1. Why do some industries become global while others remain local or regional?
There are a number of factors that play a role in determining which industries become global, which become regional, and which remain local. The airline industry, for example, is considered a global industry. One of the main reasons for this status is the cost of developing and producing large aircraft, combined with market size. The industry is “forced” to be global because it must sell aircraft to a marketplace that is big enough to justify the costs of developing and building new jets. No single country has a market big enough to justify such costs, thus companies must seek customers around the globe. On the other hand, the bakery industry tends to be regional or local because its products tend to perish very easily. While improvements in transportation and shipping have created a larger marketplace, for the most part, firms in this industry cater to local customers. From this brief discussion, it is clear that factors such as cost, market size, and product life all play a role in determining which industries will be global and which will not. However, it is important to recognize that many other factors (for example, resource availability, government regulations, and similarity of customer taste) also play a role in this determination.
2. What is the impact of the Internet on international business? Which companies and which countries will gain as Internet usage increases throughout the world? Which will lose?
The Internet has had a significant impact on international business in at least three ways. First, the Internet facilitates international trade in services (e.g., banking, education, and retailing). Second, it has helped level the playing field between large and small firms entering a foreign market, since even small firms can sell their products internationally on the Web. Third, the Internet can make business to business transactions (e.g., bringing together suppliers and buyers) much easier and more efficient.
3. Which markets are more important to international business – the traditional markets of North America, the European Union, and Japan or the emerging markets? Defend your answer.
Clearly the volume of business in the traditional markets is much greater than the volume in emerging markets. However, as the traditional markets become saturated opportunities for growth will increasingly shift toward emerging markets.
4. Does your college or university have any international programs? Does this make the institution an international organization? Why or why not?
Students who attend a college or university that has international programs will probably find this question interesting. Students who do not have international programs available to them can still find the question worth considering if they use a little imagination. The text defines international organizations to include public sector organizations that cross national borders. With this definition in mind, a college or university could very well be considered an international organization. However, it is important to consider the type of international programs an institution has to offer. For example, one could argue that a university that simply offers several courses that deal with international business is not an international organization because the institution at that point does not cross borders (see definition above). In contrast, it could be argued that a university that offers courses in international business and also offers a student exchange program is an international organization because the missing element in the previous example (of crossing borders) is fulfilled because of the exchange program. The key point in this question therefore is to determine exactly when international programs make a college or university an international organization.
5. What are some of the differences in skills that may exist between managers in a domestic firm and those in an international firm?
When compared to domestic managers, international managers, by definition, are more likely to consider business from a global perspective. In doing so, international managers should consider such variables as exchange rates, cultural differences, differences in the political and economic environments, trade barriers, and so forth. In contrast, the domestic manager is not likely to be concerned with any of these variables and will instead focus on the marketplace. The international manager will probably see the world as the marketplace and in doing so, develop a keen awareness of the differences between markets, while the domestic manager will not.
6. Would you want to work for a foreign-owned firm? Why or why not?
The answer to this question is, of course, based on a student?s opinion and therefore can generate a lot of Some students may already work for a foreign-owned firm; some may work for a foreign-owned firm and not it. Students who work for foreign-owned companies can be asked to contrast their experiences in the company with positions they may have held elsewhere (or can be asked to simply comment on their experiences if they have not held other positions). This can set the stage for a discussion of the merits of working for or not working for foreign-owned companies.
1. Regional trading blocs, such as the EU and NAFTA, are growing in importance. What are the implications of these trading blocs for international business? Are they helpful or harmful? How may they affect a firm’s investment decisions?
Trading blocs such as the North American Free Trade Agreement and the European Union stand to have a great impact on international business because they change the rules of trade and in some cases, investment, presenting new opportunities but also new threats to both foreign and domestic companies. Whether they are harmful or helpful is difficult to state in just a paragraph or two, but will depend on the perspective of the particular company (or individual). For companies inside a trading bloc, such agreements can be seen as helpful since they can have the effect of keeping nonmember companies out, thus providing a degree of protection to member companies. Moreover, member companies are helped by the increase in effective market size that is a result of such an agreement. On the other hand, since trading agreements essentially create one large market, member companies may find that they face increased competition within the bloc. For companies outside a trading bloc, particularly those that have had a strong trading relationship with a member country, trade agreements can be devastating. Companies may find that they face high tariff and nontariff barriers that prevent them from exporting to the companies within trade bloc. This situation may lead firms to invest in a member country and essentially become an insider.
