WHAT IS MANAGEMENT
Business in
Global Markets
Other Teaching Tools 3.3
Video Notes 3.4
Brief Chapter Outline and Learning Goals 3.5
Lecture Outline and Lecture Notes 3.7
Career and Study Skills Notes 3.31
Career Development: Developing Skills for a Successful Career 3.31
study skills: Rate Your Study Skills 3.32
Lecture Links 3.33
lecture link 3-1 The Great Trade Protection Debate 3.33
lecture link 3-2 Europe is Shrinking 3.33
LectURE LINK 3-3 Why There Are No Indian Wal-Marts 3.34
LectURE LINK 3-4 Foreign Etiquette Tips 3.35
LectURE LINK 3-5 Bribery Pitfalls 3.36
LectURE LINK 3-6 E-Mail by Snail-Mail 3.36
Bonus Internet Exercise 3.37
Bonus INternet Exercise 3-1 Which Country? 3.37
Critical Thinking Exercises 3.38
critical thinking exercise 3-1 Trade Agreements 3.38
critical thinking exercise 3-2 Evaluating Global Expansion 3.40
Critical thinking Exercise 3-3 Currency Shifts 3.42
Bonus Cases 3.45
Bonus case 3-1 Entering the Import/Export Business 3.45
Bonus case 3-2 Cooling Off the Sweatshops 3.47
Bonus case 3-3 Walt Disney Imagineering: The Mouse that Doesn’t 3.49
Come with a Computer (Video Case)
Bonus case 3-4 The China Challenge 3.51
Other Teaching Tools
FOR A DESCRIPTION OF EACH OF THESE VALUABLE TEACHING TOOLS, PLEASE SEE THE PREFACE IN THIS MANUAL.
Student Learning Tools
Student Online Learning Center (OLC) diasbusiness
Student Study Guide
Spanish Translation Glossary (OLC)
Spanish Translation Quizzes (OLC)
Instructor Teaching Tools
Annotated Instructor’s Resource Manual
IRCD (Instructor’s Resource Manual, Test Bank, PowerPoints, EZtest)
Asset Map
Online Learning Center (OLC) diasbusiness
PageOut
PowerPoint Presentations (on IRCD and OLC)
Test Bank
Business Videos on DVD
Enhanced Cartridge option
Spanish Translation Glossary (OLC)
video NOTES
TWENTY VIDEOS ARE AVAILABLE, GEARED TO INDIVIDUAL CHAPTER TOPICS. THE TEACHING NOTES FOR THESE VIDEOS ARE ALSO INCLUDED IN THE VIDEO NOTES SECTION OF THIS INSTRUCTOR’S RESOURCE MANUAL, BEGINNING ON PAGE V.1.
Video 3: “Walt Disney Imagineering: The Mouse that Doesn’t Come with a Computer”)
This video focuses on challenges faced by Walt Disney Imagineering, the group of artists and craftspeople who design and create Disney-themed venues. Disney management has successfully responded to differing expectations in global markets.
(Bonus Case 3-3, “Walt Disney Imagineering: The Mouse that Doesn’t Come with a Computer,” on page 3.49 of this manual relates to this video.)
BRIEF CHAPTER OUTLINE AND LEARNING GOALS
CHAPTER 3
Business in Global Markets
I. Understanding Globalization
LEARNING OBJECTIVE 1
Define global business.
II. Global Trade
LEARNING OBJECTIVE 2
Understand the importance of global trade.
A. Why Trade Globally?
III. Comparative Advantage and Absolute Advantage
LEARNING OBJECTIVE 3
Discuss the roles of comparative and absolute advantage in global trade.
IV. Measuring Trade
LEARNING OBJECTIVE 4
Discuss the two indicators for measuring global trade.
A. Balance of Payments and Trade Deficits
B. Unfair Trade Practices
V. Trade Protection and Agreements
LEARNING OBJECTIVE 5
Describe different types of trade protections and trade agreements.
A. The General Agreement on Tariffs and Trade and the WTO
B. Common Markets
C. Organization of the Petroleum Exporting Countries (OPEC)
D. The North American Free Trade Agreement (NAFTA)
VI. Strategies for Reaching Global Markets
LEARNING OBJECTIVE 6
Discuss the different strategies for reaching global markets.
A. Licensing
B. Exporting
C. Franchising
D. Contract Manufacturing
E. International Joint Ventures and Strategic Alliance
F. Foreign Direct Investment
VII. Forces Affecting Trade in Global Markets
LEARNING OBJECTIVE 7
Explain the forces affecting the global trade market.
A. Sociocultural Forces
1. Religion
2. Human Resource Management
3. Communication
B. Economic and Financial Forces
C. Legal and Regulatory Forces
D. Physical and Environmental Forces
VIII. The Future of Global Trade
IX. SUMMARY
LECTURE OUTLINE AND LECTURE NOTES
CHAPTER OPENING PROFILE
BRETT BATS (TEXT PAGES 70-71)
The opening profile focuses on Joe Sample and his firm, Brett Bats. Brett Bats pioneered a new, stronger wood technology, but found that the process was too expensive to produce profitably in the U.S. Instead, he found a production facility in China that could produce the bats cost-effectively. The profile covers some of the concerns that face entrepreneurs in global trade, such as communication, cultural differences, and increased travel.
|Lecture outline lecture notes |
| I. Understanding Globalization | |
|Learning objective 1 |PowerPoint 3-1 |
|Define global business. (Text page 72) |Chapter Title |
|A. GLOBAL BUSINESS is any activity that seeks to provide goods and services to others across national|(Refers to text page 70) |
|borders while operating at a profit. | |
|B. Both large and small businesses engage in global business. |PowerPoint 3-2 |
| |Learning Objectives |
| |(Refers to text page 71) |
| II. Global Trade |TEXT FIGURE 3.1 |
|Learning objective 2 |World Population by Continent (Box in |
|UNDERSTAND THE IMPORTANCE OF GLOBAL TRADE. (TEXT PAGES 72-74) |text on page 73) |
|A. Most major U.S. companies plan to expand globally. | |
|1. There are 300 million people in the U.S., but there are 6 billion potential customers in the | |
|world. |TEXT REFERENCE |
|a. Of these, approximately 75% live in developing areas. |Real World Business Apps |
|b. These developing countries will eventually have the resources to buy goods from other countries. |(Box in text on page 73) |
|2. America buys and sells billions of dolars’ worth of goods to and from other countries. |Angela Wilson owns a small jewelry |
|a. Major league sports teams play games in other countries. |design business that sells through |
|b. Indian companies provide low-cost labor for U.S. firms. |small boutiques in the Southwestern |
|c. Thomas Friedman believes that technology is helping to “flatten the world.” |U.S. She has just received an order |
|3. The U.S. is the largest exporting and importing nation in the world. |from one of her major clients that |
|a. EXPORTING is selling products to another country. |exceeds her production capacity. This |
|b. IMPORTING is buying products from another country. |chapter discusses many of the |
|c. Competition is intense: The U.S. must compete against aggressive competitors in Germany, Japan, |opportunities and challenges Angela |
|and China. |will face if she decides to use a |
|B. Why Trade Globally? |low-cost off-shore supplier. |
|1. No nation can produce all the products that its people need. | |
|2. Nations seek trade with countries to meet the needs of their people. | |
|3. Mutually beneficial exchange |PowerPoint 3-3 |
|a. Some nations have abundant natural resources but lack technological know-how. |Understanding Globalization (Refers to|
|b. Others have sophisticated technology but few natural resources. |text pages 72-74) |
|c. Trade relations enable countries to produce what they can and buy the rest in a mutually | |
|beneficial exchange. | |
|4. FREE TRADE is the movement of goods and services among nations without political or economic trade| |
|barriers. | |
|Self Check Questions (Text page 74) |Bonus Case 3-1 |
|Why is the freedom of exporting and importing so important in global business? |Entering the Import/ |
|Why do companies decide to engage in global business? |Export Business |
| |Gordon and Carole Segal started an |
| |import/export business with $17,000 |
| |and one employee. Today Crate & Barrel|
| |has 144 stores and is expanding into |
| |Canada. (See complete case, discussion|
| |questions, and suggested answers on |
| |page 3.45 of this manual.) |
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| |TEXT FIGURE 3.2 |
| |The Pros and Cons of Free Trade (Box |
| |in text on page 75) |
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| III. COmparative Advantage and aBSOLUTE aDVANTAGE | |
|Learning objective 3 | |
|DISCUSS THE ROLES OF COMPARATIVE AND ABSOLUTE ADVANTAGE IN GLOBAL TRADE. (TEXT PAGES 74-76) | |
|A. Global trade is the exchange of goods and services across national borders. | |
|B. COMPARATIVE ADVANTAGE THEORY states that a country should sell to other countries those products | |
|that it produces most effectively and efficiently and should buy from other countries those products | |
|that it cannot produce as effectively or efficiently. | |
|1. Examples: England selling wool and France selling wine | |
|2. Every country has a comparative advantage in something. | |
|3. Comparative advantage has been the basic principle of free economic exchange since David Ricardo | |
|suggested the theory in the 19th century. | |
|C. ABSOLUTE ADVANTAGE occurs when a country has a monopoly on producing a specific product or is able| |
|to produce it more efficiently than all other countries. | |
|1. South Africa once had an absolute advantage in diamond production. | |
|2. Most absolute advantage situations involve scarce natural resources. |PowerPoint 3-4 |
|sELF Check Questions (Text page 76) |Comparative Advantage and Absolute |
|What is comparative advantage? Provide an example of a country that has a comparative advantage. |Advantage |
| |(Refers to text pages 74-75) |
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| IV. mEASURING tRADE | |
|Learning objective 4 | |
|DISCUSS THE TWO INDICATORS FOR MEASURING GLOBAL TRADE. (TEXT PAGES 76-78) | |
|A. Balance of Payments and Trade Deficits | |
|1. BALANCE OF TRADE is a ratio of a country’s exports to imports. | |
|a. A favorable balance of trade, or TRADE SURPLUS, exists when a country exports more than it | |
|imports. |PowerPoint 3-5 |
|b. A TRADE DEFICIT, an unfavorable balance of trade; occurs when a country imports more than it |Measuring Trade (Refers to text pages |
|exports. |76-78) |
|2. BALANCE OF PAYMENTS is the difference between money coming into a country (from exports) and money| |
|leaving the country (for imports) plus money flows from other factors such as tourism, foreign aid, | |
|military expenditures, and foreign investment. | |
|a. A favorable balance of payments means more money is flowing into than flowing out of the country. | |
|b. An unfavorable balance of payments means more money is leaving than coming into the country. | |
|3. Since 1976 the U.S. has run a trade deficit. | |
|4. The U.S. exports a much lower percentage of its products than other countries do. | |
|a. In the early 1980s, no more than 10% of American businesses exported products. | |
|b. Today a majority of large businesses are involved in global trade, and growing numbers of small | |
|businesses are going global. | |
|B. Unfair Trade Practices | |
|1. Many countries try to ensure that global trade is conducted fairly. | |
|2. DUMPING is the practice of selling products in a foreign country at lower prices than those | |
