International Business Chapter 1 Homework If Many students will probably argue that the European Union’s restrictions against hormone

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or are not available to consumers? Should the WTO? What do you think would have happened if

the WTO had ruled in favor of the EU?

2. Why was McDonald’s chosen as the target for anti-globalization protests? How can companies

like McDonald’s protect themselves from the actions of protesters like Bove?

GLOBALIZATION, JOBS, AND INCOME

C) In developed countries, labor leaders lament the loss of good-paying jobs to low-wage

countries. However, supporters of globalization argue that free trade will result in countries

specializing in the production of those goods and services that they can produce most efficiently,

while importing goods and services that they cannot produce as efficiently. Free trade advocates

suggest that despite some job dislocation, the whole economy is better off with free trade. They

make a similar argument to support the outsourcing of services like call centers to low-wage

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GLOBALIZATION, LABOR POLICIES, AND THE ENVIRONMENT

D) A second source of concern is that free trade encourages firms from advanced nations to

move manufacturing facilities offshore to less developed countries that lack adequate regulations

to protect labor and the environment from abuse by the unscrupulous. Supporters of free trade

and greater globalization express serious doubts about this scenario. They point out that tougher

environmental regulation and stricter labor standards go hand in hand with economic progress. In

general, as countries get richer, they enact tougher environmental and labor regulations.

E) Lower labor costs are only one of the reasons why a firm may seek to expand in developing

countries. These countries may also have lower standards on environmental controls and

workplace safety. Nevertheless, since investment typically leads to higher living standards, there

GLOBALIZATION AND NATIONAL SOVEREIGNTY

F) Another concern voiced by critics of globalization is that in today’s increasingly

interdependent global economy, economic power is shifting away from national governments

and toward supranational organizations such as the World Trade Organization (WTO), the

European Union (EU), and the United Nations. As perceived by critics, the problem is that

unelected bureaucrats are now sometimes able to impose policies on the democratically elected

governments of nation-states, thereby undermining the sovereignty of those states.

GLOBALIZATION AND THE WORLD’S POOR

H) Critics of globalization argue that over the last century, the gap between rich and poor has

gotten wider, and the benefits of globalization have not been shared equally. However,

supporters of free trade suggest that the actions of governments have limited economic

improvement in many countries. In addition, debt may also be limiting growth in some countries.

Today, there are various efforts underway to encourage debt relief programs.

CONNECT

Click and Drag

The Globalization Debate

Summary

This activity focuses on the debate on globalization. While globalization has long been viewed as

a beneficial trend, more recently, certain segments of the population have voiced their strong

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opposition to the trend. Anecdotes, evidence, and arguments can be collected to support each

side of the debate.

Activity

CONNECT

Video Case

Is the Future of Globalization in Doubt?

Summary

This activity focuses on the globalization debate. While it is generally accepted that countries

benefit from globalization, those benefits are not always equally distributed. Some are now

After decades of general support for globalization, some are now challenging that perspective.

Ask students to discuss this trend and what it means for international companies.

Managing in the Global Marketplace

A) An international business is any firm that engages in international trade or investment.

B) As their organizations increasingly engage in cross-border trade and investment, managers

need to recognize that the task of managing an international business differs from that of

managing a purely domestic business in many ways. Countries differ in their cultures, political

systems, economic systems, legal systems, and levels of economic development.

C) These differences require that business people vary their practices country by country,

recognizing what changes are required to operate effectively. It is necessary to strike a balance

between adaptation and maintaining global consistency, however.

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D) As a result of making local adaptations, the complexity of international business is clearly

greater than that of a purely domestic firm. Firms need to decide which countries to enter, what

mode of entry to use, and which countries to avoid. Rules and regulations also differ, as do

currencies and languages.

E) Managing an international business is different from managing a purely domestic business for

at least four reasons: 1) countries differ, 2) the range of problems and manager faces is greater

and more complex, 3) an international business must find ways to work within the limits

imposed by governmental intervention and the global trading system, and 4) international

transactions require converting funds and are susceptible to exchange rate changes.

CONNECT

Video Case

iPhone Assembly in China

Summary

This activity explores iPhone’s activities in China. Like other companies, Apple is faced with

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End-of-Chapter Resources

Critical Thinking and Discussion Questions

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 the United Kingdom? North America? Hong

Kong?

Answer: The world economy has shifted dramatically over the past 30 years. As late as the

1960s, four trends described the demographics of the global economy. The first was U.S.

dominance in the world economy and world trade. The second was U.S. dominance in the world

foreign direct investment picture. Related to this, the third fact was the dominance of large,

2. “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 smaller firms.”

Evaluate this statement.

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Answer: People who believe in this view, and the firms that they work for, may find that they do

3. How have changes in technology contributed to the globalization of markets and production?

Would the globalization of production and markets have been possible without these

technological changes?

Answer: Changes in technology have significantly contributed to the globalization of markets

and of production. Improvements in transportation technology have paved the way for

companies like Coca-Cola, Levi Strauss, Sony and McDonalds to make their products available

worldwide. Similarly, improvements in communications technology have had a major impact.

4. “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.” Evaluate

this statement.

