Ch. 15 Global Aspects of Entrepreneurship
Ch. 15 Global Aspects of Entrepreneurship MGMT 3850
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This 3 page Class Notes was uploaded by Alora Lornklang on Sunday May 1, 2016. The Class Notes belongs to MGMT 3850 at University of North Texas taught by Brandi Everett in Spring 2016. Since its upload, it has received 17 views. For similar materials see Foundations of Entrepreneurship in Entrepreneurship at University of North Texas.
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Date Created: 05/01/16
MGMT 3850 Foundations of Entrepreneurship Ch. 15 Global Aspects of Entrepreneurship 1. Explain why “going global” has become an integral part of many small companies’ marketing strategies. Companies that move into international business can reap many benefits, including offsetting sales declines in the domestic market; increasing sales and profits; extending their products’ life cycles; lowering manufacturing costs; improving competitive position; raising quality levels; and becoming more customer oriented 2. Describe the principal strategies small businesses have for going global. Create a website Trade intermediaries, such as EMCs, ETCs, MEAs, export merchants, resident buying offices, and foreign distributors, can serve as a small company’s “export department” In a domestic joint venture, two or more U.S. small companies form an alliance for the purpose of exporting their goods and services abroad. In a foreign joint venture, a domestic small business forms an alliance with a company in the target area. Some small businesses enter foreign markets by licensing businesses in other nations to use their patents, trademarks, copyrights, technology, processes, or products. Franchising has become a major export industry for the US. Franchisers that enter foreign markets rely on 3 strategies o Direct franchising o Area development o Master franchising Some countries lack a hard currency that is convertible into other currencies, so companies doing business there must rely on countertrading or bartering. A countertrade is a transaction in which a business selling goods in a foreign country agrees to promote investment and trade in that country. Bartering involves trading goods and services for other goods and services. Once established in international markets, some small businesses set up permanent locations there. Although they can be very expensive to establish and maintain, international locations give businesses the opportunity to stay in close contact with their international customers Many small companies shop the world for the goods and services they sell. The intensity of price competition has made importing and outsourcing successful strategies for many small businesses. Some entrepreneurs choose to exploit opportunities in foreign markets by moving to those countries and becoming expert entrepreneurs. 3. Discuss the major barriers to international trade and their impact on the global economy. Three domestic barriers to international trade are common: the attitude that “we’re too small to export,” lack of information on how to get started in global trade and a lack of available financing International barriers include tariffs, quotas, embargoes, dumping, and political, business, and cultural barriers. 4. Describe the trade agreements that will have the greatest influence on foreign trade in twentyfirst century. The WTO was established in 1995 to implement the rules established by the Uruguay Round negotiations of GATT from 1986 to 1994, and it continues to negotiate additional trade agreements. The WTO has 160 member nations and represents more than 97 percent of all global trade. The WTO is the governing body that resolves trade disputes among members. NAFTA created a free trade area among Canada, Mexico, and the US. The agreement created an association that knocked down trade barriers, both tariff and nontariff, among the partner nations. CAFTADR created a free trade area among the United States and six nations in Central America: Costa Rica, El Salvador, Guatemala, Honduras, the Dominican Republic, and Nicaragua. In addition, to reducing tariffs among these nations, CAFTA protects U.S. companies’ investments and intellectual property in the region, simplifies the export process for U.S. companies, and provides easier access to Central American markets. Vocabulary Trade intermediaries o Domestic agencies that serve as distributors in foreign countries for domestic companies of all sizes Export management companies (EMCs) o Merchant intermediaries that provide small businesses with lowcost, efficient, offsite international marketing department Export trading companies (ETCs) o Businesses that buy and sell products in a number of countries and offer a wide variety of import and export services to their clients Manufacturer’s export agents (MEA) o Businesses that act as international sales representatives in a limited number of markets for noncompeting domestic companies Export merchants o Domestic wholesalers who do business in foreign markets Resident buying office o Governmentor privately owned operations of one country established in another country for the purpose of buying goods made there. Letter of Credit o An agreement between an exporter’s bank and the foreign buyer’s bank that guarantees payment to the exporter for a specific shipmetn of goods Bank Draft o A document the seller draws on the buyer, requiring the buyer to pay the face amount either on sight or on a specified date Expat Entrepreneurs o Entrepreneurs who keep their citizenship in their home country but live and run their businesses on foreign soil. Tariff o A tax, or duty, that a government imposes on goods and services imported into that country. Quota o A limit on the amount of a product imported into a country Embargo o A total ban on imports of certain products into a country Dumping o Selling large quantities of goods at prices that are below cost in foreign countries in an effort to grab market share quickly. Culture o The beliefs, values, views, and mores that a nation’s inhabitants share