International Business: The Challenges of Globalization, 9th Edition
By John J. Wild and Kenneth L. Wild
Contents:
Preface xviii
PART 1 Global Business Environment 2
Chapter 1 Globalization 2
Apple’s Global iMpact 3
1.1 Key Players in International Business 4
Multinational Corporations 5
Entrepreneurs and Small Businesses 6
MANAGER’S BRIEFCASE: The Keys to Global Success 6
1.2 What is Globalization? 7
Globalization of Markets 8
GLOBAL SUSTAINABILITY: Three Markets, Three Strategies 9
Globalization of Production 9
1.3 Forces Driving Globalization 10
Falling Barriers to Trade and Investment 10
Measuring Globalization 16
1.4 Debate about Jobs and Wages 17
Against Globalization 17
For Globalization 17
Summary of the Jobs and Wages Debate 18
1.5 Debate about Income Inequality 19
Inequality within Nations 19
Inequality between Nations 19
Global Inequality 20
1.6 Debate about Culture, Sovereignty, and the Environment 21
Globalization and Culture 21
CULTURE MATTERS: The Culture Debate 21
Globalization and National Sovereignty 22
Globalization and the Environment 22
1.7 Developing Skills for your Career 23
The Global Business Environment 24
The Road Ahead for International Business 25
BOTTOM LINE FOR BUSINESS 26
Chapter Summary 27 • Key Terms 28 • Talk About It 1 28 • Talk About
It 2 28 • Ethical Challenge 29 • Teaming Up 29 • Market Entry Strategy
Project 29
PRACTICING INTERNATIONAL MANAGEMENT CASE 30
Appendix World Atlas 31
PART 2 National Business Environments 40
Chapter 2 Cross-Cultural Business 40
Hold the Pork, Please! 41
2.1 What is Culture? 42
National Culture 42
Subcultures 43
Physical Environment 43
Need for Cultural Knowledge 44
CULTURE MATTERS: Creating a Global Mindset 44
2.2 Values and Behavior 45
Values 45
Attitudes 46
Aesthetics 46
Appropriate Behavior 46
MANAGER’S BRIEFCASE: A Globetrotter’s Guide to Meetings 47
2.3 Social Structure and Education 48
Social Group Associations 48
Social Status 48
Social Mobility 49
Education 50
2.4 Religion 51
Christianity 51
Islam 51
Hinduism 54
Buddhism 54
Confucianism 55
Judaism 55
Shinto 56
2.5 Personal Communication 56
Spoken and Written Language 56
GLOBAL SUSTAINABILITY: Speaking in Fewer Tongues 57
Body Language 58
2.6 Culture in the Global Workplace 59
Perception of Time 59
View of Work 60
Material Culture 60
Cultural Change 61
Studying Culture in the Workplace 62
BOTTOM LINE FOR BUSINESS 65
Chapter Summary 66 • Key Terms 67 • Talk About It 1 67 • Talk About
It 2 68 • Ethical Challenge 68 • Teaming Up 68 • Market Entry Strategy
Project 68
PRACTICING INTERNATIONAL MANAGEMENT CASE 69
Chapter 3 Political Economy and Ethics 70
PepsiCo’s Global Challenge 71
3.1 Political Systems 73
Totalitarianism 73
GLOBAL SUSTAINABILITY: From Civil War to Civil Society 75
Democracy 75
MANAGER’S BRIEFCASE: Your Global Security Checklist 77
3.2 Economic Systems 78
Centrally Planned Economy 78
Mixed Economy 80
Market Economy 81
3.3 Legal Systems 83
CULTURE MATTERS: Playing by the Rules 83
Common Law 86
Civil Law 86
Theocratic Law 87
3.4 Global Legal Issues 87
Intellectual Property 87
Product Safety and Liability 89
Taxation 89
Antitrust Regulations 90
3.5 Ethics and Social Responsibility 91
Philosophies of Ethics and Social Responsibility 91
Bribery and Corruption 92
Labor Conditions and Human Rights 92
Fair Trade Practices 93
Environment 93
BOTTOM LINE FOR BUSINESS 97
Chapter Summary 98 • Key Terms 99 • Talk About It 1 99 • Talk About
It 2 99 • Ethical Challenge 99 • Teaming Up 100 • Market Entry Strategy
Project 100
