CHAPTER 1: GLOBALIZATION

Boeing’s Global Production system

1. What are the benefits to Boeing outsourcing manufacturing of components of the
Boeing 787 to firms based in other countries?
As mentioned in the case, there are two major benefits to Boeing to outsource the
components to firms in other countries. Firstly the countries from where the production was
done usually ordered more planes from Boeing. This led to a sufficient increase in the sales
and considering the close competition with Airbus for same airspace, the teams had to ensure
all possibilities of sales were open and highly used. Another major reason as mentioned in the
case is to ensure all the best manufacturers/ service providers could do the work in the
respective areas. For instance, when Mitsubishi became a domain expert in the manufacture
of wings, it ensured that the products received from them were of the highest quality and
reliability. Boeing as an organization no longer had to worry about the quality issues and
management of inventory. Also using the outsourced model enables Boeing to focus on more
value adding areas.
2. What are the potential costs and risks to Boeing of outsourcing?
Outsourcing always has a risk attached to it. One major issue which is highlighted in
the case is late deliveries. When a company such as Mitsubishi is the world leader for making
wings, other aircraft manufacturers would also be placing the orders for them. For such
companies there are a lot of pending orders which get piled up over time and which in turn
leads to hasty delivery of shipments to customers. Managing the data flow from such a vast
network of outsourced suppliers is also difficult. Another major risk is the data loss which
can occur when dealing with such a vast group of suppliers.
3. In addition to foreign subcontractors and Boeing, who else benefits from
Boeing's decision to outsource component part manufacturing assembly to other
nations and who are the potential losers?
In addition to foreign subcontractors and Boeing, the major benefactors of such an
activity are the customers and the end customers. Customers are the flight service providers
who purchase the aircraft and end customers are the passengers of the flight. Having such an
agreement for assembly of aircraft ensures that the prices are competitive and the same can
be passed on to the end customers. The potential losers could be the local employees who
could have got a job in Boeing or its related companies for production of aircrafts.
4. If Boeing's management decided to keep all production in America, what do you
think the effect would be on the company, its employees, and the communities
that depend on it?
If Boeing`s management decided to keep all the activities with themselves, it would
be difficult for them to manage everything. Having an outsourced supplier network helps in
focusing the resources to the high value adding areas. This helps in reduction of capital for
research and development for each and other area of the aircraft. If Boeing decided to do all
these by themselves, they would need to expand the capacities including infrastructure,
human resources, skilled labor, inventories, and most importantly the intellectual property.
5. On balance, do you think that the kind of outsourcing undertaken by Boeing is a
good thing or bad thing for the American economy? Explain your reasoning
 Yes, I am of the opinion that such outsourcing activities are good for the economy. It
forges new relationships across borders and helps in ensuring the best products are delivered
to the customers when they need. It also gives the organizations an opportunity to improve
the core competency while not worrying about the other areas of operations. For an economy
while the cash flow may be going outside the country, the value of the finished goods will be
very high. This brings a positive cash flow into the system. This also gives opportunities for
the country to show support in developing other countries.

General Motors in China

1. What are the long term prospects for the Chinese market?
The long-term prospects for the Chinese market are the growing demand for electric
vehicles in China. Despite being the world’s largest automobile market, China only has
around 173 vehicles per capita. Therefore, there is still a lot of space for growth in the
automotive industry.
2. Does it make sense for GM to produce automobiles for the Chinese market in
China?Why
Setting up factories in China has allowed GM to take advantage of the large Chinese
market and a depreciating yuan, without worrying much about the ongoing tariff wars. So far,
the decision has proved to be profitable for GM, China has become the world’s largest auto
market, creating tremendous business opportunities
Joint ventures allow firms to expand their base in economies where there is a threat
from a high tariff structure, as in the case of China. Also, JVs allow firms to share costs and
risks of business with a partner. Catering to the growing Chinese market would have been
marred by conflicts if GM had chosen to export from the US; the tariff war between the two
nations make thes business very risky for parties on both sides. The 50-50 JV allowed GM to
expand business in CHina with a more positive outlook. It promised to be a cost effective
investment, carrying lesser risk.
Hence, GM’s decision to set up production facilities in China that produced
automobiles for the Chinese market via a Joint Venture with a Chinese firm made good
business sense given the costs and risks involved in exporting.
3. What do you think would happen if GM tried to serve the Chinese market by
exporting production from the United States?
General Motors Company (GM) , commonly referred to as General Motors, is an
American multinational corporation headquartered in Detroit. GM is heavily dependent on
China: it sold 835,934 vehicles there in the third quarter, compared with 694,638 in the U.S.
The two markets together contributed more than three quarters of GM’s global sales. GM
banked roughly $2 billion in profits from its China operations last year. GM trying to serve
the Chinese market by exporting production from the United States is not a feasible Idea. In
the globalized auto industry, auto manufacturers need to set up production close to their
customers to earn extra profit by avoiding import and export tariffs. Even if tariffs are zero, it
is not feasible to import goods from us because the supply chain will be too long. Shifting
GM production plants from the US to China will be more profitable than import. But it will
affect the relationship between the US government and GM.
 4. Why do you think GM went into partnership with a state-owned company to
produce automobiles in China? What are the possible benefits of such a venture?
What might be the downside?
GM went into a partnership with a state-owned company in China because of the
following reasons. First, it gave GM the benefit of having a local partner with great local
knowledge. This helped GM to make cars as per the requirement of local buyers. China is a
completely different market from the USA and having a local partner gave GM the ability to
make the right decisions for china.
Another benefit of partnering with a state-owned company is that in an autocratic
country like China having a state-owned partner will mean more support from the
government. In terms of downside GM loses some of its operational freedom as it is bound
by constraints of its partnership.
5. What does this case teach you about benefits and costs of import tariffs
This case taught me that import tariffs do not always create a win-win situation and
hence high tariffs are detrimental to the development of world markets. The benefit of tariffs
is that the importing country generates revenue from the tariff that is charged on the imports.
On the other hand, this is a disadvantage for other country and other countries may retaliate
and this may give rise to a trade war. The recent trade war between the US and China is
taking place due to tariffs only.

