Download VTU (Visvesvaraya Technological University) MBA 2nd Semester (Second Semester) 17MBA26-Entrepreneurial Development Module 5 International entreprenership opportunities Important Lecture Notes (MBA Study Material Notes)
entrepreneurship
opportunities
MODULE 6
FirstRanker.com - FirstRanker's Choice
International
entrepreneurship
opportunities
MODULE 6
ASSIGNEMENT
? Barriers to international trade
? Tariff barriers
? International v/s domestic entrepreneurship
FirstRanker.com - FirstRanker's Choice
International
entrepreneurship
opportunities
MODULE 6
ASSIGNEMENT
? Barriers to international trade
? Tariff barriers
? International v/s domestic entrepreneurship
International entrepreneurship
? Process of discovering and creatively exploiting opportunities that
exists outside one?s own country with the purpose of reaching
competitive advantage wherein importance of recognition,
discovery and exploitation of opportunities is recognised.
? It is a combination of innovative proactive and risk taking behaviour
that crosses national borders and is intended to create value in
organisations.
? This deals with general aspects of being global entrepreneur and
identifying global opportunities.
? Issues covered are importance of international entrepreneurship,
globalisation and the international environment, impact of culture,
venture, aspects of global business etc
FirstRanker.com - FirstRanker's Choice
International
entrepreneurship
opportunities
MODULE 6
ASSIGNEMENT
? Barriers to international trade
? Tariff barriers
? International v/s domestic entrepreneurship
International entrepreneurship
? Process of discovering and creatively exploiting opportunities that
exists outside one?s own country with the purpose of reaching
competitive advantage wherein importance of recognition,
discovery and exploitation of opportunities is recognised.
? It is a combination of innovative proactive and risk taking behaviour
that crosses national borders and is intended to create value in
organisations.
? This deals with general aspects of being global entrepreneur and
identifying global opportunities.
? Issues covered are importance of international entrepreneurship,
globalisation and the international environment, impact of culture,
venture, aspects of global business etc
Nature of international
entrepreneurship
?Integration of economies
?International competition
?Mutually acceptable currency
?Different national policies and government
intervention:
?Proactive or reactive based on perceived
opportunities/threats
FirstRanker.com - FirstRanker's Choice
International
entrepreneurship
opportunities
MODULE 6
ASSIGNEMENT
? Barriers to international trade
? Tariff barriers
? International v/s domestic entrepreneurship
International entrepreneurship
? Process of discovering and creatively exploiting opportunities that
exists outside one?s own country with the purpose of reaching
competitive advantage wherein importance of recognition,
discovery and exploitation of opportunities is recognised.
? It is a combination of innovative proactive and risk taking behaviour
that crosses national borders and is intended to create value in
organisations.
? This deals with general aspects of being global entrepreneur and
identifying global opportunities.
? Issues covered are importance of international entrepreneurship,
globalisation and the international environment, impact of culture,
venture, aspects of global business etc
Nature of international
entrepreneurship
?Integration of economies
?International competition
?Mutually acceptable currency
?Different national policies and government
intervention:
?Proactive or reactive based on perceived
opportunities/threats
Importance of int buss to the firm
? Superior technological know-how
? Larger size and economies of scale
? Lower input costs due to large size
? Ability to access raw materials overseas
? Ability to shift production overseas
? Economies of scale in shipment/distribution/promotion
? Brand image and goodwill advantage
? Access to low cost financing
? Information advantage
? Managerial expertise and experience
? Diversification of risks
FirstRanker.com - FirstRanker's Choice
International
entrepreneurship
opportunities
MODULE 6
ASSIGNEMENT
? Barriers to international trade
? Tariff barriers
? International v/s domestic entrepreneurship
International entrepreneurship
? Process of discovering and creatively exploiting opportunities that
exists outside one?s own country with the purpose of reaching
competitive advantage wherein importance of recognition,
discovery and exploitation of opportunities is recognised.
? It is a combination of innovative proactive and risk taking behaviour
that crosses national borders and is intended to create value in
organisations.
? This deals with general aspects of being global entrepreneur and
identifying global opportunities.
? Issues covered are importance of international entrepreneurship,
globalisation and the international environment, impact of culture,
venture, aspects of global business etc
Nature of international
entrepreneurship
?Integration of economies
?International competition
?Mutually acceptable currency
?Different national policies and government
intervention:
?Proactive or reactive based on perceived
opportunities/threats
Importance of int buss to the firm
? Superior technological know-how
? Larger size and economies of scale
? Lower input costs due to large size
? Ability to access raw materials overseas
? Ability to shift production overseas
? Economies of scale in shipment/distribution/promotion
? Brand image and goodwill advantage
? Access to low cost financing
? Information advantage
? Managerial expertise and experience
? Diversification of risks
Rostow?s model of stages of
economic development
? According to Rostow, 1960 countries pass through 5 stages of economic
development
? 1. Traditional society ? subsistence, barter, Agri and labour intensive,
limited capital, traditional methods of production
? 2. transitional stage ? specialisation leading to surplus for trading,
transport infrastructure develops, income/savings/investments increase,
entrepreneurship develops, external trade on primary articles
? 3. Take-off ? Industrialisation develops, works shift to industrial from Agri
sector, growth concentrated in a few regions and industries, investment
reaches 10% of GNP
new political and social institutions develop, more savings lead to more
investments
FirstRanker.com - FirstRanker's Choice
International
entrepreneurship
opportunities
MODULE 6
ASSIGNEMENT
? Barriers to international trade
? Tariff barriers
? International v/s domestic entrepreneurship
International entrepreneurship
? Process of discovering and creatively exploiting opportunities that
exists outside one?s own country with the purpose of reaching
competitive advantage wherein importance of recognition,
discovery and exploitation of opportunities is recognised.
? It is a combination of innovative proactive and risk taking behaviour
that crosses national borders and is intended to create value in
organisations.
? This deals with general aspects of being global entrepreneur and
identifying global opportunities.
? Issues covered are importance of international entrepreneurship,
globalisation and the international environment, impact of culture,
venture, aspects of global business etc
Nature of international
entrepreneurship
?Integration of economies
?International competition
?Mutually acceptable currency
?Different national policies and government
intervention:
?Proactive or reactive based on perceived
opportunities/threats
Importance of int buss to the firm
? Superior technological know-how
? Larger size and economies of scale
? Lower input costs due to large size
? Ability to access raw materials overseas
? Ability to shift production overseas
? Economies of scale in shipment/distribution/promotion
? Brand image and goodwill advantage
? Access to low cost financing
? Information advantage
? Managerial expertise and experience
? Diversification of risks
Rostow?s model of stages of
economic development
? According to Rostow, 1960 countries pass through 5 stages of economic
development
? 1. Traditional society ? subsistence, barter, Agri and labour intensive,
limited capital, traditional methods of production
? 2. transitional stage ? specialisation leading to surplus for trading,
transport infrastructure develops, income/savings/investments increase,
entrepreneurship develops, external trade on primary articles
? 3. Take-off ? Industrialisation develops, works shift to industrial from Agri
sector, growth concentrated in a few regions and industries, investment
reaches 10% of GNP
new political and social institutions develop, more savings lead to more
investments
Rostow?s model
? 4. Drive to maturity ? diversification to new areas, technological innovation,
producing wide range and less reliance to imports
? 5. high mass consumption ? mass consumption, consumer durables industry
flourishes, service sector becomes dominant
According to Rostow development requires substantial capital. Aid and FDI
given in stage 3 after reaching stage 2 leads to rapid growth.
Limitations of the model:
Based on western culture and not India
Too generalised
doesn?t detail preconditions for growth
Difficult to identify stages as they are merged
Just a growth model highlighting need for investment and doesn?t address issue
of development
FirstRanker.com - FirstRanker's Choice
International
entrepreneurship
opportunities
MODULE 6
ASSIGNEMENT
? Barriers to international trade
? Tariff barriers
? International v/s domestic entrepreneurship
International entrepreneurship
? Process of discovering and creatively exploiting opportunities that
exists outside one?s own country with the purpose of reaching
competitive advantage wherein importance of recognition,
discovery and exploitation of opportunities is recognised.
? It is a combination of innovative proactive and risk taking behaviour
that crosses national borders and is intended to create value in
organisations.
? This deals with general aspects of being global entrepreneur and
identifying global opportunities.
? Issues covered are importance of international entrepreneurship,
globalisation and the international environment, impact of culture,
venture, aspects of global business etc
Nature of international
entrepreneurship
?Integration of economies
?International competition
?Mutually acceptable currency
?Different national policies and government
intervention:
?Proactive or reactive based on perceived
opportunities/threats
Importance of int buss to the firm
? Superior technological know-how
? Larger size and economies of scale
? Lower input costs due to large size
? Ability to access raw materials overseas
? Ability to shift production overseas
? Economies of scale in shipment/distribution/promotion
? Brand image and goodwill advantage
? Access to low cost financing
? Information advantage
? Managerial expertise and experience
? Diversification of risks
Rostow?s model of stages of
economic development
? According to Rostow, 1960 countries pass through 5 stages of economic
development
? 1. Traditional society ? subsistence, barter, Agri and labour intensive,
limited capital, traditional methods of production
? 2. transitional stage ? specialisation leading to surplus for trading,
transport infrastructure develops, income/savings/investments increase,
entrepreneurship develops, external trade on primary articles
? 3. Take-off ? Industrialisation develops, works shift to industrial from Agri
sector, growth concentrated in a few regions and industries, investment
reaches 10% of GNP
new political and social institutions develop, more savings lead to more
investments
Rostow?s model
? 4. Drive to maturity ? diversification to new areas, technological innovation,
producing wide range and less reliance to imports
? 5. high mass consumption ? mass consumption, consumer durables industry
flourishes, service sector becomes dominant
According to Rostow development requires substantial capital. Aid and FDI
given in stage 3 after reaching stage 2 leads to rapid growth.
Limitations of the model:
Based on western culture and not India
Too generalised
doesn?t detail preconditions for growth
Difficult to identify stages as they are merged
Just a growth model highlighting need for investment and doesn?t address issue
of development
Entry modes to international
business
? Method of entry into an international market depends upon goals of
the entrepreneur and the company?s strengths and weaknesses
? Entry modes can be broadly categorized into 3 categories viz
- exporting as an entry strategy
- manufacturing strategies without FDI
- manufacturing strategies with FDI
FirstRanker.com - FirstRanker's Choice
International
entrepreneurship
opportunities
MODULE 6
ASSIGNEMENT
? Barriers to international trade
? Tariff barriers
? International v/s domestic entrepreneurship
International entrepreneurship
? Process of discovering and creatively exploiting opportunities that
exists outside one?s own country with the purpose of reaching
competitive advantage wherein importance of recognition,
discovery and exploitation of opportunities is recognised.
? It is a combination of innovative proactive and risk taking behaviour
that crosses national borders and is intended to create value in
organisations.
? This deals with general aspects of being global entrepreneur and
identifying global opportunities.
? Issues covered are importance of international entrepreneurship,
globalisation and the international environment, impact of culture,
venture, aspects of global business etc
Nature of international
entrepreneurship
?Integration of economies
?International competition
?Mutually acceptable currency
?Different national policies and government
intervention:
?Proactive or reactive based on perceived
opportunities/threats
Importance of int buss to the firm
? Superior technological know-how
? Larger size and economies of scale
? Lower input costs due to large size
? Ability to access raw materials overseas
? Ability to shift production overseas
? Economies of scale in shipment/distribution/promotion
? Brand image and goodwill advantage
? Access to low cost financing
? Information advantage
? Managerial expertise and experience
? Diversification of risks
Rostow?s model of stages of
economic development
? According to Rostow, 1960 countries pass through 5 stages of economic
development
? 1. Traditional society ? subsistence, barter, Agri and labour intensive,
limited capital, traditional methods of production
? 2. transitional stage ? specialisation leading to surplus for trading,
transport infrastructure develops, income/savings/investments increase,
entrepreneurship develops, external trade on primary articles
? 3. Take-off ? Industrialisation develops, works shift to industrial from Agri
sector, growth concentrated in a few regions and industries, investment
reaches 10% of GNP
new political and social institutions develop, more savings lead to more
investments
Rostow?s model
? 4. Drive to maturity ? diversification to new areas, technological innovation,
producing wide range and less reliance to imports
? 5. high mass consumption ? mass consumption, consumer durables industry
flourishes, service sector becomes dominant
According to Rostow development requires substantial capital. Aid and FDI
given in stage 3 after reaching stage 2 leads to rapid growth.
Limitations of the model:
Based on western culture and not India
Too generalised
doesn?t detail preconditions for growth
Difficult to identify stages as they are merged
Just a growth model highlighting need for investment and doesn?t address issue
of development
Entry modes to international
business
? Method of entry into an international market depends upon goals of
the entrepreneur and the company?s strengths and weaknesses
? Entry modes can be broadly categorized into 3 categories viz
- exporting as an entry strategy
- manufacturing strategies without FDI
- manufacturing strategies with FDI
Exporting
? Strategy to enter a foreign market with least commitment. Opportunities
there aren?t large enough to set up own manufacture. So it is centrally
manufactured to derive economies of scale and exported. Gives cost
and quality advantage. However, managers in far-off locations may not
be responsive to customer needs.
? Forms of exporting: includes indirect exporting and direct exporting.
? Indirect exporting is exporting through others; resorted to by companies
which have limited resources. Objective is to sell off excess production
overseas with minimum expenses and inconvenience. Such firms usually
withdraw when their home country sales improve. Cost and risk is low
but control is also low on how when and where the goods are sold.
Sometimes they are not even aware of their exports.
? There are 4 methods of indirect exporting.
? 1. Domestic purchase: some companies are contacted by foreign
companies who purchase at factory gate and exporting marketing and
distributing. Local subcontractors and OEMs fall in this category. Provides
limited knowledge and access to the company.
FirstRanker.com - FirstRanker's Choice
International
entrepreneurship
opportunities
MODULE 6
ASSIGNEMENT
? Barriers to international trade
? Tariff barriers
? International v/s domestic entrepreneurship
International entrepreneurship
? Process of discovering and creatively exploiting opportunities that
exists outside one?s own country with the purpose of reaching
competitive advantage wherein importance of recognition,
discovery and exploitation of opportunities is recognised.
