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CHAPTER 15

CHAPTER 15. International Small Business. Learning Objectives. List factors to consider when preparing an international business plan Name five ways for small businesses to conduct international trade Analyze factors for small businesses to consider when exporting and importing

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CHAPTER 15

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  1. CHAPTER 15 International Small Business

  2. Learning Objectives • List factors to consider when preparing an international business plan • Name five ways for small businesses to conduct international trade • Analyze factors for small businesses to consider when exporting and importing • Explain how small businesses can manage their finances in international trade • Articulate the cultural and economic challenges of international small business activity

  3. List factors to consider when preparing an international business plan LO - 15.1

  4. Requirements of an international business plan Unique product Market (or markets) for the product Managerial skills Financial capability Preparing to Go International

  5. Preparing to Go International

  6. Figure 15.1 - Small Business Globalization bythe Numbers Source: ALLbusiness.com/FocusMagazine/GoingGLobaL, U.S. Department of Commerce, and SBA Office of Advocacy.

  7. Preparing to Go International

  8. Name five ways for small businesses to conduct international trade LO - 15.2

  9. Establishing Business in Another Country Exporting Importing Expanding into other countries International licensing International joint ventures and strategic alliances Direct investment

  10. Establishing Business in Another Country

  11. Establishing Business in Another Country

  12. Advantages of Joint Ventures

  13. Analyze factors for small businesses to consider when exporting and importing LO - 15.3

  14. Advantages of Exporting

  15. Advantages of Exporting

  16. Disadvantages of Exporting

  17. Disadvantages of Exporting

  18. Methods of exporting Indirect exporting Direct exporting Exporting • Involves hiring an export service company to market products abroad • Goods are sold directly in the foreign market

  19. Piggyback exporting Agents and brokers Intermediaries Export management companies (EMCs) Foreign-baseddistributors Foreign-based agents Export trade companies (ETCs) Indirect Exporting

  20. Indirect Exporting

  21. Direct Exporting

  22. Identifying Potential Export Markets • Find countries with attractive, penetrable markets • Market Research (www.export.gov) • SBA (www.sba.gov) • CIA World Factbook • Define export markets that match the product • How does the product quality compare to foreign products? • Will the prices be competitive?

  23. Identifying Potential Export Markets • Can customers be segmented? • Are there political risks in the country? • Will the products need modifications? • Will tariffs or nontariff barriers prevent entry into the market?

  24. Figure 15.2 - Global Hot Spots

  25. Importing

  26. Explain how small businesses can manage their finances in international trade LO - 15.4

  27. International Finance Conventional financing Venture capital Options for export financing Prepayment or down payment from oversees buyers Export-import bank (Ex-Im Bank) Small business administration (SBA)

  28. Payment in advance Countertrade and barter Letter of credit Methods of paying for international transactions Documentary collection (Drafts) Open account Consignment Managing International Accounts

  29. Countertrade • Completion of a business deal without the use of money as a means of exchange • Barter - Most common form

  30. Figure 15.3 - International Payment Terms, by Risk to Seller Source: IOMA’S Report on Managing Exports, December 2002, 1.

  31. Information Assistance • U.S. Census Bureau • U.S. Department of Commerce • U.S. Small Business Administration • International Logistics • Currency Conversion Calculator • Foreign Incentives • American Association of Exporters and Importers

  32. Information Assistance • Federation of International Trade Associations • International Chamber of Commerce • International Federation of Customs Brokers Association • International Organization for Standardization

  33. Articulate the cultural and economic challenges of international small business activity LO - 15.5

  34. International issues Cultural differences Global trade regions World Trade Organization(WTO) ISO 9000 certification International Challenge

  35. Understanding Other Cultures Religion Language Important cultural factors Social systems Education

  36. Attributes That Help to Succeed in a Global Environment • Global business knowledge • Cognitive complexity • Cosmopolitan outlook • Diversity • Adventure • Self-assurance • Intercultural empathy • Interpersonal impact • Diplomacy

  37. Figure 15.4 - Cultural Iceberg Source: Kevin WaLsh, “How to Negotiate European Style,” Journal of European Business, July/August 1993, 45–47.

  38. International Trading Regions

  39. Figure 15.5 - Top Four Major Regional Trade Associations

  40. International Trading Regions

  41. Article 401 of NAFTA

  42. General Agreement on Tariffs and Trade (GATT) • First global tariff agreement (1947) • Created the World Trade Organization (WTO) • Includes 153 member countries that represent more than 90 percent of world trade • Promotes international trade • Provides legal and institutional framework for settling disputes

  43. International Standards Organization (ISO) • Established 18,000 international quality standards for manufacturers’ methods of product development • Reduces the need for on-site visits to ensure quality production • ISO 9000 standards relate to quality standards of production • ISO 14000 standards relate to environmental issues

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