IBT – MIDTERMS NOTES

CHAPTER 4: OTHER THEORIES OF INTERNATIONAL TRADE

Lowy Institute data - before 2000, US was at the helm of global trade
- 80 percent of countries traded with US more than they did with China
2018 - steep decline to mere 30 percent; China had become the largest trading partner for 128 of 190 countries
2020 - China's share in global trade was nearly 15 percent, 3 rd to EU and US
- managed to maintain a positive balance of trade despite its wider reach

January 1998 - Le Monde Diplomatique carried an article titled "China holds world trade hostage" by Stephen S.
Cohen postulated that China, "stripped of its old ideology," was bent on "asserting itself as a world power in every
domain."; Chinese economic growth, particularly in exports, had come due to its movement to complex
manufacturing. Yet, this growth had been at cost of Southeast Asia, which faced brunt of the economic crisis during
that period; world's second largest economy (in terms of GDP); never followed WTO's underlying values for free
trade in spirit; has access to open trade across globe due to WTO norms, but its own economy is a "black box" due
to opaque political and economic decision making, and notoriously unreliable data provided for the benefit of CCP;
there have also been concerns regarding its external trade policies. Chinese trade practices have been described as
mercantilist and protectionist

Mercantile - tendency of manipulation of currency and higher production to oversupply markets

protectionist - utilization of tariff and nontariff barriers that act as a roadblock for foreign commodities and
companies to enter and survive in China.
Chinese mercantile behavior also manifests in the form of
"dumping" - selling a commodity in another country at a price lower than its own domestic market; US and India
largest victims of China's dumping policy, esp w electric commodities, aluminum, and steel.

The Centre of Strategic and International Studies - urged for international players to "push back against Chinese
economic coercion," including in trade relations.

LESSON 4.1. The Specific Factor Model

Trade raises real incomes of trading countries.
Real income - inflation-adjusted income, measures amount of disposable income available to consumers; represents
purchasing power; closely linked to market conditions
National Income – represents total amount of income accruing to a country from economic activities in a year’s
time; affects intl mktg ; country’s share in intl bus and trade affects its natl income

Gross national income (GNI) - sum of value added by all goods and services produced within a particular country,
including foreign investment, to wc are added any product taxes (excluding subsidies), and value earned by nation
through overseas ventures.
IBT – agent affecting income distro throughout the world
Ronald Jones and Paul Samuelson – countries rich in capital will mean an increase in marginal productivity from
the manufacturing sector, increase in territory will increase the production of food

Two reasons why trade has an important influence upon income distribution:
a. Resources (factors of production: land, labor, and capital) cannot be transferred immediately and without costs
from one industry to another.
 - it is hard to move resources from one country to another without incurring any cost since factors of
production are generally innate to a country
b. Industries use different factors and a change in the production mix a country offers will reduce the demand for
some of the production factors and increase the demand for other production factors.
- production of a particular product requires different factors of production; hence, most countries would
produce those products for which it has abundant factors of production

Factor of production - any resource used by firms to produce goods and services.
Specific factor (SF) model - originally advanced by Jacob Viner; variant of Ricardian model; Ricardo-Viner model
Ricardian model of trade - by David Ricardo in his magnum opus “On the Principles of Political Economy and
Taxation” (1817); first formal model of international trade; assumes that owners (countries) of factors of production
for products that are in demand would receive an increasing part of world's global income.

Paul Samuelson and Ronald Jones - elaborated SF model based on specific factors, which are factors of
production-land, labor, and capital.
Factors: territory or terrain (T) (terra means land), labor (L), and capital (K).

Food (X) = (T + L)
Manufactured Products (Y) = (K+L)

Labor (L) - mobile factor, used in both food and manufactured products. Territory and capital - specific factors

QF = QF (T, L) where
QF = output of food

QMP = QMP (K, L)

Q = output of the manufactured product

When labor moves from food to manufactured product, food production falls while output of manufactured product
rises. The shape of production function reflects law of diminishing marginal returns.

Law of diminishing marginal returns - predicts that after some optimal level of capacity is reached, adding an
additional factor of production will actually result in smaller increases in output.

Country rich in capital and poor in land tends to produce more manufactured products than food products, whatever
the price. A country rich in land (territory), like most agricultural countries, tends to produce more food.
Other factors held constant, an increase in capital will mean an increase in marginal productivity from manufactured
sector, while an increase in territory will increase production of food. Important for countries rich in capital and
those countries rich in territory to trade with each other.

LESSON 4.2. Standard Model of Trade

Standard model of trade (Paul Krugman-Maurice Obsfeld model) - existence of relative global demand curve
resulting from different preferences for a certain good and relative global supply curve resulting from the different
production possibilities.
Paul Krugman and Maurice Obstfeld - exchange rate is determined by intersection between two curves –
equilibrium
Exchange rate - rapport between export prices and import prices
Relative prices - determine economy's output. Other factors being constant, exchange rate improvement for a
country implies a substantial rise in welfare of that country

Global demand or total demand - amount of money, which subjects (consumers) of an economy plan to spend on
goods and services at different size of income or at given prices in a given period.
Total demand - personal consumption of households and individuals, gross private domestic investment by
businesses, gross government spending, and net export.

Net exports - measure of a nation's total trade.

Formula: value of a nation's total export goods and services minus value of all goods and services it imports equal its
net exports.

Market equilibrium - intersection of global demand curve and global supply curve.
Market/economy equilibrium - national product and level of prices are shaped on level on which buyers are
willing to buy what enterprises are ready to sell.
Aggregate demand curve - how many goods and services consumers can and are willing to buy at different total
price levels, other conditions remaining the same (ceteris paribus).
Size of purchases made by consumers influences prices. Size of global demand changes the level of prices inversely.
The crucial factor is elasticity of global demand in relation to interest rates or level of global wealth.
Supply curve represents relationship between price and quantity supplied, with all other factors affecting supply held
constant. Quantity supplied (supply curve) is a function of price; shift happens when a nonprice determinant of
supply changes and overall relationship between price and quantity supplied is affected.
Standard trade model - includes Ricardian model, Ronald Jones and Paul Samuelson specific factors model, and
Heckscher-Ohlin (H-O) model as special cases-two goods, food (F) and cloth (C). Each country's production
possibility frontier (PPF) is a smooth curve.
The standard trade model assumes the following:
a. Each country produces two goods, food (F) and cloth (C).
b. Each country's production possibility frontier (PPF) is a smooth curve (TT).
c. The point on its PPF, at which an economy actually produces, depends on the price of cloth relative to food, PC
/PF.
d. Isovalue lines are lines along which the market value of output is constant.

Production Possibility Frontier (PPF) - determines its relative supply function because it shows what country is
capable of producing, which should be maximized.
National relative supply function - determines world relative supply function, which along with world relative
demand determines equilibrium under international trade.
V = (PC)(QC) + (PF)(QF)
V = value of output
PC = price of cloth
QC = quantity of cloth
PF = price of food
QF = quantity of food

Slope of an isovalue line (relative price of cloth to food) equals PC/PF; best point to produce is where PPF is tangent
to isovalue line, a line of slope equal to the relative prices.
Value of an economy's consumption equals value of its production: economy's choice of a point on isovalue line
depends on tastes of its consumers, which can be represented graphically by a series of indifference curves.

The standard trade model is built on four key relationships:

a. relationship between the PPF and the world relative supply (RS) curve;
b. relationship between relative prices (RP) and relative demand (RD);
c. world equilibrium as determined by world RS and RD;
d. how changes in the terms of trade affect a nation's welfare.

World relative supply curve (RS) is upward sloping because an increase in price of cloth/price of food (PC/PF) leads
both countries to produce more cloth and less food.
World relative demand curve (RD) is downward sloping because an increase in PC/PF leads both countries to shift
their consumption mix away from cloth toward food.
Terms of trade (TOT) - price of a country's exports divided by a country's imports.
- rise in the TOT increases a country's welfare, while a decline in the TOT reduces its welfare. Intuitively, if TOT
falls, price of what a country produces goes down relative to price of what the country consumes. The relationship
between TOT, total price of production, and a country's welfare is direct.

LESSON 4.3. Leontief Paradox

According to Heckscher-Ohlin theory (factor proportions theory), a country rich in a particular resource should be
exporting products that will use that resource and import products made from resources that the country lacks.

1st serious attempt - Wassily W. Leontief in 1953

H-O theory predicts that the US would export more capital-intensive goods and import labor-intensive goods.
Leontief paradox - US was actually exporting labor-intensive goods and importing capital-intensive goods; showed
that in international division of labor, US specialized in labor intensive rather than capital intensive goods.

