Daniels Merged

International Business
Sixteenth Edition, Global Edition
Chapter 1
and Globalization
Copyright © 2018 Pearson Education Limited. All Rights Reserved.

Learning Objectives (1 of 2)
1-1 Relate globalization and international
business (IB) to each other and explain why
their study is important
1-2 Grasp the forces driving globalization and IB
1-3 Discuss the major criticisms of globalization

1-4 Assess the major reasons companies seek to
create value by engaging in IB
1-5 Define and illustrate the different operating

modes for companies to accomplish their
international objectives
1-6 Recognize why national differences in

companies’ external environments affect how
they may best improve their IB performance

Factors in IB Operations
Objective 1-1
Figure 1.1 Factors in IB Operations

Globalization and IB
Objective 1-1
• What is Globalization?
• Why Globalization?
• The connection between Globalization and IB.
• Why study IB?

The Forces Driving Globalization and IB
Objective 1-2
• Globalization
−Has been growing.
−Is less pervasive than generally thought.
−Has economic and noneconomic dimensions.
−Is stimulated by several factors.

Factors in increased Globalization
Objective 1-2
• Factors in increased Globalization
− Rise in and application of technology
− Liberalization of cross-border trade and resource
movements
− Development of services that support IB
− Growth of consumer pressures
− Increase in global competition
− Changes in political situations and government
policies
− Expansion of cross-national cooperation

Criticisms of Globalization and IB
Objective 1-3
• Sovereignty
• Environment
• Some people may lose
• Increase to personal stress

Why engage in IB?
Objective 1-4
• Sales expansion
• Resource acquisition
• Risk reduction

IB Operating Modes
Objective 1-5
• Merchandise Exports and Imports
• Service Exports and Imports
• Investments

Types of International Organizations
Objective 1-5
• MNE
• Multinational Enterprise
• Collaborative Arrangements

Factors Affecting Ability to Operate Abroad
Objective 1-6
• Physical factors
• Institutional factors
• Competitive factors

Chapter 2
Culture

Learning Objectives
2-1 Explain why culture, especially national culture,
is important in IB, but tricky to assess
2-2 Grasp the major causes of national cultural
formation and change
2-3 Discuss major behavioral factors influencing
countries’ business practices
2-4 Recognize the complexities of cross-cultural
communications
2-5 Analyze guidelines for cultural adjustment

Globalization and IB
Objective 2-1
• What is Culture?
• Bicultural and/or Multicultural
• Relevant Groups/Dissimilar Groups

Cultural Factors and the IB Environment
Objective 2-1
FIGURE 2.1 Cultural Factors Affecting IB Operations

Using Cultural Reference Points
Objective 2-1
• Cultural reference points

– Culture can be useful reference point
– However, culture reference points may not
always be accurate

Cultural Collision
Objective 2-1
• What is cultural collision?
• Deal-focus culture (DF)
• Relationship-focus culture (RF)

Cultural Awareness Research
Objective 2-1
• Shortcomings in cultural research
• Dangers in cultural awareness research
– Comparing countries by what people say
– Variations within countries
– Outdated research

Influences on Cultural Change
Objective 2-2
• Sources of Change
– Choice
– Imposition

Diffusers and Stabilizers of Culture: Language
Objective 2-2
• Language
• Insert Map 2.2

Diffusers and Stabilizers of Culture: Religion
Objective 2-2
• Religion
• Insert Map 2.3

Behavioral Practices Affecting Business:
Social Stratification
Objective 2-3
• Social stratification
– Group Memberships
– Examples

Work Motivation
Objective 2-3
• Work motivation
– Levels of materialism
– Trade off between productivity and leisure time
– Success and reward
– Masculinity-femininity index

Relationship Preferences
Objective 2-3
• Relationship preferences
– Power Distance
– Individualism vs. Collectivism

Risk Taking Behaviors
Objective 2-3
• Risk taking behaviors
– Uncertainty avoidance
– Trust
– Future orientation
– Fatalism

Behavioral Practices Affecting Business
Objective 2-3
• Information and Task processing

– Perception of cues
– Low and high context cultures
– Monochromic and polychromic
– Whole vs. the Parts
– Idealism vs. Pragmatic

Challenges Communicating Across Cultures
Objective 2-4
• Translation of written and spoken language
• Silent language
– Colors
– Distance
– Time
– Body language
– Prestige

Guidelines for Cultural Adjustment
Objective 2-5
• Degrees of adjustment
– Host society acceptance
– Degree of cultural differences
– Ability to adjust
– Company and Management orientations

Strategies for Instituting Change
Objective 2-5
• Approaches to successful changes:
– Value systems
– Resistance
– Participation
– Reward sharing
– Opinion leadership
– Bicultural
– Timing
– Learning abroad

Chapter 3
Governmental and
Legal Systems

Learning Objectives
3-1 Explain how politics and laws influence business
3-2 Appraise the principles and practices of the political
environment
3-3 Discuss the contemporary state of political freedom
3-4 Interpret political risk
3-5 Appraise the principles and practices of the legal
environment
3-6 Describe key legal issues facing international companies
3-7 Relate the ideas of politics, law, and the business
environment

Political and Legal Forces
Objective 3-1
Figure 3.1 Political and Legal Factors Influencing IB Operations

Political Risk Map
Objective 3-2
Map 3.1 Map of Political Risk, 2015
Source: Based on Marsh Political Risk Map 2015; and AON Political Risk, http://www.aon.com/2016politicalriskmap
Political Definitions
Objective 3-2
• Political System
• Political Freedom
• Individualism
• Collectivism

The Political Spectrum
Objective 3-2
Figure 3.2 The Political Spectrum

Types of Governments
Objective 3-2
• Democracy
• Totalitarian

Democracy vs. Totalitarian
Objective 3-2
Table 3.1 Prominent Types of Democracies
Table 3.2 Prominent Types of Totalitarianism

The State of Political Freedom
Objective 3-3
Map 3.2 Map of Freedom
Source: Freedom House, “Map of Freedom 2015,” at https://freedomhouse.org/report/freedom-world/freedom-world-2015.