? It is a combination of innovative proactive and risk taking behaviour
that crosses national borders and is intended to create value in
organisations.
? This deals with general aspects of being global entrepreneur and
identifying global opportunities.
? Issues covered are importance of international entrepreneurship,
globalisation and the international environment, impact of culture,
venture, aspects of global business etc
Nature of international
entrepreneurship
?Integration of economies
?International competition
?Mutually acceptable currency
?Different national policies and government
intervention:
?Proactive or reactive based on perceived
opportunities/threats
Importance of int buss to the firm
? Superior technological know-how
? Larger size and economies of scale
? Lower input costs due to large size
? Ability to access raw materials overseas
? Ability to shift production overseas
? Economies of scale in shipment/distribution/promotion
? Brand image and goodwill advantage
? Access to low cost financing
? Information advantage
? Managerial expertise and experience
? Diversification of risks
Rostow?s model of stages of
economic development
? According to Rostow, 1960 countries pass through 5 stages of economic
development
? 1. Traditional society ? subsistence, barter, Agri and labour intensive,
limited capital, traditional methods of production
? 2. transitional stage ? specialisation leading to surplus for trading,
transport infrastructure develops, income/savings/investments increase,
entrepreneurship develops, external trade on primary articles
? 3. Take-off ? Industrialisation develops, works shift to industrial from Agri
sector, growth concentrated in a few regions and industries, investment
reaches 10% of GNP
new political and social institutions develop, more savings lead to more
investments
Rostow?s model
? 4. Drive to maturity ? diversification to new areas, technological innovation,
producing wide range and less reliance to imports
? 5. high mass consumption ? mass consumption, consumer durables industry
flourishes, service sector becomes dominant
According to Rostow development requires substantial capital. Aid and FDI
given in stage 3 after reaching stage 2 leads to rapid growth.
Limitations of the model:
Based on western culture and not India
Too generalised
doesn?t detail preconditions for growth
Difficult to identify stages as they are merged
Just a growth model highlighting need for investment and doesn?t address issue
of development
Entry modes to international
business
? Method of entry into an international market depends upon goals of
the entrepreneur and the company?s strengths and weaknesses
? Entry modes can be broadly categorized into 3 categories viz
- exporting as an entry strategy
- manufacturing strategies without FDI
- manufacturing strategies with FDI
Exporting
? Strategy to enter a foreign market with least commitment. Opportunities
there aren?t large enough to set up own manufacture. So it is centrally
manufactured to derive economies of scale and exported. Gives cost
and quality advantage. However, managers in far-off locations may not
be responsive to customer needs.
? Forms of exporting: includes indirect exporting and direct exporting.
? Indirect exporting is exporting through others; resorted to by companies
which have limited resources. Objective is to sell off excess production
overseas with minimum expenses and inconvenience. Such firms usually
withdraw when their home country sales improve. Cost and risk is low
but control is also low on how when and where the goods are sold.
Sometimes they are not even aware of their exports.
? There are 4 methods of indirect exporting.
? 1. Domestic purchase: some companies are contacted by foreign
companies who purchase at factory gate and exporting marketing and
distributing. Local subcontractors and OEMs fall in this category. Provides
limited knowledge and access to the company.
Exporting
? Export houses: export houses or export marketing companies (EMC) are
specialist companies setup to act as export department to a host of
companies. They can facilitate small and medium companies to develop
their international trade. They also provide indirect access to market
information and contacts.
? Piggybacking: an established international distribution network of one
manufacturer is used to carry the products of another manufacturer. The
second manufacturer rides on the back of reputation, contacts and
administration of the carrier with no direct involvement. Carrier is either rpai a
commission, or he buys the products and distributes independently.
? Trading companies: trading companies from the colonial days have played
important role in indirect exports. African trading company of Unilever and
sogo shosyas of japan are classical examples.
FirstRanker.com - FirstRanker's Choice
International
entrepreneurship
opportunities
MODULE 6
ASSIGNEMENT
? Barriers to international trade
? Tariff barriers
? International v/s domestic entrepreneurship
International entrepreneurship
? Process of discovering and creatively exploiting opportunities that
exists outside one?s own country with the purpose of reaching
competitive advantage wherein importance of recognition,
discovery and exploitation of opportunities is recognised.
? It is a combination of innovative proactive and risk taking behaviour
that crosses national borders and is intended to create value in
organisations.
? This deals with general aspects of being global entrepreneur and
identifying global opportunities.
? Issues covered are importance of international entrepreneurship,
globalisation and the international environment, impact of culture,
venture, aspects of global business etc
Nature of international
entrepreneurship
?Integration of economies
?International competition
?Mutually acceptable currency
?Different national policies and government
intervention:
?Proactive or reactive based on perceived
opportunities/threats
Importance of int buss to the firm
? Superior technological know-how
? Larger size and economies of scale
? Lower input costs due to large size
? Ability to access raw materials overseas
? Ability to shift production overseas
? Economies of scale in shipment/distribution/promotion
? Brand image and goodwill advantage
? Access to low cost financing
? Information advantage
? Managerial expertise and experience
? Diversification of risks
Rostow?s model of stages of
economic development
? According to Rostow, 1960 countries pass through 5 stages of economic
development
? 1. Traditional society ? subsistence, barter, Agri and labour intensive,
limited capital, traditional methods of production
? 2. transitional stage ? specialisation leading to surplus for trading,
transport infrastructure develops, income/savings/investments increase,
entrepreneurship develops, external trade on primary articles
? 3. Take-off ? Industrialisation develops, works shift to industrial from Agri
sector, growth concentrated in a few regions and industries, investment
reaches 10% of GNP
new political and social institutions develop, more savings lead to more
investments
Rostow?s model
? 4. Drive to maturity ? diversification to new areas, technological innovation,
producing wide range and less reliance to imports
? 5. high mass consumption ? mass consumption, consumer durables industry
flourishes, service sector becomes dominant
According to Rostow development requires substantial capital. Aid and FDI
given in stage 3 after reaching stage 2 leads to rapid growth.
Limitations of the model:
Based on western culture and not India
Too generalised
doesn?t detail preconditions for growth
Difficult to identify stages as they are merged
Just a growth model highlighting need for investment and doesn?t address issue
of development
Entry modes to international
business
? Method of entry into an international market depends upon goals of
the entrepreneur and the company?s strengths and weaknesses
? Entry modes can be broadly categorized into 3 categories viz
- exporting as an entry strategy
- manufacturing strategies without FDI
- manufacturing strategies with FDI
Exporting
? Strategy to enter a foreign market with least commitment. Opportunities
there aren?t large enough to set up own manufacture. So it is centrally
manufactured to derive economies of scale and exported. Gives cost
and quality advantage. However, managers in far-off locations may not
be responsive to customer needs.
? Forms of exporting: includes indirect exporting and direct exporting.
? Indirect exporting is exporting through others; resorted to by companies
which have limited resources. Objective is to sell off excess production
overseas with minimum expenses and inconvenience. Such firms usually
withdraw when their home country sales improve. Cost and risk is low
but control is also low on how when and where the goods are sold.
Sometimes they are not even aware of their exports.
? There are 4 methods of indirect exporting.
? 1. Domestic purchase: some companies are contacted by foreign
companies who purchase at factory gate and exporting marketing and
distributing. Local subcontractors and OEMs fall in this category. Provides
limited knowledge and access to the company.
Exporting
? Export houses: export houses or export marketing companies (EMC) are
specialist companies setup to act as export department to a host of
companies. They can facilitate small and medium companies to develop
their international trade. They also provide indirect access to market
information and contacts.
? Piggybacking: an established international distribution network of one
manufacturer is used to carry the products of another manufacturer. The
second manufacturer rides on the back of reputation, contacts and
administration of the carrier with no direct involvement. Carrier is either rpai a
commission, or he buys the products and distributes independently.
? Trading companies: trading companies from the colonial days have played
important role in indirect exports. African trading company of Unilever and
sogo shosyas of japan are classical examples.
Exporting
? Direct exporting:
? for long term interest in international markets a
company needs to proactively export directly.
Requires commitment and resource allocation
into a number of supporting activities. It can be
a huge financial burden on the company and
hence timing becomes critical. So well planned
and gradual transition is important.
FirstRanker.com - FirstRanker's Choice
International
entrepreneurship
opportunities
MODULE 6
ASSIGNEMENT
? Barriers to international trade
? Tariff barriers
? International v/s domestic entrepreneurship
International entrepreneurship
? Process of discovering and creatively exploiting opportunities that
exists outside one?s own country with the purpose of reaching
competitive advantage wherein importance of recognition,
discovery and exploitation of opportunities is recognised.
? It is a combination of innovative proactive and risk taking behaviour
that crosses national borders and is intended to create value in
organisations.
? This deals with general aspects of being global entrepreneur and
identifying global opportunities.
? Issues covered are importance of international entrepreneurship,
globalisation and the international environment, impact of culture,
venture, aspects of global business etc
Nature of international
entrepreneurship
?Integration of economies
?International competition
?Mutually acceptable currency
?Different national policies and government
intervention:
?Proactive or reactive based on perceived
opportunities/threats
Importance of int buss to the firm
? Superior technological know-how
? Larger size and economies of scale
? Lower input costs due to large size
? Ability to access raw materials overseas
? Ability to shift production overseas
? Economies of scale in shipment/distribution/promotion
? Brand image and goodwill advantage
? Access to low cost financing
? Information advantage
? Managerial expertise and experience
? Diversification of risks
Rostow?s model of stages of
economic development
? According to Rostow, 1960 countries pass through 5 stages of economic
development
? 1. Traditional society ? subsistence, barter, Agri and labour intensive,
limited capital, traditional methods of production
? 2. transitional stage ? specialisation leading to surplus for trading,
transport infrastructure develops, income/savings/investments increase,
entrepreneurship develops, external trade on primary articles
? 3. Take-off ? Industrialisation develops, works shift to industrial from Agri
sector, growth concentrated in a few regions and industries, investment
reaches 10% of GNP
new political and social institutions develop, more savings lead to more
investments
Rostow?s model
? 4. Drive to maturity ? diversification to new areas, technological innovation,
producing wide range and less reliance to imports
? 5. high mass consumption ? mass consumption, consumer durables industry
flourishes, service sector becomes dominant
According to Rostow development requires substantial capital. Aid and FDI
given in stage 3 after reaching stage 2 leads to rapid growth.
Limitations of the model:
Based on western culture and not India
Too generalised
doesn?t detail preconditions for growth
Difficult to identify stages as they are merged
Just a growth model highlighting need for investment and doesn?t address issue
of development
Entry modes to international
business
? Method of entry into an international market depends upon goals of
the entrepreneur and the company?s strengths and weaknesses
? Entry modes can be broadly categorized into 3 categories viz
- exporting as an entry strategy
- manufacturing strategies without FDI
- manufacturing strategies with FDI
Exporting
? Strategy to enter a foreign market with least commitment. Opportunities
there aren?t large enough to set up own manufacture. So it is centrally
manufactured to derive economies of scale and exported. Gives cost
and quality advantage. However, managers in far-off locations may not
be responsive to customer needs.
? Forms of exporting: includes indirect exporting and direct exporting.
? Indirect exporting is exporting through others; resorted to by companies
which have limited resources. Objective is to sell off excess production
overseas with minimum expenses and inconvenience. Such firms usually
withdraw when their home country sales improve. Cost and risk is low
but control is also low on how when and where the goods are sold.
Sometimes they are not even aware of their exports.
? There are 4 methods of indirect exporting.
? 1. Domestic purchase: some companies are contacted by foreign
companies who purchase at factory gate and exporting marketing and
distributing. Local subcontractors and OEMs fall in this category. Provides
limited knowledge and access to the company.
Exporting
? Export houses: export houses or export marketing companies (EMC) are
specialist companies setup to act as export department to a host of
companies. They can facilitate small and medium companies to develop
their international trade. They also provide indirect access to market
information and contacts.
? Piggybacking: an established international distribution network of one
manufacturer is used to carry the products of another manufacturer. The
second manufacturer rides on the back of reputation, contacts and
administration of the carrier with no direct involvement. Carrier is either rpai a
commission, or he buys the products and distributes independently.
? Trading companies: trading companies from the colonial days have played
important role in indirect exports. African trading company of Unilever and
sogo shosyas of japan are classical examples.
Exporting
? Direct exporting:
? for long term interest in international markets a
company needs to proactively export directly.
Requires commitment and resource allocation
into a number of supporting activities. It can be
a huge financial burden on the company and
hence timing becomes critical. So well planned
and gradual transition is important.
Manufacturing without FDI
? Strategy involving manufacturing and service supply from overseas plants. As it involves
huge costs and risks manufacture can be without direct investment
? - licensing: under a licensing agreement a company (licensor) grants rights to intangible
property to another company (licensee) for a specified period in exchange, the licensee
pays a royalty to the licensor. Rights may be exclusive or non-exclusive
? Most common for the use of patents, trademarks, copyrights and unpatented technology.
Licensor does not risk tangible assets like plant and machinery while the licensee does not
have to develop intangible asset on their own.
? It permits a foreign company to use industrial property to manufacture and sell in their
country or in other countries
? Multinational companies commonly license their own subsidiaries in order to establish
legal ownership of industrial property., to facilitate repatriation of income or to satisfy
home and host governments. Many indian companies have licensing arrangement with
other countries eg Ranbaxy in indonesia and jordan
FirstRanker.com - FirstRanker's Choice
International
entrepreneurship
opportunities
MODULE 6
ASSIGNEMENT
? Barriers to international trade
? Tariff barriers
? International v/s domestic entrepreneurship
International entrepreneurship
? Process of discovering and creatively exploiting opportunities that
exists outside one?s own country with the purpose of reaching
competitive advantage wherein importance of recognition,
discovery and exploitation of opportunities is recognised.
? It is a combination of innovative proactive and risk taking behaviour
that crosses national borders and is intended to create value in
organisations.
? This deals with general aspects of being global entrepreneur and
identifying global opportunities.
