International Business: The Challenges of Globalization, Tenth Edition PDF by John J. Wild and Kenneth L. Wild

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International Business: The Challenges of Globalization, Tenth Edition

John J. Wild and Kenneth L. Wild

International Business_ The Challenges of Globalization

Contents

Preface 16

About the Authors 25

PART 1 Global Business Environment 26

Chapter 1 Globalization Today 26

Apple’s Global iMpact 27

1.1 Introduction and Key Players 28

1.1.1 Key Players in International Business 30

GLOBAL MANAGER: The Keys to Global Success 31

1.2 What is Globalization? 31

1.2.1 Evolution of Globalization 33

1.2.2 Globalization of Markets 34

1.2.3 Globalization of Production 38

1.3 Drivers of Globalization 39

1.3.1 Falling Barriers to Trade and Investment 39

1.3.2 Global E-commerce 41

1.3.3 Digital Transformation 42

1.3.4 Communication and Transportation 43

1.4 Globalization Debate 45

1.4.1 Globalization Harms Jobs and Wages 45

1.4.2 Globalization Improves Jobs and Wages 45

1.4.3 Debate about Income Inequality 46

1.4.4 Globalization and Culture 48

CULTURE INSIGHTS: The Culture Debate 48

1.4.5 Globalization and National Sovereignty 49

1.4.6 Globalization and the Environment 49

1.5 Workplace Skills 50

1.5.1 Skills for Your Career 50

1.5.2 The Global Business Environment 52

Chapter Summary 53 • Key Terms 54 • Talk About It 55

Teaming Up 55 • Ethical Challenge 55 • Writing Assignments 55

PRACTICING INTERNATIONAL MANAGEMENT CASE 56

Appendix World Atlas 57

Chapter 2 Ethics, Social Responsibility, and Sustainability 66

Tony’s Chocolonely 67

2.1 Ethics Theories 69

2.1.1 Utilitarianism 70

2.1.2 Rights Theory 70

2.1.3 Theory of Justice 71

2.1.4 Cultural Relativism 72

2.2 Business Ethics 72

2.2.1 Resolving Ethical Dilemmas 73

2.2.2 Codes of Ethics 74

2.2.3 Sources of Unethical Behavior 75

2.3 Corporate Social Responsibility 76

2.3.1 Efficiency and Profits as Social Responsibility 76

2.3.2 Business Responsibilities to Society 77

CULTURE INSIGHTS: Speaking in Fewer Tongues 78

2.3.3 Stakeholder Theory 79

2.4 Sustainability 80

2.4.1 Carbon Footprints and Climate Change 81

GLOBAL MANAGER: Three Sustainable Strategies for Three Markets 82

2.4.2 A Circular Economy 82

2.4.3 Greenwashing 83

2.5 Additional Key Global Issues 85

2.5.1 Bribery and Corruption 85

2.5.2 Working Conditions and Human Rights 86

2.5.3 Diversity, Equity, and Inclusion 87

Chapter Summary 90 • Key Terms 91 • Talk About It 92

Teaming Up 92 • Ethical Challenge 92 • Writing Assignments 92

PRACTICING INTERNATIONAL MANAGEMENT CASE 93

PART 2 National Business Environment 94

Chapter 3 Cross-Cultural Business 94

Vans: Off The Wall 95

3.1 What Is Culture? 96

3.1.1 Cross-Cultural Literacy 96

3.1.2 National Culture 98

3.1.3 Subcultures 98

3.1.4 Physical Environment 99

3.1.5 Material Culture 100

3.2 Values, Attitudes, and Behavior 100

3.2.1 Values 100

3.2.2 Attitudes 100

3.2.3 Aesthetics 101

3.2.4 Behaviors 101

CULTURE INSIGHTS: A Globetrotter’s Guide to Meetings 102

3.3 Social Structure and Education 103

3.3.1 Social Group Associations 103

3.3.2 Social Status 104

3.3.3 Social Mobility 105

3.3.4 Education 108

GLOBAL MANAGER: Social Flexibility 109

3.4 Religion 109

3.4.1 Christianity 109

3.4.2 Islam 112

3.4.3 Hinduism 112

3.4.4 Buddhism 114

3.4.5 Judaism 114

3.4.6 Confucianism 115

3.5 Personal Communication 115

3.5.1 Spoken and Written Language 115

3.5.2 Body Language 117

3.6 Culture in the Global Workplace 118

3.6.1 Perception of Time 118

3.6.2 View of Work 118

3.6.3 Cultural Change 119

3.6.4 Kluckhohn-Strodtbeck Framework 120

3.6.5 Hofstede Framework 121