Used by permission of Freedom House.

Change in the State of Political Freedom
Objective 3-3
• More Democracy world wide

– “Third Wave of Democratization”
• Reasons for this shift

Current Political Systems
Objective 3-3
Table 3.3 Types and Characteristics of Political Systems in the World

Change in the State of Political Freedom
Objective 3-3
• What is political risk?

• Why discuss political risk?

Types of Political Risk
Objective 3-4
Figure 3.4 Classes and Characteristics of Political Risk

Legal Systems and Components
Objective 3-5
• What is the legal System?

• Components of a legal System
– Constitutional Law
– Criminal Law
– Civil and Commercial Law

Types of Legal Systems
Objective 3-5
Map 3.4 The Wide World of Legal Systems
Source: University of Ottawa, “World Legal Systems,” retrieved February 15, 2016, from
http://www.juriglobe.ca/eng/index.php. Used by permission.

The Basis of Rule
Objective 3-5
• The Rule of Man

• The Rule of Law

Two Key Legal Concerns Facing IB
Objective 3-6
• Operational
• Strategic

Ranking of Doing Business in Various Countries
Objective 3-7
Table 3.5 Easy Here, Hard There: Doing Business In Various Countries
Source: Doing Business 2016. The World Bank. Retrieved May 15, 2016.

Chapter 4
Economic Systems
and Market Methods

Learning Objectives
4-1 Explain the value of economic analysis
4-2 Differentiate the types of economic environments
4-3 Explain the idea of economic freedom
4-4 Differentiate the types of economic systems
4-5 Interpret indicators of economic development,
performance, and potential
4-6 Profile elements of economic analysis

Economic Systems and IB
Objective 4-1
• Principles used to assess economic
environments
– System Complexity
– Market Dynamism
– Market Interdependence

Economic Factors Affecting Business
Objective 4-1
Figure 4.2 Economic Factors Affecting International Business Operations

Types of Economic Environments
Objective 4-2
• Types of economics
– Developed
– Developing
– Economies in transition
• Degrees of development

Forces Affecting Degrees of Development
Objective 4-1
Table 4.2 Moderators of Economic Development

Emerging Economies
Objective 4-2
Map 4.1 Emerging Economies of the World

Economic Freedom
Objective 4-3
• What is economic freedom?

• Economic Freedom Index

Chart on Economic Freedom and Standard of Living
Objective 4-3
Figure 4.4
Economic
Freedom and
the Standard
of Living
Source: Adapted from

Terry Miller and
Anthony Kim, “Why
Economic Freedom
Matters | 2015 Index of
Economic Freedom
Book.” 2016.
Accessed April 15.
http://www.heritage.org
/index/book/chapter-2.
Used by permission.
Note: GDP is adjusted
for PPP.

Economic Freedom Classifications
Objective 4-3
Table 4.4 Economic Freedom: Classification and Characteristics
Source: Adapted from “Methodology | 2015 Index of Economic Freedom Book.” Accessed December 8, 2015.
http://www.heritage.org/index/book/methodology.

Map of Economic Freedom
Objective 4-3
Map 4.2 The Presence and Prevalence of Economic Freedom
Source: Terry Miller and Kim Holmes, 2016 Index of Economic Freedom, (Washington, DC: The Heritage Foundation and
Dow Jones & Co., Inc., 2016).
Types of Economic Systems
Objective 4-4
• Why is the understanding of economic systems

important in IB?
• Market economics
• Command economies
• Mixed economies

Chart Explaining Economic Systems
Objective 4-4
Figure 4.5 Types of Economic Systems

Assessing Economic Development,
Performance, and Potential
Objective 4-5
• Ways to measure an economy
– Monetary
§ GNI (Gross National Income)
§ GDP (Gross Domestic Product)
§ GNP (Gross National Product)

Improving Economic Analytics
Objective 4-5
• Other economic analytics

– Rate of economic growth
– Population size
– Purchasing Power Parity
• Shadow economies

The Ten Largest Economies
Objective 4-5
Table 4.7 The 10 Largest Economies, GDP Adjusted for Purchasing Power Parity, 2014
Source: World Bank Development Indicators 2015.

Sustainability in Economies
Objective 4-5
• Green Economies
• Sustainability
– Net National Product (NNP)
– Genuine Progress Indicators (GPI)
– Human Development Index (HDI)

Stability in Economies
Objective 4-5
• Happynomics
– YBLI (Your Better Life Index)
– GNWI (Gross National Wellness Index)
– HPI (Happy Planet Index)

Key Components of Economic Analysis
Objective 4-6
Table 4.8 Key Components of Economic Analysis

Profile Elements of Economic Analysis
Objective 4-6
• Other elements of economic analysis for IB managers to
consider
– GCI (Global Competitiveness Index)
– GII (Global Innovation Index)
– WCI (World Competiveness Index)

Chapter 5
Trade and Factor
Mobility Theory

5-1 Understand why policymakers rely on international
trade
and factor mobility theories to help achieve economic
objectives
5-2 Illustrate the historical and current rationale for
interventionist and free trade theories
5-3 Describe theories that explain national trade patterns

5-4 Explain why a country’s export capabilities are dynamic

5-5 Summarize the reasons for and major effects of
international factor movements
5-6 Assess the relationship between foreign trade and
international factor mobility

Factor Mobility and Trade Theory Questions
Objective 5-1
• What is Factor Mobility?

