What is International Entrepreneurship?
International entrepreneurship refers to the process of engaging in entrepreneurial activities across national borders. It involves individuals or businesses seeking to create, develop, and manage innovative ventures in international or global markets. International entrepreneurs may pursue a variety of activities, including exporting products, establishing foreign subsidiaries, forming joint ventures with foreign partners, or engaging in cross-border mergers and acquisitions.
Table of Content
- 1 What is International Entrepreneurship?
- 2 What is Domestic Entrepreneurship?
- 3 Difference between International and Domestic Entrepreneurship
- 4 Importance of International Entrepreneurship to Firm
- 5 Entrepreneurial Entry Into New International Business
- 5.1 Exporting
- 5.2 Direct exporting
- 5.3 Indirect exporting
- 5.4 Licensing
- 5.5 Non-equity arrangements
- 5.6 Turn key projects
- 5.7 Management Contract
- 5.8 Foreign Direct Investment (FDI)
- 5.9 Minority interest
- 5.10 Majority interest
- 5.11 Joint Venture
- 5.12 Mergers
- 5.13 Horizontal merger
- 5.14 Vertical merger
- 5.15 Product extension
- 5.16 Market extension merger
- 5.17 Diversified activity merger
- 6 Barriers to International Trade and Entrepreneurship
- 7 Profiles of Global Entrepreneurs
International business scholars Wright and Ricks (1994) highlighted international entrepreneurship as a newly emerging research direction, and it became clear the arena included:
- Comparisons of entrepreneurial behavior in multiple countries and cultures as well as
- Organizational behavior that extends across national borders and is entrepreneurial.
According to McDougall & Oviatt(2000), International entrepreneurship is a combination of innovative, proactive, and risk-seeking behavior that crosses national borders and is intended to create value in organizations.
International entrepreneurship is defined as the expansion of international new undertakings or startups that from their commencement engage in international business, thus seeing their operation sphere as international from the initial stages of the international procedure.
Example: Tech industry Microsoft, Apple, Google, and Yahoo are enormous multinational companies now but they all started with limited funding from small startups. The demand for this technology- operating systems, search engines, office software, and smartphones is widespread and universal in established nations which is the cause of why these companies have rapid growth.
What is Domestic Entrepreneurship?
Domestic entrepreneurship refers to the process of starting, developing, and managing innovative business ventures within a single country’s borders. It involves individuals or organizations creating and operating businesses that primarily serve the domestic market, catering to the needs and demands of customers within their own country. Domestic entrepreneurs focus on establishing and growing their businesses within a local or national context, without engaging in international business activities.
Domestic Entrepreneurship: The importance of a production development strategy and customer concentration strategy is how the domestic entrepreneur is differentiated. Concentrating on limited geographical markets is involved in production development strategy. The customer concentration strategy incorporates the production of a specialty product that is purchased uncommonly.
Thus, a reliable “closeness” between the producer and consumer is implied for both of the domestic strategies. This may be a significant basis for highlighting the new undertaking’s decision to compete in a limited domestic context.
Difference between International and Domestic Entrepreneurship
A few differences between domestic and international entrepreneurship are described below:
- Economic system: Economic conditions within a country are required to be understood when an entrepreneur is functioning at the domestic level, but he/she should be having information and thorough knowledge about the economic system of those countries where he/she is operating business at international level which includes currency rate, phase of business cycle, etc. at international level.
- Stage of economic development: The development stage of a domestic country is what he/she should be concentrating on when an entrepreneur is operating at the national level; on the divergent he/she has to look at the nation from developed, developing and underdeveloped viewpoint and therefore plan in business strategies in the economy when he/she is operating on an international scale.
- Balance of Payments: The valuation of its currency is affected because of a country’s balance of payments. The valuation of a country’s currency disturbs business dealings between countries.
- Cultural sensitivity: An entrepreneur functioning at the national level must comprehend cultural issues prevailing in the home country and at the international level, he/she has to comprehend and manage the cultural diversity of customers as well as employees in business.
