International
Business
The Challenges
of Globalization
TENTH EDITION
John J.
Kenneth L.
Wild Wild
International
Business
TENTH EDITION
The Challenges
of Globalization
John J. Wild
University of Wisconsin, Madison
Kenneth L. Wild
University of London, England
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Library of Congress Cataloging-in-Publication Data
Names: Wild, Kenneth L., author. | Wild, John J., author.
Title: International business : the challenges of globalization / Kenneth Wild, John Wild.
Description: Tenth Edition. | New York : Pearson, [2022] | Revised edition of the authors’ International business, [2019] | Includes
bibliographical references and index.
Identifiers: LCCN 2022008986 | LCCN 2022008987 | ISBN 9780137474714
Subjects: LCSH: International business enterprises—Management. | International trade.
Classification: LCC HD62.4 .W586 2022 (print) | LCC HD62.4 (ebook) | DDC 658/.049—dc23/eng/20220225
LC record available at https://lccn.loc.gov/2022008986
LC ebook record available at https://lccn.loc.gov/2022008987
ScoutAutomatedPrintCode
ISBN 10: 0-13-747471-7
ISBN 13: 978-0-13-747471-4
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Brief Contents
Preface xvi
About the Authors xxvii
PART 1 Global Business Environment 2
Chapter 1
Chapter 2
Globalization Today 2
Ethics, Social Responsibility, and Sustainability 42
PART 2 National Business Environment 70
Chapter 3
Chapter 4
Chapter 5
Cross-Cultural Business 70
Political, Economic, and Legal Systems 104
Economic Development of Nations 128
PART 3 International Trade and Investment 150
Chapter 6
Chapter 7
Chapter 8
Chapter 9
International Trade Theory 150
Governments and Trade 174
Foreign Direct Investment 196
Regional Economic Integration 218
PART 4 International Financial System 242
Chapter 10
Chapter 11
International Financial Markets 242
International Monetary System 260
PART 5 International Business Management 280
Chapter 12
Chapter 13
Chapter 14
Chapter 15
Chapter 16
Chapter 17
International Strategy and Organization 280
Analyzing International Opportunities 300
Selecting and Managing Entry Modes 322
Developing and Marketing Products 344
Managing International Operations 362
Hiring and Managing Employees 380
Endnotes 398
Glossary 410
Name Index 418
Subject Index 420
iv
Contents
Preface xvi
About the Authors xxvii
PART 1 Global Business Environment 2
Chapter 1
Globalization Today 2
Apple’s Global iMpact 3
1.1 Introduction and Key Players 4
1.1.1 Key Players in International Business 6
•
GLOBAL MANAGER: The Keys to Global Success 7
1.2 What is Globalization? 7
1.2.1 Evolution of Globalization 9
1.2.2 Globalization of Markets 10
1.2.3 Globalization of Production 14
1.3 Drivers of Globalization 15
1.3.1 Falling Barriers to Trade and Investment 15
1.3.2 Global E-commerce 17
1.3.3 Digital Transformation 18
1.3.4 Communication and Transportation 19
1.4 Globalization Debate 21
1.4.1 Globalization Harms Jobs and Wages 21
1.4.2 Globalization Improves Jobs and Wages 21
1.4.3 Debate about Income Inequality 22
1.4.4 Globalization and Culture 24
•
CULTURE INSIGHTS: The Culture Debate 24
1.4.5 Globalization and National Sovereignty 25
1.4.6 Globalization and the Environment 25
1.5 Workplace Skills 26
1.5.1 Skills for Your Career 26
1.5.2 The Global Business Environment 28
Chapter Summary 29 • Key Terms 30 • Talk About It 31
Teaming Up 31 • Ethical Challenge 31 • Writing Assignments 31
•
PRACTICING INTERNATIONAL MANAGEMENT CASE 32
Appendix
World Atlas 33
Chapter 2
Ethics, Social Responsibility, and Sustainability 42
Tony’s Chocolonely 43
2.1 Ethics Theories 45
2.1.1 Utilitarianism 46
2.1.2 Rights Theory 46
2.1.3 Theory of Justice 47
2.1.4 Cultural Relativism 48
2.2 Business Ethics 48
2.2.1 Resolving Ethical Dilemmas 49
2.2.2 Codes of Ethics 50
2.2.3 Sources of Unethical Behavior 51
v
vi Contents
2.3 Corporate Social Responsibility 52
2.3.1 Efficiency and Profits as Social Responsibility 52
2.3.2 Business Responsibilities to Society 53
•
CULTURE INSIGHTS: Speaking in Fewer Tongues 54
2.3.3 Stakeholder Theory 55
2.4 Sustainability 56
2.4.1 Carbon Footprints and Climate Change 57
•
GLOBAL MANAGER: Three Sustainable Strategies for Three Markets 58
2.4.2 A Circular Economy 58
2.4.3 Greenwashing 59
2.5 Additional Key Global Issues 61
2.5.1 Bribery and Corruption 61
2.5.2 Working Conditions and Human Rights 62
2.5.3 Diversity, Equity, and Inclusion 63
Chapter Summary 66
Teaming Up 68
•
•
•
Key Terms 67
• Talk About It 68
Ethical Challenge 68
• Writing Assignments 68
PRACTICING INTERNATIONAL MANAGEMENT CASE 69
PART 2 National Business Environment 70
Chapter 3
Cross-Cultural Business 70
Vans: Off The Wall 71
3.1 What Is Culture? 72
3.1.1 Cross-Cultural Literacy 72
3.1.2 National Culture 74
3.1.3 Subcultures 74
3.1.4 Physical Environment 75
3.1.5 Material Culture 76
3.2 Values, Attitudes, and Behavior 76
3.2.1 Values 76
3.2.2 Attitudes 76
3.2.3 Aesthetics 77
3.2.4 Behaviors 77
•
CULTURE INSIGHTS: A Globetrotter’s Guide to Meetings 78
3.3 Social Structure and Education 79
3.3.1 Social Group Associations 79
3.3.2 Social Status 80
3.3.3 Social Mobility 81
3.3.4 Education 84
•
GLOBAL MANAGER: Social Flexibility 85
3.4 Religion 85
3.4.1 Christianity 85
3.4.2 Islam 88
3.4.3 Hinduism 88
3.4.4 Buddhism 90
3.4.5 Judaism 90
3.4.6 Confucianism 91
3.5 Personal Communication 91
3.5.1 Spoken and Written Language 91
3.5.2 Body Language 93
3.6 Culture in the Global Workplace 94
3.6.1 Perception of Time 94
3.6.2 View of Work 94
Contents vii
3.6.3 Cultural Change 95
3.6.4 Kluckhohn-Strodtbeck Framework 96
3.6.5 Hofstede Framework 97
Chapter Summary 99
Teaming Up 101
•
Chapter 4
•
•
Key Terms 101
Ethical Challenge 101
• Talk About It 101
• Writing Assignments 102
PRACTICING INTERNATIONAL MANAGEMENT CASE 103
Political, Economic, and Legal Systems 104
TikTok Rocks 105
4.1 Political Systems 106
4.1.1 Totalitarianism 107
•
GLOBAL MANAGER: From Civil War to Civil Society 108
4.1.2 Democracy 110
4.2 Economic Systems 111
4.2.1 Centrally Planned Economy 112
4.2.2 Mixed Economy 113
4.2.3 Market Economy 114
4.3 Legal Systems 118
4.3.1 Common Law 119
4.3.2 Civil Law 119
•
CULTURE INSIGHTS: Playing by the Rules 120
4.3.3 Theocratic Law 120
4.4 Global Legal Issues 120
4.4.1 Intellectual Property 121
4.4.2 Product Safety and Liability 123
4.4.3 Antitrust Regulations 124
4.4.4 Taxation 124
Chapter Summary 125
Teaming Up 126
•
Chapter 5
•
•
Key Terms 125
Ethical Challenge 126
• Talk About It 126
• Writing Assignments 126
PRACTICING INTERNATIONAL MANAGEMENT CASE 127
Economic Development of Nations 128
Paytm in India 129
5.1 Economic Development 130
5.1.1 Classifying Countries 130
5.1.2 National Production 132
5.1.3 Purchasing Power Parity 133
5.1.4 Human Development 133
5.2 Political Risk 136
5.2.1 Conflict and Violence 136
•
GLOBAL MANAGER: Your Global Security Checklist 137
5.2.2 Property Seizure 137
5.2.3 Government Policies 138
5.3 Managing Political Risk 139
5.3.1 Adaptation 139
5.3.2 Information Gathering 140
5.3.3 Political Influence 140
5.3.4 International Relations 140
5.3.5 The United Nations 141
5.4 Economic Transition 142
5.4.1 Transition Obstacles 142
5.4.2 China’s Economic Transition 143
•
CULTURE INSIGHTS: Guidelines for Good Guanxi 144
5.4.3 Russia’s Economic Transition 145
viii Contents
Chapter Summary 146
Teaming Up 147
•
•
•
Key Terms 147
Ethical Challenge 148
• Talk About It 147
• Writing Assignments 148
PRACTICING INTERNATIONAL MANAGEMENT CASE 149
PART 3 International Trade and Investment 150
Chapter 6
International Trade Theory 150
Tesla Charges Ahead 151
6.1 The Nature of International Trade 152
6.1.1 Benefits of Trade 152
6.1.2 Economic Importance of Trade 153
6.1.3 Top Trading Nations 153
6.1.4 Global Trade and Output 156
6.1.5 Trade Interdependence 156
•
CULTURE INSIGHTS: Business Culture in the Pacific Rim 157
6.2 Mercantilism 157
6.2.1 How Mercantilism Worked 158
6.2.2 Flaws of Mercantilism 158
6.3 Theories of Absolute and Comparative Advantage 159
6.3.1 Absolute Advantage 159
6.3.2 Comparative Advantage 161
6.4 Factor Proportions Theory 163
6.4.1 Labor Versus Land and Capital Equipment 163
6.4.2 Evidence on Factor Proportions Theory: The Leontief Paradox 164
6.5 International Product Life Cycle 164
6.5.1 Stages of the Product Life Cycle 164
6.5.2 Limitations of the Theory 165
•
GLOBAL MANAGER: Five Fulfillment Mistakes 166
6.6 New Trade Theory 166
6.6.1 First-Mover Advantage 166
6.7 National Competitive Advantage 167
6.7.1 Factor Conditions 167
6.7.2 Demand Conditions 168
6.7.3 Related and Supporting Industries 169
6.7.4 Firm Strategy, Structure, and Rivalry 169
6.7.5 Government and Chance 169
Chapter Summary 170
Teaming Up 171
•
Chapter 7
•
•
Key Terms 171
Ethical Challenge 172
• Talk About It 171
• Writing Assignments 172
PRACTICING INTERNATIONAL MANAGEMENT CASE 173
Governments and Trade 174
Netflix Reinvents TV 175
7.1 Why Do Governments Intervene in Trade? 176
7.1.1 Political Motives 176
•
CULTURE INSIGHTS: A Culture of Business Security 178
7.1.2 Economic Motives 179
7.1.3 Cultural Motives 180
7.2 Instruments of Trade Promotion 181
7.2.1 Subsidies 181
7.2.2 Export Assistance 182
•
GLOBAL MANAGER: Experts in Exporting 182
7.2.3 Foreign Trade Zones 183
7.2.4 Special Government Agencies 183
Contents ix
7.3 Instruments of Trade Restriction 184
7.3.1 Tariffs 184
7.3.2 Quotas 185
7.3.3 Other Nontariff Barriers 186
7.4 Global Trading System 187
7.4.1 General Agreement on Tariffs and Trade (GATT) 188
7.4.2 World Trade Organization (WTO) 189
Chapter Summary 192
Teaming Up 193
•
Chapter 8
•
•
Key Terms 193
• Talk About It 193
Ethical Challenge 193
• Writing Assignments 194
PRACTICING INTERNATIONAL MANAGEMENT CASE 195
Foreign Direct Investment 196
Spotify for Every Mood 197
8.1 The Nature of Foreign Direct Investment 198
8.1.1 Forms of Foreign Direct Investment 198
•
CULTURE INSIGHTS: Cross-Cultural Mergers and Acquisitions 199
8.1.2 Worldwide Flows of FDI 199
8.1.3 Recipients and Sources of FDI 200
8.2 Theories of Foreign Direct Investment 202
8.2.1 International Product Life Cycle 202
8.2.2 Market Imperfections 203
8.2.3 Eclectic Theory 204
8.2.4 Market Power 204
8.3 Management Issues and Foreign Direct Investment 204
8.3.1 Control 204
8.3.2 Purchase-or-Build Decision 206
8.3.3 Production Costs 206
•
GLOBAL MANAGER: Surprises of Investing Abroad 206
8.3.4 Customer Knowledge 208
8.3.5 Following Clients 208
8.3.6 Following Rivals 208
8.4 Why Governments Intervene in FDI 209
8.4.1 Balance of Payments 209
8.4.2 Reasons for Intervention by the Host Country 209
8.4.3 Reasons for Intervention by the Home Country 210
8.5 Government Policy Instruments and FDI 211
8.5.1 Host Countries: Promotion 211
8.5.2 Host Countries: Restriction 213
8.5.3 Home Countries: Promotion 213
8.5.4 Home Countries: Restriction 213
Chapter Summary 214
Teaming Up 215
•
Chapter 9
•
•
Key Terms 215
• Talk About It 215
Ethical Challenge 215
• Writing Assignments 216
PRACTICING INTERNATIONAL MANAGEMENT CASE 217
Regional Economic Integration 218
Nestlé’s Global Recipe 219
9.1 The Nature of Regional Integration Efforts 220
9.1.1 Levels of Regional Integration 220
9.1.2 The Case for Regional Integration 221
9.1.3 The Case Against Regional Integration 223
9.2 Integration in Europe 225
9.2.1 European Union 225
•
CULTURE INSIGHTS: Czech List 229
9.2.2 European Free Trade Association (EFTA) 231
x Contents
9.3 Integration in the Americas 232
9.3.1 United States-Mexico-Canada Agreement (USMCA) 232
9.3.2 Central American Free Trade Agreement (CAFTA-DR) 234
9.3.3 Andean Community (CAN) 235
9.3.4 Southern Common Market (MERCOSUR) 235
9.3.5 Central America and the Caribbean 235
9.4 Integration in Asia and Africa 236
9.4.1 Comprehensive and Progressive Agreement for Trans-Pacific
­Partnership (CPTPP) 236
9.4.2 Association of Southeast Asian Nations (ASEAN) 236
•
GLOBAL MANAGER: The Ins and Outs of ASEAN 236
9.4.3 Regional Comprehensive Economic Partnership (RCEP) 237
9.4.4 Asia Pacific Economic Cooperation (APEC) 237
9.4.5 Africa’s Integration Efforts 238
Chapter Summary 239
Teaming Up 240
•
•
•
Key Terms 240
• Talk About It 240
Ethical Challenge 240
• Writing Assignments 240
PRACTICING INTERNATIONAL MANAGEMENT CASE 241
PART 4 International Financial System 242
Chapter 10 International Financial Markets 242
Samsung’s Number Won 243
10.1 The International Capital Market 244
10.1.1 Benefits of the International Capital Market 244
10.1.2 International Bond Market 245
•
CULTURE INSIGHTS: Big Results from Microfinance 246
10.1.3 International Equity Market 246
10.1.4 Eurocurrency Market 247
10.2 The Foreign Exchange Market 248
10.2.1 Functions of the Foreign Exchange Market 248
10.2.2 Exchange-Rate Risk 250
10.3 Currency Rates and Instruments 252
10.3.1 Spot and Forward Rates 252
10.3.2 Forward Contracts, Swaps, and Options 252
10.4 Market Structure and Convertibility 254
10.4.1 Financial Centers 254
•
GLOBAL MANAGER: Managing Foreign Exchange 255
10.4.2 Interbank Market 255
10.4.3 Currency Convertibility 255
Chapter Summary 257
Teaming Up 258
•
•
•
Key Terms 258
• Talk About It 258
Ethical Challenge 258
• Writing Assignments 258
PRACTICING INTERNATIONAL MANAGEMENT CASE 259
Chapter 11 International Monetary System 260
The Euro 261
11.1 Importance of Currency Values 262
11.1.1 Desire for Stability and Predictability 263
11.1.2 Efficient Versus Inefficient Market View 263
11.1.3 Forecasting Techniques 264
•
CULTURE INSIGHTS: The Long Arm of the Law 264
11.2 Factors That Determine Exchange Rates 265
11.2.1 Law of One Price 265
11.2.2 Purchasing Power Parity 265
11.2.3 Evaluating Purchasing Power Parity 267
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Contents xi
11.3 Fixed Exchange-Rate Systems 268
11.3.1 The Gold Standard 268
11.3.2 Bretton Woods Agreement 270
11.4 Floating Exchange-Rate System 272
11.4.1 Today’s Exchange-Rate Arrangements 273
11.4.2 Recent Financial Crises 273
•
GLOBAL MANAGER: Adjusting to Currency Swings 273
11.4.3 Future of the International Monetary System 276
Chapter Summary 276
Teaming Up 278
•
•
•
Key Terms 277
Ethical Challenge 278
• Talk About It 278
• Writing Assignments 278
PRACTICING INTERNATIONAL MANAGEMENT CASE 279
PART 5 International Business Management 280
Chapter 12 International Strategy and Organization 280
Ryanair Soars Above 281
12.1 Company Analysis 282
12.1.1 Company Mission and Goals 282
12.1.2 Core Competency and Value Creation 283
12.1.3 Business Environment 285
•
CULTURE INSIGHTS: Researching Business Environments 286
12.2 Strategy Formulation 286
12.2.1 Two International Strategies 286
12.2.2 Corporate-Level Strategies 288
12.2.3 Business-Level Strategies 288
12.2.4 Department-Level Strategies 290
•
GLOBAL MANAGER: Questions to Ask Before Going International 291
12.3 Issues of Organizational Structure 291
12.3.1 Centralization Versus Decentralization 291
12.3.2 Coordination and Flexibility 292
12.4 Types of Organizational Structure 293
12.4.1 International Division Structure 293
12.4.2 International Area Structure 294
12.4.3 Global Product Structure 294
12.4.4 Global Matrix Structure 295
12.4.5 Work Teams 296
Chapter Summary 297
Teaming Up 298
•
•
•
Key Terms 298
Ethical Challenge 298
• Talk About It 298
• Writing Assignments 298
PRACTICING INTERNATIONAL MANAGEMENT CASE 299
Chapter 13 Analyzing International Opportunities 300
Starbucks’ Global Expansion 301
13.1 Basic Appeal and National Factors 302
13.1.1 Identify Basic Appeal 302
13.1.2 Assess the National Business Environment 303
•
GLOBAL MANAGER: Expanding Globally Online 306
13.2 Measure and Select the Market or Site 306
13.2.1 Measure Market or Site Potential 306
13.2.2 Select the Market or Site 310
