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Description

Resources

Read/review the following resources for this activity:

  • Textbook: All Chapters
  • Lecture (PDF): Presentation (Luthans 10e) – All Chapters (in Course Documents)
  • A minimum of 15-20 resources which can be a combination of websites, journal articles, news articles

Introduction
Over the last several weeks, you have been preparing a feasibility study for the Vice President of Human Resources (instructor) and the Board of Directors concerning what the 3M Corporation – Asia Pacific Division will need to know to manage employment relations as effectively as possible for a new manufacturing facility in (your chosen country) to build and assemble Medical-Surgical devices for sale in the Latin America market. This week you complete the last 2 sections of your paper and submit your final project. Please incorporate any instructor feedback that you received on your draft submissions.

Activity Instructions
Your final paper should include the following sections:

Section 1. Introduction and Country Selection

  • Identify the name of the country you will research for the ESA assignment.
  • Explain your selection by listing at least 3 reasons why you are choosing this country.

Section 2. General Characteristics

  • Describe the location, size, population, principle industries, language, religion, literacy, and type of government of your country.

Section 3. Economic Conditions

  • Discuss the standard of living (What do the people own? How does the standard of living compare to the U.S.? Ideally, this should be measured in purchasing power, accounting for the difference in currency and cost of living.)
  • Identify the income distribution (Proportion of upper, middle, and lower classes?)
  • Explain the wage levels (Compared to U.S.? Compared to rest of world?)
  • Explain the employment levels (Unemployment rate? Participation rate of women, minorities, youth?)
  • Describe how wages are determined (Supply and demand? Government policy? Collective bargaining?)
  • Examine employer-provided benefits.
  • Discuss working conditions (Hygiene and safety?)
  • Discuss skills available (Shortages in particular areas?)

Section 4: Organizational Topics and Human Resource Management Analysis

1. Organizational Topics, discuss the following:

  • Performance evaluation and discipline
  • Recruitment and training
  • Dispute resolution
    • Grievances over rules application
    • Impasses resulting from disputes establishing wages, hours and working conditions
  • Employee participation in decision-making

2. Human Resource Management Analysis of (your country’s name), discuss the following:

  • Benefits
  • Liabilities
  • Potential solutions

Section 5: Governmental

  • Describe the extent of government intervention in private employment.
  • Explain the existence and impact of labor laws.

Section 6: Personal

  • Explain the ideology, ethics, and values of people (individualistic or group-oriented, role of religion in employment, reaction to authority and organizational needs)
  • Discuss employee motivation (How "hard working" are employees? What motivates their performance?)

Section 7: Conclusion

  • Summarize your key findings and include a recommendation as to whether to locate or not locate in your chosen country.

Writing Requirements (APA format)

  • 15-20 pages (approx. 300 words per page), not including title page or references page
  • 1-inch margins
  • Double spaced
  • 12-point Times New Roman font
  • Title page with topic and name of student
  • References page (minimum of 15-20 resources)


