Preface p. xii
Globalization p. 2
Globalization p. 2
Opening Case: Planet Starbucks p. 2
Introduction p. 4
What is Globalization? p. 7
The Globalization of Markets p. 7
The Globalization of Production p. 8
The Emergence of Global Institutions p. 9
Drivers of Globalization p. 11
Declining Trade and Investment Barriers p. 11
The Role of Technological Change p. 14
The Changing Demographics of the Global Economy p. 18
The Changing World Output and World Trade Picture p. 18
The Changing Foreign Direct Investment Picture p. 20
The Changing Nature of the Multinational Enterprise p. 22
The Changing World Order p. 23
The Global Economy of the 21st Century p. 25
The Globalization Debate p. 26
Antiglobalization Protests p. 26
Globalization, Jobs, and Income p. 28
Globalization, Labor Policies, and the Environment p. 30
Globalization and National Sovereignty p. 32
Globalization and the World's Poor p. 34
Managing in the Global Marketplace p. 35
Key Terms p. 37
Summary p. 37
Critical Thinking and Discussion Questions p. 38
Research Task p. 38
Closing Case: Ecuadorean Valentine Roses p. 39
Closing Case: Who's Reading Your X-Ray? p. 40
Sustainability in Practice: Adidas-Solomon: Supply-Chain Management p. 42
Country Differences p. 44
National Differences in Political Economy p. 44
Opening Case: The Poorest Continent p. 44
Introduction p. 46
Political Systems p. 48
Collectivism and Individualism p. 48
Democracy and Totalitarianism p. 51
Economic Systems p. 53
Market Economy p. 53
Command Economy p. 54
Mixed Economy p. 54
Legal Systems p. 55
Different Legal Systems p. 55
Differences in Contract Law p. 56
Property Rights p. 57
The Protection of Intellectual Property p. 59
Product Safety and Product Liability p. 63
The Determinants of Economic Development p. 63
Differences in Economic Development p. 63
Broader Conceptions of Development: Amartya Sen p. 67
Political Economy and Economic Progress p. 70
Geography, Education, and Economic Development p. 72
States in Transition p. 73
The Spread of Democracy p. 73
The New World Order and Global Terrorism p. 75
The Spread of Market-Based Systems p. 77
The Nature of Economic Transformation p. 78
Implications of Changing Political Economy p. 82
Focus on Managerial Implications p. 83
Benefits p. 83
Costs p. 84
Risks p. 84
Overall Attractiveness p. 85
Key Terms p. 86
Summary p. 86
Critical Thinking and Discussion Questions p. 87
Research Task p. 87
Closing Case: The Changing Political Economy of India p. 88
Differences in Culture p. 90
Opening Case: Guanxi-Ties That Bind p. 90
Introduction p. 93
What is Culture? p. 94
Values and Norms p. 94
Culture, Society, and the Nation-State p. 96
The Determinants of Culture p. 96
Social Structure p. 97
Individuals and Groups p. 97
Social Stratification p. 99
Religious and Ethical Systems p. 102
Christianity p. 104
Islam p. 105
Hinduism p. 107
Buddhism p. 108
Confucianism p. 110
Language p. 111
Spoken Language p. 111
Unspoken Language p. 112
Education p. 113
Culture and the Workplace p. 114
Cultural Change p. 116
Focus on Managerial Implications p. 121
Cross-Cultural Literacy p. 121
Culture and Competitive Advantage p. 122
Key Terms p. 123
Summary p. 124
Critical Thinking and Discussion Questions p. 124
Research Task p. 125
Closing Case: McDonald's and Hindu Culture p. 125
Ethics in International Business p. 128
Opening Case: Nike p. 128
Introduction p. 130
Ethical Issues in International Business p. 131
Employment Practices p. 132
Human Rights p. 132
Environmental Pollution p. 134
Corruption p. 137
Moral Obligations p. 139
Ethical Dilemmas p. 140
The Roots of Unethical Behavior p. 141
Philosophical Approaches to Ethics p. 145
Straw Men p. 146
Utilitarian and Kantian Ethics p. 149
Rights Theories p. 150
Justice Theories p. 151
Ethical Decision Making p. 152
Hiring and Promotion p. 153
Organization Culture and Leadership p. 153
Decision-Making Processes p. 154
Ethics Officers p. 156
Moral Courage p. 157
Summary of Decision-Making Steps p. 157
Key Terms p. 158
Summary p. 158
Critical Thinking and Discussion Questions p. 159
Research Task p. 159
Closing Case: Etch-A-Sketch Ethics p. 159
Sustainability in Practice: BC Hydro's Aboriginal Relations Program p. 161
Cross-Border Trade and Investment p. 162
International Trade Theory p. 162
Opening Case: Hollowing Out the U.S. Knowledge-Based Economy p. 162
Introduction p. 164
