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Alan M. RugmanSimon Collinson

INTERNATIONALBUSINESS5THEDT0N

FTLPrentice I LS-B01-000.981FINANCIAL TIMES

Contents in Detail

List of IllustrationsPrefaceAbout the AuthorsGuide to the Case StudiesGuided TourAcknowledgments

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Part One

THE WORLD OF !INTERNATIONAL BUSINESS

Chapter 1Regional and Global Strategy 3

Objectives of the chapter 3

• Active Learning CaseCoke goes worldwide with a local strategy 4

Overview of the book 5Country and firm factors 5International competitiveness and firm strategy 6Globalization 7Regionalization 7

Introduction 7

World business: a brief overview 8Exports and imports 8Foreign direct investment 10The triad 12

Today's international environment 14International trade regulation 14Technology 15Small and medium-sized enterprises (SMEs) 15

B International Business Strategy in ActionAmazon.com is not a global business 16

Globalization and strategic management 17' Regional triad strategies 17

Maintaining economic competitiveness 18Multinationals in action 21

H International Business Strategy in ActionTata 22

The study of international business 25From general to strategic emphasis 25

Framework for this book 26Key points 27Key terms 28

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Review and discussion questions 28

H Real CasesBig oil gets bigger 29Wal-Mart 30

Endnotes 31Additional bibliography 32Appendix to Chapter 1 33

Chapter 2The Multinational Enterprise 37


• Active Learning Case

Disneyland in Europe 38

Introduction 39

The nature of MNEs 40Characteristics of MNEs 40The internationalization process 42Why firms become MNEs 44

H International Business Strategy in ActionItalian family firms 45The strategic philosophy of MNEs 46

Strategic management and MNEs 47Strategic management of MNEs: an

introduction 47

H International Business Strategy in ActionNestle , 49

A framework for global strategies:the FSA-CSA matrix 50

The FSA-CSA matrix 51

It's regional, not flat 53

Multinationals in action 53Solectron 53BMW 54Levi Strauss 55Canon 56Zara 56

Key points 59Key terms 59Review and discussion questions 60

• Real CasesStarbucks 60Sony 61

Endnotes 63

CONTENTS IN DETAIL

Additional bibliographyAppendix A to Chapter 2Appendix B to Chapter 2

Chapter 3The Triad and International Business

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72Objectives of the chapter


Boeing versus Airbus 73

Introduction 74

Reasons for FDI 75Increase sales and profits 75

• International Business Strategy in ActionAflac 77Enter rapidly growing markets 78Reduce costs 78

• International Business Strategy In ActionLafarge and Cemex: concrete multinationals 79Gain a foothold in economic blocs 80Protect domestic markets 81Protect foreign markets 81Acquire technological and managerial know-how 81

FDI and trade by triad members 82The triad's domination of FDI and trade 82Triad FDI clusters 83

Multinationals in action: regional business strategy 84The world's regional automotive industry 85Mergers and acquisitions 91


• Real CasesMatsushita and Philips 93Toys V Us in Europe and Japan 94

Endnotes 95Additional bibliography 96

Part Two

THE ENVIRONMENT OFINTERNATIONAL BUSINESS

Chapter 4International Politics

Objectives of the chapter

• Active Learning CaseHow risky is foreign investment in Russia ? .

IntroductionPolitical ideologies and economics

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• International Business Strategy in ActionSoftwood lumber: not-so-free trade 106

Government control of assets 107Government-business cooperation 108

Economic integration 110Trade creation and trade diversion 110Levels of economic integration 111Economic integration: an overall perspective 112Ethics, environment, MNEs, and the civil society 113

H International Business Strategy in ActionNon-governmental organizations and

political power 114

The European Union (EU) 116Other examples of economic integration 119

Economic integration and strategic management 120Strategic alliances and acquisitions 120Localization of business operations 121


m Real CasesHow environmental regulations can be used as

trade barriers 125Embraer vs. Bombardier 126

EndnotesAdditional bibliography

Chapter 5International Culture

Objectives oLthe chapter ' ,

• Active Learning CaseCulture clash at Pharmacia and Upjohn

IntroductionWhat is culture?

