International Business
Geringer, McNett, Minor, Ball
Instructor Guide to Module 8
BONUS ACTIVITIES (additional resources not in the text)
VIDEO SUGGESTIONS
McGraw Hill’s collection of international business videos is available on pinterest at
https://pinterest.com/mheibvideos. The Foreign Exchange Market board is rich and varied,
updated monthly. It’s a great resource. See The BBC on Lithuania Changes from Litas to Euro
https://www.pinterest.com/pin/387591111656061819/ .
See “Out of the Ashes (Rebuilding the International Monetary System),“ posted by the IMF, at
https://www.youtube.com/watch?v=s2OeN-im044 /.
“Making Sense of SDRs” was uploaded by the IMF and offers a good introduction to the SDR.
See https://www.youtube.com/watch?v=s2OeN-im044/ .
To look at controversy about the international monetary system, you may want to suggest
students view “End of the International Monetary System Is Immanent,” an alarmist approach
by Jim Rickards on goldsilver.com, https://www.youtube.com/watch?v=s2OeN-im044/ .
TEAM EXERCISES
These may be done individually or in groups or teams, either in or out of class, for later class
presentation. Some are also appropriate for hybrid and online courses.
1. Islamic Financial Institutions
Many students are not aware of the difference between Islamic financial institutions and other
financial institutions. Assign small teams (5 students) to research Islamic financial institutions,
having each team focus on one topic. By dividing the topics, you can have all students focused on
aspects of Islamic finance and then share their knowledge in brief class or discussion board
presentations. Material from these presentations may be included in exams or quizzes. Here
are suggested topics:
▪ Summarize the history and religious basis of Islamic finances, including its
purpose.
▪ Summarize how Islamic financial institutions support trade
▪ Review the growth of Islamic banking and explain this phenomenon
▪ Review the role of women in Islamic banking
▪ Discuss the size and impact of Islamic banking
▪ Discuss non-bank institutions that play a role in Islamic finance
▪ Discuss where Islamic finance institutions play the largest roles and offer
explanations.
International Business
Geringer, McNett, Minor, Ball
Instructor Guide to Module 8
▪ Discuss the contributions Islamic banking has made in developing countries
2. Chinese devalue the yuan
The Chinese economy is the second largest in the world, yet its government controls the
3. Inflation rates by country
Assign small groups a country whose inflation rates they are to research. Good sites are
www.cia.gov and www.imf.org. Then ask them to list ways their findings would affect
international business decisions regarding that country. Report back to the class or using an
online collaboration tool to share findings with class members.
U.S. $3.50 range. Harvard Business Publishing
(https://cb.hbsp.harvard.edu/cbmp/pages/home) requires an account and offers downloadable
review copies for educators. The case prices begin in the $6 range.
“Debt and Development in Jamaica” describes the economic development problems faced by
Jamaica over most of the past half-century. This case allows students to explore the
complicated economic difficulties faced by Jamaica, which remains burdened by a self–
reinforcing set of interrelated factors, including high public debt, a sluggish private sector, an
inefficient public sector, poverty, and crime, among others. (Harvard)
“Can the Eurozone Survive?” covers the sovereign debt crisis that took Greece by storm in 2010
and spread to other European markets, Ireland and Portugal, with Spain and Italy next in line.
The European financial system became strained. Banks were found to be undercapitalized and
began to ration credit to the economy. The European Central Bank intervened to provide
liquidity to the system in order to avoid a credit crunch. Can the eurozone survive the storm?
International Business
Geringer, McNett, Minor, Ball
Instructor Guide to Module 8
cost of conducting business in Brazil, known as “Custo Brasil,” was hurting domestic
manufacturing, and incoming foreign investments threatened to overwhelm Brazilian markets.
Under President Dilma Rousseff, economic growth stagnated, and Brazil struggled to find the
best balance between reducing inflation, maintaining a flexible exchange rate, and improving
the competitiveness of Brazilian exports.
CONTROVERSIAL ISSUE
Inversions Still have Their Appeal
The U.S. Treasury restrictions tightened merger rules that went into effect recently, which make
it more difficult for U.S. companies to access their overseas cash unless it is taxed at U.S. rates
and tightens the conditions under which a merger can be an inversion. Inversions were once an
esoteric tax loophole, but in the past few years have come to be used more frequently as a way
to reduce tax rates. Essentially, they allow companies to lower their corporate tax rates by
buying foreign companies. Here’s how it works: the company either sets up or buys another
company in a country with a lower corporate tax rate and then calls the new country home.
Essentially, nothing moves. The company simply moves its legal address outside the U.S. Then
the company can move some of their profits to the new company and lower their tax rates.
U.S. corporate rates tend to be higher than those in many other countries. For example, U.K.
rates are around 20%, while U.S. rates are almost 40%, before tax credits. The average tax rate
in 2010 among the 10 most profitable U.S. companies was 25.4%, according to Forbes
(http://www.forbes.com/2011/04/13/ge-exxon-walmart-apple-business-washington-corporate-
taxes.html). So inversions lower tax rates and yet, the company still operates in the U.S.,
enjoying conditions supported by the taxes of other businesses and individuals.
