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Copyright, ii
Dear Friends and Colleagues, xv
Preface, xvii
About the Authors, xxvii
Part 1. Global Business Environment, 2
Chapter 1. Globalization, 2
International Business Involves Us All, 4
Technology Makes It Possible, 4
Global Talent Makes It Happen, 5
Globalization, 6
Globalization of Markets, 6
Globalization of Production, 7
Forces Driving Globalization, 8
Global Challenges: Investing in Security Pays Dividends, 9
Falling Barriers to Trade and Investment, 9
Technological Innovation, 11
Measuring Globalization, 14
Untangling the Globalization Debate, 15
Today’s Globalization in Context, 15
Introduction to the Debate, 16
Globalization’s Impact on Jobs and Wages, 17
Globalization’s Impact on Labor, the Environment, and Markets, 19
Global Manager’s Briefcase: The Keys to Global Success, 20
Globalization and Income Inequality, 20
Globalization and National Sovereignty, 22
Globalization’s Influence on Cultures, 23
Culture Matters: The Global Consumer, 24
Key Players in International Business, 24
Multinational Corporations, 24
Entrepreneurs and Small Businesses, 25
Entrepreneur’s Toolkit: Debunking the Myths of Small Business Exporting, 26
Why International Business Is Special, 26
The Global Business Environment, 26
The Road Ahead for International Business, 28
Bottom Line for Business, 29
Chapter Summary, 30
Talk It Over, 31
Teaming Up, 31
Key Terms, 31
Take It to the Web, 32
Ethical Challenges, 32
Practicing International Management Case: MTV Goes Global with a Local Beat, 33
Appendix: World Atlas, 35
Part 2. National Business Environments, 44
Chapter 2. Cross-Cultural Business, 44
What Is Culture?, 46
Culture Matters: Creating a Global Mind-set, 47
National Culture and Subcultures, 47
Components of Culture, 49
Aesthetics, 49
Values and Attitudes, 50
Entrepreneur’s Toolkit: Localize Your Web Site, 50
Manners and Customs, 54
Global Manager’s Briefcase: A Globetrotter’s Guide to Manners, 55
Social Structure, 56
Religion, 57
Personal Communication, 63
Global Challenges: Speaking in Fewer Tongues, 64
Education, 67
Physical and Material Environments, 68
Classifying Cultures, 69
Kluckhohn–Strodtbeck Framework, 70
Hofstede Framework, 71
Bottom Line for Business, 73
Chapter Summary, 74
Talk It Over, 75
Teaming Up, 75
Key Terms, 76
Take It to the Web, 76
Ethical Challenges, 76
Practicing International Management Case: A Tale of Two Cultures, 77
Chapter 3. Politics, Law, and Business Ethics, 78
Political Systems, 80
Politics and Culture, 80
Political Participation, 80
Political Ideologies, 81
Global Challenges: From Civil War to Civil Society, 83
Political Systems in Times of Change, 86
Political Risk, 86
Types of Political Risk, 86
Global Manager’s Briefcase: Your Global Security Checklist, 90
Managing Political Risk, 91
Legal Systems, 93
Culture Matters: Playing by the Rules, 94
Common Law, 94
Civil Law, 95
Theocratic Law, 95
Standardization, 95
Intellectual Property, 96
Product Safety and Liability, 98
Taxation, 98
Antitrust Regulations, 98
Entrepreneur’s Toolkit: The Long Arm of the Law, 99
Ethics and Social Responsibility, 100
Philosophies of Ethics and Social Responsibility, 100
Corporate Social Responsibility Issues, 101
Business and International Relations, 106
The United Nations, 106
Bottom Line for Business, 107
Chapter Summary, 108
Talk It Over, 110
Teaming Up, 110
Key Terms, 110
Take It to the Web, 111
Ethical Challenges, 111
Practicing International Management Case: Pirates of Globalization, 112
Chapter 4. Economics and Emerging Markets, 114
Economic Systems, 116
Centrally Planned Economy, 116
Emerging Market Focus: China, 118
Global Manager’s Briefcase: Guidelines for Good Guanxi, 119
Mixed Economy, 120
Market Economy, 121
Development of Nations, 126
Culture Matters: Foundations of Development, 127
National Production, 127
Purchasing Power Parity, 131
Human Development, 131
Classifying Countries, 132
Global Challenges: Public Health Goes Global, 133
Economic Transition, 134
Obstacles to Transition, 134
Emerging Market Focus: Russia, 135
Entrepreneur’s Toolkit: Russian Rules of the Game, 136
