CHAPTER 4

INTERNATIONAL ENTREPRENEURSHIP OPPORTUNITIES

Local Company

Regional Company

National Company

Multi-National / International / Transnational Company

Global Companies (e.g. Pepsi, Proctor & Gamble, Nestle)

Conglomerates (Mitsubishi, L.G.) (Multi Businesses/multi countries)

INTRODUCTION:

The challenges include geographical changes control over operations and

adoptability.
International business is always changing.
Globalization is coming through all types of companies, the profit or no-profit,
public or private, small or large.
Need for physical and technological infra-structure is increasing.
Internationalization creates wealth and employment.

NATURE OF INTERNATIONAL ENTREPRENEURSHIP:

“International Entrepreneurship is a process of conducting business across
national boundaries”.

REASONS:

1. More profits.
2. More sales.
3. Expansion
4. To get international exposure.
5. To have more brand awareness.
6. As a result of cut throat local competition.
7. Encouraging host government policies.
8. Capitalize on natural and human resources of host country.
IMPORTANCE OF INTERNATIONAL BUSINESS TO FIRM:

GE = C1 + PL + E + D + C2 + C3

GE = Global Entrepreneurship
C1 = Culture
PL = Politics and Legal Environment
E = Economy and economic integration
DC = Distribution Channel
C2 = Change
C3 = Communication (Level of Technology)

INTENATIONAL VS. DOMESTIC ENTREPRENEURSHIP:

1. ECONOMICS:

Differences exist in level of economic development, currency valuation,

Government
regulations, Interest, banking systems, Venture Capital Market, Marketing and
Distribution System and issues of raising capital.

2. STAGE OF ECONOMIC DEVELOPMENT:

Differences exist on Infra-structure e.g. roads, electricity, communications,

banking
facilities, educational system, legal system, business ethics and norms.

3. BALANCE OF PAYMENTS:

The difference between country value of export and import over time and effects
Business transactions and exchange rates among countries.

Export > Import (Surplus Balance)

Export < Import (Deficit Balance)

4. TYPE OF SYSTEM:

The socio-economic system existing in a country.

Various systems include capitalism, communism, imperialism, dictatorism,
socialism and social welfare.
5. POLITICAL ND LEGAL ENVIRONMENT:

Political system is law making i.e. system of parliament.

Legal system constitutes of law implementation i.e. system of courts.

Individualism Vs collectivism.
Individualism: A person is looking after him or his immediate family members
and then society
Collectivism: In collectivism it look it society first and then after his family
members.

Democracy Vs Totalitarianism
Democracy: People have right to choose their representative.
Totalitarianism: No involvement of public.

Political Risk Analysis:

Risk includes operating risk, transfer risk, ownership risk, conflicts, gorilla war
fare, civil disturbance and terrorism.
Legal system covers property rights, contract laws, product safety and liability.

6. CULTURAL ENVIRONMENT:

Each element of business plan has some concurrency with local culture.
Collection of bellicose, norms, artifacts, symbols,.
Bribery and corruption issue.
Translation problems and errors.

7. TECHNOLOGICAL ENVIRONMENT:
(Production and Operational Technology)

Variations exist among countries.

Standardization and National responsiveness

Customers are interest in consistent technology.

New Product Development.
CULTURE:
Common ways of thinking and behavior that are passed on from generations or
transmitted by social organization, developed, reinforce and learnt.
Elements include language, social situations, religion, political philosophy,
economic philosophy, education, manners and customs.

i) Language:
Language is composed of verbal and non-verbal components whereas non-
verbal includes body position, eye contact, gestures and physical space.
Time is assumed differently in different cultures. E.g. in Arabs it is very common
to say Bukra Inshallah.
Business relationship is also important.

ii) Social Structure:

This affects life style, living standards, and consumption patterns. E.g. a family in
USA comprises of parents and children whereas in other countries grand parents
and other relatives are also part of family
Social classes that is upper class, middle class and lower class.
Reference Group that reflects individual’s behavior.
Manager, Employees relationships.

iii) Religion:
The shared believes and attitudes e.g. Christianity, Islam, Hinduism, Buddhism
and non-religious.
Religion is reflected in values and attitudes of individual and society.

iv.) Political Philosophy:

The rules and regulation of a country impacting the global entrepreneur and the
way he conducts the business e.g. Embargos controls sanctions.

v) Economics and Economic Philosophy:

Whether the country is overall in favour of trade or impose trade restrictions e.g.
Import
duties, Tariffs and subsides.

vi.) Education:
The formal and informal education that may include literacy rate, skills, career
paths and
technology levels.

vii) Manners and Customs:

Negotiation:
One has to be careful before reaching on conclusion e.g. use of silence gaps
Gift Giving:
Whether to give a gift, what gift, how to wrap it and manner of giving it.
ECONOMIC SYSTEM AND DEVELOPMENT:
CATEGORIES OF ECONOMIC SYSTEM:

There are some categories of economic system:

i) Market Economy:

All or most of the activities are privately owners and services are not planned.
Production depends on supply and demand factors, that determines price. No
restriction
on supply, economic efficiency and economic growth and development.

ii) Command Economy:

Type, quantity and price are planned by government and pre government owned.
Lack of efficiency as there is no competition.

iii) Mixed Economy:

Both market and command economy that is private and government ownership
e.g. France, Italy, Sweden, usually health care is controlled by government.

iv.) State Directed Economy:

Government has an established industrial policy and direct investments of private

firms e.g. Japan and Korea.

Economic, Political and Legal systems affect economic development and make a
country attractive to global entrepreneurs

AVAILABLE DISTRIBUTION SYSTEMS:

Logistics and transportation had improved allot.
Distribution channel differ considerably among countries and can affect, success
of a company a lot.
Factors include overall sales potential, amount and type of competition, cost of
product, geographic size of country, investment policies, exchange rates, political
risks and marketing plan.
BARRIERS TO INTERNATIONAL TRADE:

The problems that may come to international trade

i) General Agreement for Trade & Tariff (GATT):

WTO (World Trade Organization)

(The purpose of WTO is free trade among nations)

Barriers include duties, tariff, restrictions quota, subsidies and taxes.

Mutually agreed upon systems of reduction of above and violating country may
be pressurized to change its policies.

ii) Increasing Protectionist Attitude:

They results from events happening in the last decade. E.g. Trade deficit of USA,
emergence of Japan and China and bilateral export restraints to avoid GATT.

iii) Trade Blocks and Free Trade Areas:

Groups of nation facilitating trade among themselves and excluding outsides.

NAFTA (North American Free Trade Agreement)
European Community based on the principle of Supra-nationality and the
members countries cannot enter into trade agreement on their own.

ENTREPRENEUR STRATEGY AND TRADE BARRIERS:

The problems include:

1. Increased cost of product.

2. Voluntary export restraint.
3. Conformance with the local content one.

IMPLICATION FOR GLOBAL ENTREPRENEUR:

The influence, attractiveness as the potential investment opportunities.

Careful analysis and determine the best country to enter.