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International Business: The
Challenges of Globalization
Ninth Edition
John J. Wild
Kenneth L. Wild
Instructor's Resource Manual
for
International Business: The
Challenges of Globalization
By John J. Capela
Challenges of Globalization
Ninth Edition
John J. Wild
Kenneth L. Wild
Instructor's Resource Manual
for
International Business: The
Challenges of Globalization
By John J. Capela
CHAPTER 1
GLOBALIZATION
LEARNING OBJECTIVES:
1.1 Identify the types of companies active in international business.
1.2 Explain globalization and how it affects markets and production.
1.3 Detail the forces that drive globalization.
1.4 Outline the debate about globalization’s impact on jobs and wages.
1.5 Summarize the debate about income inequality.
1.6 Outline the debate about culture, sovereignty, and the environment.
1.7 Identify how this course will help you develop skills for your career.
CHAPTER OUTLINE:
Introduction
Key Players in International Business
Multinational Corporations
Entrepreneurs and Small Businesses
What Is Globalization?
Globalization of Markets
Reduces Marketing Costs
Creates New Market Opportunities
Levels Uneven Income Streams
Local Buyers’ Needs
Global Sustainability
Three Markets, Three Strategies
Globalization of Production
Access Lower-Cost Workers
Access Technical Expertise
Access Production Inputs
Forces Driving Globalization
Falling Barriers to Trade and Investment
World Trade Organization
Other International Organizations
Regional Trade Agreements
Trade and National Output
Technological Innovation
E-Mail and Videoconferencing
The Internet
Company Intranets and Extranets
Advancements in Transportation Technologies
Measuring Globalization
Debate about Jobs and Wages
Against Globalization
Eliminates Jobs in Developed Nations
GLOBALIZATION
LEARNING OBJECTIVES:
1.1 Identify the types of companies active in international business.
1.2 Explain globalization and how it affects markets and production.
1.3 Detail the forces that drive globalization.
1.4 Outline the debate about globalization’s impact on jobs and wages.
1.5 Summarize the debate about income inequality.
1.6 Outline the debate about culture, sovereignty, and the environment.
1.7 Identify how this course will help you develop skills for your career.
CHAPTER OUTLINE:
Introduction
Key Players in International Business
Multinational Corporations
Entrepreneurs and Small Businesses
What Is Globalization?
Globalization of Markets
Reduces Marketing Costs
Creates New Market Opportunities
Levels Uneven Income Streams
Local Buyers’ Needs
Global Sustainability
Three Markets, Three Strategies
Globalization of Production
Access Lower-Cost Workers
Access Technical Expertise
Access Production Inputs
Forces Driving Globalization
Falling Barriers to Trade and Investment
World Trade Organization
Other International Organizations
Regional Trade Agreements
Trade and National Output
Technological Innovation
E-Mail and Videoconferencing
The Internet
Company Intranets and Extranets
Advancements in Transportation Technologies
Measuring Globalization
Debate about Jobs and Wages
Against Globalization
Eliminates Jobs in Developed Nations
Ch 1: Globalization2
Lowers Wages in Developed Nations
Exploits Workers in Developing Nations
For Globalization
Increases Wealth and Efficiency in All Nations
Generates Labor Market Flexibility in Developed Nations
Advances the Economies of Developing Nations
Summary of the Jobs and Wages Debate
Debate about Income Inequality
Inequality within Nations
Inequality between Nations
Global Inequality
Summary of the Income Inequality Debate
Debate about Culture, Sovereignty and the Environment
Globalization and Culture
Globalization and National Sovereignty
Globalization: Menace to Democracy?
Globalization: Guardian of Democracy?
Globalization and the Environment
Developing Skill for Your Career
The Global Business Environment
The Road Ahead for International Business
Bottom Line for Business
A comprehensive set of specially designed PowerPoint slides is available for use
with Chapter 1. These slides and the lecture outline below form a completely integrated
package that simplifies the teaching of this chapter’s material.
Lecture Outline
I. INTRODUCTION
Globalization is reshaping our cultures, our political, legal, and economic
systems, and affecting our standards of living. It alters the global pattern of trade
and investment by expanding markets and multiplying production possibilities.
II. KEY PLAYERS IN INTERNATIONAL BUSINESS
Large firms from developed nations once dominated, but firms from Brazil,
China, and India now play a bigger role. Technological advancements allow small
and midsize companies to better compete.
A. Multinational Corporations
A multinational corporation (MNC) has direct investments abroad in
multiple countries. They generate significant jobs, investment, and tax
revenue for the regions and nations they enter.
1. Profiling the largest multinationals
a. Some MNCs have more employees than small nations have
citizens (e.g., Walmart has 2.2 million employees globally).
Lowers Wages in Developed Nations
Exploits Workers in Developing Nations
For Globalization
Increases Wealth and Efficiency in All Nations
Generates Labor Market Flexibility in Developed Nations
Advances the Economies of Developing Nations
Summary of the Jobs and Wages Debate
Debate about Income Inequality
Inequality within Nations
Inequality between Nations
Global Inequality
Summary of the Income Inequality Debate
Debate about Culture, Sovereignty and the Environment
Globalization and Culture
Globalization and National Sovereignty
Globalization: Menace to Democracy?
Globalization: Guardian of Democracy?
Globalization and the Environment
Developing Skill for Your Career
The Global Business Environment
The Road Ahead for International Business
Bottom Line for Business
A comprehensive set of specially designed PowerPoint slides is available for use
with Chapter 1. These slides and the lecture outline below form a completely integrated
package that simplifies the teaching of this chapter’s material.
Lecture Outline
I. INTRODUCTION
Globalization is reshaping our cultures, our political, legal, and economic
systems, and affecting our standards of living. It alters the global pattern of trade
and investment by expanding markets and multiplying production possibilities.
