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Chapter 01 – Globalization
1-8
However, supporters of globalization contend that the power of these organizations is
limited to what nation-states agree to grant, and that the power of the organizations lies in
their ability to get countries to agree to follow certain actions.
Another Perspective: To explore economic freedom and globalization, go to The Fraser
Institute’s Economic Freedom of the World Report at {www.freetheworld.com}.
Critics of globalization argue that the gap between rich and poor has gotten wider and
that the benefits of globalization have not been shared equally.
Supporters of free trade suggest that the actions of governments have made limited
economic improvement in many countries.
Slide 1-34 Managing in the Global Marketplace
Managing an international business (any firm that engages in international trade or
investment) is different from managing a domestic business because countries differ,
managers face a greater and more complex range of problems, international companies
must work within the limits imposed by governmental intervention and the global trading
system, and international transactions require converting funds and being susceptible to
exchange rate changes.
CRITICAL THINKING AND DISCUSSION QUESTIONS
QUESTION 1: Describe the shifts in the world economy over the last 30 years. What are
the implications of these shifts for international businesses based in Great Britain? North
America? Hong Kong?
ANSWER 1: Over the last 30 years, there has been a shift away from a world in which
national economies are relatively self-contained entities, isolated by barriers to trade and
investment, and differences in government regulation, culture, and business systems and
toward a world where barriers to trade and investment are declining, cultures are
converging, and national economies are merging into an integrated, interdependent global
Chapter 01 – Globalization
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Copyright © 2019 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
within China. International businesses based in all three locations are facing new
opportunities and threats.
QUESTION 2: Evaluate this statement: “The study of international business is fine if you
are going to work in a large multinational enterprise, but it has no relevance for
individuals who are going to work in small firms.”
ANSWER 2: Globalization is changing the world economy. Firms, even small ones, can
no longer ignore events going on outside their borders because what occurs in one
QUESTION 3: How have changes in technology contributed toward the globalization of
markets and production? Would the globalization of markets and production have been
possible without these technological changes?
ANSWER 3: Technological change has made globalization a reality. Major advances in
communication, information processing, and transportation have brought countries of the
world closer together. The development of the microprocessor is perhaps the single, most
QUESTION 4: Evaluate this statement: “Ultimately, the study of international business is
no different from the study of domestic business. Thus, there is no point in having a
separate course on international business.”
ANSWER 4: There are at least four reasons why studying international business is
important. First, countries are different; and managers must understand the reasons for
the differences and their implications for business. Second, the range of problems
Chapter 01 – Globalization
1-10
Copyright © 2019 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
international transactions involve converting money into different currencies. Managers
who fail to appreciate these basic differences greatly increase their chance for failure.
QUESTION 5: How does the Internet affect international business activity and the
globalization of the world economy?
ANSWER 5: Internet usage has exploded over the last two decades. In 1990, there were
fewer than 1 million people connected to the Internet. By 2017 that figure had risen to
more than 3.8 billion, some 51 percent of the global population! One of the biggest
QUESTION 6: If current trends continue, China may emerge as the world’s largest
economy by 2030. Discuss the possible implications for such a development for (a) the
world trading system; (b) the world monetary system; (c) the business strategy of today’s
European- and U.S.-based global corporations; and (d) global commodity prices.
ANSWER 6: China is continuing to move toward greater free market reforms, and if it
stays on its present track, could become an industrial superpower in the near future.
While the United States is still the world’s largest economy, in 2018, China became the
QUESTION 7: Reread the Management Focus on Boeing and answer the following
questions:
a. What are the benefits to Boeing of outsourcing manufacturing of components for the
Boeing 787 to firms based in other countries?
b. What are the potential costs and risks to Boeing of outsourcing?
c. In addition to foreign subcontractors and Boeing, who else benefits from Boeing's
decision to outsource component-part manufacturing assembly to other nations? Who are
the potential losers?
d. If Boeing's management decided to keep all production in America, what do you think
the effect would be on the company, its employees, and the communities that depend on
it?
e. Do you think that the kind of outsourcing undertaken by Boeing is a good thing or a
bad thing for the American economy? Explain your reasoning.
