International business managing globalization john hill

International Business


To my family. My wife Linda and sons Christopher and Richard have been brilliant.
Too often they have asked, “Where’s Dad?” The response has always been the same:
“He’s at the office doing his book.”
This work is dedicated to them.


International Business
MANAGING

GLOBALIZATION

John S. Hill
University of Alabama at Tuscaloosa


Copyright  2009 by SAGE Publications, Inc.
All rights reserved. No part of this book may be reproduced or utilized in any form or by any means,
electronic or mechanical, including photocopying, recording, or by any information storage and
retrieval system, without permission in writing from the publisher.
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Printed in the United States of America.
Library of Congress Cataloging-in-Publication Data
Hill, John S., 1951International business : managing globalization / John S. Hill.
p. cm.
Includes bibliographical references and index.
ISBN 978-1-4129-5364-1 (pbk.)
1. Globalization—Economic aspects. 2. International business enterprises—Management.
3. International economic integration. 4. International business enterprises.
I. Title.
HF1359.H55 2009
658′.049—dc22

2008030698

This book is printed on acid-free paper.
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Contents

PART I. THE GLOBALIZATION PROCESS: BACKGROUND, CAUSES, AND EFFECTS

1 The International Business Challenge
Introduction 4
The International Business Challenge

3

6

The Diverse International Marketplace 6
The Changing International Marketplace 7

Responding to the International Business Challenge:
How Executives Cope With Global Diversity and Change

9

From Cultural Ignorance to Cultural Understanding 9
Analytic Tools: The Multidisciplinary Nature of International Business

Globalization: Historical Background

Definition and Components 13
The Exploration Era to 1500 16
1500–1900: The Colonial Era 17
1900–Today: The Era of the International Corporation

The Globalization Era Since 1980

10

13

18

21

The Major Catalysts of Post-1980 Globalization 22
Globalization and the Developing World 24
Reasons for Developmental Differences:
The Diffusion Process in International Business 25
Diffusion Effects on Strategy Formulation and Implementation

International Business Topics and the Organization of This Text

28

31

Part 1: The Globalization Process—Background, Causes, and Effects 31
Part 2: International Business Analysis 33
Part 3: Managing Globalization—International Business Strategies 33

1


KEY POINTS 34
SHORT CASE 1.1. The September 11 Tragedy: An International Business Perspective 36
SHORT CASE 1.2. The Internet: Revolutionizing International Business? Or Not? 39

2 Globalization and Worldwide Infrastructure Development

41

Introduction 42
Global Infrastructure Development: UN Facilitators of International Business

44

United Nations Background 44
International Telecommunications Union (ITU) 46
International Civil Aviation Organization (ICAO) 46
Universal Postal Union (UPU) 46
International Maritime Organization (IMO) 46
UN Commission on International Trade Laws (UNCITRAL) 47
World Intellectual Property Organization (WIPO) 47
International Labor Organization (ILO) 47
International Court of Justice 47
Financial Infrastructures: International Monetary Fund 48
Currency Convertibility and the IMF 56
World Trade Organization (WTO) 57
The Free Trade–Protectionism Debate 58
National Infrastructure Development: World Bank Group 62

Private Sector Infrastructure Developments 62
Regional Economic and Political Integration 65
Degrees of Integration: Types of Trade Blocs 65
Formation of Economic/Political Blocs: The Evolution of the EU 66
Key Success Factors in Regional Blocs: The European Union 69
Other Trade Blocs: Progress and Problems 70

Global Privatization and Deregulation Programs

71

National Privatization and Deregulation Programs
Industry and Company Effects 74

71

World Infrastructure Development and International Business Growth
KEY POINTS
SHORT CASE
SHORT CASE
SHORT CASE
SHORT CASE

76
2.1.
2.2.
2.3.
2.4.