An Overview of Trade Theory p. 165
The Benefits of Trade p. 166
The Pattern of International Trade p. 166
Trade Theory and Government Policy p. 167
Mercantilism p. 169
Absolute Advantage p. 170
Comparative Advantage p. 172
The Gains from Trade p. 173
Qualifications and Assumptions p. 174
Simple Extensions of the Ricardian Model p. 175
Heckscher-Ohlin Theory p. 177
The Leontief Paradox p. 178
The Product Life-Cycle Theory p. 179
Evaluating the Product Life-Cycle Theory p. 180
New Trade Theory p. 182
Increasing Product Variety and Reducing Costs p. 183
Economies of Scale, First-Mover Advantages, and the Pattern of Trade p. 183
Implications of New Trade Theory p. 184
National Competitive Advantage: Porter's Diamond p. 186
Factor Endowments p. 187
Demand Conditions p. 187
Related and Supporting Industries p. 187
Firm Strategy, Structure, and Rivalry p. 188
Evaluating Porter's Theory p. 190
Focus on Managerial Implications p. 190
Location p. 190
First-Mover Advantages p. 191
Government Policy p. 191
Key Terms p. 192
Summary p. 192
Critical Thinking and Discussion Questions p. 193
Research Task p. 194
Closing Case: Logitech p. 194
The Political Economy of International Trade p. 196
Opening Case: The Politics of Trade in Steel p. 196
Introduction p. 198
Instruments of Trade Policy p. 200
Tariffs p. 200
Subsidies p. 201
Import Quotas and Voluntary Export Restraints p. 203
Local Content Requirements p. 205
Administrative Policies p. 205
Antidumping Policies p. 206
The Case for Government Intervention p. 206
Political Arguments for Intervention p. 206
Economic Arguments for Intervention p. 211
The Revised Case for Free Trade p. 213
Retaliation and Trade War p. 213
Domestic Politics p. 214
Development of the World Trading System p. 214
From Smith to the Great Depression p. 215
1947-1979: GATT, Trade Liberalization, and Economic Growth p. 215
1980-1993: Protectionist Trends p. 216
The Uruguay Round and the World Trade Organization p. 216
WTO: Experience to Date p. 218
The Future of the WTO: Unresolved Issues and the Doha Round p. 222
Focus on Managerial Implications p. 226
Trade Barriers and Firm Strategy p. 226
Policy Implications p. 227
Key Terms p. 228
Summary p. 228
Critical Thinking and Discussion Questions p. 230
Research Task p. 230
Closing Case: Agricultural Subsidies Development p. 230
Foreign Direct Investment p. 232
Opening Case: The Globalization of Toyota p. 232
Introduction p. 235
Foreign Direct Investment in the World Economy p. 236
Trends in FDI p. 236
The Direction of FDI p. 238
The Source of FDI p. 241
The Form of FDI: Acquisitions versus Green-Field Investments p. 242
Foreign Direct Investment in the World Economy p. 245
Why Foreign Direct Investment? p. 245
The Pattern of Foreign Direct Investment p. 247
The Eclectic Paradigm p. 249
Political Ideology and Foreign Direct Investment p. 250
The Radical View p. 250
The Free Market View p. 251
Pragmatic Nationalism p. 252
Shifting Ideology p. 253
Benefits and Costs of FDI p. 253
Host-Country Benefits p. 253
Host-Country Costs p. 257
Home-Country Benefits p. 258
Home-Country Costs p. 259
International Trade Theory and FDI p. 259
Government Policy Instruments and FDI p. 260
Home-Country Policies p. 260
Host-Country Policies p. 261
International Institutions and the Liberalization of FDI p. 262
Focus on Managerial Implications p. 263
The Theory of FDI p. 263
Government Policy p. 265
Key Terms p. 265
Summary p. 266
Critical Thinking and Discussion Questions p. 266
Research Task p. 267
Closing Case: Ford and General Motors in Russia p. 267
Regional Economic Integration p. 270
Opening Case: Drug Companies and the European Union p. 270
Introduction p. 272
Levels of Economic Integration p. 274
The Case for Regional Integration p. 276
The Economic Case for Integration p. 276
The Political Case for Integration p. 276
Impediments to Integration p. 277
The Case against Regional Integration p. 277
Regional Economic Integration in Europe p. 279
Evolution of the European Union p. 280
Political Structure of the European Union p. 280
The Single European Act p. 282
The Establishment of the Euro p. 285
Enlargement of the European Union p. 288
Regional Economic Integration in the Americas p. 289
The North American Free Trade Agreement p. 289
The Andean Community p. 293
MERCOSUR p. 294
Central American Common Market and CARICOM p. 295
Free Trade Area of the Americas p. 295