CHAPTER 2: NATIONAL DIFFERENCES IN POLITICAL, ECONOMICS

AND LEGAL SYSTEMS

DID WALMART VIOLATE THE FOREIGN CORRUPT PRACTICES ACT

Question: Read the Management Focus "Did Walmart Violate the Foreign Corrupt
Practices Act?" What is your opinion? If you think it did, what do you think the consequences
will be for Walmart?
Answer:
Walmart is one of the largest retailers in the world, with a very diversified product
assortment, and with very large numbers of stores worldwide. The company has a large
tradition of presence in foreign markets, and Mexico is not an exception; for decades
Walmart has been presented in this market.
But, Mexico has a significantly higher reputation for being a very corrupted country
than most of the developed economies, including the U.S. Simply, bribery has been seen as a
very common practice in order to start with some new and important investment.

Observing all these, Walmart decided to not oblige to usual practices, and to pursue
profit, using different corruptionist methods:
● Paying bribery to let the construction of new stores to be possible lines of authorities
have a mutual interest not to publicize corruption cases,
 ● Constructions of additional facilities of Walmart happened, even in densely
populated areas, where safety standards were not used preferred position was given to
Walmart and its business activities, thus eliminating competition in an unfair way, etc
Walmart voluntarily performed all these illegal activities, for pure economic logic of higher
profit and elimination of competition. Next consequences happened and could happen:

● Walmart received a high number of negative public opinions, which surely impact the
revenue of the company, with future newly public critics made by the media
● Walmart was and will continue to be the subject of many law investigations, raising
amounts of funds that the company has to pay to its legal attorneys and courts
● Corruptions scandal in Mexico would influence the further investigation, in other
foreign markets where Walmart is presented

In conclusion, Walmart had to pay a large fine, when bribery was proved, in the amount of
almost 300 million U.S. dollars. This was way less than perceived and way less than total
profit gained from all business happened by using illegal practices. We could say that
corruption was economically justified in this case - but long-term observations of the
company as bad and corrupted would inflict much damage to the company and these attempts
should be excluded in the future as an option.

TRANSFORMATION IN SAUDI ARABIA

1. What long-term economic and political problems does Saudi Arabia face?

Saudi Arabia is facing economic and political problems. The Kingdom's economy is
declining, budgets are being reduced, oil ships are being attacked, and four terror incidents
have occurred in the last month. According to Bayly Winder (2020), Saudi Arabia's economic
hurdles also pose opportunities as the country prepares for a post-pandemic world. Ever since
the Covid-19 pandemic started in January 2020, it has devalued oil and has been discounted
even more, wreaking havoc on the non-energy industries that Saudi Arabia is attempting to
promote as part of its diversification strategy. Current dynamics are putting the rentier state to
the test, forcing unprecedented austerity measures to be implemented

2. How might the reforms proposed by Muhammad bin Salman potentially

address these problems? Who will gain from these reforms? Who might object
and push back against them?

Muhammad bin Salman is a crown prince and son of the late King Salman bin Abd Al-Aziz.
The crown prince created a vision for Saudi Arabia known as Vision 2030. He proposed that
Saudi Aramco privatize, lessening the kingdom's dependence on oil revenues and reducing
energy and water subsidies.
Also, boosting the private sector, investing $500 billion in a new city called NEOM for
foreign and private investment, he proposed a value-added tax to eradicate the government's
deficit, loosening stifling moral codes.

Moreover, the ones who can benefit from the said reform are the people of Saudi Arabia and
its economy. For five years and counting for launching the Vision 2030, The council
emphasized the changes to access in health services which increased from 36 percent to 87
percent today, better road management, it has an open door for better job opportunities,
diversified its income, and increases its GDP and encourage and boost the economy to be
resource-efficient. The Saudi Public Investment Fund has doubled to approximately SR1.5
trillion in 5 years.

Nevertheless, as Vision 2030 launched, the torture and execution of juvenile protesters
increased and even human rights deprived. The authorities have executed several people,
including children and peaceful protesters.

Thus, Vision 2030 has already proved its achievement even in just a short period, and it has
already established unprecedented solutions to its economic and political issues. However, it
has a downside on human rights.

3. Current plans for Saudi Aramco call for the state-owned oil company to be
privatized. 5 An initial public offering (IPO) is tentatively Scheduled for 2021.
What are the potential bono benefits to Saudi Arabia of privatizing Saudi and
Aramco? Is there a downside?

Privatization is a process of selling the business or property for the state-owned oil company
Saudi Aramco to private individuals or investors. It is for the reason of saving government
money and to increase the efficiency of the production.

The potential benefits the country of Saudi Arabia can gain through privatizing the Saudi
Aramco will boost the economy and improve its competitiveness and efficiency. Analysts
and bankers informed the Saudi government, it would make Saudi Aramco the most valuable
public company in the world. The said company may value at around $1.5 trillion. It would
create a lot of opportunities in finance and investment.

On the other hand, the risk of Saudi Aramco IPO on some investors would be the Saudi
government’s involvement given the scandalous murder of Washington Post journalist Jamal
Khoshoggi and its horrific records on human rights deprivation. With the environmental,
social and governance criteria this does not suit well with a company which relies mainly on
fossil fuels.

Thus, a lot of foreign and private investors will run after the privatization of Saudi Aramco. It
would definitely change the economy in good ways but with the government’s involvement it
is a decision that one cannot take lightly.
 4. Is it morally correct for international businesses to invest in a country that
denies basic rights to women?

Saudi Arabia is one of the most traditional societies in the world and this type of behavior is
implemented and accepted by their religion. Saudi women simply have lacked the initiative to
fight more openly for their rights, because of extreme male dominance in such society.

What is considered a norm in one society, could not be easily applied to all the others.
Different views simply exist and are very hard to change. This applies of course to Saudi
Arabia - there has not been political will for many years to change the situation about banning
women's rights.

Some advantages from the decision to invest, despite observed challenging norms in Saudi
Arabia society could be seen as:

● Great business opportunities to generate huge income society has started to implement
changes, and many new sectors in the country's economy are created
● Good perspectives for growth of high-technology companies
● Rich society, with high demand for luxury products
● Strict implementation of certain law procedures, cheap labor force from abroad, etc.
Despite all this, investments in Saudi Arabia could make issues to certain companies in next
ways:

● Company's image would be negatively viewed in most Western-based societies

● Bribery and other forms of unethical behaviors are common practice in the country,
despite law regulation
● Uncertainty about demand, especially if products of the company are considered
unacceptable do Islam doctrine fall in products sold on the domestic market, further
negative campaigns against the company, etc.