74

AIDS in Africa: Two Prescriptions—Any Cure? 78
Free Trade for Steel? The Debate Continues 80
The Battle in Seattle and the Anti-Globalization Movement 82
Working With Exchange Rates and Exchange Rate Arrangements 83

Globalization Effects on Country Institutions,

3 People, Industries, Business, and Consumers
Introduction: The Economic Development Process
Resource Bases for Industrialization

85

86

88

Economic Development Effects on Country Institutions and People

89


Changes in Country Institutions 91
Changes in People and Values 94
The Diffusion of Modern Behaviors: Explaining Within-Country
Variations in Behaviors Through the Flexible Stereotype 98

Developmental Effects on Industry, Business Practices, and Consumers

99

Developmental Effects on Industry Behaviors 101
Developmental Effects on Business Practices 104
Developmental Effects on Consumer Behavior 109

Country Development, Industrialization, Modernization, and
Integration Into the Regional and Global Economies 110
Stage 1: Traditional Preindustrial Societies 113
Stage 2: Industrialization and Modernization Processes 113
Stage 3: Postindustrial Economies 114
Stage 4: Regionally and Globally Involved Societies 114
Some Conclusions 114

Obstacles to Economic Development

114

Industrialization Process Impediments 115
Geographic Impediments 115
Ethnic and Linguistic Composition 116
Institutional Resistance to Change 117
KEY POINTS 118
SHORT CASE 3.1. Transitioning to the Market Economy: The Case of Eastern Europe 120
SHORT CASE 3.2. Tradition and Modernization in Developing Pakistan 121

CASE 1: Globalization and the Middle East
CASE 2: Královopolská

124

133

PART II. INTERNATIONAL BUSINESS ANALYSIS

149

4 Globalization and Regional Markets: Geopolitical Analyses
The Importance of Geopolitical Studies 153
Regional Development in the Worldwide Context
North America 154
Geographic Characteristics 154
Historical and Cultural Perspectives
Commercial History 157

Latin America

158

Geographic Characteristics 158
Historical and Cultural Perspectives
Commercial History 161

Western Europe

156

162

160

154

151


Geographic Characteristics 162
Historical and Cultural Perspectives
Commercial History 165

Eastern Europe

167

Geographic Characteristics 167
Historical and Cultural Perspectives
Commercial History 169

The Middle East and Africa

167

171

Geographic Characteristics 171
Historical and Cultural Perspectives
Commercial History 174

Asia

162

173

179
Geographic Characteristics 179
Historical and Cultural Perspectives
Commercial History 182

Geopolitics and Strategy

179

184

KEY POINTS 185
SHORT CASE 4.1. The Effects of Geography and History on Regional Development 187
SHORT CASE 4.2. Oil and the Middle East 187

5 National Market Analysis
Introduction 193
Essential Background

191

193

Historic Influences on National Culture Development 193
Geographic Influences on National Culture Development 196

Current Position Analysis

199

The Current Political Situation 199
The Current Economic Position 204
International Position: Analyzing Country Balance of Payments
How Managers Use Balance-of-Payments Data 213

Commercial Analyses

214

Industry Analysis 214

Demand Analysis: Customer and Marketing Considerations
Supply Chain Analyses 216
Business Environment Analyses 219

Cultural Analyses

206

215

221

KEY POINTS 222
SHORT CASE 5.1. The Japanese Economy—Historical Perspectives and Current Situation 224
SHORT CASE 5.2. Looking at Brazil in Its Latin American Context 229
SHORT CASE 5.3. Comparing Market Profiles for the United States, Brazil, and China 231


6 Analyzing Global Industries and Competitors
Introduction 236
Worldwide Industry Analyses

236

Evaluations of Worldwide Market Demand
Assessing Industry Supply Chains 240
Industry Structure 246
Drivers of Industry Change 246
Financial Benchmarks 252
Key Success Factors 253

Global Competitor Analyses

235

237

253

Internal Assessments 253
External Assessments: Analyzing Competitor Operations

254

Using Market Opportunity and Competitive Analyses to Craft Global Strategies
Market Selection Strategies 258
Competitive Effects on Strategic Decision Making

258

258

KEY POINTS 261
SHORT CASE 6.1. Global Change and the Wine Industry 262
SHORT CASE 6.2. The Airbus–Boeing Global Rivalry 267

CASE 3: IBCA, Ltd.

270

CASE 4: Nestlé (Ghana), Ltd.