Unformatted Attachment Preview

International Management Culture, Strategy, and Behavior Ninth Edition Fred Luthans University of Nebraska–Lincoln Jonathan P. Doh Villanova University INTERNATIONAL MANAGEMENT: CULTURE, STRATEGY, AND BEHAVIOR, NINTH EDITION Published by McGraw-Hill Education, 2 Penn Plaza, New York, NY 10121. Copyright © 2015 by McGraw-Hill Education. All rights reserved. Printed in the United States of America. Previous editions © 2012, 2009, and 2006. No part of this publication may be reproduced or distributed in any form or by any means, or stored in a database or retrieval system, without the prior written consent of McGraw-Hill Education, including, but not limited to, in any network or other electronic storage or transmission, or broadcast for distance learning. Some ancillaries, including electronic and print components, may not be available to customers outside the United States. This book is printed on acid-free paper. 1 2 3 4 5 6 7 8 9 0 DOW/DOW 1 0 9 8 7 6 5 4 ISBN 978-0-07-786244-2 MHID 0-07-786244-9 Senior Vice President, Products & Markets: Kurt L. Strand Vice President, Content Production & Technology Services: Kimberly Meriwether David Brand Manager: Anke Weekes Developmental Editor: Kelly Delso Marketing Manager: Michael Gedatus Director, Content Production: Terri Schiesl Content Project Manager: Jessica Portz Buyer: Jennifer Pickel Cover Designer: Studio Montage, St. Louis, MO Cover Image: © Ariel Skelley/Blend Images LLC RF, © Chris Ryan/age fotostock, and © Blend Images/Getty Images RF Media Project Manager: Shawn Coenen Compositor: Aptara ®, Inc. Typeface: 10/12 Times Roman Printer: R. R. Donnelley All credits appearing on page or at the end of the book are considered to be an extension of the copyright page. Library of Congress Cataloging-in-Publication Data Luthans, Fred. International management : culture, strategy, and behavior / Fred Luthans, University of Nebraska-Lincoln, Jonathan P. Doh, Villanova University.—Ninth edition. pages cm ISBN-13: 978-0-07-786244-2 (alk. paper) ISBN-10: 0-07-786244-9 1. International business enterprises—Management. 2. International business enterprises—Management—Case studies. I. Doh, Jonathan P. II. Title. HD62.4.H63 2014 658'.049—dc23 2013039863 The Internet addresses listed in the text were accurate at the time of publication. The inclusion of a website does not indicate an endorsement by the authors or McGraw-Hill Education, and McGraw-Hill Education does not guarantee the accuracy of the information presented at these sites. www.mhhe.com www.MyEbookNiche.eCrater.com Dedicated in Memory of Richard M. Hodgetts A Pioneer in International Management Education iii www.MyEbookNiche.eCrater.com This page intentionally left blank www.MyEbookNiche.eCrater.com Preface C hanges in the global business environment continue at a rapid and often unpredictable pace. The global financial crisis and economic recession of 2008–2010 have given way to destabilizing political changes in many regions of the world, especially North Africa and the Middle East (see Chapter 2 opening article). In addition, rapid advances in social media have not only accelerated globalization but also provided a means for those who seek political and economic changes to organize and influence their leaders for more responsible governance (see Chapter 1 opening article). In addition, concerns about the exhaustion of finite resources and the need to pursue more sustainable growth have prompted governments, companies, and NGOs to consider alternate approaches to business and governance (see Chapter 3 opening article). Some of these developments have challenged assumptions about globalization and economic integration, but they also underscore the inexorably interconnected nature of global economies. Although many countries and regions around the world are closely and inextricably linked, important differences in institutional and cultural environments persist, and some of these differences have become even starker in recent years. The challenges for international management reflect this dynamism and the increasing unpredictability of global economic and political events. Continued growth of the emerging markets is reshaping the global balance of economic power, even though differences exist between and among regions and countries. Although many emerging markets continued to experience growth during a period when developed countries’ economies stagnated or declined, some developed economies bucked this trend and some developing countries did not share in what was otherwise a dynamic period for the emerging world. The global political and security environment remains unpredictable and volatile, with ongoing conflicts in the Middle East and Africa and continuing tensions in Iran, North Korea, Iraq, and Afghanistan. On the economic front, although little progress was made in the efforts to conclude a global multilateral agreement under the World Trade Organization (WTO), regional and bilateral agreements have proliferated, including the Trans-Pacific Partnership (TPP), a proposed free-trade agreement that would involve more than a dozen countries in the Americas and Asia. In addition, the tragic fire, building collapse, and other industrial accidents in India, Bangladesh, and China have renewed calls for corporations to do more to protect workers and for governments to get tougher with companies in terms of oversight and accountability. (See Chapter 3 for additional discussion.) As noted above, the advent of social networking has transformed the way citizens interact, how businesses market, promote, and distribute their products globally, and how civil society expresses its concerns that governments provide greater freedoms and accountability. Concurrently, companies, individuals, and even students can now engage in broad “mass” collaboration through digital, online technology for the development of new and innovative systems, products, and ideas. Both social networking and mass collaboration bring new power and influence to individuals across borders and transform the nature of their relationships with global organizations. Although globalization and technology continue to link nations, businesses, and individuals, these connections also highlight the importance of understanding different cultures, national systems, and corporate management practices around the world. The world is now interconnected geographically, but also electronically and psychologically; as such, nearly all businesses have been touched in some way by globalization. Yet, as cultural, political, and economic differences persist, astute international managers must be in a position to adapt and adjust to the vagaries of different contexts and environments. v www.MyEbookNiche.eCrater.com vi Preface In this new ninth edition of International Management, we have retained the strong and effective foundations gained from research and practice over the past decades while incorporating the important latest research and contemporary insights that have changed the context and environment for international management. Several trends have emerged that pose both challenges and opportunities for international managers. First, emerging markets continue to rise in importance, with dynamic growth and development in many emerging regions and countries. This includes the emergence of multinationals from emerging markets that are becoming globally competitive. Second, pressure for greater social and environmental responsibility among multinational organizations has increased, especially in light of rising pollution and the exposure of poor working conditions in many factories around the world. Third, the importance of cultural differences continues to be an omnipresent reality for international managers. And social media and other forms of electronic connectivity continue to facilitate international business of all sorts. Although we have extensive new, evidence-based material in this edition, we continue to strive to make the book even more user-friendly and applicable to practice. We continue to take a balanced approach in the ninth edition of International Management: Culture, Strategy, and Behavior. Whereas other texts stress culture, strategy, or behavior, our emphasis on all three critical dimensions—and the interactions among them—has been a primary reason why the previous editions have been the market-leading international management text. Specifically, this edition has the following chapter distribution: environment (three chapters), culture (four chapters), strategy (four chapters), and organizational behavior/human resource management (three chapters). Because the context of international management changes rapidly, all the chapters have been updated and improved. New real-world examples and research results are integrated throughout the book, accentuating the experiential relevance of the straightforward content. As always, we emphasize a balance of research and application. For the new ninth edition we have incorporated important new content in the areas of sustainability and sustainable management practices, the emergence and role of social media as a means of transacting business around the world, the rise of emerging market multinationals and the challenges they pose for developed country MNCs, and other important developments in the international management field. Many of these topics— such as social media—are integrated throughout the book, as they touch on—and influence—many aspects of international management. We have incorporated the latest research and practical insights on pressure for MNCs to adopt more sustainable practices, and the strategies many companies are using to differentiate their products through such “green” management practices. We have updated discussion of a range of contemporary topics, including continued exploration of the role of the comprehensive GLOBE study on cross-cultural leadership. A continuing and relevant end-of-chapter feature in this edition is the “Internet Exercise.” The purpose of each exercise is to encourage students to use the Internet to find information from the websites of prominent MNCs to answer relevant questions about the chapter topic. An end-of-book feature is a series of Skill-Building and Experiential Exercises for aspiring international managers. These in-class exercises represent the various parts of the text (culture, strategy, and behavior) and provide hands-on experience. We have extended from the eighth edition of International Management the chapteropening discussions called “The World of International Management” (WIM) based on very recent, relevant news stories to grab readers’ interest and attention. Many of these opening articles are new to this edition and all have been updated. These timely opening discussions transition the reader into the chapter topic. At the end of each chapter, there is a pedagogical feature that recapitulates the chapter’s subject matter: “The World of International Management—Revisited.” Here we pose several discussion questions based on the topic of the opening feature in light of the student’s entire reading of the chapter. Answering these questions requires readers to reconsider and to draw from the chapter material. Suggested answers to these “WIM—Revisited” discussion questions appear in www.MyEbookNiche.eCrater.com Preface vii the completely updated Instructor’s Manual, where we also provide some multiple-choice and true-false questions that draw directly from the chapters’ World of International Management topic matter for instructors who want to include this material in their tests. The use and application of cases is further enhanced in this edition. All cases have been updated and several new ones have been added. The short within-chapter country case illustrations—“In the International Spotlight”—can be read and discussed in class. These have all been revised and two have been added—Turkey and Indonesia. The revised or newly added “Integrative Cases” positioned at the end of each main part of the text were created exclusively for this edition and provide opportunities for reading and analysis outside of class. Review questions provided for each case are intended to facilitate lively and productive written analysis or in-class discussion. Our “Brief Integrative Cases” typically explore a specific situation or challenge facing an individual or team. Our longer and more detailed “In-Depth Integrative Cases” provide a broader discussion of the challenges facing a company. These two formats allow maximum flexibility so that instructors can use the cases in a tailored and customized fashion. Accompanying many of the in-depth cases are short exercises that can be used in class to reinforce both the substantive topic and students’ skills in negotiation, presentation, and analysis. The cases have been extensively updated and several are new to this edition. Cases concerning the global AIDS epidemic, Dansko, Russell Athletics/Fruit of the Loom, Euro Disneyland and Disney Asia, Google in China, IKEA, HSBC, Nike, Walmart, Tata, AirAsia, Sony, Danone, Chiquita, Coca-Cola, and others are unique to this book and specific to this edition. Of course, instructors also have access to Create (www.mcgraw-hillcreate.com), McGraw-Hill’s extensive content database, which includes thousands of cases from major sources such as Harvard Business School, Ivey, Darden, and NACRA case databases. Along with the new or updated “International Management in Action” boxed application examples within each chapter and other pedagogical features at the end of each chapter (i.e., “Key Terms,” “Review and Discussion Questions,” “The World of International Management—Revisited,” and “Internet Exercise”), the end-of-part brief and indepth cases and the end-of-book skill-building exercises and simulations on the Online Learning Center complete the package. To help instructors teach international management, this text is accompanied by a revised and expanded Instructor’s Resource Manual, Test Bank, and PowerPoint Slides, all of which are available password protected on the Online Learning Center at www. mhhe.com/luthans9e. Another important innovation is carried over and updated from the 8th edition: we have provided instructors with a guide to online publicly available videos, many available on YouTube, that link directly to chapter themes. These short clips give instructors an opportunity to use online visual media in conjunction with traditional lecture, discussion, and PowerPoint presentations. Our guide includes the name, short description, and link for the videos, which we will keep updated on the book website. International Management is generally recognized to be the first “mainstream” text of its kind. Strategy casebooks and specialized books in organizational behavior, human resources, and, of course, international business, finance, marketing, and economics preceded it, but there were no international management texts before this one, and it remains the market leader. We have had sustainability because of the effort and care put into the revisions. We hope you agree that this ninth edition continues the tradition and remains the “world-class” text for the study of international management. Acknowledgments We would like to acknowledge those who have helped to make this book a reality. We will never forget the legacy of international management education in general and for this text in particular provided by our departed colleague Richard M. Hodgetts. Special thanks also go to our growing number of colleagues throughout the world who have given us many ideas and inspired us to think internationally. Closer to home, Fred Luthans would www.MyEbookNiche.eCrater.com viii Preface like to give special recognition to two international management scholars: Henry H. Albers, former Chair of the Management Department at the University of Nebraska and former Dean at the University of Petroleum and Minerals, Saudi Arabia, to whom previous editions of this book were dedicated; and Sang M. Lee, former Chair of the Management Department at Nebraska, founding and current President of the Pan Pacific Business Association, and close colleague on many ventures around the world over the past 30 years. Jonathan Doh would like to thank the Villanova School of Business and