Bottom Line for Business, 137
Chapter Summary, 138
Talk It Over, 139
Teaming Up, 139
Key Terms, 140
Take It to the Web, 140
Ethical Challenges, 140
Practicing International Management Case: Cuba Comes Off Its Sugar High, 141
Part 3. International Trade and Investment, 142
Chapter 5. International Trade, 142
Overview of International Trade, 144
Benefits of International Trade, 144
Volume of International Trade, 144
International Trade Patterns, 145
Trade Dependence and Independence, 148
Global Manager’s Briefcase: Building Good Relations in the Pacific Rim, 149
Theories of International Trade, 150
Mercantilism, 150
Absolute Advantage, 152
Comparative Advantage, 154
Factor Proportions Theory, 156
International Product Life Cycle, 157
Entrepreneur’s Toolkit: Five Fulfillment Mistakes, 159
New Trade Theory, 160
National Competitive Advantage, 160
Bottom Line for Business, 163
Chapter Summary, 164
Talk It Over, 165
Teaming Up, 165
Key Terms, 165
Take It to the Web, 166
Ethical Challenges, 166
Practicing International Management Case: First in Asia and the World, 167
Chapter 6. Business–Government Trade Relations, 168
Why Do Governments Intervene in Trade?, 170
Political Motives, 170
Economic Motives, 172
Cultural Motives, 174
Methods of Promoting Trade, 175
Subsidies, 175
Export Financing, 175
Entrepreneur’s Toolkit: Experts in Export Financing, 176
Foreign Trade Zones, 177
Special Government Agencies, 177
Global Manager’s Briefcase: Surfing the Regulatory Seas, 178
Methods of Restricting Trade, 178
Tariffs, 178
Quotas, 179
Embargoes, 181
Local Content Requirements, 181
Administrative Delays, 182
Currency Controls, 182
Global Trading System, 182
General Agreement on Tariffs and Trade (GATT), 183
World Trade Organization (WTO), 184
Bottom Line for Business, 187
Chapter Summary, 188
Talk It Over, 189
Teaming Up, 189
Key Terms, 189
Take It to the Web, 189
Ethical Challenges, 190
Practicing International Management Case: Down with Dumping, 191
Chapter 7. Foreign Direct Investment, 192
Patterns of Foreign Direct Investment, 194
Ups and Downs of Foreign Direct Investment, 194
Worldwide Flows of FDI, 196
Entrepreneur’s Toolkit: The Cowboy of Manchuria, 196
Explanations for Foreign Direct Investment, 197
International Product Life Cycle, 197
Market Imperfections (Internalization), 197
Eclectic Theory, 198
Market Power, 199
Management Issues in the FDI Decision, 199
Control, 199
Purchase-or-Build Decision, 201
Production Costs, 201
Customer Knowledge, 202
Following Clients, 202
Following Rivals, 202
Global Manager’s Briefcase: Surprises of Investing Abroad, 203
Government Intervention in Foreign Direct Investment, 204
Balance of Payments, 204
Reasons for Intervention by the Host Country, 206
Reasons for Intervention by the Home Country, 207
Government Policy Instruments and FDI, 208
Host Countries: Promotion, 208
Host Countries: Restriction, 209
Home Countries: Promotion, 209
Home Countries: Restriction, 210
Bottom Line for Business, 210
Chapter Summary, 211
Talk It Over, 212
Teaming Up, 212
Key Terms, 213
Take It to the Web, 213
Ethical Challenges, 213
Practicing International Management Case: World Class in Dixieland, 214
Chapter 8. Regional Economic Integration, 216
What Is Regional Economic Integration?, 218
Levels of Regional Integration, 218
Effects of Regional Economic Integration, 221
Benefits of Regional Integration, 221
Drawbacks of Regional Integration, 222
Integration in Europe, 223
European Union, 223
Entrepreneur’s Toolkit: Czech List, 228
European Free Trade Association (EFTA), 230
Integration in the Americas, 231
North American Free Trade Agreement (NAFTA), 231
Central American Free Trade Agreement (CAFTA-DR), 232
Andean Community (CAN), 233
Latin American Integration Association (ALADI), 234
Southern Common Market (MERCOSUR), 234
Central America and the Caribbean, 234
Free Trade Area of the Americas (FTAA), 235
Integration in Asia, 235
Association of Southeast Asian Nations (ASEAN), 235
Asia Pacific Economic Cooperation (APEC), 236
Global Manager’s Briefcase: The Ins and Outs of ASEAN, 236
Closer Economic Relations Agreement (CER), 237
Integration in the Middle East and Africa, 237