289

CASE 5: The Evolution of an Irish Multinational Kerry Group, plc

PART III. MANAGING GLOBALIZATION:
INTERNATIONAL BUSINESS STRATEGIES

319

7 International Strategic Planning and Market Screening
The International Planning Process

301

321

322

Introduction 322
The Changing Environment of International Planning: Historic Perspectives
The Evolution of the International Corporate Planning Processes 324

Assessing the Corporate Position

325

Internal Assessments 325
External Assessments: The Marketplace Situation 328

External Assessments: Corporate and Industry Resource Deployments

Formulation of Strategic Plans
Subsidiary-Level Planning

336
337

336

323


Integrating National Plans into Regional and Global Strategies
The Benefits of Well-Executed Planning Processes 341

Market Screening and Risk Assessments

337

343

Political Risks 343
Economic Risks 344
Financial and Foreign Currency Risks 344
Operations Risks 345
Legal Risks 345
Taxation Risks 346
Security Risks 346
Business Risk Evaluation Methodologies 346

Special Case: Evaluating Emerging Markets 347
Long-Term Planning: Scenario Analyses 348
KEY POINTS 350
SHORT CASE 7.1. Strategic Planning at Benetton 351
SHORT CASE 7.2. Wal-Mart and Market Screening 353
SHORT CASE 7.3. Managing Risk in Emerging Markets 354

8 Internationalization and Globalization Processes
Internationalization and Globalization

357

358

Definitions 358
Measuring Internationalization and Globalization 359
Advantages of Internationalization and Globalization 363
Disadvantages of Internationalization and Globalization 363
Internationalization, Globalization, and Industry Strategies 364

Drivers of Corporate Internationalization and Globalization: Why Firms Go Abroad
Market Drivers 365
Cost Drivers 367
Competitive Drivers 368
Government Drivers 369
A Major Globalization Facilitator: The Role of Information Technologies

Preparing the Company for Internationalization and Globalization

369

371

Focusing the Organization: Corporate Competencies 372
Focusing the Organization: Supply Chain Restructuring 372
Developing Leadership and Management Capabilities 373
Globalizing the Corporate Culture 375

Effects of Globalization

381

Industry Structure Effects 381
Organizational Structure Effects 382
Corporate Culture Effects 384
Relationships Among Strategies, Structures, and Corporate Cultures

Financing International and Global Operations
Equity Options Using Outside Financing

386
386

385

365


Equity Options Using Internal Financing 387
Debt Options Using External Financing 388

Debt Options and Internal Financing 388
KEY POINTS 389
SHORT CASE 8.1. Four Companies Go Global 391
SHORT CASE 8.2. Setting Up a Multilingual Website

9 Market Entry and Servicing Strategies
Exporting Strategies

393

401

403

Indirect Exporting and Use of Trading Companies
Direct Exporting 404

Contractual Forms of Market Entry

403

406

Licensing 406
Franchising 407
Management Contracts 409
Contract Manufacturing 409
Coproduction Agreements 411

Investment Options for Servicing Foreign Markets:

Joint Ventures, Acquisitions, and Greenfield Operations
International Joint Ventures (IJVs) 411
Mergers and Acquisitions (M & A’s) 413
Greenfield Operations 422
Siting Research and Development Capabilities

411

424

Matching Market Servicing Strategies to Environmental and Corporate Needs

426

External Factors 426
Internal Factors 428
KEY POINTS 430
SHORT CASE 9.1. Managing the International Joint Venture (IJV)
SHORT CASE 9.2. The Daimler-Chrysler Megamerger 435

10 Global and Multimarket Strategies

433

437

Identifying and Developing Core Businesses
Internationalizing the Core Strategy 439

439

Identifying Cross-National Customer Similarities: Global Segmentation Criteria

Globalizing the International Strategy

444

Advantages and Disadvantages of Global Branding Strategies 445
Building Global Brand Portfolios 446
Creating Global Brands 447
Standardizing and Adapting Marketing Strategies: “Be Global, Act Local”

451

440


Dealing With Competitors: Global and
Multimarket Competitive and Cooperative Strategies
Competitive Strategies 453
Responding to Global Competitors

453

457

Cooperating With Competitors: Global Alliances 460
Global and Multimarket Financial Strategies 463
Transfer Pricing Issues 463
Managing Foreign Currency Risks

