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Chapters 1, 2, 4 thru 9, and 11 thru 16, Global Business Today, 12th Edition by Hill

Chapter 1 - Globalization             

This chapter focuses on the concepts of Globalization as it is today.  We will discover the good and the bad in the:

                                                1) Globalization of Markets

                                                2) Globalization of Production   

Chapter 2 – National Differences

This chapter focuses on the different political, economic, and legal systems that are influential in the world. It is made clear to the reader that these differences are significant and must be clearly understood by the managers of international firms.

The section that focuses on legal systems includes a discussion of intellectual property including patents, copyrights, and trademarks.  Protecting intellectual property is a particularly problematic issue in international trade.

Finally, the chapter ends with a discussion of the managerial implications of differing political, economic, and legal systems of a country.

Chapter 4 – Culture

This chapter begins by introducing the concept of culture. The determinants of culture are identified, which include religion, political philosophy, economic philosophy, education, language, and social structure.

The first half of the chapter focuses on the influence of social structure, religion, language, and education on culture. The section on religion explains the economic implications of Christianity, Islam, Hinduism, Buddhism, and Confucianism.

In addition, Geert Hofstede’s model of how a society’s culture impacts the values found in the workplace is presented. According to Hofstede, cultures vary along the lines of power distance, individualism versus collectivism, uncertainty avoidance, and masculinity versus femininity. The concept of ethnocentric behavior is introduced.

Finally, the author reiterates the point that the value systems and norms of a country influence the costs of doing business in that country.

Chapter 5 – Ethics

This chapter focuses on how ethical issues can and should be incorporated into decision making in an international business.

The chapter starts by looking at the source and nature of ethical issues and dilemmas in an international business.

Then, the reasons for poor ethical decision making in international business are reviewed.

Next, there is a discussion of different philosophical approaches to business ethics.

Finally, the chapter concludes with a review of the different processes that managers can adopt to make sure that ethical considerations are incorporated into decision making in an international business firm.

Chapter 6 – International Trade Theory

This chapter focuses on the benefits of international trade and introduces several theories that help explain the patterns of international trade that are observed in practice.

The discussion begins with an explanation of the classical theories of mercantilism, and then proceeds to discuss the theories of absolute advantage and comparative advantage.

Four additional theories are discussed, including the Heckscher-Ohlin theory, the product life cycle theory, the new trade theory, and the theory of national competitive advantage.  Each of these theories helps explain why certain goods are (or should be) made in certain countries.

The chapter ends by discussing the link between the theories of international trade and (1) a firm’s decision about where (in the world) to locate its various productive activities, (2) the importance of establishing first-mover advantages, and (3) government trade policies.     

Chapter 7 –The Political economy of Trade

This chapter begins with a discussion of the six main instruments of trade policy, including tariffs, subsidies, import quotas, voluntary export restraints, local content requirements, and administrative policies. This section is followed by a discussion of the merits of government intervention into international trade. The author provides a balanced view of this difficult issue.

The second half of the chapter focuses on the development of the global trading system. A historical context is provided, along with a view of the global trading system as it exists today. The author acquaints the reader with the General Agreement on Trade and Tariffs (GATT) and the World Trade Organization.

Chapter 8 – Foreign Direct Investment

This chapter focuses on the topic of foreign direct investment (FDI).  FDI occurs when a firm invests directly in new facilities to produce and/or market a product in a foreign country.

At the outset, the chapter discusses the growth in FDI, particularly by medium-sized and small firms. The theoretical underpinnings of FDI are discussed, which describe under what circumstances it is advantageous for a firm to invest in production facilities in a foreign country.

The chapter also addresses the different policies that governments have toward foreign direct investment. Some governments are opposed to FDI and some governments encourage it. Three specific ideologies of FDI are discussed, including the radical view, the free market view, and pragmatic nationalism.

The chapter also provides a discussion of the costs and benefits of FDI from the perspective of both the home country and the host country involved. The chapter concludes with a review of the policy instruments that governments use to regulate FDI activity by international firms.

Chapter 9 – Regional Integration

In this chapter, the topic of regional economic integration is explored. The levels of regional economic integration discussed (from least to most integrated) include: a free trade area, a customs union, a common market, an economic union, and a full political union. The arguments for and against regional economic integration are provided. Many students will remember some of these arguments from the debate of the ratification of the North American Free Trade Agreement (NAFTA).

The chapter also provides information about the major trade blocks of the world, including the European Union, NAFTA, the Andean Group, MERCOSUR, and several other Latin American and Asian trade alliances. In addition, the implications for business of these trade agreements and others are fully discussed.

