Description
TABLE OF CONTENTS
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
Two Sides of the Globalization Coin 8
1.3 Governing Globalization 9
1.4 Managing Globalization 11
Emerging Markets 12
Multinational Corporations 13
Summary 14
Case Study: Trade Wars and Tofu 15
2 Analytical Tools for International Business 18
Introduction 18
2.1 Why International Business? 19
Increased Sales 20
New Resources 21
Reduced Risk 21
2.2 External Environment 23
Political Factors 23
Economic Factors 23
Sociocultural Factors 24
Technological Factors 24
Conducting a PEST Analysis 25
2.3 Internal Environment 26
Country Entry 26
Strategy 28
Organization 29
Leadership 29
Summary 30
Case Study: AI in Amazon 30
3 Political Systems 33
Introduction 33
3.1 The Political Spectrum 33
Individualism 34
Collectivism 34
Democratic Political Systems 34
Autocratic Political Systems 35
Communism and Socialism 37
Categorizing Political Systems 37
Mixed Political Systems 37
3.2 Political Risks 38
Macro Political Risk 39
Micro Political Risk 40
Direct and Indirect Effects of Political Risk 40
The Constant Challenge of Managing Political Risk 42
3.3 Measures of Political Freedom 42
The Freedom House and Heritage Foundation Measures 43
Implications of Political Freedom for International Business 43
Recent Political Trends that Affect Multinational Corporations 45
3.4 Government’s Involvement in Business 48
When Governments Relax their Policies 49
Summary 50
Case Study: Background on the Banana Industry 50
4 The Legal Environment 54
Introduction 54
4.1 Differing Legal Systems 54
The Rule of Law 55
Three Different Levels of Law 56
Types of Legal Systems 56
International Law 58
The Effect of the Enforcement of Laws on International Business 60
4.2 Common Legal Issues for International Business 62
Increasing Wealth through Regulatory Changes 62
Product Liability 62
Property Rights and Intellectual Property 63
4.3 Illegal versus Unethical Conduct 64
Ethics 65
International Business and a Reactive versus Proactive Response to Ethical Dilemmas 65
4.4 Important International Laws 67
The Foreign Corrupt Practices Act 67
e-Commerce and Data Privacy 68
Summary 70
Case Study: Nestlé—Illegal vs. Unethical 70
5 Economic Systems 74
Introduction 74
5.1 Understanding Economic Systems 74
5.2 Measuring Output 77
Gross Domestic Product 78
Gross National Product 79
Other Measures of Prosperity and Opportunity 79
The Components of GDP 81
5.3 Governmental Economic Controls 83
Fiscal Policy 84
Monetary Policy 85
5.4 Currency Fluctuation and Concentration Effects 87
Purchasing Power Parity and the Law of One Price 87
The Gini Coefficient 88
Summary 92
Case Study: President Trump’s Attempts to Direct Monetary Policy for the United States 92
6 Currency and Foreign Exchange 95
Introduction 95
6.1 What Is Money? 96
6.2 Understanding Exchange Rates 97
What Institutions Make Foreign Exchange Happen? 99
Determining Exchange Rates 101
Under- or Overvalued Currency 102
6.3 The Consequences of Under- or Overvalued Currencies for International Businesses 103
Undervalued Currency 103
Overvalued Currency 105
6.4 Understanding and Managing Exchange Rate Risk 105
Managing Exchange Rate Risks 107
Predicting Exchange Rate Shifts 108
Summary 109
Case Study: Libra—The Next Bitcoin? 110
7 Trade 112
Introduction 112
7.1 Theories of Trade 113
Interventionist Theories 113
Free-Trade Theories 114
Trade Pattern Theories 115
Using Trade Theory as a Global Manager 119
7.2 Trade Imbalances and their Consequences 120
The Balance of Trade 120
Why Trade Imbalances Exist and Persist 121
What about the US Dollar and International Trade? 122
7.3 Patterns of Trade: Increased Regionalization 123
Global Integration 124
Policy Implications of the WTO 125
Bilateral Trade Agreements 125
Regional Trade Agreements 126
Other Forms of Trade Agreements 128
7.4 Government Policies Directed at Trade 128
Summary 131
Case Study: USMCA and Polaris 132
8 Culture 135
Introduction 135