? Issues covered are importance of international entrepreneurship,
globalisation and the international environment, impact of culture,
venture, aspects of global business etc
Nature of international
entrepreneurship
?Integration of economies
?International competition
?Mutually acceptable currency
?Different national policies and government
intervention:
?Proactive or reactive based on perceived
opportunities/threats
Importance of int buss to the firm
? Superior technological know-how
? Larger size and economies of scale
? Lower input costs due to large size
? Ability to access raw materials overseas
? Ability to shift production overseas
? Economies of scale in shipment/distribution/promotion
? Brand image and goodwill advantage
? Access to low cost financing
? Information advantage
? Managerial expertise and experience
? Diversification of risks
Rostow?s model of stages of
economic development
? According to Rostow, 1960 countries pass through 5 stages of economic
development
? 1. Traditional society ? subsistence, barter, Agri and labour intensive,
limited capital, traditional methods of production
? 2. transitional stage ? specialisation leading to surplus for trading,
transport infrastructure develops, income/savings/investments increase,
entrepreneurship develops, external trade on primary articles
? 3. Take-off ? Industrialisation develops, works shift to industrial from Agri
sector, growth concentrated in a few regions and industries, investment
reaches 10% of GNP
new political and social institutions develop, more savings lead to more
investments
Rostow?s model
? 4. Drive to maturity ? diversification to new areas, technological innovation,
producing wide range and less reliance to imports
? 5. high mass consumption ? mass consumption, consumer durables industry
flourishes, service sector becomes dominant
According to Rostow development requires substantial capital. Aid and FDI
given in stage 3 after reaching stage 2 leads to rapid growth.
Limitations of the model:
Based on western culture and not India
Too generalised
doesn?t detail preconditions for growth
Difficult to identify stages as they are merged
Just a growth model highlighting need for investment and doesn?t address issue
of development
Entry modes to international
business
? Method of entry into an international market depends upon goals of
the entrepreneur and the company?s strengths and weaknesses
? Entry modes can be broadly categorized into 3 categories viz
- exporting as an entry strategy
- manufacturing strategies without FDI
- manufacturing strategies with FDI
Exporting
? Strategy to enter a foreign market with least commitment. Opportunities
there aren?t large enough to set up own manufacture. So it is centrally
manufactured to derive economies of scale and exported. Gives cost
and quality advantage. However, managers in far-off locations may not
be responsive to customer needs.
? Forms of exporting: includes indirect exporting and direct exporting.
? Indirect exporting is exporting through others; resorted to by companies
which have limited resources. Objective is to sell off excess production
overseas with minimum expenses and inconvenience. Such firms usually
withdraw when their home country sales improve. Cost and risk is low
but control is also low on how when and where the goods are sold.
Sometimes they are not even aware of their exports.
? There are 4 methods of indirect exporting.
? 1. Domestic purchase: some companies are contacted by foreign
companies who purchase at factory gate and exporting marketing and
distributing. Local subcontractors and OEMs fall in this category. Provides
limited knowledge and access to the company.
Exporting
? Export houses: export houses or export marketing companies (EMC) are
specialist companies setup to act as export department to a host of
companies. They can facilitate small and medium companies to develop
their international trade. They also provide indirect access to market
information and contacts.
? Piggybacking: an established international distribution network of one
manufacturer is used to carry the products of another manufacturer. The
second manufacturer rides on the back of reputation, contacts and
administration of the carrier with no direct involvement. Carrier is either rpai a
commission, or he buys the products and distributes independently.
? Trading companies: trading companies from the colonial days have played
important role in indirect exports. African trading company of Unilever and
sogo shosyas of japan are classical examples.
Exporting
? Direct exporting:
? for long term interest in international markets a
company needs to proactively export directly.
Requires commitment and resource allocation
into a number of supporting activities. It can be
a huge financial burden on the company and
hence timing becomes critical. So well planned
and gradual transition is important.
Manufacturing without FDI
? Strategy involving manufacturing and service supply from overseas plants. As it involves
huge costs and risks manufacture can be without direct investment
? - licensing: under a licensing agreement a company (licensor) grants rights to intangible
property to another company (licensee) for a specified period in exchange, the licensee
pays a royalty to the licensor. Rights may be exclusive or non-exclusive
? Most common for the use of patents, trademarks, copyrights and unpatented technology.
Licensor does not risk tangible assets like plant and machinery while the licensee does not
have to develop intangible asset on their own.
? It permits a foreign company to use industrial property to manufacture and sell in their
country or in other countries
? Multinational companies commonly license their own subsidiaries in order to establish
legal ownership of industrial property., to facilitate repatriation of income or to satisfy
home and host governments. Many indian companies have licensing arrangement with
other countries eg Ranbaxy in indonesia and jordan
Manufacturing without FDI
? Franchising:
? Means of marketing goods and services in which the franchiser
grants the legal rights to use branding trademarks and products
and method of operation is transferred to third party-franchisee
- in return for a fee. The franchiser provides assistance training
and help with sourcing and exercises significant control over
the franchisee?s method of operation.
? Franchisee invests in capital but is considered less risky.
Franchiser has the advantage of greater market coverage
withoput having to invest in capital
? Chan identifies 2 types of franchise. Viz product/trade franchise
and business format franchise.
FirstRanker.com - FirstRanker's Choice
International
entrepreneurship
opportunities
MODULE 6
ASSIGNEMENT
? Barriers to international trade
? Tariff barriers
? International v/s domestic entrepreneurship
International entrepreneurship
? Process of discovering and creatively exploiting opportunities that
exists outside one?s own country with the purpose of reaching
competitive advantage wherein importance of recognition,
discovery and exploitation of opportunities is recognised.
? It is a combination of innovative proactive and risk taking behaviour
that crosses national borders and is intended to create value in
organisations.
? This deals with general aspects of being global entrepreneur and
identifying global opportunities.
? Issues covered are importance of international entrepreneurship,
globalisation and the international environment, impact of culture,
venture, aspects of global business etc
Nature of international
entrepreneurship
?Integration of economies
?International competition
?Mutually acceptable currency
?Different national policies and government
intervention:
?Proactive or reactive based on perceived
opportunities/threats
Importance of int buss to the firm
? Superior technological know-how
? Larger size and economies of scale
? Lower input costs due to large size
? Ability to access raw materials overseas
? Ability to shift production overseas
? Economies of scale in shipment/distribution/promotion
? Brand image and goodwill advantage
? Access to low cost financing
? Information advantage
? Managerial expertise and experience
? Diversification of risks
Rostow?s model of stages of
economic development
? According to Rostow, 1960 countries pass through 5 stages of economic
development
? 1. Traditional society ? subsistence, barter, Agri and labour intensive,
limited capital, traditional methods of production
? 2. transitional stage ? specialisation leading to surplus for trading,
transport infrastructure develops, income/savings/investments increase,
entrepreneurship develops, external trade on primary articles
? 3. Take-off ? Industrialisation develops, works shift to industrial from Agri
sector, growth concentrated in a few regions and industries, investment
reaches 10% of GNP
new political and social institutions develop, more savings lead to more
investments
Rostow?s model
? 4. Drive to maturity ? diversification to new areas, technological innovation,
producing wide range and less reliance to imports
? 5. high mass consumption ? mass consumption, consumer durables industry
flourishes, service sector becomes dominant
According to Rostow development requires substantial capital. Aid and FDI
given in stage 3 after reaching stage 2 leads to rapid growth.
Limitations of the model:
Based on western culture and not India
Too generalised
doesn?t detail preconditions for growth
Difficult to identify stages as they are merged
Just a growth model highlighting need for investment and doesn?t address issue
of development
Entry modes to international
business
? Method of entry into an international market depends upon goals of
the entrepreneur and the company?s strengths and weaknesses
? Entry modes can be broadly categorized into 3 categories viz
- exporting as an entry strategy
- manufacturing strategies without FDI
- manufacturing strategies with FDI
Exporting
? Strategy to enter a foreign market with least commitment. Opportunities
there aren?t large enough to set up own manufacture. So it is centrally
manufactured to derive economies of scale and exported. Gives cost
and quality advantage. However, managers in far-off locations may not
be responsive to customer needs.
? Forms of exporting: includes indirect exporting and direct exporting.
? Indirect exporting is exporting through others; resorted to by companies
which have limited resources. Objective is to sell off excess production
overseas with minimum expenses and inconvenience. Such firms usually
withdraw when their home country sales improve. Cost and risk is low
but control is also low on how when and where the goods are sold.
Sometimes they are not even aware of their exports.
? There are 4 methods of indirect exporting.
? 1. Domestic purchase: some companies are contacted by foreign
companies who purchase at factory gate and exporting marketing and
distributing. Local subcontractors and OEMs fall in this category. Provides
limited knowledge and access to the company.
Exporting
? Export houses: export houses or export marketing companies (EMC) are
specialist companies setup to act as export department to a host of
companies. They can facilitate small and medium companies to develop
their international trade. They also provide indirect access to market
information and contacts.
? Piggybacking: an established international distribution network of one
manufacturer is used to carry the products of another manufacturer. The
second manufacturer rides on the back of reputation, contacts and
administration of the carrier with no direct involvement. Carrier is either rpai a
commission, or he buys the products and distributes independently.
? Trading companies: trading companies from the colonial days have played
important role in indirect exports. African trading company of Unilever and
sogo shosyas of japan are classical examples.
Exporting
? Direct exporting:
? for long term interest in international markets a
company needs to proactively export directly.
Requires commitment and resource allocation
into a number of supporting activities. It can be
a huge financial burden on the company and
hence timing becomes critical. So well planned
and gradual transition is important.
Manufacturing without FDI
? Strategy involving manufacturing and service supply from overseas plants. As it involves
huge costs and risks manufacture can be without direct investment
? - licensing: under a licensing agreement a company (licensor) grants rights to intangible
property to another company (licensee) for a specified period in exchange, the licensee
pays a royalty to the licensor. Rights may be exclusive or non-exclusive
? Most common for the use of patents, trademarks, copyrights and unpatented technology.
Licensor does not risk tangible assets like plant and machinery while the licensee does not
have to develop intangible asset on their own.
? It permits a foreign company to use industrial property to manufacture and sell in their
country or in other countries
? Multinational companies commonly license their own subsidiaries in order to establish
legal ownership of industrial property., to facilitate repatriation of income or to satisfy
home and host governments. Many indian companies have licensing arrangement with
other countries eg Ranbaxy in indonesia and jordan
Manufacturing without FDI
? Franchising:
? Means of marketing goods and services in which the franchiser
grants the legal rights to use branding trademarks and products
and method of operation is transferred to third party-franchisee
- in return for a fee. The franchiser provides assistance training
and help with sourcing and exercises significant control over
the franchisee?s method of operation.
? Franchisee invests in capital but is considered less risky.
Franchiser has the advantage of greater market coverage
withoput having to invest in capital
? Chan identifies 2 types of franchise. Viz product/trade franchise
and business format franchise.
? Product/trade franchise is like car dealership, petrol
service station, soft drinks bottlers where the
franchisees are granted right to distribute a
manufacturer?s product in a specified territory.
? Business format franchise includes many types of
businesses like restaurants, convenience stores and
hotels, this includes licensing of trade marks, and the
system of operating the business and appearance of
the location
? One has to decide to what extent the franchise
format must take into account local demands and
expectations. McDonad, Pizzahut and KFC have
catered to local tastes in different countres.
FirstRanker.com - FirstRanker's Choice
International
entrepreneurship
opportunities
MODULE 6
ASSIGNEMENT
? Barriers to international trade
? Tariff barriers
? International v/s domestic entrepreneurship
International entrepreneurship
? Process of discovering and creatively exploiting opportunities that
exists outside one?s own country with the purpose of reaching
competitive advantage wherein importance of recognition,
discovery and exploitation of opportunities is recognised.
? It is a combination of innovative proactive and risk taking behaviour
that crosses national borders and is intended to create value in
organisations.
? This deals with general aspects of being global entrepreneur and
identifying global opportunities.
? Issues covered are importance of international entrepreneurship,
globalisation and the international environment, impact of culture,
venture, aspects of global business etc
Nature of international
entrepreneurship
?Integration of economies
?International competition
?Mutually acceptable currency
?Different national policies and government
intervention:
?Proactive or reactive based on perceived
opportunities/threats
Importance of int buss to the firm
? Superior technological know-how
? Larger size and economies of scale
? Lower input costs due to large size
? Ability to access raw materials overseas
? Ability to shift production overseas
? Economies of scale in shipment/distribution/promotion
? Brand image and goodwill advantage
? Access to low cost financing
? Information advantage
? Managerial expertise and experience
? Diversification of risks
Rostow?s model of stages of
economic development
? According to Rostow, 1960 countries pass through 5 stages of economic
development
? 1. Traditional society ? subsistence, barter, Agri and labour intensive,
limited capital, traditional methods of production
? 2. transitional stage ? specialisation leading to surplus for trading,
transport infrastructure develops, income/savings/investments increase,
entrepreneurship develops, external trade on primary articles
? 3. Take-off ? Industrialisation develops, works shift to industrial from Agri
sector, growth concentrated in a few regions and industries, investment
reaches 10% of GNP
new political and social institutions develop, more savings lead to more
investments
Rostow?s model
? 4. Drive to maturity ? diversification to new areas, technological innovation,
producing wide range and less reliance to imports
? 5. high mass consumption ? mass consumption, consumer durables industry
flourishes, service sector becomes dominant
According to Rostow development requires substantial capital. Aid and FDI
given in stage 3 after reaching stage 2 leads to rapid growth.
Limitations of the model:
Based on western culture and not India
Too generalised
doesn?t detail preconditions for growth
Difficult to identify stages as they are merged
Just a growth model highlighting need for investment and doesn?t address issue
of development
Entry modes to international
business
? Method of entry into an international market depends upon goals of
the entrepreneur and the company?s strengths and weaknesses
? Entry modes can be broadly categorized into 3 categories viz
- exporting as an entry strategy
- manufacturing strategies without FDI
- manufacturing strategies with FDI
Exporting
? Strategy to enter a foreign market with least commitment. Opportunities
there aren?t large enough to set up own manufacture. So it is centrally
manufactured to derive economies of scale and exported. Gives cost
and quality advantage. However, managers in far-off locations may not
be responsive to customer needs.
