Title: INTERNATIONAL BUSINESS The Challenges of Globalization
Edition: Canadian Edition
Author(s): Wild, Wild, Valladares Montemayor
Publisher: Pearson Canada
ISBN: 978-0-13-286688-0
PART 1 Global Business Environment 2
Chapter 1 Globalization 2
■ YouTube’s Global Impact 3
International Business Involves Us All 4
Technology Makes It Possible 4
Global Talent Makes It Happen 4
Globalization 6
Globalization of Markets 6
Globalization of Production 7
■ GLOBAL CHALLENGES: Managing Security in the Age of Globalization 8
Forces Driving Globalization 9
Falling Barriers to Trade and Investment 9
Technological Innovation 14
Measuring Globalization 15
Untangling the Globalization Debate 16
Today’s Globalization in Context 17
Introduction to the Debate 17
Globalization’s Impact on Jobs and Wages 18
Globalization’s Impact on Labour, the Environment, and Markets 21
Globalization and Income Inequality 21
■ GLOBAL MANAGER’S BRIEFCASE: The Keys to Global Success 22
Globalization and National Sovereignty 24
Globalization’s Influence on Cultures 24
■ CULTURE MATTERS: The Global Consumer 25
Key Players in International Business 26
Multinational Corporations 26
Entrepreneurs and Small Businesses 27
■ ENTREPRENEUR’S TOOLKIT: Myths of Small Business Exporting 27
Why International Business Is Special 28
The Global Business Environment 28
The Road Ahead for International Business 29
■ BOTTOM LINE FOR BUSINESS 30
Chapter Summary 31 • Talk It Over 32
Key Terms 32 • Take It to the Web 32
■ Practising International Management Case: Ludia Plays Global 33
APPENDIX World Atlas 34
TEAMING UP Globalization 43
PART 2 National Business Environments 44
Chapter 2 Cross-Cultural Business 44
■ Connecting Cultures 45
What Is Culture? 46
■ CULTURE MATTERS: Creating a Global Mindset 47
National Culture and Subcultures 47
Components of Culture 49
Aesthetics 49
■ ENTREPRENEUR’S TOOLKIT: Giving Web Sites Local Appeal 50
Values and Attitudes 50
Manners and Customs 54
■ GLOBAL MANAGER’S BRIEFCASE: A Globetrotter’s Guide to Manners 55
Social Structure 55
Religion 57
Personal Communication 62
■ GLOBAL CHALLENGES: Speaking in Fewer Tongues 63
Education 66
Physical and Material Environments 67
Classifying Cultures 69
Kluckhohn–Strodtbeck Framework 69
Hofstede Framework 70
International Human Resource Management 72
International Staffing Policy 73
Ethnocentric Staffing 73
Polycentric Staffing 74
Geocentric Staffing 74
Recruiting and Selecting Human Resources 75
Human Resource Planning 75
Recruiting Human Resources 76
Selecting Human Resources 76
Culture Shock 77
Reverse Culture Shock 77
Cultural Training 78
Employee Compensation 79
Managerial Employees 79
■ BOTTOM LINE FOR BUSINESS 80
Chapter Summary 82 • Talk It Over 84
Key Terms 83 • Take It to the Web 84
■ Practising International Management Case: Culture Makes or Breaks the Deal 85
Chapter 3 Politics and Law 86
■ PepsiCo’s Global Challenge 87
Political Systems 88
Politics and Culture 88
Political Participation 88
Political Ideologies 89
■ GLOBAL CHALLENGES: From Civil War to Civil Society 91
Political Systems in Times of Change 93
Political Risk 94
Types of Political Risk 94
■ GLOBAL MANAGER’S BRIEFCASE: Your Global Security Checklist 96
Managing Political Risk 97
Legal Systems 102
■ CULTURE MATTERS: Playing by the Rules 102
Common Law 103
Civil Law 103
Theocratic Law 103
Standardization 104
Intellectual Property 104
Product Safety and Liability 106
Taxation 107
