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2. Jason Peters says that he has learned that, for someone who wishes to develop
international skills and experiences, the biggest challenge is oneself. Do you agree with this
assertion? Why or why not? What do you think of his recommendations for addressing this
challenge?
Students will have various answers to this question, depending on their experience with other
cultures as well as their own self-awareness and self-confidence. He emphasizes the value of
clarifying one’s goals before going abroad. By explicitly identifying what you hope to achieve, be
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END OF MODULE EXERCISES
CRITICAL THINKING QUESTIONS
1. What impacts do economic forecasts have on a firm’s functional areas? If management
learns from the economic analysis of country A that wage rates are expected to increase by
10 percent next year, which functional areas of the firm will be concerned? Why will this be
of concern to management? 

The answers to this question may vary. As the text discusses, a change in just one economic
factor such as wage rates can affect all of the major functions of the company. For example, the
2. When might a country’s level of economic development mislead a marketer? 

The answers to this question may vary. The overall level of economic development, typically
assessed through measures such as GNI per capita, do not provide a direct indication about
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3. What might the differences between economically developing and developed nations
mean to an international company considering entry into a foreign market? 

Table 7.1 provides an overview of typical characteristics of developed and developing countries,
highlighting the differences in terms of income, standard of living, production techniques, and
4. Why should managers of international companies be concerned about purchasing power
parity?
Purchasing power parity rates tend to evidence more stability than do market rates, which may
fluctuate substantially over rather short time periods. Purchasing power parity helps to capture
5. What is the value of using data on GNI per capita and population density when analyzing
the attractiveness of an economy? What limitations or potential problems can arise when
using these data in an analysis?
The answers to this question may vary. For example, higher levels of GNI per capita are
generally associated with more advanced economies, and products and services demanded
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Education.
economists to estimate monetary values for the various goods and services that are not sold in
the marketplace, and this informal economy may constitute a significant portion of the overall
economy of a nation without being accurately captured within the GNI per capita data. GNI per
capita also does not provide an indication of how much or how rapidly the economy is growing,
nor how much disparity there is within the population in terms of the distribution of income. A
high income nation might still have a substantial subset of its population that is living within
much more modest levels of income, and a low income nation might still have a significant
segment that has a large level of disposable income. GNI per capita may also not reflect
accurately the level of discretionary income in an economy, which may vary due to different
levels of costs of essentials and taxes across nations. Population density figures on their own do
not provide an indication of the extent to which some of the urban population lives in slums
versus more economically well off contexts, with the social, economic, and other challenges
and opportunities that are associated with such demographics. Both parameters need to be the
starting point of research with further analysis of income distribution and population
distribution.
6. What social, political, and economic conditions might signal the existence of a large
underground economy, and why should managers pay heed to such signals?
The answers to this question may vary. As noted in the text, nations with high levels of taxation
and substantial amounts of bureaucratic red tape often experience underreporting or
nonreporting of income and other aspects of an underground economy. Countries with weak
7. Why is income distribution important to marketers in international companies? What
might be the attraction and concerns associated with relatively even distribution of income,
and with highly uneven income distribution, and how might this assessment be impacted
based on the level of the economy’s economic development?
Income distribution is important because that provides an indication of the level of purchasing
power and the types of products or services that might be most demanded for those segments
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Copyright © 2020 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
distribution of income in their early stages of development, a situation that tends to reverse at
later stages of development. Knowledge of income distribution can identify how large the
populations are within subsistence, low income, middle income, or high income segments of an
economy, and how the sizes of these segments might be changing over time. A country with an
increasing level of economic development may evidence the emergence of a substantial middle
class with disposable income and the ability to buy goods and services beyond those of a basic
level, as well as having an upper class with substantial capability for consumption of luxury
goods, for example. Countries with large segments of people living at subsistence levels might
represent markets that are more appropriate for basic consumer items. Table 7.4 and Table 7.5
can provide useful information for students as they make these analyses and comparisons.
8. The staff economist of a large multinational with a Turkish subsidiary has given the firm’s
chief financial officer a report on Turkey’s foreign debt situation, as shown in Figure 7.7.
What concerns might the chief financial officer have?
