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International Business provides a learning format that enables instructors to give their students an engaging and active learning experience. The course integrates a streamlined content approach with dynamic content that includes current cutting-edge topics and high-interest examples that are relevant to the business world.
About the Authors v
Preface vi
1 Globalization 1
Introduction 1
1.1 What Is Globalization? 1
Globalization of Markets 3
Globalization of Production 5
1.2 The Flat World, Round World
Globalization Debate 6
Both Sides of the Coin 8
1.3 Governing Globalization 9
1.4 Managing Globalization 12
Emerging Markets 12
Multinational Corporations 13
Summary 14
Case: Siri, Where Were You Made? 15
2 Analytical Tools for International Business 17
Introduction 17
2.1 Why International Business? 18
Increased Sales 19
New Resources 20
Reduced Risk 20
2.2 External Environment 22
Political Factors 22
Economic Factors 22
Sociocultural Factors 23
Technological Factors 23
Conducting a PEST Analysis 24
2.3 Internal Environment 25
Country Entry 25
Strategy 27
Organization 28
Leadership 28
Summary 29
Case: Toyota for the World 29
3 Political Systems 32
Introduction 32
3.1 The Political Spectrum 32
Individualism 33
Collectivism 33
Democratic Political Systems 33
Autocratic Political Systems 34
Communism and Socialism 35
Categorizing Political Systems 36
Mixed Political Systems 36
3.2 Political Risks 37
Macro Political Risk 37
Micro Political Risk 38
Direct and Indirect Effects of Political Risk 39
The Constant Challenge of Managing Political Risk 40
3.3 Measures of Political Freedom 41
The Freedom House and Heritage Foundation Measures 41
Implications of Political Freedom for International Business 43
Recent Political Trends That Affect Multinational Corporations 43
3.4 Government’s Involvement in Business 46
When Governments Relax Their Policies 47
Summary 48
Case Study: Micro Political Risk and the Fast-Food Industry in Korea 48
4 The Legal Environment 52
Introduction 52
4.1 Differing Legal Systems 52
The Rule of Law 53
Three Different Levels of Law 54
Types of Legal Systems 55
International Law 56
The Effect of the Enforcement of Laws on International Business 58
4.2 Common Legal Issues for International Business 60
Increasing Wealth through Regulatory Changes 60
Product Liability 60
Property Rights and Intellectual Property 61
4.3 Illegal Versus Unethical Conduct 62
Ethics 63
International Business and a Reactive versus
Proactive Response to Ethical Dilemmas 63
4.4 Important International Laws 65
The Foreign Corrupt Practices Act 65
e-Commerce and Data Privacy 67
Summary 67
Case Study: Can Korean Entertainment Content
Companies Compete with Pirates? 68
5 Economic Systems 72
Introduction 72
5.1 Understanding Economic Systems 72
5.2 Measuring Output 75
Gross Domestic Product 76
Gross National Product 77
Other Measures of Prosperity and Opportunity 77
The Components of GDP 78
5.3 Governmental Economic Controls 81
Fiscal Policy 82
Monetary Policy 83
5.4 Currency Fluctuation and Concentration Effects 84
Purchasing Power Parity and the Law of One Price 85
The Gini Coefficient 86
Summary 89
Case Study: Comparing GDP Growth in China and India 90
6 Currency and Foreign Exchange 93
Introduction 93
6.1 What Is Money? 94
6.2 Understanding Exchange Rates 95
What Instituations Make Foreign Exchange Happen? 97
Determining Exchange Rates 99
Under- or Overvalued Currency 100
6.3 The Consequences of Under- or Overvalued Currencies for International Businesses 101
Undervalued Currency 101
Overvalued Currency 103
6.4 Understanding and Managing Exchange Rate Risk 103
Managing Exchange Rate Risks 105
Predicting Exchange Rate Shifts 106
Summary 107
Case Study: BMW and Foreign Exchange Rate Risk 108
7 Trade 110
Introduction 110
7.1 Theories of Trade 111
Interventionist Theories 111
Free-Trade Theories 112
Trade Pattern Theories 113
Using Trade Theory as a Global Manager 117
7.2 Trade Imbalances and Their Consequences 118
The Balance of Trade 118
Why Trade Imbalances Exist and Persist 119
What About the US Dollar and International Trade? 120