II. KEY PLAYERS IN INTERNATIONAL BUSINESS
Large firms from developed nations once dominated, but firms from Brazil,
China, and India now play a bigger role. Technological advancements allow small
and midsize companies to better compete.
A. Multinational Corporations
A multinational corporation (MNC) has direct investments abroad in
multiple countries. They generate significant jobs, investment, and tax
revenue for the regions and nations they enter.
1. Profiling the largest multinationals
a. Some MNCs have more employees than small nations have
citizens (e.g., Walmart has 2.2 million employees globally).
Ch 1: Globalization 3
b. If Walmart were a country, it would rank third behind
Norway in terms of economic power (Figure 1.1).
B. Entrepreneurs and Small Businesses
1. They are increasingly active in international business by exporting
earlier and growing faster with help from technology.
2. A born global firm is a company that adopts a global perspective
and engages in international business from or near its inception.
3. Some small Internet companies reach customers solely through the
Web (e.g., Vellus Products, Weekend in Italy).
III. WHAT IS GLOBALIZATION?
Globalization is the trend toward greater economic, cultural, political, and
technological interdependence among national institutions and economies. It is
marked by “denationalization,” which is not “internationalization.”
A. Globalization of Markets
1. Convergence in buyer preferences in markets around the world
a. Reduces marketing costs by standardizing activities
b. Creates market opportunities abroad if home is small or
saturated
c. Levels uneven income streams for global seasonal products
d. Companies must not overlook local buyers’ needs
e. Need for global sustainability—development that meets the
needs of the present without compromising the ability of
future generations to meet their own needs.
2. Global Sustainability, Three Markets, Three Strategies. The
world’s 7 billion people live in three types of markets, yet all
require companies to act in a sustainable manner:
a. Developed markets are solidly middle class and people can
consume almost any product desired. A firm may use the
latest technologies to develop sustainable products in a
sustainable manner.
b. Emerging markets are racing to catch up to rich nations and
are overloading infrastructures. Resource constraints can
force companies to develop sustainable production
methods.
c. Traditional markets have mostly rural populations for
whom poverty and corruption prevail. Here, sustainability
means teaching safe farming practices, environmental
stewardship, and disease awareness.
B. Globalization of Production
1. Dispersal of production activities to locations that help a company
to minimize costs or maximize quality
a. Access lower-cost workers to cut overall production costs
b. Access technical expertise
c. Access production inputs unavailable or more costly at
home
b. If Walmart were a country, it would rank third behind
Norway in terms of economic power (Figure 1.1).
B. Entrepreneurs and Small Businesses
1. They are increasingly active in international business by exporting
earlier and growing faster with help from technology.
2. A born global firm is a company that adopts a global perspective
and engages in international business from or near its inception.
3. Some small Internet companies reach customers solely through the
Web (e.g., Vellus Products, Weekend in Italy).
III. WHAT IS GLOBALIZATION?
Globalization is the trend toward greater economic, cultural, political, and
technological interdependence among national institutions and economies. It is
marked by “denationalization,” which is not “internationalization.”
A. Globalization of Markets
1. Convergence in buyer preferences in markets around the world
a. Reduces marketing costs by standardizing activities
b. Creates market opportunities abroad if home is small or
saturated
c. Levels uneven income streams for global seasonal products
d. Companies must not overlook local buyers’ needs
e. Need for global sustainability—development that meets the
needs of the present without compromising the ability of
future generations to meet their own needs.
2. Global Sustainability, Three Markets, Three Strategies. The
world’s 7 billion people live in three types of markets, yet all
require companies to act in a sustainable manner:
a. Developed markets are solidly middle class and people can
consume almost any product desired. A firm may use the
latest technologies to develop sustainable products in a
sustainable manner.
b. Emerging markets are racing to catch up to rich nations and
are overloading infrastructures. Resource constraints can
force companies to develop sustainable production
methods.
c. Traditional markets have mostly rural populations for
whom poverty and corruption prevail. Here, sustainability
means teaching safe farming practices, environmental
stewardship, and disease awareness.
B. Globalization of Production
1. Dispersal of production activities to locations that help a company
to minimize costs or maximize quality
a. Access lower-cost workers to cut overall production costs
b. Access technical expertise
c. Access production inputs unavailable or more costly at
home
Ch 1: Globalization4
IV. FORCES DRIVING GLOBALIZATION
Forces increase competition among nations by leveling the global business
playing field.
A. Falling Barriers to Trade and Investment
1947 General Agreement on Tariffs and Trade (GATT) was designed to
promote free trade by reducing tariffs and nontariff barriers. 1994 GATT
revision (1) reduced tariffs and lowered subsidies for agricultural
products; (2) defined and protected intellectual property rights; and (3)
created the WTO.
1. World Trade Organization
a. World Trade Organization (WTO) is the international
organization that enforces the rules of international trade.
b. WTO goals: (1) to help the free flow of trade, (2) help
negotiate the further opening of markets, and (3) settle
trade disputes.
c. WTO agreements are contracts committing members to fair
and open trade policies. WTO dispute settlement system is
the spine of the global trading system.
2. Other International Organizations
a. World Bank - The initial purpose of the World Bank
(www.worldbank.org) was to finance European
reconstruction following the Second World War. The
World Bank later shifted its focus to the general financial
needs of developing countries, and today it finances many
economic development projects (infrastructure
development) in Africa, South America, and Southeast
Asia.
b. International Monetary Fund - is an agency created to
regulate fixed exchange rates and to enforce the rules of the
international monetary system. Among the purposes of the
IMF (www.imf.org) are promoting international monetary
cooperation, facilitating the expansion and balanced growth
of international trade, avoiding competitive exchange
devaluation, and making financial resources temporarily
available to members suffering from severe balance of
payment problems.