its leadership, especially Dean Pat Maggitti, Vice Dean Daniel Wright, and Herb Rammrath who generously endowed the Chair in International Business Jonathan now holds. Also, for this new ninth edition we would like to thank Ben Littell, who did much of the research and drafting of the chapter opening World of International Management features and provided extensive research assistance for other revisions to the book. In addition, we would like to acknowledge the help that we received from the many reviewers from around the globe, whose feedback guided us in preparing the ninth edition of the text. These include: Thomas M. Abbott, Post University David Elloy, Gonzaga University James Gran, Buena Vista University Julie Huang, Rio Hondo College Jae C. Jung, University of Missouri– Kansas City Emeric Solymossy, Western Illinois University. Our thanks, too, to the reviewers of previous editions of the text: Yohannan T. Abraham, Southwest Missouri State University Janet S. Adams, Kennesaw State University Irfan Ahmed, Sam Houston State University Chi Anyansi-Archibong, North Carolina A&T State University Kibok Baik, James Madison University R. B. Barton, Murray State University Lawrence A. Beer, Arizona State University Koren Borges, University of North Florida Tope A. Bello, East Carolina University Mauritz Blonder, Hofstra University Gunther S. Boroschek, University of Massachusetts–Boston Charles M. Byles, Virginia Commonwealth University Constance Campbell, Georgia Southern University Scott Kenneth Campbell, Georgia College & State University M. Suzanne Clinton, University of Central Oklahoma Helen Deresky, SUNY Plattsburgh Dr. Dharma deSilva, Center for International Business Advancement (CIBA) Val Finnigan, Leeds Metropolitan University David M. Flynn, Hofstra University Jan Flynn, Georgia College and State University www.MyEbookNiche.eCrater.com Joseph Richard Goldman, University of Minnesota Robert T. Green, University of Texas at Austin Annette Gunter, University of Central Oklahoma Jerry Haar, Florida International University–Miami Jean M. Hanebury, Salisbury State University Richard C. Hoffman, Salisbury State University Johan Hough, University of South Africa Steve Jenner, California State University–Dominguez Hills James P. Johnson, Rollins College Marjorie Jones, Nova Southeastern University Ann Langlois, Palm Beach Atlantic University Curtis Matherne III, East Tennessee State University Alan N. Miller, University of Nevada, Las Vegas Mohd Nazari Ismail, University of Malaya Robert Kuhne, Hofstra University Christine Lentz, Rider University Ben Lever III, College of Charleston Robert C. Maddox, University of Tennessee Preface Douglas M. McCabe, Georgetown University Jeanne M. McNett, Assumption College Lauryn Migenes, University of Central Florida Ray Montagno, Ball State University Rebecca J. Morris, University of Nebraska–Omaha Ernst W. Neuland, University of Pretoria William Newburry, Rutgers Business School Yongsun Paik, Loyola Marymount University Valerie S. Perotti, Rochester Institute of Technology Richard B. Peterson, University of Washington Suzanne J. Peterson, University of Nebraska–Lincoln Joseph A. Petrick, Wright State University Juan F. Ramirez, Nova Southeastern University Richard David Ramsey, Southeastern Louisiana University Mansour Sharif-Zadeh, California State Polytechnic University–Pomona ix Owen Sevier, University of Central Oklahoma Jane H. Standford, Texas A&M University– Kingsville Dale V. Steinmann, San Francisco State University Randall Stross, San Jose State University George Sutija, Florida International University Deanna Teel, Houston Community College David Turnipseed, University of South Alabama–Mobile Katheryn H. Ward, Chicago State University Li Weixing, University of Nebraska– Lincoln Aimee Wheaton, Regis College Timothy Wilkinson, University of Akron Marion M. White, James Madison University George Yacus, Old Dominion University Corinne Young, University of Tampa Zhe Zhang, University of Central Florida–Orlando Anatoly Zhuplev, Loyola Marymount University Finally, thanks to the team at McGraw-Hill who worked on this book: Paul Ducham, Managing Director; Anke Weekes, Senior Brand Manager; Kelly Delso, Senior Developmental Editor; Lori Bradshaw, Managing Developmental Editor; Michael Gedatus, Marketing Manager; and Jessica Portz, Project Manager. Last but by no means least, we greatly appreciate the love and support provided by our families. Fred Luthans and Jonathan P. Doh www.MyEbookNiche.eCrater.com LUTHANS DOH Doh The ninth edition of International Management: Culture, Strategy, and Behavior is still setting the standard. New and Enhanced Themes • • • Current authors Fred Luthans and • Jonathan P. Doh have taken care to retain the effective • • foundation gained from research and practice over the past decades. At the Thoroughly Revised and Updated Chapter Content • same time, they have fully incorporated important new and emerging developments that have changed what international managers • • • are currently facing and likely to face in the coming years. Thoroughly revised and updated chapters to reflect the most critical issues for international managers. Greater attention to and focus on global sustainability and sustainable management practices and their impact on international management. New or revised opening World of International Management features written by the authors on current international management challenges; these mini-cases were prepared expressly for this edition and are not available elsewhere. Discussions of the impact of the global economic recession on international management in the opening chapter and throughout the book, and the aftermath and ongoing challenges associated with the “Arab Spring” (in Chapter 2). New and updated discussions of project GLOBE and its importance for international management. Greater emphasis on emerging markets and developing countries, and the increasing influence of emerging markets multinationals on global competition. • New or revised opening WIM discussions on topics including the global influences of social media, the role of social networking in the Arab Spring, sustainability as a global competitive advantage, Apple vs. Samsung, Amazon vs. Alibaba, global trends in the automotive and pharmaceutical industries, managing global teams, offshoring and culture, and many other subjects. These features were written expressly for this edition and are not available elsewhere. Updated and strengthened emphasis on ethics, social responsibility, and sustainability. Extensive coverage of Project GLOBE, its relationship to other cultural frameworks, and its application to international management practice (Chapters 4, 13). Revised or new “In the International Spotlight” inserts which profile the key economic and political issues relevant to managers in specific countries, including new spotlights on Turkey and Indonesia. Greater coverage of the challenges and opportunities for international strategy targeted to the developing “base of the pyramid” economies (Chapter 8, and Tata cases). x www.MyEbookNiche.eCrater.com CONTINUES TO SET THE STANDARD. . . Thoroughly Updated and/or New Cases, Inserts, and Exercises • • • New and/or updated country spotlights, “International Management in Action” features. Thoroughly updated cases (not available elsewhere): Pharmaceutical Companies, Intellectual Property, and the Global AIDS Epidemic; Advertising or Free Speech? The Case of Nike and Human Rights; Beyond Tokyo: Disney’s Expansion In Asia; HSBC in China; Coca Cola in India; Walmart’s Global Strategies; Can Sony Regain its Innovative Edge? The OLED Project; Tata “Nano”: The People’s Car; The Ascendance of AirAsia: Building a Successful Budget Airline; and Chiquita’s Global Turnaround. Brand new end-of-part cases developed exclusively for this edition (not available elsewhere): Dansko puts its Right Foot Forward, Google in China: Protecting Property and Rights; IKEA’s Global Renovations. Totally Revised Instructor and Student Support The following instructor and student support materials can be found on the Online Learning Center (OLC) for the Ninth Edition. You can access the OLC at www.mhhe.com/luthans9e. • • • • • • The Instructor’s Manual offers a summary of Learning Objectives and teaching outline with lecture notes and teaching tips, as well as suggested answers to questions found throughout and at the conclusion of each chapter. Suggested answers are also provided for all the cases found in the book. The TestBank is offered in both Word and EZ Test formats and offers over 1,000 test items consisting of true/false, multiple choice, and essay. Answers are provided for all testbank questions. PowerPoint Presentations consisting of 30 slides per chapter give instructors talking points, feature exhibits from the text, and are summarized with a review and discussion slide. Student Quizzes are provided for each chapter and give students feedback to help them understand where additional study is required. A guide to videos available online, with title, short description, and url. Create: Instructors can now tailor their teaching resources to match the way they teach! With McGraw-Hill Create, www.mcgrawhillcreate. com, instructors can easily rearrange chapters, combine material from other content sources, and quickly upload and integrate their own content, like course syllabi or teaching notes. Find the right content in Create by searching through thousands of leading McGraw-Hill textbooks. Arrange the material to fit your teaching style. Order a Create book and receive a complimentary print review copy in 3–5 business xi www.MyEbookNiche.eCrater.com xii Continues to Set the Standard. . . days or a complimentary electronic review copy (echo) via e-mail within one hour. Go to www.mcgrawhillcreate.com today and register. McGraw-Hill Campus™ McGraw-Hill Campus is a new one-stop teaching and learning experience available to users of any learning management system. This institutional service allows faculty and students to enjoy single sign-on (SSO) access to all McGraw-Hill Higher Education materials, including the award-winning McGraw-Hill Connect platform, from directly within the institution’s website. With McGraw-Hill Campus, faculty receive instant access to teaching materials (e.g., eTextbooks, test banks, PowerPoint slides, learning objectives, etc.), allowing them to browse, search, and use any instructor ancillary content in our vast library at no additional cost to instructor or students. In addition, students enjoy SSO access to a variety of free content and subscription-based products (e.g., McGraw-Hill Connect). With McGraw-Hill Campus enabled, faculty and students will never need to create another account to access McGraw-Hill products and services. Learn more at www.mhcampus.com. Assurance of Learning Ready Many educational institutions today focus on the notion of assurance of learning, an important element of some accreditation standards. International Business is designed specifically to support instructors’ assurance of learning initiatives with a simple yet powerful solution. Each test bank question for International Business maps to a specific chapter learning objective listed in the text. Instructors can use our test bank software, EZ Test and EZ Test Online, to easily query for learning objectives that directly relate to the learning outcomes for their course. Instructors can then use the reporting features of EZ Test to aggregate student results in similar fashion, making the collection and presentation of assurance of learning data simple and easy. AACSB Tagging McGraw-Hill Education is a proud corporate member of AACSB International. Understanding the importance and value of AACSB accreditation, International Business recognizes the curricula guidelines detailed in the AACSB standards for business accreditation by connecting selected questions in the text and the test bank to the six general knowledge and skill guidelines in the AACSB standards. The statements contained in International Business are provided only as a guide for the users of this textbook. The AACSB leaves content coverage and assessment within the purview of individual schools, the mission of the school, and the faculty. While the International Business teaching package makes no claim of any specific AACSB qualification or evaluation, we have within International Business labeled selected questions according to the six general knowledge and skills areas. www.MyEbookNiche.eCrater.com About the Authors FRED LUTHANS is University and the George Holmes Distinguished Professor of Management at the University of Nebraska–Lincoln. He is also Chair of the Master Research Council for HUMANeX, Inc. He received his BA, MBA, and PhD from the University of Iowa, where he received the Distinguished Alumni Award in 2002. While serving as an officer in the U.S. Army from 1965–1967, he taught leadership at the U.S. Military Academy at West Point. He has been a visiting scholar at a number of colleges and universities and has lectured in most European and Pacific Rim countries. He has taught international management as a visiting faculty member at the universities of Bangkok, Hawaii, Henley in England, Norwegian Management School, Monash in Australia, Macau, Chemnitz in the former East Germany, and Tirana in Albania. A past president of the Academy of Management, in 1997 he received the Academy’s Distinguished Educator Award. In 2000 he became an inaugural member of the Academy’s Hall of Fame for being one of the “Top Five” all-time published authors in the prestigious Academy journals. Currently, he is coeditor-in-chief of the Journal of World Business, editor of Organizational Dynamics, coeditor of Journal of Leadership and Organization Studies, and the author of numerous books. His book Organizational Behavior (Irwin/McGraw-Hill) is now in its 12th edition and the groundbreaking book Psychological Capital (Oxford University Press) with Carolyn Youssef and Bruce Avolio will be out in its second edition in 2014. He is one of very few management scholars who is a Fellow of the Academy of Management, the Decision Sciences Institute, and the Pan Pacific Business Association, and he has been a member of the Executive Committee for the Pan Pacific Conference since its beginning 30 years ago. This committee helps to organize the annual meeting held in Pacific Rim countries. He has been involved with some of the first empirical studies on motivation and behavioral management techniques and the analysis of managerial activities in Russia; these articles have been published in the Academy of Management Journal, Journal of International Business Studies, Journal of World Business, and European Management Journal. Since the very beginning of the transition to market economies after the fall of communism in Eastern Europe, he has been actively involved in management education programs sponsored by the U.S. Agency for International Development in Albania and Macedonia, and in U.S. Information Agency programs involving the Central Asian countries of Kazakhstan, Kyrgyzstan, and Tajikistan. For example, Professor Luthans’ recent international research involves his construct of positive psychological capital (PsyCap). He and colleagues have published their research demonstrating the impact of Chinese workers’ PsyCap on their performance in the International Journal of Human Resource Management and Management and Organization Review. He is applying his positive approach to positive organizational behavior (POB), PsyCap, and authentic leadership to effective global management and has recently been the keynote at programs in China (several times), Malaysia, Korea, Indonesia, England, Norway, Finland, South Africa, and soon Italy. JONATHAN P. DOH is the Herbert G. Rammrath Chair in International Business, founding Director of the Center for Global Leadership, and Professor of Management at the Villanova School of Business. Jonathan teaches, does research, and serves as an executive instructor and consultant in the areas of international strategy and corporate responsibility and serves as an occasional executive educator for the Aresty Institute of Executive Education at the Wharton Business School. Previously, he was on the faculty of American and Georgetown Universities and