Chapter 5

Identifying and Analyzing

Domestic and International
Opportunities

Hisrich
Peters

McGraw-Hill/Irwin

Copyright 2010 by The McGraw-Hill Companies, Inc. All rights reserved.

Shepherd

Introduction
Entrepreneurs find 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).
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Introduction

(cont.)

Factors contributing to international

expansion:
Opening up of controlled economies to marketoriented 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
century.

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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.
Opportunity assessment is often best
accomplished by developing an opportunity
assessment plan.
An opportunity assessment plan is not a
business plan.
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Opportunity Recognition and the

Opportunity Assessment Plan (cont.)
An opportunity assessment plan has four
sections:
The first section develops the idea, analyzes
competitive products and companies, and
identifies the unique selling propositions.
The second section focuses on the marketits
size, trends, characteristics, and growth rate.
The third section focuses on the entrepreneurs
and management teams skills and experience.
The final section develops a time line indicating
the steps to successfully launch the venture.
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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, entre-ed.org,
kauffman.org.
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Information Sources

(cont.)

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 on nonprofit organizations and
associations.
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Information Sources

(cont.)

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.
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Information Sources

(cont.)

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
www.osha.gov/pls/imis/sic_manual.html
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Information Sources

(cont.)

Government Sources in Philippines

http://www.dti.gov.ph/dti/index.php
http://industry.gov.ph/
General Information
http://www.gonegosyo.net/
http://philippines.smetoolkit.org/philippine/
en

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Information Sources

(cont.)

Search Engines
There are many key terms for searching the
needed industry, market, and competitive
information.

Trade Associations
Good source for country-specific industry data.

Trade Publications
Provide information and insights on trend,
companies, and trade shows from a local
perspective of the particular market and market
conditions.
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The Nature of International

Entrepreneurship
International entrepreneurship 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.
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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:
Fully understand the difference between
domestic and international business.
Respond accordingly thereby successfully going
global.

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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:

Levels of economic development.

Currency valuations.
Government regulations.
Banking, venture capital, marketing, and distribution
systems.

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International versus Domestic

Entrepreneurship (cont.)
Stage of Economic Development
Certain factors significantly impact a firms
ability to successfully engage in international
business such as:

Fundamental infrastructures.
Banking facilities and systems.
Educational systems.
Legal system.
Business ethics and norms.

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International versus Domestic

Entrepreneurship (cont.)
Balance of Payments Current Account
With the present system of flexible exchange
rates, a countrys current account (the
difference between the value of a countrys
imports and exports over time) affects the
valuation of its currency.
The valuation of one countrys currency affects
business transactions between countries.

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International versus Domestic

Entrepreneurship (cont.)
Type of System
Difficulties in 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.

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International versus Domestic

Entrepreneurship (cont.)
Political-Legal Environment
Political risk analysis - An assessment of a
countrys 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.

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International versus Domestic

Entrepreneurship (cont.)
A countrys 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.
Product safety.
Product liability.

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International versus Domestic

Entrepreneurship (cont.)
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.

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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.

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Figure 5.1 - Various Aspects of

Culture

Figure 5.1
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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.
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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.
Tax benefits.
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Strategic Effects of Going Global

Physical and psychological closeness to the
international market affects the way
business occurs.
Cultural variables, language, and legal
factors can make a foreign market that is
geographically close seem psychologically
distant.

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Strategic Effects of Going Global

(cont.)

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
between individual entrepreneurs regardless of
the country.

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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.
Analyze the data.
Select the appropriate market from the market
rankings.
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Entrepreneurial Entry Strategies

Exporting
Indirect exporting.
Direct exporting.

Nonequity Arrangements
Licensing.
Turn-key projects.
Management contracts.

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Entrepreneurial Entry Strategies

(cont.)

Direct Foreign Investment

Minority Interests.
Joint Ventures.
Majority Interest.
Mergers:

Horizontal merger.
Vertical merger.
Product extension merger.
Market extension merger.
Diversified activity merger.

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Entrepreneurial Partnering
Foreign entrepreneurs know the country
and culture.
They can facilitate business transactions and
update the entrepreneur on business, economic,
and political conditions.

Good partners share the entrepreneurs

vision, are unlikely to exploit the
partnership, and can help the entrepreneur
achieve his or her goals.

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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.

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Barriers to International Trade

(cont.)

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).
Treaty of Asuncin Mercosur trade zone.
European Community (EC).
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Barriers to International Trade

(cont.)

Entrepreneurs 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.
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