13.3 Secondary Market Research 311
13.3.1 Public Information Sources 312
13.3.2 Private Information Sources 313
13.3.3 Issues with Secondary Research 313
xii Contents
13.4 Primary Market Research 315
13.4.1 Trade Shows and Trade Missions 315
•
CULTURE INSIGHTS: Is the World Your Oyster? 316
13.4.2 Interviews and Focus Groups 316
13.4.3 Surveys and Environmental Scanning 317
13.4.4 Issues with Primary Research 317
Chapter Summary 318
Teaming Up 319
•
•
•
Key Terms 319
• Talk About It 319
Ethical Challenge 319
• Writing Assignments 320
PRACTICING INTERNATIONAL MANAGEMENT CASE 321
Chapter 14 Selecting and Managing Entry Modes 322
Marvel Entertains 323
14.1 Exporting and Countertrade 324
14.1.1 Why Companies Export 324
14.1.2 Developing an Export Strategy: A Four-Step Model 325
14.1.3 Degree of Export Involvement 326
14.1.4 Countertrade 328
14.2 Export/Import Financing 329
14.2.1 Advance Payment 329
14.2.2 Documentary Collection 329
14.2.3 Letter of Credit 330
14.2.4 Open Account 331
•
GLOBAL MANAGER: Collecting International Debts 332
14.3 Contractual Entry Modes 332
14.3.1 Licensing 332
14.3.2 Franchising 333
14.3.3 Management Contracts 335
14.3.4 Turnkey Projects 335
14.4 Investment Entry Modes 336
14.4.1 Wholly Owned Subsidiaries 336
14.4.2 Joint Ventures 337
14.4.3 Strategic Alliances 338
14.4.4 Partner Selection 339
•
CULTURE INSIGHTS: Negotiating Market Entry 340
Chapter Summary 340
Teaming Up 342
•
•
•
Key Terms 341
Ethical Challenge 342
• Talk About It 341
• Writing Assignments 342
PRACTICING INTERNATIONAL MANAGEMENT CASE 343
Chapter 15 Developing and Marketing Products 344
Wings for Life 345
15.1 Developing Product Strategies 346
15.1.1 Laws and Culture 346
15.1.2 Brand and Product Names 347
15.1.3 Other Product Issues 348
15.2 Creating Promotional Strategies 349
15.2.1 Push and Pull Strategies 349
•
GLOBAL MANAGER: Managing an International Sales Force 349
15.2.2 International Advertising 350
15.2.3 Communicating Promotional Messages 351
15.2.4 Blending Product and Promotional Strategies 352
•
CULTURE INSIGHTS: Localizing Digital Advertising 353
15.3 Designing Distribution Strategies 354
15.3.1 Designing Distribution Channels 354
15.3.2 Special Distribution Issues 355
Contents xiii
15.4 Developing Pricing Strategies 356
15.4.1 Worldwide Pricing 356
15.4.2 Dual Pricing 356
15.4.3 Factors That Affect Pricing Decisions 357
Chapter Summary 358
Teaming Up 360
•
•
•
Key Terms 359
• Talk About It 359
Ethical Challenge 360
• Writing Assignments 360
PRACTICING INTERNATIONAL MANAGEMENT CASE 361
Chapter 16 Managing International Operations 362
Toyota Races Ahead 363
16.1 Production Strategy 364
16.1.1 Capacity Planning 364
16.1.2 Facilities Location Planning 364
16.1.3 Process Planning 366
16.1.4 Facilities Layout Planning 367
16.2 Acquiring Physical Resources 367
16.2.1 Reasons to Make 368
16.2.2 Reasons to Buy 369
16.2.3 Raw Materials 370
16.2.4 Fixed Assets 370
16.3 Key Production Concerns 371
16.3.1 Quality Improvement Efforts 371
•
GLOBAL MANAGER: World-Class Standards 372
16.3.2 Shipping and Inventory Costs 372
16.3.3 Reinvestment versus Divestment 372
16.4 Financing Business Operations 373
16.4.1 Borrowing 373
16.4.2 Issuing Equity 374
16.4.3 Internal Funding 375
•
CULTURE INSIGHTS: Financing Business from Abroad 375
16.4.4 Capital Structure 376
Chapter Summary 377
Teaming Up 378
•
•
•
Key Terms 378
• Talk About It 378
Ethical Challenge 378
• Writing Assignments 378
PRACTICING INTERNATIONAL MANAGEMENT CASE 379
Chapter 17 Hiring and Managing Employees 380
IKEA Togetherness 381
17.1 International Staffing Policies 382
17.1.1 Ethnocentric Staffing 382
17.1.2 Polycentric Staffing 384
17.1.3 Geocentric Staffing 384
17.2 Recruiting and Selecting Human Resources 385
17.2.1 Human Resource Planning 385
•
GLOBAL MANAGER: Growing Global 385
17.2.2 Recruiting Human Resources 386
17.2.3 Selecting Human Resources 386
17.2.4 Culture Shock 387
17.2.5 Reverse Culture Shock 387
•
CULTURE INSIGHTS: A Shocking Ordeal 388
17.3 Training and Development 389
17.3.1 Methods of Cultural Training 389
17.3.2 Compiling a Cultural Profile 390
17.3.3 Nonmanagerial Worker Training 390
xiv Contents
17.4 Compensation, Labor, and Management 391
17.4.1 Managerial Employees 391
17.4.2 Nonmanagerial Workers 392
17.4.3 Labor–Management Relations 392
Chapter Summary 394
Teaming Up 395
•
Endnotes 398
Glossary 410
Name Index 418
Subject Index 420
•
•
Key Terms 395
Ethical Challenge 396
• Talk About It 395
• Writing Assignments 396
PRACTICING INTERNATIONAL MANAGEMENT CASE 397
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our course. Instructors say this text’s clear and lively writing style helps
students learn and appreciate international business. Our approach also
includes a concise and clutter-free style. This is a competitive advantage that
will never be sacrificed.
International Business is now available in Revel®, a powerful interactive
learning platform. Fully digital, Revel blends our author-created narrative,
media, and assessment. Revel is mobile so students can learn anytime,
anywhere, on any device. Even if you assign International Business as
an eBook or printed rental, students will benefit from this text’s learning
platform.
We owe the success of this text to you, our colleagues and our students
who keep us focused on evolving educational needs. In this era of rapid global
change, we continue to instill in our students a passion for international
business and to equip them with the skills and knowledge needed to compete.
Please accept our heartfelt thanks and know that your input is reflected in
everything we write.
John J. Wild
Kenneth L. Wild
xv
Preface
Welcome to the tenth edition of International Business: The Challenges of Globalization. As in
previous editions, this text evolved from extensive market surveys, chapter reviews, and correspondence with scores of instructors and students. We are delighted that an overwhelming number of instructors and students agree with our approach to international business. The reception
of this text in the United States and across the world has exceeded all expectations.
This text is the most reliable travel companion available to accompany students on their
journey through international business. It motivates the reader by making international business
thought-provoking and accessible. It embraces the central role of culture and other environmental factors in international business. Each chapter is infused with real-world discussion, while
underlying theory appears in the background where it belongs. Terminology is used consistently, and theories are explained in direct and concise terms. This text’s visual style is innovative yet subtle, and carefully balances the use of photos, illustrations, and features. The result is
an easy-to-read and clutter-free design.
New to This Edition
• NEW Revel® digital course option. Revel improves learning by empowering students to
actively participate in studying international business. Revel delivers an engaging blend
of our author-created narrative, media, and assessment in one continuous ­experience.
­Interactive content and assessments give students opportunities to explore and apply
­concepts. And Revel is mobile so students can learn anytime, anywhere, on any device
online and offline.
• NEW Chapter 2: Ethics, Social Responsibility, and Sustainability. This new chapter
explains the moral foundations of ethical business in clear, accessible terms. It describes
how international managers contend with ethical dilemmas and manage businesses
in a socially responsible manner for all stakeholders. It also presents the drive toward
­sustainability and a more circular economy. The chapter closes by addressing diversity,
equity, and inclusion in a global context.
• Reduced complexity of foreign exchange in Chapter 10: International Financial
­Markets. Students sometimes struggle with foreign exchange, so we removed ­topics
not central to the core chapter lessons. Gone are explanations of quoted and base
­currencies, direct and indirect quotes, calculating cross rates, and the chapter’s appendix of
­calculations. Also removed is the lengthy currency table easily found online today.
• Revised and simplified economic theories in Chapter 11: International Monetary
System. Feedback tells us that students struggle with the complexity of the law of one
price and purchasing power parity theories. Coverage of these theories is highly condensed
and now focuses on the essential, need-to-know aspects. Each theory is presented in our
trademark straightforward style and explained with uncomplicated examples.
• NEW and significantly revised opening vignettes and case studies of high-interest
­companies. Each brief company profile previews topics covered in the chapter. ­Examples
include Apple, Netflix, Spotify, TikTok, Tesla, Vans, Paytm of India, and Tony’s
Chocolonely of the Netherlands. Many chapters close with cases that feature these same
companies to illustrate topics presented in the chapter.
• Employability skills emphasized in the pedagogy. The text, group projects, debates,
shared writing exercises, and case studies help students to enhance skills that will increase
their value in a digital economy. This edition expands student opportunities to develop
key skills, including knowledge application and analysis, reflective (critical) thinking,
­communication, and ethical understanding and social responsibility, among others.
• NEW art and media program. New maps, figures, graphs, tables, photos, and videos help
bring international business to life.
xvi
Preface xvii
Chapter-by-Chapter Changes in this Edition
All Chapters
New and updated company profiles begin every chapter
New and updated cases end every chapter
New and interesting examples illustrate concepts
New maps, figures, graphs, tables, and photos throughout
All chapters after Chapter 1 are renumbered (Old Chapter 2 is now Chapter 3, etc.)
Chapter 1
Updated opening vignette: Apple’s Global iMpact
New material on e-commerce, the Internet of Things, and digital transformation
New coverage of the pandemic’s impact on business and society
New graphs on world trade and new map on nations’ extent of globalization
Condensed globalization debate to one learning objective from three
Updated employability skills (workplace skills)
New case: Apple’s Global Strategy
Chapter 2
ALL NEW chapter on Ethics, Social Responsibility, and Sustainability
Opening vignette: Tony’s Chocolonely
Ethics theories explained in straightforward terms
Covers ethical dilemmas, stakeholder theory, climate change, DEI efforts
Figures show carbon emissions and demonstrate a circular economy
New case: Big Chocolate’s Big Problem
Chapter 3
New opening vignette: Vans: Off The Wall
Additional coverage of cross-cultural literacy and new graphics
New map and expanded content reveal nations’ social mobility scores
New maps show religious affiliations globally
Updated Hofstede tables to include African and Arab countries
New case: Off The Wall with Vans and VF Corporation
Chapter 4
New opening vignette: TikTok Rocks
Streamlined coverage of the three types of economic systems
New map shows nations’ levels of economic freedom
Updated intellectual property and other topics in legal systems
New case: TikTok and the Big-Tech Crackdown
Chapter 5
New opening vignette: Paytm in India
Updated shadow economies in gross domestic product coverage
New map shows national rankings on the Human Development Index
Condensed coverage of political risk and how it can be managed
New case: Paytm Pays Off for India
Chapter 6
New opening vignette: Tesla Charges Ahead
New map and coverage of the economic importance of trade
New graphic shows relation between world trade and world output
New diagram shows Porter’s national competitive advantage diamond
New case: Tesla Drives EV Market Growth
Chapter 7
New opening vignette: Netflix Reinvents TV
Updated examples of motives for trade intervention
New examples on geopolitics, carbon pricing, and intellectual property
Updated recent performance of the World Trade Organization
New case: Netflix and Trade in Digital Services
Chapter 8
New opening vignette: Spotify for Every Mood
Updated figure shows global flows of foreign direct investment (FDI)
New graphs of FDI inflows and outflows for developed vs. developing nations
Significant revision of government FDI intervention and policy instruments
Simplified balance of payments explanation
New case: Taking Local Sounds Global
xviii Preface
Chapter 9
Chapter 10
Chapter 11
Chapter 12
Chapter 13
Chapter 14
Chapter 15
Chapter 16
Chapter 17
Updated opening vignette: Nestlé’s Global Recipe
Improved clarity in figure of regional integration types
Updated and revised European Union content
New coverage of integration in Africa, Asia-Pacific, and North America
Condensed or removed several small trade agreements
New case: Nestlé Adapts to Regional Integration
New opening vignette: Samsung’s Number Won
Condensed introduction to capital markets
New section on transaction, translation, and economic exposure
Removed quoted and base currencies, and direct and indirect quotes
Removed currency tables, cross rates, and calculations appendix
New case: Samsung’s Earnings and the Won
Updated opening vignette: The Euro
Updated currency values in figures and examples
Simplified coverage of law of one price and purchasing power parity
Removed coverage of the defunct European monetary system
New case: Argentina Survives a Crisis—Again
Updated opening vignette: Ryanair Soars Above
Revised value chain coverage and added glossary terms
New box on researching business environments
Revised low-cost leadership strategy for clarity and brevity
Updated examples using technology products and popular brands
New case: Flying High with Low Fares
Updated opening vignette: Starbucks’ Global Expansion
New examples and anecdotes of market and site selection
Condensed national business environment screening process
New map showing number of mobile phone subscribers per nation
Updated secondary research sources for use in country analysis
Updated case: Vietnam’s Robust Economic Growth
Updated opening vignette: Marvel Entertains
Expanded table of top US trade partners
New examples illustrating countertrade
Absorbed last section on partnership issues throughout the chapter
New case: Marvel’s Cinematic Universe
Updated opening vignette: Wings for Life
Removed discussion of national image
Revised section on counterfeit goods
New, updated, and revised marketing examples
New case: Red Bull’s Marketing Energy
Updated opening vignette: Toyota Races Ahead
Added coverage of pandemic’s effect on supply chains
Revised reinvestment vs. divestment section for brevity
Updated exercises and writing assignments
Updated case: Just-in-Time Plus Just-in-Case
New opening vignette: IKEA Togetherness
Revised cultural training methods and added glossary terms
Updated sources used to compile a cultural profile
Condensed compensation and labor issues into one section from two
New case: IKEA’s HR Leadership
Preface xix
Revel
International Business employs the powerful interactive learning platform Revel®. Fully digital
and highly engaging, Revel provides students with all course materials. With Revel, ­learning
and evaluation are integrated as students
read and practice in one ­continuous
­experience. Revel delivers an engaging
blend of media and assessment woven
into our ­author-created narrative. ­Students
­perform better because they actively
­participate in learning by exploring and
applying international ­business concepts.
