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CHAPTER 16. GLOBAL ASPECTS OF ENTREPRENEURSHIP
Part 1: Learning Objectives
1. Explain why “going global” has become an integral part of many small companies’
marketing strategies.
2 Describe the principal strategies small businesses can use for going global.
3. Discuss the major barriers to international trade and their impact on the global
economy.
4. Describe the trade agreements that will have the greatest influence on foreign trade in
the twenty-first century.
Part 2: Class Instruction
Introduction
The global marketplace offers tremendous potential for many entrepreneurial companies.
The Internet combined with other forms of affordable technology, increased access to
information on conducting global business, and the growing interdependence of the
world’s economies have made it easier than ever before for companies to engage in
international trade. As entrepreneurs discover the global business tools, the costs of going
global are decreasing. American small businesses fall behind their counterparts in most
countries. The opportunities demand exploration.
Why Go Global? LO 1
Today’s business environment is highly competitive and businesses can no longer consider
themselves as domestic companies if they truly want to compete. Operating a successful
business increasingly requires entrepreneurs to see their companies as global citizens
the stringent demands of foreign customers, lower the manufacturing cost of their
products by spreading fixed costs over a larger number of units, and enhance their
competitive positions to become stronger businesses.
Copyright © 2019 Pearson Education, Inc.
Chapter 16, Page 259
Success in a global economy requires constant innovation; staying nimble to use speed as a
competitive weapon; maintaining a high level of quality and constantly improving it; being
sensitive to foreign customers’ unique requirements; adopting a more respectful attitude
toward foreign habits and customers; hiring motivated, multilingual employees; and
retaining a desire to learn constantly about global markets.
Global thinking is the ability to appreciate, understand, and respect the different beliefs,
values, behavior, and business practices of companies and people in different cultures and
countries.
Strategies for Going Global LO 2
There are 10 strategies for going global as described in Figure 16.1, Ten Strategies for
Trade Intermediaries.
Trade intermediaries are domestic agencies that serve as distributors in foreign countries
for domestic companies of all sizes. They rely on their networks of contacts, extensive
knowledge of local customs and markets, and experience in international trade. They
serve as the export departments for small businesses. There are many types of trade
a number of countries and offer a wide variety of services to their clients.
Export merchants are domestic wholesalers who do business in foreign
markets.
Resident buying office is government- or privately owned operations of one
country established in another country for the purpose of buying goods made
surrender control over their foreign sales. Therefore, it is essential to thoroughly screen
them, and find the ones that specialize in the products their companies sell, as well as
have experience and established contact in the targeted countries. Refer to Table 16.1,
Foreign Licensing.
Rather than sell their products or services directly to customers overseas, some small
companies enter foreign markets by licensing businesses in other nations to use their
company collects royalties from the sales of its foreign licenses. This works well for
franchisees; select quality candidates; structure the franchise deal (direct franchising, area
development, or master franchising).
Countertrading and Bartering.
A countertrade is a transaction in which a company selling goods in a foreign country
agrees to promote investment and trade in that country. The goal is to help offset the
The biggest barrier to exporting is not knowing where or how to start, but there are many
resources, training, and consulting services to help. To develop a sound export strategy
the entrepreneur should follow these nine steps:
1. Recognize that even the tiniest companies and least experienced entrepreneurs
2. Analyze your product or service.
3. Analyze your commitment. Refer to Figure 16.3, Length of Time Small
Business Owners Invest Before Exporting.
4. Research markets and pick your target. Refer to Figure 16.4, Number of
5. Develop a distribution strategy.
6. Find your customer.
7. Find financing.
8. Ship your goods.
9. Collect your money. A letter of credit is an agreement between an exporter’s
bank and the foreign buyer’s bank that guarantees payment to the exporter for
a specific shipment of goods. Refer to Figure 16.5, How a Letter of Credit
Works. A bank draft is a document the seller draws on the buyer, requiring
the buyer to pay the face amount either on sight or on a specified date.
lower labor costs, as well as gaining a firsthand knowledge of customers’ preferences and
culture.