a senior trade official with the U.S. government. Jonathan is author or co-author of more than 75 refereed articles published in the top international xiii www.MyEbookNiche.eCrater.com xiv About the Authors business and management journals, 30 chapters in scholarly edited volumes, and more than 75 conference papers. Recent articles have appeared in journals such as Academy of Management Review, California Management Review, Journal of International Business Studies, Journal of World Business, Organization Science, Sloan Management Review, and Strategic Management Journal. He is co-editor and contributing author of Globalization and NGOs (Praeger, 2003) and Handbook on Responsible Leadership and Governance in Global Business (Elgar, 2005) and co-author of the previous edition of International Management: Culture, Strategy, and Behavior (8th ed., McGraw-Hill/Irwin, 2012), the best-selling international management text. His current research focus is on strategy for emerging markets, global corporate responsibility, and offshore outsourcing of services. His most recent scholarly books are Multinationals and Development (with Alan Rugman, Yale University Press, 2008), NGOs and Corporations: Conflict and Collaboration (with Michael Yaziji, Cambridge University Press, 2009) and Aligning for Advantage: Competitive Strategy for the Social and Political Arenas (with Tom Lawton and Tazeeb Rajwani, Oxford University Press, 2014). He is co-Editor-in-Chief of MRN International Environment of Global Business (SSRN Journal), Senior Editor of Journal of World Business, Associate Editor of Business & Society, and Consulting Editor of Long Range Planning. Beginning in January of 2015 he will assume the position of Editor-in-Chief of Journal of World Business. Jonathan has also developed more than a dozen original cases and simulations published in books, journals, and case databases and used at many leading global universities. He has been a consultant or executive instructor for ABB, Anglo American, Bodycote, Bosch, China Minsheng Bank, Hana Financial, HSBC, Ingersoll Rand, Medtronic, Shanghai Municipal Government, Siam Cement, the World Economic Forum, and Deloitte Touche, where he served as senior external adviser to the Global Energy Resource Group. Jonathan is part of the Executive Committee of the Academy of Management Organizations and Natural Environment Division with increasing responsibilities culminating in the chair of the division in 2016. He was ranked among the top 15 most prolific international business scholars in the world for the period 2001–2009 (Lahiri and Kumar, 2012). He holds a PhD in strategic and international management from George Washington University. www.MyEbookNiche.eCrater.com Brief Contents Part One Environmental Foundation 1 Globalization and International Linkages 2 The Political, Legal, and Technological Environment 3 Ethics, Social Responsibility, and Sustainability Brief Integrative Case 1.1: Advertising or Free Speech? The Case of Nike and Human Rights Brief Integrative Case 1.2: Dansko Puts Its Right Foot Forward In-Depth Integrative Case 1.1: Student Advocacy and “Sweatshop” Labor: The Case of Russell Athletic In-Depth Integrative Case 1.2: Pharmaceutical Companies, Intellectual Property, and the Global AIDS Epidemic 2 36 62 87 89 92 97 Part Two The Role of Culture 4 5 6 7 The Meanings and Dimensions of Culture Managing Across Cultures Organizational Cultures and Diversity Cross-Cultural Communication and Negotiation Brief Integrative Case 2.1: Coca-Cola in India Brief Integrative Case 2.2: Danone’s Wrangle with Wahaha In-Depth Integrative Case 2.1a: Euro Disneyland In-Depth Integrative Case 2.1b: Beyond Tokyo: Disney’s Expansion in Asia In-Depth Integrative Case 2.2: Walmart’s Global Strategies 110 146 174 200 238 244 250 260 264 Part Three International Strategic Management 8 9 10 11 Strategy Formulation and Implementation Entry Strategies and Organizational Structures Managing Political Risk, Government Relations, and Alliances Management Decision and Control Brief Integrative Case 3.1: Google in China: Protecting Property and Rights 274 306 342 366 392 xv www.MyEbookNiche.eCrater.com xvi Brief Contents Brief Integrative Case 3.2: Can Sony Regain Its Innovative Edge? The OLED Project In-Depth Integrative Case 3.1: Tata “Nano”: The People’s Car In-Depth Integrative Case 3.2: The Ascendance of AirAsia: Building a Successful Budget Airline in Asia Part Four 397 402 411 Organizational Behavior and Human Resource Management 12 Motivation Across Cultures 13 Leadership Across Cultures 14 Human Resource Selection and Development Across Cultures Brief Integrative Case 4.1: IKEA’s Global Renovations In-Depth Integrative Case 4.1: HSBC in China In-Depth Integrative Case 4.2: Chiquita’s Global Turnaround 422 454 492 537 544 560 Skill-Building and Experiential Exercises References Endnotes Glossary Indexes 587 591 631 637 www.MyEbookNiche.eCrater.com Table of Contents Environmental Foundation 1 Part One Globalization and International Linkages 2 The World of International Management: An Interconnected World Introduction Globalization and Internationalization 2 4 6 Globalization, Antiglobalization, and Global Pressures 6 Global and Regional Integration 9 The Shifting Balance of Economic Power in the Global Economy Global Economic Systems 19 Market Economy 19 Command Economy 19 Mixed Economy 20 Economic Performance and Issues of Major Regions 2 12 20 Established Economies 20 Emerging Economies 22 Developing Economies on the Verge 26 The World of International Management—Revisited 30 Summary of Key Points 32 Key Terms 32 Review and Discussion Questions 32 Answers to the In-Chapter Quiz 33 Internet Exercise: Global Competition in Fast Food 33 In the International Spotlight: India 34 The Political, Legal, and Technological Environment 36 The World of International Management: Social Media and the Pace of Change 36 Political Environment 38 Ideologies 39 Political Systems 41 Legal and Regulatory Environment 44 Basic Principles of International Law 44 Examples of Legal and Regulatory Issues 45 Privatization 48 Regulation of Trade and Investment 50 Technological Environment and Global Shifts in Production 51 Trends in Technology, Communication, and Innovation 51 xvii www.MyEbookNiche.eCrater.com xviii Table of Contents 3 Biotechnology 53 E-Business 54 Telecommunications 55 Technological Advancements, Outsourcing, and Offshoring 56 The World of International Management—Revisited Summary of Key Points Key Terms Review and Discussion Questions Internet Exercise: Hitachi Goes Worldwide In the International Spotlight: Vietnam 58 59 59 59 60 61 Ethics, Social Responsibility, and Sustainability 62 The World of International Management: Sustaining Sustainable Companies 62 Ethics and Social Responsibility 64 Ethics and Social Responsibility in International Management 65 Ethics Theories and Philosophy 65 Human Rights 66 Labor, Employment, and Business Practices 68 Environmental Protection and Development 69 Globalization and Ethical Obligations of MNCs 71 Reconciling Ethical Differences across Cultures 73 Corporate Social Responsibility and Sustainability 74 Corporate Governance 78 Corruption 79 International Assistance 81 The World of International Management—Revisited Summary of Key Points Key Terms Review and Discussion Questions Internet Exercise: Social Responsibility at Johnson & Johnson and HP In the International Spotlight: Saudi Arabia Brief Integrative Case 1.1: Advertising or Free Speech? The Case of Nike and Human Rights Brief Integrative Case 1.2: Dansko Puts its Right Foot Forward In-Depth Integrative Case 1.1: Student Advocacy and “Sweatshop” Labor: The Case of Russell Athletic In-Depth Integrative Case 1.2: Pharmaceutical Companies, Intellectual Property, and the Global AIDS Epidemic Part Two 83 84 84 84 85 86 87 89 92 97 The Role of Culture 4 The Meanings and Dimensions of Culture 110 The World of International Management: The Cultural Roots of Toyota’s Quality Crisis 110 www.MyEbookNiche.eCrater.com Table of Contents xix The Nature of Culture 112 Cultural Diversity 113 Values in Culture 117 Value Differences and Similarities across Cultures 117 Values in Transition 118 Cultural Dimensions 120 Hofstede 120 Trompenaars 127 Integrating Culture and Management: The GLOBE Project 136 Culture and Management 137 GLOBE’s Cultural Dimensions 138 GLOBE Country Analysis 138 The World of International Management—Revisited Summary of Key Points Key Terms Review and Discussion Questions Internet Exercise: Renault-Nissan in South Africa In the International Spotlight: South Africa 5 Managing Across Cultures 141 141 142 142 143 144 146 The World of International Management: Apple v. Samsung: Comparing Corporate Culture 146 The Strategy for Managing across Cultures 148 Strategic Predispositions 149 Meeting the Challenge 150 Cross-Cultural Differences and Similarities 153 Parochialism and Simplification 153 Similarities across Cultures 156 Many Differences across Cultures 156 Cultural Differences in Selected Countries and Regions 160 Doing Business in China 161 Doing Business in Russia 163 Doing Business in India 165 Doing Business in France 166 Doing Business in Brazil 167 Doing Business in Arab Countries 168 The World of International Management—Revisited Summary of Key Points Key Terms Review and Discussion Questions Internet Exercise: Haier’s Approach In the International Spotlight: Mexico 6 Organizational Cultures and Diversity The World of International Management: Managing Culture and Diversity in Global Teams www.MyEbookNiche.eCrater.com 170 171 171 171 171 172 174 174 xx Table of Contents The Nature of Organizational Culture 176 Definition and Characteristics 177 Interaction between National and Organizational Cultures 178 Organizational Cultures in MNCs 182 Family Culture 184 Eiffel Tower Culture 184 Guided Missile Culture 185 Incubator Culture 186 Managing Multiculturalism and Diversity 188 Types of Multiculturalism 190 Potential Problems Associated with Diversity 192 Advantages of Diversity 193 Building Multicultural Team Effectiveness 194 The World of International Management—Revisited Summary of Key Points Key Terms Review and Discussion Questions Internet Exercise: Lenovo’s International Focus In the International Spotlight: Japan 7 188 Phases of Multicultural Development 196 196 197 197 197 199 Cross-Cultural Communication and Negotiation 200 The World of International Management: Offshoring Culture and Communication The Overall Communication Process 200 203 Verbal Communication Styles 203 Interpretation of Communications 206 Communication Flows 207 Downward Communication 207 Upward Communication 209 Communication Barriers 210 Language Barriers 210 Perceptual Barriers 213 The Impact of Culture 215 Nonverbal Communication 217 Achieving Communication Effectiveness 220 Improve Feedback Systems 220 Provide Language Training 220 Provide Cultural Training 221 Increase Flexibility and Cooperation 221 Managing Cross-Cultural Negotiations Types of Negotiation 223 223 The Negotiation Process 224 Cultural Differences Affecting Negotiations 225 www.MyEbookNiche.eCrater.com Table of Contents xxi Negotiation Tactics 228 Negotiating for Mutual Benefit 229 Bargaining Behaviors 231 The World of International Management—Revisited Summary of Key Points Key Terms Review and Discussion Questions Internet Exercise: Working Effectively at Toyota In the International Spotlight: China Brief Integrative Case 2.1: Coca-Cola in India Brief Integrative Case 2.2: Danone’s Wrangle with Wahaha In-Depth Integrative Case 2.1a: Euro Disneyland In-Depth Integrative Case 2.1b: Beyond Tokyo: Disney’s Expansion in Asia In-Depth Integrative Case 2.2: Walmart’s Global Strategies 234 235 235 236 236 237 238 244 250 260 264 Part Three International Strategic Management 8 Strategy Formulation and Implementation The World of International Management: Big Pharma Goes Global Strategic Management 274 274 277 The Growing Need for Strategic Management 278 Benefits of Strategic Planning 279 Approaches to Formulating and Implementing Strategy 279 Global and Regional Strategies 283 The Basic Steps in Formulating Strategy 286 Environmental Scanning 286 Internal Resource Analysis 288 Goal Setting for Strategy Formulation 288 Strategy Implementation 290 Location Considerations for Implementation 290 Combining Country and Firm-Specific Factors in International Strategy 292 The Role of the Functional Areas in Implementation 293 Specialized Strategies 295 Strategies for Emerging Markets 295 Entrepreneurial Strategy and New Ventures 301 The World of International Management—Revisited Summary of Key Points Key Terms Review and Discussion Questions Internet Exercise: Infosys’s Global Strategy 302 303 303 303 304 In the International Spotlight: Poland 305 www.MyEbookNiche.eCrater.com xxii Table of Contents 9 Entry Strategies and Organizational Structures 306 The World of International Management: Volkswagen’s Comeback: Aligning Strategy and Structure Entry Strategies and Ownership Structures 306 308 Export/Import 308 Wholly Owned Subsidiary 309 Mergers/Acquisitions 309 Alliances and Joint Ventures 314 Alliances, Joint Ventures, and M&A: The Case of the Automotive Industry 316 Licensing 317 Franchising 320 The Organization Challenge Basic Organizational Structures 320 321 Initial Division Structure 321 International Division Structure 322 Global Structural Arrangements 324 Transnational Network Structures 328 Nontraditional Organizational Arrangements 330 Organizational Arrangements from Mergers, Acquisitions, Joint Ventures, and Alliances 330 The Emergence of the Network Organizational Forms Organizing for Product Integration Organizational Characteristics of MNCs 332 332 334 Formalization 334 Specialization 335 Centralization 336 Putting Organizational Characteristics in Perspective 336 The World of International Management—Revisited Summary of Key Points Key Terms Review and Discussion Questions Internet Exercise: Organizing for Effectiveness In the International Spotlight: Australia 10 Managing Political Risk, Government Relations, and Alliances The World of International Management: Shell’s Russian Roulette The Nature and Analysis of Political Risk 338 338 339 339 339 340 342 342 344 Macro and Micro Analysis of Political Risk 345 Terrorism and Its Overseas Expansion 349 Analyzing the Expropriation Risk 349 Managing Political Risk and Government Relations Developing a Comprehensive Framework or Quantitative Analysis www.MyEbookNiche.eCrater.com 350 350 Table of Contents xxiii Techniques for Responding to Political Risk 352 Relative Bargaining Power Analysis 352 Managing Alliances 357 The Alliance Challenge 357 The Role of Host Governments in Alliances 359 Examples of Challenges and Opportunities in Alliance Management 360 The World of International Management—Revisited Summary of Key Points Key Terms Review and Discussion Questions Internet Exercise: Nokia in China In the International Spotlight: Brazil 11 Management Decision and Control 361 362 362 362 363 364 366 The World of International Management: Global Online Retail: Amazon v. Alibaba 366 Decision-Making Process and Challenges 368 Factors Affecting Decision-Making Authority 369 Cultural Differences and Comparative Examples of Decision Making 372 Total Quality Management Decisions 373 Decisions for Attacking the Competition 375 Decision and Control Linkages The Controlling Process 376 377 Types of Control 378 Approaches to Control 380 Performance Evaluation as a Mechanism of Control 382 Financial Performance 382 Quality Performance 383 Personnel Performance 386 The World of International Management—Revisited Summary of Key Points Key Terms Review and Discussion Questions Internet Exercise: Looking at the Best In the International Spotlight: Turkey Brief Integrative Case 3.1: Google in China: Protecting Property and Rights Brief Integrative Case 3.2: Can Sony Regain Its Innovative Edge? The OLED Project In-Depth Integrative Case 3.1: Tata “Nano”: The People’s Car In-Depth Integrative Case 3.2: The Ascendance of AirAsia: Building a Successful Budget Airline in Asia www.MyEbookNiche.eCrater.com 388 389 389 389 390 391 392 397 402 411 xxiv Table of Contents Part Four Organizational Behavior and Human Resource Management 12 Motivation Across Cultures 422 The World of International Management: Motivating