GLOBAL International Business

International BusinessThe New RealitiesTHIRD EDITION

S. Tamer Cavusgil • Gary Knight • John R. Riesenberger

International BusinessThe N

ew

RealitiesC

avusgil • Knight

Riesenberger

TH

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EDIT

ION

GLO

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NThis is a special edition of an established title widely used by colleges and universities throughout the world. Pearson published this exclusive edition for the benefi t of students outside the United States and Canada. If you purchased this book within the United States or Canada you should be aware that it has been imported without the approval of the Publisher or Author.

Pearson International Edition

GLOBALEDITION

This Global Edition has been edited to include enhancements making it more relevant to students outside the United States. The editorial team at Pearson has worked closely with educators around the globe to include:

— Expanded! Detailed explanations of key concepts based in micro- and macro-economic theory.

— Revised! Greater emphasis on Africa and other developing regions.

— Updated! Substantial expansion on topics of sustainability and corporate social responsibility.

International Business introduces a complete teaching and learning system that seamlessly integrates cases, exercises and videos. This edition now includes extensive new and updated material, along with globally applicable examples including Uniglo’s international expansion from Asia, foreign investment in Qatar and the revitalizing of the Landover and Jaguar brands.

GLOBALEDITION

International Business, Global Edition

Table of Contents

Cover

International Business

About the Authors

Brief Contents

Contents

Preface

Part 1 Foundation ConceptsIntroduction: What Is International Business?��

Facebook: A Global Phenomenon

What Are the Key Concepts in International Business?

��

The Nature of International Trade

��

The Nature of International Investment

��

Services as Well as Products

��

The International Financial Services Sector

��

How Does International Business Differ from Domestic Business?

��

The Four Risks in Internationalization

��

Who Participates in International Business?

��

Multinational Enterprise (MNE)

Governments and Nongovernmental Organizations (NGOs)

Global Trend: UNIQLO: A Japanese international Success

Why Do Firms Internationalize?

��

Why Study International Business?

��

Facilitator of the Global Economy and Interconnectedness

��

Contributor to National Economic Well-Being

A Competitive Advantage for the Firm

��

A Competitive Advantage for You

��

An Opportunity to Support Sustainability and Corporate Citizenship

��

Table of Contents

You Can Do It | Recent Grad in IB: Ashley lumb

Closing Case: internationalization at Harley-Davidson

Chapter Essentials: Key Terms

Summary

Test Your Comprehension

Apply Your Understanding

GlobalEDGE Internet Exercises

Globalization of Markets and the Internationalization of the Firm��

Bangalore: ITs Global Destination

Why Globalization Is Not New

��

Phases of Globalization

��

Market Globalization: An Organizing Framework

Dimensions of Market Globalization

��

Drivers of Market Globalization

��

Technological Advances

��

Information Technology

��

Communications ��

Manufacturing ��

Transportation ��

Societal Consequences of Market Globalization

��

Global Trend: Globalization and E-Business in the online World

Contagion: Rapid Spread of Monetary or Financial Crises

��

Loss of National Sovereignty

��

Offshoring and the Flight of Jobs

��

Effect on the Poor

��

Effect on Sustainability and the Natural Environment

��

Effect on National Culture

��

Globalization and Africa

��

Firm-level Consequences of Market Globalization: Internationalization of the

Firms Value Chain

��

Table of Contents

Closing Case: Debating the Merits of Globalization


Summary




Organizational Participants That Make International Business Happen��

The Emergence of Born Global Firms

Four Types of Participants in International Business

��

Participants Arranged by Value-Chain Activity

Illustrating the International Value Chain Using Nokia

��

Focal Firms in International Business

��

The Multinational Enterprise (MNE)