Chapter 11 – The International Monetary System

The objective of this chapter is to explain how the international monetary system works and its implications for international business.

The chapter begins by reviewing the historical evolution of the monetary system, starting with the gold standard and the Bretton Woods System.

The chapter explains the role of the International Monetary Fund (IMF) and the World Bank, both of which were initiated by the Bretton Woods Conference. The fixed exchange rate system that was initiated by the Bretton Woods Conference collapsed in 1973.

The majority of the chapter explains the workings of the current international monetary system. The pluses and minuses of fixed exchange rates versus floating exchange rates are discussed. Scholars differ in regard to which system is best. The current role of the IMF and the World Bank are discussed, including the manner in which the IMF has helped nations restructure their debts.

Chapter 12 – International Business Strategy

This chapter focuses on the strategies that firms use to compete in foreign markets. At the outset, the chapter reviews the reasons that firms engage in international commerce, which range from earning a greater return from distinctive skills to realizing location economies by dispersing particular value creation activities to locations where they can be performed most efficiently.

A major portion of the chapter is dedicated to the pressures that international firm's face for cost reductions and local responsiveness. These pressures place conflicting demands on firms.

On the one hand, cost reductions are best achieved through product standardization and economies of scale.

On the other hand, pressures for local responsiveness require firms to modify their products to suit local demands.

The chapter also discusses the four basic strategies that firms utilize to compete in international markets. These strategies include:

a global standardization strategy,

a localization strategy,

a transnational strategy, and

an international strategy.

The advantages and disadvantages of each of these strategies are discussed.   The chapter concludes with a discussion of international strategic alliances.

Chapter 13 –Foreign Market Entry

This chapter focuses on the basic market entry decisions for firms. The six most common foreign entry strategies are discussed. These are: exporting, turnkey projects, licensing, franchising, establishing a joint venture with a host country firm, and setting up a wholly owned subsidiary in the host country. The advantages and disadvantages of each of these strategies are discussed.  

Chapter 14 – Exporting, Importing, Countertrade

This chapter focuses on the “nuts and bolts” of exporting and importing.  The promise and pitfalls of exporting are discussed, along with a discussion of the role of export management companies in the internationalization process.  The chapter also provides a nice discussion of export financing.  In this section, the author discusses the financial devices that have evolved to facilitate exporting including: the letter of credit, the draft (or bill of exchange), and the bill of lading.  The section ends by providing an example of a typical international trade transaction.  This example illustrates the complex nature of international trade transactions.  Finally, the chapter explores countertrade, its growth and the pros and cons of this type of transaction.

Chapter 15 – Global Production, Outsourcing, and Logistics

This chapter explores the issues associated with global operations management. At the outset, the author defines the terms operations, production, and material management, and then goes on to discuss the importance of total quality management (TQM) and ISO 9000.

Particular emphasis is placed on the topics of where international firms should locate their manufacturing operations and how international firms decided whether to make or buy component parts. In regard to the former, the author argues that country factors, technological factors, and product factors influence a manufacturer’s location decision. In regard to make-or-decisions, the author provides a balanced discussion of the advantages and disadvantages of buying components parts (in the world marketplace) opposed to making them in-house.

The chapter concludes with separate discussion of the importance of strategic alliances, just-in-time manufacturing, and information technology to international firms.

Chapter 16 – Global Marketing & Research & Development

This chapter focuses on the marketing and R&D activities of global firms. The chapter begins with a review of the four elements that constitute a firm's marketing mix: product attributes, distribution strategy, communication strategy, and pricing strategy.

A firm's marketing mix is the set of choice that if offers its customers. Many firms vary their marketing mix from country to country depending on differences in cultures, levels of economic development, product and technical standards, the availability of distribution channels, and so forth.

The chapter discusses the strategic implications of each element of the marketing mix for an international firm. The link between marketing and R&D is also discussed. The author stresses the point that selling a product on a global scale may require that a firm vary its products from country to country to satisfy local preferences. This may require a firm to establish R&D centers in different parts of the world, and closely link R&D and marketing in each region to ensure that the company is producing products that its overseas customers will buy.

Marketing Basics

4 Ps of Marketing

Chapter 1 – Globalization

Understand what is meant by the term globalization.

Recognize the main drivers of globalization.

Describe the changing nature of the global economy.

Explain the main arguments in the debate over the impact of globalization.

 Understand how the process of globalization is creating opportunities and challenges for business managers.

Chapter 2 – National Differences

Understand how the political systems of countries differ.

Understand how the economic systems of countries differ.