• Trade theory and focus on IB

Interventionist Theories
Objective 5-2
• What is Mercantilism?
– Governmental policies
– Balance of Trade
• What is neomercantilism?

Free Trade Theories
Objective 5-2
• Why Trade at all?
• Absolute Advantage
• Natural Advantage
• Acquired Advantage
• Comparative Advantage
• Assumptions made with Comparative Advantage
and Absolute Advantage

Illustration of Absolute Advantage
Objective 5-2
Figure 5.2 Production Possibilities under Conditions of Absolute Advantage

Illustration of Comparative Advantage
Objective 5-2
Figure 5.3 Production Possibilities under Conditions of Comparative Advantage

Map of State and Relative Country Economies
Objective 5-2
Map 5.2 U.S. States’ Economies Compared to National Economies

Theories to Explain Trade Patterns
Objective 5-3
• How much does a country trade?

– Theory of country size
– Size of the economy
• What types of products should a country trade?
– Factor Proportions Theory
• With whom do countries trade?
– Country-Similarity theory

PLC Theory
Objective 5-4
• What is the Product Lifecycle Theory (PLC)?

– Introduction
– Growth
– Maturity
– Decline

Limitations of PLC Theory
Objective 5-4
• Exceptions to PLC Theory

Diamond of National Competitive Advantage Theory
Objective 5-4
Figure 5.4 The Diamond of National Competitive Advantage
Source: Based on Michael E. Porter, “The Competitive Advantage of Nations,” Harvard Business Review, 68:2 (March–April
1990).

The Theory and Effects of Factor Mobility
Objective 5-5
• What is the Factor Mobility Theory?

Why Production Factors Move
Objective 5-5
• Capital
• People
• Effects of factor movements
– Brain drain

The Relationship Between Trade and
Factor Mobility
Objective 5-6
• Substitution
• Complementarity

Chapter 6
Trade Protectionism

6-1 Recognize the conflicting outcomes of trade
protectionism
6-2 Assess governments’ economic rationales and
outcome uncertainties with international trade
intervention
6-3 Assess governments’ noneconomic rationales
and outcome uncertainties with international
trade intervention

6-4 Describe the major instruments of trade
control
6-5 Classify how companies deal with
governmental trade influences

What is Protectionism?
Objective 6-1
• What is protectionism?
• Why do governments intervene in trade?
• Stakeholders and protectionism

Institutional Factors Affecting the Flow of Trade
Objective 6-1
Figure 6.1 Institutional Factors Affecting the Flow of Goods and Service

Economic Rationales for Trade Restrictions
Objective 6-2
• To fight unemployment
• To protect infant industries
• To develop an industrial base
• Economic relationships with other countries

Why Government Intervenes in Trade
Objective 6-2
Table 6.1 Why Governments Intervene in Trade

Noneconomic Rationale for Trade Restrictions
Objective 6-3
• Maintain essential industries

• Promoting acceptable practices abroad
• Maintain or extend spheres of influence
• Preserve national culture

Instruments of Trade Control: Tariffs
Objective 6-4
• Tariff (Duty)
• Why are Tariffs levied?
• Types of Tariffs

Instruments of Trade Control: Non-tariff (1 of 3)
Objective 6-4
• Subsidies–Definition
– Agriculture Subsidies

Objective 6-4
• Aids and Loans

• Quotas
• Embargo
• Buy Local Legislation
• Standards and Labels
• Specific Permission Requirements
• Administrative Delays

Objective 6-4
• Service Industries
– Four factors to consider
§ Essentiality
§ Not-for-Profit Services
§ Standards
§ Immigration

How Companies Deal with Governmental
Influences
Objective 6-5
• Threats from import competition

– Options for companies

Chapter 7
Economic Integration
and Cooperation

7-1 Define the three major types of international
economic integration
7-2 Explain what the World Trade Organization is
and how it is working to reduce trade barriers
on a global basis
7-3 Summarize the major benefits of regional
economic integration

7-4 Compare and contrast different regional
trading groups
7-5 Describe the forces that affect the prices of
commodities and their impact on commodity
agreements

What is Economic Integration?
Objective 7-1
• Economic Integration Definition
• Major ways to approach agreements
– Global integration
– Bilateral integration
– Regional integration

GATT: Predecessor to WTO
Objective 7-2
• GATT
– General Agreement on Tariffs and Trade
• Trade without Discrimination
– Fundamental principle

The WTO
Objective 7-2
• WTO
– World Trade Organization
– Purpose
• WTO and “most favored nation clause”
• WTO and Dispute Settlement

Benefits of Regional Economic Integration
Objective 7-3
• Static Effects
• Dynamic Effects

The Impact of Trade Agreements
Objective 7-3
Figure 7.1 Impact of Free Trade Agreements

The European Union (EU)
Objective 7-4
• The goals of the EU

• Why the EU?
• Governing bodies of the EU

Other Aspects of the EU
Objective 7-4
• Antitrust Investigations
• Monetary Union
• Schengen Area
• Expansion
• Bilateral Agreements
• Transatlantic Trade and Investment Partnership

The European Union Countries
Objective 7-4
Map 7.1 European Trade and Economic Integration

NAFTA
Objective 7-4
• What is NAFTA?
– North American Free Trade Agreement
• Reasons and Goals for NAFTA

Other Aspects of NAFTA
Objective 7-4
• Rules of Origin
• Impact of NAFTA

Economic Integration in Caribbean and
Central America
Objective 7-4
Map 7.2 Economic Integration in Central America and the Caribbean

CARICOM
Objective 7-4
Map 7.2 Economic Integration in Central America and the Caribbean

Economic Integration in Latin America
Objective 7-4
Map 7.3 Latin American Economic Integration

Economic Integration: MERCOSUR,
Pacific Alliance and CAN
Objective 7-4
• What is Mercosur?
• What is the Pacific Alliance?
• What is CAN?

