International Business in Entrepreneurship Development

1. MODULE 5
INTERNATIONAL BUSINESS
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Mr. Ajinkya Damle
Assistant Professor, MBA@AITM

2. MODULE 5 : INTERNATIONAL ENTREPRENEURSHIP
OPPORTUNITIES
• Meaning of International Entrepreneurship
• The nature of international entrepreneurship
• Importance of international business to the firm
• International v/s domestic entrepreneurship
• Stages of economic development
• Entrepreneurship entry into international business -
• Barriers to international trade.
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3. INTERNATIONAL ENTREPRENEURSHIP
• In simple terms, international entrepreneurship is defined as carrying out
entrepreneurship activities beyond the national boundaries of the country
• According to Zahra, “International entrepreneurship is the study of nature
and consequences of a firms risk-taking behaviour as it ventures into
international markets”
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4. NATURE OF INTERNATIONAL ENTREPRENEURSHIP
1. Involvement of two countries
2. Language differences
3. More risk
4. Government intervention
5. Foreign currency
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5. IMPORTANCE OF INTERNATIONAL ENTREPRENEURSHIP
1. Superior technical know-how
2. Large size and economies of scale
3. Lower input cost due to large size
4. Ability to access raw material overseas
5. Ability to shift production overseas
6. Brand image and goodwill advantages
7. Access to low-cost financing
8. Information advantages
9. Managerial experience and expertise
10. Diversification of risk
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6. FACTORS AFFECTING INTERNATIONAL MARKETING
• INTERNAL FACTORS (CONTROLLABLE)
– Internal or controllable factors are those which can be controlled by
marketing managers
– These factors are related to marketing mix
– These factors are not perfectly controllable because the market
situation and behaviour are not within the decision limit of the firm
– One individual firm can modify and manage its 4P’s according to the
environment
• EXTERNAL FACTORS (UNCONTROLLABLE)
– Marketing manager has to also face external uncontrollable factors
while taking his marketing decisions
– The external factors include Cultural factors, Social factors, Legal factors,
Economic factors, Political factors, Technological factors
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7. ENTREPRENEURSHIP ENTRY INTO INTERNATIONAL BUSINESS
• There are several ways(modes) to enter international business, the most
important ways are
1. Exporting (Indirect & Direct)
2. Non-Equity Arrangements (Licensing, Turn-key Projects, Management
Contracts)
3. Foreign Direct Investment (FDI) (Assembly, Wholly-owned Subsidiary, Joint
Ventures, Mergers and Acquisitions, Strategic Alliances, Partnering)
Some other modes of entry are
• Piggybacking
• Trading Companies
• Franchising
• Direct Marketing 7

8. 1. EXPORTING
• This is the most common method of entering international business
• Exporting can be done in two forms – direct and indirect
• Direct exporting is preferred by entrepreneurs when they wish to secure a
more permanent long-term place in international markets.
• Indirect Exporting is preferred when entrepreneur has little or few
resources for international marketing. This type of exporting has lower cost
and is simple method to enter international markets compared to direct
exporting
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9. 2. NON-EQUITY ARRANGEMENTS
• An entrepreneur can enter into international business by one of three non-
equity arrangements
• Licensing : under licensing agreement, an entrepreneur (the licensor)
grants rights to intangible property to another company (the licensee) for a
specified period. Here the licensor grants permission to use their patents,
trademarks etc
• Turn-key Projects : One of the special modes of carrying out international
business is a turnkey project. It is a contract under which a firm agrees to
fully design, construct and equip a manufacturing/ business/ service
facility and turn the project over to the purchaser when it is ready for
operation for a remuneration.
• Management Contracts : an entrepreneur who markets and sells products
into international markets might arrange for a local manufacturer to
produce the product under contract. This makes the entrepreneur to focus
on sales and marketing. 9

10. 3. FOREIGN DIRECT INVESTMENT (FDI)
• Foreign direct investment (FDI) is an investment made by a company or
individual in one country in business interests in another country, in the
form of either establishing business operations or acquiring business
assets in the other country, such as ownership or controlling interest in a
foreign company
FDI includes following options
• Assembly Operations
• Wholly-owned Subsidiary
• Joint Ventures
• Mergers and Acquisitions
• Strategic Alliances
• Partnering
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11. • Assembly Operations : An assembly operation is a variation of
the subsidiary. A foreign production plan might be set up simply to
assemble components manufactured in the domestic market or elsewhere.
In this strategy, parts or components are produces in various countries and
then assembled at one unit
• Wholly-owned Subsidiary : A wholly owned subsidiary is a company
whose common stock is 100% owned by another company, the parent
company. This is the most expensive method to enter foreign markets.
• Joint Ventures : it occurs when a company decides that shared ownership
of a specially set up new company for marketing and manufacturing is the
most appropriate method of exploiting a business opportunity.
• Mergers and Acquisitions : it refers to the aspect of corporate strategy,
corporate finance and management dealing with the buying, selling and
combining of different companies.
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12. • Strategic Alliances : it is a business relationship established by two or more
companies to cooperate out of mutual need and to share risk in achieving
a common objective. Such alliances are done to shore up weakness and
increase competitive strength .
• Entrepreneurial Partnering : this method involves getting into partnership
with an entrepreneur of a foreign country. This is the most useful and best
method as it helps to get the exact knowledge of foreign markets by
partnering with local entrepreneur.
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13. DRIVING FORCES FOR AN ENTREPRENEUR TO GO
INTERNATIONAL
1. Growth
2. Profitability
3. Achieving economies of scale
4. Uniqueness of product/service
5. Access to imported inputs
6. Marketing opportunities due to life cycles
7. Spreading R&D costs
8. Risk spread
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14. BARRIERS TO INTERNATIONAL TRADE
1. Social and Cultural Differences
i. Language
ii. Values and religious attributes
2. Economic barriers
i. Infrastructure
ii. Currency conversion and shifts
3. Political and legal barriers
4. Tariff and non-tariff barriers
5. Boycotts
6. Standards and safety regulations
7. Anti-dumping barriers 14

15. THANK YOU
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