How does the Internet affect international business activity and the globalization of the world economy? Chapter 2: Reread the Management Focus feature: Did ?Walmart Violate th
Conceptual Assignment #1
Chapter 1: How does the Internet affect international business activity and the globalization of the world economy?
Chapter 2: Reread the Management Focus feature: 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?
Chapter 3: What is the relationship between property rights, corruption, and economic progress? How important are anticorruption efforts in the effort to improve a country’s level of economic development?
Chapter 4: Do you think business practices in an Islamic country are likely to differ from business practices in a Christian country? If so, how?
Chapter 5: Milton Friedman stated in his famous article in The New York Times in 1970 that “the social responsibility of business is to increase profits.” Do you agree? If not, do you prefer that multinational corporations adopt a focus on corporate social responsibility or sustainability practices?
Chapter 6: Is free trade fair? Discuss.
The Conceptual Assignment must follow the following guidelines:
- You must give quality answers that show mastery of the concepts being discussed, using clear logic, and supporting facts. Also, the answers must directly address the questions or discussion topics using chapter readings and research.
- Conceptual assignments test the understanding of key concepts and elements of International Business, therefore, they must be thoroughly addressed.
- You must use citations with references to document information obtained from sources. The key concepts and elements of International Business are found in the sources listed in the syllabus (it is your duty to search for them, read, analyze, evaluate, summarize, paraphrase in your answers, and cite the authors who wrote the articles, books, term papers, memoirs, studies, etc. What it means is that you will have not less than 6 references from the listed sources.
- Grammatically correct paper, no typos, and must have obviously been proofread for logic.
- Questions must be typed out as headings, with follow up answers in paragraph format, and a summary or conclusion at the end of the paper.
The Assignment must be in APA format
Conceptual Assignment #1 (BUS6750 International Business Management)
Chapter 1: How does the Internet affect international business activity and the globalization of the world economy?
Chapter 2: Reread the Management Focus feature: 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?
Chapter 3: What is the relationship between property rights, corruption, and economic progress? How important are anticorruption efforts in the effort to improve a country’s level of economic development?
Chapter 4: Do you think business practices in an Islamic country are likely to differ from business practices in a Christian country? If so, how?
Chapter 5: Milton Friedman stated in his famous article in The New York Times in 1970 that “the social responsibility of business is to increase profits.” Do you agree? If not, do you prefer that multinational corporations adopt a focus on corporate social responsibility or sustainability practices?
Chapter 6: Is free trade fair? Discuss.
The Conceptual Assignment must follow the following guidelines:
1. You must give quality answers that show mastery of the concepts being discussed, using clear logic, and supporting facts. Also, the answers must directly address the questions or discussion topics using chapter readings and research.
2. Conceptual assignments test the understanding of key concepts and elements of International Business, therefore, they must be thoroughly addressed.
3. You must use citations with references to document information obtained from sources. The key concepts and elements of International Business are found in the sources listed in the syllabus (it is your duty to search for them, read, analyze, evaluate, summarize, paraphrase in your answers, and cite the authors who wrote the articles, books, term papers, memoirs, studies, etc. What it means is that you will have not less than 6 references from the listed sources.
4. Grammatically correct paper, no typos, and must have obviously been proofread for logic.
5. Questions must be typed out as headings, with follow up answers in paragraph format, and a summary or conclusion at the end of the paper.
The Assignment must be in APA format
Chapter 2 Management F O C U S
Did Walmart Violate the Foreign Corrupt Practices Act?
In the early 2000s, Walmart wanted to build a new store in San Juan Teotihuacan, Mexico, barely a mile from ancient pyramids that drew tourists from around the world. The owner of the land was happy to sell to Walmart, but one thing stood in the way of a deal: the city’s new zoning laws. These prohibited commercial development in the historic area. Not to be denied, executives at the headquarters of Walmart de Mexico found a way around the problem: They paid a $52,000 bribe to a local official to redraw the zoning area so that the property Walmart wanted to purchase was placed outside the commercial-free zone. Walmart then went ahead and built the store, despite vigorous local opposition, opening it in late 2004.
