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2013.11.19 Seminar on Born Globals

THE BORN GLOBALS
Rizwan Ahmad Khan
Afsheen Akhtar
Shazia Naureen

Born Global – Sequence
Rizwan Ahmed Khan Afsheen Akhter Shazia Naureen
• Concept Success Factors Opportunities
• Definition Dimensions Threats
• Why & How? UPPSALA Model Survival Capacity
• Characteristics International Examples Future Research
• Types Examples from Pakistan Conclusion
4

Born Global – Concept
• Individual, independent companies having vision and
strategy to become global.
• Mostly small technology-oriented companies.
• The time at which they decided to become global, varies
from immediate to 3 years.
• The firms having an export share of at least 25% of total
sales during, at least 2, of the fist 5 years.
• A minimum 2 number of countries being served outside
the home country.
• The company size is irrelevant and whole world is the
marketplace.
5

Born Global – Concept (Contd.)
• These firms start international activities right from their
inception and enter very distant markets in multiple
countries at once.
• They are quite capable of forming joint ventures without
prior experience.
• Such firms are labeled as;
o High Technology Start-up Firms
o International New Ventures
o Infant-Multinationals
o Global Start-ups
o Instant Internationals or
o The BORN GLOBALS
6

Born Global – Definition
 (In fact no single, generally accepted definition of BORN GLOBALS is
found in the literature, yet.)
 Oviatt and McDougall (1994) defined ‘Born Global’
as;
“A business organization that, from inception seeks to
derive significant competitive advantage from the use
of resources and the sale of outputs in multiple
countries.”
 Knight (1997) termed ‘Born Global’ as;
“A company which, from or near to its founding, seeks
to derive a substantial proportion of its revenue from
the sale of its products in international markets.”
7

Born Global – Why?
The Reasons for Emergence of Born Global Firms
• Globalization of market conditions.
• Development of technology.
• Capability development of people and small firms.
• Home market conditions.
• Regulatory environment at home market.
• Emergence of innovative products.
• BG firms are highly entrepreneurial in their international
activities and not opposed to risk-taking abroad.
• Eventually, foreign markets are perceived as more
profitable than domestic.
8

Born Global – Characteristics
• There are three main noticeable categories of
Internationalization processes:
(a) The traditional exporters, who's internationalization
pattern can be described and explained by traditional
stages models of internationalization. (e.g. UPPSLA Model)
(b) The firms that leapfrog some stages, e.g., Late starters
that have only domestic sales for many years, but then
suddenly invest in a distant foreign markets.
(c) The BORN GLOBAL firms.
• Although the BORN GLOBAL firms are smaller in size than
traditional MNEs, yet they incorporate similar characteristics
i.e., target international markets and scatter value-adding
activities.
• These are relatively young and entrepreneurial (aim to cater
international markets from inception), so their revenues are
generated mostly in foreign markets rather than in their
home market. 10

Born Global – Characteristics (Contd.)
• Since BORN GLOBALS operate on very internationalized
markets, they have to think globally when deciding about
their activities;
– i.e., they have to incorporate considerations about other foreign markets
when they take decision about one particular foreign market.
• Frequently characterized as knowledge-intensive
organizations that sell mainly innovative, self-developed
technology-based products.
• Have fewer financial and other resources than traditional
MNEs.
• Heavy use of information and communications technologies
11

Born Global – Types
The intensity of the way in which these firms take on
international business can differ in following ways;
• DYNAMIC BORN GLOBALS - Some firms quickly reach a
high level of international activity which continues.
• Others reach the same level just as quickly as the Dynamic
ones but then slow down and then stabilize – STEADY
BORN GLOBALS.
• VOLATILE BORN GLOBALS - Some experience fluctuations
in international activities, but have high levels of
internationalization during their early growth phase.
• Some young firms with initial high levels of
internationalization activities may voluntarily (or
involuntarily) decrease their international business –
DECREASING BORN GLOBALS.
13

Born Global – Success Factors
• The success of Born Global firms could be attributed to a
number of factors;
oUniqueness (market niche).
oTechnology Development.
oCommunication Breakthroughs.
oGlobal networking and alliances.
• Success in business is achieved in organizations whose
senior management is committed to continuously upgrading
their technology strengths through innovations, while
realizing their business strategic goals.
16