Asia’s Economic Integration Agreements
Objective 7-4
• ASEAN Free Trade Area

• Asia Pacific Economic Cooperation (APEC)
• Trans-Pacific Partnership (TPP)

ASEAN Free Trade Area
Objective 7-4
Map 7.4 The Association of Southeast Asian Nations

Africa Regional Integration
Objective 7-4
Map 7.5 Regional Integration in Africa

The United Nations
Objective 7-4
• What is it?
• UN Purpose
• UN Family of Organizations

Commodity Agreements
Objective 7-5
• What are commodities?

• Purpose of Commodities Agreements
• OPEC
– Organization of the Petroleum Exporting
Countries

Chapter 8
Markets for Foreign
Exchange

8-1 Define what foreign exchange is and who the major
players are in the foreign-exchange market
8-2 Summarize the major characteristics of the foreign-
exchange market
8-3 Compare and contrast spot, forward, options, and
futures markets

8-4 Explain some of the major aspects of the foreign-

exchange markets
8-5 Show how companies use foreign exchange to
facilitate international trade

Foreign Exchange
Objective 8-1
• What is foreign exchange?

• Exchange rates
• Bank for International Settlements (BIS)

How Foreign Exchange is Traded
Objective 8-1
• Ways of trading
• Electronic means
• Two major segments
– Over the counter market
– Exchange traded market

Global OTC Foreign Exchange Instruments
Objective 8-2
• Spot transactions
• Outright forward transactions
• FX Swap
• Currency swap
• Options
• Futures

The U.S. Dollar and Foreign Exchange
Markets
Objective 8-2
• U.S. Dollar as currency on the foreign exchange

market
• Insert table 8.1

London as a Trading Center
Objective 8-2
• London as an important Trading Center
– Geographic Location
– Time Zone

Geographical Distribution of Foreign
Exchange Markets
Objective 8-2
Figure 8.1 Foreign-Exchange Markets: Geographical Distribution, September 2013
Source: Based on Bank for International Settlements, Central Bank Survey Report on Foreign Exchange Turnover in April
2013: Preliminary Global Results (Basel, Switzerland: BIS, September 2013: 14): 1.

The Spot Market
Objective 8-3
• Bid Rate
• Direct and Indirect quotes
• Base and term currencies

The Forward, Options, and Futures Markets
Objective 8-3
• Forward Markets
• Forward Discount
• Forward Premium
• Option

Foreign Exchange Markets
Objective 8-4
• Largest Markets
– CME Group
– NASDAQ
– NYSE: ICE

The Foreign Exchange Trading Process:
A Visual
Objective 8-4
Figure 8.3 The Foreign-Exchange Trading Process

How Companies Use Foreign Exchange
Objective 8-5
• Draft or Commercial Bill of Exchange
• Letter of Credit
• Speculation
• Arbitrage

Chapter 9
Factors that Influence
Exchange Rates

9-1 Describe the International Monetary Fund and

its role in determining exchange rates
9-2 Discuss the major exchange-rate arrangements that
countries use
9-3 Identify the major determinants of exchange rates

9-4 Show how managers try to forecast exchange-rate

movements
9-5 Examine how exchange-rate movements influence
business decisions

The International Monetary Fund (IMF)
Objective 9-1
• International Monetary Fund
• Purpose of the IMF

Determination of Exchange Rates
Objective 9-1
• Brenton Woods Agreement

• Quota System
• Special Drawing Right (SDR)
• The Smithsonian Agreement

Exchange Rate Arrangements
Objective 9-2
• Hard Peg
• Soft Peg
• Floating arrangements

The Euro as a Floating Arrangement
Objective 9-2
• The EMU (European Monetary Union)

• Stability and Growth Pact Criteria

Determining Exchange Rates
Objective 9-3
• The role of Central Banks
• Central Bank Reserve Assets

Central Banks and Exchange Rates
Objective 9-3
• Central Banks and Intervention in the Market

Other Considerations on Exchange Rates
Objective 9-3
• Black Markets and Exchange rates

• Convertible Currencies
• Hard and Soft Currencies
• PPP and The Big Mac Index

The Big Mac Index
Objective 9-3
Table 9.2 The Big Mac Index
Source: Based on The Big Mac Index, http://www.economist.com/bigmac (accessed January 7, 2016).

Exchange Rates and Interest Rates
Objective 9-3
• The International Fisher Effect

Forecasting Exchange Rate Movements
Objective 9-4
• Technical Forecasting and Fundamental

Forecasting
• Biases in Forecasting

Exchange Rates: Factors to Monitor
Objective 9-4
• Institutional Setting
• Fundamental Analyses
• Confidence Factors
• Circumstances
• Technical analyses

Business Implications of Exchange Rates
Objective 9-5
• Marketing Decisions
• Production Decisions
• Financial Decisions

Chapter 10
Global Debt and Equity
Markets

10-1 Describe the finance function of an MNE in a
global context
10-2 Define leverage and how it affects the choice
of capital structure
10-3 Explain the different ways to access debt
internationally

10-4 Summarize how foreign source income is
taxed
10-5 Analyze how offshore financial centers
provide
financing opportunities for MNEs

The Role of a CFO
Objective 10-1
• The Role of a CFO in a Global Organization

– Financial decisions
– Investment decisions
– Manage short-term capital

Factors Affecting Choice of Capital
Structure
Objective 10-2
• Leveraging
• Debt and Exchange Rates
• Regulatory Risk

Currency and Bond Markets
Objective 10-3
• Eurocurrency market
• Major sources of Eurocurrencies
• International Bonds
– Types

International Stock Markets
Objective 10-3
Map 10.1 Global Markets: Domestic Market Capitalization, January 2016
Source: Based on World Federation of Exchanges, Statistics, www.world-exchanges.org/statistics

/monthly-reports, (accessed May 7, 2016).
Taxation and Business Choices
Objective 10-4
• Taxation has a strong impact on choices.

