Section 2 From Idea to Opportunity Chapter 6
Description: Section 2 From Idea to Opportunity Chapter 6 Identifying and Analyzing Domestic and International Opportunities Introduction In order to expand a venture, the entrepreneur should identify opportunities for domestic and international
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slide1. Section 2 From Idea to Opportunity Chapter 6
Identifying and Analyzing Domestic and International Opportunities<br>
slide2. Introduction In order to expand a venture, the entrepreneur should identify opportunities for domestic and international expansion.
The distinction between foreign and domestic markets is becoming less pronounced.
The pressure to internationalize is being felt in virtually every organization, including entrepreneurships.<br>
slide3. Opportunity Assessment Plan The key to a profitable domestic and international venture is to develop an idea that has a large, reachable market.
An opportunity assessment plan differs from a business plan.
Shorter than a business plan.
Focus is on the opportunity, not the venture.
The plan has no pro forma financial statements.
It is the basis of the decision to act on a opportunity or wait.
An opportunity assessment plan has four sections – two major sections and two minor sections.<br>
slide4. Opportunity Assessment Plan – Major Sections The first major section includes the following:
A description of the product.
The market need for the product or service.
Specific aspects of the product or service.
Products currently filling the need, features and prices.
Competitive companies in the industry.
Unique selling propositions of the product. The second major section includes the following:
The market need filled.
The social condition underlying the market need.
Any available data to describe this market need.
Size, trends, characteristics of the market.
Growth rate of the market.<br>
slide5. Opportunity Assessment Plan – Minor Sections A third section answers the following questions:
Why does this opportunity excite you?
How does the product idea fit into your background and experience?
What business skills do you have?
What business skills are needed?
Do you know someone who has these skills? The final section is a time line focusing on the following:
Identifying each step.
Determining the sequence of activities.
Identifying what is accomplished in each step.
Determining time and money needed at each step.
Determining total time and money needed.
Identifying the source of this needed money.<br>
slide6. Information Sources SCORE is a nonprofit providing free online and in-person assistance through training, consulting, and mentoring.
Small Business Development Centers provide counseling, training, and technical assistance when starting a new venture.
General information sources include the U.S. Chamber of Commerce Small Business Center.
Many other valuable websites exist including The Small Business Investor Alliance , National Venture Capital Association, and the Collegiate Entrepreneurs Organization.<br>
slide7. Industry and Market Information Plunkett provides industry data, market research, trends and statistics on markets, and forecasts.
Frost and Sullivan provides very industry specific information.
Euromonitor provides information on companies and brands as well as consumer market sizes and marketing parameters.
Gartner provides information on technology markets.
Gale Directory Library provides industry statistics and a directory of nonprofit organizations and associations.<br>
slide8. Competitive Company and Product Information Business Source Complete has company and industry information through their Datamonitor reports.
Hoovers provides information on both large and small companies with links to competitors in the NAICS category.
Mergent has detailed company and product information on U.S. and international companies.<br>
slide9. Government Sources and Other Information Sources Government sources include the following:
Census reports.
Export/import authority.
NAICS and SIC codes.
Use search engines and pairs of key terms to find general online information.
Some trade associations do market surveys and are involved in international standards issues.
Trade publications provide interesting information and insights on trends, companies, market conditions, and trade shows.<br>
slide10. The Nature and Importance of International Business International entrepreneurship is the process of conducting business across national boundaries.
It may consist of exporting, licensing, or opening a sales office in another country.
The U.S. is a relative newcomer to international business.
Foreign investors helped build much of the early U.S. industrial base.
The future commercial strength of the U.S. depends on entrepreneur’s success in markets outside the U.S.
International business is important to firms of all sizes.
Successful entrepreneurs understand how international business differs from domestic business and responds accordingly.<br>
slide11. International Versus Domestic Entrepreneurship All entrepreneurs are concerned with – sales, costs, and profits.
What varies is the relative importance of the factors.
Decisions are complex due to uncontrollable factors.
Conducting a P.E.S.T. analysis is useful when exploring international business opportunities. Political.
Public policy, who influences policymakers, wars, and government stability.
Economic.
Taxation, monetary policy, distribution, and trends.
Social.
Language, psychographics, ethics, and major events.
Technical.
Technology varies by country and products should reflect the country’s infrastructure.<br>
slide12. Culture Culture refers to common ways of thinking and behaving.