|charged in the producing country. | |
|a. Example: Japan and Russia have been accused of dumping steel in the U.S. | |
|b. U.S. laws against dumping require that foreign firms price their products fairly. | |
|c. There is also evidence that some governments subsidize certain industries to sell goods in global | |
|markets for less. | |
|3. The GRAY MARKET is the flow of goods in a distribution channel other than those intended by the | |
|manufacturer. | |
|a. Selling “extra” designer suits on eBay is an example of the gray market. | |
|b. Although unethical, the gray-market practice occurs frequently. | |
|Self Check Questions (Text page 78) | |
|What are two indicators in measuring the effectiveness of global trade? |TEXT FIGURE 3.3 |
|What role do unfair practices play in global trade? |The Top Trading Partners of the United|
| |States (Box in text on page 77) |
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| |Study Skills: Rate Your Study Skills |
| |(Box in text on page 78) |
| |An additional exercise and discussion |
| |is available in this chapter on page |
| |3.32 of this manual. |
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| V. Trade Protection and Agreements | |
|Learning objective 5 | |
|DESCRIBE DIFFERENT TYPES OF TRADE PROTECTIONS AND TRADE AGREEMENTS. (TEXT PAGES 79-85) | |
|A. The political atmosphere between nations is often the greatest barrier to global trade. | |
|1. TRADE PROTECTIONISM is the use of government regulations to limit the import of goods and | |
|services. | |
|a. Advocates believe that trade protectionism allows domestic producers to survive and grow, | |
|producing more jobs. | |
|b. Countries often use trade protectionism measures to protect their industries against dumping and | |
|foreign competition. | |
|c. Another barrier to international trade is the overall political atmosphere between nations. |PowerPoint 3-6 |
|2. Governments sometimes charge a tariff, a tax on imports, making imported goods more expensive. |Trade Protection and Agreements |
|a. Protective tariffs are import taxes designed to raise the price of imported products so that |(Refers to text pages 79-80) |
|domestic products can be more competitively priced. | |
|b. Revenue tariffs are designed to raise money for the government. | |
|c. The HARMONIZED TARIFF SCHEDULE is a publication of the U.S. government that lists the tariffs and | |
|quotas for every imported good. | |
|3. Quotas are more restrictive. | |
|a. An IMPORT QUOTA limits the number of products in certain categories that a nation can import. |critical thinking |
|b. An EMBARGO is a complete ban on the goods to or from a country. (example: the U.S. embargo against|exercise 3-1 |
|trade with Cuba) |Trade Agreements |
|4. Global trade is also limited by NONTARIFF BARRIERS, restrictive standards that detail exactly how |This Internet exercise introduces |
|a product must be sold in a country. |students to the most important |
|a. For example, Demark requires that butter be sold in cubes, not tubs. |international trade agreements. (See |
|b. Japanese companies forge semi-permanent ties, called keiretsu, with suppliers, customers, and |complete exercise on page 3.38 of this|
|distributors. |manual.) |
|c. Today Japan is a more open market. | |
|B. The General Agreement and Tariffs and Trade and the WTO | |
|1. In 1948, leaders from 23 countries formed the General Agreement on Tariffs and Trade (Gatt). | |
|2. The General Agreement on Tariffs and Trade (GATT) is an agreement signed by many countries to | |
|reduce the restrictions on trade with one another; it is overseen by the WTO. | |
|3. The 1986 Uruguay Round of GATT Talks was convened to deal with the renegotiation of trade | |
|agreements. | |
|a. After eight years, 124 nations agreed to a new GATT agreement. | |
|b. The U.S. House of Representatives and Senate approved the pact in 1994. | |
|4. The new GATT agreement: | |
|a. lowers tariffs on average by 38% worldwide; and |Lecture link 3-1 |
|b. extends GATT rules to new areas such as agriculture, services, and the protection of copyrights |The Great Trade |
|and patents. |Protection Debate |
|5. Created on January 1, 1995, the WORLD TRADE ORGANIZATION (WTO) is the organization that mediates |This lecture link focuses on the |
|trade disputes between countries and also sets policies in place to encourage trade. |consequences of the 1930 Smoot-Hawley |
|6. The WTO replaced the General Agreement of Tariffs and Trade. |Act. |
|7. WTO acts as an independent entity that oversees key cross-border issues and global business |(See complete lecture link on page |
|practices. |3.33 of this manual.) |
|8. The formation of the WTO did not totally eliminate the internal national laws that impede trade | |
|expansion. | |
|a. The 2001 “WTO Round” addressed many unresolved issues. | |
|b. In 2001 China became a member. | |
|C. Common Markets | |
|1. A COMMON MARKET (also called a trading bloc) is a regional group of countries that have a common | |
|external tariff, no internal tariffs, and the coordination of laws to facilitate exchange among | |
|member countries. | |
|2. The EUROPEAN UNION (EU) is an agreement among European member countries to eventually reduce all | |
|barriers to trade and become unified both economically and politically. | |
|a. When combined, the 25 European Union nations are the world’s second largest economy. | |
|b. The objective for creating the EU was to make Europe an even stronger competitor in global | |
|commerce. | |
|3. The path to unification has been slow and difficult, yet significant progress has been made. | |
|a. On January 1, 1999, the EU officially launched its joint currency. | |
|b. In January 2002, the separate currencies of the EU nations were transformed into a single monetary| |
|unit: the euro. | |
|c. The adoption of the euro eliminated currency conversion problems and saved billions of dollars. | |
|d. It is hoped that the EU’s unified currency will bring more economic clout, more buying power, and | |
|greater economic stability. | |
|e. The euro’s value has been increasing compared to the dollar. | |
|4. Another common market is Mercosur, a group that includes Brazil, Argentina, Paraguay, Uruguay, | |
|Chile, and Bolivia. | |
|a. Initially, there were ambitious economic goals including a single currency. | |
|b. However, the Mercosur trading bloc has not achieved its goals. | |
|D. Organization of the Petroleum Exporting Countries (OPEC) | |
|1. OPEC is an organization, consisting of 12 oil-producing countries, to work collectively for oil | |
|interests. | |
|2. The mission of the organization, started in 1960, is to: | |
|a. coordinate petroleum policies; | |
|b. seek ways to stabilize prices in oil markets; and | |
|c. provide a fair return on capital for petroleum investors. | |
|E. The NORTH AMERICAN FREE TRADE AGREEMENT (NAFTA) is an agreement signed by the United States, | |
|Mexico, and Canada to reduce or eliminate tariffs on goods and to encourage trade between the | |
|countries. | |
|1. NAFTA is not an economic union, as the EU is. | |
|2. The objectives of NAFTA were to: | |
|a. eliminate trade barriers; | |
|b. promote conditions of fair competition; | |
|c. increase investment opportunities; | |
|d. provide protection of intellectual property rights; and | |
|e. establish a framework for further regional trade cooperation. | |
|3. NAFTA opponents believe the agreement caused loss of U.S. jobs and capital. | |
|4. Proponents predicted a vast new market for exports that would create jobs and opportunities in the| |
|long term. | |
|5. In 1994, Congress approved NAFTA, and President Clinton signed it into law. | |
|6. The combination of the United States, Canada, and Mexico created a market of over 417 million | |
|people with a gross domestic product of over $11 trillion. | |
|7. NAFTA has experienced both success and difficulties. | |
|a. U.S. exports to NAFTA partners have increased about 85% since the agreement was signed. | |
|b. Mexican trade has increased by 225%. | |
|c. However, the U.S. has lost almost 1 million jobs since signing NAFTA. | |
|d. Inequities still exist between Mexico and the U.S. in income and working conditions. | |
|Self Check Questions (Text page 85) | |
|Why do countries engage in protectionist policies? Do you agree with using these policies in global | |
|business? Why or why not? | |
|What are the advantages and disadvantages of countries’ agreeing to be part of a common market? | |
|Do you think NAFTA should consider using a common currency? | |
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| |PowerPoint 3-7 |
| |Trade Protection and Agreements |
| |(Refers to text pages 80-84) |
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| |lecture link 3-2 |
| |Europe Is Shrinking |
| |According to the United Nations, |
| |Europe’s population will shrink by |
| |more than 90 million people in the |
| |next 50 years. (See complete lecture |
| |link on page 3.33 of this manual.) |
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| |TEXT FIGURE 3.4 |
| |Steps to Economic Integration of the |
| |European Union (Box in text on pages |
| |82-83) |
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| |Trade Protection and Agreements |
| |(Refers to text pages 85-86) |
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| |Trade Protection and Agreements |
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| VI. Strategies for Reaching Global Markets | |
|Learning objective 6 | |
|DISCUSS THE DIFFERENT STRATEGIES FOR REACHING GLOBAL MARKETS. (TEXT PAGES 86-93) | |
|A. There are many ways an organization can participate in global trade. |TEXT FIGURE 3.5 |
|B. Licensing |Strategies for Reaching Global Markets|
|1. LICENSING is selling the right to manufacture a product or use a trademark to a foreign company |(Box in text on page 86) |
|(the licensee) for a fee (a royalty). | |
|2. In a licensing agreement, one company allows another company to produce goods under their name. | |
|3. The advantages of licensing are: |PowerPoint 3-10 |
|a. A company can gain additional revenues from a product it would not have normally produced |Strategies for Reaching Global Markets|
|domestically. |(Refers to text page 86) |
|b. A company can gain from the sale of start-up supplies, component materials, and consulting | |
|services from the licensing firm. | |
|c. Companies such as Coca-Cola and Disney often enter foreign markets through licensing agreements. | |
|d. Licensing works well for small companies that developed a new product. |TEXT REFERENCE |
|4. The problems of licensing are: |Career Development |
|a. Often a firm must grant licensing rights to its product for an extended period. |Developing Skills for |
