College of Administrative and Financial Sciences
Assignment 2
Deadline: 28-03-2020 @ 23:59
Course Name: Intro to International Business
Student’s Name:
Course Code: MGT-321
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Semester: II
CRN:
Academic Year: 1440/1441 H
For Instructor’s Use only
Instructor’s Name:
Students’ Grade: Marks Obtained/Out of
Level of Marks: High/Middle/Low
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Assignment Structure:
A.No
Type
Marks
Assignment-2
Critical Thinking
10
Total
10
Learning Outcomes:
· Analyze the effects of culture, politics and economic systems in the context of international business (Lo 1.9 & 2.1)
· Identify the major components of international business management (Lo 1.2)
· Carry out effective self-evaluation through discussing economic systems in the international business context (Lo. 3.6)
Critical Thinking
Please read Case 2: “Venezuela under Hugo Chávez and Beyond” available in your e-book (page no.611), and answer the following questions:
Assignment Question(s): (Marks: 10)
1. Under Chávez’s leadership, what kind of economic system was put in place in Venezuela? How would you characterize the political system?
2. How do you think that Chávez’s unilateral changes to contracts with foreign oil companies will affect future investment by foreigners in Venezuela?
3. How will the high level of public corruption in Venezuela affect future growth rates?
4. During the Chávez years, many foreign multinationals exited Venezuela or reduced their exposure there. What do you think the impact of this has been on Venezuela? What needs to be done to reverse the trend?
5. By 2016, Venezuela’s economy appeared to be on the brink of total collapse. What do you think needs to be done to reverse this?
Answer:
1.
2.
3.
4.
5.
&&&&
Cases 611
On March 5, 2013, Hugo Chávez, the president of
Venezuela, died after losing a battle against cancer.
Chávez had been president of Venezuela since 1999. A
former military officer who was once jailed for engineer-
ing a failed coup attempt, Chávez was a self-styled demo-
cratic socialist who won the presidential election by
campaigning against corruption, economic mismanage-
ment, and the “harsh realities” of global capitalism. When
he took office in February 1999, Chávez claimed he had
inherited the worst economic situation in the country’s
recent history. He wasn’t far off the mark. A collapse in
the price of oil, which accounted for 70 percent of the
country’s exports, left Venezuela with a large budget defi-
cit and forced the economy into a deep recession.
Soon after taking office, Chávez worked to consolidate
his hold over the apparatus of government. By 2012, Free-
dom House, which annually assesses political and civil
liberties worldwide, concluded Venezuela was only
“partly free” and that freedoms were being progressively
curtailed. In 2006, for example, Parliament, which was
dominated by his supporters, gave him the power to legis-
late by decree for 18 months. In late 2010, Chávez yet
again persuaded the National Assembly to grant him the
power to rule by decree for another 18 months.
On the economic front, the economy shrank in the
early 2000s, while unemployment remained persistently
high (at 15 to 17 percent) and the poverty rate rose to
more than 50 percent of the population. A 2003 study
by the World Bank concluded Venezuela was one of the
most regulated economies in the world and that state
controls over business activities gave public officials
ample opportunities to enrich themselves by demand-
ing bribes in return for permission to expand opera-
tions or enter new lines of business. Despite Chávez’s
anticorruption rhetoric, Transparency International,
which ranks the world’s nations according to the extent
of public corruption, noted that corruption increased
under Chávez. In 2012, Transparency International
ranked Venezuela 165th out of 174 nations in terms of
level of corruption.
Consistent with his socialist rhetoric, Chávez progres-
sively took various enterprises into state ownership and
required that other enterprises be restructured as “work-
ers’ cooperatives” in return for government loans. In addi-
tion, the government took over large rural farms and
ranches that Chávez claimed were not sufficiently pro-
ductive and turned them into state-owned cooperatives.
In mid-2000, the world oil market bailed Chávez out of
mounting economic difficulties. Oil prices started to surge
from the low $20s in 2003, reaching $150 a barrel by mid-
2008. Venezuela, the world’s fifth-largest producer, reaped
a bonanza. On the back of surging oil exports, the econ-
omy grew at a robust rate. Chávez used the oil revenues to
boost government spending on social programs, many of
them modeled after programs in Cuba. These included ultra-
cheap gasoline and free housing for the poor.