465

Global Cash Management: Settling Corporate Subsidiary Accounts 466
Global and Multimarket Financial Synergies
Administering Global Finances 469

468

KEY POINTS 469
SHORT CASE 10.1. Global Branding, Rivalries, and Organizational Practices 472
SHORT CASE 10.2. Making All the Right Moves: India’s Tata Group 474

11 Global and Multimarket Supply Chain Management
Global and Multimarket Supply Chains: Integration Options

477
479

Environmental and Corporate Catalysts to
Global and Multimarket Supply Chain Development 479
Supplier–Manufacturer Integration: “Upstream Relationships” 481
International Manufacturing Systems and Supply Chain Management 486
Manufacturer–Distribution Linkages 492
Distributor–Customer Linkages: Electronic Data Interchange and Internet Systems

Integration Mechanisms for Global Supply Chains:
IT, Managerial, and New Product Development Issues

495

495

Supply Chain Integration and Information Technologies 495
Creating Multicultural Managers 497
Integrating Supply Chain and Human Resource Policies 498
Global and Multimarket New Product Development Strategies 499

Deintegrating the Global Supply Chain: Outsourcing Strategies

501

Strategic Advantages of Outsourcing 502
Strategic Disadvantages of Outsourcing 502
Outsourcing Individual Supply Chain Components: Pros and Cons

503

KEY POINTS 508
SHORT CASE 11.1. Constructing and Evaluating Global and Multimarket Supply Chains 511
SHORT CASE 11.2. Evaluating Outsourcing Decisions 513

12 Managing Cultural Differences

515

Low-, Medium-, and High-Context Cultures:
A Framework for Understanding Business and Interpersonal Behaviors
Low-Context Behaviors 517
Medium-Context Behaviors 517

High-Context Behaviors 519

516


Cultural Underpinnings of Low-, Medium-,
and High-Context Behaviors: The “Whys”

519

Religion 519
Economic and Political System Effects
Social Forces 532

Intercultural Negotiations

531

533

Negotiating With U.S. Businesspeople 533
Negotiating With the Japanese 534
Negotiating With Latin Americans 536
Negotiating With Western Europeans 538
Negotiating With Asians (Other Than Japanese) 540
Negotiating With Middle Easterners 540
Negotiating With Eastern Europeans: The Russian Case

Organizing International Negotiations

541

543

Planning and Preparation 543
Conducting the Negotiation 544
Reaching an Agreement 544
Some Conclusions: What Is a Good Negotiator?

544

KEY POINTS 545
SHORT CASE 12.1. West Meets East Over the Negotiation Table: Contrasts and Causes 547
SHORT CASE 12.2. Negotiating Cross-Border Acquisitions in a Changing Europe 551

13 Localization Strategies: Managing Stakeholders and Supply Chains
The Importance of Localization Strategies

554

The Need for Localization/Insider Strategies 555
Market Servicing Strategy and Localization Potential

Managing Local Stakeholder Relations

553

556

556

Building Government Relations 556
Building Business Community Relations 558
Environmental Groups 558
Consumerism 559
Public Relations and the Press 560

Supply Chain Management

560

The Benefits of Supply Chain Localization 560
Supplier Management 561
Managing Local Manufacturing Operations 562
Localizing Marketing Operations: Multinational Strategies 564
Managing Local Supply Chains: Management and Human Resource Issues 574
Management–Worker Relations 579
KEY POINTS 582
SHORT CASE 13.1. Localization Strategies in Rural India 586
SHORT CASE 13.2. Child Labor: Is It a Matter of Perspective? 588
SHORT CASE 13.3. The Case of the Efficiency-Oriented Gringo 590


Case 6: Hewlett-Packard Company in Vietnam
Case 7: Manchester United

609

Case 8: Negotiating Across the Pacific
Case 9: Shell Oil in Nigeria

636

Case 10: Lion Nathan China

651

Index

678

About the Author

713

626

591


Preface
T

his text, International Business: Managing Globalization, has been retitled from World
Business: Globalization, Analysis, and Strategy to reflect its strong managerial orientation.
International business and globalization are synonymous in that the performance of business activities outside of companies’ countries of origin is now recognized as a primary catalyst of change around the world. No longer do firms automatically adapt everything they
do outside of their home markets to local cultures. Modern international firms take advantage of homogenizing tastes in world markets to leverage brands and expertise in increasingly modern and global marketplaces, though they are still very much aware of local needs
and adapt to them where needed. But corporations are increasingly aware of the globalization effects their activities have on national cultures. This text recognizes the full cultural
effects of globalization and shows how the best international firms manage their business
efforts in changing marketplaces to optimum effect. International Business: Managing