3. Regional Trade Agreements
a. Smaller groups of nations also are integrating their
economies (e.g., NAFTA, European Union).
4. Trade and National Output
a. Effect of the WTO and regional trade pacts is greater global
trade and cross-border investing (Map 1.1).
b. Trade growth has been faster than world output.
c. Gross Domestic Product (GDP) is the value of all goods
and services produced by a domestic economy over a one-
IV. FORCES DRIVING GLOBALIZATION
Forces increase competition among nations by leveling the global business
playing field.
A. Falling Barriers to Trade and Investment
1947 General Agreement on Tariffs and Trade (GATT) was designed to
promote free trade by reducing tariffs and nontariff barriers. 1994 GATT
revision (1) reduced tariffs and lowered subsidies for agricultural
products; (2) defined and protected intellectual property rights; and (3)
created the WTO.
1. World Trade Organization
a. World Trade Organization (WTO) is the international
organization that enforces the rules of international trade.
b. WTO goals: (1) to help the free flow of trade, (2) help
negotiate the further opening of markets, and (3) settle
trade disputes.
c. WTO agreements are contracts committing members to fair
and open trade policies. WTO dispute settlement system is
the spine of the global trading system.
2. Other International Organizations
a. World Bank - The initial purpose of the World Bank
(www.worldbank.org) was to finance European
reconstruction following the Second World War. The
World Bank later shifted its focus to the general financial
needs of developing countries, and today it finances many
economic development projects (infrastructure
development) in Africa, South America, and Southeast
Asia.
b. International Monetary Fund - is an agency created to
regulate fixed exchange rates and to enforce the rules of the
international monetary system. Among the purposes of the
IMF (www.imf.org) are promoting international monetary
cooperation, facilitating the expansion and balanced growth
of international trade, avoiding competitive exchange
devaluation, and making financial resources temporarily
available to members suffering from severe balance of
payment problems.
3. Regional Trade Agreements
a. Smaller groups of nations also are integrating their
economies (e.g., NAFTA, European Union).
4. Trade and National Output
a. Effect of the WTO and regional trade pacts is greater global
trade and cross-border investing (Map 1.1).
b. Trade growth has been faster than world output.
c. Gross Domestic Product (GDP) is the value of all goods
and services produced by a domestic economy over a one-
Loading page 6...
Ch 1: Globalization 5
year period. Gross national product (GNP) adds income
from international activities.
B. Technological Innovation
Technology accelerates globalization by making it easier, faster, and less
costly to move data, goods, and equipment around the world.
1. E-mail and Videoconferencing
a. Speed information flows and ease the tasks of coordination
and control, which are complicated by operating across
borders.
b. Driving growth in videoconferencing are lower-cost
bandwidth and equipment, and decreased travel for cost or
safety reasons.
2. The Internet
a. Helps firms sharpen forecasting, lower inventories,
improve communication with suppliers, and communicate
quickly and cheaply with distant managers
b. Reduces the cost of reaching an international customer
base, which is essential for the competitiveness of small
firms
3. Company Intranets and Extranets
a. Intranets are private networks of company Web sites and
other information sources that allow employee access to
information from distant locations.
b. Extranets are computer networks that give distributors and
suppliers access to a company’s database so they can place
orders or restock inventories electronically and
automatically.
4. Advancements in transportation technologies
a. Make global shipping more efficient and dependable (e.g.,
GPS)
C. Measuring Globalization
1. The KOF Swiss Economic Institute’s Globalization Index ranks
nations on their economic, social, and political engagement.
2. Richest nations are the most global, with many in Europe. The
United States is currently ranked 27th (see Table 1.1).
3. The least global nations are found in Africa, East Asia, South Asia,
Latin America, and the Middle East. Low technological
connectivity slows global integration.
V. DEBATE ABOUT JOBS AND WAGES
A. Against Globalization
1. Eliminates jobs in developed nations as good-paying
manufacturing jobs go abroad to developing countries. Low-priced
goods are not worth lost jobs.
year period. Gross national product (GNP) adds income
from international activities.
B. Technological Innovation
Technology accelerates globalization by making it easier, faster, and less
costly to move data, goods, and equipment around the world.
1. E-mail and Videoconferencing
a. Speed information flows and ease the tasks of coordination
and control, which are complicated by operating across
borders.
b. Driving growth in videoconferencing are lower-cost
bandwidth and equipment, and decreased travel for cost or
safety reasons.
2. The Internet
a. Helps firms sharpen forecasting, lower inventories,
improve communication with suppliers, and communicate
quickly and cheaply with distant managers
b. Reduces the cost of reaching an international customer
base, which is essential for the competitiveness of small
firms
3. Company Intranets and Extranets
a. Intranets are private networks of company Web sites and
other information sources that allow employee access to
information from distant locations.
b. Extranets are computer networks that give distributors and
suppliers access to a company’s database so they can place
orders or restock inventories electronically and
automatically.
4. Advancements in transportation technologies
a. Make global shipping more efficient and dependable (e.g.,
GPS)
C. Measuring Globalization
1. The KOF Swiss Economic Institute’s Globalization Index ranks
nations on their economic, social, and political engagement.
2. Richest nations are the most global, with many in Europe. The
United States is currently ranked 27th (see Table 1.1).
3. The least global nations are found in Africa, East Asia, South Asia,
Latin America, and the Middle East. Low technological
connectivity slows global integration.
V. DEBATE ABOUT JOBS AND WAGES
A. Against Globalization
1. Eliminates jobs in developed nations as good-paying
manufacturing jobs go abroad to developing countries. Low-priced
goods are not worth lost jobs.
Loading page 7...
Ch 1: Globalization6
2. Lowers wages in developed nations by causing worker dislocation
that gradually lowers wages. New jobs that replace lost
manufacturing jobs often pay less.