? Forms of exporting: includes indirect exporting and direct exporting.
? Indirect exporting is exporting through others; resorted to by companies
which have limited resources. Objective is to sell off excess production
overseas with minimum expenses and inconvenience. Such firms usually
withdraw when their home country sales improve. Cost and risk is low
but control is also low on how when and where the goods are sold.
Sometimes they are not even aware of their exports.
? There are 4 methods of indirect exporting.
? 1. Domestic purchase: some companies are contacted by foreign
companies who purchase at factory gate and exporting marketing and
distributing. Local subcontractors and OEMs fall in this category. Provides
limited knowledge and access to the company.
Exporting
? Export houses: export houses or export marketing companies (EMC) are
specialist companies setup to act as export department to a host of
companies. They can facilitate small and medium companies to develop
their international trade. They also provide indirect access to market
information and contacts.
? Piggybacking: an established international distribution network of one
manufacturer is used to carry the products of another manufacturer. The
second manufacturer rides on the back of reputation, contacts and
administration of the carrier with no direct involvement. Carrier is either rpai a
commission, or he buys the products and distributes independently.
? Trading companies: trading companies from the colonial days have played
important role in indirect exports. African trading company of Unilever and
sogo shosyas of japan are classical examples.
Exporting
? Direct exporting:
? for long term interest in international markets a
company needs to proactively export directly.
Requires commitment and resource allocation
into a number of supporting activities. It can be
a huge financial burden on the company and
hence timing becomes critical. So well planned
and gradual transition is important.
Manufacturing without FDI
? Strategy involving manufacturing and service supply from overseas plants. As it involves
huge costs and risks manufacture can be without direct investment
? - licensing: under a licensing agreement a company (licensor) grants rights to intangible
property to another company (licensee) for a specified period in exchange, the licensee
pays a royalty to the licensor. Rights may be exclusive or non-exclusive
? Most common for the use of patents, trademarks, copyrights and unpatented technology.
Licensor does not risk tangible assets like plant and machinery while the licensee does not
have to develop intangible asset on their own.
? It permits a foreign company to use industrial property to manufacture and sell in their
country or in other countries
? Multinational companies commonly license their own subsidiaries in order to establish
legal ownership of industrial property., to facilitate repatriation of income or to satisfy
home and host governments. Many indian companies have licensing arrangement with
other countries eg Ranbaxy in indonesia and jordan
Manufacturing without FDI
? Franchising:
? Means of marketing goods and services in which the franchiser
grants the legal rights to use branding trademarks and products
and method of operation is transferred to third party-franchisee
- in return for a fee. The franchiser provides assistance training
and help with sourcing and exercises significant control over
the franchisee?s method of operation.
? Franchisee invests in capital but is considered less risky.
Franchiser has the advantage of greater market coverage
withoput having to invest in capital
? Chan identifies 2 types of franchise. Viz product/trade franchise
and business format franchise.
? Product/trade franchise is like car dealership, petrol
service station, soft drinks bottlers where the
franchisees are granted right to distribute a
manufacturer?s product in a specified territory.
? Business format franchise includes many types of
businesses like restaurants, convenience stores and
hotels, this includes licensing of trade marks, and the
system of operating the business and appearance of
the location
? One has to decide to what extent the franchise
format must take into account local demands and
expectations. McDonad, Pizzahut and KFC have
catered to local tastes in different countres.
? Contract manufacturing:
? Firm engaged in international business may engage local
manufacturers to produce the product for them under
contract. Nike and Gap use contract manufacturers in low
cost economies advantage is that the company can
concentrate on sales and marketing. As investment is kept at
a minimum withdrawal becomes easy.
? It helps to overcome trade barriers
? Sometimes it is the only way where local govts insist on local
employment
? During political uncertainty it is better not to invest on
production capacity.
FirstRanker.com - FirstRanker's Choice
International
entrepreneurship
opportunities
MODULE 6
ASSIGNEMENT
? Barriers to international trade
? Tariff barriers
? International v/s domestic entrepreneurship
International entrepreneurship
? Process of discovering and creatively exploiting opportunities that
exists outside one?s own country with the purpose of reaching
competitive advantage wherein importance of recognition,
discovery and exploitation of opportunities is recognised.
? It is a combination of innovative proactive and risk taking behaviour
that crosses national borders and is intended to create value in
organisations.
? This deals with general aspects of being global entrepreneur and
identifying global opportunities.
? Issues covered are importance of international entrepreneurship,
globalisation and the international environment, impact of culture,
venture, aspects of global business etc
Nature of international
entrepreneurship
?Integration of economies
?International competition
?Mutually acceptable currency
?Different national policies and government
intervention:
?Proactive or reactive based on perceived
opportunities/threats
Importance of int buss to the firm
? Superior technological know-how
? Larger size and economies of scale
? Lower input costs due to large size
? Ability to access raw materials overseas
? Ability to shift production overseas
? Economies of scale in shipment/distribution/promotion
? Brand image and goodwill advantage
? Access to low cost financing
? Information advantage
? Managerial expertise and experience
? Diversification of risks
Rostow?s model of stages of
economic development
? According to Rostow, 1960 countries pass through 5 stages of economic
development
? 1. Traditional society ? subsistence, barter, Agri and labour intensive,
limited capital, traditional methods of production
? 2. transitional stage ? specialisation leading to surplus for trading,
transport infrastructure develops, income/savings/investments increase,
entrepreneurship develops, external trade on primary articles
? 3. Take-off ? Industrialisation develops, works shift to industrial from Agri
sector, growth concentrated in a few regions and industries, investment
reaches 10% of GNP
new political and social institutions develop, more savings lead to more
investments
Rostow?s model
? 4. Drive to maturity ? diversification to new areas, technological innovation,
producing wide range and less reliance to imports
? 5. high mass consumption ? mass consumption, consumer durables industry
flourishes, service sector becomes dominant
According to Rostow development requires substantial capital. Aid and FDI
given in stage 3 after reaching stage 2 leads to rapid growth.
Limitations of the model:
Based on western culture and not India
Too generalised
doesn?t detail preconditions for growth
Difficult to identify stages as they are merged
Just a growth model highlighting need for investment and doesn?t address issue
of development
Entry modes to international
business
? Method of entry into an international market depends upon goals of
the entrepreneur and the company?s strengths and weaknesses
? Entry modes can be broadly categorized into 3 categories viz
- exporting as an entry strategy
- manufacturing strategies without FDI
- manufacturing strategies with FDI
Exporting
? Strategy to enter a foreign market with least commitment. Opportunities
there aren?t large enough to set up own manufacture. So it is centrally
manufactured to derive economies of scale and exported. Gives cost
and quality advantage. However, managers in far-off locations may not
be responsive to customer needs.
? Forms of exporting: includes indirect exporting and direct exporting.
? Indirect exporting is exporting through others; resorted to by companies
which have limited resources. Objective is to sell off excess production
overseas with minimum expenses and inconvenience. Such firms usually
withdraw when their home country sales improve. Cost and risk is low
but control is also low on how when and where the goods are sold.
Sometimes they are not even aware of their exports.
? There are 4 methods of indirect exporting.
? 1. Domestic purchase: some companies are contacted by foreign
companies who purchase at factory gate and exporting marketing and
distributing. Local subcontractors and OEMs fall in this category. Provides
limited knowledge and access to the company.
Exporting
? Export houses: export houses or export marketing companies (EMC) are
specialist companies setup to act as export department to a host of
companies. They can facilitate small and medium companies to develop
their international trade. They also provide indirect access to market
information and contacts.
? Piggybacking: an established international distribution network of one
manufacturer is used to carry the products of another manufacturer. The
second manufacturer rides on the back of reputation, contacts and
administration of the carrier with no direct involvement. Carrier is either rpai a
commission, or he buys the products and distributes independently.
? Trading companies: trading companies from the colonial days have played
important role in indirect exports. African trading company of Unilever and
sogo shosyas of japan are classical examples.
Exporting
? Direct exporting:
? for long term interest in international markets a
company needs to proactively export directly.
Requires commitment and resource allocation
into a number of supporting activities. It can be
a huge financial burden on the company and
hence timing becomes critical. So well planned
and gradual transition is important.
Manufacturing without FDI
? Strategy involving manufacturing and service supply from overseas plants. As it involves
huge costs and risks manufacture can be without direct investment
? - licensing: under a licensing agreement a company (licensor) grants rights to intangible
property to another company (licensee) for a specified period in exchange, the licensee
pays a royalty to the licensor. Rights may be exclusive or non-exclusive
? Most common for the use of patents, trademarks, copyrights and unpatented technology.
Licensor does not risk tangible assets like plant and machinery while the licensee does not
have to develop intangible asset on their own.
? It permits a foreign company to use industrial property to manufacture and sell in their
country or in other countries
? Multinational companies commonly license their own subsidiaries in order to establish
legal ownership of industrial property., to facilitate repatriation of income or to satisfy
home and host governments. Many indian companies have licensing arrangement with
other countries eg Ranbaxy in indonesia and jordan
Manufacturing without FDI
? Franchising:
? Means of marketing goods and services in which the franchiser
grants the legal rights to use branding trademarks and products
and method of operation is transferred to third party-franchisee
- in return for a fee. The franchiser provides assistance training
and help with sourcing and exercises significant control over
the franchisee?s method of operation.
? Franchisee invests in capital but is considered less risky.
Franchiser has the advantage of greater market coverage
withoput having to invest in capital
? Chan identifies 2 types of franchise. Viz product/trade franchise
and business format franchise.
? Product/trade franchise is like car dealership, petrol
service station, soft drinks bottlers where the
franchisees are granted right to distribute a
manufacturer?s product in a specified territory.
? Business format franchise includes many types of
businesses like restaurants, convenience stores and
hotels, this includes licensing of trade marks, and the
system of operating the business and appearance of
the location
? One has to decide to what extent the franchise
format must take into account local demands and
expectations. McDonad, Pizzahut and KFC have
catered to local tastes in different countres.
? Contract manufacturing:
? Firm engaged in international business may engage local
manufacturers to produce the product for them under
contract. Nike and Gap use contract manufacturers in low
cost economies advantage is that the company can
concentrate on sales and marketing. As investment is kept at
a minimum withdrawal becomes easy.
? It helps to overcome trade barriers
? Sometimes it is the only way where local govts insist on local
employment
? During political uncertainty it is better not to invest on
production capacity.
?Turnkey projects:
?Turnkey projects are common in international trade
in supply, erection and commissioning of plants like
oil refineries, steel plants, cement and fertilizer
plants,; construction projects as well as franchising
agreements.
?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 remuneration . Form of remuneration
includes fixed price , or on a cost plus basis.
FirstRanker.com - FirstRanker's Choice
International
entrepreneurship
opportunities
MODULE 6
ASSIGNEMENT
? Barriers to international trade
? Tariff barriers
? International v/s domestic entrepreneurship
International entrepreneurship
? Process of discovering and creatively exploiting opportunities that
exists outside one?s own country with the purpose of reaching
competitive advantage wherein importance of recognition,
discovery and exploitation of opportunities is recognised.
? It is a combination of innovative proactive and risk taking behaviour
that crosses national borders and is intended to create value in
organisations.
? This deals with general aspects of being global entrepreneur and
identifying global opportunities.
? Issues covered are importance of international entrepreneurship,
globalisation and the international environment, impact of culture,
venture, aspects of global business etc
Nature of international
entrepreneurship
?Integration of economies
?International competition
?Mutually acceptable currency
?Different national policies and government
intervention:
?Proactive or reactive based on perceived
opportunities/threats
Importance of int buss to the firm
? Superior technological know-how
? Larger size and economies of scale
? Lower input costs due to large size
? Ability to access raw materials overseas
? Ability to shift production overseas
? Economies of scale in shipment/distribution/promotion
? Brand image and goodwill advantage
? Access to low cost financing
? Information advantage
? Managerial expertise and experience
? Diversification of risks
Rostow?s model of stages of
economic development
? According to Rostow, 1960 countries pass through 5 stages of economic
development
? 1. Traditional society ? subsistence, barter, Agri and labour intensive,
limited capital, traditional methods of production
? 2. transitional stage ? specialisation leading to surplus for trading,
transport infrastructure develops, income/savings/investments increase,
entrepreneurship develops, external trade on primary articles
? 3. Take-off ? Industrialisation develops, works shift to industrial from Agri
sector, growth concentrated in a few regions and industries, investment
reaches 10% of GNP
new political and social institutions develop, more savings lead to more
investments
Rostow?s model
? 4. Drive to maturity ? diversification to new areas, technological innovation,
producing wide range and less reliance to imports
? 5. high mass consumption ? mass consumption, consumer durables industry
flourishes, service sector becomes dominant
According to Rostow development requires substantial capital. Aid and FDI
given in stage 3 after reaching stage 2 leads to rapid growth.
Limitations of the model:
Based on western culture and not India
Too generalised
doesn?t detail preconditions for growth
Difficult to identify stages as they are merged
Just a growth model highlighting need for investment and doesn?t address issue
of development
Entry modes to international
business
? Method of entry into an international market depends upon goals of
the entrepreneur and the company?s strengths and weaknesses
? Entry modes can be broadly categorized into 3 categories viz
- exporting as an entry strategy
- manufacturing strategies without FDI
- manufacturing strategies with FDI
Exporting
? Strategy to enter a foreign market with least commitment. Opportunities
there aren?t large enough to set up own manufacture. So it is centrally
manufactured to derive economies of scale and exported. Gives cost
and quality advantage. However, managers in far-off locations may not
be responsive to customer needs.
? Forms of exporting: includes indirect exporting and direct exporting.
? Indirect exporting is exporting through others; resorted to by companies
which have limited resources. Objective is to sell off excess production
overseas with minimum expenses and inconvenience. Such firms usually
withdraw when their home country sales improve. Cost and risk is low
but control is also low on how when and where the goods are sold.
Sometimes they are not even aware of their exports.
? There are 4 methods of indirect exporting.
? 1. Domestic purchase: some companies are contacted by foreign
companies who purchase at factory gate and exporting marketing and
distributing. Local subcontractors and OEMs fall in this category. Provides
limited knowledge and access to the company.