|b. If a product experiences remarkable growth in the foreign market, the bulk of the revenues go to |Successful Career |
|the licensee. |(Box in text on page 87) |
|c. If the foreign licensor learns the technology, it may break the agreement and begin to produce a |An additional exercise and discussion |
|similar product on its own. |is available in this chapter on page |
|C. Exporting |3.31 of this manual. |
|1. Export assistance centers (EACs) were created by the U.S. government to provide hands-on exporting| |
|assistance and trade-finance support for small and medium-sized businesses. | |
|2. Small and medium-sized firms represent 95% of exporters. | |
|3. To overcome small firms’ reluctance, export-trading companies can match buyers and sellers from | |
|different countries. |PowerPoint 3-11 |
|4. Export trading companies also help exporters reduce a key risk—getting paid. |Strategies for Reaching Global Markets|
| |(Refers to text pages 86-90) |
|D. Franchising | |
|1. A FRANCHISING AGREEMENT is an arrangement whereby someone with a good idea for a business sells | |
|the rights to use the business name and sell a product or a service to others in a given territory. | |
|a. The franchisor is a company that develops a product concept and sells others the rights to make | |
|and sell the product. | |
|b. The Franchisee is the person who buys a franchise. | |
|2. Franchising is popular both domestically and in global markets. | |
|3. Franchising allows the use of an entire concept, not just the product. | |
|4. Franchisers must adapt in the countries they serve. | |
|a. KFC failed in Hong Kong because consumers considered it too greasy. | |
|b. Pizza Hut found that Germans like small, individual pizzas. | |
|c. Domino’s Pizza found that Japanese enjoyed squid and sweet mayonnaise pizza. | |
|E. Contract Manufacturing | |
|1. CONTRACT MANUFACTURING is when one country produces goods with another country’s company label on | |
|it; this is also called outsourcing. | |
|2. Example, Dell Computer using Quanta Computers | |
|3. Using contract manufacturing a company can often experiment in a new market without heavy start-up| |
|costs. | |
|4. A firm can also use contract manufacturing temporarily to meet an unexpected increase in orders. | |
|5. A major disadvantage is that intellectual property and copyright laws differ from country to | |
|country (example: China). | |
|F. International Joint Ventures and Strategic Alliances | |
|1. A JOINT VENTURE is a partnership in which two or more companies (often from different countries) | |
|join to undertake a major project for a specific time period. | |
|2. The text offers the example of the joint venture among Volkswagen, General Motors, and China’s | |
|Shanghai Automotive Industrial Corporation. | |
|3. A unique joint venture is that between University of Pittsburg and the government of Italy to | |
|build a medical transplant center in Italy. | |
|4. The benefits of joint venture include: | |
|a. Shared technology. | |
|b. Shared marketing and management expertise. | |
|c. Entry into markets where foreign companies are not allowed unless their goods are produced | |
|locally. | |
|d. Shared risk. | |
|5. The drawbacks are: | |
|a. One partner can learn the technology and practices of the other and leave to become a competitor. | |
|b. The technology may become obsolete. | |
|c. The partnership may be too large to be as flexible as needed. | |
|6. In a GREENFIELD INVESTMENT, a company decides to enter a country and build offices and production | |
|facilities. | |
|7. A STRATEGIC ALLIANCE is an agreement between two or more companies to work together to achieve | |
|competitive market advantages. | |
|a. Alliances can provide access to markets, capital, and technical expertise. | |
|b. They usually do not involve sharing costs, risks, management, or profits. | |
|c. Strategic alliances can be flexible and can be effective between firms of different sizes. | |
|d. The text uses several examples, such as Motorola and Oracle Corporation. | |
|G. FOREIGN DIRECT INVESTMENT is buying permanent property and business in foreign nations. | |
|1. A FOREIGN SUBSIDIARY is a company owned in a foreign country by another company (parent company). | |
|a. The legal requirements of both the parent (home) and the foreign (host) countries must be | |
|observed. | |
|b. The advantage of foreign subsidiaries is that the company maintains complete control over any | |
|technology or expertise it may possess. | |
|c. The major disadvantage is EXPROPRIATION, when a host government takes over a foreign subsidiary in| |
|a country. | |
|d. The text uses the example of consumer giant Nestlé as a company with many foreign subsidiaries. | |
|2. Multinational corporations | |
|a. A MULTINATIONAL CORPORATION is an organization that manufactures and markets products in many | |
|different countries; it has multinational stock ownership and multinational management. | |
|b. Only firms that have manufacturing capacity or other physical presence in different nations can | |
|truly be called multinational. | |
|3. Different strategies reflect different levels of ownership, financial commitment, and risk. | |
|Self Check Questions (Text page 93) | |
|Why would a firm choose to export rather than become involved in a joint venture? | |
|What do you think would be the best way to get involved in global business as a small soap | |
|manufacturer? | |
|What are the advantages and disadvantages of creating a subsidiary? | |
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| |TEXT REFERENCE |
| |Thinking Critically: McDonalizing the |
| |World |
| |(Box in text on page 89) |
| |In all markets in which McDonald’s |
| |operates, the company continuously |
| |listens to customers and adapts to |
| |their culture and preferences. |
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| |PowerPoint 3-12 |
| |Strategies for Reaching Global Markets|
| |(Refers to text pages 90-92) |
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| |TEXT REFERENCE |
| |Ethical Challenge: Doing Bad by Trying|
| |to Do Good |
| |(Box in text on page 92) |
| |The CEO of a major pharmaceutical |
| |manufacturer has announced plans to |
| |donate its AIDS drugs to government |
| |clinics in several developing |
| |countries. She is surprised by the |
| |criticism of her actions by many |
| |humanitarian groups, who prefer that |
| |the drug price be lowered for |
| |everyone, not just selected patients. |
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| |PowerPoint 3-13 |
| |Strategies for Reaching Global Markets|
| |(Refers to text pages 92-93) |
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| |critical thinking |
| |exercise 3-2 |
| |Evaluating Global |
| |Expansion |
| |One company is faced with the decision|
| |of whether or not to enter a joint |
| |venture with a Latin American country.|
| |(See complete exercise on page 3.40 of|
| |this manual.) |
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| |lecture link 3-3 |
| |Why There Are No Indian Wal-Marts |
| |There are millions of small shop |
| |owners in India that are fighting to |
| |keep the big retail chains out of the |
| |country. (See complete lecture link on|
| |page 3.34 of this manual.) |
| | |
| VII. FOrces Affecting Trade in Global Markets | |
|Learning objective 7 | |
|EXPLAIN THE FORCES AFFECTING THE GLOBAL TRADE MARKET. (TEXT PAGES 93-101) | |
|A. Succeeding in any business takes work and effort, and has many challenges. | |
|B. Sociocultural Forces | |
|1. The term CULTURE refers to the set of values, beliefs, rules, and institutions held by a specific | |
|group of people. |bonus internet |
|a. Primary components of culture include social structures, religion, manner and customs, attitudes, |exercise 3-1 |
|language, and personal communication. |Which Country? |
|b. Geert Hofstede suggests there are five main dimensions of culture that affect communication among |This Internet exercise asks students |
|nations (See Text Figure 3.6.). |to go online to evaluate a possible |
|c. American businesspeople are notoriously bad at adapting to cultural differences among nations. |expansion into one of two countries. |
|d. They have been accused of ETHNOCENTRICITY, which is an attitude that one’s own culture is superior|(See complete exercise on page 3.37 of|
|to all others. |this manual.) |
|e. In contrast, foreign businesspeople are very good at adapting to U.S. culture. | |
|f. Example: German and Japanese car makers have adapted to the U.S. market. | |
|2. Religion is an important part of any society’s culture and can have a significant impact on | |
|business operations. | |
|a. Example: McDonald’s and Coca-Cola offended Muslims by putting the Saudi Arabian flag on their |PowerPoint 3-14 |
|packaging. |Forces Affecting Trade in Global |
|b. Religion may be the most important of the social cultural forces. |Markets (Refers to text pages 94-97) |
|3. Human resource management | |
|a. Sociocultural differences can also have an impact on business decisions involving human resource | |
|management. | |
|b. One American manager in Peru tried to introduce democratic decision making, which was |TEXT FIGURE 3.6 |
|misinterpreted as incompetence. |Hofstede’s Five Dimensions of Culture |
|c. Learning about sociocultural perspectives regarding time, change, competition, natural resources, |(Box in text on page 95) |
|achievement, and even work itself can help. | |
|4. Communication | |
|a. Global marketing is the term used to describe selling the same product in essentially the same way| |
|everywhere in the world. |lecture link 3-4 |
|b. Even successful global marketers such as IBM and Sony face difficulties translating advertising |Foreign Etiquette Tips |
|into different languages. |The author of Business Etiquette for |
|c. A sound global philosophy is never assume what works in one country will work in another. |Dummies gives tips for avoiding |
|d. Many U.S. companies fail to think globally. |embarrassing cultural gaffes. (See |
|e. The U.S. is one of only five nations that still haven’t converted to the metric system. |complete lecture link on page 3.35 of |
|C. Economic and Financial Forces |this manual.) |
|1. Global opportunities may not be viable opportunities at all due to economic conditions. | |
|2. Global financial markets do not have a worldwide currency. | |
|a. The U.S. dollar is the world’s most dominant and stable currency. | |
|b. Since 2002, the euro has been the official currency of the European Union, replacing the German | |
|deutschmark, the French franc, and the Italian lira. | |
|3. The EXCHANGE RATE is the value of one nation’s currency relative to the currencies of other | |
|countries. | |
|a. Change in a nation’s exchange rates occurs because people trade in currencies just as people trade| |
|in stocks. | |