A former lawyer for Walmart de Mexico subsequently contacted Walmart executives at the company’s corporate headquarters in Bentonville, Arkansas. He told them that Walmart de Mexico routinely resorted to bribery, citing the altered zoning map as just one example. Alarmed, executives at Walmart started their own investigation. Faced with growing evidence of corruption in Mexico, top Walmart executives decided to engage in damage control, rather than coming clean. Walmart’s top lawyer shipped the case files back to Mexico and handed over responsibility for the investigation to the general council of Walmart de Mexico. This was an interesting choice as the very same general council was alleged to have authorized bribes. The general council quickly exonerated fellow Mexican executives, and the internal investigation was closed in 2006.
For several years nothing more happened; then, in April 2012, The New York Times published an article detailing bribery by Walmart. The Times cited the changed zoning map and several other examples of bribery by Walmart: for example, eight bribes totaling $341,000 enabled Walmart to build a Sam’s Club in one of Mexico City’s most densely populated neighborhoods without a construction license, an environmental permit, an urban impact assessment, or even a traffic permit. Similarly, thanks to nine bribe payments totaling $765,000, Walmart built a vast refrigerated distribution center in an environmentally fragile flood basin north of Mexico City, in an area where electricity was so scarce that many smaller developers were turned away.
Walmart responded to The New York Times article by ramping up a second internal investigation into bribery that it had initiated in 2011. By mid-2015, there were reportedly more than 300 outside lawyers working on the investigation, and it had cost more than $612 million in fees. In addition, the U.S. Department of Justice and the Securities and Exchange Commission both announced that they had started investigations into Walmart’s practices. In November 2012, Walmart reported that its own investigation into violations had extended beyond Mexico to include China and India.
Among other things, it was looking into the allegations by the Times that top executives at Walmart, including former CEO Lee Scott Jr., had deliberately squashed earlier investigations. In late 2016 people familiar with the matter stated that the federal investigation had not uncovered evidence of widespread bribery. In November 2017 it was reported that Walmart had settled with the Justice Department and paid a $283 million fine, significantly less than had been expected.
Sources: David Barstow, “Vast Mexican Bribery Case Hushed Up by Wal-Mart after Top Level Struggle,” The New York Times, April 21, 2012; Stephanie Clifford and David Barstow, “Wal-Mart Inquiry Reflects Alarm on Corruption,” The New York Times, November 15, 2012; Nathan Vardi,“Why Justice Department Could Hit Wal-Mart Hard over Mexican Bribery Allegations,” Forbes, April 22, 2012; Phil Wahba,“Walmart Bribery Probe by Feds Finds No Major Misconduct in Mexico,” Fortune, October 18, 2015; T. Schoenberg and M. Robinson, “Wal-Mart Balks at Paying $600 Million in Bribery Case,” Bloomberg, October 6, 2016; and Sue Reisinger, “Wal-Mart Reserves $283 million to Settle Mexico FCPA Case,” Corporate Counsel, November 17, 2017.
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11e
GLOBAL BUSINESS TODAY
Charles W. L. Hill
University of Washington
G. Tomas M. Hult
Michigan State University
Page ii
GLOBAL BUSINESS TODAY, ELEVENTH EDITION
Published by McGraw-Hill Education, 2 Penn Plaza, New York, NY 10121. Copyright © 2020 by McGraw-Hill Education. All rights reserved. Printed in the United States of America. Previous editions © 2018, 2016, and 2014. No part of this publication may be reproduced or distributed in any form or by any means, or stored in a database or retrieval system, without the prior written consent of McGraw-Hill Education, including, but not limited to, in any network or other electronic storage or transmission, or broadcast for distance learning.
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This book is printed on acid-free paper.
