INTERNATIONAL BUSINESS A Course on the Essentials THIRD ...

[Pages:13]INTERNATIONAL BUSINESS A Course on the Essentials THIRD EDITION

RIAD A. AJAMI AND G. JASON GODDARD

cM.E.Sharpe Armonk, New York

London, England

Detailed Contents

Preface

xvii

Prologue: Ode to the Yes Era

xxi

Maps

xxv

1. An Introduction to International Business and

Multinational Corporations

3

Current Scope and Historical Antecedents

4

What Is International Business?

4

Brief History of International Business

7

The Multinational Corporation

8

Definition of a Multinational Corporation

8

Multinational Corporations Come of Age

9

A Look at Present-Day Multinational

11

Operating Advantages and Disadvantages of Multinational

15

Recent Trends in World Trade

21

Expanding Volume

21

Increased Competition

24

Increasing Complexity

24

Trade in Services

25

The Field of International Business Studies

25

Discussion Questions

26

Bibliography

27

Globalization at the Crossroads: Germany's Mittelstand

and Competitive Advantage

27

Case Study 1.1: Transworld Minerals Inc.

28

2. The Nature of International Business

31

Domestic Versus International Business

31

Methods of Going International

33

Exporting

33

v

vi

Detailed Contents

Licensing

34

Franchising

35

Management Contracts

36

Contract Manufacturing

36

Direct Investment

37

Strategie Alliances

37

Wholly Owned Subsidi?res

38

Globalized Operations

39

Portfolio Investments

39

Recent Trade Pattems and Changes in Global Trade

41

Product Croups

44

Pattems of Direct Investment

45

Government Involvement in Trade Restrictions and Incentives

46

Protectionism

47

Tariffs

48

World Trade Organization

49

Regional Trade Groups

50

Cartels

50

Nontariff Barners to Merchandise Trade

51

Quotas

52

Nontariff Price Barners

52

Government Restriction of Exports

53

Summary

53

Discussion Questions

54

Bibliograph^

55

Globalization at the Crossroads: Is Securitization the Enemy?

56

Gase Study 2.1: Electronics International Ltd.

57

3. Theories of Trade and Economic Development

60

Introduction to International Trade Theories

60

Mercantilism

61

Classical Theory

62

Comparative Advantage

63

Weaknesses of Early Theories

64

More Recent Theories

64

Factor Endowment Theory

64

The Leontief Paradox

65

Criticisms

66

Modern Theories

66

International Product Life Cycle Theory

66

Other Modem Investment Theories

67

Detailed Contents

vii

Theories of Economic Development

68

Rostow's Stages of Economic Growth

69

The Big Push: Balanced Versus Unbalanced Growth

71

Hirschman's Strategy of Unbalance

71

Galbraith's Equilibrium of Poverty

72

Sen's Development as Freedom

73

The Global Continuum: Where Nations Fall Today

74

The Political Continuum

74

The Economic Continuum

75

Integrating Both Continua

77

Pattems of World Development

77

Background: The Role of GNI

77

The Developed Countries

79

Upper-Middle-Income Countries

80

Low-Income and Lower-Middle-Income Countries

81

The Subterranean Economies

82

Parallel Tracks: The Continued Diversity of the World Economy

82

Summary

84

Discussion Questions

85

Bibliography

86

Globalization at the Crossroads: The Fortune at the Bottom of the Pyramid

87

Case Study 3.1: Euromanage Inc.

88

4. International Monetary System and the Balance of Payments

92

International Monetary Terminology

93

Hard Currencies

93

Soft Currencies

94

Convertibility

94

Exchange Rate

94

Appreciation

95

Depreciation

95

A Brief History of the International Monetary System

95

The Gold Standard (1880-1914)

95

The Gold Specie Standard

96

The Gold Bullion Standard

96

The Interwar Years (1918-1939)

97

The Bretton Woods System (1944-1973)

98

The International Monetary Fund

99

Aims

99

Membership

100

Structure

100

viii

Detailed Contents

Forms of IMF Assistance Extended Fund Facility Structural Adjustment Facilities

IMF Conditionality Special Drawing Rights

Using Special Drawing Rights Valuation of SDRs Difficulties in the Bretten Woods System The Floating-Rate Era: 1973 to the Present Pure Floating Rates Managed, or Dirty, Floating Rates Pegging Crawling Pegs Basket of Currencies Fixed Rates European Monetary System Difficulties in the Floating-Rate Era Fluctuations in the US Dollar: The Plaza and Louvre Accords European Monetary Union Maastricht Treaty Denmark's Challenge to Monetary Union Asian Financial Crisis EU Sovereign Debt Crisis Issues for Reform International Exchange-Rate Stability Target Zones International Liquidity A More Equitable International Monetary System Summary Discussion Questions Bibliography Appendix 4.1: Balance of Payments

