The New Business Venture MGT 2230 Chapter 4 International Entrepreneurship Opportunities MALACHI MIVON III Page 85-87

THE NATURE OF INTERNATIONAL ENTREPRENURSHIP An entrepreneur doing business across his or her national boundary. Satisfying the needs and wants of target customers often take place in more than one country. With a commercial history of only 300 years, the U.S. is a relative newcomer to the international business arena. The Importance of International Business to the Firm 1. International business is increasingly important to all firms. 2. Every firm is competing in a hypercompetitive global economy. 3. The successful entrepreneur must understand how international business differs from domestic. Must address the following questions; How is managing international business different from managing domestic business? What are the strategic issues to be resolved in going global? What are the options available for engaging in international business? How should one assess the decision to enter an international market? GE= C(1) + PL + E + DC + C(2) + C(3) GE = Global Entrepreneurship C (1) = Culture PL = Politics & Legal Environment E = Economy & Economic Integration DC = Distribution Channels C (2) = Change C (3) = Communication This formula indicates the important aspects surrounding global entrepreneurship as well as the things that must happen in order for an entrepreneurial firm to truly be global.

INTERNATIONAL VERSUS DOMESTIC ENTREPRENURSHIP Economics A country is almost always designed under a single economic system and has the same currency. Must deal with differences in; 1. Levels of economic development. 2. Currency valuations. 3. Government regulations. 4. Banking. 5. Venture capital. 6. Marketing. 7. Distribution systems. Raising capital varies greatly by the area of the world. Stage of Economic Development The U.S. is an industrially developed nation with regional variances of relative income. Globally you have to worry about: 1. Roads. 2. Electricity. 3. Communication systems. (phones, internet, etc) 4. Banking facilities and systems. 5. Adequate educational systems. 6. Well developed legal systems. 7. Established business ethics and norms. These factors vary greatly in other countries. They significantly impact a firms ability to successfully engage in international business. Balance of Payments A countrys trade balance is the flexible exchange rates which affects the valuation of the currency. The valuation of one countrys currency affects business transactions between countries. Fiat Example. Type of Economic System Barter is a method of payment using non-money items of value. Third party arrangement is paying for goods indirectly through another source. Example is Pepsi syrup for Russian Vodka. These gaps in economic systems create problems in finding a barter item or having a nonconvertible currency. Political Legal Environment

The multiplicity of political and legal environments in the international market creates vast business problems. Example: U.S. environmental standards prevent U.S. entrepreneurs from importing several European auto models as well Chinese models. Tax situations in each country are unique. Advertising is restricted in what can be said in many countries. Product design can be affected by legal requirements for labeling, ingredients and packaging. Types of company ownership and organizational formats may be restricted in different countries. Some political systems view the needs of the whole as opposed to the individual success. Must provide a political risk analysis to assess that countrys political policies and its stability. Review the following issues of a country; 1. Property rights of the resources owned and the income earned from these resources. Intellectual property is of great concern in other systems. 2. Contract law and how it is enforced as it pertains to rights of ownership. 3. Product safety and the need to understand how the law might be enforced. 4. Product liability will usually much lower in other countries. Maintain the higher standard of the U.S. Cultural Environment Each element of the business plan has some degree of congruence with the local culture. An increasingly important aspect of the cultural environment in some countries concern bribes and corruption. Finding a translator whose native tongue is the target language and whose expertise matches that of the entrepreneur. Technical Environment Technology varies significantly across countries. Products are created based on the conditions and infrastructure operating in that country. Your assumptions need to be significantly altered when dealing with technology in other countries. CULTURE The single most important aspect of global business is the crossing of cultures. Culture is learned behavior and the identity of an individual and society. Culture encompasses a wide variety of elements: 1. Language, both verbal and nonverbal, is the means to transmit messages and ideas. 2. Social Structure. Social stratification is very strong in some cultures and impacts buying habits and working conditions.

3. Religion. Defines the ideas for life in a culture. It will affect the business in their attitude towards consumption. 4. Political Philosophy. Rules and regulations of a country significantly impact the global entrepreneur and the way he conducts business. 5. Economics and Economic Philosophy. Whether the country is in favor of trade or inhibits trade through restrictions is important to the entrepreneur. 6. Education. The degree of emphasis on particular skills or career paths is important to the entrepreneur needing a pool of skilled workers. 7. Manners & Customs. Must be carefully dealt with and monitored. It is important to the entrepreneur in negotiations and gift giving so as not to insult or offend. ECONOMIC SYSTEM AND DEVELOPMENT 1. Market Economy. All productive activities are privately owned rather than the state owned and goods produced are not planned. 2. Command Economy. The type & quantity of the goods and services produced in a country and their selling prices are planned by the government. 3. Mixed Economy. Has aspect of both. Example: European Union such as France, Italy and Sweden. In the best interests of society, one sector usually controlled by the government is health care. 4. State Directed Economy. The government plays a significant role in the investment activities of private enterprise through an industrial policy. Japan & Korea. AVAILABLE DISTRIBUTION SYSTEMS The global entrepreneur must determine the best channel of distribution in worldwide logistics; 1. The overall sales potential. (Volume) 2. The amount and type of competition. 3. The cost of the product. 4. The geographical size and density of the country. 5. The investment policies of the country. 6. Exchange rates and any controls. 7. The level of political risk. 8. The overall marketing plan. BARRIERS TO INTERNATIONAL TRADE 1. General Agreement on Tariffs and Trade (GATT). In 1947, established by the U.S., liberalizes trade by eliminating or reducing tariffs, subsidies and quotas. 2. Increasing Protectionist Attitudes. Support of GATT fluctuates: The U.S. trade deficit strains the world trading system. Economic success of countries perceived as not playing by the rules (Japan and China) also strain the worldwide trading system. Countries responded to these pressures established voluntary trade restraints to circumvent GATT. 3. Trade Blocs & Free Trade Areas. Groups of nations banded together to increase trade and investment among that particular group.

4. Trade Barriers. Problems posed for the entrepreneur are increased costs, Ability maybe limited to prevent similar based competition from entering the country.

HOMEWORK Find the website of two companies that are based in countries other than the U.S. Choose companies whose type of business interests you. Search for and answer the following question; 1) List the two websites. 2) What is the business of these two companies? 3) What types of job offerings did they have in their career section? 4) Navigate all the tabs of their website. What differences did you find in the structure and style of their websites as opposed to U.S. Companys? 5) Do you think the differences addressed a cultural need?