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Born global entrepreneurship

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How born global firms differ from traditional firms?

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Born global entrepreneurship

  1. 1. BORN GLOBAL Enterpreneuership MBA International Management WS 16/17 Presented by: PRIYA SARANGLA
  2. 2. Agenda 2 1. Definitions 2. Development and growth stages 3. Comparison Born Global v/s Traditional Business 4. Examples & Case study 5. Challenges 6. Conclusion
  3. 3. 3 Key Principles • Companies that start selling products in their home markets and then they sequentially look at new countries. • Also known as, The Uppsala Internationalization Model or Stage Model. • Born globals are defined as organizations that within a few years from being founded enter several international markets and have a global mindset from day one. • Also Known as, Early internationalizers, international New Ventures, High Technology Start-ups, Global Start-ups or International Entrepreneurs What is Traditional & Born Global Firm? Traditional Born Global • “Business organization that, from inception, seeks to derive significant competitive advantage from the use of resources and the sale of outputs in multiple countries (Oviatt & McDougall, 1994) • Traditional business is a process in which enterprise gradually increase their international involvement (Johanson and Vahlne, 1977, p. 23) New Market Conditions Learning from Overseas Technological Advances
  4. 4. Agenda 1. Definitions 2. Development and growth stages 3. Comparison Born Global v/s Traditional Business 4. Examples & Case study 5. Challenges 6. Conclusion 1.
  5. 5. Cross Sectional Analysis (Benchmark) Time Series Cross-sectional analysis involves the comparison of different firms’ financial ratios at the same point in time. • Competitor Comparison • Industry Average Comparison Years Sales Born Global Stages Characteristics 1. Research Development No sales, global vision 2. Domestic Stage Domestic revenues,global vision 3. Entry age < 25% of international revenues,global vision 4. Starting Stage 25% of international revenues and < 25% of revenues from other continents, global vision 5. Development Stage > 50% of international revenues, global vision 6. Growth Stage > 25% of revenue from other continents, global vision 7. Mature Stage > 50% of revenue from other continents Source: Development Phases of Born Globals (Gabrielsson et al.,(2008) Seven stages of development based on operations, revenues , and the origin of those revenues Development Stages
  6. 6. Characteristic Born Global Introductory Phase • Developing a commercially acceptable product • Secure financing • Develop the market Commercialization & foreign entries • Enter to foreign markets • Increase revenue volumes Rapid growth & foreign expansion • Penetrate existing markets • Expand to new continents Rationalization & foreign maturity • Align operations and marketing to reach global synergies. Globalexpansionofthefirm Growth of firm Size Growth Phase 1: Introductory InternationalizationdegreeGlobalizationdegree 25%50%25%50%` Micro Small Medium Large Growth Phase 2: Comercialization and foreign entries Growth Phase 3: Rapid growth and Foreign Expansion Growth Phase 4: Rationalization and Foreign Maturity Growth Phases of International New Ventures Growth Phase Source: Gabrielsson & Gabrielsson, 2009
  7. 7. Revenues Origin of Revenues R & D Stage Domestic Stage Entry Stage Starting Stage Development Stage Growth Stage Mature Stage Revenues from home country Revenues from home continent Revenues from other continents Growth Phase 4 Growth Phase 3 Growth Phase 2 Growth Phase 1 Development & Growth stage – Diagramatic representation Source: Luostarinenen & Gabrielsson (2006) and Grabrielsson & Gabrielsson(2009)
  8. 8. Agenda 1. Definitions 2. Development and growth stages 3. Comparison Born Global v/s Traditional Business 4. Examples & Case study 5. Challenges 6. Conclusion 1. 8
  9. 9. Comparison Born Global v/s Traditional Business Born Globals Traditional Firms -Proactive and structured -Global niche markets Internationalization approach -Reactive and oppurtunistic -Adverse home markets -Competitive -Compete with high competitors Objective -Survive -Increasing sales volume -Focuses on geographically spread lead markets -Psychic Distance irrelevant -Extreme Flexibility to adapt Internationalization Strategy -International markets developed serially -In order of psychic distance -Limited Flexibility to change -Simulationeous domestic and international expansion -Lead markets focused -High conncectiviy network Expansion Patterns -Domestic expansion first -Low-market targets - Limited networks -Strong knowledge-base and technology competence Market advantage -Several years of operations expereince - Domestic market largely irrelevant Home market -Domestic market developed first -Rapid penetration of global niche -Internationalization within few years of inception Pace -Single Market at a time -Gradually Expanding --Integrated with client´s channel or Big MNC‘s Supply chain. -Multiple entry modes like stategic alliance, Joint ventures or subsidaries. Networks -Faciliate Internatinolization -Coorporation with Agents/distributors
