OPENING CASE: Democracy and Economic Development in Sub-Saharan Africa
Summary
The opening case explores the transformation of sub-Saharan Africa from a region plagued by
corrupt military dictatorships to one in which democracy, civil rights, and a diverse market-based
economy are on the rise. Whereas many economies in the region were overly dependent on the
unstable commodities market in the past, manufacturing, telecommunications, banking, and
service industries are now major economic contributors. Although only 19 of 49 states in the
region are currently classified as electoral democracies and military interference in elections and
civil rights issues remains rampant, there have been several important inroads into establishing
legal infrastructures that can support the rule of law and promote economic growth. As a result,
the region experienced a record high level of foreign direct investment for the period 2012 to
2014. Discussion of the case can revolve around the following questions:
QUESTION 1. How did sub-Saharan Africa’s dependence on commodity exports affect its past
economic performance?
ANSWER 1: Because the commodities market has become globalized, agricultural producers
can no longer rely upon steady prices and regular purchases from neighboring countries. Shifts in
QUESTION 2: How might a shift toward deregulating markets and broadening civil rights
encourage economic development in sub-Saharan Africa?
ANSWER 2: By deregulating markets and strengthening civil rights, countries in sub-Saharan
Africa have begun to develop economies that are more responsive to the needs of consumers in
QUESTION 3: Discuss the emergence of banking and telecommunications and significant
drivers in the economies of sub-Saharan Africa. How do these industries compare to
commodities exports in terms of their contribution to regional economic development?
ANSWER 3: The emergence of banking, telecommunications, and other service industries in
Another Perspective: For more on foreign investment, economic growth, and lingering risks for
sub-Saharan Africa go to
{http://www.ibtimes.com/analysts-raise-expectations-economic-growth-sub-saharan-africa-thoug
h-commodity-1938286}.
CRITICAL THINKING AND DISCUSSION QUESTIONS
QUESTION 1: What is the relationship between property rights, corruption, and economic
progress? How important are anticorruption efforts in the effort to improve a country’s level of
economic development?
ANSWER 1: Innovation and entrepreneurship are widely recognized as important to long-run
economic growth. Innovation and entrepreneurship flourish in environments that are free of
QUESTION 2: You are a senior manager at a U.S. automobile company with the job of deciding
whether to invest in production facilities in China, Russia, or Germany. These facilities will
serve local market demand. Evaluate the benefits, costs, and risks associated with doing
business in each nation. Given your answer here, which country seems to be the most attractive
target for foreign direct investment? Why?
ANSWER 2: Responses to this question will vary by student. Many will probably suggest that
China’s low cost labor and large potential domestic market make it an attractive destination for
QUESTION 3: Reread the Country Focus feature on India and answer the following questions:
a. What kind of economic system did India operate during 1947 to 1990? What kind of system is
it moving toward today? What are the impediments to completing this transformation?
b. How might widespread public ownership of business and extensive government regulations
have impacted (i) the efficiency of state and private businesses, and (ii) the rate of new business
formation in India during the 1947 to 1990 time frame? How do you think these factors affected
the rate of economic growth in India during this time frame?
c. How would privatization, deregulation, and the removal of barriers to foreign direct
investment affect the efficiency of business, new business formation, and the rate of economic
growth in India during the post-1990 time period?
d. India now has pockets of strengths in key high-technology industries such as software and
pharmaceuticals. Why do you think India is developing strength in these areas? How might
success in these industries help to generate growth in other sectors of the Indian economy?
e. Given what is now occurring in the Indian economy, do you think the country represents an
attractive target for inward investment by foreign multinationals selling consumer products?
Why?
ANSWER 3:
a. From 1947 to 1990, India operated under a mixed economy that included several large
b. Many students will probably agree that introducing privatization at a much earlier date could
c. Since 1990, India has been much more open to foreign investment, and extensive privatization
d. India’s information technology sector and pharmaceutical sector have been particularly
e. Many students will probably suggest that despite the many recent changes in India, consumer
CLOSING CASE: Political and Economic Reform in Myanmar
Summary
The closing case explores the recent political and economic changes in the country of Myanmar
(formerly known as Burma). With a new president in place, the government released hundreds of
military prisoners and freed Nobel Peace Prize winner Aung San Suu Kyi from house arrest. The
government also began privatizing state-owned enterprises and changed the official exchange
rate for the country’s currency. A discussion of the case can revolve around the following
questions:
QUESTION 1: What explains the economic stagnation of Myanmar until very recently?
ANSWER 1: Myanmar has a long history of corrupt military rule that stifled economic growth
by limiting the development of new industries and by siphoning profits from existing industries.
QUESTION 2: What do you think motivated the government of Myanmar to start
undertaking political and economic reforms from 2010 onward?
ANSWER 2: Many of Myanmar’s neighbors in Southeast Asia embarked on a period of political
and economic reform in the second half of the twentieth century. Thus, by the early twenty-first
QUESTION 3: How would you characterize the nature of the economic reforms now
being implemented in Myanmar? What is the government trying to do here? What do you
think the results will be?
ANSWER 3: The government in Myanmar appears to be seeking greater integration with
regional and global economies. By allowing the national currency to decline in value, the
QUESTION 4: What potential impediments do you think might stand in the way of further
improvements in Myanmar?
ANSWER 4: The military still retains control of the political process in Myanmar, and many
Another Perspective: To learn more about what is at stake in Myanmar’s 2015 elections go to
{http://www.theguardian.com/world/2015/sep/08/aung-san-suu-kyi-says-crucial-transition-perio
d-will-follow-myanmar-electiont}.
MHE INTERNATIONAL BUSINESS VIDEO LIBRARY
Please click here to visit our International Business Video Library on Pinterest, which is updated
on a monthly basis. While there be sure to “like” the clips that work well for you, and add notes
that might be helpful to your colleagues.
INCORPORATING globalEDGE™ EXERCISES
Use the globalEDGE™ site {http://globalEDGE.msu.edu/} to complete the following exercises:
Exercise 1
Increased instability in the global marketplace can introduce risks in a company’s daily
transactions which can be unanticipated. As such, your company must evaluate these
commercial transaction risks for its foreign operations in Argentina, China, the Czech Republic,
India, Indonesia, and the United Arab Emirates. A risk analyst at your firm indicated that you
could evaluate both the political and commercial risk of these countries simultaneously. Provide
a commercial transaction risk overview of all six countries for top management. In your
evaluation, indicate possible corrective measures in the countries with considerably high political
and/or commercial risk.
Exercise 2
Managers at your firm are very concerned about the influence of terrorism on its long-term
strategy. To counter this issue, the CEO has indicated you must analyze the countries in which
Answers to Exercise Questions
Exercise 1
The data can be accessed by searching for the term “commercial transaction” at
Exercise 2
The data can be accessed by searching for the term “terrorism” at
Search Phrase: “Terrorism”