Description
In this such a detailed illustration with regards to review of global marketing environment and entrepreneurship development.
International Journal of Commerce and Law
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Review of Global Marketing Environment and
Entrepreneurship Development
Musibau Akintunde Ajagbe
Centre for Entrepreneurship Studies,
Department of Business Management,
Covenant University,
KM 10 Canaan Land,
Ota, Nigeria
Tel: +2349035414257
Email: [email protected] & [email protected]
E. I. Mercy Ogbari
Department of Business Management,
Covenant University,
KM 10 Canaan Land,
Ota, Nigeria
Tel: +2348060319126
E-mail: [email protected]
Adunola Oluremi Oke
Department of Business Management,
Covenant University,
KM 10 Canaan Land,
Ota, Nigeria
David Isiavwe
Department of Accounting
Igbinedion University
Okada, Nigeria
[email protected]
The research is part financed by Covenant University, Canaan Land, Ota, Nigeria
Abstract
In recent times, globalization of new entrepreneurial ventures are both expanding and this may possibly
contribute to a greater number of economic actors pursuing foreign markets. Empirical studies reveals
that the expansion and acceleration of cross-border entrepreneurship should be considered in the light
of substantial changes that has taken place in the past decades and that resulted in a reduction of
transaction costs for undertaking international business. In view of this, business venture owners
globally find avenues of taking their brands to global markets, but marketing environment at the global
arena presents several challenges to overseas players. The political, cultural and technological
atmosphere has many influence on entrepreneurial success in foreign markets. The purpose of this
study is to understand the challenges that entrepreneurial firms encounter in trying to launch their
brands in global market. This study adopted a secondary approach to data collection by reviewing
archival literatures in this domain of investigation. This study concludes that cross-border business
activities are essential avenues through which emerging entrepreneurs could create value, generate
growth and access new knowledge and technologies via their exposure to foreign markets.
Keywords: International Marketing, Small and Medium Sized Firms, Cross Border Entrepreneurs,
Business Venturing, Business Environment.
1. Introduction
Barringer & Ireland (2005) argued that businesses are the movers of most national economies of the
world, and that the prosperity attained by majority of entrepreneurs are tied to different economic
regulations that operates in such countries. Importantly, environmental variables play an essential role
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in the accomplishment of entrepreneurial ventures particularly in global markets (Barringer & Ireland,
2005; Ajagbe, 2014; Ajagbe & Ismail, 2014). However, in most of the developing economies, small
and medium sized businesses contribute a larger proportion of what drives the economy. Not minding
this, entrepreneurs encounter many challenges such as inadequate funds, inadequate power supply and
inadequate support from national governments. These problems have resulted to entrepreneurs rather
than getting involved in large production oriented ventures but are engaged in ordinary trading
activities. The concept of buy low sell high has given a lot of business persons many reasons to be
involved in trading commodities both locally and internationally.
Acs et al. (2005) argued that international marketing environment cannot be avoided in evaluating
entrepreneurship development particularly in situations where such entrepreneur transacts his ventures
across international borders. The reason is that for anyone to operate successfully in a country of their
choice, such venture owner should be ready to adhere to the trade policies that exist in such country. In
addition to this, trade organizations in the foreign environment are another subject of interest to the
entrepreneur because there is need to understand trade restrictions, regulations and barriers that are
applicable to the new entrants. Hannafey (2003) posit that this is not surprising that entrepreneurs are
as varied as the kinds of businesses they engage in. The author added that for every characteristic that
describes one prosperous entrepreneur, one can find another completely varying, yet successful,
entrepreneur who displays another kind of behavior. In relation to this, studies indicates that there are
four broad groups that entrepreneurs can be categorized: the home-based entrepreneur, the serial
entrepreneur, the traditional entrepreneur, and, more recently, the cyber entrepreneur (Shane &
Venkataraman, 2000; Hannafey, 2003; Ismail et al. 2011). These group of behaviours are self-
explanatory, however, the emergence of the commercial Internet gave rise to the cyber entrepreneur,
one who takes pride in the fact that they do not have a “bricks-and-mortar” operation. Allen (2003)
opine that cyber entrepreneurs transact all their businesses with customers, suppliers, strategic partners,
and others on the Internet and deal in digital products and services that do not require bricks-and-
mortar infrastructure like warehousing and physical distribution. Empirical literature has revealed an
inadequate studies recognizing the articulated and contextual dimension of entrepreneurship (Shane &
Venkataraman, 2000). The available studies describes entrepreneurship mainly in terms of the
personality and functions of the entrepreneurs, independent of the situations in which they find
themselves. Shane (2003) wrote that the entrepreneurship concept has long been viewed as an
important economic activity. The author added that the past twenty years has witnessed an abundance
of investigation of research into entrepreneurs and their actions with considerable emphasis on the
elements that constitute successful entrepreneurship. There is no doubt that entrepreneurship has
tremendous impact on national economies and on society. Evidence are bound that considerably large
number of people are engaged in entrepreneurial endeavours around the world. Studies also shows that
entrepreneurial activity varies significantly by geographic region, types of business, and entrepreneurial
motivation. Review of empirical literature has focused more on medium sized firms and multinational
corporations as regards the concept of international marketing. Most studies did not investigate the
extent to which international marketing environment has affected entrepreneurs in emerging markets.
Furthermore, many of the existing studies dwell more on large sized firms as regards production of
exportable commodities and this has received much attention as regards entrepreneurship development
of business owners. However, this study shall be arranged in the following manner. The next section
shed more light on perspectives of entrepreneurship, followed by the characteristics of entrepreneurs,
challenges of entrepreneurs in developing economies, dynamics of international environment, market
and sales forecasting in international environment, international trade theory and ends with a detailed
conclusion. Figure 1 below shows the relationship among the variables as a conceptual research
framework.
Global Marketing
Business
Environment
Entrepreneurship
Development
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Figure 1: Research Framework
2. Conceptual Overview
2.1 Entrepreneurship in Perspectives
Writers and researchers have for many decades described the entrepreneurship concept in terms of
pursuing new, innovative, flexible, dynamic, creative, and risk-taking ventures (Drucker, 1985; Porter,
1990; Mason & Brown, 2010; Mason, 2010). Many of the researchers have argued that recognizing and
pursuing business ideas are an essential dimension of entrepreneurship. Mason & Brown (2011) posit
that entrepreneurship involves the generation of value, the process of starting or building new profit-
making ventures, the process of making available new products or services, and the deliberate creation
of value through organization by an individual contributor or a small group of partners (Coulter, 2003;
Ajagbe & Ismail, 2014; Ajagbe, 2014). Another definition of entrepreneurship that has been used is
“the process of creating something different with value by devoting the necessary time and effort,
assuming the accompanying financial, psychological, and social risks, and receiving the resulting
rewards of monetary and personal satisfaction”. The concept was coined from the French words entre,
which means “between,” and prendre, meaning “to take.” It was originally used to describe people who
“take on the risk” between buyers and sellers or who “undertake” a task such as starting a new business
venture. Barringer & Ireland (2005) added that it is also important to distinguish between inventors and
entrepreneurs as they differ from each other. They put forward that an inventor creates something new,
while an entrepreneur assembles and then integrates all the resources needed, the money, the people,
the business model, the strategy, and the risk bearing ability to transform the invention into a viable
business.
Therefore “entrepreneurship” is the process by which individuals pursue opportunities without regard
to resources they currently control. Barringer & Ireland (2005) argued that the essence of
entrepreneurial behaviour is identifying opportunities and putting useful ideas into practice. Markman
et al. (2009) concluded that the responsibilities required for by this character can be derived by either a
group of individual or an individual and particularly requires creativity, drive, and an urge to be a risk
taker. They added that it is not compulsory that it must be a new product and/or service, but a new
insight and the preparedness to be committed and take risks. Whereas many people perceive
entrepreneurship as establishing a new venture, it is usually viewed to be an individual’s activity.
Mason (2010) opine that existing firms could also display an entrepreneurial attitude.
