Skip to main content

International Business

E-Book

Product not available for purchase

International Business

Shad Morris, James Oldroyd

ISBN: 978-1-119-61226-1 September 2019

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