- Technological environment: Until now, technical changes are continuing in various nations reliant on time of implementation, up gradation of technology, etc. Even though technology is progressive at a larger scale it has to be analyzed by the entrepreneur and accordingly, he/she shall implement a plan and strategy in business processes.
- Government policy: Entrepreneurs are required to study and understand national as well as international policy if going in for internationalization of business, as constraints laid in the home country for the export of goods disturb trade of entrepreneur and constraints in the host country on entering of new entrepreneurs in their company.
- Political and legal environment: In international business as well as a national business, politics and rules play a crucial role. In the national as well as international markets, entrepreneurs should be alert to the political and legal environment.
Conducting business activities across national boundaries is a process of international entrepreneurship. It consists of exporting, certifying, or opening a sales office in another country. To satisfy the needs and requirements of target consumers is the main motive.
The difference between foreign and domestic markets is becoming less prominent as more countries become market focused and developed. International entrepreneurship is the procedure of an entrepreneur directing business activities over nationwide limitations. It is exporting, licensing, or opening a sales office in another nation. International entrepreneurship occurs when an entrepreneur performs his or her business model in more than one country.
Importance of International Entrepreneurship to Firm
If the sale of a company is decreasing in the domestic market, international entrepreneurship is beneficial because they can sell products in the international market bearing in mind the demand for the product in other country market customers. Entrepreneurs can earn profits by their sales by selling their products in foreign markets which have touched the maturity stage of their life cycle in domestic markets. By selling their products in the global market businesses which are experiencing high levels of fixed costs can lessen their manufacturing costs by spreading these fixed costs over a long number of units.
Entrepreneur can expand their entrepreneurial affordability and improve their status. Entrepreneurs will learn how to encourage the habit of customer relation management (CRM) through the internationalization of business.
Presence in the global market will make the entrepreneur profound towards their customers in the national market and they can adopt a more respectful attitude towards foreign habits and customers. Entrepreneurs can appoint interested, multi-lingual employees; learn continually about foreign markets. They will think internationally and start evolving an outlook from a global perspective.
Increased sales and profit
Entrepreneurs can sell their products in foreign markets where the life cycle of a product is in favorable conditions when they are not able to make a profit or demand for their product decreases in the local market. E.g. Apple earned added profits from international business.
Lower manufacturing cost
The company can choose the production process in the host country if the company’s manufacturing cost upsurges by manufacturing products in the home country, on the divergent if the company is in a no-profit or no-loss situation then the company can choose any option. e.g. McDonald’s.
Advantage of cheap labor
The major challenge for every business is the quantity and quality of labor, if the labor is inexpensive in foreign countries then the business can outsource essential labor if the organization is into foreign operations.
Utilization of talent and managerial competence
The performance or activity can be outsourced or hired from the host country businesses are not able to get the required talented workforce in their own country, which has given birth to the notion of expatriation.
International business is one of the primary platforms to achieve objectives such as growth and expansion of business which are very essential for an entrepreneur.
Expansion of domestic market
Beyond national boundaries international business helps for domestic market to increase. Businesses can go in for growth of the business to advertise their products in international markets when the domestic market has been entirely selected. e.g. Sony
Globalization of customers
To preserve pace with competition to attract customers domestic businesses have to go in for internationalization of business when customers in the country desire to buy foreign brand products.
Globalization of competitors
International business not only upsurges the opportunity for existence and growth but also encourages companies to face competition from global competitors in the market, which in turn hints at growing of the market, chasing global scale efficiencies, etc.
Payoffs of international business
Owing to the internationalization of business international business progresses image of the company in the national market and appeals more consumers in the domestic market. e.g. Ranbaxy
Entrepreneurial Entry Into New International Business
On the goals of the entrepreneur and the company’s strengths and weaknesses, the choice of entry method depends.
It means selling goods made in one nation to another nation. Exporting typically involves the sale and shipment of products manufactured in one nation to a customer positioned in another nation.