Characteristically, existing firms with an entrepreneurial focus are proactive, innovative, and risk-
taking. It is also essential that the level of entrepreneurship displayed in an organization could be
dependent on the type of industry. Ismail et al. (2011) emphasized that an entrepreneur is one who
creates a new business in the face of risk and uncertainty for the purpose of achieving profit and growth
by identifying significant opportunities and assembling the necessary resources to commercialize on
them. Not minding the intention behind been an entrepreneur, it is the act of creating businesses by
perceiving an opportunity, assessing and risking resources to exploit the opportunity, managing the
process of creating business enterprise from an idea, and creating value that makes it the
entrepreneurial act.
2.2 Characteristics of Entrepreneurs
Mason et al. (2009) argued that the characteristics of an entrepreneur is not of one particular dimension
and that there is no single set of behavior that one can use to describe who will become entrepreneurs
and whether or not such person will succeed. The researchers wrote that the diversity inherent in them
seems to be a central characteristic of entrepreneurs. Although entrepreneurship theory is considered to
be underdeveloped, existing studies has shown a preoccupation with the success or failure of individual
entrepreneurs and organizations. Shane & Venkataraman (2000) believe that it is more appreciated to
have a more inclusive opinion of prosperous entrepreneurship which is based on both foundational
classics and more recent literature in the area. This report perceive the concept as a reflection of the
component of innovation, social and economic change, risk (Mill, 1848; Knight, 1921), and reward
(Hawley, 1901; McClelland, 1961). The components of successful entrepreneurship are universally
identified in the more recent studies which advocates an emphasis on the attitude of creating new
enterprise (Gartner, 1988). The combination of various views of the components of an entrepreneur
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appears to display the following characteristics:
Vision: Entrepreneurs are perceived as successful, partly if they visualize a future not seen by others in
their industry (Hamel & Prahalad, 1994).
Innovation: They are people who create new markets, new products, and/or new services, it involves
changing, revolutionizing, transforming, and introducing new approaches or systems (Drucker, 1985;
Ajagbe et al. 2015a; Ajagbe et al. 2015b).
Passion for the business: This passion typically stems from the entrepreneur’s belief that the business
will positively influence people’s lives (Shane, 2003). Entrepreneurship is not for a person who is only
partially committed. It is important to be enthusiastic about a business idea, but it also is important to
understand its potential flaws and risks (Barringer & Ireland, 2005).
Product/customer focus: This underscores an understanding of the two most important elements in any
business. An entrepreneur’s keen focus on products and customers typically stems from the fact that
most successful entrepreneurs are, at heart, craftspeople (Mason & Harrison, 2008).
Opportunity identification: Whether opportunities are created or opportunities are identified,
entrepreneurs seize opportunities. Entrepreneurs’ special talent lies in recognizing and exploiting
particular opportunities (Shane & Venkataraman, 2000; Shane, 2003).
Creating value: This involves the ability to fashion a solid business idea into a viable business. This
means developing a business model, putting together a new venture team, raising money, establishing
partnerships, managing finances, leading and motivating employees, and so on (Barringer & Ireland,
2005).
Growth: Traditional definitions of entrepreneurial success have included tangible growth indicators
such as revenue growth, increase in market share, and growth profits (Ismail et al. 2011).
Social and economic change: Arguably, a key outcome of entrepreneurial activity is reward for the
individual entrepreneurs. Drucker (1985) find that entrepreneurs are more likely than others to
“approve of actions that maximize personal financial rewards” even when such rewards come at other
people’s expense.
Financial risk: Almost always entrepreneurs’ actions involve financial risk, both for individual
entrepreneurs and for external investors (Baumol, 2002; Sarasvathy et al. 1998).
Tenacity despite failure: Because entrepreneurs are typically trying something new, the failure rate
associated with their efforts is naturally high. Developing a new business idea may require a certain
degree of experimentation before a success is attained (Barringer & Ireland, 2005; Kotler, 2007).
2.3 Challenges of Entrepreneurs in Developing Economies
Ajagbe & Ismail (2014) opine that before international investors stake in their money in a particular
venture, they are of the knowledge that a few challenges may occur. Among these is that they must
consider the determinants of the conditions of entry, which the authors describes as the power of the
established sellers in an industry persistently to raise prices above the competitive level without
attracting new firms to enter. Three major determinants of entry has been described by previous
researchers, firstly, an absolute cost advantage for established firms, such as the control of production
techniques through patents, imperfections in factor markets, which allow lower purchasing prices, and
money market imperfections, which impose higher interest rates on potential entrants (Shane, 2003;
Mason, 2010; Mason & Brown, 2011). The situation that is favourable to product differentiation
through brand preferences and the reputation of the firm is the second determinant and finally, the
significant economies of scale. Barriers to new entre are characteristics of Oligopoly and it is amazing
that most of the oligopolies in developing countries are expatriates (Shane, 2003). This does not mean
that there is any mindful behaviour on the part of the firms, expatriate or indigenous to deter new entry;
but, where such situations have arisen, the industry remains the exclusive preserve of the established
firms. In case such firms foreign, the removal of entry barriers to indigenous firms requires particular
regulations. In addition, the main deterrent to local firms in manufacturing is ignorance on the part of
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potential investors (Oliveira et al. 2014; Abdallah et al. 2014). Knowledge acquired from empirical
studies focusing on developed countries has shown that theories of underdevelopment connected to a
lack of entrepreneurial spirit are inapplicable to many of the developing countries.
3. International Environmental Factors
The international business environment is a very significant area considering certain group of ventures.
Bjorklund (2011) opine that it is essentially important for industries directly relying on imports or
exports and import-competing industries. The author contributed that a recession in international
markets or the implementation of protectionist regulations by foreign countries could create difficulties
for firms that depend on exports. Wang et al. (2012) on the other hand suggest that a boom in the export
market or a relaxation of the protectionist regulations may help the export-oriented industries. They
added that a liberalization of imports may help industries that depend on imports, but may deter import-
competing industries. Lin (2014) observed that key international developments have their spread
effects on local enterprises. He argued further that a number of other countries felt the shock waves of
the recent past economic recession in the global world. In addition, fluctuations in crude oil price have
seriously affected a number of economies. These situation has resulted in increase in the cost of
production and the prices of certain products. Increase in crude oil prices led to an increase in the
demand for automobile models that economize fuel consumption (Bjorklund, 2011; Wang et al., 2012;
Cheraghi et al., 2004). An in-depth knowledge of export market allows a firm to develop a more
profitable product mix and to consolidate its position in the home market. This has encouraged many
companies to plan ahead their investment and production capacities considering the international
markets.
3.1 Dynamics of International Environment
Political and Legal Factors: Legal and political environment are inter-related with the business
strategy formulation due to competition. The communist countries for instance operate a centrally
planned economic system. Saffu et al. (2012) reported that many countries aside from those regulations
that control financial investment and connected issues, a number of regulations exist that control the
conduct of the investors. Ku (2014) added that such regulations cover such matters as standards of
products, packaging, and promotion etc. In addition to the aim of protecting local industries and
consumer interest, rules have become stricter. Regulations to protect the purity of the environment and
preserve the ecological balance have assumed great importance in many countries including Nigeria.
Socio-Cultural Factor: The socio-cultural fabric of a society is a significant environmental variable
that require to be evaluated while formulating business strategies. Bach et al. (2013) argued that the
cost of neglecting the customs, traditions, taboos, tastes and preferences of people could be very high.
Ajjan et al. (2013) posit that purchasing and consumption habits of the local people, their language,
beliefs and values, customs and traditions, tastes and preferences, education are all factors that affect
business.
Demographic Factors: Demographic variables such as population size, growth rate of the area,
composition of age, life expectancy, family size, spatial dispersal, employment status, job pattern and
others affect the demand for goods and services (Hanafizadeh et al. 2012). Markets with growing
population and income are growth markets. Population that is rapidly increasing reveals a rising
demand for many commodities (Ku, 2014).
Natural Environmental Factors: Ecological and geographical variables such as endowment of natural
resource, weather and climatic environments, topographical dynamics, locational aspects in the global
context, port facilities, etc., are all pertinent to business. Lin (2014) reported that variation in
geographical environment between markets could sometimes call for changes in the marketing mix.
