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For use with Peng and Meyer, International Business 3e, 9781473758438, © Cengage Learning
EMEA 2019 1
Instructor Manual
Chapter 1: Globalizing Business
(Prepared by Klaus E. Meyer, March 2019)
Introduction to the Topic
Learning Objectives
1. Explain the concept of international business (IB)
2. Articulate what you hope to learn by reading this book and taking this course
4. Participate in the debate on globalization with a reasonably balance and realistic view
6. Draw implications for action by integrating global and local knowledge
General Teaching Suggestions
This chapter is essentially about motivating students engage with the complex topic of
international business, to point to the complexities and challenges – as well as to the
opportunities that arise for those who can engage in business beyond their national borders. It
initiates many of the core themes that run through the book: one core question – two
theoretical perspectives (resource- and institution-based); the importance of emerging
economies – and of Europe; and the debates around globalization.
The most suitable starting point to engage in this topic depends on the nature and experience
of the students in your class. I usually start with asking students to introduce themselves, and
their international experience in particular. In larger classes, I ask questions that students
reply to by show of hands. For example, in my most recent MBA class, I asked, “how many
of you have work experience in a country other than where you grew up”, and 1/3 raised their
hands. The more you know your students, the better you can draw on their experience – in
business, or in living in different countries – to make various topics and cases throughout the
book become alive.
The third edition builds on the second edition; instructors who has used the earlier editions
will find few adjustments needed. However, the third edition puts a somewhat stronger
emphasis on policy dimensions of IB (e.g. related to the Brexit discussions) and on e-
businesses, both of which are expected by students of IB these days.
Opening Case Discussion Guide
The opening case about adidas’s supply chain is about coming to terms with the complexity
of international business. Focusing on one company that many students will be familiar with,
the case illustrates the global nature of a) their customer base, b) their supplier network, c)
their operations, and, as a consequence, d) the stakeholders taking an interest in their
activities, and thus creating pressures for ‘socially responsible’ business. These themes will
take taken up at various places throughout this course.
To get a discussion going, you may ask your students how many would choose adidas as a
brand for their shoes or clothing, and why? What capabilities does adidas need to build this
global network? Why does their work on labour standards matter? This discussion will lead
(1) A business (firm) that engages in international (cross-border) economic activities and/or (2) the
action of doing business abroad.
multinational enterprise (MNE)
A firm that engages in foreign direct investments and operates in multiple countries.
foreign direct investment (FDI)
Investments in, controlling, and managing value-added activities in other countries.
emerging economies (emerging markets)
Economies that only recently established institutional frameworks that facilitate international trade and
investment, typically with low or middle level income and above average economic growth
BRIC
Brazil, Russia, India and China.
gross domestic product (GDP)
The sum of value added by resident firms, households, and governments operating in an economy.
gross national product (GNP)
Gross domestic product plus income from non-resident sources abroad.
gross national income (GNI)
GDP plus income from non-resident sources abroad. GNI is the term used by the World Bank and other
international organizations to supersede the term GNP.
purchasing power parity (PPP)
A conversion that determines the equivalent amount of goods and services different currencies can
purchase. This conversion is usually used to capture the differences in cost of living in different
countries.
Section 2: Why study International Business?
Key Ideas
This section emphasizes the career opportunities that open up to students capable of engaging
in international business. As an anecdote, this is a place where I changed the message from
the American text – rather than great opportunities in distant countries, in Europe you can’t
get away from international business if you want to engage in any business of a decent size.
Key Concepts
expatriate assignment
A temporary job abroad with a multinational company
Section 3: A Unified Framework
Key Ideas
The unified framework introduced in this section – see Figure 1.3 – provides a simple
structure that ties the various chapters together. While it may be very simple, I suggest you
spend a few minutes on explaining it because it helps students seeing the common themes
running through the book: One question ‘what determined the success of failure of firms
around the globe; Two core perspectives: an institution-based view (formal and informal
rules of the game) and a resource-based view (firm-specific resources and capabilities)
Key Concepts
Most concepts relating to the two views are formally introduced in chapters 2, 3, and 4. Here
we introduce only one concept which may instructors also will find new. You may be more
familiar ‘liability of foreignness’ from Johansen and Vahlne (1977). Yet, we have decided to
move forward and adopt the new broader concept from their 2009 paper, winner of the 2019
JIBS Decade Award (also see Fig 1.4):
liability of outsidership
the inherent disadvantage that outsiders experience in a new environment because of their lack of
familiarity
Section 4: Understanding Globalization
Key Ideas
This section introduces the notion of globalization and what different people associate with
the word. On this basis, you may then discuss how best to define the word ‘globalization’ –
for which we propose a definition by Mauro Guillen.