Paradox - seemingly absurd or self-contradictory statement or proposition that when investigated or explained may
prove to be well-founded or true.

Wassily Leontief received a Nobel prize in 1973 for his contribution to input-output analysis. Three of his students,
Paul Samuelson (specific factor model), Robert Solow, and Vernon Smith also received Nobel prizes.
Boris Swerling (1953) - complained that 1947 was not a typical year
1956 - Leontief repeated test for US imports and exports which prevailed in 1951; US imports were still more
capital-intensive than US exports.
Professor Robert Baldwin (1971) - found that US imports were 27% more capital-intensive than US exports.
1959, Tatemoto and Ichimura - Japan was labor-abundant but exported capital-extensive
1961, Stolper and Roskamp- East Germany (EG); exports were capital-intensive and capital abundant relative to its
trading partners; consistent with the H-O theory.
1961, Wahl- Canada; capital-intensive. consistent with Leontief Paradox
1962, Bharawaj – India; labor-intensive; consistent with the H-O theory.
1975, Hong – Korea; consistent with the H-O theory.

Chapter 5 - PHILIPPINE INTERNATIONAL

TRADING CORPORATION (PITC)
A government-owned and controlled corporation in the Philippines.
It was established to facilitate and promote foreign trade and economic relations between the Philippines and other
countries.
The PITC operates under the Department of Trade and Industry (DTI) and plays a role in supporting the
government's trade and investment promotion efforts.
Partners with Filipino entrepreneurs and industries to compete globally and functions as a trustworthy partner and
guide for foreign companies seeking to do business in the Philippines.
Established on July 21, 1973 through PD No. 252
The mandate was expanded via PD No. 1071 to be one of the drivers of Philippine trade worldwide.

Vision: To be a global state trading and marketing enterprise in support of the development of domestic industries
by 2022.

Mission: To engage in exports, trade services and special trading arrangements, ensure the most efficient and cost-
effective procurement services, contribute to the price/supply stabilization of goods and services, and to create
strategic alliances that promotes the growth and sustainability of business enterprises.

Lesson 5.1

International involves more than one country or relates to or affecting two or more nations. Synonyms of
international include foreign, global, universal, intercontinental, and world

Business is generally defined as an occupation, profession, or trade. For our purposes, we will use business to mean
the activity engaged in by people, organizations, or countries covering any activity to earn income and gain a profit.

An occupation is a person's usual or principal work or business, as a means of earning a living, which could be by
means of employment or by going into business by owning a company, big or small.

Profession refers to a paid occupation, especially one that involves specialized educational training and a formal
qualification and license. Professionals can form partnerships for the exercise of their profession.

In general, trade is a basic economic concept involving the buying, selling, or exchange of goods and services.
Therefore, the sari-sari store or grocery the owner is engaged in a trade or is doing trading.

There are four types of business according to nature or scope. These are the following:
a. service - those rendering service like barber shops, spas, restaurants, hotels, schools, and other recreational
services
b. trading or merchandising - buying or selling; they sell what they buy
c. manufacturing - converting raw materials into finished products
d. hybrid business - e-commerce or a business geared toward socially beneficial goals.

There are also four types of business according to ownership:

a. sole proprietorship - owned by only one person
b. partnership - owned by two or more persons
c. corporation - generally owned by five or more persons, although the Revised Corporation Code, Republic Act
No. 11232 now allows the establishment of One Person Corporations(OPC).
d. Cooperative - composed of members established to serve their common good

Trade means buying, selling, or exchanging of goods and services. For our purposes, whether the business is
service, trading, or manufacturing, we will include it in the meaning of trade or business.

International business and trade means any activity/endeavor among nations around the globe involving the
buying, selling, exchanging of goods, services, capital, labor, resources, technology, people, intellectual property
(e.g., patents, copyrights, brands/trademarks, and data), and contractual assets or liabilities (e.g., the right to use
some foreign asset, execute a complex financial instrument, or provide some future service to foreign customers).
The broader definition of international business also includes for-profit border-crossing transactions as well as
transactions motivated by non-financial gains.

Triple bottom line (TBL), was first coined in 1994 by John Elkington, the founder of the british consultancy called
sustainability. in economics, believes that companies should commit to focusing as much on social and
environmental concerns as they do on profits. TBL theory posits that instead of one bottom line, there should be
three: profit or economy, people or society, and the planet or environment.

Corporate social responsibility means that businesses has an obligation to society and the environment beyond that
prescribed by law above and beyond making a profit.

International business and trade links countries (governments), organizations/institutions, and individuals and makes
them participants in the international market.

Foreign direct investment means that a firm is investing assets directly into a foreign country's buildings,
equipment, or organizations. Companies may establish offices in these foreign countries acting as branches or
representative offices or even as subsidiaries of the parent firm in their home country having all the value creation
and support activities, but in a foreign country (host country).

Foreign Direct Investment (FDI) is a crucial component of international economic activity and refers to the
investment made by individuals, businesses, or governments from one country (the source country) into physical
assets or productive activities in another country (the host country).

FDI typically involves acquiring a significant ownership stake (usually at least 10%) in a foreign company or the
establishment of new business operations in the host country.

The major ways of entering a foreign market (doing international business and trade) are the following:
a. exporting/importing
b. licensing
c. franchising
d. forming joint ventures
e. establishing a branch
f. establishing a wholly owned subsidiary
g. investment in other country's companies or stock market
h. labor migration

a. Exporting simply means selling products to foreign markets. The exporter sells the products to the foreign
market; the importer is the customer who buys the exported goods. Total trade equals exports plus imports, Trade
agreements are contractual arrangements between countries concerning their trade relationships. They are wide-
ranging taxes, tariffs, and trade treaties that often include investment guarantees.

b. Licensing is a contractual arrangement where the licensor sells the right to use intellectual property or
manufacture a product to the licensee for royalty.

Royalty means a certain percent of the sales of the product or intellectual property. The licensor has control on the
use of intellectual property by the
licensee, but has no control on the business of the licensee.
Licensing is mainly associated with the production and marketing of goods/ products, other factors necessary to
manufacture the good(s), patents, copyrights, technology, or managerial skills.

Franchising is a contractual arrangement in which the franchisor permits the franchisee to use the business model or
brand name for a fee, to conduct business as an independent branch of the franchisor. The franchisor exerts
considerable control over the franchisee's business including the raw materials, the process, and the quality of the
products sold. Franchising generally relates to the service business

d. Joint venture (JV) is a joint undertaking by two or more parties, which otherwise retain their distinct identities. It
is a business arrangement in which two or more parties agree to pool their resources for the purpose of
accomplishing a specific task or project. In international trade and business, the two parties are usually from two
different countries, one from the home country and another from the host country.

e. Establishing a branch means maintaining an office in the foreign country. A branch office of a foreign
corporation may start transacting business in the Philippines once it has been licensed by the Securities and
Exchange Commission (SEC).

f. A wholly owned subsidiary is a company whose common stock is 100% owned by the parent company.

g. International investing refers to selecting global financial instruments as part of a geographically diversified
portfolio to spread investment risk. When a company puts in capital by establishing a business in a foreign country,
we still call that foreign investment.

h. Labor migration means residents of one country goes to another country to work. The Philippines has many
Overseas Filipino Workers (OFWs), making the Philippines one of the biggest exporters of labor.

Technology transfer refers to the process of conveying results stemming from scientific and technological research
to the market place and to wider society, along with associated skills and procedures, and is, as such, an intrinsic
part of the technological innovation process.

Lesson 5.2- Globalization

A common denominator which appears to link nearly all high-growth countries together is their participation in and
integration with the global economy.

Globalization is the increasing connectedness, integration, and interdependence of world cultures, economies,
politics, and environment.
● A term used to describe how trade and technology have made the world into a more connected and
interdependent place.
● The process by which businesses or other organizations develop international influence or start operating
on an international scale.
● With the advent of interconnection (the internet), the world has been brought a lot closer than it once was.
● It also brings about increased interconnectedness with the advent of interconnection technology, i.e., the
internet.

According to the World Health Organization (WHO), globalization is generally understood to include two
interrelated elements:

a. the opening of international borders to increasingly fast flows of goods, services, finance, people, and ideas; and
b. the changes in institutions and policies at national and international levels that facilitate or promote such flows.
Results:
1. Liberalization of national economies
2. Reducing trade restrictions or barriers
3. Free movement of FDI worldwide
4. Strengthening the role of international companies in the international production and mutual trade and exchange

GLOBALIZATION refers to growth of global connectivity, integration and interdependence of worldwide

economic, social, technological, cultural, political and environmental spheres.