Revel is mobile and user-friendly so
­students can learn on the go—anytime,
anywhere, on any device.
Features
• Interactives integrated within the
n­ arrative get students learning actively
and are designed for the way students
read, think, and learn. The interactives
can be completed quickly so students
stay focused on the task.
xx Preface
• Embedded assessments afford students regular opportunities to check their ­understanding.
Interactive quizzes at the end of each module and chapter allow instructors to provide timely
­feedback to students and quickly address learning gaps.
• Writing assignments—including journaling prompts, shared writing activities, and
essays—appear throughout the text. Writing is one of the best ways to foster and assess
critical thinking. ­Educators can integrate critical thinking exercises without adding
­significantly to their grading tasks.
Preface xxi
• Video assignments offer students opportunities to further their knowledge by applying
concepts and testing their understanding. Instructors can share videos accompanied by
time-stamped multiple-choice questions.
• Mobile app lets students read and practice on Revel anywhere, anytime, on any device—
online and offline. It automatically syncs work across all registered devices, allowing
­students to toggle freely between phone, tablet, and laptop as they move through
their day.
• Educator dashboard offers an at-a-glance look at overall class performance. The dashboard helps instructors manage all aspects of the course, including identifying and contacting
struggling and low-activity students.
• LMS integration provides institutions, instructors, and students easy access to their Revel
courses via Blackboard Learn, Canvas, Brightspace by D2L, Moodle, and others.
• Market Entry Strategy Project is an interactive simulation that asks students to research
a country as a future market for a new video game system. Working as part of a team,
­students research and analyze a country and then recommend a course of action.
Solving Teaching and Learning Challenges
International business is a dynamic and exciting subject that deserves an enjoyable and wellwritten text. This is an easy-to-read and timely text written in a concise and straightforward
manner. This International Business text helps solve several teaching and learning challenges.
Motivating Students of International Business
Students need to be motivated to read course materials. This text uses students’ inherent
­curiosity of other cultures to pique their interest. We introduce culture in Chapter 3 and
return to it often to encourage students to engage with the text. We illustrate concepts
with thought-provoking, real-world examples at the intersection of international business
and culture.
Culture Insights boxes illustrate how culture is related to key chapter topics. For example,
one chapter presents the debate about whether or not globalization harms local cultures.
Another box shows how entrepreneurs use knowledge of local cultures to succeed in business.
The use of culture in this way keeps the subject lively and accessible for students.
xxii Preface
Making International Business Relevant
Students search for the relevance of certain international business concepts to their future
careers. This text enlivens topics such as trade and investment theories, political and economic
systems, foreign exchange, and the international monetary system. We present complex or
abstract material in straightforward terms with vivid illustrations to make international business
interesting and relevant.
Global Manager boxes reveal how some seemingly abstract issues are relevant to entre­
preneurs, small businesses, and the world’s largest companies. Topics include obtaining capital
to finance international expansion and how to be mindful of personal security while abroad
on business. Students are more eager to study course materials when they see the managerial
implications of topics and their real-world applications.
Global
Providing Context for International
Business
International
Globalization
Today
(ch. 1)
International
Monetary System
(ch. 11)
National
Business
International
Trade Theory
(ch. 6)
Cross-Cultural
Business
(ch. 3)
Hiring and
Managing
Employees
(ch. 17)
Economic
International Development Managing
International
Financial
of Nations
Operations
Markets
(ch. 5)
(ch. 16)
(ch. 10)
International
Strategy and
Organization
(ch. 12)
Analyzing
International
Opportunities
(ch. 13)
Selecting
Developing
and
and Marketing Managing
Products Entry Modes
(ch. 15)
(ch. 14)
Political,
Economic, and
Legal Systems
(ch. 4)
Regional
Economic
Integration
(ch. 9)
Foreign Direct
Investment
(ch. 8)
Governments
and Trade
(ch. 7)
Ethics, Social
Responsibility
and
Sustainability
(ch. 2)
Students try to visualize how the many diverse elements
of international business come together. International
business covers a range of subjects, including culture,
politics, law, economics, globalization, trade, market­
ing, human resources, and supply chain management, to
name a few. Students benefit when material is presented
with a structured framework that illustrates how all
these parts fit together.
The Global Business Environment model shown
here and detailed in Chapter 1 is a unique organizing
framework that illustrates how the elements of inter­
national business are related. It depicts a dynamic,
integrated system that weaves together national and
international business environments and international
business management within the context of the global
business environment.
Preface xxiii
Tools for Active Learning
Instructors need a comprehensive set of tools to evaluate students’ understanding of concepts.
Carefully chosen assignment materials in this text span the full range of complexity to test
students’ knowledge and ability to apply key principles. Assessment materials are often experiential in nature to help students develop decision-making skills. These tools for active learning
help instructors to evaluate student progress.
• Quick Study concept checks at the end of each learning objective verify that students have
learned key terms and concepts before moving on. In the Revel text, students obtain immediate feedback on answers they provide.
• Teaming Up projects go beyond the text and require students to collaborate in teams to
­conduct interviews, research other countries, hold in-class debates, or come together in
breakout sessions.
• Talk About It questions raise important issues confronting ­entrepreneurs, international
­managers, policy makers, consumers, and others. Questions can be assigned as homework
or for in-class discussion.
• Ethical Challenge exercises
ask students to assume the
Talk About It
role of a manager, government
2-1. The actions taken by companies and their employees are seemingly always in the
official, or other individual and
spotlight because of the ubiquity of social media. One ethical misstep can cause a
company tremendous reputational damage. What steps can a multinational company
consider how they would react
take to avoid potential ethical lapses? How important are codes of ethics in maintaining corporate integrity?
to an ethical dilemma based on
2-2. Companies are increasingly pressured to conduct their activities in a way that
benefits all stakeholders. This can be a daunting task, especially for small businesses.
facts presented.
Should a company prioritize its stakeholders and focus most of its efforts on
satisfying the most important ones? Do you think benefit corporations are the way
of the future in global business?
2-3. Proponents of the circular economy say that it is the only responsible way forward
for the global economy. Describe the advantages of a circular economy. Do you
think the world can move toward greater circularity? Select a company that you
think can reduce its carbon footprint. What specific things might the company do to
improve its circularity?
Teaming Up
• Practicing International
­ anagement cases ask
M
­students to ­analyze and respond
to ­real-world companies’ issues,
problems, and opportunities that
are presented in each chapter.
Imagine that you and several of your classmates form the C-suite (chief executive officer, chief
information officer, etc.) of a company that makes semiconductors. Your task is to write a
INTERNATIONAL
MANAGEMENT CASE
national “rider” that will be added to your home country code of ethics toPRACTICING
be implemented
at a
new fabrication facility built in a Southeast Asian nation of your choosing.
2-4. What are the most important topics and subtopics that your code of ethics will include?
Just-in-Time Plus Just-in-Case
2-5. How does your team propose to avoid ethical imperialism and make sure it does not
follow cultural relativism in its code of ethics rider?
T
Ethical Challenge
Writing Assignments
oyota Motor Corporation is one of the world’s most respected
companies. It thrives as it overcomes obstacles, whether it be
an economic downturn, slack demand, natural disaster, or global
pandemic. Toyota’s production system is key to its success and
many companies have implemented a similar approach in their own
operations.
Toyota first began producing cars in 1937. In the mid-1950s, a
Toyota machinist named Taiichi Ohno began questioning the way
You are the newly hired CEO of a business that contracts with a global
media managed
firm to production. Concerned about quality
thatsocial
car companies
andinefficiency,
noted how supermarkets, unlike carmakers,
enforce its community standards. Your employees (content moderators)
a dozenOhno
countries
did
not
maintain
large
inventories of all their products. Instead, they
earn around $15 per hour to review and purge content that fails to meet your client’s standards.
ordered specific merchandise from suppliers as inventories dipped.
People say the social media firm sends the most controversial content for
review
to
companies
Ohno then introduced just-in-time inventory practices to automobile
like yours. Reviewing one of your firm’s international locations, you find past
and present
workers’
production.
This approach
became known as the Toyota Production
complaints of filthy workspaces, sexual harassment, physical and verbalSystem
abuse,(TPS).
discrimination,
Toyota’s
just-in-time
approach
eliminates inventory buildup
and drug use at work. The psychological toll of hours spent watching graphic violence, hate
by identifying parts that are in short supply during the assembly
speech, child pornography, and even murder cause employees to be diagnosed
with ofanxiety,
process. Suppliers
those parts are then notified to make a delivery
depression, and post-traumatic stress disorder (PTSD).
to the facility. Toyota’s system also relies on groups of workers to
suggest ways to improve the work process and make better cars. The
2-6. Why do you think the global social media company contracts thisentire
typeTPS
of iswork
basedto
onother
jidoka, which literally means “automation.”
companies?
But at Toyota the word expresses management’s faith in the worker
2-7. What specific steps can you think of that could be implemented immediately
toand a thinker.
as a human being
The year 2021 was tough for automobile producers, including
improve the situation at your company?
Toyota. Vehicles
require a large number of semiconductors
2-8. Do you think the social media company bears any ethical responsibility
for thetoday
physical
chips), and a chip shortage hampered worldwide auto
and psychological health of your employees, or is it entirely your(computer
firm’s responsibility?
production. The shortage arose from pandemic-induced lockdowns
2-9. Do you think the social media company or your firm has any long-term
responsibility
and labor shortages as well as other factors. An unusual snowstorm
for your employees’ health once they leave your employment? in Texas in February 2021 disrupted the chip fabrication facilities
of Infineon and other companies. A fire in March at Japanese chip
supplier, Renesas, destroyed $156 million of inventory and slowed
production for months. And a drought in Taiwan slowed chip output
because semiconductor production requires large amounts of water
to wash away chemicals.
Decades after Toyota laid the groundwork for its TPS system,
the results speak for themselves. Toyota prevailed despite a global
pandemic
2-10. Globalization and increased cross-cultural business bring moral issues andand low semiconductor supplies. In 2021, Toyota sold
more cars than GM in the United States for the first time ever.
competitiveness front and center today. Why is it important for companies
to take a
Every year since 1931, when GM overtook Ford in sales, GM sold
position on social issues and build a business based on integrity? more cars in the US market than any other automaker. Also in
2-11. Many companies get involved in environmental, or “green,” issues
to demonstrate
their
2021,
Toyota dethroned
Volkswagen as the world’s top producer of
social responsibility. How might a company align its social responsibility
efforts
with how Toyota overcame a global semiautomobiles.
To understand
11/03/22 conductor
12:26 PM shortage to outproduce its rivals, we need to explore
its strategy? Provide specific examples.
Toyota’s response to an event one decade earlier.
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CHAPTER 16 • MAnAging inTERnATionAl oPERATions
379
An earthquake-caused tsunami in 2011 devastated the coastline
region of Japan’s Fukushima prefecture and caused an accident at
a nuclear energy facility. In addition to the human tragedy, the devastation disrupted industrial activity for many Japanese companies,
including Toyota. So, Toyota examined the 25,000 to 30,000 parts
that go into one of its autos. It discovered that around 1,400 of those
parts are crucial components for which there is no easy substitute,
such as brakes, motor parts, and computer chips.
To help safeguard its auto production in future emergencies,
Toyota demanded that suppliers maintain higher inventories for its
must-have components. For example, chip suppliers now maintain
an inventory equal to six months’ worth of Toyota’s needs. Toyota
also sources components from multiple companies so that it can
switch suppliers quickly if one supplier experiences problems.
Toyota then created a database of its suppliers and its suppliers’ suppliers, which it calls its RESCUE (REinforce Supply Chain
Under Emergency) system. In case of an emergency, Toyota’s supply chain managers use RESCUE to identify at-risk components
and suppliers and adapt quickly to unfolding events. The changes
Toyota made in its inventory management after the 2011 Fukushima
disaster led directly to its reserve of semiconductors and other crucial components. Toyota was able to continue production when
many other companies needed to shut down operations.
Today, Toyota’s inventory system is based on just-in-time principles plus a dose of just-in-case readiness. Companies using justin-time practices might want to once again follow Toyota’s lead and
re-examine their inventory systems to ensure their own preparedness for unexpected events.7
Thinking Globally
16-11. Why do you think Toyota itself does not produce more of
the crucial parts that go into their automobiles and electric
vehicles? Which reasons to buy do you think outweigh
reasons to make?
16-12. Why do you think Toyota is investing near its assembly
operations in the US market and elsewhere? Identify as
many motives as you can in its home country, Japan, and
target markets.
16-13. Scientists warn that climate change will increase weatherrelated difficulties for companies. Can you think of
precautions that companies could take to protect their
operations? Explain.
16-14. For a product you are relatively familiar with and that is
composed of several or more parts, which ones do you
think are “must-have” components? How many of those
parts does the producer itself make?
xxiv Preface
Developing Employability Skills
Some students enrolled in this course are majoring in international business or a related area.
Other students are not business majors and are taking this course to gain insight into how businesses operate in the global economy today. Regardless of the chosen field of study, this course
helps students develop useful capabilities we call employability skills.
• Knowledge application and analysis refers to one’s ability to learn a concept and appro-
priately apply that knowledge in another setting to achieve a higher level of understanding.
­Business innovation is an underlying theme of this text. Students will discover that application of knowledge is key to innovation—experimenting, learning, applying knowledge, and
evaluating. They will learn how innovation, or a lack of it, influences a company’s success
or failure. Students apply these skills in many assignments, projects, cases, and the market
entry strategy project that is included with the Revel digital version of this text.