In 2006, he announced plans to reduce the stakes held
by foreign companies in oil projects in the Orinoco re-
gions, to increase the royalties they had to pay to the
Venezuelan government, and to give the state-run oil com-
pany a majority position. Simultaneously, he replaced
professional managers at the state-owned oil company
with his supporters, many of whom knew little about the
oil business. They extracted profits to support Chávez’s
social programs but at the cost of low investments in the
oil company, and over time its output started to fall.
Notwithstanding his ability to consolidate political
power, on the economic front, Venezuela’s performance
under Chávez was mixed. His main achievements were to
reduce poverty, which fell from 50 percent to 28 percent
by 2012, and to bring down unemployment from 14.5 per-
cent at the start of his rule to 7.6 percent in February
2013. Profits from oil helped Chávez achieve both these
goals. However, despite strong global demand and mas-
sive reserves, oil production in Venezuela fell by a third
between 2000 and 2012 as foreign oil companies exited
the country and the state-run oil company failed to make
up the difference. Inflation surged and was running at
around 28 percent per annum between 2008 and 2012,
one of the highest rates in the world. To compound mat-
ters, the budget deficit expanded to 17 percent of GDP in
2012 as the government spent heavily to support its social
programs and various subsidies.
Following Chávez’s death, his handpicked successor,
Nicolas Maduro, took over the presidency. Maduro con-
tinued the policies introduced by Chávez. Things did not
go well. By 2014, the country was in a recession. The
economy contracted by 4 percent that year, while infla-
tion surged to around 65 percent. The situation contin-
ued to deteriorate in 2015 and 2016. Exacerbated by a
sharp fall in oil prices and hence government revenues,
the economy was forecasted by the IMF to be 23 percent
smaller in 2017 than it was in 2013, the worst decline in
the world. By 2015, widespread shortages of basic goods
had emerged. In 2016, an estimated 75 percent of Venezu-
elans lost weight, averaging 8.7 kg per person, because of
a scarcity of food. Unemployment was rising. Inflation
increased to 741 percent by the end of 2016 (the highest in
the world). The poverty rate was back up over 30 percent.
To cap this litany of disaster, the value of the Venezuelan
currency, the bolivar, fell from 64 per U.S. dollar in 2014
to 960 per dollar by 2016.
Parliamentary elections held in December 2015 re-
sulted in large losses for the ruling United Socialist
Party. For the first time since 1999, the opposition
gained a majority of seats in Parliament. Maduro’s
Venezuela under Hugo Chávez and Beyond
612 Part 7 Cases
Case Discussion Questions
1. Under Chávez’s leadership, what kind of economic
system was put in place in Venezuela? How would
you characterize the political system?
2. How do you think that Chávez’s unilateral changes
to contracts with foreign oil companies will affect
future investment by foreigners in Venezuela?
3. How will the high level of public corruption in
Venezuela affect future growth rates?
4. During the latter part of Chávez’s rule, Venezuela
benefited from high oil prices. Since 2014, however,
oil prices have fallen substantially. What has the af-
fect of this has been on government finances and
the Venezuelan economy?
5. During the Chávez years, many foreign multina-
tionals exited Venezuela or reduced their exposure
there. What do you think the impact of this has
been on Venezuela? What needs to be done to
reverse the trend?
6. By 2016, Venezuela’s economy appeared to be on
the brink of total collapse. What do you think needs
to be done to reverse this?
response was to have the supreme court, which was
populated with Chavez appointees, exercise “parlia-
mentary power” while declaring the legislature to be in
contempt of the court. In effect, Venezuela has become
a full-f ledged dictatorship.