The answers to this question may vary quite a bit across students. Table 7.7 shows that Turkey
has seen a continuing increase in the level of international debt, growing from $19 billion in
1980 to $406 billion in 2016, meaning that 2016’s debt was 2,136 percent of the level of debt in
1980. The chief financial officer might view this with some alarm, as it suggests that Turkey may
9. In developing economies, what factors are associated with reduced birthrates and what is
the logic of these associations?
The answers to this question may vary. Many forces are responsible for reductions in birthrates.
Governments are supporting family planning programs, to be sure, but there is ample evidence
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10. What implications might the rural–to-urban shift in developing countries have for
international companies?
The answers to this question may vary. Some students may suggest that as more people move
from rural areas to urban areas, there will be a corresponding increase in the need for
GLOBALEDGE RESEARCH TASK
Exercise 1
The quickest way to reach this section would be to search globalEDGE using the phrase ‘by
Classification’. The economic indicator comparisons can be accessed by visiting each of the
Exercise 2
Aerospace Industry Market Potential Index is available on the MPI page under the ‘Tools and
Data’ tab on the top menu. Once on the MPI page, scroll down and check the right-hand
MINICASE: The Impact of Darawan’s Development Policy
This minicase explores a situation where the secretary of the treasury in the fictitious nation of
Darawan has made a statement about a proposed change in that country’s development
strategy. It helps students to understand the different options available and their implications
for a firm.
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1. Describe the two strategies for the CEO.
2. Explain how the change in Darawan’s development strategy will affect the firm in many
ways.
This question can prove to be difficult for some students to answer, and there can be a range of
3. What changes in its entry plans will the firm have to make?
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BONUS ACTIVITIES
VIDEO SUGGESTIONS
McGraw Hill’s collection of international business videos is available at
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 use in hybrid/flipped classroom and online courses.
1. Country Experts
We have had good response from students when we have asked them to choose a country and
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2. The Effect of Economic and Socioeconomic Changes on Managers
Assign various kinds of changes in the economic and socioeconomic dimensions and ask the
3. Labor Compensation Cost
4. Labor Costs Around the World
Many students believe the labor costs in the United States are the highest in the world. Ask
students to examine the information in Figure 7.4. Have the students explain how a country like
Norway or the United States can remain competitive over time, particularly in competition with
labor compensation costs in Brazil, Mexico, and Greece. When contemplating where to locate
production facilities, what other factors must an international business manager contemplate
beyond just labor compensation costs?
5. Economic Turmoil
Students are probably aware of recent economic turmoil in countries like Brazil, Venezuela,
Sudan, Spain, or Greece. Have the students pick one of these countries, or another appropriate
country that has suffered from social and political challenges due to economic turmoil, and
research the events and outcomes. What was the root cause of the economic turmoil and what
was the eventual outcome of this economic chaos (or what do they think the eventual outcome
will be)? How did international businesses respond to the situation?
6. GNI
Have students consider that they are working in the marketing department for an international
company that is analyzing market opportunities within the European Union. For the most
recent year for which data are available, what are the five EU member countries with the
highest real gross national income (GNI) per capita? For the same year, what are the five
member countries with the lowest real GNI per capita? Find similar data for EU members from
5 years earlier. Which country has had the highest percentage increase in GNI per capita?
Which has had the lowest?
SUPPLEMENTAL ACTIVITIES
Case Studies
Case studies that focus on intercultural issues and their effects in business environments are
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an account and offers downloadable review copies for educators. The case prices begin at
$7.50.
Harvard Cases
“Wal–Mart in China 2012” examines Wal-Mart’s challenges in competing successfully in the
diverse and changing economic and socioeconomic environment that China represents.
“Celtel Nigeria: Towards serving the rural poor (A)” describes the efforts by Celtel Nigeria to
serve the rural poor. It provides detailed demographic and socioeconomic information, helping
CONTROVERSIAL ISSUES
1. Global Debate: What Is the Best Way to Measure a Nation’s Development: Income or
Quality of Life?
This boxed feature described earlier in this module’s Instructor Guide provides an excellent
foundation for debating some of the issues raised in the text. This Global Debate provides an
2. Debate on Whether India or China Will Be the First to Achieve Developed Nation Status
Drawing from the content in the introductory vignette, “Two Emerging Asian Superpowers: The
China-versus-India Development Race,” you can ask students to take opposing perspectives to
argue that India or China has economic, demographic, institutional, or other resources and
attributes that will give them an advantage, or a disadvantage, in their relative efforts to
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Copyright © 2020 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
achieve sustained development and become developed nations. Stereotypes and biases can be
useful for raising issues that could subsequently be explored in more depth.