|b. A high value of the dollar means the products of foreign producers would be cheaper, but | |
|U.S.-produced goods would be more expensive. | |
|c. A low value of the dollar means foreign goods become more expensive because it takes more dollars | |
|to buy them. | |
|d. To earn the highest amount of profit, business people hope that the trading currency will remain | |
|stable. | |
|4. Changes in currency values impact global commerce in numerous ways. | |
|a. Currency valuations can be especially tough for developing economies. | |
|b. In many developing nations the only trade possible is BARTERING, the exchange of merchandise for | |
|merchandise or service for service with no money involved. | |
|c. COUNTERTRADING is a complex form of bartering in which several nations may be involved, each | |
|trading goods for goods or services for services. | |
|d. Approximately 20% of the global exchanges involve countertrading. | |
|e. The text uses the example of the Ford Motor Company trading vehicles to Jamaica for bauxite. | |
|5. Understanding currency fluctuations and financing opportunities is vital to success in the global | |
|market. | |
|D. Legal and Regulatory Forces | |
|1. Business practices are tied to the legal and regulatory environment. | |
|2. Unlike the U.S., there is no central system of laws globally. | |
|3. Several groups of laws and regulations may apply. | |
|a. Global markets are governed by a myriad of laws and regulations that are often inconsistent. | |
|b. Important legal questions are interpreted differently country to country. | |
|4. American businesspeople are bound to follow U.S. laws and regulations in conducting business | |
|globally. | |
|a. The Foreign Corrupt Practices Act of 1978 prohibits “questionable” or “dubious” payments to | |
|foreign officials to secure business contracts. | |
|b. However, this law runs contrary to beliefs and practices in many countries. | |
|5. The Organization for Economic Cooperation and Development (OECD) is leading a global effort to | |
|fight corruption and bribery in foreign markets. | |
|E. Physical and Environmental Forces | |
|1. Technological constraints may make it difficult to build a large global market. | |
|2. Some developing nations have such primitive transportation and storage systems that international | |
|distribution is ineffective. | |
|3. Certain technological differences affect exportable products (such as the difference between 110 | |
|and 220 voltage). | |
|4. Computer and Internet usage in many developing countries is minimal or nonexistent. | |
|SELF Check Questions (Text page 101) |TEXT FIGURE 3.7 |
|What are some forces that must be considered in global business? Give an example of a business |Oops, Did We Say That? (Box in text on|
|consideration for each. |page 97) |
|If you had to choose, which force affecting trade do you think would be the most important to | |
|consider for an Internet-based business? What about a business that manufacturers paper products? | |
|What is countertrade? Give an example not already provided in this chapter. | |
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| |PowerPoint 3-15 |
| |Forces Affecting Trade in Global |
| |Markets (Refers to text pages 97-100) |
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| |critical thinking |
| |exercise 3-3 |
| |Currency Shifts |
| |This exercise asks students to track |
| |the exchange rates for six currencies |
| |for 30 days. (See complete exercise on|
| |page 3.42 of this manual.) |
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| |TEXT REFERENCE |
| |Ethical Challenge: |
| |(Product) Red |
| |(Box in text on page 99) |
| |Bono, lead singer of U2, has teamed up|
| |with DATA and Bobby Shiver to create a|
| |line of (PRODUCT) RED products. A |
| |portion of the profits from the sale |
| |goes to support AIDS medication in |
| |developing countries. |
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| |PowerPoint 3-16 |
| |Forces Affecting Trade in Global |
| |Markets (Refers to text pages 100-103)|
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| |TEXT FIGURE 3.8 |
| |Countries Rated Highest on Corrupt |
| |Business Practices (Box in text on |
| |page 100) |
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| |lecture link 3-5 |
| |Bribery Pitfalls |
| |The Sarbanes-Oxley Act has focused |
| |corporate executives’ attention on |
| |uncovering and preventing bribery. |
| |(See complete lecture link on page |
| |3.36 of this manual.) |
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| |Bonus Case 3-2 |
| |Cooling Off the Sweatshops |
| |Apparel leaders such as Nike, Reebok, |
| |and Liz Claiborne are responding to |
| |critics by joining The Fair Labor |
| |Association, a sweatshop monitoring |
| |organization. (See complete case, |
| |discussion questions, and suggested |
| |answers on page 3.47 of this manual.) |
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| |Bonus Case 3-3 |
| |Walt Disney Imagineering: The Mouse |
| |that Doesn’t Come with a Computer |
| |(Video Case) |
| |This bonus case ties in with the video|
| |available for use with this chapter. |
| |Translating the Disney mystique to |
| |another culture is tricky. (See |
| |complete case, discussion questions, |
| |and suggested answers on page 3.49 of |
| |this manual.) |
| | |
| | |
| |lecture link 3-6 |
| |E-Mail by Snail-Mail |
| |In rural India, only 6% of the |
| |population has Internet access. India |
| |Post has created the ePost system to |
| |bring electronic communication to this|
| |market. (See complete lecture link on |
| |page 3.36 of this manual.) |
| VIII. The Future of Global Trade | |
|A. New markets present new opportunities for trade and development. | |
|B. Advanced communications have made distant markets instantly accessible, particularly the People’s | |
|Republic of China. |TEXT REFERENCE |
|1. China’s population of 1.3 billion represents a tremendous business opportunity. |Career Spotlight: So, You Want to Be …|
|2. China is a fast-growing economy that is shifting its economic philosophy from central planning to |Involved in Global Business |
|free markets. |(Box in text on page 102) |
|3. Investments in China, once considered too risky, are now becoming more practical. |There are many ways to become involved|
|4. Concerns still remain about China’s one-party political system, trade imbalances, and human rights|in global business. |
|policies. | |
|5. The U.S. Congress granted China permanent normal trading rights, paving the way for China to join | |
|the WTO in 2001. |TEXT REFERENCE |
|C. Other Global Opportunities |Real World Business Apps |
|1. Russia’s 150 million potential customers are prized by global traders. |(Box in text on page 103) |
|2. Other potential markets include India, Taiwan, Indonesia, Thailand, Singapore, the Philippines, |After studying the concepts discussed |
|Korea, and Malaysia. |in this chapter, Angela has a clearer |
| |understanding about contract |
| |manufacturing and growing her |
| |business. |
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| | |
| |Bonus Case 3-4 |
| |The China Challenge |
| |MTV China’s Li Yifei has shown that |
| |women businesspeople can be successful|
| |in traditionally male societies. (See |
| |complete case, discussion questions, |
| |and suggested answers on page 3.51 of |
| |this manual.) |
| IX. Summary | |
career and study skills notes
CAREER DEVELOPMENT BOX
DEVELOPING SKILLS FOR A SUCCESSFUL CAREER (TEXT PAGE 87)
Instructor’s Notes for Text Box Three:(Objectives to consider and implement to increase students’ knowledge, usage and understanding of the concepts).
Have you analyzed the POTENTIAL of your career considering the overall skills necessary to contribute to a job/company as you see below? This analysis is important to the value of your position as companies evaluate you for hire. Your ability to find this out and put it in some usable format is important and something you will need to become experienced at doing. Let’s look more at this concept.
Student Exercise:
HAVE STUDENTS DO AN HONEST ASSESSMENT OF HOW BECOMING A GOOD, VALUABLE EMPLOYEE IS A PROCESS OF UNDERSTANDING A WIDE RANGE OF SKILLS AND KNOWLEDGE THAT CREATES A LARGER VIEW IN TERMS OF WHAT IT REQUIRES TO BE A RETURN ON THE COMPANY’S INVESTMENT. HAVE STUDENTS LOOK AT THE LIST OF SKILLS AND RATE THEMSELVES. UPON COMPLETION, DISCUSS SIMILAR HIGH RANKINGS AND ALSO WHERE THERE MIGHT BE SOME COMMON LOW SCORES. ASK STUDENTS HOW MUCH THEY LEARNED ABOUT THEMSELVES IN THE PROCESS.
Assessment Objectives:
At this point, placing a numeric value on your own assessment of where you think your current skills are with regards to the industry hiring needs is important. Take a look at the following questions and use this evaluation estimate as a guide to where you are currently in your skill set as it relates to the job industry and the job opportunities that might exist for an entry- or mid-level job.
Study Skills Box
RATE YOUR STUDY SKILLS (TEXT PAGE 78)
Instructor’s Notes for Text Box Three:(Objectives to consider and implement to increase students’ knowledge, usage and understanding of the concepts).
How good are your study skills? What are your strengths when it comes to study knowledge, preparation, and execution? What has been your history? How would you grade yourself? Where might you need the most help? Consider your answers to these questions.
Study skill assessment is important for many reasons. Before we can improve, fix or change our current study history, we need to do an honest assessment. Therefore, if you can, give yourself a grade for the following: 1-study knowledge, 2-study preparation, 3-study execution. What does your report card look like? Are you going out to celebrate or are you grounded for a poor report card? What can be done to improve your performance?
Student Exercise:
GET THE STUDENTS TO BEGIN THINKING OF HOW THEY PERCEIVE THEMSELVES AS HAVING POOR, AVERAGE GOOD, OR VERY GOOD STUDY HABITS. BEFORE A STUDENT CAN IMPROVE THIS SKILL, HE/SHE MUST HONESTLY LOOK AT PAST AND CURRENT STUDY PATTERNS AND SEE WHERE STRENGTHS AND WEAKNESSES MIGHT BE. REVIEW THE GRADES AND GET INTO A DISCUSSION ABOUT WHY STUDENTS HAVE GRADED THEMSELVES ACCORDINGLY. EXPLAIN TO THEM HOW IMPROVED WORK IN THESE AREAS MIGHT HELP THEM DO BETTER IN THEIR CLASSES AND IN THE LONG RUN, MAKE THEM BETTER LEARNERS OF INFORMATION REGARDLESS OF WHETHER IT IS FOR A CLASS, A JOB, OR IN ANY LEARNING ENVIRONMENT THEY MIGHT ENCOUNTER.
lecture links
lecture link 3-1
THE GREAT TRADE PROTECTION DEBATE
The subject of trade protection generates intense debate. Some media stories refer to “Smoot-Hawley.” When the subject comes up, this question is inevitably asked: “What is Smoot-Hawley and why does this term appear ever so often?” Some history may help clarify the issue.