– Examples
• International Tax Practices

Taxing Foreign Sourced Income
Objective 10-4
• Controlled Foreign Corporation

• Active Versus Passive Income
• Arm’s Length Price

Tax Status of U.S. Owned Foreign
Subsidiaries
Objective 10-4
Figure 10.2 The Tax Status of U.S.-Owned Foreign Subsidiaries

Double Taxation and Tax Treaties
Objective 10-4
• Tax Credits to avoid double taxation

• Tax treaties

Offshore Financing
Objective 10-5
• Offshore Financial Centers

– Characteristics

Operational and Booking Centers
Objective 10-5
• Operational Centers
• Booking Centers
• Tax Haven’s

Chapter 11
Ethics and Social
Responsibility

11-1 Describe the trade-offs among different stakeholders
in
MNE activities
11-2 Evaluate the major economic effects of MNEs on
home
and host countries
11-3 Explain the broad foundations of ethical behavior
11-4 Identify the cultural foundations of ethical behavior
11-5 Illustrate how ethical behavior is affected by different
legal attitudes corporate behavior

11-6 Show how corruption and bribery affect and are
affected by cultural, legal, and political forces
11-7 Summarize what the roles are of governments
and companies in resolving environmental issues
11-8 Demonstrate how global labor issues need to be
addressed by MNEs to their stakeholders
11-9 Restate how codes of conduct can help MNEs
respond to concerns by stakeholders over
responsible corporate behavior

Meeting the Needs of Stakeholders
Objective 11-1
• What are stakeholders?
• Why be concerned about the needs of
stakeholders?

Factors Affecting Ability to Operate Abroad
Objective 11-2
Figure 11.1 What MNEs Have to Offer

What MNE’s Have to Offer Society
Objective 11-2
Figure 11.1 What MNEs Have to Offer

Balance of Payments considerations
Objective 11-2
• Balance of Payments effects

– FDI
– Net import effect
– Net capital flow
• Growth and Employment effects

Foundations of Ethical Behavior
Objective 11-3
• Foundations of Ethical Behavior

– Preconventional level
– Conventional level
– Postconventional level
• Individuals and ethics
– Teleological approach
– Utilitarianism
– Deontological

Why Do Companies Care About Ethical Behavior?
Objective 11-3
• Why do companies care about ethical behavior?

– Competitive advantage
– Perception

Cultural Foundations of Ethical Behavior
Objective 11-4
• Relativism
• Normativism

Legal Foundations of Ethical Behavior
Objective 11-5
• Illegal vs. Unethical

– Going above and beyond the law to ethics
– Using the law to justify ethical behavior

Corruption and Bribery
Objective 11-6
• What is Corruption?
• What is bribery?
• Efforts to minimize corruption

Figure 11.2 Where Bribes Are (and Are Not) Business as Usual
Source: Based on Transparency International, “TI Corruption Perceptions Index” (2015), transparency.org/cpi2015
(accessed February 15, 2016).

Ethics and the Environment
Objective 11-7
• What is sustainability?
• Global efforts for the environment

Ethics and Labor Conditions
Objective 11-8
• Labor conditions as a challenge to MNEs
• ETI’s (Ethical Trading Initiative) code on labor conditions

Figure 11.3 Sources of Worker-Related Pressures in the Global Supply Chain

Corporate Codes of Ethics
Objective 11-9
• Strategy for ethical behavior

– Codes of conduct

Chapter 12
Strategies for

12-1 Explain the idea of strategy in the MNE

12-2 Profile how executives make strategy
12-3 Differentiate resources, capabilities, and core
competencies
12-4 Assess approaches to create value

12-5 Diagram the features and functions of the value chain
12-6 Compare global integration and local responsiveness
12-7 Differentiate the types of strategies used by MNEs

IB Strategy
Objective 12-1
• What is strategy?
• Components of Strategy

Strategy Process
Objective 12-1
Figure 12.1 The Role of Strategy in IB

Mission and Vison
Objective 12-1
• What is a vision?
• What is a mission?

Examples of Mission and Visons
Objective 12-1
Table 12.1 Vision and Mission Statements, Leading MNEs

How do Executives Create Strategy?
Objective 12-2
• Industrial Organizations Outlook
• Great by Choice Outlook

Tangible and Intangible Resources
Objective 12-3
Table 12.2 Resources of the Firm: Specification and Profile

Resources, Capabilities and Core
Competencies
Objective 12-3
• Capabilities
• Core Competencies

Creation of Value
Objective 12-4
• Value
• Cost Leadership Strategy
• Differentiation Strategy
• Integrating Cost Leadership/Differentiation Strategies

The Value Chain
Objective 12-5
Figure 12.2 Visualizing the Value Chain

Configuration Choices
Objective 12-5
• Configuration definition
– Concentrated
– Dispersed
– Location advantages
– Economies of scale
– Experience and learning effects
– Risks of configuration choices