7.3 Patterns of Trade: Increased Regionalization 121
Global Integration 122
Policy Implications of the WTO 123
Bilateral Trade Agreements 123
Regional Trade Agreements 124
Other Forms of Trade Agreements 126
7.4 Government Policies Directed at Trade 126
Summary 129
Case Study: Globalization and the Fight to Keep 1,000
Carrier Jobs in Indiana 129
8 Culture 132
Introduction 132
8.1 What Is Culture? 132
What Is Culture? 133
Determinants of Culture 135
8.2 What Does Culture Mean for Business? 139
Social Stratification 139
Work Motivation 139
Relationship Preferences 140
Risk-Taking Behavior 141
Information 141
8.3 Managing Cultural Differences 142
Recognize Differences 142
Respect Differences 143
Reconcile Differences 143
8.4 Building Cultural Intelligence 144
Assessing Cultural Intelligence 145
Improving Cultural Intelligence 146
Summary 147
Case Study: A Cultural Challenge in Managing Ace Adams 147
9 Sustainability 150
Introduction 150
9.1 What Is Sustainability? 150
Climate Change 152
Resource Constraints 155
9.2 Fighting Short-Termism 156
Sources of Short-Termism 157
Fighting Short-Termism 157
9.3 Collaborating for Sustainability 159
Why Companies Want to Collaborate 159
How to Collaborate Successfully 161
9.4 Sustainability and Innovation 163
Stage 1: View Compliance as Opportunity 163
Stage 2: Make Value Chains Sustainable 163
Stage 3: Design Sustainable Products and Services 164
Stage 4: Develop New Business Models 165
Summary 166
Case Study: Patagonia Invests in Repair and Recycle 166
10 Poverty 169
Introduction 169
10.1 Causes and Consequences of Global Poverty 170
The Poverty Trap 171
Risks of Poverty 171
10.2 Traditional Responses to Poverty 174
Poverty Programs 174
Other Types of Organizations That Fight Poverty 176
Poverty Science 177
10.3 A Business Response to Poverty 177
The Poor as a Social Responsibility 178
The Poor as Profitable Clients 178
Base of the Pyramid Strategies 179
Reverse Innovation 181
The Poor as Entrepreneurial Producers 182
10.4 Doing Well and Doing Good 183
Summary 184
Case Study: Grameen Bank Considers Lending to the Non-Poor 184
11 Technological Change and Infrastructure 187
Introduction 187
11.1 Technology as Physical Infrastructure 188
Raw Materials 189
Manufacturing Equipment 189
Transportation Networks 190
Energy Resources 191
11.2 Technology of Information Infrastructure 194
Communication Technologies 195
Speed of the Internet 196
Peer-to-Peer and the Shared Economy 196
Data Storage and Processing
Technologies 198
11.3 Technology of Human Infrastructure 200
Education 200
Corporate Training and Development 201
Industry, Education, and Government 202
11.4 Technology Trends in International Business 202
The Globalization of Research and Development 203
Summary 205
Case Study: LinkedIn in Brazil 206
12 Global Innovation and Intellectual Property 211
Introduction 211
12.1 Innovation as a Tool for Global Growth 212
Three Kinds of Innovation 212
Risks of Market-Creating Innovation 214
12.2 Investing in Innovation 215
From Local to Global Innovation 217
Innovation as a Human Capital Endeavor 218
12.3 Driving a Culture of Innovation 219
Foundations of Culture 219
The Innovator’s Imperative 220
12.4 Protecting Intellectual Property 222
Patents 223
Advantages of Patents 224
Copyrights 225
Trademarks 225
Trade Secrets 226
International Bodies and Laws Governing IP 227
The Difficulty of Enforcement 227
Summary 228
Case: Mettler-Toledo: Measuring the Weight of Innovation 228
13 Country Selection and Entry
Modes 232
Introduction 232
13.1 Deciding Which Foreign Markets to Enter 232
The Liability of Foreignness 233
First-Mover Advantage 234
Following Clients Globally 235
13.2 Entry Modes 236
Exporting 236
Turnkey Operations 239
Licensing 239
Franchising 241
Joint Ventures 243
Wholly Owned Subsidiary 244
13.3 Make, Ally, or Buy 245
Make 246
Ally 246
Buy 248
Summary 249
Case Study: Blendtec Goes Global Again 249
14 International Strategy 253
Introduction 253
14.1 What Is Strategy? 253
Value Creation and Capture 254
Strategic Positioning 254
Value Chain Analysis 256
14.2 Becoming Locally Responsive 258
Disadvantages of Being Locally Responsive 261