In conclusion, it is very hard to judge moral issues. This is exactly the case of Saudi Arabia
and the country's doctrine when it comes to the rights of women. The company could simply
face too much pressure and negative opinions from domestic markets, as well as the liberal
ones, and it may decide to abstain from investing in Saudi Arabia, despite good business
opportunities. On the other hand, a more open approach of the Saudi government, which is
underway, could help more companies invest in this country in the future.

5. Is it morally correct for international businesses to invest in an autocratic

country where the current leader has been implicated in ordering the murder of
one of his critics?
Saudi Arabia is one of the most traditional societies in the world, and it is governed by very
strict religious practices. One of the core values is complete acceptance and tolerance of the
Saudi royal family, even if they are not so good at governing the country.

Again, the norms of one society could not be so easily applied to others. Even if freedom of
speech is one of the most widely reckoned norms, this is not the case in Saudi Arabia. There
have been few attempts to change this pattern, but all of them finished similarly as one in our
case - by eradicating this person.

Unfortunately, critic Jamal Khashoggi was murdered, which came as major world news.
Additional issues for the Saudi government were that this was done on the territory of a
foreign country - Turkey, as well Khashoggi was an American citizen also.

It would be very wise for, especially the U.S. companies in this year, to abstain from
investing in Saudi Arabia, or in any business connection with this country. Simply, despite
official explanations and apologies from Saudi officials, this case was super-heated.

In conclusion, issues about the moral correctness of certain decisions are very hard to judge.
Of course, doing business with a country where freedom of speech could be paid with one's
own life is not very desirable. The innovative and more open approach of the Saudi
government, which would be carefully assessed, especially by Western media, could help
more companies to invest in this country in the future.

CHAPTER 3 SOCIOCUTURAL FORCES

China and Its Guanxi
1. Why do you think it is so important to cultivate guanxi and guanxiwang in
China?
- It is very important to cultivate both guanxi and guanxiwang in China in order
to adapt to the culture of the country. In China, Guanxi is considered as a
 personal ties and social position that is more important than the law. There are
many businesses in China that even a business plays under the rules but doesn’t
try to bend them in their favor, they failed to succeed.
- There are so many laws that without guanxi and guanxiwang nothing would get
done and a business would go out of business. The connections that a
businessman makes can either make or break a deal. A deal gone well will give
that businessman prestige and allow him easy access to other resources in the
future.
2. What does the experience of DMG tell us about the way things work in
China? What would likely happen to a business that obeyed all the rules
and regulations, rather than trying to find a way around them like Dan
Mintz?
- Dan Mintz as the founder of DMG had no experience in the advertisement
sector nor contact in China, even the language itself. However, he had guanxi
with two young Chinese who have connections with diverse levels of people so
they were able to be one of China's fastest-growing advertising agencies. The
DMG experience in China shows that culture matters is an important thing in
China. Guanxiwang refers to the relationship network that companies cultivate.
Both of these are important in dealing with others that drives business in China.
Dan Mintz has a believe that guanxi and guanxiwang can help companies get
around restrictions that limit the ability of companies to function so it is very
useful in delivering a good job. Businesses in China without the relationships
network threatened to fail because it is almost impossible for us to get triumph
if we can't work around the law and have doors opened. Culture in China has a
role as an imperative factor when conducting business (Foreign or domestic).
The guanxi and guanxiwang factors are very important pieces of China's
culture. Both are essential to someone who is trying to start a successful
business in China. Overall this is an advantage that DMG was able to acquire
due to the fact that Wu was a recognized national champion and Xiao has
political connections.
3. What ethical issues might arise when drawing on guanxiwang to get things
done in China? What does this suggest about the limits of using
guanxiwang for a Western business committed to high ethical standards?
- When talking about ethical issues, the practice of guanxiwang
(network/networking) practiced by DMG might be classified as unethical or
even borderline corrupt seen from the Western perspective. The Western
culture and perspective in general (not only in the business world) highly
values equal chances. Had this case happened in the Western business world, it
wouldn't only concern ethical values but also a number of laws. Due to this
reason, Western businesses committed to a high ethical standard and high
 compliance with the law would refuse the practice of guanxi. However, this
might become a barrier for them when trying to expand to China, as they might
come across regulations that limit them from doing certain business practices.
China, Hong Kong, Macau, and Taiwan
1. When Goldman Sachs chief economist Jim O’Neill coined the acronym
BRIC in 2001 to refer to Brazil, Russia, India, and China, the focus was to
highlight the immense collective economic potential of these countries.
Since that time, China and Russia have influenced the international
marketplace in political ways as well. How do you think these four
countries—or a subset of them—will likely influence the world’s cultures
in the next 10 years?
- In the next 10 years, Brazil, Russia, India, and China (BRIC countries) are
likely to continue exerting their influence on the world's cultures in various
ways. While it is challenging to predict the exact nature and extent of their
influence, we can make some observations based on current trends and their
historical trajectories. Here are some potential ways these countries or subsets
of them could impact global cultures:

1) Cultural Exchange: As the BRIC countries continue to grow economically and

develop closer ties with the rest of the world, there will likely be an increase in
cultural exchange. This exchange can happen through trade, tourism,
migration, and the spread of technology. It may result in the fusion of cultural
elements, such as food, music, fashion, and art, leading to a more diverse and
interconnected global cultural landscape.

2) Pop Culture Influence: BRIC countries have rich and diverse cultural
traditions, which could increasingly find their way into global popular culture.
For example, Bollywood movies from India have already gained significant
popularity worldwide, and Brazilian music genres like samba and bossa nova
have had a global impact. In the next decade, we may see further integration of
BRIC countries' popular culture elements into the global entertainment
industry.