Employees in a Multicultural Context: Insights from the Emerging Markets 422 The Nature of Motivation 424 The Universalist Assumption 425 The Assumption of Content and Process 426 The Hierarchy-of-Needs Theory 427 The Maslow Theory 427 International Findings on Maslow’s Theory 427 The Two-Factor Theory of Motivation 431 The Herzberg Theory 431 International Findings on Herzberg’s Theory 433 Achievement Motivation Theory 437 The Background of Achievement Motivation Theory 437 International Findings on Achievement Motivation Theory 438 Select Process Theories 439 Equity Theory 439 Goal-Setting Theory 441 Expectancy Theory 441 Motivation Applied: Job Design, Work Centrality, and Rewards 442 Job Design 442 Sociotechnical Job Designs 443 Work Centrality 444 Incentives and Culture 448 The World of International Management—Revisited Summary of Key Points Key Terms Review and Discussion Questions Internet Exercise: Motivating Potential Employees In the International Spotlight: Indonesia 13 Leadership Across Cultures 450 450 452 452 452 453 454 The World of International Management: Global Leadership Development: An Emerging Need 454 Foundation for Leadership 456 The Manager-Leader Paradigm 456 Philosophical Background: Theories X, Y, and Z 458 Leadership Behaviors and Styles 461 The Managerial Grid Performance: A Japanese Perspective 462 Leadership in the International Context www.MyEbookNiche.eCrater.com 465 Table of Contents xxv Attitudes of European Managers toward Leadership Practices 465 Japanese Leadership Approaches 467 Differences between Japanese and U.S. Leadership Styles 468 Leadership in China 470 Leadership in the Middle East 471 Leadership Approaches in India 471 Leadership Approaches in Latin America 472 Recent Findings and Insights about Leadership Transformational, Transactional, and Charismatic Leadership 473 473 Qualities for Successful Leaders 475 Culture Clusters and Leader Effectiveness 477 Leader Behavior, Leader Effectiveness, and Leading Teams 478 Cross-Cultural Leadership: Insights from the GLOBE Study 478 Positive Organizational Scholarship and Leadership 482 Authentic Leadership 482 Ethical, Responsible, and Servant Leadership 485 Entrepreneurial Leadership and Mindset 486 The World of International Management—Revisited Summary of Key Points Key Terms Review and Discussion Questions Internet Exercise: Taking a Closer Look In the International Spotlight: Germany 487 487 488 489 489 490 14 Human Resource Selection and Development Across Cultures 492 The World of International Management: The Challenge of Talent Retention in India 492 The Importance of International Human Resources 495 Getting the Employee Perspective 495 Employees as Critical Resources 496 Investing in International Assignments 496 Economic Pressures 496 Sources of Human Resources 498 Home-Country Nationals 498 Host-Country Nationals 498 Third-Country Nationals 499 Subcontracting and Outsourcing 500 Selection Criteria for International Assignments 503 General Criteria 503 Adaptability to Cultural Change 504 Physical and Emotional Health 505 Age, Experience, and Education 505 Language Training 506 Motivation for a Foreign Assignment 506 www.MyEbookNiche.eCrater.com xxvi Table of Contents Spouses and Dependents or Work-Family Issues 506 Leadership Ability 507 Other Considerations 507 Economic Pressures and Trends in Expat Assignments 509 International Human Resource Selection Procedures 510 Testing and Interviewing Procedures 510 The Adjustment Process 510 Compensation 512 Common Elements of Compensation Packages 513 Tailoring the Package 515 Individual and Host-Country Viewpoints 516 Candidate Motivations 516 Host-Country Desires 517 Repatriation of Expatriates 518 Reasons for Returning 518 Readjustment Problems 518 Transition Strategies 519 Training in International Management 520 The Impact of Overall Management Philosophy on Training 522 The Impact of Different Learning Styles on Training and Development 523 Reasons for Training 524 Types of Training Programs 526 Standardized vs. Tailor-Made Cultural Assimilators Positive Organizational Behavior Future Trends 526 529 530 531 The World of International Management—Revisited Summary of Key Points Key Terms Review and Discussion Questions Internet Exercise: Going International with Coke In the International Spotlight: Russia Brief Integrative Case 4.1: IKEA’s Global Renovations In-Depth Integrative Case 4.1: HSBC in China In-Depth Integrative Case 4.2: Chiquita’s Global Turnaround 531 533 534 534 535 536 537 544 560 Skill-Building and Experiential Exercises Personal Skill-Building Exercises 1. The Culture Quiz 2. Using Gung Ho to Understand Cultural Differences www.MyEbookNiche.eCrater.com 569 570 575 Table of Contents xxvii 3. “When in Bogotá . . .” 4. The International Cola Alliances 5. Whom to Hire? 577 580 584 In-Class Simulations (available on the Online Learning Center at www.mhhe.com/luthans9e) 1. “Frankenfoods” or Rice Bowl for the World: The U.S.–EU Dispute over Trade in Genetically Modified Organisms 2. Cross-Cultural Conflicts in the Corning–Vitro Joint Venture References 587 Endnotes 591 Glossary 631 Name and Organization Index 637 Subject Index 649 www.MyEbookNiche.eCrater.com PART ONE ENVIRONMENTAL FOUNDATION www.MyEbookNiche.eCrater.com Chapter 1 OBJECTIVES OF THE CHAPTER GLOBALIZATION AND INTERNATIONAL LINKAGES Globalization is one of the most profound forces in our contemporary economic environment. And its practical impact on international management is substantial. In nearly every country, increasing numbers of large, medium, and even small corporations are going international, and a growing percentage of company revenue is derived from overseas markets. This is even true for U.S.-based companies that historically have relied on the large domestic market. Yet, the reverberations of the financial crisis and global economic recession, and continued economic and political uncertainties in many world regions present challenges for governments, corporations, and communities around the world, causing some to question the current system for regulating and overseeing international trade, investments, and global financial flows. Nonetheless, international management—the process of applying management concepts and techniques in a multinational environment—continues to retain importance. Although globalization and international linkages have been part of history for centuries (see the International Management in Action box later in the chapter, “Tracing the Roots of Modern Globalization”), the principal focus of this opening chapter is to examine the process of globalization in the contemporary world. The rapid integration of countries, advances in information technology, and the explosion in electronic communication have created a new, more integrated world and true global competition. Yet, the complexities of doing business in distinct markets persist. These developments both create and influence the opportunities, challenges, and problems that managers in the international arena will face during the years ahead. Since the environment of international management is all-encompassing, this chapter is mostly concerned with the economic dimensions, while the following two chapters are focused on the political, legal, and technological dimensions and ethical and social dimensions, respectively. The specific objectives of this chapter are: 1. ASSESS the implications of globalization for countries, industries, firms, and communities. 2. REVIEW the major trends in global and regional integration. 3. EXAMINE the changing balance of global economic power and trade and investment flows among countries. 4. ANALYZE the major economic systems and recent developments among countries that reflect those systems. The World of International Management An Interconnected World ay 18, 2012, marked one of the most highlyanticipated initial public offerings (IPOs) in history. Facebook, which had grown from a college dorm room to a 900-million-member social network in just eight years, was set to offer shares to the public for the first time. As May 18 approached, founder Mark Zuckerberg, wearing his characteristic “hoodie” sweatshirt, embarked on a roadshow to promote the company. Facebook programmers celebrated with allnight “hackathons,” and huge demand for the IPO prompted Facebook to release 25 percent more shares than initially planned. The IPO price was set to $38 per share, valuing Facebook at $104 billion. Many analysts predicted the price would soar as high as $60 on the first day alone. On the morning of May 18, Mark Zuckerberg ceremoniously rang a bell from Facebook’s California campus to celebrate the opening of the market at 9:30 A.M. As Wall Street’s closing bell rang just a few hours later, however, the original optimism that started the day had all but faded. The shares were trading only $0.23 above the IPO price—and down $3.82 from the opening bell price. In the following weeks, Facebook’s stock continued its downward trajectory. By mid-August, Facebook stock had decreased to nearly half its original offering price, leaving many to wonder, “Is social networking really here to stay?” M Social Media Has Changed How We Connect Though some have second-guessed the longevity of online networks, one thing is certain: We currently live in a world interconnected by social media. Through online networking, the way we connect with others has drastically changed. Virtually anyone on the globe is only a few clicks away. In fact, the average number of links separating any two random people on Facebook is now only 4.74.1 Facebook’s statistics underscore how 2 www.MyEbookNiche.eCrater.com social media has connected people across the globe: • • • • • • • • More than one billion people have active accounts on Facebook. More than 50 percent of these active users log onto Facebook in any given day.2 The average user has 190 friends.3 3.2 billion comments and likes are uploaded per day. 18 percent of time spent online is dedicated to social media.4 Over 80 percent of Facebook users are outside the United States. More than 70 translations are available on Facebook. Over 200 million people from the emerging nations of Brazil, India, Indonesia, and Mexico are now active Facebook users.5 Certainly, social networks are a part of many people’s lives. Yet, has the virtual world of social media networks made a permanent impact in the world of international business? Social Media Has Changed Business Strategy Procter & Gamble (P&G), which owns several of the most recognizable brands on the planet, has strategically leveraged social media to improve its long-term brand image. In 2010, P&G unveiled a Billion Acts of Green™ Facebook application which allows people to “make a pledge to lessen their environmental impact and promote environmentally beneficial habits to friends and family via social media channels.” This social media application enables users to share their “act of green” pledges with their Facebook network. As of 2013, there were over one billion acts of green pledged.6 P&G has also utilized social networking to increase revenue. After stagnant sales in 2010, P&G decided to refocus the advertising of Pepto-Bismol online. By monitoring Facebook activity, P&G discovered that the most social media buzz regarding Pepto-Bismol was occurring on weekend mornings, likely after customers had overindulged the night before. To tap into this market, P&G created a Facebook initiative called “Celebrate Life.” Within one year, Pepto-Bismol gained 11 percent market share.7 The following year, in 2011, Secret deodorant sales began to drop. In an effort to shift its advertising toward teenage females, P&G created a Facebook marketing campaign that addressed the issue of bullying. Titled “Mean Stinks,” the campaign encouraged users to “like” the Facebook page and share stories and videos. This campaign increased activity on Secret’s Facebook page by 25 times, and sales spiked by 9 percent over a six-month period.8 Through its use of Facebook, P&G has connected with millions of people around the world at little cost to increase sales and enhance its brand. Businesses have gained huge competitive edges by seizing the opportunities inherent in this new global society of online social networks. Social Media Has Changed How We Do Business In his book Socialnomics: How Social Media Transforms the Way We Live and Do Business, Erik Qualman writes, “Social media platforms like Facebook, YouTube, and Twitter are fundamentally changing the way businesses and consumers behave, connecting hundreds of millions of people to each other via instant communication.” In essence, social media is reshaping how “consumers and companies communicate and interact with each other.”9 Social media has changed how consumers search for products and services. Qualman gives the example of a woman who wants to take a vacation to South America, but she is not sure which country she wants to visit. In the past, she would have typed in “South American vacation” to Google, which would have brought her to travel websites such as TripAdvisor. After hours of research, she would have picked a destination. Then, after more research, she would pick a place to stay. With social media, this woman’s vacation planning becomes streamlined. When she types “South American vacation” into a social network, she finds that five of her friends have taken a trip to South America in the last year. She notices that two of her friends highly recommended their vacations to Chile with GoAhead Tours. She clicks on a link to GoAhead Tours and books her vacation. In a social network, online word of mouth among friends carries great weight for consumers. With the data available from their friends about products and services, consumers know what they want without traditional marketing campaigns.10 This trend means that marketers must be responsive to social networks. For example, an organization that gives travel tours has a group on Facebook. A marketer at that 3 www.MyEbookNiche.eCrater.com 4 Part 1 Environmental Foundation organization could create a Facebook application that allows its group members to select “places I’d like to visit.” Let’s say that 25 percent of group members who use the application choose Victoria Falls as a place they would like to visit. The organization could develop a tour to Victoria Falls, and then could send a message to all of its Facebook group members to notify them about this new tour. In this way, a social network serves as an inexpensive, effective means of marketing directly to a business’s target audience. Social Media Has Impacted Diplomacy In February 2010, Washington sent an unconventional delegation to Moscow, which included the creator of Twitter, the chief executive of eBay, and the actor Ashton Kutcher. One of the delegation’s goals was “to persuade Russia’s thriving online social networks to take up social causes like fighting corruption or human trafficking,” according to Jared Cohen who serves on Secretary of State Hillary Clinton’s policy planning staff. In Russia, the average adult spends 10.4 hours a month on social networking sites, based on comScore market research. This act of diplomacy by Washington underscores how important social networks have become in our world today, a world in which Twitter has helped mobilize people to fight for freedom from corruption. Social media networks have accelerated technological integration among the nations of the world. People across the globe are now linked more closely than ever before. This social phenomenon has implications for businesses as corporations can now leverage networks such as Facebook to achieve greater success. Understanding the global impact of social media is key to understanding our global society today. Social networks have rapidly diffused from the United States and Europe to every region of the world, underscoring the inexorable nature of globalization. As individuals who share interests and preferences link up, they are afforded opportunities to connect in ways that were unimaginable just a decade ago. Facebook, Twitter, Linkedin, and others are all providing communication platforms for individuals and groups in disparate—and even isolated—locations around the world. Such networks also offer myriad business opportunities for companies large and small to identify and