Sources
D. Luhnow and P. Millard, “Chávez Plans to Take More Con-
trol of Oil away from Foreign Firms,” The Wall Street Journal,
April 24, 2006, p. A1; R. Gallego, “Chávez’s Agenda Takes
Shape,” The Wall Street Journal, December 27, 2005, p. A12;
“The Sickly Stench of Corruption: Venezuela,” The Economist,
April 1, 2006, p. 50; “Chávez Squeezes the Oil Firms,” The
Economist, November 12, 2005, p. 61; “Glimpsing the Bottom
of the Barrel: Venezuela,” The Economist, February 3, 2007,
p. 51; “The Wind Goes Out of the Revolution—Defeat for Hugo
Chávez,” The Economist, December 8, 2007, pp. 30–32; “Oil
Leak,” The Economist, February 26, 2011, p. 43; “Medieval Poli-
cies,” The Economist, August 8, 2011, p. 38; “Now for the Reck-
oning,” The Economist, May 5, 2013; “Heading for a Crash,” The
Economist, January 23, 2016; Matt O’Brian, “Venezuela Is on
the Brink of Complete Economic Collapse,” The Washington
Post, January 29, 2016; “How Chavez and Maduro Have Impov-
erished Venezuela,” The Economist, April 6, 2017.
For decades, the Southeast Asian nation of Myanmar
(formerly known as Burma) was an international pariah.
Ruled by a brutal military dictatorship since the 1960s,
political dissent was not tolerated, the press was tightly
controlled, and opposition parties were shut down. Much
economic activity was placed in the hands of the state—
which effectively meant the hands of the military elite,
who siphoned off economic profits for their own benefit.
Corruption was rampant. In the 1990s, America and the
European Union imposed sweeping economic sanctions
on the country to punish the military junta for stealing
elections and jailing opponents. The de facto leader of
the country’s democratic opposition movement, Nobel
Peace Prize–winner Aung San Suu Kyi, was repeatedly
placed under house arrest from 1989 through 2010.
None of this was good for the country’s economy. De-
spite having a wealth of natural resources—including timber,
minerals, oil, and gas—the economy stagnated while its
Southeast Asian neighbors flourished. By 2012, Myanmar’s
GDP per capita was $1,400. In neighboring Thailand, it
was $10,000 per capita. The economy was still largely rural,
with 70 percent of the country’s nearly 60 million people
involved in agriculture. This compares with 8.6 percent in
Thailand. Few people own cars or cell phones, and there
are no major road or rail links between Myanmar and its
neighbors—China, India, and Thailand.
In 2010, the military again won elections that were
clearly rigged. Almost no one expected any changes, but
the new president, Thein Sein, was to defy expectations.
The government released hundreds of political prisoners,
removed restrictions on the press, freed Aung San Suu
Kyi, and allowed opposition parties to contest seats in a
series of by-elections. When Aung San Suu Kyi won a by-
election, thrashing her military-backed opponent, they let
her take the seat, raising hopes that Myanmar was at last
joining the modern world. In response, both America and
the European Union began to lift their sanctions.
Thein Sein also started to initiate much-needed eco-
nomic reforms. Even before the 2010 elections, the mili-
tary had begun to quietly privatize state-owned
enterprises, although many were placed in the hands of
cronies of the regime. In 2012, Thein Sein stated that the
government would continue to reduce its role in a wide
range of sectors, including energy, forestry, health care,
finance, and telecommunications. Land reforms are also
under way. The government also abandoned the official
fixed exchange rate for the Myanmar currency, the kyat,
replacing it with a managed float. From 2001 to 2012, the
official exchange rate for the kyat varied between 5.75
and 6.70 per U.S. dollar, while the black-market rate was
between 750 and 1,335 per U.S. dollar. The official fixed
exchange rate had effectively priced Myanmar’s exports
out of the world market, although it did benefit the mili-
tary elite who were able to exchange their worthless kyat
for valuable U.S. dollars on very favorable terms. Imple-
mented in April 2012, the managed float valued the kyat
Political and Economic Reform in Myanmar
- Cover
- Title Page
- Copyright Page
- Dedication
- About the Authors
- Brief
- Contents
- Acknowledgments
- part one Introduction and Overview
- part two National Differences
- part three The Global Trade and Investment Environment
- part four The Global Monetary System
- part five The Strategy and Structure of International Business
- part six International Business Functions
- part seven Integrative Cases
- Glossary
- Organization Index
- Name Index
- Subject Index
Contents
CHAPTER 1 Globalization
Opening Case Globalization of BMW, Rolls-Royce, and the MINI
Introduction
What Is Globalization?
