The Difference between Entrepreneurship and Export Entrepreneurship - Essay Example

A Report on the difference between Entrepreneurship and Export Entrepreneurship Table of Contents Executive Summary Page 3 Introduction Page 4 Main Body Page 5 Conclusion Page 9 References Page 10 Executive Summary This report focuses on the difference between entrepreneurship and export entrepreneurship. Whiled certain fundamental qualities of entrepreneurship are required, there are additional dynamics which are at play. While the Entrepreneur looks for profit opportunities at all times and all circumstances, the nature of export is such that there is insufficient information to gauge profitability. The Main reason for that is the entrepreneur is sending a product or service to a foreign country. The entrepreneur is relying on a payment system which they may or may not have a complete understanding of. In case of disputes, the entrepreneur may not be familiar with all aspects of the dispute resolution and even if that base knowledge , the unsaid rules of a foreign country and a culture may elude him or her. This report seeks to clarify those risks and give an understanding of what an Export Entrepreneur must do , different from an Entrepreneur. Introduction The Difference between an Entrepreneur and an Export Entrepreneur: The Entrepreneur is some one who takes risks and makes maximum usage of existing resources and also seeks to maximize profit. An Export Entrepreneur shares the same qualities except the risk is a lot higher and the profit potential is also higher. What additional factors are faced by an SME , which is an export entrepreneur: A small or medium enterprise faces a lot of obstacles because of it’s limited resources and size. However there are additional issues which are faced by exporting SMEs . They usually cannot afford an extensive international presence in the country they are exporting. Nor is it feasible for them to deal with extended regulations in the country they are exporting to. The general conclusion of this Report: This report , generally focuses on the difference between exporting and non exporting SMEs and focuses on the pitfalls which export entrepreneurs should be aware of. The nature of the Report: The report will be in an essay format with references to scholarly works in this area. Main Body This report draws on perspectives from entrepreneurship, exporting, and contingency literatures to examine the export behavior of small firms. It explores, in particular, the effect of entrepreneurial orientation and external environmental moderators in the export venture creation process of small firms. It is obvious that entrepreneurial orientation is associated with better export venturing, and is the appropriate for small firms operating in hostile environments of a foreign Country’s Market. It would appear, also, that this orientation is associated with certain decision-maker characteristics including international orientation and contacts and previous business experience and firm-level competencies.i What is the difference between an entrepreneur and an export entrepreneur? Both seek profit from opportunities and taking appropriate amount of risk. The risk in Export Entrepreneurship is that when imperfectly-informed entrepreneurs search for profitable export opportunities the risk increases by many multiples. Uncertainty can be about production costs, or about foreign demand, The point is that starting to export a product is an entrepreneurial gamble that may fail, leading to short-lived export “spells”. The shorter those spells, the more discoveries or new products there should be, as new entrepreneurs try again a few months or years later, incurring the sunk cost of reaching foreign markets anew. Entrepreneurs generally take a lot of risks. A Entrepreneur running a SME, has to make sure that he is well funded to buy stock and pay for overhead and employee salaries. The entrepreneur also needs to know he will be able to sell his product or service at sufficient margins to make his business viable. The export entrepreneur must not only consider all that but in addition have to deal with other factors and risks. “Businesses that do not consider all aspects of an export transaction can find themselves trading at a loss if currency fluctuations, shipping delays, documentation errors and the like are not taken into account at the outset. There are insurance policies for the additional risks and it is essential to obtain cover before trading in certain high risk markets. However, the risks are there and can be fatal to the business if not properly handled. A focused exporting business will always ensure that all the documentation is correct. A small error at this stage may make any claim difficult to enforce or, indeed, invalid. Sales should not view insurance as a comfort blanket giving them free rein to sell to anyone they choose. Utilised constructively it should be used as a working tool to help increase business in existing areas and generate potential new business in others. Insurance cover can be beneficial to the business not only to cover the debts but also in providing comfort to financial institutions. It is apparent, that the export entrepreneur has more risks to deal with and he does have the ability to minimize the risk with good insurance and utilizing best practices.” ii In the past decade, the number of small, entrepreneurial businesses participating in the global economy has tripled. With this increase comes a rise in the number of cross-border commercial disputes. The unwary small business, not familiar with international transactions, may commit errors that adversely affect their ability to do and stay in business. There is a need to know which methods small businesses should use in constructing their dispute resolution provisions and how to avoid errors in drafting