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International Business
Geringer, McNett, Minor, Ball
Instructor Guide to Module 2
trade and foreign investment and the reduction or removal of barriers. Evidence suggests that
government efforts to liberalize policies and reduce market failures such as government
GLOBAL DEBATE: Comparative Advantage: Should the United States be Sending
class discussion. This simple lesson in economics is quite controversial and serves as a starting
point for a stimulating class discussion on such topics as:
• What are the profit motives for outsourcing? What advantages other than profit can
be gained by outsourcing?
opportunities to replace those being outsourced?
Online and Hybrid: 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
International Business
Geringer, McNett, Minor, Ball
Instructor Guide to Module 2
1. Can a company gain advantages besides profit by offshoring? If so, what are they? If
not, why not?
The answer to this question will vary, and it is intended to help people think through the issue.
Certainly, students are likely to focus on the profit motives as a key driver, and many times their
due to strikes or other responses to moving jobs away. Many companies find that moving
activities to a foreign location where labor costs are lower may expose them to a higher level of
overall costs, due to factors such as increased transportation costs, increased uncertainty in
logistics and scheduling, exposure to a range of political, economic and other risks, etc.
2. Does a company face ethical considerations in deciding whether to offshore activities?
Why or why not?
This question raises an issue that almost always generates strong opinions and a variety of
perspectives. Some students may feel that companies have a primary responsibility to maximize
International Business
Geringer, McNett, Minor, Ball
Instructor Guide to Module 2
3. What might be the long-term implications of offshoring, from the perspective of the
home country? The host country?
This question also raises issues that almost always generates strong opinions and a variety of
perspectives. Some students may feel that the home country is being hollowed out, with jobs,
knowledge, and growth opportunities moving abroad to where costs are lower. In some cases,
When examining this perspective from the host country, some students may suggest that it is
essential for economic and social development that the host country encourage foreign
investment and/or job creation associated with bringing in offshored jobs. These jobs can help
in order to attract the offshored jobs. In so doing, this may stunt rather than promote the
economic and social well-being of the host countries, according to these perspectives.
GET THAT JOB! FROM BACKPACK TO BRIEFCASE Katie Lasco: Accept the Challenge of a
New Culture!
Katie Lasco discusses her career goal to integrate the study and practice of sustainability with her
business career objectives, and how she could use an internship with a sustainability focus in
Ecuador to enhance her experience and career opportunities.
International Business
Geringer, McNett, Minor, Ball
Instructor Guide to Module 2
24
Instructor’s Manual – Module 2 | Geringer, McNett, Minor, Ball © 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.
Online and Hybrid: Virtual teams evaluate Hotzman’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 Holtzman’s advice.
1. How would you evaluate Lasco’s efforts to prepare for her Ecuadorian experience by
studying the language and culture of Ecuador? How can such efforts help her to achieve her
objective of entering the culture “ready to learn and engage” and “with realistic expectations
about my experience”? Were there other actions she could have undertaken to prepare for
her experience?
Students will have various answers to this question, depending on their experience with other
responding to her new environment.
2. Despite Lasco’s efforts to prepare herself prior to departure, she notes that she still
experienced culture shock, both within the host country and subsequently upon her return to
the United States. Do you think such experiences are typical? Is there anything she could have
done to avoid culture shock? How well do you think she responded once she found herself
experiencing culture shock, in terms of coming to grips with it and engaging in constructive
responses?
Students will have various answers to this question, depending on their experience with other
cultures as well as their own self-awareness and self-confidence. Lasco does acknowledge that
additional language immersion and training, and trying to take a positive, constructive approach
to her experience.
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International Business
Geringer, McNett, Minor, Ball
Instructor Guide to Module 2
END OF MODULE EXERCISES
CRITICAL THINKING QUESTIONS
1. Discuss and explain how international trade in merchandise and services has changed
over the past two decades and what the major trends are. What future trends can you
speculate about? How might this information be of value to a manager?
The answers to this question may vary. The introductory vignette, “Firms invest overseas, but
to serve international companies as customers, as well as in identifying which areas within and
across regions might be more or less likely to experience an increase in trade.
2. Where do merchandise exports come from, and where do they typically go? How and
why has this been changing over time, and do you think these trends are likely to continue?
Why or why not? Why might this information be valuable to a marketing analyst?
The answers to this question may vary. More than half the exports from developing nations go
to developed nations, but this proportion has been declining, from 72% in 1970 to about 50%
continue. Proliferation of regional trade agreements may suggest continued growth in regional
trade. Interregional trade agreements such as occur between Europe and some of the former
colonies around the world, or the proposed Transpacific Partnership between Australasia and
the Americas, may create a basis for increased regional trade. The internationalization of supply
chains by international companies may also promote continued growth in trade, as companies
International Business
Geringer, McNett, Minor, Ball
Instructor Guide to Module 2
may argue that the pendulum may swing back from international trade, due to protectionism,
3. Describe mercantilism, and explain why some call it a poor approach to promoting
economic development and prosperity. Given the criticisms, why do some countries continue
to rely on practices based on mercantilism?
4. Explain Adam Smith’s theory of absolute advantage. What are the potential
limitations of this theory for helping policy makers when making decisions related to
international trade? How does Ricardo’s theory of comparative advantage differ from the
theory of absolute advantage?
5. “Sending service jobs to low-cost nations, such as India, is good for America.” What
are the arguments in support of such an assertion? Under what circumstances might such an
assertion be viewed as false?