Small and Medium-Sized Enterprises

Born Global Firms

��

International Entry Strategies of Focal Firms

��

A Framework for Classifying International Entry Strategies

��

Other Types of International Entry Strategies

��

Distribution Channel Intermediaries in International Business

��

Intermediaries Based in the Foreign Market

��

Intermediaries Based in the Home Country

��

Online Intermediaries

��

Facilitators in International Business

��

Global Trend: online Retailers Surge Ahead

Governments in International Business

��

Closing Case: DHl, FedEx, and UPS: Shifting Fortunes in the Global logistics

Services industry


Summary



Table of Contents

GlobalEDGE internet Exercises

Part 2 The Environment of International BusinessThe Cultural Environment of International Business��

Culture and Management: Google in China

The Nature of Cross-Cultural Risk

Characteristics of Culture

��

What Culture Is Not

��

Socialization and Acculturation

��

The Many Dimensions of Culture

��

Lenses to Understand Culture

��

High- and Low-Context Cultures

Hofstedes Research on National Culture

��

Cultural Metaphors

��

Idioms ��

Subjective and Objective Dimensions of Culture

��

Values and Attitudes

��

Deal versus Relationship Orientation

Example: Contrasting Mexico and the United States

Manners and Customs

��

Perceptions of Time

��

Perceptions of Space

��

Religion ��

Symbolic Productions

��

Material Productions and Creative Expressions of Culture

��

Language: A Key Dimension of Culture

Cultural Change ��

Technology, the Internet, and Culture

��

Globalizations Effect on Culture: Are Cultures Converging?

��

Context of International Business

��

Table of Contents

Culture and the Services Sector

��

Overcoming Cross-Cultural Risk: Managerial Guidelines

You Can Do It | Recent Grad in IB: Zhibo (Lawrence) Yu

Global Trend: Minimizing Cross-Cultural Bias with Critical Incident Analysis

Closing Case: Hollywoods Influence on Global Culture


Summary

Test your Comprehension

Apply your Understanding


Ethics, Sustainability, and Corporate Social Responsibility in InternationalBusiness��

Corporate Social Responsibility at Coca-Cola

Ethical Challenges in International Business

��

Intellectual Property Violations

��

Bribery ��

Corruption ��

Key Aspects of International Ethics

��

The Value of Behaving Ethically

Variation in Ethical Standards Among Countries

��

An Ethical Dilemma

��

Linking Ethics, Corruption, and Responsible Behavior

��

Corporate Social Responsibility

��

The Value of CSR

The Role of Sustainability in International Operations

��

Global Trend: Global Corporate Social Responsibility Rises to the Top of the MNE

Agenda

Corporate Governance and Its Implications for Managers

��

Code of Conduct ��

Deciding What Constitutes Ethical Behavior

��

A Framework for Making Ethical Decisions

��

Embracing CSR and Sustainability

Table of Contents

A Global Consensus

��

Closing Case: Corruption at Siemens


Summary




Theories of International Trade and Investment��

Apples Comparative and Competitive Advantages

Why Do Nations Trade?

��

Classical Theories

��

How Can Nations Enhance Their Competitive Advantage?

��

Contemporary Theories

��

Global Trend: Moving from Comparative to National Competitive Advantages

Why and How Do Firms Internationalize?

��

Company Internationalization

��

How Can Internationalizing Firms Gain and Sustain Competitive Advantage?

��

FDI-Based Explanations

Non-FDI-Based Explanations

Closing Case: Hyundai: leading the Way in the Global Auto Industry


Summary




Political and Legal Systems in National Environments��

The Political and Legal Realities of Doing Business in China

The Nature of Country Risk

��

How Prevalent Is Country Risk?