Globalization looks at markets the same way that managers do—as geographic entities that
must manage the forces of globalization within the contexts of regional and national cultures that have been around for hundreds and often thousands of years. Gone are the
academic notions that artificially separated environments into distinct, isolated disciplines
(economic, political, cultural, legal, and financial factors). In this text, these factors are
viewed as interactive within global, regional, and national market contexts. In like fashion,
the artificial separating out of business functions into marketing, manufacturing, human
resources, finance, and accounting areas, each unique and distinctive, is cast aside in favor
of fully integrated approaches that organize business functions according to companies’
strategic orientations (global, regional, or local) and corporate integrations of supply
chains. This pragmatic approach purposefully integrates environments and strategies
instead of leaving topic integration to instructors and students.
In this second edition, the essential structure of the text (described below) remains
unchanged. But as the world changes, so does text content. Specifically,
• In Chapter 1, greater emphasis has been placed on how earlier globalization
efforts have shaped today’s marketplace—the spread of global religious
philosophies (Christianity, Islam, Buddhism, Confucianism, and Taoism); the
diffusion of European languages through colonization; and the dissemination of
common foods such as maize, wheat, and potatoes throughout world markets.

xv


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I N T E R N AT I O N A L B U S I N E S S

• The changing structure of the world’s top corporations is recorded, reflecting the
new power of big oil companies (through rising petroleum prices) and the coming
of age of the large global retailers (the USA’s Wal-Mart, France’s Carrefour,
Germany’s Metro).

• Trade blocs that continue to proliferate across the global landscape are described.
The European Union moves inexorably forward with the addition of Romania and
Bulgaria in 2007. A new group, the South Asian Free Trade Area (SAFTA) came on
stream in 2006. Almost all trade blocs have continued their pushes toward closer
economic integration.
• Materials concerning the Middle East (the 9/11 short case and the Middle East
Globalization case) have been updated to reflect current circumstances. The Israel–
Lebanon war of 2006, and the ongoing struggle between Israel and the
Palestinians, remain key regional conflict points.
• In Chapter 5 (National Market Analysis), key differences in GDP per capita
measures (nominal GDP per capita and GDP measured by purchasing power
parity) are explained.
• All statistics in Chapter 6 (Analyzing Global Industries and Competitors) have been
updated to reflect current situations, especially with respect to megamergers.
• Chapter 10’s global strategy chapter has been augmented with new examples
reflecting company pushes toward global brands, and Part II long cases now
include Manchester United, the world’s premier global sporting brand, and its rise
to prominence.
• In Chapter 12, materials relating to the world’s major religions have been updated
to include new research in the area that relates religious values to daily behaviors
in the marketplace and to managerial attitudes and styles. Eastern religions,
especially Hinduism, Buddhism, Confucianism, and Taoism, are highlighted for
their effects on Asian lifestyles.
This text is multidisciplinary. It integrates history, geography, political science, economics, anthropology, and other social sciences into its explanations of how markets function and
how managers can best assess whether global, regional, or local decisions best suit particular markets. It starts with a three-chapter examination of the globalization process. This
emphasis helps students understand the underlying forces at work in the world marketplace.
Chapter 1 demonstrates that globalizing influences have been at work for hundreds of years,
and how these influences have accelerated since 1980. Chapter 2 explores modern globalizing influences in detail. In particular, it underscores the role of the United Nations in providing, through its specialized agencies, vital services to link world markets and facilitate
commercial interactions. Chapter 3 has been renamed to emphasize the consequences of
globalization, and its effects on country cultures and values. This chapter provides a conceptual framework to explain changes in institutions, individual values and behaviors,

industries, corporate behaviors, management styles, marketing, and consumer behavior.
Part II focuses on international business analyses. In Chapters 4 and 5, major emphases
are placed on history and geography in explaining how regions and countries have developed, and what tools are useful in their analysis. These explanations go beyond detailing
current conditions (the usual approach), and probe the origins of regional and national
development. This helps students understand why regions and countries evolved the way


