Global Business Today , 10th Edition Class Notes

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Global Business TodayTenthEditionChapter 1© 2018by McGraw-Hill Education.This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner.This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.3ChapterActivityConduct this activity during the first week of class, as an icebreaker.After students introduce themselves, ask them what their aspirant professional job will be aftergraduation. Organize the responses into groups on the whiteboard: accountants, supply chainmanagers, ERP managers, business owner or entrepreneur, marketingand sales reps, etc. Then, askwhat additional skills they will need to do those jobs withinternationalcustomers, suppliers, andco-workers.The idea is to help students understand they are unlikely to be successful unless they understandglobalization and develop cultural competencies. Skills they might name include comfort withrapid change, can understand national cultural differences, can work in diverse cultures, can adaptto diverse management, leadership and participation styles, can understand differences inintercultural communication, can build relationships, be a lifelong learner,andothers.Uber:GoingGlobalfromDayOneopeningcaseSummaryThe opening case follows the development and business model of San Francisco-based Uber. Uberoffers an alternative business model to the traditional taxi service offered in metropolitan areasworldwide. Instead of relying on traditional city-based laws toregulate the number of taxisregistered in a given city, Uber bases its business model on a smartphone app which allowspotential riders to find, track, and pay for transportation services. The price for a ride betweenlocations is determined by an algorithm Uber uses to set pricesthatmatchesdemand fortransportation with the supply of automobiles available. A discussion of the case can involve thefollowing questions.Discussion QuestionsQUESTION 1:Reflect on the purpose and practical application of taxi market regulation by cityauthorities. What does this type of regulation accomplish? What are the drawbacks? How has thisallowed Uber to successfully enter markets?ANSWER 1:The stated purpose of the regulations in place are five-fold: 1) to limit taxi supplyand increase demand for other forms of public transportation; 2) to decrease traffic congestion; 3)to ensure rider safety via licensed taxis; 4) to guarantee "fair" prices; and 5) to ensure reasonableprofitability for taxi owners. The main drawback to these purposes is that there are typicallyshortages in many cities as the number of taxi licenses issued in the past decades has not metincreased population levels. To meet the demand for individualized transportation services, Uber

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Global Business TodayTenthEditionChapter 1© 2018by McGraw-Hill Education.This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner.This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.4enters a market and relies on the support generated among its consumers to pressure localgovernments not to discontinue their offering.QUESTION 2:How have local authorities and competitive actors responded to Uber's marketentry strategies?ANSWER 2:Many times local regulations permit Uber and its drivers to conduct business in ametropolitan area. However, there are numerous incidents in which the service has been banned toprotect the existing transportation system. Vancouver (Canada), Brussels (Belgium), and Delhi(India) are noted as cases in which this has been done. Also, there are cases where taxi drivershave gone on strike due to Uber's presence (London) and where local rivals provide formidablechallenges with a strong market position prior to Uber's entry (Beijing).TeachingTip:Students can explore Uber's operations and fare options at the company's websiteat {http://www.uber.com/}.Lecture Note:To extend the discussion, consider Uber's pullout strategy in China as Didi Kuaidi(also known as Didi Chuxing) buys its operations. To learn more, go to{http://www.bloomberg.com/news/articles/2016-08-01/uber-s-china-deal-moves-ride-sharing-giant-a-step-closer-to-ipo}.Chapter Outline with Lecture Notes, Video Notes, and Teaching TipsIntroductionA)Globalizationrefers to the trend towards a more integrated global economic systemwherebarriers to cross-border trade and investment are declining, perceived distance is shrinking thanksto advances in transportation and telecommunications, and material cultures are more similaracross borders. The effects of globalization can be seen everywhere, from the cars people driveand the food they eat, to the jobsthey haveand the clothes they wear.In 2013, some $19 trillion ofgoods, and $5 trillion of services were soldacross borders.Morethan $5 trillion in foreignexchange transactions are madeevery day.Lecture Note:To extend this discussion, consider {http://www.bloomberg.com/news/articles/2014-01-16/at-davos-the-state-of-globalization-in-2014} and{http://www.bloomberg.com/news/articles/2014-01-16/davos-defenders-of-globalization-fight-to-show-2014-is-not-1914}.TeachingTip:The trend towards globalization has not gone unnoticed at many premieruniversities around the world. An organization called the Network of International BusinessSchools {http://www.nibsnet.org/} provides a forum for schools with international businessprograms to discuss their curriculums. Consider visiting this web site, and providing your studentssome examples of how colleges and universities are integrating the realities of globalization into

