Business Opportunities Analysis

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Questions and Answers

What is the primary objective of a turn-key project?

To acquire a majority stake in a foreign company

To improve market extension through mergers

To supply technology and infrastructure and then transfer ownership to local entities (correct)

To establish a joint venture with local firms for shared equity

Which type of entrepreneurial entry strategy involves sharing ownership of a new company formed by two firms?

Direct foreign investment

Joint ventures (correct)

Turn-key projects

Licensing agreements

What characterizes a horizontal merger?

Combining firms that sell the same products in distinct markets

Acquiring unrelated companies to form a conglomerate

Merging companies that produce the same or related products in the same area (correct)

Combining firms that operate at different production stages

Which entrepreneurial entry strategy allows a foreign manufacturer to use specific intellectual property in exchange for payment?

Licensing (C) Signup and view all the answers

Which trade initiative is designed to minimize trade barriers between member countries?

General Agreement on Tariffs and Trade (GATT) (A) Signup and view all the answers

What impact do trade barriers generally have on businesses trying to enter foreign markets?

Limit the ability to sell products developed outside the target country (C) Signup and view all the answers

Which merger type is defined by the consolidation of firms with related distribution activities but not competing products?

Product extension merger (D) Signup and view all the answers

What best defines management contracts in the context of international business?

Contracting management expertise to a company without equity interest (A) Signup and view all the answers

Which of the following defines a vertical merger?

Merging companies that contribute to different stages of production (B) Signup and view all the answers

What is one key advantage of partnering with foreign entrepreneurs?

Access to updated information about business conditions (C) Signup and view all the answers

What is the focus of the second section of the opportunity assessment plan?

Evaluating market size and trends (B) Signup and view all the answers

Which factor does NOT generally affect the ability to engage in international business?

Local weather conditions (C) Signup and view all the answers

What type of risk must be assessed when considering entering a foreign market?

Operational risk (A) Signup and view all the answers

Which source of information can provide country-specific industry data for entrepreneurs?

Government sources (D) Signup and view all the answers

What is a critical area that entrepreneurs must consider in international business concerning legal frameworks?

Product liability and safety (B) Signup and view all the answers

Which of the following is NOT a method of entering a foreign market?

Franchising (C) Signup and view all the answers

What is a significant consequence of currency valuation changes in international business?

Altered trade status between countries (D) Signup and view all the answers

Which component does NOT belong to the structure of an opportunity assessment plan?

Marketing strategies (A) Signup and view all the answers

Which statement about international entrepreneurship is accurate?

It requires understanding various cultural aspects. (D) Signup and view all the answers

What is one of the primary motivations for businesses to pursue global markets?

Diversifying risk across regions (D) Signup and view all the answers

Which of the following is considered a type of political risk?

Operating risk (C) Signup and view all the answers

What is a crucial aspect of selecting a foreign market?

Determining the market's environmental regulations (B) Signup and view all the answers

Which factor influences the distribution system of a country the least?

Local customs (B) Signup and view all the answers

Which best describes indirect exporting?

Using third-party companies to handle overseas sales (B) Signup and view all the answers

Study Notes

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.

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Description

This quiz delves into identifying and analyzing both domestic and international business opportunities. You will learn how to create an opportunity assessment plan while recognizing barriers to entering global markets. The focus is on the importance of understanding market trends and characteristics for profitability.