Physical and Technological Factors: Physical influences such as geographical variables, weather and
climatic situations may call for alterations in the product to suit the environment because these
environmental constructs are not controllable (Saffu et al. 2012). In addition, technological variables
sometimes pose problems. An organization that is not capable of adjusting with the technological
dynamics, may not survive. Ajagbe et al. (2011) opine that differing technological conditions of
varying markets may call for product modifications.
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3.2 Market and Sales Forecasting in International Environment
Thome et al. (2012) argued that market and sales forecasting are fundamental to the theory and practice
of the international marketing functions. They authors put further that without a sales forecast, in the
short term, operations can only respond retroactively, leading to lost orders, inadequate service and
poorly utilized production resources. In the longer term, financial and market decision leading to
misallocation of resources so that the organization's continuing existence may be brought into question.
Danese & Kalchsmidt (2011) opine that in such consequences it is hardly surprising that the
management science literature has long been filled with attempts to improve the quality of an
organization's market forecasts. Ogbari et al. (2015) posit that previous studies on management science
and operational research practice forecasting is placed at the head of the techniques employed.
Researchers reported that since 1960 major growth has been witnessed in the areas of research into
forecasting (Danese and Kalchschmidt, 2011; Thome et al. 2012; Solomon et al. 2012). However, most
of those research have concentrated on only one aspect of the problem: how to develop appropriate
forecasting methods. In parallel with the technical research into forecasting methods, some researchers
have examined market forecasting practices. They have been concerned with such factors as the level
of aggregation for which a forecast is made (from product up to industry), the time horizon of the
forecast, the methods used and the accuracy achieved.
Bach et al. (2013) found that in any organization the objectives of the market forecasting process are
not straightforward, and different organizational objectives will be better served by a matching
organizational design. While these objectives will usually, if not invariably, include statistical notions
such as accuracy and bias, more general aspects of the marketing function are also affected such as
improved competitive intelligence and sales force motivation. Hanafizadeh et al. (2012) concluded that
the relative importance (both perceived and actual) of any particular objective will vary from
organization to organization. Organizational theorists have postulated a desired match between
environmental uncertainty and organizational design (Ajagbe et al. 2011; Ogbari et al. 2015). In order
to counter the effects of an unstable, complex environment the organization needs a richer information
base and more effective buffers to cushion it from rapidly deteriorating market conditions or swift
changes in technology or fashion. Scholars argued that organizations performed better when the
uncertainty in their environment was matched by levels of staff specialization and integration between
business functions. Bjorklund (2011) suggested that organizational aim should be to combine these
differing information sources, and achieve a synthesis where conflicting information is available.
However, inadequate linkages between departments can undermine the value of any forecasting
procedure.
3.3 Domestic Markets and International Competitiveness
Alessandria & Choi (2014) argued that one possible way of enhancing international competitiveness of
firms and continuous existence is the increasing returns to scale at the firm level. Several sources exist
to determine increasing returns to scale, including the adoption of more efficient production
technologies, learning by doing and other experience-based learning (Marin & Verdier, 2014).
However, increasing returns at the firm level could likely be a source of variations in competence
across markets when the size of market is on the order of minimum efficient scale. The description
emphasizes on increasing returns to scale at the level of the industry. Hence, this study suggest that
larger markets can accommodate more firms. Thus, if the efficiency level of each firm is a random
variable, then the most efficient firm in a large market will, on average, be more efficient than the most
efficient firm in a smaller market (Kotler, 2007; Porter, 1990; Ogbari et al. 2015). This result is an
application of a standard result in the theory of order statistics that states that the maximum of a sample
is bigger, the bigger is the size of the sample: the greater the number of times one can try out a game of
pure chance, the higher the 'best' one can achieve (Kotler, 2007; Ogbari et al. 2015). However,
economics research strongly suggests that larger markets are also more competitive, and hence, that the
number of firms does not increase in proportion with market size (Porter, 1990; Ogbari et al. 2015).
Thus such model implies that the expected difference in efficiency between the most efficient firms in
two markets of different size will diminish as both markets expand in proportion (Hannan et al. 1990;
Allen et al. 2005; Hannan & Freeman, 1977).
Reynolds (1997) argued that small and medium sized firms seems to migrate into international markets
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as exporters and/or as foreign investors. He suggested that foreign direct investment (FDI) and
exporting are also collective techniques adopted in the international operations of big multinational
organizations. Though past studies emphasized on the recognition of the causes of one of these
internationalization techniques, it is a distinctively significant techniques of growth for small and
medium sized firms whose scope of business has been geographically confined. Zahra et al. (2000)
argued that by broadening customer bases through entering into new markets, firms are able to achieve
a larger volume of production and growth. Furthermore, there are differences in market conditions
across different geo-graphic areas. By leveraging resources in different markets, firms are in a position
to capitalize on market imperfections and achieve higher returns on their resources. Sooner or later, in
the pursuit of growth and/or higher return to resources, small firms will adopt a geographic expansion
strategy to pursue new opportunities to leverage core competences across a broader range of markets
(Zahra et al. 2000).
The characteristics of the internationalization of entrepreneurial firms have arrested the interest of
entrepreneurship researchers who traditionally study start-ups that have a domestic business scope
(Ajagbe, 2014; Mason, 2007; Mason & Pierrakis, 2011). The growing emphasis in the globalization of
small and medium sized firms has resulted to ample studies on the phenomenon. Whereas the area of
global entrepreneurship is still in its infancy (Hisrich et al. 1977; Brazeal & Herbert, 1999; Mason &
Harrison, 2008), two varying thoughts have emerged (McDougall & Oviatt, 2000). One domain
emphasizes on international new firms: that is start-ups that are international from inception, otherwise
called born global. The other domain, to which this study belongs, looks at the internationalization of
established, yet small firms. In the former domain, authors have investigated both the antecedents and
outcomes of internationalization (Autio et al. 2000; Zahra et al. 2000). In the latter domain, however,
previous studies tended to focus on various aspects of small and medium sized firms export activities in
terms of the antecedents and the process of exporting, and export performance (Miesenbock, 1988;
Shoham, 1998). More recently, researchers have extended investigation beyond exporting to include
more broadly the processes and patterns of internationalization. However, few studies have addressed
the performance implications of internationalization even thought this is of central concern to
entrepreneurs (McDougall & Oviatt, 2000). This is primarily due to the difficulties in obtaining
detailed information on small and medium sized firm’s foreign investments and firm performance.
Documented information about many small and medium sized firms are simply not publicly available.
While studies on the performance implications of internationalization strategies have been sparse in the
entrepreneurship literature, studies in international business and strategic management literatures have
long explored the performance implications of international diversification strategies.
4. Theoretical Overview
International Economic Theories
Alessandria & Choi (2014) argued that a general perspective of the theory of international trade is
interchange of goods, capital, and services across international territories. Marin & Verdier (2014)
wrote that in many international markets, it reveals an ample share of gross domestic product (GDP).
While international trade has been present throughout much of history, its economic, social, and
political significance has been increasing in recent centuries. Tong & Wei (2014) opine that
industrialization, advanced transportation, globalization, multinational corporations, and outsourcing
are all having major impact on the international trade system. They argued further that rising foreign
trade is critical to the continuance of globalization. International trade is a major source of economic
revenue for any nation that is considered a world power. Without foreign trade, countries would be
restricted to the goods and services produced within their own borders.
International trade is in principle not different from domestic trade as the motivation and the behavior
of parties involved in a trade does not change fundamentally depending on whether trade is across a
border or not. The main difference is that international trade is typically more costly than domestic
trade (Marin & Verdier, 2014; Alessandria & Choi, 2014; Tong & Wei, 2014). The authors suggested
reasons for this to be that an international border typically imposes additional costs such as tariffs, time
costs due to border delays and costs associated with country differences such as language, the legal
system or a different culture. International trade uses a variety of currencies, the most important of
which are held as foreign reserves by governments and central banks. Ren et al. (2010) argued that
international trade is also a branch of economics, which, together with international finance, forms the
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larger branch of international economics. However, free trade is a type of trade policy that permits
trading partners’ mutual gains from trade as a function of the law of comparative advantage. Pol &
Folev (2011) wrote that under a free trade regulation, commodity prices are a reflection of true demand
and supply, and are the sole determinant of resource allocation. It varies from forms of trade regulation
where the allocation of goods and services amongst trading partners are determined by artificial prices
that do not reflect the true nature of demand and supply.
