INTERNATIONAL

ENTREPRENEURIAL
OPPORTUNITIES
Lecture # 6
Course Instructor
Sahar Ansari
International Entrepreneurial Opportunities
• As more countries become market oriented and
developed, the distinction between foreign and domestic
markets is becoming less pronounced.
• International entrepreneurship is the process of an
entrepreneur conducting business activities across
national boundaries. It is exporting, licensing, or opening a
sales office in another country. When an entrepreneur
executes his or her business in more than one country,
international entrepreneurship occurs.
Direct Foreign Investment
• Majority interest Another equity method is to purchase a
majority interest in a foreign business. The majority
interest allows the entrepreneur to obtain managerial
control while maintaining the company’s local identity. In
technical sense anything over 50% of the equity of the
firm is majority interest
100 Percent Ownership
• One hundred percent ownership assures control. One form of 100
percent ownership is mergers and acquisitions, but the entrepreneur
needs to have a general understanding of the benefits and problems of
mergers as a strategic option.
• A horizontal merger is the combination of two firms that produce
closely related projects in the same area. the merger of HP and
Compaq are examples of horizontal merger. A horizontal merger
decreases competition in the market. If Coca-Cola and Pepsi were to
merge, this would be an example of a horizontal merger. 
• A vertical merger is between two companies producing different goods
or services for one specific finished product.  This type of merger
happens when companies in an industry’s supply chain merge
operations.  Pepsi’s merger with restaurant chains that it supplies with
beverages is a vertical merger. E-Bay buying PayPal is another
example. An auto manufacturing company merging with a parts supplier.
• A market extension merger is when two firms produce the same
products but sell them in different areas. Market extension
mergers allow merging companies to gain access to a bigger
market share and a larger client base. 
• Example
• RBC Centura’s acquisition of Eagle Bancshares, Inc. is an
example of a market extension merger.  Eagle Bancshares holds
the Tucker Federal Bank in Atlanta, which in terms of market
share, is the one of the ten biggest banks in the area.

• A diversified activity merger A conglomerate merger is between

two companies involved in totally unrelated business activities. 
Pure and mixed are two types of conglomerate mergers.  Pure
conglomerate mergers are between companies that have nothing
in common.
• The merger between the Walt Disney Company and American
Broadcasting Company is an example of a conglomerate merger. 
• A product extension merger A product extension merger is
between two business organizations which deal in products
that  are related to each other and operate in the same
market.  This type of merger allows merging companies to
group their products together and gain access to more
consumers.
• Broadcam’s acquisition of Mobilink Telecom, Inc. is an
example of a products extension merger.  Broadcam
manufactures Bluetooth personal area network hardware
systems and chips for wireless LAN.  Mobillink manufactures
product designs meant for handsets that are equipped with
Global System for Mobil Communications technology. 
Mobilink’s products complement Broadcom’s products. 
• Mergers are a sound strategic option for an entrepreneur
when synergy is present. Economies of scale are the
most common reason for mergers. A second factor that
causes synergy is taxation, or unused tax credits. The
final factor is the benefits received in combining
complementary resources.
 INTERNATIONAL JOINT VENTURE
The entrepreneur attempting to “go international” should also
consider an international joint venture. Here, two firms get
together and form a third company in which they share the equity.
The joint venture should have synergy.

• Synergy means that the whole is

greater than the sum of its parts so that:

• Examples of joint ventures include:

