The International Entrepreneurship is the process of an entrepreneur

conducting business activities across national boundaries.

It may consist of exporting, licensing, opening a sales office in another
country. The activities necessary for ascertaining and satisfying the needs
and wants of target consumers often take place in more than one country.
When an entrepreneur executes his or her business model in more than one
country, international entrepreneurship is occurring.
Nature of International Entrepreneurship:
The term International Entrepreneurship was introduced around 1988
to describe the many untapped foreign markets that were open to new
ventures reflecting a new technological and cultural environment.
McDougall defined international entrepreneurship as the
development of international new ventures or start-ups that, from their
inception, engage in international business, thus viewing their operating
domain as international from the initial stages of the firms operation.
In 1997 McDougall and Oviatt introduced a broader definition of
international entrepreneurship to include the study of established
companies and the recognition comparative (cross-national) analysis. They
defined this field as a combination of innovative, proactive and risk
seeking behavior that crosses or is compared across national borders and is
intended to create value in business organization. This definition takes into
account at the organizational level the notions of innovation, risk taking
and proactive behavior. It also focuses on the entrepreneurial behavior of
these firms rather than only the characteristics and intentions of the
individual entrepreneurs. The key dimensions of entrepreneurship
innovativeness, proactiveness and risk propensity can be found and
developed at the organizational level.
The International Entrepreneurship is an activity of an entrepreneur
that crossed a national border. Numerous research studies and definitions
have emerged focusing on a wide variety of areas, such as the international
sales of new ventures, born-global ventures, role of national culture and
internationalization of small and medium enterprises.
With a commercial history of only 300 years, the United States is a
relative newcomer to the international business arena. As soon as
settlements were established in the new world, American business began an

active international trade with Europe. Foreign investors helped to build

much of the early industrial trade with Europe as well as much of the early
industrial base of the United States. The future commercial strength of the
Unites States, as well as the rest of the world, will depend on the ability of
both entrepreneurs and established companies to be involved in markets
outside their borders.
Importance of international business:
Every company is trying to expand its business by entering foreign markets.
International business helps in the following ways:1. Helps as growth strategy: - Geographic expansion may be used as a
business strategy even though companies may expand their business at
home.
2. Helps in managing product life cycle: - Every product has to pass
through different stages of product life cycle.When the product reaches the
last stages of life cycle in present market, it may get proper response at
other markets.
3. Technology advantages: - some companies have outstanding technology
advantages through which they enjoy core competency. This technology
helps the company in capturing other markets.
4. New business opportunities: - business opportunities in overseas markets
help in expansion of many companies. They might have reached a
saturation point in domestic market.
5. Proper use of resources: -Sometimes industrial resources like labor,
minerals etc. are available in a country but are not productively utilized.
6. Availability of quality products: - when markets are open, better quality
goods will be available everywhere. Foreign companies will market latest
products at reasonable prices. Good product will be available in the
markets.
7. Earning foreign exchange: - international business helps in earning
foreign exchange which may be used for strategic imports .India needs
foreign exchange to import crude oil, deface equipment, raw material and
machinery.

8. Helps in mutual growth: - countries depend upon each other for meeting
their requirements. India depends on gulf countries for its crude oil
supplies.
9. Investment in infrastructure: - international business necessitates proper
development of infrastructure. A company entering international business
must invest in roads.
INTERNATIONAL VERSUS DOMESTIC ENTREPRENEURSHIP
International Entrepreneurship is the process of an entrepreneur
conducting business activities across national boundaries. It may consist of
exporting, licensing, opening a sales office in another country. International
and domestic entrepreneurship are alike with respect to sales, costs and
profits, what differentiates domestic from international entrepreneurship is
the variation in relative importance of the factors involved in each decision.
International entrepreneurial decisions are more complex due to such
uncontrollable factors as economies, politics, culture and technology.
ECONOMIES:
In domestic entrepreneurship a single country at specified level of
economic development is focus of their efforts.
But in the case of international entrepreneurship, creating a business
strategy means dealing with differences in the level of economic
development, currency valuations, government regulations and marketing
systems.
STAGES OF ECONOMIC DEVELOPMENT:
In domestic entrepreneurship, suppose the entrepreneur concentrating
in the United States which is an industrially developed nation with
variances of relative income, need not worry about fundamental
infrastructures and established business ethics and norms.
But these factors vary greatly in other countries, from those
industrialized to those in the process of developing.