target discrete groups of consumers or other business partners. These networks are revolutionizing the nature of management—including international management—by allowing producers and consumers to interact directly without the usual intermediaries. Networks and the individuals who make them up are bringing populations of the world closer together and further accelerating the already rapid pace of globalization and integration. Though the disappointing Facebook IPO left many to initially question the value and longevity of social media, the pace of interconnectivity across the globe has not slowed. Social media has altered the way that we interact with each other, and businesses, like P&G, have gained real advantages by leveraging online networks. In this chapter, we examine the globalization phenomenon, the growing integration among countries and regions, the changing balance of global economic power, and examples of different economic systems. As you read this chapter, keep in mind that although there are periodic setbacks, such as the recession of 2008–2009, globalization is moving at a rapid pace and that all nations, including the United States, as well as individual companies and their managers, are going to have to keep a close watch on the current environment if they hope to be competitive in the years ahead. management Process of completing activities efficiently and effectively with and through other people. international management Process of applying management concepts and techniques in a multinational environment and adapting management practices to different economic, political, and cultural contexts. ■ Introduction Management is the process of completing activities with and through other people. International management is the process of applying management concepts and techniques in a multinational environment and adapting management practices to different economic, political, and cultural contexts. Many managers practice some level of international management in today’s increasingly diverse organizations. International management is distinct from other forms of management in that knowledge and insights about global issues and specific cultures are a requisite for success. Today more firms than ever are earning some of their revenue from international operations, even nascent organizations as illustrated in The World of International Management chapter opening. www.MyEbookNiche.eCrater.com Chapter 1 Globalization and International Linkages 5 Table 1–1 The World’s Top Nonfinancial TNCs, Ranked by Foreign Assets, 2012 (in millions of dollars) Rank 1 2 3 4 5 6 7 8 9 10 Company Name Home Economy Foreign Assets Total Assets Foreign Sales Total Sales General Electric Royal Dutch/ Shell plc British Petroleum Company Plc Toyota Motor Corporation Total SA Exxon Mobil Corporation Vodafone Group Plc GDF Suez Chevron Corporation Volkswagen Group United States Netherlands/ United Kingdom $338,157 $685,328 $75,640 $144,796 307,938 360,325 282,930 467,153 United Kingdom Japan France United States United Kingdom France United States Germany 270,247 233,193 214,507 214,349 199,003 175,057 158,865 158,046 300,193 376,841 227,107 333,795 217,031 271,607 232,982 409,257 300,216 170,486 180,440 301,840 62,065 78,555 132,743 199,129 375,580 265,770 234,287 420,714 70,224 124,711 222,580 247,624 Source: UNCTAD World Investment Report 2013, Web Table 28. Many of these companies are multinational corporations (MNCs). An MNC is a firm that has operations in more than one country, international sales, and a mix of nationalities among managers and owners. In recent years such well-known American MNCs as Avon Products, Chevron, Citicorp, Coca-Cola, Colgate Palmolive, Du Pont, ExxonMobil, Eastman Kodak, Gillette, Hewlett-Packard, McDonald’s, Motorola, Ralston Purina, Texaco, the 3M Company, and Xerox have all earned more annual revenue in the international arena than they have stateside. GE, one of the world’s largest companies, with 2012 revenue of more than $147 billion, earned 57 percent of its industrial revenue from overseas that year. Table 1–1 lists the world’s top nonfinancial companies ranked by foreign assets in 2012. In addition, companies from developing economies, such as India, Brazil, and China, are providing formidable competition to their North American, European, and Japanese counterparts. Names like Cemex, Embraer, Haier, Lenovo, LG Electronics, Ping An, Rambaxy, Telefonica, Santander, Reliance, Samsung, Grupo Televisa, Tata, and Infosys are becoming well-known global brands. Globalization and the rise of emerging markets’ MNCs have brought prosperity to many previously underdeveloped parts of the world, notably the emerging markets of Asia. Since 2009, sales of automobiles in China have exceeded those in the United States. Vehicle sales in China reached a record 19.3 million units in 2012, according to the China Association of Automobile Manufacturers, far ahead of the 14.5 million cars and light trucks sold in the U.S.11 Moreover, a number of Chinese auto companies are becoming global players through their exporting, foreign investment, and international acquisitions, including the purchase by Geely of ailing Ford unit Volvo, Fiat’s investment in Chrysler, and Tata’s purchase of Jaguar-Land Rover. In a striking move, Cisco Systems, one of the world’s largest producers of network equipment, such as routers, announced it would establish a “Globalization Center East” in Bangalore, India. This center includes all the corporate and operational functions of U.S. headquarters, which have been mirrored in India. Under this plan, which includes an investment of over $1.1 billion, one-fifth of Cisco’s senior management will move to Bangalore.12,13 In September 2012, Procter and Gamble relocated their skin care, cosmetics, and personal care headquarters from Cincinnati to Singapore. According to P&G, Asia accounts for roughly half of the skin care market globally, and, with the growing prosperity in Asia, is expected to continue to expand.14 Similarly, citing the massive growth in the healthcare market in Asia, General Electric moved its X-ray business headquarters to China in 2011, and vice chairman John Rice relocated to Hong Kong.15,16 www.MyEbookNiche.eCrater.com MNC A firm having operations in more than one country, international sales, and a nationality mix among managers and owners. 6 Part 1 Environmental Foundation Table 1–2 The World’s Top Nonfinancial TNCs from Developing and Transitioning Economies, Ranked by Foreign Assets, 2011 (in millions of dollars) Rank 1 2 3 4 5 6 7 8 9 10 Company Name Home Economy Foreign Assets Total Assets Foreign Sales Total Sales Hutchison Whampoa Limited CITIC Group Hon Hai Precision Industries Vale SA China Ocean Shipping (Group) Company Petronas – Petroliam Nasional BhD Cemex S.A.B. de C.V. America Movil SAB De CV VimpelCom Ltd China National Offshore Oil Group Hong Kong/ China China $77,291 71,512 $92,788 514,847 $23,477 9,923 $30,023 51,659 Taiwan Brazil 52,198 48,045 57,451 128,728 114,285 49,475 117,992 60,389 China 40,435 52,230 19,454 29,579 Malaysia 38,907 Mexico 34,601 Mexico 32,694 Russian Federation 29,829 150,435 39,191 67,590 54,039 43,228 11,792 38,315 11,280 72,853 15,208 53,553 20,262 China 112,887 19,786 75,518 29,802 Source: UNCTAD World Investment Report 2013, Web Table 29. IBM, another American archetype, had about 433,000 employees globally in 2012, with only about 95,000 in the U.S. This is fewer than in India, which has about 130,000 IBM employees. In 2011, IBM drew 64 percent of its $100 billion in revenue from overseas.17 With a focus on large-scale projects in emerging markets, such as building a wireless phone network across Africa, IBM plans to receive 30 percent of its revenue from emerging markets by 2015.18,19 As of 2012, IBM had operations in over 20 African nations, and, in August 2012, IBM announced the opening of a research lab in Kenya.20 More than half of IBM’s research staff are currently located outside of the United States. These trends reflect the reality that firms are finding they must develop international management expertise, especially expertise relevant to the increasingly important developing and emerging markets of the world. Managers from today’s MNCs must learn to work effectively with those from many different countries. Moreover, more and more small and medium-sized businesses will find that they are being affected by internationalization. Many of these companies will be doing business abroad, and those that do not will find themselves doing business with MNCs operating locally. Table 1–2 lists the world’s top nonfinancial companies from developing countries ranked by foreign assets in 2011. ■ Globalization and Internationalization globalization The process of social, political, economic, cultural, and technological integration among countries around the world. International business is not a new phenomenon; however, the volume of international trade has increased dramatically over the last decade. Today, every nation and an increasing number of companies buy and sell goods in the international marketplace. A number of developments around the world have helped fuel this activity. Globalization, Antiglobalization, and Global Pressures Globalization can be defined as the process of social, political, economic, cultural, and technological integration among countries around the world. Globalization is distinct www.MyEbookNiche.eCrater.com International Management in Action Tracing the Roots of Modern Globalization Globalization is often presented as a new phenomenon associated with the post–World War II period. In fact, globalization is not new. Rather, its roots extend back to ancient times. Globalization emerged from longstanding patterns of transcontinental trade that developed over many centuries. The act of barter is the forerunner of modern international trade. During different periods of time, nearly every civilization contributed to the expansion of trade. Middle Eastern Intercontinental Trade In ancient Egypt, the King’s Highway or Royal Road stretched across the Sinai into Jordan and Syria and into the Euphrates Valley. These early merchants practiced their trade following one of the earliest codes of commercial integrity: Do not move the scales, do not change the weights, and do not diminish parts of the bushel. Land bridges later extended to the Phoenicians, the first middlemen of global trade. Over 2,000 years ago, traders in silk and other rare valued goods moved east out of the Nile basin to Baghdad and Kashmir and linked the ancient empires of China, India, Persia, and Rome. At its height, the Silk Road extended over 4,000 miles, providing a transcontinental conduit for the dissemination of art, religion, technology, ideas, and culture. Commercial caravans crossing land routes in Arabian areas were forced to pay tribute—a forerunner of custom duties—to those who controlled such territories. In his youth, the Prophet Muhammad traveled with traders, and prior to his religious enlightenment the founder of Islam himself was a trader. Accordingly, the Qur’an instructs followers to respect private property, business agreements, and trade. Trans-Saharan Cross-Continental Trade Early tribes inhabiting the triad cities of Mauritania, in ancient West Africa below the Sahara, embraced caravan trade with the Berbers of North Africa. Gold from the sub-Saharan area was exchanged for something even more prized—salt, a precious substance needed for retaining body moisture, preserving meat, and flavoring food. Single caravans, stretching five miles and including nearly 2,500 camels, earned their reputation as ships of the desert as they ferried gold powder, slaves, ivory, animal hides, and ostrich feathers to the northeast and returned with salt, wool, gunpowder, porcelain pottery, silk, dates, millet, wheat, and barley from the East. China as an Ancient Global Trading Initiator In 1421, a fleet of over 3,750 vessels set sail from China to cultivate trade around the world for the emperor. The voyage reflected the emperor’s desire to collect tribute in exchange for trading privileges with China and China’s protection. The Chinese, like modern-day multinationals, sought to extend their economic reach while recognizing principles of economic equity and fair trade. In the course of their global trading, the Chinese introduced uniform container measurements to enable merchants to transact business using common weight and dimension measurement systems. Like the early Egyptians and later the Romans, they used coinage as an intermediary form of value exchange or specie, thus eliminating complicated barter transactions. European Trade Imperative The concept of the alphabet came to the Greeks via trade with the Phoenicians. During the time of Alexander the Great, transcontinental trade was extended into Afghanistan and India. With the rise of the Roman Empire, global trade routes stretched from the Middle East through central Europe, Gaul, and across the English Channel. In 1215 King John of England signed the Magna Carta, which stressed the importance of crossborder trade. By the time of Marco Polo’s writing of The Description of the World, at the end of the 13th century, the Silk Road from China to the city-states of Italy was a well-traveled commercial highway. His tales, chronicled journeys with his merchant uncles, gave Europeans a taste for the exotic, further stimulating the consumer appetite that propelled trade and globalization. Around 1340, Francisco Balducci Pegolotti, a Florentine mercantile agent, authored Practica Della Mercatura (Practice of Marketing), the first widely distributed reference on international business and a precursor to today’s textbooks. The search for trading routes contributed to the Age of Discovery and encouraged Christopher Columbus to sail west in 1492. Globalization in U.S. History The Declaration of Independence, which set out grievances against the English crown upon which a new nation was founded, cites the desire to “establish Commerce” as a chief rationale for establishing an independent state. The king of England was admonished “for cutting off our trade with all parts of the world” in one of the earliest antiprotectionist free-trade statements from the New World. Globalization, begun as trade between and across territorial borders in ancient times, was historically and is even today the key driver of world economic development. The first paths in the creation of civilization were made in the footsteps of trade. In fact the word meaning “footsteps” in the old Anglo-Saxon language is trada, from which the modern English word trade is derived. Contemporary globalization is a new branch of a very old tree whose roots were planted in antiquity. 