Strategic Management: A Competitive

Advantage Approach, Concepts and

Cases
Eighteenth Edition

Chapter 11
Global and International
Issues

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Learning Objectives
11.1 Discuss the nature of doing business globally, including
labor union issues and tax rates.
11.2 Explain the advantages and disadvantages of doing
business globally.
11.3 Discuss the global challenge facing firms, including
outsourcing and reshoring.

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Learning Objectives (continued)
11.4 Compare and contrast U.S. business culture versus
foreign business cultures; explain why this is a strategic
issue.
11.5 Discuss business culture, with emphasis on Mexico,
Japan, China, and India.
11.6 Discuss business climate in nations across the globe.

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Figure 11.1
The Comprehensive, Integrative Strategic Management Model

Source: Fred R. David, “How Companies Define Their Mission,” Long Range Planning (February 1989): 91.
no. 1
22, See
also Anik Ratnaningsih, Nadjadji Anwar, Patdono Suwignjo, and Putu Artama Wiguna, “Balance Scorecard of David’s
Strategic Modeling at Industrial Business for National Construction Contractor of Indonesia,” Journal of Mathematics and
Technology no. 4 (October 2010): 20. See also Meredith E. David, Fred R. David, and Forest R. David, “Closing the Gap
Between Graduates’ Skills and Employers’ Requirements: A Focus on the Strategic Management Capstone
Business
Course,” Administrative Sciences
no. 1 (2021): 10-26.
11,
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Global/International Issues
• The underpinnings of strategic management hinge on
managers gaining an understanding of competitors,
markets, prices, suppliers, distributors, governments,
creditors, shareholders, and customers worldwide.
• The price and quality of a firm’s products and services
must be competitive on a worldwide basis, not just on a
local basis.

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The Nature of Doing Business
Globally
• Exports of goods and services from the United States
account for only 12 percent of U.S. gross domestic
product.

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Globalization
• Globalization
– process of doing business worldwide, so strategic
decisions are made based on global profitability of the
firm rather than just domestic considerations
• Global Strategy
– includes designing, producing, and marketing products
with global needs in mind, instead of considering
individual countries alone

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Table 11.1
The Largest Company (in Revenues) in 25 Different
Countries
Company Country
Walmart United States
Brookfield Canada
Gazprom Russia
Hon Hai Precision Industry Taiwan
Samsung Electronics South Korea
Toyota Motor Japan
America Movil Mexico
State Grid China
Koc Turkey
Petronas Malaysia
Trafigura Singapore
Reliance Industries India
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Table 11.1 (continued)
The Largest Company (in Revenues) in 25 Different
Countries
Company Country
PT T Thailand
Saudi Aramco Saudi Arabia
BH P Group Australia
Pertamina Indonesia
Arcelormittal Luxembourg
Volvo Sweden
Maersk Denmark
Volkswagen Germany
Accenture Ireland
Royal Dutch Shell Netherlands
BP Britain
Anheuser-Busch Inbev Belgium
Banco Santander Spain

Source: Based on https://fortune.com/longform/biggest-companies-in-every-country-global-500/

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Multinational Firms
• Multinational Firms
– Organizations that conduct business operations
across national borders
– Also called international firms
– The decision to expand into foreign markets is one of
the most important strategic decisions a firm can make

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Labor Unions
• Labor unions are an important factor in strategic decisions
• Unions increase wage costs and impact the firm’s choice
of where to locate stores and factories
• Unions represent about 11% of U.S. workers
• Unions represent about 23% of E U workers. However,
some nations such as Finland and Sweden have union
membership rates above 70%

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Table 11.2
Corporate Tax Rates for Various Countries in 2021 (From
High to Low)

Corporate Tax
Country Continent Rate
Argentina South America 35
Brazil South America 34
Australia Australia 30
India Asia 30
Nigeria Africa 30
Mexico North America 30
Germany Europe 29.94
Japan Asia 29.74
France Europe 28.41
Canada North America 26.5
US A North America 25.75

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Table 11.2 (continued)
Corporate Tax Rates for Various Countries in 2021 (From
High to Low)

Country Continent Corporate Tax Rate

China Asia 25
Malaysia Asia 24
Egypt Africa 22.5
Indonesia Asia 22
Turkey Asia 20
Poland Europe 19
Singapore Asia 17
Ireland Europe 12.5
Chile South America 10
Hungary Europe 9
Bermuda North America 0
Cayman Islands North America 0
Turks and Caicos Islands North America 0

Source: Based on https://taxfoundation.org/corporate-tax-rates-by-country-2021/

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Advantages of Global Business
1. Firms can gain new customers for their products.
2. Foreign operations can absorb excess capacity, reduce
unit costs, and spread economic risks over a wider
number of markets.
3. Foreign operations can allow firms to establish low-cost
production facilities in locations close to raw materials or
cheap labor.
4. Competitors in foreign markets may not exist, or
competition may be less intense than in domestic
markets.