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Global Business TodayTenthEditionChapter 1© 2018by McGraw-Hill Education.This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner.This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.5their business curriculums.Lecture Note:The U.S. Census Bureau offers an extensive website that maintains, among otherthings, monthly statistics on trade between the United States and its trading partners. The websiteis {http://www.census.gov/foreign-trade/top/}.B) The rapidly emerging global economy raises a multitude of issues for businesses,including allsorts of new opportunities for business to expand their revenues, drive down their costs, and boosttheir profits. It also gives rise to challenges and threats,such as how best to expand into a foreignmarket, whether and how to customize product offerings, marketing policies, human resourcespractices, business strategies in order to deal with national differences in culture,and how best todeal with the threat posed by efficient foreign competitors entering the home marketplace.C) Globalization is also unleashing new anxieties for people who, until recently, had felt fairlysecure in their jobs. Thanks toadvances in technology, lower transportation costs, and an increasein skilled workers in low cost nations such as India,and China,servicesthat had been performedlocally can be exported.Lecture Note:Having a global mindset is becoming an important variable in the hiring selectionprocess at some companies. To learn more, go to {http://www.bloomberg.com/news/articles/2014-10-01/international-experience-will-help-you-get-a-job-at-goldman-sachs}.D)The accounting services industry is just one of many that have been transformed as a result ofglobalization. Today, many accountants in India who aretrained in the U.S. accounting codeperform work for U.S. accounting firms.These accountants access individual tax returns stored oncomputers in the United States, perform routine calculations, and save their work.A U.S.counterpart then inspects their work, and bills the U.S. client for services.WhatIsGlobalization?A)Globalizationrefers to the shift towards a more integrated and interdependent world economy.Video Note:To explore globalization from the perspective of Apple's products in India, considerApple eyes India's Smartphone Marketin the International Business Library athttp://bit.ly/MHEIBVideo.Click “Ctrl+F” on your keyboard to search for the video title.Additionally, our McGraw-Hill Education International Business Video Library athttp://bit.ly/MHEIBVideoprovides on ongoingstream of updated video suggestions correlated bykey concept and major topic. Every new clip posted is supported by teaching notes, discussionquestions.Please feel free to leave comments in the library that you feel might be helpful to your colleagues.THE GLOBALIZATION OF MARKETSB) Theglobalization of marketsrefers to themerging ofhistorically distinct and separate nationalmarketsintoone huge global marketplace in which the tastes and preferences of consumers in

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Global Business TodayTenthEditionChapter 1© 2018by McGraw-Hill Education.This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner.This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.6different nations are beginning to converge upon some global norm. The global acceptance ofCoca-Cola, Citigroup credit cards,IKEA furniture, and McDonald's hamburgers are all examples.These firms not only benefit from the globalization of markets, they also, by offering the samebasic products worldwide, facilitate the trend.Yet there are still significant differencesbetweenmarketsthat frequently require that marketing strategies, product features, and operating practicesbe customizedfora country. In fact, most global markets are for industrial goods and materialsthat serve a universal need around the worldlike microprocessors,rather than for consumerproducts. In many industries, there is no such thing as a “German market” or an “Americanmarket,” there is only a global market.Video Note:To explorethe role of globalization and global markets, considerGlobalization andAssessing Global Marketsin the International Business Library athttp://bit.ly/MHEIBVideo.Click“Ctrl+F” on your keyboard to search for the video title.THEGLOBALIZATIONOFPRODUCTIONC)Theglobalization of productionrefers to the sourcing of goods and services from locationsaround the globe to take advantage of national differences in the cost and quality offactors ofproduction(such as land, labor, capital, and energy), thereby allowing them to compete moreeffectively against their rivals. Building Boeing’s 777 for example, involves eight Japanesesuppliers, and a supplier from Singapore. Boeing outsources 65 percent of its 787aircraft toforeign companies.Did You Know Video Clip:The video clip asks: “Did you know that your iPhone wasassembled in China? It’s not what you mightthink.”DiscussionQuestions:Question 1:Why do labor costs made up such a small percentage of the cost to produce an iPhone?Answer 1:Because most of the costs to make one iPhone are in COGS (cost of goods sold), which areabout $290 of the $650 price. About $200 is in materials, and the rest is spent on transportation, warranty,costs, and manufacturing including labor. Labor costs arebetween $13 and $25 per phone.Question 2:Why is itmoredifficult for Apple to find engineers in the U.S. thanin China?Answer 2:Demand for engineering skills in the U.S.remains greater than in China. Although many newengineering graduates come from developing and emerging countries,the U.S.is in second place,producing 238,000engineersa year.Russia is in first place, producing 454,000 engineers, and Iran is inthird place with 233,700.Thisis from reports oftheWorldEconomicForumHuman Capital ReportandexcludesChina and India for lack of data.Question 3:Where are the iPhone’s components produced and purchased?

