Transcript Doing Business Abroad - World Trade Center Denver

International
Entrepreneurship
By, Dr. Nina Radojevich-Kelley
Metropolitan State University of Denver
School of Business
Department of Management
[email protected]
International Entrepreneurship
• Definition
• “process of an entrepreneur conducting business activities across
national boundaries” (Hisrich, 2013)
• Exporting, licensing, having a sales office in another country
STATS
 85% of the world’s population lives in developing
countries
 infrastructure development is needed
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Over half of world’s population lives in Asia
China has 20% of world’s population
India twice the size of Latin America
Many new market opportunities and transitioning
countries…huge opportunities exist
 Russia, Serbia, China, Malaysia, Peru, Vietnam, Iraq,
countries in Africa
International Entrepreneurship
• Many potential markets and prospective countries
available
• Foreign market selection is critical issue
• Should you…
• enter the top country,
• select the largest potential market or one that is easier to
navigate?
• Should you go into a developed market? Or developing market?
• Decision….
• Based on past sales, competitive positioning and assessment of
EACH foreign market alternative
• Collect data on a regional (EU) and country basis (Southeastern
China)
BEFORE expanding abroad:
Entrepreneurs should…..
• Assess key indicators
• Collect and analyze data (primary and secondary)
• Look at stats for 3 year period of time (or more) to see trends
• Secondary Data
• NAICS codes- look for equivalent industry reports
• Doing Business Abroad reports
• GEM reports
• STAT-country (STAT-USA)
• CIA World fact book
• Index on Economic Freedom
• Humanitarian Response Index
• GLOBUS
• National Trade Database
• Look at country rankings & cultural perceptions
Motivations for GOING International?
 Increase profits
 95% of world’s population lives outside of USA =$
 Competitive pressures
 Can’t keep up with low prices…need to manufacture abroad
 To avoid increased government regulations
 Car manufacturing, chemicals & toxins
 Unique product/service
 Similar markets elsewhere
 Aging population, obesity, autism
 Excess production capacity
 Have a ton of extra stuff and local market doesn’t want it
 Declining home country sales
 In latter part of life-cycle
 If your technology is obsolete in your country….take it to another country which might see it at
revolutionary…new sales opportunities
 Take advantage of lower costs
 Lower costs in labor, raw materials, manufacturing overhead
 Nike, Reebok, Disney
 Technological advantage
 Tax benefits
 Have advantage of having sales office and distribution
Things to Consider When
Selecting a Country?
• Language
• Economy and type of economic system
• Political and Legal environment
• Labeling requirements, advertising claims, ingredients, packaging,
types of legal ownership, pricing decisions (if Value-Added-Tax)
• Culture
• How open is the culture to entrepreneurship?
• Perceptions of local entrepreneurs
• How similar/different the culture is from your own
• Technological Environment
• Local competitors
• Opportunity perception
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Entrepreneurs motivation for expanding international
Proximity to customers (physical and psychological closeness)
Trade Agreements (regional and free trade)
How long does it take to actually form/create a business
Best Place for Entrepreneurs to
Research Foreign Markets?
• World Bank
• Doing Business Abroad Report
• Ease of doing business
• Global Entrepreneur Monitor (GEM)
Doing Business Abroad
• World Bank
• Ranked 185 economies on Ease of Doing Business in 2013
• Environment is more or less conducive to starting and operating a
business in a given country
• “TOP” ranked countries have less RED TAPE…
• More attractive to entrepreneurs…….but is this the complete picture?
• Concerns with JUST using these reports?
