Barriers to international entrepreneurship

By Prodip Kumar and Gourav Roy

The barriers in international business development are the different forces that influence the state and development of the firm. These are both internal and external forces which together form the environment.

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The internal forces are the forces a company can control and include finance, production, marketing and personnel. The external forces are uncontrollable by the company and therefore involve political, legal, distributive, competitive, physical, labor, financial, technological, economic, socioeconomic and socio-cultural forces.

While a company which is solely operating on the domestic market only has to deal with its domestic environment, an internationally operating company has to deal with those of the foreign companies or strategic business units as well.

The domestic environment contains barriers for entrepreneurs from going international. While in the process of internationalisation many entrepreneurs focus on the foreign barriers, the domestic barriers need to be overcome first. Of course, it is advised to map the barriers of the domestic, foreign and the international environment at an early stage, but it is not necessary to address the foreign barriers in case the domestic barriers cannot be dealt with.

In general the common factors that act as restrictions from the domestic corner are limited access to finance&working capital, high transportation costs, non-diversifiable risks and small scale of production. The entrepreneurs in our country are facing these problems which are stopping them from taking their businesses across the border, i.e. they can’t go for international entrepreneurship.

Foreign barriers restricting the business of domestic country from going abroad are lack of knowledge for foreign markets, language and cultural barriers, financial barriers, costly & non-transparent foreign government regulations, limited information and inability to contact overseas customers.

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Now measures can be taken to help overcome the major restrictions. The steps that can be followed are:

  • Using pooled resources from other small firms through trade associations. By taking resources from similar small firms and combining them, the firms can ensure efficient economies of scale to launch their business internationally.
  • Taking the advantage of government programmes designated to help exporters can be a major focus. By taking these advantages, the exporters can cover initial losses through the associated help from the government. Simultaneously, when the firms will be self-reliant, they can experience cash inflows without loss.
  • Taking advantage of favourable regulatory structures in certain countries and considering a problem as not always a problem is a better technique. A problem to other competitors can be termed as the exporting business firm’s benefits. So, proper information flows and market knowledge and proper fundamental analysis of the firms and the economy are very necessary in order to get the required advantages over the other businesses.
  • Collaborate with large firms or simply mergers with other firms. Through such mergers, the reputation, capital, information flow and ability to face complexities can be largely avoided.

Basically, lack of international expansion is a big problem standing in the way of increasing remittances for our home country. These steps can greatly help entrepreneurs planning to go international.

Prodip Kumar Roy FCS is the Chief Financial Officer at Active Fine Chemicals Ltd. Gourav Roy is a student of Finance at University of Dhaka.