Another important discussion in this section concerns the historical context. A common
fallacy of globalization debates is to suggest that everything is new. Some things are new,
other aren’t. Students tend to find it difficult to see their own life experience in a historical
context – the benefit of being young. So, instructors talking from experience help setting
things into perspective. In the classroom, I often find it helpful to confront students with
historical maps obtained from the internet that illustrate a very different structure of the
global economy. In line with In Focus 1.2, this map may depict the world economy of the
year 1900.
Alternatively, I also find it very instructive to present a map of Zheng He’s journeys in the
early 1400 – well before Christopher Columbus ‘discovered’ America some 70 years later
using a much smaller ship, the Santa Maria.
The other relatively new theme in globalization is the rise of emerging economies, which
raises issues from the ‘bottom of the pyramid’ (Figure 1.5) to ‘new patterns of global
innovation’ (In Focus 1.3). You can extend the discussion on GE and its innovations in India
by playing a video interview of Prof Vijai Govindarayan with the The Economist in which he
mentions GE as leading example:
http://www.facebook.com/video/video.php?v=453101145816&ref=mf. The interview also
For use with Peng and Meyer, International Business 3e, 9781473758438, © Cengage Learning
EMEA 2019 6
The identification and assessment of risks and the actions taken to minimize their impact.
Section 5: A Glance at the Global Economy
Key Ideas
The main purpose of this section is to introduce a few ‘big names’ in terms of both countries
and companies. These are the big players in the global economy, and what they do or say
matters. Instructors could quiz students on various items in these tables to challenge their
curiosity.
Moreover, you should set your (the students’) own country into perspective of other
countries. One instructive exercise is to compare the size of your own country (by population
or by GDP) to Chinese provinces or Indian states. I am writing these notes in Shanghai, a city
of 23 to 27 million inhabitants – that is more than Romania or Australia.
Data to make such a comparison for classroom use can be found on Wikipedia:
• https://en.wikipedia.org/wiki/Provinces_of_China
• https://en.wikipedia.org/wiki/States_and_union_territories_of_India
• https://en.wikipedia.org/wiki/List_of_countries_and_dependencies_by_population
Here is a trivia question to get students to consult their maps: How many Chinese Provinces /
Indian States / EU member states have more than 90 million inhabitants? Answer: three
(Guandong, Shandong and Henan)/ four (Uttar Pradesh, Maharashtra, Bihar & West Bengal) /
none (Germany only has 81 million people, Russia has 146 million but is not in the EU).
Key Concepts
None.
Section 6: Implications for Practice
Key Ideas
This is the first ‘implications for practice’ section that you will find at the end of each
chapter. These challenge students to think beyond the material presented in the chapter, and
consider its applications to their personal experience and their careers.
Key themes in this section are the challenges created by globalization, and the biases that
students are likely to have – or how their own views may not be representation of society
more generally.
Key Concepts
Ethnocentric perspective
A view of the world through the lens of one’s own culture.
Not-invented-here syndrome
The tendency to distrust new ideas coming from outside of one’s own organisation of community.
Cosmopolitans
The people embracing cultural diversity and the opportunities of globalization
Review Questions
Review questions are provided to students on the website accompanying the book. They
directly ask to summarize the material provided in the text. Instructors may also use the
questions to structure their lectures or review sessions.
Normally, there are 15 questions. However, for chapter 1 – given its breadth, I have provided
a few more.
Review Questions
(as provided to students on the website)
Material in the Book
1. What do we call a firm that is engaged in foreign direct
investment?
2. What is international business?
3. Explain why businesses in Europe need to engage with
both European integration and with the global economy
outside Europe!
4. Explain the difference between GDP and GNP!
5. Why do some organizations report GDP data by
‘Purchasing Power Parity’ (PPP) rather than market
exchange rates?
6. What are the attractions of an expatriate assignment?
for employees working in purely domestic firms?
8. What is the overarching question in the field of
international business?
9. What is the main focus of the institution-based view of
international business?
10. What is the main focus of the resource-based view of
international business?
11. Explain the concept of liability of outsidership!
12. Name four simplifying views on globalizations!
13. How do we define globalization in this book?
14. Why was 19th century liberalization important for the
acceleration of globalization?