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The importance of culture in different businesscontexts 133

Culture has always been important 134

H International Business Strategy in ActionMcDonald's 135

National stereotypes and key dimensionsof culture 136

Culture at two levels 136Hofstede's four dimensions of culture 136Trompenaars' seven dimensions of culture 138The GLOBE project's nine dimensions of culture 139Applying the national culture frameworks 140"The way we do things here": the implications

of cultural differences for organizations andmanagers 142

Cross-cultural management 144

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CONTENTS IN DETAIL

Organization 144LeadershipCommunicationThe corporate responseMultinational organization structures:

imperialist or independent?Culture clash in cross-border M&A and joint

ventures

S International Business Strategy in ActionDanone and Parmalat—going international,

staying local

Culture embodied in national institutionsFrance: cultural and social characteristics that

create a national distinctiveness

Key pointsKey termsReview and discussion questions

• Real CasesDo not throw your meishi! 154Sport can be local and global: Manchester United 155


Chapter 6International Trade 159


• Active Learning Case /

Trade of the triad and China ' 160

Introduction ^ 161

International trade theory 162Theory of absolute advantage 162Theory of comparative advantage 163Factor endowment theory 165International product life cycle theory 165Other important considerations 167

H International Business Strategy in ActionMicrosoft shows the world is not flat 168

Barriers to trade 169Reasons for trade barriers 169Commonly used barriers 170Tariffs 171US trade policy - 172

B International Business Strategy in ActionThe courier wars 173

Non-tariff barriers to trade 174Quotas 174"Buy national" restrictions 175Customs valuation 175Technical barriers 175

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countervailing dutiesAgricultural productsExport restraints

Other economic developmentsCountertradeTrade in servicesFree trade zones


W Real CasesJob losses and offshoring to ChinaDumping on trade complaints

EndnotesAdditional bibliographyAppendix to Chapter 6: Balance of payments

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Antidumping legislation, subsidies, and

Chapter 7International Financial Markets andInstitutions 193



Barclays Bank international financial dealings 194

Introduction 195

Foreign exchange markets 196Foreign exchange markets in the United States 197

Determination of the exchange rate 202Purchasing power parity 202International Fisher effect 203Combined equilibrium relationships 203Other factors determining exchange rates 204

Protecting against exchange risk 205

• International Business Strategy in ActionWall Street and world financial markets 206Alternatives to minimize exchange risk 206

Foreign money and capital markets 208MNEs and national money markets 209MNEs and national capital markets 209

Regional money and capital markets 209The eurocurrency market 210Eurocurrency interest rates 211Other market characteristics 212Criticisms of the euromarkets 213Eurobonds and euroequities 214

E International Business Strategy in ActionAngloGold Ashanti 215

The IMF system 216- Unresolved problems with the IMF system 218

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CONTENTS IN DETAIL

MNEs and international financial markets andinstitutions


• Real CasesHSBCWorld financial crises

EndnotesAdditional bibliographyAppendix to Chapter 7: Regional aspects ofmultinationality and performance

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Part Three

INTERNATIONAL BUSINESSSTRATEGIES

Chapter 8Multinational Strategy 235



Vodafone and the triad telecom market 236

Introduction 237

Strategic orientations 239

• International Business Strategy in Action •'Arthur Andersen, Accenture, and McKinsey 240

Strategy formulation 241External environmental assessment 241Internal environmental assessment 245Goal setting 249

Strategy implementation 250Location 250

• International Business Strategy in ActionFuji Xerox and Xerox 251

Ownership 251Functional strategies 253

Control and evaluation 254Common methods of measurement 255

Key points 256Key terms 257Review and discussion questions . 257

• Real CasesMountain Equipment Co-op: a small business 258Benetton 259

Endnotes 260

Additional bibliography 261

Chapter 9Organizing Strategy 263



Procter & Gamble 264

Introduction 265

Organization structures 266Early organization structures 266

E International Business Strategy in ActionSanofi-Aventis 268The international division 269Global organization structures 269

• International Business Strategy in ActionMaking matrix work 275

Strategic management and organizing strategy 277Analysis of key structural variables 277Coordination 279


• Real CasesLVMH: organizing luxury products in the

international arena 285Command Alkon: a small business 286


Chapter 10Production Strategy 289



The GE production process and Six Sigma 290

Introduction 291

Research, development, and innovation 292Speed-to-market 295

Generation of goods and services 296Global sourcing 296

EJ International Business Strategy in Action

Gap Inc.: a successfully "Hollow Corporation" 298

Manufacturing of goods 299

a International Business Strategy in ActionGreening the supply chain 300

Inventory control 304Developing a strong service orientation 304

International logistics 306Transportation 306Packaging 308Storage 309

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CONTENTS IN DETAIL

Different kinds of global production systems

Strategic management and production strategyTechnology and production designContinuous improvementAlliances and acquisitions