3) Technological Innovations: China, in particular, has been at the forefront of

technological advancements in recent years. As these countries continue to
invest in research and development, they are likely to contribute significantly to
technological innovation. Their advancements may shape the way people
interact, communicate, and consume media, potentially influencing global
cultural practices and behaviors.
 - It is important to note that the future is uncertain, and these predictions are
speculative. The degree of influence these countries will have on the world's
cultures will depend on various factors, including their economic growth,
political stability, technological advancements, and global trends.
2. Anyone who has been to Hong Kong typically says it is different from
mainland China, more like Singapore, albeit with a strong connection to China.
Do you think Hong Kong will become more like China in the next few years, or
will China leverage Hong Kong as an asset to engage more capitalistically in the
international marketplace instead?
- The relationship between Hong Kong and mainland China has undergone
significant changes in recent years, and it is a topic of ongoing debate and
speculation. While it is challenging to predict the future with certainty, we can
analyze the current trends and factors at play.
- Since Hong Kong's return to Chinese sovereignty in 1997, it has operated under
the principle of "one country, two systems," which allowed it to maintain a
high degree of autonomy, its legal system, and economic freedoms. However,
in recent years, there have been concerns about the erosion of Hong Kong's
autonomy and the tightening of control by mainland China.
- It is worth noting that Hong Kong has been a crucial gateway for foreign
capital into mainland China, serving as an international financial hub due to its
well-established legal and financial systems. It has also benefited from its
position as a bridge between China and the global economy. China recognizes
the value of Hong Kong as a financial and business center and is likely to
leverage its international connections and expertise to further its own economic
interests.
- That said, China has also been working to integrate Hong Kong more closely
into its overall development plans. Initiatives like the Greater Bay Area project
aim to connect Hong Kong, Macau, and several mainland Chinese cities into an
integrated economic region. This integration could result in Hong Kong
aligning more closely with China in terms of economic policies and
regulations.
- The future direction of Hong Kong will depend on various factors, including
China's economic and political priorities, global economic trends, and the
response of Hong Kong's residents and international stakeholders. It is possible
that Hong Kong may continue to evolve and adapt, finding a delicate balance
between its connection to China and its unique characteristics, preserving its
role as an international financial and business hub.
- Ultimately, the outcome will depend on the actions and decisions of the
Chinese government, the aspirations of the people of Hong Kong, and the
dynamics of the international marketplace.
3. Macau was under Portuguese influence until 1999, which is not that long ago.
Many in Macau welcomed the Chinese takeover so that the area could be better
taken care of (e.g., infrastructure, economy). But being part of the Portuguese
administration from 1887 to 1999 clearly has imbued their cultural values and
beliefs in the mindset of Macau’s citizens. How are these values and beliefs likely
to influence the Macau–China relationship in the years to come?

The influence of Portuguese culture and values on Macau, even after the Chinese
takeover in 1999, is indeed significant. Macau's long history under Portuguese
administration has left a lasting imprint on its society, institutions, and cultural
identity. These influences are likely to continue shaping the Macau-China relationship
in the years to come in several ways:
1) Cultural Diversity: Macau's unique blend of Chinese and Portuguese cultural
elements contributes to its distinctiveness and serves as a bridge between China
and the Portuguese-speaking world. This cultural diversity can enhance
Macau's role as a platform for cultural exchange and cooperation between
China and Portuguese-speaking countries, such as Brazil, Portugal, and Angola
2) Economic Development: Macau's historical connections with Portugal and its
status as a Special Administrative Region of China provide it with a unique
position in the Greater Bay Area and in China's Belt and Road Initiative.
Macau can use its Portuguese-speaking background and cultural affinities to
attract investments, facilitate trade, and promote tourism between China and
Portuguese-speaking countries.
3) Governance and Legal System: Macau's legal system, influenced by Portuguese
civil law, coexists with China's socialist legal framework. Macau's legal
traditions and practices can offer a different perspective and contribute to the
development of legal and governance systems in mainland China. It may also
provide a platform for legal cooperation and exchange between Macau and
China.
4) Cultural Heritage Preservation: Macau's architectural, culinary, and cultural
heritage from its Portuguese colonial past can be a valuable asset for tourism
and cultural preservation. By maintaining and promoting its unique cultural
assets, Macau can contribute to China's broader efforts in cultural preservation
and heritage tourism, enhancing the Macau-China relationship.
However, it is important to note that as time passes and Macau integrates further with
mainland China, there may be ongoing challenges in preserving and promoting its
distinct Portuguese cultural heritage. The balance between preserving Macau's cultural
identity and aligning with China's overall development goals will require careful
navigation and mutual understanding between the local population, the Macau
government, and the Chinese authorities.
Overall, the influence of Portuguese cultural values and beliefs on Macau is likely to
continue shaping its relationship with China, providing opportunities for cultural
exchange, economic cooperation, and unique contributions to China's broader
development strategies.
4. Taiwan maintains diplomatic relations with some 76 member states of the
United Nations (19 in an official capacity and 57 in an unofficial capacity). The
nation’s culture is a blend of Confucianist Han Chinese and Taiwanese
aboriginal influences. How would you handle the link between China and Taiwan
—culturally, economically, and politically?
The issue of the relationship between China and Taiwan is complex and highly
sensitive, involving political, cultural, and economic dimensions. As an AI language
model, I can provide a neutral and informative perspective on the topic, but it is
essential to note that any solution to the issue requires careful consideration and
negotiation among the involved parties. Here is a broad overview of the different
aspects of the link between China and Taiwan:
● Cultural Link:
1) Cultural Exchange: Culturally, there are shared historical and linguistic ties
between China and Taiwan due to their common ethnic heritage, particularly in
terms of Confucianist Han Chinese influences. Cultural exchange programs,
tourism, and academic collaborations can help foster understanding and
appreciation of each other's cultures.
2) Preservation of Taiwanese Aboriginal Culture: Taiwan's indigenous cultures
are an integral part of its cultural diversity. It is crucial to preserve and promote
the unique traditions, languages, and heritage of Taiwanese aboriginal
communities. Recognizing and respecting these indigenous cultures can
contribute to a more inclusive and diverse cultural link between China and
Taiwan.
● Economic Link:
1) Trade and Investment: Taiwan and China have significant economic
interdependencies. Maintaining open trade channels and facilitating investment
flows between the two can be mutually beneficial. Promoting fair and
transparent trade practices and reducing barriers can foster economic growth
and cooperation.
2) Economic Cooperation and Integration: Exploring opportunities for economic
cooperation in areas such as technology, innovation, infrastructure
development, and regional economic integration can enhance the economic link
between China and Taiwan. Frameworks like the Comprehensive Economic
Cooperation Agreement (CECA) could be considered to deepen economic ties.
● Political Link:
 1) Dialogue and Diplomacy: Open and constructive dialogue between China and
Taiwan is crucial for addressing political issues. Encouraging direct
communication channels, diplomatic discussions, and peaceful negotiations can
help ease tensions and find mutually acceptable solutions.
2) Respect for Democratic Processes: Taiwan has developed a vibrant democratic
system, and respecting the will of the Taiwanese people is vital. Supporting
democratic values, human rights, and the rule of law in the context of cross-
strait relations can contribute to a stable and peaceful political link.
It is important to note that any resolution of the link between China and Taiwan
requires the willingness of both sides to engage in meaningful dialogue, respect for
each other's sovereignty and aspirations, and a commitment to peaceful coexistence.
The process will need to consider the complex historical, political, and cultural factors
at play, with the involvement of international stakeholders to facilitate productive
discussions.
Ultimately, the path forward will depend on the decisions and actions of the
governments and people of China and Taiwan, as well as the international
community's support for a peaceful resolution based on mutual respect and
understanding.
CHAPTER 4: INTERNATIONAL TRADE AND FOREIGN DIRECT INVESTMENT
( Tương ứng Chapter 7 trong sách)