Exporting
? Export houses: export houses or export marketing companies (EMC) are
specialist companies setup to act as export department to a host of
companies. They can facilitate small and medium companies to develop
their international trade. They also provide indirect access to market
information and contacts.
? Piggybacking: an established international distribution network of one
manufacturer is used to carry the products of another manufacturer. The
second manufacturer rides on the back of reputation, contacts and
administration of the carrier with no direct involvement. Carrier is either rpai a
commission, or he buys the products and distributes independently.
? Trading companies: trading companies from the colonial days have played
important role in indirect exports. African trading company of Unilever and
sogo shosyas of japan are classical examples.
Exporting
? Direct exporting:
? for long term interest in international markets a
company needs to proactively export directly.
Requires commitment and resource allocation
into a number of supporting activities. It can be
a huge financial burden on the company and
hence timing becomes critical. So well planned
and gradual transition is important.
Manufacturing without FDI
? Strategy involving manufacturing and service supply from overseas plants. As it involves
huge costs and risks manufacture can be without direct investment
? - licensing: under a licensing agreement a company (licensor) grants rights to intangible
property to another company (licensee) for a specified period in exchange, the licensee
pays a royalty to the licensor. Rights may be exclusive or non-exclusive
? Most common for the use of patents, trademarks, copyrights and unpatented technology.
Licensor does not risk tangible assets like plant and machinery while the licensee does not
have to develop intangible asset on their own.
? It permits a foreign company to use industrial property to manufacture and sell in their
country or in other countries
? Multinational companies commonly license their own subsidiaries in order to establish
legal ownership of industrial property., to facilitate repatriation of income or to satisfy
home and host governments. Many indian companies have licensing arrangement with
other countries eg Ranbaxy in indonesia and jordan
Manufacturing without FDI
? Franchising:
? Means of marketing goods and services in which the franchiser
grants the legal rights to use branding trademarks and products
and method of operation is transferred to third party-franchisee
- in return for a fee. The franchiser provides assistance training
and help with sourcing and exercises significant control over
the franchisee?s method of operation.
? Franchisee invests in capital but is considered less risky.
Franchiser has the advantage of greater market coverage
withoput having to invest in capital
? Chan identifies 2 types of franchise. Viz product/trade franchise
and business format franchise.
? Product/trade franchise is like car dealership, petrol
service station, soft drinks bottlers where the
franchisees are granted right to distribute a
manufacturer?s product in a specified territory.
? Business format franchise includes many types of
businesses like restaurants, convenience stores and
hotels, this includes licensing of trade marks, and the
system of operating the business and appearance of
the location
? One has to decide to what extent the franchise
format must take into account local demands and
expectations. McDonad, Pizzahut and KFC have
catered to local tastes in different countres.
? Contract manufacturing:
? Firm engaged in international business may engage local
manufacturers to produce the product for them under
contract. Nike and Gap use contract manufacturers in low
cost economies advantage is that the company can
concentrate on sales and marketing. As investment is kept at
a minimum withdrawal becomes easy.
? It helps to overcome trade barriers
? Sometimes it is the only way where local govts insist on local
employment
? During political uncertainty it is better not to invest on
production capacity.
?Turnkey projects:
?Turnkey projects are common in international trade
in supply, erection and commissioning of plants like
oil refineries, steel plants, cement and fertilizer
plants,; construction projects as well as franchising
agreements.
?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 remuneration . Form of remuneration
includes fixed price , or on a cost plus basis.
?Management contracts:
?Companies with low level technology and
management expertise may go for technical and
management contract with a foreign company for a
specified period for a monetary consideration.
?Compensation can be in the form of a flat fee,
percentage of sales or performance bonus.
?Some Indian companies like Tata Tea, AV, Harrison
Malayalam have contract to run estates in SriLanka.
FirstRanker.com - FirstRanker's Choice
International
entrepreneurship
opportunities
MODULE 6
ASSIGNEMENT
? Barriers to international trade
? Tariff barriers
? International v/s domestic entrepreneurship
International entrepreneurship
? Process of discovering and creatively exploiting opportunities that
exists outside one?s own country with the purpose of reaching
competitive advantage wherein importance of recognition,
discovery and exploitation of opportunities is recognised.
? It is a combination of innovative proactive and risk taking behaviour
that crosses national borders and is intended to create value in
organisations.
? This deals with general aspects of being global entrepreneur and
identifying global opportunities.
? Issues covered are importance of international entrepreneurship,
globalisation and the international environment, impact of culture,
venture, aspects of global business etc
Nature of international
entrepreneurship
?Integration of economies
?International competition
?Mutually acceptable currency
?Different national policies and government
intervention:
?Proactive or reactive based on perceived
opportunities/threats
Importance of int buss to the firm
? Superior technological know-how
? Larger size and economies of scale
? Lower input costs due to large size
? Ability to access raw materials overseas
? Ability to shift production overseas
? Economies of scale in shipment/distribution/promotion
? Brand image and goodwill advantage
? Access to low cost financing
? Information advantage
? Managerial expertise and experience
? Diversification of risks
Rostow?s model of stages of
economic development
? According to Rostow, 1960 countries pass through 5 stages of economic
development
? 1. Traditional society ? subsistence, barter, Agri and labour intensive,
limited capital, traditional methods of production
? 2. transitional stage ? specialisation leading to surplus for trading,
transport infrastructure develops, income/savings/investments increase,
entrepreneurship develops, external trade on primary articles
? 3. Take-off ? Industrialisation develops, works shift to industrial from Agri
sector, growth concentrated in a few regions and industries, investment
reaches 10% of GNP
new political and social institutions develop, more savings lead to more
investments
Rostow?s model
? 4. Drive to maturity ? diversification to new areas, technological innovation,
producing wide range and less reliance to imports
? 5. high mass consumption ? mass consumption, consumer durables industry
flourishes, service sector becomes dominant
According to Rostow development requires substantial capital. Aid and FDI
given in stage 3 after reaching stage 2 leads to rapid growth.
Limitations of the model:
Based on western culture and not India
Too generalised
doesn?t detail preconditions for growth
Difficult to identify stages as they are merged
Just a growth model highlighting need for investment and doesn?t address issue
of development
Entry modes to international
business
? Method of entry into an international market depends upon goals of
the entrepreneur and the company?s strengths and weaknesses
? Entry modes can be broadly categorized into 3 categories viz
- exporting as an entry strategy
- manufacturing strategies without FDI
- manufacturing strategies with FDI
Exporting
? Strategy to enter a foreign market with least commitment. Opportunities
there aren?t large enough to set up own manufacture. So it is centrally
manufactured to derive economies of scale and exported. Gives cost
and quality advantage. However, managers in far-off locations may not
be responsive to customer needs.
? Forms of exporting: includes indirect exporting and direct exporting.
? Indirect exporting is exporting through others; resorted to by companies
which have limited resources. Objective is to sell off excess production
overseas with minimum expenses and inconvenience. Such firms usually
withdraw when their home country sales improve. Cost and risk is low
but control is also low on how when and where the goods are sold.
Sometimes they are not even aware of their exports.
? There are 4 methods of indirect exporting.
? 1. Domestic purchase: some companies are contacted by foreign
companies who purchase at factory gate and exporting marketing and
distributing. Local subcontractors and OEMs fall in this category. Provides
limited knowledge and access to the company.
Exporting
? Export houses: export houses or export marketing companies (EMC) are
specialist companies setup to act as export department to a host of
companies. They can facilitate small and medium companies to develop
their international trade. They also provide indirect access to market
information and contacts.
? Piggybacking: an established international distribution network of one
manufacturer is used to carry the products of another manufacturer. The
second manufacturer rides on the back of reputation, contacts and
administration of the carrier with no direct involvement. Carrier is either rpai a
commission, or he buys the products and distributes independently.
? Trading companies: trading companies from the colonial days have played
important role in indirect exports. African trading company of Unilever and
sogo shosyas of japan are classical examples.
Exporting
? Direct exporting:
? for long term interest in international markets a
company needs to proactively export directly.
Requires commitment and resource allocation
into a number of supporting activities. It can be
a huge financial burden on the company and
hence timing becomes critical. So well planned
and gradual transition is important.
Manufacturing without FDI
? Strategy involving manufacturing and service supply from overseas plants. As it involves
huge costs and risks manufacture can be without direct investment
? - licensing: under a licensing agreement a company (licensor) grants rights to intangible
property to another company (licensee) for a specified period in exchange, the licensee
pays a royalty to the licensor. Rights may be exclusive or non-exclusive
? Most common for the use of patents, trademarks, copyrights and unpatented technology.
Licensor does not risk tangible assets like plant and machinery while the licensee does not
have to develop intangible asset on their own.
? It permits a foreign company to use industrial property to manufacture and sell in their
country or in other countries
? Multinational companies commonly license their own subsidiaries in order to establish
legal ownership of industrial property., to facilitate repatriation of income or to satisfy
home and host governments. Many indian companies have licensing arrangement with
other countries eg Ranbaxy in indonesia and jordan
Manufacturing without FDI
? Franchising:
? Means of marketing goods and services in which the franchiser
grants the legal rights to use branding trademarks and products
and method of operation is transferred to third party-franchisee
- in return for a fee. The franchiser provides assistance training
and help with sourcing and exercises significant control over
the franchisee?s method of operation.
? Franchisee invests in capital but is considered less risky.
Franchiser has the advantage of greater market coverage
withoput having to invest in capital
? Chan identifies 2 types of franchise. Viz product/trade franchise
and business format franchise.
? Product/trade franchise is like car dealership, petrol
service station, soft drinks bottlers where the
franchisees are granted right to distribute a
manufacturer?s product in a specified territory.
? Business format franchise includes many types of
businesses like restaurants, convenience stores and
hotels, this includes licensing of trade marks, and the
system of operating the business and appearance of
the location
? One has to decide to what extent the franchise
format must take into account local demands and
expectations. McDonad, Pizzahut and KFC have
catered to local tastes in different countres.
? Contract manufacturing:
? Firm engaged in international business may engage local
manufacturers to produce the product for them under
contract. Nike and Gap use contract manufacturers in low
cost economies advantage is that the company can
concentrate on sales and marketing. As investment is kept at
a minimum withdrawal becomes easy.
? It helps to overcome trade barriers
? Sometimes it is the only way where local govts insist on local
employment
? During political uncertainty it is better not to invest on
production capacity.
?Turnkey projects:
?Turnkey projects are common in international trade
in supply, erection and commissioning of plants like
oil refineries, steel plants, cement and fertilizer
plants,; construction projects as well as franchising
agreements.
?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 remuneration . Form of remuneration
includes fixed price , or on a cost plus basis.
?Management contracts:
?Companies with low level technology and
management expertise may go for technical and
management contract with a foreign company for a
specified period for a monetary consideration.
?Compensation can be in the form of a flat fee,
percentage of sales or performance bonus.
?Some Indian companies like Tata Tea, AV, Harrison
Malayalam have contract to run estates in SriLanka.
Manufacturing with FDI
? FDI is the process where residents of a source country acquire
ownership of assets in a host country for the purpose of
controlling production distribution an d other activities of a firm
? FDI in which wholly owned manufacturing subsidiaries are
considered by global firms in order to
? - acquire raw materials
? - operate at lower manufacturing costs
? - for avoiding tariff barriers
? - satisfy local content requirements
? - for penetrating local market
Manufacturing strategy with FDI includes
FirstRanker.com - FirstRanker's Choice
International
entrepreneurship
opportunities
MODULE 6
ASSIGNEMENT
? Barriers to international trade
? Tariff barriers
? International v/s domestic entrepreneurship
International entrepreneurship
? Process of discovering and creatively exploiting opportunities that
exists outside one?s own country with the purpose of reaching
competitive advantage wherein importance of recognition,
discovery and exploitation of opportunities is recognised.
? It is a combination of innovative proactive and risk taking behaviour
that crosses national borders and is intended to create value in
organisations.
? This deals with general aspects of being global entrepreneur and
identifying global opportunities.
? Issues covered are importance of international entrepreneurship,
globalisation and the international environment, impact of culture,
venture, aspects of global business etc
Nature of international
entrepreneurship
?Integration of economies
?International competition
?Mutually acceptable currency
?Different national policies and government
intervention:
?Proactive or reactive based on perceived
opportunities/threats
Importance of int buss to the firm
? Superior technological know-how
? Larger size and economies of scale
? Lower input costs due to large size
? Ability to access raw materials overseas
? Ability to shift production overseas
? Economies of scale in shipment/distribution/promotion
? Brand image and goodwill advantage
? Access to low cost financing
? Information advantage
? Managerial expertise and experience
? Diversification of risks
Rostow?s model of stages of
economic development
? According to Rostow, 1960 countries pass through 5 stages of economic
development
? 1. Traditional society ? subsistence, barter, Agri and labour intensive,
limited capital, traditional methods of production
? 2. transitional stage ? specialisation leading to surplus for trading,
transport infrastructure develops, income/savings/investments increase,
entrepreneurship develops, external trade on primary articles
? 3. Take-off ? Industrialisation develops, works shift to industrial from Agri
sector, growth concentrated in a few regions and industries, investment
reaches 10% of GNP
new political and social institutions develop, more savings lead to more
investments
Rostow?s model
? 4. Drive to maturity ? diversification to new areas, technological innovation,
producing wide range and less reliance to imports
? 5. high mass consumption ? mass consumption, consumer durables industry
flourishes, service sector becomes dominant
According to Rostow development requires substantial capital. Aid and FDI
given in stage 3 after reaching stage 2 leads to rapid growth.
Limitations of the model:
Based on western culture and not India
Too generalised
doesn?t detail preconditions for growth
Difficult to identify stages as they are merged
Just a growth model highlighting need for investment and doesn?t address issue
of development
Entry modes to international
business
? Method of entry into an international market depends upon goals of
the entrepreneur and the company?s strengths and weaknesses
? Entry modes can be broadly categorized into 3 categories viz
- exporting as an entry strategy
- manufacturing strategies without FDI
- manufacturing strategies with FDI
Exporting
? Strategy to enter a foreign market with least commitment. Opportunities
there aren?t large enough to set up own manufacture. So it is centrally
manufactured to derive economies of scale and exported. Gives cost
and quality advantage. However, managers in far-off locations may not
be responsive to customer needs.