3. Exploits workers in developing nations who work cheaply
servicing western consumers.
B. For Globalization
1. Increases wealth and efficiency in all nations because trade
openness raises output. Firms grow more efficient and pass savings
on to consumers.
2. Generates labor market flexibility in developed nations that allows
an economy to rapidly deploy labor where demand is relatively
high.
3. Advances the economies of developing nations by injecting capital
that creates higher-paying jobs, which expands the middle class
and raises standards of living.
C. Summary: Although globalization eliminates jobs in some economic
sectors, it creates jobs in other sectors. Gains in national economies are
worth lost livelihoods that individuals may suffer.
D. Globalization’s Impact on Labor, the Environment, and Markets
1. Labor standards
a. Trade unions claim that firms continually move to nations
with low labor standards, which reduces labor’s bargaining
power and forces overall labor standards lower.
b. But studies of developing nations’ export processing zones
instead find evidence that contradicts such claims.
2. Environmental protection
a. Globalization opponents say it creates a “race to the
bottom” in environmental conditions and regulations:
countries compete in reducing environmental protection
laws.
b. But evidence shows pollution-intensive U.S. firms tend to
invest in countries with stricter environmental standards.
Also, closed economies historically are the worst polluters.
3. Future markets
a. Protesters claim international firms pay locals the lowest
possible wage and export their goods back to the home
country.
b. Today, firms want to build local markets in developing
nations, not simply exploit workers and foment local
animosity.
VI. DEBATE ABOUT INCOME INEQUALITY
A. Inequality within Nations
1. Globalization critics claim that income disparity in rich nations is
increasing as firms move factory jobs to poor nations.
2. Lowers wages in developed nations by causing worker dislocation
that gradually lowers wages. New jobs that replace lost
manufacturing jobs often pay less.
3. Exploits workers in developing nations who work cheaply
servicing western consumers.
B. For Globalization
1. Increases wealth and efficiency in all nations because trade
openness raises output. Firms grow more efficient and pass savings
on to consumers.
2. Generates labor market flexibility in developed nations that allows
an economy to rapidly deploy labor where demand is relatively
high.
3. Advances the economies of developing nations by injecting capital
that creates higher-paying jobs, which expands the middle class
and raises standards of living.
C. Summary: Although globalization eliminates jobs in some economic
sectors, it creates jobs in other sectors. Gains in national economies are
worth lost livelihoods that individuals may suffer.
D. Globalization’s Impact on Labor, the Environment, and Markets
1. Labor standards
a. Trade unions claim that firms continually move to nations
with low labor standards, which reduces labor’s bargaining
power and forces overall labor standards lower.
b. But studies of developing nations’ export processing zones
instead find evidence that contradicts such claims.
2. Environmental protection
a. Globalization opponents say it creates a “race to the
bottom” in environmental conditions and regulations:
countries compete in reducing environmental protection
laws.
b. But evidence shows pollution-intensive U.S. firms tend to
invest in countries with stricter environmental standards.
Also, closed economies historically are the worst polluters.
3. Future markets
a. Protesters claim international firms pay locals the lowest
possible wage and export their goods back to the home
country.
b. Today, firms want to build local markets in developing
nations, not simply exploit workers and foment local
animosity.
VI. DEBATE ABOUT INCOME INEQUALITY
A. Inequality within Nations
1. Globalization critics claim that income disparity in rich nations is
increasing as firms move factory jobs to poor nations.
Loading page 8...
Ch 1: Globalization 7
2. Evidence is mixed, but poor people in developing nations seem to
benefit from an open economy.
B. Inequality between Nations
1. Globalization opponents say it is widening the gap in average
incomes between rich and poor nations.
2. Looking closely at the evidence, we see that open nations are
benefiting from trade whereas closed ones are not.
C. Global Inequality
1. Opponents of globalization say it is widening income inequality
among all people of the world.
2. Studies tend to agree that global inequality has fallen in recent
decades, though they disagree on the extent of the decline.
D. Summary of the Income Inequality Debate
VII. DEBATE ABOUT CULTURE, SOVEREIGNTY AND THE ENVIRONMENT
A. Globalization and Culture
1. Critics say globalization homogenizes our world and lets MNCs
destroy cultural diversity and wipe out small local businesses.
2. Yet globalization allows nations to: (1) specialize and trade for
goods they do not produce, (2) import other peoples’ cultural
goods, and (3) still protect deeper moral and cultural norms.
B. Globalization and National Sovereignty
1. Globalization: Menace to Democracy?
a. Supranational institutions with international goals and
appointed officials undermine national sovereignty and
democracy.
b. Elected officials undercut democracy and local and
regional authority with “international” agreements on
citizens’ behalf.
2. Globalization: Guardian of Democracy?
a. Globalization has helped spread democracy worldwide
(e.g., more democratic nations than ever).
b. Some losses of sovereignty have had positive social
impacts, as in human rights, workers’ rights, and
discrimination.
3. Globalization and the Environment
a. Most international firms today support reasonable
environmental laws because (if for no other reason) they
want to expand future local markets for their goods and
services. They recognize that healthy future markets require
a sustainable approach to business expansion.
VIII. DEVELOPING SKILLS FOR YOUR CAREER
Skills required for a career in International Business include: critical thinking, an
understanding of business ethics and social responsibility, communication and
knowledge application and awareness.
2. Evidence is mixed, but poor people in developing nations seem to
benefit from an open economy.
B. Inequality between Nations
1. Globalization opponents say it is widening the gap in average
incomes between rich and poor nations.
2. Looking closely at the evidence, we see that open nations are
benefiting from trade whereas closed ones are not.
C. Global Inequality
1. Opponents of globalization say it is widening income inequality
among all people of the world.
