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McKee Chapter 14:
GLOBALIZATION: MANAGING EFFECTIVELY IN A
GLOBAL ECONOMIC ENVIRONMENT
CHAPTER OBJECTIVES
14.1 Define globalization and understand how this trend affects business, politics, and
economics.
14.2 Understand how technology plus political and economic changes fostered
globalization.
CHAPTER SUMMARY
In Chapter 14, we will study how globalization, or the global flow of money,
products, information, services, and expertise, has transformed the business
environment—and society in general—in recent years.
First, we will explore what globalization is and why does it matter. Next, we look
at the key aspects of globalization, such as technology’s critical role. We look at how
politics, such as the cold war and the eventual demise of communism in Russia has had a
huge impact on global business. From there we move toward considering how trade
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Finally, to conclude the chapter, we’ll explore HR’s role in supporting an
organization’s global strategy, as well as what managers, leaders, and you can do to be
successful in an increasingly interconnected world.
CHAPTER OUTLINE
Teaching Objective: To increase awareness of the importance of globalization in today’s
economic environment
I. What Is Globalization and Why Does It Matter?
A. globalization – the global flow of money, products, information, services,
expertise and people
II. How Do Changes in Technology, World Politics, and Economics Foster
Globalization?
A. Technology’s Role in Fostering Rapid Globalization
1. Globalization means that businesses and people everywhere are more closely
B. ICTs and Global Business
1. Technological changes allow companies to arrange for the production,
C. Changing Global Politics and Economic Shifts after the Cold War
1. The Cold War was a political and ideological conflict between the
former Soviet Union (USSR) and the United States which sought to
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5. Several countries in the Middle East and elsewhere grew very wealthy
very quickly as oil reserves were discovered and exploited during the
latter half of the twentieth century and has had significant impact on the
world’s businesses and governments.
6. World politics, conflicts over oil, and social issues linked to religion
have played and continue to play a very large role in international
relations and business.
III. How Do Trade Agreements and International Finance Affect Business and
Economies?
A. Global Forums for Debate, Oversight, and Regulation
1. Business and government leaders often come together with experts in
B. Global Trade Alliances
1. exporting – the transportation and sale of domestic goods to foreign markets
C. The European Union
1. European Union (EU) –an economic and political union of 27 European
power to the union in exchange for certain benefits
D. Global Investment, Finance, Debt, and Inflation
1. Global investors own trillions of dollars’ worth of U.S. stocks, bonds, and
other securities.
2. global investment helps the US finance its infrastructure
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6. Inflation – the rise in prices for goods and services over a period of time and
the decrease in the relative purchasing power of currency.
a. Inflation can be caused by a number of factors related to a weakened
economy including increasing interest rates, selling government bonds, or
simply by printing money
IV. What Must Be Considered When Developing a Global Strategy?
A. Reviewing Legal and Organizational Structure Issues
1. Leaders of a company that want to do business in one or more countries
B. Global Strategy and Culture
1. McDonaldization – a form of global scientific management that leads to
V. What Are the Opportunities and Risks in a Global Business Environment?
A. Opportunity: Expand Sales in Developing Markets
1. It’s very possible that within the next 50 years, Indian and Chinese consumers
B. Opportunity: Access to Expertise While Saving Money
1. Sometimes, outsourcing or offshoring work can result in a business being able
to capitalize on greater expertise and less costly labor.
C. Opportunity: Take Advantage of Time Zones and Round-the-Clock Business
1. More countries are creating friendly climates for global businesses –
businesses can work and sell around the clock, if they choose.
D. Opportunity: Economies of Scale
1. Economy of scale – the process of using increased production to lower per-
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E. Risk: Uncertainty Due to Government Involvement and Political Instability
1. Depending on a country’s political climate, the business environment can
F. Risk: Growing Too Fast
1. During periods of global expansion, companies can be tempted to grow too
fast.
G. Risk: Global Partnerships Can Increase Exposure
1. The fortunes or misfortunes of one global company can affect that company’s
consumers, and the partner business and its consumers as well.
