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International Business
Geringer, McNett, Minor, Ball
Instructor Guide to Module 10
11 Instructor’s Manual – Module 10 | Geringer, McNett, Minor, Ball © 2016 by McGraw-Hill Education.
Transfer pricing is the price for transactions between members of the same enterprise.
6. The subsidiary’s frustration with its limited power
a. An objective of all businesses is to obtain and keep able, loyal executives. If
subsidiary managers are not allowed to make important decisions, regarding their
operations, they may resign or become hostile toward HQ.
LO 10-4
Discuss how an international company can maintain control of a
joint venture or of a company in which it owns less than 50 percent
of the voting stock
• Where decisions are made in joint ventures and
subsidiaries less than 100 percent owned
o Loss of freedom and flexibility
o Control can be had even with limited or no ownership
Key Terms:
Lecture Outline and Notes:
I. Where decisions are made in joint ventures and subsidiaries less than 100 percent owned
Control is not as easy as it is with a 100 percent owned subsidiary. The other shareholders or
joint venture partner may make it difficult or impossible for the parent or other partner to
make the sort of decisions mentioned above. There are ways to exercise some control over
subsidiaries owned less than 100 percent
7. Loss of freedom and flexibility
1. If shareholders outside the IC control the affiliate, they can block efforts of IC headquarters to
move production factors away, fill an export order from another affiliate or subsidiary, etc.
If outside shareholders are a minority and cannot directly control the affiliate, they can bring
pressures on the IC to prevent it from diminishing the affiliate’s profitability for the
enterprise’s benefit.
A local joint venture partner is unlikely to agree with measures that penalize the venture for the
IC’s benefit
8. Control can be had even with limited or no ownership
1. With less than 50 percent of the voting stock and even with no voting stock, an IC can have
control through:
a. A management contract
Control of the finances
Control of the technology
Putting people from the IC in important executive positions.
LO 10-5
List the types of information an international company’s units
around the world need to report to the parent company
• Reporting
o Financial reporting
o Technological reporting
o Reporting about market opportunities
Key Terms:
International Business
Geringer, McNett, Minor, Ball
Instructor Guide to Module 10
12 Instructor’s Manual – Module 10 | Geringer, McNett, Minor, Ball © 2016 by McGraw-Hill Education.
o Political and economic reporting
Lecture Outline and Notes:
II. Reporting
For controls to be effective, all operating units of an IC must provide headquarters with timely,
accurate, and complete reports
1. Financial reporting
1. Parent HQ must know the existence and size of a surplus to determine its best use across the
range of options: the subsidiary generating the surplus, another subsidiary or affiliate, or at the
parent company
2. Technological reporting
1. New technology is constantly being developed in different countries, and the subsidiary or
affiliate operating in such a country is likely to learn about it before IC headquarters.
If HQ finds the new technology potentially valuable, it can gain competitive advantage by being the
first to contact the developer for a license to use it
3. Reporting about market opportunities
1. Affiliates may spot new or growing markets for some product of the enterprise .
4. Political and economic reporting
Economic and political conditions in local markets need to be continually monitored and reported
to HQ for quick response or changes as needed .
International Business
Geringer, McNett, Minor, Ball
Instructor Guide to Module 10
13 Instructor’s Manual – Module 10 | Geringer, McNett, Minor, Ball © 2016 by McGraw-Hill Education.
CONNECT TOOLS FOR CLASS PREPARATION
SmartBook
What is SmartBook?
SmartBook is a digital version of your course textbook. It contains the same content within the
textbook, but unlike a typical eBook, SmartBook actively tailors that content to your individual
needs as a student. SmartBook can be accessed online through your laptop, tablet or
smartphone and is also accessible when you’re offline!
How Does SmartBook Help You/Students?
• Assignable – assigning students their reading and studying their textbook content
ensures they are coming to class prepared.
• Proven to help students get a better grade. Studies show SmartBook technology can help
increase grades by a full letter.
• Save time. Study smarter. SmartBook makes sure students focus on the things you don’t
know so they can prioritize your study time wisely.
• No more cramming. SmartBook helps learners retain key concepts so you can learn—not
memorize.
• Accessible on the go. Use SmartBook on your laptop, tablet or smartphone–online or
offline–via your browser or mobile app.
• Results in real time. Track student progress–and prevents them from wait for midterms
or finals. Know how well you understand the material now.
How to assign SmartBook to ensure students come to class prepared?
• On the Connect course homepage click “add assignment” > LearnSmart > Select the
chapter
• Decide what content you’d like your students to study, and how much time you’d like
students to spend on their work. Start by narrowing down the content prior adjusting the
slider bar. – Many instructors find it useful to limit the assignment to a maximum of 45
minutes.
• Assign points to the assignment. Instructors have found that if they give the
LearnSmart/SmartBook assignment a minimum of 10% of the course grade that students
are more likely to complete the assignment.
• The entire LearnSmart/SmartBook module is available to your student at all times,
however, assigning it will prompt students to try it. You are required to select a due date
for this assignment, however, this will not prevent the student from access to the tool; it
is designed to show you that the student has taken the LearnSmart/SmartBook
International Business
Geringer, McNett, Minor, Ball
Instructor Guide to Module 10
14 Instructor’s Manual – Module 10 | Geringer, McNett, Minor, Ball © 2016 by McGraw-Hill Education.
assignment. LearnSmart/ SmartBook is an adaptive study tool designed for students. It
can also show you where students are struggling to understand specific concepts.
• The student’s LearnSmart/SmartBook score in the Connect reports is based on their
mastery of the material at the time the assignment is due. Mastery is an evaluation of
the number of learning objectives they completed via performance on answering
questions.