7 www.MyEbookNiche.eCrater.com 8 offshoring The process by which companies undertake some activities at offshore locations instead of in their countries of origin. outsourcing The subcontracting or contracting out of activities to external organizations that had previously been performed by the firm. Part 1 Environmental Foundation from internationalization in that internationalization is the process of a business crossing national and cultural borders, while globalization is the vision of creating one world unit, a single market entity. Evidence of globalization can be seen in increased levels of trade, capital flows, and migration. Globalization has been facilitated by technological advances in transnational communications, transport, and travel. Thomas Friedman, in his book The World Is Flat, identified 10 “flatteners” that have hastened the globalization trend, including the fall of the Berlin Wall, offshoring, and outsourcing, which have combined to dramatically intensify the effects of increasing global linkages.21 Hence, in recent years, globalization has accelerated, creating both opportunities and challenges to global business and international management. On the plus side, global trade and investment continue to grow, bringing wealth, jobs, and technology to many regions around the world. While some emerging countries have not benefited from globalization and integration, the emergence of MNCs from developing countries reflects the increasing inclusion of all regions of the world in the benefits of globalization. Yet, as the pace of global integration quickens, so have the cries against globalization and the emergence of new concerns over mounting global pressures.22 These pressures can be seen in protests at the meetings of the World Trade Organization (WTO), International Monetary Fund (IMF), and other global bodies and in the growing calls by developing countries to make the global trading system more responsive to their economic and social needs. These groups are especially concerned about rising inequities between incomes, and nongovernmental organizations (NGOs) have become more active in expressing concerns about the potential shortcomings of economic globalization.23 Who benefits from globalization? Proponents believe that everyone benefits from globalization, as evidenced in lower prices, greater availability of goods, better jobs, and access to technology. Theoretically, individuals in established markets will strive for better education and training to be prepared for future positions, while citizens in emerging markets and underdeveloped countries will reap the benefits of large amounts of capital flowing into those countries which will stimulate growth and development. Critics disagree, noting that the high number of jobs moving abroad as a result of the offshoring of business services jobs to lower-wage countries does not inherently create greater opportunities at home and that the main winners of globalization are the company executives. Proponents claim that job losses are a natural consequence of economic and technological change and that offshoring actually improves the competitiveness of American companies and increases the size of the overall economic pie.24 Critics point out that growing trade deficits and slow wage growth are damaging economies and that globalization may be moving too fast for some emerging markets, which could result in economic collapse. Moreover, critics argue that when production moves to countries to take advantage of lower labor costs or less regulated environments, it creates a “race to the bottom” in which companies and countries place downward pressure on wages and working conditions.25 India is one country at the center of the globalization debate. As noted above, India has been the beneficiary of significant foreign investment, especially in services such as software and IT. Limited clean water, power, paved roadways, and modern bridges, however, are making it increasingly difficult for companies to expand. There have even been instances of substantial losses for companies using India as an offshore base, such as occurred when Nokia Corp. experienced the destruction of thousands of cellular phones due to a lack of storage space at an airport during a rainstorm. With India’s public debt at around 70 percent of GDP, the country now stands where China did a decade ago. It is possible that India will follow in China’s footsteps and continue rapid growth in incomes and wealth; however, it is also possible that the challenges India faces are greater than the country’s capacity to respond to them.26 This example illustrates just one of the ways in which globalization has raised particular concerns over environmental and social impacts. According to antiglobalization activists, if corporations are free to locate anywhere in the world, the world’s poorest www.MyEbookNiche.eCrater.com A Closer Look Outsourcing and Offshoring The concepts of outsourcing and offshoring are not new, but these practices are growing at an extreme rate. Offshoring refers to the process by which companies undertake some activities at offshore locations instead of in their countries of origin. Outsourcing is the subcontracting or contracting out of activities to external organizations that had previously been performed within the firm and is a wholly different phenomenon. Often the two combine to create “offshore outsourcing.” Offshoring began with manufacturing operations. Globalization jump-started the extension of offshore outsourcing of services, including call centers, R&D, information services, and even legal work. During 2006, Du Pont hired attorneys in Manila to oversee documentation in preparation for legal cases. The company hopes to save an estimated $6 million in legal spending by moving offshore and cutting documentation by 40 to 60 percent once everything is scanned and digitally saved. This is a risky venture as legal practices are not the same across countries, and the documents may be too sensi- tive to rely on assembly-line lawyers. It also raises the question as to whether or not there are limitations to offshore outsourcing. Many companies, including Deutsche Bank, spread offshore outsourcing opportunities across multiple countries such as India and Russia for economic or political reasons. The advantages, concerns, and issues with offshoring span a variety of subjects. Throughout the text we will revisit the idea of offshore outsourcing as it is relevant. Here in Chapter 1 we see how skeptics of globalization wonder if there are benefits to offshore outsourcing, while in Chapter 2 we see how these are related to technology, and finally in Chapter 14 we see how offshore practices affect human resource management and the global distribution of work. Source: Pete Engardio and Assif Shameen, “Let’s Offshore the Lawyers,” BusinessWeek, September 18, 2006, p. 42; and Tony Hallett and Andy McCue, “Why Deutsche Bank Spreads Its Outsourcing,” BusinessWeek, March 15, 2007. countries will relax or eliminate environmental standards and social services in order to attract first-world investment and the jobs and wealth that come with it. Proponents of globalization contend that even within the developing world, it is protectionist policies, not trade and investment liberalization, that result in environmental and social damage. They believe globalization will force higher-polluting countries such as China and Russia into an integrated global community that takes responsible measures to protect the environment. However, given the significant changes required in many developing nations to support globalization, such as better infrastructure, greater educational opportunities, and other improvements, most supporters concede that there may be some short-term disruptions. Over the long term, globalization supporters believe industrialization will create wealth that will enable new industries to employ more modern, environmentally friendly technology. We discuss the social and environmental aspects of globalization in more detail in Chapter 3. These contending perspectives are unlikely to be resolved anytime soon. Instead, a vigorous debate among countries, MNCs, and civil society will likely continue and affect the context in which firms do business internationally. Business firms operating around the world must be sensitive to different perspectives on the costs and benefits of globalization and adapt and adjust their strategies and approaches to these differences. Global and Regional Integration One important dimension of globalization is the increasing economic integration among countries brought about by the negotiation and implementation of trade and investment agreements. Here we provide a brief overview of some of the major developments in global and regional integration. Over the past six decades, succeeding rounds of global trade negotiations have resulted in dramatically reduced tariff and nontariff barriers among countries. Table 1–3 shows the history of these negotiation rounds, their primary focus, and the number of countries involved. These efforts reached their crest in 1994 with the conclusion of the Uruguay Round of multilateral trade negotiations under the General Agreement on Tariffs and Trade (GATT) and the creation of the World Trade Organization (WTO) to World Trade Organization (WTO) The global organization of countries that oversees rules and regulations for international trade and investment. 9 www.MyEbookNiche.eCrater.com 10 Part 1 Environmental Foundation Table 1–3 Completed Rounds of the Negotiations under the GATT and WTO Year Place (name) Subjects Covered 1947 1949 1951 1956 1960–1961 Geneva Annecy Torquay Geneva Geneva (Dillon Round) Geneva (Kennedy Round) Geneva (Tokyo Round) Geneva (Uruguay Round) Tariffs Tariffs Tariffs Tariffs Tariffs 1964–1967 1973–1979 1986–1994 Countries 23 13 38 26 26 Tariffs and antidumping measures Tariffs, nontariff measures, “framework” agreements Tariffs, nontariff measures, services, intellectual property, dispute settlement, textiles, agriculture, creation of WTO 62 102 123 Source: Understanding the WTO (Geneva: World Trade Organization, 2008), http://www. wto.org/english/thewto_e/whatis_e/tif_e/understanding_e.pdf. Reprinted with permission. North American Free Trade Agreement (NAFTA) A free-trade agreement between the United States, Canada, and Mexico that has removed most barriers to trade and investment. oversee the conduct of trade around the world. The WTO is the global organization of countries that oversees rules and regulations for international trade and investment, including agriculture, intellectual property, services, competition, and subsidies. Recently, however, the momentum of global trade agreements has slowed. In December 1999, trade ministers from around the world met in Seattle to launch a new round of global trade talks. In what later became known as the “Battle in Seattle,” protesters disrupted the meeting, and representatives of developing countries who felt their views were being left out of the discussion succeeded in ending the discussions early and postponing a new round of trade talks. Two years later, in November 2001, the members of the WTO met again and successfully launched a new round of negotiations at Doha, Qatar, to be known as the “Development Round,” reflecting the recognition by members that trade agreements needed to explicitly consider the needs of and impact on developing countries.27 However, after a lack of consensus among WTO members regarding agricultural subsidies and the issues of competition and government procurement, progress slowed. At a meeting in Cancún in September 2003, a group of 20-plus developing nations, led by Brazil and India, united to press developed countries such as the United States, the European Union (EU), and Japan to reduce barriers to agricultural imports. Failure to reach agreement resulted in another setback, and although there have been attempts to restart the negotiations, they have remained stalled, especially in light of rising protectionism in the wake of the global economic crisis.28 Partly as a result of the slow progress in multilateral trade negotiations, the United States and many other countries have pursued bilateral and regional trade agreements. The United States, Canada, and Mexico make up the North American Free Trade Agreement (NAFTA), which in essence has removed all barriers to trade among these countries and created a huge North American market. A number of economic developments have occurred because of this agreement which are designed to promote commerce in the region. Some of the more important developments include (1) the elimination of tariffs as well as import and export quotas; (2) the opening of government procurement markets to companies in the other two nations; (3) an increase in the opportunity to make investments in each other’s country; (4) an increase in the ease of travel between countries; and (5) the removal of restrictions on agricultural products, auto parts, and energy www.MyEbookNiche.eCrater.com Chapter 1 Globalization and International Linkages goods. Many of these provisions were implemented gradually. For example, in the case of Mexico, quotas on Mexican products in the textile and apparel sectors were phased out over time, and customs duties on all textile products were eliminated over 10 years. Negotiations between NAFTA members and many Latin American countries, such as Chile, have concluded, and others are ongoing. Moreover, other regional and bilateral trade agreements, including the U.S.–Singapore Free Trade Agreement, concluded in May 2003, and the U.S.–Central American Free Trade Agreement (CAFTA), later renamed CAFTA-DR to reflect the inclusion of the Dominican Republic in the agreement and concluded in May 2004, were negotiated in the same spirit as NAFTA. The U.S. Congress approved the CAFTA-DR in July 2005, and the president signed it into law on August 2, 2005. The export zone created will be the United States’ second largest freetrade zone in Latin America after Mexico. The United States is implementing the CAFTA-DR on a rolling basis as countries make sufficient progress to complete their commitments under the agreement. The agreement first entered into force between the United States and El Salvador on March 1, 2006, followed by Honduras and Nicaragua on April 1, 2006, Guatemala on July 1, 2006, and the Dominican Republic on March 1, 2007. Implementation by Costa Rica was delayed by concerns over the impact of the opening of Costa Rica’s energy and telecommunications monopoly, and a subsequent election and referendum; however, the agreement finally entered into force for Costa Rica on January 1, 2009.29 Agreements like NAFTA and CAFTA not only reduce barriers to trade but also require additional domestic legal and business reforms in developing nations to protect property rights. Most of these agreements now include supplemental commitments on labor and the environment to encourage countries to upgrade their working conditions and environmental protections, although some critics believe the agreements do not go far enough in ensuring worker rights and environmental standards. Partly due to the stalled progress with the WTO and FTAA, the United States has pursued bilateral trade agreements with a range of countries, including Australia, Bahrain, Chile, Colombia, Israel, Jordan, Malaysia, Morocco, Oman, Panama, Peru, and Singapore.30 Economic activity in Latin America continues to be volatile. Despite the continuing political and economic setbacks these countries periodically experience, economic and export growth continue in Brazil, Chile, and Mexico. In addition, while outside MNCs continually target this geographic area, there also is a great deal of cross-border investment between Latin American countries. Regional trade agreements are helping in this cross-border process, including NAFTA, which ties the Mexican economy more closely to the United States. The CAFTA agreement, signed August 5, 2006, between the United States and Central American countries presents new opportunities for bolstering trade, investment, services, and working conditions in the region. Within South America there are Mercosur, a common market created by Argentina, Brazil, Paraguay, Uruguay, and Venezuela, and the Andean Common Market, a subregional free-trade compact that is designed to promote economic and social integration and cooperation between Bolivia, Colombia, Ecuador, and Peru. The European Union (EU) has made significant progress over the past decade in becoming a unified market. In 2003 it consisted of 15 nations: Austria, Belgium, Denmark, Finland, France, Germany, Great Britain, Greece, the Netherlands, Ireland, Italy, Luxembourg, Portugal, Spain, and Sweden. In May 2004, 10 additional countries joined the EU: Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia, and Slovenia. On January 1, 2007, Romania and Bulgaria acceded to the EU, and on July 1, 2013, Croatia officially became the newest and 28th member of the EU. Not only have most trade barriers between the members been removed, but a subset of European countries have adopted a unified currency called the euro. As a result, it is now possible for customers to compare prices between most countries and for business firms to lower their costs by conducting business in one, uniform currency. With access to the entire pan-European market, large MNCs can now achieve the operational scale and scope necessary to reduce costs and increase efficiencies. Even though long-standing www.MyEbookNiche.eCrater.com 11 European Union A political and economic community consisting of 28 member states. 12 Part 1 Environmental Foundation cultural differences remain, and the EU has recently experienced some substantial ...
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Running Head: SWITZERLAND CASE STUDY