15. Why did British Historian Geoff Jones describe the 19th
and 20th century as two waves of globalization?
Page 5
Page 5
Page 5-6
In Focus 1.1
In Focus 1.1
Page 7-8
Page 9-10
Page 10
Page 10-11
Page 11 and Fig 1.4
Page 14-15
Page 13
Page 14 and 15 (In Focus 1.2)
Page 14
Page 13-15
16. How was the global economy in 1900 different from the
global economy in 2010? How about the global
economy in 1950?
17. Why did globalization gather speed in the 1990s?
18. Why is understanding emerging economies important
for European businesses?
19. Explain the concept of ‘base of the pyramid’?
20. Does the financial crisis of 2008/09 mark the end of
globalization?
21. Name the largest country by GDP, by population, and
by stock of outward FDI!
22. Name some of the largest companies in the world!
23. Which country has experienced the largest increase in
companies listed in the “Fortune 500”?
24. Why do cosmopolitans tend to have different views
about globalization than people who spend all their life
in the same town?
25. Explain why universalists and exceptionalists are likely
to fail in global business
In Focus 1.2
Page 16-17
Page 17-18, esp. Figure 1.5
Page 18
Table 1.2, Page 20
Table 1.3, Page 21
Table 1.4, Page 22
Page 24
Page 22-24
Critical Discussion Questions
At the end the chapter, we provide discussion questions that aim to stimulate students
thinking beyond memorizing the material learned in the chapter. They are designed to be
used at a basis for in-class discussions, group work, or individual assignments. Below, I
provide some indicative answers of issues that may be raised in response to these questions.
Discussion Questions
(as provided in the book)
Indicative Responses
1. A classmate says: “Global business is relevant
for top executives such as CEOs in large
companies. I am just a lowly student who will
struggle to gain an entry-level job, probably in
a small domestic company. Why should I care
historical cases don’t really help me in the 21st
century”. How do you convince him that he
1. A powerful way to address this
question is to explore the day-to-
day work of any individual
working company above the very
basic level. What is it you direct
boss is doing day in, day out?
Quickly they will find out how
many international interaction are
involved.
lessons from that time had been
essentially stable contributed to the
crisis. History is important to avoid
should care about lessons from the past?
3. What are some of the darker sides (in other
words, costs) associated with globalization?
How can business leaders make sure that the
benefits of their various actions outweigh
their drawbacks (such as job losses in
developed economies)?
4. Some argue that aggressively investing in
emerging economies is not only economically
beneficial but also highly ethical because it
may potentially lift many people out of
poverty (see Closing Case). However, others
caution that in the absence of reasonable
hopes of decent profits, rushing to emerging
economies is reckless. How would you
participate in this debate?
making the same mistakes again
(or at least reducing the costs).
3. The darker sides include increased
concentration of power, both
economically and politically,
beyond the national level, and
increased inequality within
developed economies. Businesses
can engage in socially responsible
actions (see Chapter 9) to soften
the impact, and to work with
stakeholders to ensure ‘fair’
distribution of the gains of
globalization – for instance by
offering training.
4. Many views may be taken on this
question. Personally, I think the
second argument is nonsense
because returns in emerging
economies are often high – even
though (or because) they are
associated with high risks.
Moreover, ignoring emerging
economies risks that new
competitors emerge that the
companies fails to anticipate.
Closing Case
1. In the digital age, what barriers do
entrepreneurs face wishing to
expand their business globally?
1. When engaging with customers in other
countries, the legal, linguistic and
cultural conditions of that country
determine how one can grow the
business. It may be possible to start
2. For local businesses, such as
Airbnb hosts, what are the key
challenges of partnering with a
digital economy firm based in
another country?
3. As a traveller, what do you see
as the main pros and cons of
using Airbnb for your next trip
to an unfamiliar country?
business markets), but to reach larger
customer groups, local conditions are
important. The case offers several
examples of that.
2. For local firms, key challenges may arise
for example from the partners’ lack of
understanding of the local business
environment. For example, the
regulatory regime for hotels and B&B
are usually defined locally and the
platform or franchise conditions of a
foreign partner may or may not be
aligned with such regulatory conditions.
Examples mentioned in the case include
health and safety standards/
3. Many students will be able to speak
from experience to this question. Airbnb
has built many routines into its system
that aim to address concerns of
international travellers, including various
safety features. However, ultimately it is
a platform and the accommodation
contract is with a local partner and
subject to local laws and regulations.