Despite the Treasury clampdown, U.S. businesses continue to practice inversions as a part of
their corporate tax strategy. There were 14 inversions completed in 2014 and many are
planned as of mid-2015, including Coca Cola Enterprises (a bottler and distributor) and CF
Industries, both to the U.K.
• What is meant by an inversion deal?
• Another way to look at inversions is that they are examples of the benefits of
globalization. Companies are simply exploiting a comparative advantage. Evaluate this
viewpoint.
• A recent The Economist August 15, 2015) article suggests that U.S. tax law is
what has to change and that until it does, U.S. cash-rich companies abroad (who do not
pay U.S. taxes until profits are repatriated) will be targets for acquisition by non-U.S.
companies. Evaluate this perspective.
International Business
Geringer, McNett, Minor, Ball
Instructor Guide to Module 8
TEACHING SUGGESTIONS
1. This chapter is very important to students’ understanding of the importance of the
international monetary system and financial forces in international business.
2. Focusing on the boxed material and the case study will help students achieve the
objectives of the chapter. Answers for both the boxed material and case studies are provided in
this Instructor’s Manual.
3. The “Check Your Progress” section in the textbook will help in understanding chapter
content. These topics may be assigned as an outside class assignment. One of the problems in
giving textbook questions as outside assignments is that students frequently do not do the
assignments and wait for the instructor to give them the answers. Instructors can avoid these
problems in several ways: (1) collect assignments at random and assign a grade; (2) occasionally
give some of the same questions as a quiz, thus rewarding students who have done their
assignments; (3) have students hand in assignments and give credit for work submitted (or
penalties for work not submitted); and (4) call on students at random to present on specific
questions (giving a small number of points for correct answers).
4. Guest lecturers on the financial forces that affect management are a way to underscore the
importance of the information in this module. Possible guests include
• an economist who can speak to exchange rate volatility and its effects.
• a financial manager with experience in financial management would recount
some interesting experiences in addressing financial forces
• a retired IMF or Treasury employee whose work included some of the issues
addressed in this module
• someone who served in the Peace Corps might also have interesting
observations about financial forces and economic development
• faculty colleagues from other countries.
5. Students who view themselves as not strong in math may mistakenly think that this will be
a difficult chapter for them. The material is presented stressing the underlying concept to assist
such students.
6. To cover such a vast subject as financial forces and the monetary system in the short time
available is impossible. Students who become interested in this area might be encouraged to
explore an international finance course. Our aim is to help students realize that there are
financial forces and that international business managers must be aware of them and work with
them.
Tools & Tricks
International Business
Geringer, McNett, Minor, Ball
Instructor Guide to Module 8
CONNECT TOOLS FOR A SSESSEMENT OF LEARNING
Interactive Applications
Assigning Interactives
Consider assigning only 2 interactives per chapter. Interactive applications allow students to see
concepts in practice and assess higher order thinking skills. There are numerous exercises of
different types available. Click’n’drag, video cases, and case analysis are the types you will see
most frequently in this program.
Time-Saving Hints:
• Instructors may want to give students unlimited or multiple attempts on the first few
assignments so the students have a chance to learn and navigate the system before
selecting the option for one attempt only.
• The value of each question should probably be relatively low, since multiple questions
are usually assigned for each chapter. A good rule of thumb would be to make “Quiz
Questions” worth 1 point each and “Interactives” worth 5-10 points each since these
require more time and thought.
International Business
Geringer, McNett, Minor, Ball
Instructor Guide to Module 8
• Feedback given to students is time flexible. Selecting feedback to be displayed after the
assignment due date helps to limit students from giving the correct answers to other
students while the interactive is still available.
Connect Content Matrix
For every chapter, please refer to the Connect Content Matrix to see what application
exercises are available, what Learning Objectives they help reinforce/assess.
International Business
Geringer, McNett, Minor, Ball
Instructor Guide to Module 8
Module
Title
Topic(s)
Learning
Objective(s)
AACSB
Accreditation
Tagging
Bloom’s
Taxonomy
8
The International
Monetary System
The
International
Monetary
System: A Brief
History
08–01
Understand
8
Understanding
Exchange Rates
The Floating
Currency
Exchange Rate
System
08-02; 08-
03
Reflective
thinking
Understand
8
Foreign Exchange
Market
Financial
Forces:
Fluctuating
Currency
Values
08-02; 08-
03
Reflective
thinking
Understand
8
Spolkswagen’s
Hedging Strategy
Financial
Forces
Governments
Can Exert
08-03; 08-
04
Analytical/
Reflective
thinking
Understand
8
The Balance of
Payments (BoP)
Explained
Balance-of–
Payments
08–05
Reflective
Thinking/ Apply
Application/
Understand