1 2 3 4 5 6 7 8 9 LWI 22 21 20 19 ISBN 978-1-260-08837-3 (bound edition) MHID 1-260-08837-5 (bound edition) ISBN 978-1-260-78061-1 (loose-leaf edition) MHID 1-260-78061-9 (loose-leaf edition)
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Library of Congress Cataloging-in-Publication Data Names: Hill, Charles W. L., author. | Hult, G. Tomas M., author. Title: Global business today / Charles W.L. Hill, University of Washington, G. Tomas M. Hult, Michigan State University. Description: 11e [edition]. | New York, NY : McGraw-Hill Education, [2020] Identifiers: LCCN 2018050510| ISBN 9781260088373 (alk. paper) | ISBN 1260088375 (alk. paper) Subjects: LCSH: International business enterprises—Management. | International trade. | Investments, Foreign. | Capital market. Classification: LCC HD62.4 .H548 2020 | DDC 658/.049—dc23 LC record available at https://lccn.loc.gov/2018050510
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Page iiiFor my mother June Hill, and the memory of my father, Mike Hill
—Charles W. L. Hill
For Gert & Margareta Hult, my parents
—G. Tomas M. Hult
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about the authors
CHARLES W. L. HILL
University of Washington
Charles W. L. Hill is the Hughes M. and Katherine Blake Professor of Strategy and International Business at the Foster School of Business, University of Washington. Professor Hill has taught in the MBA, Executive MBA, Technology Management MBA, Management, and PhD programs at the University of Washington. During his time at the University of Washington, he has received over 25 awards for teaching excellence, including the Charles E. Summer Outstanding Teaching Award. The Foster School is consistently ranked as a Top-25 business school. Learn more about Professor Hill at http://foster.uw.edu/faculty-research/directory/charles-hill.
A native of the United Kingdom, Professor Hill received his PhD from the University of Manchester, UK. In addition to the University of Washington, he has served on the faculties of the University of Manchester, Texas A&M University, and Michigan State University.
Professor Hill has published over 50 articles in top academic journals, including the Academy of Management Journal, Academy of Management Review, Strategic Management Journal, and Organization Science. Professor Hill has also published several textbooks, including International Business (McGraw-Hill) and Global Business Today (McGraw-Hill). His work is among the most widely cited in international business and strategic management.
Beginning in 2014, Dr. Hill partnered with Dr. Tomas Hult in a formidable co-authorship of the International Business franchise of textbooks (International Business and Global Business Today).This brought together two of the most cited international business scholars in history.
Professor Hill works on a private basis with a number of organizations. His clients have included Microsoft, where he has been teaching in-house
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executive education courses for two decades. He has also consulted for a variety of other large companies (e.g., AT&T Wireless, Boeing, BF Goodrich, Group Health, Hexcel, Microsoft, Philips Healthcare, Philips Medical Systems, Seattle City Light, Swedish Health Services, Tacoma City Light, Thompson Financial Services, WRQ, and Wizards of the Coast). Professor Hill has also served on the advisory board of several start- up companies.
For recreation, Professor Hill enjoys skiing and competitive sailing!
G. TOMAS M. HULT
Michigan State University
Dr. Tomas Hult is Professor of Marketing, Byington Endowed Chair, and Director of the International Business Center in the Department of Marketing in the Eli Broad College of Business at Michigan State University. He also teaches for the Broad College’s Department of Supply Chain Management and Department of Management. Learn more about Professor Hult at http://broad.msu.edu/facultystaff/hult.
A native of Sweden, Dr. Hult received a mechanical engineer degree in Sweden before obtaining Bachelor and MBA degrees in the United States, followed by a PhD at The University of Memphis. In addition to Michigan State University, he has served on the faculties of Florida State University and the University of Arkansas at Little Rock. Dr. Hult holds visiting professorships in the International Business Group of his native Uppsala University, Sweden, and the International Business Division of Leeds University, United Kingdom. Michigan State, Uppsala, and Leeds are all ranked in the top 10 in the world in international business research.
