Identifying and Analyzing
Domestic and International
Opportunities
Chapter 5
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).
Introduction (contd.)
• Factors contributing to international
expansion:
– Opening up of controlled economies to market-
oriented 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.
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.
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 market—its size,
trends, characteristics, and growth rate.
– The third section focuses on the entrepreneur’s and
management team’s skills and experience.
– The final section develops a time line indicating the
steps to successfully launch the venture.
Information Sources
• 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.
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.
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.”
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 multi-country area
means dealing with differences in:
• Levels of economic development.
• Currency valuations.
• Government regulations.
• Banking, venture capital, marketing, and
distribution systems.
International versus Domestic
Entrepreneurship (cont.)
• Stage of Economic Development
– Certain factors significantly impact a firm’s ability
to successfully engage in international business
such as:
• Fundamental infrastructures.
• Banking facilities and systems.
• Educational systems.
• Legal system.
• Business ethics and norms.
International versus Domestic
Entrepreneurship (cont.)
• Balance of Payments Current Account
– With the present system of flexible exchange
rates, a country’s current account (the difference
between the value of a country’s imports and
exports over time) affects the valuation of its
currency.
– The valuation of one country’s currency affects
business transactions between countries.
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 non-
money items.
• Third-party arrangements - Paying for goods
indirectly through another source.
International versus Domestic
Entrepreneurship (cont.)
• Political-Legal Environment
– Political risk analysis - An assessment of a country’s
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.
International versus Domestic
Entrepreneurship (cont.)
– A country’s 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.
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.
Lost in Translation
• Even the best-laid business plans can be botched by a careless
translator. Here is how some of the America’s biggest
companies have managed to mess things up:
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.
Various Aspects of Culture
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.
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.
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.
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.
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.
Entrepreneurial Entry Strategies
• Exporting
– Indirect exporting.
– Direct exporting.
• Non-equity Arrangements
– Licensing.
– Turn-key projects.
– Management contracts.
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.
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 entrepreneur’s
vision, are unlikely to exploit the partnership,
and can help the entrepreneur achieve his or
her goals.
International Trade Mechanism
• 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.
• World Trade Organization (WTO)
– WTO officially commenced on 1 January 1995 under
the Marrakesh Agreement, signed by 124 nations on
15 April 1994, replacing the General Agreement on
Tariffs and Trade (GATT). It is the largest international
economic organization in the world.
Barriers to International Trade
• Trade Blocs and Free Trade Areas
– Free Trade Area (FTA).
– North American Free Trade Agreement (NAFTA).
– Treaty of Asunción – Mercosur trade zone.
– European Community (EC).
– ASEAN Economic Community
– SAFTA
Barriers to International Trade (contd.)
• Entrepreneur’s Strategy and Trade Barriers
– Trade barriers increase entrepreneurs’ costs of
exporting products or semi-finished 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.
Last Slide