• Does not take into account the culture, perception among entrepreneurship
among citizens, perceived opportunities for starting ventures
Doing Business Abroad:
Averages a country’s percentile rankings on 10 topics
• Starting a business
•
# payments, time in days, costs% income per capita, paid-in min. capital (% per capita income)
• Dealing with construction permits
•
# procedures and # days to obtain permits to build warehouse, cost (% per capita)
• Getting electricity
•
# procedures and # days to obtain permanent electricity, cost (% per capita)
• Registering property
•
# procedures and # days required to register property, cost (% per capita)
• Getting credit
•
degree to which collateral and bankruptcy laws protect the rights of borrowers and lenders and
facilitate lending, borrowing history, rules & practices
• Protecting investors
•
Liability, stakeholder ability to sue directors/officers, transparency of transactions,
• Paying taxes
•
# payments per year, time it takes to file, % of tax paid on profits, upkeep labor, % tax paid for
mandatory contributions (Federal corp income tax, State prop. tax, Sales, federal unemployment
tax, other (truck-lease tax, fuel tax)
• Trading across borders
•
total # documents required per shipment to export/import goods, costs associated with
exports/imports (including documents, admin fees for custom clearance, broker fees)
• Enforcing contracts
•
# of days to resolve dispute, # procedures to enforce contract, and costs of attorney fees and court
fees
• Resolving Insolvency
•
Average time to close a business, average cost of bankruptcy proceedings, recovery rate cents-to-$
Top 10 Countries for Entrepreneurship
http://doingbusiness.org/rankings
Ease of
Dealing
Doing Starting a
with
Getting Register
Economy
Business Business Construct Electricity Property
Rank
Permits
Getting Protecting
Credit Investors
Trading
Enforcing Resolving
Across
Contracts Insolvency
Borders
Paying
Taxes
Singapore
Hong
Kong,
China
New
Zealand
United
States
1
4
2
5
36
12
2
5
1
12
2
2
6
1
4
60
4
3
4
2
10
17
3
1
6
32
2
4
1
21
25
17
13
4
13
17
19
25
4
6
69
22
6
16
Denmark
5
33
8
14
6
23
32
13
4
34
10
Norway
United
Kingdom
Korea,
Rep.
6
43
23
14
7
70
25
19
21
4
3
7
19
20
62
73
1
10
16
14
21
8
8
24
26
3
75
12
49
30
3
2
14
Georgia
9
7
3
50
1
4
19
33
38
30
81
Australia
10
2
11
36
37
4
70
48
44
15
18
Finland
11
49
34
21
24
40
70
23
6
9
5
Top 10 Countries for Entrepreneurship
http://doingbusiness.org/rankings
Ease of
Doing Starting a
Economy
Business Business
Rank
Singapore
Per Capita
$ 42,930
Hong
Kong,
China
1
3 days
3 proced
.6% Cost
per capita
2
Per Capita
$ 36,648
6
2
3
1
Paying
Taxes
Trading
Across
Borders
Enforcing Resolving
Contracts Insolvency
5
1
12
5 pymtsYR
82 hrs/yr
6% profit
tax
26 days 36 days
21 days
27.6%
11 proced 4 proced 5 proced total Tax
4 docu 150 days
16.7% cost 28% cost 2.9% cost
Exprt $456 21 proced
1
5
4
3 days
3 proced
67 days 41 days
1.9% Cost 6 proced 4 proced
per capita 16.3% cost 1.6% cost
Per Capita
$ 35,160
New
Zealand
4
Dealing
with
Getting Register
Construct Electricity Property
Permits
6
32
1 days
50 days
1 proced
89 days 5 proced
.4% Cost 6 proced
76.1%
per capita 29.8% cost
cost
36
60
4
2
10
3 pymtsYR
78 hrs/yr
17% profit
36 days
tax
5 proced 23.% total
6 docu 360 days