Dr. Hult serves as Executive Director and Board Member of the Academy of International Business (AIB), President and Board Member of the Sheth Foundation, and serves on the U.S. District Export Council. Tomas Hult hosts the radio show globalEDGE Business Beat on the Michigan Business Network.
Hult is one of the world’s leading academic authorities (citations, publications) in marketing strategy, international business, international marketing, strategic management, global supply chains, and complex multinational corporations. He is one of only about 100 Elected Fellows of the Academy of International Business, an accolade achieved by only the elite international business scholars. Dr. Hult was also selected in 2016 as the Academy of Marketing Science/CUTCO-Vector Distinguished Marketing Educator.
He regularly speaks at high profile events (e.g., European Commission,
Swedish Entrepreneurship Forum, United Nation's Conference on Trade and Development, U.S. Department of Education, World Investment Forum) and publishes influential op-ed articles (e.g., Time, Fortune, Fortune, World Economic Forum, The Conversation). Tomas has developed a large clientele of the world’s top corporations (e.g., ABB, Albertsons, Avon, BG, Bechtel, Bosch, BP, Defense Logistics Agency, Domino’s, FedEx, Ford, FreshDirect, General Motors, GroceryGateway, HSBC, IBM, Michigan Economic Development Corporation, Masco, NASA, Raytheon, Shell, Siemens, State Farm, Steelcase, Tech Data, and Xerox).
In addition to co-authoring with Charles W. L. Hill the market-share leading textbooks in international business (Global Business Today, now in its 11th edition, and International Business, now in its 12th edition), Dr. Hult has written several popular business trade books (e.g., Second Shift; Global Supply Chain Management; Extending the Supply Chain; and Total Global Strategy).
Tennis, golf, and traveling are his favorite recreational activities.
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brief contents
PART ONE Introduction and Overview
Chapter One Globalization 2
PART TWO National Differences
Chapter Two National Differences in Political, Economic, and Legal Systems 36
Chapter Three National Differences in Economic Development 58
Chapter Four Differences in Culture 86
Chapter Five Ethics, Corporate Social Responsibility, and Sustainability 122
PART THREE The Global Trade and Investment Environment
Chapter Six International Trade Theory 150
Chapter Seven Government Policy and International Trade 184
Chapter Eight Foreign Direct Investment 212
Chapter Nine Regional Economic Integration 240
PART FOUR The Global Monetary System
Chapter Ten The Foreign Exchange Market 270
Chapter Eleven The International Monetary System 294
PART FIVE The Strategy of International Business
Chapter Twelve The Strategy of International Business 320
Chapter Thirteen Entering Developed and Emerging Markets 356
PART SIX International Business Functions
Chapter Fourteen Exporting, Importing, and Countertrade 382
Chapter Fifteen Global Production and Supply Chain Management 408
Chapter Sixteen Global Marketing and Business Analytics 438
Chapter Seventeen Global Human Resource Management 474
GLOSSARY 503
NAME INDEX 511
SUBJECT INDEX 513
ACRONYMS 531
COUNTRIES AND THEIR CAPITALS 532
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the proven choice for international business
Current. Application Rich, Relevant. Accessible and Student Focused. Global Business Today (GBT), the worldwide market leader among international business products, has set a new standard for international business teaching. We have focused on creating resources that
Are comprehensive, state of the art, and timely. Are theoretically sound and practically relevant. Focus on applications of international business concepts. Tightly integrate the chapter topics throughout. Are fully integrated with results-driven technology. Take full and integrative advantage of globalEDGE.msu.edu—the Google-ranked #1 web resource for “international business resources.”
International Business (now in its 12th edition, 2019), also co-authored by Charles W. L. Hill and G. Tomas M. Hult, is a more comprehensive and case- oriented version that lends itself to the core course in international business for those that want a deeper focus on the global monetary system, structure of international business, international accounting, and international finance.