? Forms of exporting: includes indirect exporting and direct exporting.
? Indirect exporting is exporting through others; resorted to by companies
which have limited resources. Objective is to sell off excess production
overseas with minimum expenses and inconvenience. Such firms usually
withdraw when their home country sales improve. Cost and risk is low
but control is also low on how when and where the goods are sold.
Sometimes they are not even aware of their exports.
? There are 4 methods of indirect exporting.
? 1. Domestic purchase: some companies are contacted by foreign
companies who purchase at factory gate and exporting marketing and
distributing. Local subcontractors and OEMs fall in this category. Provides
limited knowledge and access to the company.
Exporting
? Export houses: export houses or export marketing companies (EMC) are
specialist companies setup to act as export department to a host of
companies. They can facilitate small and medium companies to develop
their international trade. They also provide indirect access to market
information and contacts.
? Piggybacking: an established international distribution network of one
manufacturer is used to carry the products of another manufacturer. The
second manufacturer rides on the back of reputation, contacts and
administration of the carrier with no direct involvement. Carrier is either rpai a
commission, or he buys the products and distributes independently.
? Trading companies: trading companies from the colonial days have played
important role in indirect exports. African trading company of Unilever and
sogo shosyas of japan are classical examples.
Exporting
? Direct exporting:
? for long term interest in international markets a
company needs to proactively export directly.
Requires commitment and resource allocation
into a number of supporting activities. It can be
a huge financial burden on the company and
hence timing becomes critical. So well planned
and gradual transition is important.
Manufacturing without FDI
? Strategy involving manufacturing and service supply from overseas plants. As it involves
huge costs and risks manufacture can be without direct investment
? - licensing: under a licensing agreement a company (licensor) grants rights to intangible
property to another company (licensee) for a specified period in exchange, the licensee
pays a royalty to the licensor. Rights may be exclusive or non-exclusive
? Most common for the use of patents, trademarks, copyrights and unpatented technology.
Licensor does not risk tangible assets like plant and machinery while the licensee does not
have to develop intangible asset on their own.
? It permits a foreign company to use industrial property to manufacture and sell in their
country or in other countries
? Multinational companies commonly license their own subsidiaries in order to establish
legal ownership of industrial property., to facilitate repatriation of income or to satisfy
home and host governments. Many indian companies have licensing arrangement with
other countries eg Ranbaxy in indonesia and jordan
Manufacturing without FDI
? Franchising:
? Means of marketing goods and services in which the franchiser
grants the legal rights to use branding trademarks and products
and method of operation is transferred to third party-franchisee
- in return for a fee. The franchiser provides assistance training
and help with sourcing and exercises significant control over
the franchisee?s method of operation.
? Franchisee invests in capital but is considered less risky.
Franchiser has the advantage of greater market coverage
withoput having to invest in capital
? Chan identifies 2 types of franchise. Viz product/trade franchise
and business format franchise.
? Product/trade franchise is like car dealership, petrol
service station, soft drinks bottlers where the
franchisees are granted right to distribute a
manufacturer?s product in a specified territory.
? Business format franchise includes many types of
businesses like restaurants, convenience stores and
hotels, this includes licensing of trade marks, and the
system of operating the business and appearance of
the location
? One has to decide to what extent the franchise
format must take into account local demands and
expectations. McDonad, Pizzahut and KFC have
catered to local tastes in different countres.
? Contract manufacturing:
? Firm engaged in international business may engage local
manufacturers to produce the product for them under
contract. Nike and Gap use contract manufacturers in low
cost economies advantage is that the company can
concentrate on sales and marketing. As investment is kept at
a minimum withdrawal becomes easy.
? It helps to overcome trade barriers
? Sometimes it is the only way where local govts insist on local
employment
? During political uncertainty it is better not to invest on
production capacity.
?Turnkey projects:
?Turnkey projects are common in international trade
in supply, erection and commissioning of plants like
oil refineries, steel plants, cement and fertilizer
plants,; construction projects as well as franchising
agreements.
?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 remuneration . Form of remuneration
includes fixed price , or on a cost plus basis.
?Management contracts:
?Companies with low level technology and
management expertise may go for technical and
management contract with a foreign company for a
specified period for a monetary consideration.
?Compensation can be in the form of a flat fee,
percentage of sales or performance bonus.
?Some Indian companies like Tata Tea, AV, Harrison
Malayalam have contract to run estates in SriLanka.
Manufacturing with FDI
? FDI is the process where residents of a source country acquire
ownership of assets in a host country for the purpose of
controlling production distribution an d other activities of a firm
? FDI in which wholly owned manufacturing subsidiaries are
considered by global firms in order to
? - acquire raw materials
? - operate at lower manufacturing costs
? - for avoiding tariff barriers
? - satisfy local content requirements
? - for penetrating local market
Manufacturing strategy with FDI includes
Manufacturing with FDI
? Joint ventures:
? Joint venture is any kind of cooperative arrangement between
two or more independent companies which leads to the
establishment of a third entity organisationally separate from
the parent companies. Each company takes an equity stake
here. Stake may be as low as 10% but can still give voice in
decision making.
? Indian pharma companies have made use of this strategy well.
eg companies like Ranbaxy Lupin and Reddy?s.
? In many cases joint ventures have helped stabilise parent
company in local market stabilise
FirstRanker.com - FirstRanker's Choice
International
entrepreneurship
opportunities
MODULE 6
ASSIGNEMENT
? Barriers to international trade
? Tariff barriers
? International v/s domestic entrepreneurship
International entrepreneurship
? Process of discovering and creatively exploiting opportunities that
exists outside one?s own country with the purpose of reaching
competitive advantage wherein importance of recognition,
discovery and exploitation of opportunities is recognised.
? It is a combination of innovative proactive and risk taking behaviour
that crosses national borders and is intended to create value in
organisations.
? This deals with general aspects of being global entrepreneur and
identifying global opportunities.
? Issues covered are importance of international entrepreneurship,
globalisation and the international environment, impact of culture,
venture, aspects of global business etc
Nature of international
entrepreneurship
?Integration of economies
?International competition
?Mutually acceptable currency
?Different national policies and government
intervention:
?Proactive or reactive based on perceived
opportunities/threats
Importance of int buss to the firm
? Superior technological know-how
? Larger size and economies of scale
? Lower input costs due to large size
? Ability to access raw materials overseas
? Ability to shift production overseas
? Economies of scale in shipment/distribution/promotion
? Brand image and goodwill advantage
? Access to low cost financing
? Information advantage
? Managerial expertise and experience
? Diversification of risks
Rostow?s model of stages of
economic development
? According to Rostow, 1960 countries pass through 5 stages of economic
development
? 1. Traditional society ? subsistence, barter, Agri and labour intensive,
limited capital, traditional methods of production
? 2. transitional stage ? specialisation leading to surplus for trading,
transport infrastructure develops, income/savings/investments increase,
entrepreneurship develops, external trade on primary articles
? 3. Take-off ? Industrialisation develops, works shift to industrial from Agri
sector, growth concentrated in a few regions and industries, investment
reaches 10% of GNP
new political and social institutions develop, more savings lead to more
investments
Rostow?s model
? 4. Drive to maturity ? diversification to new areas, technological innovation,
producing wide range and less reliance to imports
? 5. high mass consumption ? mass consumption, consumer durables industry
flourishes, service sector becomes dominant
According to Rostow development requires substantial capital. Aid and FDI
given in stage 3 after reaching stage 2 leads to rapid growth.
Limitations of the model:
Based on western culture and not India
Too generalised
doesn?t detail preconditions for growth
Difficult to identify stages as they are merged
Just a growth model highlighting need for investment and doesn?t address issue
of development
Entry modes to international
business
? Method of entry into an international market depends upon goals of
the entrepreneur and the company?s strengths and weaknesses
? Entry modes can be broadly categorized into 3 categories viz
- exporting as an entry strategy
- manufacturing strategies without FDI
- manufacturing strategies with FDI
Exporting
? Strategy to enter a foreign market with least commitment. Opportunities
there aren?t large enough to set up own manufacture. So it is centrally
manufactured to derive economies of scale and exported. Gives cost
and quality advantage. However, managers in far-off locations may not
be responsive to customer needs.
? Forms of exporting: includes indirect exporting and direct exporting.
? Indirect exporting is exporting through others; resorted to by companies
which have limited resources. Objective is to sell off excess production
overseas with minimum expenses and inconvenience. Such firms usually
withdraw when their home country sales improve. Cost and risk is low
but control is also low on how when and where the goods are sold.
Sometimes they are not even aware of their exports.
? There are 4 methods of indirect exporting.
? 1. Domestic purchase: some companies are contacted by foreign
companies who purchase at factory gate and exporting marketing and
distributing. Local subcontractors and OEMs fall in this category. Provides
limited knowledge and access to the company.
Exporting
? Export houses: export houses or export marketing companies (EMC) are
specialist companies setup to act as export department to a host of
companies. They can facilitate small and medium companies to develop
their international trade. They also provide indirect access to market
information and contacts.
? Piggybacking: an established international distribution network of one
manufacturer is used to carry the products of another manufacturer. The
second manufacturer rides on the back of reputation, contacts and
administration of the carrier with no direct involvement. Carrier is either rpai a
commission, or he buys the products and distributes independently.
? Trading companies: trading companies from the colonial days have played
important role in indirect exports. African trading company of Unilever and
sogo shosyas of japan are classical examples.
Exporting
? Direct exporting:
? for long term interest in international markets a
company needs to proactively export directly.
Requires commitment and resource allocation
into a number of supporting activities. It can be
a huge financial burden on the company and
hence timing becomes critical. So well planned
and gradual transition is important.
Manufacturing without FDI
? Strategy involving manufacturing and service supply from overseas plants. As it involves
huge costs and risks manufacture can be without direct investment
? - licensing: under a licensing agreement a company (licensor) grants rights to intangible
property to another company (licensee) for a specified period in exchange, the licensee
pays a royalty to the licensor. Rights may be exclusive or non-exclusive
? Most common for the use of patents, trademarks, copyrights and unpatented technology.
Licensor does not risk tangible assets like plant and machinery while the licensee does not
have to develop intangible asset on their own.
? It permits a foreign company to use industrial property to manufacture and sell in their
country or in other countries
? Multinational companies commonly license their own subsidiaries in order to establish
legal ownership of industrial property., to facilitate repatriation of income or to satisfy
home and host governments. Many indian companies have licensing arrangement with
other countries eg Ranbaxy in indonesia and jordan
Manufacturing without FDI
? Franchising:
? Means of marketing goods and services in which the franchiser
grants the legal rights to use branding trademarks and products
and method of operation is transferred to third party-franchisee
- in return for a fee. The franchiser provides assistance training
and help with sourcing and exercises significant control over
the franchisee?s method of operation.
? Franchisee invests in capital but is considered less risky.
Franchiser has the advantage of greater market coverage
withoput having to invest in capital
? Chan identifies 2 types of franchise. Viz product/trade franchise
and business format franchise.
? Product/trade franchise is like car dealership, petrol
service station, soft drinks bottlers where the
franchisees are granted right to distribute a
manufacturer?s product in a specified territory.
? Business format franchise includes many types of
businesses like restaurants, convenience stores and
hotels, this includes licensing of trade marks, and the
system of operating the business and appearance of
the location
? One has to decide to what extent the franchise
format must take into account local demands and
expectations. McDonad, Pizzahut and KFC have
catered to local tastes in different countres.
? Contract manufacturing:
? Firm engaged in international business may engage local
manufacturers to produce the product for them under
contract. Nike and Gap use contract manufacturers in low
cost economies advantage is that the company can
concentrate on sales and marketing. As investment is kept at
a minimum withdrawal becomes easy.
? It helps to overcome trade barriers
? Sometimes it is the only way where local govts insist on local
employment
? During political uncertainty it is better not to invest on
production capacity.
?Turnkey projects:
?Turnkey projects are common in international trade
in supply, erection and commissioning of plants like
oil refineries, steel plants, cement and fertilizer
plants,; construction projects as well as franchising
agreements.
?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 remuneration . Form of remuneration
includes fixed price , or on a cost plus basis.
?Management contracts:
?Companies with low level technology and
management expertise may go for technical and
management contract with a foreign company for a
specified period for a monetary consideration.
?Compensation can be in the form of a flat fee,
percentage of sales or performance bonus.
?Some Indian companies like Tata Tea, AV, Harrison
Malayalam have contract to run estates in SriLanka.
Manufacturing with FDI
? FDI is the process where residents of a source country acquire
ownership of assets in a host country for the purpose of
controlling production distribution an d other activities of a firm
? FDI in which wholly owned manufacturing subsidiaries are
considered by global firms in order to
? - acquire raw materials
? - operate at lower manufacturing costs
? - for avoiding tariff barriers
? - satisfy local content requirements
? - for penetrating local market
Manufacturing strategy with FDI includes
Manufacturing with FDI
? Joint ventures:
? Joint venture is any kind of cooperative arrangement between
two or more independent companies which leads to the
establishment of a third entity organisationally separate from
the parent companies. Each company takes an equity stake
here. Stake may be as low as 10% but can still give voice in
decision making.
? Indian pharma companies have made use of this strategy well.
eg companies like Ranbaxy Lupin and Reddy?s.
? In many cases joint ventures have helped stabilise parent
company in local market stabilise
Manufacturing with FDI
? Mergers:
? Merger (amalgamation, consolidation, integration) is a combination
of two or more organisations in which one acquires the assets and
liabilities of the other in exchange for shares or cash or both. Here
both the organisations are dissolved and the assets and liabilities are
combined and new stock is issued.
? It is a combination of equals and the board will not be dominated
by either company.
? Asian pains, Essel packaging have merged companies abroad to
gain foothold in international market.
FirstRanker.com - FirstRanker's Choice
International
entrepreneurship
opportunities
MODULE 6
ASSIGNEMENT
? Barriers to international trade
? Tariff barriers
? International v/s domestic entrepreneurship
International entrepreneurship
? Process of discovering and creatively exploiting opportunities that
exists outside one?s own country with the purpose of reaching
competitive advantage wherein importance of recognition,
discovery and exploitation of opportunities is recognised.