The Globalization of Markets
The Globalization of Production
Management Focus Boeing’s Global Production System
The Emergence of Global Institutions
Drivers of Globalization
Declining Trade and Investment Barriers
Role of Technological Change
The Changing Demographics of the Global Economy
The Changing World Output and World Trade Picture
The Changing Foreign Direct Investment Picture
Country Focus India’s Software Sector
The Changing Nature of the Multinational Enterprise
Management Focus Wanda Group
The Changing World Order
Global Economy of the Twenty-First Century
The Globalization Debate
Antiglobalization Protests
Globalization, Jobs, and Income
Country Focus Protesting Globalization in France
Globalization, Labor Policies, and the Environment
Globalization and National Sovereignty
Globalization and the World’s Poor
Managing in the Global Marketplace
Chapter Summary
Critical Thinking and Discussion Questions
Research Task
Closing Case Uber: Going Global from Day One
Endnotes
CHAPTER 2 National Differences in Political, Economic, and Legal Systems
Opening Case The Decline of Zimbabwe
Introduction
Political Systems
Collectivism and Individualism
Democracy and Totalitarianism
Country Focus Putin’s Russia
Economic Systems
Market Economy
Command Economy
Mixed Economy
Legal Systems
Different Legal Systems
Differences in Contract Law
Property Rights and Corruption
Country Focus Corruption in Brazil
Management Focus Did Walmart Violate the Foreign Corrupt Practices Act?
The Protection of Intellectual Property
Management Focus Starbucks Wins Key Trademark Case in China
Product Safety and Product Liability
Focus on Managerial Implications: The Macro Environment Influences Market Attractiveness
Chapter Summary
Critical Thinking and Discussion Questions
Research Task
Closing Case Economic Transformation in Vietnam
Endnotes
CHAPTER 3 National Differences in Economic Development
Opening Case Economic Development in Bangladesh
Introduction
Differences in Economic Development
Map 3.1 GNI per capita, 2016
Map 3.2 GNI PPP per capita, 2016
Map 3.3 Average annual growth rate in GDP (%), 2007–2016
Broader Conceptions of Development: Amartya Sen
Map 3.4 Human Development Index, 2015
Political Economy and Economic Progress
Innovation and Entrepreneurship Are the Engines of Growth
Innovation and Entrepreneurship Require a Market Economy
Innovation and Entrepreneurship Require Strong Property Rights
The Required Political System
Country Focus Emerging Property Rights in China
Economic Progress Begets Democracy
Geography, Education, and Economic Development
States in Transition
The Spread of Democracy
Map 3.5 Freedom in the world, 2017
The New World Order and Global Terrorism
The Spread of Market-Based Systems
Map 3.6 Index of economic freedom, 2017
The Nature of Economic Transformation
Deregulation
Privatization
Country Focus India’s Economic Transformation
Legal Systems
Implications of Changing Political Economy
Focus on Managerial Implications: Benefits, Costs, Risks, and Overall Attractiveness of Doing Business Internationally
Chapter Summary
Critical Thinking and Discussion Questions
Research Task
Closing Case The Political and Economic Evolution of Indonesia
Endnotes
CHAPTER 4 Differences in Culture
Opening Case The Swatch Group and Cultural Uniqueness
Introduction
What Is Culture?
Values and Norms
Culture, Society, and the Nation-State
Determinants of Culture
Social Structure
Individuals and Groups
Social Stratification
Country Focus India and Its Caste System
Religious and Ethical Systems
Map 4.1 World Religions
Christianity
Islam
Country Focus Secularism in Turkey
Hinduism
Buddhism
Confusianism
Management Focus China and Its Guanxi
Language
Spoken Language
Unspoken Language
Education
Culture and Business
Cultural Change
Focus on Managerial Implications: Cultural Literacy and Competitive Advantage
Chapter Summary
Critical Thinking and Discussion Questions
Research Task
Closing Case The Emirates Group and Employee Diversity
Endnotes
CHAPTER 5 Ethics, Corporate Social Responsibility, and Sustainability
Opening Case Woolworths Group’s Corporate Responsibility Strategy 2020
Introduction
Ethics and International Business
Employment Practices
Management Focus “Emissionsgate” at Volkswagen
Human Rights
Environmental Pollution
Corruption
Ethical Dilemmas
Roots of Unethical Behavior
Personal Ethics
Decision-Making Processes
Organizational Culture
Unrealistic Performance Goals
Leadership
Societal Culture
Philosophical Approaches to Ethics
Straw Men
Utilitarian and Kantian Ethics
Rights Theories
Justice Theories
Focus on Managerial Implications: Making Ethical Decisions Internationally
Management Focus Corporate Social Responsibility at Stora Enso
Chapter Summary
Critical Thinking and Discussion Questions
Research Task
Closing Case UNCTAD Sustainable Development Goals
Endnotes
CHAPTER 6 International Trade Theory
Opening Case Donald Trump on Trade
Introduction
An Overview of Trade Theory
The Benefits of Trade
The Pattern of International Trade
Trade Theory and Government Policy
Mercantilism
Country Focus Is China Manipulating Its Currency in Pursuit of a Neo-Mercantilist Policy?