• Reflective (critical) thinking involves purposeful and goal-directed thinking used to
define and solve problems, make decisions, or form judgments related to a set of circumstances. For example, this text asks students to use critical thinking skills to examine how
a country develops its political, economic, and legal systems into a complex arrangement
to achieve its goals. Students also use their reflective or critical thinking skills to formulate
answers to many exercises in this text. The text also asks students to develop their analytical thinking skills, which involves drawing a conclusion from a pattern of facts.
• Communication skills involve the use of oral, written, and nonverbal language, along with
technology, to communicate ideas effectively and to listen intently. This text teaches that
articulating one’s thoughts and ideas in another language and culture should be done carefully to not offend the values and beliefs of others. Journaling prompts and other exercises ask
students to craft appropriate responses to specific situations in which they place themselves.
Other assessments require students to communicate effectively with others in shared writing
exercises, team exercises, and debates.
• Ethical understanding and social responsibility are sets of guiding principles that influence the way individuals and organizations behave within society. Students will encounter
scenarios of personal ethics and reasoning throughout this text. They will read how managers made ethical decisions under specific circumstances and how they fared. And ethics
exercises ask students to put themselves in a manager’s position and decide how to handle
an ethical dilemma.
Instructor Teaching Resources
For more information and resources, visit www.pearson.com.
Acknowledgments
We are grateful for the encouragement and suggestions provided by many instructors, professionals, and students in preparing this tenth edition of International Business: The Challenges
of Globalization. We especially thank the following instructors who provided valuable feedback
to improve this and previous editions:
Rob Abernathy
Hadi S. Alhorr
Gary Anders
Madan Annavarjula
Ogugua Anunoby
Robert Armstrong
Wendell Armstrong
Mernoush Banton
George Barnes
Constance Bates
Marca Marie Bear
University of North Carolina, Greensboro
Drake University
Arizona State University West
Northern Illinois University
Lincoln University
University of North Alabama
Central Virginia Community College
Florida International University
University of Texas at Dallas
Florida International University
University of Tampa
Preface xxv
Leta Beard
Tope A. Bello
Robert Blanchard
David Boggs
Chuck Bohleke
Erin Boyer
Todd Brachman
Richard Brisebois
Bill Brunsen
Thierry Brusselle
Thomas Byrne
Mikelle Calhoun
Martin Calkins
Lisa Cherivtch
Kenichiro Chinen
Joy Clark
Erikson Conkling
Randy Cray
Tim Cunha
Robert Engle
Herbert B. Epstein
Blair Farr
Stanley Flax
Ronelle Genser
Carolina Gomez
Jorge A. Gonzalez
Andre Graves
Kenneth R. Gray
James Gunn
Lynnette Guzzino
James Halteman
Alan Hamlin
Faisal Harahao
Dale Hartley
Charles Harvey
M. Anaam Hashmi
Les Jankovich
R. Sitki Karahan
Bruce Keillor
Kersten Kelly-Brunner
Ken Kim
Ki Hee Kim
Anthony C. Koh
Donald J. Kopka Jr.
James S. Lawson Jr.
Ian Lee
Tomasz Lenartowicz
Joseph W. Leonard
Antoinette Lloyd
Carol Lopilato
Karen Lynden
University of Washington, Washington
East Carolina University
Salem State College
Eastern Illinois University
Owens Community College
Central Piedmont Community College
Marquette University, Wisconsin
Everglades University
Eastern New Mexico at Portales
Chaffey College
Oakton Community College
Ohio State University
Santa Clara University
Oakton Community College
California State University at Sacramento
Auburn University–Montgomery
Ivy Tech Community College
University of Wisconsin at Stevens Point
Eastern New Mexico University at Portales
Quinnipiac University
University of Texas at Tyler
Jarvis Christian College
St. Thomas University
Devry University
University of Houston
University of Wisconsin at Milwaukee
SUNY Buffalo
Florida A&M University
Berkeley College
Thomas More University
Wheaton College
Southern Utah University
University of Redlands
Laramie County Community College
University of the West of England, UK
Minnesota State University at Mankato
San Jose State University
Montana State University
Youngstown State University
Ivy Tech Community College
University of Toledo
William Paterson University
University of Toledo
Towson University
Mississippi State University
Carleton University
Florida Atlantic University
Miami University (Ohio)
Virginia Union University
California State University at Dominguez Hills
The University of North Carolina at Greensboro
xxvi Preface
Jennifer Malarski
Donna Weaver McCloskey
James McFillen
Mantha Vlahos Mehallis
John L. Moore
David Mosby
Richard T. Mpoyi
Tim Muth
Christopher “Kit” Nagel
Rod Oglesby
Kenneth (Kyeungrae) Oh
Sam Okoroafo
Patrick O’Leary
Jaime Ortiz
Yongson Paik
Thomas Passero
Hui Pate
Clifford Perry
Susan Peterson
Janis Petronis
William Piper
Abe Qastin
Krishnan Ramaya
James Reinnoldt
Elva A. Resendez
Nadine Russell
C. Richard Scott
Deepak Sethi
Charlie Shi
Coral R. Snodgrass
Mark J. Snyder
Rajeev Sooreea
John Stanbury
William A. Stoever
Kenneth R. Tillery
William Walker
Paula Weber
James E. Welch
Steve Werner
David C. Wyld
Robert Yamaguchi
Bashar A. Zakaria
Man Zhang
Miguel Ángel Zúñiga
North Hennepin Community College
Widener University
Bowling Green State University
Florida Atlantic University
Oregon Institute of Technology
University of Texas, Arlington
Middle Tennessee State University
Florida Institute of Technology
Concordia University Irvine
Southwest Baptist University
Charleston Southern University
University of Toledo
St. Ambrose University
Texas International Education Consortium
Loyola Marymount University
Owens Community College
Skyline College
Florida International University
Scottsdale Community College
Tarleton State University
William Piedmont College
Lakeland College
Pacific University of Oregon
University of Washington–Bothell
Texas A&M University
Central Piedmont Community College
Metropolitan State College of Denver
Old Dominion University
Diablo Valley College
Canisius College
University of North Carolina
Penn State—University Park
George Mason University
Seton Hall University
Middle Tennessee State University
University of Houston
St. Cloud State University
Kentucky Wesleyan College
University of Houston
Southeastern Louisiana University
Fullerton College
California State University, Sacramento
Bowling Green State University, Kentucky
Morgan State University
It takes a dedicated group of individuals to take a textbook from first draft to final ­manuscript.
We thank our partners at Pearson for their tireless efforts in bringing the tenth edition of this
text to fruition. Special thanks on this project go to Lynn Huddon, Manager of Content ­Strategy;
Sutapa Mukherjee, Managing Editor; Neeraj Bhalla, Senior Sponsoring Editor; Priya ­Christopher,
Senior Sponsoring Editor; Bhanuprakash Sherla, Content Producer; Sugandh Juneja, Senior
­Manager, Content Producer; Kristin Ruscetta and Meghan DeMaio, Project Managers, Straive.
About the Authors
John J. Wild and Kenneth L. Wild provide a blend of skills uniquely suited to writing an international business text. They combine award-winning teaching and research with a global
view of business gained through years of living and working in cultures around the world.
Their ­writing makes the topic of international business practical, accessible, and interesting.
John J. Wild is a distinguished Professor of Business at the University of Wisconsin at
Madison. He previously held appointments at the University of Manchester in England and at
Michigan State University. He received his BBA, MS, and PhD degrees from the University of
Wisconsin at Madison.
Teaching business courses at both the undergraduate and graduate levels, Professor Wild
has received several teaching honors, including the Mabel W. Chipman Excellence-in-Teaching
Award, the Teaching Excellence Award from the business graduates of the University of
­Wisconsin, and a departmental Excellence-in-Teaching Award from Michigan State University.
He is a prior recipient of national research fellowships from KPMG and the EY Foundation.
Professor Wild is also a frequent speaker at universities and at national and international
conferences.
The author of more than 60 publications, in addition to several best-selling books, Professor
Wild conducts research on a wide range of topics, including corporate governance, capital
markets, and financial analysis and forecasting. He is an active member of several national and
international organizations, including the Academy of International Business, and has served as
associate editor and editorial board member for several prestigious journals.
Kenneth L. Wild is affiliated with the University of London, England. He previously taught
at Pennsylvania State University. He received his PhD from the University of Manchester
(UMIST) in England and his BS and MS degrees from the University of Wisconsin. Dr. Wild
also undertook postgraduate work at École des Affairs Internationale in Marseilles, France.
Having taught students of international business, marketing, and management at both the
undergraduate and graduate levels, Dr. Wild is a dedicated contributor to international ­business
education. As a member of several national and international organizations, including the
­Academy of International Business, Dr. Wild has spoken at major universities and at national
and international conferences.
Dr. Wild’s research covers a range of international business topics, including marketing
strategy, entry modes, risk in emerging markets, culture’s influence on business, and ­corporate
social responsibility.
xxvii
Part
1
Global Business Environment
Chapter One
Globalization
Today
Learning Objectives
1.1 Identify the types of companies active in international business.
After studying this chapter,
you should be able to
1.2 Explain globalization and the significance of global markets and production.
1.3 Detail the forces that drive globalization.
1.4 Summarize the main arguments in the debate about globalization.
1.5 Identify the skills this course will help you develop for your career.
A Look at This Chapter
This chapter defines the scope
of international business and
introduces us to some of its most
important topics. We begin by
identifying the key players in
international business today.
We then present globalization,
describing its influence on markets
and production, and the forces
behind its growth. Next, we analyze
each main argument in the debate
about globalization. This chapter
2
closes by describing how this course
can help develop your employability
skills and by presenting a model
of an integrated global business
environment.
A Look Ahead
Chapter 2 introduces us to
ethics and key ethical situations
companies confront in international
business. We present the importance
of corporate social responsibility
and managing for all stakeholders
in international business. We also
discuss the drive toward sustainability
and a circular economy. Finally, we
address the additional key issues
of corruption, human rights, and
efforts toward diversity, equity, and
inclusion.
CHAPTER 1 • Globalization Today 3
Apple’s Global iMpact
CUPERTINO, California—The Apple iPhone was the world’s first-ever smartphone and
gave people mobile computing power they never had before. The business models of
Uber and Lyft are entirely based on smartphone technology. Companies like TikTok and
applications like WhatsApp owe their success to the popularity of smartphones. Steve
Jobs once explained that the “i” in iPhone refers mainly to the internet but also stands
for individual, instruct, inform, and inspire.
Apple earns around 80 percent
of its revenue outside the United
States. Globalization benefits Apple
enormously and is at the core of its
global strategy. Globalized production allows Apple to source parts
and components worldwide and to
assemble its devices wherever it is
most cost effective. Apple’s hundreds of suppliers are based in as
many as 50 countries depending on
the device produced. And globalized
markets means that Apple can sell
its products worldwide with little or
no modification.
Despite the opportunities that
globalization provides Apple and
other companies, there are challenges too. Cultural, political, and
economic tensions can trigger rising nationalism. A US–China trade war caused a backlash against US imports to China and hurt Apple’s iPhone sales there. Lower-priced
­Chinese competitors improved their smartphones and took market share from Apple.
As you read this chapter, consider how the many aspects of globalization impact the
activities of international companies everywhere.1
David Grossman/Alamy Stock Photo
4 PART 1 • GLOBAL BUSINESS ENVIRONMENT
international business
Commercial transaction that
crosses the borders of two or more
nations.
imports
Goods and services purchased
abroad and brought into a country.
exports
Goods and services sold abroad
and sent out of a country.
Every day, each of us experiences the fruits of international business transactions as we go
about our routines. You awaken and turn off the alarm coming from your Apple iPhone, which
was designed in the United States and assembled in China with parts from Japan, South Korea,
Taiwan, and several other places. You pop in your AirPods and over a quick breakfast listen to a
podcast that was produced by Britain’s BBC radio. You slip on your Calvin Klein T-shirt and jeans
made in India and jump into your Vans shoes that were made in Vietnam. You head out the door
and hop into your Korean Hyundai that was made in Alabama. You hit the drive-through at the
Starbucks along your route to campus for a latte brewed from beans harvested in Colombia and
Ethiopia. Your day is just one hour old, but in a way, you’ve already taken a virtual trip around the
world. A quick glance at the “Made in” tags on your jacket, backpack, wallet, or other items you
have with you right now will demonstrate the pervasiveness of international business transactions.
How each of these products was designed and made and how each became available for you to
purchase is a result of international business transactions.
International business is any commercial transaction that crosses the borders of two or more
nations. You don’t have to set foot outside a small town to find evidence of international business.
It reaches into each of our lives in ways we don’t often realize. No matter where you live, you’ll be
surrounded by imports—goods and services purchased abroad and brought into a country. Your
counterparts around the world will undoubtedly spend some part of their day using your nation’s
exports—goods and services sold abroad and sent out of a country. Every year, all the nations
of the world export goods worth around $19 trillion and export services worth nearly $6 trillion.
To put it in perspective, this figure for merchandise exports is around 36 times the annual global
revenue of Walmart.2
This book describes the work and responsibilities of managers in an international business.
It covers an extraordinarily wide range of topics that influence international business activities.
We begin this chapter with an overview of the subject and an introduction to the key players in
international business. Then, we describe globalization’s powerful influence on markets and production and explain the forces behind its expansion. Next, we cover each main point in the debate
about globalization, including jobs, wages, income inequality, culture, and more. Then, we explain
how this course will help you develop employability skills, such as application of knowledge,
reflective thinking, communication, and ethics. Finally, we explain why international business is
special by presenting an integrated model of the global business environment.
1.1 Introduction and Key Players
1.1 Identify the types
of companies active in
­international business.
International business is rooted in the cultural, political, economic, and legal moorings of nations.
The study of international business involves learning about government policies, company activities, the work of managers, the work and social lives of ordinary people, and a host of social
issues. People are at the center of each of these topics and are what makes international business
a dynamic and thrilling journey of discovery.
There are periods of international cooperation among nations and periods of pullback.
­Sometimes nations quarrel over international trade and foreign direct investment policies and
other times find themselves working closely together. This geopolitical tension or cooperation then
has ripple effects for international companies, managers, workers, and consumers. The ebb and
flow of international political and economic cooperation is a hallmark of international business.
Each generation faces its own issues, and international business today presents new challenges
and opportunities within a new set of realities.
Relations between China and the United States are going through a difficult period. Much of this
has to do with fundamental differences between these countries’ cultures and systems of politics and
economics. The US government barred US companies from doing business with the China-based
telecom company, Huawei, without government approval primarily because it feared China’s leaders could use Huawei to commit espionage. This followed revelations that Super Micro Computer
of San Jose, California, sold computer servers to US businesses containing hidden computer code
in chips as well as extra chips that sent information to Chinese intelligence services. These types
of events reinforce calls for tighter control over global supply chains to reduce geopolitical risk.3
The vulnerability of companies’ supply chains has become apparent. Rather than maintain
large inventories of component parts, many industries depend on suppliers to deliver parts to the
CHAPTER 1 • Globalization Today 5
The first Industrial Revolution
was driven by steam power, the
second by electricity, and the third
by digital technologies. This fourth
Industrial Revolution is driven by
artificial intelligence, biotechnology,
quantum ­computing, and more. It
is blending our digital, physical,
and biological worlds and creating
vehicles that drive themselves,
robot arms used in smart factories,
and other innovations. How might
the fourth Industrial Revolution
alter the production, marketing,
and other management activities
of companies?