? It is a combination of innovative proactive and risk taking behaviour
that crosses national borders and is intended to create value in
organisations.
? This deals with general aspects of being global entrepreneur and
identifying global opportunities.
? Issues covered are importance of international entrepreneurship,
globalisation and the international environment, impact of culture,
venture, aspects of global business etc
Nature of international
entrepreneurship
?Integration of economies
?International competition
?Mutually acceptable currency
?Different national policies and government
intervention:
?Proactive or reactive based on perceived
opportunities/threats
Importance of int buss to the firm
? Superior technological know-how
? Larger size and economies of scale
? Lower input costs due to large size
? Ability to access raw materials overseas
? Ability to shift production overseas
? Economies of scale in shipment/distribution/promotion
? Brand image and goodwill advantage
? Access to low cost financing
? Information advantage
? Managerial expertise and experience
? Diversification of risks
Rostow?s model of stages of
economic development
? According to Rostow, 1960 countries pass through 5 stages of economic
development
? 1. Traditional society ? subsistence, barter, Agri and labour intensive,
limited capital, traditional methods of production
? 2. transitional stage ? specialisation leading to surplus for trading,
transport infrastructure develops, income/savings/investments increase,
entrepreneurship develops, external trade on primary articles
? 3. Take-off ? Industrialisation develops, works shift to industrial from Agri
sector, growth concentrated in a few regions and industries, investment
reaches 10% of GNP
new political and social institutions develop, more savings lead to more
investments
Rostow?s model
? 4. Drive to maturity ? diversification to new areas, technological innovation,
producing wide range and less reliance to imports
? 5. high mass consumption ? mass consumption, consumer durables industry
flourishes, service sector becomes dominant
According to Rostow development requires substantial capital. Aid and FDI
given in stage 3 after reaching stage 2 leads to rapid growth.
Limitations of the model:
Based on western culture and not India
Too generalised
doesn?t detail preconditions for growth
Difficult to identify stages as they are merged
Just a growth model highlighting need for investment and doesn?t address issue
of development
Entry modes to international
business
? Method of entry into an international market depends upon goals of
the entrepreneur and the company?s strengths and weaknesses
? Entry modes can be broadly categorized into 3 categories viz
- exporting as an entry strategy
- manufacturing strategies without FDI
- manufacturing strategies with FDI
Exporting
? Strategy to enter a foreign market with least commitment. Opportunities
there aren?t large enough to set up own manufacture. So it is centrally
manufactured to derive economies of scale and exported. Gives cost
and quality advantage. However, managers in far-off locations may not
be responsive to customer needs.
? Forms of exporting: includes indirect exporting and direct exporting.
? Indirect exporting is exporting through others; resorted to by companies
which have limited resources. Objective is to sell off excess production
overseas with minimum expenses and inconvenience. Such firms usually
withdraw when their home country sales improve. Cost and risk is low
but control is also low on how when and where the goods are sold.
Sometimes they are not even aware of their exports.
? There are 4 methods of indirect exporting.
? 1. Domestic purchase: some companies are contacted by foreign
companies who purchase at factory gate and exporting marketing and
distributing. Local subcontractors and OEMs fall in this category. Provides
limited knowledge and access to the company.
Exporting
? Export houses: export houses or export marketing companies (EMC) are
specialist companies setup to act as export department to a host of
companies. They can facilitate small and medium companies to develop
their international trade. They also provide indirect access to market
information and contacts.
? Piggybacking: an established international distribution network of one
manufacturer is used to carry the products of another manufacturer. The
second manufacturer rides on the back of reputation, contacts and
administration of the carrier with no direct involvement. Carrier is either rpai a
commission, or he buys the products and distributes independently.
? Trading companies: trading companies from the colonial days have played
important role in indirect exports. African trading company of Unilever and
sogo shosyas of japan are classical examples.
Exporting
? Direct exporting:
? for long term interest in international markets a
company needs to proactively export directly.
Requires commitment and resource allocation
into a number of supporting activities. It can be
a huge financial burden on the company and
hence timing becomes critical. So well planned
and gradual transition is important.
Manufacturing without FDI
? Strategy involving manufacturing and service supply from overseas plants. As it involves
huge costs and risks manufacture can be without direct investment
? - licensing: under a licensing agreement a company (licensor) grants rights to intangible
property to another company (licensee) for a specified period in exchange, the licensee
pays a royalty to the licensor. Rights may be exclusive or non-exclusive
? Most common for the use of patents, trademarks, copyrights and unpatented technology.
Licensor does not risk tangible assets like plant and machinery while the licensee does not
have to develop intangible asset on their own.
? It permits a foreign company to use industrial property to manufacture and sell in their
country or in other countries
? Multinational companies commonly license their own subsidiaries in order to establish
legal ownership of industrial property., to facilitate repatriation of income or to satisfy
home and host governments. Many indian companies have licensing arrangement with
other countries eg Ranbaxy in indonesia and jordan
Manufacturing without FDI
? Franchising:
? Means of marketing goods and services in which the franchiser
grants the legal rights to use branding trademarks and products
and method of operation is transferred to third party-franchisee
- in return for a fee. The franchiser provides assistance training
and help with sourcing and exercises significant control over
the franchisee?s method of operation.
? Franchisee invests in capital but is considered less risky.
Franchiser has the advantage of greater market coverage
withoput having to invest in capital
? Chan identifies 2 types of franchise. Viz product/trade franchise
and business format franchise.
? Product/trade franchise is like car dealership, petrol
service station, soft drinks bottlers where the
franchisees are granted right to distribute a
manufacturer?s product in a specified territory.
? Business format franchise includes many types of
businesses like restaurants, convenience stores and
hotels, this includes licensing of trade marks, and the
system of operating the business and appearance of
the location
? One has to decide to what extent the franchise
format must take into account local demands and
expectations. McDonad, Pizzahut and KFC have
catered to local tastes in different countres.
? Contract manufacturing:
? Firm engaged in international business may engage local
manufacturers to produce the product for them under
contract. Nike and Gap use contract manufacturers in low
cost economies advantage is that the company can
concentrate on sales and marketing. As investment is kept at
a minimum withdrawal becomes easy.
? It helps to overcome trade barriers
? Sometimes it is the only way where local govts insist on local
employment
? During political uncertainty it is better not to invest on
production capacity.
?Turnkey projects:
?Turnkey projects are common in international trade
in supply, erection and commissioning of plants like
oil refineries, steel plants, cement and fertilizer
plants,; construction projects as well as franchising
agreements.
?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 remuneration . Form of remuneration
includes fixed price , or on a cost plus basis.
?Management contracts:
?Companies with low level technology and
management expertise may go for technical and
management contract with a foreign company for a
specified period for a monetary consideration.
?Compensation can be in the form of a flat fee,
percentage of sales or performance bonus.
?Some Indian companies like Tata Tea, AV, Harrison
Malayalam have contract to run estates in SriLanka.
Manufacturing with FDI
? FDI is the process where residents of a source country acquire
ownership of assets in a host country for the purpose of
controlling production distribution an d other activities of a firm
? FDI in which wholly owned manufacturing subsidiaries are
considered by global firms in order to
? - acquire raw materials
? - operate at lower manufacturing costs
? - for avoiding tariff barriers
? - satisfy local content requirements
? - for penetrating local market
Manufacturing strategy with FDI includes
Manufacturing with FDI
? Joint ventures:
? Joint venture is any kind of cooperative arrangement between
two or more independent companies which leads to the
establishment of a third entity organisationally separate from
the parent companies. Each company takes an equity stake
here. Stake may be as low as 10% but can still give voice in
decision making.
? Indian pharma companies have made use of this strategy well.
eg companies like Ranbaxy Lupin and Reddy?s.
? In many cases joint ventures have helped stabilise parent
company in local market stabilise
Manufacturing with FDI
? Mergers:
? Merger (amalgamation, consolidation, integration) is a combination
of two or more organisations in which one acquires the assets and
liabilities of the other in exchange for shares or cash or both. Here
both the organisations are dissolved and the assets and liabilities are
combined and new stock is issued.
? It is a combination of equals and the board will not be dominated
by either company.
? Asian pains, Essel packaging have merged companies abroad to
gain foothold in international market.
Manufacturing with FDI
? Acquisitions
? Acquisition is purchasing an existing venture. Easy way to expand business.
? One must be careful about payments so as not to overburden the company.
? Notion that acquisition is a faster way than organic growth is not entirely true.
It may take considerable time to search and evaluate targets, negotiate
and integrate.
? It is a transaction in which a firm buys a controlling interest in another firm with
an intention of making it a subsidiary business or integrating it with the existing
business.
? Some firms adopt acquisition a s a one time strategy to gain control on a
particular market but for some other it is a strategy that is perpetual. A sound
acquisition strategy ensures firm?s growth.
FirstRanker.com - FirstRanker's Choice
International
entrepreneurship
opportunities
MODULE 6
ASSIGNEMENT
? Barriers to international trade
? Tariff barriers
? International v/s domestic entrepreneurship
International entrepreneurship
? Process of discovering and creatively exploiting opportunities that
exists outside one?s own country with the purpose of reaching
competitive advantage wherein importance of recognition,
discovery and exploitation of opportunities is recognised.
? It is a combination of innovative proactive and risk taking behaviour
that crosses national borders and is intended to create value in
organisations.
? This deals with general aspects of being global entrepreneur and
identifying global opportunities.
? Issues covered are importance of international entrepreneurship,
globalisation and the international environment, impact of culture,
venture, aspects of global business etc
Nature of international
entrepreneurship
?Integration of economies
?International competition
?Mutually acceptable currency
?Different national policies and government
intervention:
?Proactive or reactive based on perceived
opportunities/threats
Importance of int buss to the firm
? Superior technological know-how
? Larger size and economies of scale
? Lower input costs due to large size
? Ability to access raw materials overseas
? Ability to shift production overseas
? Economies of scale in shipment/distribution/promotion
? Brand image and goodwill advantage
? Access to low cost financing
? Information advantage
? Managerial expertise and experience
? Diversification of risks
Rostow?s model of stages of
economic development
? According to Rostow, 1960 countries pass through 5 stages of economic
development
? 1. Traditional society ? subsistence, barter, Agri and labour intensive,
limited capital, traditional methods of production
? 2. transitional stage ? specialisation leading to surplus for trading,
transport infrastructure develops, income/savings/investments increase,
entrepreneurship develops, external trade on primary articles
? 3. Take-off ? Industrialisation develops, works shift to industrial from Agri
sector, growth concentrated in a few regions and industries, investment
reaches 10% of GNP
new political and social institutions develop, more savings lead to more
investments
Rostow?s model
? 4. Drive to maturity ? diversification to new areas, technological innovation,
producing wide range and less reliance to imports
? 5. high mass consumption ? mass consumption, consumer durables industry
flourishes, service sector becomes dominant
According to Rostow development requires substantial capital. Aid and FDI
given in stage 3 after reaching stage 2 leads to rapid growth.
Limitations of the model:
Based on western culture and not India
Too generalised
doesn?t detail preconditions for growth
Difficult to identify stages as they are merged
Just a growth model highlighting need for investment and doesn?t address issue
of development
Entry modes to international
business
? Method of entry into an international market depends upon goals of
the entrepreneur and the company?s strengths and weaknesses
? Entry modes can be broadly categorized into 3 categories viz
- exporting as an entry strategy
- manufacturing strategies without FDI
- manufacturing strategies with FDI
Exporting
? Strategy to enter a foreign market with least commitment. Opportunities
there aren?t large enough to set up own manufacture. So it is centrally
manufactured to derive economies of scale and exported. Gives cost
and quality advantage. However, managers in far-off locations may not
be responsive to customer needs.
? Forms of exporting: includes indirect exporting and direct exporting.
? Indirect exporting is exporting through others; resorted to by companies
which have limited resources. Objective is to sell off excess production
overseas with minimum expenses and inconvenience. Such firms usually
withdraw when their home country sales improve. Cost and risk is low
but control is also low on how when and where the goods are sold.
Sometimes they are not even aware of their exports.
? There are 4 methods of indirect exporting.
? 1. Domestic purchase: some companies are contacted by foreign
companies who purchase at factory gate and exporting marketing and
distributing. Local subcontractors and OEMs fall in this category. Provides
limited knowledge and access to the company.
Exporting
? Export houses: export houses or export marketing companies (EMC) are
specialist companies setup to act as export department to a host of
companies. They can facilitate small and medium companies to develop
their international trade. They also provide indirect access to market
information and contacts.
? Piggybacking: an established international distribution network of one
manufacturer is used to carry the products of another manufacturer. The
second manufacturer rides on the back of reputation, contacts and
administration of the carrier with no direct involvement. Carrier is either rpai a
commission, or he buys the products and distributes independently.
? Trading companies: trading companies from the colonial days have played
important role in indirect exports. African trading company of Unilever and
sogo shosyas of japan are classical examples.
Exporting
? Direct exporting:
? for long term interest in international markets a
company needs to proactively export directly.
Requires commitment and resource allocation
into a number of supporting activities. It can be
a huge financial burden on the company and
hence timing becomes critical. So well planned
and gradual transition is important.
Manufacturing without FDI
? Strategy involving manufacturing and service supply from overseas plants. As it involves
huge costs and risks manufacture can be without direct investment
? - licensing: under a licensing agreement a company (licensor) grants rights to intangible
property to another company (licensee) for a specified period in exchange, the licensee
pays a royalty to the licensor. Rights may be exclusive or non-exclusive
? Most common for the use of patents, trademarks, copyrights and unpatented technology.
Licensor does not risk tangible assets like plant and machinery while the licensee does not
have to develop intangible asset on their own.
? It permits a foreign company to use industrial property to manufacture and sell in their
country or in other countries
? Multinational companies commonly license their own subsidiaries in order to establish
legal ownership of industrial property., to facilitate repatriation of income or to satisfy
home and host governments. Many indian companies have licensing arrangement with
other countries eg Ranbaxy in indonesia and jordan
Manufacturing without FDI
? Franchising:
? Means of marketing goods and services in which the franchiser
grants the legal rights to use branding trademarks and products
and method of operation is transferred to third party-franchisee
- in return for a fee. The franchiser provides assistance training
and help with sourcing and exercises significant control over
the franchisee?s method of operation.