• Real CasesFlextronicsNike


Chapter 11Marketing StrategyObjectives of the chapter

• Active Learning CaseVolkswagen in the United States

Introduction

International market assessmentInitial screening: basic need and potentialSecond screening: financial and economic

conditionsThird screening: political and legal forcesFourth screening: socio-cultural forcesFifth screening: competitive environmentFinal selection

Product strategiesLittle or no modificationModerate to high modification

B International Business Strategy in ActionKola Real Group

PromotionNature of the productAdvertising

• International Business Strategy in ActionIKEA in international markets

Personal selling

PricingGovernment controlsMarket diversityCurrency fluctuationsPrice escalation forces

PlaceDifferent distribution systemsChoosing the best distribution system

Strategic management and marketing strategy

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Ongoing market assessmentEffective pricingInternet marketing and "open innovation"


m Real CasesBang & OlufsenBrazilian soap operas: a world market


Chapter 12Human Resource ManagementStrategy


• Active Learning CaseThe Coca-Cola Company thinks local

Introduction

Selection and repatriationInternational screening criteria and selection

proceduresRepatriation of expats

Training and developmentTypes of training

13 International Business Strategy in ActionP&O, Carnival, and Dubai Ports

CompensationCommon elements in an international -

compensation packageCompensation trends and comparisons

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Labor relations practicesH International Business Strategy in Action

German management gets tough

Industrial democracyIndustrial democracy in action

Strategic management and IHRMstrategies

Language trainingCultural adaptationCompetitive compensationSpecially designed HRM programs


• Real CasesOffshoring to IndiaExecutive search firms

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CONTENTS IN DETAIL


Chapter 13Political Risk and NegotiationStrategy 384


• Active Learning CaseKodak in China: changing the rules of the game 385

Introduction 387Generic PEST analysis 387

Political risk 389Deregulation and political risk 390The nature of political risk 391Sources of political risk 392

Country analysis and political risk assessment 393Online risk information resources 393Quantifying risk vulnerability 394Accounting for country risk 397

Negotiation strategies 398

1 International Business Strategy in ActionPolitical risk for De Beers 401

Behavioral characteristics of the participants innegotiations 401

B International Business Strategy in ActionDell goes to Brazil • 403Transparency and corruption: politically sensitive

political risk y 406

Strategic management and political risk 407Use of integrative and protective/defensive

techniques 408


• Real CasesYukos and the Russian oligarchs 412Problems with ports 414

Endnotes 415Additional bibliography • 416www resources 417

Chapter 14International Financial Management 418

Objectives of the chapter . 418


British Airways 419

Introduction 420

Determining parent-subsidiary relationships 422

Polycentric solution 422Ethnocentric solution 422Geocentric solution 422

Managing global cash flows 423Internal funds flows 423Funds positioning techniques 424Multilateral netting 427

O International Business Strategy in Action

Tax havens 428

. Managing cash , 430

• International Business Strategy in ActionSovereign wealth funds 432

Exchange risk management 433Transaction risk 433Translation risk 433Economic risk 434An example of exchange risk management 436Developing forecasting and reporting systems 437

Capital budgeting in the MNE 438Use of NPV 440Institutional features 441

International financing in the MNE 442Financial structure 443

Control: identifying objectives, evaluating affiliateperformance, and making performance consistentwith goals 444

Strategic international finance 445Establishing overseas operations 445Reducing financial risk 446Alliances 446Cost cutting 446

Key points 447Key terms e 448Review and discussion questions 448

M Real CasesSkandia 449Repsois acquisition of YPF - 450


Part Four

INTERNATIONAL BUSINESSSTRATEGIES IN ACTION

Chapter 15Corporate Strategy and NationalCompetitiveness


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CONTENTS IN DETAIL

• Active Learning CaseWorldwide operations and local strategies

of ABB 456

Introduction 457

The single diamond 457Determinants and external variables 458Critique and evaluation of the model 459

The double diamond , 461Canada and the double diamond 461

B International Business Strategy in ActionNokia and Ericsson 464

Mexico and the double diamond 466

Integration and responsiveness c. 469Integration versus national responsiveness 469

B International Business Strategy in ActionKodak 470

Balancing the trade-offs 472Competitiveness in the triad 474


B Real CasesThere is no global beer, only local 479IBM 480

Endnotes 481Additional bibliography , 483

Chapter 16European Union 485


B Active Learning CaseFrance Telecom 486

The EU environment 487Emergence of a Single European Market 487The competitive status of the EU 491

Conducting a strategic analysis 494Using competitive intelligence 494

B International Business Strategy in ActionFord and Volvo 495Evaluatingtlocations 497