14.3 Achieving Global Integration 261
Advantages of Being Globally Integrated 262
Disadvantages of Being Globally Integrated 264
14.4 Choosing an International Strategy 265
Multidomestic Strategy 266
Meganational Strategy 266
Transnational Strategy 267
Summary 268
Case Study: Lincoln Electric’s International Strategy 268
15 International Organizational Structures 271
Introduction 271
15.1 Types of Organizational Structures 272
Functional Structure 273
Divisional Structure 274
Matrix Structure 275
Network Structure 276
15.2 Informal Organizational Controls 278
Company Culture 278
Control Systems 279
Incentives as Control 282
15.3 Reducing the Need for Coordination among Subsidiaries: Virtual Organizations, Standards, and Modularity 283
Virtual Organizations 283
Technology Standards 284
Modularity 284
15.4 Horizontal Subsidiary Coordination 286
Summary 287
Case Study: Control at Zara 288
16 Global Leadership 291
Introduction 291
16.1 What Is Global Leadership? 291
The Global Context of Leadership 292
The Need for Global Leadership 292
16.2 Global Leadership Competencies 294
General Competencies 295
Company-Related Competencies 297
Location-Related Competencies 298
16.3 Building Global Leadership Competencies in Others 299
16.4 Building Global Leadership Competencies in Yourself 301
Find Academic Environments That Encourage Global Development 301
Seek Opportunities at Work and Ask for Help 301
Be Patient and Flexible 303
Summary 303
Case Study: Honeywell Identifies Future Leadership Needs 304
17 Global Marketing 307
Introduction 307
17.1 Global Market Segmentation 307
17.2 Standardization Versus Differentiation in International Marketing 309
Standardization of the Marketing Mix 310
Differentiation of the Marketing Mix 311
Glocalization 312
17.3 Global Branding 313
Building Brand Awareness 314
Brand Image 316
Brand Loyalty 316
Brand Equity 316
Benefits of a Global Brand 317
Downsides of a Global Brand 317
17.4 Global Pricing and Distribution 317
General Pricing Strategies 317
Other Factors Affecting Global Pricing 319
Distribution Strategies 321
Summary 322
Case Study: Peaks Sends Kilimanjaro to Brazil 323
18 Global Operations and Supply-Chain Management 326
Introduction 326
18.1 Global Procurement 326
Advantages of Global Procurement 328
Disadvantages of Global Procurement 329
Outsourcing and Offshoring 330
18.2 Global Production 331
Advantages of Making 331
Disadvantages of Making 332
Location 332
Relocation 336
18.3 Global Supply Chains 336
Improving Global Supply-Chain Management 338
Information Technologies 338
18.4 Using Data Analytics to Improve Supply Chains 340
Applications of Data Analytics 341
Improving Performance 341
Summary 343
Case Study: Boeing in China 344
19 Global Human Resource Management 346
Introduction 346
19.1 The Global HR Wheel 346
Human Capital Portfolios 347
HR Practices 348
Focusing on Organizational Outcomes 350
19.2 Human Capital in the Global Context 351
Local Human Capital 351
Subsidiary Human Capital 352
Corporate Human Capital 353
International Human Capital 354
19.3 Meeting Strategic Objectives Through Human Capital 354
The Multidomestic Strategy 355
The Meganational Strategy 356
The Transnational Strategy 357
19.4 Tasks of the Global HR Function 358
Contributing to Business Decision
Making 359
Providing HR Expertise 359
Delivering HR Services 361
Summary 361
Case Study: Intel’s Search for Talent in Vietnam 362
20 Global Finance and Accounting 365
Introduction 365
20.1 Financing International Trade and Investment 365
International Banking 366
International Bond Markets 369
International Stock Markets 370
20.2 Capital Budgeting for Multinational Companies 373
The Parent Firm’s Capital Budgeting Decisions 373
The Cost of Capital: Domestic versus Global 374
20.3 International Accounting Standards 375
Generally Accepted Accounting Principles 375
International Financial Reporting Standards 376
20.4 Global Tax Matters 376
Corporate Income Tax 377
Transfer Pricing 378
Chapter Summary 379
Case Study: GlaxoSmithKline: What’s the Right Price to Pay? 380
GLOSSARY 382
Index 389
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