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Advantages of Global Business
(continued)

5. Foreign operations may result in reduced tariffs, lower

taxes, and favorable political treatment.
6. Multinational joint ventures can enable firms to learn the
technology, culture, and business practices of other
people and to make contacts with potential customers,
suppliers, creditors, and distributors in foreign countries.
7. Economies of scale can be achieved from operation in
global rather than solely domestic markets.
8. A firm’s power and prestige in domestic markets may be
significantly enhanced if the firm competes globally.

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Disadvantages of Global Business
1. Foreign operations could be seized by nationalistic
factions.
2. Firms confront different and often little understood social,
cultural, demographic, environmental, political,
governmental, legal, technological, economic, and
competitive forces.
3. Weaknesses of competitors in foreign lands are often
overestimated, and strengths are often underestimated.
4. Language, culture, and value systems differ among
countries, which can create barriers to communication.
5. Gaining an understanding of regional organizations is
difficult.
6. Dealing with two or more monetary systems can
complicate international business operations.
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The Global Challenge (1 of 3)
• America's economy is becoming much less American.
• A world economy and monetary system are emerging.
• Markets are shifting rapidly and, in many cases
converging in tastes, trends, and prices.

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The Global Challenge (2 of 3)
• Protectionism
– Refers to countries imposing tariffs, taxes, and
regulations on firms outside the country to favor their
own companies and people.
– The U.S. and China often impose tariffs on each
other’s products imported although the number and
magnitude of tariffs and taxes varies depending on
U.S. presidential elections.

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The Global Challenge (3 of 3)
• Outsourcing
– Involves companies hiring other companies to take
over various parts of their functional operations, such
as human resources, information systems, payroll,
accounting, customer service, and even marketing.
• Reshoring
– Refers to U.S. companies moving a portion of their
manufacturing back to the United States.

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Table 11.3
Potential Benefits of Outsourcing
1. Cost savings: Access lower wages in foreign countries.
2. Focus on core business: Focus resources on developing the
core business rather than being distracted by other functions.
3. Cost restructuring: Outsourcing changes the balance of fixed
costs to variable costs by moving the firm more to variable
costs.
4. Improve quality: Improve quality by contracting out various
business functions to specialists.
5. Knowledge: Gain access to intellectual property and wider
experience and knowledge.
6. Contract: Gain access to services within a legally binding
contract with financial penalties and legal redress. This is not
the case with services performed internally.
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Table 11.3 (continued)
Potential Benefits of Outsourcing
7. Access to talent: Gain access to a larger talent pool and a
sustainable source of skills, especially science and
engineering.
8. Catalyst for change: Use an outsourcing agreement as a
catalyst for major change that cannot be achieved alone.
9. Reduce time to market: Accelerate development or
production of a product through additional capability brought
by the supplier.
10. Risk management: Manage risk by partnering with an outside
firm.
11. Tax benefit: Capitalize on tax incentives to locate
manufacturing plants to avoid high taxes in various countries.

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Benefits to Reshoring
1. Reliable energy at a relatively low cost, lower
transportation and shipment costs
2. A large, skilled workforce with U.S. laws that protect
employees, including females and people of color
3. Greater security and ability to protect designs and
intellectual property from theft and overseas copycats
4. Closer tabs on quality control and supply chains, enabling
enhanced customer responsiveness
5. More efficient production capacity and inventory
management
6. Simplified legal and tax-related issues
7. Foster participation in the U.S. economy by providing
new jobs and developing “made in America” products
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US A Versus Foreign Business
Culture
• To be successful in world markets, U.S. managers must
obtain a better knowledge of historical, cultural, and
religious forces that motivate and drive people in other
countries.
• For multinational firms, knowledge of business culture
variation across countries can be essential for gaining and
sustaining competitive advantage.

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Table 11.4
Components of Business Culture Across Various Countries
Business Attitude Communication
Time Sensitivity Style Informal
Win-Lose to Win- Indirect to
Country Low to High to Formal
Win Direct
Australia 5.0
5 point 0

4.0
4 point 0

2.0
2 point 0

5.0
5 point 0

Brazil 3.0
3 point 0

1.0
1 point 0

2.0
2 point 0

3.0
3 point 0

Canada 5.0
5 point 0

4.5 3.0
3 point 0

5.0
5 point 0

China 2.0
2 point 0

2.0
2 point 0 5.0
5 point 0

1.0
1 point 0

France 3.0
3 point 0

1.0
1 point 0

4.0
4 point 0

3.0
3 point 0

Germany 3.5 5.0

5 point 0

5.0
5 point 0

4.0
4 point 0

India 3.0
3 point 0

2.0
2 point 0

3.0
3 point 0

2.0
2 point 0

Indonesia 4.0
4 point 0

2.5 4.5 1.0

1 point 0

Italy 3.5 3.5 3.0

3 point 0

2.5

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Table 11.4 (continued)
Components of Business Culture Across Various Countries
Business Attitude Communication
Time Sensitivity Style Informal
Win-Lose to Win- Indirect to
Country Low to High to Formal
Win Direct
Japan 4.0
4 point 0