Trade theory: This in addition embraces endogenous dissimilarities between nations. The main
emphasis here is on economies of scale. JaeBin (2010) argued that the larger market as a result of trade
imposes a cost advantage in an industry in one of the countries. The second theory depends on
monopolistic competition, Ren et al. (2010) opine that this is a situation that the larger markets result to
trade increase. Due to varieties of commodities in the markets, buyers search for distinctive qualities of
international brands. James and Marcouiller (2002) mentioned that differentiated products trade flows
both ways within product groups, and the costs also determine the structure of trade in the international
market. Economic theory of gravity describes the complicated mutual trade mechanism among nations.
Real trade is far lesser than gravity envisages in a frictionless atmosphere, this provides evidence of
trade costs much larger than those due to policy or transportation (Marin & Verdier, 2014). Such costs
are properly described by geography and a set of national variations. Stabilizing this interconnection
over time reveals that the costs change slowly.
Absolute Advantage Theory: This term in principles of economics means the ability of a particular
country to produce a particular good with fewer resources than another country (Alessandria & Choi,
2014; Saffu et al. 2012). It is also the ability to produce more of a given product using a given amount
of resources. Hanafizadeh et al. (2012) opine that this concept could be in contrast to the notion of
comparative advantage which means the ability to produce a particular good at a lower opportunity
cost. The notion behind absolute advantage is universally connected to Adam Smith, while "the
principle of comparative advantage", is universally connected to David Ricardo in his 1817 Principles
of Political Economy and Taxation.
Comparative Advantage Theory: The comparative advantage theory in the principles of economics
means the ability of a country to produce a particular commodity at a lower opportunity cost than
another country. The concept further means the ability to produce a product most efficiently given all
the other products that could be produced in the same market. Bach et al. (2013) opine that this theory
can be contrasted with absolute advantage which means the ability of a country to produce a particular
good at a lower absolute cost than another. The theory describes the manner in which trade can create
value for both parties even when one can produce all commodities with fewer resources than the other
(Hanafizadeh et al. 2012). The net benefits of such an outcome are called gains from trade. Initial
research on comparative advantage theory was first described by Robert Torrens in 1815 in an essay on
the Corn Laws. He concluded it was England's advantage to trade with Poland in return for grain, even
though it might be possible to produce that grain more cheaply in England than Poland.
Competitive Advantage Theory: This concept is a situation a firm occupies against its competitors.
Michael Porter propounded the three mechanism for creating a sustainable competitive advantage
through cost leadership, differentiation or focus (James & Marcouiller, 2002). The aspect of cost
leadership come to play when an organization the same services as its competitors but at a lower cost.
However, the differentiation advantage come to play when an organization delivers greater services for
the same price of its competitors. JaeBin (2010) posit that they concept is jointly refer to as positional
advantages because they indicate the position of the organization in its industry as a leader in either
superior services or cost. Porter, competitive advantage emerges from the manner an organization
organizes and performs discrete operations (1990). The activities of an organization can be grouped
into a series of operations such as salespeople making sales calls, service technicians performing
repairs, scientists in the laboratory designing products or processes, and treasurers raising capital. Ren
et al. (2010) mentioned that by carrying out these operations firms create value for their customers. The
ultimate value an enterprise creates is measured by the amount customers are willing to pay for its
product or services. However, an organization is successful if the value created supersedes the overall
cost of carrying out all of the required operations. In order to derive competitive advantage over its
competitors, an organization must either provide comparable value to the customer, but carry out its
operations more perfectly than its competitors (lower cost), or perform operations in a unique way that
creates greater buyer value and commands a premium price (Porter,1990).
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5. Empirical Analysis
Feenstra (2003) argued that the concept of “buy low, sell high” rationality lead economists to the
comparative advantage theory. The theory indicates that the comparison of relative price variance
between countries to describe the trade pattern. Acs & Audretsch (2003) opine that entrepreneurship as
measured by varying dimensions such as start-up activity rates, increase in business ownership both
play significant role in economies of nations. Entrepreneurship is perceived as an essential mechanism
for development of national economies. This could be through its contribution to employment and
innovation generation (Acs & Audretsch, 2003; Autio, 1994; Baumol, 2002; Carree & Thurik, 2003;
Wennekers & Thurik, 1999). In addition, there are ample dissimilarities that occur between nations at
the degree to which entrepreneurship adds positively to national economic growth.
Yeoh (2004) recommended cross-border entrepreneurship as an important instrument for national
economic development. This mindset helps to gain insight into the variables that impact the emergence
of different groups of entrepreneurship and into the economic outcomes. Additionally, the involvement
of small and medium sized firms and young start-ups in the global economy despite environmental
forces that deter firms performance outside their regions of operation. Mason & Zhou (2009) wrote that
cross-border entrepreneurship, such as exports, are an essential avenue through which small firms are
able to create value, to generate growth, to access new knowledge and technologies overseas. Recently,
globalization of small and medium sized firms and young start-ups are expanding and could largely
contribute to a greater number of economic players aiming at foreign markets (Hessels, 2007b). This
expansion should be measured in the view of substantial dynamics that took place many years ago and
that lead to lowering of transaction costs for undertaking global ventures. Considering that firms are
operating in an economy that is becoming increasingly internationalized. Technological advancements
such as the adoption of the internet, e-mail and lowering transportation costs have led to increased flow
of information between countries that encourage small and medium sized firm’s globalization (Autio,
2005; Reynolds, 1997). This scenario has made it easier for small and medium firms to be able to
assess needed information about international markets, communicate with international business
partners and to coordinate different operations across national boundaries.
6. Conclusion of Study
This study has examined the effects of global marketing environment on entrepreneurship
development. This study laid much emphasis on variables that influence global marketing environment
of business, such variables are technological, cultural, political, environment, and government
regulations. Empirical studies of previous researchers were reviewed as they relate to the research
topic. In addition, theories that surround this topic of investigation were brought to light in the
theoretical framework, empirical framework and the gap in the literature reviewed. This study finds
that global marketing environment cannot be separated from other entrepreneurship development of the
economy. Hence, as earlier reported by earlier researchers, the impact of global marketing on
entrepreneurship development of an economy cannot be over emphasized. Therefore for entrepreneurs
to be successful in international market the impact of global marketing environment must be
considered in business decision making.
This study found that cross-border activities, such as exports, are an important means through which
small and new ventures are able to create value, to generate growth and to access new knowledge and
technologies abroad. This finding is consistent with the report of Yeoh (2004). The finding of Hessels
(2007b) further corroborated this current report and that of Yeoh (2004) because the author also adds
that the internationalization of SMEs and new ventures are both expanding and this may likely
contribute to a greater number of economic actors pursuing foreign markets. The expansion and
acceleration of cross-border entrepreneurship should be considered in the light of substantial changes
that took place in the past decades and that resulted in a reduction of transaction costs for undertaking
international business. Firms are operating in an economy that is becoming increasingly global. The
global shrinking of trade and investment barriers through the World Trade Organization and the
establishment of regional economic cooperation agreements such as the European Union have
diminished barriers for SMEs and new ventures to become internationally active. Also, technological
advancements (including the widespread use of internet and e-mail) and falling transportation costs
have resulted in enhanced information flows between countries which facilitate small and new venture
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internationalization. However, this study suggests that potential profit from international dealings is
dependent on the potential to align the business with available government regulations in the host
country. In addition, there is urgent need for entrepreneurial ventures to key into the ongoing
technological revolution to make their products available to the global markets, this is because it is
evident in the literature that emerging countries with substantial number of small and medium sized
firms have not really cashed into the adoption of technology to enhance their business transactions.
Acknowledgement
The researchers wish to thank the Covenant University Ota, Nigeria for making available some of the
facilities that enhanced the compilation of this study.
*Corresponding Author: Dr. Musibau Akintunde Ajagbe ([email protected] or
[email protected]) is from the Centre for Entrepreneurship Development Studies (CEDS),
Covenant University, Canaan Land, Ota, Nigeria.