The extent of quality of these factors significantly impacts the ability to

successfully engage in international business.
BALANCE OF PAYMENTS
With the present system of flexible exchange rates, a countrys balance of
payments affects the valuation of its currency. The valuation of one
countrys currency affects how businesses of that country do business in
other countries.
TYPE OF SYSTEM
There are many difficulties in doing in developing and transition
economies. These problems reflect the gaps in the basic knowledge of the
Western system regarding business plans, product promotion, marketing
and profits, widely variable rates of return which necessitates finding a
counter-trade item, differences in the accounting system.
POLITICAL AND LEGAL ENVIRONMENT
The multiplicity of political and legal environments in the international
market creates vastly different business problems, opening some market
opportunities for entrepreneurs and eliminating others.
CULTURAL ENVIRONMENT
The impact of culture on entrepreneurs and strategies is also significant.
Entrepreneurs must make sure that each element in the business plan has
some degree of congruence with local culture. An increasingly important
aspect of cultural environment in some countries concerns bribes and
corruption.
Understanding local culture is essential to the entrepreneurs
development of worldwide strategies and plans. The degree of adaptation
and the amount standardization in worldwide plans center around the
concept of culture and must be determined by each entrepreneur doing
international business

.TECHNOLOGICAL ENVIRONMENT
The variations and availability of technology are often surprising
particularly to an entrepreneur from a developed country. New products in
a country are created based on the conditions and infrastructure operant in
that country.
STRATEGIC ISSUES
Four strategic issues are of paramount importance to the international
entrepreneurs or an entrepreneur thinking about going international:

The allocation of responsibility between the domestic and foreign

operations
The nature of the planning, reporting and control systems to be used
throughout the international operations.
The appropriate organizational structures for conducting international
operations
The degree of standardization possible,.

Stages of Economic Development

The ability of a nation to compete and its priorities for development change
as it passes through different stages of economic development. These can be
categorized into three stages:

Factor-driven economies
Economies primarily compete on low prices and natural resources
Enterprises are mainly involved in primary production and occupy a
small part of the value chain

The economy is particularly susceptible to fluctuations in the world

economic cycle, commodity prices, and exchange rates

Investment-driven stage
Companies produce standard products and services
Productivity is improved through increased investment in
infrastructure and a business-friendly environment

Enterprises move up the value chain beyond basic manufacturing

towards product design, distribution, and marketing

Financial crises and external, sector-specific demand shocks can still

impact the economy

Innovation-driven stage
Economies produce unique goods and services for the global market,
driving advances in technology and business methods
Service industries play an increasingly important role and contribute
significantly to GDP

Economies at this stage of development are more resilient in a volatile

global economy

Entrepreneurship entry into International business:

CULTURE
Customs,
Work
Values,
skills &

beliefs

LEGAL
INFRASTRUC
TURE

Commerce,
Law ,ex-lm
systems

POLITICA
L SYSTEM

DECISION
TO EXPORT
OR INVEST
IN FOREIGN
BUSINESS
OPERATIONS

Leadership
and
Stability

ECONOMIC
FACTORS

Foreign
exchange
costs,
taxes

CULTURE
Culture consists of values , beliefs and attitudes shared by members of a
society that collectively influence there behavior. For example , in Japan ,
Women seldom achieve promotions to important managerial posts , and
although this situation is changing , entrepreneur in Japan will find that
.doing business is generally reserved for men

POLITICAL SYSTEMS
It clearly differs between countries. Most countries have trade quatos for
both imports and exports, and these are controlled politically through
agreements and treaties. More important, changes in govt leadership can
.dramatically alter these agreements
LEGAL SYSTEMS
This affect taxation, licensing, bank lending, hiring practices and safety
regulations among many other factors. Foreign subsidiaries must be setup
under domestic laws of foreign host countries business owners may have to
be local citizens, post bonds, have govt sponsorship.
ECONOMIC SYSTEMS
Economic differences influence all overseas decisions. Because foreign
customers may be more or less affluent than domestic onces, product
quality, packaging promotion and methods of distribution will differ. Also
because most foreign countries have pronounced difference in income.
EXPORTING
Exporting is the process of selling domestic goods or manufactured
products to foreign consumers.
For ex, the American company Weyerhauser, inc., can sell number to a
Japanese contractor for use in housing, or Compaq can shift fully

assembled micro computers from United States to its export agent for resale
in Nigeria. Exporting is a easiest way to enter global markets with little cost
or risk to the domestic company, and exporting can be relatively simple.
Consequently, exporting is particularly attractive to entrepreneurs who
seldom have capital for foreign investment or the expertise to set up
international ventures.
Direct exporting
It has the advantage of personal control by entrepreneurs, but they must
understand foreign markets and have experience negotiating with
foreigncustomers.

Foreign
Retailers

Domestic
manufacturer or
marketing company
seeking export
markets.