Management focus: Protecting U.S. Magnesium

Reread the Management Focus “Protecting U.S. Magnesium.” Who gains most
from the antidumping duties levied by the United States on imports of magnesium from
China and Russia? Who are the losers? Are these duties in the best national interests of
the United States?

Có 3 ý nhỏ:

● Who gains most from the antidumping duties levied by the United States on
imports of magnesium from China and Russia?

The article suggests that the U.S. Magnesium, the sole surviving U.S. producer of
magnesium, would gain the most from the antidumping duties levied by the United States on
imports of magnesium from China and Russia. The imposition of duties allowed U.S.
Magnesium to protect its domestic market from what it perceived as unfair competition from
foreign producers selling magnesium at prices significantly below market value.

The favorable ruling enabled U.S. Magnesium to reap the benefits of its investments in the
manufacturing plant and boost its capacity. It also helped the company to increase its market
share and profitability. The spokesperson for U.S. Magnesium stated that once unfair trade
practices were removed, they would be able to compete with anyone.

● Who are the losers?

According to the article, the losers in the situation of imposing antidumping duties on imports
of magnesium from China and Russia are the magnesium consumers in the United States.
The higher prices resulting from the duties had a negative impact on these consumers, such as
Alcoa, which used magnesium in their products. They argued that the increased prices would
force them to consider moving production outside the United States or find alternatives to
magnesium.
The article also mentions that the imposition of antidumping duties raised prices in the United
States significantly above world levels for magnesium. This situation could potentially drive
engineers in the automobile industry to design magnesium out of automobiles or force
manufacturing elsewhere, which would ultimately have negative consequences for everyone.
So, while the antidumping duties aimed to protect the U.S. Magnesium and the domestic
industry, they had adverse effects on magnesium consumers in the United States and could
potentially impact the competitiveness and choices available to industries relying on
magnesium as a raw material.

● Are these duties in the best national interests of the United States?

Determining whether the antidumping duties levied on imports of magnesium from China
and Russia were in the best national interests of the United States is a complex and subjective
matter. Different stakeholders may have different perspectives on the issue.

From the perspective of U.S. Magnesium, the imposition of antidumping duties likely served
their best interests as it protected their domestic market from what they perceived as unfair
competition. It allowed them to increase their market share, profitability, and capacity, which
they argued would enable them to compete on a level playing field.

On the other hand, the article highlights concerns raised by magnesium consumers in the
United States, such as Alcoa and the automobile industry. They argued that the higher prices
resulting from the duties could have negative consequences, including potentially driving
production overseas, reducing competitiveness, or leading to the substitution of magnesium
with other materials.

Ultimately, determining the best national interests requires a comprehensive analysis that
considers both the short-term benefits and the potential long-term consequences for various
stakeholders in the United States.

The United States and South Korea Strike a Revised Trade Deal

1. Why do you think the Obama administration pursued a trade deal with Korea in
2012? What were the potential economic and political benefits? What were the
potential costs?
 The US-Korean free trade deal of 2012, was the first trade deal between the United
States and an Asian economy over a significant export and import goods. Combined with the
consumers of Korea and the US, there lies a vast potential of a growing economy for the
future of steel and vehicle industries as a whole. Korea is one of the largest steel suppliers in
the US, while American cars are one of the highly demanded goods around the world and in
Korea. The trade agreement ceased to provide benefits to both the economies, economically
and politically. For the US alone, the Obama administration saw the potential in creating
jobs, learning, and manufacturing units by the Koreans. The agreement's downside was that it
lessened the quota and tariffs, while the contract could not be broken before five years with
the same terms and conditions.

2. Is there any evidence that the 2012 free trade deal between the United States and
South Korea was a “job killer” as claimed by President Trump?
President Trump’s view is that the US can manufacture the goods it is currently
importing from Korea. The President claims the deal to be a job killer in the essence that
because the products are being imported, the US economy is not setting manufacturing and
production units for domestic production. As a result, people are not being employed. His
solution was for the American economy to start domestically producing those products and
utilizing the local labor to discourage importing Korean goods.

3. What were the motivations of the Trump administration in renegotiating the

2012 deal?
The most significant factor was that Korea was seen as an ally against North Korea,
and the US could not bear to be its enemy by harming its economy. The Trump
administration didn't like that in the 2012 deal, both the U.S. and South Korea were
benefiting. I think they wanted it to just be the U.S. benefiting from the trade which is why
they renegotiated to limit the export of steel from Korea, a bigger amount for U.S. cars traded
to Korea, and an increase of 25% on imported trucks from Korea.