Antitrust (Antimonopoly) Regulations 107
■ ENTREPRENEUR’S TOOLKIT: The Long Arm of the Law 108
Business and International Relations 109
The United Nations 109
■ BOTTOM LINE FOR BUSINESS 110
Chapter Summary 112 • Talk It Over 113
Key Terms 113 • Take It to the Web 113
■ Practising International Management Case: Pirates of Globalization 114
Chapter 4 International Ethics 116
■ Air Canada’s Corporate Social Responsibility 117
Ethics, Ethical Behaviour, Ethical Dilemmas, and Codes of Ethics 118
Ethical Dilemmas 118
Codes of Ethics 120
■ GLOBAL CHALLENGES: The Global Con 121
■ ENTREPRENEUR’S TOOLKIT: Tips for Combating Corruption in International Business 122
Philosophies of Ethics 123
Corporate Social Responsibility and CSR Issues 125
Bribery and Corruption 125
■ GLOBAL MANAGER’S BRIEFCASE: Who Is Bribing Whom? 128
Labour Conditions and Human Rights 128
Fair Trade Practices 130
Sustainability 130
The Principles of Responsible Investment 133
■ BOTTOM LINE FOR BUSINESS 135
Chapter Summary 136 • Talk It Over 137
Key Terms 137 • Take It to the Web 137
■ Practising International Management Case: Digging Deep for CSR 138
Chapter 5 Economics and Emerging Markets 140
■ Datawind 141
Economic Systems 142
Centrally Planned Economy 142
Emerging Market Focus: China 144
■ GLOBAL MANAGER’S BRIEFCASE: Guidelines for Good Guanxi 145
Mixed Economy 146
Emerging Market Focus: India 147
Emerging Market Focus: Brazil 148
Market Economy 150
Development of Nations 153
UN World Risk Index 153
National Production 156
■ CULTURE MATTERS: Foundations of Development 156
Purchasing Power Parity 160
Human Development 161
Classifying Countries 162
■ GLOBAL CHALLENGES: Public Health Goes Global 163
Economic Transition 164
Obstacles to Transition 164
Emerging Market Focus: Russia 165
■ ENTREPRENEUR’S TOOLKIT: Russian Rules of the Game 166
■ BOTTOM LINE FOR BUSINESS 167
Chapter Summary 168 • Talk It Over 169
Key Terms 169 • Take It to the Web 169
■ Practising International Management Case: Cuba Comes Off Its Sugar High 170
TEAMING UP Cross-Cultural Business 171
PART 3 International Trade and Investment 172
Chapter 6 International Trade 172
■ From Bentonville to Fuzhou 173
Overview of International Trade 174
Benefits of International Trade 174
Volume of International Trade 174
International Trade Patterns 175
Trade Dependence and Independence 179
■ GLOBAL MANAGER’S BRIEFCASE: Doing Business in the Pacific Rim 179
Why Do Governments Intervene in Trade? 180
Political Motives 180
Economic Motives 181
Cultural Motives 182
Methods of Promoting Trade 183
Subsidies 183
Export Financing 184
Foreign Trade Zones 184
Special Government Agencies 185
Methods of Restricting Trade 185
Tariffs 186
Quotas 186
Embargoes 188
Local Content Requirements 188
Administrative Delays 189
Currency Controls 189
Theories of International Trade 189
Mercantilism 189
Absolute Advantage 191
Comparative Advantage 193
Assumptions and Limitations 194
Factor Proportions Theory 195
Labour Versus Land and Capital Equipment 196
Evidence on Factor Proportions Theory: The Leontief Paradox 196
International Product Life Cycle 196
New Trade Theory 198
■ ENTREPRENEUR’S TOOLKIT: Five Fulfillment Mistakes 199
National Competitive Advantage 199
■ BOTTOM LINE FOR BUSINESS 201
Chapter Summary 203 • Talk It Over 205
Key Terms 205 • Take It to the Web 205
■ Practising International Management Case: Down with Dumping 207
Chapter 7 Foreign Direct Investment 208