Jenson/Shutterstock
production process as they are needed. A global shortage of semiconductors arose from high
demand for consumer electronics and electric vehicles starting in 2020. This caused a shortage of computer chips for braking systems and dashboard displays that forced General Motors,
­Volkswagen, and other carmakers to close factories temporarily. The chip shortage caused the
global auto industry to produce at least 1.5 million fewer cars in 2021.4 Shipment delays and
shortages struck supplies of all sorts of products. Companies began to shelter needed parts from
negative surprises by diversifying supply chains and returning some of them to domestic markets.
Across the world, the Covid-19 pandemic caused many businesses to fail while entrepreneurs and other firms sprang into action to satisfy the needs of businesses, hospitals, schools, and
individuals in dire straits. The pandemic changed how we studied, worked, dined, socialized, and
entertained ourselves. Almost overnight, “going to school” and “going to work” meant finding a
quiet place in the home to use a laptop or phone plus video software to log in to online classes and
meetings. Demand shot up for video-meeting software such as Cisco’s Webex meetings, Zoom
meetings, Microsoft Teams, Google Meet, and more.
A person’s job is a key component of their identity and helps determine their standard of
living and certain aspects of their lifestyle. The pandemic allowed many white-collar employees
to work from home. After the pandemic subsided, some of them adopted a hybrid arrangement
where they spend a portion of the week working from home and a portion in the office. Bluecollar workers and front-line employees, however, still needed to show up for work during the
pandemic. Some companies rewarded their employees with bonuses for their efforts in keeping
essential goods and services available for the rest of society.5
International business is also about the work of executives and managers. The ways they
lead their teams of employees are distinctive across cultures. There are similarities, certainly, but
culture helps determine how leaders motivate others and accomplish business objectives. Leadership
everywhere is as much an art as a science. Managers in other cultures need to know what it takes
to motivate team members to dedicate themselves to their work. And an expatriate manager posted
abroad who has a grasp of local beliefs and desires can increase their probability of success.
Now the 21st century digital economy is transforming the nature of the skills that businesses
require of their employees. As companies undertake digitalization to make productive use of data,
work in all sorts of occupations and industries is becoming more complex. In turn, employees are
being encouraged to hone a range of technical and social skills and engage in lifelong learning.
We touch on these and other topics in this first chapter and throughout this book. So, let’s
begin our journey by exploring the kinds of companies that engage in international business.
6 PART 1 • GLOBAL BUSINESS ENVIRONMENT
1.1.1
Business that has direct investments
abroad in multiple countries.
foreign direct investment
Purchase of physical assets or a
significant amount of the ownership
of a company in another country
to gain a measure of management
control.
Figure 1.1
Comparing the World’s
Largest Companies with
Selected Countries
Source: Based on data obtained from
­“Fortune Global 500: The 500 Largest
­Corporations in the World” (www.fortune.
com/global500), August/September 2021;
World Bank data set (www.data.
worldbank.org).
Companies of all types and sizes and in all sorts of industries become involved in international
business although they vary in the extent of their involvement. A small shop owner might only
import supplies from abroad, whereas a large company might have dozens of factories and retail
stores located worldwide. Large companies from the highest-income nations still dominate
­international business. But firms from emerging markets (such as Brazil, China, and India) now
vigorously compete for global market share. Small and medium-sized companies are also increasingly active in international business, largely because of advances in technology.
A multinational corporation (MNC) is a business that has direct investments (in the form
of marketing or manufacturing subsidiaries) abroad in multiple countries. A company that invests
directly in operations abroad engages in foreign direct investment—the purchase of physical
assets or a significant amount of the ownership of a company in another country to gain a measure
of management control. In addition to importing and exporting, it is the third main way companies
engage in international business activity.
Multinationals generate significant jobs, investment, and tax revenue for the regions and
nations they enter. Likewise, they can leave thousands of people out of work when they close
or scale back operations. Mergers and acquisitions between multinationals are commonly worth
billions of dollars and increasingly involve companies based in emerging markets.
Some companies have more employees than the number of people living in some small countries and island nations. Walmart, for example, has 2.3 million employees. We see the enormous
economic clout of multinational corporations when we compare the revenues of the Global 500
ranking of companies with the value of goods and services that countries generate. Figure 1.1 shows
Poland
Walmart (USA)
Sweden
Belgium
Thailand
Venezuela
Nigeria
Austria
United Arab Emirates
Ireland
Israel
State Grid (China)
Amazon (USA)
Argentina
Egypt
Norway
Philippines
Denmark
Hong Kong SAR, China
Singapore
Malaysia
Bangladesh
South Africa
China National Petroleum (China)
Sinopec Group (China)
Apple (USA)
Colombia
Finland
Vietnam
CVS Health (USA)
Pakistan
United Health Group (USA)
Toyota Motor (Japan)
Volkswagen (Germany)
Chile
Country/Company
multinational corporation
(MNC)
Key Players in International Business
0
100
200
300
400
GDP/Revenue (US $ billions)
500
600
CHAPTER 1 • Globalization Today 7
the world’s 10 largest companies (measured in revenue) inserted into a ranking of nations a­ ccording
to their national output (measured in GDP). If Walmart were a country, it would weigh in as a
high-income nation and rank just one place behind Poland. Even the nearly $25 billion in revenue
generated by Netflix, the 484th largest firm in the world, exceeds the annual output of dozens of
countries, including El Salvador and Iceland. As multinational companies continue to grow and run
out of customers at home, they seek markets internationally. The 328 million US consumers represent
a significant market, but some firms are also appealing to the 7.5 billion potential consumers in the
rest of the world. Netflix now earns 44 percent of its revenue and Nike earns 59 percent of its revenue
outside the United States.6
Information technology has given rise to a new entity, the born global firm—a company with
a global perspective that engages in international business from inception and quickly achieves
a competitive advantage. Many of these companies (also called global startups) become international competitors within several years. They do not follow the traditional model for multinational
companies, which is to build a strong base in the home market first and only later venture into
international markets.
Born global firms tend to have innovative cultures and knowledge-based organizational capabilities that are difficult to imitate. They exploit these resources to quickly build their competitive
advantage over rivals. Lists of companies considered born global often include Airbnb, Uber,
Spotify, Twitch, and TikTok. Born global firms emerged in the 1990s along with the expansion of
the internet and the World Wide Web. It is this global information technology (IT) infrastructure
that enables these firms to rapidly expand using their well-designed apps and programs. For some
traditional insights into how companies succeed in international markets, see the Global Manager
feature, “The Keys to Global Success.”
GLOBAL MANAGER
•
Communicate Effectively. Cultural differences in business
relationships and etiquette are central to global business
and require cross-cultural competency. Effective global
managers welcome uniqueness and ambiguity while
­demonstrating flexibility, respect, and empathy.
Know the Customer. Successful managers understand
how a company’s different products serve the needs
of international customers. Then, they ensure that the
­company remains flexible and capable enough to customize
products that meet those needs.
•
•
Company with a global perspective
that engages in international
business from inception and
quickly achieves a competitive
advantage.
The Keys to Global Success
Making everything from 99-cent hamburgers (McDonald’s) to
$150 million jumbo jets (Boeing), managers of global companies
must overcome obstacles when competing in unfamiliar markets.
Global managers acknowledge certain common threads in their
approaches to management and offer the following advice:
•
born global firm
•
Emphasize Global Awareness. Good global managers
­integrate foreign markets into business strategy from the
outset. They ensure that products and services are designed
and built with global markets in mind and not used as
dumping grounds for the home market’s outdated products.
Market Effectively. The world will beat a path to your
door to buy your better product only if it knows about it.
A poor marketing effort can cause great products to fade
into obscurity while an international marketing blunder
can bring unwanted media attention. Top global managers
match quality products with excellent marketing.
Monitor Global Markets. Successful managers keep a
watchful eye on business environments for shifting political,
legal, and socioeconomic conditions. They make obtaining
accurate information a top priority.
QUICK STUDY 1.1
1. How do you define the terms international business, imports, and exports?
2. What is a multinational corporation, and why is it significant to our study of international
business?
3. Why might a company be referred to as a “born global firm”?
1.2 What is Globalization?
Nations historically retained absolute control over the products, people, and capital crossing
their borders. But today, economies are increasingly intertwined. This greater interdependence
can mean an increasingly freer flow of goods, services, money, people, and information across
1.2 Explain globalization
and the significance of global
markets and production.
8 PART 1 • GLOBAL BUSINESS ENVIRONMENT
Trend toward greater economic,
cultural, political, and technological
interdependence among national
institutions and economies.
gross domestic product
(GDP)
Value of all goods and services
produced by a domestic economy
during a one-year period.
Figure 1.2
Home Country of
the World’s Largest
Corporations
Source: Based on data obtained from
­“Fortune Global 500: The 500 Largest
­Corporations in the World” (www.fortune.
com/global500), August/September 2020.
national borders. Globalization is the name we give to this trend toward greater economic,
cultural, political, and technological interdependence among national institutions and economies.
Cultural, political, economic, and legal events in one country increasingly affect the lives of
people in other countries. Globalization is characterized by denationalization (national boundaries becoming less relevant) and is different from internationalization (entities cooperating
across national boundaries).
By knitting the world more tightly together, globalization transforms the way companies do
business. But globalization is not on an unalterable upward trajectory. It expands with increasing
trade and foreign investment, contracts with divestment of assets and reduced imports and exports,
and goes through periods of stabilization. Globalization underwent a period of unprecedented
expansion from the 1940s until the financial crisis of 2008. Globalization today is proceeding
unevenly with alternating periods of expansion and contraction.
People can approach globalization from very different perspectives. A businessperson might
see globalization as an opportunity to source goods and services from lower-cost locations and to
pry open new markets. A frontline factory employee might see it either as an opportunity for new
work or as a threat to their current job. An economist might see it as an opportunity to examine the
impact of globalization on jobs and standards of living. An environmentalist might be concerned
with how globalization affects the natural environment. An anthropologist might want to examine
the influence of globalization on the culture of a group of people. And a political scientist might
be concerned with the impact of globalization on the power of governments relative to that of
multinational companies.
Globalization presents challenges as well as opportunities. The falling cost of global communication and travel exposes us to the traits and practices of other cultures. We might find these
practices offensive or threatening to our sensibilities and our way of life. Or we might discover
new ideas and new ways of doing things that enrich our lives. Likewise, globalization allows us
to buy products from individuals and companies on the other side of the world easily and inexpensively online. But this can harm businesses in our local communities and threaten our fellow
citizens’ livelihoods.
Globalization today involves greater competition and forces companies to grow more competitive in the face of greater rivalry. Over the years, businesses from some countries have grown
more competitive and those from other nations have lost ground, relatively speaking. Figure 1.2
shows the home country for each of the 500 largest companies in the world. We see the amazing
rise of Chinese firms, going from having no companies in the top 500 in 1990 to having 124 in
2020. We also see a drop in the number of US firms, peaking at 175 top 500 firms in 2000 and
20 years later having 121. Over that same time period, Japan lost more than half of its top spots
from 1990 to 2020 and around half of Britain’s firms dropped off the list.
Central to any discussion of globalization is an understanding of a few key terms we will
encounter time and again in this book. Gross domestic product (GDP) is the value of all
goods and services produced by a domestic economy during a one-year period. World GDP is
180
Number of Global 500 Firms
globalization
160
United States
140
120
Japan
China
100
80
60
Germany
Britain
40
20
0
1990
France
1995
2000
2005
Year
2010
2015
2020
CHAPTER 1 • Globalization Today 9
simply the sum of all individual nations’ GDP figures. GDP is a somewhat narrower figure than
gross national product (GNP)—the value of all goods and services produced by a country’s
domestic and international activities during a one-year period. GNP includes a nation’s income
generated from exports, imports, and the international operations of its companies. A country’s
GDP or GNP per capita is simply its GDP or GNP divided by its population.
1.2.1
Evolution of Globalization
Nation’s GDP or GNP divided by its
population.
Figure 1.3
World Trade as a
­Percentage of GDP
70
60
Trade-to-GDP Ratio
Value of all goods and services
produced by a country’s domestic
and international activities during a
one-year period.
GDP or GNP per capita
It is helpful to put today’s globalization into context. The first age of globalization extended from
the mid-1800s to the 1920s.7 In those days, labor was highly mobile, with 300,000 people leaving
Europe each year in the 1800s and 1 million people leaving each year after 1900.8 Other than in
wartime, nations did not even require passports for international travel before 1914. During that
first age of globalization, trade and capital flowed more freely than ever before. Global companies from high-income nations extracted raw materials from distant lands and produced all sorts
of goods. Large cargo ships plied the seas to deliver their manufactures to faraway markets. The
transatlantic cable (completed in 1866) between Europe and the United States allowed news to
travel faster than ever before.
How important was trade to the world economy in those days? To answer this question, we
explore the ratio of total global exports and imports of goods and services to world gross domestic
product. Up until around 1870 the global trade-to-GDP ratio never exceeded 10 percent. This means,
on average, countries traded around 10 percent of their total annual output. The drivers of the first
age of globalization include the steamship, telegraph, railroad, and, later, the telephone and airplane.
The first age of globalization ended abruptly with the arrival of the First World War, the
­Russian Revolution, and the Great Depression in the early 1900s. The great flows of goods,
­capital, and people became a mere trickle. The world remained divided for 75 years from the start
of the First World War to the end of the Cold War between the former Soviet Union and the United
States. The geographic divide between East and West paralleled an ideological divide between
communism and capitalism. After the Second World War, the West experienced steady economic
gains, but international flows of goods, capital, and people were confined to their respective
capitalist and communist systems and geographies. Figure 1.3 shows that the global trade-to-GDP
ratio grew to 27 percent by 1970. In other words, on average, countries now traded 27 percent of
their yearly output—a gain of 17 percentage points in 100 years.
A second age of globalization began around 1989 with the collapse of the wall separating communist East Berlin and capitalist West Berlin. One by one, central and eastern European nations
rejected communism and adopted democratic institutions and free-market economic systems.
It took until the 1990s for international capital flows, in absolute terms, to recover to levels seen
prior to the First World War, but the global economy had finally been reborn. The drivers of the second age of globalization include communication satellites, fiber optics, microchips, and the internet.
Trade-to-GDP Ratio is sum
of exports and imports of goods
and services measured as a share
of gross domestic product.
50
40
Source: Based on data obtained from
World Development Indicators Database
­(Washington, D.C.: The World Bank),
(www.worldbank.org), various years.
30
20
10
0
1970
gross national product (GNP)
1975
1980
1985
1990
1995
Year
2000
2005
2010
2015
2020
10 PART 1 • GLOBAL BUSINESS ENVIRONMENT
RECENT EVENTS Throughout the 1990s and early 2000s, nations focused increasingly on
expanding trade. The European Union grew to include additional countries and integrated their
economies more deeply. The free trade agreement came into effect between Canada, Mexico, and
the United States (it was revised in 2020). China’s entry into the World Trade Organization in 2001
made the country the de facto factory of the world. Western companies outsourced labor-intensive
jobs to China, which then exported finished and intermediate goods to the rest of the world.
China’s share of world exports quickly tripled and the volume of global trade surged. China, along
with Taiwan, South Korea, and Japan, grew embedded into the seemingly ever-extending supply
chains of global companies.9
By 2008, the global trade-to-GDP ratio had more than doubled since 1970, growing to around
60 percent. So, on average, countries were trading a remarkable 60 percent of their yearly output
(see Figure 1.3). But the global financial crisis struck in 2008 and led to a worldwide recession.
Global trade in goods and services fell more than 22 percent from 2008 to 2009. It was the most
severe shock to hit the global economy since the Great Depression. The crisis shrank the global
economy by 2.2 percent.10 Despite its severe decline, trade rebounded and within around two
years was back to its 2008 level.