2. Studies tend to agree that global inequality has fallen in recent
decades, though they disagree on the extent of the decline.
D. Summary of the Income Inequality Debate
VII. DEBATE ABOUT CULTURE, SOVEREIGNTY AND THE ENVIRONMENT
A. Globalization and Culture
1. Critics say globalization homogenizes our world and lets MNCs
destroy cultural diversity and wipe out small local businesses.
2. Yet globalization allows nations to: (1) specialize and trade for
goods they do not produce, (2) import other peoples’ cultural
goods, and (3) still protect deeper moral and cultural norms.
B. Globalization and National Sovereignty
1. Globalization: Menace to Democracy?
a. Supranational institutions with international goals and
appointed officials undermine national sovereignty and
democracy.
b. Elected officials undercut democracy and local and
regional authority with “international” agreements on
citizens’ behalf.
2. Globalization: Guardian of Democracy?
a. Globalization has helped spread democracy worldwide
(e.g., more democratic nations than ever).
b. Some losses of sovereignty have had positive social
impacts, as in human rights, workers’ rights, and
discrimination.
3. Globalization and the Environment
a. Most international firms today support reasonable
environmental laws because (if for no other reason) they
want to expand future local markets for their goods and
services. They recognize that healthy future markets require
a sustainable approach to business expansion.
VIII. DEVELOPING SKILLS FOR YOUR CAREER
Skills required for a career in International Business include: critical thinking, an
understanding of business ethics and social responsibility, communication and
knowledge application and awareness.
Loading page 9...
Ch 1: Globalization8
A. The Global Business Environment – What makes international business
special is that it occurs within a dynamic, integrated system that weaves
together four distinct elements:
1. Globalization is transforming our societies and commercial
activities. It also increases competition everywhere, forcing
companies to be vigilant.
2. Each national business environment consists of unique cultural,
political, legal, and economic characteristics. Companies must be
attentive to nuances and adapt products and practices as needed.
3. The international business environment influences how business is
conducted so firms must closely monitor events.
4. Context of international business management is defined by the
characteristics of the national and international business
environments. Managers must abide by the prevailing rules in each
market in which it operates.
B. The Road Ahead for International Business
Part 1 (Chapter 1): Globalization
Part 2 (Chapters 2–4): National Business Environments
Parts 3 and 4 (Chapters 5–8 and 9–10): International Business
Environment
Part 5 (Chapters 11–16): International Business Management
IX. BOTTOM LINE FOR BUSINESS
A. Harnessing Globalization’s Benefits
1. The most global nations tend to have the greatest equality, robust
environmental protection, inclusive political systems, lowest levels
of corruption, healthiest lifestyles, and be where women have
achieved the most social, educational, and economic progress.
2. The debate has opened a dialogue on how globalization can be
harnessed to make its benefits exceed its costs.
B. Intensified Competition
1. Continued globalization is taking companies into
A. The Global Business Environment – What makes international business
special is that it occurs within a dynamic, integrated system that weaves
together four distinct elements:
1. Globalization is transforming our societies and commercial
activities. It also increases competition everywhere, forcing
companies to be vigilant.
2. Each national business environment consists of unique cultural,
political, legal, and economic characteristics. Companies must be
attentive to nuances and adapt products and practices as needed.
3. The international business environment influences how business is
conducted so firms must closely monitor events.
4. Context of international business management is defined by the
characteristics of the national and international business
environments. Managers must abide by the prevailing rules in each
market in which it operates.
B. The Road Ahead for International Business
Part 1 (Chapter 1): Globalization
Part 2 (Chapters 2–4): National Business Environments
Parts 3 and 4 (Chapters 5–8 and 9–10): International Business
Environment
Part 5 (Chapters 11–16): International Business Management
IX. BOTTOM LINE FOR BUSINESS
A. Harnessing Globalization’s Benefits
1. The most global nations tend to have the greatest equality, robust
environmental protection, inclusive political systems, lowest levels
of corruption, healthiest lifestyles, and be where women have
achieved the most social, educational, and economic progress.
2. The debate has opened a dialogue on how globalization can be
harnessed to make its benefits exceed its costs.
B. Intensified Competition
1. Continued globalization is taking companies into
Loading page 10...
Ch 1: Globalization 9
1. Rich nations could open their markets, slash agricultural subsidies,
and increase development aid. Poor nations could improve their
investment climates and improve social protection for the poor.
2. Rich nations could offer workers their wage insurance, subsidized
health insurance if out of work, and improve education. Rich
nations could help enforce labor standards, help clarify
environmental agreements, and research the environmental
implications of trade agreements.
Quick Study Questions
Quick Study 1
1. Q: What is the value of goods and services that all nations of the world export
every year?
A: Goods worth $16.2 trillion and services worth 4.7 trillion.
2. Q: A business that has direct investments in the form of marketing or
manufacturing subsidiaries abroad in multiple countries is called a what?
A: A business that has direct investments abroad in multiple countries is a
multinational corporation (MNC).
3. Q: A born global firm engages in international business from or near its inception
and does what else?
A: A born global firm also adopts a global perspective.
Quick Study 2
1. Q: Globalization causes the institutions and economies of nations to become
what?
A: Globalization causes institutions and economies of nations to become more
interdependent.
2. Q: What benefits might a company obtain from the globalization of markets?
A: Globalization of markets refers to convergence in buyer preferences in markets
around the world. Potential benefits for companies include: (1) reduced marketing
costs by standardizing activities, (2) market opportunities abroad if home market
is small or saturated, and (3) levels an income stream by letting international sales
offset domestic sales for a company selling a global seasonal product.
3. Q: Sustainability is development that meets present needs without compromising
what?
A: Sustainability is development that meets present needs without compromising
the ability of future generations to meet their own needs.
