Chapter 4

International Entrepreneurship
Opportunities
4-1

International Entrepreneurship

“International Entrepreneurship is the

process of an entrepreneur conducting
business activities across national
boundaries”
 The entrepreneur attempting to “go
international” should also consider an
international joint venture. Here, two firms get
together and form a third company in which they
share the equity.
The joint venture should have synergy.

 Synergy means that

the whole is greater
than the sum of its
parts so that:
11 3
 The Difference Between International &
Domestic Entrepreneurship

1. Economics
2. Balance of Payment
3. Type of Systems
4. Political-Legal Environment
5. Technological Environment
6. Strategic Issues
 Strategic Issues

Four strategic issues are important to the international

entrepreneur:

1) The allocation of responsibility between you 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
 Strategic Decision Making

Experience suggest:
Stage 1: highly centralized decision-making

Stage 2: When success occurs, a shift to

decentralization

Stage 3: Decentralization is scaled back and major

strategic decisions are again centralized.
 Strategic Decision Making
To understand what is required for effective planning,
reporting, and control, the entrepreneur should consider:
1. Environmental analysis
2. Strategic planning
3. Structure
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
5. Resources
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
weaknesses
 Exporting
o Indirect exporting - foreign purchaser in the local market
o Direct exporting – ind. distributors/own overseas sales office
 Non equity arrangements
o Licensing - involves a manufacturer giving a foreign manufacturer
the right to use a patent, trademark, or technology in return for a
royalty
o Turn-key projects - Lesser-developed countries are able to obtain
manufacturing technology without surrendering economic control
through turn-key projects
 Management contracts - Entrepreneurs can contract their management
techniques and skills, often following a turn-key project
 Direct Foreign Investment – the wholly owned subsidiary
 Direct Foreign Investment
Minority interests - Source of ‘Raw Material’ or a ‘Captive Market’ for
products
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
Motives for the significant increase in the use of joint
ventures:
 To share the costs and risks of an uncertain project
 To gain synergy between the two firms.
 To obtain a competitive advantage.
 To enter markets that pose entrance difficulties.
 Direct Foreign Investment
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 form of 100% ownership is mergers

and acquisitions
o Horizontal Merger
o Vertical Merger
o Product Extension Merger
o Market Extension Merger
o Diversified Activity Merger