4. Who benefits from the revised (2018) deal? Who might lose? Does the 2018 deal
represent an improvement over that ratified in 2012?
In a way, both the nations benefit from the deal with the reliance on goods from both
countries.
In 2018, the Trump administration renegotiated the trade deal that saw some changes
to the original agreement. For example, the deal increased the export proportions and
expanded eco-credits for US vehicles. The new agreement allows the US car manufacturers
to export 50,000 cars per manufacturer to South Korea, which was an improvement from
25,000 autos per manufacturer from the previous deal. The US benefited more than South
Korea in the agreement since it increased its vehicle exports. The car manufacturers selling
more vehicles to South Korea would pay taxes to the US government. Therefore, the United
States economy received a significant boost from the trade agreement because of the
increased taxes.
The deal allows President Trump to claim that his “get tough” approach to trade
negotiations works. For their part, the South Koreans were reportedly pleased that they didn’t
have to give ground on opening up their agricultural industry to US imports. Compared with
the 2012 agreement, the 2018 value has been seen to be reasonably lenient.

Burberry Shifts Its Entry Strategy in Japan

1. Why did Burberry initially choose a licensing strategy to expand its presence in
Japan?
Licensing is a crucial strategy to expand the business. Burberry’s operations in Japan
were successful due to the effective implementation of this market entry strategy.
Burberry selected licensing to contain the rapid expansion in Japan, and it created a
positive impact on the overall net worth of the company. Sanyo Shoki managed the
operations incredibly, and it paid $80 million to the company. Of course, apart from
the financial benefits, the company initially adopted this strategy because it was better
to increase sales and grab an immense range of customers. Partner Sanyo Shoki made
this deal successful by growing the number of stores in different Japanese regions.
The company wanted to reduce capital investment in Japan initially, and it is one of
the most prominent reasons for this strategy and execution. However, the brand
image was to be sustained by the company, and it was also a significant concern in
this market.

2. What limitations of the licensing strategy became apparent over time? Should
Burberry have expected these drawbacks to arise?
Some limitations of the licensing strategy became apparent over time. For Instance,
Burberry aimed to increase or sustain the brand exposure by retaining the brand
image. The company wanted to keep its prices high for effective positioning.
However, it was revealed that Sanyo sold products at low prices to increase sales and
revenues. It was beyond the firm’s strategy, and it was not more luxury for customers.
Lack of control on operations and pricing strategy were two prominent limitations,
which also made the brand controversial. Burberry did not expect these limitations or
drawbacks in this market. In the contemporary business environment, competitive
advantage is a crucial factor, which can enable business growth and sustainability.
Burberry intended to keep its image alive, but Sanyo Shoki had its concerns. The
difference between business ideologies made the difference, and it compelled the
company to change its decision and strategy.

3. What terminating the Japanese licensing agreement and opening wholly owned
stores the correct strategic move for Burberry? What are the risks here?
Terminating a licensing agreement and operation with wholly owned stores was the
best strategy for the company to survive in the global market like Japan. The company
wanted to create a brand image through high prices of its luxury products. By opening
its stores, the company was in a better position to sell its product with the appropriate
pricing strategy. Interestingly, this pricing strategy did not create a negative impact on
 sales and revenues. Selling at high prices through wholly owned stores created the
opportunity to regain its image and target customers who wanted to pay high to get
luxury products. Previously, the licensing agreement reduced the switching cost of
customers, and it hit the company in the competitive market. It seemed a correct
strategic move by the company to gain control of sales in foreign markets. The risk of
customer conversion was also in the limelight, but retargeting customers by opening
new stores was a right approach to meet sales targets and rebuild the brand image.

4. To what extent does internationalization theory explain Burberry’s experience in

Japan?
The international theory explains the presence of Burberry in Japan. Burberry
expanded the business or justified the internalization due to the imperfect
intermediate product market. For instance, in the United Kingdom, the company got
the potential to maximize its production process to meet the needs of customers.
Due to increasing competition and availability of substitutes for customers, the
company moves to Japan to grab new customers and explore the market. The
internalization theory also depicts some business risks such as unfamiliarity of new
market conditions and trends. However, these risks are to be taken by the company
to increase its global market share. The business partner sold products at low prices,
which made the market imperfect for this firm. Now, containing the wholly owned
stores in Japan is a part of the journey of making the market perfect for both
customers and the business, and ultimately, it can create the favorable impact on
profitability, brand image and competitive advantage.

Greely Goes Global

1. Why did Geely acquire Volvo? What are the benefits of acquisition? What are
the potential costs and risks?
- The main reasons why Geely acquired Volvo: they needed to develop cars’ design
and engineering skills, excellent perspectives for growth, especially in China, low
price of the acquisition, personal preference for the brand Volvo, of Geely owner, Li
Shufu. Geely was known as a manufacturer of cheap cars with a short history, poor
safety, and questionable quality, whereas Volvo was a premier European luxury
brand. When the acquisition happened, the strengths of Volvo would help overcome
the weaknesses of Geely. The combination of the timing of Ford selling Volvo at a
low price and Li Shufu's fondness for Volvo over the years creates a good reason for
Geely to buy Volvo.
- The benefits of this acquisition are as follows:
+) Geely got access to advanced technology of Volvo: It is a fact that Volvo has one
of the most advanced technologies in the automobile industry. Volvo is most well-
known in the safety design, but also in the environment technology. Volvo is regarded
as the safest car in the world by many. In addition, Volvo has a complete and
advanced product development process, world-wide customer management, etc. By
 acquiring Volvo, Geely got access to these technologies directly, and this will shorten
the time for Geely to develop such by its own.
+) Brand enhancement of Geely: Through the acquisition of Volvo, Geely has
strengthened its brand both in China and abroad. In China, people are really proud of
Geely’s acquisition of the prestigious Volvo, which gives a lift for the image of Geely
in China. Overseas, Geely has got a lot of attention in the world media because of the
acquisition business. The people in the western countries already know the brand of
Geely, even if they have not seen the products yet. This definitely helps Geely’s
overseas expansion in the future
+) High growing possibility for Volvo in the Chinese market: Geely’s chairman Li
Shufu has been confident that he can make Volvo grow significantly in the fast
growing Chinese market. He can help Volvo understand the Chinese market deeper
and better. He can help Volvo establish new plants in China in an efficient way.
+) Development of the Chinese automobile industry. The automobile industry not
only eyes on the domestic market, but also the overseas expansion. The government
really wants to see the direction of overseas expansion. Therefore, the government
helped Geely acquire Volvo, which opens a channel for the Chinese automobile
industry to the world. This acquisition has great strategic significance in enhancing
the nation’s brand, to bring China's automobile industry to a new level on the world
stage.
- The potential costs and risks of this acquisition are:
+) Customer loyalty can be kept only through the preservation of the brand value.
However, to keep the high value of the Volvo brand is a very challenging work after
Volvo was bought by Geely. The reason is simple: the Geely brand is very weak, and
Geely is unknown to the people in industrial nations, and in China, Geely is regarded
as a low-cost and low-quality product. This kind of owner does not increase the value
of the Volvo brand. In addition, Geely is totally different from Volvo’s previous
owner Ford, where Ford itself has a good reputation even though it is not regarded as
the luxury brand.
+) Because Geely and Volvo operate in different segments, they have very different
cost structures in their products. With this huge difference in their cost structure,
Geely, the owner of Volvo, will be difficult to understand the investment and
management of Volvo. When it makes an investment in Volvo, Geely will always
wonder why such a big investment can only produce so little results in Volvo, while
so much can be done in Geely with the same amount of money. If this can’t be treated
in a good way, there will certainly be problems between Geely and Volvo.