Strategy issues 499Overall strategic analysis for the EU 499Exporting ~ 500Strategic acquisitions and alliances 502

B International Business Strategy in ActionDB: more than a railway 503

Marketing considerations 504Manufacturing considerations 505

Management considerationsBarriers to EU market access

Key points ,Key termsReview and discussion questions

B Real CasesAccor budget hotelsCarrefour


Chapter 17Japan

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B Active Learning Case

Doing business in Japan 517

Introduction 519

Political, social, and cultural characteristics 519A traditionally strong government role in the

economy 519Distinctive cultural characteristics 520

Economic characteristics 522Japan and China: the new Asian powerhouse? 525

Business characteristics 525Manufacturing strengths 526Strong applied R&D 526Keiretsu 527

B International Business Strategy in ActionKirin Beer goes international 530

Distribution, retailing, and customerorientation 531

Japanese corporations f 532

A changing nation 534Restructuring capital markets 535Deregulation, increased M&A, and inward FDI 537

D International Business Strategy in ActionWal-Mart takes Seiyu 539

Restructuring corporations 540The decline of manufacturing and distribution

keiretsu 541The growth of outward FDI and offshore

manufacturing 541The decline of lifetime employment and changing

HRM practices 542Diversification strategies 542

Conclusions 543


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CONTENTS IN DETAIL

• Real Cases

Renault and Nissan: no pain, no gain

Canon Group

Endnotes

Additional bibliography

www resources

Chapter 18North America



NAFTA at 15

Introduction

CanadaCanada's economy

Differences in the business environment

H International Business Strategy in Action

Bombardier

Canada's multinationalsMultilateral agreement on investment (MAI)

Business opportunities in Canada

Franchising

Mexico

Mexico's economyMexico and NAFTARegional trade agreements

Doing business in Mexico

• International Business Strategy in Action /

Mexico and NAFTA

Key points

Key terms

Review and discussion questions

• Real Cases

Jumex of Mexico

GlaxoSmithKline in the United States

Endnotes


Chapter 19Emerging Economies



Acer Taiwan goes international

Introduction

Triad firms and emerging economy firms: why the

mutual interest?

An overview of emerging economies, by region

Asia-Pacific and the Middle East

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Central and Eastern Europe

Latin America and the Caribbean

Africa

E3 International Business Strategy in Action

From Oserian to Tesco: the Kenyan cut

flower industry

Shifting patterns of comparative and competitive

advantage

Flying Geese model

Emerging economies as sources of innovation

Market access to the triad

• International Business Strategy in Action

Korean chaebols.- Hyundai and Samsung

Key points

Key terms


m Real Cases

The Indian IT, software, and services industry

Bumrungrad International in Thailand

Endnotes


www resources

Chapter 20China



Oxford Instruments in China

Introduction

Unprecedented scale, scope, and speed

of growth

The role of government ,

MNE investment into China


Airbus in China

Foreign R&D investment

Getting into China

Outward investment and the new multinationals

from China


Haier abroad

Key points

Key terms


m Real Cases

Citigroup in China

Nanjing Auto makes the MG

Endnotes

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CONTENTS IN DETAIL

Additional Bibliography 640www resources 642

Chapter 21Corporate Ethics and the NaturalEnvironment 643



The environment, NGOs, and MNEs 644

Introduction 645

Developing effective strategies 646Going where the action is 646

B International Business Strategy in Action3M . 647

International business research frameworks 648Theories of international business 648Practical applications of the theory 649

The five partners business network framework 650Forging new business networks 650

Coping with changing environments 652

Political environment 652

Economic environment 653

The trade and investment framework 656

Environment and MNEs 658

• International Business Strategy in ActionIs The Body Shop an ethical business? 659The pattern of MNE responses 662


m Real CasesDell: B2C 664Maersk Group 666


Glossary 671Subject Index 683Company Index 699Name Index 705

Supporting resourcesVisit www.pearsoned.co.uk/rugman to find valuable online resources

i

Companion Website for students• Multiple choice questions to test understanding

• Extensive links to valuable resources on the web

• An online glossary to explain key terms

• Electronic 'flashcards' to check understanding of key terms and definitions during revision

For instructors• An Instructor's Manual containing teaching notes and guidance on case studies

• Powerpoint slides that can be downloaded and used for presentations

• Testbank of over 2000 assessment questions

Also: The Companion Website provides the following features:

• Search tool to help locate specific items of content

• E-mail results and profile tools to send results of quizzes to instructors

• Online help and support to assist with website usage and troubleshooting

For more information please contact your local Pearson Education sales representative or visitwww.pearsoned.co.uk/rugman

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