1. Rich nations could open their markets, slash agricultural subsidies,
and increase development aid. Poor nations could improve their
investment climates and improve social protection for the poor.
2. Rich nations could offer workers their wage insurance, subsidized
health insurance if out of work, and improve education. Rich
nations could help enforce labor standards, help clarify
environmental agreements, and research the environmental
implications of trade agreements.
Quick Study Questions
Quick Study 1
1. Q: What is the value of goods and services that all nations of the world export
every year?
A: Goods worth $16.2 trillion and services worth 4.7 trillion.
2. Q: A business that has direct investments in the form of marketing or
manufacturing subsidiaries abroad in multiple countries is called a what?
A: A business that has direct investments abroad in multiple countries is a
multinational corporation (MNC).
3. Q: A born global firm engages in international business from or near its inception
and does what else?
A: A born global firm also adopts a global perspective.
Quick Study 2
1. Q: Globalization causes the institutions and economies of nations to become
what?
A: Globalization causes institutions and economies of nations to become more
interdependent.
2. Q: What benefits might a company obtain from the globalization of markets?
A: Globalization of markets refers to convergence in buyer preferences in markets
around the world. Potential benefits for companies include: (1) reduced marketing
costs by standardizing activities, (2) market opportunities abroad if home market
is small or saturated, and (3) levels an income stream by letting international sales
offset domestic sales for a company selling a global seasonal product.
3. Q: Sustainability is development that meets present needs without compromising
what?
A: Sustainability is development that meets present needs without compromising
the ability of future generations to meet their own needs.
Loading page 11...
Ch 1: Globalization10
Quick Study 3
1. Q: What global organizations have helped expand globalization?
A: The 1947 GATT lowered trade barriers and made it cheaper and easier to ship
goods across borders. In 1988 world merchandise trade was 20 times larger than
in 1947; average tariffs dropped from 40 percent to 5 percent. A 1994 GATT
revision created the WTO, which has the power to enforce international trade
rules. Goals of the WTO are: (1) to help the free flow of trade, (2) help negotiate
further opening of markets, and (3) settle trade disputes. WTO agreements are
contracts committing members to fair and open trade policies. The WTO dispute
settlement system is the spine of the global trading system. The World Bank and
the International Monetary Fund have also helped expand globalization.
2. Q: What technological innovations are helping to propel globalization?
A: E-mail and videoconferencing speed information flows and ease the tasks of
coordination and control. Firms use the Web to sharpen forecasting, lower
inventories, and improve communication with suppliers, and to communicate with
distant managers quickly, cheaply, and efficiently. The Web also reduces the cost
of reaching international customers—important for the competitiveness of small
firms. Company intranets allow employees to access information from distant
locations to share best practices. Extranets give distributors and suppliers access
to a company’s database so they can place orders or restock inventories
electronically and automatically. Transportation advancements are facilitating
globalization by making shipping more efficient and dependable.
3. Q: What nations rank high in terms of globalization?
A: Netherlands, Ireland and Belgium are examples of a nations that rank high in
terms of globalization.
Quick Study 4
1. Q: In the debate over jobs and wages, opponents of globalization say that it does
what?
A: Opponents state that globalization eliminates jobs in developed nations,
exploits workers in developing countries, and lowers wages in developed nations.
2. Q: In the debate over jobs and wages, supporters of globalization say that it does
what?
A: Supporters state that globalization generates labor market flexibility in
developed nations and advances the economies of developing nations.
Quick Study 5
1. Q: Evidence suggests that globalization can help developing nations boost
incomes for their poorest citizens in what part of the debate over inequality?
A: Inequality within nations
Quick Study 3
1. Q: What global organizations have helped expand globalization?
A: The 1947 GATT lowered trade barriers and made it cheaper and easier to ship
goods across borders. In 1988 world merchandise trade was 20 times larger than
in 1947; average tariffs dropped from 40 percent to 5 percent. A 1994 GATT
revision created the WTO, which has the power to enforce international trade
rules. Goals of the WTO are: (1) to help the free flow of trade, (2) help negotiate
further opening of markets, and (3) settle trade disputes. WTO agreements are
contracts committing members to fair and open trade policies. The WTO dispute
settlement system is the spine of the global trading system. The World Bank and
the International Monetary Fund have also helped expand globalization.
2. Q: What technological innovations are helping to propel globalization?
A: E-mail and videoconferencing speed information flows and ease the tasks of
coordination and control. Firms use the Web to sharpen forecasting, lower
inventories, and improve communication with suppliers, and to communicate with
distant managers quickly, cheaply, and efficiently. The Web also reduces the cost
of reaching international customers—important for the competitiveness of small
firms. Company intranets allow employees to access information from distant
locations to share best practices. Extranets give distributors and suppliers access
to a company’s database so they can place orders or restock inventories
electronically and automatically. Transportation advancements are facilitating
globalization by making shipping more efficient and dependable.
3. Q: What nations rank high in terms of globalization?
A: Netherlands, Ireland and Belgium are examples of a nations that rank high in
terms of globalization.
Quick Study 4
1. Q: In the debate over jobs and wages, opponents of globalization say that it does
what?
A: Opponents state that globalization eliminates jobs in developed nations,
exploits workers in developing countries, and lowers wages in developed nations.
2. Q: In the debate over jobs and wages, supporters of globalization say that it does
what?
A: Supporters state that globalization generates labor market flexibility in
developed nations and advances the economies of developing nations.
Quick Study 5
1. Q: Evidence suggests that globalization can help developing nations boost
incomes for their poorest citizens in what part of the debate over inequality?
A: Inequality within nations
Loading page 12...
Ch 1: Globalization 11
2. Q: In the debate over inequality between nations, evidence suggests that
developing nations that are open to trade and investment do what?
A: Evidences suggests that developing nations that are open to trade and
investment grow faster than rich nations.