Another setback to world trade was the trade war between China and the United States that
started in 2018. The strained relationship forced companies to re-examine their strategies of outsourcing to China and their lengthy supply chains that placed distant production and distribution
activities at risk. It was in this fragile trade environment that the pandemic struck in early 2020
and companies pulled their supply chains closer to home. Countries called for medical and other
key products to be made in their home markets and some nations incentivized their firms to return
production activities home or diversify them outside China.11
The pandemic and the economic shutdowns it prompted are likely to have shrunk the world
economy by 8 percent in 2020 (instead of 3 percent expected growth, the global economy likely
shrunk 5 percent).12 The decline of global economic activity dealt a setback to globalization, which
some began calling slowbalization.13 Trade staged a strong comeback in 2021 from pent-up demand
caused by economic lockdowns, slower production, and shipping delays during the pandemic. The
final toll from the pandemic is yet to be determined.14
MEASURING GLOBALIZATION Although we intuitively feel that our world is becoming smaller,
researchers have created ways to measure the extent of globalization. One index of globalization is
that created by the KOF Swiss Economic Institute. This newly revised index ranks nations on 43
variables on three dimensions: economic, social, and political globalization.15 By incorporating a
wide variety of variables, the index attempts to cut through cycles occurring in any single category
and to capture the broad nature of globalization. Map 1.1 shows each nation’s globalization score
according to the KOF Index of Globalization. European nations occupy the top 14 positions, with
smaller nations clearly dominating the rankings. The United States appears in 25th place overall, and
ranks 59th in economic globalization, 21st in social globalization, and 15th in political globalization.
The world’s least-globalized nations account for about half the world’s population and are
found in Africa, East Asia, South Asia, Latin America, and the Middle East. Some of the leastglobalized nations are characterized by political unrest. Other nations with large agricultural
sectors export commodities whose market prices are highly volatile and sometimes face trade
barriers in developed countries. Still others are heavily dependent on oil exports and suffer erratic
prices in energy markets.
But globalization doesn’t simply arise on its own. From the largest global firms to individual
entrepreneurs, companies of all sizes get involved in international business. These businesses are
the ones doing the importing, exporting, and international investing. Commercial banks, financial
markets, and other lenders, including private equity, provide financing for these business activities. Governments then provide the boundaries for the kinds of activities companies can engage
in and set the laws by which they must operate. The actions of all these parties are facilitating the
globalization of markets and production.
1.2.2
Globalization of Markets
Globalization of markets refers to the convergence in buyer preferences in markets around the
world. This trend is occurring in many product categories, including consumer goods, industrial
products, and business services. Sports apparel brand, Adidas, and streaming video provider,
CHAPTER 1 • Globalization Today 11
Two friends created the ­website
airbedandbreakfast.com,
inflated three airbeds on their
floor, and rented them to guests.
Airbnb disrupted the ­hospitality
industry with help from
­technology and globalization.
It now has listings in 191 countries
and 81,000 cities, and celebrity
­influencers post photos and stories
of their luxury Airbnb stays on
Instagram. Today the company
is expanding into the ­emerging
markets of India and China. What
other technology companies can
you think of that ­disrupted their
industries?
Chonlachai/Shutterstock
Netflix, are just two companies that sell global products—products marketed in all countries
essentially without any changes. The Apple iPad also qualifies as a global product because of
its highly standardized features and because of Apple’s global marketing strategy and globally
recognized brand.
Global markets, products, and competition characterize many industries today, including
music streaming (Spotify, Pandora), microprocessors (AMD, Intel), aircraft (Airbus, Boeing),
construction equipment (Caterpillar, Mitsubishi), online retail (Amazon, Rakuten), automobiles
(Toyota, Ford), financial services (Citicorp, HSBC), business consulting (Deloitte, Accenture),
and consumer goods (Procter & Gamble, Unilever). The globalization of markets is important to
international business because of the benefits it offers companies.
REDUCES MARKETING COSTS Companies that sell global products can reduce costs by
s­ tandardizing certain marketing activities. A company selling a global product, such as shampoo, computer mice, or skateboards, can make an identical product for the global market and
then simply design different packaging to account for the written language in each market.
Companies can achieve further cost savings by keeping an online advertising campaign’s visual
component the same for all markets but translating spoken and written components into local
languages.
CREATES NEW MARKET OPPORTUNITIES A company that sells a global product can explore
opportunities abroad if its home market is small or becomes saturated. Global furniture retailer,
IKEA, opened its first showroom in 1953 in Älmhult, Sweden. In 1963, the company expanded
outside its home market of 7.5 million people to reach neighboring Norway and its 3.6 million
inhabitants. Success in these markets took the company next to Switzerland, then to Germany, then to
the world. IKEA recently ventured into China and India. These two markets, with around 1.4 billion
people each, present enormous potential for IKEA and other retailers as their economies develop
and their middle classes expand.
LEVELS UNEVEN INCOME STREAMS A company that sells a product with universal, but
seasonal, appeal can use international sales to level its income stream. By supplementing domestic sales with international sales, the company can reduce or eliminate wide variations in sales
between seasons and steady its cash flow. For example, a firm that produces suntan and sunblock
lotions can match product distribution with the summer seasons in the northern and southern
hemispheres in alternating fashion—thereby steadying its income from these global, yet highly
12 PART 1 • GLOBAL BUSINESS ENVIRONMENT
Map 1.1
Globalization Score
of Countries
ARC T I C O
GREENLAND
A LA SK A
O
R
ICELAND
N
FAROE
ISLANDS
UNITED
KINGDOM
C A N A D A
IRELAND
DENMARK
NETHERLANDS
GERMAN
BELGIUM
LUXEMBOURG
FRANCE LICHT.
SWITZ.
UN ITED STATES
O CEAN
OF AMERIC A
NOR TH
BERMUDA
SWED EN
DENMARK
OC EAN
CAYMAN CUBA
ISLANDS
DOMINICA
JAMAICA
VIRGIN ISLANDS (US)
BELIZE
HAITI PUERTO ST KITTS & NEVIS
ANTIGUA & BARBUDA
RICO
GUATEMALA HONDURAS
ST VINCENT & ST LUCIA
EL SALVADOR NICARAGUATHE GRENADINES GRENADA
ARUBA
BARBADOS
TRINIDAD &
COSTA RICA
TOBAGO
VENEZUELA,
PANAMA
FRENCH
RB
GUYANA GUIANA
GALAPAGOS
SURINAME
LATVIA
COLOMBIA
ISLANDS
LITHUANIA
R. F.
ECUADOR
BELARUS
CZECH
REP.
F RANC E
LICHTENSTEIN
SWITZERLAND
AUSTRIA
MOLDOVA
HUNGARY
R O M A N IA
BOSNIA- SERBIA
HERZEGOVINA
MONTENEGRO KOSOVO BULGARIA
ITALY
BOLIVIA
SLOVAK REP.
SLOVENIA
CROATIA
SAN
MARINO
B L A C K S EA
PARAGUAY
N. MACEDONIA
URUGUAY
T U R K E Y
H
ALBANIA
GREECE
ARGENTINA
C
ALGERIA
CYPRUS
MALTA
FALKLAND/MALVINAS
ISLANDS
L I B YA
CABO
VERDE
ALGERIA
MAURITANIA
SENEGAL
THE GAMBIA
GUINEA-BISSAU GUINEA
MALI
BURKINA
FASO
NIGE R
NIGERIA
COTE
D'IVOIRE
LIBERIA
CAMEROO
SAO TOME & PRINCIPE
EQUATORIAL
GUINEA
GABON
SIERRA LEONE
SO UT H
UKRAINE
E
LUXEMBOURG
TUNISIA
WESTERN
SAHARA
B R A Z I L
PERU
L
BELGIUM GERMANY
P OL AN D
I
NETHERLANDS
MONACO
TUNISIA
MOROCCO
MEXICO
HAWAII
ANDORRA
ATLANTIC
BAHAMAS, THE
ANDORRA
SPAIN
PORTUGAL
GHANA
TOGO
BENIN
PA CIFIC
MONACO
AT LAN T I C
O C EAN
CHAPTER 1 • Globalization Today 13
N
R
FINLAND
S W
O
R
E D
W
E
A
N
Y
C T I C OCEA N
U
S
S
I
A
N
F
E
D
E
R
A
T
I
O
N
ESTONIA
LATVIA
LITHUANIA
R. F.
BELARUS
DENMARK
GERMANY
POLAND
CZECH
REP. SLOVAK REP. U K R A I N E
LUXEMBOURG
KAZAKHSTAN
LICHT. AUSTRIA
MOLDOVA
HUNGARY
ROMANIA
CROATIA
BOSNIA- SERBIA
HERZEGOVINA
BULGARIA
MONTENEGRO KOSOVO
ITALY N. MACEDONIA
ALBANIA
MONGOLIA
SWITZ. SLOVENIA
GREECE
TUNISIA
GEORGIA
KYRGYZ REPUBLIC
AZERBAIJAN UZBEKISTAN
ARMENIA
TURKMENISTAN
TAJIKISTAN
TURKEY
SYRIAN
ARAB REP.
CYPRUS
LEBANON IRAQ
BANK
ISRAEL WEST
& GAZA
JORDAN
L I B YA
N I G ER
BAHRAIN
QATAR
EGYPT,
ARAB REP.
SAUDI
CENTRAL AFRICAN
REPUBLIC
CAMEROON
PRINCIPE
QUATORIAL
CONGO
GUINEA
REPUBLIC
GABON
CONGO
BHUTAN
INDIA
VIETNAM
UGANDA
I NDIAN
KENYA
COMOROS
MICRONESIA, FED STS
BRUNEI
DARUSSALAM
MARSHALL
ISLANDS
M A L AY S I A
SINGAPORE
PALAU
INDONESIA
OCEAN
TANZANIA
PHILIPPINES
MALDIVES
SRI
LANKA
OC EAN
GUAM
CAMBODIA
SOMALIA
ANGOLA
HONG KONG SAR, CHINA
MACAU SAR, CHINA
LAO PDR
THAILAND
E T HIO P IA
PAC IFIC
TAIWAN
MYANMAR
(BURMA)
DJBOUTI
RWANDA
DEMOCRATIC
BURUNDI
REPUBLIC
(ZAIRE)
JAPAN
BANGLADESH
ERITREA YEMEN, REP.
S OU TH
SUDAN
NIGERIA
NEPAL
UNITED ARAB
EMIRATES
OMAN
REPUBLIC
OF KOREA
C H I N A
IRAN,
ISLAMIC
PAKISTAN
REP.
ARABIA
S UDAN
CH A D
KUWAIT
AFGHANISTAN
KOREA, DEM
PEOPLE’S REP
SEYCHELLES
KIRIBATI
PAPUA
NEW
GUINEA
TIMOR-LESTE
SOLOMON
ISLANDS
SAMOA
ZAMBIA MALAWI
MOZAMBIQUE
NAMIBIA
ZIMBABWE
MADAGASCAR
RÉUNION
BOTSWANA
ESWATINI
SOUTH
AFRICA
VANUATU
MAURITIUS
Globalization Score
AUSTRALIA
NEW
CALEDONIA
LESOTHO
30 TO 40
40 TO 50
50 TO 60
60 TO 70
70 TO 80
80 TO 90
OVER 90
No data
NEW
ZEALAND
FIJI
TONGA
14 PART 1 • GLOBAL BUSINESS ENVIRONMENT
seasonal, products. Likewise, manufacturers of snowblowers, snow shovels, snowboards, and
cold-weather clothing can match distribution to the hemispheres’ seasons and keep production
capacity at more even levels.
LOCAL BUYERS’ NEEDS In pursuit of the potential benefits of global markets, managers must
constantly monitor the match between the firm’s products and markets in order to not overlook
the needs of buyers. The benefit of serving customers with an adapted product might outweigh
the benefit of a standardized one. Soft drinks, fast food, and other consumer goods are global
products that continue to penetrate markets around the world. Sometimes these products require
small modifications to better suit local tastes. For example, in southern Japan, Coca-Cola sweetens
its traditional formula to compete with the sweeter-tasting Pepsi. In India, where cows are sacred
and the consumption of beef is taboo, McDonald’s markets the “Maharaja Mac”—two all-mutton
patties on a sesame-seed bun with all the usual toppings.
GLOBAL SUSTAINABILITY Multinationals must also consider the need among all the world’s
sustainability
Development that meets the
needs of the present without
­compromising the ability of future
generations to meet their needs.
people for sustainability—development that meets the needs of the present without compromising
the ability of future generations to meet their needs.16 Most companies today operate in an
environment of increased transparency and scrutiny regarding their business activities. The
rise of social media has contributed to this trend. Concerned individuals and nongovernmental
organizations will quickly use social media to call out any firm caught harming the environment or
society. ­Enlightened firms should always hold in the highest regard the welfare of their employees,
customers, suppliers, owners, lenders, communities, and anyone affected by their business activities.
For years, forward-looking businesses have employed the motto, “reduce, reuse, and recycle.”
The idea is to reduce the use of resources and waste, reuse resources with more than a single-use
lifespan, and recycle what cannot be reduced or reused. The most dedicated managers and firms
promote sustainable communities by adding to that motto, “redesign and reimagine.” This means
redesigning products and processes for sustainability and reimagining how a product is designed
and used to lessen its environmental impact.17 We devote a significant portion of the following
chapter to a discussion of sustainability.
1.2.3
Globalization of Production
Globalization of production refers to the dispersal of production activities to locations that
help a company achieve its cost-minimization or quality-maximization objectives for a good or
service. This includes the sourcing of key production inputs (such as raw materials or products
for assembly) as well as the international outsourcing of services. Let’s now explore the benefits
of globalized production.
ACCESS LOWER-COST WORKERS Global production activities allow companies to reduce
overall production costs through access to lower-cost labor. For decades, companies located their
factories in lower-wage nations in order to churn out all kinds of goods, including toys, small
appliances, inexpensive electronics, and textiles. Yet whereas moving production to lower-cost
locales traditionally meant production of goods almost exclusively, it increasingly applies to the
production of services such as accounting and research. Although many services must be produced
where they are consumed, some can be performed at remote locations where labor costs are lower.
Many European and US businesses have moved their customer service and other operations to
other nations to slash costs by as much as 60 percent. This allows businesses to pass lower costs
on to customers in the form of lower prices and to offer workers in distant locations good-paying
jobs that otherwise would not be available.
ACCESS TECHNICAL EXPERTISE Companies also produce goods and services abroad to
b­ enefit from technical know-how. India’s labor force has a strong work ethic, is tech savvy, is
highly proficient in English, and is less costly. Companies in developed nations sometimes set
up a company in India to perform key business processes including customer service, technical
­support, and accounting tasks such as payroll. The practice is popular among US healthcare
­providers that hire Indian firms to perform data entry, medical billing, coding of medical procedures and diagnoses, record keeping, claims processing, document and dictation digitization, and
data ­analytics. Performing these services in India where the technical expertise resides allows
US-based healthcare providers to focus on other efforts.
CHAPTER 1 • Globalization Today 15
ACCESS PRODUCTION INPUTS Globalization of production allows companies to access
resources that are unavailable or more costly at home. The quest for natural resources draws
many companies into international markets. Japan, for example, is a small, densely populated
island nation with very few natural resources of its own—especially forests. But Japan’s largest
paper company, Nippon Seishi, does more than simply import wood pulp. The company owns
huge forests and corresponding processing facilities in Australia, Canada, and the United States.