Absolute Advantage
Comparative Advantage
The Gains from Trade
Qualifications and Assumptions
Extensions of the Ricardian Model
Country Focus Moving U.S. White-Collar Jobs Offshore
Heckscher–Ohlin Theory
The Leontief Paradox
The Product Life-Cycle Theory
Product Life-Cycle Theory in the Twenty-First Century
New Trade Theory
Increasing Product Variety and Reducing Costs
Economies of Scale, First-Mover Advantages, and the Pattern of Trade
Implications of New Trade Theory
National Competitive Advantage: Porter’s Diamond
Factor Endowments
Demand Conditions
Related and Supporting Industries
Firm Strategy, Structure, and Rivalry
Evaluating Porter’s Theory
Focus on Managerial Implications: Location, First-Mover Advantages, and Government Policy
Chapter Summary
Critical Thinking and Discussion Questions
Research Task
Closing Case The Trans Pacific Partnership (TPP)
Appendix International Trade and the Balance of Payments
Endnotes
CHAPTER 7 Government Policy and International Trade
Opening Case Boeing and Airbus Are in a Dogfight over Illegal Subsidies
Introduction
Instruments of Trade Policy
Tariffs
Subsidies
Country Focus Are the Chinese Illegally Subsidizing Auto Exports?
Import Quotas and Voluntary Export Restraints
Export Tariffs and Bans
Local Content Requirements
Administrative Policies
Antidumping Policies
The Case for Government Intervention
Management Focus Protecting U.S. Magnesium
Political Arguments for Intervention
Economic Arguments for Intervention
The Revised Case for Free Trade
Retaliation and Trade War
Domestic Policies
Development of the World Trading System
From Smith to the Great Depression
1947–1979: GATT, Trade Liberalization, and Economic Growth
1980–1993: Protectionist Trends
The Uruguay Round and the World Trade Organization
WTO: Experience to Date
The Future of the WTO: Unresolved Issues and the Doha Round
Country Focus Estimating the Gains from Trade for America
Multilateral and Bilateral Trade Agreements
The World Trading System under Threat
Focus on Managerial Implications: Trade Barriers, Firm Strategy, and Policy Implications
Chapter Summary
Critical Thinking and Discussion Questions
Research Task
Closing Case Is China Dumping Excess Steel Production?
Endnotes
CHAPTER 8 Foreign Direct Investment
Opening Case Foreign Direct Investment in Retailing in India
Introduction
Foreign Direct Investment in the World Economy
Trends in FDI
The Direction of FDI
The Source of FDI
Country Focus Foreign Direct Investment in China
The Form of FDI: Acquisitions versus Greenfield Investments
Theories of Foreign Direct Investment
Why Foreign Direct Investment?
