INTERNATIONAL MANAGEMENT Chapter 1: Introduction to International Management
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Chapter 1
INTRODUCTION TO INTERNATIONAL MANAGEMENT
Learning Objectives
After studying this chapter, you should be able to:
2. identify the drivers of internationalization;
4. understand the discussion points in subsequent chapters.
General Teaching Suggestions
Provide an overview of the current scenario of global trade. Encourage discussion on the
various products in the market and assess the role of global trade in their availability.
Focusing on the undeniable reality of the global market, lead the discussion to the
Opening Case Discussion Guide
“Toyota and Successful Internationalization” describes the strategic decisions that helped
Toyota Motors become one of the most internationalized auto firms in the world..
Students should read the case and discuss the strategies in the light of the challenges
posed by the new global economy.
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CHAPTER OUTLINE: KEY CONCEPTS AND TERMS
Sections I through IV of Chapter 1
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I. BENEFITS TO CONSUMERS OF INTERNATIONAL TRADE
1. Key Concepts
International competition pushes all businesses to be better, providing consumers
with less-expensive and higher-quality products. Not only products but also
2. Key Terms
• Globalization – is a modern term used to describe the changes in societies and
the world economy that result from dramatically increased international trade,
foreign direct investment, and cultural exchange.
• Outsourcing – (or contracting out) is often defined as the delegation of noncore
INTERNATIONAL MANAGEMENT Chapter 1: Introduction to International Management
II. A GLOBAL WORLD
1. Key Concepts
• Two Periods in the Globalization Trend: The period immediately after World
War II is often referred to as the period of ‘‘Big Unit’’ capitalism. The start of
the second period of globalization can be traced to 1971.
• Drivers of Globalization: Three major factors have helped drive the expansion of
globalization since the 1971 collapse of Bretton Woods:
i. Technology Changes
are best served by international trade.
2. Key Terms
• Tariffs – Taxes on imported (not exported) goods.
• Big Unit capitalism – A Big Unit economy will be dominated by Big Business,
Big Government, and Big Labor. The Big Unit economy generally produced
efficient but rigid, pyramidal organizations and government departments that
were full of soft niches that relaxed standards and did not demand (and reward)
excellence and accountability in work and educational quality.
• Bretton Woods system – The Bretton Woods system was a negotiated monetary
order after World War II to govern monetary relations and currency exchange
rates among independent states.
III. WHY STUDY INTERNATIONAL MANAGEMENT?
1. Key Concepts
International management teaches that through education and study you will
learn some of the things that differ from what is considered right in your society;
differences that you may face when managing an international firm.
• Shifting Players in International Business: One of the recent trends in
INTERNATIONAL MANAGEMENT Chapter 1: Introduction to International Management
2. Key Terms
• Foreign Direct Investment (FDI) – Investment by foreigners in a nation
IV. SUMMARY
1. Key Concepts:
• This chapter laid the foundation for the study of international management and
examined the drivers for the internationalization of business, including
technology, information access, and financial changes.
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END-OF-CHAPTER GUIDE
* MANAGERIAL GUIDELINES
* OPENING VIGNETTE DISCUSSION QUESTIONS
* DISCUSSION QUESTIONS
* IN-CLASS EXERCISES
* TAKE-HOME EXERCISES
* SHORT CASE QUESTIONS
MANAGERIAL GUIDELINES
1. The pace of internationalization has increased in recent years and will likely
expand further in the future.
2. There are many cultural differences that can easily be misunderstood if the
3. The manager can prepare for these cultural differences before conducting business
4. Legal standards should always be observed–if not, long term consequences to the
INTERNATIONAL MANAGEMENT Chapter 1: Introduction to International Management
5. Legal standards, however, are not enough. Additionally, the firm needs an active
policy detailing their ethical standards and how those standards are to be acted
upon.
OPENING VIGNETTE DISCUSSION QUESTIONS
1. Why do you think Toyota has been so successful?
2. How easy do you think it has been for Toyota to adapt to the changes it faces?
3. Do you think it would be easy for an international firm, such as Toyota, to lose its
focus on what it is trying to achieve?