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Global Business TodayTenthEditionChapter 1© 2018by McGraw-Hill Education.This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner.This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.7Answer 3:In many countries, but a surprising number are made by U.S.companies such as TexasInstruments, Fairchild, Corning, Cirrus Logic. But most of these companies have significantmanufacturing around the world. Thefingerprint sensor was imagined in Florida, butmanufactured in Asia by Taiwanese giant TMSC. The M7 motion co-processor was the brainchildof NXP, a Dutch companythathas fabrication facilities in Taiwan, Thailand, Malaysia, Singaporeand the Philippines. U.S.companies in the Apple supply chain are beefing up their U.S.productionfacilities and many of the components that go into the iPhone are actually made stateside andshipped to China for assembly.Learn more about how the iPhone is made:https://financesonline.com/how-iphone-is-made/management FOCUS: Boeing’s Global Production SystemSummaryThefeatureexplores U.S. aircraft manufacturer Boeing’s approach to the production of itsDreamliner 787 airplane. Boeing’s strategy was unlike any of its previous strategies. Instead ofproducing much of the aircraft itself, Boeing, noting that 80 percent of its customers were foreignairlines, decided to outsource some 65 percent of the value of the Dreamliner to suppliers locatedaround the world. This strategy introduced a number of challenges for Boeing, and production ofthe 787 was delayed by four years.Discussion Questions:Please see Critical Thinking and Discussion Question 7(page 20)for discussion of this feature.Teaching Tip:To learn more about Boeing go to {http://www.boeing.com/}.TheEmergenceof Global InstitutionsA) Over the last half century, a number of global institutions have been created to help manage,regulate, and police the global marketplace, as well as to promote the establishment ofmultinational treaties to govern the global business system. TheWorld Trade Organization(WTO), like its predecessor theGeneral Agreement on Tariffs and Trade (GATT),isresponsible for policing the world trading system and making sure that nations adhere to the rulesestablished in WTO treaties.As of 2016, the 162 nations that account for about 98 percent ofworld trade were all members of the WTO.TheInternational Monetary Fund (IMF)maintainsorder inthe international monetary system while theWorld Bankpromotes economicdevelopment. TheUnited Nations (UN)maintains international peace and security, develops

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Global Business TodayTenthEditionChapter 1© 2018by McGraw-Hill Education.This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner.This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.8friendly relations among nations, cooperates in solving international problems,promotes respectfor human rights, and is a center for harmonizing the actions of nations.DriversofGlobalizationA) Two macro factors seem to underlie the trend toward greater globalization. First, the decline inbarriers to the free flow of goods, services, and capital that has occurred since the end of WorldWar II;and second, technological change.Dramatic technological change in recent decades hasbrought about advances in communication, information processing, and transportation.DECLINING TRADE AND INVESTMENT BARRIERSB)International tradeoccurs when a firm exports goods or services to consumers in anothercountry.Foreign direct investment (FDI)occurs when a firm invests resources in businessactivities outside its home country.After WWII, the industrialized countries of the West started aprocess of removing barriers to the free flow of goods, services, and capital between nations.Under GATT, nations negotiated even further decreases in tariffs and made significant progress ona number of non-tariff issues (e.g. intellectual property, trade in services). With the establishmentof the WTO, a mechanism now exists for dispute resolution and the enforcement of trade laws.Teaching Tip:A comprehensive overview of GATT is available at{http://www.ciesin.org/TG/PI/TRADE/gatt.html}.Teaching Tip:The World Trade Organization maintains an excellent web site at{http://www.wto.org/}. This site provides information about recent trade disputes, "hot" areas ofinternational trade, and the statusofcurrent talks.Teaching Tip:To extend this discussion and to explore the relevance for the Trans-PacificPartnershipwithin the context of the current global economy go to{http://www.bloomberg.com/news/articles/2015-10-08/a-mega-trade-deal}. In addition, thecomplexities of implementing the trade agreement within and between countries can be found at{http://www.reuters.com/article/us-trade-tpp-idUSKCN0VD08S}.C) This removal of barriers to trade has taken place in conjunction with increasedinternationaltrade, world output, and foreign direct investment. World Trade Organization data shows that thevolume of world merchandise trade has grownconsistently faster than the rate ofthe worldeconomy since 1950. In 2014, the volume of world merchandise trade was 5.3 times larger than itwas in 1990. International trade in services has also grown significantly since the 1980s, and nowaccounts for about 20 percent ofthe value of all world trade.D) The growth offoreign direct investmentis a direct result of nations liberalizing theirregulations to allow foreign firms to invest in facilities and acquire local companies. With theirinvestments, these foreign firms often also bring expertise and global connections that allow localoperations to have a much broader reach than would have been possible for a purely domesticcompany.In 2013, FDI flows were about $1.5 trillion, below the peak of $2 trillion in 2007, butshowing a strong upward trend.