Management Focus Foreign Direct Investment by Cemex
The Pattern of Foreign Direct Investment
The Eclectic Paradigm
Political Ideology and Foreign Direct Investment
The Radical View
The Free Market View
Pragmatic Nationalism
Shifting Ideology
Benefits and Costs of FDI
Host-Country Benefits
Host-Country Costs
Home-Country Benefits
Home-Country Costs
International Trade Theory and FDI
Government Policy Instruments and FDI
Home-Country Policies
Host-Country Policies
International Institutions and the Liberalization of FDI
Focus on Managerial Implications: FDI and Government Policy
Chapter Summary
Critical Thinking and Discussion Questions
Research Task
Closing Case Burberry Shifts Its Strategy in Japan
Endnotes
CHAPTER 9 Regional Economic Integration
Opening Case Renegotiating NAFTA
Introduction
Levels of Economic Integration
The Case for Regional Integration
The Economic Case for Integration
The Political Case for Integration
Impediments to Integration
The Case against Regional Integration
Regional Economic Integration in Europe
Evolution of the European Union
Map 9.1 Member states of the European Union in 2017
Political Structure of the European Union
Management Focus The European Commission and Intel
The Single European Act
The Establishment of the Euro
Country Focus The Greek Sovereign Debt Crisis
Enlargement of the European Union
British Exit from the European Union (BREXIT)
Regional Economic Integration in the Americas
Map 9.2 Economic integration in the Americas
The North American Free Trade Agreement
The Andean Community
Mercosur
Central American Common Market, CAFTA, and CARICOM
Regional Economic Integration Elsewhere
Association of Southeast Asian Nations
Map 9.3 ASEAN countries
Regional Trade Blocs in Africa
Other Trade Agreements
Focus on Managerial Implications: Regional Economic Integration Threats
Chapter Summary
Critical Thinking and Discussion Questions
Research Task
Closing Case The Push toward Free Trade in Africa
Endnotes
CHAPTER 10 The Foreign Exchange Market
Opening Case The Mexican Peso, the Japanese Yen, and Pokemon Go
Introduction
The Functions of the Foreign Exchange Market
Currency Conversion
Insuring against Foreign Exchange Risk
Management Focus Embraer and the Gyrations of the Brazilian Real
The Nature of the Foreign Exchange Market
Economic Theories of Exchange Rate Determination
Prices and Exchange Rates
Country Focus Quantitative Easing, Inflation, and the Value of the U.S. Dollar
Interest Rates and Exchange Rates
Investor Psychology and Bandwagon Effects
Summary of Exchange Rate Theories
Exchange Rate Forecasting
The Efficient Market School
The Inefficient Market School
Approaches to Forecasting
Currency Convertibility
Focus on Managerial Implications: Foreign Exchange Rate Risk
Chapter Summary
Critical Thinking and Discussion Questions
Research Task
Closing Case Apple’s Earnings Hit by Strong Dollar
Endnotes
CHAPTER 11 The International Monetary System
Opening Case Egypt and the IMF
Introduction
The Gold Standard
Mechanics of the Gold Standard
Strength of the Gold Standard
The Period between the Wars: 1918–1939
The Bretton Woods System
The Role of the IMF
The Role of the World Bank
The Collapse of the Fixed Exchange Rate System
The Floating Exchange Rate Regime
The Jamaica Agreement
Exchange Rates since 1973
Country Focus The U.S. Dollar, Oil Prices, and Recycling Petrodollars
Fixed versus Floating Exchange Rates
The Case for Floating Exchange Rates
The Case for Fixed Exchange Rates
Who Is Right?
Exchange Rate Regimes in Practice
Pegged Exchange Rates
Currency Boards
Crisis Management by the IMF
Financial Crises in the Post–Bretton Woods Era
Country Focus The IMF and Iceland’s Economic Recovery
Evaluating the IMF’s Policy Prescriptions
Focus on Managerial Implications: Currency Management, Business Strategy, and Government Relations
Management Focus Airbus and the Euro
Chapter Summary
Critical Thinking and Discussion Questions
Research Task
Closing Case China’s Exchange Rate Regime
Endnotes
CHAPTER 12 The Global Capital Market
Opening Case Saudi Aramco
Introduction
Benefits of the Global Capital Market
Functions of a Generic Capital Market
Attractions of the Global Capital Market
Management Focus The Industrial and Commercial Bank of China Taps the Global Capital Market
Growth of the Global Capital Market
Global Capital Market Risks
Country Focus Did the Global Capital Markets Fail Mexico?