Online and Hybrid: Virtual teams can be assigned to take different perspectives to argue for or
against the likelihood that either China or India might achieve developed country status ahead
of the other nation (or perhaps whether either country will be able to achieve such status, from
the perspective of some cynics). You could ask the teams to conduct research in support of
their perspective, examining economic, socioeconomic, and other data to identify trends and
considerations impacting the level and rate of development that can be achieved over time.
These assignments can be submitted as a group and then opened up to discussion and debate
on an online class discussion site or blog, or presented and debated in a face-to-face setting.
Face-to-Face: As with the online and hybrid assignment, students can be assigned to take
different perspectives to argue for or against India or China emerging first as a developed
country, and then they can be asked to argue their positions within an in-class debate and
discussion.
3. Current Events for Sources of Culture Controversy
A focus on current events that are relevant to the module’s topics is a good way to bring home
the concepts, review their application, and build news-review habits. Ask everyone to come
prepared with an article for every meeting. If a meaningful percentage of the final grade is
TEACHING SUGGESTIONS
1. Students often are unaware of the broad impacts on a company from changes in economic
variables. It can be useful to pick one or two recent events—such as currency devaluation or a
2. The material on Levels of Economic Development can be a useful base for generating a
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Copyright © 2020 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
these distinctions are, including how they may be valuable for international managers and what
limitations they might involve. We tie in Table 7.1 and discuss how they may provide useful
insight for international managers. We then conclude this discussion by including the material
from the Global Debate box, “What Is the Best Way to Measure a Nation’s Development:
Income or Quality of Life?” and generally have an invigorating discussion about what
“development” really means or should mean, what dimensions should be examined, and how
to measure it.
3. We find it useful to conduct a discussion of how the various measures of an economy’s size
can be useful for international managers. For example, we discuss the usefulness of GNI and
GNI per capita for helping to identify or rule out markets for potential products, a discussion
4. Generally students do not fully understand the Purchasing Power Parity concept. We find it
useful to put together scenarios (such as presented in the text, about Thailand versus the U.S.),
5. Students often find the topic of the underground economy and informal markets to be
interesting, although often they do not seem to fully understand the extent of such activities.
6. We often find it useful to discuss the distribution of income in an economy, how it varies
across nations, and the implications of different distributions. Table 7.4 is a useful tool for such
7. It can be interesting to have a class discussion on the impacts of different age distributions
within nations. Figure 7.6 provides a useful starting point for such a discussion. Asking students
about why an economy would have a higher or lower proportion of elderly in its population can
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8. Guest Lecturer possibilities: Some people who could contribute to the material in this
module would be:
• Someone involved in planning or economic analysis in a multinational firm.
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CONNECT TOOLS FOR ASSESSEMENT OF LEARNING
CONNECT CONTENT MATRIX
For every chapter, please refer to the Connect Content Matrix to see what application exercises
are available and what Learning Objectives they help reinforce/assess.
Title
Assignme
nt Type
Topic(s)
AACSB
Accreditation
Tagging
Bloom’s
Taxonomy
Evaluating Country
Attractiveness
Click and
Drag
Socioeconomic Country
Attractiveness
Analytical
Thinking
Apply
Japan’s Economic
Malaise
Video
Case
Dimensions that Describe
the Economy and their
Relevance for International
Business
Analytical
Thinking
Analyze
Understanding the
Environment in
Economic Analyses
Click and
Drag
International Economic
Analyses
Analytical
Thinking/
Reflective
Thinking
Understand/
Remember
Three Levels of
Economic
Development
Case
Analysis
Levels of Economic
Development
Knowledge
Application
Understand
CONNECT ACTIVITIES
1. Evaluating Country Attractiveness
Activity Summary: This is a click and drag activity in which economic indicators are matched to
2. Japan’s Economic Malaise
Activity Summary: This is a video case in which students watch a short video and answer one or
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In groups or individually, have students compare Japan’s economic indicators with the U.S. or
another country. What indicators are similar and what are different?
3. Understanding the Environment in Economic Analyses
Activity Summary: In this click and drag activity, students match the environment type (foreign
4. Three Levels of Economic Development
Activity Summary: This case analysis gives a bulleted list of reports from the International