Transcript LEARNING OBJECTIVES

EX 6-1 INC 500 FIRMS IN
VARIOUS COUNTRIES
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INTRODUCTION
SMALL BUSINESSES:
Europe,
N. American, & Japan,
over 98% of businesses are small
Employ more than 50%
Produce nearly 50% of the
countries' GNPs
Create more than 2/3 of new jobs
WHAT IS A SMALL BUSINESS?
UN:
less than 500 employees
The popular press: less than 100
employees
U.S. Small business
administration: definition varies
by industry, sales revenue and
the number of people
WHAT IS AN ENTREPRENEUR?
Creates
new ventures that seek
profit and growth
Faces risk and uncertainty of
new and untested business
Risk: outcomes are variable
Uncertainty: impossible to
predict variable outcomes
NEW VENTURES
Enter
a new market
Offer a new product or service
Introduce a new method
technology, or innovative use of
raw materials
INTERNATIONALIZATION AND
THE SMALL BUSINESS
Small
business stage model
Global start-up
THE SMALL BUSINESS STAGE
MODEL
Stage
1--passive exporting
Stage 2--export management
Stage 3--export department
Stage 4--sales branches
Stage 5--production abroad
Stage 6--the transnational
GLOBAL START UP
Occur
when firms begin as
multinationals
Require unique conditions and
organizations
SMALL BUSINESS BARRIERS
TO INTERNATIONALIZATION
Small
Size
– Limited financial and
personnel resources
– Lack of sufficient scale to
produce goods or services as
efficiently as larger companies
Managers’ limited
international
experience =
– Negative attitudes
– Belief that venture too risky/not
profitable
– Competition seen as domestic
– Ignoring of international
opportunities
THE SOLUTION
A Global Culture
Values
that view strategic
opportunities as global
A common language to describe
international operations
Owners have a global mind-set
Thinking globally
THE SOLUTION
Change Attitudes of Key Decision
Makers
Begin close in culture and
geography
Overcome skepticism regarding
the international markets
Positive attitudes more necessary
for global start-ups
EX 6-2 ATTITUDES CONCERNING
INTERNATIONALIZATION
T o o C om plic ated
G re ater C o st
G re ater R is k
F o sters G ro w th
P o ten tia l P ro fits
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N o n -E xp o rters
E xp o rters
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5 = Strongly Agree
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INTERNATIONALIZATION
EFFECTS ON THE CEO
Increased
travel and stress from
undertaking a new venture
Can adversely affect family life
Takes away from the daily
management
Job of CEO may change
EX 6-3 TRAINING & KNOWLEDGE
NEEDS OF SMALL FIRM CEOs
A d a p t M a r k e t in g S k ills
C r o s s - C u lt u r a l N e g o t ia t io n S k ills
A b ility to W o r k in D if f e r e n t C u lt u r e s
K n o w le d g e o f C u s t o m s R e g u la t io n s
0
10
20
30
40
50
SIZE AND SMALL BUSINESS
INTERNATIONALIZATION
Larger
firms
– More likely to export
– More resources to absorb risk
Differ primarily in initial
internationalization
THE SMALL BUSINESS
ADVANTAGE
Faster
innovation
– Can change products and
internal operations faster
Speed can overcome size
disadvantages
THE FUTURE
Falling
barriers to small
businesses internationalization
More global start-ups
More government programs
Trade agreements a positive
force
Increase
in the number of small
businesses engaged in
international activities
– Makes it easier for other
businesses to develop a global
culture
More managers gain experience
in international business
SHOULD A SMALL BUSINESS
GO INTERNATIONAL:
the questions
Does
the company have:
– A global product or service?
– The managerial, financial, and
organizational resources?
– The willingness to face the
risks of internationalization?
Is
there a country in which we
feel comfortable doing business?
Is there a profitable market for
our product or service?
Which country should we enter?
Do
we have a unique product or
service that is not easily copied
by larger companies or local
entrepreneurs?
Do location advantages exist
upstream in the value chain?
Can we afford not to go global?
EXHIBIT 6-5 STEPS IN
PICKING A FOREIGN MARKET
Screen potential markets
– Target potential countries
– Assess target markets - key
trends, competition, potential
problems
Draw conclusions--make the
choice
PARTICIPATION STRATEGIES
Same
participation options as do
larger firms
Most often exporting
FINDING CUSTOMERS AND
PARTNERS
Trade
shows
Catalogue expositions
International advertising agencies
and consulting firms
Govt.-sponsored trade missions
Direct contact
SEE EXHIBIT 6-7 FOR
INTERNATIONAL TRADE
LEADS ON THE WORLD WIDE
WEB!
READY TO GO AND
CONNECTED
Finding
the right overseas
partner: the most important step
Find a good wedge to break into
a new market
ENTRY WEDGE
DEFINED
".. A strategic competitive
advantage for breaking into the
established pattern of
commercial activity" (Vesper)
TYPES OF ENTRY WEDGES
FIRST MOVER ADVANTAGE
Establish
the business before
other firms can react Must be
innovative
Must be comprehensive
– Meet customer expectations in
areas such as warranty and
expected components
FIRST MOVER
COMPETITIVE ADVANTAGES
Technological
Access
natural or social resources
Develop close relationships with
research universities
The best locations - raw materials
or proximity to customers
COPY CAT BUSINESSES
The
"me too" strategy
Adopt existing products or
services
But-- find a niche or slight
innovation to attract customers
SUCCESSFUL COPY CAT MOVES
Be the first to a new standard
Go after the toughest customers
Play to different customer needs
Transfer the location
Be a dedicated supplier/distributor
Seek abandoned or ignored markets
Acquire an existing business
SUMMARY AND CONCLUSIONS
The Small Business
Key factor in the economies of
all nations
Provides jobs, economic growth,
innovation
Must face the challenges of
entering the international
marketplace
Can
go international--through
stages or through global startups
Have the same multinational and
participation strategic options as
larger firms
Entering the international
market is an entrepreneurial
venture