H. Risk: Political and Popular Disapproval
1. Job migration is part of globalization which has been and continues to be
VI. What Opportunities Exist in Emerging Markets
1. BRIC Markets: Brazil, Russia, India, China
A. Brazil- positive growth for most of the 21st century
1. Brazil: The Past (1889-1985)
a. Slave supported sugar plantations
2. Brazil: The Present
a. 1985 Military rule came to an end
3. Brazil: The Future
a. Likely to experience continued economic growth
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d. Valuable mineral and oil deposits
4. Advantages and Disadvantages of Doing Business With Brazil
a. Advantages
B. Russia
• Centrally planned socialist economy- an economy in which the government
• Capitalist economy– an economy in which what is produced and sold, how
much goods and services cost, and what workers are paid is determined by the
market
1. Russia: The Past (1917-1989)
a. Outward aggression and inward oppression
2. Russia: The Present
a. 1989- Fall of Berlin Wall
b. Between 2000-2004 GDP increased by 72%
c. Vladimir Putin wins third nonconsecutive term as President
3. Russia: The Future
a. Considered to be at a political and economic crossroads
4. Advantages and Disadvantages of Doing Business With Russia
a. Advantages
i. Education and expertise
ii. Cultural proximity to the West
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C. India- Midst of financial boom fueled by liberalization of economic policies and
improved economic political relations with the West
1. India: The Past (2500 B.C.E. To 1990)
a. Oldest continuous civilizations on Earth
2. India: The Present
a. 1991- Major steps toward liberalization of economic policies
b. By 1993 GDP increasing at rate of 5.1% per year
c. Since 2000 GDP increasing at rate of 7% per year
3. India: The Future
a. Dedicated to continued economic growth
b. Estimates GDP growth for 2012 at 6.5%
4. Advantages and Disadvantages of Doing Business With India
a. Advantages
i. Large pool of educated workers
D. China-After breaking free from a centrally planned economy China quickly
became an economic powerhouse due to its large population, resources to
modernization and economic growth
1. China: The Past (1912-1989)
a. One of the world’s oldest civilizations
2. China: The Present
a. Tiananmen Square Massacre- over 2,600 protesters against authoritarian
3. China: The Future
a. Remains powerful in terms of economy and military
4. Advantages and Disadvantages of Doing Business with China
a. Advantages
i. Population
ii. Growing middle class
VII. What is HR’S Role in Supporting Global Business– HR leaders prepare employees to
be part of the global workforce by creating development programs and training
A. Coaching for Success: Helping Employees and Managers Adjust to Globalization
1. Coach training tips for success
a. Understand your client’s culture and the host country culture.
b. Deliberately build a strong, trusting, and confidential relationship
2. The Expat Experience: HR Designs Programs That Matter
a. Expat employees work outside their home country
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VIII. What Can We All Do To Succeed In A Global Environment
A. The Intersection Between Personal Ethics, Societal Ethics, and Company Ethics
1. Be clear about your own values and ethics as well as those of your society and
B. Competencies That Support Working Abroad
1. Communication is a very important skill
DISCUSSION QUESTIONS
Discussion Questions for Objective 14.1:
1. How has globalization affected the community in which you grew up?
Suggested Answer:
2. Do you think globalization is here to stay? Why or why not? What will slow progress
toward seamless global business (e.g., specific cultural, political or economic issues)?
Suggested Answer:
Discussion Questions for Objective 14.2:
1. Explain why educated students of management and business need to understand world
politics. Give at least two examples of current events that are important to today’s
business environment and explain how they impact the business, the people in the
organization(s), and consumers.
Suggested Answer:
Student responses will vary. World politics, conflicts over oil, and social issues linked to
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2. How has technology—particularly ICTs—contributed to the Arab Spring? Do you
think social and political revolutions like the Arab Spring will continue to spread
globally? If so, where to, and why?
Suggested Answer:
Student responses will vary. The Arab Spring involved uprisings against dictatorships
and restrictions of freedoms in several countries in the Middle East and North Africa. The
By January 2011, citizens in Algeria, Lebanon, Jordan, Mauritania, Sudan, Oman,
Saudi Arabia, Egypt, and Yemen had all participated in similar protests. Protests also
spread to Iraq, Bahrain, Libya, Kuwait, Morocco, Western Sahara, Syria, and the border
regions of Israel.24 By the end of 2011, the political landscape of North Africa had
changed dramatically with the overthrow of the Tunisian, Egyptian, and Libyan
governments.
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Discussion Questions for Objective 14.3:
1. Check the label on your clothes, phone, television, computer, or bedding. Where were
these items made? What kind of oversight or regulations do you think were followed to
ensure you are using a safe product that is produced in conditions that are aw-abiding and
ethical (e.g. without the use of child labor, safe working conditions, etc)?
Suggested Answer:
2. Within the EU, people can move freely between countries and can work in any
member country without a visa. What are the benefits and potential problems that arise
from such policies?
Suggested Answer:
Student responses will vary. Benefits are obvious that companies have access to over 227
Discussion Questions for Objective 14.4:
1. Do an online search to identify examples of organizations representing the following
global business structures: cooperative contracts, licensing, franchising, strategic
alliances, wholly owned affiliates, global new ventures, and outsourcing.
