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Global Business Today Ninth Edition Chapter 1
countries. However, given that the wage gap between developed and developing countries is
closing, the migration of unskilled jobs to low-cost nations may only be a temporary phenomenon.
Teaching Tip: An interesting site for companies interested in exporting their services is available at
{http://www.ita.doc.gov/td/sif/exporting_services_overseas.htm}, and also through the export
assistance center at {http://www.export.gov/}.
Video Note: A video clip on exporting is available at {http://www.export.gov/}. For the video,
click on “Begin Exporting”.
Country Focus: Protesting Globalization in France
Summary
This feature describes the anti-globalization protests going on in France. The protests, led by
activist Jose Bove, started when the U.S. retaliated against EU bans on beef imports by imposing a
100% tariff on some EU products. Bove and his associates targeted McDonald’s, and also
California winemaker Mondavi as symbols of their opposition to American investments. Still,
despite the protests, foreign investment in France is at record highs, and ironically, so are French
investments abroad.
Suggested Discussion Questions
1. Consider the trade war that initiated the protests led by Bove. The EU instituted restrictions on
the import of hormone treated beef because it was feared that the product might lead to health
problems. The WTO stated that the restrictions were prohibited under WTO agreements and
ordered the EU to lift the restrictions or face retaliatory measures. In your opinion, did the WTO
2. Why was McDonald’s chosen as the target for anti-globalization protests? How can companies
like McDonald’s protect themselves from the actions of protesters like Bove?
Global Business Today Ninth Edition Chapter 1
© 2016 by McGraw-Hill Education.
This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner.
This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
14
that are not. Students might recommend that companies like McDonald’s work to integrate
themselves with the host country through charitable programs, social activities, and so on.
Teaching Tip: To learn more about ongoing WTO disputes, go the WTO’s homepage:
{www.wto.org}.
Video Note: Protesting against globalization is not uncommon. The iGlobe Environmental Activist
Questions the Goals of Globalization also explores the negative effects of globalization.
Globalization, Labor Policies, and the Environment
D) A second source of concern is that free trade encourages firms from advanced nations to move
manufacturing facilities offshore to less developed countries that lack adequate regulations to
protect labor and the environment from abuse by the unscrupulous. Supporters of free trade and
greater globalization express serious doubts about this scenario. They point out that tougher
environmental regulation and stricter labor standards go hand in hand with economic progress. In
general, as countries get richer, they enact tougher environmental and labor regulations.
Lecture Note: To extend this discussion, consider {http://www.businessweek.com/ap/2014-10-
23/coal-rich-poland-ready-to-block-eu-climate-deal}.
E) Lower labor costs are only one of the reasons why a firm may seek to expand in developing
countries. These countries may also have lower standards on environmental controls and
workplace safety. Nevertheless, since investment typically leads to higher living standards, there
is often pressure to increase safety regulations to international levels. No country wants to be
known for its poor record on health and human safety. Thus supporters of globalization argue that
foreign investment often helps a country to raise its standards.
Globalization and National Sovereignty
F) A final concern voiced by critics of globalization is that in today's increasingly interdependent
global economy, economic power is shifting away from national governments and toward
supranational organizations such as the World Trade Organization (WTO), the European Union
(EU), and the United Nations. As perceived by critics, the problem is that unelected bureaucrats
are now sometimes able to impose policies on the democratically elected governments of nation-
states, thereby undermining the sovereignty of those states.
G) With the development of the WTO and other multilateral organizations such as the EU and
NAFTA, countries and localities necessarily cede some authority over their actions. Supporters of
these organizations claim that if the organizations fail to serve the collective interests of member
states, the states will withdraw their support and the organizations will collapse.
Globalization and the World’s Poor
H) Critics of globalization argue that over the last century the gap between rich and poor has
Global Business Today Ninth Edition Chapter 1
gotten wider, and that the benefits of globalization have not been shared equally. However
supporters of free trade suggest that the actions of governments have limited economic
improvement in many countries. In addition, debt may also be limiting growth in some countries.
Today, there are various efforts underway to encourage debt relief programs.
MANAGING IN THE GLOBAL MARKETPLACE
A) An international business is any firm that engages in international trade or investment.
B) As their organizations increasingly engage in cross-border trade and investment, managers need
to recognize that the task of managing an international business differs from that of managing a
purely domestic business in many ways. Countries differ in their cultures, political systems,
economic systems, legal systems, and levels of economic development.
C) These differences require that business people vary their practices country by country,
recognizing what changes are required to operate effectively. It is necessary to strike a balance
between adaptation and maintaining global consistency, however.
