Introduction
The world economy is in transition. National economies were once isolated by trade and investment barriers, differences in language and culture, distinctive business practices, and various government regulations.
But these dissimilarities are fading over time as market preferences converge, trade barriers falls, and national economies integrate to form a global economic system.
Globalization – The expansion of international business, promoted by converging market preferences, failing trade barriers, and the integration of national economies.
SMALL BUSINESS AS GLOBAL ENTERPRISES
Let’s describe the potential of small firms as global enterprises.
 Research has shown that recent start-ups and even the smallest businesses are internationalizing at an increasing rate.
 Small firms may decide to go global to expand their opportunities, or they may be forced to enter foreign markets in order to compete with those firms in their industry that have already done so.
 The fact that many firms are doing it does not mean that going global is easy for small firms, the challenges small businesses faces in international markets are considerable.
 Small business owner must decide whether the company is up to the task.
U.S. Department of Commerce publishes “A Basic Guide to exporting”, and this handbook composed of important questions entrepreneurs should consider in assessing readiness for the challenges of global business.
Questions to consider before going global
Management Objectives
 What are the company’s reasons for going global?
 How committed is top management to going global?
 How quickly does management expect its international operations to pay off?

Management experience and resources
 What in-house international expertise does the firm have (international sales experience, language skills, etc.)
 Who will be responsible for the company’s international operations?
 How much senior management time should be allocated to the company’s global efforts?
 What organizational structure is required to ensure success abroad?
Production Capacity
 How is the present capacity being used?
 Will international sales hurt domestic sales?
 What will be the cost of additional production at home and abroad?
 What product designs and packaging options are required for international markets?
Financial Capacity
 How much capital can be committed to international production and marketing?
 How are the initial expenses of going global to be covered?
 What other financial demands might compete with plans to internationalize?
 By what date must be the global effort for itself?
 Once the small business owners decide to expand internationally, it is essential that they study the cultural, political, and economic forces in the foreign markets to figure out how best to adapt the product to local demand or make other adjustments necessary to ensure smooth entry.
 Entrepreneurs are likely to make costly mistakes if they fail to study foreign market carefully.
 Differences in types of trading systems and importing requirements can also make international trade challenging.
 Trade barriers are falling in some regions of the world, as countries agree to eliminate tariffs and trade restrictions.

 Tariffs – taxes charged on imported goods
THE FORCES DRIVING GLOBAL BUSINESSES
Expanding the market
 Extend the product life cycle
 Find buyers for highly specialized products
Countries Targeted
Develop market opportunities outside the home country.
Products Promoted
They use international expansion to extend a products life cycle.
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The role of television programs, movies and social can ease the entry of small businesses into international market.
Gaining access to Resources
To gain access to resources including raw materials and skilled labor.
Cutting Cross
Reduce labor and transportation costs
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Obtain tariff reductions
Capitalizing on special features of the location
capitalize on unique or special features of local government.
STRATEGY OPTIONS FOR GLOBAL FIRM
Establishing an international essence
Exporting

International Strategic
Alliances
International
Franchising
Global
Strategy
Option
Importing
Foreign Licensing
 Exporting - selling products produced in the country to customers in another country
 Importing - selling goods produced in another country to buyers in the home country
 Foreign Licensing - allowing a company in another country to purchase the right to manufacture and sell company products in international markets.
 International Franchising - selling a standard package of products systems and managements services to a company in another country
 International Strategic Alliances - a combination of the efforts and
/ or assets of companies in the countries for the sake of pooling resources and sharing the risk of an enterprise.
 Establishing An International Presence o Cross-border - acquisition-purchase by a business in one country of a company located another country. o Greenfield Venture – is a form of market entry strategy with establishment of a new wholly owned subsidiary in a foreign country by constructing its facilities from start.
CHALLENGES TO GLOBAL BUSINESS
Political Risk

- the potential for a country political forces to a negatively affect the performance of business enterprise operating within its border.
How to mitigate Political Risk in Business
 Get your business ensured
 Have a plan B
Economic Risk
is the probability that a government will mismanage its economy and change the business environment.
Managerial Limitations
conducting a business internationally will never be as easy as doing business at home it is likely to stretch managerial skills and resources to the limit.
 PRODUCT PLANNING
 MARKETING
 FINANCE
 MANAGEMENT
 ACCOUNTING
ASSISTANCE FOR GLOBAL ENTERPRISE
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Help is available to small companies with international interest. You need only open your eyes to find it.
Analyzing markets and planning strategy
Among the many activities required to prepare a small firm for the challenges of going global, two are especially fundamental to success abroad.
Connecting with international customers
 A small company cannot sell abroad unless it connects with customers in target markets.
1. Trade Leads

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Trade leads are essential in identifying potential customers in target markets.
2. Trade Missions
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Joining a trade mission is another excellent to evaluate a foreign market and link up overseas customers.
A SAMPLE OF INTERNATIONAL TRADE LEADS o Bidmix.com - bidmix.com provides an eletronic market place for buying and selling worldwide. o Meetbuyer.com - his site is design for user all over the world. It features a company directory of members and product search option.
Member sheep is free. o Online trade leads - onlineleads.com provides trade leads for importers, expoters, and related services. Companies can post buy, sell and search entries at 00 charge. o Tradeleads.com - Use of tradeleads.com requires a membership. Non members can post leads. But they are unable to read or search for leads. o World Bank Fundline - the world bank`s private sector development department operates this site to connect potential equity investors with enterprises. o World Trade Markets - world trade market allows firm to capture, disseminate, and search tarde point trade leads through the world.
3. Trade intermediaries
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Perhaps the easiest way to break into international markets is to use a trade intermediary.
Trade intermediaries most suited for small business
1. Export management campanies

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An export management company (EME) acts as the export department for one or several producers of goods or services.
2. Export trading companies
 An export trading company (ETC) facilitates the export of U.S. goods or services.
3. Export agents, merchants, or remarkers
 Export agents merchants or remarkers purchase products directly from the manufacture, packing and marking the products according to their own specifications.
4. Piggyback marketers
Piggyback marketers are manufacturers or service firms that distribute a second firm`s product or service.
Financing o Private Banks – commercial banks typically have a loan officer who is responsible for handling foreign transaction.
 Letter of credit – an agreement issued by a bank to honor a draft or other demand for payment when specified condition are met. o Small business administration – serves small US firms primarily through its regional, district, and branch offices.
 Bill of lading – a document indicating that a product has been shipped and the titlr to that product has been trasffered.