International Business: The Challenges of Globalization, Tenth Edition
John J. Wild and Kenneth L. Wild
Contents
Preface 16
About the Authors 25
PART 1 Global Business Environment 26
Chapter 1 Globalization Today 26
Apple’s Global iMpact 27
1.1 Introduction and Key Players 28
1.1.1 Key Players in International Business 30
GLOBAL MANAGER: The Keys to Global Success 31
1.2 What is Globalization? 31
1.2.1 Evolution of Globalization 33
1.2.2 Globalization of Markets 34
1.2.3 Globalization of Production 38
1.3 Drivers of Globalization 39
1.3.1 Falling Barriers to Trade and Investment 39
1.3.2 Global E-commerce 41
1.3.3 Digital Transformation 42
1.3.4 Communication and Transportation 43
1.4 Globalization Debate 45
1.4.1 Globalization Harms Jobs and Wages 45
1.4.2 Globalization Improves Jobs and Wages 45
1.4.3 Debate about Income Inequality 46
1.4.4 Globalization and Culture 48
CULTURE INSIGHTS: The Culture Debate 48
1.4.5 Globalization and National Sovereignty 49
1.4.6 Globalization and the Environment 49
1.5 Workplace Skills 50
1.5.1 Skills for Your Career 50
1.5.2 The Global Business Environment 52
Chapter Summary 53 • Key Terms 54 • Talk About It 55
Teaming Up 55 • Ethical Challenge 55 • Writing Assignments 55
PRACTICING INTERNATIONAL MANAGEMENT CASE 56
Appendix World Atlas 57
Chapter 2 Ethics, Social Responsibility, and Sustainability 66
Tony’s Chocolonely 67
2.1 Ethics Theories 69
2.1.1 Utilitarianism 70
2.1.2 Rights Theory 70
2.1.3 Theory of Justice 71
2.1.4 Cultural Relativism 72
2.2 Business Ethics 72
2.2.1 Resolving Ethical Dilemmas 73
2.2.2 Codes of Ethics 74
2.2.3 Sources of Unethical Behavior 75
2.3 Corporate Social Responsibility 76
2.3.1 Efficiency and Profits as Social Responsibility 76
2.3.2 Business Responsibilities to Society 77
CULTURE INSIGHTS: Speaking in Fewer Tongues 78
2.3.3 Stakeholder Theory 79
2.4 Sustainability 80
2.4.1 Carbon Footprints and Climate Change 81
GLOBAL MANAGER: Three Sustainable Strategies for Three Markets 82
2.4.2 A Circular Economy 82
2.4.3 Greenwashing 83
2.5 Additional Key Global Issues 85
2.5.1 Bribery and Corruption 85
2.5.2 Working Conditions and Human Rights 86
2.5.3 Diversity, Equity, and Inclusion 87
Chapter Summary 90 • Key Terms 91 • Talk About It 92
Teaming Up 92 • Ethical Challenge 92 • Writing Assignments 92
PRACTICING INTERNATIONAL MANAGEMENT CASE 93
PART 2 National Business Environment 94
Chapter 3 Cross-Cultural Business 94
Vans: Off The Wall 95
3.1 What Is Culture? 96
3.1.1 Cross-Cultural Literacy 96
3.1.2 National Culture 98
3.1.3 Subcultures 98
3.1.4 Physical Environment 99
3.1.5 Material Culture 100
3.2 Values, Attitudes, and Behavior 100
3.2.1 Values 100
3.2.2 Attitudes 100
3.2.3 Aesthetics 101
3.2.4 Behaviors 101
CULTURE INSIGHTS: A Globetrotter’s Guide to Meetings 102
3.3 Social Structure and Education 103
3.3.1 Social Group Associations 103
3.3.2 Social Status 104
3.3.3 Social Mobility 105
3.3.4 Education 108
GLOBAL MANAGER: Social Flexibility 109
3.4 Religion 109
3.4.1 Christianity 109
3.4.2 Islam 112
3.4.3 Hinduism 112
3.4.4 Buddhism 114
3.4.5 Judaism 114
3.4.6 Confucianism 115
3.5 Personal Communication 115
3.5.1 Spoken and Written Language 115
3.5.2 Body Language 117
3.6 Culture in the Global Workplace 118
3.6.1 Perception of Time 118
3.6.2 View of Work 118
3.6.3 Cultural Change 119
3.6.4 Kluckhohn-Strodtbeck Framework 120
3.6.5 Hofstede Framework 121
Chapter Summary 123 • Key Terms 125 • Talk About It 125
Teaming Up 125 • Ethical Challenge 125 • Writing Assignments 126
PRACTICING INTERNATIONAL MANAGEMENT CASE 127