��

Political and Legal Environments in International Business

��

Political Systems

Table of Contents

��Totalitarianism ��

Socialism ��

Democracy ��

Democracys Link to Economic Freedom and Openness

��

The Relationship between Political Systems and Economic Systems

Legal Systems ��

Common Law ��

Civil Law ��

Religious Law ��

Mixed Systems ��

Participants in Political and Legal Systems

��

Government ��

International Organizations

��

Regional Economic Blocs

��

Special Interest Groups

��

Competing Firms ��

Types of Country Risk Produced by Political Systems

��

Government Takeover of Corporate Assets

��

Embargoes and Sanctions

��

Boycotts against Firms or Nations

Terrorism ��

War, Insurrection, and Violence

��

Example: Country Risk in the Middle East

��

Types of Country Risk Produced by Legal Systems

��

Country Risk Arising from the Host-Country Legal Environment

Country Risk Arising from the Home-Country Legal Environment

Global Trend: Evolving legal Aspects of E-Commerce

Managing Country Risk

��

Proactive Environmental Scanning

��

Strict Adherence to Ethical Standards

��

Alliances with Qualified Local Partners

��

Protection Through Legal Contracts

Table of Contents

��Closing Case: Political, legal, and Ethical Dilemmas in the Global

Pharmaceutical industry


Summary




Government Intervention in International Business��

Qatar Welcomes New Foreign Investment

The Nature of Government Intervention

��

Rationale for Government Intervention

��

Defensive Rationale

��

Offensive Rationale

��

Instruments of Government Intervention

��

Tariffs ��

Nontariff Trade Barriers

��

Investment Barriers

��

Subsidies and Other Government Support Programs

��

Consequences of Government Intervention

��

Evolution of Government Intervention

��

General Agreement on Tariffs and Trade

��

Global Trend: The World Trade Organization and Collapse of the Doha Round

Intervention and the Global Financial Crisis

��

How Firms Can Respond to Government Intervention

��

Strategies for Managers

��

Closing Case: Government Intervention at Airbus and Boeing


Summary



Table of Contents


Regional Economic Integration��

Evolution of the European Union

Regional Integration and Economic Blocs

��

Levels of Regional Integration

��

The Leading Economic Blocs

��

The European Union (EU)

European Free Trade Association (EFTA)

North American Free Trade Agreement (NAFTA)

Global Trend: Troubles in the European Union

El Mercado Comun del Sur (MERCOSUR)

The Caribbean Community (CARICOM)

Comunidad Andina de Naciones (CAN)

Association of Southeast Asian Nations (ASEAN)

Asia Pacific Economic Cooperation (APEC)

Australia and New Zealand Closer Economic Relations Agreement (CER)