Preface

xvii

they did. Chapters 6 and 7 look at how global industries and competitors are analyzed, and
how individual companies review their global situations in the planning process.
Part III deals with corporate management of globalization. The logical jump-off point is
corporate globalization. This is examined from both internal perspectives (Chapter 8) and
external viewpoints through Chapter 9 coverage of market entry strategies. The focus then
shifts to global and multimarket strategies: how companies execute strategies across
national markets and orchestrate their supply chains for maximum global effectiveness. No
other international text that I know of takes this contemporary approach. Finally, localization issues are examined in Chapters 12 and 13. The Chapter 12 treatment of cultural differences includes extensive materials on religion—how Islam, Buddhism, Hinduism,
Confucianism, and Taoism affect daily and business behaviors among the 4 billion nonChristians in world markets. This approach contrasts with current texts that generally give
scant or no coverage to this important topic. Finally, Chapter 13 addresses stakeholder and
supply chain issues at the local level. Again, the integrative approach is used to give students
comprehensive perspectives on localization strategies.
Throughout this text, efforts have been made to give equal treatments to all world regions
and countries. The United States is undoubtedly a very important market in the global economy, but overemphasis on this nation should not come at the expense of other markets.

DIFFERENTIATING FEATURES
The following table describes my approach to eight particular dimensions of the text.
Text Organization

Chapter topics revolve around globalization, diffusion, and
economic development themes with linkages to environmental
analyses and global/local strategies

Globalization

Explored historically and with respect to current globalizing forces
and effects

Change Orientation

Change is the one constant of world markets, and is examined
from institutional, individual, industry, and corporate perspectives.

Market Analyses

Evaluated as managers see them—from geographic perspectives:
global, regional forces affecting national markets

Industries and Competitors

Analyzed as companies see them—from global, regional, and
national market perspectives

Strategy Implementation

Assessed according to strategic needs: global/multimarket and
localization strategies

Topic Presentation Within Chapters

Chapter outlines and figures show topics and their interrelatedness

Relation to Broader Themes: The
World at Large

Quotations bring in outside commentaries to reinforce text
principles and concepts


xviii

I N T E R N AT I O N A L B U S I N E S S

1. Globalization as an underlying text theme: This book has an underlying rationale, a
framework that links chapters in a logical and progressive manner. This is explained in
Chapter 1 and reinforced throughout the text. This rationale is that globalization, technology transfers, and modernization take time to diffuse, both across world markets and within
individual countries. As firms transfer goods and services into similar (often developed) markets, the need for adaptations diminishes and standardized global strategies may be appropriate. But as companies move into developing countries, environmental differences become
pronounced, particularly in heavily populated rural areas. These necessitate strategic
changes as local needs must be accommodated. To varying degrees, all overseas business
requires some adaptation as peoples from national cultures interact, and as firms combine
corporate needs for scale economies with adaptive touches and global–local strategies.
2. A comprehensive look at globalization: Many political scientists, economists, politicians, businesspeople, and writers in the popular press have commented about globalization from their particular vantage points. This text examines this very important topic
in-depth—its historical origins, what factors cause it, and its effects. Readers will start to
understand some underlying controversies: why foreign franchises of U.S. companies
have been attacked; why Islamic (and many other) nations are suspicious of Westernization;
and, perhaps most important, why the changes globalization promotes are disruptive to
national cultures.
3. Understanding and managing change: The one constant in world markets is change,
and change is what most executives must understand and manage if they are to be successful. This text tackles change head-on. We explore the past through history, and students

