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International Business
Geringer, McNett, Minor, Ball
Instructor Guide to Module 5
1 Instructor’s Manual – Module 1 | Geringer, McNett, Minor, Ball © 2016 by McGraw-Hill Education.
Module 5: Political Forces That Affect Global Trade
Use this Instructor Guide to incorporate the unique content of this product and facilitate your
Face-to-Face, Online, and Hybrid classes. This guide has been designed to be interactive and links
have been created within each title in the Table of Contents to guide you to each section. You
can also link back to the main page by clicking at the button at the bottom of each page.
Here is the Table of Contents highlighting what you’ll be able to find to support you in teaching
this module:
YOUR CONTENT
Summary
Learning Objectives
Key Terms & Key Terms with Definitions
Content Outline
CONNECT TOOLS FOR CLASS PR EPARATION
SmartBook
What is SmartBook?
How Does SmartBook Help You/Students?
How to assign SmartBook to ensure students come to class prepared?
ENGAG EMENT & APPLICATION (FACE TO FACE & ONLINE & HYBRID)
BOXED TEXT DISCUSSION QUESTIONS WITH SUGGESTED ANSWERS
IB IN PRACTICE
GLOBAL DEBATE
GET THAT JOB! FROM BACKPACK TO BRIEFCASE
Critical Thinking Questions
Global Edge Research Task
MiniCase
Bonus Activities
Video Suggestions
Team Exercises
Supplemental Lecture
Tools & Tricks
Controversial Issues
Teaching Suggestions
International Business
Geringer, McNett, Minor, Ball
Instructor Guide to Module 5
2 Instructor’s Manual – Module 1 | Geringer, McNett, Minor, Ball © 2016 by McGraw-Hill Education.
CONNENCT TOOLS FOR ASSESSEMENT OF LEARNING
Interactive Applications
Assigning Interactives
Time-Saving Hints:
Connect Content Matrix
International Business
Geringer, McNett, Minor, Ball
Instructor Guide to Module 5
3 Instructor’s Manual – Module 1 | Geringer, McNett, Minor, Ball © 2016 by McGraw-Hill Education.
YOUR CONTENT
SUMMARY
This chapter examines three primary forms of business ownership—sole proprietorship,
partnership, and corporation—and weighs the advantages and disadvantages of each. These
forms are the most often used whether the business is a traditional bricks and mortar company,
an online-only one, or a combination of both. We also take a look at S corporations, limited
liability companies, and cooperatives and discuss some trends in business ownership. You may
wish to refer to Table 4.1 to compare the various forms of business ownership mentioned in the
chapter.
LEARNING OBJECTIVES
LO 5-1 Describe the goals of nationalizing and privatizing business.
LO 5-2 Explain government protection and stability and their importance to business.
LO 5-3 Describe the role of country risk assessment in international business.
LO 5-4 Explain the political motivations for government intervention in trade and the
major types of government trade restrictions.
KEY TERMS AND DEFINITIONS
ad valorem duty (p. 140)
An import duty levied as a percentage of the invoice value of
imported goods
compound duty (p. 141)
A combination of specific and ad valorem duties
countervailing duties (p. 139)
Additional import taxes levied on imports that have benefited from
export subsidies
country risk assessment (CRA) (p.
133)
An assessment of a country’s economic situation and politics to
determine how much risk to employees, property, and
investmentexists for the firm doing business there.
cybercrime (p. 130)
Any illegal Internet–mediated activity that takes place in electronic
networks.
dumping (p. 139)
Selling a product abroad for less than the cost of production, less
than the price in the home market, or less than the price to third-
party countries.
instability (p. 126)
Characteristic of a government that cannot maintain itself in power
or that makes sudden, unpredictable, or radical policy changes.