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doc_975571009.pdf
In this such a detailed illustration with regards to review of global marketing environment and entrepreneurship development.
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Review of Global Marketing Environment and
Entrepreneurship Development
Musibau Akintunde Ajagbe
Centre for Entrepreneurship Studies,
Department of Business Management,
Covenant University,
KM 10 Canaan Land,
Ota, Nigeria
Tel: +2349035414257
Email: [email protected] & [email protected]
E. I. Mercy Ogbari
Department of Business Management,
Covenant University,
KM 10 Canaan Land,
Ota, Nigeria
Tel: +2348060319126
E-mail: [email protected]
Adunola Oluremi Oke
Department of Business Management,
Covenant University,
KM 10 Canaan Land,
Ota, Nigeria
David Isiavwe
Department of Accounting
Igbinedion University
Okada, Nigeria
[email protected]
The research is part financed by Covenant University, Canaan Land, Ota, Nigeria
Abstract
In recent times, globalization of new entrepreneurial ventures are both expanding and this may possibly
contribute to a greater number of economic actors pursuing foreign markets. Empirical studies reveals
that the expansion and acceleration of cross-border entrepreneurship should be considered in the light
of substantial changes that has taken place in the past decades and that resulted in a reduction of
transaction costs for undertaking international business. In view of this, business venture owners
globally find avenues of taking their brands to global markets, but marketing environment at the global
arena presents several challenges to overseas players. The political, cultural and technological
atmosphere has many influence on entrepreneurial success in foreign markets. The purpose of this
study is to understand the challenges that entrepreneurial firms encounter in trying to launch their
brands in global market. This study adopted a secondary approach to data collection by reviewing
archival literatures in this domain of investigation. This study concludes that cross-border business
activities are essential avenues through which emerging entrepreneurs could create value, generate
growth and access new knowledge and technologies via their exposure to foreign markets.
Keywords: International Marketing, Small and Medium Sized Firms, Cross Border Entrepreneurs,
Business Venturing, Business Environment.
1. Introduction
Barringer & Ireland (2005) argued that businesses are the movers of most national economies of the
world, and that the prosperity attained by majority of entrepreneurs are tied to different economic
regulations that operates in such countries. Importantly, environmental variables play an essential role
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in the accomplishment of entrepreneurial ventures particularly in global markets (Barringer & Ireland,
2005; Ajagbe, 2014; Ajagbe & Ismail, 2014). However, in most of the developing economies, small
and medium sized businesses contribute a larger proportion of what drives the economy. Not minding
this, entrepreneurs encounter many challenges such as inadequate funds, inadequate power supply and
inadequate support from national governments. These problems have resulted to entrepreneurs rather
than getting involved in large production oriented ventures but are engaged in ordinary trading
activities. The concept of buy low sell high has given a lot of business persons many reasons to be
involved in trading commodities both locally and internationally.
Acs et al. (2005) argued that international marketing environment cannot be avoided in evaluating
entrepreneurship development particularly in situations where such entrepreneur transacts his ventures
across international borders. The reason is that for anyone to operate successfully in a country of their
choice, such venture owner should be ready to adhere to the trade policies that exist in such country. In
addition to this, trade organizations in the foreign environment are another subject of interest to the
entrepreneur because there is need to understand trade restrictions, regulations and barriers that are
applicable to the new entrants. Hannafey (2003) posit that this is not surprising that entrepreneurs are
as varied as the kinds of businesses they engage in. The author added that for every characteristic that
describes one prosperous entrepreneur, one can find another completely varying, yet successful,
entrepreneur who displays another kind of behavior. In relation to this, studies indicates that there are
four broad groups that entrepreneurs can be categorized: the home-based entrepreneur, the serial
entrepreneur, the traditional entrepreneur, and, more recently, the cyber entrepreneur (Shane &
Venkataraman, 2000; Hannafey, 2003; Ismail et al. 2011). These group of behaviours are self-
explanatory, however, the emergence of the commercial Internet gave rise to the cyber entrepreneur,
one who takes pride in the fact that they do not have a “bricks-and-mortar” operation. Allen (2003)
opine that cyber entrepreneurs transact all their businesses with customers, suppliers, strategic partners,
and others on the Internet and deal in digital products and services that do not require bricks-and-
mortar infrastructure like warehousing and physical distribution. Empirical literature has revealed an
inadequate studies recognizing the articulated and contextual dimension of entrepreneurship (Shane &
Venkataraman, 2000). The available studies describes entrepreneurship mainly in terms of the
personality and functions of the entrepreneurs, independent of the situations in which they find
themselves. Shane (2003) wrote that the entrepreneurship concept has long been viewed as an
important economic activity. The author added that the past twenty years has witnessed an abundance
of investigation of research into entrepreneurs and their actions with considerable emphasis on the
elements that constitute successful entrepreneurship. There is no doubt that entrepreneurship has
tremendous impact on national economies and on society. Evidence are bound that considerably large
number of people are engaged in entrepreneurial endeavours around the world. Studies also shows that
entrepreneurial activity varies significantly by geographic region, types of business, and entrepreneurial
motivation. Review of empirical literature has focused more on medium sized firms and multinational
corporations as regards the concept of international marketing. Most studies did not investigate the
extent to which international marketing environment has affected entrepreneurs in emerging markets.
Furthermore, many of the existing studies dwell more on large sized firms as regards production of
exportable commodities and this has received much attention as regards entrepreneurship development
of business owners. However, this study shall be arranged in the following manner. The next section
shed more light on perspectives of entrepreneurship, followed by the characteristics of entrepreneurs,
challenges of entrepreneurs in developing economies, dynamics of international environment, market
and sales forecasting in international environment, international trade theory and ends with a detailed
conclusion. Figure 1 below shows the relationship among the variables as a conceptual research
framework.
Global Marketing
Business
Environment
Entrepreneurship
Development
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Figure 1: Research Framework
2. Conceptual Overview
2.1 Entrepreneurship in Perspectives
Writers and researchers have for many decades described the entrepreneurship concept in terms of
pursuing new, innovative, flexible, dynamic, creative, and risk-taking ventures (Drucker, 1985; Porter,
1990; Mason & Brown, 2010; Mason, 2010). Many of the researchers have argued that recognizing and
pursuing business ideas are an essential dimension of entrepreneurship. Mason & Brown (2011) posit
that entrepreneurship involves the generation of value, the process of starting or building new profit-
making ventures, the process of making available new products or services, and the deliberate creation
of value through organization by an individual contributor or a small group of partners (Coulter, 2003;
Ajagbe & Ismail, 2014; Ajagbe, 2014). Another definition of entrepreneurship that has been used is
“the process of creating something different with value by devoting the necessary time and effort,
assuming the accompanying financial, psychological, and social risks, and receiving the resulting
rewards of monetary and personal satisfaction”. The concept was coined from the French words entre,
which means “between,” and prendre, meaning “to take.” It was originally used to describe people who
“take on the risk” between buyers and sellers or who “undertake” a task such as starting a new business
venture. Barringer & Ireland (2005) added that it is also important to distinguish between inventors and
entrepreneurs as they differ from each other. They put forward that an inventor creates something new,
while an entrepreneur assembles and then integrates all the resources needed, the money, the people,
the business model, the strategy, and the risk bearing ability to transform the invention into a viable
business.
Therefore “entrepreneurship” is the process by which individuals pursue opportunities without regard
to resources they currently control. Barringer & Ireland (2005) argued that the essence of
entrepreneurial behaviour is identifying opportunities and putting useful ideas into practice. Markman
et al. (2009) concluded that the responsibilities required for by this character can be derived by either a
group of individual or an individual and particularly requires creativity, drive, and an urge to be a risk
taker. They added that it is not compulsory that it must be a new product and/or service, but a new
insight and the preparedness to be committed and take risks. Whereas many people perceive
entrepreneurship as establishing a new venture, it is usually viewed to be an individual’s activity.
Mason (2010) opine that existing firms could also display an entrepreneurial attitude.