The date: June 13, 1930 (Friday the 13th). The time: 2:13 p.m. The place: the U.S. Senate. The Great Depression had started, and the air was full of talk about trade protection. Over 1,000 economists warned the government that protectionism was dangerous and petitioned it not to pass the Smoot-Hawley Act. (Hawley was a professor of economics at Willamette University. Smoot was a banker and wool manufacturer.) But, by a vote of 44 to 42, the bill passed. It was an act conceived by Republican congressmen, passed by a Republican Congress, and signed into law by conservative, Republican President Herbert Hoover.
The bill imposed duties of up to 60% on almost everything imported into the United States. The concept was to protect the Western sugar beet farmer by raising the duty for sugar; protect the Northwestern wheat farmer by raising the duty on wheat; and protect the Imperial Valley cotton farmer by raising the duty on cotton from Egypt. The list went on: cattle and dairy products, hides, shoes, velvet, silk, china, pocket knives, watch parts, and so on.
The result was world trade fell by one third, and a global trade war started. Exports dropped from $4.8 billion to $1.7 billion from 1929 to 1932. Imports dropped from $5.4 billion to $2.4 billion. Other countries were plunged into depression as world trade fell. In 1934, Congress passed the Reciprocal Trade Agreement Act to reduce tariffs, but it was too little, too late.
The issue of world trade regulation continued. From 1987 until 1993, the GATT discussions often reached impasse points or stalemates. A collapse of the negotiations would have actually pleased protectionists. Instead the GATT agreement was passed by 124 nations in 1994; it was replaced by the WTO in 1995. Still the growth of several key trading blocs such as NAFTA and the EU raised the fear that a new wave of protectionism might surface. These trading blocs allow for free trade among nations in the same trading bloc, but may lead to greater protectionist legislation and less free trade between nations in competing trading blocs. Many wondered if Smoot-Hawley is lifting its head again.[i]
lecture link 3-2
EUROPE IS SHRINKING
At the end of the 20th century, massive changes took place in Europe—the Berlin Wall came down and communism disappeared as the Soviet Union collapsed. While the public’s attention was focused on these historic events, another extraordinary change was quietly taking place.
According to the United Nations, Europe’s population will shrink by more than 90 million people in the next 50 years, roughly twice the number killed worldwide during World War II. For more than two decades the total fertility rate—the average number of children each woman will bear in her lifetime—has remained below the 2.1 level required to replace the population.
In the late 1990s Europe’s population began to fall. Demographers doubt that the fertility rate will return to replacement level in the near future. Some speculate that the decline may not be limited to Europe. The world’s population could actually decline by the end of the 21st century—a trend unseen since the 14th century Black Death.
Among the first nations to experience the population implosion will be historically fertile Italy. With births below replacement level since 1977, Italy is projected to lose nearly a quarter of its current population by 2050. Contraceptive use is at record levels, and women are earning more college degrees than men, leading many to seek careers first and families second. Couples who do start families are waiting longer to have their first child.
Germany has one of the world’s lowest birthrates: fewer babies were born in 2005 than in the last year of World War II. A United Nations report estimated that by 2050 Germany will need 3.5 million working-age immigrants each year to maintain its population ratio and fund pension, health care, and other programs.
Without babies to replenish the labor force and pay taxes, Europeans will find it hard to fund the pensions of longer-living retirees. To stay in the black, governments will need to take unpopular steps, such as raising the retirement age, cutting benefits, hiking taxes, and increasing legal immigration.
Or do what France has done. Since World War I, France has been awarding medals for childbearing to women of “good character” to restore its war-devastated population. Today, with France again in need of more children, the country has relaxed its medal rules: the mothers don’t have to be married; and they don’t even have to be French. [ii]
lecture link 3-3
WHY THERE ARE NO INDIAN WAL-MARTS
If you needed to buy a bag of rice or a CD player in Delhi, India, you wouldn’t be able to go to the local Wal-Mart to buy it. You’d probably wind up at the Big Bazaar store, where electronic equipment is displayed alongside women’s panties and tennis balls next to handbags. The feeling at Big Bazaar, and at most Indian stores, is like a typical bazaar. Colorful, chaotic, and a little cluttered. Most shopkeepers know that this is the way Delhi residents like it.
The Big Bazaar, one of 90 owned by Pantaloon, India’s largest retail group, draws up to 8,000 customers a day with its wide array of merchandise and air conditioning. Fueling this commercial boom is India’s growing middle class which now makes up a third of the country’s 1.1 billion population.
Retailers like Wal-Mart and Tesco have long eyed the huge Indian market, but you won’t find either store in the country. Those big retailers can’t enter the Indian market, thanks to restrictions on foreign investment. Even the promise of lower prices and more efficient supply chains haven’t been enough to overcome the political power of India’s 12 million shopkeepers. These small entrepreneurs account for 97% of the country’s $258 billion in annual retail sales. Large Indian companies are also urging the government to slow down reforms that would open the market to foreign competition. Opponents of foreign investment estimate that eight million people would lose their jobs if Wal-Mart or similar stores took just 20% of the retail trade.
India’s Commerce Minister Kamal Nath is considering an incremental plan that would create new jobs, while not replacing or displacing employment in small neighborhood shops. Nath’s plan would initially limit companies like Wal-Mart to India’s six biggest cities and allow them to open only one store a year in each city. These stores would have to be at least 100,000 square feet, so they couldn’t be located in inner-city neighborhoods. The plan has not gotten much traction due to delays by the business lobby and factions in India’s government.
Retail sales are increasing in India by an average of 10% a year, and spending on luxury goods is rising nearly twice as fast. With two-thirds of India’s population under 35, consumer demand is clearly growing. However, India’s two political parties say they have no intention of relaxing their position and do not expect government reforms in the foreseeable future.[iii]
lecture link 3-4
FOREIGN ETIQUETTE TIPS
As more businesses engage in global trade, cultural pitfalls increase. Every day business deals are jeopardized or lost when foreign associates are offended by Americans unaware of other countries customs, culture, or manners. Sue Fox, the author of Business Etiquette for Dummies, provides the following tips for avoiding embarrassing gaffes.
Argentina: It is rude to ask people what they do for a living. Wait until they offer the information.
Bahrain: Never show signs of impatience, because it is considered an insult. If tea is offered, always accept.
Cambodia: Never touch or pass something over the head of a Cambodian, because the head is considered sacred.
China: As in most Asian culture, avoid waving or pointing chopsticks, putting them vertically in a rice bowl, or tapping them on the bowl. These actions are considered extremely rude.
Dominican Republic: When speaking to someone, failure to maintain good eye contact may be interpreted as losing interest in the conversation.
France: Always remain calm, polite, and courteous during business meetings. Never appear overly friendly, because this could be construed as suspicious. Never ask personal questions.
Greece: If you need to signal a taxi, holding up five fingers is considered an offensive gesture if the palm faces outward. Face your palm inward with closed fingers.
India: Avoid giving gifts made from leather, because many Hindus are vegetarian and consider cows sacred. Also, keep this in mind when taking Indian clients to restaurants. Don’t wink, because it is seen as a sexual gesture.
Japan: Never write on a business card or shove the card into your back pocket when you are with the giver. This is considered disrespectful. Hold the card with both hands and read it carefully. It’s considered polite to make frequent apologies in general conversation.
Malaysia: If you receive an invitation from a business associate from Malaysia, always respond in writing. Avoid using your left hand because it is considered unclean.
Mexico: If visiting a business associate’s home, do not bring up business unless the associate does.
Singapore: If you plan to give a gift, always give it to the company. A gift to one person is considered a bribe.
Spain: Always request your check when dining out in Spain. It is considered rude for wait staff to bring your bill beforehand.
Vietnam: Shake hands only with someone of the same sex who initiates it. Physical contact between men and women in public is frowned upon.[iv]
lecture link 3-5
BRIBERY PITFALLS
The passage of the Sarbanes-Oxley Act in 2002 raised the stakes for corporate responsibility. CEOs and CFOs now have to personally sign off on company financials, making those executives much more wary of letting a bribe slide through. Conducting business globally exposes U.S. companies to all sorts of potential minefields that don’t exist at home.
The Corruption Perception Index, based on bribery data and surveys conducted by Transparency International, a nongovernment organization dedicated to fighting bribery, finds sings of “rampant corruption” in no fewer than 60 countries. Bangladesh and Haiti are the worst of that group. Russia and several other former Soviet republics are included.
Non-U.S. companies face far fewer constraints when dealing with this shadowy business world. While the 35 signatories of the Organization of Economic Cooperation and Development 1997 convention made it a crime to bribe foreign officials, there has been little enforcement of new laws by national governments, other than by the U.S.
That bribery gap has been costly for American companies. During a 12-month period in 2004, according to the U.S. Commerce Department, competition for 47 contracts worth $18 billion may have been affected by bribes that foreign firms paid to foreign officials.
Since 1977, the Foreign Corrupt Practices Act has barred all issuers of U.S.-traded equities from bribing foreign government officials to acquire or retain business. But while it is illegal for U.S.-listed companies and employees to take part in bribes, some authorities suggest that until a few years ago companies didn’t routinely report corruption in their overseas operations. The concept was that companies didn’t have to turn themselves in on a potential crime.