The answers to this question may vary. For example, there may be situations in which a country
International Business
Geringer, McNett, Minor, Ball
Instructor Guide to Module 2
outsourcing may result in job losses that cannot be quickly and fully replenished through the
creation of other jobs, due to the different skills required and the time needed to acquire such
destination nations have the policies and competencies to acquire and enhance their human
6. Name some products that you believe have passed through the four stages of the
international product life cycle. Try to identify industries or products for which the
international product life cycle still helps explain international trade and investment. Can you
identify industries or products for which this concept does not apply?
The answers to this question may vary. Microwave ovens and athletic shoes are two examples
7. Use Porter’s diamond model of national advantage to explain why an emerging
market such as Indonesia would be expected to experience great difficulty in achieving global
competitiveness in a new industry sector such as “smart” cell phones or hybrid electric-
gasoline automobile engines.
An emerging market such as Indonesia would be expected to experience great difficulty in
skilled, highly educated workforces, advance communication systems, the most advanced
design and production equipment, and so forth. (c) Related and supporting industries are likely
to be deficient, since an emerging market is unlikely to have strong computer hardware and
software industries, venture capital markets, a pool of highly experienced entrepreneurs and
business people in similar or related advanced sectors, etc. (d) The extent of domestic
position long term, especially in the face of vigorous competition from competitors in nations
with stronger profiles on the above factors.
International Business
Geringer, McNett, Minor, Ball
Instructor Guide to Module 2
8. What are the possible explanations for the observed decline in the proportion of FDI
accountedfor by the United States and Japan? What are the implications of such a decline?
Do you expect that this decline will continue in the future? Why or why not?
The answers to this question may vary quite a bit across students. The United States only
even suggest that either the absolute level of global FDI will decline, or that the U.S. and
Japanese (and perhaps European, as well) proportions will shrink as the power of developed
countries wanes and the power of emerging markets grows. This can be an interesting
discussion to have within class.
9. How has the level and direction of FDI changed over the past two to three decades,
both overall and in terms of annual outflows and inflows? What might explain why these
changes have occurred? Why would this information be of relevance to managers?
The answers to this question may vary. The proportion accounted for by the United States has
International Business
Geringer, McNett, Minor, Ball
Instructor Guide to Module 2
29
Instructor’s Manual – Module 2 | Geringer, McNett, Minor, Ball © 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.
managers, in terms of identifying potential sources of new or increased competition (or
collaboration) as well as new sources of supply or of customers.
10. According to theories presented in this module, why might companies engage in
foreign direct investment rather than international trade?
The answers to this question may vary. Each of the trade theories presented in this chapter
offer an explanation for why companies engage in foreign direct investment, because each of
the theories helps to explain why production costs differ across national borders or how
competitive responses are necessary in a globalized economy. However, in some cases there
counterbalance the actions of their international competitors.
The answers to this question may vary. Some techniques and concepts can be applied to
operations in other nations. However, the differences among the environmental forces often
require that these techniques are altered and in some cases, they cannot be used at all.
MINICASE: Can Brazil Become a Global Competitor in the Information Technology
Outsourcing Business?
This minicase explores the issue of outsourcing and how countries may compete to be the
destination for outsourced activities. The specific example is of Brazil and how it has emerged as
can be attractive for real-time services. Brazilian culture and business practices also tend to be
more similar to those in the U.S. than may be the case for China, for example.
1. Use the theories of international trade and investment in this module to help explain
Brazil’s intentions and actions regarding the international information technology sector.
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International Business
Geringer, McNett, Minor, Ball
Instructor Guide to Module 2
Answers are likely to vary quite a bit on this question. Students may refer to absolute or
comparative advantage theories to show why Brazil is a superior site to the USA (absolute
advantage), and to other potential offshoring sites (e.g., China, India), based on labor cost, labor
quality, and other factors. Students may refer to Porter’s diamond model to show how Brazil has
developed a cluster that has internationally competitive competencies, enabling it to compete
effectively with other sites internationally. Some students might refer to Linder’s theory of
overlapping demand, arguing that the culture and business practices are similar, but this would
probably be an incorrect application of the theory as Linder refers to countries with similar
income levels and Brazil and the USA are quite different. Students might use resource
endowment theory, arguing that Brazil has an ample supply of talented IT specialists and
engineers, helping to compensate for shortages in the USA. Some students might even use the
IPLC (International Product Life Cycle) to explain the situation, arguing that advanced IT services
often begin in a lead market such as the U.S., get exported from the U.S., and then as skills
develop abroad there may be replacement of export market supply from the lower cost foreign
sites (displacing U.S. exports of these services) and ultimately replacing these services in the U.S.
as well. Strategic behavior theory, for example, might help explain why firms from the U.S. or
elsewhere might set up operations to exploit the talented, low cost labor available in Brazil, in
order to service U.S. demand in a more cost competitive manner. Dynamic capabilities theory
might also suggest that firms might invest in Brazil in order to participate in the development
and exploitation of cost competitive centers of excellence in emerging markets such as Brazil.
The variety of positions and theoretical perspectives that are likely to be presented can provide
the basis for a lively discussion or even debate within the classroom and provide a strong link to
the concepts of internationalization of businesses, economic globalization, and offshoring.
2. What recommendations would you give to the Brazilian government and its
outsourcing industry in order to improve their prospects for success in building a strong
international competitive position in the information technology outsourcing business?
This question can prove to be difficult for some students to answer, and there can be a range of