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Global Business TodayTenthEditionChapter 1© 2018by McGraw-Hill Education.This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner.This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.9THE ROLE OF TECHNOLOGICAL CHANGEE) While the lowering of trade barriers made globalization of markets and production a theoreticalpossibility, technological change made it a tangible reality.Microprocessors and TelecommunicationsF) Since the end of World War II, there have been major advances in communications andinformation processing.G)Moore’s Lawpredicts the power of microprocessor technology doubles and its cost ofproduction falls in half every 18 months. As this happens, the cost of global communicationplummets, lowering the cost of coordinating and controlling a global organization.The InternetH) The Internet, whichhasexperienced explosive growth worldwide, promisestocontinue todevelopasthe information backbone of tomorrow's global economy.The Internet effectivelyallows its 3.3 billion users in 2015 to find each other. For business, it can be a goldmine. In theUnited States, online retail sales in 2015 were about $340 billion and global e-commerce salessurpassed $1 trillion in 2012.Transportation TechnologyI) In addition to these developments, several major innovations in transportation technology haveoccurred since World War II. In economic terms, the most important are probably development ofcommercial jet aircraft and super freighters and the introduction of containerization, which greatlysimplifies transshipment from one mode of transport to another.Implications for the Globalization of ProductionJ)Due totechnological innovations, the real costs of information processing andcommunicationhave fallen dramatically in the past two decades. These developments make it possible for afirmto create and then manage a globally dispersed production system, further facilitating theglobalization of production. A worldwide communications network has become essential for manyinternational businesses.Implications for the Globalization of MarketsK) As a consequence of these trends, a manager in today's firm operates in an environment thatoffers more opportunities, but is also more complex and competitive than that faced a generationago.While there has been some convergence of consumer tastes and preferences between markets(a global culture), firms must still address differences between countries.The Changing Demographics of the Global EconomyA)As late as the 1960s, four facts described the demographics of the economy. The first was theU.S. dominance in the world economy and the world trade picture.The second was U.S.dominance in world foreign direct investment.The third fact was the dominance of large,multinational U.S. firms on the international business scene. The fourth was that roughly half ofthe globe-the centrally planned economies of theCommunist world-was off limits to Westerninternational business.