Chapter 4 Political, Economic, and Legal Systems 128
TikTok Rocks 129
4.1 Political Systems 130
4.1.1 Totalitarianism 131
GLOBAL MANAGER: From Civil War to Civil Society 132
4.1.2 Democracy 134
4.2 Economic Systems 135
4.2.1 Centrally Planned Economy 136
4.2.2 Mixed Economy 137
4.2.3 Market Economy 138
4.3 Legal Systems 142
4.3.1 Common Law 143
4.3.2 Civil Law 143
CULTURE INSIGHTS: Playing by the Rules 144
4.3.3 Theocratic Law 144
4.4 Global Legal Issues 144
4.4.1 Intellectual Property 145
4.4.2 Product Safety and Liability 147
4.4.3 Antitrust Regulations 148
4.4.4 Taxation 148
Chapter Summary 149 • Key Terms 149 • Talk About It 150
Teaming Up 150 • Ethical Challenge 150 • Writing Assignments 150
PRACTICING INTERNATIONAL MANAGEMENT CASE 151
Chapter 5 Economic Development of Nations 152
Paytm in India 153
5.1 Economic Development 154
5.1.1 Classifying Countries 154
5.1.2 National Production 156
5.1.3 Purchasing Power Parity 157
5.1.4 Human Development 157
5.2 Political Risk 160
5.2.1 Conflict and Violence 160
GLOBAL MANAGER: Your Global Security Checklist 161
5.2.2 Property Seizure 161
5.2.3 Government Policies 162
5.3 Managing Political Risk 163
5.3.1 Adaptation 163
5.3.2 Information Gathering 164
5.3.3 Political Influence 164
5.3.4 International Relations 164
5.3.5 The United Nations 165
5.4 Economic Transition 166
5.4.1 Transition Obstacles 166
5.4.2 China’s Economic Transition 167
CULTURE INSIGHTS: Guidelines for Good Guanxi 168
5.4.3 Russia’s Economic Transition 169
Chapter Summary 170 • Key Terms 171 • Talk About It 171
Teaming Up 171 • Ethical Challenge 172 • Writing Assignments 172
PRACTICING INTERNATIONAL MANAGEMENT CASE 173
PART 3 International Trade and Investment 174
Chapter 6 International Trade Theory 174
Tesla Charges Ahead 175
6.1 The Nature of International Trade 176
6.1.1 Benefits of Trade 176
6.1.2 Economic Importance of Trade 177
6.1.3 Top Trading Nations 177
6.1.4 Global Trade and Output 180
6.1.5 Trade Interdependence 180
CULTURE INSIGHTS: Business Culture in the Pacific Rim 181
6.2 Mercantilism 181
6.2.1 How Mercantilism Worked 182
6.2.2 Flaws of Mercantilism 182
6.3 Theories of Absolute and Comparative Advantage 183
6.3.1 Absolute Advantage 183
6.3.2 Comparative Advantage 185
6.4 Factor Proportions Theory 187
6.4.1 Labor Versus Land and Capital Equipment 187
6.4.2 Evidence on Factor Proportions Theory: The Leontief Paradox 188
6.5 International Product Life Cycle 188
6.5.1 Stages of the Product Life Cycle 188
6.5.2 Limitations of the Theory 189
GLOBAL MANAGER: Five Fulfillment Mistakes 190
6.6 New Trade Theory 190
6.6.1 First-Mover Advantage 190
6.7 National Competitive Advantage 191
6.7.1 Factor Conditions 191
6.7.2 Demand Conditions 192
6.7.3 Related and Supporting Industries 193
6.7.4 Firm Strategy, Structure, and Rivalry 193
6.7.5 Government and Chance 193
Chapter Summary 194 • Key Terms 195 • Talk About It 195
Teaming Up 195 • Ethical Challenge 196 • Writing Assignments 196
PRACTICING INTERNATIONAL MANAGEMENT CASE 197
Chapter 7 Governments and Trade 198
Netflix Reinvents TV 199
7.1 Why Do Governments Intervene in Trade? 200
7.1.1 Political Motives 200
CULTURE INSIGHTS: A Culture of Business Security 202
7.1.2 Economic Motives 203
7.1.3 Cultural Motives 204
7.2 Instruments of Trade Promotion 205
7.2.1 Subsidies 205
7.2.2 Export Assistance 206
GLOBAL MANAGER: Experts in Exporting 206
7.2.3 Foreign Trade Zones 207
7.2.4 Special Government Agencies 207
7.3 Instruments of Trade Restriction 208
7.3.1 Tariffs 208
7.3.2 Quotas 209
7.3.3 Other Nontariff Barriers 210