3. Q: Regarding the debate over global inequality, experts tend to agree on what?
A: Experts tend to agree that inequality has fallen in recent decades.
Quick Study 6
1. Q: People opposed to globalization say that it does what to national cultures?
A: People opposed to globalization say that it homogenizes national cultures.
2. Q: In the debate over inequality between nations, evidence suggests that
developing nations that are open to trade and investment do what?
A: Evidences suggests that developing nations that are open to trade and
investment grow faster than rich nations.
3. Q: Regarding the debate over global inequality, experts tend to agree on what?
A: Experts tend to agree that inequality has fallen in recent decades.
Quick Study 6
1. Q: People opposed to globalization say that it does what to national cultures?
A: People opposed to globalization say that it homogenizes national cultures.
Loading page 13...
Ch 1: Globalization12
A: International firms encounter unfamiliar societies. International managers must
scan the globe for opportunities and threats. International firms may need to adapt
practices or products to local conditions.
Ethical Challenge
You are the CEO of a major U.S. apparel company that contracts work to garment
manufacturers abroad. Employees of the contractors report 20-hour workdays, pay lower
than the minimum wage, overcrowded living conditions, physically abusive supervisors,
and confiscation of their passports. Contractors and government officials say local labor
laws are adhered to and enforced, though abuses appear widespread. You send
inspectors to the factories abroad but they uncover no labor violations. A labor-advocacy
group claims that supervisors coached workers to lie to your inspectors about conditions
and threatened workers with time in makeshift jails without food if they talked.
1-5. Should you implement a monitoring system to learn the truth about what is
happening?
A: The implementation of a monitoring system is important. A keener sense of
business ethics and social responsibility are critical to the success of MNC. These
concepts serve as the guiding principles that influence the way individuals and
organizations behave within society. The issues of personal ethical responsibility
and reasoning should impact how managers make ethical decisions under specific
circumstances and how they fared.
1-6. Do you help the factory improve conditions, withdraw your business, or simply do
nothing?
A: The answer depends on the overall outlook of the market and opportunities
that it presents. If the long term opportunities are good, it is important to note the
business does have a social responsibility with regard to topics such as human
rights, fair trade, and sustainable development.
1-7. How might your actions affect your relations with the factory owner and your
ability to do business in the country?
A: It’s extremely important that your company be thorough and transparent
throughout the monitoring process. The monitoring process could seem more
impartial by contracting an independent organization to conduct the investigation,
rather than employ someone with whom the company might be suspected as
having social or political connections. You could also have the report made public
to all parties simultaneously to eliminate the perception of the report being
adjusted. To implement and maintain rapid, sustainable improvements: monitor
and verify codes of conduct regarding labor practices, disseminate information to
workers explaining their rights, appeal to government agencies on effective ways
to raise labor standards, explain how their reputation as being “good guys” in the
labor standards arena can create a useful marketing tool and opportunities for
A: International firms encounter unfamiliar societies. International managers must
scan the globe for opportunities and threats. International firms may need to adapt
practices or products to local conditions.
Ethical Challenge
You are the CEO of a major U.S. apparel company that contracts work to garment
manufacturers abroad. Employees of the contractors report 20-hour workdays, pay lower
than the minimum wage, overcrowded living conditions, physically abusive supervisors,
and confiscation of their passports. Contractors and government officials say local labor
laws are adhered to and enforced, though abuses appear widespread. You send
inspectors to the factories abroad but they uncover no labor violations. A labor-advocacy
group claims that supervisors coached workers to lie to your inspectors about conditions
and threatened workers with time in makeshift jails without food if they talked.
1-5. Should you implement a monitoring system to learn the truth about what is
happening?
A: The implementation of a monitoring system is important. A keener sense of
business ethics and social responsibility are critical to the success of MNC. These
concepts serve as the guiding principles that influence the way individuals and
organizations behave within society. The issues of personal ethical responsibility
and reasoning should impact how managers make ethical decisions under specific
circumstances and how they fared.
1-6. Do you help the factory improve conditions, withdraw your business, or simply do
nothing?
A: The answer depends on the overall outlook of the market and opportunities
that it presents. If the long term opportunities are good, it is important to note the
business does have a social responsibility with regard to topics such as human
rights, fair trade, and sustainable development.
1-7. How might your actions affect your relations with the factory owner and your
ability to do business in the country?
A: It’s extremely important that your company be thorough and transparent
throughout the monitoring process. The monitoring process could seem more
impartial by contracting an independent organization to conduct the investigation,
rather than employ someone with whom the company might be suspected as
having social or political connections. You could also have the report made public
to all parties simultaneously to eliminate the perception of the report being
adjusted. To implement and maintain rapid, sustainable improvements: monitor
and verify codes of conduct regarding labor practices, disseminate information to
workers explaining their rights, appeal to government agencies on effective ways
to raise labor standards, explain how their reputation as being “good guys” in the
labor standards arena can create a useful marketing tool and opportunities for
Loading page 14...
Ch 1: Globalization 13
firms and countries by differentiating themselves when competing in the apparel
export market.
Teaming Up
Research Project. Imagine that you and several of your classmates own a company that
manufactures cheap sunglasses. To lower production costs, you choose to move your
factory from your developed country to a more cost-effective nation.
1-8. What elements of the national business environment might influence your decision
where to move production? Are there obstacles to overcome in the international
business environment?
A: The first factor is based on the need potential. For example, if a company
produces air conditioners, it will obviously look at countries with warm climates.
You would then address the Financial and Economic Forces, the analyst should
look at factors such as trends in inflation rates, exchange rates and interest rates.