Directly
contracts
with

Foreign
Wholesalers

Overseas
Distributors

Indirect Exporting
Entrepreneurs can simplify the export process by indirect marketing
through an expert intermediary. Having someone else handle foreign
negotiation and legal transactions minimizes an entrepreneurs
responsibility. Perhaps more important, intermediaries usually have
excellent market connections to arrange sales efficiency.
The several types of intermediaries are:

1.
2.
3.
4.
5.

Commission agents
Export Management Companies [EMCs]
Export Trading Companies [ETCs]
Export Merchants or Remarketers
Piggyback Marketing

Foreign direct investment (FDI) is a measure of foreign ownership of

productive assets, such as factories, mines and land. Increasing foreign
investment can be used as one measure of growing economic globalization.
Types
A foreign direct investor may be classified in any sector of the economy and
could be any one of the following

An individual;
A group of related individuals;

An incorporated or unincorporated entity;

A public company or private company;

A group of related enterprises;

A government body;

An estate (law), trust or other societal organization; or

Any combination of the above.

Methods
The foreign direct investor may acquire 10% or more of the voting power of
an enterprise in an economy through any of the following methods:

By incorporating a wholly owned subsidiary or company

By acquiring shares in an associated enterprise

Through a merger or an acquisition of an unrelated enterprise

Participating in an equity joint venture with another investor or

enterprise

Foreign direct investment incentives may take the following forms:

Low corporate tax and income tax rates

Tax holidays

Other types of tax concessions

Preferential tariffs

Special economic zones

Investment financial subsidies

Soft loan or loan guarantees

Free land or land subsidies

Relocation & expatriation subsidies

Job training & employment subsidies

Infrastructure subsidies

R&D support

Derogation from regulations (usually for very large projects)

BARRIERS TO INTERNATIONAL TRADE:

There are varying attitudes throughout the world concerning
free trade. Generally, a positive attitude started around 1947 with the
development of general trade agreements and the reduction of tariffs and
other trade barriers.
1. GENERAL AGREEMENT ON TARIFFS AND TRADE (GATT)
One of the longest-lasting agreements on tariffs and trade
(GATT), which was established in 1947 under U.S. leadership.

 GATT is a multilateral agreement with the objective of

liberalizing trade by eliminating or reducing tariffs, subsidies
and import quotas.
GATT membership includes over 100 nations and has had 8
rounds of tariff reductions, the most recent being the Uruguay
Round that lasted from 1986-1993.
In each round, mutual tariff reductions are negotiated between
member nations and monitored by a mutually agreed upon
system.
While GATT has assisted in developing more unrestricted trade,
its voluntary membership gives it little authority to ensure that
this type of trade will occur.
2. INCREASING PROTECTIONIST ATTITUDES
The support of GATT goes up and down. Although down in 1970s the
support increased in the 1980s due to the rise in protectionist
pressures in many industrialized countries.
This renewed support reflected three events.
First, the world trading system was strained by the persistent trade
deficit of the U.S., the worlds largest economy, a situation that caused
adjustments in such industries as automobiles, semiconductors, steel
and textiles.
Second, the economic success of a country perceived as not playing by
the rules has also strained the worlds trading systems.
Finally, in response to these pressures, many countries have
established bilateral voluntary export restraints to circumvent GATT.
The economic prosperity of the 1990s has lessened the interest in
GATT.

3. TRADE BLOCKS AND FREE TRADE AREAS

 Around the world, groups of nations are banding together to increase

trade and investment between nations in the group and exclude those
nations outside the group.
One little known agreement between the U.S. and Israel, signed in
1985, establishes a Free Trade Area (FTA) between the 2 nations.
All tariffs and quotas except on certain agricultural products were
phased out over a 10-year period
In 1989, an FTA went into effect between Canada and the U.S. that
phased out tariffs and quotas between the two countries, which are
each others largest trading partners.
Many trading alliances have evolved in the Americas.
The North American Free Trade Agreement (NAFTA) among the
United States, Canada, and Mexico is a much publicized agreement to
reduce trade barriers and encourage investment among the three
countries. Another important trading block has been developed by the
European Community (EC).
Unlike GATT or NAFTA, the EC is founded on the principle of supranationality, with the member nations not being able to enter into trade
agreements on their own that are inconsistent with the EC regulations.

4. ENTREPRENEURS STRATEGY AND TRADE BARRIERS

Trade barriers pose problems for the entrepreneur who wants to
become involved in international business.
First, trade barriers increase an entrepreneurs costs of exporting
products or semi-finished products to a country
Secondly, voluntary export restraints may limit an entrepreneurs
ability to sell products outside the country.
Finally, an entrepreneur may have to locate assembly or production
facilities in a country to conform to the local content regulations of the
country.