Gulf Cooperation Council (GCC), 237
Economic Community of West African States (ECOWAS), 237
African Union (AU), 238
Bottom Line for Business, 239
Chapter Summary, 239
Talk It Over, 241
Teaming Up, 241
Key Terms, 241
Take It to the Web, 241
Ethical Challenges, 242
Practicing International Management Case: Global Trade Deficit in Food Safety, 243
Part 4. The International Financial System, 244
Chapter 9. International Financial Markets, 244
International Capital Market, 246
Purposes of National Capital Markets, 246
Purposes of the International Capital Market, 247
Entrepreneur’s Toolkit: Microfinance Makes a Big Impression, 248
Forces Expanding the International Capital Market, 249
World Financial Centers, 249
Main Components of the International Capital Market, 250
International Bond Market, 250
International Equity Market, 251
Eurocurrency Market, 252
Foreign Exchange Market, 253
Functions of the Foreign Exchange Market, 253
How the Foreign Exchange Market Works, 255
Quoting Currencies, 255
Spot Rates, 259
Forward Rates, 259
Swaps, Options, and Futures, 260
Foreign Exchange Market Today, 261
Trading Centers, 261
Important Currencies, 262
Institutions of the Foreign Exchange Market, 263
Global Manager’s Briefcase: Managing Foreign Exchange, 264
Currency Convertibility, 264
Goals of Currency Restriction, 264
Policies for Restricting Currencies, 265
Bottom Line for Business, 266
Chapter Summary, 266
Talk It Over, 268
Teaming Up, 268
Key Terms, 268
Take It to the Web, 269
Ethical Challenges, 269
Practicing International Management Case: Argentina Into the Abyss, Then Out, and Now Back In?, 270
Chapter 10. International Monetary System, 272
How Exchange Rates Influence Business Activities, 274
Desire for Stability and Predictability, 275
What Factors Determine Exchange Rates?, 276
Law of One Price, 276
Purchasing Power Parity, 278
Forecasting Exchange Rates, 282
Efficient Market View, 282
Inefficient Market View, 283
Forecasting Techniques, 283
Difficulties of Forecasting, 283
Global Manager’s Briefcase: Adjusting to Currency Swings, 284
Evolution of the International Monetary System, 284
Early Years: The Gold Standard, 284
Bretton Woods Agreement, 286
A Managed Float System Emerges, 288
Today’s Exchange-Rate Arrangements, 289
European Monetary System, 289
Recent Financial Crises, 290
Future of the International Monetary System, 293
Bottom Line for Business, 294
Chapter Summary, 294
Talk It Over, 296
Teaming Up, 296
Key Terms, 296
Take It to the Web, 297
Ethical Challenges, 297
Practicing International Management Case: Banking On Forgiveness, 298
Part 5. International Business Management, 300
Chapter 11. International Strategy and Organization, 300
International Strategy, 302
Strategy Formulation, 302
Identify Company Mission and Goals, 302
Identify Core Competency and Value-Creating Activities, 304
Entrepreneur’s Toolkit: Questions to Ask Before Going Global, 306
Formulate Strategies, 307
Global Manager’s Briefcase: Strategies for Emerging Market Companies, 311
International Organizational Structure, 312
Centralization Versus Decentralization, 313
Coordination and Flexibility, 314
Types of Organizational Structure, 315
Work Teams, 318
A Final Word, 319
Chapter Summary, 320
Talk It Over, 321
Teaming Up, 321
Key Terms, 321
Take It to the Web, 322
Ethical Challenges, 322
Practicing International Management Case: IKEA’s Global Strategy, 323
Chapter 12. Analyzing International Opportunities, 324
Screening Potential Markets and Sites, 326
Step 1: Identity Basic Appeal, 326
Step 2: Assess the National Business Environment, 328
Global Manager’s Briefcase: Conducting Global e-Business, 332
Step 3: Measure Market or Site Potential, 333
Step 4: Select the Market or Site, 335
Conducting International Research, 338
Difficulties of Conducting International Research, 339
Sources of Secondary International Data, 340
Methods of Conducting Primary International Research, 343
Entrepreneur’s Toolkit: Is the World Your Oyster?, 344
A Final Word, 346
Chapter Summary, 346
Talk It Over, 347
Teaming Up, 347
Key Terms, 347
Take It to the Web, 348
Ethical Challenges, 348