It indicates where a business takes complete responsibility for making its goods available in the target market by selling directly to end users generally through its agents.
Indirect exporting takes place when the exporting corporation does not have the necessary infrastructure to involve it in direct exporting. It comes into existence when the export business sells its products to mediators who in turn sell the same products to the end customers in foreign markets.
It includes an entrepreneur whose manufacturer (license) is giving a foreign manufacturer (licensor) the right to use a patent, trademark, technology, production process, or product against the payment of royalty.
Without direct equity investment in the foreign market non-equity arrangements allow the entrepreneur to enter a market. In return for a royalty payment licensing includes an entrepreneur who a manufacturer is giving a foreign manufacturer the power to use a patent, trademark, or knowledge.
When the entrepreneur has no chance of entering the market through exporting or direct investment this arrangement is most appropriate. The procedure is ordinarily low-risk and an easy way to generate incremental revenue. Licensing arrangements have several drawbacks without careful analysis.
Turn key projects
Something that is ready for instant use is referred as turnkey, generally used in the trade or supply of goods or services. It is anagreement under which a businessdecides to fully design, construct and equip a manufacturing/ business/ service facility and turn the project over to the purchaser when it is complete for operation for payment.
Through turn-key projects lesser developed countries are able to obtain manufacturing technology without surrendering economic control. A foreign entrepreneur builds a facility, trains the workers, and trains the organization to run the installation. Once the operation is on-line, it is turned over to local owners. Early profits can lead to follow-up sales. By the local company or government financing is provided.
Against fee management contract is apreparation under which operational control of an enterprise is vested by contract in a separate enterprise which performs the necessary managerial functions. Management contracts include not just selling a method of doing things (as with franchising or certifying) but also doing them. The management contract allows the purchasing country to gain foreign know-how without turning ownership over to a foreigner.
Foreign Direct Investment (FDI)
Either by buying a company in the country or by increasing the operations of an existing business in the country, foreign direct investment (FDI) is a straight investment into one country by a company in production located in another country. For direct investment, the wholly-owned foreign subsidiary has been a preferred mode of ownership.
Minority interest means a company having interest or ownership of less than 50 percent in another company by either an investor or another company a significant but non-controlling ownership of less than 50% of a company’s voting shares. The minority interest can provide the firm with either a source of raw materials or a captive market for products. Before making a major investment entrepreneurs have used minority positions to earn a position in the market.
An ownership interest greater than fifty percent (50%) of the voting interest in a business enterprise is known as majority interest.
A business contract in which parties approve to develop, for a limited time, a new object and new assets by contributing equity is called a joint venture (JV). Two firms get together and form a third company in which they share the equity. In two situations Joint ventures have been used by entrepreneurs: When the entrepreneur wants to obtain local knowledge and a recognized facility.
When speedy entry into a market is needed, they exercise control over the enterprise and accordingly share incomes, expenditures, and properties. When two parties come together to take on one project a joint venture takes place. In a joint venture, to build on the original concept both parties equally invest in the project in terms of money, time, and energy.
The joining of two or more companies, usually by proposing the stockholders of one company securities in the acquiring company in exchange for the submission of their stock. Mergers and achievements refer to the feature of corporate policy, corporate investment, and management dealing with the purchasing, selling, separating, and conjoining of different companies and similar objects that can help an enterprise grow quickly in its sector.
When a firm is being taken over by, or merged with, another firm which is in the similar industry and the similar stage of manufacture as the merged firm, a horizontal merger takes place. e.g. a car manufacturer merging with another car manufacturer / a horizontal merger is when two companies opposing in the same market merge or join together. e.g.merger of Daimler-Benz and Chrysler.
The grouping of two or more firms in consecutive stages of production that often involve purchaser and supplier relationships is known as a vertical merger. This form of merger steadies supply and production and offer more control of these serious areas. (Merger between McDonald’s and Philips Petroleum)
A merger happens when obtaining and acquiring companies have connected production or distribution activities but do not have products that contend directly with each other. A grouping of two firms producing the same product but selling them in different geographic markets is a combination of product extension mergers.