• Vodafone & Telefónica agreed to share
11 3
their mobile network. BMW and Toyota
co-operate on research into hydrogen
fuel cells, vehicle electrification and
ultra- lightweight materials. West Coast
– joint venture between Virgin Rail &
Stagecoach.
PROS OF JOINT VENTURE:
• Companies considering JVs should consider many things, such as:
• Strategy/objectives:  How much control do you want, and how
should it be exercised?  What programs and processes must your
partner have in place? How much oversight can you realistically
provide? Will the J.V. have its own employees or simply “loaned” to
the J.V.? What functions are essential that you provide, and how will
you do that? Is it important for you to book the sales from the J.V.?
On what operational decisions do you want a say, or the final say?
• Partner fit:  How well does your partner’s business culture match
yours?  What is their reputation locally? How risk-averse or risk-
taking is your partner? What is their willingness to invest?
• Operational clarity:  What investments will be made, and by whom?
Who will the employees report to? How will success be measured,
and rewards shared?  How will disputes and disagreements be
resolved?
CONS OF JOINT VENTURES
• Joint ventures are fragile. Clashes in corporate culture
and disputes about control and operational decisions are
common.  For example, which financial, ethics, or
operational policies should the new joint venture follow?  If
the parties disagree about strategies and investment,
which has the ultimate say-so?
• Finding balance is often difficult. Too little oversight can
mean lack of direction, or damage to your company’s
brand or reputation.  Too much oversight or control can
result in frustration, and value destruction rather than
creation.
 Options for entering international
markets.
• Indirect exporting involves
using a foreign purchaser in
a local market.
• Direct exporting uses
independent distributors.
ENTREPRENEURIAL PARTNERSHIPS

• Collaboration between sectors (non-profit, business,

government, academia, civil society) in order to promote
innovation and new ventures.
• One of the best methods to enter an international market is
to partner with an entrepreneur in that country. These
foreign entrepreneurs know the country and culture and
therefore facilitate business transactions while keeping the
entrepreneur current on business, economic and political
conditions. This partnering is facilitated by understanding
the nature of entrepreneurship in the country. Three areas
of particular interest to U.S. entrepreneurs are Europe, the
Far East and transition economies.
• For Example:
• 1. Apple + Hermes
• Apple defines its Hermes-branded watch as “the
culmination of a partnership based on parallel thinking,
singular vision and mutual regard.” Given that Apple
Watch’s biggest criticism has been its design aesthetics,
offering an upscale version with Hermes handmade
leather straps and an exclusive watch face ups the cool
factor considerably, extending the reach of the Apple
Watch from techies to more fashion conscious
consumers.
BARRIERS TO INTERNATIONAL TRADE
• The positive attitude toward free trade began about 1947
with the development of general trade agreements and
reduction of trade barriers. General Agreement on Tariffs and
Trade (GATT). GATT is a multilateral agreement with the
objective of liberalizing trade by eliminating tariffs and import
quotas.

• International trade is carried out by both businesses and

governments—as long as no one puts up trade barriers. In
general, trade barriers keep firms from selling to one another
in foreign markets. The major obstacles to international trade
are natural barriers, tariff barriers, and nontariff barriers.
Natural Barriers
• Natural barriers to trade can be either physical or cultural.
For instance, even though raising beef in the relative
warmth of Argentina may cost less than raising beef in the
bitter cold of Siberia, the cost of shipping the beef from
South America to Siberia might drive the price too high.
Distance is thus one of the natural barriers to international
trade.
• Language is another natural trade barrier. People who
can’t communicate effectively may not be able to
negotiate trade agreements or may ship the wrong goods.
Tariff Barriers
• A tariff is a tax imposed by a nation on imported goods. It may
be a charge per unit, such as per barrel of oil or per new car; it
may be a percentage of the value of the goods, such as 5
percent of a $500,000 shipment of shoes; or it may be a
combination. No matter how it is assessed, any tariff makes
imported goods more costly, so they are less able to compete
with domestic products.
• Protective tariffs make imported products less attractive to
buyers than domestic products. Japan imposes a tariff on U.S.
cigarettes that makes them cost 60 percent more than
Japanese brands. U.S. tobacco firms believe they could get as
much as a third of the Japanese market if there were no tariffs
on cigarettes. With tariffs, they have under 2 percent of the
market.
Non-Tariff Barrier
• Governments also use other tools besides tariffs to restrict
trade. One type of nontariff barrier is the import quota, or
limits on the quantity of a certain good that can be
imported. The goal of setting quotas is to limit imports to
the specific amount of a given product. The United States
protects its shrinking textile industry with quotas.