MAN 470 – Berk TUNCALI 1 National borders are no longer defensible against the invasion of knowledge, ideas, and financial data. -Walter Wriston The new electronic interdependence recreates the world in the image of a global village. -Marshall McLuhan Why Go Global? Offset sales declines in the domestic market. Increase sales and profits. Extend your products’ life cycle. Lower manufacturing costs. Lower the cost of their products. Improve competitive position and enhance reputation. Raise quality levels. Become more customer-oriented. Why Go Global? (cont’d) 1. 2. 3. 4. 5. 6. Before venturing into the global marketplace, entrepreneurs should ask themselves six questions: Is there a profitable market in which our firm has the potential to be successful over the long run? Do we have and are willing to commit adequate resources of time, people, and capital to global campaign? Are we considering going global for the right reasons? Do we understand the cultural differences, history, economics, value systems, opportunities, and risks of conducting business in the country (or countries) we are considering? Is there a viable exit strategy for our company if conditions change or the new venture is not successful? Can we afford not to go global? Strategies for Going Global Creating a presence on the web (fcbk, ebay, amazon) Trade intermediaries Export management companies Export trading companies Manufacturer’s export agents Export merchants Foreign distributors The value of using trade intermediaries Joint ventures (temporary partnership) eg. MillerCoors, SonyEricsson, Strategies for Going Global (cont’d) International franchising eg. Mcdonalds with teriyaki burgers or vegetarian mcnuggets, Domino’s Pizza with different topics 1. 2. 3. 4. Identify the county or countries that are best suited to the franchiser’s business concept. Generate leads for potential franchisees. Select quality candidates. Structure the franchise deal. Countertrading and bartering Countertrading: company selling goods in a foreign country agrees to promote investment and trade in that country. Bartering: exchange of goods and services for other goods and services. Foreign licensing Strategies for Going Global (cont’d) Exporting Step 1: recognize that even the tiniest companies and least experienced entrepreneurs have the potential to export. Step 2: analyze your product or service. Step 3: analyze your commitment. Step 4: research markets and pick your target. Step 5: develop a distribution strategy. Step 6: find your customer. Step 7: find financing. Step 8: ship your goods. Step 9: collect your money. Strategies for Going Global (cont’d) Establishing international locations Importing and outsourcing (call centers in İndia) Entrepreneurs who are considering importing goods and service or outsourcing their manufacturing to foreign countries should follow these steps: 1. Make sure that importing or outsourcing is right for your business. 2. Establish your target cost for your product. 3. Do your research before you leave home. 4. Be sensitive to cultural differences. 5. Do your groundwork. 6. Protect your company’s intellectual property. 7. Select a manufacturer. 8. Provide an exact model of the product you want manufactured. 9. Stay in constant contact with the manufacturer and try to build a long-term relationship. Barriers to International Trade Domestic barriers eg. information and financing International barriers Tariff barriers (tax on exports to keep under control) Nontariff barriers eg. rules of origin, packaging conditions, labelling Quotas (limitation on export/import) Embargoes (prohibition of commerce from a particular country) Dumping (Predatory pricing) Exporting at a price lower than the sale price at home market Political barriers eg. Petrol dispute between Iran and EU Business barriers eg. Labour quality, worker unions and strikes Cultural barriers eg. Bicycle preferrance in China Producers of 1/3 of the worlds bicycle. or Many vegetarians in India (steakhouse) National Trade Agreements The world trade organization (WTO) formed to reduce tariffs among member nations. The members account for over 97% of all world trade. NAFTA Among NAFTA’s provisions are: Tariff reductions Elimination of nontariff barriers Simplified border processing Tougher health and safety standards Conclusion Although there are no sure-fire rules for going global, small businesses that want to become successful international competitors should observe these guidelines: Make yourself at home in all three of the world’s key markets: North America, Europe, and Asia. Appeal to the similarities within the various regions in which you operate but recognize the differences in their specific cultures. Develop new products for the world market. Familiarize yourself with foreign customs and languages; constantly scan, clip, and build a file on other cultures: their lifestyles, values, customs, and business practices. Conclusion (cont’d) Learn to understand your customers from the perspective of their culture, not your own. “Glocalize.” Make global decisions about products, markets, and management but allow local employees to make tactical decisions about packaging, advertising, and service. Recruit and retain multicultural workers who can give your company meaningful insight into the intricacies of global markets. Train employees to think globally, send them on international trips, and equip them with state-of-the-art communications technology. Hire local managers to staff foreign offices and branches. Do whatever seems best wherever it seems best, even if people at home lose jobs of responsibilities. Consider using partners and joint ventures to break into foreign markets you cannot penetrate on your own.