The Eurocurrency Market
Genesis and Growth of the Market
Attractions of the Eurocurrency Market
Drawbacks of the Eurocurrency Market
The Global Bond Market
Attractions of the Eurobond Market
The Global Equity Market
Foreign Exchange Risk and the Cost of Capital
Focus on Managerial Implications: Growth of the Global Capital Market
Chapter Summary
Critical Thinking and Discussion Questions
Research Task
Closing Case Alibaba’s Record-Setting IPO
Endnotes
CHAPTER 13 The Strategy of International Business
Opening Case Sony’s Global Strategy
Introduction
Strategy and the Firm
Value Creation
Strategic Positioning
The Firm as a Value Chain
Global Expansion, Profitability, and Profit Growth
Expanding the Market: Leveraging Products and Competencies
Location Economies
Experience Effects
Leveraging Subsidiary Skills
Profitability and Profit Growth Summary
Management Focus Leveraging Skills Worldwide at ArcelorMittal
Cost Pressures and Pressures for Local Responsiveness
Pressures for Cost Reductions
Pressures for Local Responsiveness
Management Focus Viacom International Media Networks
Choosing a Strategy
Global Standardization Strategy
Localization Strategy
Transnational Strategy
International Strategy
Management Focus Evolution of Strategy at Procter & Gamble
The Evolution of Strategy
Chapter Summary
Critical Thinking and Discussion Questions
Research Task
Closing Case IKEA’s Global Strategy
Endnotes
CHAPTER 14 The Organization of International Business
Opening Case Unilever’s Global Organization
Introduction
Organizational Architecture
Organizational Structure
Vertical Differentiation: Centralization and Decentralization
Management Focus Walmart International
Horizontal Differentiation: The Design of Structure
Integrating Mechanisms
Management Focus Dow—(Failed) Early Global Matrix Adopter
Control Systems and Incentives
Types of Control Systems
Incentive Systems
Control Systems, Incentives, and Strategy in the International Business
Processes
Organizational Culture
Creating and Maintaining Organizational Culture
Organizational Culture and Performance in the International Business
Management Focus Lincoln Electric and Culture
Synthesis: Strategy and Architecture
Localization Strategy
International Strategy
Global Standardization Strategy
Transnational Strategy
Environment, Strategy, Architecture, and Performance
Organizational Change
Organizational Inertia
Implementing Organizational Change
Chapter Summary
Critical Thinking and Discussion Questions
Research Task
Closing Case Organizational Architecture at P&G
Endnotes
CHAPTER 15 Entry Strategy and Strategic Alliances
Opening Case Gazprom and Global Strategic Alliances
Introduction
Basic Entry Decisions
Which Foreign Markets?
Management Focus Tesco’s International Growth Strategy
Timing of Entry
Scale of Entry and Strategic Commitments
Market Entry Summary
Management Focus The Jollibee Phenomenon
Entry Modes
Exporting
Turnkey Projects
Licensing
Franchising
Joint Ventures
Wholly Owned Subsidiaries
Selecting an Entry Mode
Core Competencies and Entry Mode
Pressures for Cost Reductions and Entry Mode
Greenfield Venture or Acquisition?
Pros and Cons of Acquisitions
Pros and Cons of Greenfield Ventures
Which Choice?
Strategic Alliances
Advantages of Strategic Alliances
Disadvantages of Strategic Alliances
Making Alliances Work
Chapter Summary
Critical Thinking and Discussion Questions
Research Task
Closing Case Starbucks’ Foreign Entry Strategy
Endnotes
CHAPTER 16 Exporting, Importing, and Countertrade
Opening Case Tata Motors and Exporting
Introduction
The Promise and Pitfalls of Exporting
Management Focus Ambient Technologies and the Panama Canal
Improving Export Performance
International Comparisons
Information Sources
Management Focus Exporting with Government Assistance
Service Providers
Export Strategy
Management Focus 3M’s Export Strategy
The globalEDGE™ Exporting Tool
Export and Import Financing
Lack of Trust
Letter of Credit
Draft
Bill of Lading
A Typical International Trade Transaction
Export Assistance
Export-Import Bank
Export Credit Insurance
Countertrade
The Popularity of Countertrade
Types of Countertrade
Pros and Cons of Countertrade
Chapter Summary
Critical Thinking and Discussion Questions
Research Task
Closing Case Embraer and Brazilian Importing
Endnotes
CHAPTER 17 Global Production and Supply Chain Management
Opening Case Alibaba and Global Supply Chains