International Business
Geringer, McNett, Minor, Ball
Instructor Guide to Module 5
4 Instructor’s Manual – Module 1 | Geringer, McNett, Minor, Ball © 2016 by McGraw-Hill Education.
nationalization (p. 124)
The taking of private property by a government to make it public
nontariff barriers (NTBs) (p. 141)
All forms of discrimination against imports other than import duties
orderly marketing arrangements
(p. 142)
Formal agreements between exporting and importing countries
privatization (p. 125)
The selling of government-owned property to the private sector
quotas (p. 141)
Numerical limits placed on specific classes of imports
specific duty (p. 141)
A fixed sum levied on a physical unit of an imported good
stability (p. 126)
Characteristic of a government that maintains itself in power and
whose fiscal, monetary, and political policies are predictable and not
subject to sudden, radical changes
subsidies (p. 139)
Financial contributions, provided directly or indirectly by a
government, that confer a benefit, including grants, preferential tax
treatment, and government assumption of normal business
expenses
tariffs (p. 140)
Taxes on imported goods for the purpose of raising their price to
reduce competition for local producers or stimulate local production
terrorism (p. 128)
Unlawful acts of violence committed for a wide variety of reasons
variable levy (p. 141)
An import duty set at the difference between world market prices
and local government-supported prices
voluntary export restraints
(VERs) (p. 142)
Export quotas imposed by the exporting nation
International Business
Geringer, McNett, Minor, Ball
Instructor Guide to Module 5
5 Instructor’s Manual – Module 1 | Geringer, McNett, Minor, Ball © 2016 by McGraw-Hill Education.
CONTENT OUTLINE
The following section provides the flow of information using the LEARNING OBJECTIVES as a guide, KEY
TERMS learners will need to take away from the course and a notation of when to use POWERPOINT
SLIDES with LECTURE NOTES to drive home teaching points.
LO 5-1
Describe the goals of nationalizing and privatizing business.
• Introduction to idea of government ownership of business
• Nationalization: Why governments get involved
• Privatization motivations
Key Terms:
• Nationalization
• privatization
Lecture Outline and Notes:
I. Introduction
A. Most types of government own businesses, not only those with socialist-leaning or
centralized economies, or Communist ones
B. U.S. government owns Export-Import Bank Farm Credit Bureau, Tennessee Valley
Authority, St. Lawrence Seaway, Gallaudet Univ., etc.
II. Nationalization motivations are varied
A. Belief that government can better manage businesses that provide public goods—health
care, education, national defense
B. Nationalization is motivated by belief that government can manage a public good or
necessity better than can the private, profit-driven sector.
1. Extract more money from business for the public good
2. Increase profitability
3. Enact political goals (U.S with AIG and GM)
III. Privatization motivations
A. To gain more efficiency in business operations
B. To raise money (British Royal Mail, defence sectors)
C. Change in political climate/philosophy (Chile)
D. Outsourcing trend similar to privatization, although government retains equity. (U.S., UK)
E. Major privatizers include U.S., Russia, China, Portugal, Greece
LO 5-2
Explain government protection and stability and their importance
to business.
• Issues with lack of peace and predictability
• Protection from unfair competition
• Protection from terrorism, cybercrime, other threats
o Terrorism
Key Terms:
• stability
• instability
• terrorism
International Business
Geringer, McNett, Minor, Ball
Instructor Guide to Module 5
o Kidnapping
o Piracy
o Cybercrime
LO 5-3
Describe the role of country risk assessment in international
business..
• Country Risk Assessment
• Available countermeasures
Key Terms:
• Country risk
assessment (CRA)
Lecture Outline and Notes:
I. Country Risk assessment
A. Economic and political dimensions
B. Role of home country (Iran for Japanese vs. U.S. firm)
C. Time required for investment and nature of business
1. Green key operation vs. extraction sector business
2. Kidnap, ransom and extortion (KRE) insurance
3. (See Fig. 5.4)
II. Available countermeasures
D. Know country and region so risk-assessment is realistic
A. Outsourced skills as needed to cope with crisis
B. Train for daily living skills (evasive driving, avoidance of routine, hardened cars)
LO 5-4
Explain the political motivations for government intervention in
trade and the major types of government trade restrictions.
