Objectives

2. Objectives At the end of lecture students should be able to: Explain why "going global" has become an integral part of many small companies’ strategies. Describe the eight principal strategies small businesses can use to go global. Explain how to build a successful export program. Discuss the major barriers to international trade and their impact on the global economy. Describe the trade agreements that will have the great­est influence on foreign trade. Fundamental of Entrepreneurship

3. Topics Covered Why going global? Strategies for going global International trade Barrier in international trade Fundamental of Entrepreneurship

4. Why “Go Global?” • Offset sales declines in the domestic market • Increase sales and profits • Extend products’ life cycles • Lower manufacturing costs • Improve competitive position • Raise quality levels • Become more customer-oriented Fundamental of Entrepreneurship

5. Questions to Consider Before Going Global • Is there a profitable market in which our company has the potential to be successful over the long run? (see Table 12.1) • Do we have and are we willing to commit adequate resources of time, people, and capital to a global campaign? • Are domestic pressures forcing our company to consider global opportunities? Fundamental of Entrepreneurship

6. Questions to Consider Before Going Global • Do we understand the cultural differences, history, economics, values, opportunities, and risks of conducting business in the country we are considering? • Is there a viable exit strategy for our company if conditions change or the new venture does not succeed? • Can we afford not to go global? Fundamental of Entrepreneurship

7. Eight Strategies for Pursuing Global Markets Fundamental of Entrepreneurship

8. Strategies For "Going Global" • Launching a World Wide Web site Fundamental of Entrepreneurship

9. Fundamental of Entrepreneurship

10. Strategies For "Going Global" • Launching a World Wide Web site • Relying on trade intermediaries Fundamental of Entrepreneurship

11. Trade Intermediaries • Export Management Companies (EMCs) • Export Trading Companies (ETCs) • Manufacturer’s Export Agents (MEAs) • Export merchants • Resident buying offices • Foreign distributors Fundamental of Entrepreneurship

12. Strategies For "Going Global" • Launching a World Wide Web site • Relying on trade intermediaries • Joint ventures Fundamental of Entrepreneurship

13. Joint Ventures • Domestic joint venture – two or more U.S. companies form an alliance for the purpose of exporting their goods and services abroad. • Foreign joint venture – a domestic firm forms an alliance with a company in the target nation. • Most important ingredient: Choosing the right partner. • Another key to success: Establishing common objectives. Fundamental of Entrepreneurship

14. Strategies For "Going Global" • Launching a World Wide Web site • Relying on trade intermediaries • Joint ventures • Foreign licensing • International franchising • Countertrading and bartering • Exporting Fundamental of Entrepreneurship

15. Exporting • Small companies account for 97% of all companies involved in exporting, but… • They generate just one-third of the U.S. export sales. • Only 1% of all small and medium-sized businesses export; twice as many are capable of exporting but are not doing so. Fundamental of Entrepreneurship

16. Source: Exporter Data Base, U.S. Dept of Commerce, Office of Trade and Economic Analysis, Trade Development/International Trade Agency. Fundamental of Entrepreneurship

17. Steps to Successful Exporting 1. Recognize that even the tiniest companies and least experienced entrepreneurs have the potential to export. 2. Analyze your product or service. 3. Analyze your commitment to developing export markets. 4. Research potential markets and pick your target. Fundamental of Entrepreneurship

18. Steps to Successful Exporting 5. Develop a distribution strategy. 6. Find your customer. • U.S. Department of Commerce • International Trade Administration • Find financing for export sales. • SBA, EX-IM Bank, OPIC, and others 8. Ship your goods. 9. Collect your money. Fundamental of Entrepreneurship

19. How a Letter of Credit Works. Seller Buyer Foreign buyer agrees to buy products; seller agrees to ship goods if buyer arranges a letter of credit. Seller ships goods to buyer according to letter of credit’s terms and submits shipping documents to bank issuing letter of credit. Seller’s Bank Buyer's Bank $ $ $ Letter of Credit Buyer requests that his bank grant a letter of credit, which assures exporter payment if she presents documents proving goods were actually shipped. Bank makes out letter of credit to seller and sends it to seller’s bank (called the confirming bank). Buyer’s bank makes payment to seller’s (confirming) bank. Confirming bank then pays seller amount specified in letter of credit. Fundamental of Entrepreneurship

20. Strategies For "Going Global" • Establishing international locations • Launching a World Wide Web site • Relying on trade intermediaries • Joint ventures • Foreign licensing • International franchising • Countertrading and bartering • Exporting Fundamental of Entrepreneurship

21. Barriers To International Trade Domestic Barriers: • Attitude - "My company is too small to export." • Lack of information about how to get started. • Lack of export financing. Fundamental of Entrepreneurship

22. Barriers To International Trade International Barriers: • Tariffs - Taxes a government imposes on goods and services imported into that country. • Quotas- Limits on the amount of a product imported into a country. • Embargoes - Total bans on imports of certain products. Fundamental of Entrepreneurship

23. Barriers To International Trade International Barriers: • Dumping - Selling large quantities of a product in a foreign country below cost to gain market share. • Political barriers- rules, regulations and risks. • Businessbarriers – business practices and laws. • Cultural barriers- Differing languages, philosophies, traditions, and accepted business practices. Fundamental of Entrepreneurship

24. International Trade Agreements • General Agreement on Tariffs and Trade (GATT) and the World Trade Organization (WTO) • North American Free Trade Agreement (NAFTA) Fundamental of Entrepreneurship

25. Guidelines For Success In International Markets • Make yourself at home in all three of the world's key markets - North America, Europe, and Asia. • Appeal to the similarities within the various regions in which you operate but recognize the differences in their particular cultures. • Be willing to commit the necessary resources to make your global efforts successful. • Develop new products for the world market. Fundamental of Entrepreneurship

26. Guidelines For Success In International Markets • Use the many resources available to research potential markets and to determine the ideal target for your products. • Familiarize yourself with foreign customs and languages. • Learn to understand your customers from the perspective of their culture, not your own. Fundamental of Entrepreneurship

27. Guidelines For Success In International Markets • "Glocalize" - Make global decisions about products, markets, and management, but allow local employees to make tactical decisions about packaging, advertising, and service. • Make positive and preferably visible contributions to the local community. Fundamental of Entrepreneurship

28. Guidelines For Success In International Markets • Train employees to think globally, send them on international trips, and equip them with state-of-the-art communication technology. • Hire local managers to staff foreign offices and branches. Fundamental of Entrepreneurship

29. Guidelines For Success In International Markets • Do whatever seems best wherever it seems best, even if people at home lose jobs or responsibilities. • Consider using partners and joint ventures to break into foreign markets you cannot penetrate on your own. Fundamental of Entrepreneurship