GBT has always endeavored to be current, relevant, application rich, accessible, and student-focused. Our goal has always been to cover macro and micro issues equally and in a relevant, practical, accessible, and student- focused approach. We believe that anything short of such a breadth and depth of coverage is a serious deficiency. Many of the students in these international business courses will soon be working in global businesses, and they will be expected to understand the implications of international business for their organization’s strategy, structure, and functions in the context of the global marketplace. We are proud and delighted to have put together this
international business learning experience for the leaders of tomorrow.
Over the years, and now through 11 editions, Dr. Charles Hill has worked hard to adhere to these goals. Since the ninth edition, Charles’ co-author, Dr. Tomas Hult, has followed the same approach. In deciding what changes to make, we have been guided not only by our own reading, teaching, and research but also by the invaluable feedback we received from professors and students around the world, from reviewers, and from the editorial staff at McGraw-Hill Education. Our thanks go out to all of them.
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Comprehensive and Up-to-Date To be relevant and comprehensive, an international business package must
Explain how and why the world’s cultures, countries, and regions differ. Cover economics and politics of international trade and investment. Tackle international issues related to ethics, corporate social responsibility, and sustainability. Explain the functions and form of the global monetary system. Examine the strategies and structures of international businesses. Assess the special roles of the various functions of an international business.
Relevance and comprehensiveness also require coverage of the major theories. It has always been a goal to incorporate the insights gleaned from recent academic scholarship into the book. Consistent with this goal, insights from the following research, as a sample of theoretical streams used in the book, have been incorporated:
New trade theory and strategic trade policy. The work of Nobel Prize–winning economist Amartya Sen on economic development. Samuel Huntington’s influential thesis on the “clash of civilizations.” Growth theory of economic development championed by Paul Romer and Gene Grossman. Empirical work by Jeffrey Sachs and others on the relationship between international trade and economic growth. Michael Porter’s theory of the competitive advantage of nations. Robert Reich’s work on national competitive advantage. The work of Nobel Prize–winner Douglass North and others on national institutional structures and the protection of property rights. The market imperfections approach to foreign direct investment that has grown out of Ronald Coase and Oliver Williamson’s work on transaction cost economics. Bartlett and Ghoshal’s research on the transnational corporation. The writings of C. K. Prahalad and Gary Hamel on core competencies,
global competition, and global strategic alliances. Insights for international business strategy that can be derived from the resource-based view of the firm and complementary theories. Paul Samuelson’s critique of free trade theory. Conceptual and empirical work on global supply chain management— logistics, purchasing (sourcing), operations, and marketing channels.
In addition to including leading-edge theory, in light of the fast-changing nature of the international business environment, we have made every effort to ensure that this product is as up-to-date as possible. A significant amount has happened in the world since we began revisions of this book. By 2016, almost $4 trillion per day were flowing across national borders. The size of such flows fueled concern about the ability of short-term speculative shifts in global capital markets to destabilize the world economy.
The world continued to become more global. As you can see in Chapter 1 on Globalization, trade across country borders has almost exponentially escalated in the last few years. Several Asian economies, most notably China and India, continued to grow their economies at a rapid rate. New multinationals continued to emerge from developing nations in addition to the world’s established industrial powers.
Increasingly, the globalization of the world economy affected a wide range of firms of all sizes, from the very large to the very small. We take great pride in covering international business for small- and medium-sized enterprises (SMEs), as well as larger multinational corporations. We also take great pride in covering firms from all around the world. Some sixty SMEs and multinational corporations from all six core continents are covered in the chapters’ opening cases, closing cases, and/or Management Focus boxes.
And unfortunately, global terrorism and the attendant geopolitical risks keep emerging in various places globally, many new and inconceivable just a decade ago. These represent a threat to global economic integration and activity. Plus, with the United Kingdom opting to leave the European Union (Brexit), which has implications past 2019, the election of President Donald Trump in the United States (who espouses views on international trade that break with the long established consensus), and several elections around the world, the globe—in many ways—has paid more attention to nationalistic
issues over trade. These topics and many more are integrated into this text for maximum learning opportunities.
