MODUL

5
Assessing The
Entrepreneurship
Environment

McGraw-Hill/I rwin
Copyright 2013 by The McGraw-Hill Companies, I nc. All rights reserved.
5-2
Learning Objectives
To understand the aspects and importance of
identifying good domestic or international
opportunities
To be able to identify these opportunities
To be able to create an opportunity
assessment plan
5-3
Learning Objectives
To present the problems and barriers of
entering global markets
To be able to select a global market
To understand the options for entering a
foreign market
5-4
Opportunity Recognition and the
Opportunity Assessment Plan
Opportunity assessment plan
Determines the profitability of a product/service
idea
Constitutes of four sections
First section - Identifies:
Uniqueness of the idea in terms of its unique selling
propositions
Available competitive products
Companies in the product market space
5-5
Opportunity Recognition and the
Opportunity Assessment Plan
Second section- Focuses on the market
Size
Trends
Characteristics
Growth rate
Third section - Focuses on the entrepreneurs and
management teams skills and experience
Fourth section - Develops a time line indicating the
steps to successfully launch the venture

5-6
Information Sources
Assistance
Training, consulting, and mentoring provided by
experienced executives and entrepreneurs
General information
Start-up assistance on Web-based resources
Industry and market information
Available on industry and market databases
5-7
Information Sources
Competitive company and product
information
Provided by external sources
Assistance
Training, consulting, and mentoring provided by
experienced executives and entrepreneurs
General information
Start-up assistance on Web-based resources

5-8
Information Sources
Industry and market information
Available on industry and market databases
Competitive company and product
information
Provided by external sources
Government sources
Search engines
Enable searching the needed industry, market,
and competitive information
5-9
Information Sources
Trade associations
Provide country-specific industry data
Trade publications
Provide:
Information and insights on trends and companies
Perspective on the particular market and market
conditions
5-10
The Nature of International
Entrepreneurship
International entrepreneurship
Process of conducting business activities across
national boundaries
The activities necessary for ascertaining and
satisfying the needs and wants of target
consumers take place in more than one country.
Constitutes exporting, licensing, or opening a sales
office in another country
2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document
may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
The Importance of International
Business to the Firm
International business has become increasingly
important to firms of all sizes.
A successful entrepreneur must be able to:
Fully understand the difference between domestic
and international business.
Respond accordingly thereby successfully going
global.

5-12
Table 5.1 - International versus
Domestic Business
5-13
International versus Domestic
Entrepreneurship
Economics
Domestic
Entire country is organized under a single economic
system and has the same currency
International
Requires dealing with differences in:
Levels of economic development
Currency evaluations
Government regulations
Banking, venture capital, marketing and distribution system
5-14
International versus Domestic
Entrepreneurship
Stage of economic development
Ability to successfully engage in international
business depends on:
Fundamental infrastructure
Banking facilities and systems
Educational system
Legal system
Business ethics and norms

5-15
International versus Domestic
Entrepreneurship
Current account: Trade status of imports/
exports between countries
Valuation of a countrys currency affects business
transactions between countries

5-16
International versus Domestic
Entrepreneurship
Type of economic system
Barter: A method of payment using nonmoney
items
Third-party arrangements: Paying for goods
indirectly through another source
Political-legal environment
Political risk analysis: Assessment of a countrys
political policies and its stability
5-17
International versus Domestic
Entrepreneurship
Types of political risks
Operating risk
Transfer risk
Ownership risk
Conflict and changes in the solvency of the country
Critical areas for every entrepreneur
Property rights
Contract law
Product safety
Product liability
5-18
International versus Domestic
Entrepreneurship
Language
Hire a translator whose:
Native tongue is the target language
Expertise matches that of the original authors
5-19
Technological Environment
Varies across countries
Infrastructure impacts the creation of new
products in operant countries

5-20
Figure 5.1 - Various Aspects of Culture
5-21
Available Distribution Systems
Factors that impact the distribution system of
a country:
Overall sales potential
Amount and type of competition
Cost of the product
Geographical size and density

5-22
Available Distribution Systems
Investment policies
Exchange rates and controls
Level of political risk
Overall marketing plan
5-23
Table 5.3 - Motivations to Go Global
5-24
Strategic Effects of Going Global
Increased physical and psychological proximity
to the customers and the ports
5-25
Foreign Market Selection
Five-step approach to market selection
Develop appropriate indicators
Collect data and convert into comparable
indicators
Establish an appropriate weight for each indicator
Analyze the data
Select the appropriate market from the market
rankings
5-26
Foreign Market Selection
Company specific indicators should be
developed to determine:
Overall market size indicators
Market growth indicators
Product indicators
5-27
Entrepreneurial Entry Strategies
Exporting
Sale and shipping of products manufactured in
one country to a customer in another country
Indirect exporting: Using a foreign purchaser in
the local market or an export management firm
Direct exporting
Using independent distributors or the companys own
overseas sales office for international business

5-28
Entrepreneurial Entry Strategies
No equity Arrangements
Licensing.
Turn-key projects.
Management contracts.
Nonequity arrangements
Obtaining sales and profits without direct equity
investment in the foreign market

5-29
Entrepreneurial Entry Strategies
Licensing: In return of payment of royalty, giving a
foreign manufacturer the right to use a:
Patent
Trademark
Technology
Production process
Product
5-30
Entrepreneurial Entry Strategies
Turn-key projects
Supplying the manufacturing technology or
infrastructure for a business and then turning it over to
local owners
Management contracts
Contracting management techniques and skills to a
purchasing company

5-31
Entrepreneurial Entry Strategies
Direct foreign investment
Minority interests
Investing entrepreneur holds a minority ownership
position in the foreign venture
Joint ventures
Joining of two firms in order to form a third company in
which the equity is shared
Majority interest
Purchase of over 50 percent of the equity in a foreign
business
5-32
Entrepreneurial Entry Strategies
Mergers - Obtaining 100 percent ownership to
ensure complete control
Horizontal merger
Combining two firms that produce same or closely
related products in the same geographic area
Vertical merger
Combining two or more firms in successive stages of
production
5-33
Entrepreneurial Entry Strategies
Product extension merger
Acquiring and acquired companies:
Have related production and/or distribution activities
Do not have products that compete directly
Market extension merger
Combining two firms that produce the same products
but sell them in different geographic markets
Diversified activity merger
Conglomerate merger involving the consolidation of
two essentially unrelated firms
5-34
Entrepreneurial Partnering
Partnering with foreign entrepreneurs
Advantages
Facilitates business transactions
Updates the entrepreneur on business, economic,
and political conditions
5-35
Barriers to International Trade
Trade barriers: Hindrances to doing
international business
Initiatives to reduce trade barriers
General Agreement on Tariffs and Trade (GATT)
Trade Blocs and free trade areas
Free Trade Area (FTA)
North American Free Trade Agreement (NAFTA)
Treaty of Asuncin Mercosur trade zone
European Community (EC)
5-36
Entrepreneurs Strategy and Trade
Barriers
Impact of trade barriers
Increase costs of exporting products to a country
Limit entrepreneurs ability to sell products in a
country from production facilities outside the
country
Necessitate re-locating production facilities to
conform to local regulations

5-37
END OF MODULE 5