Economic Integration in the Middle East and Africa

��

Advantages of Regional Integration

��

Success Factors for Regional Integration

��

Ethical Dilemmas and Drawbacks of Regional Integration

��

Sustainability of Firms and National Assets

��

Management Implications of Regional Integration

��

Closing Case: H&M: Choosing between Global and Regional Free Trade


Summary




Understanding Emerging Markets��

The New Global Challengers: MNEs from Emerging Markets

Advanced Economies, Developing Economies, and Emerging Markets

��

Advanced Economies

��

Table of Contents

Developing Economies

��

Emerging Market Economies

��

What Makes Emerging Markets Attractive for International Business

��

Global Trend: Chinas Evolving opportunities and Challenges

Emerging Markets as Target Markets

��

Emerging Markets as Manufacturing Bases

��

Emerging Markets as Sourcing Destinations

��

Assessing the True Potential of Emerging Markets

��

Per-Capita Income as an Indicator of Market Potential

Middle Class as an Indicator of Market Potential

��

Risks and Challenges of Emerging Markets

��

Political Instability

��

Weak Intellectual Property Protection

��

Bureaucracy, Red Tape, and Lack of Transparency

��

Poor Physical Infrastructure

��

Partner Availability and Qualifications

��

Dominance of Family Conglomerates

��

Success Strategies for Emerging Markets

��

Customize Offerings to Unique Emerging Market Needs

��

Partner with Family Conglomerates

��

You Can Do It | Recent Grads in IB: Andrew & Jamie Waskey

Target Governments in Emerging Markets

��

Skillfully Challenge Emerging Market Competitors

��

Corporate Social Responsibility, Sustainability, and the Crisis of Global

Poverty

��

Foster Economic Development with Profitable Projects

��

Microfinance to Facilitate Entrepreneurship

Table of Contents

��The Special Case of Africa

��

Closing Case: Prowling for Success: The Revival of Jaguar land Rover


Summary




The International Monetary and Financial Environment��

The European Union and the Euro

Exchange Rates and Currencies in International Business

��

Convertible and Nonconvertible Currencies

��

Foreign Exchange Markets

��

Currency Risk ��

How Exchange Rates Are Determined

��

Economic Growth ��

Inflation and Interest Rates

��

Market Psychology

��

Government Action

��

Emergence of the Modern Exchange Rate System

��

The Bretton Woods Agreement

��

The Modern Exchange Rate System

��

The Monetary and Financial Systems

��

International Monetary System

��

Global Financial System

��

Global Trend: Global Financial Crisis

Key Players in the Monetary and Financial Systems

��

The Firm ��

National Stock Exchanges and Bond Markets

��

Commercial Banks

Table of Contents

��You Can Do It | Recent Grads in IB: Maria Keeley

Central Banks ��

The Bank for International Settlements

��

International Monetary Fund

��

The World Bank ��

The Global Debt Crisis

��

Closing Case: AiG and Global Financial Contagion


Summary




Part 3 Strategy and Opportunity AssessmentStrategy and Organization in the International Firm��

IKEAs Global Strategy

Strategy in International Business

��

Building the Global Firm

��

Visionary Leadership

��

Organizational Culture

��

Organizational Processes

��

The Distinction between Multidomestic and Global Industries

The Integration-Responsiveness Framework

Pressures for Global Integration

��

Pressures for Local Responsiveness

��

Strategies Based on the Integration-Responsiveness Framework

Organizational Structure

��

Centralized or Decentralized Structure?

��

Organizational Structures for International Operations

��

Export Department

��

International Division Structure

Table of Contents

��Geographic Area Structure (Decentralized Structure)

Product Structure (Centralized Structure)

Functional Structure (Centralized Structure)

Global Matrix Structure

��

Closing Case: lenovoThe Global Challenger from an Emerging Market


Summary




Global Market Opportunity Assessment��

Estimating Demand in Emerging Markets

Task One: Analyze Organizational Readiness to Internationalize

��

Task Two: Assess the Suitability of Products and Services for Foreign Markets

��

Task Three: Screen Countries to Identify Target Markets

��

Screening Countries for Exporting

��

Global Trend: Global Macro Trends That Affect international Business

Country Screening for Foreign Direct Investment

��

Country Screening for Sourcing

��

Task Four: Assess Industry Market Potential

��

Data Sources for Estimating Industry Market Potential

��

Task Five: Choosing Foreign Business Partners

��

You Can Do It | Recent Grad in IB: Javier Estrada

Criteria for Choosing a Partner

��

Searching for Prospective Partners

��

Task Six: Estimate Company Sales Potential

��

Practical Approaches to Estimating Company Sales Potential

��

In Conclusion ��

Closing Case: Advanced Biomedical Devices: Assessing Readiness to Export


Table of Contents

Summary




Part 4 Entering and Operating in International MarketsExporting and Countertrade��

Li-Ning: Athletic Apparel Entering the U.S. Again

An Overview of Foreign Market Entry Strategies

��

Characteristics of Internationalization

��

Diverse Motives for Pursuing Internationalization

��

The Nature of Internationalization

��

Exporting as a Foreign Market Entry Strategy

��

Exporting and the Global Economy

��

Exporting: A Popular Entry Strategy

Service Sector Exports

��

Advantages and Disadvantages of Exporting

��

Global Trend: The Emergence of SME Exporters

A Systematic Approach to Exporting

��

Importing ��

Managing Export-Import Transactions

Documentation ��

Shipping and Incoterms

��

Payment Methods in Exporting and Importing

��

Cash in Advance ��

Letter of Credit

��

Open Account ��

Export-Import Financing

Commercial Banks

��

Factoring, Forfaiting, and Confirming

��

Distribution Channel Intermediaries

��

Buyers and Suppliers

Table of Contents

��Intracorporate Financing

��

Government Assistance Programs

��

Multilateral Development Banks (MDBs)

Identifying and Working with Foreign Intermediaries

��

Working with Foreign Intermediaries

��

When Intermediary Relations Go Bad

��

Countertrade: A Popular Approach for Emerging Markets and Developing Economies

Magnitude and Drivers of Countertrade

��

Types of Countertrade

��

Risks of Countertrade

��

Why Consider Countertrade?