2. The Volvo acquisition allowed Geely to grow its sales in China. Why might an
acquisilion have been preferred to simply licensing the brand and knowhow
from Volvo (assuming that was an option)?
A licensing agreement has restricted potential for return, as the foreign firm gets more
benefits due to the licensing agreement. In this case study , the Volvo acquisition
allowed Geely to grow its sales in China but still laying on licensing obviously led
Geely to a disadvantageous position because licensing will result in lower income
 when compared to other entry modes such as acquisitions. Geely also will lose control
of licensee manufacture and marketing operations and other practices resulting in the
loss of quality. In addition, Volvo as a foreign partner can even become a challenger
by selling its creation in China and the Geely products might disappear from the
market.

3. Following the Volvo acquisition, Geely built a new wholly owned factory to
produce Volvo cars in the United States. Why direct investment strategy
preferred to other ways of growing the US market such as through exporting or
licensing the Volvo brand and designs to another producer?
A direct investment strategy was preferred to other ways of growing the US market
because it would give Geely more control over the product development and
distribution channels.For a firm using the market entry mode of FDI is very
advantageous which stands for ownership, location and Internationalisation
advantages for FDI. Ownership refers to the assets of the MNE which enables the
MNE to successfully compete against rivals in the global markets and location
advantage is the low costs that a foreign country can offer an MNE such as cheap
labor, cheap land. Exporting or licensing the Volvo brand and designs to another
producer might have resulted in limited control over the quality of the product and the
marketing activities. In more details, it is given that though the licensor has quality
control over the licensed product, name or technology they do not control the
licensee's production supply or advertising something that the licensor (firm) would
be interested in. A firm wanting to use licensing as a market entry mode will face
disadvantages in that its own technology could be enhanced and used by the licensee
to enter the licensor market and put it out of business

4. What are the benefits of Geelys investment in Southern California to the US

economy? What are the potential costs? Do you think it was in the interests of
the United States to let this investment proceed?
- The benefits of Geely's investment in South Carolina to the US economy include job
creation, capital investment, and increased tax revenue. The FDI has the potential to
generate employment through direct hiring of people for new plants, which means
they improve aggregate domestic employment through types of jobs created, regional
distribution of new employment, wage levels, income distribution and skill transfer.
In this case study, Geely had double the number of U.S employees to almost 4,000.
American engineers and designers obtained great new knowledge, and many
resources and data about the safety and efficiency of the Volvo cars were received and
implemented.
- The potential costs include environmental impacts and a highly demanded fund to
start. Increased FDI inflows could lead to increased environmental emissions. First,
the intense competition among developing countries to attract FDI may lead to
relaxing of environmental standards for foreign firms, thus encouraging firms in
developed countries to move their pollution-intensive production to developing
countries. Second, the increasing costs of pollution abatement in certain sectors in
 developed countries make pollution-intensive activities costly in developed countries.
US FDI being skewed towards industries that face high pollution abatement cost at
home. As a result, A lot of people have opposed FDI inflows to their country over the
years, leading to some difficulties in selling products. China's capital outflow with the
U.S. suffered, because of the large funds needed to finance building everything from
scratch.
- It was in the interests of the United States to let this investment proceed because it
created jobs and increased economic growth.

CHAPTER 5: REGIONAL ECONOMIC INTEGRATION

(Tương ứng Chapter 9 trong sách)

NAFTA 2.0: THE USCMA

1. On balance, do you think that NAFTA has been a net positive or negative for the
United States economy? What about for the economies of Mexico and Canada?
On balance, I think that NAFTA has been a net positive for all of the three countries:
The United States, Canada and Mexico. As NAFTA increases economic cooperation and
boosts trade among the 3 countries. In addition, it would increase competitiveness in world
markets, and more investment opportunities for U.S.Since NAFTA was signed in 1994, trade
between the United States, Canada, and Mexico has tripled to $1.3 trillion
Now, I am going to analyze it respectively

THE US
● Increased trade:
Since NAFTA was signed , NAFTA has tripled US trade with Canada and Mexico,
faster than the US trade with any other countries.Canada and Mexico are the two largest
export markets in the US, which accounts for one-third of the US export.
● Jobs creation: NAFTA directly supported 5.4 million jobs.
The steepest decline is from 2000 and 2010 coming from the event “ China joins the
WTO”. In fact, by contributing to the development of cross-border supply chains, NAFTA
lowered costs, increased productivity which helped the U.S. auto industry compete with
China. This means that without the pact, even more jobs could have been lost.

