Topic 2-Lesson 7 2015(1)

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Facultad de Negocios.Carrera de Administracin y Negocios Internacionales.

MULTINATIONAL MANAGEMENTMSc Alberto del Couz1


Road-Trip-Map2


Small Business and International Entrepreneurship

Frankfurt- Germany3


Lesson 6: ContentsIntroduction.What Is a Small Business?Internationalization and the Small BusinessOvercoming Small Business Barriers to InternationalizationWhen Should a Small Business Go International?Getting Connected to the International Market?New Venture Strategies for Small Multinational Companies

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Specific Objectives of this topicUnderstand the basic definitions of small business and entrepreneurship.Explain how small businesses can begin as global start-ups or follow the stages of internationalization.Understand how small businesses can overcome barriers to internationalization.Identify when a small business or entrepreneurs should consider going international.Describe how small businesses or entrepreneurs can find customers, partners, or distributors aboard.Understand how new venture wedge strategies can be used in foreign markets.Explain the factors driving entrepreneurship at an international level. 5



Ver video GLOBAL 3000 | Social Entrepreneur Peru: Albina Ruiz and the Ciudad Saludable

https://www.youtube.com/watch?v=x0LgwcAsNB46


IntroductionSmall business contributes significantly to most national economies all around the worldand even in Per.Lets check this

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What Is a Small Business?The term Small business is variously defined. The small business has:UN & OECD: less than 500 employeesThe popular press: less than 100 employeesUS Small Business Administration:Definition varies by industryUses both sales revenue and the number of peopleAccording SUNAT:Es la unidad econmica constituida por una persona natural o jurdica, bajo cualquier forma de organizacin o gestin empresarial contemplada en la legislacin vigente, que tiene como objeto desarrollar actividades de extraccin, transformacin, produccin, comercializacin de bienes o prestacin de servicios.

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Internationalization and the Small BusinessTwo models:

Small business stage model: process of following incremental stages of internationalization

Global start-up or Born-global firm: company that begins as a multinational company11


Internationalization and the Small BusinessStage Model of InternacionalizationStage 1: Passive exportingFirm fills international orders but does not seek export business. Does not realize it has an international market.

Stage 2: Export managementSpecifically seeks exports, usually relying on indirect exporting due to resource limitations. Major orientation change for the firm: Exporting is seen as an opportunity.

Stage 3. Export departmentSignificant resources dedicated to seeking increased sales from exporting. No longer see exporting as a prohibitive risk. Key is to find good local partner for distribution.

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Stage 4: Sales branchesHigh demand justifies setting up local sales office. Must have resources to transfer manager or hire local managers

Stage 5: Production abroadFirm moves beyond downstream activities; uses licensing, joint ventures or direct investment. This is a difficult stage because failure may put whole firm at risk.

Stage 6: The transnationalIts small size does not prevent the firm from developing a global integrated network.

Internationalization and the Small BusinessStage Model of Internacionalization13


Companies begin as multinationals; they must pursue a global vision from inception and globalize rapidly.Born - globals are critical to the international business environment. Threat to traditional multinationals: Very flexible, fast moving, knowledge intensive; introduce innovations.Global start ups are riskier than domestic startups.Yet, they offer an avenue for new venture success in rapidly globalizing industries.

Internationalization and the Small BusinessSmall Business Global Start-Ups or Born-Global Firms14


Internationalization and the Small BusinessSmall Business Global Start-Ups or Born-Global FirmsAttributeBorn-Global FirmSmall- Business ModelManagerial visionGlobal from foundingInternational market developed after solid domestic market base.Previous global experienceSignificant among foundersLow degree of previous global experienceNetworkingStrong use of personal and business networks at both domestic and international levelLooser network with only foreign distributors playing a key role in internationalization effortsDegree of innovationHigh, though product diferentiation based on leading-edge technology and tech innovativenessLess innovative approachNature of international strategyNiche-oriented and proactive international strategy to gain market share in key markets around the worldBroader market approach and more reactive strategic approachEnvironmental approachFast and flexibleLess flexibleNature of relationshipsStrong customer orientation and close or direct customer relationshipsIndirect relationships through intermediaries at early stages of internationalization15


Internationalization and the Small BusinessSmall Business E-CommerceTechnology has leveled the playing field for small firms.

The internet offers a rapid way to go international.

A web site configured for e-commerce is a low cost and quick way to sell across national borders.16


Internationalization and the Small BusinessSmall Business E-Commerce: AdvantagesAbility of small firms to compete locally, nationally and internationally Possibility and opportunity for more diverse people to start a businessConvenient and easy way of doing business 24 hours a day, 7 days a weekInexpensive way to compete with larger businessesMakes domestic products available in other countriesHowever, psychological and resource barriers remain.