D) As a result of making local adaptations, the complexity of international business is clearly
greater than that of a purely domestic firm. Firms need to decide which countries to enter, what
mode of entry to use, and which countries to avoid. Rules and regulations also differ, as do
currencies and languages.
E) Managing an international business is different from managing a purely domestic business for
at least four reasons: 1) countries differ, 2) the range of problems and manager faces is greater and
more complex, 3) an international business must find ways to work within the limits imposed by
governmental intervention and the global trading system, and 4) international transactions require
converting funds and being susceptible to exchange rate changes.
Critical Thinking and Discussion Questions
1. Describe the shifts in the world economy over the last 30 years. What are the implications of
these shifts for international businesses based in Great Britain? North America? Hong Kong?
Global Business Today Ninth Edition Chapter 1
© 2016 by McGraw-Hill Education.
This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner.
This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
16
Korea. This trend is also reflected in the world foreign direct investment picture. As depicted in
Figure 1.2 in the textbook, the share of world output (or the stock of foreign direct investment)
generated by developing countries has been on a steady increase since the 1960s, while the share
of world output generated by rich industrial countries has been on a steady decline. Shifts in the
world economy can also be seen through the shifting power of multinational enterprises. Since the
1960s, there have been two notable trends in the demographics of the multinational enterprise.
The first has been the rise of non-U.S. multinationals, particularly Japanese multinationals. The
second has been the emergence of a growing number of small and medium-sized multinationals,
called mini-multinationals. The fall of Communism in Eastern Europe and the republics of the
former Soviet Union have brought about the final shift in the world economy. Many of the former
Communist nations of Europe and Asia seem to share a commitment to democratic politics and
free market economies. Similar developments are being observed in Latin America. If these
trends continue, the opportunities for international business may be enormous. The implications of
these shifts are similar for North America and Britain. The United States and Britain once had the
luxury of being the dominant players in the world arena, with little substantive competition from
the developing nations of the world. That has changed. Today, U.S. and British manufacturers
must compete with competitors from across the world to win orders. The changing demographics
of the world economy favor a city like Hong Kong. Hong Kong (which is now under Chinese
rule) is well located with easy access to markets in Japan, South Korea, Indonesia, and other Asian
markets. Hong Kong has a vibrant labor force that can compete on par with the industrialized
nations of the world. The decline in the influence of the United States and Britain on the global
economy provides opportunities for companies in Hong Kong to aggressively pursue export
markets.
2. "The study of international business is fine if you are going to work in a large multinational
enterprise, but it has no relevance for individuals who are going to work in smaller firms."
Evaluate this statement.
3. How have changes in technology contributed to the globalization of markets and of production?
Would the globalization of production and markets have been possible without these technological
changes?
Global Business Today Ninth Edition Chapter 1
4. "Ultimately, the study of international business is no different from the study of domestic
business. Thus, there is no point in having a separate course on international business." Evaluate
this statement.
5. How does the Internet affect international business activity and the globalization of the world
economy?
Global Business Today Ninth Edition Chapter 1
reach of large, resource rich firms.
6. If current trends continue, China may emerge as the world's largest economy by 2020. Discuss
the possible implications of such a development for:
• The world trading system.
• The world monetary system.
• The business strategy of today's European and U.S. based global corporations.
• Global commodity prices.
7. Reread the Management Focus on Vizio and answer the following questions:
a) Why is the manufacturing of flat panel TVs migrating to different locations around the world?
b) Who benefits from the globalization of the flat panel industry? Who are the losers?
c) What would happen if the U.S. government required that flat panel displays sold in the United
States had to also be made in the United States? On balance, would this be a good thing or a bad
thing?
d) What does the example of Vizio tell you about the future of production in an increasingly
integrated global economy? What does it tell you about the strategies that enterprises must adopt
in order to thrive in highly competitive global markets?
Global Business Today Ninth Edition Chapter 1
workers, consumers would probably buy far fewer televisions, and therefore any new jobs that
Closing Case: Who Makes the Apple iPhone?
Summary
This case explores the international expansion of Apple’s production over the last thirty years. In
1983, Apple produced its products in the United States, but by 2004, most production had shifted
to foreign countries, and in particular China. Today, Apple’s popular iPhone is assembled in
China, but contains parts made around the world. Despite its reliance on foreign manufacturing
however, Apple has maintained its R&D and marketing functions in the United States. A
discussion of the case can revolve around the following questions:
QUESTION 1: What are the benefits to Apple of outsourcing the assembly of the iPhone to
foreign countries, and particularly China? What are the potential costs and risks to Apple?
QUESTION 2: In addition to Apple, who else benefits from Apple’s decision to outsource
assembly to China? Who are the potential losers here?