PRACTICING INTERNATIONAL MANAGEMENT CASE 101
Chapter 4 Economic Development of Nations 102
India’s Tech King 103
4.1 Economic Development 104
Classifying Countries 104
National Production 105
Purchasing Power Parity 108
Human Development 109
4.2 Economic Transition 110
Managerial Expertise 110
Shortage of Capital 110
Cultural Differences 111
Sustainability 111
4.3 Political Risk 111
GLOBAL SUSTAINABILITY: Public Health Goes Global 114
Conflict and Violence 114
Terrorism and Kidnapping 115
Property Seizure 115
Policy Changes 116
Local Content Requirements 116
4.4 Managing Political Risk 117
Adaptation 117
Information Gathering 117
Political Influence 118
International Relations 118
The United Nations 118
4.5 Emerging Markets and Economic Transition 119
China’s Profile 119
Chinese Patience and Guanxi 120
China’s Challenges 121
CULTURE MATTERS: Guidelines for Good Guanxi 121
Russia’s Profile 122
Russia’s Challenges 122
MANAGER’S BRIEFCASE: Russian Rules of the Game 123
BOTTOM LINE FOR BUSINESS 124
Chapter Summary 124 • Key Terms 125 • Talk About It 1 125 • Talk About
It 2 126 • Ethical Challenge 126 • Teaming Up 126 • Market Entry Strategy
Project 126
PRACTICING INTERNATIONAL MANAGEMENT CASE 127
PART 3 International Trade and Investment 128
Chapter 5 International Trade Theory 128
From Bentonville to Beijing 129
5.1 Benefits, Volume, and Patterns of International Trade 130
Benefits of International Trade 130
Volume of International Trade 130
International Trade Patterns 131
CULTURE MATTERS: Business Culture in the Pacific Rim 134
5.2 Mercantilism 135
How Mercantilism Worked 135
Flaws of Mercantilism 136
5.3 Theories of Absolute and Comparative Advantage 136
Absolute Advantage 137
Comparative Advantage 138
5.4 Factor Proportions Theory 140
Labor Versus Land and Capital Equipment 141
Evidence on Factor Proportions Theory: The Leontief Paradox 141
5.5 International Product Life Cycle 142
Stages of the Product Life Cycle 142
Limitations of the Theory 142
MANAGER’S BRIEFCASE: Five Fulfillment Mistakes 143
5.6 New Trade Theory 144
First-Mover Advantage 144
5.7 National Competitive Advantage 144
Factor Conditions 145
GLOBAL SUSTAINABILITY: Foundations of Development 145
Demand Conditions 146
Related and Supporting Industries 146
Firm Strategy, Structure, and Rivalry 146
Government and Chance 146
BOTTOM LINE FOR BUSINESS 147
Chapter Summary 148 • Key Terms 149 • Talk About It 1 149 • Talk About
It 2 149 • Ethical Challenge 150 • Teaming Up 150 • Market Entry Strategy
Project 150
PRACTICING INTERNATIONAL MANAGEMENT CASE 151
Chapter 6 Political Economy of Trade 152
Lord of the Movies 153
6.1 Why do Governments Intervene in Trade? 154
Political Motives 154
GLOBAL SUSTAINABILITY: Managing Security in the Age of
Globalization 155
Economic Motives 156
Cultural Motives 157
CULTURE MATTERS: Myths of Small Business Exporting 158
6.2 Instruments of Trade Promotion 159
Subsidies 159
Export Financing 159
Foreign Trade Zones 160
MANAGER’S BRIEFCASE: Experts in Export Financing 160
Special Government Agencies 161
6.3 Instruments of Trade Restriction 161
Tariffs 161
Quotas 162
Embargoes 164
Local Content Requirements 164
Administrative Delays 164
Currency Controls 165
6.4 Global Trading System 165
General Agreement on Tariffs and Trade (GATT) 165
World Trade Organization (WTO) 167
BOTTOM LINE FOR BUSINESS 169
Chapter Summary 170 • Key Terms 171 • Talk About It 1 171 • Talk About
It 2 171 • Ethical Challenge 171 • Teaming Up 172 • Market Entry Strategy
Project 172
PRACTICING INTERNATIONAL MANAGEMENT CASE 173