MEXICO
● Auto export: The United States is Mexico's largest auto export market
(accounting for more than 68%), followed by Canada with 6.9%.
● Job creation and FDI inflows:
Automotive companies began to organize part or all of their production processes in
Mexico, and now the auto industry is on the way to become the largest industry in Mexico.
Foreign investment in Mexico for these plants has created many manufacturing jobs for
Mexican citizens

CANADA
 ● Energy export:
NAFTA has helped to increase Canada's energy exports to the United States, which is
Canada's largest trading partner. This has been particularly important for Canada's oil and gas
industry, which is a major contributor to the country's economy.

2. Why do you think Donald Trump was so focused on renegotiating NAFTA

during and after his successful presidential campaign?
- The first reason is huge NAFTA Trade Deficit Emerges
The U.S. goods trade deficit with Mexico and Canada has worsened considerably
For example, in 2017, U.S. producers exported $21 billion of finished automobiles
and automotive parts to Mexico, but imported $84 billion in autos and parts from Mexico.
Since NAFTA, the annual growth of the U.S. goods trade deficit has been 51 percent
higher with Mexico and Canada than with countries that are not party to NAFTA.

- The second reason is the massive U.S. Jobs Losses Due to NAFTA
At the heart of NAFTA are special protections that make it cheaper and safer for
corporations to outsource U.S. jobs to low-wage Mexico. Mexican worker’s wages are much
cheaper than American workers, so that U.S. auto, electronics, appliance, heavy equipment
and other manufacturers built high-tech, multi-million dollar plants in Mexico. But Trump
complains that NAFTA’s costs — “thousands of factories and millions of jobs”. The
Economic Policy Institute said in 2013 that some 700,000 jobs had been lost as production
moved to Mexico – with California, Texas, and Michigan among the worst hit states.
EPI further calculated that the ballooning trade deficit with Mexico alone destroyed
about 850,000 net U.S. jobs.

- And the last reason is wages Decline Due to NAFTA

The quality of jobs available, and the wages most U.S. workers can earn, have been
degraded. According to the U.S. Bureau of Labor Statistics, two out of every five displaced
manufacturing workers who were rehired in 2017 experienced a wage reduction. One out of
every four displaced manufacturing workers took a pay cut of greater than 20 percent. For the
average worker earning the median manufacturing wage of $39,500 per year, this meant an
annual loss of at least $7,900.

3. What is your assessment of the USCMA? What are the potential benefits of this
agreement for the United States? What are the costs? On balance, does this
agreement represent an improvement over NAFTA?
Assessment of the USCMA
The United States, Mexico, and Canada updated NAFTA to create the new USMCA. I
believe that The USMCA is a win for the three countries involved as it supports mutually
beneficial trade which leads to freer markets, fairer trade, and economic growth in North
America.

Potential benefits of this agreement for the United States

 - Entering into the USMCA would deliver significant benefits to America. In terms of
economy, USMCA would raise US real GDP by $68.2 billion and US employment by
176,000 jobs, according to the International Trade Commission.
- Secondly, America’s dairy farmers will have new market opportunities in Canada for
a wide variety of dairy products. Canada also agrees to eliminate the unfair milk
pricing program that allowed its farmers to undersell US producers.
- Thirdly, the USCMA will also protect American auto workers. The new agreement
will increase the production of automobiles and component parts in the United States,
at least 75 percent of parts made in North America in order to
qualify for zero tariffs. Also, 40 to 45 percent of an auto will have to be made by
workers earning at least $16 an hour.
- Lastly, due to removal of tariffs, the United States can import oil and other products
from Mexico at lower costs, minimizing the country’s dependence on oil from the
Middle East.

Costs: However, there are some negative effects of the USCMA for the US.
- The USCMA may include higher costs to North American automobile producers, and
higher prices for consumers. Overall, this would raise the average price of vehicles in
the US market and reduce US sales.
- The agreement could lead to job losses in the United States, as companies may
relocate to Mexico in search of cheaper labor. Researches show that the average
wages for production workers in the US is about triple that of Mexico.

Improvement over NAFTA

The USMCA is regarded as a necessary upgrade and worthy replacement for NAFTA, which
modernized and improved its provisions. This stronger and more defined trade agreement
will undoubtedly have some collective benefits for the US, Canada and Mexico. With more
defined rules, trade between the countries is expected to increase significantly, meaning that
the three countries can rely less on other trade partners farther away. Free trade and shorter
distances not only save money, but they also mean less waiting times for manufacturers and
consumers and less environmental pollution by ships and aircraft.

4. On balance, is the USCMA good for Canada and Mexico?

Overall, the USMCA is expected to have a positive impact on Canada and Mexico's
export of goods and services, as well as their automobile industry.
1. Exported goods and services: The USMCA maintains the tariff-free access to the U.S.
market that was established under NAFTA, which is particularly important for
Canada and Mexico, as the U.S. is their largest trading partner. The agreement also
includes new provisions related to e-commerce, intellectual property, and other areas
that are important for trade in the modern economy. By maintaining and updating the
provisions of NAFTA, the USMCA provides greater certainty and stability for
businesses and investors in the region, which should help to promote continued
growth in the export of goods and services.
 For example: In 2019, Canada's exports to the U.S. totaled $312.1 billion, and
Mexico's exports to the U.S. totaled $358.4 billion.
2. Automobile industry: The USMCA includes new rules related to the automobile
industry, such as requiring that a certain percentage of a vehicle's parts be produced in
North America to qualify for tariff-free treatment. These rules are intended to promote
the growth of the automobile industry in the region, particularly in the United States.
While these rules may increase costs for some producers, they are generally seen as a
positive development for the industry as a whole, as they provide greater certainty and
stability for businesses and promote investment in the region.
For example: Under the USMCA, automakers must produce at least 75% of a
vehicle's components in North America, up from the 62.5% required under NAFTA.
In addition, 40-45% of a vehicle's components must be made by workers earning at
least $16 per hour.

According to a study by the United States International Trade Commission, the

USMCA is expected to increase U.S. exports to Canada and Mexico by 5.9% and 6.7%,
respectively, compared to the baseline scenario in which NAFTA remained in place. The
study also found that the USMCA is expected to increase U.S. GDP by 0.35%, create
176,000 new jobs, and increase investment in the U.S. by $34 billion.

Overall, while there may be some challenges associated with the implementation of
the USMCA, particularly in the automobile industry, the agreement is expected to have a
positive impact on Canada and Mexico's export of goods and services.