Toyota has a goal to hold 15 percent of the world’s auto market and 15 percent of
DISCUSSION QUESTIONS
1. While the flow of information has increased around the world, firms, such as
Google and Yahoo!, still must compromise on what information they will provide
to their customers if they are to have access to markets such as China’s. Do you
think this is an appropriate compromise or not?
Government regulation on information varies across countries. Some students
may argue that firms such as Google and Yahoo! should respect the market
2. How has the formation of the EU created new opportunities for member
countries? Of what importance are these opportunities to international managers
in other geographic regions such as North America or Asia?
INTERNATIONAL MANAGEMENT Chapter 1: Introduction to International Management
EU the third largest population in the world, following China and India. For both
member countries and international managers in other regions alike, this is a
3. Many multinational corporations have secured a foothold in China and India, and
many more are looking to develop business relations there. Why does this region
of the world hold such interest for international management? Identify and
describe some reasons for such interest.
China is the world’s largest country in terms of population with about 1.2 to 1.5
4. Do you believe that ethics can be taught? Why or why not?
5. Do you think the Foreign Corrupt Practices Act in the U.S. or similar laws that
exist around the world are good?
Laws like the Foreign Corrupt Practices Act are reference points for
IN-CLASS EXERCISES
1. Tough organizational choices
• The new plant manager with a worldwide manufacturing company
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2. African plane
• As an expatriate in an African country, what would you do when the local
population and government mobilize protests against your company
because of an accident involving a military cargo plane from your
country?
3. Consider the following vignettes in each of the four ethical dilemma categories
and consider what you would do in each setting. Each setting contrasts two ethical
rights.
a. Truth versus Loyalty
o John has been told by his boss to maintain confidentiality regarding
information on future layoffs. How should John respond to his team-
member Jim’s query? Should he remain loyal to his boss or should he
be honest?
Discussion: How would you handle this dilemma?
b. Individual versus community.
o In the mid-1980s, the administrator of a residential care is informed
that five of his elderly resident could possibly be HIV infected through
blood transfusion.
Discussion: What would you do?
c. Short Term versus long Term.
o Andy contemplates doing an MBA to further his career but is faced with
a dilemma as he will be burdening his wife with all the familial
responsibilities along with compromising on valuable time with his
near-teen kids.
Discussion: What should Andy do?
d. Justice versus Mercy.
o The editor of a major daily newspaper is presented with proof that a
new hire in the food section is found to have plagiarized from another
feature.
Discussion: It was right to enact justice, but mercy is also a virtue. How
would you handle this situation? Can you work out a solution that is
both merciful and just?
TAKE-HOME EXERCISES
1. On balance, how has globalization performed in the countries that have become
most globalized? Select a country that globalization has helped and explain how
and why that country was helped. Give examples.
Student observations and responses will vary, based on the country that they
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2. Research the pros and cons of globalization. How can firms and governments help
to reduce the effect of globalization’s cons? If you enter the term
‘‘antiglobalization organization’’ into an online search engine, you will be able to
3. How can firms, nongovernment organizations (NGOs), and governments help to
reduce the effect of globalization’s cons? Are there such efforts under way in the
world now that you can identify?
In many countries, companies are working closely with the government to arrive
at a common ground for development and to reduce the negative impact of
globalization. Social welfare and community programs sponsored by the industry
4. Locate a recent accounting or bribery scandal that has occurred in your home
country. Read the stories about the situation? What rationale was offered by those
who committed the offense? What do you think of their rationale?
Student answers will vary. For example, one of the latest scandals to make news
is the Siemens bribery scandal. According to the Justice Department, the charges
SHORT CASE QUESTIONS
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1. Discuss why you think business groups have developed in environments, such as
Asia but not in North America? (We will discuss this issue later in the book to a
greater degree.)
Several factors work in favor of business development opportunities in Asia. The
most important of these is the availability of skilled labor at competitive rates.
2. Why do you think South Korea has developed a tradition of strong unions when
most of the rest of Asia has not? How will this impact your business dealings in
the country?
Students should research the development of trade unions in South Korea with
3. Why do you think the effort to reform business groups has now slowed as the
economy has improved, especially when the result for Hynix looks so good?
The efforts at reforming businesses were pursued aggressively during a period of
intense challenges faced by the economy following the fall of the value of the