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Overcomming Small Business Barriers to InternationalizationSmall size barriers include:Limited financial and personnel resources to dedicate to international operationsLack of sufficient scale to produce goods efficientlyTop managers with limited international experience, or negative attitudes, viewing them as being too riskyOrganizational cultures with strong domestic orientationContextual and environmental issues that magnify difficulties in international operations

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Overcomming Small Business Barriers to InternationalizationOvercome small business barriers to internationalization by:Developing a small business global cultureChanging attitudes of key decision makersGaining experienceOvercoming size limitationsUsing the small business advantage

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Overcomming Small Business Barriers to InternationalizationDeveloping a Small- Business Global CultureGlobal culture is achieved when managers and workers value view strategic opportunities as global and not just domestic.Workers share common language to describe international operations at all levels.Develop a framework to understand international operations.Develop an international mindset.Global thinking: Do business and conduct value chain operations anywhere in the world.21


Overcomming Small Business Barriers to InternationalizationChanging Attitudes of Key Decision MakersCharacteristics of decision makers affecting development of a global culture:Perceived psychological distance to foreign marketsInternational experienceRisk aversionOverall attitudes toward international strategies

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Overcomming Small Business Barriers to InternationalizationChanging Attitudes of Key Decision MakersHow to change attitudes of key decision makers:Begin with sales to countries close in culture and geographyExperience and success overcome skepticism regarding the international markets.Eventually, foreign markets perceived as more profitable than domestic.

But positive attitudes crucial for global start-ups from beginning.

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Overcomming Small Business Barriers to InternationalizationIs Size a Barrier for Small Business InternationalizationLiabilities of smallness: challenges facing small businesses in the resources necessary to internationalize.Large firms serve more national markets, have access to resources, can negotiate with geographically dispersed partners, & invest in cross cultural training.Small firms lack scale to produce goods or services as efficiently as larger companies, and absorb risks.Size liabilities, however, may exist only in the initial internationalization stage.

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Speed becomes the small business advantage:Faster innovationCan change products and internal operations fasterSpeed can overcome size disadvantagesLarger firms must often overcome bureaucratic procedures, slow to take advantage of new marketsFirst to market allows capture of market share before larger companies can react.

Overcomming Small Business Barriers to InternationalizationUsing Small Business Advantage25



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A small business that answers yes to these questions may be ready to go global:Do we have a global product or service?Do we have the managerial, organizational, and financial resources to internationalize?Are we willing to commit resources to face the risks of internationalization?Is there a country in which we feel comfortable doing business?Is there a profitable market for our product or service?Do we have a unique product or service that is not easily copied by large MNEs or local entrepreneurs?Do location advantages exist upstream in the value chain?

When Should a Small Business Go International?27



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Same participation options as larger firms.Exporting, licensing, joint ventures, and foreign direct investment.Most small businesses choose exporting, and use services of ETCs or EMCs to get their product to international markets.

Getting Connected to the International MarketParticipation Strategies29


Trade showsCatalog expositionsInternational advertising agencies & consulting firmsGovernment-sponsored trade missionsDirect contact

Getting Connected to the International MarketParticipation Strategies30



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Basically there are two different stratigies:

New product or service and first mover advantage:- That of the entrepreneur who moves quickly into a new venture and establishes the business befores other companies can react.Copycat business:- Those following the me-too strategy whereby they adopt existing strategies for providing products or services.New Venture Strategies for Small Multinational Companies32


First-Mover Advantage: Being the first to introduce a product or service: Product or service must be innovative and comprehensive.*Comprehensive: Must meet customer expectations in areas such as warranty, customer service & expected components. Without these, its easy for competitors to imitate.Technological leadership: being first to use or introduce a new technology; most common source of advantage; gives a head start for further innovations

New Venture Strategies for Small Multinational CompaniesNew Product or Service and First Mover Advantage33


Advantages of being First-Mover:Have first access to natural and social resources.Can choose the best locations for resources, proximity to customersHave the best access to social relationshipsLeads to personal contacts to build effective channels of distribution , & to build trust & commitmentReduce switching costs which a customer incurs when going to a competitors product (Apple vs Windows)

New Venture Strategies for Small Multinational CompaniesNew Product or Service and First Mover Advantage34


Copycat Business: Adopts existing products or servicesA copycat business follows the me too strategy.Competitive advantage comes from varying the nature of a product or service, or how the firm provides the product or service.Successful copycats do not copy existing business identically. They find a niche or slight innovation to attract customers.

New Venture Strategies for Small Multinational CompaniesCopycat Business35


Successful Copycat moves include these:Be the first to change to a new standard.Go after the toughest customers.Play to minor differences in customer needs.Transfer the location.Become a dedicated supplier or distributor.Seek abandoned or ignored markets.Acquire existing business.



Successful Copycat moves include these:Be the first to change to a new standard.Go after the toughest customers.Play to minor differences in customer needs.Transfer the location.Become a dedicated supplier or distributor.Seek abandoned or ignored markets.Acquire existing business.



WeProvide crucial background information on small businesses, and also discusses international entrepreneurship. SB are important aspects of economies of all nations.SB often provide the most jobs, economic growth and the best innovation.The world offers opportunities and challenges for international small business and entrepreneurship.

Key Points38

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Topic 2-Lesson 7 2015(1)

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