8.1 What Is Culture? 135
What Is Culture? 136
Determinants of Culture 138
8.2 What Does Culture Mean for Business? 142
Social Stratification 142
Work Motivation 143
Relationship Preferences 143
Risk-Taking Behavior 144
Information 145
8.3 Managing Cultural Differences 146
Recognize Differences 146
Respect Differences 146
Reconcile Differences 147
8.4 Building Cultural Intelligence 148
Assessing Cultural Intelligence 148
Improving Cultural Intelligence 149
Summary 150
Case Study: Cultural Misunderstanding in Bulgaria 151
9 Sustainability 154
Introduction 154
9.1 What Is Sustainability? 154
Climate Change 156
Resource Constraints 159
9.2 Fighting Short-Termism 160
Sources of Short-Termism 161
Fighting Short-Termism 161
9.3 Collaborating for Sustainability 163
Why Companies Want to Collaborate 163
How to Collaborate Successfully 165
9.4 Sustainability and Innovation 167
Stage 1: View Compliance as Opportunity 167
Stage 2: Make Value Chains Sustainable 167
Stage 3: Design Sustainable Products and Services 168
Stage 4: Develop New Business Models 169
Summary 170
Case Study: Sustainable Fashion at H&M 170
10 Poverty 174
Introduction 174
10.1 Causes and Consequences of Global Poverty 175
The Poverty Trap 176
Risks of Poverty 177
10.2 Traditional Responses to Poverty 179
Poverty Programs 179
Other Types of Organizations that Fight Poverty 181
Poverty Science 182
10.3 A Business Response to Poverty 182
The Poor as a Social Responsibility 183
The Poor as Profitable Clients 183
Base of the Pyramid Strategies 184
Reverse Innovation 185
The Poor as Entrepreneurial Producers 187
10.4 Doing Well and Doing Good 187
Summary 189
Case Study: Solving Poverty in China 189
11 Technological Change and Infrastructure 193
Introduction 193
11.1 Technology as Physical Infrastructure 194
Raw Materials 195
Manufacturing Equipment 195
Transportation Networks 196
Energy Resources 197
11.2 Technology of Information Infrastructure 200
Communication Technologies 201
Speed of the Internet 202
Peer-to-Peer and the Shared Economy 203
Data Storage and Processing Technologies 204
11.3 Technology of Human Infrastructure 206
Education 206
Corporate Training and Development 207
Industry, Education, and Government 208
11.4 Technology Trends in International Business 208
The Globalization of Research and Development 210
Summary 211
Case Study: Mobileye Driverless Tech and Global Partnerships 212
12 Global Innovation and Intellectual Property 218
Introduction 218
12.1 Innovation as a Tool for Global Growth 219
Three Kinds of Innovation 219
Risks of Market-Creating Innovation 221
12.2 Investing in Innovation 222
From Local to Global Innovation 224
Innovation as a Human Capital Endeavor 225
12.3 Driving a Culture of Innovation 226
Foundations of Culture 226
The Innovator’s Imperative 227
12.4 Protecting Intellectual Property 229
Patents 230
Advantages of Patents 231
Copyrights 232
Trademarks 232
Trade Secrets 233
International Bodies and Laws Governing IP 234
The Difficulty of Enforcement 234
Summary 235
Case Study: How China Innovates 235
13 Country Selection and Entry Modes 239
Introduction 239
13.1 Deciding which Foreign Markets to Enter 240
The Liability of Foreignness 240
First-Mover Advantage 241
Following Clients Globally 242
13.2 Entry Modes 243
Exporting 243
Turnkey Operations 245
Licensing 246
Franchising 248
Joint Ventures 249
Wholly Owned Subsidiary 250
13.3 Make, Ally, or Buy 251
Make 252
Ally 253
Buy 254
Summary 255
Case Study: Coke vs. Pepsi in the Global Arena 255
14 International Strategy 259
Introduction 259
14.1 What Is Strategy? 259
Value Creation and Capture 260
Strategic Positioning 260
Value Chain Analysis 262
14.2 Becoming Locally Responsive 264
Disadvantages of Being Locally Responsive 267
14.3 Achieving Global Integration 267
Advantages of Being Globally Integrated 268
Disadvantages of Being Globally Integrated 270
14.4 Choosing an International Strategy 271
Multidomestic Strategy 272
Meganational Strategy 272