Chapter 7 Foreign Direct Investment 174
Das Auto 175
7.1 Pattern of Foreign Direct Investment 176
Ups and Downs of FDI 176
CULTURE MATTERS: The Cowboy of Manchuria 178
Worldwide Flows of FDI 178
7.2 Theories of Foreign Direct Investment 179
International Product Life Cycle 179
Market Imperfections (Internalization) 179
Eclectic Theory 180
Market Power 180
7.3 Management Issues and Foreign Direct Investment 181
Control 181
Purchase-or-Build Decision 182
Production Costs 182
MANAGER’S BRIEFCASE: Surprises of Investing Abroad 182
Customer Knowledge 184
Following Clients 184
Following Rivals 184
GLOBAL SUSTAINABILITY: Greening the Supply Chain 184
7.4 Why Governments Intervene in FDI 185
Balance of Payments 185
Reasons for Intervention by the Host Country 186
Reasons for Intervention by the Home Country 187
7.5 Government Policy Instruments and FDI 189
Host Countries: Promotion 189
Host Countries: Restriction 190
Home Countries: Promotion 190
Home Countries: Restriction 190
BOTTOM LINE FOR BUSINESS 191
Chapter Summary 191 • Key Terms 192 • Talk About It 1 193 • Talk About
It 2 193 • Ethical Challenge 193 • Teaming Up 193 • Market Entry Strategy
Project 194
PRACTICING INTERNATIONAL MANAGEMENT CASE 195
Chapter 8 Regional Economic Integration 196
Nestlé’s Global Recipe 197
8.1 Levels of Integration and the Debate 198
Free Trade Area 198
Customs Union 199
Common Market 199
Economic Union 199
Political Union 199
The Case for Regional Integration 199
The Case Against Regional Integration 201
8.2 Integration in Europe 202
European Union 203
CULTURE MATTERS: Czech List 208
European Free Trade Association (EFTA) 209
8.3 Integration in the Americas 209
North American Free Trade Agreement 209
Central American Free Trade Agreement (CAFTA-DR) 211
Andean Community (CAN) 211
Southern Common Market (MERCOSUR) 212
Central America and the Caribbean 212
Free Trade Area of the Americas (FTAA) 213
8.4 Integration in Asia and Elsewhere 213
Association of Southeast Asian Nations (ASEAN) 213
Asia Pacific Economic Cooperation (APEC) 213
MANAGER’S BRIEFCASE: The Ins and Outs of ASEAN 214
Closer Economic Relations (CER) Agreement 214
Gulf Cooperation Council (GCC) 214
Economic Community of West African States (ECOWAS) 215
African Union (AU) 215
BOTTOM LINE FOR BUSINESS 216
Chapter Summary 216 • Key Terms 217 • Talk About It 1 217 • Talk About
It 2 218 • Ethical Challenge 218 • Teaming Up 218 • Market Entry Strategy
Project 218
PRACTICING INTERNATIONAL MANAGEMENT CASE 219
PART 4 The International Financial System 220
Chapter 9 International Financial Markets 220
Wii Is the Champion 221
9.1 Importance of the International Capital Market 222
Purposes of National Capital Markets 223
Purposes of the International Capital Market 223
GLOBAL SUSTAINABILITY: Big Results from Microfinance 224
Forces Expanding the International Capital Market 224
World Financial Centers 225
9.2 International Capital Market Components 226
International Bond Market 226
International Equity Market 227
Eurocurrency Market 227
9.3 The Foreign Exchange Market 228
Functions of the Foreign Exchange Market 228
9.4 Currency Quotes and Rates 230
Quoting Currencies 230
Spot Rates 233
Forward Rates 233
Swaps, Options, and Futures 234
9.5 Market Instruments and Institutions 235
Trading Centers 235
Important Currencies 235
Interbank Market 236
Securities Exchanges 236
Over-the-Counter Market 237
MANAGER’S BRIEFCASE: Managing Foreign Exchange 237
Instruments for Restricting Currencies 238
BOTTOM LINE FOR BUSINESS 238