Dimensions covered:
1. Economic
2. Cultural
3. Political
4. Geographical
5. Environmental

The first stage of global development, what Thomas Friedman(2005) calls "Globalization 1.0," started with
Columbus' discovery of the New World, ran from 1492 to about 1800, and characterized by how much industrial
power countries could produce and apply.

"Globalization 2.0," from about 1800 to 2000, was largely shaped by the emerging power of huge, multinational
corporations.From about 1800 to 2000 which was disrupted by the Great Depression and both World Wars, was
largely shaped by the emerging power of huge,
multinational corporations.

"Globalization 3.0,' " which Friedman says is today's globalization, began around 2000, with advances in global
electronic interconnectivity that allowed individuals to communicate as never before.

2010 ASEAN Trade in Goods Agreement (ATIGA)

● Consolidated all Common Effective Preferential Tariff/ASEAN Free Trade Area commitments related to
trade in goods.
● Seeks to establish a single market and production base with a free flow of goods in the ASEAN region.
● Covers tariff liberalization, trade facilitation initiatives, simplification of rules of origin, and establishment
of an ASEAN Trade Repository.

The Philippines-Japan Economic Partnership Agreement (PJEPA) is the first bilateral free trade agreement of
the Philippines. signed in Helsinki, Finland, by then President Gloria
Macapagal-Arroyo and former Prime Minister Junichiro Koizumi on September 9, 2006. The PJEPA covers trade in
goods, trade in services, investments, movement of natural persons (MNP), intellectual property (IP), government
procurement (GP), competition, and
improvement of business environment (BE) among others.

The Philippines and the European Free Trade Association (EFTA) members -Iceland, Liechtenstein, Norway,
and Switzerland-signed a free trade agreement in 2016 which became effective in 2018. The Philippines-EFTA
covers trade in goods, trade in services, investment, competition, intellectual property, government procurement, and
trade and sustainable development.
Under ASEAN, the Philippines has a preferential trade agreements with China, Hong Kong, India, Japan, South
Korea, Australia, and New Zealand.

The current process of globalization is basically characterized by:

a. increasing worldwide active communication systems; and
b. increasing fluent economic conditions, especially those circumstances
and factors regarding mobility of financial resources and trade.

The basic principles of international trade that seem to underpin greater prosperity among nations are the following:
a. investment (particularly foreign direct investment);
b. the spread of technology;
c. strong institutions;
d. sound macroeconomic policies;
e. an educated workforce; and
f. existence of a market economy.

Lesson 5.3- Glocalization

Glocalization is the creation of products or services for the global market by adapting them to local cultures and
environment.
Glocalization is a portmanteau (combining) of "globalization" and "localization."

It's a concept used to describe the adaptation of global products, services, or ideas to fit the local context or
preferences of a specific region or market.

Glocalization recognizes that while there is a global interconnectedness and the spread of ideas and products across
borders, these global elements often need to be customized or localized to be successful in different cultural,
linguistic, economic, and social environments

The term "glocalization" was popularized by the sociologist Roland Robertson.

He is known for his work in the field of globalization and the study of the global-local dynamic. While he didn't
necessarily coin the term, he played a significant role in introducing and developing the concept of glocalization as
an important aspect of the globalization process.

Glocalization as a concept gained prominence in the late 20th century, and it has since been widely used in various
disciplines, including business, sociology, and cultural studies, to describe the adaptation of global products,
services, and ideas to local contexts.

Roland Robertson's contributions to the study of globalization and glocalization have had a lasting impact on how
we understand the complex interplay between global and local forces in an increasingly interconnected world.

There are two typical reactions and results of this interplay of global and local forces (both encourage diversity):
a. The opportunistic reaction is the creation of hybrids. Especially in world cities where immigrants and elites must
adjust to each other and maintain ties abroad, mixed cultures and identities arise.

b. The rebellious reaction is to foster a resistance identity defending local history, traditions, and authentic cultures.

Glocalization is a concept that can be observed in various aspects of life in the Philippines, reflecting the adaptation
of global elements to local contexts. Here are some examples of glocalization in the Philippines:
1. Fast Food Chains
2. Festivals
3. Language and Pop Culture
4. Fashion
5. Local Cuisine with a Twist
6. Social Media & E-Commerce
7. Hybrid Religious Practices
8. Local Branding
9. Educational System
10. Language Variations

Glocalization is used to refer to the marketing strategies and business, methodologies of companies in a foreign
market. It is the creation of products or services for the global market by adapting them to local cultures and
environment.

Glocalization in Cebu is manifested in the key areas of business, export trade, governance, and trans-border
diplomacy. Nevertheless, Cebu's experience of glocalization shows that there are enabling factors that can maximize
global opportunities:
a. Leadership, not only of the local chief executives but also of the private sector and civil society organizations;
b. The ability to use, process, and analyze data on resource inputs to the locality, specifically, information and
communications technology (ICT) as a potential tool currently introduced from the grassroots to the local
government;
C. Education that meets global labor demands; and
d. A mindset that is global in orientation, but grounded on local realities.

In the case of Rome and Kigali, for instance, glocalization is seen in both cities engaging in a multisector project
which focuses on food security, job creation, and market development in the city of Kigali. Civil society groups
were formed —the "Friends of Kigali" in Rome and the "Friends of Rome"
in Kigali.

In France, McDonald's replaced its familiar Ronald McDonald mascot with Asterix, a popular French cartoon
character. In India, the beef burger of McDonald's is replaced by McalooTikki burgers. Some of its local favorites
around the world include the Mcitaly burger in Italy, Maharaja Mac in India, the McLobster in Canada, and the Ebi
Filet-O in Japan. In Japan McDonald's also has the Teriyaki McBurger with Seaweed Shaker fries, Croquette
Burger, and Bacon Potato Pie.

KFC has initiated a five-year plan to upgrade its UK restaurants with new contemporary designs to increase visits
from local residents. KFC worked with local property developers to produce designs based on "look and feel" of the
area. KFC introduced Krushers in the cold beverages segment in India and sells spicier chicken in India as compared
to other countries in the world. Also,KFC has a vegetarian thali, a mixed meal with rice and cooked vegetables, and
Chana Snacker (burger with chickpeas) to cater to vegetarians in India.

Starbucks opened their first store in October 2012 in an upscale area of downtown Mumbai. Starbucks carefully
selected partnership with the Tata Group, a giant Indian conglomerate and one of the largest coffee producers in
Asia. The menu featuring a blend of western and local delights in the shape of mouthwatering murg (chicken) tikka
panini, tandoori paneer (cheese) rolls, and cardamom (Elaichi) cookies. In China, Starbucks built bigger stores to
cater to the Chinese need to relax in more spacious surroundings. Menu items include Chinese teas and moon cakes.
In the Asian market, Starbucks has diversified their product offerings to include green-tea-based products.
 In 1955, Coca-Cola glocalized by posting an advertisement referring to the Philippines as the "Pearl of the Orient"
showing Coca-Cola's popularity in the Philippines and how Coke has merged itself into the Philippine economy and
culture.

Also, car manufacturers glocalize by producing cars in accordance with whether the country they will trade with is
"right-hand driving" or "left-hand
driving." There are still around 55 countries that still practice right-hand driving even today including Thailand,
South Africa, Indonesia, Singapore, New Zealand, Malta, Malaysia, Kenya, and Japan.

The opening of national boundaries to trade and investment increased the economic importance of location. The
resulting economic environment is instead characterized by the clustering of companies in specific city-regions and
by geographic concentration.

LESSON 6.1. INTERNATIONAL MARKETING

INTERNATIONAL MARKETING
● The application of marketing principles to satisfy the varied needs and wants of different
peoples residing across the national borders.

● International marketing refers to the application of marketing principles and strategies to

promote and sell products or services in foreign markets. It involves tailoring marketing
campaigns, distribution channels, and product offerings to suit the unique needs and
preferences of consumers in different countries or regions.

● International marketing is critical for companies looking to expand their customer base
beyond their domestic market. It allows businesses to tap into the potential of a global
customer base, but it also presents challenges and risks that require careful planning
and adaptation to succeed in diverse international markets.

● International marketing covers designing the marketing mix.

● Market segmentation is the practice of dividing the entire market into groups and
creating subsets of a market based on demography, needs, priorities, common
interests, and other psychographic or behavioral criteria.

● Market targeting is the process of selecting the target market and the segment(s) the company wants to
serve.

● Market positioning is a strategic tool used to establish the image of a brand or product in the minds of the
consumer.