4% cost
Tax Exprt $923 27 proced
2
21
25
17
8 pymtsYR
152 hrs/yr
28.8%
2 days profit tax
2 proced
33.5.%
5 docu 216 days
.1% cost total Tax Exprt $870 30 proced
2
.8 years
Cost 1%
estate
17
1.1 years
Cost 9%
estate
13
1.3 years
Cost 4%
estate
Top 10 Countries for Entrepreneurship
http://doingbusiness.org/rankings
Ease of
Doing Starting a
Economy
Business Business
Rank
United
States
Per capita
$48, 850
Denmark
Per Capita
$ 60,390
United
Kingdom
Per Capita
$ 37,780
4
13
Dealing
with
Getting Register
Construct Electricity Property
Permits
17
19
7
19
4 docu
Exprt 370 days
$1090 32 proced
4
34
1.5years
Cost 7%
estate
10
4 docu
Exprt 410 days
$1744 35 proced
1 years
Cost 4%
estate
16
14
21
8 pymtsYR
110 hrs/yr
22% profit
99 days 105 days
29 days
tax
9 proced 5 proced 6 proced
35.5.%
4docu 399 days
62.4% cost 108% cost 4.7% cost total Tax Exprt $950 28 proced
8
13 days
6 proced
.7% Cost
per capita
62
73
22
Enforcing Resolving
Contracts Insolvency
16
20
69
11 pmtsYR
175 hrs/yr
27.6%
profit tax
12 days
46.7%
4 proced total Tax
3.5% cost
6
13
10
pymtsYR
130 hrs/yr
20% profit
10 days
tax
3 proced 27.% total
.6% cost
Tax
Trading
Across
Borders
6
6 days
68 days
6 proced
27 days 4 proced
1.4% Cost 15 proced
16.1%
per capita 14.4% cost
cost
5
33
8
14
6 days
4 proced
.2% Cost
per capita
38 days
PLUS 24.2%
68 days 4 proced
capital 8 proced 119.6%
saved 57.1% cost
cost
25
Paying
Taxes
1 years
Cost 6%
estate
Top countries
• Can’t just take top 10 countries and go forward
• Doing Business Abroad does not tell entire story
• Must look at culture (fear of failure), perception among entrepreneurship
among citizens, perceived opportunities for starting ventures
• Funding opportunities (VC, Angel investors)
• Opportunity for women in entrepreneurship
• GDP per capita (strength of the economy)
• Free Trade Agreements
• Immigration laws
• Workforce-strength, skills, age
• Size of market
• Cultural support
• Some of the largest countries are the best countries for entrepreneurs,
but some of the smaller economies made the list (New Zealand, Chile)
• Some of the smallest HAVE the great opportunities WITH LESS
competition
Remember
• Just because it is easy to start a business in a country does not
mean that small businesses are being started
• Example: Japan, France
• Always rank in top 20% of countries to start a business in
• Yet have low rates of entrepreneurship
• Fear of failure
• Not supported by culture
GEM Report 2012
http://www.gemconsortium.org
Looks to understand societal attitudes, participant levels,
characteristics of entrepreneurs, etc.
Entrepreneurship is a good career choice
• In the EU only 50% of respondents agreed that
entrepreneurship was a good career choice
• In Latin America/Caribbean, the Middle East/North Africa
(MENA) and Sub-Saharan Africa regions, over 75% of
respondents considered entrepreneurship to be a good career
choice
• Asia Pacific/South Asia region estimated 30% of the
population saw opportunities for entrepreneurship
• Only 17% intended to actually start a business in next 3 yrs
Fear of Failure
http://www.gemconsortium.org
• Sub-Saharan Africa exhibited the lowest levels of fear of
failure.
• Only 24% of all respondents indicated that fear of failure would
prevent them from starting a business.