can see linkages to current situations. We examine economic and cultural change to see
where nations have been, where they are, and where they would like to be. Similarly, we
look at changes in corporate outlooks and market development as countries adapt (or not)
to the challenge of globalization.
4. Looking at markets the way that managers do—as geographic entities: Executives analyze regions and countries as geographic units . They know that most nations have unique
histories, and that those histories significantly affect their current situations and outlooks
on life. Likewise, geography is also a major determinant of economic development. Most
important, managers know that they must examine political, economic, and cultural as well
as other factors together as a group to understand why regions and markets behave the way
they do.
5. Looking at industries and competitors from a global perspective: Managers know that
to be effective across world markets, they must analyze industry behaviors and market rivals
from a worldwide vantage point. Similarly, executives know that global planning is a
“must” as they allocate their limited resources in an effective manner. This text recognizes
these most important of management tasks and provides guidelines to help students
understand how international firms undertake this process.
6. Implementing strategies in multidisciplinary ways: This text responds to contemporary
trends in business and replaces the old functional approaches of marketing, manufacturing, and
HRM with integrated approaches to demand management and to supply chain organization,


Preface

xix

both at the global/multimarket and local levels. This represents a major shift in how international business might be taught and, just as important, it is in step with current management thinking and academic practices. From a practical perspective, follow-on
international courses that use functional field breakouts will not seem as repetitive to both
students and instructors.
7. Integrated chapter outlines: Topic integration facilitates learning as students see “how
it all fits together.” This text both integrates world business topics around the globalization

theme, at the chapter level, and includes frameworks to integrate the various themes within
chapters.
8. How world business topics relate to broader themes: This is achieved through quotations from famous (and infamous) personalities from all walks of life. Just as important, they
lighten the reading load and reinforce key principles and concepts throughout the text.

PEDAGOGICAL FEATURES
Introductory vignettes. The opening vignettes for each chapter define the chapter topics
and set the stage for further chapter reading.
The global Web. This resource provides users with the opportunity to engage in more indepth research via the Internet.

In-text quotations from well-known politicians, economists, businesspeople, philosophers, poets, and writers give the reader perspectives from additional voices. Some of these
quotations reinforce key text points, others provide an opposing viewpoint, and some are
humorous anecdotes.

Short cases. These cases at the end of each chapter cover mainstream topics and can be
focal points for class discussion or used in individual study.
Comprehensive (long) cases. These cases appear at the end of each part to more thoroughly
explore the part concepts through in-depth analyses of global companies.
Part I cases—
• Case 1: Globalization and the Middle East—Explores the issues of globalization,
modernization and Westernization in the Islamic Middle East.
• Case 2: Královopolská—Examines how an Eastern European company managed the
transition from state-owned enterprise to competing in the privatized economy.

Part II cases—
• Case 3: IBCA, Ltd.—Looks at how a financial services company analyzes global and
regional opportunities in the international marketplace.


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I N T E R N AT I O N A L B U S I N E S S

• Case 4: Nestlé (Ghana), Ltd.—Evaluates how the country subsidiary of a large
global company analyzes market opportunities in an African country.
• Case 5: The Evolution of an Irish Multinational Kerry Group—reviews how a small
regional dairy-based firm evolved into a major player in the world foods market.

Part III cases—
• Case 6: Hewlett-Packard Company in Vietnam—Examines the market entry
decision into an emerging Southeast Asian country.
• Case 7: Manchester United—Reviews how an English soccer club became a major
global brand in sports.
• Case 8: Negotiating Across the Pacific—Looks at how culture affects East–West
communications in an export business deal.
• Case 9: Shell Oil in Nigeria—Looks at how a major oil company manages its
stakeholders in a politically volatile environment.
• Case 10: Lion Nathan China—Explores how a beer company manages its strategy
in an expanding but very competitive national market.

INSTRUCTOR RESOURCES
Instructor’s Test Bank
The text is accompanied by sets of true–false and multiple choice questions that examine
all facets and concepts presented in the text. All were prepared by the author and have been
classroom-tested.

PowerPoint Lecture Presentation
The accompanying lectures provide outlines for every chapter, graphics of the illustrations
from the text, and additional examples providing instructors with a number of learning

opportunities for students. In each set of chapter power-points, there are questions inserted
at strategic points—usually three per chapter. There are three sets of PowerPoints—plain
(with no added questions), PowerPoints with questions (but no answers), and PowerPoints
with questions and answers. I usually use the second set (with questions but no answers)
for distribution to the class and the third set (with answers) for classroom presentations.