Born Global – Success Factors (Contd.)
• In addition, the entrepreneur is singled out as the most significant
actor within any Globalization.
• The characteristics of entrepreneurs and their related attributes
like;
oGlobal vision
oManagerial commitment
oInternational experience and
oPersonal relationships
are relevant variables for understanding BG firms.
• Due to the lack of tangible resources, Born Globals control their
other intangible resources, these include;
oStrategies.
oMarketing orientations.
oSkills, know-how and
oPrevious experiences.
17

Born Global – Dimensions
• Starting Time: The Product may be innovative, but not the only
venture on earth that is offering a service that solves a given
problem. The decision on how you will manage your market entry
depends on the magnitude of internal resources (financial and
organizational)
• Scale of Internationalization: How big has the market entry to
be? It is not only a question of liquid resources but more
importantly there are many strategic effects behind a large or
small scale market entries.
19

Born Global – Dimensions (Contd.)
• Market Scope: What kinds of products have global market
potential. They must have a “Distinct Differentiation Strategy”
as compared to products that are already on the market.
oSuch products must have either unique technology and/or
superior design or unique product/service.
oThe know-how, the systems or other highly specialized
competence, including new production methods.
20

Born Global – Dimensions (Contd.)
Entry Mode
The six major modes of international business are :
1. Imports and exports,
2. Tourism and transportation,
3. Licensing and franchising,
4. Turnkey operations,
5. Management contracts, and
6. Direct and portfolio investment

Born Global – Vs. UPPSALA Model
• phenomenon of ‘Born Global’ firms contradicts the UPPSALA
gradual process of internationalization.
• It is now presumed that ‘‘gradual internationalization is dead’’.
• the shorter product life cycles and the emergence of global
demand cause ‘born global’ firms to adopt an international
perspective regardless of age and size .
• The need to reach markets of sufficient size and exploit first
mover’s advantages are motivation for firms to internationalize
rapidly.
22

Born Global – Straight Examples
• F-Secure Corporation: An anti-virus content and computer
security company based in Finland. It has 20 country offices and
presence in more than 100 countries, with Security Lab
operations in Finland and Malaysia. F-Secure claims that it was
the first antivirus vendor to establish a presence on the World
Wide Web. http://www.f-secure.com/en/web/home_global/home
• Amazon: Online shopping portal for Electronics, Apparels,
Computers, Books, DVDs & more (http://www.amazon.com/)
Amazon started off as a BORN GLOBAL and used the Internet to
grow very fast. It is now even leveraging its customer base by
‘‘renting’’ its customers to affiliates and partners.
Amazon Pakistan: http://www.amazon.com/b?ie=UTF8&node=4907
is an online portal for shopping variety of books in Pakistan.
23

Born Global – Straight Examples (Contd.)
• Stonesoft Corporation: A publicly owned vendor of network security
solutions based in, Finland. Its product portfolio include firewall/VPN
devices, IPS (Internet Detection & Prevention Systems) etc.
http://www.stonesoft.com/en/
• Other famous Examples Include:
24

Born Global – Treaty Examples
Licensing: A focal firm that grants the right to the foreign
partner to use certain intellectual property in exchange for
some royalties.
• Mega Bloks (Canadian toymaker) signed an agreement with
Disney that gives it the right to manufacture toys that feature
Disney characters like Winnie the Pooh, Power Rangers etc.
• Franchising: A Focal firm grants the right to the foreign
partner to use an entire business system in exchange for fees
and royalties.
• For firms like Subway or KFC, it’s an efficient way to
internationalize. In China, Subway is the third-largest U.S.
fast-food chain.
25

Born Global – Examples from Pakistan
• Founded in 2009
• Head office is in Lahore, Pakistan.
• Offers products and services including CRM solutions, web
solutions and mobile software solutions.
• Providing its products and services in Australia, Europe and
America.
• Annual turnover rate is PKR 32.54 M.
• At present 9 employees are working in the company.
26