This ownership not only gives the firm access to an essential resource but also gives it control over
earlier stages in the papermaking process. As a result, the company is guaranteed a steady flow of
its key ingredient (wood pulp) and avoids the swings in prices and supply associated with buying
pulp on the open market. Likewise, to access cheaper energy resources used in manufacturing,
a variety of Japanese firms are relocating production to Vietnam where energy costs are lower.
QUICK STUDY 1.2
1. How does globalization influence the institutions and economies of nations?
2. What has been the evolution of globalization and what is its recent history?
3. What benefits might a company obtain from the globalization of markets?
4. For what reasons might a company wish to globalize its production activities?
1.3 Drivers of Globalization
The broad forces inspiring the globalization of markets and production over the years are falling
barriers to trade and investment and several forms of technological innovation. These forces are
bringing companies worldwide into more direct confrontation and cooperation. Local industries,
once isolated by time and distance, are increasingly accessible to large international companies
based many thousands of miles away. Some small- and medium-sized local firms now cooperate
with one another or with larger international firms in order to remain competitive. Other local
businesses revitalize themselves in a bold attempt to survive the competitive onslaught. And
consolidation is occurring as former competitors in many industries link up to challenge others
on a worldwide basis.
Let’s now explore the drivers of globalization. We first cover falling barriers to trade and
investment by discussing the World Trade Organization, regional trade agreements, and international organizations. We then present technological innovation with expanded coverage of
s­everal topics, each under its own heading: (1) global e-commerce, (2) digital transformation,
and (3) communication and transportation. We spend extra time covering these special topics
because of technological innovation’s key role in facilitating globalization and its great importance
to economic growth worldwide.
1.3.1
1.3 Detail the forces that
drive globalization.
Falling Barriers to Trade and Investment
In 1947, political leaders of 23 nations (12 developed and 11 developing economies) made history
when they created the General Agreement on Tariffs and Trade (GATT)—a treaty designed
to promote free trade by reducing tariffs and nontariff barriers to international trade. Tariffs are
essentially taxes levied on traded goods, and nontariff barriers are limits on the quantity of an
imported product. The treaty was successful in its early years. After four decades, world merchandise trade had grown 20 times larger, and average tariffs had fallen from 40 percent to 5 percent.
Significant progress occurred again with a 1994 revision of the GATT treaty. Nations participating in the treaty further reduced average tariffs on merchandise trade and lowered subsidies
(government financial support) for agricultural products. The treaty’s revision also clearly defined
intellectual property rights. This gave protection to copyrights (including computer programs,
databases, sound recordings, and films), trademarks and service marks, and patents (including
trade secrets and know-how). A major flaw of the original GATT was that it lacked the power
to enforce world trade rules. Thus, the creation of the World Trade Organization was likely the
greatest accomplishment of the GATT revision.
WORLD TRADE ORGANIZATION The World Trade Organization (WTO) is the international
organization that enforces the rules of international trade. The three main goals of the WTO are
General Agreement on Tariffs
and Trade (GATT)
Treaty designed to promote free
trade by reducing both tariffs and
nontariff barriers to international
trade.
World Trade Organization
(WTO)
International organization that
enforces the rules of international
trade.
16 PART 1 • GLOBAL BUSINESS ENVIRONMENT
to support the free flow of trade, help negotiate the further opening of markets, and settle trade
disputes among its members. The WTO’s power to settle trade disputes and its ability to penalize
offending nations set it apart from its predecessor, the GATT. The various WTO agreements are,
essentially, contracts between member nations that commit them to maintaining fair and open
trade policies. Offenders must realign their trade policies according to WTO guidelines or face
fines and, perhaps, trade sanctions (penalties). The WTO replaced the institution of GATT but
absorbed all of the former GATT agreements. Thus, the GATT institution no longer officially
exists. Today, the WTO recognizes 164 members and 25 “observers.”
Starting in the early 2000s, powerful trading nations began to grow impatient with the WTO.
They squabbled over WTO rulings on matters and sometimes flagrantly continued the practice
that caused another nation to bring a case to the WTO in the first place. In late 2001, a round of
WTO negotiations in Doha, Qatar, failed, and repeated attempts to restart progress never took
hold. Critics say the WTO is irrelevant today because it did not adequately address changes in
the global trading system over the past two-plus decades, including China’s rise and the arrival
of the digital economy.18
Key to the WTO’s hearing of cases is the appellate panel of seven experts who have the
final say on trade disputes. In 2019, the United States blocked the naming of new members to
that panel, essentially eliminating its power. The arrival of a new WTO Director-General, Ngozi
Okonjo-Iweala, in 2021 offered the best chance for WTO reform in years. But an obstacle to free
trade is the increased tendency for countries in regional trade fights to claim a national-security
exemption, which lies beyond WTO oversight.19
REGIONAL TRADE AGREEMENTS In addition to the WTO, smaller groups of nations are
integrating their economies by fostering trade and boosting cross-border investment. For example,
the United States-Mexico-Canada Agreement (USMCA) gathers these three nations into a freetrade bloc. The more ambitious European Union (EU) combines 27 countries across Europe.
The Asia Pacific Economic Cooperation (APEC) consists of 21 member economies committed
to creating a free-trade zone around the Pacific. The aims of each of these smaller trade pacts are
similar to those of the WTO but are regional in nature. Most trade in Asia and Europe is already
intra-regional. This makes sense intuitively—companies typically trade and invest more with
neighboring countries than with distant ones.
A key advantage of regional trade agreements is that negotiating with fewer nations can be
easier than dealing with the WTO’s many more members. If the World Trade Organization remains
dysfunctional, some experts foresee regional trade agreements as the way to garner the benefits of
Regional trade agreements cover
more than half of all international
trade and work alongside the WTO
to lower trade barriers worldwide.
South Africa is a member of the
World Trade Organization and
­participates in at least seven
regional, international, and
­bilateral trade agreements. Trade
agreements help provide
­good-paying jobs for many South
­Africans like these individuals
who assemble industrial valves at
a factory in Johannesburg. In what
trade agreements does your
­country participate?
Sunshine Seeds/Shutterstock
CHAPTER 1 • Globalization Today 17
trade. But evidence of a greater regional focus has not yet materialized. Nations are undertaking
bilateral and multilateral trade agreements at their normal pace and merchandise trade is flowing
its typical distance.20
OTHER INTERNATIONAL ORGANIZATIONS Two other institutions play leading roles in fos-
tering globalization. The World Bank is an agency created to provide financing for national
economic development efforts. The initial purpose of the World Bank was to finance European
reconstruction following the Second World War. The bank later shifted its focus to the general
financial needs of developing countries, and today it finances many economic development projects in Africa, South America, and Southeast Asia.
The International Monetary Fund (IMF) is an agency created to regulate fixed exchange
rates and to enforce the rules of the international monetary system. The IMF’s stated purposes
include promoting international monetary cooperation, facilitating the expansion and balanced
growth of international trade, avoiding competitive exchange devaluation, and making financial
resources temporarily available to members.
1.3.2
World Bank
Agency created to provide
­financing for national economic
development efforts.
International Monetary Fund
Agency created to regulate fixed
exchange rates and to enforce the
rules of the international monetary
system.
Global E-commerce
Although falling barriers to trade and investment encourage globalization, technological ­innovation
is accelerating its pace. Innovations in information technology and transportation methods are
making it easier, faster, and less costly to move data, goods, and equipment around the world.
Companies use technology to acquire materials and products from distant lands and to sell goods
and services abroad. As the cost of computing power falls and new technologies are developed,
companies may find it easier and less costly to manage widely dispersed marketing activities and
production facilities.
When businesses or consumers use technology to conduct transactions, they engage in
e-commerce—the use of computer networks to purchase, sell, or exchange products; to service
customers; and to collaborate with partners. E-commerce makes it easier for companies to make
their products abroad, not simply to import and export finished goods. Let’s examine several
innovations that have had a considerable impact on globalization.
e-commerce
Use of computer networks to
­purchase, sell, or exchange
­products; to service customers;
and to collaborate with partners.
THE INTERNET Companies use the internet to quickly and inexpensively contact managers in
distant locations to revise sales strategies, check on distribution bottlenecks, sharpen forecasting,
and manage inventories. The lower cost of reaching an international customer base especially
benefits small firms, which were among the first to use the internet as a global marketing tool.
Using the internet enables companies to cut postproduction costs by decreasing the number of
intermediaries a product passes through on its way to the customer.
The internet is also used to solve some difficult problems. InnoCentive, a global network of
nearly 400,000 creative thinkers, uses internet competitions and crowdsourcing to connect companies and institutions seeking solutions to difficult problems. These engineers, scientists, inventors,
and businesspeople with expertise in life sciences, engineering, chemistry, math, technology, and
entrepreneurship compete to solve some of the world’s toughest problems in return for significant
financial awards. InnoCentive is open to anyone, is available in seven languages, and pays cash awards
that range from $5,000 to more than $1 million. The company has awarded $20 million to date.21
Internet usage continues to expand and reach more of the world’s population. Figure 1.4
shows the percentage of the world’s total internet users in each of seven world regions in 2011
and 2021. We see that North America comprised 12.0 percent of the world’s internet users in
2011 but just 6.5 percent in 2021. By contrast, Africa made up 6.2 percent of world internet users
in 2011 but grew to 12.5 percent in 2021, almost twice that of North America. And whereas the
internet’s availability in North America is nearly 90 percent, the percentage of Africa’s population
with internet access is only 46 percent. Africa’s percentage of world internet users will continue
to grow as the internet becomes more widely available. North America’s rate will continue to
slow as near-maximum availability is achieved. Internet penetration rates for the other regions
are Asia (63 percent), Europe (87 percent), Latin America/Caribbean (72 percent), Middle East
(71 percent), and Oceania/Australia (67 percent).
The physical and digital worlds are integrating further every day as at least 127 new devices
connect to the internet every second. The Internet of Things (IoT) includes all devices and equipment that are readable, recognizable, locatable, addressable and/or controllable via the internet.
Internet of Things (IoT)
All devices and equipment that are
readable, recognizable, locatable,
addressable and/or controllable via
the internet.
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18 PART 1 • GLOBAL BUSINESS ENVIRONMENT
Figure 1.4
World Internet Users
Percent of World Users
Source: Based on data obtained from Internet
World Stats (www.internetworldstats.com).
60
2011
2021
50
40
30
20
10
0
Africa
Asia
Europe
Latin America/
Caribbean
Middle
East
North
America
Oceania/
Australia
World Region
This includes devices that communicate with each other and with people, such as home appliances,
wearable devices, and automobiles. Experts estimate more than 30 billion IoT connections by
2025, or around 4 IoT devices per person.22
Companies use IoT devices in many ways. Rolls-Royce airplane engines contain sensors
that transmit information on the engine’s status in real time. The sensors send information to the
company, which analyzes the data for signs of wear or other issues. This increases flight safety
for crew and passengers and can extend an engine’s life. Rolls-Royce also uses the data to schedule maintenance for any issues the sensors detect. This proactive strategy increases safety and
­efficiency and helps prevent costly downtime for unexpected engine repairs.23
INTRANETS AND EXTRANETS Internal company websites and information networks
(intranets) give employees access to company data using personal computers regardless of where
they are located. The objective of an intranet is to facilitate communication, cooperation, and
collaboration in a virtual space inside an organization. An intranet acts like a company’s private
internet. Behind the company firewall, team members access digital tools, instant messages, data,
and other files within the secure confines of the organization’s internal network. Project management, marketing strategy, production, and every area of business benefit from the efficiencies that
intranets offer.
An effective marketing tool on Volvo Car Corporation’s intranet is a quarter-by-quarter database of marketing and sales information. The cycle begins when headquarters submits its corporate-wide marketing plan to Volvo’s intranet. Marketing managers at each subsidiary worldwide
then select those activities that apply to their own market, develop their marketing plan, and
submit it to the database. This allows managers in every market to view every other subsidiary’s
marketing plan and to adapt relevant aspects to their own plan. In essence, the entire system acts
as a tool for the sharing of best practices across all of Volvo’s markets.
An extranet is similar to an intranet but extends access to specific parties outside an
­organization. For example, an extranet can give suppliers access to a company’s network so they
can restock inventories automatically. An extranet is firewalled off from unrelated areas of the
firm’s internal business network and from the public internet. Access to the extranet is usually
provided through a virtual private network (VPN) portal. An extranet allows an international
company to respond more quickly and appropriately to internal and external conditions.
1.3.3
digitization
Process of changing ­information
from analog to digital form for
use by computers and other
­information technologies.
Digital Transformation
Another key area of technological innovation involves the changeover from older, analog processes to digital ones. The process of changing information from analog to digital form for use
by computers and other information technologies is called digitization. Businesses digitize their
data and other information to optimize business processes for efficiency gains and cost savings.
Digitization is a necessary first step before businesses can undertake subsequent, higher-order
technology processes.
CHAPTER 1 • Globalization Today 19
Digitalization is the use of digital data and technology to develop a digital platform for new
business operations, strategies, or business models. Digitalization directly affects how businesspeople do their work. Businesses used to communicate internally and externally using analog
methods, such as landline telephones and couriered packages or mailed letters, whereas they now
primarily communicate through digital technologies, including email, social media, chat, video
calling, and so forth.24 Companies can engage in a series of digitalization projects. For example,
a firm could install a robust computer network to take orders, bill customers, and order from
­suppliers. Later, it might train employees on how to use new features on the network that will
assist team members who are collaborating on projects.
Digital transformation is fundamental change in which digital technologies penetrate all
areas of operations, strategy, and culture to create customer-focused competitive advantage.
It is a far deeper and wider process than digitalization although it can involve the completion of
many separate digitalization projects. The changes required to digitally transform a company are
typically time-consuming and arduous, but can be vital to the firm’s survival. This is why businesses often wait to undertake digital transformation until they are faced with fierce competitive
challenges. But when done right, digital transformation creates value for all stakeholders of the
business and produces a long-term competitive advantage.
Digital transformation is a foundational change in delivering value to customers. Athletic
apparel retailer, Lululemon, recognized early the importance of such change and made moving
with the market a critical imperative in its digital transformation strategy. The company launched
international websites and mobile applications to provide flexibility for customers who shop from
smartphones. The move resulted in significantly increased sales.25
Global toy and game company, Hasbro, changed its marketing strategy to target parents and
used in-house data to recommend toys and games for their children. It then created targeted marketing campaigns on social media and other channels. Hasbro’s digital strategy helped improve
its brand relationship with customers globally by combining nostalgia with digital storytelling.
The transformation increased advertising costs by 1,100 percent but increased global sales by
$1 billion over the same period. When the industry later faced volatility, Hasbro’s digital strategy
helped it weather the storm.26
Companies are accelerating their digital transformation efforts by investing in automation and
moving certain business operations to the internet. Almost 70 percent of boards of directors are
prioritizing digital business investment. The market for digital transformation is expected to be
worth $3.3 billion by 2025.27 Around 75 percent of digital transformation initiatives use artificial
intelligence (AI) services, mostly employing industrial robots to perform routine tasks.
1.3.4
Communication and Transportation
Operating across borders and time zones complicates the job of coordinating and controlling
business activities. Technological innovation in the various methods of communication and transportation can ease the task of international management.
COMMUNICATION Communication technology can speed the flow of information and ease
the tasks of coordination and control. Videoconferencing is an indispensable tool that managers use to stay in contact with international operations. Managers halfway around the world can
meet in virtual face-to-face meetings and save travel time plus the cost of travel, lodging, meals,
entertainment, token gifts, and other expenses incurred on international business trips. The rise of
videoconferencing dovetails with companies’ desire to reduce carbon emissions—cutting travel
is a relatively easy first step in that direction.