  10. 10. Agenda 1. Definitions 2. Development and growth stages 3. Comparison Born Global v/s Traditional Business 4. Examples & Case study 5. Challenges 6. Conclusion 1. 10
  11. 11. Born Global v/s Traditional Model : AA Inception: Inception: Inception: 1994 2003 1974 Internationalization: Internationalization: Internationalization: From inception From inception 1988 Performance: Performance: Performance: Employees: 268,900 Employees: 500 2169 stores Worldwide Worldwide, 700 million registered users by 2011 Operates in 88 countries Group Turnover Group Turnover Group Turnover US $107 billion (2015) US $2 billion (2013) US $15.9 billion (2016) Examples
  12. 12.  Amazon.com was founded in 1994 by Jeff Bezos  Went online in the year 1995  As an online Book Store but soon diversified into wide range of products  In its first week, received nearly $12,500 of orders.  Within its first month, books were sold to customer in all fifty United States and forty-five other countries.  End of 1996, Amazon boosted $ 15.7 million in sales.  Today its one of the worlds largest online retailer 12 Case Study - Amazon
  13. 13. 13 Founder Family Business Angels Angel Syndicate Family IPO $18 $.3333 $.3333 $.1287 $.1717 $.001 Jul 1994 Two angels invest a total of $54,408 Jeff Bezos starts Amazon.com: he invests $10,000 Feb 1995 Aug 1995 Dec 1995 May 1996 May 1997 Founder’s father and mother invest a combined $245,500 Price/Share Twenty angels invest $46,850 Siblings invest $20,000 3 M shares are offered, raising $49.1 M Success Story Source: 1000ventures.com
  14. 14. “If you make customers unhappy on the internet, they can each tell 6000 friends”.- Jeff Bezos,1996 Cost structure Revenue streams Key resources Channels Key activitiesKey partners Value proposition Costumer relationships Costumer segments Price:cost effectively Customer Experience & Convenience Wide selection More distribution channel Suppliers & Manufacturers Network of Sellers Publishers Merchandising Production & Design Physical Warehouses Human Web & application development Intellectual: Kindle Platform Self-Service Automated Services Parternership Alliances Mass Market Global market Sellers ( companies and individual) DevelopersAmazon.com Mobile apps Logistic Networks Other retailers Cost Driven Marketing Technology and content fulfilment Economies of Sale Retail sales E-books & Contents Commision on reseller sales Prime monthly subscriptions Business Model 14
  15. 15. Cross Sectional Analysis (Benchmark) Time Series Years Sales 15 Summary of Comaprison Born Globals Traditional Firms Internationalization From inception Gradual process Vision Vision from the begining No vision, logical step Commitment Made by the enterpreneuer Driven by activities, knowledge and investments Industry High-tech industry Manufacturing industry Market Entry Without any pattern Throughout the establishment chain Networks Networks created abroad. Weak ties and cooperative networks. Networks established in the home market – market relationships
  16. 16. Agenda 1. Definitions 2. Development and growth stages 3. Comparison Born Global v/s Traditional Business 4. Examples & Case study 5. Challenges 6. Conclusion 1. 16
  17. 17. 17  Born global firms face the following kinds of Challenges:  Enterpreneurial Challenges  Managerial.  R&D.  Financial and sales.  Marketing challenges.  Lack of home market position.  Governmental Challenges  Lack of knowledge on government’s policies. Difference in languages and business practices.  Educational Challenges Lack of international market knowledge. Size Time • Credibility • Finance • R&D • Export know-how & skills • Foreign representation • Market information • Innovation... the next product Evolution of a Born Global Exporter & Challenges It Overcomes Product or process development Small domestic sales only Begin exporting early (2 years) Create International position Manage transition issues early Niche limits Some will exceed $100 million Challenges Source: Luostarinen and Gabrielsson (2002)
  18. 18. Agenda 1. Definition & Characteristics 2. Development and growth stages 3.Comparison Born Global v/s Traditional Business 4. Examples & Case study 5. Evolution of Born Global & Challenges 6. Conclusion 1. 18
  19. 19. • International Origins • The tech sector dominates born global companies • Unlike multinational firms, most born global firms tend to be small and self- financed • Early & rapid in internationalization, still have to face challenges. 19 Conclusion
  20. 20. 20 Thank you ! Any Questions?