Culture is learned behavior, identifying an individual and society.
Cultural aspects that may prove difficult include:
Language.
Social structure.
Religion.
Politics.
Education.
Manners and customs.
Aesthetics.<br>
slide13. Available Distribution Systems Distribution channels within the targeted country is a challenge.
To select the best channel of distribution, consider the following:
Overall sales potential.
Amount and type of competition.
Cost of the product.
Geographic size and density of the country.
Investment policies of the country.
Exchange rates and monetary controls.
Level of political risk.
The overall marketing plan.<br>
slide14. Motivations to Go Global Profits are the most significant reasons for going global.
Profitability is lowered due to costs of preparing to go global, underestimating the costs involved, and losses due to mistakes.
Sales to other markets is another reason to go global.
The domestic market may be leveling or even declining.
Entrepreneurs may move to international markets to avoid industry regulations, or societal concerns about the product.
When the entrepreneur’s technology is obsolete in the domestic market, there may be sales opportunities in foreign markets.
Going global may take advantage of lower costs in foreign countries for labor, overhead, and raw materials.<br>
slide15. Strategic Effects of Going Global One major effect centers on the concept of proximity to the firm’s customers and ports.
Some factors can make a foreign market that is geographically close seem psychologically distant.
The distance envisioned by the entrepreneur may be more a matter of perception than reality.
Closer psychological proximity makes it easier to enter a market.
There are more similarities than differences between individual entrepreneurs, regardless of the country.<br>
slide16. Foreign Market Selection Base the market selection on past sales and competitive positioning and assess and rank each foreign market alternative.
One method employs a five-step approach.
Develop appropriate indicators.
Collect data and convert into comparable indicators.
Establish an appropriate weight for each indicator.
Analyze the data.
Select the appropriate market from the market rankings.<br>
slide17. Entrepreneurial Entry Strategies Exporting.
Indirect exporting involves the least amount of risk using an export management firm, or purchasing offices for commodities.
Direct exporting through independent distributors or an overseas sales office requires little financial commitment.
Nonequity arrangements.
Licensing is used when there is no intent to export or directly invest.
Turn-key projects are facilities built in a foreign country and turned over to local owners for operation.
Management contracts allow entrepreneurs to contract their management techniques and skills to a foreign purchasing company.
Direct foreign investment.
Ownership percentage hinges on amount of money invested, the nature of the industry and the rules of the host government.<br>
slide18. Direct Foreign Investment Minority interests allows an entrepreneur to gain a foothold or acquire experience in a market before committing.
Joint ventures are used to purchase local knowledge or an established facility, or when rapid entry is needed.
Majority interest is the purchase of over 50% equity in a firm.
Mergers are often difficult to assess.
Horizontal mergers are motivated by economies of scale.
A vertical merger offers control over supply and production.
In a product extension merger the acquired firm has related activities.
A market extension merger combines skills of the acquired firm.
In a diversified activity merger, the acquiring firm does not run the new company.<br>
slide19. Entrepreneurial Partnering One of the best entry methods is partnering with an entrepreneur in the targeted country.
Foreign partners know the culture and can facilitate business transactions and keep the entrepreneur current on conditions.
A good partner can help the entrepreneur achieve their goals.
Good partners should share the entrepreneur’s vision and will then be unlikely to exploit the partnership for their own benefit.<br>
slide20. Aspects of International Trade General Agreement on Tariffs and Trade (GATT).
A multilateral agreement liberalizing trade by eliminating tariffs, subsidies, and import quotas.
Trade agreements and free trade areas.
Free trade areas (FTA) exist between the U.S. and Israel and between the U.S. and Canada.
The North American Free Trade Agreement (NAFTA) reduces barriers and encourages investment.
The Mercosur trade zone exists between North and South American countries.
The Trans-Pacific Partnership (TPP) includes the U.S., Japan and ten other countries.
The European Community (EC) encourages supra-nationality.<br>
slide21. Entrepreneur’s Strategies and Trade Barriers Trade barriers pose problems as they increase the costs of exporting.
Voluntary export restrictions may limit the ability to sell products in a country from production facilities outside the country.
The entrepreneur may have to locate assemble or facilities in a country to conform to the local content regulations.<br>
slide22. Implications for the Global Entrepreneur The cultural, political, economic, and distribution systems of a country influence its attractiveness as a potential market and investment opportunity.
