International and Traditional Entrepreneurship - Assignment Example

?International Entrepreneurship How would you define International Entrepreneurship, and why do you define it the way that you do? Answer this question first before continuing. Do others define it differently? If so, what do you agree (or disagree) with regarding their definitions, and why? Why do we separate international entrepreneurship from traditional entrepreneurship in the first place? To my mind, international entrepreneurship can be defined as a general means of creating grounds for business success, generating new ideas, as well as creating a base for economically setting up value creation in another country. This definition of international entrepreneurship arises from the fact that IE arises from the desire to expand their operation beyond the borders of the countries of their operation. International entrepreneurship is becoming increasingly important in many economies around the world as corporations take advantage of the vast opportunities availed by globalization. Consequently, companies, both small and large multinationals, are increasing finding it necessary to expand their operations into other countries or regions so that that they can tap the numerous benefits availed by such ventures. Hence, a perfect definition for international entrepreneurship must entail the desire to create a successful business venture in a country different than the present country of operation. My definition captures this aspect of IE. Although the wording used in defining IE differs from one scholar to another, almost all of the definitions point to one area: that of seeking out and conducting new and innovative business activities across national borders. For example, McDougall and Oviatt (903) define IE as ‘a combination of innovative, proactive, and risk-seeking behavior that crosses national borders and is intended to create value in organizations’. On the other hand, Zahra and George (45) defined IE as ‘the process of creatively discovering and exploiting opportunities that lie outside a firm’s domestic markets in the pursuit of competitive advantage.’ I agree with these two definitions as they point out to companies becoming innovative and opening up business opportunities outside the company’s domestic market, or simply embracing innovativeness with an aim of expanding operations across the international border. McDougall and Oviatt go a step further in their definition to state that IE creates value in an organization. This is absolutely right as IE elevates the profile of a company to that of a multinational, particularly if it establishes markets in numerous international markets. Expansion into foreign markets also adds value in form the company gaining skills and experience from the challenges and successes realized in the foreign markets. The same concept is captured in by Zahra and George’s definition of IE when they mention that companies establish operations in foreign markets in pursuit of competitive advantage. Another definition for IE was given by IE scholars meeting in 2008. Taking into consideration McDougall and Oviatt’s definition, the scholars aimed to expand this earlier definition to make it more concise and add an outcome or value to it. After consultations amongst themselves, they defined IE as “the creation of economic value through cross-border entrepreneurial activity” (ie-scholars discussion). This latest definition simply echoes those made earlier, particularly that made by McDougall and Oviatt. However, they add the aspect of value creation through exports and imports. Due to the recent emergence of globalization and creation of trading blocs such as the EU, AU, and NAFTA it has become necessary to create a distinction between international entrepreneurship from traditional entrepreneurship. While both types of entrepreneurships involve innovation, risk-seeking behavior, and creatively discovering and exploiting opportunities, the former transcends national borders or goes beyond the company’s domestic market while the latter is concentrated within the domestic or home market. As a result of this added initiative, persons or entities involved in IE encounter added challenges and risks such as differences in culture, demographic factors, foreign government policies and legislation, competition, and economic factors. Consequently, IE covers a wider subject area, focusing on subjects such as factors affecting the choice of new international markets, how to overcome the various challenges involved in IE, and market entry approaches. Although domestic entrepreneurs also face some of these challenges, it must be noted that international entrepreneurs operate in an environment of more complexity and uncertainity. Hence, a specialization into IE can enable a deeper and more comprehensive understanding of how companies can create economic value through cross-border entrepreneurial activity. This justifies the need to separate IE from domestic entrepreneurship. 2. You’re the CEO and founder of a small business that has grown from an operation run from your garage to one employing many more people. You recently conversed with a sales rep at a trade show about opportunities to grow your business in Latin America. You are convinced you can grow your business, but you are not sure exactly where in Latin America you should start. How would you go about deciding on a market to enter? Once you make a decision, how would you enter the market? International market selection proceeds through three main stages: preliminary screening, in-depth screening, and lastly the final selection. The business the offers hospitality services in 15 countries spread in 4 continents. In the initial stage of selecting a market in Latin America, we will identify and eliminate countries with unsuitable trading climates by applying macro-level indicators that give clues to disparities between organizational objectives and the features of a given foreign market. These indicators include market size, growth rate, stability, competition, socio-cultural factors and basic fit with customer preferences. To this end, the company will initiate a research of all Latin American countries from various news agencies and in some cases, will send representatives to the respective countries to collect first-hand information. From the company’s research, we will be able to identify politically unstable countries. The level of insecurity in any country will greatly determine whether a potential market proceed to the next stage of screening. Being a hospitality industry, the success of our company will greatly depend on peace and political tranquility within the country. It is well known that insecurity and political turmoil has a significant impact in the hospitality industry. We will also conduct research on the competitive environment within the proposed market. This will involve assessing the number of competitors in the market. Generally, competition is toughest where a few large domestic companies dominate the market as compared to small companies spread all over. Hence, we will analyze the type of competitors in the market and their respective market shares. In markets dominated by a few large domestic companies, we will strive to gather as much information about their strengths and weaknesses and look into the possibility of differentiating our services from those offered by main competitors. Market size will also be an important variable