Entrepreneurship and Small Business Management

1. Entrepreneurship and Small Business Management Chapter 10 Marketing Globally

2. Ch. 10 Performance Objectives • Identify the reasons for ventures to market globally. • Understand the various strategic options for global ventures. • Explore the challenges to international trade. • Learn about the types of support that are available for global ventures. • Describe regional trade agreements that influence global trade.

3. Reasons to Market Globally • Expand market opportunities. • Acquire access to resources that are scarce or more competitive. • Reduce costs for materials, labor, etc. • Utilize advantages in a specific location such as skilled artisans, tax breaks, etc. • Improve product/service quality levels.

4. Importing • The sale of products produced in a foreign country to customers in your home country • Consider importing to… • Sell a product not produced at home • Take advantage of better cost/quality factors • Remain competitive • Some information resources: • Foreign embassies and consulates • National Customs Brokers and Forwarders Association of America

5. Exporting • Selling goods or services produced domestically to foreign customers • Higher growth rates and lower failure rates reported by companies that export, compared to those that do not • Trade intermediaries—serve as contract distributors of products between countries; have extensive trading networks and contacts

6. Reasons to Export • Enhance competitiveness • Increase sales and profits • Gain global market share • Reduce dependence on existing markets • Exploit corporate technology and know-how • Extend sales potential of existing products • Stabilize seasonal market fluctuations • Enhance potential for corporate expansion • Sell excess production capacity • Gain information about foreign competition

7. Exporting May Require You To: • Subordinate short-term profits to long-term gains • Hire staff to launch the export expansion • Modify products or packaging • Develop new promotional material • Incur added administrative costs • Dedicate personnel for traveling • Wait longer for payments • Apply for additional financing • Obtain special export licenses

8. Strategic Global Alliances • Strategic alliance—partnership between two or more firms in which each one provides a particular set of skills or resources • International strategic alliance—partners from at least two countries; one partner is located in the targeted geographic area • Benefits include: • Reduced risks • Greater potential rewards

9. Other Global Venture Strategies • License products and processes globally to get the greatest benefits from intellectual property. • Sell franchise units on an international scale to enter new, profitable markets. • Operate international facilities to create better supply to regional customers.

10. Economic Risk of Global Trade • Changes in a foreign country’s economy may cause financial or other harm to your business. • Examples: • Failure of payment by foreign customers • Exchange-rate risk

11. Political Risk of Global Trade • Changes in a foreign country’s political structure and policies may negatively impact your business. • Examples: • A ban on imports • Prohibition of foreign direct investment • Government seizure of foreign assets • Regulations which reveal trade secrets

12. Organizational Capacity • Will your firm have enough capacity to participate in international trade? • Factors to consider: • Management’s expectations and objectives • Previous global trade experiences • Personnel requirements (time and talent) • Production capacity • Financial capacity

13. Legal and Regulatory Barriers • Tariffs—taxes or duties on goods and services imported into a country • Quotas—limits on the amounts of specific products that can be imported into a country • Embargo—a ban on the import of all products (or specific ones) from a particular nation • Laws against dumping: When companies price products below cost and sell large quantities in foreign markets, it can harm domestic firms.

14. Cultural and Ethnic Considerations • Culture—the values, perspectives, beliefs, and norms shared by a group of people • An acceptable business practice in one country might be considered rude and inappropriate in another. • Other factors include foreign peoples’… • Language differences • Perceived importance of personal relationships • Expectations of product/service quality

15. Sources of Global Trade Support • U.S. Department of Commerce • International Trade Administration • Export portal (http://www.export.gov) • U.S. and Foreign Commercial Services • Small Business Development Centers • U.S. Export Assistance Centers • District Export Councils • Publications such as International Trade Forum and World Trade Magazine

16. Resources for Trade Leads • The Federation of International Trade Associations has list of no-fee Web sites. • Fee-based services will develop leads. • Trade missions provide travel opportunities to countries of interest. • Trade intermediaries can help with initial marketing and communications.

17. Forms of Financial Assistance • Letters of credit • Working Capital Loan Program (EWCP) • Export Express Loan Program • International Trade Loan Program • Ex-Im Bank’s Export Working Capital Program • Export Medium-Term Delegated Authority Program • Ex-Im Bank’s Loan Guarantee Program

18. Trade Agreements • Regional Trade Agreements (RTAs) • Regulate trade between participating countries called Member States • Help facilitate trade on a regional basis by cutting tariffs and reducing border barriers • Regional Free Trade Agreements (RFTAs) • Go beyond RTAs to increase market access • Simplify regulations and reduce tariffs to zero

19. Significant RTAs and RFTAs • European Union (EU or EC) • European Free Trade Association (EFTA) • North American Free Trade Agreement (NAFTA) • Southern Common Market (Mercosur) • Association of Southeast Asian Nations (ASEAN) Free Trade Area (AFTA) • Common Market of Eastern and Southern Africa (COMESA)