Global Business Today Ninth Edition Chapter 1
ANSWER 2: Most students will probably recognize that consumers are a main beneficiary of
QUESTION 3: What are the potential ethical problems associated with outsourcing assembly jobs
to Foxconn in China? How might Apple deal with these?
ANSWER 3: Apple has come under fire for choosing to work with suppliers that run factories
QUESTION 4: On balance, do you think that the kind of outsourcing undertaken by Apple is a
good thing, or a bad thing for the American economy? Explain your reasoning.
Global Business Today Ninth Edition Chapter 1
© 2016 by McGraw-Hill Education.
This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner.
This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
21
Lecture Note: Students may also want to explore the situation at Foxconn, Apple’s Chinese
supplier at {http://www.businessweek.com/articles/2012-09-27/whats-behind-the-foxconn-worker-riots}.
Continuous Case Concept
This feature allows you to integrate the material presented in each chapter of the text using a single
industry, the auto industry. For each chapter, ideas will be presented on how to link the chapter
contents to the current situation in the auto industry. This discussion can take place at the
beginning of a new unit, at the end, or it could be threaded through the chapter material. In some
cases, you may want to use the feature more than once. By using the continuous case concept,
students will have the opportunity to understand how the elements presented throughout the text
apply to an evolving, real situation.
• Sketch out a diagram of the auto industry showing the major players such as Ford,
Chrysler, Toyota, Nissan, BMW, Mercedes, Tata, and Hyundai. Look at recent changes in
corporate structure. For example, Italian automaker Fiat recently took control of Chrysler.
Global Business Today Ninth Edition Chapter 1
globalEDGE Exercises
The resources for each exercise can be easily located by using the search box at the top of the
globalEDGE website at http://globalEDGE.msu.edu
Exercise 1
Search phrase: trade forecasts or HSBC Global Connections
Resource Name: HSBC Global Connections
Website: https://globalconnections.hsbc.com/us/en
globalEDGE Category: Globalization
Additional Info:
Once on the HSBC Global Connections website, the Trade Forecast Tool can be found under the
Tools & Data section of the site. It’s an interactive chart, where you can see the trade routes that
are forecasted to exhibit the largest annual growth over the next several years.
Exercise 2
Search phrase: FDI Confidence Index
Resource Name: A.T. Kearney: Foreign Direct Investment Confidence Index
Website: http://globaledge.msu.edu/global-resources/rankings
globalEDGE Category: Rankings
Additional Info:
This ranking study, published regularly since 1998 surveys over 300 hundred executives from
multinationals with more than $500 million revenues from 28 countries. The Index is calculated as
a weighted average of the number of high, medium, and low responses to questions about the
likelihood of direct investment in a market over the next three years. Index values are based on
non-source-country responses (so the rating for India does not include responses from Indian
multinationals).
Additional Readings and Sources of Information
Apple vs. Google: Starkly Different China Experiences
http://www.businessweek.com/articles/2012-06-12/apple-and-google-are-having-very-different-
china-experiences
China Imports Pharmaceutical Professionals
http://www.businessweek.com/technology/content/sep2010/tc20100915_284108.htm
Call-It Chimerica: The U.S. and China Grow Ever Closer
http://www.businessweek.com/articles/2012-10-11/call-it-chimerica-the-u-dot-s-dot-and-china-
Global Business Today Ninth Edition Chapter 1
grow-ever-closer#r=hpt-ls
The F-35’s Global Supply Chain
http://www.businessweek.com/magazine/the-f35s-global-supply-chain-09012011-gfx.html
Will Foxconn Findings Change Apple’s Supply Chain
http://www.businessweek.com/videos/2012-03-29/will-foxconn-findings-change-apples-supply-
chain
The Must Read Globalization: World’s Vicious Cycle
http://www.businessweek.com/videos/2012-10-15/the-must-read-globalization-worlds-vicious-
cycle
Globalization: Key Issues
http://www.imf.org/external/np/exr/key/global.htm
What Would a Fair Labor iPod Cost?
http://www.businessweek.com/managing/content/jul2009/ca20090731_483871.htm
Why Globalization is Going into Reverse
http://www.businessweek.com/articles/2013-11-25/why-globalization-is-going-into-reverse
Vizio’s Outsourcing Hits a Profitable Note
http://www.businessweek.com/management/vizios-outsourcing-hits-a-profitable-note-
07292011.html
Rushing to Finish a Global Free-Trade Deal
http://www.businessweek.com/articles/2012-05-31/rushing-to-finish-a-global-free-trade-deal
Foreign Makers Tune into China’s TV Market
http://www.businessweek.com/stories/2010-08-11/foreign-makers-tune-in-to-chinas-tv-market