MARKETING MIX COMPONENTS:

1. Product- This is the commodity or good produced or manufactured to satisfy the needs and
Wants of customers. It can be tangible (goods) or intangible (services).
The physical item or service a company offers to meet customer needs. It encompasses features, design, quality, and
any additional attributes that make it unique.
PRODUCT DIFFERENTIATION strategy helps companies build brand image and value.
2. Price- Basically the amount that customers pay so they can have the product and enjoy it.
The amount of money customers are required to pay for a product or service.
The most critical element of a marketing plan.

3. Place- It is how the product is brought and where it is bought.

How – refers to the distribution channel
Where – the location where the products should be positioned and distributed

Also known as distribution, this refers to the locations and channels through which a product or service is made
available to customers. It involves decisions about retail stores, online sales, and distribution networks.

4. Promotion- A marketing communication process that helps the company to acquaint the
customers with the product and publicize it and its features to the public.

The activities and strategies used to inform, persuade, and influence potential customers to purchase a product or
service. It includes advertising, sales promotions, public relations, and marketing campaigns.

5. People
Company’s employees who deliver the service to clients.

The most important resource of a company.

The individuals involved in the service delivery process and their interactions with customers. This can include
employees, sales representatives, customer support, and other staff who play a role in the customer experience.

6. Process
The flow of activities or mechanism that takes place when there is in an interaction between the customers and the
business.

The procedures, systems, and methods a company uses to deliver its product or service to customers. It focuses on
the customer's journey and how well it is managed, from initial contact to after-sales service.

a. Electronic processes - These include the use of barcodes, receipts, and other forms or graphics or logos, and the
information about a product or a company that comes with them. These may also include the use of those codes that
one can scan using an app on a mobile phone.

b. Technological processes - These are the creation of products that are tangible that customers could really feel
and own. Not only should the manufacturer create products that the customers need, but also what the customers
want.

C. Direct activities - These are the actual distribution and sales to customers and the reactions of the customers as
they get to try the product and how the company feels about what the customers have said.

d. Indirect activities - These are the support that happen before, during, or after the service has been given, which
may even last for a lifetime.

7. Physical Evidence
The physical environment experienced by the customer.
The tangible and intangible elements that contribute to the customer's perception of a business. This can include the
physical surroundings, ambiance, layout, and overall experience within a store, restaurant, or service location.

Another aspect of physical is BRANDING which means that a company's name, products, services, logo or image
easily comes to mind.

Branding is the process of creating a unique and recognizable identity for a product, service, or company. It
involves the use of a name, logo, slogan, design, or other elements to differentiate it from competitors and create a
positive impression in the minds of customers.

INTERNATIONAL MARKETING
● Also called GLOBAL MARKETING which promotes products, brands, services, ideas, and technology
worldwide to attract international customers for the purpose of gaining a bigger market share, gain
worldwide recognition and of course, earn huge profits.

● Global marketing is a marketing strategy that involves promoting and selling products or services in
multiple countries and regions around the world. It requires adapting marketing strategies to suit the unique
needs, preferences, and cultural differences of various international markets.

REASONS FOR GOING GLOBAL:

1. Increase sales and profitability
2. Enter new markets
3. Create jobs
4. Offset slow growth in the home market
5. Outmaneuver competitors
6. Enlarge the customer base
7. Create economies of scale in production
8. Explore untapped markets with the power of the internet
9. Make use of excess capacity off-season
10. Travel to new countries
11. Sharing of costs and risks between markets
12. Extending a product’s life cycle
13. Take advantage of a less competitive market
14. Utilize excess capacity
15. Taking advantage of geographical diversification
16. Taking advantage of the demand abroad

6.2. FACTORS AFFECTING INTERNATIONAL MARKETING

FACTORS THAT CONTRIBUTE TO INTERNATIONAL MARKETING:

1. Emerging regional economic and political integration
2. Enhancement in technology
3. Improvements in transportation and telecommunication
4. World economic growth
5. Transition to market economies
6. Converging consumer needs
Economic integration, consistent with the free trade economic theory, revolves around the trade agreements/treaties
between countries that usually include elimination of trade barriers and aligning monetary and fiscal policies leading
to a more interconnected global economy

Technological advances are a driving force for development as they make consumers worldwide aware of products,
services, and entertainment. New inventions lead to new machineries and processes.

Efficient transportation due to containerization and just-in-time (JIT) technology are creating more international
business opportunities. Lower costs and higher quality communication, like email and teleconferencing due to
satellite technology have increased business opportunities globally and internationally.

Transition to market economy leads to economic development and prosperity as in the case of the Soviet Union.
An emerging middle class with increasing buying power in large emerging markets such as China, Brazil,and India
makes them viable trade partners. The Eastern Bloc has converted into a market economy creating important new
markets and opportunities to transform inefficient government-owned local companies into successful international
enterprises.

International business and trade stimulates long-term world economic growth through multiple channels. It is
evident that the most conducted tradesis associated with the monetary and financial system.

Converging consumer needs had dictated international business and trade participants on what to produce and sell
in the international markets. Consumer nowadays are more well-informed due to the technological advancement we
have aforementioned and have more demands and expectations.

PESTLE ANALYSIS
The PESTLE analysis, a useful scanning tool, identifies the relevant political, economic,
sociocultural, technological, legal, and environmental factors from the external environment.

PESTLE analysis, also known as PESTEL analysis, is a strategic framework used by

businesses to assess and analyze the external macro-environmental factors that can impact
their operations.

A PESTLE analysis helps organizations gain a comprehensive understanding of the external

forces that may affect their industry or market. By identifying these factors, businesses can
make informed decisions, develop strategies, and mitigate potential risks while capitalizing
on opportunities. It is a valuable tool for strategic planning and risk management.

PESTLE FACTORS
1.Political- factors such as changes in tax rates, policies and actions of government, political stability of a country,
and foreign trade regulations among others affect international marketing.

2.Economic- factors relate to the economic system of the country where a company operates. Customer behavior
and attitude and their purchase demands are often linked to their economic/financial status.

Inflation is an economic factor. It is the rate at which the price level of products and services are rising. When there
is inflation, prices go up and the purchasing power goes down.

A country's national income represents the total amount of income accruing to a country from economic activities
in a year's time. It includes payments made to all resources in the form of wages, interest, rent, and profits.
3.Socio Cultural- Social factors concern people. Organizations are made up of people. People and organizations
have their own culture. Therefore, Sociocultural factors affect international marketing. Social environment and
culture, such as customs, lifestyles, and values, differ from country to country, which further directly impact
international marketing.

4.Technological- Technological factors refer to advancement in technology.New products and services are possible
nowadays because of new technologies, which increase revenues and profits. It is technologies that have created
new businesses like telephones, automobiles, railways, television, movie production, and computers at different
times in history.

5.Legal- Adjunct to the political factor is the legal factor. Governments have long intervened in international trade
through a variety of mechanisms, one of which is through their legal system. Laws and ordinances of all countries
engaged in international marketing affects the activity. Governments Impose some trade restrictions on certain
products for health and safety reasons. In addition, governments restrict international trade to protect domestic
producers from competition by using tariffs, subsidies, and/or quotas. Also, consumer protection and trade
regulations and restrictions are just some of the legal barriers that companies must be aware of their international
marketing efforts. In addition, laws relating to age and disability discrimination, wage rates, employment, and
environment laws affect the workings of business firms.

6.Environmental- When we say environmental factors, we are talking not only about the physical environment, but
also about the business and trade environment businesses operate within and without. The PESTLE factors that we
are currently studying are basically the environmental factors that affect international marketing. Inasmuch as these
factors could act either positively or negatively on the business, international marketing participants need to do a
careful analysis of these environmental factors before going into any venture in any country.

In addition, paying particular attention to the actual physical environment where a company operates is equally
important. The weather, climate change, temperature, and the like affect business firms and the demand patterns of
various goods and services.

OTHER FACTORS AFFECTING INTERNATIONAL MARKETING

1. Infrastructure- Refers to all the essential systems and facilities needed for the smooth flow of a country’s day-to-
day activities enhancing the people’s standard of living.