Chapter Summary 123 • Key Terms 125 • Talk About It 125

Teaming Up 125 • Ethical Challenge 125 • Writing Assignments 126

PRACTICING INTERNATIONAL MANAGEMENT CASE 127

Chapter 4 Political, Economic, and Legal Systems 128

TikTok Rocks 129

4.1 Political Systems 130

4.1.1 Totalitarianism 131

GLOBAL MANAGER: From Civil War to Civil Society 132

4.1.2 Democracy 134

4.2 Economic Systems 135

4.2.1 Centrally Planned Economy 136

4.2.2 Mixed Economy 137

4.2.3 Market Economy 138

4.3 Legal Systems 142

4.3.1 Common Law 143

4.3.2 Civil Law 143

CULTURE INSIGHTS: Playing by the Rules 144

4.3.3 Theocratic Law 144

4.4 Global Legal Issues 144

4.4.1 Intellectual Property 145

4.4.2 Product Safety and Liability 147

4.4.3 Antitrust Regulations 148

4.4.4 Taxation 148

Chapter Summary 149 • Key Terms 149 • Talk About It 150

Teaming Up 150 • Ethical Challenge 150 • Writing Assignments 150

PRACTICING INTERNATIONAL MANAGEMENT CASE 151

Chapter 5 Economic Development of Nations 152

Paytm in India 153

5.1 Economic Development 154

5.1.1 Classifying Countries 154

5.1.2 National Production 156

5.1.3 Purchasing Power Parity 157

5.1.4 Human Development 157

5.2 Political Risk 160

5.2.1 Conflict and Violence 160

GLOBAL MANAGER: Your Global Security Checklist 161

5.2.2 Property Seizure 161

5.2.3 Government Policies 162

5.3 Managing Political Risk 163

5.3.1 Adaptation 163

5.3.2 Information Gathering 164

5.3.3 Political Influence 164

5.3.4 International Relations 164

5.3.5 The United Nations 165

5.4 Economic Transition 166

5.4.1 Transition Obstacles 166

5.4.2 China’s Economic Transition 167

CULTURE INSIGHTS: Guidelines for Good Guanxi 168

5.4.3 Russia’s Economic Transition 169

Chapter Summary 170 • Key Terms 171 • Talk About It 171

Teaming Up 171 • Ethical Challenge 172 • Writing Assignments 172

PRACTICING INTERNATIONAL MANAGEMENT CASE 173

PART 3 International Trade and Investment 174

Chapter 6 International Trade Theory 174

Tesla Charges Ahead 175

6.1 The Nature of International Trade 176

6.1.1 Benefits of Trade 176

6.1.2 Economic Importance of Trade 177

6.1.3 Top Trading Nations 177

6.1.4 Global Trade and Output 180

6.1.5 Trade Interdependence 180

CULTURE INSIGHTS: Business Culture in the Pacific Rim 181

6.2 Mercantilism 181

6.2.1 How Mercantilism Worked 182

6.2.2 Flaws of Mercantilism 182

6.3 Theories of Absolute and Comparative Advantage 183

6.3.1 Absolute Advantage 183

6.3.2 Comparative Advantage 185

6.4 Factor Proportions Theory 187

6.4.1 Labor Versus Land and Capital Equipment 187

6.4.2 Evidence on Factor Proportions Theory: The Leontief Paradox 188

6.5 International Product Life Cycle 188

6.5.1 Stages of the Product Life Cycle 188

6.5.2 Limitations of the Theory 189

GLOBAL MANAGER: Five Fulfillment Mistakes 190

6.6 New Trade Theory 190

6.6.1 First-Mover Advantage 190

6.7 National Competitive Advantage 191

6.7.1 Factor Conditions 191

6.7.2 Demand Conditions 192

6.7.3 Related and Supporting Industries 193

6.7.4 Firm Strategy, Structure, and Rivalry 193

6.7.5 Government and Chance 193

Chapter Summary 194 • Key Terms 195 • Talk About It 195

Teaming Up 195 • Ethical Challenge 196 • Writing Assignments 196

PRACTICING INTERNATIONAL MANAGEMENT CASE 197

Chapter 7 Governments and Trade 198

Netflix Reinvents TV 199

7.1 Why Do Governments Intervene in Trade? 200

7.1.1 Political Motives 200

CULTURE INSIGHTS: A Culture of Business Security 202

7.1.2 Economic Motives 203

7.1.3 Cultural Motives 204

7.2 Instruments of Trade Promotion 205

7.2.1 Subsidies 205

7.2.2 Export Assistance 206

GLOBAL MANAGER: Experts in Exporting 206

7.2.3 Foreign Trade Zones 207