The costs and political risks are lower in countries more advanced economically and politically.
Long-run benefits are the country’s future growth and expansion.<br>
Identifying and Analyzing Domestic and International Opportunities<br>
slide2. Introduction In order to expand a venture, the entrepreneur should identify opportunities for domestic and international expansion.
The distinction between foreign and domestic markets is becoming less pronounced.
The pressure to internationalize is being felt in virtually every organization, including entrepreneurships.<br>
slide3. Opportunity Assessment Plan The key to a profitable domestic and international venture is to develop an idea that has a large, reachable market.
An opportunity assessment plan differs from a business plan.
Shorter than a business plan.
Focus is on the opportunity, not the venture.
The plan has no pro forma financial statements.
It is the basis of the decision to act on a opportunity or wait.
An opportunity assessment plan has four sections – two major sections and two minor sections.<br>
slide4. Opportunity Assessment Plan – Major Sections The first major section includes the following:
A description of the product.
The market need for the product or service.
Specific aspects of the product or service.
Products currently filling the need, features and prices.
Competitive companies in the industry.
Unique selling propositions of the product. The second major section includes the following:
The market need filled.
The social condition underlying the market need.
Any available data to describe this market need.
Size, trends, characteristics of the market.
Growth rate of the market.<br>
slide5. Opportunity Assessment Plan – Minor Sections A third section answers the following questions:
Why does this opportunity excite you?
How does the product idea fit into your background and experience?
What business skills do you have?
What business skills are needed?
Do you know someone who has these skills? The final section is a time line focusing on the following:
Identifying each step.
Determining the sequence of activities.
Identifying what is accomplished in each step.
Determining time and money needed at each step.
Determining total time and money needed.
Identifying the source of this needed money.<br>
slide6. Information Sources SCORE is a nonprofit providing free online and in-person assistance through training, consulting, and mentoring.
Small Business Development Centers provide counseling, training, and technical assistance when starting a new venture.
General information sources include the U.S. Chamber of Commerce Small Business Center.
Many other valuable websites exist including The Small Business Investor Alliance , National Venture Capital Association, and the Collegiate Entrepreneurs Organization.<br>
slide7. Industry and Market Information Plunkett provides industry data, market research, trends and statistics on markets, and forecasts.
Frost and Sullivan provides very industry specific information.
Euromonitor provides information on companies and brands as well as consumer market sizes and marketing parameters.
Gartner provides information on technology markets.
Gale Directory Library provides industry statistics and a directory of nonprofit organizations and associations.<br>
slide8. Competitive Company and Product Information Business Source Complete has company and industry information through their Datamonitor reports.
Hoovers provides information on both large and small companies with links to competitors in the NAICS category.
Mergent has detailed company and product information on U.S. and international companies.<br>
slide9. Government Sources and Other Information Sources Government sources include the following:
Census reports.
Export/import authority.
NAICS and SIC codes.
Use search engines and pairs of key terms to find general online information.
Some trade associations do market surveys and are involved in international standards issues.
Trade publications provide interesting information and insights on trends, companies, market conditions, and trade shows.<br>
slide10. The Nature and Importance of International Business International entrepreneurship is the process of conducting business across national boundaries.
It may consist of exporting, licensing, or opening a sales office in another country.
The U.S. is a relative newcomer to international business.
Foreign investors helped build much of the early U.S. industrial base.
The future commercial strength of the U.S. depends on entrepreneur’s success in markets outside the U.S.
International business is important to firms of all sizes.
Successful entrepreneurs understand how international business differs from domestic business and responds accordingly.<br>
slide11. International Versus Domestic Entrepreneurship All entrepreneurs are concerned with – sales, costs, and profits.
What varies is the relative importance of the factors.
Decisions are complex due to uncontrollable factors.
Conducting a P.E.S.T. analysis is useful when exploring international business opportunities. Political.
Public policy, who influences policymakers, wars, and government stability.
Economic.
Taxation, monetary policy, distribution, and trends.
Social.
Language, psychographics, ethics, and major events.
Technical.
Technology varies by country and products should reflect the country’s infrastructure.<br>
slide12. Culture Culture refers to common ways of thinking and behaving.
Culture is learned behavior, identifying an individual and society.
Cultural aspects that may prove difficult include:
Language.
Social structure.
Religion.