There are three types of infrastructures:

a. Soft infrastructure Soft infrastructure refers to all the institutions that help maintain a healthy economy. This
involves human capital (workforce) and are service-oriented toward the population. It includes the health
infrastructure, educational infrastructure, financial infrastructure, law and order, and governmental systems. The soft
infrastructure, therefore, would include the political infrastructure and the social infrastructure. are all for the benefit
of the people or the population.

b. Hard infrastructure
Hard infrastructure covers all the physical systems crucial to running a modern, industrialized economy. It includes
the transport systems, such as roads and highways,' and telecommunication services like telephone lines and
broadband systems. We can, perhaps, call these as economic infrastructure because it advances the economy of the
country.
c. Critical infrastructure
Critical infrastructure makes up all the assets that are defined by the government as being crucial to the functioning
of an economy. It includes assets used for shelter and heating, public health, telecommunication, and agricultural
facilities, including natural gas,drinking water, and medicine. Inasmuch as these are also physical systems, the hard
infrastructure referred to above belongs to the critical infrastructure.

2. Competition- refers to the presence of rival businesses and products in the global marketplace that are vying for
the attention, loyalty, and spending of customers across
different countries.

It encompasses the challenges and opportunities posed by other companies operating internationally and can
significantly impact a company's marketing strategies, pricing, product differentiation, and market positioning.

The level and nature of competition in international markets can vary widely and require
businesses to adapt and formulate effective marketing plans to succeed on a global scale.

Michael Porter’s Five Forces

Michael Porter's Five Forces is a framework used for analyzing and evaluating the competitive environment of an
industry. Developed by renowned Harvard Business School professor Michael E. Porter, this model identifies and
examines five key forces that shape a company's competitive strategy.

Michael Porter's Five Forces model helps businesses

analyze their competitive landscape,
make informed strategic decisions, and identify opportunities and threats within their industry. It provides a
structured framework for assessing the dynamics that shape competition and profitability.

MICHAEL PORTER’S FIVE FORCES

a. Competition in the industry/ Industry Rivalry

A competitive industry is highly dynamic in nature, such that any change can happen anytime. If international
marketing participants do not react, they may be left far behind. Too many firms increase the competition in the
industry causing profitability to drop.

b. Threat of new entrants

New entrants enter the market to capture market share. The More barriers there are for entry, the more the industry
becomes attractive, the more competitors become interested, even if these barriers are there to actually discourage
them.

c. Threat of substitute products

Substitute products are products which are essentially the same or similar enough to another product. China is one of
the fastest growing nations in the world because of its strategy of making substitute products, such that the original
loses some of its value.

D. Bargaining power of customers

Bargaining power of customers means the ability of the customers to persuade the seller to do something to reduce
the price or a product/service, deliver immediately or in accordance with their time frame, and render additional
service among others. The more customers there are in a market, the stronger the bargaining power of the customers.

e . Bargaining power of suppliers

Like customers, suppliers also have their bargaining power if they are bigger, more concentrated, or more organized.
More so if there is a monopoly, such that the single supplier dictates. For some manufacturers, only one supplier can
supply their needed raw material for the products they are manufacturing. In this case, the supplier has the superior
bargaining power. When the supply is limited, the supplier has the bargaining power.

3. Structure of Distribution
The structure of distribution refers to the design and organization of the distribution channels and networks used to
deliver products or services to customers in foreign markets.

4. Geography
Relates to the physical location and characteristics of different markets, including their size, location, climate,
culture, and infrastructure.
Geography is the study of the physical features and environment of the earth and its atmosphere, including the
impact of human activity on these factors and vice versa. It also encompasses the study of patterns of human
population distribution, land use, resource availability, and industries

6.3. LEVELS OF INTERNATIONAL MARKETING

1. International / Export Marketing

International or export marketing is the process of promoting and selling products or services from one country (the
exporting country) to customers or markets in other countries (importing or foreign markets).

It involves tailoring marketing strategies and adapting to the unique cultural, economic, and
regulatory aspects of foreign markets to effectively reach and satisfy the needs of international customers.

Export marketing encompasses a range of activities, such as market research, product

adaptation, pricing strategies, distribution channel selection, and promotional efforts, all
geared toward successfully entering and operating in global markets.

It is an essential element of a company's international business strategy, with the goal of

expanding its customer base and increasing revenue beyond its domestic market.

REASONS TO ENGAGE IN THE EXPORT INDUSTRY:

1. Products in the maturity stage of their domestic life cycle may find new growth opportunities overseas.
 2. Some firms find it less risky and more profitable to expand by exporting current products
instead of developing new products.
3. Firms who face seasonal domestic demand may choose to sell their products to foreign
markets when those products are “in season” in those markets.
4. Some firms may elect to export produces because there is less competition overseas.

LEVELS OF INTERNATIONAL MARKETING

WAYS OF EXPORTING:
a. Indirect exporting- is a common practice among firms that are just beginning their exporting by going through
international marketing intermediaries. These firms do not directly do the exporting; the international marketing
intermediary does the exporting.
International marketing intermediaries are domestic or foreign companies who will help the domestic company, who
want to export,and find buyers in the foreign markets. Indirect exporting involves very little investment, as no
overseas sales force or other types of contacts need to be developed. indirect exporting also involves little risk, as the
international marketing intermediaries take the risks for they have knowledge of the markets and will make fewer
mistakes than neophyte exporters, who knows little about the foreign market.

b. Semi-direct exporting means an exporter initiates the contact through agents, merchant middlemen, or other
manufacturers in the home country (they are domestic), where the exporter resides. Such semi-direct exporting can
be handled in a variety of ways:
I. A domestic agent intermediary can act as an exporting department for several noncompeting firms. This is
mostly for trading firms.
II. A manufacturer's export agent (MEA) operates very much like the domestic agent intermediary, but
caters to manufacturing firms only.
III. Through an export association, which will act similar to I and II, that handles the exporting of the
products of the association's members.
IV. Piggyback exporting, in which one manufacturer (carrier) that has export facilities and overseas channels
of distribution handles the exporting of another firm's (rider) noncompeting but complementary products.
The carrier does the exporting for the rider.
3. Direct Exporting- where the company generally establishes an export department to sell directly to a foreign
market. The company conducts market research, establishes physical distribution, and obtains all necessary export
documentation.

2. Multinational Marketing
Multinational Marketing is a specialized branch of marketing that focuses on promoting and selling products or
services across multiple countries and regions.

It is a complex and dynamic field that requires a deep understanding of international markets, diverse cultures, and
varying consumer behaviors.

Multinational marketing is conducted by businesses with a global presence. These are typically large companies that
operate in multiple countries and regions around the world. They have subsidiaries, affiliates, or branches in various
locations.

Multinational Companies (MNCs), also known as Multinational Corporations (MNCs) or Multinational

Enterprises (MNEs), are large, globally operating businesses with apresence in multiple countries and regions
around the world.
These companies conduct their operations, such as production, marketing, and sales, in several countries and often
have a network of subsidiaries, branches, or affiliates in various locations.

MULTINATIONAL MARKETING
Domestic Subsidiary, Foreign Branch Office, and Foreign Representative Office are distinct business structures
used by companies to establish a presence in a foreign country.
1. Domestic Subsidiary
A domestic subsidiary is a separate legal entity incorporated or registered in a foreign country, and it is wholly
owned and controlled by a parent company located in a different country. The subsidiary operates as an independent
company under the laws and regulations of the host country.

The primary purpose of a domestic subsidiary is to conduct business operations in the foreign
market. It allows the parent company to enter a foreign market, establish a local presence, and engage in various
business activities, including sales, production, and distribution.

The parent company has full control over the subsidiary, as it usually owns 100% of the subsidiary' shares.

The subsidiary is a separate legal entity, and its liabilities are generally limited to its own assets.

2. Foreign Branch Office

A foreign branch office is an extension of the parent company, operating in a foreign country. It is not a separate
legal entity. Instead, it represents the parent company and conducts business activities on its behalf in the foreign
market.

The primary purpose of a foreign branch office is to facilitate business activities in the foreign market. It can handle
sales, marketing, and other operational functions, but it is not considered a separate business entity.

The parent company retains full control over the foreign branch office.

The parent company is typically liable for the obligations and liabilities of the branch office since it is not a separate
legal entity.

3. Foreign Representative Office

A foreign representative office, also known as a liaison office or a representative agency, is established in a foreign
country to promote and represent the interests of the parent company. It is primarily involved in market research,
promotion, and information gathering.

The primary purpose of a foreign representative office is to establish a minimal presence in the foreign market
without engaging in revenue-generating activities. It conducts research, provides information, and serves as a
communication link between the parent company and local stakeholders.

The parent company retains control, but the representative office does not engage in significant operational
activities.

Since it is not involved in revenue generation, the representative office's liability is typically
limited to its own actions.