Suggested Answer:
Student responses will vary. There are plenty of examples that students should be able to
find. For example, in licensing, Laura Ashley licensed her name to Henredon Furniture.
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2. On the Internet, find two or three stores that you patronize regularly that have
international operations. Based on what you read on the Web, discuss aspects of the
companies’ values, ethics, and cultures that you believe the companies want visible in
their stores everywhere. Can you see any indication that the Web sites you reviewed are
tailored specifically to one culture? If so, which culture, and what is your evidence? Be
wary of your own cultural biases and stereotypes, which might cause you to pay attention
to some things more than others.
Suggested Answer:
Discussion Questions for Objective 14.5:
1. Imagine you have been asked to transfer abroad to work for an indefinite period of
time. What opportunities might this provide for you as a person and a professional? What
concerns would you have, and how might you address them?
Suggested Answer:
Student responses will vary. Working abroad for an extended period of time can very
often be a learning experience of a lifetime. You can immerse oneself in a culture,
2. Higher education has been one of developed nations’ most prominent exports. This has
resulted in cheaper or more skilled labor abroad. What are other pros and cons of
exporting higher education?
Suggested Answer:
Student responses will vary. Pros of exporting higher education might be 1) expand sales
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Discussion Questions for Objective 14.6:
1. Review the advantages and disadvantages of working and doing business in Brazil,
Russia, India, and China. Which advantages are most appealing to you and why? Which
disadvantages concern you the most and why?
Suggested Answer:
Student responses will vary. Brazil is becoming increasingly attractive to international
firms. Brazil offers many advantages beyond the factors mentioned earlier, including
economic stability, openness to foreign investment, and engagement in the global export
“have a shrinking population base, have a withering economy, [and] have a banking
sector and structure that is not likely to withstand the next 15 years. Although this remark
angered Moscow and may have hindered the U.S. State Department’s attempts to
improve relations with Russia, what Biden said is true. India offers a number of
advantages to international companies. These include a large pool of educated workers, a
growing middle class, and widespread fluency in English. As with many emerging
nations, however, there are certain disadvantages to working with India. The most
2. How would you need to prepare yourself to live and work in Brazil, Russia, India, or
China? Consider all aspects of life, not just work.
Suggested Answer:
Student responses will vary. A good way to think about it might be start with if you were
Discussion Questions for Objective 14.7:
1. Think about an experience you have had working or living in a community and culture
not your own. If you haven’t had an international experience, consider a time when you
joined a new organization at your school or when you took a new job. How did you learn
about the business practices and culture in the new setting?
Suggested Answer:
2. When you visit a country or a region that has a different culture than your own, what
do you do to try to “fit in”? Are there some occasions where it might not be important or
even a good idea to fit in? Why or why not?
Suggested Answer:
Discussion Questions for Objective 14.8:
1. Choose a company that does business in the United States and in several countries that
have different values and ethics when it comes to things like nepotism, bribery, and
negotiating the price of goods. What dilemmas might employees face? How would you
deal with these ethical dilemmas?
Suggested Answer:
2. Which emotional intelligence competencies and personal strengths do you have that
would help you work in a country other than your own? In addition to your emotional
intelligence competencies, consider personal resiliency, and your experience with other
cultures.
Suggested Answer:
Student responses will vary.
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END OF CHAPTER ACTIVITIES: EXPERIENCING LEADERSHIP
Leading in a Global World: On Global Economic Assignment
Global economic issues, such as the global recession that began in 2007, are impacted in
part by international organizations like the WTO, G8, G-20, and the World Economic
Forum. These bodies typically meet once a year to discuss economic issues in the global
arena and what member nations can do to resolve those issues jointly.
1. Imagine you are a journalist for the international newspaper the Global Economic
Observer. You have been assigned to cover the most recent G-20 meeting. Research this
2. Once you have gathered data, write a brief article for your paper about the discussions
and outcomes of the G-20 meetings. Be sure to consider which of the five above points
received the most focus and which received the least. What working groups were
established and who is responsible for them? What was the primary theme of the summit?
How was this summit different from the previous one in its scope and focus?
Suggested Answer:
Leading with Emotional Intelligence: A Crib Sheet For Cultural Sensitivity
Working in and among other cultures can be an awesome learning experience. Another
culture’s ethics, values, beliefs, and social norms can be both enlightening and
challenging, depending on the circumstances. In these situations, our emotional
intelligence competencies are put to the test. Imagine you are going to start a business in
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international classmates, business owners from that country, or members of the
university’s administration or faculty. In the interview, you will want to keep the
following questions in mind:
• What are some of the most important values and social norms of the culture?
