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Chapter 14
THE FUTURE OF INTERNATIONAL MANAGEMENT
Learning Objectives
After studying this chapter, you should be able to:
2. identify entrepreneurial firms; entrepreneurs; their role in the world economy; and
born global firms.
4. identify ‘‘the bottom billion’’.
5. analyze the future of globalization and international management.
General Teaching Suggestions
Introduce terms from the text like “born–global” and “bottom–billion” to the class.
Discuss the understanding of these terms.
Opening Case Discussion Guide
The case describes how Safaricom succeeded in generating very good profits through
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CHAPTER OUTLINE: KEY CONCEPTS AND TERMS
Sections I through VII of Chapter 14
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I. INCREASED IMPORTANCE OF INTERNATIONAL MANAGEMENT
1. Key Concepts
Business people and policymakers alike generally agree on the increasing
importance of international business and the positive change and economic
2. Key Terms
• Bottom billion – The world’s poorest billion people who have largely missed the
economic progress that has come from globalization over the last 25 years.
II. ENTREPRENEURSHIP AND INTERNATIONAL MANAGEMENT
1. Key Concepts
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In management, entrepreneurship is defined as value-creation activities by
individuals, either in creating a new enterprise or building a new business or
product line within an existing organization.
• Impact of Entrepreneurship around the World: Large firms influence economic
growth through the construction of new plants, which, in turn, creates job
opportunities. The Organization for Economic Cooperation and Development
highlights the critical role of entrepreneurs as agents who accelerate the
generation, application, and spread of innovative ideas and economic growth.
• A Lack of Entrepreneurship: Entrepreneurship is very important for economic
• Born Global Entrepreneurial Firms: It is increasingly recognized that
entrepreneurial firms are participating in the world’s increased globalization. The
growth of these entrepreneurial global ventures is facilitated by the removal of
• Resources and Strategy of Entrepreneurial Firms: Entrepreneurial firms have
special needs compared to more mature firms, which focus on firm assets. They
often do not have the financial resources to succeed, and it is commonly believed
• Corporate Entrepreneurship: Many mature firms can become stagnant and so
bureaucratic that they fail to innovate, but these firms can try to regain their
competitiveness by pursuing internal corporate entrepreneurship. Typically the
steps that a firm needs to accomplish such a change are as follows:
i. Build a sense of urgency for the change.
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vii. Focus on key employees.
• Entrepreneurship and Innovation: Upstream and Downstream
It is important to remember that upstream innovation—research and
development, basic science, and university-company partnerships—is not the
only important component of innovation and a prosperous society. Downstream
innovation is a firm’s ability to use research and basic product components and
package them together to create a new, salable product or service. There are three
broad components of downstream innovation that are important to
competitiveness:
i. Technology indigenization
ii. Turnkey innovation, and
2. Key Terms
• Entrepreneurship – Value-creation activities to create new enterprises or build a
new business or product line within an existing organization.
III. ENVIRONMENTALISM AND THE FUTURE
1. Key Concepts
There is an increased focus today on the business and the natural environment,
2. Key Terms
• Renewable energy certificate (REC) – Certificate for each 1000 kilowatts of
renewable energy that can be bought or sold. Governments create such
IV. THE BOTTOM BILLION AND INTERNATIONAL BUSINESS
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1. Key Concepts
While the world’s economy has grown dramatically in recent years,
approximately one-sixth of the world’s population has benefited little from this
growth. The quality and quantity of products and services available in this
V. UNDERSTANDING FINANCIAL PANICS
1. Key Concepts
According to the efficient market theory, price changes observed in financial
markets are the result of markets responding to a constant stream of new
information. Several facts have been discerned from studying financial manias
2. Key Terms
• Financial panic – Financial panics include a variety of situations in which some
VI. FUTURE OF INTERNATIONAL MANAGEMENT & YOU
1. Key Concepts:
The world will only become more internationally oriented. As firms
internationalize, they will need to take the basic concepts they know from the
United States and adapt those concepts internationally. The concepts presented in
VII. CONCLUSION
1. Key Concepts:
The world’s developing economies are creating excellent opportunities—
opportunities that cannot be ignored. Some people have played up the potential
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threats of internationalization, rather than its opportunities. They claim that free
trade with developing economies is a recipe for mass unemployment, huge wage
inequalities, and a massive migration of firms to low-wage countries. Optimists
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END-OF-CHAPTER GUIDE
* MANAGERIAL GUIDELINES
* OPENING VIGNETTE DISCUSSION QUESTIONS
* DISCUSSION QUESTIONS
* IN-CLASS EXERCISES
* TAKE-HOME EXERCISES
MANAGERIAL GUIDELINES
1. Entrepreneurship and value creation are getting more attention around the world.
2. Competition is also coming from firms in emerging economies, some of which
3. Firms must be more willing to send young professionals abroad. Expatriates are
4. One key challenge for young workers posted abroad and their firms is the
acculturation process. Though firms should assist in preparing for the
5. It is crucial for firms to provide clear career paths for younger professionals going
6. Although younger expats may not have families to bring abroad with them, they
7. Expats must be careful not to project their own values onto their new colleagues
OPENING VIGNETTE DISCUSSION QUESTIONS
1. Safaricom had to make a number of adjustments to its product line to make it
affordable for people. What kinds of adjustments would a computer firm need to
make in order for its product to be accessible to low-income people even if these
potential customers were not as poor as those buying phone minutes from
Safaricom in Kenya?
2. Do you think firms from emerging economies will be able to make these kinds of
adjustments better than those from mature economies?
Transition economies have some advantages over mature economies in that they
3. Would the adjustments for a firm in another low-income country, such as
Guatemala, be different than those in Kenya?
4. What are some types of products that would not be expected to successfully adapt
DISCUSSION QUESTIONS
1. Why do you think that approximately one-sixth of the world’s population has not
experienced much substantive economic growth over the past 30 years?
2. How will businesses have to adapt as concerns about the natural environment
increase?
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3. Do you think that being environmentally sensitive can be a source of competitive
advantage or does it only represent a cost to a business?
Student opinions may vary. As the consumers become more environmentally
4. How can people living on $1 per day possibly represent a market for a
multinational enterprise?
The opening case describes how Safaricom reaped good profits from a market
IN-CLASS EXERCISES
1. Discuss which country you would like to work in someday and why.
2. Identify a local business and the ways globalization may affect it in the future.
3. Many firms are increasingly asking employees to go abroad for medical treatment
in order to cut costs. Would you be willing to have some common elective
surgery abroad if your employer insisted because the cost in Thailand, for
example, would be 50 percent less than in the United States? What might make
you more willing?
4. Identify the businesses in your area that may be at greatest risk from international
competition.
Student observations may vary.
TAKE-HOME EXERCISES
1. Outline a business plan for a venture that will serve people making $2 or less per
day. This should be a plan for dealing with an existing product that you are
already familiar with. Discuss how the product must be adapted to this market.
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2. Investigate entrepreneurial opportunities in a developing country in which most of
the population survives on $1 or less per day. You can find a list of these
countries on the World Bank Web site (www.worldbank.org). Consider firms that
may want to relocate production activities to a country like this with opportunities
to sell products that benefit the local population in an affordable way.
3. Research an African country in which the population survives on a $1 a day. If
you had to design a foreign aid program for this country, what would be in it?
4. Write a plan for your career. Specifically talk about how you will address key
international issues. Are you studying a foreign language? Where have you
traveled abroad and what were the key challenges you faced in that foreign
country?
Student responses will vary.