Politics.
Education.
Manners and customs.
Aesthetics.<br>
slide13. Available Distribution Systems Distribution channels within the targeted country is a challenge.
To select the best channel of distribution, consider the following:
Overall sales potential.
Amount and type of competition.
Cost of the product.
Geographic size and density of the country.
Investment policies of the country.
Exchange rates and monetary controls.
Level of political risk.
The overall marketing plan.<br>
slide14. Motivations to Go Global Profits are the most significant reasons for going global.
Profitability is lowered due to costs of preparing to go global, underestimating the costs involved, and losses due to mistakes.
Sales to other markets is another reason to go global.
The domestic market may be leveling or even declining.
Entrepreneurs may move to international markets to avoid industry regulations, or societal concerns about the product.
When the entrepreneur’s technology is obsolete in the domestic market, there may be sales opportunities in foreign markets.
Going global may take advantage of lower costs in foreign countries for labor, overhead, and raw materials.<br>
slide15. Strategic Effects of Going Global One major effect centers on the concept of proximity to the firm’s customers and ports.
Some factors can make a foreign market that is geographically close seem psychologically distant.
The distance envisioned by the entrepreneur may be more a matter of perception than reality.
Closer psychological proximity makes it easier to enter a market.
There are more similarities than differences between individual entrepreneurs, regardless of the country.<br>
slide16. Foreign Market Selection Base the market selection on past sales and competitive positioning and assess and rank each foreign market alternative.
One method employs a five-step approach.
Develop appropriate indicators.
Collect data and convert into comparable indicators.
Establish an appropriate weight for each indicator.
Analyze the data.
Select the appropriate market from the market rankings.<br>
slide17. Entrepreneurial Entry Strategies Exporting.
Indirect exporting involves the least amount of risk using an export management firm, or purchasing offices for commodities.
Direct exporting through independent distributors or an overseas sales office requires little financial commitment.
Nonequity arrangements.
Licensing is used when there is no intent to export or directly invest.
Turn-key projects are facilities built in a foreign country and turned over to local owners for operation.
Management contracts allow entrepreneurs to contract their management techniques and skills to a foreign purchasing company.
Direct foreign investment.
Ownership percentage hinges on amount of money invested, the nature of the industry and the rules of the host government.<br>
slide18. Direct Foreign Investment Minority interests allows an entrepreneur to gain a foothold or acquire experience in a market before committing.
Joint ventures are used to purchase local knowledge or an established facility, or when rapid entry is needed.
Majority interest is the purchase of over 50% equity in a firm.
Mergers are often difficult to assess.
Horizontal mergers are motivated by economies of scale.
A vertical merger offers control over supply and production.
In a product extension merger the acquired firm has related activities.
A market extension merger combines skills of the acquired firm.
In a diversified activity merger, the acquiring firm does not run the new company.<br>
slide19. Entrepreneurial Partnering One of the best entry methods is partnering with an entrepreneur in the targeted country.
Foreign partners know the culture and can facilitate business transactions and keep the entrepreneur current on conditions.
A good partner can help the entrepreneur achieve their goals.
Good partners should share the entrepreneur’s vision and will then be unlikely to exploit the partnership for their own benefit.<br>
slide20. Aspects of International Trade General Agreement on Tariffs and Trade (GATT).
A multilateral agreement liberalizing trade by eliminating tariffs, subsidies, and import quotas.
Trade agreements and free trade areas.
Free trade areas (FTA) exist between the U.S. and Israel and between the U.S. and Canada.
The North American Free Trade Agreement (NAFTA) reduces barriers and encourages investment.
The Mercosur trade zone exists between North and South American countries.
The Trans-Pacific Partnership (TPP) includes the U.S., Japan and ten other countries.
The European Community (EC) encourages supra-nationality.<br>
slide21. Entrepreneur’s Strategies and Trade Barriers Trade barriers pose problems as they increase the costs of exporting.
Voluntary export restrictions may limit the ability to sell products in a country from production facilities outside the country.
The entrepreneur may have to locate assemble or facilities in a country to conform to the local content regulations.<br>
slide22. Implications for the Global Entrepreneur The cultural, political, economic, and distribution systems of a country influence its attractiveness as a potential market and investment opportunity.
The costs and political risks are lower in countries more advanced economically and politically.
Long-run benefits are the country’s future growth and expansion.<br>