• Partnerships
o Types of Partnership
o Articles of Partnership
o Advantages of Partnerships
o Disadvantages of Partnerships
o Taxation of Partnerships
Key Terms:
• Partnership
• General partnership
• Limited partnership
• Articles of partnership
I. Partnerships
A. Most states have a model law governing partnerships based on the Uniform Partnership
1. Partnerships are the least used form of business organization.
B. Keys to success in a partnership include: (Table 4.2)
International Business
Geringer, McNett, Minor, Ball
Instructor Guide to Module 5
2. Partners’ skill sets should complement each other
3. Honesty is critical
LO 5-4
Explain the political motivations for government intervention in
trade and the major types of government trade restrictions.
• Impact of government restrictions on trade
o Cost of goods increase
o Trade and economic efficiency decline
• Reasons for restricting trade
o National defense
o Imposition of sanctions
o Protect infant or dying industry
o Protect domestic jobs
o Ensure fair competition
o Retaliation
• Tariff barriers
o Ad valorem
o Specific duty
o Compound duty
o Variable duty
• Nontariff barriers
o Quantitative
o Voluntary
o Nonquantitative
Key Terms:
• dumping
• subsidies
• countervailing duties
• tariffs
• ad valorem duty
• specific duty
• compound duty
• variable levy
• nontariff barriers (NTBs)
• quotas
• voluntary export
restraints (VERs)
• orderly marketing
arrangements
A. Cost of goods increases, born by consumer usually
B. Trade flows and economic efficiency are reduced
1. This is the case with agricultural subsidies, which are common, in order to protect
2. WTO goals hampered by agricultural trade barriers
II. Reasons for restricting trade
International Business
Geringer, McNett, Minor, Ball
Instructor Guide to Module 5
8 Instructor’s Manual – Module 1 | 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.
A. National defense
1. Protect industries vital to security
2. Arguments weak (economists say) and call on patriotism to gain emotional
advantage.
B. Imposition of sanctions
1. Goal to inflict economic damage, punish, or encourage change of behavior
2. Sanctions seldom achieve goal of forcing change and create collateral damage
3. Sanctions give the market to international competitors
1. Give infant industries a chance to grow and build comparative advantage
2. Slow down impacts on labor of a dying industry—time for retraining, movement of
capital into other sectors
D. Protect domestic jobs
1. Cheap foreign labor argument is misleading, since labor only a portion of cost, and
wages only a portion of labor. Also productivity levels relevant.
2. Labor-cost component not a function of only wage rates. Mexican productivity rates
E. Ensure fair competition
1. Import duty to bring costs of imports up to cost of domestic goods
2. Unfair advantage (technology, lower tax rates, lower labor costs)
3. Protects least efficient domestic producer; creates windfall profits for efficient
producers; increases costs to consumers.
F. Retaliation
1. Sought by producers from government to respond to tariffs they face abroad
2. (Ex.: U.S. response to EU ban on hormone-treated beef)
3. Response to dumping (predatory, social, environmental)
4. Response to subsidies (such as those received by U.S. sugar producers)
III. Tariff barriers
A. Import duties levied to raise the selling price of imports to reduce competition for domestic
producers
B. Smoot Hawley Tariff Act in U.S. contributed to depression
C. Three types
1. Ad valorem--% of invoice (U.S.: 6% on flavor extract imports)
5. Nuisance tariffs have low rates but administrative challenges (French review of
Japanese VCRs in Poitiers)
IV. Nontariff barriers
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International Business
Geringer, McNett, Minor, Ball
Instructor Guide to Module 5
9 Instructor’s Manual – Module 1 | Geringer, McNett, Minor, Ball © 2016 by McGraw-Hill Education.
A. All discrimination against imports other than import duties
B. Quantitative nontariff barriers—Quota or numerical limit
1. Voluntary Export Restraint (VER)—quota imposed by exporting government
2. Orderly marketing arrangements—formalized VER
C. Nonquantitative nontariff barriers
1. Direct government participation in trade
2. Customs and other administrative procedures
3. Standards
International Business
Geringer, McNett, Minor, Ball
Instructor Guide to Module 5
10 Instructor’s Manual – Module 1 | 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.
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
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