Introduction
Strategy, Production, and Supply Chain Management
Where to Produce
Country Factors
Management Focus IKEA Production in China
Technological Factors
Production Factors
The Hidden Costs of Foreign Locations
Management Focus H&M and Its Order Timing
Make-or-Buy Decisions
Global Supply Chain Functions
Global Logistics
Global Purchasing
Managing a Global Supply Chain
Role of Just-in-Time Inventory
Role of Information Technology
Coordination in Global Supply Chains
Interorganizational Relationships
Chapter Summary
Critical Thinking and Discussion Questions
Research Task
Closing Case Amazon’s Global Supply Chains
Endnotes
CHAPTER 18 Global Marketing and R&D
Opening Case ACSI and Satisfying Global Customers
Introduction
Globalization of Markets and Brands
Market Segmentation
Management Focus Marketing to Afro-Brazilians
Product Attributes
Cultural Differences
Economic Development
Product and Technical Standards
Distribution Strategy
Differences between Countries
Choosing a Distribution Strategy
Communication Strategy
Barriers to International Communication
Push versus Pull Strategies
Management Focus Unilever among India’s Poor
Global Advertising
Pricing Strategy
Price Discrimination
Strategic Pricing
Regulatory Influences on Prices
Configuring the Marketing Mix
International Market Research
Product Development
The Location of R&D
Integrating R&D, Marketing, and Production
Cross-Functional Teams
Building Global R&D Capabilities
Chapter Summary
Critical Thinking and Discussion Questions
Research Task
Closing Case Global Branding, Marvel Studios, and Walt Disney Company
Endnotes
CHAPTER 19 Global Human Resource Management
Opening Case Building a Global Diverse Workforce at Sodexo
Introduction
Strategic Role of Global HRM: Managing a Global Workforce
Staffing Policy
Types of Staffing Policies
Expatriate Managers
Management Focus Expatriates at Royal Dutch Shell
Global Mindset
Training and Management Development
Training for Expatriate Managers
Repatriation of Expatriates
Management Focus Monsanto’s Repatriation Program
Management Development and Strategy
Performance Appraisal
Performance Appraisal Problems
Guidelines for Performance Appraisal
Compensation
National Differences in Compensation
Management Focus McDonald’s Global Compensation Practices
Expatriate Pay
Building a Diverse Global Workforce
International Labor Relations
The Concerns of Organized Labor
The Strategy of Organized Labor
Approaches to Labor Relations
Chapter Summary
Critical Thinking and Discussion Questions
Research Task
Closing Case AstraZeneca
Endnotes
CHAPTER 20 Accounting and Finance in the International Business
Opening Case Shoprite—Financial Success of a Food Retailer in Africa
Introduction
National Differences in Accounting Standards
International Accounting Standards
Management Focus Chinese Accounting
Accounting Aspects of Control Systems
Exchange Rate Changes and Control Systems
Transfer Pricing and Control Systems
Separation of Subsidiary and Manager Performance
Financial Management: The Investment Decision
Capital Budgeting
Project and Parent Cash Flows
Management Focus Black Sea Oil and Gas Ltd
Adjusting for Political and Economic Risk
Risk and Capital Budgeting
Financial Management: The Financing Decision
Financial Management: Global Money Management
Minimizing Cash Balances
Reducing Transaction Costs
Managing the Tax Burden
Moving Money across Borders
Chapter Summary
Critical Thinking and Discussion Questions
Research Task
Closing Case Tesla, Inc.—Subsidizing Tesla Automobiles Globally
Endnotes
Global Medical Tourism
Venezuela under Hugo Chávez and Beyond
Political and Economic Reform in Myanmar
Will China Continue to Be a Growth Marketplace?
Lead in Toys and Drinking Water
Creating the World’s Biggest Free Trade Zone
Sugar Subsidies Drive Candy Makers Abroad
Volkswagen in Russia
The NAFTA Tomato Wars
Subaru’s Sales Boom Thanks to the Weaker Yen
The IMF and Ukraine’s Economic Crisis
The Global Financial Crisis and Its Aftermath: Declining Cross-Border Capital Flows
Ford’s Global Platform Strategy
Philips’ Global Restructuring
General Motors and Chinese Joint Ventures
Exporting Desserts by a Hispanic Entrepreneur
Apple: The Best Supply Chains in the World?
Domino’s Global Marketing
Siemens and Global Competitiveness
Microsoft and Its Foreign Cash Holdings
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