��

Closing Case: Barrett Farm Foods: A Small Firms international Launch


Summary




Foreign Direct Investment and Collaborative Ventures��

Huaweis Investments in Africa

International Investment and Collaboration

��

Trends in Foreign Direct Investment and Collaborative Ventures

��

Motives for FDI and Collaborative Ventures

Market-Seeking Motives

Resource- or Asset-Seeking Motives

Efficiency-Seeking Motives

Characteristics of Foreign Direct Investment

��

You Can Do It | Recent Grad in IB: Jennifer Knippen

Challenges of FDI

Corporate Social Responsibility, Sustainability, and FDI

Most Active Firms in FDI

Service Firms and FDI

Leading Destinations for FDI

Factors to Consider in Choosing FDI Locations

Table of Contents

Types of Foreign Direct Investment

��

Greenfield Investment versus Mergers and Acquisitions

The Nature of Ownership in FDI

Vertical versus Horizontal Integration

Global Trend: FDi in the Global Economy

International Collaborative Ventures

��

Equity Joint Ventures

��

Project-Based, Nonequity Ventures

Differences between Equity and Project-Based, Nonequity Ventures

Consortium ��

Cross-Licensing Agreements

Managing Collaborative Ventures

��

Understand Potential Risks in Collaboration

��

Pursue a Systematic Process for Partnering

��

Ensure Success with Collaborative Ventures

��

The Experience of Retailers in Foreign Markets

��

Challenges of International Retailing

��

International Retailing Success Factors

��

Closing Case: DaimlerChrysler: A Failed Global Merger


Summary




Licensing, Franchising, and Other Contractual Strategies��

Harry Potter: The Magic of Licensing

Contractual Entry Strategies

��

Unique Aspects of Contractual Relationships

��

Licensing as an Entry Strategy

��

Trademark and Copyright Licensing

��

Know-How Licensing

Table of Contents

The Worlds Top Licensing Firms

��

Advantages and Disadvantages of Licensing

��

Advantages of Licensing

��

Disadvantages of Licensing

��

Franchising as an Entry Strategy

��

Who Are the Top Global Franchisors?

��

Global Trend: internationalization of Franchising: Emerging Markets

Advantages and Disadvantages of Franchising

��

The Franchisor Perspective

��

The Franchisee Perspective

��

Managerial Guidelines for Licensing and Franchising

��

Other Contractual Entry Strategies

��

Turnkey Contracting

��

Build-Operate-Transfer Arrangements (BOT)

Management Contracts

��

Leasing ��

The Special Case of Internationalization by Professional Service Firms

��

Infringement of Intellectual Property: A Global Problem

Guidelines for Protecting Intellectual Property

��

Closing Case: Subway and the Challenges of Franchising in China


Summary




Global Sourcing ��Global Sourcing of Pharmaceutical Drug Trials

Outsourcing, Global Sourcing, and Offshoring

��

Decision 1: Outsource or Not?

��

Decision 2: Where in the World Should Value-Adding Activities Be Located?