Answer: This statement reflects a poor understanding of the unique challenges involved in

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5. How does the Internet affect international business activity and the globalization of the world

economy?

Answer: The Internet has changed the way companies do business. This technology makes it

easier for individuals and companies in different countries to conduct business with one another

6. If current trends continue, China may be the world’s largest economy by 2030. Discuss the

possible implications of 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

d. global commodity prices

Answer: The world trading system would clearly be affected by such a development. Currently,

7. Reread the Management Focus “Boeing’s Global Production System” and answer the

following questions:

a. What are the benefits to Boeing of outsourcing manufacturing of components of the

Boeing 787 to firms based in other countries?

b. What are the potential costs and risks to Boeing 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?

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e. On balance, 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.

globalEDGE™ Research Task

Use the globalEDGE™ site (globaledge.msu.edu) to complete the exercises in the text.

Exercise 1

Search phrase: trade forecasts or HSBC Global Connections

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Additional Info:

Exercise 2

Search phrase: FDI Confidence Index

Resource Name: A.T. Kearney: Foreign Direct Investment Confidence Index

Additional Info:

Globalization of BMW, Rolls-Royce, and the MINI

closing case

Summary

This case explores the globalization of BMW, Rolls-Royce, and the MINI. BMW is recognized

around the world as a leader in the luxury car market. By combining outstanding performance,

breathtaking design, and ground-breaking innovations in each of its vehicles, BMW has been

able to attract buyers from around the globe. Rolls-Royce is the iconic luxury motor car. With its

commitment to absolute perfection, Rolls-Royce holds the global position as the pinnacle luxury

automaker in the world. With its quirky design, MINI appeals to younger buyers seeking the

individuality the car offers.

Case Discussion Questions

1. How do you think BMW integrates its various unique brands into a global effort that works for

them (BMW, Rolls-Royce, and the MINI) across the world’s many global markets?

2. What is your reaction to the global brand of BMW when you hear the name, think of the

brand, and see the BMW vehicles on the road?

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3. The Rolls-Royce chase of perfection drives the supreme quality, exquisite hand craftsmanship,

and attention to the finest detail to maintain its global position as the pinnacle luxury automobile

manufacturer in the world. How do you think the Rolls-Royce brand helps, or hurts, the other

BMW brands globally (BMW, the MINI)?

4. The MINI is a unique car offering in the BMW portfolio. It has long-standing attention to

clever solutions with distinctive designs that unlock urban driving and cater to customers’

individual needs—at least that is what the target focus is for the MINI. Do you agree that this is

the focus, and do you think it is working as advertised globally?

CONNECT

Geography

Summary

This activity is designed to test the student’s knowledge of geography. Questions related to

chapter material are asked, requiring students to understand the topics and the locations of the

countries involved.

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Continuous Case Concept

This feature allows you to integrate the material presented in each chapter of the text using a

single industry, the auto industry. For each chapter, ideas will be presented on how to link the

chapter contents to the current situation in the auto industry. This discussion can take place at the

beginning of a new unit, at the end, or it could be threaded through the chapter material. In some

cases, you may want to use the feature more than once. By using the continuous case concept,

students will have the opportunity to understand how the elements presented throughout the text

apply to an evolving, real situation.

• Sketch out a diagram of the auto industry showing the major players such as Ford,

Chrysler, Toyota, Nissan, BMW, Mercedes, Tata, and Hyundai. Look at recent changes

in corporate structure. For example, Italian automaker Fiat recently took control of

Chrysler.

• Finally, reflect on the factors that made the industry a global one, and consider what is

likely to happen to the industry in the next three years, five years, and ten years. Students

may note for example, that although the U.S. market is getting stronger, emerging

markets have become more important. Similarly, students may predict that automakers

will continue to look for ways to streamline production. Ford, for example, believes that

auto buyers are becoming more similar in their buying habits and so has recently

implemented a new strategy, One Ford, which will allow it to sell just a few models in

every market. The company hopes that by streamlining all phases of product

development, production, and marketing it will be able to capture a larger share of the

market and bigger profits.

Video Note: To explore an article that relates to short- and long-term industry and consumer

factors automotive companies must consider in this discussion, consider Volkswagen Comes

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Additional Readings and Sources of Information

Trade War Update: China May Have Shot Self in Foot

https://www.forbes.com/sites/kenrapoza/2018/08/15/trade-war-update-china-soy-tariffs-brazil-

trump/#134149032bc7

Brexit Won’t Stop Globalization

http://www.bloomberg.com/news/articles/2016-07-14/brexit-won-t-stop-globalization

China Inc. Goes on a Buying Spree for Global Health Assets

http://www.bloomberg.com/news/articles/2016-07-05/china-inc-goes-on-a-buying-spree-for-

global-health-care-assets

Chinese Startup Wants to Predict Your Health With a Digital DNA Avatar

http://www.bloomberg.com/news/articles/2016-06-29/disease-predicting-avatars-fuel-billion-

dollar-chinese-startup

Trump Targets Foreign Auto Companies for Not Building Enough in U.S.

https://www.wsj.com/articles/auto-makers-meet-with-donald-trump-on-emissions-nafta-

1526063070