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Global Business TodayTenthEditionChapter 1© 2018by McGraw-Hill Education.This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner.This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.10THE CHANGING WORLD OUTPUT AND THE CHANGING WORLD TRADEPICTUREB) In the early 1960s, the U.S. was still by far the world's dominant industrial power. In 1960, forexample, the U.S. accounted for38.3percent of world manufacturing output. By2014,the UnitedStates accounted for only22.4 percent.This decline in the U.S. position was not an absolutedecline, rather, it was a relative decline, reflecting the faster economic growth of several othereconomies, most notably those in Asia.Video Note:To explore globalization from the perspective of India's growing standing in theworld economy, considerIndia’s Business Ties with the UKin the International Business Libraryathttp://bit.ly/MHEIBVideo.Click “Ctrl+F” on your keyboard to search for the video titleandaccess to teaching notes and discussion questions for this video.C) If we look into the future, most forecasts now predict a rapid rise in the share of world outputaccounted for by developing nations such as China,Russia,India, Indonesia, Thailand,Mexico,Brazil,and South Korea, and a commensurate decline in the share enjoyed by rich industrializedcountries such asGreatBritain,Germany,Japan, and the United States. For internationalcompanies, these trends suggest that future economic opportunities may be greater in developingnations, and that new competitors are like to emerge from these countries.countryFOCUS: India’s Software SectorSummaryThis feature explores the growth of India’s software industry. Starting from nothing just twenty-five years ago,Infosys Technologiesnow generates revenuesof $8.25billion, and exports ofalmost $100 billion. India’s growth in the software sector is based on its abundant supply ofengineers, low labor costs, India’s fluency in English, and time differences between India and theU.S.As Indian firms have done more business with large U.S. firms, U.S. firms have beguninvesting in their own Indian operations.DiscussionQuestions1. What factors have contributed to the growth of India’s software industry?Discussion Points:Four key factors have contributed to the growth of India’s software industry.First is the huge number of engineers in India. Some 400,000 engineers graduate from Indianuniversities every year. A second factor is India’s low wage structure. Indian engineers makeabout 12 percent of what an American colleague might make. Third, coordination betweenWestern firms and Indian firms is facilitated by the large number of English-speaking Indians.Finally, because of the differences in time zones, Indian firms operate while American firms areclosed.

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Global Business TodayTenthEditionChapter 1© 2018by McGraw-Hill Education.This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner.This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.112. How has India’s software industry changed in recent years? What are the implications of thesechanges for American companies like IBM and Microsoft?Discussion Points:There has been a gradual shift in the Indian software industry in recent years.Initially, Indian firms focused on the low end of the industry to supply basic software developmentand testing services to Western firms. Today however, many companies havemoved into higherend services to compete for large software development projects, business outsourcing contracts,and information technology consulting services. This new competitive threat is forcing Americanfirms like IBM and EDS to rethink their global strategies. Some Western companies are nowinvesting in India with the goal of capturing some of the cost advantages Indian companies likeInfosys Technologies enjoy.Lecture Note:India’s smartphone industry is growing rapidly and Google is just one companythat is looking to capitalize on this growth. To learn more, go to{http://www.businessweek.com/articles/2014-10-21/googles-big-plans-for-low-cost-android-one-phones-in-india}.THE CHANGING FOREIGN DIRECT INVESTMENT PICTUREE) As shown in Figure 1.2in the textbook, the share oftotal foreign direct investment stock sincethe 1980s for developed economies such as the United States and the United Kingdom hasdeclined. Meanwhile, the same statistic indicates a considerable increase in developing economies.F)As shown in Figure 1.3, this trend is mirroredin FDI. However, fluctuations appear in the totalamount of foreign direct investment inflows due to economic factors. This is most noticeable forthe 2001-2005 and 2009-2014 periods. The first drastic reduction (2001-2005) did not showrecovery until 2006. Meanwhile, the decrease from 2007 has yet to fully recover.THE CHANGING NATURE OF THE MULTINATIONAL ENTERPRISEG) Amultinational enterpriseis any business that has productive activities in two or morecountries.Non-U.S. MultinationalsH)In the 1960s, large U.S.multinationals dominated the global business environment, accountingfor about two-thirds of all foreign direct investment. By 2012, a different picture had emerged (asindicated in Figure 1.4). The globalization of the world economy has resulted in a relative declinein the dominance of U.S. firms in the global marketplace.While most of the world’s largestmultinationals were from developed countries, firms from developing economies had also begun toplay a major role in the global economy.Looking to thefuture, we can reasonably expect thegrowth of new multinational enterprises (any business that has productive activities in two or morecountries) from the world's developing nations.