SEC policy and the Sarbanes-Oxley rules, however, now call for disclosure of both the incidents and the steps a company takes to address them.[v]
lecture link 3-6
E-MAIL BY SNAIL-MAIL
Modern India is a paradox. Though it’s a global technology powerhouse, life for many of its people hasn’t changed much in centuries. A quarter of Indians live below the poverty line, and only about 6% use the Internet. That created a market opportunity for India Post’s ePost system. Using ePost, farmers in India’s remote regions can send and receive e-mail messages even if they have never seen a computer.
ePost receives e-mail messages at local post offices, where they are printed and hand delivered. In reverse, rural patrons can handwrite letters and have them translated into e-mails. Delivery by ePost-gram costs less than 25 cents a page and usually takes a day, compared with about a week by snail-mail. According to ePost general manager R. R. P. Singh, “You can talk about any technology you like—but somewhere the last mile has to be walked by somebody.”
Now India Post is aiming the service at corporate customers with bigger budgets, promoting ePost as a way to easily and affordably reach India’s unconnected majority. A recent upgrade to the technology allows e-mailers to reach 9,999 addresses at once, bringing even remote villagers the wonders of corporate spam.[vi]
Bonus Internet exercise[vii]
Bonus Internet Exercise 3-1
WHICH COUNTRY?
The Internet gives students access to endless information sources. One of the most surprising sources is the online database maintained by the CIA. The agency’s World Factbook gives extensive data about each country’s geography, government, economy, communications, etc. Go to the CIA Factbook Website (cia/publications/factbook/index.html.). (Sometimes the web address for a location changes. You might need to search to find the exact location mentioned.)
For this exercise assume you are the owner of a small electronics firm based in the American Midwest. Your research department has developed a cellular phone that translates conversations into any of twenty-four languages. From conversations with business associates and friends, you have identified two especially attractive overseas markets—Brazil and Australia.
Use the CIA World Factbook to research these two countries.
1. What is the total population for each country? Which country’s population is growing the fastest? What is the median age?
2. Compare the government types for each country. What type of legal system does each have?
3. Which country has the largest number of cellular phones in use? What percent of the population uses cellular phones?
4. Based on your research, which country, Brazil or Australia, would you choose to introduce your product? Why?
Critical thinking exercises
critical thinking exercise 3-1
TRADE AGREEMENTS
Countries around the world have formed trading agreements for economic prosperity and ease of currency exchange (see the discussion of the EU agreement). The purpose of this exercise is to better understand trading agreements and what impact they have had on the economies that have participated and what problems or difficulties have occurred in making these agreements work as planned.
For this exercise, the two trade agreements that will be evaluated are the NAFTA trade agreement and the formation of the EU (European Union). Along with gaining a general understanding of these two trade agreements, you will also learn about the WTO (World Trade Organization), WB (World Bank) and the IMF (International Monetary Fund) as they are all partners in assisting trade rules and regulations among countries around the world.
Before you begin, use the internet and get familiar with NAFTA, EU, WTO, WO, and the IMF. Once you have a basic understanding, you can use this knowledge to answer the questions below:
1. When was the NAFTA agreement drafted and what countries are part of the agreement? What were the general guidelines of the agreement?
2. What are the basics of the agreement of the European Union (go to Wikipedia for a basic, general overview of the EU)? How many states are part of the EU and when was the original agreement made?
3. What is the role of the World Trade Organization? What are the benefits of the WTO?
4. How do the World Bank and the International Monetary Fund assist the WTO?
5. Overall, what have been the benefits of the trade agreements? How important are these agreements as we conduct business in the new world economy?
NOTES ON critical thinking exercise 3-1
1. WHEN WAS THE NAFTA AGREEMENT DRAFTED AND WHAT COUNTRIES ARE PART OF THE AGREEMENT? WHAT WERE THE GENERAL GUIDELINES OF THE AGREEMENT?
The NAFTA agreement began January 1, 1994. The agreement removes most barriers among trade and investment between Canada, Mexico and the United States. The NAFTA agreement removes tariffs for agriculture trade among these countries.
2. What are the basics of the agreement of the European Union (go to Wikipedia for a basic, general overview of the EU)? How many states are part of the EU and when was the original agreement made?
The European Union is a political and economic community of twenty-seven member states located primarily in Europe. Its traces its roots to the EEC were formed in 1957. In 1993 the Maastricht Treaty established the current legal framework. The EU creates a single market by a system of laws which apply in all member states guaranteeing the freedom of movement of people, goods, services and capital.
3. What is the role of the World Trade Organization? What are the benefits of the WTO?
It is the only global international organization dealing with the rules of trade between nations. The benefits of the WTO are:
1) helps to promote peace;
2) disputes are handled constructively;
3) rules make it easier for all;
4) freer trade cuts the costs of living;
5) provides more choice of products and qualities;
6) trade raises incomes;
7) trade stimulates economic growth;
8) basic principles make life more efficient;
9) governments are shielded from lobbying;
10) the system encourages good government.
4. How do the World Bank and the International Monetary Fund assist the WTO?
The World Bank (vital source of financial and technical and assistance to developing countries around the world) and the International Monetary Fund (international organization that oversees the global financial system by observing exchange rates and balance of trade payments) help to facilitate closer cooperation between the multilateral institutions who have key roles with the formulation and implementation of different elements of framework for global economic policy.
5. Overall, what have been the benefits of the trade agreements? How important are these agreements as we conduct business in the new world economy?
The benefits of trade agreements have been primarily in creating a better understanding among neighboring countries of how each can help improve each trading partner’s economy by eliminating barriers that slow and hasten trade. In the new world economy, this will be beneficial as the flow of goods and services are accepted by more trading partners and in the process, this acceptance can improve the standard of living among all trading partners.
critical thinking exercise 3-2
EVALUATING GLOBAL EXPANSION
Greenwich Industries entered the Latin American market in the 1950s by forming a joint venture with Industro Viejes in Santo Ignezeto to manufacture bicycle parts. The joint venture flourished in the 1960s, and Greenwich eventually bought out 100% ownership. The company earned steady profits from the Latin American subsidiary until a military junta overthrew the government in the late 1970s. The ruling generals expropriated all foreign owned companies, including the Santo Ignezeto bicycle parts plant.
Today Santo Ignezeto is ruled by a democratic government that has been in power for ten years. Industro Viejes has approached Greenwich about another joint venture. The government is offering an attractive incentive package to attract foreign investment.
You have been assigned to travel to Santo Ignezeto and begin planning and staffing.
1. What are the potential problems that face the new venture?
2. What are the potential advantages of this venture for the company?
3. Would you recommend entering the joint venture? Why or why not?
4. If Greenwich Industries partners with Industro Viejes, would you recommend hiring local managers or American managers for the top and middle management positions? Why or why not?
NOTES for critical thinking exercise 3-2
1. WHAT ARE THE POTENTIAL PROBLEMS THAT FACE THE NEW VENTURE?
All of the risks of international commerce are here—currency shifts, cultural differences, infrastructure, etc. In the previous joint venture, Greenwich Industries had its plant expropriated, so this will be an ongoing concern, despite the current government stability.
2. What are the potential advantages of this venture for the company?
Locating a plant in a Latin American country will probably mean lower-cost labor, thus reducing the cost of producing bicycle parts and lowering the prices to consumers. There is also the potential for expanding Greenwich’s consumer base. In most Latin American countries, low per-capita income means fewer people can afford a car. Bicycle transportation is more common and presents an opportunity to enter a new market with both production and revenue potential.
3. Would you recommend entering the joint venture? Why or why not?
Using the answers to questions 1 and 2, balance the risks and potential advantages, and make the decision.
4. If Greenwich Industries partners with Industro Viejes, would you recommend hiring local managers or American managers for the top and middle management positions? Why or why not?
Local managers would be more in touch with the area job market and local customs. In a new enterprise, however, more control and oversight is needed in the early years. A compromise might involve American top management at the beginning, shifting to local managers as the business matures.
critical thinking exercise 3-3
CURRENCY SHIFTS
As the text discusses, one of the hurdles of international trade is the constant shift in exchange rates. Just how much do exchange rates change over a 30 day period? Let’s find out by choosing five countries of interest to you and recording the exchange rate for their currency (Great Britain’s pound, Japan’s yen, Mexico’s peso, or the European euro.) for 30 days. The rates are available daily in The Wall Street Journal (in the “Currency Markets” chart in the “Money and Investing” section). They are also available on many Websites, such as Yahoo Finance (finance.) or CNNMoney (). The published chart shows the amount of foreign currency per dollar. What effect would such currency shifts have on your business trade with each of these countries? (Sometimes the web address for a location changes. You might need to search to find the exact location mentioned.)
Country Country Country Country Country
(Currency) (Currency) (Currency) (Currency) (Currency)
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critical thinking exercise 3-3 (continued)
COUNTRY COUNTRY COUNTRY COUNTRY COUNTRY
(Currency) (Currency) (Currency) (Currency) (Currency)
___________ ___________ ___________ ___________ ___________
(__________) (__________) (__________) (__________) (__________)
15. ___________ ___________ ___________ ___________ ___________
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notes for critical thinking exercise 3-3
WHAT EFFECT WOULD SUCH CURRENCY SHIFTS HAVE ON YOUR BUSINESS TRADE WITH EACH OF THESE COUNTRIES?
The principle is this: If the currency of another country goes up, that means they can buy more U.S. goods more cheaply, and that is good for exporters. If the value of their currency goes down, that means that goods and services from the United States are more expensive, and that would hurt your business.
BONUS CASES
Bonus case 3-1
ENTERING THE IMPORT/EXPORT BUSINESS
Gordon and Carole Segal went to the Caribbean on their honeymoon. While there, they were fascinated by the variety of elegant, functional housewares they saw: French copper, German cutlery, and so on. A few months later, Gordon was doing the dishes (Arzberg dinnerware) when he got the inspiration to start an importing firm. He had experience in restaurants and real estate. Carole was a teacher. Neither had any experience in retailing.
With $17,000 in capital and one employee, the couple opened the first Crate & Barrel store in an old elevator factory in Chicago’s Old Town district. It took a while to learn the business. In fact, the couple forgot to buy a cash register and went several days without one. This was in 1962.