Born Global – Examples from Pakistan
• Software company situated in Lahore, Pakistan.
• Founded in 2009 and serving the markets in Australia,
Thailand and United Arab Emirates.
• Currently 8 employees are working with annual turnover of
PKR 10.57 M.
• Products and services are related to web designing and web
development.
27

Born Global – Opportunities
• Because of their young age, BORN GLOBALS tend to be
mainly micro or small enterprises.
• Entrepreneurs and staff in born globals are highly skilled
and educated, particularly in their knowledge of
technology and languages.
• Due to their relationships with other firms and their way of
doing business (e.g., outsourcing) their products/services
have global reach which creates large enough revenues
and cash flows rapidly, to flourish and grow.
• Their business strategies that are not arrogant, but
confident and cautious.
• Born global firms are swift learning organizations.
28

Born Global – Opportunities (Contd.)
• Build new markets by serving unmet needs or specialist
niches.
• Geographic distance can become an advantage through
the smart application of information and communications
technologies and by taking advantage of world time zones.
• Born Globals offer an avenue for new venture success in
rapidly globalizing industries.
29

Born Global – Threats
• The pioneering character in terms of young age and lack
of established presence on the market presents significant
challenges for the capacity of Born Globals to survive.
• They not only have to master the development of an
innovative product suitable for international markets, but
also to do it rapidly.
• This requires high levels of technical and managerial
expertise, familiarity with procedures and markets and a
high level of commitment and engagement.
• Furthermore, a comparatively high level of capital is
needed to achieve these multiple tasks.
• Since BGs don’t possess sufficient resources at start-up
time to stand up to a serious business mistake, any such
mistake heavily damages their personal asset base.
• Consequently, born globals tend to be vulnerable to
economic developments and need government support to
realise their full potential.
30

Born Global – Threats (Contd.)
• In theory, any risk-averse firm would not commit its
resources to international markets until it reaches a
degree of maturity in its home market. However, the home
market is frequently negligible for ‘born globals’, as many
of them sell their first product in foreign markets.
• Global start ups are riskier than domestic startups.
31

Born Global – Survival Capacity
• The survival of born globals depends on how quickly they
manage to make a profit while at the same time needing
to get investment in untested products or processes.
• The establishment of internationally oriented business
incubators can provide a comprehensive set of services,
including business networking, training, peer review
opportunities, and sometimes even with access to
potential investors.
• Other examples are granting tax incentives or premiums
in public tenders if they outsource some of their business
functions to born globals.
32

Born Global – Survival Capacity
Social Networking Capital:
• A generally accepted characteristic of born globals is that
the founder and management team have international
networks which play a crucial role in the design and
implementation of the business model and create social
capital for the firm.
• Consequently, the social capital through networks not only
triggers rapid internationalization but also enables
continuation and further development of international
activity
• As born global enterprises lack abundant tangible capital
compared to large MNEs, they may compensate for this
via intangible capital through their existing networks
33

Born Global – Future Research
• In the future researchers should the first attempt to be
made is to reach a generally accepted definition of the
Born Globals to be studied. As we have seen, the same
phenomenon has been given many different names, of
which we have adopted the name Born Global in this
article.
• For many Born Globals it is a special challenge that they
often have to choose hybrid forms of governance
structures in their export channels.
• An interesting research question is certainly to analyse
how even small firms may make effective use of strategic
alliances and networking activities on a worldwide scale.
Clearly, this is not an easy task and hence it is a very
important managerial issue.
34

CONCLUSION
• While the phenomenon of ‘born global’ firms is
becoming increasingly common, a comprehensive
theory explaining its existence is still lacking.
o Some scholars focus on international mobility of
know-how and on entrepreneurial vision and
capabilities.
o others highlight the importance of informal
networks as a catalyst for internationalization.
o while still others suggest combining various schools
of thought.
• To create a global mindset among future
entrepreneurs, educational initiatives that familiarize
the young people with the importance of foreign trade
for the national economy will be helpful.
35

Contacts
Communicate @ Email
Rizwan Ahmad Khan rizwan.ahmed.khan@live.co.uk
Afsheen Akhtar sheenriaz1@gmail.com
Shazia Naureen shazianoreen@hotmail.com
37
Thanks

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2013.11.19 Seminar on Born Globals

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