In the Philippines, foreign investments may be any of the following modes:

 1. By establishing a domestic branch office or operation
2. By establishing a Philippine representative office
3. By operating through a business association in the Philippines
4. By operating through a local subsidiary, which may be owned entirely or partially by the foreign business
entity
5. By establishing joint venture arrangement with a local corporation or business organization
6. By establishing an affiliate in the Philippines

3. Transnational Marketing
Transnational marketing is a marketing strategy that reflects the global nature of contemporary business operations.
It goes beyond traditional international marketing by recognizing that, in a highly interconnected world, companies
often operate in multiple countries and regions simultaneously.

Transnational marketing recognizes the importance of adapting to local market conditions, cultural differences, and
consumer preferences. This means that marketing strategies may be tailored to suit specific markets within a global
framework.

Transnational marketing is used by multinational corporations (TNCs) to navigate the complexities of a global
marketplace, combining the benefits of a global approach with the flexibility to meet local market needs.

Transnational corporations are large companies with a global presence. They operate
in multiple countries and regions around the world, often with subsidiaries, branches, or affiliates in each location.

4. Global Marketing
A strategic approach to marketing that focuses on promoting and selling products or services on a worldwide scale.
It involves creating and implementing marketing strategies and campaigns with the aim of reaching and satisfying
customers in multiple countries and regions.

Global marketing recognizes that, in today's interconnected world, companies often need to expand beyond their
domestic markets to tap into the potential of international markets.

A Global Business refers to the activities and operations of a company that transcend national boundaries and
extend beyond its domestic market. It involves conducting various business functions, including production,
marketing, sales, and distribution, on a global scale.

A global business operates in multiple countries and regions, often with the aim of capitalizing on international
markets, resources, and opportunities.

They implement global marketing strategies that may involve standardization of certain marketing elements, such as
branding and advertising, while also adapting to local market conditions.

6.4. PARTICIPANTS IN INTERNATIONAL MARKETING

International marketing or international business and trade, which is trade in the international arena, involves
several participants, in general. Individuals, for-profit and nonprofit organizations, and governments all have a
vested interest in understanding and shaping international business practices and trends.

PARTICIPANTS IN INTERNATIONAL MARKETING

 1. Individuals include households, workers/employees, managers, and entrepreneurs. One of the very
significant contributions of the worldwide web and the internet is the empowerment of individuals (and
small firms) to start business and to expand their business horizon.

2. Businesses could be micro, small, medium, or large, and include even the international, multinational,
transnational, or global companies. About one-third of the international trade is estimated to be intra-
company transfers. Most trading companies are merchant exporters, that is, they export products
manufactured by other firms.

3. Governments are participants in international marketing when they buy products, machineries and
equipment, services, or when they borrow money directly or sell bonds and other securities in the foreign
capital market.
Most governments build infrastructures using help from other countries by buying equipment and services, like
intellectual properties and technology from the world market.

The North American Free Trade Agreement (NAFTA) is an agreement signed by the governments of the United
States, Canada, and Mexico to create a trade bloc in North America to reduce or eliminate tariffs among the member
countries and thus facilitate trade.

The Atlanta Agreement is an agreement between participating governments and companies to eliminate child labor
in the production of soccer balls in Pakistan.

The European Community (EC) agreements span trade, the environment, labor, and many other subjects related to
business, social, and environmental issues.

The Kyoto Protocol is an agreement aimed at combating global warming among participating countries.

Finally, world organizations like the United Nations (UN) or the World Trade Organization (WTO) are practically
separate governments themselves with certain powers over all member countries.

State trading was the rule in the communist countries and was prominent in socialist countries. There was
substantial canalization of foreign trade in India. A canalized item can be exported/imported only by a public sector
undertaking, like MMTC Limited and the State Trading Corporation of India Limited (STC).

4. Nongovernmental organizations (NGOs) include any nonprofit, voluntary citizens' groups that are organized on
a local, national, or international level. International NGOs were important in the anti-slavery movement, the
movement for women's suffrage, and movement against child labor. NGOs were formed to emphasize humanitarian
issues, developmental aid, and sustainable development.

Associations like the Lions, Rotary International, industry associations,trade groups, and even cooperatives and
chambers of commerce purchase computers, equipment, books, and other products and services from othercountries
to support their aims.

GLOBAL ENTREPRENEURSHIP AND INTRAPRENEURSHIP- CHAPTER 7

INTRODUCTION
It is overwhelming and enlightening to know that the Philippines is bent on encouraging entrepreneurship in the
country. TheDepartment of Trade and Industry (DTI) is taking the lead as it continues to promote entrepreneurship.

Entrepreneurship is important to uplift the living standards of people in any country. Innovation and creativity
propel prosperity and wealth.

7.1. ENTREPRENEURSHIP vs. INTRAPRENEURSHIP

CREATIVITY AND INNOVATION

Creativity and innovation are related concepts, but they are distinct from each other and serve different purposes in
problem-solving and development.

A differentiation between the two:

1. Definition
• Creativity: Creativity is the ability to generate new and novel ideas, concepts, or solutions that are original and
imaginative. It is the process of thinking differently and coming up with fresh and unique perspectives.

• Innovation: Innovation is the practical application of creative ideas to bring about a valuable change or
improvement in a product, service, process, or system. It involves turning creative ideas into something tangible and
useful.

2. Nature
Creativity is primarily a mental and cognitive process. It's about generating ideas, often without immediate
consideration of their practicality or feasibility.

Innovation is more action-oriented and involves implementing creative ideas to create something new or improve
existing products, services, or processes.

3. Output
Creativity results in creative outputs such as ideas, concepts, art, music, or designs.
These outputs may or may not have a direct practical application.

Innovation produces tangible outcomes, such as new products, services, technologies, or processes, which provide
value to individuals, organizations, or society.

4. Timing
Creativity can happen at any time and in any context. It can be a spontaneous or ongoing process and doesn't
necessarily have to lead to immediate action.
Innovation is often a purposeful, structured, and planned process that requires effort and resources to bring creative
ideas to fruition.

5. Relationship
Creativity is a precursor to innovation. Innovative solutions are built upon creative ideas. In other words, creativity
feeds into the innovation process.

Innovation relies on creativity but goes beyond it by adding the practical element of implementation and execution.

6. Goal
The goal of creativity is to generate a broad range of ideas and possibilities, regardless of their feasibility, to expand
one's thinking and problem-solving abilities.

The goal of innovation is to create something new or improve existing solutions, products, or processes, with a focus
on delivering value and solving specific problems.

ENTREPRENEURSHIP vs. INTRAPRENEURSHIP

Entrepreneurship and intrapreneurship are both related to the creation and development of new business
opportunities, but they differ in their context and execution.

A differentiation between the two:

Definition
Entrepreneurship refers to the process of identifying, creating, and managing a new business or startup, typically
in pursuit of a profit. Entrepreneurs are individuals who take on the financial and personal risk to create their own
businesses or ventures.

Intrapreneurship involves entrepreneurial activities and behaviors within an existing organization. Intrapreneurs
are employees who act like entrepreneurs but do so within the confines and resources of their organization.

Ownership
Entrepreneurs often start their own businesses, and they have a significant ownership stake in the ventures they
create. They may be sole proprietors, partners, or co-founders of a new company.

Intrapreneurs work for established companies, and they typically do not have ownership stakes in the organization.
Instead, they operate within the existing corporate structure.

Risk
Entrepreneurs assume a high level of personal and financial risk, as they invest their own resources and capital to
establish and operate their businesses. They are responsible for the success or failure of the venture.

Intrapreneurs take on relatively lower personal financial risk because they leverage the resources, infrastructure, and
financial backing of the organization they work for. They are not personally liable for the success or failure of the
project.

Independence
Entrepreneurs typically enjoy a high degree of independence and autonomy in making decisions about their
businesses. They have full control over their ventures and can shape them according to their vision.

Intrapreneurs work within the established framework of their organization. While they may have some level of
autonomy and creative freedom, they ultimately answer to company management.

Goal
The primary goal of entrepreneurship is to create and develop a new business or startup, often with the aim of
making a profit and achieving financial independence.

The primary goal of intrapreneurship is to drive innovation and growth within an existing organization.
Intrapreneurs develop new products, services, or processes, often with the aim of increasing the company's
competitiveness and profitability.
MYTHS
1. Entrepreneurs are born, not made
This is not true. A person can learn the art of entrepreneurship through hard work, commitment, determination, and
strong will. In addition, one needs motivation, passion, and persistence. If you are decided, no one and nothing can
prevent you from doing what you want to pursue.

2. Entrepreneurs are aggressive risk takers

As we had discussed, thinking that entrepreneurs are aggressive risk takers is far from the truth. They are certainly
an adventurous group, but not aggressive risk takers. Most entrepreneurs are more comfortable with managed risk.

