Chapter 15

Going
Global

McGraw-Hill/Irwin
Entrepreneurship, 7/e Copyright © 2008 The McGraw-Hill Companies, Inc. All rights reserved. 15-1
 Class Discussion
 Is going international something that only large and
established firms should pursue after they have
achieved success in its domestic market, or should
entrepreneurs think about international markets “right
off the bat?” Which sorts of products are more
amenable for going international by small and new
firms?

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 Motivations to go Global

 Profits
 Competitive pressures
 Unique products/services
 Excess production capacity
 Declining home country sales
 Unique marketing opportunity
 Economies of scale
 Technological advantage
 Tax benefits

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 Important Considerations (1 of 2)
 Entrepreneur should consider the following areas for
effective planning, reporting and control:

 Environmental analysis.
 Strategic planning.
 Structure.
 Operational planning.
 Controlling the marketing program.

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 Important Considerations (2 of 2)
 To identifying markets and cluster countries data needs
to be analyzed on each country in the following areas:

 Market characteristics.
 Marketing institutions.
 Industry conditions.
 Legal environment.
 Resources.
 Political environment.

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Various Entry Models

 <<Insert Table 15.2>>

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 Exporting
 Sale and shipping of products manufactured in one
country to a customer located in another country.

 Indirect exporting: involves having a foreign purchaser in

the local market or using an export management firm.
 Direct exporting: involves the use of independent
distributors or the company’s own overseas sales office
in conducting international business.

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 Nonequity Arrangements
 Entrepreneur can enter a market and obtain sales and
profits without direct equity investment in the foreign
market.
 Licensing: giving a foreign manufacture the right to use
a patent, technology, production process, or product in
return for the payment of a royalty. (e.g. foreign food
chains)
 Turn-key project: foreign entrepreneur supplies the
manufacturing technology or infrastructure for a
business and then turns it over to local owners. (e.g.
foreign construction companies of roads/bridges)
 Management contract: entrepreneur contracts his or her
management techniques and skills to a (foreign)
purchasing company. (e.g. BPOs)
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 Direct Foreign Investment
 Minority interest: investing entrepreneur holds a
minority ownership position in the foreign venture.
 Joint venture: joining of two firms in order to form a
third company in which the equity is shared.
 Majority interest: purchase of over 50 percent of the
equity in a foreign business.

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Direct Foreign Investment: Mergers (1 of 2)
 Horizontal merger: combining two firms that produce
one or more of the same or closely related products in
the same geographic area
 Vertical merger: combining two or more firms in
successive stages of production.
 Product extension merger: acquiring and acquired
companies have related production and/or distribution
activities but do not have products that compete
directly with each other

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Direct Foreign Investment: Mergers (2 of 2)
 Market extension merger: combing two firms that
produce the same products but sell them in different
geographic markets.
 Diversified activity merger: conglomerate merger
involving the consolidation of two essentially unrelated
firms.

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 Entrepreneurial Partnering
 Foreign entrepreneurs are familiar with the country
and culture.
 Can facilitate business transactions.

 Characteristics of a good partner:

 Can help entrepreneur achieve his or her goals.
 Share entrepreneur’s vision.
 Are unlikely to try to opportunistically exploit partnership
for their benefit.

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