At first, the Segals and their company, Euromarket Designs, Inc., imported only quality items they had seen and used themselves. Eventually, they toured the continent searching for more items. They learned that European tradespeople were often reluctant to sell to Americans because of past bad experiences with department store buyers. For example, these buyers would place large orders; the manufacturers would expand to fill the orders; and then, when there were no reorders, the manufacturers were stuck. Often, the Segals had to spend days negotiating to buy goods.
When the store opened, sales were $8,000 the first month. The second month they fell to $4,000, the third month to $2,000. About half the initial inventory was sold at cost due to ignorance, not charity. Eventually things got straightened out, and the Segals opened a second store in 1968 in suburban Wilmette, Illinois (outside Chicago). A third store opened in 1971.
Crate & Barrel now has 144 stores. They were the ones who set the image for new housewares stores. Glassware, dinnerware, flatware, and cookware are piled floor to ceiling on open shelves. Emphasis is on the product, not the display case.
The Segals’ honeymoon shopping trip in the Caribbean led to a major retail chain in the United States. The Segals sold a majority stake in the company in 1998 to Otto Group, but Gordon is still considered the public face of the company.
By 2006 Crate & Barrel was planning its first international expansion, opening a store in Toronto just across the Canadian border. Expansion into Europe, however, will take more time. The company has undertaken a study of every product in its inventory to determine what products would easily translate abroad and what merchandise would have to be redesigned. Early results: Crate’s overstuffed furniture may not fit in smaller European apartments. And its measuring spoons would have to be redesigned to accommodate the British definition of teaspoon.
discussion questions for BONUS case 3-1
1. HOW MUCH THOUGHT HAVE YOU GIVEN TO THE IMPORT/EXPORT BUSINESS AS A CAREER? THE SEGALS IMPORTED EUROPEAN GOODS TO AMERICA. WOULD YOU ENJOY SELLING AMERICAN GOODS IN EUROPE?
2. What are some of the successful stores you have seen that sell imported goods? Have you ever talked to the owners about their experiences? Do so and report back to the class.
3. Why is the global market an attractive career possibility for tomorrow’s college graduates relative to the U.S. market?
answers to discussion questions for BONUS case 3-1
1. HOW MUCH THOUGHT HAVE YOU GIVEN TO THE IMPORT/EXPORT BUSINESS AS A CAREER? THE SEGALS IMPORTED EUROPEAN GOODS TO AMERICA. WOULD YOU ENJOY SELLING AMERICAN GOODS IN EUROPE?
This is a good opportunity to discuss living conditions in other countries and the kinds of products available in America not often found in other countries, including air conditioning, large refrigerators and freezers, certain franchises such as taco places and copy services, not to mention computers and cell phones.
2. What are some of the successful stores you have seen that sell imported goods? Have you ever talked to the owners about their experiences? Do so and report back to the class.
This is a good project for the class. Because you are dealing with local businesses, class interest should be high.
3. Why is the global market an attractive career possibility for tomorrow’s college graduates relative to the U.S. market?
The world market is much larger (6.6 billion versus 300 million people), growing much faster, less competitive, more in need of available goods and services, and potentially more interesting and challenging. At least it is a subject worth talking about and investigating.
Bonus case 3-2
COOLING OFF THE SWEATSHOPS
In the late 1800s and early 1900s, labor conditions in the United States were certainly less than ideal. The average workweek was 60 hours, but it was not unusual for workers to spend 80 hours on the job every week. Children toiled in unsafe conditions sometimes 10 hours a day, six days a week; wages were low and fears of unemployment high; and job benefits such as sick leave and medical care were nonexistent. Labor unions, religious groups, and social reformers were active, attempting to ignite efforts to reform the workplace and end the existence of “sweatshops,” where workers often spent their entire lives in atrocious working conditions. Efforts by reformers, plus the publication of the novel The Jungle by Upton Sinclair, heightened public awareness of the abuses existing in the workplace. Sinclair portrayed the dark side of Chicago’s meat-packing industry, whose inhuman conditions often destroyed the lives and spirit of workers.
A real-life tragedy at the Triangle Shirtwaist Company on March 25, 1911 also intensified the efforts aimed at eliminating sweatshops in the United States. Triangle employed young women in the garment industry. A fire at the company’s factory led to the death of 126 young women, who could not exit the building due to locked doors and the lack of a fire escape. News reports faulted the company and brought to light the harsh conditions in which these women worked. The fallout from Sinclair’s book and the Triangle Shirtwaist Company fire generated an impassioned public outcry and eventually led to strong federal legislation that improved working conditions throughout the United States.
The issue of sweatshops is again a hot topic in the media. However, today’s issue does not deal directly with U.S. workers. The issue is also championed not just by unions and other such organizations but by college students. At college campuses across the country, students are demanding assurances that clothing bearing their universities’ names and logos are produced under humane conditions in global markets. United Students Against Sweatshops (USAS) represents students at some 100 colleges across the nation. The organization demands that universities employ a vigorous monitoring campaign that forces companies to publicly disclose the location of foreign factories so human rights groups can independently monitor their actions. They also demand that employers pay a so-called living wage that meets the basic needs of workers in various global markets.
Apparel industry leaders Nike, Reebok, and Liz Claiborne, responded by agreeing to join the Fair Labor Association (FLA), a sweatshop-monitoring group established by a presidential task force of apparel makers and human rights groups. Students, however, argue that this group is nothing more than a publicity stunt, with a weak code of conduct and very little accountability. The USAS and UNITE (the largest garment-workers union in the United States) founded the Workers Rights Consortium (WRC) in 1999 as an alternative to the Fair Labor Association.
Apparel companies contend that their businesses involve thousands of factories operating in very diverse economies. They claim the idea of establishing a formal living-wage structure is impossible and could in fact place significant burdens on the industry and workers in the global economies they seek to help. Edward Graham, a senior fellow at the Institute for International Economics agrees. He says that multinational companies offer the best paying jobs around in developing countries. If they did not, workers would refuse to take them. Political leaders in many developing nations fear that if wage standards are imposed on companies like Nike, Levi Strauss, and others, it could price them out of global markets. Since these countries depend on foreign investment money, the loss of such investment could shatter their nation’s economies. Economists fear that the concept of a living wage will cost many workers their jobs. They also agree that it is difficult to define a living wage down to the penny and say that the term living wage is an emotional term rather than a definable economic term. Still, Juan O. Somavia, director-general of the International Labor Organization predicts in five years labor rules around the globe will establish standards. This emotional debate will certainly rage on.[viii]
discussion questions for BONUS case 3-2
1. AN ARGUMENT CAN BE OFFERED THAT DEVELOPED (INDUSTRIALIZED) COUNTRIES IN THE WORLD EXPERIENCED POOR WORKING CONDITIONS AS THEIR ECONOMIES MATURED. THEREFORE, OVER TIME, WORKERS IN DEVELOPING COUNTRIES WILL GAIN THE SAME BENEFITS AS THEIR COUNTERPARTS IN COUNTRIES SUCH AS THE UNITED STATES, GERMANY, AND JAPAN. WHAT’S YOUR OPINION?
2. What role, if any, should the U.S. government take in this issue of setting fair wages in developing countries? What is your definition of a “fair” (living) wage? Would it vary by country?
3. Would you buy an apparel item with your college name or logo on it if you knew it was produced in a country where workers toiled in sweatshops? Why or why not?
discussion questions for BONUS case 3-2
1. AN ARGUMENT CAN BE OFFERED THAT ALL DEVELOPED (INDUSTRIALIZED) COUNTRIES IN THE WORLD EXPERIENCED POOR WORKING CONDITIONS AS THEIR ECONOMIES MATURED. THEREFORE, OVER TIME, WORKERS IN DEVELOPING COUNTRIES WILL GAIN THE SAME BENEFITS AS THEIR COUNTERPARTS IN COUNTRIES SUCH AS THE UNITED STATES, GERMANY, AND JAPAN. WHAT’S YOUR OPINION?
This should open quite a discussion in class because the topic is current and emotion-laden. It is important to look at this issue from all sides, so several student opinions should be aired. There is no doubt that more can be done to help workers in other countries achieve better working conditions, but is it possible to set wages without in-depth knowledge of the local market?
2. What role, if any, should the U.S. government taking in this issue of setting fair wages in developing countries? What is your definition of a “fair” (living) wage? Would it vary by country?
The U.S. government can urge other countries to establish fair wages, but it has no authority to demand such wages. The U.S. government, on the other hand, can and should investigate and solve and problems with below-standard wages and conditions in the United States. Teaching by example is the key.
Each student will have his or her own definition of “fair” wages. Students who have already been out in the real job market may have a different interpretation than those who have never worked. There may also be differences in student responses depending on the age of the student, geographic location, and other variables.
3. Would you buy an apparel item with your college name or logo if you knew it was produced in a country where workers toiled in sweatshops? Why or who not?
This is an opinion question, but, again, one that should generate lively debate. The apparel should be less expensive if produced in such a country, but what are the moral issues? And what, exactly, is a “sweatshop?” Does the definition change from country to country? What is a “fair” wage? These are issues that can be explored, but not necessarily answered.
Bonus case 3-3
WALT DISNEY IMAGINEERING: THE MOUSE THAT DOESN’T COME WITH A COMPUTER (VIDEO CASE)
(NOTE: This case can be used with the Video on DVD for this chapter.)
What could be more American than Mickey Mouse? M-I-C-K-E-Y-M-O-U-S-E. How would you say that in Chinese or Japanese or French? Would it have the same meaning, the same appeal? Those are the questions Disney faced when planning to take the Disneyland experience overseas. Would the “Happiest Place on Earth” be equally happy for people who hadn’t been exposed since birth to Mickey Mouse, Donald Duck and the other Disney characters?
Walt Disney Imagineering is the creative arm of the Walt Disney Company. It is the function of the people in Imagineering to come up with the solutions to the questions posed above. The problem may be easier to solve than you imagine because people all over the world have similar likes, fears, and imaginations. Just because they come from a different culture and speak a different language doesn’t mean that they won’t be equally enchanted by Cinderella, Snow White, and Mickey. On the other hand, there may be huge differences in the way people react. So, what can you do to minimize the potential for disharmony? One answer is to hire local people to help in every phase of the project. They know the culture. They know the language. And they know what people like and dislike—in the specific country or town or village.