3. Entrepreneurs must invent something new

Entrepreneurship is all about solving problems and providing an answer to a problem, which nobody thought was
possible. In fact, it may even start with something old that nobody thought matters or would make a difference.

4. Entrepreneurs make more money

In fact, most businesses do not make money during their first years of operation, say the first three to five years.
At most they break even, if they do not lose. It really takes several years of hard work before one earns, but when
they earn, they earn big

5. Being first is essential

And while being "first" counts, being first is not always the best, nor is it essential.

6. A good product means a successful business

Relying solely on a good product to make a business successful is not right. A successful business greatly depends
on how capable and good the entrepreneur is, because he or she is the one running the business. He or she is the
creator, the innovator, and the leader. Marketing the product, building the business network, managing people, and
budgeting, these are all dependent on the entrepreneur's hard work, drive, commitment, motivation, and
determination.

7. It takes a lot of money to start a business

While it is impractical to think that a business can be started with no money, it is also not true that you need a huge
amount of money to start your own business. In fact, there are many companies which started their business by
simply borrowing or with meager amounts that become successful.

8. Age is a limit
Being young and restless to become a successful entrepreneur is a misconception. There is a long list of successful
people to prove that age does not matter. The founder of Kentucky Fried Chicken (KFC,) Harland David Sanders,
started his now massively famous company at the age of 62, while Robert Noyce co-founded Intel at the age of 41.

7.2 THE ENVIRONMENTS OF ENTREPRENEURSHIP & INTRAPRENEURSHIP

Both entrepreneurship and intrapreneurship play critical roles in driving economic growth and fostering innovation.

While entrepreneurship focuses on creating new businesses,intrapreneurship harnesses entrepreneurial energy within
existing organizations to promote continuous growth and development.

The environments in which these concepts thrive differ in terms of structure, resources, and the level of risk
involved, but both contribute to economic and societal progress.
The Environment of Entrepreneurship:
Market Opportunity
Entrepreneurs identify gaps or opportunities in the market where their innovations can make a difference.

Start-up Ecosystem
Entrepreneurship thrives in areas with a supportive ecosystem, including access to funding, mentorship, and
networking opportunities.

Innovation Culture
A culture that values creativity and problem-solving fosters entrepreneurship.

Regulatory Environment
Government policies, such as tax incentives and business-friendly regulations, can impact the entrepreneurial
environment.

Technology and Infrastructure

Access to technology and necessary infrastructure can significantly influence the success of entrepreneurial
ventures.

Corporate Culture
Intrapreneurship flourishes in organizations that encourage a culture of innovation, risk tolerance, and employee
empowerment.

Leadership Support
Senior management must endorse and actively support intrapreneurial initiatives.

Resource Allocation
The availability of resources, such as time, budgets, and cross- functional teams, is essential for intrapreneurship to
thrive.

Incentives and Recognition

Rewards and recognition systems can motivate employees to engage in intrapreneurial activities.

Innovation Framework
Some companies establish specific innovation labs or incubators to facilitate intrapreneurship.

The entrepreneurial environment is influenced by various external factors, including politics, socioeconomics,
technology, legal considerations, and infrastructure.

These factors can either facilitate or hinder entrepreneurial activities.

1. Political Factors
Regulatory Framework Government policies and regulations can significantly impact entrepreneurship. A business-
friendly regulatory environment with rules and minimal bureaucracy can encourage entrepreneurship, while
excessive red tape and regulatory barriers can deter it.

The word "politics" comes from the Greek word "polis" which means "city- state." What transpires in the "polis" is
politics. Politics, therefore, is a term encompassing the totality of human activities transpiring within the city-state
(intrastate), as well as among states (interstate).
Political Stability
A stable political environment reduces uncertainty and encourages investment in new ventures.

Government Incentives
Governments may offer tax incentives, grants, or subsidies to promote entrepreneurship, which can positively
influence the entrepreneurial ecosystem.

HOW POLITICAL ACTIVITY CAN SHAPE ENTREPRENEURIAL DECISIONS & OUTLOOK:

1. Demographics Insights
Any political change in government or in Congress represents the rise or fall of a particular demography.

b. Periods of activity or inactivity in legislation - The creation, change, or removal of legislation could have a huge
impact on businesses, especially for start-ups.

C. Fears on new developments - Political tumult often leads to fear and fear leads to the rise of new needs.

d. Excitement over new developments - Similarly, new developments stir people's excitement and their needs may
change in different ways.

e. Cultural attitudes and buying decisions - Politician's leadership has the potential to shape an entire generation of
cultural attitudes and beliefs.

POLITICS IS BOTH A SCIENCE AND AN ART

Politics is a science because it employs empirical analysis, systematic study, and theoretical frameworks to
understand political phenomena.

It is also an art because it involves subjective decisions, negotiations, communication, and adaptation to unique
situations.

The combination of both scientific and artistic elements is what makes politics a complex and multifaceted field,
requiring a blend of analytical skills and intuitive judgment for success.

Politics as a Science
Empirical Analysis
Politics involves the study of human behavior, institutions, policies, and the impact of government decisions.
Political scientists use empirical methods to collect data, analyze trends, and make predictions about political
phenomena.

Systematic Study
Political science is a field that seeks to understand and explain political events and behaviors through rigorous
research and systematic analysis. It employs methodologies such as surveys, experiments, and statistical modeling to
uncover patterns and relationships.

Theory and Frameworks

Political science has developed various theories and frameworks that provide a structured and systematic way to
understand political dynamics. These theories, such as realism, liberalism, and constructivism in international
relations, help explain and predict political behavior.
Objective Data
Political scientists aim to gather objective data and evidence to draw conclusions about political phenomena. This
data-driven approach is a hallmark of the scientific method.

Politics as an art
Subjectivity and Judgment
Politics often involves subjective decisions, negotiations, and judgments. Politicians, policymakers, and diplomats
frequently make choices based on their values, intuition, and personal experience.

Conflict Resolution
Artful diplomacy and negotiation are essential in politics, where conflicting interests and values need to be balanced
and reconciled. Skill in negotiation and compromise is a crucial aspect of political art.

Communication
Effective communication and persuasion are vital in politics. Politicians need to engage with the public, convey their
ideas, and build coalitions. This requires skill in rhetoric, public speaking, and media management, all of which are
more aligned with the art of persuasion.

Adaptation to Unique Situations

The art of politics involves adapting to unique, ever-changing circumstances. Situations can be fluid, and a one-size-
fits-all approach is often ineffective. Successful politicians and leaders must be adept at improvisation and
responding to unexpected challenges.

Ethical Considerations
Ethical considerations and moral values play a significant role in political decisions. What is considered ethically
right or wrong can vary between individuals and cultures, making politics a realm where moral judgments and
ethical dilemmas come into play.

2. Socioeconomic Factors
Socioeconomic- means the interaction of social and economic factors. Economics relates to trade, industry, and the
creation of wealth.

An economic system is an organized way i n which a country allocates resources and distributes goods and services
across the whole nation, a type of social system.

Socioeconomic factors are the social and economic experiences and realities that help mold one's personality,
atitudes, and lifestyle; the factors that define regions and neighborhood and the lifestyle components and
measurements of both financial viability and social standing

Culture and/or ethnicity are also socioeconomic factors that can contribute to our thoughts and attitudes impacting
on how people are raised, their core values, and their sense of family and tradition.

Market Demand
The level of demand for products or services in a particular region affects entrepreneurial opportunities. A growing
and diverse consumer base can be more attractive to entrepreneurs.

Education and Workforce

A well-educated and skilled workforce is crucial for entrepreneurial success.
Access to a pool of potential employees and collaborators can drive entrepreneurship.

Income Levels
The income levels of potential customers can determine the size of the market and the pricing strategy for products
or services.

SOCIOECONOMIC FACTORS THAT WILL AFFECT

ENTREPRENEURSHIP:
1. Level of Education
Educational levels influence economic social status as higher paying jobs tend to require advanced or specialized
education. One's level of education can shape how he or she views the world and how h e or she can contribute to
social growth. It can lead to increased earning capacity, which, in turn, can contribute to better purchasing power
and higher quality of life.

2. Income and Consumption

As the level of education affects incomes and occupations, incomes and occupations affect one's socioeconomic
status. Net income is a direct contributor to people's purchasing power. Where the entrepreneur will establish his or
her business will determine the purchasing power of his or her market and the corresponding market demand.

3. Health and Lifestyle

Health status is a definite measurement of socioeconomic status. A person may be rendered stagnant because of poor
health. The health and lifestyle of the people in a particular location can reflect on the demand of that particular
location and this will affect any entrepreneurial activity in that locality.