7.2.4 Special Government Agencies 207

7.3 Instruments of Trade Restriction 208

7.3.1 Tariffs 208

7.3.2 Quotas 209

7.3.3 Other Nontariff Barriers 210

7.4 Global Trading System 211

7.4.1 General Agreement on Tariffs and Trade (GATT) 212

7.4.2 World Trade Organization (WTO) 213

Chapter Summary 216 • Key Terms 217 • Talk About It 217

Teaming Up 217 • Ethical Challenge 217 • Writing Assignments 218

PRACTICING INTERNATIONAL MANAGEMENT CASE 219

Chapter 8 Foreign Direct Investment 220

Spotify for Every Mood 221

8.1 The Nature of Foreign Direct Investment 222

8.1.1 Forms of Foreign Direct Investment 222

CULTURE INSIGHTS: Cross-Cultural Mergers and Acquisitions 223

8.1.2 Worldwide Flows of FDI 223

8.1.3 Recipients and Sources of FDI 224

8.2 Theories of Foreign Direct Investment 226

8.2.1 International Product Life Cycle 226

8.2.2 Market Imperfections 227

8.2.3 Eclectic Theory 228

8.2.4 Market Power 228

8.3 Management Issues and Foreign Direct Investment 228

8.3.1 Control 228

8.3.2 Purchase-or-Build Decision 230

8.3.3 Production Costs 230

GLOBAL MANAGER: Surprises of Investing Abroad 230

8.3.4 Customer Knowledge 232

8.3.5 Following Clients 232

8.3.6 Following Rivals 232

8.4 Why Governments Intervene in FDI 233

8.4.1 Balance of Payments 233

8.4.2 Reasons for Intervention by the Host Country 233

8.4.3 Reasons for Intervention by the Home Country 234

8.5 Government Policy Instruments and FDI 235

8.5.1 Host Countries: Promotion 235

8.5.2 Host Countries: Restriction 237

8.5.3 Home Countries: Promotion 237

8.5.4 Home Countries: Restriction 237

Chapter Summary 238 • Key Terms 239 • Talk About It 239

Teaming Up 239 • Ethical Challenge 239 • Writing Assignments 240

PRACTICING INTERNATIONAL MANAGEMENT CASE 241

Chapter 9 Regional Economic Integration 242

Nestlé’s Global Recipe 243

9.1 The Nature of Regional Integration Efforts 244

9.1.1 Levels of Regional Integration 244

9.1.2 The Case for Regional Integration 245

9.1.3 The Case Against Regional Integration 247

9.2 Integration in Europe 249

9.2.1 European Union 249

CULTURE INSIGHTS: Doing Business in the Czech Republic 253

9.2.2 European Free Trade Association (EFTA) 255

9.3 Integration in the Americas 256

9.3.1 United States-Mexico-Canada Agreement (USMCA) 256

9.3.2 Central American Free Trade Agreement (CAFTA-DR) 258

9.3.3 Andean Community (CAN) 259

9.3.4 Southern Common Market (MERCOSUR) 259

9.3.5 Central America and the Caribbean 259

9.4 Integration in Asia and Africa 260

9.4.1 Comprehensive and Progressive Agreement for Trans-Pacific

Partnership

(CPTPP) 260

9.4.2 Association of Southeast Asian Nations (ASEAN) 260

GLOBAL MANAGER: The Ins and Outs of ASEAN 260

9.4.3 Regional Comprehensive Economic Partnership (RCEP) 261

9.4.4 Asia Pacific Economic Cooperation (APEC) 261

9.4.5 Africa’s Integration Efforts 262

Chapter Summary 263 • Key Terms 264 • Talk About It 264

Teaming Up 264 • Ethical Challenge 264 • Writing Assignments 264

PRACTICING INTERNATIONAL MANAGEMENT CASE 265

PART 4 International Financial System 266

Chapter 10 International Financial Markets 266

Samsung’s Number Won 267

10.1 The International Capital Market 268

10.1.1 Benefits of the International Capital Market 268

10.1.2 International Bond Market 269

CULTURE INSIGHTS: Big Results from Microfinance 270

10.1.3 International Equity Market 270

10.1.4 Eurocurrency Market 271

10.2 The Foreign Exchange Market 272

10.2.1 Functions of the Foreign Exchange Market 272

10.2.2 Exchange-Rate Risk 274

10.3 Currency Rates and Instruments 276

10.3.1 Spot and Forward Rates 276

10.3.2 Forward Contracts, Swaps, and Options 276

10.4 Market Structure and Convertibility 278