Global Integration or Local Responsiveness?
Objective 12-6
Table 12.6 Motivations of Global Integration and Local Responsiveness

Considerations with Global
Integration or Local Responsiveness
Objective 12-6
• Potential to standardize
• Responding to local customers preferences
• Institutional agents
• Mapping interaction

The Integration Responsiveness Grid
Objective 12-6
Figure 12.4 The Integration-Responsiveness Grid

International Corporate Level
Strategies
Objective 12-6
• International Strategy
• Localization Strategy
• Global Strategy
• Transnational Strategy

Chapter 13
Evaluation of Countries
for Operations

13-1 Elaborate on the significance of location in IB
operations
13-2 Illustrate why comparing countries through
scanning is important and how it connects to

final location choices
13-3 Discern major opportunity and risk variables
and how to prioritize and relate them when

deciding whether and where to expand
13-4 Summarize the sources and shortcomings of
comparative country information

13-5 Explain alternative considerations and means
for companies to allocate resources among
countries
13-6 Recognize why companies make non-
comparative decisions when choosing where
Location Choices
Objective 13-1
• Why be concerned with location choices?
• Decisions related to location choices

The Scanning Process
Objective 13-2
• Why use scanning?
• Insert figure 13.2

Scanning and Detailed Analysis
Objective 13-2
• Scanning first
– Types of information gathered
• Detailed Analysis

Opportunities: Sales Expansion
Objective 13-3
• Sales expansion
– Demographic and economic factors to
consider

Opportunities: Resource Acquisition
Objective 13-3
• Securing Resources
– Cost considerations

Factors to Analyze Regarding Risk
Objective 13-3
• Factors to consider with risk
• Types of Risks

Example on How to Analyze Risk
Objective 13-3
Table 13.1 Simplified Country Comparison Grid Figure 13.1 Regional Emphasis of Burger King
Based on data from 2015 Burger King 10K Report.

The sales figures are for 2013, and the restaurant
figures are for 2014.

Shortcomings of Comparative Country
Information
Objective 13-4
• Inaccuracy
• Non-Comparability

Strategies for International Expansion:
Alternative Gradual Commitments
Objective 13-5
• Alternative Gradual Commitments
• Insert figure 13.4

Strategies for International Expansion:
Diversification, Concentration, Reinvesting
Objective 13-5
• Diversification Strategy
• Concentration strategy
• Reinvesting and Harvesting

Non-Comparative Decisions
Objective 13-6
• Decision Making Process
• Go-no-go decisions
• Interdependence

Chapter 14
Modes of Trading
Internationally

14-1 Explain the principles and practices of
exporting
14-2 Articulate the motivations and methods of
exporting
14-3 Understand export startup and expansion
14-4 Explain the principles and practices of
importing
14-5 Articulate the motivations and methods of
importing

14-6 Describe the problems and pitfalls that
challenge international traders
14-7 Differentiate the resources and assistance
that help international traders
14-8 Define the standards of an export plan
14-9 Distinguish the principles and practices of
countertrade

Exporting and Types of Exporters
Objective 14-1
• What is exporting?
• Types of exporters
– Non-exporter
– Sporadic exporter
– Regular exporter

Exporting Advantages
Objective 14-1
• Ownership advantages
• Location advantages
• Internalization advantages

Exporting Motivations
Objective 14-2
• Exporting helps companies:
– Increase profitability
– Improve productivity
– Diversify activities

Two views on Exporting
Objective 14-3
• Incremental Internationalization
• Born Global Phenomenon

Approaches to Exporting
Objective 14-4
• Direct Exporting
• Indirect Exporting
• Which approach to use?

Import Drivers
Objective 14-4
• Specialization of Labor
• Input Optimization
• Local Unavailability
• Diversification

Who are Importers?
Objective 14-5
• Input Optimizers
• Opportunistic
• Arbitrageurs

Problems and Pitfalls to Exporting
Objective 14-6
• Financial Risk
• Customer Management
• International Business Expertise
• Marketing Challenges
• Top Management Commitment
• Government Regulation
• Trade Documentation

Barriers to Exporting
Objective 14-6
Table 14.1 The Relative Influence of Common Barriers to Export
Source: “Small and Medium-Sized Enterprises: Characteristics and Performance,” United States International Trade
Commission, Investigation No. 332–510, November 2010.

Trade Documentation Required for Exporting
Objective 14-6
Table 14.2 Types of Export Documents

Export Assistance
Objective 14-7
• Public Agencies
– U.S. Commercial Service office
• Private Agencies
– EMC
– ETC
– Freight Forwarders
– 3PL’s
– Brokers Trading

Export Plans
Objective 14-8
Table 14.4 Improving the Effectiveness of the Export Planning Process

Countertrade
Objective 14-9
• Countertrade definition
Table 14.5 Common Forms of Countertrade

Chapter 15
Forms and Ownership
of Foreign Production

15-1 Comprehend why export and import may not
suffice for companies’ achievement of IB
objectives
15-2 Explain why and how companies make wholly
owned foreign direct investments
15-3 Ascertain why companies collaborate in
international markets

15-4 Compare and contrast forms of and
considerations for selecting an international
collaborative arrangement
15-5 Grasp why IB collaborative arrangements fail
or succeed

Why Export and Import May Not
Suffice
Objective 15-1
• Advantages to locate production in another
country
– As opposed to exporting

Alternatives to Foreign Expansion
Objective 15-1
Figure 15.2 Foreign Expansions: Alternative Operating Modes

Why Wholly-Owned FDI?
Objective 15-2
• Market Failure
• Internalization Theory
• Appropriability Theory
• Freedom to Pursue Global Objectives

