Business Opportunities Analysis

Identifying and Analyzing Domestic and International Opportunities

• This chapter focuses on identifying and analyzing both domestic and international business opportunities.
• Learning objectives include understanding the importance of identifying good opportunities, the ability to identify these opportunities, and creating an opportunity assessment plan.
• This includes recognizing the problems and barriers of entering global markets.
• The ability to select a global market and understanding options for entering a foreign market are key skills.

Opportunity Assessment Plan

• An opportunity assessment plan determines the profitability of a product or service.
• It consists of four sections.
• The first section identifies the uniqueness of the idea in terms of its unique selling propositions, available competitive products, and companies in the product market space.
• The second section focuses on the market size, trends, characteristics, and growth rate.
• The third section examines the entrepreneur's and management team's skills and experience.
• The fourth section creates a timeline for successfully launching the venture.

Information Sources

• Assistance through training, consulting, and mentoring from experienced executives and entrepreneurs.
• Start-up assistance from web-based resources.
• Industry and market information available in industry and market databases.
• Competitive company and product information from external sources.
• Government sources and search engines are also valuable sources.
• Trade associations provide country-specific industry data and insights on trends and companies within a specific market.

The Nature of International Entrepreneurship

• International entrepreneurship involves conducting business activities across national boundaries.
• This includes exporting, licensing, or opening a sales office in another country.
• Considerations include cultural norms, ethics, political factors, economic factors (e.g., tax, exchange rates), and social factors (e.g., education, demographics).

International versus Domestic Business

• Domestic business operates within a single economic system with a single currency.

• International business deals with differences in economic development, currency evaluations, government regulations, banking, venture capital, marketing, and distribution systems.

• Factors determining a country's suitability include its stage of economic development and the fundamental infrastructure (banking, education, legal systems, business ethics).

• The current account (imports/exports) and its relation to a country's currency valuation also play a crucial role.

• Other aspects impacting international business decisions include the country’s economic system, which can involve barter, third-party arrangements, political-legal environment and political risk analysis (stability etc).

• Language is a critical barrier to international business and requires experienced translators.

• Technological infrastructure varies widely, impacting new-product development.

Available Distribution Systems

• Factors affecting distribution include overall sales potential, amount and type of competition, product cost, geographical size and density.
• Investment policies, exchange rates, and political risk are key considerations in selecting the best distribution system.

Motivations to Go Global

• Global expansion is motivated by profitability, competitive pressures, unique products, excess production capacity, declining home sales, economies of scale, technological advantages, and tax benefits.

Strategic Effects of Going Global

• Expanding globally increases proximity (physical and psychological) to customers and ports.

Foreign Market Selection

• A five-step approach for selecting a foreign market includes:
  • Developing appropriate indicators.
  • Collecting and comparing data.
  • Establishing appropriate weights for each indicator.
  • Analyzing the data.
  • Ranking markets.
• Company-specific indicators such as overall market size, market growth, and product indicators can also be considered.

Entrepreneurial Entry Strategies

• Exporting includes selling and shipping products to customers in another country directly or indirectly. -Indirect exporting uses local foreign purchasers or export management firms. -Direct exporting involves independent distributors or overseas sales offices.

• No equity arrangements such as licensing, turn-key projects, and management contracts allow sales without direct investment in the foreign venture.

• Licensing involves granting rights for a fee to a foreign manufacturer to use a patent, trademark, technology, production process, or product.

• Turn-key projects involve supplying the technology or infrastructure to a foreign entity.

• Management contracts involve providing expertise to a foreign client, such as those related to managing businesses & production.

• Direct foreign investment includes minority and majority ownership interests in foreign ventures, joint ventures (combining resources), and mergers (acquiring complete ownership). -Mergers, of which horizontal and vertical are types, are important for expansion. -Horizontal mergers combine companies producing similar products in the same geographic area.

• Vertical mergers connect companies in successive stages of production.

• Different mergers (product extension, market extension, diversified activity) are further distinctions.

Entrepreneurial Partnering

• Partnering with foreign entrepreneurs facilitates business transactions and provides updates on business, economic, and political conditions.

Barriers to International Trade

• Trade barriers hinder international business.
• Initiatives to reduce barriers include GATT, free trade areas (e.g., NAFTA, Mercosur), and the EC.

Entrepreneur's Strategy and Trade Barriers

• Trade barriers increase costs for exporting and limit selling opportunities from outside production facilities.
• Entrepreneurs may need to adjust operations to meet local regulations.