LEARNING OBJECTIVES

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EX 6-1 INC 500 FIRMS IN VARIOUS COUNTRIES
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INTRODUCTION SMALL BUSINESSES

• Europe, N. American, Japan, over 98 of
  businesses are small
• Employ more than 50
• Produce nearly 50 of the countries' GNPs
• Create more than 2/3 of new jobs

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WHAT IS A SMALL BUSINESS?

• UN less than 500 employees
• The popular press less than 100 employees
• U.S. Small business administration definition
  varies by industry, sales revenue and the number
  of people

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WHAT IS AN ENTREPRENEUR?

• Creates new ventures that seek profit and growth
• Faces risk and uncertainty of new and untested
  business
• Risk outcomes are variable
• Uncertainty impossible to predict variable
  outcomes

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NEW VENTURES

• Enter a new market
• Offer a new product or service
• Introduce a new method technology, or innovative
  use of raw materials

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INTERNATIONALIZATION AND THE SMALL BUSINESS

• Small business stage model
• Global start-up

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THE SMALL BUSINESS STAGE MODEL

• Stage 1--passive exporting
• Stage 2--export management
• Stage 3--export department
• Stage 4--sales branches
• Stage 5--production abroad
• Stage 6--the transnational

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GLOBAL START UP

• Occur when firms begin as multinationals
• Require unique conditions and organizations

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SMALL BUSINESS BARRIERS TO INTERNATIONALIZATION

• Small Size
• Limited financial and personnel resources
• Lack of sufficient scale to produce goods or
  services as efficiently as larger companies

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• Managers limited international experience
• Negative attitudes
• Belief that venture too risky/not profitable
• Competition seen as domestic
• Ignoring of international opportunities

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THE SOLUTION A Global Culture

• Values that view strategic opportunities as
  global
• A common language to describe international
  operations
• Owners have a global mind-set
• Thinking globally

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THE SOLUTION Change Attitudes of Key Decision
Makers

• Begin close in culture and geography
• Overcome skepticism regarding the international
  markets
• Positive attitudes more necessary for global
  start-ups

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EX 6-2 ATTITUDES CONCERNING INTERNATIONALIZATION
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INTERNATIONALIZATION EFFECTS ON THE CEO

• Increased travel and stress from undertaking a
  new venture
• Can adversely affect family life
• Takes away from the daily management
• Job of CEO may change

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EX 6-3 TRAINING KNOWLEDGE NEEDS OF SMALL FIRM
CEOs
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SIZE AND SMALL BUSINESS INTERNATIONALIZATION

• Larger firms
• More likely to export
• More resources to absorb risk
• Differ primarily in initial internationalization

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THE SMALL BUSINESS ADVANTAGE

• Faster innovation
• Can change products and internal operations
  faster
• Speed can overcome size disadvantages

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THE FUTURE

• Falling barriers to small businesses
  internationalization
• More global start-ups
• More government programs
• Trade agreements a positive force

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• Increase in the number of small businesses
  engaged in international activities
• Makes it easier for other businesses to develop a
  global culture
• More managers gain experience in international
  business

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SHOULD A SMALL BUSINESS GO INTERNATIONAL the
questions

• Does the company have
• A global product or service?
• The managerial, financial, and organizational
  resources?
• The willingness to face the risks of
  internationalization?

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• Is there a country in which we feel comfortable
  doing business?
• Is there a profitable market for our product or
  service?
• Which country should we enter?

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• Do we have a unique product or service that is
  not easily copied by larger companies or local
  entrepreneurs?
• Do location advantages exist upstream in the
  value chain?
• Can we afford not to go global?

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EXHIBIT 6-5 STEPS IN PICKING A FOREIGN MARKET

• Screen potential markets
• Target potential countries
• Assess target markets - key trends, competition,
  potential problems
• Draw conclusions--make the choice

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PARTICIPATION STRATEGIES

• Same participation options as do larger firms
• Most often exporting

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FINDING CUSTOMERS AND PARTNERS

• Trade shows
• Catalogue expositions
• International advertising agencies and consulting
  firms
• Govt.-sponsored trade missions
• Direct contact

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SEE EXHIBIT 6-7 FOR INTERNATIONAL TRADE LEADS ON
THE WORLD WIDE WEB!
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READY TO GO AND CONNECTED

• Finding the right overseas partner the most
  important step
• Find a good wedge to break into a new market

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ENTRY WEDGE DEFINED

• ".. A strategic competitive advantage for
  breaking into the established pattern of
  commercial activity" (Vesper)

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TYPES OF ENTRY WEDGES
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FIRST MOVER ADVANTAGE

• Establish the business before other firms can
  react Must be innovative
• Must be comprehensive
• Meet customer expectations in areas such as
  warranty and expected components

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FIRST MOVER COMPETITIVE ADVANTAGES

• Technological
• Access natural or social resources
• Develop close relationships with research
  universities
• The best locations - raw materials or proximity
  to customers

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COPY CAT BUSINESSES

• The "me too" strategy
• Adopt existing products or services
• But-- find a niche or slight innovation to
  attract customers

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SUCCESSFUL COPY CAT MOVES

• Be the first to a new standard
• Go after the toughest customers
• Play to different customer needs
• Transfer the location
• Be a dedicated supplier/distributor
• Seek abandoned or ignored markets
• Acquire an existing business

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SUMMARY AND CONCLUSIONS The Small Business

• Key factor in the economies of all nations
• Provides jobs, economic growth, innovation
• Must face the challenges of entering the
  international marketplace

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• Can go international--through stages or through
  global start-ups
• Have the same multinational and participation
  strategic options as larger firms
• Entering the international market is an
  entrepreneurial venture