CHAPTER 11
GLOBAL BUSINESS
CHAPTER OVERVIEW
The importance of global to small business is emphasized in this chapter.
International trade represents exciting opportunities for many entrepreneurs in many lines
of business. Even modest attempts at exploiting overseas markets require careful analysis
and planning. This chapter explores the risks and rewards of international trade and
describes various sources of assistance available to the entrepreneur who chooses to
engage in it.
LEARNING OBJECTIVES
Small firms should consider exporting and importing.
A range of approaches may be used to enter foreign markets.
There are widely accepted procedures for reducing the risk of doing business with
an individual or firm in another country.
A wide range of government programs to assist entrepreneurs in exporting is
available.
CHAPTER OUTLINE
I. Exporting
A. The Current Situation
1. Commerce of the world is changing rapidly and in ways that often
affect domestic business profoundly.
2. The United States has not pursued development of export markets
as aggressively as many other countries; our nation’s balance of
trade has been negative since the 1970s.
3. Although the U.S. economy is the largest in the world, much of the
economic growth of the next century will occur in developing
nations.
4. Many entrepreneurs do not even consider opportunities in
, international trade because they feel the domestic market is more
than large enough and that any business in a foreign country will
bring complications.
B. The Decision to Start Exporting
1. The most basic concern in deciding whether to go international
with a product is its export potential; i.e., some products seem to fit
well into many cultures; others have very limited appeal in cultures
other than their origin.
2. In addition to the question of whether a company’s products will
be accepted, the reasons why the move is even being considered
and what it will mean to the firm’s operations must be examined.
C. Developing an Export Plan
1. One early step in the development of an export plan is the
identification of products that are export ready. This step includes
product design and technology.
2. The country, or countries, to which products are to be exported
must be selected.
3. The price to be charged may be based on a number of factors,
including the costs of serving the market, the objectives of the
firm, competition, etc.
D. Getting Established in an International Market
1. One approach to entering the international market is through
indirect exporting. This involves the use of an outside individual or
organization to assist in marketing and/or shipping the product.
2. The direct approach to exporting is much more ambitious because
it requires that company making all the arrangements with the
foreign buyers, including shipping, marketing, promoting,
servicing, selecting channels of distribution, etc.
E. Getting Paid
1. Dealing with a buyer in another country can be very risky because
of the ways in which culture and laws may differ.
2. The conventional way of removing the uncertainty regarding the
payment is the letter of credit.
, F. Government Assistance
1. General export counseling is offered by the U.S. government to
firms and individuals new to exporting.
2. Industry specific is provided by the U.S. Department of Commerce
to entrepreneurs who need information on world trade in a
particular industry.
3. Several programs of the U.S. Department of Commerce provide
information on specific countries.
4. The government also provides customized research on overseas
markets.
II. Importing
A. Finding the Product to Import
1. One way of locating the product to bring into the country is by
searching for sources internationally.
2. Another way to locate goods to import is by spotting opportunities
to make foreign goods that are currently not marketed domestically
available to the U.S. market.
B. Getting the Goods Into the Country
1. The first of five steps in the process of clearing U.S. Customs is
entry during which a variety of shipping documents are used.
2. Inspection of the goods is made to determine whether the goods
can be brought into the country.
3. After the goods have been inspected an appraisal of their value is
made.
4. The next step involves the U.S. Customs Service classifying the
import to establish what duty should be charged.
5. With the rate of duty and the value of the goods the amount of duty
can be determined; this step is known as liquidation.
C. Selling the Goods
, 1. If the entrepreneur used the sourcing method of locating goods, the
buyers of the imported goods are rather easily identified; they are
the current users of the product for whom the better price and/or
value is appealing.
2. Opportunity-spotting importers, on the other hand, may find they
have to use a number of channels to develop a sufficiently high
level of sales.
SUGGESTED RESPONSES TO DISCUSSION QUESTIONS
1. Describe the contrast between the United States trade balance during the first 70
years of the 20th century versus that of the period since 1970.
The first 70 years were marked by an unbroken string of surpluses in our
country’s trade balance; since then—with only 2 years as exceptions—we have
had deficits. Those deficits are now at a level of $100–$120 billion annually.
2. Why are there so few small businesses involved in exporting or importing?
Most small business owners seem content to serve the U.S. only, reasoning that
there is plenty of untapped potential in the domestic market. Another reason that
small firms do not get into international trade is the additional complexity
involved in developing and serving customers in a different culture and country.
3. Distinguish between direct and indirect approaches to entering international
markets and give examples of each.
Direct entry into a foreign market is one in which the firm takes on the tasks of
locating the customers, making the sale, shipping the goods, arranging for
payment, and providing documentation. No outside help is used. On the other
hand, many firms choose to contract for assistance as they enter overseas markets.
Some of these companies will make use of the services of export management
companies, which arrange for all aspects of the international transaction. Other
kinds of indirect exporting include use of international trading companies and
companies that are already in international markets that take on the products of
another company for sale in those markets.
4. What is the U.S. Department of Commerce’s Trade Information Center?
The International Trade Center provides a wide variety of advice and service to
firms needing to learn about the export process. The Center can describe the
government programs and offices available to exporters, direct entrepreneurs to
market research and trade leads, and provide information on export financing
programs.