Characteristically, existing firms with an entrepreneurial focus are proactive, innovative, and risk-
taking. It is also essential that the level of entrepreneurship displayed in an organization could be
dependent on the type of industry. Ismail et al. (2011) emphasized that an entrepreneur is one who
creates a new business in the face of risk and uncertainty for the purpose of achieving profit and growth
by identifying significant opportunities and assembling the necessary resources to commercialize on
them. Not minding the intention behind been an entrepreneur, it is the act of creating businesses by
perceiving an opportunity, assessing and risking resources to exploit the opportunity, managing the
process of creating business enterprise from an idea, and creating value that makes it the
entrepreneurial act.
2.2 Characteristics of Entrepreneurs
Mason et al. (2009) argued that the characteristics of an entrepreneur is not of one particular dimension
and that there is no single set of behavior that one can use to describe who will become entrepreneurs
and whether or not such person will succeed. The researchers wrote that the diversity inherent in them
seems to be a central characteristic of entrepreneurs. Although entrepreneurship theory is considered to
be underdeveloped, existing studies has shown a preoccupation with the success or failure of individual
entrepreneurs and organizations. Shane & Venkataraman (2000) believe that it is more appreciated to
have a more inclusive opinion of prosperous entrepreneurship which is based on both foundational
classics and more recent literature in the area. This report perceive the concept as a reflection of the
component of innovation, social and economic change, risk (Mill, 1848; Knight, 1921), and reward
(Hawley, 1901; McClelland, 1961). The components of successful entrepreneurship are universally
identified in the more recent studies which advocates an emphasis on the attitude of creating new
enterprise (Gartner, 1988). The combination of various views of the components of an entrepreneur
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appears to display the following characteristics:
Vision: Entrepreneurs are perceived as successful, partly if they visualize a future not seen by others in
their industry (Hamel & Prahalad, 1994).
Innovation: They are people who create new markets, new products, and/or new services, it involves
changing, revolutionizing, transforming, and introducing new approaches or systems (Drucker, 1985;
Ajagbe et al. 2015a; Ajagbe et al. 2015b).
Passion for the business: This passion typically stems from the entrepreneur’s belief that the business
will positively influence people’s lives (Shane, 2003). Entrepreneurship is not for a person who is only
partially committed. It is important to be enthusiastic about a business idea, but it also is important to
understand its potential flaws and risks (Barringer & Ireland, 2005).
Product/customer focus: This underscores an understanding of the two most important elements in any
business. An entrepreneur’s keen focus on products and customers typically stems from the fact that
most successful entrepreneurs are, at heart, craftspeople (Mason & Harrison, 2008).
Opportunity identification: Whether opportunities are created or opportunities are identified,
entrepreneurs seize opportunities. Entrepreneurs’ special talent lies in recognizing and exploiting
particular opportunities (Shane & Venkataraman, 2000; Shane, 2003).
Creating value: This involves the ability to fashion a solid business idea into a viable business. This
means developing a business model, putting together a new venture team, raising money, establishing
partnerships, managing finances, leading and motivating employees, and so on (Barringer & Ireland,
2005).
Growth: Traditional definitions of entrepreneurial success have included tangible growth indicators
such as revenue growth, increase in market share, and growth profits (Ismail et al. 2011).
Social and economic change: Arguably, a key outcome of entrepreneurial activity is reward for the
individual entrepreneurs. Drucker (1985) find that entrepreneurs are more likely than others to
“approve of actions that maximize personal financial rewards” even when such rewards come at other
people’s expense.
Financial risk: Almost always entrepreneurs’ actions involve financial risk, both for individual
entrepreneurs and for external investors (Baumol, 2002; Sarasvathy et al. 1998).
Tenacity despite failure: Because entrepreneurs are typically trying something new, the failure rate
associated with their efforts is naturally high. Developing a new business idea may require a certain
degree of experimentation before a success is attained (Barringer & Ireland, 2005; Kotler, 2007).
2.3 Challenges of Entrepreneurs in Developing Economies
Ajagbe & Ismail (2014) opine that before international investors stake in their money in a particular
venture, they are of the knowledge that a few challenges may occur. Among these is that they must
consider the determinants of the conditions of entry, which the authors describes as the power of the
established sellers in an industry persistently to raise prices above the competitive level without
attracting new firms to enter. Three major determinants of entry has been described by previous
researchers, firstly, an absolute cost advantage for established firms, such as the control of production
techniques through patents, imperfections in factor markets, which allow lower purchasing prices, and
money market imperfections, which impose higher interest rates on potential entrants (Shane, 2003;
Mason, 2010; Mason & Brown, 2011). The situation that is favourable to product differentiation
through brand preferences and the reputation of the firm is the second determinant and finally, the
significant economies of scale. Barriers to new entre are characteristics of Oligopoly and it is amazing
that most of the oligopolies in developing countries are expatriates (Shane, 2003). This does not mean
that there is any mindful behaviour on the part of the firms, expatriate or indigenous to deter new entry;
but, where such situations have arisen, the industry remains the exclusive preserve of the established
firms. In case such firms foreign, the removal of entry barriers to indigenous firms requires particular
regulations. In addition, the main deterrent to local firms in manufacturing is ignorance on the part of
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potential investors (Oliveira et al. 2014; Abdallah et al. 2014). Knowledge acquired from empirical
studies focusing on developed countries has shown that theories of underdevelopment connected to a
lack of entrepreneurial spirit are inapplicable to many of the developing countries.
3. International Environmental Factors
The international business environment is a very significant area considering certain group of ventures.
Bjorklund (2011) opine that it is essentially important for industries directly relying on imports or
exports and import-competing industries. The author contributed that a recession in international
markets or the implementation of protectionist regulations by foreign countries could create difficulties
for firms that depend on exports. Wang et al. (2012) on the other hand suggest that a boom in the export
market or a relaxation of the protectionist regulations may help the export-oriented industries. They
added that a liberalization of imports may help industries that depend on imports, but may deter import-
competing industries. Lin (2014) observed that key international developments have their spread
effects on local enterprises. He argued further that a number of other countries felt the shock waves of
the recent past economic recession in the global world. In addition, fluctuations in crude oil price have
seriously affected a number of economies. These situation has resulted in increase in the cost of
production and the prices of certain products. Increase in crude oil prices led to an increase in the
demand for automobile models that economize fuel consumption (Bjorklund, 2011; Wang et al., 2012;
Cheraghi et al., 2004). An in-depth knowledge of export market allows a firm to develop a more
profitable product mix and to consolidate its position in the home market. This has encouraged many
companies to plan ahead their investment and production capacities considering the international
markets.
3.1 Dynamics of International Environment
Political and Legal Factors: Legal and political environment are inter-related with the business
strategy formulation due to competition. The communist countries for instance operate a centrally
planned economic system. Saffu et al. (2012) reported that many countries aside from those regulations
that control financial investment and connected issues, a number of regulations exist that control the
conduct of the investors. Ku (2014) added that such regulations cover such matters as standards of
products, packaging, and promotion etc. In addition to the aim of protecting local industries and
consumer interest, rules have become stricter. Regulations to protect the purity of the environment and
preserve the ecological balance have assumed great importance in many countries including Nigeria.
Socio-Cultural Factor: The socio-cultural fabric of a society is a significant environmental variable
that require to be evaluated while formulating business strategies. Bach et al. (2013) argued that the
cost of neglecting the customs, traditions, taboos, tastes and preferences of people could be very high.
Ajjan et al. (2013) posit that purchasing and consumption habits of the local people, their language,
beliefs and values, customs and traditions, tastes and preferences, education are all factors that affect
business.
Demographic Factors: Demographic variables such as population size, growth rate of the area,
composition of age, life expectancy, family size, spatial dispersal, employment status, job pattern and
others affect the demand for goods and services (Hanafizadeh et al. 2012). Markets with growing
population and income are growth markets. Population that is rapidly increasing reveals a rising
demand for many commodities (Ku, 2014).
Natural Environmental Factors: Ecological and geographical variables such as endowment of natural
resource, weather and climatic environments, topographical dynamics, locational aspects in the global
context, port facilities, etc., are all pertinent to business. Lin (2014) reported that variation in
geographical environment between markets could sometimes call for changes in the marketing mix.