The most important benefit of these mergers is that firms can economically combine their management skills, production, and marketing with acquired firms. (Merger between western publishing (children’s books) and Mattel (Toy Company).
Market extension merger
Two companies that deal in the same products but in separate markets are when a market extension merger takes place. The main purpose of the market extension merger is to make sure that the merging companies can get admission to a bigger market and that guarantees a bigger client base. (Acquisition of Eagle Bancshares Inc. by the RBC Centura)
Diversified activity merger
This is a multinational merger relating merging of two dissimilar firms. (Philip Morris acquisition of Miller Brewing)
Barriers to International Trade and Entrepreneurship
Starting near about around 1947 with the development of general trade agreements and the reduction of trade barriers there has been an optimistic attitude toward free trade. General Agreement on Tariffs and Trade (GATT) is a multilateral agreement to loosen trade by removing tariffs, grants, and import quotas. In each round, mutual tariff reductions are negotiated between member nations. Members can ask for an examination of violations. While GATT has helped out develop more clear trade, its voluntary membership gives it little authority.
Increasing protectionist attitudes
Due to the rise in protective pressures in many countries, support for free trade increased meaningfully in the 1980s.The persistent U.S. trade deficit has stressed the world trading system. The economic success of a country (Japan) alleged as not playing by the rules has also strained the trading system. In response, many countries have established two-sided voluntary export restrictions to avoid GATT.
Trade blocs and free trade areas
Groups of nations are coming together to upsurge investment between nations in the group and eliminate others. Free trade areas have been recognized between the U.S. and Israel and between the U.S. and Canada. The North American Free Trade Agreement (NAFTA) between the U.S., Canada, and Mexico reduces barriers and boosts investment.
The Americas, Argentina, Brazil, Paraguay, and Uruguay have created the Mercosul trade zone, a free trade zone among the countries. The European Community (EC) originated on the principle of supra-nationality—member nations are not able to enter into trade agreements on their own that are unpredictable with EC regulations.
To partner with an entrepreneur in that country is one of the best ways to enter an international market. A good partner shares the entrepreneur’s dream and is unlikely to exploit the partnership. Choose a good partner. Gather information about the industry and possible partners. Check references for each possible partner. Meet with the possible partner to get to know the individual and company before any promise is made.
Attitude of entrepreneur
For international trade a major barrier will be when an entrepreneur has the negative mindset that a foreign market is unfamiliar to him/her and he/she might find it tough to set up his/her business in a new country.
Lack of information
Issues in terms of acceptance and locating the product in the market, as the entrepreneur is a new entrant in the international market he/she is uninformed about the market conditions in the host country and the taste and fondness of customers.
Lack of network influences
Network with recognized business corporations makes it easy for the entrepreneur in a new market but if the entrepreneur has no acquaintances in a foreign country then it will be challenging for the entrepreneur from an early stage of receiving required authorization to starting a business in country.
Financial institutions may be unwilling in terms of providing the required finance to entrepreneurs as international business comprises huge risks.
Duty imposed by the government on imports means tariff. Imposing tariffs increases the price of imported goods making them less attractive to consumers and guarding the interests of the manufacturers of equivalent domestic products and services.
The difficulties to imports other than tariffs such as testing, authorization, or administrative obstacles that have effect of restricting imports are non-tariff barriers. These are administrative measures that are imposed by a domestic government to distinguish against foreign goods and in favor of home goods.
Before a country’s goods enter into the foreign market it has to go through certain tests for authentication which is what is referred to as technical barriers.
In a small number of nations there happen to be plentiful business opportunities but the political scenario in that nation may be unbalanced such as kidnappings, bombings, and violence against businesses and employees which proves to be a major question mark in terms of the future success of the business.