Transnational Strategy 273
Summary 274
Case Study: Qualtrics’ Strategy to Shape the Future of Employee Experience 274
15 International Organizational Structures 278
Introduction 278
15.1 Types of Organizational Structures 279
Functional Structure 280
Divisional Structure 281
Matrix Structure 282
Network Structure 283
15.2 Informal Organizational Controls 285
Company Culture 285
Control Systems 286
Incentives as Control 289
15.3 Reducing the Need for Coordination among Subsidiaries: Virtual Organizations, Standards, and Modularity 290
Virtual Organizations 290
Technology Standards 291
Modularity 291
15.4 Horizontal Subsidiary Coordination 293
Summary 294
Case Study: Should Tesla Keep its Partnership with Panasonic? 295
16 Global Leadership 298
Introduction 298
16.1 What Is Global Leadership? 298
The Global Context of Leadership 299
The Need for Global Leadership 299
16.2 Global Leadership Competencies 301
General Competencies 302
Company-Related Competencies 304
Location-Related Competencies 305
16.3 Building Global Leadership Competencies in Others 306
16.4 Building Global Leadership Competencies in Yourself 308
Find Academic Environments that Encourage Global Development 308
Seek Opportunities at Work and Ask for Help 308
Be Patient and Flexible 310
Summary 310
Case Study: Silvio Napoli in India 311
17 Global Marketing 314
Introduction 314
17.1 Global Market Segmentation 314
17.2 Standardization versus Differentiation in International Marketing 316
Standardization of the Marketing Mix 317
Differentiation of the Marketing Mix 318
Glocalization 319
17.3 Global Branding 320
Building Brand Awareness 320
Brand Image 322
Brand Loyalty 323
Brand Equity 323
Benefits of a Global Brand 323
Downsides of a Global Brand 323
17.4 Global Pricing and Distribution 324
General Pricing Strategies 324
Other Factors Affecting Global Pricing 325
Distribution Strategies 327
Summary 329
Case Study: The Growth of Domino’s through International Marketing 329
18 Global Operations and Supply-Chain Management 333
Introduction 333
18.1 Global Procurement 333
Advantages of Global Procurement 335
Disadvantages of Global Procurement 336
Outsourcing and Offshoring 337
18.2 Global Production 338
Advantages of Making 338
Disadvantages of Making 339
Location 340
Relocation 343
18.3 Global Supply Chains 344
Improving Global Supply-Chain Management 344
Information Technologies 347
18.4 Using Data Analytics to Improve Supply Chains 348
Applications of Data Analytics 349
Improving Performance 349
Summary 351
Case Study: Altra Running: Racing with or against your Suppliers? 351
19 Global Human Resource Management 356
Introduction 356
19.1 The Global HR Wheel 356
Human Capital Portfolios 357
HR Practices 358
Focusing on Organizational Outcomes 360
19.2 Human Capital in the Global Context 361
Local Human Capital 361
Subsidiary Human Capital 362
Corporate Human Capital 363
International Human Capital 364
19.3 Meeting Strategic Objectives through Human Capital 364
The Multidomestic Strategy 365
The Meganational Strategy 366
The Transnational Strategy 367
19.4 Tasks of the Global HR Function 368
Contributing to Business Decision Making 369
Providing HR Expertise 369
Delivering HR Services 371
Summary 371
Case Study: Time for Realignment: Developing a Culture of Transparency at MX across the Pond 372
20 Global Finance and Accounting 376
Introduction 376
20.1 Financing International Trade and Investment 376
International Banking 377
International Bond Markets 380
International Stock Markets 381
20.2 Capital Budgeting for Multinational Companies 384
The Parent Firm’s Capital Budgeting Decisions 384
The Cost of Capital: Domestic versus Global 385
20.3 International Accounting Standards 386
Generally Accepted Accounting Principles 386
International Financial Reporting Standards 387
20.4 Global Tax Matters 387
Corporate Income Tax 388
Transfer Pricing 389
Summary 390
Case Study: Microsoft’s Failed Acquisition of Nokia 391
Glossary 395
Index 401