Physical and Technological Factors: Physical influences such as geographical variables, weather and
climatic situations may call for alterations in the product to suit the environment because these
environmental constructs are not controllable (Saffu et al. 2012). In addition, technological variables
sometimes pose problems. An organization that is not capable of adjusting with the technological
dynamics, may not survive. Ajagbe et al. (2011) opine that differing technological conditions of
varying markets may call for product modifications.
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3.2 Market and Sales Forecasting in International Environment
Thome et al. (2012) argued that market and sales forecasting are fundamental to the theory and practice
of the international marketing functions. They authors put further that without a sales forecast, in the
short term, operations can only respond retroactively, leading to lost orders, inadequate service and
poorly utilized production resources. In the longer term, financial and market decision leading to
misallocation of resources so that the organization's continuing existence may be brought into question.
Danese & Kalchsmidt (2011) opine that in such consequences it is hardly surprising that the
management science literature has long been filled with attempts to improve the quality of an
organization's market forecasts. Ogbari et al. (2015) posit that previous studies on management science
and operational research practice forecasting is placed at the head of the techniques employed.
Researchers reported that since 1960 major growth has been witnessed in the areas of research into
forecasting (Danese and Kalchschmidt, 2011; Thome et al. 2012; Solomon et al. 2012). However, most
of those research have concentrated on only one aspect of the problem: how to develop appropriate
forecasting methods. In parallel with the technical research into forecasting methods, some researchers
have examined market forecasting practices. They have been concerned with such factors as the level
of aggregation for which a forecast is made (from product up to industry), the time horizon of the
forecast, the methods used and the accuracy achieved.
Bach et al. (2013) found that in any organization the objectives of the market forecasting process are
not straightforward, and different organizational objectives will be better served by a matching
organizational design. While these objectives will usually, if not invariably, include statistical notions
such as accuracy and bias, more general aspects of the marketing function are also affected such as
improved competitive intelligence and sales force motivation. Hanafizadeh et al. (2012) concluded that
the relative importance (both perceived and actual) of any particular objective will vary from
organization to organization. Organizational theorists have postulated a desired match between
environmental uncertainty and organizational design (Ajagbe et al. 2011; Ogbari et al. 2015). In order
to counter the effects of an unstable, complex environment the organization needs a richer information
base and more effective buffers to cushion it from rapidly deteriorating market conditions or swift
changes in technology or fashion. Scholars argued that organizations performed better when the
uncertainty in their environment was matched by levels of staff specialization and integration between
business functions. Bjorklund (2011) suggested that organizational aim should be to combine these
differing information sources, and achieve a synthesis where conflicting information is available.
However, inadequate linkages between departments can undermine the value of any forecasting
procedure.
3.3 Domestic Markets and International Competitiveness
Alessandria & Choi (2014) argued that one possible way of enhancing international competitiveness of
firms and continuous existence is the increasing returns to scale at the firm level. Several sources exist
to determine increasing returns to scale, including the adoption of more efficient production
technologies, learning by doing and other experience-based learning (Marin & Verdier, 2014).
However, increasing returns at the firm level could likely be a source of variations in competence
across markets when the size of market is on the order of minimum efficient scale. The description
emphasizes on increasing returns to scale at the level of the industry. Hence, this study suggest that
larger markets can accommodate more firms. Thus, if the efficiency level of each firm is a random
variable, then the most efficient firm in a large market will, on average, be more efficient than the most
efficient firm in a smaller market (Kotler, 2007; Porter, 1990; Ogbari et al. 2015). This result is an
application of a standard result in the theory of order statistics that states that the maximum of a sample
is bigger, the bigger is the size of the sample: the greater the number of times one can try out a game of
pure chance, the higher the 'best' one can achieve (Kotler, 2007; Ogbari et al. 2015). However,
economics research strongly suggests that larger markets are also more competitive, and hence, that the
number of firms does not increase in proportion with market size (Porter, 1990; Ogbari et al. 2015).
Thus such model implies that the expected difference in efficiency between the most efficient firms in
two markets of different size will diminish as both markets expand in proportion (Hannan et al. 1990;
Allen et al. 2005; Hannan & Freeman, 1977).
Reynolds (1997) argued that small and medium sized firms seems to migrate into international markets
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as exporters and/or as foreign investors. He suggested that foreign direct investment (FDI) and
exporting are also collective techniques adopted in the international operations of big multinational
organizations. Though past studies emphasized on the recognition of the causes of one of these
internationalization techniques, it is a distinctively significant techniques of growth for small and
medium sized firms whose scope of business has been geographically confined. Zahra et al. (2000)
argued that by broadening customer bases through entering into new markets, firms are able to achieve
a larger volume of production and growth. Furthermore, there are differences in market conditions
across different geo-graphic areas. By leveraging resources in different markets, firms are in a position
to capitalize on market imperfections and achieve higher returns on their resources. Sooner or later, in
the pursuit of growth and/or higher return to resources, small firms will adopt a geographic expansion
strategy to pursue new opportunities to leverage core competences across a broader range of markets
(Zahra et al. 2000).
The characteristics of the internationalization of entrepreneurial firms have arrested the interest of
entrepreneurship researchers who traditionally study start-ups that have a domestic business scope
(Ajagbe, 2014; Mason, 2007; Mason & Pierrakis, 2011). The growing emphasis in the globalization of
small and medium sized firms has resulted to ample studies on the phenomenon. Whereas the area of
global entrepreneurship is still in its infancy (Hisrich et al. 1977; Brazeal & Herbert, 1999; Mason &
Harrison, 2008), two varying thoughts have emerged (McDougall & Oviatt, 2000). One domain
emphasizes on international new firms: that is start-ups that are international from inception, otherwise
called born global. The other domain, to which this study belongs, looks at the internationalization of
established, yet small firms. In the former domain, authors have investigated both the antecedents and
outcomes of internationalization (Autio et al. 2000; Zahra et al. 2000). In the latter domain, however,
previous studies tended to focus on various aspects of small and medium sized firms export activities in
terms of the antecedents and the process of exporting, and export performance (Miesenbock, 1988;
Shoham, 1998). More recently, researchers have extended investigation beyond exporting to include
more broadly the processes and patterns of internationalization. However, few studies have addressed
the performance implications of internationalization even thought this is of central concern to
entrepreneurs (McDougall & Oviatt, 2000). This is primarily due to the difficulties in obtaining
detailed information on small and medium sized firm’s foreign investments and firm performance.
Documented information about many small and medium sized firms are simply not publicly available.
While studies on the performance implications of internationalization strategies have been sparse in the
entrepreneurship literature, studies in international business and strategic management literatures have
long explored the performance implications of international diversification strategies.
4. Theoretical Overview
International Economic Theories
Alessandria & Choi (2014) argued that a general perspective of the theory of international trade is
interchange of goods, capital, and services across international territories. Marin & Verdier (2014)
wrote that in many international markets, it reveals an ample share of gross domestic product (GDP).
While international trade has been present throughout much of history, its economic, social, and
political significance has been increasing in recent centuries. Tong & Wei (2014) opine that
industrialization, advanced transportation, globalization, multinational corporations, and outsourcing
are all having major impact on the international trade system. They argued further that rising foreign
trade is critical to the continuance of globalization. International trade is a major source of economic
revenue for any nation that is considered a world power. Without foreign trade, countries would be
restricted to the goods and services produced within their own borders.
International trade is in principle not different from domestic trade as the motivation and the behavior
of parties involved in a trade does not change fundamentally depending on whether trade is across a
border or not. The main difference is that international trade is typically more costly than domestic
trade (Marin & Verdier, 2014; Alessandria & Choi, 2014; Tong & Wei, 2014). The authors suggested
reasons for this to be that an international border typically imposes additional costs such as tariffs, time
costs due to border delays and costs associated with country differences such as language, the legal
system or a different culture. International trade uses a variety of currencies, the most important of
which are held as foreign reserves by governments and central banks. Ren et al. (2010) argued that
international trade is also a branch of economics, which, together with international finance, forms the
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larger branch of international economics. However, free trade is a type of trade policy that permits
trading partners’ mutual gains from trade as a function of the law of comparative advantage. Pol &
Folev (2011) wrote that under a free trade regulation, commodity prices are a reflection of true demand
and supply, and are the sole determinant of resource allocation. It varies from forms of trade regulation
where the allocation of goods and services amongst trading partners are determined by artificial prices
that do not reflect the true nature of demand and supply.