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WHAT’S NEW IN THE 11TH EDITION The success of the first ten editions of Global Business Today (and its longer, more in-depth textbook option and companion, International Business, now in the 12th edition) was based in part on the incorporation of leading-edge research into the text, the use of the up-to-date examples and statistics to illustrate global trends and enterprise strategy, and the discussion of current events within the context of the appropriate theory. Building on these strengths, our goals for the 11th edition have focused on the following:
1. Incorporate new insights from scholarly research. 2. Make sure the content covers all appropriate issues. 3. Make sure the text is up-to-date with current events, statistics, and
examples. 4. Add new and insightful opening and closing cases in most chapters.
5. Incorporate value-added globalEDGETM features in every chapter. 6. Connect every chapter to a focus on managerial implications.
As part of the overall revision process, changes have been made to every chapter in the book. All statistics have been updated to incorporate the most recently available data. As before, we provide the only textbook in International Business that ensures that all material is up-to-date on virtually a daily basis. The copyright for the book is 2020, but you are likely using the text somewhere between the years 2019 to 2022. We keep the textbook updated to each semester you use the text in your course! We do this by integrating Connect and globalEDGETM features in every chapter.
Specifically, combining McGraw Hill’s Connect platform with the Google number-one-ranked globaledge.msu.edu site (for “international business resources”), we can add up-to-date materials and exercises to each chapter to add value to the material and provide relevant data and information. This keeps chapter material constantly and dynamically updated for teachers who want to infuse Connect and globalEDGETM material into the chapter topics, and it keeps students abreast of current developments in international business.
In addition to updating all statistics, figures, and maps to incorporate most recently published data, a chapter-by-chapter selection of changes for the 10th edition include the following:
CHAPTER 1: GLOBALIZATION New opening case: GM and Its Chevrolet Supercar, The Corvette ZR1 New materials on international trade, trade agreements, world production, and world population Explanations of differences in cross-border trade and in-country production; the value of trade agreements; and population implications related to resource constraints Revised Management Focus: Boeing’s Global Production System Revised Management Focus: Wanda Group New closing case: Globalization of BMW, Rolls-Royce, and the MINI
CHAPTER 2: NATIONAL DIFFERENCES IN POLITICAL, ECONOMIC, AND LEGAL SYSTEMS
New opening case: Transformation in Saudi Arabia New Country Focus: Putin’s Russia Updated data on corruption Updated Country Focus: Corruption in Brazil New closing case: The Decline of Zimbabwe
CHAPTER 3: NATIONAL DIFFERENCES IN ECONOMIC DEVELOPMENT
New opening case: Brazil’s Struggling Economy Updated statistics and discussion in section Differences in Economic Development Updated Country Focus: Property Rights in China Updated statistics and discussion in section States in Transition New closing case: Economic Development in Bangladesh
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CHAPTER 4: DIFFERENCES IN CULTURE
New opening case: China, Hong Kong, Macau, and Taiwan Deeper treatment of culture, values, and norms Revised the foundation that most religions are now pro-business Updated the Hofstede culture framework with new research New Country Focus: Determining Your Social Class by Birth New Country Focus: Turkey, Its Religion, and Politics New Management Focus: China and Its Guanxi New closing case: The Swatch Group and Cultural Uniqueness
CHAPTER 5: ETHICS, CORPORATE SOCIAL RESPONSIBILITY, AND SUSTAINABILITY
New opening case: Sustainability Initiatives at Natura, the Bodyshop, and Aesop Deeper focus on corporate social responsibility and sustainability at the country, company, and customer levels New Management Focus: “Emissionsgate” at Volkswagen New closing case: Woolworths’s Corporate Responsibility Strategy
CHAPTER 6: INTERNATIONAL TRADE THEORY
New opening case: “Trade Wars Are Good and Easy to Win” Discussion of President Donald Trump’s approach to international trade Updated Country Focus: Is China Man
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