10.4.1 Financial Centers 278

GLOBAL MANAGER: Managing Foreign Exchange 279

10.4.2 Interbank Market 279

10.4.3 Currency Convertibility 279

Chapter Summary 281 • Key Terms 282 • Talk About It 282

Teaming Up 282 • Ethical Challenge 282 • Writing Assignments 282

PRACTICING INTERNATIONAL MANAGEMENT CASE 283

Chapter 11 International Monetary System 284

The Euro 285

11.1 Importance of Currency Values 286

11.1.1 Desire for Stability and Predictability 287

11.1.2 Efficient Versus Inefficient Market View 287

11.1.3 Forecasting Techniques 288

CULTURE INSIGHTS: The Long Arm of the Law 288

11.2 Factors That Determine Exchange Rates 289

11.2.1 Law of One Price 289

11.2.2 Purchasing Power Parity 289

11.2.3 Evaluating Purchasing Power Parity 291

11.3 Fixed Exchange-Rate Systems 292

11.3.1 The Gold Standard 292

11.3.2 Bretton Woods Agreement 294

11.4 Floating Exchange-Rate System 296

11.4.1 Today’s Exchange-Rate Arrangements 297

11.4.2 Recent Financial Crises 297

GLOBAL MANAGER: Adjusting to Currency Swings 297

11.4.3 Future of the International Monetary System 300

Chapter Summary 300 • Key Terms 301 • Talk About It 302

Teaming Up 302 • Ethical Challenge 302 • Writing Assignments 302

PRACTICING INTERNATIONAL MANAGEMENT CASE 303

PART 5 International Business Management 304

Chapter 12 International Strategy and Organization 304

Ryanair Soars Above 305

12.1 Company Analysis 306

12.1.1 Company Mission and Goals 306

12.1.2 Core Competency and Value Creation 307

12.1.3 Business Environment 309

CULTURE INSIGHTS: Researching Business Environments 310

12.2 Strategy Formulation 310

12.2.1 Two International Strategies 310

12.2.2 Corporate-Level Strategies 312

12.2.3 Business-Level Strategies 312

12.2.4 Department-Level Strategies 314

GLOBAL MANAGER: Questions to Ask Before Going International 315

12.3 Issues of Organizational Structure 315

12.3.1 Centralization Versus Decentralization 315

12.3.2 Coordination and Flexibility 316

12.4 Types of Organizational Structure 317

12.4.1 International Division Structure 317

12.4.2 International Area Structure 318

12.4.3 Global Product Structure 318

12.4.4 Global Matrix Structure 319

12.4.5 Work Teams 320

Chapter Summary 321 • Key Terms 322 • Talk About It 322

Teaming Up 322 • Ethical Challenge 322 • Writing Assignments 322

PRACTICING INTERNATIONAL MANAGEMENT CASE 323

Chapter 13 Analyzing International Opportunities 324

Starbucks’ Global Expansion 325

13.1 Basic Appeal and National Factors 326

13.1.1 Identify Basic Appeal 326

13.1.2 Assess the National Business Environment 327

GLOBAL MANAGER: Expanding Globally Online 330

13.2 Measure and Select the Market or Site 330

13.2.1 Measure Market or Site Potential 330

13.2.2 Select the Market or Site 334

13.3 Secondary Market Research 335

13.3.1 Public Information Sources 336

13.3.2 Private Information Sources 337

13.3.3 Issues with Secondary Research 337

13.4 Primary Market Research 339

13.4.1 Trade Shows and Trade Missions 339

CULTURE INSIGHTS: Is the World Your Oyster? 340

13.4.2 Interviews and Focus Groups 340

13.4.3 Surveys and Environmental Scanning 341

13.4.4 Issues with Primary Research 341

Chapter Summary 342 • Key Terms 343 • Talk About It 343

Teaming Up 343 • Ethical Challenge 343 • Writing Assignments 344

PRACTICING INTERNATIONAL MANAGEMENT CASE 345

Chapter 14 Selecting and Managing Entry Modes 346

Marvel Entertains 347

14.1 Exporting and Countertrade 348

14.1.1 Why Companies Export 348

14.1.2 Developing an Export Strategy: A Four-Step Model 349

14.1.3 Degree of Export Involvement 350

14.1.4 Countertrade 352

14.2 Export/Import Financing 353

14.2.1 Advance Payment 353

14.2.2 Documentary Collection 353