in the preliminary screening of potential markets. Here the company will evaluate what share of the total market in the country it can reasonably expect to capture, given competition and uptake of the services provided. Market size will be measured through various variables such as the population size, tourist numbers, GDP, and import and export volumes. Similarly, market growth will be assessed as it will determine current and future demands for our products. Evaluation of market growth will not only involve analysis of current demand but also likely future demand as well as underserved market segments. Markets that fail at this preliminary stage will be omitted from the list of potential markets and those found to be favorable will undergo the in-depth screening process. The next stage of our screening of potential markets is the in-depth screening. In this stage, we will research on information specific to the hospitality industry. The information will be gathered, analyzed and evaluated for each of the potential foreign target markets remaining from the preliminary phase. Countries will be assessed based on their ability to provide an adequate market for the hospitality industry. This assessment will involve a critical analysis of aggregate current and future consumption of hospitality industry products. Trends from past years will be analyzed and projections made to approximate future demand and the ability of current markets to satisfy this future demand. Other factors to be considered in this phase include possible barriers to market access, product potential (including the ability of our products to satisfy customers’ needs and desires, competitive offerings, and attitudes towards product offered by foreign companies. The potential distribution networks will also be analyzed. For restricted markets, the company will look into the possibility of merging with domestic companies. However, if the restrictions are too stringent in a specific country, then they will be filtered out from the list of potential markets. Foreign markets conditions should be in line with our company’s objectives so that they can be passed over to the next stage of selection. The final stage of the selection process involves an analysis three major elements: company objectives, strategies, and resource availability. The company will have to strike a balance between its commitment to the domestic market and the desire to expand its operations abroad. It must be noted that a strong domestic presence has the effect of instilling a sense of stability in the foreign market. Similarly, the ability of the company to operate beyond its borders increases its acceptability locally. Hence, neither of the two markets should be alienated. However, if the strategies devised to enter the new market do not succeed, then the market should be filtered out of the list of potential markets. Resource availability must be considered before entering the new market since some markets require a huge capital outlay than others. Once a market has been identified, the mode of entry will depend on resource availability and entry barriers. The first step in the entry process will be the initiation of an aggressive marketing campaign in both local and international media. Meanwhile, the company will establish distribution networks in its major targets by acquiring and renovating buildings where necessary before commencing operations. The company will initially use a number of staff from its domestic market while training the new staff in its new market. It will also seek to acquire land to construct more hotel facilities. 3. You run a successful business leasing luxury, state-of-the-art conference space to Fortune 500 companies located in New York and San Francisco. You have put everything in place to begin doing the same in Frankfurt, Germany and Tokyo, Japan – everything except hiring and training new employees. You seek the advice of your current HR manager, who you have been thinking of firing for slacking off on the job for the past 4 months. He tells you not to worry, and that in this business cultural differences don’t matter as much. You’re launching internationally in 4 months. What issues do you think your HR manager is missing, and what would you do to ensure a smooth start? The HR fails to comprehend the significant role played by cultural differences in IE. Communication is one of the most important tools for achieving success in the business world. Understanding cultural differences and overcoming language barriers are some of the areas people should focus on when handling business matters with people of various cultures. Business deals are regularly lost because the entities involved in the process did not take the time to learn about their each other’s cultures in the initial stages of interaction. It must be noted that despite using a common language, it is not uncommon for misunderstandings to occur due to differences in culture. As a result of these differences, persons involved in IE must be aware of the prevailing customs, etiquette and culture in the respective countries before they venture out into these new international markets. When conducting IE, it is vital for company representatives to have adequate knowledge about the different cultural belief and business practices. For instance, behavior which might be taken as normal in the US might be radically abhorred in Japan, or Qatar. Consequently, failure to comprehend foreign business norms could act as a barrier to cordial business relations. On the contrary, spending some time to learn the business culture in a potential market before venturing out can result into huge benefits and help build a strong foundation for future business relationships. An understanding of cultural differences is paramount in almost every aspect of IE. For example, when signing a contract, some cultures allow re-negotiation of the contract even after it has been signed. However, in other cultures, mainly among Western nations, trying to re-negotiate a contract could imply that one party is not taking the issue seriously and this could result into a cancellation of the contract. In certain cultures, even renting a simple item as a bicycle requires that the two parties sign a contract while in others, the agreement is based on the pre-existing trust between them. Understanding cultural differences also comes in handy during communication. In some cultures, such as in the US or Germany, it is a common norm for the two parties to speak loudly and be more assertive or aggressive when communicating. However, in Asian countries, such as Japan or China, people generally speak softly and are more submissive when communicating or negotiating a deal. The type of language is also important when trying to reach target audiences in marketing campaigns. Levels of conservatism, gender roles and principles can differ significantly among cultures. For instance, in Japan and Austria, men make purchasing decisions, but in Sweden, it is the women who make the purchasing decisions. Hence, adverts in Japan and Austria must target men while in Sweden, it must target women. Works Cited McDougall, P. and Oviatt, B. International Entrepreneurship: The Intersection of Two Research Paths. Academy of Management Journal, 43(5): 902-906, 2000. Zahra, S. and George, G. International Entrepreneurship: The Current Status of the Field and Future Research Agenda. Malden, MA: Blackwell Publishers, 2002. Print. Read More