• Latin American and Caribbean economies (28%) had fear of
failure which would prevent them from starting a venture
• Fear of failure generally increases as one moves from earlystage to advanced development levels
• Greece (61%) and Italy (58%) showed the highest fear of
failure levels
Perceived Opportunities
http://www.gemconsortium.org
• factor-driven economies (those relying on agriculture or
extraction businesses with a heavy reliance on (unskilled)
labor and natural resources) had highest perceptions of
opportunities for entrepreneurship and intention to start
business
• Middle East & North Africa
• Algeria, Egypt, Iran, Palestine
• Sub-Saharan Africa
• Angola, Botswana, Ethiopia, Ghana, Malawi, Nigeria, Uganda, Zambia
• Asia Pacific & South Asia (Pakistan)
• 70% of sub-Saharan African economies had high perceptions
about the presence of good opportunities AND 76% believed they
have the skills and knowledge to start a business
• Sub-Saharan Africa reports high levels of entrepreneurship
Entrepreneurship Intention
http://www.gemconsortium.org
• The intention to start a venture in next 3 years
• Factor-driven economies (48%)
• Middle-East and North African countries, Sub-Saharan Africa
• Iran, Egypt, Ethiopia, Ghana, Nigeria
• Efficiency driven economies (26%)
• European Union (Hungary, Romania, Poland, Lithuania), NonEuropean union (Croatia, Serbia, Russia, Turkey), Asia Pacific & South
Asia (China, Thailand, Malaysia), Latin America & Caribbean
(Argentina, Brazil, Chile, Costa Rica, Peru, Panama)
• Innovation-driven economies (11%)
• North Africa & Middle East (Israel), South Asia & Asia Pacific (Japan,
Singapore, Taiwan), European Union (Austria, Belgium, Denmark,
Germany, France, Ireland, Greece, Spain, UK, Sweden, Slovakia,
Portugal), non-European Union (Norway, Switzerland), United States
Economy
http://www.gemcons
ortium.org
Perceived
Opportunity
Perceived
Capability
Fear of
Failure
Entrepreneur Good
Intention
Career
Brazil
52%
54%
31%
36%
86%
Nigeria
82
88
21
44
82
China
32
38
36
20
72
Japan
6
9
53
2
30
Singapore
23
27
42
16
50
Rep. of Kor
13
27
43
13
59
UK
33
47
36
10
50
New
Zealand
47
62
24
13
61
Australia
48
47
43
12
54
Denmark
44
31
39
7
NA
Greece
13
50
61
10
64
Croatia
17
44
36
19
64
Russia
20
24
47
2
60
USA
43
56
32
13
92
Economy
Total Entrepreneur
Rate (18-64 yrs)
Necessity
Driven
Opportunity Driven
http://www.gemcons
ortium.org
Brazil
15
30
59
Nigeria
35
35
53
China
13
37
39
Japan
4
21
66
Singapore
12
15
54
Rep. of Kor
7
35
46
UK
9
18
43
New
Zealand
17
7
79
Australia
10.5
15
73
Denmark
5
8
71
Greece
7
30
32
Croatia
8
34
36
Russia
4
36
31
USA
13
21
59
Conclusion: Top Countries
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New Zealand
Australia
Denmark
Republic of Korea
Canada
Singapore
Chile
UK
South Korea
• Look at Doing Business Abroad
• Ease of starting business
• Culture (fear of failure),
perception among
entrepreneurship among
citizens, perceived
opportunities for starting
ventures (GEM)
• Funding opportunities (VC,
Angel investors)
• Opportunity for women in
entrepreneurship
• GDP per capita (strength of the
economy)
• Free Trade Agreements
• Immigration laws
• Workforce-strength, skills, age
• Size of market
• Cultural support
Top Countries
• New Zealand
• Fast to start (1 day, 1 procedure, costs $ 127), strong GDP ($ 162 Bill),
maintained high percentage of companies started annually, strong
opportunity driven, strong perceptions, good angel/VC. Stable business
climate, good personal freedom, lacks red tape and corruption, corporate tax
(28%), good FDI
• Australia
• Fast to start (2 days, 2 procedures), strong GDP ($ 1.1 Trill), maintained high
percentage of companies started annually, strong opportunity driven, strong
perceptions, good angel/VC, Negatives—high tax rates (47.7%), but 50%
believe there is excellent opportunity, Australian Free trade Agreement,
strong personal freedom and strong business climate
• Canada
• Fast to start (5 days, 1 procedure, costs $ 195), strong GDP ($ 1.6 Trill),
maintained high percentage of companies started annually, strong
opportunity driven, strong perceptions, good angel/VC, low tax rates (28.8%
on profits versus USA 46.7%), NAFTA, not many Canadians starting
businesses. But lacks innovation, but has strong investor protection
Top Countries
• Denmark
• GDP is one of highest in world ($59, 684 versus USA $ 48,442)(World
Bank, 2012), business-friendly climate, easy to start and run
businesses and strong opportunity perceptions, good angel/VC
opportunities
• Chile
• More VC/angel funding available, growing economy, is one of least
restrictive systems in South America for starting a business, good
perception for opportunity
• Start-up Chile- programs created by government to promote
innovation..provides $40,000 equity (seed-capital) and a 1 year
temporary visitor visa. Tax rate is 25% (lowest of all OECD nations)
• Singapore
• Good perceptions and opportunities, economy depends on exports,
trade surplus (24% of GDP), BUT scores low on personal freedom,
easy to start and run business
Top Countries
• UK
• Trying to lure entrepreneurs with new type of visa, hard to get a
bank loan (only 64% success rate), can settle into UK with in 2
years…depending on how much money you inject into economy,
good VC/Angel opportunities, easy to start business, good
business climate . Costs $ 257 to start business, takes 13 days, 6
procedures
• South Korea
• Fast to start (7day, 5 procedures, $36 dollars), strong GDP ($ 1
Trill), cheap and easy to start, fear of failure is biggest concern
(45%), 40% of Koreans work for companies with 10-49 employees
TOP Countries
• USA???