Chapter 01 – Globalization
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ANSWER 7:
a. Student answers will vary. In some respects, outsourcing to overseas suppliers
probably keeps company and consumer costs down, allowing Boeing to spend more
b. Many of the costs and risks associated with outsourcing were underscored by Boeing’s
experience with the 787. Boeing lost much of the control it once had over the complex
c. By awarding many manufacturing contracts to overseas suppliers, Boeing created
thousands of jobs in foreign countries—jobs that would normally be held by workers in
d. Boeing faced extensive criticism in the United States for its decision to outsource jobs
overseas, particularly after the 787 project began to experience setbacks. By bringing
production back to the United States, Boeing would benefit from positive publicity and
e. There are several reasons that Boeing decided to outsource manufacturing to foreign
firms. First, many of the firms are located in countries that are home to major airlines,
and awarding large contracts to businesses in these countries may result in airlines
CLOSING CASE: Uber: Going Global from Day One
Chapter 01 – Globalization
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Summary
The closing case explores the global strategy of ride-for-hire, Uber. From its inception,
Uber has focused on developing market share in large metropolitan areas around the
world. Critics have argued that Uber’s attempt to use the same business model in all
markets may have hurt the start-up though, as the company has been banned from
operating in markets like Brussels and Delhi. A discussion of the case can begin with the
following questions:
QUESTION 1: Companies like Uber, Lyft (one of Uber’s main competitors), and Airbnb
(an online marketplace that enables people to lease or rent short-term lodging) are
innovating in fields that traditionally have been very complex and regulated. Can Uber’s
business model be applied in other industries globally?
ANSWER 1: Responses to this question will vary by student; however, many will
probably suggest that indeed there is room for this type of business model in other
QUESTION 2: Are cities around the world doing a disservice to citizens or visitors, or
both, by banning it outright from operating in their community?
ANSWER 2: This question will probably generate significate debate as students will
probably have various opinions on this issue. Some may suggest governments have no
QUESTION 3: Uber’s strategy has been to break these regulations, establishing its
service first, and then fighting attempts by regulators to shut the service down. This goes
along with the old saying, “do first, ask questions later.” Is this business approach viable
globally in the long run?
ANSWER 3: Responses to this question will vary by student. Some will argue that
Uber’s sometimes combative approach to entering markets does the company a disservice
Chapter 01 – Globalization
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Copyright © 2019 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
which are important to future success. Still other students may admire Uber for changing
the way consumers think about transportation, but question the company’s long term
strategy pointing out that Uber’s brash approach could be costly going forward if local
regulators, knowing the company’s reputation, refuse to bargain and simply ban the
company as they did in Delhi and Brussels.
Another Perspective: Students can find out more about Uber at
{https://hbr.org/2017/06/uber-cant-be-fixed-its-time-for-regulators-to-shut-it-down}.
MHE International Business Video Library
Please click here to visit our International Business Video Library which provides an
ongoing stream of updated video suggestions correlated by key concept and major topic.
Every new clip posted is supported by teaching notes and discussion questions. Please
feel free to leave comments in the library that you feel might be helpful to your
colleagues.
INCORPORATING globalEDGE™ EXERCISES
Use the globalEDGE™ site {globaledge.msu.edu/} to complete the following exercises:
Exercise 1
As the drivers of globalization continue to pressure for both the globalization of markets
and the globalization of production, we continue to see the impact of greater globalization
on worldwide trade patterns. HSBC, a large global bank, analyzes these pressures and
trends to identify opportunities across markets and sectors through its trade forecasts.
Visit the HSBC Global Connections site and use the trade forecast tool to identify which
export routes are forecasted to see the greatest growth over the next 15 to 20 years. What
patterns do you see? What types of countries dominate these routes?
Exercise 2
You are working for a company that is considering investing in a foreign country.
Investing in countries with different traditions is an important element of your company’s
long-term strategic goals. As such, management has requested a report regarding the
attractiveness of alternative countries based on the potential return of FDI. Accordingly,
the ranking of the top 25 countries in terms of FDI attractiveness is a crucial ingredient
for your report. A colleague mentioned a potentially useful tool called the Foreign Direct
Investment (FDI) Confidence Index. The FDI Confidence Index is a regular survey of
global executives conducted by A.T. Kearney. Find this index and provide additional
information regarding how the index is constructed.
Chapter 01 – Globalization
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Exercise 1 Answer
Search phrase: trade forecasts or HSBC Global Connections
Resource Name: HSBC Global Connections
Website: https://globalconnections.hsbc.com/us/en
globalEDGE™ Category: Globalization
Additional Info:
Once on the HSBC Global Connections website, the Trade Forecast Tool can be found
under the Tools & Data section of the site. It’s an interactive chart, where you can see the
trade routes that are forecasted to exhibit the largest annual growth over the next several
years.
Exercise 2 Answer
Search phrase: FDI Confidence Index
Resource Name: A.T. Kearney: Foreign Direct Investment Confidence Index
Website: http://globaledge.msu.edu/global-resources/rankings
globalEDGE™ Category: Rankings
Additional Info:
This ranking study, published regularly since 1998 surveys over 300 hundred executives
from multinationals with more than $500 million in revenues from 28 countries. The
Index is calculated as a weighted average of the number of high, medium, and low
responses to questions about the likelihood of direct investment in a market over the next
three years. Index values are based on non-source-country responses (so the rating for
India does not include responses from Indian multinationals).
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