GLOBAL BUSINESS
CHAPTER OVERVIEW
The importance of global to small business is emphasized in this chapter.
International trade represents exciting opportunities for many entrepreneurs in many lines
of business. Even modest attempts at exploiting overseas markets require careful analysis
and planning. This chapter explores the risks and rewards of international trade and
describes various sources of assistance available to the entrepreneur who chooses to
engage in it.
LEARNING OBJECTIVES
Small firms should consider exporting and importing.
A range of approaches may be used to enter foreign markets.
There are widely accepted procedures for reducing the risk of doing business with
an individual or firm in another country.
A wide range of government programs to assist entrepreneurs in exporting is
available.
CHAPTER OUTLINE
I. Exporting
A. The Current Situation
1. Commerce of the world is changing rapidly and in ways that often
affect domestic business profoundly.
2. The United States has not pursued development of export markets
as aggressively as many other countries; our nation’s balance of
trade has been negative since the 1970s.
3. Although the U.S. economy is the largest in the world, much of the
economic growth of the next century will occur in developing
nations.
4. Many entrepreneurs do not even consider opportunities in
, international trade because they feel the domestic market is more
than large enough and that any business in a foreign country will
bring complications.
B. The Decision to Start Exporting
1. The most basic concern in deciding whether to go international
with a product is its export potential; i.e., some products seem to fit
well into many cultures; others have very limited appeal in cultures
other than their origin.
2. In addition to the question of whether a company’s products will
be accepted, the reasons why the move is even being considered
and what it will mean to the firm’s operations must be examined.
C. Developing an Export Plan
1. One early step in the development of an export plan is the
identification of products that are export ready. This step includes
product design and technology.
2. The country, or countries, to which products are to be exported
must be selected.
3. The price to be charged may be based on a number of factors,
including the costs of serving the market, the objectives of the
firm, competition, etc.
D. Getting Established in an International Market
1. One approach to entering the international market is through
indirect exporting. This involves the use of an outside individual or
organization to assist in marketing and/or shipping the product.
2. The direct approach to exporting is much more ambitious because
it requires that company making all the arrangements with the
foreign buyers, including shipping, marketing, promoting,
servicing, selecting channels of distribution, etc.
E. Getting Paid
1. Dealing with a buyer in another country can be very risky because
of the ways in which culture and laws may differ.
2. The conventional way of removing the uncertainty regarding the
payment is the letter of credit.
, F. Government Assistance
1. General export counseling is offered by the U.S. government to
firms and individuals new to exporting.
2. Industry specific is provided by the U.S. Department of Commerce
to entrepreneurs who need information on world trade in a
particular industry.
3. Several programs of the U.S. Department of Commerce provide
information on specific countries.
4. The government also provides customized research on overseas
markets.
II. Importing
A. Finding the Product to Import
1. One way of locating the product to bring into the country is by
searching for sources internationally.
2. Another way to locate goods to import is by spotting opportunities
to make foreign goods that are currently not marketed domestically
available to the U.S. market.
B. Getting the Goods Into the Country
1. The first of five steps in the process of clearing U.S. Customs is
entry during which a variety of shipping documents are used.
2. Inspection of the goods is made to determine whether the goods
can be brought into the country.
3. After the goods have been inspected an appraisal of their value is
made.
4. The next step involves the U.S. Customs Service classifying the
import to establish what duty should be charged.
5. With the rate of duty and the value of the goods the amount of duty
can be determined; this step is known as liquidation.
C. Selling the Goods
, 1. If the entrepreneur used the sourcing method of locating goods, the
buyers of the imported goods are rather easily identified; they are
the current users of the product for whom the better price and/or
value is appealing.
2. Opportunity-spotting importers, on the other hand, may find they
have to use a number of channels to develop a sufficiently high
level of sales.
SUGGESTED RESPONSES TO DISCUSSION QUESTIONS
1. Describe the contrast between the United States trade balance during the first 70
years of the 20th century versus that of the period since 1970.
The first 70 years were marked by an unbroken string of surpluses in our
country’s trade balance; since then—with only 2 years as exceptions—we have
had deficits. Those deficits are now at a level of $100–$120 billion annually.
2. Why are there so few small businesses involved in exporting or importing?
Most small business owners seem content to serve the U.S. only, reasoning that
there is plenty of untapped potential in the domestic market. Another reason that
small firms do not get into international trade is the additional complexity
involved in developing and serving customers in a different culture and country.
3. Distinguish between direct and indirect approaches to entering international
markets and give examples of each.
Direct entry into a foreign market is one in which the firm takes on the tasks of
locating the customers, making the sale, shipping the goods, arranging for
payment, and providing documentation. No outside help is used. On the other
hand, many firms choose to contract for assistance as they enter overseas markets.
Some of these companies will make use of the services of export management
companies, which arrange for all aspects of the international transaction. Other
kinds of indirect exporting include use of international trading companies and
companies that are already in international markets that take on the products of
another company for sale in those markets.
4. What is the U.S. Department of Commerce’s Trade Information Center?
The International Trade Center provides a wide variety of advice and service to
firms needing to learn about the export process. The Center can describe the
government programs and offices available to exporters, direct entrepreneurs to
market research and trade leads, and provide information on export financing
programs.