Importing and Outsourcing.
More U.S. companies shop the world market for products they can sell here. For
example, due to low labor costs in some countries, businesses there offer goods and
protect your company’s intellectual property; select a manufacturer; provide an exact
model of the product you want manufactured; stay in constant contact with the
manufacturer and try to build a long-term relationship.
Expat Entrepreneurs.
Expat entrepreneurs keep their citizenship in their home country, but live and run their
governments use a variety of barriers that block free trade among nations in an attempt to
protect their own industries. Foreign firms are restricted access into global markets and all
consumers suffer and pay the price. Barriers to international trade include domestic and
Copyright © 2019 Pearson Education, Inc.
Chapter 16, Page 262
international barriers. Refer to Figure 16.6, Most Frequently Encountered Impediments to
International Trade.
Domestic Barriers.
Three major domestic roadblocks are common: attitude, information, and financing.
Attitude. “I’m too small to export.” The first step to building an export
program is recognizing that the opportunity to export exists. Refer to Table
16.3, Global Business Assumptions.
Lack of Information. Entrepreneurs should thoroughly research the possibility
of going global and use every possible resource available to them such as
government and private organizations’ international exporting and marketing
information, in order to make valid decisions. Companies must also be willing
International Barriers.
Tariffs Barriers. A tariff is a tax, or duty, that a government imposes on goods
and services imported into that country.
Nontariff Barriers. Nations have lowered the tariffs they impose but they rely
on other nontariff structures as protectionist trade barriers.
These may include: excessive government and legal regulations; government takeovers of
private property; coups to overthrow ruling parties; kidnapping, bombings, and other
violent acts again businesses and their employees; and other threatening events.
Business Barriers.
Business practices and regulations in foreign lands can be quite different from those in the
Culture is the beliefs, values, views, and mores that a nation’s inhabitants share. Culture,
customs, and the norms of behavior differ greatly among nations, and making the correct
impression is extremely critical to building a long-term business relationship. There are
many examples in the chapter.
agreements among nations exist. The most prominent organizations include:
The World Trade Organization (WTO). This organization establishes rules for
trade among nations. Members commit themselves to nondiscriminatory trade
practices and to reduce barriers to free trade. For example, the WTO’s intellectual
among partner nations.
The Dominican Republic-Central America Free Trade Agreement (CAFTA-DR
and also referred to as CAFTA) is to Central America what NAFTA is to North
America. CAFTA was implemented between 2006 and 2008 to promote free trade
among the United States and six Central American countries.
implementation of a global strategy.
Part 3: Chapter Exercises
You Be the Consultant: “Going Global from the
1. As the global market grows, more small businesses are expanding into other
markets. What are the implications for small companies that have the potential to
2. What advice can you offer the founders of Zee Wines USA about selling their
products globally? (LO 2) (AACSB: Application of knowledge)
3. Notice that the founders of Zkipster used a direct, localized sales approach to
enter new markets. What are the advantages and the disadvantages of setting up
local sales operations? Why do most small companies that sell internationally use
trade intermediaries rather than open local offices? (LO 2) (AACSB: Reflective
intermediaries can be a more efficient process to initiate and sustain higher volume sales
over time.
You Be the Consultant: “Selling a Simple Product to a
Global Market”
1. Identify the risks and the benefits that The Pasta Shoppe faces by operating as a
global business. (LO 2) (AACSB: Reflective thinking)
2. Identify some of the barriers that companies such as The Pasta Shoppe
encounter as they expand internationally. What steps can entrepreneurs take to
overcome these obstacles? (LO 2) (AACSB: Reflective thinking)
3. What steps do you recommend that entrepreneurs such as John Aron take
before they make the decisions to take their companies global? (LO 2) (AACSB:
Reflective thinking)
To develop a sound export strategy they should follow these nine steps:
