Академический Документы
Профессиональный Документы
Культура Документы
GLOBALIZING BUSINESS
Learning Objectives
After studying this chapter, you should be able to:
1. Explain the concepts of international business and global business.
2. Give three reasons why it is important to study global business.
3. Articulate the fundamental question that the study of global business seeks to
answer and two perspectives from which to answer it.
4. Identify three ways of understanding what globalization is.
5. State the size of the global economy and its broad trends.
Chapter Summary
This chapter begins by discussing what global business is and gives an overview of the
global economy, focusing on the Triad as well as emerging countries. It then presents a
unified framework for the study of global business centered on a single question: What
determines the success and failure of firms around the globe? It then introduces the
institution- and resource-based views that shape the answers to this question throughout
the book. Students will also learn three different views on globalization and why the
globalization debate matters to them.
Opening Case Discussion Guide
This opening case about Avon Products, Inc., a leading global beauty products company,
provides a means of helping students to see how an older form of doing business (direct
selling) can adapt to changing technologies and economic conditions in a global
economy.
_______________________________________________________________________
LESSON PLAN FOR LECTURE
_______________________________________________________________________
Outline and Suggested PowerPoint Slides:
Learning Outcome PowerPoint Slides
Learning Objectives Overview 2: Learning Objectives
LO1 3: International Business and Global
Explain the concepts of international Business
business and global business. 4: The Contributions of Emerging
Economies
5: Emerging Economies in the Global
Market
LO2 6: Why Study Global Business? –
Give three reasons why it is important to Employability
study global business. 7: Why Study Global Business? – Career
Advancement
8: Why Study Global Business?
Globalization
LO3 9: The Fundamental Question
Articulate the fundamental question that 10: InstitutionBased View
the study of global business seeks to 11: ResourceBased View
answer and two perspectives from which to
answer it.
LO4 12: Three Views on Globalization
Identify three ways of understanding what 13: The Pendulum View
globalization is. 14: Lessons from a Recession
15: Semiglobalization
LO5 16: The Global Economy
State the size of the global economy and its 17: The Global Economy
broad trends. 18: The Globalization Debate and You
_______________________________________________________________________
CHAPTER OUTLINE
_______________________________________________________________________
LO1: Explain the concepts of international business and global business.
1. Key Concepts
“International Business” is defined as (1) a business (firm) that engages in
international (crossborder) economic activities or (2) the action of doing business
abroad. Typically, studies in IB focus on entry into foreign markets. “Global
business,” on the other hand, is defined as business around the globe, and entails a
study of both international and domestic activities. In “Global Business,” there is
a deliberate blurring of boundaries between international and domestic business
that reflects the increasingly globalized nature of national markets. Global
business is further distinguished from IB by its treatment of emerging economies.
While IB focuses primarily on competition within developed economies, global
business looks at business activities within emerging markets, a rapidly growing
segment of the world economy.
2. Key Terms
Base of the pyramid is the vast majority of humanity, about five billion people,
who make less than $2,000 a year.
Emerging economies (or emerging markets) are developing countries.
Foreign direct investment (FDI) is investment in, controlling, and managing
valueadded activities in other countries.
Global business is business around the globe.
Gross domestic product (GDP) is the sum of value added by resident firms,
households, and governments operating in an economy.
Group of 20 (G20) is the group of 19 major countries plus the European Union
(EU) whose leaders meet on a regular basis to solve global economic problems.
International business (IB) is defined as (1) a business (or firm) that engages in
international (crossborder) economic activities and/or (2) the action of doing
business abroad.
Multinational enterprise (MNE) is defined as a firm that engages in foreign
direct investment and operates in multiple countries.
Purchasing power parity (PPP) is a conversion that determines the equivalent
amount of goods and services that different currencies purchase. This conversion
is usually used to capture the differences in cost of living in different countries.
Triad refers to three regions of developed economies (North America, Western
Europe, and Japan).
LO2: Give three reasons why it is important to study global business.
1. Key Concepts
There are three key reasons for studying global business. First, mastering global
business knowledge helps advance your employability and career in an
increasingly competitive global economy. Second, many students may, at some
point in their careers, find opportunities for an expatriate position, which will
require a skill set that can be developed in this course. Finally, even students who
do not have aspirations for international business are likely to find themselves
working with overseas partners or suppliers, or again foreign competitors.
2. Key Terms
Expatriate Manager (expat) is a manager who works outside his or her native
country.
International premium refers to a significant pay raise commanded by
expatriates when working overseas.
LO3: Articulate the fundamental question that the study of global business seeks to
answer and two perspectives from which to answer it.
1. Key Concepts
Though the course will draw from a variety of fields, such as history, psychology,
finance and marketing, there is one question that is the foundation for everything
else: What determines the success and failure of firms around the globe?
To answer this question, the book employs two core perspectives, the institution
based view and the resourcebased view. By considering the fundamental
question through these two perspectives in every chapter, the book will develop a
unified framework that will provide a thematic consistency to each chapter.
2. Key Terms
Formal institutions are institutions such as laws, regulations, and rules.
Informal institutions are institutions such as norms, cultures, and ethics.
Institutional framework refers to the formal and informal institutions that
govern individual and firm behavior.
Institutionbased view is a leading perspective in global business that suggests
that firm performance is, at least in part, determined by the institutional
frameworks governing firm behavior around the world.
Institutions are the formal and informal rules of the game.
Liability of foreignness is the inherent disadvantage that foreign firms
experience in host countries because of their nonnative status.
Resourcebased view is a leading perspective in global business that suggests
that firm performance is, at least in part, determined by its internal resources and
capabilities.
3. Discussion Exercise
Companies take a variety of actions in order to succeed. Consider the following
examples, and discuss whether they are informed by an institution or resource
based view.
- A number of large credit card companies, such as Bank of America, Chase
and ING have locations in Delaware to take advantage of the state’s lenient tax
and interest laws.
- Google’s “20 percent policy” permits engineers to spend one day per week
working on innovative projects that are not strictly a part of their job description.
- The toy manufacturer Melissa & Doug emphasizes the rigorous testing of
their products for toxic materials in their marketing materials.
LO4: Identify three ways of understanding what globalization is.
1. Key Concepts
Globalization is defined as the close integration of countries and peoples around
the world. The ways in which it is understood as a historical and cultural
phenomenon, however, are quite varied. While some view it as a recent (post
WWII) development, others consider it to be a longrun historical evolution. This
book suggests that globalization should not be viewed as neither unidirectional
nor recent, but as a pendulum.
2. Key Terms
BRIC is a newly coined acronym for the emerging economies of Brazil, Russia,
India, and China.
Globalization is the close integration of countries and peoples around the world.
Pendulum view suggests that globalization is the “closer integration of the
countries and peoples of the world which has been brought about by the enormous
reduction of the costs of transportation and communication, and the breaking
down of artificial barriers to the flows of goods, services, capital, knowledge, and
(to a lesser extent) people across borders.” According to this view, globalization is
unable to keep going in one direction.
Risk management is the identification and assessment of risks and the
preparation to minimize the impact of highrisk, unfortunate events.
Scenario planning refers to a technique to prepare and plan for multiple
scenarios (either high or low risk).
Semiglobalization is a perspective that suggests that barriers to market
integration at borders are high, but not high enough to completely insulate
countries from each other.
LO5: State the size of the global economy and its broad trends
1. Key Concepts
The global economy at the beginning of the 21st century is an approximately $60
trillion economy. Total sales for the largest 500 MNEs exceed $20 trillion. What
is more, the number of powerful MNEs from emerging economies is continually
rising. This trend suggests that future business leaders should not ignore the
global influence and implications of what they do. However, all of this rapid
globalization also leads to strong concerns, as evidenced by frequent protests and
even terrorist attacks. To a large degree, the general public has a far less favorable
view of globalization than do business students or current business leaders.
2. Key Terms
Nongovernment organizations (NGOs) are organizations that are not affiliated
with governments. Such organizations include environmentalist groups, human
rights activists, and consumer groups.
3. Discussion Exercise
This discussion exercise can be linked with LO4, which suggested that there are a
variety of views on globalization.
On September 23, 2009, a group of protesters from the NGO Greenpeace hung an
enormous banner off Pittsburgh’s West End Bridge that read “Danger: Climate
Destruction Ahead. Reduce CO2 Emissions Now.” This act was part of wide
scale protests that took place in the city in anticipation of the G20 summit.
According to Greenpeace, the aim of the protests was “to warn of the political
maneuverings and delays that put an international climate treaty in jeopardy.” The
organization also calls on G20 leaders to “put money on the table to support
developing countries” and “to kickstart economic recovery through clean energy
investment.” How would you, as proponent of global business, respond to these
protests? What is the role of global business in the development of emerging
economies and in resolving environmental issues?
(source: “The World is Ready for a Strong Climate Treaty”
http://www.greenpeace.org/usa/news/climateweek)
Closing Case
Closing Case Discussion Guide
Most business people would agree that being an innovator can be very valuable
but this case suggests that it may be useful to “innovate in the way one
innovates,” like General Electric has done with its “reverse innovation” strategy.
Closing Case Discussion Questions
1. What are the similarities and differences between GE’s traditional innovation
and reverse innovation?
In both cases GE seeks to grow through new development but the difference is
that traditional innovation begins in developed countries and applications are
developed for emerging nations whereas reverse innovation begins in emerging
nations and expands to developed nations. The benefit of the reverse approach is
that it is more likely to involve a focus on low cost and simplicity in order to be
profitable in the emerging nation, but such attributes can also pay off in
developed nations.
2. Why is GE so interested in reverse innovation?
GE recognizes that it is more likely to be a source of competitive threats and if
it does not use that approach it may be ultimately destroyed by those who do.
3. What are the main concerns that prevent Western MNEs from aggressively
investing in emerging economies? What are the costs if they choose not to focus
on emerging economies?
Students may have varying opinions regarding this question. Many may point out
that the developed economies may appear to be the most profitable in the short
run thus firms might be inclined to overlook the long run potential benefits and
the corresponding cost of being overtaken by emerging economy MNE’s.
4. Why is a leading US MNE such as GE afraid of emerging multinationals from
emerging economies?
Innovation can come from anywhere in the world and innovators who focus on
low cost and simplicity may eventually come to dominate the market. One
historic example in the U.S. is Henry Ford. Ford did not invent the automobile
but he did simplify the production process and cut costs. Thus he became a
billionaire not by raising price but by lowering price.
Video Case
Watch “Integrating Global Business at a Local Level” by E. Neville Isdell of the
CocaCola Company.
1. What is meant by the title of the video “Integrating Global Business at a Local
Level”? What is being “integrated”?
A firm must be integrated into the local environment both in perception and
reality. It must understand the culture and institutions of the local environment in
order to fit in, otherwise it will be viewed as an outsider.
2. In referring to past practices of global firms, Isdell referred to simply
“parachuting in.” What did he mean by that and how does it relate to his concern
about economic nationalism?
Often companies have simply moved into a country to achieve their specific
objectives without regard to the impact of the firm on the local country. He
advocates that firms consider how they can provide a positive benefit to local
needs and not simply to the firm’s needs.
3. How must global firms in the future be different regarding identifying with
society as a whole?
They need to identify the needs of the society that can be addressed with the
expertise of the firm in a mutually beneficial manner.
4. How does a franchise system with its use of local entrepreneurs contribute to the
integration desired by Isdell?
Franchisees are already part of the local environment and are affected by their
own actions. Local citizens are more likely to view the company in terms of their
neighbors who are franchisees instead of as an organization headquartered in a
different country.
5. Isdell warned against simply extracting and not putting something back. What
challenge did CocaCola have in that regard? Think of an example of another firm
or industry that may heed Isdell’s warning and explain the reason for your
selection.
Water is a vital part of the firm’s products and it is also vital to each nation in
which it operates. Its challenge was to not be viewed as a threat to a country’s
water supply but rather as a positive force in its proper management and in its
availability to all citizens. Most students’ examples will probably involve firms or
industries that have harmed either the people and/or the environment.
_______________________________________________________________________
ADDITIONAL DISCUSSION MATERIAL
*Review Questions
*Critical Discussion Questions
Review Questions
1. What is the difference between international business and global business, as
defined in this chapter?
International business (IB) is defined as (1) a business firm that engages in
international (cross border) economic activities and/or (2) the action of doing
business abroad.
Global business is defined in this book as business around the globe. The
activities include both (1) international (crossborder) activities covered by
traditional IB books and (2) domestic (nonIB) business activities.
2. Why are you studying global business? How does it affect your future?
The important thing is not so much the answer as the extent to which the student
demonstrates thought in providing the answer.
3. What is the most fundamental question driving global business? Why is it
important?
Our most fundamental question is: what determines the success and failure of
firms around the globe? This unified framework for approaching global business
introduces new material but always relates it back to the fundamental question.
4. How would you describe an institutionbased view of global business?
Institutions are the “rules of the game.” Doing business around the globe
requires intimate knowledge about the formal and informal rules governing
competition in various countries.
5. How would you describe a resourcebased view of global business?
The resourcebased view focuses on a firm’s internal resources and capabilities.
6. After comparing the three views of globalization, which seems the most logical
and sensible to you?
The three views are as follows:
- A new force sweeping through the world in recent times.
- A longrun historical evolution since the dawn of human history.
- A pendulum that swings from one extreme to another from time to time.
Student answers may vary. The important thing is not so much the answer as the
extent to which the student demonstrates thought in providing the answer.
7. Referring to Exhibit 1.1, how important are emerging economies in the overall
global economy?
Emerging economies already command 45% of global GDP. However, some of
the improving economies of some countries are not keeping pace with their
expanding populations.
8. Referring to Exhibit 1.2, what observations can you make about the three tiers of
people in the global economic pyramid?
The base of the pyramid is part of the view of the global economy as a pyramid.
The vast majority of humanity, about five billion people, live at the base of this
pyramid making less than $2,000 a year.
9. If you were to work as an expatriate manager, where would you like to go and
what would you like to do?
An expatriate manager (expat) is a manager who works abroad. The important
thing is not so much the answer as the extent to which the student demonstrates
thought in providing the answer.
-
10. What is semiglobalization, and what factors contribute to it?
Semiglobalization avoids total isolation and total globalization and calls for
more than oneway for doing business around the globe. Trade, FDI, and
barriers to market integration are all factors.
11. What does Exhibit 1.6 tell you about changes in the global economy over the last
six years?
While MNEs from the Triad dominate the list, Japan and the United States have
experienced reductions in numbers recently, while MNEs from emerging
economies, particularly China have seen notable growth in numbers of late.
12. Why do some people protest against globalization? Do they make any points that
all people, whether for or against globalization, should consider?
They do raise a valid point on the necessity of firms, especially MNEs, to have a
broader concern for various stakeholders affected by their actions around the
world. At present, this view is increasingly moving from the periphery to the
mainstream.
13. What can people who are in favor of global business learn from NGOs such as
environmentalists, human rights activists, and consumer groups?
Instead of viewing NGOs as opponents, many firms should view them as partners.
Ignoring them will be a grave failure in due diligence when doing business
around the globe.
Critical Discussion Questions
1. A classmate says: “Global business is relevant for top executives such as CEOs in
large companies. I am just a lowly student who will struggle to gain an entrylevel
job, probably in a small domestic company. Why should I care about it?” How do
you convince her that she should care about it?
Refer back to what was covered in the discussion and assignments related to the
Opening Case Discussion Guide.
2. ON ETHICS: What are some of the darker sides (in other words, costs)
associated with globalization? How can business leaders make sure that the
benefits of their various actions (such as outsourcing) outweigh their drawbacks
(such as job losses in developed economies)?
There should be a variety of answers, including some that are not practical. This
is a question in which the answer is not as important as the thought process and
the ability to clearly articulate.
3. ON ETHICS: Some argue that aggressively investing in emerging economies is
not only economically beneficial but also highly ethical because it may potentially
lift many people out of poverty. However, others caution that in the absence of
reasonable hopes of decent profits, rushing to emerging economies is reckless.
How would you participate in this debate?
The response to this question may depend on how the student perceives the
purpose and capabilities of business. Is lifting people out of poverty the purpose
of firms and to what extent do firms have the capability of doing so? Challenge
people to explain their answers regardless of what they might be and to use
critical thinking.