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Global Business TodayTenthEditionChapter 1© 2018by McGraw-Hill Education.This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner.This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.12management FOCUS: The Dalian Wanda GroupSummaryThis feature examines the expansion of the Dalian Wanda Group from its beginning in 1988.Originating in China, the company is well-known within the country as an important real estatedeveloper. In 2012, Dalian Wanda expanded by purchasing the cinema chain AMC EntertainmentHoldings in the United States. This expansion continued in 2015 with the acquisition of anAustralian cinema operator, as well. In all, the company operates over 500 cinemas. Withproperties in Los Angeles, Chicago, Spain, and London, Dalian Wanda's goal is to have assets of$200 billion, revenues of $100 billion, and net profits of $10 billion by 2020.DiscussionQuestions1. How has Dalian WandaGroupestablished itself in its home market of China? In other words,what is the company best known for?Discussion Points:The company has had much success with five-star hotels as it is the largestowner of this hotel category. In addition, with activities in the film, sports, tourism, and children'sentertainment industries, Dalian WandaGroupis well-positioned within China to expandinternationally based on the experiences developed thus far.2. Why has Dalian WandaGroupexpanded internationally at such a fast rate? How do theacquisitions made fit into the company's strategy overall?Discussion Points: Dalian WandaGrouphas identified that it aims to have assets of $200 billion,revenues of $100 billion, and net profits of $10 billion by 2020. One approach to accomplish thisis to expand internationally based on the skills the company has developed thus far. Since its corecompetencies include real estate development focusing on the film industry, in particular, DalianWandaGroupsaw the opportunity to negotiate better distribution terms with movie studios afterits purchase of cinemas in theUnited States and Australia. As a result of these and otherexpansions, the actions discussed assist the company to reach its goals for assets, revenues, and netprofits.Teaching Tip:To learn moreaboutWandaGroupgo to {http://www.wanda-group.com/}.Lecture Note:WandaGroupis continuing its expansion and reach into the U.S. market. To learnmore and extend the discussion of this feature, go to{http://www.bloomberg.com/news/articles/2016-01-12/china-s-richest-man-to-buy-godzilla-producer-for-3-5-billion}.The RiseofMini-MultinationalsI) Anothertrend in international business has been the growth of medium-sized and smallmultinationals. These businesses are referred to as mini-multinationals.

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Global Business TodayTenthEditionChapter 1© 2018by McGraw-Hill Education.This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner.This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.13THE CHANGING WORLD ORDERJ) The collapse ofcommunism in Eastern Europe presenteda host of export and investmentopportunities for Western businesses.However, because there is still unrest and totalitariantendencies in many states, companies must be cautious.K) The economic development of China presents huge opportunities and risks, in spite of itscontinued Communist control.In addition, firms must be aware of the threat posed by China’semerging multinationals.L) For North American firms, the growth and market reforms in Mexico and Latin America alsopresent tremendous new opportunities both as markets and sources of materials and production.However, given the history of economic mismanagement in Latin America, the favorable trendsmay not continue.THE GLOBAL ECONOMY OF THE 21STCENTURYM) The path to full economic liberalization and open markets is not without obstruction.Economic crises in Latin America, South East Asia, and Russia all caused difficulties in 1997 and1998. While firms must be prepared to take advantage of an ever moreintegrated global economy,they must also prepare for political and economic disruptions that may throw their plans intodisarray.The 2008-2009 financial crisis that began in the United States, for example, quicklyspread to much of the rest of the world.The Globalization DebateA) Is the shift toward a more integrated and interdependent global economy a good thing? Whilemany economists, politicians and business leaders seem to think so, globalization is not without itscritics.Globalization stimulates economic growth, raises the incomes of consumers, and helps tocreate jobs in all countries that choose to participate in the global economy.Yet, there is a risingtide of opposition to globalization.ANTI-GLOBALIZATION PROTESTSB) Since 1999, when protesters against globalization targeted the WTO meeting in Seattle, anti-globalization protesters have turned up at almost every major meeting of a global institution.Protesters fear that globalization is forever changing the world in a negative way. However,despite their protests, most citizens seem to welcome the higher living standards that progressbrings.GLOBALIZATION, JOBS, AND INCOMESC) In developed countries, labor leaders lament the loss of good paying jobs to low wagecountries. However, supporters of globalization argue that free trade will result in countriesspecializing in the production of those goods and services that they can produce most efficiently,while importing goods and services that they cannot produce as efficiently. Free trade advocatessuggest that despite some job dislocation, the whole economy is better off with free trade. Theymake a similar argument to supportthe outsourcing of services like call centers to low-wagecountries.However, given that the wage gap between developed and developing countries isclosing, the migration of unskilled jobs to low-cost nations may only be a temporary phenomenon.