Regional Economic Integration Elsewhere p. 296
Association of Southeast Asian Nations p. 296
Asia-Pacific Economic Cooperation p. 297
Regional Trade Blocs in Africa p. 298
Focus on Managerial Implications p. 299
Opportunities p. 299
Threats p. 300
Key Terms p. 301
Summary p. 301
Critical Thinking and Discussion Questions p. 302
Research Task p. 303
Closing Case: Increasing Competition in the European Automobile Market p. 303
Sustainability in Practice: Foreign Investment for Sustainable Community Development: Multinationals Learning from the Grameen Example p. 305
Global Money System p. 308
The Foreign Exchange Market p. 308
Opening Case: Volkswagen's Hedging Strategy p. 308
Introduction p. 310
The Functions of the Foreign Exchange Market p. 311
Currency Conversion p. 311
Insuring against Foreign Exchange Risk p. 313
The Nature of the Foreign Exchange Market p. 317
Economic Theories of Exchange Rate Determination p. 319
Prices and Exchange Rates p. 319
Interest Rates and Exchange Rates p. 325
Investor Psychology and Bandwagon Effects p. 326
Summary p. 326
Exchange Rate Forecasting p. 327
The Efficient Market School p. 327
The Inefficient Market School p. 327
Approaches to Forecasting p. 328
Currency Convertibility p. 330
Focus on Managerial Implications p. 332
Transaction Exposure p. 332
Translation Exposure p. 332
Economic Exposure p. 332
Reducing Translation and Transaction Exposure p. 333
Reducing Economic Exposure p. 334
Other Steps for Managing Foreign Exchange Risk p. 334
Key Terms p. 335
Summary p. 336
Critical Thinking and Discussion Questions p. 337
Research Task p. 337
Closing Case: Hedging the Euro at Axis p. 337
The International Monetary System p. 340
Opening Case: China's Exchange Rate Policy p. 340
Introduction p. 342
The Gold Standard p. 344
Mechanics of the Gold Standard p. 344
Strength of the Gold Standard p. 344
The Period between the Wars: 1918-1939 p. 345
The Bretton Woods System p. 346
The Role of the IMF p. 347
The Role of the World Bank p. 348
The Collapse of the Fixed Exchange Rate System p. 348
The Floating Exchange Rate Regime p. 350
The Jamaica Agreement p. 350
Exchange Rates since 1973 p. 350
Fixed versus Floating Exchange Rates p. 352
The Case for Floating Exchange Rates p. 352
The Case for Fixed Exchange Rates p. 353
Who Is Right? p. 354
Exchange Rate Regimes in Practice p. 355
Pegged Exchange Rates p. 355
Currency Boards p. 356
Crisis Management by the IMF p. 357
Financial Crises in the Post-Bretton Woods Era p. 357
Mexican Currency Crisis of 1995 p. 359
The Asian Crisis p. 361
Evaluating the IMF's Policy Prescriptions p. 365
Focus on Managerial Implications p. 369
Currency Management p. 369
Bustiness Strategy p. 369
Corporate-Government Relations p. 370
Key Terms p. 371
Summary p. 372
Critical Thinking and Discussion Questions p. 373
Closing Case: The Tragedy of the Congo (Zaire) p. 373
Sustainability in Practice: A Tax on Currency Speculation to Finance Sustainable Development and Other Suggestions for a Sustainable Global Economy p. 375
Competing in a Global Marketplace p. 376
The Strategy of International Business p. 376
Opening Case: Wal-Mart's Global Expansion p. 376
Introduction p. 379
Strategy and the Firm p. 380
Value Creation p. 380
Strategic Positioning p. 382
Operations: The Firm as a Value Chain p. 383
Organization: The Implementation of Strategy p. 385
In Sum: Strategic Fit p. 387
Profiting from Global Expansion p. 388
Location Economies p. 388
Experience Effects p. 391
Leveraging Core Competencies p. 393
Leveraging Subsidiary Skills p. 394
Pressures for Cost Reductions and Local Responsiveness p. 395
Pressures for Cost Reductions p. 396
Pressures for Local Responsiveness p. 397
Strategic Choices p. 400
International Strategy p. 400
Multidomestic Strategy p. 401
Global Strategy p. 402
Transnational Strategy p. 403
Strategy Summary p. 406
Strategic Alliances p. 406
The Advantages of Strategic Alliances p. 406
The Disadvantages of Strategic Alliances p. 407
Making Alliances Work p. 408
Key Terms p. 411
Summary p. 411
Critical Thinking and Discussion Questions p. 412
Research Task p. 412
Closing Case: Global Strategy at MTV Networks p. 413
Entering Foreign Markets p. 416
Opening Case: Diebold p. 416
Introduction p. 418
Basic Entry Decisions p. 419
Which Foreign Markets? p. 419
Timing of Entry p. 420
Scale of Entry and Strategic Commitments p. 421
