BPME1013 Basic Entrepreneurship Prepared by: MATHIVANNAN JAGANATHAN

At the end of this chapter, students will be able to:

1. Understand why an entrepreneur needs to develop business into

global market.
2. Understanding the importance and benefits of global business.
3. Understand and discuss the methods that can be used to enter the
global market.
4. Understand the necessary steps to be taken before enter the global
market.
5. Understand and discuss the obstacles in global business.
6. Understanding the constraints of the global market.

BPME1013 Basic Entrepreneurship Prepared by: MATHIVANNAN JAGANATHAN

 Extend the product life cycle
 an entrepreneur can still continue the age of the product lifecycle by
introducing products in global market.
 For example, the white products such as televisions, refrigerators
can still be sold in developed countries.
Improve sales and profits
 local market and overseas market, the entrepreneur can increase
sales and profits more lucrative.
Reduce production cost
 increase in the rate of production for global market to reduce the
average production cost per unit product.

BPME1013 Basic Entrepreneurship Prepared by: MATHIVANNAN JAGANATHAN

 Balancing sales decline in local market
If businesses in the local market is not so good, entrepreneurs can
accommodate this loss of business sales in overseas markets.

Improving the quality of products

To enter the global market such as Japan, the United States and the
EU (European Union), an entrepreneur needs to ensure that the
products meet stringent quality requirements.

BPME1013 Basic Entrepreneurship Prepared by: MATHIVANNAN JAGANATHAN

 a) The method of importation (import)
grocery shopping and bring foreign products to be sold in local
markets to get products that are not produced by local production.

b)Method of exports (export)

exportation, transmission and sale of products from a country to
foreign countries.
 important to entrepreneurs because it would increase the potential
market for his company's products.

c) Method of forming strategic alliances (strategic alliance)

no formal agreement to share information and collaboration.
Strategic alliances give the company access to additional resources and
capabilities to share high costs and business risks.

BPME1013 Basic Entrepreneurship Prepared by: MATHIVANNAN JAGANATHAN

 d) export management companies (export management company)
export activities is through the export management company, also
known as house trade (trading house).
can help manage the process of exporting the items need to start by
making shipping up to find the customer.

e) Foreign distributor (foreign Distributors)

Distributors appointed by the entrepreneurs or companies from outside
the country will carry out all the marketing, sale and delivery.

f) foreign agents (foreign agents)

producers retain the rights to the product until it is delivered to the
buyer or its customers.
Foreign agent commission will be paid by the manufacturer.

BPME1013 Basic Entrepreneurship Prepared by: MATHIVANNAN JAGANATHAN

 g) The establishment of local office (setting up a local office)
manufacturers will send one or two people who have foreign language
ability or expertise to establish a foreign culture.

h) production contract (contract manufacturing)

a manufacturer would allow a local company to produce it under
contract or agreement signed by both parties.
i) Joint venture (joint venture)
a partnership of international business (international business
collaboration) in which two or more parties to establish a business
entity.

BPME1013 Basic Entrepreneurship Prepared by: MATHIVANNAN JAGANATHAN

 j) Foreign direct investment (foreign direct investment)
Direct investment is typically involved ownership of 10 percent to 25
percent equity or voting stock of the foreign company
Selected as one of the methods for conducting business in foreign
countries due to certain factors.
The first factor, the existence of trade restrictions or prohibitions the
importation of certain products.
The second factor - the possibility of foreign countries to provide
incentives to foreign firms that invest in the country.
The first way is through the purchase of part of the equity of the
companies operating in global market.
The second way - through the purchase of the majority or recruitment
company. the parent company.
The third way is through the purchase of a foreign company in order
to establish a direct investment.

BPME1013 Basic Entrepreneurship Prepared by: MATHIVANNAN JAGANATHAN

 k) subsidiary (subsidiary)
when a multinational company to invest directly in terms of capital and
personnel to set up branches overseas or buy facilities from other
foreign companies.
The holding company has full control of the company's travel
operations.

l)Licensing (licensing)
give permission to issue or sell a brand or using copyright, patent and
how the process for manufacturing a product.
The licensor will get a reward in the form of fee and royalty from the
sale of products or services produced by licensees.

BPME1013 Basic Entrepreneurship Prepared by: MATHIVANNAN JAGANATHAN

 Licensing (licensing)
Advantages
using a low-capital, and easy to enter the global market.
as an extension of the life of the product in the maturity stage of
product life cycle.
royalties for the license was secured and the term overcome the high
transportation costs.
The risk level is low in licensing business.
Weakness
the applicant may lose interest to renew the contract unless the
licensor to maintain interest
the licensor must have a unique technology, its own copyright and
brand that could attract the attention of international consumers.