Preliminary Definitions Problems in Balance of Payments Appendix 4.1 Discussion Questions Appendix 4.1 Bibliography Case Study 4.1: Global Bank Corporation Case Study 4.2: Scrinton Technologies

5. Foreign Exchange Markets Background

101 101 101 102 103 103 104 105 107 107 107 107 108 108 108 108 109 110 111 112 113 113 115 116 116 117 117 118 119 120 121 121 122 126 129 130 130 132

136 136

The Structure of the Foreign Exchange Markets Market Participants

Individuais Institutions Banks Central Banks and Other Official Participants Speculators and Arbitragers Foreign Exchange Brokers Location of Foreign Exchange Markets Japan Singapore and Hong Kong Bahrain European Markets US Markets Market Volumes Uses of the Foreign Exchange Market Types of Foreign Exchange Markets The Spot Market The Forward Market Foreign Exchange Rates Bid and Offer Rates Cross Rates Premiums and Discounts Devaluation and Revaluation of Exchange Rates Triangular Arbitrage Covered Interest Arbitrage Currency Futures Markets Differences Between Futures and Forward Markets Foreign Currency Options Option Terminology Forecasting Foreign Exchange Rates Problems in Forecasting Foreign Exchange Rates Fundamental Forecasting Technical Forecasting Assessing Market Sentiments Forecasting Strategy Types of Exposure in Foreign Exchange Markets Transaction Exposure Economic Exposure Translation Exposure Consolidation Problems

Detailed Contents

IX

137 139 139 139 140 140 141 141 142 142 142 143 143 143 144 144 145 145 146 147 148 148 149 153 155 157 158 159 159 160 160 161 161 162 162 162 163 163 165 165 168

X

Detailed Contents

(Konsolidation Rules in the United States

168

Inflation

170

Tax Exposure

171

Tax H?vens

171

Transfer Pricing

172

Transfer Pricing and Costing

173

Summary

174

Discussion Questions

174

Bibliography

175

Case Study 5.1: Skytrack Instrumentation

176

Case Study 5.2: Chemtech Inc.

178

6. Supranational Organization* and International Institutions

181

Background

181

General Agreement on Tariffs and Trade

182

World Trade Organization

184

Agreement on Trade Related Aspects of Intellectual Property

Rights (TRIPS)

185

Doha Agenda

186

United Nations Conference on Trade and Development

186

Regional Trade Groupings

188

Forms of Regional Integration

188

Free Trade Area

189

Customs Union

190

Common Market

191

Economic Union

192

Political Union

193

Association of South East Asian Nations

193

Asia-Pacific Economic Cooperation Forum

195

Financial Organizations

196

The World Bank

196

Inter-American Development Bank

201

Asian Development Bank

202

African Development Bank

203

European Investment Bank

204

European Bank for Reconstruction and Development

205

Summary

205

Discussion Questions

206

Bibliography

207

Globalization at the Crossroads: Whither the WTO?

207

Case Study 6.1: Structural Adjustments in Masawa

208

7. Analyzing National Economies The Purpose and Methodology of Country Analysis Preliminary Economic Indicators Size of the Economy Income Levels Income Distribution Personal Consumption Growth and Stability Pattems Population Sector Analysis Inflationary Trends External Financial Position: Extent of Debt Exchange-Rate Levels and Policies Banking and Financial Markets Comparison of Similar Economies Tax Systems Fiscal and Monetary Policy Situations Economic Flanning: Ideology and Practices Competition Market Demand Forecasting Purposes Data Collection and Sources Primary Research Areas of Research Trade Activities Input-Output Tables Historical Trends Country Comparisons: Analysis by Analogy Regression Analysis Income Elasticity Methods of Estimating Market Size and Share Market Buildup Chain Ratio Analogy with Known Data Designing Initial Market Strategy Summary Discussion Questions Bibliography Globalization at the Crossroads: World Oil Demand and the Edgeworth Box Case Study 7.1: The Republic of Mazuwa

Detailed Contents

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236 240

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