) exist between the U.S. and Israel and between
the U.S. and Canada.
• The North American Free Trade Agreement (NAFTA) reduces barriers
and encourages investment.
• The Mercosur trade zone exists between North and South American
countries.
• The Trans-Pacific Partnership (TPP) includes the U.S., Japan and ten
other countries.
• The European Community (EC) encourages supra-nationality.

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• Entrepreneur’s Strategies and Trade Barriers
Trade barriers pose problems as they increase the costs of
exporting.

Voluntary export restrictions may limit the ability to sell products

in a country from production facilities outside the country.

The entrepreneur may have to locate assemble or facilities in a

country to conform to the local content regulations.

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• Implications for the Global Entrepreneur
The cultural, political, economic, and distribution systems of a
country influence its attractiveness as a potential market and
investment opportunity.

The costs and political risks are lower in countries more

advanced economically and politically.

Long-run benefits are the country’s future growth and

expansion.

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