? Franchisee invests in capital but is considered less risky.
Franchiser has the advantage of greater market coverage
withoput having to invest in capital
? Chan identifies 2 types of franchise. Viz product/trade franchise
and business format franchise.
? Product/trade franchise is like car dealership, petrol
service station, soft drinks bottlers where the
franchisees are granted right to distribute a
manufacturer?s product in a specified territory.
? Business format franchise includes many types of
businesses like restaurants, convenience stores and
hotels, this includes licensing of trade marks, and the
system of operating the business and appearance of
the location
? One has to decide to what extent the franchise
format must take into account local demands and
expectations. McDonad, Pizzahut and KFC have
catered to local tastes in different countres.
? Contract manufacturing:
? Firm engaged in international business may engage local
manufacturers to produce the product for them under
contract. Nike and Gap use contract manufacturers in low
cost economies advantage is that the company can
concentrate on sales and marketing. As investment is kept at
a minimum withdrawal becomes easy.
? It helps to overcome trade barriers
? Sometimes it is the only way where local govts insist on local
employment
? During political uncertainty it is better not to invest on
production capacity.
?Turnkey projects:
?Turnkey projects are common in international trade
in supply, erection and commissioning of plants like
oil refineries, steel plants, cement and fertilizer
plants,; construction projects as well as franchising
agreements.
?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 remuneration . Form of remuneration
includes fixed price , or on a cost plus basis.
?Management contracts:
?Companies with low level technology and
management expertise may go for technical and
management contract with a foreign company for a
specified period for a monetary consideration.
?Compensation can be in the form of a flat fee,
percentage of sales or performance bonus.
?Some Indian companies like Tata Tea, AV, Harrison
Malayalam have contract to run estates in SriLanka.
Manufacturing with FDI
? FDI is the process where residents of a source country acquire
ownership of assets in a host country for the purpose of
controlling production distribution an d other activities of a firm
? FDI in which wholly owned manufacturing subsidiaries are
considered by global firms in order to
? - acquire raw materials
? - operate at lower manufacturing costs
? - for avoiding tariff barriers
? - satisfy local content requirements
? - for penetrating local market
Manufacturing strategy with FDI includes
Manufacturing with FDI
? Joint ventures:
? Joint venture is any kind of cooperative arrangement between
two or more independent companies which leads to the
establishment of a third entity organisationally separate from
the parent companies. Each company takes an equity stake
here. Stake may be as low as 10% but can still give voice in
decision making.
? Indian pharma companies have made use of this strategy well.
eg companies like Ranbaxy Lupin and Reddy?s.
? In many cases joint ventures have helped stabilise parent
company in local market stabilise
Manufacturing with FDI
? Mergers:
? Merger (amalgamation, consolidation, integration) is a combination
of two or more organisations in which one acquires the assets and
liabilities of the other in exchange for shares or cash or both. Here
both the organisations are dissolved and the assets and liabilities are
combined and new stock is issued.
? It is a combination of equals and the board will not be dominated
by either company.
? Asian pains, Essel packaging have merged companies abroad to
gain foothold in international market.
Manufacturing with FDI
? Acquisitions
? Acquisition is purchasing an existing venture. Easy way to expand business.
? One must be careful about payments so as not to overburden the company.
? Notion that acquisition is a faster way than organic growth is not entirely true.
It may take considerable time to search and evaluate targets, negotiate
and integrate.
? It is a transaction in which a firm buys a controlling interest in another firm with
an intention of making it a subsidiary business or integrating it with the existing
business.
? Some firms adopt acquisition a s a one time strategy to gain control on a
particular market but for some other it is a strategy that is perpetual. A sound
acquisition strategy ensures firm?s growth.
Manufacturing with FDI
? Wholly-owned subsidiary
? It is the most expensive way of entering foreign market. It requires
greatest commitment in terms of time resources. It can be undertaken
when the market is assured. It helps companies to have complete
control and ownership on foreign opearations.
? Wholly owned subsidiary meana 100% ownership of the entity by
parent company. The subsidiary has a different legal entity but
operates under the control of the holding company.
? Location in a different country is one of the main reasons why
companies are not absorbed but run as a subsidiary. Compelling
regulatory and financial factors are the other factors.
FirstRanker.com - FirstRanker's Choice
International
entrepreneurship
opportunities
MODULE 6
ASSIGNEMENT
? Barriers to international trade
? Tariff barriers
? International v/s domestic entrepreneurship
International entrepreneurship
? Process of discovering and creatively exploiting opportunities that
exists outside one?s own country with the purpose of reaching
competitive advantage wherein importance of recognition,
discovery and exploitation of opportunities is recognised.
? It is a combination of innovative proactive and risk taking behaviour
that crosses national borders and is intended to create value in
organisations.
? This deals with general aspects of being global entrepreneur and
identifying global opportunities.
? Issues covered are importance of international entrepreneurship,
globalisation and the international environment, impact of culture,
venture, aspects of global business etc
Nature of international
entrepreneurship
?Integration of economies
?International competition
?Mutually acceptable currency
?Different national policies and government
intervention:
?Proactive or reactive based on perceived
opportunities/threats
Importance of int buss to the firm
? Superior technological know-how
? Larger size and economies of scale
? Lower input costs due to large size
? Ability to access raw materials overseas
? Ability to shift production overseas
? Economies of scale in shipment/distribution/promotion
? Brand image and goodwill advantage
? Access to low cost financing
? Information advantage
? Managerial expertise and experience
? Diversification of risks
Rostow?s model of stages of
economic development
? According to Rostow, 1960 countries pass through 5 stages of economic
development
? 1. Traditional society ? subsistence, barter, Agri and labour intensive,
limited capital, traditional methods of production
? 2. transitional stage ? specialisation leading to surplus for trading,
transport infrastructure develops, income/savings/investments increase,
entrepreneurship develops, external trade on primary articles
? 3. Take-off ? Industrialisation develops, works shift to industrial from Agri
sector, growth concentrated in a few regions and industries, investment
reaches 10% of GNP
new political and social institutions develop, more savings lead to more
investments
Rostow?s model
? 4. Drive to maturity ? diversification to new areas, technological innovation,
producing wide range and less reliance to imports
? 5. high mass consumption ? mass consumption, consumer durables industry
flourishes, service sector becomes dominant
According to Rostow development requires substantial capital. Aid and FDI
given in stage 3 after reaching stage 2 leads to rapid growth.
Limitations of the model:
Based on western culture and not India
Too generalised
doesn?t detail preconditions for growth
Difficult to identify stages as they are merged
Just a growth model highlighting need for investment and doesn?t address issue
of development
Entry modes to international
business
? Method of entry into an international market depends upon goals of
the entrepreneur and the company?s strengths and weaknesses
? Entry modes can be broadly categorized into 3 categories viz
- exporting as an entry strategy
- manufacturing strategies without FDI
- manufacturing strategies with FDI
Exporting
? Strategy to enter a foreign market with least commitment. Opportunities
there aren?t large enough to set up own manufacture. So it is centrally
manufactured to derive economies of scale and exported. Gives cost
and quality advantage. However, managers in far-off locations may not
be responsive to customer needs.
? Forms of exporting: includes indirect exporting and direct exporting.
? Indirect exporting is exporting through others; resorted to by companies
which have limited resources. Objective is to sell off excess production
overseas with minimum expenses and inconvenience. Such firms usually
withdraw when their home country sales improve. Cost and risk is low
but control is also low on how when and where the goods are sold.
Sometimes they are not even aware of their exports.
? There are 4 methods of indirect exporting.
? 1. Domestic purchase: some companies are contacted by foreign
companies who purchase at factory gate and exporting marketing and
distributing. Local subcontractors and OEMs fall in this category. Provides
limited knowledge and access to the company.
Exporting
? Export houses: export houses or export marketing companies (EMC) are
specialist companies setup to act as export department to a host of
companies. They can facilitate small and medium companies to develop
their international trade. They also provide indirect access to market
information and contacts.
? Piggybacking: an established international distribution network of one
manufacturer is used to carry the products of another manufacturer. The
second manufacturer rides on the back of reputation, contacts and
administration of the carrier with no direct involvement. Carrier is either rpai a
commission, or he buys the products and distributes independently.
? Trading companies: trading companies from the colonial days have played
important role in indirect exports. African trading company of Unilever and
sogo shosyas of japan are classical examples.
Exporting
? Direct exporting:
? for long term interest in international markets a
company needs to proactively export directly.
Requires commitment and resource allocation
into a number of supporting activities. It can be
a huge financial burden on the company and
hence timing becomes critical. So well planned
and gradual transition is important.
Manufacturing without FDI
? Strategy involving manufacturing and service supply from overseas plants. As it involves
huge costs and risks manufacture can be without direct investment
? - licensing: under a licensing agreement a company (licensor) grants rights to intangible
property to another company (licensee) for a specified period in exchange, the licensee
pays a royalty to the licensor. Rights may be exclusive or non-exclusive
? Most common for the use of patents, trademarks, copyrights and unpatented technology.
Licensor does not risk tangible assets like plant and machinery while the licensee does not
have to develop intangible asset on their own.
? It permits a foreign company to use industrial property to manufacture and sell in their
country or in other countries
? Multinational companies commonly license their own subsidiaries in order to establish
legal ownership of industrial property., to facilitate repatriation of income or to satisfy
home and host governments. Many indian companies have licensing arrangement with
other countries eg Ranbaxy in indonesia and jordan
Manufacturing without FDI
? Franchising:
? Means of marketing goods and services in which the franchiser
grants the legal rights to use branding trademarks and products
and method of operation is transferred to third party-franchisee
- in return for a fee. The franchiser provides assistance training
and help with sourcing and exercises significant control over
the franchisee?s method of operation.
? Franchisee invests in capital but is considered less risky.
Franchiser has the advantage of greater market coverage
withoput having to invest in capital
? Chan identifies 2 types of franchise. Viz product/trade franchise
and business format franchise.
? Product/trade franchise is like car dealership, petrol
service station, soft drinks bottlers where the
franchisees are granted right to distribute a
manufacturer?s product in a specified territory.
? Business format franchise includes many types of
businesses like restaurants, convenience stores and
hotels, this includes licensing of trade marks, and the
system of operating the business and appearance of
the location
? One has to decide to what extent the franchise
format must take into account local demands and
expectations. McDonad, Pizzahut and KFC have
catered to local tastes in different countres.
? Contract manufacturing:
? Firm engaged in international business may engage local
manufacturers to produce the product for them under
contract. Nike and Gap use contract manufacturers in low
cost economies advantage is that the company can
concentrate on sales and marketing. As investment is kept at
a minimum withdrawal becomes easy.
? It helps to overcome trade barriers
? Sometimes it is the only way where local govts insist on local
employment
? During political uncertainty it is better not to invest on
production capacity.
?Turnkey projects:
?Turnkey projects are common in international trade
in supply, erection and commissioning of plants like
oil refineries, steel plants, cement and fertilizer
plants,; construction projects as well as franchising
agreements.
?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 remuneration . Form of remuneration
includes fixed price , or on a cost plus basis.
?Management contracts:
?Companies with low level technology and
management expertise may go for technical and
management contract with a foreign company for a
specified period for a monetary consideration.
?Compensation can be in the form of a flat fee,
percentage of sales or performance bonus.
?Some Indian companies like Tata Tea, AV, Harrison
Malayalam have contract to run estates in SriLanka.
Manufacturing with FDI
? FDI is the process where residents of a source country acquire
ownership of assets in a host country for the purpose of
controlling production distribution an d other activities of a firm
? FDI in which wholly owned manufacturing subsidiaries are
considered by global firms in order to
? - acquire raw materials
? - operate at lower manufacturing costs
? - for avoiding tariff barriers
? - satisfy local content requirements
? - for penetrating local market
Manufacturing strategy with FDI includes
Manufacturing with FDI
? Joint ventures:
? Joint venture is any kind of cooperative arrangement between
two or more independent companies which leads to the
establishment of a third entity organisationally separate from
the parent companies. Each company takes an equity stake
here. Stake may be as low as 10% but can still give voice in
decision making.
? Indian pharma companies have made use of this strategy well.
eg companies like Ranbaxy Lupin and Reddy?s.
? In many cases joint ventures have helped stabilise parent
company in local market stabilise
Manufacturing with FDI
? Mergers:
? Merger (amalgamation, consolidation, integration) is a combination
of two or more organisations in which one acquires the assets and
liabilities of the other in exchange for shares or cash or both. Here
both the organisations are dissolved and the assets and liabilities are
combined and new stock is issued.
? It is a combination of equals and the board will not be dominated
by either company.
? Asian pains, Essel packaging have merged companies abroad to
gain foothold in international market.
Manufacturing with FDI
? Acquisitions
? Acquisition is purchasing an existing venture. Easy way to expand business.
? One must be careful about payments so as not to overburden the company.
? Notion that acquisition is a faster way than organic growth is not entirely true.
It may take considerable time to search and evaluate targets, negotiate
and integrate.
? It is a transaction in which a firm buys a controlling interest in another firm with
an intention of making it a subsidiary business or integrating it with the existing
business.
? Some firms adopt acquisition a s a one time strategy to gain control on a
particular market but for some other it is a strategy that is perpetual. A sound
acquisition strategy ensures firm?s growth.
Manufacturing with FDI
? Wholly-owned subsidiary
? It is the most expensive way of entering foreign market. It requires
greatest commitment in terms of time resources. It can be undertaken
when the market is assured. It helps companies to have complete
control and ownership on foreign opearations.
? Wholly owned subsidiary meana 100% ownership of the entity by
parent company. The subsidiary has a different legal entity but
operates under the control of the holding company.
? Location in a different country is one of the main reasons why
companies are not absorbed but run as a subsidiary. Compelling
regulatory and financial factors are the other factors.
ASSIGNMENT
? Strategic alliances:
? Assembly operations:
FirstRanker.com - FirstRanker's Choice
This post was last modified on 18 February 2020