• Students may, and are encouraged, to continue to use LearnSmart/SmartBook
throughout the semester. After the assignment due date, they can continue to access
this tool. Continued use of LearnSmart will not affect their LearnSmart/SmartBook
assignment results in the Connect reports, but has shown to improve test scores by as
much as a full letter grade.
International Business
Geringer, McNett, Minor, Ball
Instructor Guide to Module 10
ENGAGEMENT & APPLICATION (FACE TO FACE & ONLINE & HYBRID)
BOXED TEXT DISCUSSION QUESTIONS WITH SUGGESTED ANSWERS
IB IN PRACTICE: Regional Strategies for Competing Globally
The focus of this IB in Practice explores “Working in a Global Virtual Organization.” The virtual
organization, Accenture Ltd., is an example of new-order 21st Century organizations operating
without a “bricks & mortar” HQ and formal branch facilities. They outsource various functions
and professional services through a virtual existence. Asking questions such as, “Is this the
wave of the future for the corporation? Why or why not?,” will serve as a starting point for class
discussion on organizational structure and design, control in organizations, and how these
organizational elements are changing as technology provides the infrastructure for virtual
environments.
Online and Hybrid: Assign questions to be prepared in virtual teams and submitted as a
team assignment, or submitted individually and then discussed in a blog or group discussion site.
Face-to-Face: Students develop responses to the questions in class in teams/groups
1. What do you think might be the greatest strengths and weaknesses of working in a
virtual organization like this?
2. Would you enjoy working in a virtual organization like Accenture? Why or why not?
International Business
Geringer, McNett, Minor, Ball
Instructor Guide to Module 10
GLOBAL DEBATE: BIGSOFT: Should Companies Be Allowed to Profit from International
Transfer Pricing?
The focus of this Global Debate explores “BIGSOFT: Should Companies be Allowed to Profit
from International Transfer Pricing?” Transfer pricing in international companies has recently
received increasing attention in the business and popular press, and this Global Debate is
intended to help shed some light on why transfer pricing has become the focus of so much
attention. The discussion provides a vignette of a hypothetical company that is using transfer
pricing to alter its corporate tax bill by over $500 million per year. This brief scenario provides
an interesting base to explore a range of different financial, political, ethical, and other issues
associated with a management decision such as transfer pricing practices, and can allow the
discussion to consider these issues from a variety of different perspectives.
Online and Hybrid: A classroom discussion option is to assign individuals, groups, or the
class as a whole to examine the evolving issue of transfer pricing and how the practice impacts
various stakeholder groups. The students’ findings can provide a strong basis for discussion or
debate on these emerging issues. Virtual teams can be assigned questions and submit their work
as a group. Alternatively, virtual teams can be assigned to take different roles or perspectives to
argue for (or against) and these assignments can be submitted as a group and then opened up to
discussion and debate on an online class discussion site or blog, or presented and debated in a
face-to-face setting.
Face-to-Face: Students develop responses to the questions in class in teams/groups, or
else assign perspectives and conduct an in-class debate and discussion.
1. If you were a shareholder in BigSoft, would you support the company’s approach to
transfer pricing? Why or why not?
International Business
Geringer, McNett, Minor, Ball
Instructor Guide to Module 10
2. If you represented the government of Ireland, would you support BigSoft’s approach to
transfer pricing? Why or why not?
3. If you represented the U.S. government, or the government of one of the other nations
GET THAT JOB! FROM BACKPACK TO BRIEFCASE
Isaac Rush in Tianjin: So Much More Fun When You Don’t Understand Everything!
The focus of this Get that Job! From Backpack to Briefcase box explores Isaac Rush’s decision to
study international business and to gain international experience through teaching English in
China for 4 months after graduating from university. He preceded his overseas work with various
contacts and other actions to enhance his familiarization with the country and help increase
prospects for a successful experience. He concludes his discussion by providing
recommendations to students interested in living and working abroad.
Online and Hybrid: Virtual teams evaluate Rush’s advice for their own career
development and their ability to understand and adapt to life in another culture, particularly one
that is quite different from one’s home culture. Share conclusions with class, either online or in
face-to-face setting.
Face-to-Face: Students evaluate their own career strategy in light of Rangel’s advice.
1. How would you evaluate Isaac Rush’s efforts to understand and integrate effectively
within Chinese culture, as well as to adjust to cultural differences?
International Business
Geringer, McNett, Minor, Ball
Instructor Guide to Module 10
2. Rush emphasizes the importance of maintaining links with family and friends back
home while away on internship. Do you agree with this? Why or why not?
International Business
Geringer, McNett, Minor, Ball
Instructor Guide to Module 10
END OF MODULE EXERCISES
CRITICAL THINKING QUESTIONS
1. Why is organizational structure an important issue for international companies?
2. What are the main strengths and weaknesses of using an international division as part
of a company’s organizational structure? Under what circumstances might such a structure be
an appropriate choice for a company?
3. Compare and contrast geographic and product structures for international companies.
4. Your company’s matrix isn’t working; decisions are taking too long, and it seems to
you that instead of best solutions, you’re getting compromises. What can your company’s
5. You are the CEO of Mancon Incorporated, and you have just acquired Pozoli, an Italian
small-appliancemaker (electric shavers, small household and personal care appliances). It has
been in business for more than 40 years and has manufacturing plants in Italy, Mexico,
Ireland, and Spain. Its output is sold in more than 100 markets worldwide, including the
United States. Your company is now organized into two product groups—shaving and personal
care— along with an international division at the top level. How are you going to include
Pozoli in your organization? Explain your rationale.