7.4 Global Trading System 211
7.4.1 General Agreement on Tariffs and Trade (GATT) 212
7.4.2 World Trade Organization (WTO) 213
Chapter Summary 216 • Key Terms 217 • Talk About It 217
Teaming Up 217 • Ethical Challenge 217 • Writing Assignments 218
PRACTICING INTERNATIONAL MANAGEMENT CASE 219
Chapter 8 Foreign Direct Investment 220
Spotify for Every Mood 221
8.1 The Nature of Foreign Direct Investment 222
8.1.1 Forms of Foreign Direct Investment 222
CULTURE INSIGHTS: Cross-Cultural Mergers and Acquisitions 223
8.1.2 Worldwide Flows of FDI 223
8.1.3 Recipients and Sources of FDI 224
8.2 Theories of Foreign Direct Investment 226
8.2.1 International Product Life Cycle 226
8.2.2 Market Imperfections 227
8.2.3 Eclectic Theory 228
8.2.4 Market Power 228
8.3 Management Issues and Foreign Direct Investment 228
8.3.1 Control 228
8.3.2 Purchase-or-Build Decision 230
8.3.3 Production Costs 230
GLOBAL MANAGER: Surprises of Investing Abroad 230
8.3.4 Customer Knowledge 232
8.3.5 Following Clients 232
8.3.6 Following Rivals 232
8.4 Why Governments Intervene in FDI 233
8.4.1 Balance of Payments 233
8.4.2 Reasons for Intervention by the Host Country 233
8.4.3 Reasons for Intervention by the Home Country 234
8.5 Government Policy Instruments and FDI 235
8.5.1 Host Countries: Promotion 235
8.5.2 Host Countries: Restriction 237
8.5.3 Home Countries: Promotion 237
8.5.4 Home Countries: Restriction 237
Chapter Summary 238 • Key Terms 239 • Talk About It 239
Teaming Up 239 • Ethical Challenge 239 • Writing Assignments 240
PRACTICING INTERNATIONAL MANAGEMENT CASE 241
Chapter 9 Regional Economic Integration 242
Nestlé’s Global Recipe 243
9.1 The Nature of Regional Integration Efforts 244
9.1.1 Levels of Regional Integration 244
9.1.2 The Case for Regional Integration 245
9.1.3 The Case Against Regional Integration 247
9.2 Integration in Europe 249
9.2.1 European Union 249
CULTURE INSIGHTS: Doing Business in the Czech Republic 253
9.2.2 European Free Trade Association (EFTA) 255
9.3 Integration in the Americas 256
9.3.1 United States-Mexico-Canada Agreement (USMCA) 256
9.3.2 Central American Free Trade Agreement (CAFTA-DR) 258
9.3.3 Andean Community (CAN) 259
9.3.4 Southern Common Market (MERCOSUR) 259
9.3.5 Central America and the Caribbean 259
9.4 Integration in Asia and Africa 260
9.4.1 Comprehensive and Progressive Agreement for Trans-Pacific
Partnership
(CPTPP) 260
9.4.2 Association of Southeast Asian Nations (ASEAN) 260
GLOBAL MANAGER: The Ins and Outs of ASEAN 260
9.4.3 Regional Comprehensive Economic Partnership (RCEP) 261
9.4.4 Asia Pacific Economic Cooperation (APEC) 261
9.4.5 Africa’s Integration Efforts 262
Chapter Summary 263 • Key Terms 264 • Talk About It 264
Teaming Up 264 • Ethical Challenge 264 • Writing Assignments 264
PRACTICING INTERNATIONAL MANAGEMENT CASE 265
PART 4 International Financial System 266
Chapter 10 International Financial Markets 266
Samsung’s Number Won 267
10.1 The International Capital Market 268
10.1.1 Benefits of the International Capital Market 268
10.1.2 International Bond Market 269
CULTURE INSIGHTS: Big Results from Microfinance 270
10.1.3 International Equity Market 270
10.1.4 Eurocurrency Market 271
10.2 The Foreign Exchange Market 272
10.2.1 Functions of the Foreign Exchange Market 272
10.2.2 Exchange-Rate Risk 274
10.3 Currency Rates and Instruments 276
10.3.1 Spot and Forward Rates 276
10.3.2 Forward Contracts, Swaps, and Options 276
10.4 Market Structure and Convertibility 278
10.4.1 Financial Centers 278
GLOBAL MANAGER: Managing Foreign Exchange 279