3.0
3 point 0

5.0
5 point 0

1.0
1 point 0

Malaysia 4.0
4 point 0

2.0
2 point 0

3.5 2.0
2 point 0

Mexico 3.5 2.0

2 point 0

3.0
3 point 0

2.0
2 point 0

Nigeria 2.0
2 point 0

1.0
1 point 0

3.0
3 point 0

2.5

South Korea 2.0

2 point 0

3.0
3 point 0

5.0
5 point 0

2.0
2 point 0

Sweden 4.0
4 point 0

4.0
4 point 0

5.0
5 point 0

5.0
5 point 0

United Arab
3.0
3 point 0

2.0
2 point 0

2.0
2 point 0

2.0
2 point 0

Emirates
UK 4.0
4 point 0

4.0
4 point 0

4.0
4 point 0

3.0
3 point 0

United States 3.0

3 point 0

5.0
5 point 0

3.0
3 point 0

5.0
5 point 0

Source: Based on information from the World Trade Press’ Global Road Warrior database available at
https://www.globalroadwarrior.com/
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Cultural Differences between U.S.
and Foreign Managers (1 of 3)

• Americans place an exceptionally high priority on time,

viewing time as an asset. Many foreigners place more
worth on relationships.
• Personal touching and distance norms differ around the
world. Americans generally stand about three feet from
each other when carrying on business conversations, but
Arabs and Africans stand about one foot apart.

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Cultural Differences between U.S.
and Foreign Managers (2 of 3)

• Family roles and relationships vary in different countries.

• Business and daily life in some societies are governed by
religious factors.
• Many cultures around the world value modesty, team
spirit, collectivity, and patience much more than
competitiveness and individualism, which are so important
in the United States.

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Cultural Differences between U.S.
and Foreign Managers (3 of 3)

• Eating habits differ dramatically across cultures.

• Rules of etiquette vary, and managers must learn the
rules of others.
• Americans often do business with individuals they do not
know, unlike businesspersons in many other cultures.

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Communication Differences Across
Countries

• Americans sometimes come across as intrusive,

manipulative, and garrulous; this impression may reduce
their effectiveness in communication.
• Managers from the United States are much more action-
oriented than their counterparts around the world; they
rush to appointments, conferences, and meetings—and
then feel the day has been productive.
• U.S. managers often use blunt criticism, ask prying
questions, and make quick decisions.

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Mexico’s Business Culture
• Employers seek workers who are agreeable, respectful,
and obedient, rather than innovative, creative, and
independent.
• Mexican employers are paternalistic, providing workers
with more than a paycheck, but in return they expect
allegiance.

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Japan’s Business Culture
• The Japanese place great importance on group loyalty
and consensus, a concept called W a.
• When confronted with disturbing questions or opinions,
Japanese managers tend to remain silent.
• Age and status are of paramount importance.
• Elders are respected and revered.
• Business cards are exchanged with enthusiasm.

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China’s Business Culture
• The Chinese rarely do business with companies or people
they do not know.
• Your position on an organizational chart is extremely
important in business relationships.
• Arriving late to a meeting is an insult and could negatively
affect your relationship.
• Meetings require patience because mobile phones ring
frequently and conversations tend to be boisterous.
• The nation has very ambitious business goals.

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India’s Business Culture
• People in India do not like to say “no,” verbally or
nonverbally.
• Rather than disappoint you, they often will say something
is not available, or will offer you the response that they
think you want to hear or will be vague with you.
• Many Indians do not eat beef and many are vegetarians.
• Table manners are very formal.

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India’s Business Culture (continued)
• Indians prefer to do business with those whom they have
established a relationship built upon mutual trust and
respect.
• Punctuality is important.
• Indians generally do not trust the legal system and
someone’s word is often sufficient to reach an agreement.

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Business Climate Across Countries
Ease of doing business rankings based on a weighted
average of five key motivators:

1. Safety and security (25%)

2. Economic opportunity (25%)
3. Quality of life (25%)
4. Global mobility (15%)
5. Financial freedom (10%)

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Table 11.5
The Top 10 Nations That Are Best for Doing Business in 2022
Ranking Country Continent World Citizenship
Rating
1. Singapore Asia 84.8
2. United States North America 83.7
3. Hong Kong Asia 83.1
4. Netherlands Europe 82.4
5. Japan Asia 82.3
6. Switzerland Europe 82.3
7. Germany Europe 81.8
8. Denmark Europe 81.2
9. Sweden Europe 81.2
10. United Kingdom Europe 81.2
Source: Based on information at

https://ceoworld.biz/2022/02/28/the-best-places-to-do-business-in-2022-according-to-the-world-citizensh
ip-report/
, retrieved on May 31, 2022.
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Figure 11.2
How to Gain and Sustain Competitive Advantages

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