BPME1013 Basic Entrepreneurship Prepared by: MATHIVANNAN JAGANATHAN

 m) International Franchise
Franchisees or the company granted the franchise rights to provide a
number of franchise fees, royalties, management fees, as well as a
certain percentage of all sales made ​to parent company
Examples of such franchise Malaysia Nelsons, Smart Reader,
MarryBrown Fried Chicken and England Optical

BPME1013 Basic Entrepreneurship Prepared by: MATHIVANNAN JAGANATHAN

 Step 1: Conduct Preliminary (Conduct Initial Research)
make an early assessment of the global market, how the actual
situation in specific countries, are or are not doing business in the
country
Facts or preliminary information about a country can be found through
the embassy if there are embassies

Step 2: Conduct Feasibility Study

aspects of entry strategy, government and legal system factors,
characteristics such as size and market profile of the population, major
cities, socio-economic, cultural, language, climate, exchange rates, tax
rates, and risk factors of labor.

Step 3: Provide Adequate Financial (Secure adequate financing)

Adequate financing to penetrate markets that were carried out research

and evaluation shows that it is a potential

BPME1013 Basic Entrepreneurship Prepared by: MATHIVANNAN JAGANATHAN

 Step 4: Procedure Documentation
documentation procedures for the purpose of doing business in that
country.
One can use a local agent or lawyer to manage lo procedure documents.

Step 5: Prepare and implement Plan

To achieve the firm into the international market, the establishment of
policies needed to be a guideline.
conducted in accordance with the prescribed timetable or plan showing
the implementation of certain works and who is responsible for doing it.

BPME1013 Basic Entrepreneurship Prepared by: MATHIVANNAN JAGANATHAN

 a)Tariffs (tariffs)
 business restrictions in the form of tax on imported goods used to
increase the prices of goods imported and locally manufactured
products to maintain
 Specific tariffs - fixed a number of tax imposed on each unit of
imported goods.
 ad-valerom rates - the tax on the value of imported goods.

b) Quota (quota)
 restrictions on the amount of imported goods in the total quantity of
goods imported.
 Quotas imposed by a country to restrict the quantity of goods
imported but does not increase government revenue.

BPME1013 Basic Entrepreneurship Prepared by: MATHIVANNAN JAGANATHAN

 c) export subsidies (export subsidy)
payments made by the government to exporters in order to reduce
their production costs and thus to reduce their export prices

d) Control of foreign exchange (foreign exchange control)

A country's currency will be purchased by importers if they want to
import goods from these countries to the importer.

e) Embargo
Embargo imposed by some countries over whether a country imports
or exports of all product categories, regardless of destination.

BPME1013 Basic Entrepreneurship Prepared by: MATHIVANNAN JAGANATHAN

 f) Prevent the accumulation (anti-dumping)
Goods such as clothes, clothing, shoes and other necessities can be
produced by many users, and cheap in China, Vietnam, India and
others.
These items can be sold cheaply in global markets such as United
States, Great Britain and Canada.

g) Trading Block
Establishment of the North American Free Trade Area (NAFTA) and the
European Union (EU) by the number of countries is intended to
safeguard the common interest of creating a block of business.

BPME1013 Basic Entrepreneurship Prepared by: MATHIVANNAN JAGANATHAN

 a) Socio-cultural
 Culture, religion, customs, cuisine and other factors pertaining to the
community in the country skills, social perception, efficient work
habits and good relations between individuals is needed in
international management.
 For example, the issue of whether a product is halal or not is an
important matter to the market in Muslim countries like Malaysia and
Middle East countries

b) Lack of capital or limited

 requires huge capital and total capital varies according to the
strategy used
 Levels of capital required in international business is export, contract
agreements, licensing, franchising, joint ventures, subsidiaries and
manufacturing plants

BPME1013 Basic Entrepreneurship Prepared by: MATHIVANNAN JAGANATHAN

 c) political and legal
Ensure that you have adopted a political system whether based
systems of communism (China), socialist (Cuba), a full democracy
(United States), etc.
need to know such things as the type and scope of the act, taxation
and other regulations on the management of human resources, etc.

d) economic changes
Change the world economy will provide a significant impact on the
company's operations depend on the countries involved with the
business operations
The decline of the currency will lead to inflation and adversely affect
business.

BPME1013 Basic Entrepreneurship Prepared by: MATHIVANNAN JAGANATHAN

 e) patriotism
people in a country more interested in the products of their own
country.
For example, the people of Iran and Muslim countries that has
sentiment "anti-American" is would not allow products from U.S. firms

f) Technology
Every country has the capacity and capability to achieve technological
advances of its own.
If a company is bringing in technology that have a low level of
technology or the lack of conformity with the existing level of technology
in the country, this would give a bad impression to the company

BPME1013 Basic Entrepreneurship Prepared by: MATHIVANNAN JAGANATHAN

  Global market provides the greatest opportunity for an entrepreneur
to expand its business
 an entrepreneur who has been successful in the local market should
review and think about the business expansion into global market.

BPME1013 Basic Entrepreneurship Prepared by: MATHIVANNAN JAGANATHAN