Acquisition versus Greenfield
Objective 15-2
• Acquisition
• Greenfield Investments
• Leasing

Why Collaborate in International Markets?
Objective 15-3
Figure 15.3 Collaborative Arrangements and International Objectives

Factors to Consider in Collaborative
Arrangements
Objective 15-4
• Trade offs and Limitations
• Alliance types
– Scale alliances
– Link alliance
– Vertical alliance
– Horizontal alliance
• Prior company expansion
• Compensation
Types of Arrangements (1 of 2)
Objective 15-4
• Licensing
• Franchising
• Management Contracts
• Turnkey Operations
• Joint Ventures
• Equity Alliances

Types of Arrangements (2 of 2)
Objective 15-4
Figure 15.4 Collaborative Strategy and Complexity of Control
Source: Based on Shaker Zahra and Galal Elhagrasey, “Strategic Management of International Joint Ventures,” European
Management Journal 12:1 (March 1994):83–93. Reprinted with permission of Elsevier.

Reasons for Collaborative Failures
Objective 15-5
• Why do collaborative arrangements fail?

Considerations for Success
Objective 15-5
• Things to consider for Collaborative Success

Country Attractiveness/Strength Matrix
Objective 15-5
Figure 15.5 Country Attractiveness/Company Strength Matrix

Chapter 16
The Organization and
Governance of
Foreign Operations

16-1 Profile the evolving idea of organization in the MNE
16-2 Interpret classical organization structures
16-3 Interpret neoclassical organization structures

16-4 Differentiate the systems used to coordinate
international activities
16-5 Differentiate the systems used to control international
activities
16-6 Explain the purpose and characteristics of
organizational culture

Evolving MNE’s
Objective 16-1
• Organizing an MNE
– Factors to consider

Classical Organization Structures
Objective 16-2
• Organization Structure
– Vertical Differentiation
§ Centralization
§ Decentralization
– Horizontal Differentiation
§ Functional
§ Divisional
§ Global Matrix
§ Mixed Structure

Considerations for Centralization vs.
Decentralization
Objective 16-2
Figure 16.1 Factors Affecting Organizing Operations

Functional and Divisional Structure
Objective 16-2
Figure 16.2 The Functional Structure Figure 16.3 The International Division Structure

Matrix Structure
Objective 16-2
Figure 16.6 The Matrix Structure

Neoclassical Structures
Objective 16-3
• Boundaries versus Boundaryless
• Network Structure

Network Structure
Objective 16-3
Figure 16.7 A Network Structure

Virtual Organizations
Objective 16-3
• Virtual Organization
– Technology
– “Work across space and time”

Coordination Systems
Objective 16-4
• What is a coordination System
– Coordination by standardization
– Coordination by plan
– Coordination by mutual adjustment

Control Systems
Objective 16-5
• What is a control system?
• Bureaucratic Control
• Market Controls
• Clan Control
• Control Mechanisms

The role of Organizational Culture
Objective 16-6
• Organizational Culture Definition
• How organizational culture influences people’s
jobs
• The Power of a Common Cause

Company Culture
Objective 16-6
• Key features of company culture

Chapter 17
Global Marketing

17-1 Classify international marketing strategies in
terms of marketing orientations, segmentation,
and targeting
17-2 Discuss the pros and cons of adaptation
versus global standardization of products
17-3 Describe pricing complexities when selling in
foreign markets

17-4 Recognize the advantages and problems of
using uniform promotional marketing
practices among countries
17-5 Explain the different branding strategies
companies may employ internationally
17-6 Discern major practices and complications of
international distribution
17-7 Illustrate how gap analysis can help in
managing the international marketing mix

Common Marketing Orientations
Objective 17-1
• Production orientation
• Sales orientation
• Customer orientation
• Strategic marketing orientation
• Social marketing orientation

Segmenting Global Markets
Objective 17-1
• Global Segment
• By Country
• Mixing the Marketing Mix
• Mass Markets

Country Adaptation vs. Global
Standardization
Objective 17-2
• Why Adapt?
– Legal considerations
– Cultural considerations
– Economic considerations

Potential Issues in Pricing
Objective 17-3
• Government intervention
• Market Diversity
• Export Price Escalation
• Fluctuations in Currency
• Fixed versus Variable pricing

Push-Pull Promotion Decisions
Objective 17-4
• Push and Pull Definition
• Factors in Push-Pull Decisions

Standardize Advertising?
Objective 17-4
• Advantages of standardizing Advertising
• Considerations when standardizing

Global Branding
Objective 17-5
• What is a brand?
• Global Brands
– Considerations

Working with Product Distribution
Objective 17-6
• Internalization of distribution?
• Factors to determining a internalization strategy
• Distribution partnerships as an option

What is GAP analysis?
Objective 17-7
• Definition of GAP analysis
• Types of GAPS

GAP Analysis Process
Objective 17-7
Figure 17.3 Gap Analysis

Chapter 18
Global Production
and Supply Chains

18-1 Define what is meant by global supply-chain
management
18-2 Describe the different facets of global
operations strategies
18-3 Show how global sourcing is an important
aspect of global supply-chain and operations
management
18-4 Explain how information technology is used
in global operations and supply-chain
management
18-5 Summarize how quality management is
important in global operations

Global Supply Chain Strategy
Objective 18-1
Figure 18.1 An Integrated Global Supply Chain and Operations Strategy
Source: S. Thomas Foster, Scott Sampson, Cindy Wallin, and Scott Webb, Managing Supply Chain and Operations:
An Integrative Approach(Pearson Education, Inc., 2016): 2.