Summary p. 424
Entry Modes p. 426
Exporting p. 426
Turnkey Projects p. 427
Licensing p. 427
Franchising p. 429
Joint Ventures p. 432
Wholly Owned Subsidiaries p. 433
Selecting an Entry Mode p. 435
Core Competencies and Entry Mode p. 436
Pressures for Cost Reductions and Entry Mode p. 436
Green-Field Venture or Acquisition? p. 437
Pros and Cons of Acquisitions p. 437
Pros and Cons of Green-Field Ventures p. 440
Green-Field or Acquisition? p. 440
Key Terms p. 441
Summary p. 441
Critical Thinking and Discussion Questions p. 442
Research Task p. 443
Closing Case: Merrill Lynch in Japan p. 443
Exporting, Importing, and Countertrade p. 446
Opening Case: Exporting by Small U.S. Finns p. 446
Introduction p. 448
The Promise and Pitfalls of Exporting p. 449
Improving Export Performance p. 450
An International Comparison p. 450
Information Sources p. 450
Utilizing Export Management Companies p. 452
Export Strategy p. 452
Export and Import Financing p. 453
Lack of Trust p. 453
Letter of Credit p. 456
Draft p. 457
Bill of Lading p. 458
A Typical International Trade Transaction p. 458
Export Assistance p. 460
Export-Import Bank p. 460
Export Credit Insurance p. 461
Countertrade p. 461
The Incidence of Countertrade p. 462
Types of Countertrade p. 462
The Pros and Cons of Countertrade p. 463
Key Terms p. 464
Summary p. 465
Critical Thinking and Discussion Questions p. 465
Research Task p. 466
Closing Case: Megahertz Communications p. 466
Global Production, Outsourcing, and Logistics p. 468
Opening Case; Microsoft-Outsourcing Xbox Production p. 468
Introduction p. 470
Strategy, Production, and Logistics p. 471
Where to Produce p. 474
Country Factors p. 474
Technological Factors p. 475
Product Factors p. 479
Locating Production Facilities p. 480
The Strategic Role of Foreign Factories p. 481
Outsourcing Production: Make-or-Buy Decisions p. 484
The Advantages of Make p. 484
The Advantages of Buy p. 486
Trade-offs p. 488
Strategic Alliances with Suppliers p. 489
Managing a Global Supply Chain p. 490
The Role of Just-in-Time Inventory p. 490
The Role of Information Technology and the Internet p. 491
Key Terms p. 492
Summary p. 492
Critical Thinking and Discussion Questions p. 493
Research Task p. 493
Closing Case: Competitive Advantage at Dell p. 493
Global Marketing and R&D p. 496
Opening Case: Astro Boy-Marketing Japanese Anime to the World p. 496
Introduction p. 498
The Globalization of Markets and Brands p. 499
Market Segmentation p. 500
Product Attributes p. 502
Cultural Differences p. 503
Economic Development p. 503
Product and Technical Standards p. 504
Distribution Strategy p. 504
Differences between Countries p. 505
Choosing a Distribution Strategy p. 507
Communication Strategy p. 508
Barriers to International Communication p. 508
Push versus Pull Strategies p. 509
Global Advertising p. 513
Pricing Strategy p. 515
Price Discrimination p. 515
Strategic Pricing p. 516
Regulatory Influences on Prices p. 518
Configuring the Marketing Mix p. 518
New-Product Development p. 519
The Location of R&D p. 521
Integrating R&D, Marketing, and Production p. 522
Cross-Functional Teams p. 523
Building Global R&D Capabilities p. 524
Key Terms p. 525
Summary p. 526
Critical Thinking and Discussion Questions p. 526
Research Task p. 527
Closing Case: Procter & Gamble in Japan p. 527
Global Human Resource Management p. 530
Opening Case: Molex p. 530
Introduction p. 533
The Strategic Role of International HRM p. 534
Staffing Policy p. 534
Types of Staffing Policy p. 535
Expatriate Managers p. 538
Training and Management Development p. 543
Training for Expatriate Managers p. 543
Repatriation of Expatriates p. 544
Management Development and Strategy p. 545
Performance Appraisal p. 546
Performance Appraisal Problems p. 546
Guidelines for Performance Appraisal p. 547
Compensation p. 547
National Differences in Compensation p. 547
Expatriate Pay p. 549
International Labor Relations p. 551
The Concerns of Organized Labor p. 551
The Strategy of Organized Labor p. 551
Approaches to Labor Relations p. 552
Key Terms p. 553
Summary p. 553
Critical Thinking and Discussion Questions p. 554
Research Task p. 554
Closing Case: Degrussa: Strategy and Human Resources in China p. 555
Sustainability in Practice: Interface: An Environmentally Sustainable Commitment to Business and Material Management p. 556
Glossary p. 559
Notes p. 569
Index p. 603