■ Foreign Takeovers: Nexen 209
Patterns of Foreign Direct Investment 210
Ups and Downs of Foreign Direct Investment 210
Worldwide Flows of FDI 212
Canada’s Flows of FDI 212
■ ENTREPRENEUR’S TOOLKIT: Canada Metal (Pacific): Surviving in
Canada by Investing Abroad 213
Explanations for Foreign Direct Investment 213
International Product Life Cycle 213
Market Imperfections (Internalization) 214
Eclectic Theory 215
Market Power 215
Management Issues in the FDI Decision 215
Control 216
Purchase-or-Build Decision 217
Production Costs 218
Customer Knowledge 219
Following Clients 219
Following Rivals 219
■ GLOBAL MANAGER’S BRIEFCASE: Surprises of Investing Abroad 220
Government Intervention in Foreign Direct Investment 220
Balance of Payments 221
Reasons for Intervention by the Host Country 221
Reasons for Intervention by the Home Country 224
Government Policy Instruments and FDI 225
Host Countries: Promotion 225
Host Countries: Restriction 226
Home Countries: Promotion 226
Home Countries: Restriction 226
■ BOTTOM LINE FOR BUSINESS 227
Chapter Summary 228 • Talk It Over 229
Key Terms 229 • Take It to the Web 230
■ Practising International Management Case: Is Canada Open for Business? 231
Chapter 8 Regional Economic Integration 232
■ Bombardier’s NAFTA Benefits 233
What Is Regional Economic Integration? 234
Levels of Regional Integration 234
Effects of Regional Economic Integration 236
Benefits of Regional Integration 237
Drawbacks of Regional Integration 237
Integration in Europe 239
European Union 239
European Free Trade Association (EFTA) 244
Integration in the Americas 245
North American Free Trade Agreement (NAFTA) 246
■ ENTREPRENEUR’S TOOLKIT: Conducting Business in Mexico 249
Andean Community (CAN) 249
Latin American Integration Association (ALADI) 250
Southern Common Market (MERCOSUR) 250
Central America and the Caribbean 250
Free Trade Area of the Americas (FTAA) 251
Integration in Asia 251
Association of Southeast Asian Nations (ASEAN) 252
Asia Pacific Economic Cooperation (APEC) 252
■ GLOBAL MANAGER’S BRIEFCASE: The Ins and Outs of ASEAN 252
Closer Economic Relations Agreement (CER) 253
Integration in the Middle East and Africa 253
Gulf Cooperation Council (GCC) 253
Economic Community of West African States (ECOWAS) 253
African Union (AU) 253
■ BOTTOM LINE FOR BUSINESS 255
Chapter Summary 256 • Talk It Over 257
Key Terms 257 • Take It to the Web 257
■ Practising International Management Case: NAFTA Doesn’t Guarantee Free Trade After All:
United States vs. Canada in the Softwood Lumber Case 258
Chapter 9 International Financial Markets and Foreign Exchange 260
■ Wii Is the Champion 261
International Capital Market 262
Purposes of National Capital Markets 263
Purposes of the International Capital Market 263
Forces Expanding the International Capital Market 264
■ ENTREPRENEUR’S TOOLKIT: Microfinance Makes a Big Impression 264
World Financial Centres 265
Main Components of the International Capital Market 266
International Bond Market 266
International Equity Market 267
Eurocurrency Market 268
Foreign Exchange Market 269
Functions of the Foreign Exchange Market 269
How the Foreign Exchange Market Works 271
Quoting Currencies 271
Forward Exchange Rates 272
Swaps, Options, and Futures 272
How Exchange Rates Influence Business Activities 273
Desire for Stability and Predictability 274
Forecasting Exchange Rates 274
Efficient Market View 274
Inefficient Market View 275
Forecasting Techniques 275