10.4.2 Interbank Market 279
10.4.3 Currency Convertibility 279
Chapter Summary 281 • Key Terms 282 • Talk About It 282
Teaming Up 282 • Ethical Challenge 282 • Writing Assignments 282
PRACTICING INTERNATIONAL MANAGEMENT CASE 283
Chapter 11 International Monetary System 284
The Euro 285
11.1 Importance of Currency Values 286
11.1.1 Desire for Stability and Predictability 287
11.1.2 Efficient Versus Inefficient Market View 287
11.1.3 Forecasting Techniques 288
CULTURE INSIGHTS: The Long Arm of the Law 288
11.2 Factors That Determine Exchange Rates 289
11.2.1 Law of One Price 289
11.2.2 Purchasing Power Parity 289
11.2.3 Evaluating Purchasing Power Parity 291
11.3 Fixed Exchange-Rate Systems 292
11.3.1 The Gold Standard 292
11.3.2 Bretton Woods Agreement 294
11.4 Floating Exchange-Rate System 296
11.4.1 Today’s Exchange-Rate Arrangements 297
11.4.2 Recent Financial Crises 297
GLOBAL MANAGER: Adjusting to Currency Swings 297
11.4.3 Future of the International Monetary System 300
Chapter Summary 300 • Key Terms 301 • Talk About It 302
Teaming Up 302 • Ethical Challenge 302 • Writing Assignments 302
PRACTICING INTERNATIONAL MANAGEMENT CASE 303
PART 5 International Business Management 304
Chapter 12 International Strategy and Organization 304
Ryanair Soars Above 305
12.1 Company Analysis 306
12.1.1 Company Mission and Goals 306
12.1.2 Core Competency and Value Creation 307
12.1.3 Business Environment 309
CULTURE INSIGHTS: Researching Business Environments 310
12.2 Strategy Formulation 310
12.2.1 Two International Strategies 310
12.2.2 Corporate-Level Strategies 312
12.2.3 Business-Level Strategies 312
12.2.4 Department-Level Strategies 314
GLOBAL MANAGER: Questions to Ask Before Going International 315
12.3 Issues of Organizational Structure 315
12.3.1 Centralization Versus Decentralization 315
12.3.2 Coordination and Flexibility 316
12.4 Types of Organizational Structure 317
12.4.1 International Division Structure 317
12.4.2 International Area Structure 318
12.4.3 Global Product Structure 318
12.4.4 Global Matrix Structure 319
12.4.5 Work Teams 320
Chapter Summary 321 • Key Terms 322 • Talk About It 322
Teaming Up 322 • Ethical Challenge 322 • Writing Assignments 322
PRACTICING INTERNATIONAL MANAGEMENT CASE 323
Chapter 13 Analyzing International Opportunities 324
Starbucks’ Global Expansion 325
13.1 Basic Appeal and National Factors 326
13.1.1 Identify Basic Appeal 326
13.1.2 Assess the National Business Environment 327
GLOBAL MANAGER: Expanding Globally Online 330
13.2 Measure and Select the Market or Site 330
13.2.1 Measure Market or Site Potential 330
13.2.2 Select the Market or Site 334
13.3 Secondary Market Research 335
13.3.1 Public Information Sources 336
13.3.2 Private Information Sources 337
13.3.3 Issues with Secondary Research 337
13.4 Primary Market Research 339
13.4.1 Trade Shows and Trade Missions 339
CULTURE INSIGHTS: Is the World Your Oyster? 340
13.4.2 Interviews and Focus Groups 340
13.4.3 Surveys and Environmental Scanning 341
13.4.4 Issues with Primary Research 341
Chapter Summary 342 • Key Terms 343 • Talk About It 343
Teaming Up 343 • Ethical Challenge 343 • Writing Assignments 344
PRACTICING INTERNATIONAL MANAGEMENT CASE 345
Chapter 14 Selecting and Managing Entry Modes 346
Marvel Entertains 347
14.1 Exporting and Countertrade 348
14.1.1 Why Companies Export 348
14.1.2 Developing an Export Strategy: A Four-Step Model 349
14.1.3 Degree of Export Involvement 350
14.1.4 Countertrade 352
14.2 Export/Import Financing 353
14.2.1 Advance Payment 353