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Global Business TodayTenthEditionChapter 1© 2018by McGraw-Hill Education.This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner.This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.14Teaching Tip:For resources related to exporting,the export assistance center at{http://www.export.gov/} can provide insight into this process.Video Note:Video clips related to importing andexportingareavailable at{http://www.census.gov/foreign-trade/aes/exporttraining/videos/index.html}.A variety of topicsare available to consider.country FOCUS: Protesting Globalization in FranceSummaryThis feature describes the anti-globalization protests going on in France. The protests, led byactivist Jose Bove, started when the U.S. retaliated against EU bans on beef imports by imposing a100% tariff on some EU products. Bove and his associates targeted McDonald’s, and alsoCalifornia winemaker Mondavi as symbols of their opposition to American investments. Still,despite the protests, foreign investment in France is at record highs, and ironically, so are Frenchinvestments abroad.Discussion Questions1. Consider the trade war that initiated the protests led by Bove. The EU instituted restrictions onthe import of hormone treated beef because it was feared that the product might lead to healthproblems. The WTO stated that the restrictions were prohibited under WTO agreements andordered the EU to lift the restrictions or face retaliatory measures. In your opinion, did the WTOact appropriately? Should a government be permitted to make decisions as to what products are orare not available to consumers?Should the WTO? What do you think would have happened if theWTO had ruled in favor of the EU?Discussion Points:Many students will probably argue that the European Union’s restrictionsagainst hormone treated beef were nothing more than thinly veiled protectionism. Accordingly,students will probably feel that the World Trade Organization was justified in its ruling. Somestudents however, may suggest that the European Union was looking out for its citizens when itinstituted the bans, and that therefore the World Trade Organization was overstepping its bounds.2. Why was McDonald’s chosen as the target for anti-globalization protests? How can companieslike McDonald’s protect themselves from the actions of protesters like Bove?Discussion Points:Students will probably recognize that as an icon of the United States,McDonald’s is a symbol of America and as such was a natural target for protesters. The fact thatits menuis based on beef was probably abonus. Many students will note that companies that areactively involved in local communities are less likely to attract negative feelingsthan those that arenot. Students might recommend that companies like McDonald’s work to integratethemselveswith the host country through charitable programs, social activities, and so on.

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Global Business TodayTenthEditionChapter 1© 2018by McGraw-Hill Education.This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner.This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.15Teaching Tip:To learn more about ongoing WTO disputes, go the WTO’s homepage:{http://www.wto.org/}.Video Note:Protesting against globalization is not uncommon. The video found at{http://www.pbs.org/newshour/bb/environment-jan-june07-globalization_03-23/} and titledEnvironmental Activist Questions the Goals of Globalizationexplores the discussion around thenegative effects of globalization.GLOBALIZATION, LABOR POLICIES, AND THE ENVIRONMENTD) A second source of concern is that free trade encourages firms from advanced nations to movemanufacturing facilities offshore to less developed countries that lack adequate regulations toprotect labor and the environment from abuse by the unscrupulous. Supporters of free trade andgreater globalization express serious doubts about this scenario. They point out that tougherenvironmental regulation and stricter labor standards go hand in hand with economic progress. Ingeneral, as countries get richer,they enact tougher environmental and labor regulations.E) Lower labor costs are only one of the reasons why a firm may seek to expand in developingcountries. These countries may also have lower standards on environmental controls andworkplace safety. Nevertheless, since investment typically leads to higher living standards, there isoften pressure to increase safety regulations to international levels.This is indicated in Figure 1.5which indicates that pollution levels decrease after per capital income levels reach $8,000.Nocountry wants to be known for its poor record on health and human safety. Thus supporters ofglobalization argue that foreign investment often helps a country to raise its standards.GLOBALIZATION AND NATIONAL SOVEREIGNTYF)Anotherconcern voiced by critics of globalization is that in today's increasingly interdependentglobal economy, economic power is shifting away from national governments and towardsupranational organizations such as the World Trade Organization (WTO), the European Union(EU), and the United Nations. As perceived by critics, the problem is that unelected bureaucratsare now sometimes able to impose policies on the democratically elected governments of nation-states, thereby undermining the sovereigntyof those states.G) With the development of the WTO and other multilateral organizations such as the EU andNAFTA, countries and localities necessarily cede some authority over their actions.Supporters ofthese organizations claim that if the organizations fail to serve the collective interests of memberstates, the states will withdraw their support and the organizations will collapse.GLOBALIZATION AND THE WORLD’S POORH) Critics of globalization argue that over the last century,the gap between rich and poor hasgotten wider,andthe benefits of globalization have not been shared equally. However,supportersof free trade suggest that the actions of governments have limited economic improvement in manycountries. In addition, debt may also be limiting growth in some countries. Today, there are

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