and negotiation.iii An Entrepreneur just running a business in his or her own locality may not have to worry about knowing too much about the local dispute resolution apart from the local court house and dispute resolution cell of the local chamber of commerce. With Globalization and increasing number of SMEs becoming global companies simply by buying or selling internationally, there is a lot more to know now. An export entrepreneur needs to understand that and it is incumbent on him to learn the procedures. “When an Entrepreneur is expanding his businesses outside his Country, from selling direct to end-users in other countries, to servicing foreign customers’ needs through distributors or agents, to setting up a joint venture, branch office or subsidiary it is important to consider the WHY more than the HOW . Why do you need to sell outside your local market , Will the additional risks have potentially much better returns as well ? Why are you considering exporting or expanding outside Ireland? Clearly, in almost every case, the answer will be increased sales. Increased sales, whether in the local market or elsewhere, are not an end in themselves. Increased profits is the goal. How specific are the plans? Are they an integral part of the business plan and strategy for the business? Or are they simply a reaction to an unexpected order or inquiry? Unless you have fully thought-through an export strategy, you are unlikely to succeed. There are just too many pitfalls to be able to skate over them all. The one thing that all the experts on exporting agree on is that exporting requires long-term commitment. Then consider which products or services you want to export? Which countries do you want to export to, and in what order of priority? What are your target markets/segments within the market? All these questions go to the core of understanding your customer the key to marketing. Often in your local market. Perhaps you can overlook these questions or make broad assumptions about the answers based on your own personal knowledge, but, outside your local market you need more information and hard facts. Have you done desk research on your potential export markets? Do you know about the size, makeup and strength of the economy, the way the market is structured, how to access it, the demographics, etc, etc? Have you actually visited the countries involved? Do you have sales experience in your proposed export markets? Do you have the language skills needed? If the answers to these questions is “No”, then you should be considering an agency or distributor arrangement to start with. Then comes the nitty-gritty, which can make or break your export success. Have you organised your administration for foreign payments and customs or excise regulations? Are you familiar with and do you comply with the regulations relating to your products or services in your proposed export markets? Does your product or service need adjustment – for safety, environment, quality, packaging, taste, fashion, culture or language? Are your terms and conditions, contracts and quotes translated and adjusted to the requirements of your proposed export markets? A key question is your prices, after calculation of the extra costs involved in exporting, are you still competitive? If not, stop now. Then look internally at your own operation. Who will be responsible for marketing and sales abroad? Is your organisation, from telephonist to after sales, ready and prepared for export and dealing internationally? Can your business cope with the demands of foreign markets - delivery times, transport and quantities? What are your turnover targets, per country, per market, per segment? Are these reasonable – high enough to justify your upfront investment, low enough to be achievable? Next, you need to consider logistics and freight, as well as all the documentation that accompanies these. Choosing the right supplier here can save you time, hassle and money as they help you navigate. Better still, do it for you – the maze of Customs and import-related regulations in the countries you plan to sell to. And payment of course is essential. There is no point in doing all this work, making your product, sending it off on the high seas to be received gratefully and enjoyed by happy customers, if you don’t get paid. Talk to your bank about export credit financing and insurance. It’s a specialist area and you need good advice. You also may need advice on intellectual property. A trademark on your product or service name may only apply in Ireland unless you registered a Community trademark. You may need to register locally in your planed export markets to protect your investment. And, of course, you don’t even have to leave home in order to be involved in international selling, that’s what the Internet is for. An ecommerce-enabled website allows you to reach customers in countries where you might not yet have sufficient market to establish a physical presence. It’s a good strategy – research the demand for your product or service by responding initially to overseas customers’ orders placed on your website, then actively seek out more web customers in specific markets and test your offerings to them, and, finally, when you are ready and have planned your approach, market entry to your chosen target markets.”iv Conclusion: Entrepreneur and Export Entrepreneur have some fundamentally same characterstics , but the difference is in the element of risk which is much larger for an export entrepreneur and the understanding and knowledge which is also at a higher threshold for an export entrepreneur. The export entrepreneur must also be very clear on the reasons for exporting and it should be a seamless part of the business. But a lack of understanding of the difference between export and non export entrepreneurship can be fatal for the business. Reference: Read More