Taking Disney to China would have many positive benefits for both countries. It would create jobs in China and bring new entertainment. For the United States, a Chinese Disneyland would create a more favorable balance of trade and possibly lead the way toward more trade with China. Chinese labor is less expensive than U.S. labor, so a Disney park could perhaps be built for less—if local architects, engineers, and set designers were used. Then everything would have to be planned with a Chinese audience in mind.
The same would be true in other countries. For example, in Japan people like to shop for gifts, so the gift shop might be bigger and have more clerks. In France, the people may prefer to drink wine instead of Coke. Local laws must be considered and local tastes. In short, taking a business overseas is a real challenge. It involves more than copying what you have done in the United States. It means listening to what locals have to say and then adapting your offerings accordingly.
Ethically, would it be fair to pay U.S. employees a different wage than locals? After all, locals may pay much less for rent, autos, etc. What if the locals found out you were paying them less? What ethical issues do you see with spreading the American culture to other countries? Are you OK with spreading American dress styles, movies, food, and music to the rest of the world? Are you open to having other cultures have an equal effect in you?
Speaking of food, is it is good idea to open fast-food restaurants in Disney parks selling the same kind of food sold in the U.S. parks? Would people in other countries be willing to spend the same amount of money to enter the parks? Are there alternative ways to charge for the experience? Which of the Disney characters would appeal the most to people from China? How would you find out?
discussion questions for BONUS case 3-3
1. WORKING IN ANOTHER COUNTRY CAN BE A FUN AND CHALLENGING EXPERIENCE. IF YOU HAD TO CHOOSE ONE COUNTRY TO LIVE IN OTHER THAN THE UNITED STATES, WHERE WOULD IT BE? WHAT AMERICAN COMPANIES ARE LOCATED THERE?
2. What products have you bought lately that were made in a different country? What countries produced them? Did you have any difficulty accepting the fact that the product came from there? Did you have any difficulty with the directions or the follow-up service? What does that tell you about global marketing and global business?
3. Imagine yourself trying to sell someone from France on the idea of visiting the Disney park. What issues might you expect to encounter? What issues may you encounter when trying to get someone visiting from France to go to the Disneyland park in the United States?
answers to discussion questions for BONUS case 3-3
1. WORKING IN ANOTHER COUNTRY CAN BE A FUN AND CHALLENGING EXPERIENCE. IF YOU HAD TO CHOOSE ONE COUNTRY TO LIVE IN OTHER THAN THE UNITED STATES, WHERE WOULD IT BE? WHAT AMERICAN COMPANIES ARE LOCATED THERE?
Good challenging and interesting question. Should cause lots of discussion.
2. What products have you bought lately that were made in a different country? What countries produced them? Did you have any difficulty accepting the fact that the product came from there? Did you have any difficulty with the directions or the follow-up service? What does that tell you about global marketing and global business?
Great discussion starter about the benefits and drawbacks of free trade.
3. Imagine yourself trying to sell someone from France on the idea of visiting the Disney park. What issues might you expect to encounter? What issues may you encounter when trying to get someone visiting from France to go to the Disneyland park in the United States?
Great discussion starter about cultural differences, including cultural icons, income levels, entertainment options and preferences, and more.
Bonus case 3-4
THE CHINA CHALLENGE
MTV has had tremendous influence on the music, style, innovation, and attitude of the teenage and 20-plus population. Imagine bringing MTV’s marketing power to China, the most populous nation on earth, and a country with not only emerging economic potential but also increasing demand among its young people. Viacom, the owner of MTV, envisions such a future and has entrusted Li Yifei, president of MTV Networks China, to make it happen.
Viacom’s chief executive chose Li Yifei for the job because of what he called the three Cs—character, competence, and commitment. Li added one more C—Chinese. Li brings an interesting background and credentials to the job. A native of Beijing (China’s capital city), Li was a national champion in tai chi (a form of martial arts) at 13 and a supporting actor in China’s first action movie. She earned the opportunity to attend the most elite foreign-language university in Beijing. At age 21, she left China to come to the United States after receiving a scholarship to attend Baylor University in Waco, Texas. Li earned a master’s degree in political science at Baylor and also observed firsthand the differences between the U.S. and Chinese cultures.
After graduation, she was one of 40 students selected for a prestigious internship at the United Nations. There she had the opportunity to produce the television program “U.N. Calling Asia.” After deciding that diplomacy was not her career calling, Li became manager of the Beijing office of Burson-Marsteller, a large public relations company. She assisted the firm’s clients in business dealings with the Chinese bureaucracy, helped handle complicated paperwork the government required, and assisted with cultural details involved with trade contacts of all kinds. Her work caught the eye of Viacom, and she was hired as the general manager of MTV Networks China in 1999.
To call her job a challenge would be an understatement. With a population of 1.3 billion and an emerging middle class, China is projected to be the second-largest advertising market in the world in the next 10 years. However, China is not really just one market. It’s fragmented into many local and cable stations and has a state-owned TV network, making the Chinese system very complex. Li is in charge of bringing everything together.
To add to this challenge, Li must adapt her management style to fit the Chinese culture. Traditional media regulators in China are very conservative and not typically concerned with program ratings (as regulators are in the United States). They are not receptive to broadcasting attractive, sometimes scantily clad vee-jays who work for a foreign network. When dealing with her mostly male Chinese business associates, Li reins in her usual straightforward, confident business style, since Chinese culture expects a woman to be soft and humble when conducting business. Li also knows it’s easier to gain access to markets in China if you have the support of a Chinese partner.
With to this understanding of Chinese culture, Li has created a win-win situation for Viacom and China. For example, she has persuaded over 300 Chinese cities to carry MTV programming and convinced CCTV, China’s state-owned national TV network, to co-produce the Chinese version of the MTV awards. She has also been instrumental in helping Viacom lay plans for a 24-hour MTV China channel through a partnership with Beijing Television.
Li Yifei is a strong example of an emerging global businessperson, that is, a person who speaks different languages, understands cultural and economic differences, and visualizes the vast potential and challenges of global markets. Fortune magazine has named her one of its “25 Rising Stars of the Next Generation of Global Leaders.” Li places great value on her time spent in the United States and strongly believes that people from different cultures can have an effective dialogue. Her dream, and the mission of Viacom, she says, is to narrow the cultural divide: “I strongly believe that different cultures can have effective dialogue as long as we have tolerance. It’s a matter of attitude.”
discussion questions for BONUS case 3-4
1. DO YOU THINK A FEMALE MANAGER SUCH AS LI YIFEI WOULD BE AS SUCCESSFUL IN ANOTHER INDUSTRY, SUCH AS MANUFACTURING?
2. Why do you think Li has been successful in a male-oriented society such as China?
3. If you were Li’s boss at MTV, would you offer her a promotion? If so, what position in the company would you recommend? Why?
answers to discussion questions for BONUS case 3-4
1. DO YOU THINK A FEMALE MANAGER SUCH AS LI YIFEI WOULD BE AS SUCCESSFUL IN ANOTHER INDUSTRY, SUCH AS MANUFACTURING
Students’ opinions on this question will be varied. She has the basic management skills to succeed in her present position. Such skills may be readily transferable to another industry. On the other hand, some may feel that the music industry is a fast paced, creative industry that would embrace a multi-cultural female manager, where the culture of another industry may not.
2. Why do you think Li has been successful in a male-oriented society such as China?
Factors such as Li’s personality, background, cultural roots, and competitive spirit may be cited, but this list is far from complete.
3. If you were Li’s boss at MTV, would you offer her a promotion? If so, what position in the company would you recommend? Why?
Interesting discussion question. Her success in China would argue for another international position. Or management may want to give her a completely different assignment to broaden her experiences, perhaps grooming her for a future senior management position.
Endnotes
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[i] Sources: Louis S. Richman, “What’s Next After GATT’s Victory?” Fortune, January 10, 1994, pp. 66-71; Tim Lang, “The New Protectionism: Global Trade Rules Protect Corporations,” The Nation, July 15, 1996, p. 29; John McGinnis, “Restraining Leviathan: If Free Trade Is Federalism’s Heir, Protectionism Is the Best Way to Ensure a Future for Big Government,” National Review, March 11, 1996, p.40.; Robert W. Staiger, “Economic Theory and the Interpretation of GATT/WTO,” The American Economist, September 22, 2002; and Mohamed Ariff, “Pitfalls Aplenty on the Fast Track to Trade,” New Strait Times, April 11, 2006.
[ii] Sources: Scott Elder, “Europe’s Baby Bust,” National Geographic, September 2003; “The Population Divide,” The Register-Guard, May 14, 2006; and “Europe Facing Culture Dilemma,” The Clarion-Ledger, March 29, 2006, p. 10A.
[iii] Source: “John Elliott, “Why There Are No Indian Wal-Marts,” Fortune, May 25, 2006.
[iv] Source: Gary Stoller, “Doing Business Abroad? Simple Faux Pas Can Sink You,” USA Today, August 24, 2007.
[v] Source: David M. Katz, “The Bribery Gap,” CFO, January 2005.
[vi] Source: Lee Gimpel, “E-mail by Snail Mail,” Fast Company, March 2007.
[vii] The Internet is a dynamic, changing information source. Web links noted in this manual were checked at the time of publication, but content may change over time. Please review the website before recommending it to your students.
[viii] Sources: Diana Fu, “Sweatshops Provoke More Than a Moral Outcry,” University Wire, January 29, 2003; Nicholas Stein, “Now Way Out of Competition to Make Products for Western Companies Has Revised an Old Form of Abuse: Debt Bondage,” Fortune, January 20, 2003, p. 102-110; Douglas Lavin, “Globalization Goes Upscale,” The Wall Street Journal, February 1, 2002, p. A18; Beth Coombs, “USC Questions Possible WRC Membership,” University Wire, June 5, 2002.
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