Chapter Summary 239 • Key Terms 240 • Talk About It 1 240 • Talk About
It 2 241 • Ethical Challenge 241 • Teaming Up 241 • Market Entry Strategy
Project 241
PRACTICING INTERNATIONAL MANAGEMENT CASE 242
Appendix Calculating Percent Change in Exchange Rates 243
Chapter 10 International Monetary System 244
Euro Rollercoaster 245
10.1 Importance of Exchange Rates 246
Desire for Predictability and Stability 247
Efficient versus Inefficient Market View 247
Forecasting Techniques 248
Difficulties of Forecasting 248
CULTURE MATTERS: The Long Arm of the Law 249
10.2 What Factors Determine Exchange Rates? 249
Law of One Price 249
Purchasing Power Parity 250
10.3 Fixed Exchange Rate Systems 254
The Gold Standard 254
Bretton Woods Agreement 255
10.4 System of Floating Exchange Rates 257
Today’s Exchange-Rate Arrangements 258
MANAGER’S BRIEFCASE: Adjusting to Currency Swings 259
European Monetary System 259
Recent Financial Crises 260
Future of the International Monetary System 262
BOTTOM LINE FOR BUSINESS 263
Chapter Summary 264 • Key Terms 265 • Talk About It 1 265 • Talk About
It 2 265 • Ethical Challenge 265 • Teaming Up 266 • Market Entry Strategy
Project 266
PRACTICING INTERNATIONAL MANAGEMENT CASE 267
PART 5 International Business Management 268
Chapter 11 International Strategy and Organization 268
Flying High with Low Fares 269
11.1 Company Analysis 270
Company Mission and Goals 270
Core Competency and Value-Creation 271
MANAGER’S BRIEFCASE: Ask Questions before Going Global 273
11.2 Strategy Formulation 274
Two International Strategies 274
Corporate-Level Strategies 276
Business-Level Strategies 276
Department-Level Strategies 278
11.3 Issues of Organizational Structure 279
Centralization versus Decentralization 279
Coordination and Flexibility 280
11.4 Types of Organizational Structure 281
International Division Structure 281
International Area Structure 282
Global Product Structure 282
Global Matrix Structure 283
Work Teams 283
A Final Word 285
Chapter Summary 286 • Key Terms 287 • Talk About It 1 287 • Talk About
It 2 287 • Ethical Challenge 287 • Teaming Up 288
PRACTICING INTERNATIONAL MANAGEMENT CASE 289
Chapter 12 Analyzing International Opportunities 290
Starbucks Causes Global Jitters 291
12.1 Basic Appeal and National Factors 292
Step 1: Identify Basic Appeal 292
Step 2: Assess the National Business Environment 294
MANAGER’S BRIEFCASE: Conducting Global e-Business 298
12.2 Measure and Select the Market or Site 298
Step 3: Measure Market or Site Potential 298
Step 4: Select the Market or Site 301
12.3 Secondary Market Research 304
International Organizations 304
Government Agencies 305
Industry and Trade Associations 306
Service Organizations 306
Internet 306
Problems with Secondary Research 307
12.4 Primary Market Research 308
Trade Shows and Trade Missions 308
CULTURE MATTERS: Is the World Your Oyster? 309
Interviews and Focus Groups 309
Surveys 309
Environmental Scanning 310
Problems with Primary Research 310
A Final Word 311
Chapter Summary 311 • Key Terms 312 • Talk About It 1 312 • Talk About
It 2 312 • Ethical Challenge 312 • Teaming Up 312
PRACTICING INTERNATIONAL MANAGEMENT CASE 313
Chapter 13 Selecting and Managing Entry Modes 314
License to Thrill 315
13.1 Exporting, Importing, and Countertrade 316
Why Companies Export 316
Developing an Export Strategy: A Four-Step Model 317
Degree of Export Involvement 318
Avoiding Export and Import Blunders 320
Countertrade 320
13.2 Export/Import Financing 321
Advance Payment 322
Documentary Collection 322
Letter of Credit 323
Open Account 324
