Lecture 6 @ 7

Entrepreneurship

DEPARTMENT OF ENGINEERING MANAGEMENT

NUST COLLEGE OF E&ME
Identifying and Analyzing
Domestic and International
Opportunities
 Introduction

 Entrepreneursfind it difficult to both manage and

expand the venture they created.
 To expand a venture, entrepreneurs need to:
Identify opportunities for domestic and
international expansion.
Develop different management skills.
Infuse new entrepreneurial spirit
(intrapreneurship).
 Introduction
 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
 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.
 Opportunityassessment 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

 An opportunity assessment plan has four sections:

 Thefirst section develops the idea, analyzes
competitive products and companies, and identifies the
unique selling propositions.
 Thesecond 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
 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, nvca.org,
nbia.org, www.fasttrac.org, activecapital.org, c-e-o.org,
 Information Sources

 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 Sources

 Competitive Company and Product 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 (North American Industrial
Classification System) category.
 Mergent - Provides detailed company and product
information on U.S. and international companies.
 Information Sources

 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
 Information Sources

 Search Engines
 Thereare many key terms for searching the
needed industry, market, and competitive
information.
 Trade Associations
 Good source for country-specific industry data.
 Trade Publications
 Provideinformation and insights on trend,
companies, and trade shows from a local
perspective of the particular market and market
 The Nature of International Entrepreneurship

 Internationalentrepreneurship 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:
Fullyunderstand 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 multicountry
area means dealing with differences in:
Levelsof economic development.
Currency valuations.
Government regulations.
Banking, venture capital, marketing, and distribution
 International versus Domestic
Entrepreneurship
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
 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
 Type of System
Difficultiesin 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 nonmoney
items.
Third-party arrangements - Paying for goods
indirectly through another source.
 International versus Domestic
Entrepreneurship
 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
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.
 International versus Domestic
Entrepreneurship
 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

Figure 5.1
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.
 Strategic Effects of Going Global

 Physical and psychological closeness to the

international market affects the way business
occurs.
 Culturalvariables, language, and legal factors can
make a foreign market that is geographically close
seem psychologically distant.
 Strategic Effects of Going Global

 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
 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.

 Entrepreneurial Entry Strategies

 Exporting
Indirect exporting.
Direct exporting.
 Nonequity Arrangements
Licensing.
Turn-key projects.
Management contracts.
 Entrepreneurial Entry Strategies

 Direct Foreign Investment

Minority Interests.
Joint Ventures.
Majority Interest.
Mergers:
Horizontal merger.
Vertical merger.
Product extension merger.
 Entrepreneurial Partnering

 Foreignentrepreneurs 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
Barriers to International Trade

 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).
 Barriers to International Trade

 Entrepreneur’s Strategy and Trade Barriers

Trade barriers increase entrepreneurs’ costs of exporting
products or semifinished products to a country.
Voluntary export restraints may limit 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.
Discussion