• Is nepotism or bribery an everyday fact of life? If so, find out how people in the
country tend to view these practices, and how they are dealt with in international
business settings.
• How easy or hard was it for the interviewee to adjust to U.S. culture and business
practices?
Suggested Answer:
Leading with Critical Thinking Skills: Emerging or Submerging Markets
The BRIC countries are large emerging markets that are poised for major growth;
however, in our networked global economy, global recession affects every country in the
network. For example, China may continue to produce massive quantities of goods, but
their customer countries may reduce the amount of goods they purchase because of the
global recession.
1. Review the table of statistics in Exhibit 14.8 and research any changes to the stats of
the five countries. You can use the CIA World Factbook, the IMF, or the World Bank as
online resources for gathering your numbers. Be sure to check statistics such as:
2. Next, identify some new opportunities and risks currently faced by BRIC countries.
Have opportunities and risks changed dramatically? Have new opportunities and new
risks arisen? If yes, what are they?
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3. South Africa and Indonesia are also important emerging markets. Using the CIA
World Factbook, the IMF, or the World Bank as online resources, gather data related to
the public and external debts, value of imports and exports, total GDP, and GDP per
capita of these nations. How do they compare to the BRIC countries in terms of these
statistics and in terms of the risks and opportunities they present?
Suggested Answer:
Ethical Leadership: Who You Know, Not What You Know
Globalization places a burden on all of us to learn and to understand how our values and
ethics will be challenged when working abroad or with people from other cultures. In
many countries, bribery is a very common business practice. When bidding for
1. On your own, research just how extensive business corruption is worldwide.
Organizations like Transparency International and the Organization for Economic Co-
Operation and Development (OECD) will prove useful resources in your research. What
are these groups doing to curb corruption? Which countries are the worst offenders and
which are the most ethical?
2. In a group, identify three major corruption cases in the last five years. Who was
involved? What are the details of the cases? Has a resolution been reached? What were
the repercussions of these cases?
Suggested Answer:
Student responses will vary. According to the 2012 Corruption Perception Index of
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ADDITIONAL SUPPORTING MATERIALS
VIDEOS
• Hector Ruiz on connecting the world
“Hector Ruiz, the executive chair of AMD, wants to give Internet access to everyone. In
this talk, he shares his extraordinary life story and describes AMD’s 50×15 initiative that
• Anil Gupta: India’s hidden hotbeds of invention
“Anil Gupta is on the hunt for the developing world’s unsung inventors — indigenous
entrepreneurs whose ingenuity, hidden by poverty, could change many people’s lives. He
shows how the Honey Bee Network helps them build the connections they need — and
• Hans Rosling: Asia’s rise — how and when
“Hans Rosling was a young guest student in India when he first realized that Asia had all
the capacities to reclaim its place as the world’s dominant economic force. At TEDIndia,
he graphs global economic growth since 1858 and predicts the exact date that India and
INDIVIDUAL EXERCISES
1. Ask your international students, if they are willing, to share the cultural differences
they have experienced between their culture and US culture. In addition, solicit
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2. Solicit from your students who have traveled abroad what their experience was like.
Ask them if they had any cultural “faux pas” experiences, such as ordering a
3. On a piece of paper, ask students to list, anonymously, five stereotypes they can think
of about the French. Next have them do the same for Italians, Irish, Germans,
Chinese, and Japanese. Have them turn the papers in. Read the lists and have
someone board the most commonly stated stereotypes. An example for the French
4. Visualization: Ask students to close their eyes. Ask them to think of environmental
pollution. After 3 minutes, ask them to open their eyes. Ask them what image they
were thinking of? Ask them to share some of their images. Usually they share images
that are of a global or, at least, international nature. Next, ask them what they think is
the source or sources of the images they evoked? Ask the class what part their culture
plays in defining how they see the world they live in?
TEAM EXERCISE
Going Global
Break your class into teams of 5. Assign each team to a geographical region: Europe,
Africa, Asia Pacific, North America, and South/Central America. Have each team
research a list of the opportunities and risks facing each region in the current economic
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Additional Research
Wal-Mart and Bharti Enterprises, Inc.
If you’re a business owner who is seeking a way to increase sales and enter new business
arenas, a joint venture is a great option to explore. An entrepreneur with savvy business
acumen can research, find, and negotiate a JV deal with another business that can help
achieve new business goals. And a few lessons from the world’s largest retailer, Wal–