4. Quality of Neighborhoods
Neighborhood is another leading socioeconomic factor. Neighborhoods are often grouped socially among people
with similar incomes and, often, similar backgrounds. There are lower income neighborhoods, middle income
neighborhoods, and high-income neighborhoods. Products and services are fitted to the neighborhoods they are
marketed.

3. Technological Factors-
Technology advancement had significantly allowed efficient use of resources, including the need to use renewable
resources and utilize nonrenewable resources within planned limits

Access to Technology
The availability of technology and infrastructure, such as the internet and communication networks, can
significantly impact the type of businesses that can thrive in a region.

Innovation Ecosystem
Entrepreneurship often thrives in areas with strong innovation ecosystems, including research institutions, tech hubs,
and venture capital firms.

Technological Readiness
The willingness of the population to adopt and adapt to new technologies can influence the success of tech-based
entrepreneurial ventures.

4. Legal Factors
Intellectual Property Protection
Strong intellectual property laws and enforcement are essential to protect the innovations and creations of
entrepreneurs.

Contract Enforcement
A legal system that enforces contracts and resolves disputes efficiently provides security for entrepreneurs and
investors.

Business Registration and Licensing

The ease and cost of registering and licensing a business can impact the attractiveness of entrepreneurship in a
particular area.

5. Infrastructure Factors
Transportation and Logistics
Efficient transportation and supply chain infrastructure can reduce costs and improve the accessibility of markets,
which is crucial for many businesses.

Access to Finance
The availability of financial institutions, venture capital, and angel investors is essential for funding entrepreneurial
endeavors.

Physical Workspace
The presence of co-working spaces, business incubators, and affordable office spaces can support entrepreneurs in
getting their ventures off the ground.

Infrastructure does not simply apply to the physical systems a country has. Van de Ven (1993) says it includes the
following:
Infrastructure Factors also includes the following:
1. Institutional arrangements to legitimate, regulate, and
standardize a new technology

2. Public resource endowments of basic scientific knowledge, financing mechanisms, and a pool of competent labor

3. Proprietary research and Development (R&D), manufacturing, marketing, and distribution functions by private
entrepreneurial firms to commercialize the innovation for profit.

7.3 INTRAPRENEURIAL ENVIRONMENT

REQUISITES

For an intrapreneur to succeed, he or she should be working in an environment that will encourage, promote, and
instill in him the drive to pursue his innovative ideas to reality.

These requisites include innovation, originality and experimentation, top management support, availability of
resources, teamwork, evaluation and reward, and nurture an innovative company culture.

These requisites for successful intrapreneurship create a supportive environment where employees are empowered to
pursue innovative ideas.
The combination of innovation, originality, experimentation, top management support, resource availability,
teamwork, evaluation and reward mechanisms, and an innovative company culture ensures that intrapreneurs can
effectively bring their ideas to reality, driving growth and innovation within the organization.

1. Innovation
Intrapreneurs should be encouraged to think creatively and come up with original ideas.

Innovation refers to the process of creating or introducing new ideas, methods, products, services, or processes that
bring about significant and positive change.

It involves taking existing concepts, technologies, or practices and improving or transforming them to generate
value. Innovations can be incremental or disruptive, depending on the degree of change they introduce.

Innovation is essential for staying competitive and adapting to evolving market demands.

Innovation plays a crucial role in developing and nurturing the intrapreneurial spirit within an organization.

Innovation sets the stage for the development of the intrapreneurial spirit by inspiring, motivating, and providing the
necessary tools and environment for employees to take initiative, drive change, and
contribute to the organization's growth.

When organizations foster a culture of innovation, intrapreneurs are more likely to emerge and thrive, bringing fresh
perspectives and innovative solutions to the table.

Innovation plays a crucial role in developing and nurturing the intrapreneurial spirit within an organization.
Innovation sets the stage for the development of the intrapreneurial spirit by inspiring, motivating, and providing the
necessary tools and environment for employees to take initiative, drive change, and contribute to the organization's
growth.

When organizations foster a culture of innovation, intrapreneurs are more likely to emerge and thrive, bringing fresh
perspectives and innovative solutions to the table.

Innovative Ideas
Innovation often begins with novel and creative ideas. These ideas can inspire and motivate employees to think
outside the box and consider new possibilities. When employees see innovative concepts coming to fruition, it
encourages them to become more intrapreneurial and bring their own ideas to life.

Innovative Solutions
Intrapreneurs are driven by a desire to solve problems and address challenges within the organization. Innovation
provides them with the tools and mindset to develop unique and effective solutions. The more innovative solutions
are encouraged and implemented, the more intrapreneurs are empowered to tackle issues.

Innovation Requires Risk

Successful innovation often involves taking risks, trying new approaches, and learning from failures. Intrapreneurs,
by their nature, are willing to take calculated risks. As they witness the organization embracing innovation and
understanding that not every experiment will succeed, they become more comfortable with risk and adaptability.

Continuous Improvement
Innovation promotes a culture of continuous improvement. Intrapreneurs thrive in an environment where learning
and growth are valued. They see innovation as a means to enhance their skills,
knowledge, and experience, which in turn fuels their intrapreneurial spirit.

Innovation Resources
Organizations that prioritize innovation often allocate resources, both financial and human, to support innovative
projects. This resource allocation provides intrapreneurs with the tools and support they need to transform their ideas
into reality, reinforcing their intrapreneurial mindset.

Acknowledging Innovation
When innovative initiatives are recognized and rewarded within the organization, it sends a clear message that
intrapreneurship is valued.
Intrapreneurs are more likely to embrace the spirit when they see that their efforts are acknowledged and celebrated.

Innovative Leadership
Innovative leaders who promote a culture of intrapreneurship by championing creative ideas and leading by example
inspire employees to adopt the same spirit. When leaders demonstrate the value of innovation, it trickles down to the
entire workforce.

Innovative Opportunities
Innovation often empowers employees by giving them the opportunity to propose and implement their ideas.
Intrapreneurs appreciate the autonomy and trust that comes with being able to drive innovation within their areas of
expertise.

2. Originality and Experimentation

Originality is the quality of being unique and novel. In the context of intrapreneurship, originality means that the
ideas and solutions generated by intrapreneurs are distinct and different from existing concepts or conventional
practices. An original idea has not been copied or replicated; it is the result of creative thinking and often challenges
the status quo. Originality is a core component of innovation because it drives the development of new and
unexplored opportunities.

Experimentation involves the process of testing new ideas, hypotheses, or approaches to gather data and learn from
the results. In intrapreneurship, experimentation is crucial for validating the feasibility and effectiveness of
innovative concepts. It allows intrapreneurs to assess the practicality of their ideas, identify potential challenges, and
refine their strategies based on empirical evidence. Experimentation can involve conducting pilot projects, A/B
testing, or other research methods to iterate and improve upon innovative concepts.

3. Top Management Support

For intrapreneurship to thrive, top management should actively endorse and support employees' entrepreneurial
initiatives. This support can take the form of providing resources, removing bureaucratic obstacles, and setting a
clear vision that aligns with the organization's strategic goals.

When leaders express commitment to intrapreneurial endeavors, it sends a powerful message throughout the
company and reinforces the importance of innovation.

4. Availability of Resources
Intrapreneurs require access to the necessary resources, including financial support, time, personnel, and tools, to
transform their innovative ideas into viable projects. Adequate resource allocation ensures that intrapreneurial
ventures are well-equipped to succeed and reduces the
risk of failure due to resource constraints.

The Ms of Management to be made available to Intrapreneurs:

a. Men
b. Money
c. Methods
d. Materials
e. Markets
f. Media
g. Moment (time)

5. Teamwork
Collaboration and cross-functional teamwork are crucial for intrapreneurs. They often need to work with colleagues
from different departments to leverage diverse skills and knowledge.

Teamwork enables the pooling of ideas, sharing of responsibilities, and addressing complex challenges, ultimately
increasing the chances of success.

6. Evaluation and Reward

Intrapreneurial efforts should be regularly evaluated and recognized. Establishing key performance indicators (KPIs)
and milestones for intrapreneurial projects allows the organization to measure progress.

Moreover, rewarding and celebrating the achievements of intrapreneurs through bonuses, promotions, or other forms
of recognition motivates employees to continue their innovative work.

7. Nurture an Innovative Company Culture

The organization should cultivate a culture that values innovation, risk- taking, and continuous learning.

An innovative company culture encourages employees at all levels to contribute their creative ideas and provides a
safe space for experimentation.

It also promotes openness, adaptability, and a willingness to embrace change