Table of Contents

Global Sourcing ��

Offshoring ��

Scope of Global Sourcing

��

Diversity of Countries That Initiate and Receive Outsourced Work

��

Global Trend: China and india: Chief Rivals in the Global Sourcing Game

Strategic Choices in Global Sourcing

��

Benefits of Global Sourcing

��

Cost Efficiency ��

Ability to Achieve Strategic Goals

��

Risks of Global Sourcing

��

Strategies for Minimizing the Risks of Global Sourcing

��

Implementing Global Sourcing Through Supply-Chain Management

Information and Communications Technology

��

Logistics and Transportation

��

Transportation Modes

��

Global Sourcing, Corporate Social Responsibility, and Sustainability

��

Potential Harm to Local and National Economy from Global Sourcing

��

Public Policy on Global Sourcing

��

Closing Case: Wolverine World Wide


Summary




Part 5 Functional Area ExcellenceMarketing in the Global Firm��

Emaar Properties: Entry to the Egyptian Market

Global Market Segmentation

��

Standardization and Adaptation of International Marketing

��

Standardization ��

Table of Contents

Adaptation ��

You Can Do It | Recent Grad in IB: John Dykhouse

Standardization and Adaptation: A Balancing Act

Global Branding and Product Development

��

Global Branding ��

Global Product Development

��

Global Trend: Growing Role for Marketing in Developing Economies

International Pricing

��

Factors That Affect International Pricing

��

A Framework for Setting International Prices

��

Managing International Price Escalation

��

Managing Pricing Under Varying Currency Conditions

��

Transfer Pricing

��

Gray Market Activity (Parallel Imports)

International Marketing Communications

��

International Advertising

��

International Promotional Activities

��

International Distribution

��

Global Account Management

��

Closing Case: H&M: international Marketing Success Story


Summary




Human Resource Management in the Global Firm��

Etisalat Egypt: Attracting and Maintaining the Best Employees

The Strategic Role of Human Resources in International Business

��

Differences between Domestic and International HRM

Key Tasks in International Human Resource Management

��

Table of Contents

International Staffing Policy

��

Recruiting, Selecting, and Developing Talent

��

Cultivating Global Mind-Sets

Cultural Intelligence

��

Expatriate Assignment Failure and Culture Shock

��

Preparation and Training of International Employees

��

Preparing Employees for Repatriation

��

Charting Global Careers for Employees

��

International Performance Appraisal

��

Compensation of Employees

��

International Labor Relations

��

Distinctive Features of Labor Around the World

��

Cost, Quality, and Productivity of Labor

��

Workforce Reduction and Employee Termination

��

International Labor Trends

��

Firm Strategy in International Labor Relations

��

Diversity in the International Workforce

��

Women in International Business

��

Global Trend: Corporate Social Responsibility and Sustainability in

international Human Resource Management

Success Strategies for Women Managers in International Business

��

Closing Case: Evolving Human Resource Challenges at Sony


Summary




Financial Management and Accounting in the Global Firm��

Table of Contents

A Small Firm Rides the Waves of Foreign Exchange

Key Tasks in International Financial Management

��

Task One: Decide on the Capital Structure

��

Task Two: Raise Funds for the Firm

��

Financial Centers

��

Sources of Funds for International Operations

��

Global Trend: Emerging Markets as investment Destinations

Task Three: Manage Working Capital and Cash Flow

��

Methods for Transferring Funds Within the MNE

Multilateral Netting

��

Task Four: Perform Capital Budgeting

��

Net Present Value Analysis of Capital Investment Projects

��

Task Five: Manage Currency Risk

��

Three Types of Currency Exposure

��

Foreign-Exchange Trading

Types of Currency Traders

��

Exchange-Rate Forecasting

Managing Exposure to Currency Risk Through Hedging

��

Hedging Instruments

��

Best Practice in Minimizing Currency Exposure

��

Task Six: Manage the Diversity of International Accounting and Tax Practices

��

Transparency in Financial Reporting

��

Trends Toward Harmonization

��

Consolidating the Financial Statements of Subsidiaries

��

International Taxation

��

Managing International Finance to Minimize Tax Burden

��

Closing Case: international Financial operations at Tektronix

Table of Contents


Summary




Glossary

Notes

Author Index

Company Index

Subject Index

Documents

GLOBAL International Business