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Introduction
Many entrepreneurs put effort to expand their business globally. Reason is, going global offers low
cost production, bigger market and more opportunities to the business. But not all business ventures
succeed. It is not because of lack of hard work. Most of the zealous entrepreneurs ignore the fact that
doing business in foreign country is not same as doing business in home country. Taking your
business on global platform requires certain home work and consideration.
An entrepreneur may take his business global in many ways, such as by importing, exporting,
outsourcing, manufacturing overseas, or forming a strategic partnership (like joint venture). Before
launching a global business effort, an entrepreneur should see if his product can sell in the market.
After identifying the market, he should concentrate on pricing, supply chain, any profitable alliances,
legal matters and financials. The entrepreneur should also take into the account the culture and
tradition of the country he is going to expand his business in.
What advice would you offer to Zach who is interested in expanding his current business and
launching a global business effort?
Expanding the business beyond home country is always a good idea. But before expanding the
business and launching global business effort, an entrepreneur should take into the account few
things. Zach should do homework before initiating any action. Some of the important points he
should keep in mind are:
1. Currency fluctuations: Doing business in foreign country means doing business in a currency
other than your home currency. Currency fluctuation and exchange rate should be taken into
consideration before entering in such business. A profit in foreign currency might be actually a
loss in home currency because of the currency fluctuation. An entrepreneur should have a plan to
mitigate any loss resulting from currency fluctuation. There are several ways he can handle this
situation. He can hedge his foreign currency cash inflow, or may plan to pay in the foreign
currency to foreign country suppliers. He can also look for raising capital in foreign currency.
2. Financials: Some times taking your manufacturing to foreign soil may result in low cost
production (specially taking your manufacturing to Asia or Africa). Manufacturing in high cost
country and selling in a country where manufacturing cost is low may give your competitive
disadvantageous position. The entrepreneur should consider the costs involved and expected
revenue generation. One should do sensitivity analysis before launching any such business effort.
Also, the entrepreneur should make arrangement of raising fund when required. Adequate capital
and low cost of capital is the key of success.
3. Marketing: The entrepreneur should identify the potential market in foreign country. Market
research may be a good idea. See if your product fits the market requirement. If it does not, work
on your product and make it fit for the market. Who are the competitors? What is your strength?
How are you going to capture the market? What are your marketing plan? One should have all
plans ready before entering global market.
4. Supply chain: Going global requires a strong and cost effective supply chain arrangement. The
entrepreneur should identify the right supplier and transporter. Supplier and transporter should be
reliable and cost effective.
5. Strategic alliances: Sometimes it is better to enter the foreign market in partnership with
someone who understands that market better than venturing alone. All types of strategic alliances
and joint ventures or partnerships should be considered when expanding into a foreign market. In
some countries, even law may require you to form a joint venture.
6. Law and regulations: Different countries have different laws and regulations. The entrepreneur
should understand the law and regulation of the country before doing any business in that
country. Ignorance may lead to costly litigation process.
7. Culture and tradition: Tradition and culture of the country you are planning to do business in
must be understood. Lack of understanding of culture and tradition may lead to embarrassment
or even loss of business. For example, in Japan, it's customary to give gifts to a business
associate but in Malaysia, it is seen as bribes. It's worth to have the help of a third party in case
business negotiation reaches an impasse due to cross-cultural misunderstanding.
Finally, when you are ready, launch your global business efforts. Success will not come overnight.
The entrepreneur should be patient. It takes time and patience to establish yourself in global
environment and build a great global business.
Explain the statement "For each benefit gained by regulation, there is a cost."
It costs to conform to any regulation. This cost may be in terms of money, resources, surrendering
freedom and privacy. Also, there is cost involved with implementing a regulation. But, an individual
or business gains from the same regulation also. Many regulations are in place to protect the
individual or business. For example, as a listed company, company has to disclose certain
information to SEC. It costs company as company has to prepare the financial statement and put
manpower on it. But, this also benefits the company as that builds confidence among investors and
lenders.
In some cases, conforming to some regulations is so important that no company will do business
with a company who is not conforming to the regulation. This is true in the case of the safety norms.
So, by not conforming to the regulation, company is putting its safety on stake, and at the same time
losing business too.
A regulation is in place because benefits from the regulation far exceeds the cost. US government
estimates that “major federal regulations provide benefits of from $135 billion to $218 billion
annually, while costing taxpayers between $38 billion and $44 billion “
( Source: http://usgovinfo.about.com/library/weekly/aacost-benefit.htm )
Conclusion
Expanding business globally requires the entrepreneur to plan properly before starting the venture.
Identification of market, product, type of business and business partners are preliminary tasks. Next
is, the entrepreneur should have a solid business plan in place. Working on financial aspects and
marketing plan is always required before starting such business. Also, understanding the culture and
tradition of the country, its laws and regulations and business practice is very much required for the
success. Any such effort to expand globally may not give result very soon. The entrepreneur should
also be patient.
Reference:
http://www.entrepreneur.com/growyourbusiness/internationalexpansion/article75138.html Retrieved
on April 16th, 2009
http://www.zeromillion.com/business/ib/going-global.html Retrieved on April 16th, 2009
http://money.cnn.com/2007/07/12/magazines/fsb/going_global.fsb/ Retrieved on April 16th, 2009
http://findarticles.com/p/articles/mi_m0DTI/is_12_32/ai_n8574417/ Retrieved on April 16th, 2009