InstructorManualtoMikePeng&KlausMeyer(2011):InternationalBusiness,CengageLearning.
Instructor Manual
Chapter 11: Starting International Business
to accompany Mike Peng & Klaus Meyer: International Business, Cengage Learning
Prepared by Klaus Meyer
version February 2011
Introduction to the Topic
Learning Objectives
1. Explain the different options for firms to start engaging in international business
3. Explain how institutions influence exporting behaviour
5. Draw implications for practice
General Teaching Suggestions
This chapter approaches international business strategy from the perspective of a small firm,
including entrepreneurial start-ups, that takes the first step of international businesses, and
engages – initially using non-equity modes. It explain critical concepts around non-equity
modes and the internationalization process. It thus lays the foundation for bigger international
business ventures in form of FDI, which are discussed in the next chapter.
Opening Case Discussion Guide
InstructorManualtoMikePeng&KlausMeyer(2011):InternationalBusiness,CengageLearning.
This case tells the story of a Russian entrepreneurial start-up that (somewhat contrary to
common stereotypes) used its entrepreneurial prowess and software design ingenuity to
develop one of the largest global players in its industry. However, it started small, and
Chapter Outline, Section by Section
Section 1: Going International
Key Ideas
This section contains a wide range of concepts relating to transactions in international
business. We start with the practicalities of managing exports before introducing a wider
range of transactions. This part of the book is organized around Table 11.1, which differs
Key Concepts
small and medium-sized enterprises (SMEs)
Firms with fewer than 500 employees.
entrepreneur
Leader identifying opportunities and taking decisions to exploit them
InstructorManualtoMikePeng&KlausMeyer(2011):InternationalBusiness,CengageLearning.
The sale of products made by firms in their home country to customers in other countries.
indirect exports
A way for SMEs to reach overseas customers by exporting through domestic-based export
intermediaries.
export intermediary
A firm that performs an important “middleman” function by linking sellers and buyers overseas.
servicing foreign residents
Supplying services to customers coming from abroad
licensing
Firm A’s agreement to give Firm B the rights to use A’s proprietary technology (such as a patent) or
trademark (such as a corporate logo) for a royalty fee paid to A by B.
InstructorManualtoMikePeng&KlausMeyer(2011):InternationalBusiness,CengageLearning.
franchising
Firm A’s agreement to give Firm B the rights to use a package of A’s proprietary assets for a royalty
fee paid to A by B.
turnkey project
A project in which clients pay contractors to design and construct new facilities and train personnel.
design and build (DB) contract
A contract combining the architectural or design work with the actual construction
tender
A competition for a major contract
subcontracting
A contract that involves outsourcing of an intermediate stage of a value chain.
R&D contract
A subcontracting of R&D between firms.
InstructorManualtoMikePeng&KlausMeyer(2011):InternationalBusiness,CengageLearning.
Section 2: Internationalization Processes
Key Ideas
This section introduces the most popular European contribution to the IB literature, the
Internationalization Process (or Uppsala) model of internationalization. The discussion
Key Concepts
experiential knowledge
Knowledge learned by engaging in the activity and context
Uppsala model
A model of internationalization processes focusing on learning processes
Section 3: Institutions and Internationalization
Key Ideas
This section focuses on two aspects of institutions relevant especially to companies with little
experience overseas. Firstly, support institutions available at home and secondly, namely the
institutional and cultural distance – or the degree to which institutions / culture in the partner
country is different from what the entrepreneurs are familiar with.
Key Concepts
cultural distance
InstructorManualtoMikePeng&KlausMeyer(2011):InternationalBusiness,CengageLearning.
Section 4: Debates and Extensions
Key Ideas
The first debate challenges students to think of entry modes in terms of designing the optimal
mode, as opposed to selecting a mode from a given set (such as Table 11.1).
Section 5: Implications for Practice
Key Ideas
The concluding section focuses on the link between building resources and organizational
Review Questions
Review questions are provided to students on the website accompanying the book. They
directly ask to summarize the material provided in the text. Instructors may also use the
questions to structure their lectures or review sessions.
Review Questions
(as provided to students on the website)
Material in the Book
1. What were the challenges that start-up company
Kapersky Lab experienced in establishing an international
operation?
Page 330-31
InstructorManualtoMikePeng&KlausMeyer(2011):InternationalBusiness,CengageLearning.