14.2.2 Documentary Collection 353
14.2.3 Letter of Credit 354
14.2.4 Open Account 355
GLOBAL MANAGER: Collecting International Debts 356
14.3 Contractual Entry Modes 356
14.3.1 Licensing 356
14.3.2 Franchising 357
14.3.3 Management Contracts 359
14.3.4 Turnkey Projects 359
14.4 Investment Entry Modes 360
14.4.1 Wholly Owned Subsidiaries 360
14.4.2 Joint Ventures 361
14.4.3 Strategic Alliances 362
14.4.4 Partner Selection 363
CULTURE INSIGHTS: Negotiating Market Entry 364
Chapter Summary 364 • Key Terms 365 • Talk About It 365
Teaming Up 366 • Ethical Challenge 366 • Writing Assignments 366
PRACTICING INTERNATIONAL MANAGEMENT CASE 367
Chapter 15 Developing and Marketing Products 368
Wings for Life 369
15.1 Developing Product Strategies 370
15.1.1 Laws and Culture 370
15.1.2 Brand and Product Names 371
15.1.3 Other Product Issues 372
15.2 Creating Promotional Strategies 373
15.2.1 Push and Pull Strategies 373
GLOBAL MANAGER: Managing an International Sales Force 373
15.2.2 International Advertising 374
15.2.3 Communicating Promotional Messages 375
15.2.4 Blending Product and Promotional Strategies 376
CULTURE INSIGHTS: Localizing Digital Advertising 377
15.3 Designing Distribution Strategies 378
15.3.1 Designing Distribution Channels 378
15.3.2 Special Distribution Issues 379
15.4 Developing Pricing Strategies 380
15.4.1 Worldwide Pricing 380
15.4.2 Dual Pricing 380
15.4.3 Factors That Affect Pricing Decisions 381
Chapter Summary 382 • Key Terms 383 • Talk About It 383
Teaming Up 384 • Ethical Challenge 384 • Writing Assignments 384
PRACTICING INTERNATIONAL MANAGEMENT CASE 385
Chapter 16 Managing International Operations 386
Toyota Races Ahead 387
16.1 Production Strategy 388
16.1.1 Capacity Planning 388
16.1.2 Facilities Location Planning 388
16.1.3 Process Planning 390
16.1.4 Facilities Layout Planning 391
16.2 Acquiring Physical Resources 391
16.2.1 Reasons to Make 392
16.2.2 Reasons to Buy 393
16.2.3 Raw Materials 394
16.2.4 Fixed Assets 394
16.3 Key Production Concerns 395
16.3.1 Quality Improvement Efforts 395
GLOBAL MANAGER: World-Class Standards 396
16.3.2 Shipping and Inventory Costs 396
16.3.3 Reinvestment versus Divestment 396
16.4 Financing Business Operations 397
16.4.1 Borrowing 397
16.4.2 Issuing Equity 398
16.4.3 Internal Funding 399
CULTURE INSIGHTS: Financing Business from Abroad 399
16.4.4 Capital Structure 400
Chapter Summary 401 • Key Terms 402 • Talk About It 402
Teaming Up 402 • Ethical Challenge 402 • Writing Assignments 402
PRACTICING INTERNATIONAL MANAGEMENT CASE 403
Chapter 17 Hiring and Managing Employees 404
IKEA Togetherness 405
17.1 International Staffing Policies 406
17.1.1 Ethnocentric Staffing 406
17.1.2 Polycentric Staffing 408
17.1.3 Geocentric Staffing 408
17.2 Recruiting and Selecting Human Resources 409
17.2.1 Human Resource Planning 409
GLOBAL MANAGER: Growing Global 409
17.2.2 Recruiting Human Resources 410
17.2.3 Selecting Human Resources 410
17.2.4 Culture Shock 411
17.2.5 Reverse Culture Shock 411
CULTURE INSIGHTS: A Shocking Ordeal 412
17.3 Training and Development 413
17.3.1 Methods of Cultural Training 413
17.3.2 Compiling a Cultural Profile 414
17.3.3 Nonmanagerial Worker Training 414
17.4 Compensation, Labor, and Management 415
17.4.1 Managerial Employees 415
17.4.2 Nonmanagerial Workers 416
17.4.3 Labor–Management Relations 416
Chapter Summary 418 • Key Terms 419 • Talk About It 419
Teaming Up 419 • Ethical Challenge 420 • Writing Assignments 420
PRACTICING INTERNATIONAL MANAGEMENT CASE 421
Endnotes 422
Glossary 435
Name Index 443
Subject Index 445