What is Supply Chain Management?
Objective 18-1
• Supply Chain Management
• Operations Management (Logistics
Management)

Operations Management Strategy
Objective 18-2
• Compatibility
• Configuration
• Coordination
• Control

Global Sourcing Visual
Objective 18-3
Figure 18.2 When a company wants to source raw materials, parts, or components
as a function of its global strategy, it’s faced with some key decisions. It may, for
example, decide to source components at home, assemble them abroad, and then
export the final product to the home market, to foreign markets, or to both.

Global Sourcing
Objective 18-3
• Outsourcing Definition
• Why Global Sourcing?

Major Sourcing Configurations
Objective 18-3
• Vertical Integration
• Industrial Clusters
• Make or Buy Decisions
• Supplier Relationships
• Conflict Minerals

Technology in Global Operations
Objective 18-4
• EDI (Electronic Data Interchange)
• ERP (Enterprise Resource Planning)
• RFID (Radio Frequency ID)

E-Commerce
Objective 18-4
• Extranet
• Intranet
• PTX (Private Technology Exchange)
• The Digital Divide

What is Quality?
Objective 18-5
• Definition of Quality
– Zero Defects
– Acceptable Quality Level (AQL)

Lean Manufacturing and TQM
Objective 18-5
• What is TQM?
• TQM and Foreign Sourcing
• Kanban System

Quality Standards
Objective 18-5
• Six Sigma
• ISO Standards
• Industry Specific Standards
• Company Specific Standards

Chapter 19
Global Accounting and
Financial Management

19-1 Explain the crossroads of accounting and
finance
19-2 Identify the major factors affecting the
development of accounting objectives,
standards, and practices
19-3 Describe international accounting standards
and the process of global convergence
19-4 Demonstrate how companies account for
foreign-currency transactions

19-5 Determine how companies can translate
foreign-currency financial statements
19-6 List some of the key international finance
functions
19-7 Show how companies protect against
foreignf exchange risk

Accounting and Finance
Objective 19-1
• The role of the CFO

• Controller
• Global Financial Challenges

Influences on Accounting Standards
Objective 19-2
Figure 19.1 Sources of Influence on Accounting Standards and Practices

Factors Affecting Accounting
Objective 19-2
• Cultural Differences in Accounting
• Secrecy-Transparency/Optimism-Conservatism Matrix
Figure 19.2 A Disclosure/Assessment Matrix for National Accounting Systems
Source: Based on Lee H. Radebaugh, Sidney J. Gray, and Ervin L. Black, International Accounting and
Multinational Enterprises, 6th ed.(New York: John Wiley & Sons, 2002): 51.
Mutual Recognition and Reconciliation
Objective 19-3
• Mutual Recognition
• Reconciliation
• Forces for Global Standards

International Accounting Standards
Objective 19-3
• Drivers of the development of core standards

globally

Accounting for Foreign Currency Transactions
Objective 19-4
• Receivables and Payables
• FASB Reporting

Translating Financial Statements
Objective 19-5
• Translation
• Consolidation
• Current Rate/Temporal Methods

Selecting a Translation Method
Objective 19-5
Figure 19.3 Selecting a Translation Method

International Finance Functions
Objective 19-6
• Capital Budgeting
• Internal Sources of Funds
• Global Cash Management

Risk Exposure
Objective 19-7
• Types of Risk Exposure

• Strategies for Exposure Management

Chapter 20
Global Management of
Human Resources

20-1 Profile international human resource
management
20-2 Distinguish the perspective of the expatriate
20-3 Differentiate the staffing frameworks used by
MNEs
20-4 Describe expatriate selection

20-5 Appraise expatriate preparation

20-6 Summarize expatriate compensation
20-7 Profile expatriate repatriation
20-8 Describe expatriate failure

IHRM
Objective 20-1
• What is IHRM?
• What are the characteristics of IHRM?

Types of Expatriates
Objective 20-2
• Local
• Expatriate
• Home-country National
• Parent-country National
• Third-Country National
• Inpatriate
• Transpatriate

Trends in Expatriate Assignments
Objective 20-2
• Commuter Assignments
• Who goes abroad
• Women
• Third-country Nationals
• Reverse expatriates

Staffing Frameworks
Objective 20-3
• Ethnocentric
• Polycentric
• Geocentric

Staffing Frameworks: Advantages and
Drawbacks
Objective 20-3
Table 20.1 Frameworks to Staff International Operations: Principles and Practices

Expatriate Selection Considerations
Objective 20-4
• What is expatriate selection?
– What skills are required for success?

Successful Expats
Objective 20-4
Figure 20.4 Key Competencies of Expatriates

Expat Preparation and Development
Objective 20-5
• Pre-departure Programs
• In-country Development Programs
• Family Matters

Compensation Considerations
Objective 20-6
• Conditions and considerations for reasonable
salaries

Compensation Plans
Objective 20-6
• Types of Compensation Plans
– Home based method
– Headquarters based method
– Host based method
– Global market method

Components of Expat Compensation
Objective 20-6
Figure 20.2 Factors Influencing IHRM in IB

Repatriation
Objective 20-7
• What is Repatriation?
– Challenges with Repatriation

Expatriate Failure
Objective 20-8
• Definition
• Costs associated with failure

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International Business

Sixteenth Edition, Global Edition

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1-5 Define and illustrate the different operating

1-6 Recognize why national differences in

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• Cultural reference points

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• Information and Task processing

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Table 3.2 Prominent Types of Totalitarianism

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Source: Freedom House, “Map of Freedom 2015,” at https://freedomhouse.org/report/freedom-world/freedom-world-2015.

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• More Democracy world wide

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• What is political risk?

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• What is the legal System?

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• The Rule of Man

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