2. What is the role of entrepreneurs and entrepreneurial
teams in setting-up and running a new business?
5. What is the role of trade intermediaries in international
trade?
6. How can services be traded across borders?
7. What are licencing and franchising, and when can it be
used in international business?
8. How are turn-key projects and build-operate-transfer
project used in the construction industry?
12. How does the ‘institutional distance’ between two
countries affect internationalization?
13. How do existing international operations affect future
internationalization?
14. How does the evolution of the internet affect the way
small businesses engage in international business?
Page 332
Page 335-36
Page 336-37
Page 337-39, In Focus 11.3
Page 339-340, In Focus 11.2
Page 347
Page 347-48
Page 348
Critical Discussion Questions
At the end the chapter, we provide discussion questions that aim to stimulate students
thinking beyond memorizing the material learned in the chapter. They are designed to be
used at a basis for in-class discussions, group work, or individual assignments. Below,
provide some indicative answers of issues that may be raised in response to these questions.
InstructorManualtoMikePeng&KlausMeyer(2011):InternationalBusiness,CengageLearning.
Discussion Questions
(as provided in the book)
Indicative Responses
1. Some suggest that foreign markets are
graveyards for entrepreneurial firms to
2. Your Kazakh classmate offers you 15%
commission if you sell hand-made,
fashionable clothing from Kazakhstan to
local distributors in your home town. Would
you consider this offer?
4. Your former high school buddy invites you
to join an entrepreneurial start-up that
specializes in cracking the codes of
protection software, which protect CDs and
These questions are about recognizing
and assessing business opportunities.
2. The key concern here is the
resources you need to put into
this business, and the long-term
potential of the business.
3. The key concern is the handling
of confidential information.
before providing them with that
information.
4. This is an ethical question with
strong legal implications. Even
if it turns out that the business
InstructorManualtoMikePeng&KlausMeyer(2011):InternationalBusiness,CengageLearning.
Closing Case
The closing case provides further opportunities to apply ideas and concepts learned in this
chapter in a real world setting. The Closing Case for this Chapter is “Naming Your School”
and focuses on different attitudes towards the idea of naming a building or an institution after
a rich donor, and the practical implications that may arise from this. Below are some
indicative responses to the case discussion questions.
Case Discussion Questions
(as provided in the book)
Indicative Responses
1. What motivates Better Generation to
become international very fast?
2. What are the risks of a fast
internationalization strategy for Better
Generation?
1. In addition to the potential of
markets around the world, this
company is internationalizing to
produce, and because the value of
its database is much higher if it is
Further Learning Activities
In addition to the cases and discussion questions provided in the book, instructors may want
to use any of the following activities to further engage students with the material.
1. You work for a small foreign language services company. You have been asked to present a
market assessment of the largest translation companies for competitor evaluation. Your report
must include the following attributes for the global industry: company, size, locations, and
ownership status. What do your findings suggest about possible worldwide opportunities?
One resource which can be used is “Common Sense Advisory: Top 20 Translation
Companies”. This website can be found by entering the search term “translation companies”
InstructorManualtoMikePeng&KlausMeyer(2011):InternationalBusiness,CengageLearning.
2. An entrepreneurship research firm has asked you to identify the most entrepreneurial
countries in the world. Based on your knowledge of the entrepreneurship field, find a
database that may assist in your research. Once the information has been secured, compare
the top five countries across the multiple years included in the database. Are there any
countries that appear in all years included in the database? What is the general percentage of
new start-ups in the overall economy for each of the top countries? Is the size of each country
similar? Explain these dynamics in your report.
One resource which can be used is “IFC SME Entrepreneurship Database”. This website can
Errors and Corrections
On page 337, the concept ‘licensing’ is introduced as ‘contract licensing’ due to a
proofreader’s change of the text. Elsewhere in the book we use the term licensing, and we
suggest that you stick to the established concept of ‘licensing’.
Further Readings
At the end the chapter, suggested further readings are provided. The primary aim is to
provide students a starting point for further work, for example when preparing a class
InstructorManualtoMikePeng&KlausMeyer(2011):InternationalBusiness,CengageLearning.
M. Forsgren, 2002, The concept of learning in the Uppsala internationalization model: a critical review,
IBR, 11: 257-277 – A review of alternative ways of learning how to do international business.