Profiles of Global Entrepreneurs
Profiles of some global entrepreneurs are presented below:
William “Bill” Gates
|Seattle, Washington, USA
|Information Technology, Computer Science
|Changed the Personal Computer Forever
|More than $53 billion
Bill Gates is the second richest man on the earth; one of the most recognized names in the world, as copious as celebrities as movie stars or pop stars due to his extremely public profile. Bill has continuously been in the limelight since he initiated his career way back when he was 13yearsof age and when the personal computer was far from near and Bill, Paul Allen and some others from high school started using the computers of the time, the DEC PDP-10 was one of them.
Bill, Allen, and their friends calculated the inner workings and made notes of coding language, and tried to decode it to understand how a computer functioned. They were eventually debarred from the DEC PDP-10 after they were trapped exploiting code “bugs” which permitted them to prolong the extent of time they had been allocated on the machine. In 1973 after completing high school with a 1600 (top score) on his SATs, he registered at the University of Harvard. While learning at Harvard.
Bill made a new friend in Steve Ballmer. They have continued to be friends to this day and Ballmer took over as CEO of Microsoft upon Gate’s early retirement. After spending much of his study time at the helm of the University’s computer systems to start his own business Bill decided to leave Harvard, this was moderately due to the launch of the Altair 8800 which used Intel’s new CPU 8080 which had made Bill excited by the prospects of what he could do with the technology.
|White Plains, New York, USA
|Social Media Mogul
|Revolutionized Online Social Media and Networking
Mark Zuckerberg, is possibly one of the most pronounced individuals, not only is he one of the richest men on the globe, he’s just had a story depicted by the Hollywood titans in a movie entitled The Social Network. Zuckerberg first launched his website Facebook although attending Harvard University, the website was launched from his dormitory room on 4th February 2004. Mark Zuckerberg was pooled by fellow Harvard University students Dustin Moskovitz and Chris Hughes as he sought to evolve the Facebook website.
To initiate with, Facebook wasn’t accessible to everybody, and due to this competitors such as; MySpace and Bebo seemed to be the clear winners, in terms of social networking. Though that soon transformed when Zuckerberg and the co-founders of Facebook dropped out of Harvard University in an offer to make Facebook successful, which they knew was promising, due to the amount of support it had received at the University.
By then 2004 Facebook had established over 1 million users for the website. Then in 2005 capital venture firm Accel Partners, invested $12.7 million into the business to support them evolve it further. Shortly Facebook was being loomed by huge brands and companies whose dearth to buy out Zuckerberg and their co-tutor is evident in influential competencies and the possible revenue to be made from it. But Zuckerberg didn’t sell Facebook and he still is CEO of it even though his partners have left now, and today according to Forbes magazine Zuckerberg is worth approximately $6.9 billion.
|Albuquerque, New Mexico, USA
Born in 1964, Jeff Bezos is the founder, the leader, and the chief executive officer as well as the Chairman of the board of one of the most prevalent and renowned websites/e-commerce sites in the world, Amazon.com. Jeff Bezos was born in Albuquerque New Mexico. His mother was just a teenage girl when he was born, she married his father which lasted only one year in total, and She remarried when Jeff was just five years old the man he reminiscences his father Miguel Bezos.
They relocated to Texas and Miguel became an engineer for Exxon. Jeff Bezos was very fascinated by scientific projects at an early age and got into a lot of suffering by reading up small electric alarms to keep his siblings out of his bedroom. He managed to convince his parents to transform their garage into his laboratory, which matched him just fine.
He went on to be very extremely awarded through his school and college years and he was awarded an honorary doctorate in science and technology from Carnegie Mellon University in 2008. Later, finally graduating from Princeton University, Jeff Bezos decided he desired to work in the computer science field and began working on Wall Street.
In 1994 after an optimistic idea whilst on a cross-country trip from New York to Seattle Jeff Bezos came up with a business plan for what he called, is on. He managed to get some support and commenced Internet business that very year and as we know it is now one of the most successful e-commerce sites in the world. Amazon.com currently has revenue of around $25 billion for the idea he came up with in the back of a car on a road trip.