2. Many American and European business people argue that the keiretsu system in Japan acts as a barrier to foreign companies’ entering the Japanese market. Why do you think they believe this?
The fact that the Japanese market is closed to foreign companies is a popular, and some would argue mistaken, belief among American and European executives. The Japanese keiretsu is a family of interrelated firms in which each firm takes a small ownership position in each of the other companies. The strong ties among keiretsu members may lead to buyer-supplier relationships (if the keiretsu is a vertical one) and may allow firms to take on high-risk investments. Many American and European executives believe that such relationships make it difficult for them to supply their products to Japanese firms, and even break into the market itself. Furthermore, they believe that the keiretsu puts European and American firms at a distinct competitive disadvantage when dealing
with the Japanese. Others, however, will argue that with patience and hard work, companies (for example, Toys “R” Us) can enjoy success in the Japanese market.
3. Ethnic ties, old colonial alliances, and shared languages appear to affect international trade. Why might this be so? If true, how does this affect international businesses’ strategies regarding which markets to enter?
Ethnic ties, old colonial alliances, and shared languages affect international trade because they may provide the basis from which a nation emerged. For example, although the United States, a former colony of Great Britain, declared its independence centuries ago, it still shares with its former ruler the same language, cultural heritage, and many beliefs about issues such as democratic rule. These ties with Britain have helped to shape the United States into the country it is today. For American companies, this relationship is beneficial because not only do American companies have easy access to the British market (and British firms to the American market), but they may also find it easier to enter other markets where, for example, English is the spoken language. In addition, if the countries in question have maintained strong ties, it is likely that they will share enemy countries, a factor that could further impact the strategy of an international firm.
4. What can African countries do to encourage more foreign investment in their economies?
A: The nations of Africa are in a difficult situation. Years of political unrest and civil war have labeled the region as a high risk one. If Africa expects foreign firms to invest in the region, it must try to lose the label. The process has already been started with the implementation of new market-oriented policies, and the region is beginning to attract the attention of international firms. To continue the process, Africa can develop more tax-free zones such as the one located in Mauritius, and provide other incentives to attract foreign companies.In addition, efforts must be made to contain any remaining civil unrest, particularly attacks against foreigners.
1. What options do firms have when caught in conflicts between home country and host country laws?
Firms caught between home and host country laws face a difficult situation. If they comply with home country laws, they may find that their activities in the host country are severely limited. Yet, if firms comply with host country regulations they may find themselves under fire in the home country. Depending on the particular situation, firms may find that the best option is to simply choose another location for business. However, in cases where the stakes are high, negotiation with the appropriate party (home or host country government) may be the best option.
2. What is the impact of vigorous enforcement of intellectual property rights on the world economy? Who gains and who loses from strict enforcement of these laws?
The protection of international property rights is the subject of ongoing debate between countries and firms. Firms with patents, copyrights, trademarks, and/or brand names favor strict enforcement of intellectual property rights on a global basis. If such protection is granted, “copycat” firms stand to lose. One might argue that consumers also stand to lose if intellectual property rights are strictly enforced because they will probably pay higher prices. However, some may say that the “copycat” products are inferior to the “real” products. Finally, since most innovation originates in developed countries, and many of the current “copycat” firms are residents of developing countries, one might argue that if intellectual property rights are strictly enforced, developing countries will be hurt by a loss in export sales. It should be noted that it will be difficult to enforce intellectual property rights until the controversy over “first to invent” and “first to file” is ended.
3. Do you agree with the U.S. government’s policies restricting the export of dual-use goods? Why or why not? (You may wish to check out the Bureau of Export Administration’s Web site, which details how the bureau operates.)
The U.S. government restricts the export of dual use goods on the grounds that they may be used for military applications which could threaten the safety of the U.S. and its allies. However, the decision is not a popular one with some industries. By forbidding U.S. firms to export aircraft construction equipment that could be used militarily, American firms lose sales that are filled by European firms. The third country gets the goods anyway, and American firms are cut out of the opportunity to profit from the transaction. In the end, whether the U.S. restricts the export of the goods or not may make little difference, since those who want the technology will simply purchase it elsewhere. Accordingly, some students may feel that the U.S. policy is nothing more than a burden to U.S. firms that will lose sales to foreign companies.
4. Map 3.2 presents the relative political riskiness of countries in 2005. For which countries has political risk changed significantly since then?