Understand how the legal systems of countries differ.

  Explain the implications for management practice of national differences in political economy.

Chapter 4 – Differences in Culture

Explain what is meant by the culture of a society.

Identify the forces that lead to differences in social culture.

Identify the business and economic implications of differences in culture.

Recognize how differences in social culture influence values in business.

  Demonstrate an appreciation for the economic and business implications of cultural change.

Chapter 5 – Ethics

Understand the ethical issues faced by international businesses.

Recognize an ethical dilemma.

Identify the causes of unethical behavior by managers.

Describe the different philosophical approaches to ethics.

Explain how managers can incorporate ethical considerations into their decision making. 

Chapter 6 – International Trade Theory

Understand why nations trade with each other.

Summarize the different theories explaining trade flows between nations.

  Recognize why many economists believe that unrestricted free trade between nations will raise the economic      welfare of all countries that participate in a free trade system.

  Explain the arguments of those who maintain that government can play a proactive role in promoting national competitive advantage in certain industries.

  Understand the important implications that international trade theory holds for business practice.

Chapter 7 – The Political Economy of Trade

Identify the policy instruments used by governments to influence international trade flows.

Understand why governments sometimes intervene in international trade.

Summarize and explain the arguments against strategic trade policy.

Describe the development of the world trading system and the current trade issues.

Explain the implications for managers of developments in the world trading system.

INSTRUMENTS OF TRADE POLICY

Tariffs

Subsides

Import Quotas and Voluntary Export Restraints

Local Content Requirements

Administrative Polices

Antidumping Policies

Chapter 8 – Foreign Direct Investment

Recognize current trends regarding foreign direct investment (FDI) in the world economy.

Explain the different theories of FDI.

Understand how political ideology shapes a government’s attitudes towards FDI.

Describe the benefits and costs of FDI to home and host countries.

Explain the range of policy instruments that governments use to influence FDI.

Identify the implications for management practice of the theory and government policies associated with FDI.

Chapter 9 –Regional Integration

             Describe the different levels of regional economic integration.

             Understand the economic and political arguments for regional economic integration.

Understand the economic and political arguments against regional economic integration.

Explain the history, current scope, and future prospects of the world's most important regional economic agreements.

Understand the implications for business that are inherent in regional economic integration agreements.

Chapter 11 – The International Monetary System

Describe the historical development of the modern global monetary system.

Explain the role played by the World Bank and the IMF in the international monetary system.

Compare and contrast the differences between a fixed and a floating exchange rate system.

Identify exchange rate regimes used in the world today, and why countries adopt different exchange rate regimes.

Understand the debate surrounding the role of the IMF in the management of financial crises.

Explain the implications of the global monetary system for currency management and business strategy.

Chapter 12 – The Strategy of International Business

             Explain the concept of strategy.

             Recognize how firms can profit by expanding globally.

Understand how pressures for cost reductions and pressures for local responsiveness influence strategic choice.

Identify the different strategies for competing globally and their pros and cons.

Explain the pros and cons of using strategic alliances to support global strategies.

Chapter 13 – Foreign Market Entry

Explain the three basic decisions that a firm contemplating foreign expansion must make: which markets to enter, when to enter, and on what scale.

Compare and contrast the advantages and disadvantages of the different modes that firms use to enter foreign markets.

Identify the factors that influence a firm’s choice of entry mode.

Recognize the pros and cons of acquisitions versus greenfield ventures as an entry strategy.

Chapter 14 – Exporting, Importing, Countertrade

Explain the promises and risks associated with exporting.

Identify the steps managers can take to improve their firm’s export performance.

Identify information sources and government programs that exist to support exporters.

Understand the basic steps involved in financing exporting.

Describe how countertrade can be used to facilitate exporting.

Chapter 15 – Global Production, Outsourcing, and Logistics

Explain why production and logistics decisions are of central importance to many multinational businesses.

Explain how country differences, production technology, and product features all affect the choice of where to locate production activities.

Recognize how the role of foreign subsidiaries in production can be enhanced over time as they accumulate knowledge.

Identify the factors that influence a firm’s decision of whether to source supplies from within the company, or from foreign suppliers.

Describe what is required to efficiently coordinate a globally dispersed production system.  

Chapter 16 – Global Marketing & Research & Development

Explain why it might make sense to vary the attributes of a product from country to country.

Recognize why and how a firm's distribution system might vary among countries.

Identify why and how advertising and promotional strategies might vary among countries.

Explain why and how a firm's pricing strategy might vary among countries.

Describe how the globalization of the world economy is affecting new-product development within the international business firm