MANAGER’S BRIEFCASE: Collecting International Debts 324
13.3 Contractual Entry Modes 325
Licensing 325
Franchising 326
Management Contracts 328
Turnkey Projects 328
13.4 Investment Entry Modes 329
Wholly Owned Subsidiaries 329
Joint Ventures 330
Strategic Alliances 332
13.5 Strategic Factors in Selecting an Entry Mode 333
Selecting Partners for Cooperation 333
CULTURE MATTERS: Negotiating Market Entry 334
Cultural Environment 334
Political and Legal Environments 334
Market Size 334
Production and Shipping Costs 335
International Experience 335
A Final Word 335
Chapter Summary 335 • Key Terms 337 • Talk About It 1 337 • Talk About
It 2 337 • Ethical Challenge 337 • Teaming Up 338
PRACTICING INTERNATIONAL MANAGEMENT CASE 339
Chapter 14 Developing and Marketing Products 340
Wings for Life 341
14.1 Developing Product Strategies 342
Laws and Regulations 342
Cultural Differences 343
Brand and Product Names 343
National Image 344
Counterfeit Goods and Black Markets 345
Shortened Product Life Cycles 345
14.2 Creating Promotional Strategies 346
Push and Pull Strategies 346
MANAGER’S BRIEFCASE: Managing an International Sales Force 347
International Advertising 347
Blending Product and Promotional Strategies 349
CULTURE MATTERS: Localizing Websites 351
14.3 Designing Distribution Strategies 352
Designing Distribution Channels 352
Influence of Product Characteristics 353
Special Distribution Problems 353
14.4 Developing Pricing Strategies 354
Worldwide Pricing 354
Dual Pricing 355
Factors That Affect Pricing Decisions 355
A Final Word 356
Chapter Summary 357 • Key Terms 357 • Talk About It 1 358 • Talk About
It 2 358 • Ethical Challenge 358 • Teaming Up 358
PRACTICING INTERNATIONAL MANAGEMENT CASE 359
Chapter 15 Managing International Operations 360
Toyota Races Ahead 361
15.1 Production Strategy 362
Capacity Planning 362
Facilities Location Planning 362
Process Planning 364
Facilities Layout Planning 365
15.2 Acquiring Physical Resources 365
Make-or-Buy Decision 365
Raw Materials 368
Fixed Assets 368
15.3 Key Production Concerns 369
Quality Improvement Efforts 369
Shipping and Inventory Costs 370
MANAGER’S BRIEFCASE: World-Class Standards 370
Reinvestment versus Divestment 371
15.4 Financing Business Operations 371
Borrowing 372
Issuing Equity 372
Internal Funding 373
CULTURE MATTERS: Financing Business from Abroad 374
Capital Structure 374
A Final Word 375
Chapter Summary 376 • Key Terms 377 • Talk About It 1 377 • Talk About
It 2 377 • Ethical Challenge 377 • Teaming Up 378
PRACTICING INTERNATIONAL MANAGEMENT CASE 379
Chapter 16 Hiring and Managing Employees 380
Leaping Cultures 381
16.1 International Staffing Policies 382
Ethnocentric Staffing 382
Polycentric Staffing 384
Geocentric Staffing 384
16.2 Recruiting and Selecting Human Resources 385
Human Resource Planning 385
MANAGER’S BRIEFCASE: Growing Global 385
Recruiting Human Resources 386
Selecting Human Resources 386
Culture Shock 387
Reverse Culture Shock 387
CULTURE MATTERS: A Shocking Ordeal 388
16.3 Training and Development 388
Methods of Cultural Training 389
Compiling a Cultural Profile 390
Nonmanagerial Worker Training 391
16.4 Employee Compensation 391
Managerial Employees 391
Nonmanagerial Workers 392
16.5 Labor–Management Relations 393
Importance of Labor Unions 393
A Final Word 394
Chapter Summary 394 • Key Terms 395 • Talk About It 1 395 • Talk About It
2 396 • Ethical Challenge 396 • Teaming Up 396
PRACTICING INTERNATIONAL MANAGEMENT CASE 397
Endnotes 398
Glossary 403
Name Index 411
Subject Index 413