Most students will probably focus on the Middle Eastern countries and those of the former Eastern Bloc and China when answering this question. Certainly, it could be argued that tension has intensified in parts of the Middle East, particularly Iraq, Afghanistan, and Iran. On the other hand, one might argue that much of the former Eastern Bloc has become less risky, and that as China has opened its doors to international trade, it, too, could be considered to be more stable.
1. How can international businesspeople avoid relying on the self-reference criterion when dealing with people from other cultures?
Reliance on the self-reference criterion refers to the unconscious use of one’s own culture to help assess new surroundings. International businesspeople who rely on their self-reference criterion when dealing with people from other cultures run the risk of creating ill will. It is important for an individual doing business in another country to remember that he/she is the foreigner and must adapt to the culture of the other country. One should attempt to achieve cross-cultural literacy and become familiar with the other culture either directly through personal experience or indirectly via training programs and publications.
This concept can be illustrated directly if there are foreign students in a class. Instructors can ask foreign students in their classes about any cross-cultural preparation they received prior to moving to this country, and on the basis of that response, raise the question of what would have made the adjustment process easier.
2. U.S. law protects women from job discrimination, but many countries do not offer women such protection. Suppose several important job opportunities arise at overseas factories owned by your firm. These factories, however, are located in countries that severely restrict the working rights of women. You fear that female managers will be ineffective there. Should you adopt gender-blind selection policies for these positions? Does it make a difference if you have good reason to fear for the physical safety of your female managers? Does it make a difference if the restrictions are cultural rather than legal in nature?
This is a difficult question to answer and instructors may wish to simply raise the issue rather than suggest a correct or incorrect response. From a U.S. manager’s perspective, the correct response would be to take a gender-blind approach to the selection process for these positions; however, from an international business perspective it is important to recall the saying “when in Rome, do as the Romans do.” The U.S. manager’s task
may be made easier if the restrictions are legal rather than cultural because the manager would have a tangible reason for not using a gender-blind selection process. While some students will probably argue that females should not be selected if they could be at risk physically, others will probably point out that women can be taught to protect themselves. This latter concept is reminiscent of the question of whether women in the U.S. Armed Forces should be permitted to engage in combat.
3. Under what circumstances should international businesspeople impose the values of their culture on foreigners with whom they do business? Does it make a difference if the activity is conducted in the home or host country?
Acceptable behavior in one country may not be acceptable in another. International businesspeople must be cautious about relying on their self-reference criterion when doing business with foreigners and adapt their perspectives as much as possible to fit with the foreign culture. In some cases, however, legal restrictions can force international businesspeople to impose the ethics of their culture on foreigners. For example, the Foreign Corrupt Practices Act (discussed in Chapter Eight) prohibits U.S. companies from using bribes when dealing with foreigners. Thus, the ethics of the U.S. culture is imposed on foreigners. In general, though, if business is conducted in the host country, the rules of the host country should be followed, while if business is conducted in the home country, home country rules should be followed.
4. How would you evaluate yourself on each of Hofstede’s dimensions?
Students will probably have a fairly good idea where they stand on each of Hofstede’s dimensions, and they may choose to confirm their beliefs by exploring some of the maps, tables, and figures presented in the section discussing Hofstede’s work. This question can be particularly interesting in a class with students from a range of countries and cultures.
5. Assume you have just been transferred by your firm to a new facility in a foreign location. How would you go about assessing the country’s culture along Hofstede’s dimensions? How would you incorporate your findings into conducting business there?
Most students will probably suggest that examining the dimensional maps that identify where different countries lie on each of the dimensions would be a good starting point in assessing the culture of a foreign location. Students might then suggest that managers attempt to translate that knowledge into specific ideas about how business might be conducted. For example, students considering a highly individualistic culture might suggest that reward systems should provide incentives for individual performance rather than group performance.
1. While people from the same culture are likely to have similar views of what constitutes ethical versus unethical behavior, what factor or factors would account for differences within a culture?
The chapter suggests differences may be the result of individual rationalization, specific circumstances surrounding an event, religious formation, and an individual’s personal values (which may vary somewhat within a culture).
2. Is it valid to describe someone as having “no ethics”? Why or why not?
Students will probably answer “no.” Those who answer “yes” often confuse “no ethics” with “unethical.” We all have individual values (which shape our ethics) – even a value of “there are no moral absolutes” is still a value and one’s ethical system would reflect that premise.