• Fell a little…but still top 10
• Still very open to FDI, good opportunities for women, and to
entrepreneurs in general, great VC/Angel investor potential,
minimal red tape, but……tax rates dampen the business interests
(highest statutory tax rate in the world-46% which is the
published rate—effective rate is lower), strong business climate,
little corruption, good protection on IP, complexity of the tax code
is troublesome
• Good personal freedom and monetary freedom
Conclusion: Worst Countries
Philippines
• lowest ranked Asian country and most difficult places to do business in. Low FDI,
slow economic growth, unstable legal system, violence and bureaucracy
Venezuela
• Bottom when it comes to ease of paying taxes, getting credit, investor protection
laws, and cross-border trading, nationalization of the economy makes it hard for
business., hard to withdraw money from your bank, inflation (26%)
Nigeria
• Africa’s largest oil producer, but huge political unrest, growing ethnic
tensions, religious tensions make it hard to do business, high corruption,
ranks among the lowest in the world for getting electricity (3months) and
registering property.
Violence, poverty, pollution, political instability
Worst Countries
Russia
• Is one of the world’s fastest growing economies, but also one of
most difficult places to do business in. One of toughest places in the
to get an electricity connection, (9.5 months). Major power outages
and lack of investment in power sector. Trade is slow..takes 3x longer
compared to other OECD nations
Argentina
• It takes 1 year to get a construction permit, compared to 7 months
for Latin American countries. Starting a business takes 26 days. They
scared off FDI by defaulting on debt in 2002
Indonesia
• One of most difficult to start a business. Need 1.5 months to launch a
business in Indonesia, hard to get electricity. 15 million households
have no access to electricity. Want FDI to provide 2/3 of $ 150 billion
needed for infrastructure development in the next five years
Step to Expanding Internationally
 Research, research and research (see next slide)
 Choose an entrepreneur-friendly environment.
 Look at the countries that are the most and least friendly to small business.
 Turn to Uncle Sam.
 Your local U.S. Export Assistance Center (USAEC) can help you with tasks
 such as finding pre-screened partners, agents and distributors; conducting background
checks and market research; and tracking down relevant trade events in 85 countries.
 Investigate suppliers thoroughly.
 Use sourcing sites such as Alibaba.com to search for suppliers by country and product (or
service).
 Avoid placing orders before you have traveled to meet potential new suppliers and tour their
factories.
 Do references checks BEFORE you sign a deal.
 Hit the trade show circuit.
 Participants of shows are well-established suppliers of goods /services or logistics experts, such
as freight-forwarders and customs brokers
 For leads on reputable trade shows, consult your industry association
 U.S. Department of Commerce for non-food related businesses
 U.S. Foreign Agricultural Service, which have offices focused on global trade events.
Places to look for Data?
• Other places to research
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STAT-country (STAT-USA)
CIA World fact book
Index on Economic Freedom
Humanitarian Response Index
GLOBUS
National Trade Database
Doing Business Abroad
GEM