Practicing International Management Case: Vietnam’s Emerging Market Potential, 349
Chapter 13. Selecting and Managing Entry Modes, 350
Exporting, Importing, and Countertrade, 352
Why Companies Export, 352
Developing an Export Strategy: A Four-Step Model, 353
Degree of Export Involvement, 354
Avoiding Export and Import Blunders, 356
Countertrade, 357
Export/Import Financing, 357
Entrepreneur’s Toolkit: Collecting International Debts, 361
Contractual Entry Modes, 361
Licensing, 361
Franchising, 363
Management Contracts, 365
Turnkey Projects, 366
Investment Entry Modes, 367
Wholly Owned Subsidiaries, 367
Joint Ventures, 368
Strategic Alliances, 370
Selecting Partners for Cooperation, 371
Global Manager’s Briefcase: Negotiating Market Entry, 372
Strategic Factors in Selecting an Entry Mode, 373
Cultural Environment, 373
Political and Legal Environments, 373
Market Size, 373
Production and Shipping Costs, 373
International Experience, 374
A Final Word, 375
Chapter Summary, 375
Talk It Over, 376
Teaming Up, 376
Key Terms, 377
Take It to the Web, 377
Ethical Challenges, 378
Practicing International Management Case: Telecom Ventures Unite the World, 379
Chapter 14. Developing and Marketing Products, 380
Globalization and Marketing, 382
Standardization Versus Adaptation, 382
Developing Product Strategies, 383
Laws and Regulations, 383
Cultural Differences, 384
Brand and Product Names, 384
National Image, 386
Counterfeit Goods and Black Markets, 386
Shortened Product Life Cycles, 387
Creating Promotional Strategies, 388
Push and Pull Strategies, 388
Global Manager’s Briefcase: Managing an International Sales Force, 389
International Advertising, 389
Blending Product and Promotional Strategies, 391
Designing Distribution Strategies, 394
Designing Distribution Channels, 394
Degree of Exposure, 394
Influence of Product Characteristics, 395
Special Distribution Problems, 395
Developing Pricing Strategies, 396
Worldwide Pricing, 396
Dual Pricing, 397
Factors That Affect Pricing Decisions, 397
A Final Word, 399
Chapter Summary, 399
Talk It Over, 400
Teaming Up, 400
Key Terms, 400
Take It to the Web, 401
Ethical Challenges, 401
Practicing International Management Case: Psychology of Global Marketing, 402
Chapter 15. Managing International Operations, 404
Production Strategy, 406
Capacity Planning, 406
Facilities Location Planning, 406
Process Planning, 409
Facilities Layout Planning, 409
Acquiring Physical Resources, 410
Make-or-Buy Decision, 410
Raw Materials, 413
Fixed Assets, 413
Key Production Concerns, 414
Quality-Improvement Efforts, 414
Global Manager’s Briefcase: World Class Standards, 415
Shipping and Inventory Costs, 415
Reinvestment Versus Divestment, 416
Financing Business Operations, 416
Borrowing, 417
Issuing Equity, 418
Entrepreneur’s Toolkit: Financing Small Business from Abroad, 419
Internal Funding, 419
Capital Structure, 420
A Final Word, 421
Chapter Summary, 422
Talk It Over, 423
Teaming Up, 423
Key Terms, 423
Take It to the Web, 424
Ethical Challenges, 424
Practicing International Management Case: Toyota’s Strategy for Production Efficiency, 425
Chapter 16. Hiring and Managing Employees, 426
International Staffing Policy, 428
Ethnocentric Staffing, 428
Polycentric Staffing, 429
Geocentric Staffing, 430
Recruiting and Selecting Human Resources, 431
Human Resource Planning, 431
Entrepreneur’s Toolkit: Growing Global, 432
Recruiting Human Resources, 432
Selecting Human Resources, 433
Culture Shock, 433
Reverse Culture Shock, 433
Global Manager’s Briefcase: A Shocking Ordeal, 434
Training and Development, 435
Methods of Cultural Training, 435
Compiling a Cultural Profile, 437
Nonmanagerial Worker Training, 437
Employee Compensation, 437
Managerial Employees, 438
Nonmanagerial Workers, 438
Labor–Management Relations, 439
Importance of Labor Unions, 440
A Final Word, 440
Chapter Summary, 441
Talk It Over, 441
Teaming Up, 442
Key Terms, 442
Take It to the Web, 442
Ethical Challenges, 442
Practicing International Management Case: Expatriation or Discrimination?, 443
Notes, 445
Glossary, 451
Name/Company Index, 461
Subject Index, 463

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