Switzerland Case Study
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Section 1. Introduction and Country Selection
Switzerland
Explain your selection by listing at least 3 reasons why you are choosing this country.
Switzerland has dramatic mountains and numerous lakes that provide pleasant scenery
that is coupled with warm temperatures in the south and cool pleasant temperatures in the north.
According to records by IMF, Switzerland is among the most developed countries in the
world with a high record per capita gross domestic product and the highest nominal wealth per
person in the world.
In terms of national performance in relation to human development, transparency, quality
of life, standards, civil liberties and economic competitiveness, Switzerland tops the list globally.
Records from Mercer (World's human resources firm) show that famous cities in
Switzerland such as Geneva and Zurich have been rated among the best cities in terms of quality
and standards of life (https://www.mercer.com/).
Section 2. General Characteristics
Describe the location, size, population, major industries, language, religion, literacy, and type
of government of your country.
Strategically situated in Western-Central Europe, the federal republic of Switzerland is a
landlocked country that is divided geographically between the Jura, the Swiss Plateau and the
Alps. Switzerland is a sovereign state in Europe that consists of 26 member states of the Swiss
Confederation with the city of Bern being the center of federal authorities. Being a landlocked

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country; Switzerland is bordered to the West by France, to the South by Italy, by Liechtenstein
and Austria to the East and by Germany to the North.
With a boundary length of 1,852 km, Switzerland has a total area of 41,290 sq Km and
extends 220km from North to South and 348KM from East to West. According to the latest
estimates by the United Nations, the total population of this outstanding country stands at 8,543,
392 which is equivalent to 0.11% of the world population. With a total land area of 41,290 sq
Km, Switzerland has a population density of 216 people per sq. Km with the more significant
percentage of approximately 73.6% of the population staying in the urban. When ranked among
other countries by population, Switzerland positions at number 99.
The main languages used to communicate within the Swiss Confederation are French,
Romansh, French and Italian while some parts of the country use Latin language in some
situations. Out of 26 members of the Swiss Confederation, 17 of them speaks German which is
the country's large population, and most of them belong to the Swiss Alps, Swiss plateau,
Eastern, Western and North-Western Plateau. Swiss-French makes 22.7% of the Frenchspeaking population while Swiss Italians stand at 8.4% of the total population with only 0.6%
speaking Romansh.
According to studies conducted by the World's most Literate Nations (WMLN),
Switzerland has been listed sixth in relation to literacy and is ahead of developed countries such
as the UK, the US, Germany and France among others. Swiss Federal Statistics office reveals
that only 10% of the men and 13% of the women fail to pursue education beyond regular
compulsory schooling. Their high levels of literacy have been facilitated by their spending on
education which is the highest at 17dollars per student compared to the average spending of $10
per individual according to studies by the Organization for Economic Cooperation and
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Development(OECD). In terms of computer availability, Switzerland ranks at the 15th position
and at 11th position in terms of education inputs (OECD, 2018)
Although this federal state doesn't have a state religion, the majority of the Cantons
appreciate official churches except for Geneva and Neuchatel. In this country, Christianity is
most predominant with its predominance dating back to the 16th century where the country was
divided into the Reformed confessions and the Roman Catholic. Considering freedom of religion
is a constitutional right in Switzerland, the larger population which stands at 38.2% belong to
Roman Catholic, and 26.9% belong to Protestant churches while the rest are Muslims, Jewish
with 21% of the population do not associate with any religious affiliations.
In the world, Switzerland is the only state that has come close to having a direct
democracy whereby the citizen's votes have the power to challenge any decree at the federal
level. Unlike many other European countries, this country doesn't have a president or a prime
minister, but the citizens of the country have the most power. As a result, its Executive,
Legislative and Judicial institutions are planned into public, federal or cantonal levels. Although
this country has a tradition of direct democracy, it is a semi-direct democratic federal republic
with the legislative power being vested in the chambers of Council of states, the National
Council and the Federal Assembly (Faber & Lurger, 2008)
Section 3. Economic Conditions
Discuss the standard of living (What do the people own? How does the standard of living
compare to the U.S.? Ideally, this should be measured in purchasing power, accounting for
the difference in currency and cost of living.)

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According to records by Better Life Index, Switzerland tops the United States whereby it
is above average in relation to health status, income, job opportunities and earnings, wealth,
housing, education and social connections among others. Although Switzerland has been ranked
among the world's rich countries, its citizens still enjoy very high living standards because they
have more income at their disposal thus high purchasing power. Out of the total population, only
4.6% live in extreme poverty which is the lowest rate in Europe. Compared to the United States,
Swiss citizens enjoy high-quality food, housing and the crime rate is low with 0 records of
beggars on the streets. However, the consumer prices are higher in Switzerland at 73.89%
compared to the United States at 42.49%, and the local purchasing power is lower at 0.08% than
that at 0.09% in the United States. Although money cannot buy happiness, money has helped
citizens of Switzerland to achieve high living standards whereby the average household annual
net-adjusted disposable income per capita is USD 36, 378 which is higher than the average
income according to OECD but lower than that of the United States which stands at USD 44,049
per year (https://www.credit-suisse.com/us/en.html).
Identify the income distribution (Proportion of upper, middle, and lower classes?)
Statistics of 2013 show that top 50% of the population earned 80% of the total revenue
while the bottom 50% earned the other 20%. To balance out living standards, the Swiss
government shifted some...


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