Additional Materials
Each chapter includes prepared materials for the instructor. They include further discussions of the questions presented in the PowerPoint presentations, additional materials, and
video and article suggestions that the instructor can use for classroom discussion. Instructor
materials also include answers to the short cases at the end of each chapter and discussion
points.


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Preface

xxi

Long Case Instructor Materials
There are 10 long cases in the text. Instructor materials include indications of where these
are most appropriately used, and comprehensive notes on the questions at the end of each
case.

ACKNOWLEDGMENTS
Sir Winston Churchill noted, “Writing a book is an adventure. To begin with, it is a toy and
an amusement. Then it becomes a mistress, then it becomes a master, then it becomes a
tyrant.” As this book moved through various steps into the master and tyrant phases, many
helped to bring it finally to fruition.
• For their help at the beginning, my thanks go to my extended family in Leicester,
England. They kept the home fires burning as I moved to the United States and

fulfilled many academic and professional objectives.
• In the United States, it was the late Richard R. Still at the University of Georgia
who taught me to write in a coherent fashion, to think beyond the status quo, and
how to write textbooks.
• At the University of Alabama, many generations of students stimulated my thought
processes and provided the enthusiasm that continues to inspire all of us in the
teaching profession. My day-to-day professional colleagues have been wonderful
and have helped create an atmosphere conducive to scholarly output. A special
tribute also to Professor Art Thompson, a veteran textbook writer, whose
encouragement was welcomed, and who has constantly demonstrated the
dedication, thoroughness, and professionalism that must accompany textbook
writing.
• To the students who read this preface (and those who do not!), I salute you.
International business is an adventure. Enjoy your studies. As you absorb the
principles within this book, I hope your enthusiasm for global studies is
enhanced, and that your interest in international activities and events continues
throughout your lifetime. Understanding the world about us has become an
imperative for good citizenship in all nations. May your minds, extended through
globalization, never go back to narrow-minded parochialism.
• To the professors who choose to adopt this text, thank you! It is a new approach to
international business and one that I hope you will enjoy teaching. No discipline
can move forward without those willing to overthrow the ways of our academic
forefathers. Please feel free to send me your comments and suggestions at
I cannot promise to implement all of them, but, like you,
I constantly strive for excellence.
• As always, there are thousands of facts that go into a textbook. I believe all of
those here to be correct, but the responsibility for any errors is ultimately mine
alone.

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P A R T

I

The Globalization Process
Background, Causes and Effects

G

lobalization is the trend toward increasing interdependencies among world markets and
the diffusion of new ideas, technologies, products, services, and lifestyles. The first three
chapters of this text examine the globalization process.
Chapter 1 looks at the international business challenge, the diversity of international
markets, and the change that occurs as a result of international business activities. First, we
look at the evolution of international business from earliest times up to the present day, and
how technological developments allowed the systematic exploration of world markets.
Then, examination is made of how technologies and ideas diffuse among and within international markets, and why some nations have benefited more and developed faster than
others. Finally, the effects of globalization on company strategies are explored, including
an assessment of when standardized approaches are appropriate and when localized
strategies are optimal.
Chapter 2 looks at the major causes of globalization—why there have been significantly
more international business dealings among nations over the past two decades. It highlights
how the building of a worldwide infrastructure has enhanced linkages among countries.
The role of public institutions such as the United Nations’ agencies is examined—the World
Trade Organization, the International Monetary Fund, the World Bank, as well as institutions

that have encouraged specific aspects of world business such as the International
Telecommunications Union, the International Civil Aviation Authority, the International
Maritime Organization, and others. The private sector contribution is also evaluated: the
roles of global retailers, transportation companies, and international media in facilitating
transfers of products, services, resources, and ideas among nations.
The effects of globalization—the cumulative impact of the transfers of new ideas,
philosophies, resources, technologies, products, and lifestyles—are assessed in Chapter 3:
how technology transfers affect economic development, and how, as countries develop,
they move from traditional to modern political and economic institutions and behaviors.
The development process also results in changes in industry, company, and consumer
behaviors as market competition increases. Finally, because economic and cultural change
is disruptive, resistance occurs. The causes and reasons for such resistance are examined.

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