Trade theory: This in addition embraces endogenous dissimilarities between nations. The main
emphasis here is on economies of scale. JaeBin (2010) argued that the larger market as a result of trade
imposes a cost advantage in an industry in one of the countries. The second theory depends on
monopolistic competition, Ren et al. (2010) opine that this is a situation that the larger markets result to
trade increase. Due to varieties of commodities in the markets, buyers search for distinctive qualities of
international brands. James and Marcouiller (2002) mentioned that differentiated products trade flows
both ways within product groups, and the costs also determine the structure of trade in the international
market. Economic theory of gravity describes the complicated mutual trade mechanism among nations.
Real trade is far lesser than gravity envisages in a frictionless atmosphere, this provides evidence of
trade costs much larger than those due to policy or transportation (Marin & Verdier, 2014). Such costs
are properly described by geography and a set of national variations. Stabilizing this interconnection
over time reveals that the costs change slowly.
Absolute Advantage Theory: This term in principles of economics means the ability of a particular
country to produce a particular good with fewer resources than another country (Alessandria & Choi,
2014; Saffu et al. 2012). It is also the ability to produce more of a given product using a given amount
of resources. Hanafizadeh et al. (2012) opine that this concept could be in contrast to the notion of
comparative advantage which means the ability to produce a particular good at a lower opportunity
cost. The notion behind absolute advantage is universally connected to Adam Smith, while "the
principle of comparative advantage", is universally connected to David Ricardo in his 1817 Principles
of Political Economy and Taxation.
Comparative Advantage Theory: The comparative advantage theory in the principles of economics
means the ability of a country to produce a particular commodity at a lower opportunity cost than
another country. The concept further means the ability to produce a product most efficiently given all
the other products that could be produced in the same market. Bach et al. (2013) opine that this theory
can be contrasted with absolute advantage which means the ability of a country to produce a particular
good at a lower absolute cost than another. The theory describes the manner in which trade can create
value for both parties even when one can produce all commodities with fewer resources than the other
(Hanafizadeh et al. 2012). The net benefits of such an outcome are called gains from trade. Initial
research on comparative advantage theory was first described by Robert Torrens in 1815 in an essay on
the Corn Laws. He concluded it was England's advantage to trade with Poland in return for grain, even
though it might be possible to produce that grain more cheaply in England than Poland.
Competitive Advantage Theory: This concept is a situation a firm occupies against its competitors.
Michael Porter propounded the three mechanism for creating a sustainable competitive advantage
through cost leadership, differentiation or focus (James & Marcouiller, 2002). The aspect of cost
leadership come to play when an organization the same services as its competitors but at a lower cost.
However, the differentiation advantage come to play when an organization delivers greater services for
the same price of its competitors. JaeBin (2010) posit that they concept is jointly refer to as positional
advantages because they indicate the position of the organization in its industry as a leader in either
superior services or cost. Porter, competitive advantage emerges from the manner an organization
organizes and performs discrete operations (1990). The activities of an organization can be grouped
into a series of operations such as salespeople making sales calls, service technicians performing
repairs, scientists in the laboratory designing products or processes, and treasurers raising capital. Ren
et al. (2010) mentioned that by carrying out these operations firms create value for their customers. The
ultimate value an enterprise creates is measured by the amount customers are willing to pay for its
product or services. However, an organization is successful if the value created supersedes the overall
cost of carrying out all of the required operations. In order to derive competitive advantage over its
competitors, an organization must either provide comparable value to the customer, but carry out its
operations more perfectly than its competitors (lower cost), or perform operations in a unique way that
creates greater buyer value and commands a premium price (Porter,1990).
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5. Empirical Analysis
Feenstra (2003) argued that the concept of “buy low, sell high” rationality lead economists to the
comparative advantage theory. The theory indicates that the comparison of relative price variance
between countries to describe the trade pattern. Acs & Audretsch (2003) opine that entrepreneurship as
measured by varying dimensions such as start-up activity rates, increase in business ownership both
play significant role in economies of nations. Entrepreneurship is perceived as an essential mechanism
for development of national economies. This could be through its contribution to employment and
innovation generation (Acs & Audretsch, 2003; Autio, 1994; Baumol, 2002; Carree & Thurik, 2003;
Wennekers & Thurik, 1999). In addition, there are ample dissimilarities that occur between nations at
the degree to which entrepreneurship adds positively to national economic growth.
Yeoh (2004) recommended cross-border entrepreneurship as an important instrument for national
economic development. This mindset helps to gain insight into the variables that impact the emergence
of different groups of entrepreneurship and into the economic outcomes. Additionally, the involvement
of small and medium sized firms and young start-ups in the global economy despite environmental
forces that deter firms performance outside their regions of operation. Mason & Zhou (2009) wrote that
cross-border entrepreneurship, such as exports, are an essential avenue through which small firms are
able to create value, to generate growth, to access new knowledge and technologies overseas. Recently,
globalization of small and medium sized firms and young start-ups are expanding and could largely
contribute to a greater number of economic players aiming at foreign markets (Hessels, 2007b). This
expansion should be measured in the view of substantial dynamics that took place many years ago and
that lead to lowering of transaction costs for undertaking global ventures. Considering that firms are
operating in an economy that is becoming increasingly internationalized. Technological advancements
such as the adoption of the internet, e-mail and lowering transportation costs have led to increased flow
of information between countries that encourage small and medium sized firm’s globalization (Autio,
2005; Reynolds, 1997). This scenario has made it easier for small and medium firms to be able to
assess needed information about international markets, communicate with international business
partners and to coordinate different operations across national boundaries.
6. Conclusion of Study
This study has examined the effects of global marketing environment on entrepreneurship
development. This study laid much emphasis on variables that influence global marketing environment
of business, such variables are technological, cultural, political, environment, and government
regulations. Empirical studies of previous researchers were reviewed as they relate to the research
topic. In addition, theories that surround this topic of investigation were brought to light in the
theoretical framework, empirical framework and the gap in the literature reviewed. This study finds
that global marketing environment cannot be separated from other entrepreneurship development of the
economy. Hence, as earlier reported by earlier researchers, the impact of global marketing on
entrepreneurship development of an economy cannot be over emphasized. Therefore for entrepreneurs
to be successful in international market the impact of global marketing environment must be
considered in business decision making.
This study found that cross-border activities, such as exports, are an important means through which
small and new ventures are able to create value, to generate growth and to access new knowledge and
technologies abroad. This finding is consistent with the report of Yeoh (2004). The finding of Hessels
(2007b) further corroborated this current report and that of Yeoh (2004) because the author also adds
that the internationalization of SMEs and new ventures are both expanding and this may likely
contribute to a greater number of economic actors pursuing foreign markets. The expansion and
acceleration of cross-border entrepreneurship should be considered in the light of substantial changes
that took place in the past decades and that resulted in a reduction of transaction costs for undertaking
international business. Firms are operating in an economy that is becoming increasingly global. The
global shrinking of trade and investment barriers through the World Trade Organization and the
establishment of regional economic cooperation agreements such as the European Union have
diminished barriers for SMEs and new ventures to become internationally active. Also, technological
advancements (including the widespread use of internet and e-mail) and falling transportation costs
have resulted in enhanced information flows between countries which facilitate small and new venture
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internationalization. However, this study suggests that potential profit from international dealings is
dependent on the potential to align the business with available government regulations in the host
country. In addition, there is urgent need for entrepreneurial ventures to key into the ongoing
technological revolution to make their products available to the global markets, this is because it is
evident in the literature that emerging countries with substantial number of small and medium sized
firms have not really cashed into the adoption of technology to enhance their business transactions.
Acknowledgement
The researchers wish to thank the Covenant University Ota, Nigeria for making available some of the
facilities that enhanced the compilation of this study.
*Corresponding Author: Dr. Musibau Akintunde Ajagbe ([email protected] or
[email protected]) is from the Centre for Entrepreneurship Development Studies (CEDS),
Covenant University, Canaan Land, Ota, Nigeria.
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