Further Learning Activities
In addition to the cases and discussion questions provided in the book, instructors may want
to use any of the following activities to further engage students with the material.
(which likely will surprise many students in Europe), and thus the rapidly evolving
role of emerging economies in the global economy (Chapter 1). The case also leads
discuss different stages of entrepreneurial growth (Chapters 11, 12, 14): from an
3. A very useful assignment to raise the awareness of the complexity of the global
economy (where you are teaching) relative to others in Europe/worldwide at this
time in history.
A useful starting point for this may be any of a series of articles in publications such
as The Economist or the Financial Times. In introducing the topic, however, it will be
important to note that at different times over the past decades, different countries have
been leading economically. Newspaper reports tend to take short-term snapshots that
miss the historical dimension. For example, in the 1990s, Germany was seen as
Europe’s laggard.
4. The two papers by the two authors of the book that are provided in the further
readings provide two different views about the essence of international business. Both
views have influenced the writing of this book. Assigning these two papers as a pair
with assignment questions such as ‘how do the authors define the scope of the
subject? What do you suggest should be the scope of the subject? provides ample
opportunity to discuss the contents of this class.
5. An important aspect of globalization is the fundamental stability of the global
economic order currently in place. Thus, FDI intentions can be influenced by its
perceived sustainability to some degree. Identify the three most important issues
related to global economic stability over the next 20 years. Be sure to discuss the
sample surveyed to provide the appropriate frame of reference for discussion.
One resource which can be used is “A.T. Kearney: FDI Confidence Index”.
This website can be found by entering the search term “foreign direct investment
intentions” at the globalEDGE™ Resource Desk search box located at
http://globaledge.msu.edu/resourceDesk/. Once at the website, click on the Download
the PDF link (found in the middle). Then, scroll to page 11 of the report where Figure
9 provides an overview of the most important challenges to the sustainability of the
global economic order over the next 20 years. The three most important challenges
are: 1) global competition for scarce energy reserves; 2) climate change; and 3) global
competition for scarce nature resources (excluding energy). The respondents surveyed
included senior executives of the world’s leading corporations. Responses from C-
level executives as well as regional and business heads were included in the report.
Search Term: “foreign direct investment intentions”
Resource Name: A.T. Kearney: FDI Confidence Index
Website: http://www.atkearney.com/index.php/Publications/foreign-direct-
investment-confidence-index.html
globalEDGE™ Tag: Rankings
6. Pankaj Ghemawat’s website has an interesting tool that allows to visualize the size of
bilateral trade flows between countries, which is very useful indeed to show the
extend of globalization in trade: https://ghemawat.com/data-viz/area-map
7. A wonderful website to generate graphical illustrations of long-term trends on various
aspects of economic development and globalization is Hans Roslings’s gapminder
website https://www.gapminder.org/tools :
Further Readings
At the end the chapter, suggested further readings are provided. The primary aim is to
provide students a starting point for further work, for example when preparing a class
assignment or dissertation. These references also are recommended for instructors not
familiar with the topic and wishing to ‘get ahead of the students’ before lecturing on a topic.
J.N. Bhagwati, 2004, In Defence of Globalization, Oxford: Oxford University Press – An esteemed
economist outlines the benefits of globalization, and how they can be made even better.
P. Dicken, 2007, Global Shift: Mapping the Changing Contours of the World Economy, 5th ed., London:
Sage – a thorough analysis of the economic trends of globalization in a variety of industries.
R. Grosse & K.E. Meyer, eds, 2018, Oxford Handbook of Managing in Emerging Markets, Oxford:
Oxford University Press. – provides in-depth overview of the state of the art of management research
related to emerging markets. Note: I am obviously not independent here, I believe that many of the
Chapters in this Handbook provide a useful next step for students to move from the content of the
textbook towards the research frontier in IB.
K.E. Meyer, 2011, What is and to what purpose do we study international business? AIB Insights
13(1): 10-13 - an essay reflecting while IB is an important field for study and research.
M.W. Peng, 2004, Identifying the big question in international business research, JIBS, 35: 99-108 –
outlines an agenda for IB scholars focused on the performance of firms in the global economy.
T. Piketty, 2014, Capital in the Twenty-First Century, Cambridge, MA: Harvard University Press
– a much discussed book offering a lot of data to support the argument that globalization causes
increased inequality within countries.