Credit availability, paying habits of customers and Return of Investment for
similar investments are other factors to be considered. You would then proceed to
look at Political and Legal Forces, The analyst should look at elements such as:
market entry barriers, profit remittance barriers and other barriers such as political
instability, tax laws, safety standards, price controls, etc., and finally followed by
looking at the Sociocultural and Competitive Forces.
1-9. What aspects of the globalization of production and marketing will you expect
will benefit your company after the move?
A: This project gets students to begin pondering the types of elements that must
be considered when selecting a country for investment. At a minimum, students’
responses should consider: (1) the presence of investment barriers in the country;
(2) resources needed to carry out production, as well as their availability and cost;
(3) availability of modern telecommunications to facilitate communication with
the home office; and (4) how the expansion might be financed.
Practicing International Management Case
firms and countries by differentiating themselves when competing in the apparel
export market.
Teaming Up
Research Project. Imagine that you and several of your classmates own a company that
manufactures cheap sunglasses. To lower production costs, you choose to move your
factory from your developed country to a more cost-effective nation.
1-8. What elements of the national business environment might influence your decision
where to move production? Are there obstacles to overcome in the international
business environment?
A: The first factor is based on the need potential. For example, if a company
produces air conditioners, it will obviously look at countries with warm climates.
You would then address the Financial and Economic Forces, the analyst should
look at factors such as trends in inflation rates, exchange rates and interest rates.
Credit availability, paying habits of customers and Return of Investment for
similar investments are other factors to be considered. You would then proceed to
look at Political and Legal Forces, The analyst should look at elements such as:
market entry barriers, profit remittance barriers and other barriers such as political
instability, tax laws, safety standards, price controls, etc., and finally followed by
looking at the Sociocultural and Competitive Forces.
1-9. What aspects of the globalization of production and marketing will you expect
will benefit your company after the move?
A: This project gets students to begin pondering the types of elements that must
be considered when selecting a country for investment. At a minimum, students’
responses should consider: (1) the presence of investment barriers in the country;
(2) resources needed to carry out production, as well as their availability and cost;
(3) availability of modern telecommunications to facilitate communication with
the home office; and (4) how the expansion might be financed.
Practicing International Management Case
Loading page 15...
Ch 1: Globalization14
United States to grow up to be like Homer Simpson. Generally, this program and
others, such asModern Family, the The Ellen Degeneres Show, and Big Bang
Theory, are watched around the world for a glimpse into the humorous or darker
aspects of U.S. culture. On the other hand, local programming can lose out to the
U.S. programming if it is not as entertaining.
In regard to desires among young people for more “Western” goods, this
is a sensitive issue involving elements of economic development and materialism.
It could be argued that it is not ethical to show U.S. programs that depict wealthy
lifestyles in developing countries because they promote discontent in those
markets and promote materialism. However, there are wealthy and poor people in
every nation and, following this line of reasoning, one could argue that such
programs should not be aired in the U.S. market either—incidentally, some
groups do make this argument.
1-17. Q: Digital compression technology made it possible for MTV to program over a
global network. Can you think of other technological innovations that have helped
companies to think globally and act locally?
A: Internet retailers such as Amazon make online books in English available
globally. However, Amazon also has online service to accommodate those in
French- and Spanish-speaking countries. This is a localized approach. The French
version of Amazon can further localize its selections by offering books tailored to
specific Francophone regions such as Africa and Canada, not just France. Clearly,
Amazon can continue to localize by selecting other languages where significant
numbers of readers are.
United States to grow up to be like Homer Simpson. Generally, this program and
others, such asModern Family, the The Ellen Degeneres Show, and Big Bang
Theory, are watched around the world for a glimpse into the humorous or darker
aspects of U.S. culture. On the other hand, local programming can lose out to the
U.S. programming if it is not as entertaining.
In regard to desires among young people for more “Western” goods, this
is a sensitive issue involving elements of economic development and materialism.
It could be argued that it is not ethical to show U.S. programs that depict wealthy
lifestyles in developing countries because they promote discontent in those
markets and promote materialism. However, there are wealthy and poor people in
every nation and, following this line of reasoning, one could argue that such
programs should not be aired in the U.S. market either—incidentally, some
groups do make this argument.
1-17. Q: Digital compression technology made it possible for MTV to program over a
global network. Can you think of other technological innovations that have helped
companies to think globally and act locally?
A: Internet retailers such as Amazon make online books in English available
globally. However, Amazon also has online service to accommodate those in
French- and Spanish-speaking countries. This is a localized approach. The French
version of Amazon can further localize its selections by offering books tailored to
specific Francophone regions such as Africa and Canada, not just France. Clearly,
Amazon can continue to localize by selecting other languages where significant
numbers of readers are.
Loading page 16...
CHAPTER 2
CROSS-CULTURAL BUSINESS
LEARNING OBJECTIVES:
2.1 Explain culture and the need for cultural knowledge.
2.2 Summarize the cultural importance of values and behavior.
2.3 Describe the roles of social structure and education in culture.
2.4 Outline how the major world religions can influence business.
2.5 Explain the importance of personal communication to international business.
2.6 Describe how firms and culture interact in the global workplace.
CHAPTER OUTLINE:
Introduction
What Is Culture?
National Culture
Subcultures
Physical Environment
Need for Cultural Knowledge
Avoiding Ethnocentricity
CROSS-CULTURAL BUSINESS
LEARNING OBJECTIVES:
2.1 Explain culture and the need for cultural knowledge.
2.2 Summarize the cultural importance of values and behavior.
2.3 Describe the roles of social structure and education in culture.
2.4 Outline how the major world religions can influence business.
2.5 Explain the importance of personal communication to international business.
2.6 Describe how firms and culture interact in the global workplace.
CHAPTER OUTLINE:
Introduction
What Is Culture?
National Culture
Subcultures
Physical Environment
Need for Cultural Knowledge
Avoiding Ethnocentricity
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Subject
Business Management