Difficulties of Forecasting 275
Foreign Exchange Market Today 276
Trading Centres 276
■ GLOBAL MANAGER’S BRIEFCASE: Managing Foreign Exchange 277
Important Currencies 277
Currency Convertibility 277
Goals of Currency Restriction 277
Policies for Restricting Currencies 278
■ BOTTOM LINE FOR BUSINESS 279
Chapter Summary 279 • Talk It Over 281
Key Terms 281 • Take It to the Web 281
■ Practising International Management Case: Managing an International Business
Despite a Strong Loonie 282
TEAMING UP International Trade 283
PART 4 International Business Management 284
Chapter 10 International Strategy and Organization 284
■ Lululemon’s Yoga Apparel—A Global Fashion Statement 285
International Strategy 286
Strategy Formulation 286
Identify Company Mission and Goals 286
Identify Core Competency and Value-Creating Activities 287
■ ENTREPRENEUR’S TOOLKIT: Ask Questions Before Going Global 290
Formulate Strategies 290
International Organizational Structure 296
Centralization Versus Decentralization 296
Coordination and Flexibility 297
Types of Organizational Structure 298
Work Teams 301
■ BOTTOM LINE FOR BUSINESS 302
Chapter Summary 303 • Talk It Over 304
Key Terms 304 • Take It to the Web 304
■ Practising International Management Case: IKEA’s Global Strategy 305
Chapter 11 Selecting and Managing Entry Modes 306
■ Spin Master Playing in the Big Leagues 307
Exporting, Importing, and Countertrade 308
Why Companies Export 309
Developing an Export Strategy: A Four-Step Model 309
Degree of Export Involvement 310
Avoiding Export and Import Blunders 312
Countertrade 312
Export/Import Financing 313
■ ENTREPRENEUR’S TOOLKIT: Collecting International Debts 317
Contractual Entry Modes 317
Licensing 317
Franchising 319
Management Contracts 320
Turnkey Projects 321
Investment Entry Modes 323
Wholly Owned Subsidiaries 323
Joint Ventures 323
Strategic Alliances 326
Selecting Partners for Cooperation 327
■ GLOBAL MANAGER’S BRIEFCASE: Negotiating Market Entry 327
Strategic Factors in Selecting an Entry Mode 328
Cultural Environment 328
Political and Legal Environments 328
Market Size 328
Production and Shipping Costs 329
International Experience 329
■ BOTTOM LINE FOR BUSINESS 329
Chapter Summary 330 • Talk It Over 331
Key Terms 331 • Take It to the Web 332
■ Practising International Management Case: Telecom Ventures Unite the World 333
Chapter 12 Developing and Marketing Products 334
■ It Gives You Wings 335
Globalization and Marketing 336
Standardization Versus Adaptation 336
Developing Product Strategies 337
Laws and Regulations 337
Cultural Differences 338
Brand and Product Names 338
National Image 340
Counterfeit Goods and Black Markets 340
Shortened Product Life Cycles 341
Creating Promotional Strategies 342
Push and Pull Strategies 342
■ GLOBAL MANAGER’S BRIEFCASE: Managing an International Sales Force 343
International Advertising 343
Blending Product and Promotional Strategies 345
Designing Distribution Strategies 348
Designing Distribution Channels 348
Influence of Product Characteristics 349
Special Distribution Problems 349
Developing Pricing Strategies 350
Worldwide Pricing 350
Dual Pricing 351
Factors That Affect Pricing Decisions 351
■ BOTTOM LINE FOR BUSINESS 352
Chapter Summary 353 • Talk It Over 354
Key Terms 354 • Take It to the Web 354
■ Practising International Management Case: Psychology of Global Marketing 355
TEAMING UP International Strategy and Organization 357