14.2.3 Letter of Credit 354

14.2.4 Open Account 355

GLOBAL MANAGER: Collecting International Debts 356

14.3 Contractual Entry Modes 356

14.3.1 Licensing 356

14.3.2 Franchising 357

14.3.3 Management Contracts 359

14.3.4 Turnkey Projects 359

14.4 Investment Entry Modes 360

14.4.1 Wholly Owned Subsidiaries 360

14.4.2 Joint Ventures 361

14.4.3 Strategic Alliances 362

14.4.4 Partner Selection 363

CULTURE INSIGHTS: Negotiating Market Entry 364

Chapter Summary 364 • Key Terms 365 • Talk About It 365

Teaming Up 366 • Ethical Challenge 366 • Writing Assignments 366

PRACTICING INTERNATIONAL MANAGEMENT CASE 367

Chapter 15 Developing and Marketing Products 368

Wings for Life 369

15.1 Developing Product Strategies 370

15.1.1 Laws and Culture 370

15.1.2 Brand and Product Names 371

15.1.3 Other Product Issues 372

15.2 Creating Promotional Strategies 373

15.2.1 Push and Pull Strategies 373

GLOBAL MANAGER: Managing an International Sales Force 373

15.2.2 International Advertising 374

15.2.3 Communicating Promotional Messages 375

15.2.4 Blending Product and Promotional Strategies 376

CULTURE INSIGHTS: Localizing Digital Advertising 377

15.3 Designing Distribution Strategies 378

15.3.1 Designing Distribution Channels 378

15.3.2 Special Distribution Issues 379

15.4 Developing Pricing Strategies 380

15.4.1 Worldwide Pricing 380

15.4.2 Dual Pricing 380

15.4.3 Factors That Affect Pricing Decisions 381

Chapter Summary 382 • Key Terms 383 • Talk About It 383

Teaming Up 384 • Ethical Challenge 384 • Writing Assignments 384

PRACTICING INTERNATIONAL MANAGEMENT CASE 385

Chapter 16 Managing International Operations 386

Toyota Races Ahead 387

16.1 Production Strategy 388

16.1.1 Capacity Planning 388

16.1.2 Facilities Location Planning 388

16.1.3 Process Planning 390

16.1.4 Facilities Layout Planning 391

16.2 Acquiring Physical Resources 391

16.2.1 Reasons to Make 392

16.2.2 Reasons to Buy 393

16.2.3 Raw Materials 394

16.2.4 Fixed Assets 394

16.3 Key Production Concerns 395

16.3.1 Quality Improvement Efforts 395

GLOBAL MANAGER: World-Class Standards 396

16.3.2 Shipping and Inventory Costs 396

16.3.3 Reinvestment versus Divestment 396

16.4 Financing Business Operations 397

16.4.1 Borrowing 397

16.4.2 Issuing Equity 398

16.4.3 Internal Funding 399

CULTURE INSIGHTS: Financing Business from Abroad 399

16.4.4 Capital Structure 400

Chapter Summary 401 • Key Terms 402 • Talk About It 402

Teaming Up 402 • Ethical Challenge 402 • Writing Assignments 402

PRACTICING INTERNATIONAL MANAGEMENT CASE 403

Chapter 17 Hiring and Managing Employees 404

IKEA Togetherness 405

17.1 International Staffing Policies 406

17.1.1 Ethnocentric Staffing 406

17.1.2 Polycentric Staffing 408

17.1.3 Geocentric Staffing 408

17.2 Recruiting and Selecting Human Resources 409

17.2.1 Human Resource Planning 409

GLOBAL MANAGER: Growing Global 409

17.2.2 Recruiting Human Resources 410

17.2.3 Selecting Human Resources 410

17.2.4 Culture Shock 411

17.2.5 Reverse Culture Shock 411

CULTURE INSIGHTS: A Shocking Ordeal 412

17.3 Training and Development 413

17.3.1 Methods of Cultural Training 413

17.3.2 Compiling a Cultural Profile 414

17.3.3 Nonmanagerial Worker Training 414

17.4 Compensation, Labor, and Management 415

17.4.1 Managerial Employees 415

17.4.2 Nonmanagerial Workers 416

17.4.3 Labor–Management Relations 416

Chapter Summary 418 • Key Terms 419 • Talk About It 419

Teaming Up 419 • Ethical Challenge 420 • Writing Assignments 420

PRACTICING INTERNATIONAL MANAGEMENT CASE 421

Endnotes 422

Glossary 435

Name Index 443

Subject Index 445

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