The pandemic’s arrival in 2020 created a strong demand for videoconferencing in the face of
reduced business travel. Reports showed that 79 percent of businesses canceled all or most travel
during that time, and experts predict around 25 percent of all business travel will disappear for good.
Lower-level internal meetings are most likely to permanently migrate to videoconferencing. While
virtual meeting software underwent explosive growth, the airlines suffered the loss of business
travel. Before the pandemic, business class travel comprised 10 percent of ticket sales, 40 percent
of revenues, and 80 percent of profits.28
Businesspeople who are willing to videoconference on a tablet or smartphone (which includes
most people today) can download free apps like FaceTime and Skype and pay no direct costs.
Businesses with greater video conferencing needs can subscribe to the enterprise versions of
digitalization
Use of digital data and ­technology
to develop new business
­operations, strategies, or business
models.
digital transformation
Fundamental change in which
digital technologies penetrate
all areas of operations, strategy,
and culture to produce customerfocused ­competitive advantage.
20 PART 1 • GLOBAL BUSINESS ENVIRONMENT
For anyone who had not
­participated in a video ­conference
before 2020, the Covid-19
pandemic likely changed that.
Economic shutdown and social
distancing guidelines worldwide
made videoconferencing the
norm. Saving the direct expenses
and travel time to work meetings
are only two benefits of
videoconferencing. The
­technology remained relevant
as economies reopened and
some individuals established
hybrid work arrangements with
employers.
Andriy Popov/123RF
Microsoft Teams and Zoom, for example. And companies with the greatest needs can pay several
hundred thousand dollars for an in-office communication system that integrates aspects of augmented and virtual reality. The market for videoconferencing is forecast to grow to $11 billion
by 2027.29
TRANSPORTATION TECHNOLOGIES Retailers worldwide rely on imports to stock their
storerooms with finished goods. Manufacturers often supply their factories with raw materials
and intermediate products from abroad. Innovation in the shipping industry is helping globalize
markets and production by making shipping more efficient and dependable. In the past, a cargo
ship would sit in port for up to 10 days while it was unloaded one pallet at a time. Today cargo
is loaded onto a 700-foot cargo ship in 20- and 40-foot containers that are unloaded quickly at
the destination onto railcars or truck chassis. It now takes 15 hours to unload the same cargo that
used to take 10 days.
Operation of cargo ships is now simpler and safer because of computerized charts that
­pinpoint a ship’s movements on the high seas using Global Positioning System (GPS) satellites.
Combining GPS with radio frequency identification (RFID) technology allows continuous monitoring of individual containers from port of departure to destination via the Internet of Things.
RFID tags can indicate whether a container’s doors have been opened and closed on its journey
and can send an alert if a container deviates from its planned route. Expansion of the IoT will
undoubtedly bring additional advancements to shipping technology.30 Ships of the future will
employ smart technology and may one day become completely autonomous and operated from
an onshore base—thereby improving efficiency while reducing the risk of losing lives at sea.
Consumers are becoming increasingly proactive about environmental issues. Innovative
companies in the shipping industry are adopting eco-friendly policies and lowering their carbon
emissions. They are working with vehicle manufacturers to develop large electric trucks capable
of hauling heavy merchandise and exploring ways to design emissions-free ships incorporating
wind and solar technologies.31
Global markets and production make product delivery a complex engineering task. As companies cut costs by outsourcing activities, supply and distribution channels grow longer and more
complex. Corporate logistics departments and logistics specialist firms are helping international
companies untangle lengthy supply chains, monitor shipping lanes, and forecast weather patterns.
High-wage logistics jobs represent the kind of high-value-added employment that results from the
“churning” in labor markets that globalization can cause.
CHAPTER 1 • Globalization Today 21
QUICK STUDY 1.3
1. How have falling barriers to trade and investment encouraged globalization?
2. What role has e-commerce, the internet, and digitization played in propelling
globalization?
3. How have advancements in communication and transportation technologies affected
globalization?
1.4 Globalization Debate
It should come as no surprise that globalization can have both positive and negative effects on
people, businesses, and nations. Fruitful debate about globalization can promote dialogue about
its merits and demerits so that what emerges is a more sober, less naïve notion of its effects.
In this way, both sides in the debate could work together to harness the benefits of globalization
while minimizing its costs.
Still, opposing sides in the debate tend to hold up results of social and economic studies
that support their arguments. These studies sometimes have political agendas, which can cloud
objectivity. A group’s aims can influence the choice of the data to analyze, the time period to
study, the nations to examine, and so forth.
Be that as it may, we open our coverage of the debate with the arguments about globalization’s
impact on jobs and wages. We follow that with debates about income inequality, culture, national
sovereignty, and the environment.
1.4.1
Globalization Harms Jobs and Wages
Some groups claim that globalization eliminates manufacturing jobs in developed nations.32 They
criticize international firms for globalizing their value chains and sending good-paying manufacturing jobs abroad to developing countries where wages are lower. They argue that a label reading
“Made in China” translates to “Not Made Here.” Critics admit that buying imports from lowerwage nations translates into lower prices for TVs, sporting goods, and so on, but say this is little
consolation for workers who lose their jobs. It is estimated that the United States lost 6 million of
its 17 million factory jobs from 2000 to 2010.33
Critics also say globalization causes worker dislocation that gradually lowers wages. When
a manufacturing job is lost in a developed nation, the worker’s new job (assuming new work
is found) might pay less than the previous one. They argue this decreases employee loyalty,
employee morale, and job security. Critics say powerful retailers continually force manufacturers
to accept lower profits so retailers can slash prices to consumers. This can force suppliers to pay
lower wages and can jeopardize working conditions. They say the fact that wages for US bluecollar jobs were flat or grew only 5 percent since the late 1970s is evidence of this.34
Critics also charge that globalization exploits workers in lower-wage nations. These critics
vehemently oppose the outsourced call center jobs of Western companies. They say these jobs
force young Asians to disguise their nationality, adopt fake Western accents, and work nights
when their US customers are awake halfway around the world.35 Critics also say that labor’s
power is diminished worldwide when companies locate operations to developing nations where
labor laws are less restrictive and labor is less costly. Figure 1.5 shows that Western firms can
outsource information technology work to emerging markets and reap great savings. International
outsourcing will remain popular as long as these economic disparities exist. The average salary
of a computer programmer in the United States is many times that of one in China and Lithuania.
1.4.2
Globalization Improves Jobs and Wages
Supporters make several arguments in favor of globalization. First, they say globalization increases
wealth and efficiency in both developed and developing nations. They argue that openness to
international trade increases national production (by increasing efficiency) and raises per capita
income (by passing savings on to consumers). For instance, squeezing inefficiencies out of supply
chains constrains inflation and boosts productivity. They say removing all remaining barriers to
free trade would significantly boost worldwide income and greatly benefit developing nations.
1.4 Summarize the main
arguments in the debate
about globalization.
22 PART 1 • GLOBAL BUSINESS ENVIRONMENT
Figure 1.5
Comparing Salaries of
Information Technology
Workers
Source: Based on data obtained from the
International Average Salary Income
Database (www.worldsalaries.org).
$49,692
United States
$30,060
Germany
$16,668
Singapore
Brazil
$14,880
Taiwan
$14,580
Mexico
$10,632
Lithuania
$4,632
China
$3,024
0
$10,000
$20,000
$30,000
$40,000
$50,000
Globalization supporters believe globalization creates positive benefits by generating labor
market flexibility in developed nations. Some claim that there are benefits from worker dislocation, or “churning” as it is called when there is widespread job turnover throughout an economy.
Flexible labor markets allow workers to be redeployed rapidly to sectors of the economy where
they are highly valued and in demand. For example, this allows employees, particularly young
workers, to gain experience and skills with an initial employer, then move to a different job that
is a better match for them.
Those in favor of globalization argue that globalization and international outsourcing help to
advance developing nations’ economies and living standards.36 India initially became an attractive
location for the software-writing operations of foreign firms because of its lower-cost, well-­
qualified, English-speaking technicians. Young graduates also found jobs working in telephone
call centers and in business support services. Young workers in the Philippines, too, are elevating
their living standards with good-paying imported jobs in the areas of financial accounting, payroll,
and benefits services.
SUMMARY OF THE JOBS AND WAGES DEBATE Theory states that international trade (and
by extension globalization) raises standards of living for nations but it does not say all sectors of
the economy will benefit. In developed economies, sectors that export high value-added products
will likely create jobs, and sectors that import low value-added products will likely shed jobs. So
far, this has been globalization’s track record. It has rewarded skilled workers who have higher
value-added jobs with rising pay. Workers having lower value-added jobs cannot compete with
workers in lower-wage nations and experience wage stagnation and job losses.37
The key point of difference between the two sides in the debate, it seems, is whether the
overall gains that accrue to a nation’s economy are worth the lost livelihoods that some individuals suffer. Those in favor of globalization say individual pain is worth the collective gain; those
against globalization say it is not. A broad consensus today seems to be emerging that the winners
need to do a better job sharing the gains of globalization with workers who benefit relatively less.
This leads us to the next topic to discuss—inequality.
1.4.3
Debate about Income Inequality
Perhaps no controversy swirling around globalization is more complex than the debate about its
role in income inequality. After a long period of increased globalization in the 1990s and early
2000s, many people experienced hardship from the financial crisis of 2008 and the pandemic
of 2020. Today, lost manufacturing jobs and stagnant wages for the middle class in developed
nations is putting a spotlight on income inequality and the need to make prosperity more inclusive.
Globally, income growth was sluggish or nonexistent for the 49 percent of income earners
between the bottom 50 percent and the top 1 percent from 1980 to 2018. Meanwhile, the top
1 percent of income earners worldwide saw their share of global income grow from 16 percent
to 20 percent. And the top 0.1 percent of income earners captured as much income growth as the
entire bottom half of the world’s wage earners. This increase in wealth at the very top is occurring
globally and includes emerging markets.38
CHAPTER 1 • Globalization Today 23
Globalization is sometimes
blamed for contributing to
­inequality within nations. Some
people say globalization benefits
cosmopolitan and well-connected
individuals who have high-level
skills but causes job loss and
­dislocation for blue-collar workers.
Here we see the accommodations
of poverty-stricken inhabitants of
Luanda, Angola, in Africa against
a backdrop of the apartments
inhabited by the more affluent of
society. We can find this type of
inequality in nearly every country
in the world.
Fabian Plock/Shutterstock
These figures do not take into account the pandemic’s arrival in 2020 and reduced incomes
for millions of people. For the first time since 1998 the pandemic quickly drove the number of
extremely impoverished higher. Here, we focus on two main aspects of the debate: inequality
within nations and inequality between nations.
INEQUALITY WITHIN NATIONS Opponents of globalization argue that freer trade and investment allows international companies to close factories in higher-wage, developed nations and
to move them to lower-wage, developing nations. They say this increases the wage gap between
white-collar and blue-collar occupations within developed nations. Today, 71 percent of the
world’s population lives in countries where inequality has increased. Between 1980 and 2018,
income inequality rose significantly within North America and Asia (particularly China and India)
and increased moderately within Europe. Over that time inequality stabilized, albeit at high levels,
within the Middle East, sub-Saharan Africa, and Brazil. Inequality fell considerably within Latin
America and the Caribbean.39
Several academic studies explored openness to the global economy and incomes. Two studies
of developed and developing nations find contradictory evidence. The first study (of 38 countries
over 30 years) finds that income inequality increases as a nation increases its openness to trade.40
But a second study (of 80 countries over 40 years) finds that income inequality does not rise in
periods of economic growth.41 Two studies of developing nations only are more consistent. The
first study finds that a 1 percent increase in the trade-to-GDP ratio raises average incomes 0.5
to 2 percent. The second study finds that incomes of the poor keep pace with growth in average incomes where there is trade integration, and the poor fall behind in periods of declining
openness.42
On the face of it, rapid globalization appears to contribute to income inequality.43 But pinpointing the precise cause can be difficult because standard economic trade models are ­imperfect.
Additional contributors to inequality can include advancements in technology, deregulation,
­education quality, tax structure, and labor policies, to name only several. For example, one study
found that countries whose populations possess greater average skill proficiency across critical
areas in ­business, technology, and data science have lower levels of income inequality.44
INEQUALITY BETWEEN NATIONS Globalization supporters say it lessens inequality between
nations. Since the early 1990s inequality between countries decreased, on average, as incomes in
developing countries began growing at a faster rate. But averages conceal differences. One group
of developing nations is more quickly closing the gap with high-income economies. Developing
24 PART 1 • GLOBAL BUSINESS ENVIRONMENT
countries and post-communist countries that embraced globalization increased personal incomes,
extended life expectancies, and improved education systems. Much of the decline in inequality
between nations is due directly to China’s integration with the global economy.45 China is narrowing the income gap between itself and the United States, with annual economic growth rates of
between 7 percent and 9 percent. Another emerging market, India, is also embracing globalization
and narrowing its income gap with the United States.46
Nations that remain more closed off from the world economy have not fared as well. Over
90 percent of the world’s poor reside in developing nations. And some of these nations are experiencing extreme poverty.47 What it is like to live on less than $1.90 per day (the threshold amount for
extreme poverty) is too difficult for most of us to comprehend. A positive development is that the
world’s population living on less than $1.90 per day fell from 2 billion people to 630 million people
between 1990 and 2018, a drop from 36 percent to 8 percent of world population. One of the United
Nations’ Sustainability Goals is to reduce extreme poverty to below 3 percent worldwide by 2030.48
A distressing statistic is that average incomes in North America are 16 times those in nations
of sub-Saharan Africa. The nations of sub-Saharan Africa account for 3 percent of world GDP,
18 percent of world population, and 63 percent of the world’s extremely impoverished people.
More than a quarter of these people live in four African countries—Nigeria, the Democratic
Republic of Congo, Ethiopia, and Tanzania. Prior to the pandemic, African nations were growing
rapidly and had reduced extreme poverty from 53 percent to 41 percent of the population between
1990 and 2018.49 Sadly, experts predict that the pandemic will increase extreme poverty in Africa
at least in the near term.
1.4.4
Globalization and Culture
National culture is a strong shaper of a people’s values, attitudes, customs, beliefs, and communication. Globalization’s detractors say that it homogenizes our world and destroys the rich diversity
of cultures. They say that in some drab, new world we all will wear the same clothes bought at the
same brand-name shops, eat the same foods at the same brand-name restaurants, and watch the
same movies made by the same production companies. Blame is usually placed squarely on the
largest US-based multinational companies that produce global consumer goods.
Supporters argue that globalization allows us all to profit from our differing circumstances
and skills. Trade allows countries to specialize in providing the goods and services they can produce most efficiently. Nations then can trade with each other to obtain goods and services they
desire but do not produce. In this way, Taiwan still produces many of the world’s semiconductors,
South Africa yields much of the world’s diamonds, and Japan continues to design some of the
world’s finest-engineered automobiles. Other nations then trade their goods and services with
these countries to enjoy the semiconductors, diamonds, and automobiles that they do not, or cannot, produce. To learn more about the interplay between culture and globalization, see the Culture
Insights feature, “The Culture Debate.”
CULTURE INSIGHTS
The Culture Debate
The debate about globalization’s influence on culture evokes
strong opinions. Here are a few main arguments in this debate:
•
•
Material Desire. Critics say globalization fosters the
­“Coca-Colanization” of nations through advertising
­campaigns that promote material desire. They also argue
that global consumer-goods companies destroy cultural
diversity (especially in developing nations) by putting local
companies out of business.
Artistic Influence. Evidence suggests, however, that the
cultures of developing nations are thriving and that the
influence of their music, art, and literature has grown (not
shrunk) throughout the past century. African cultures, for
example, have influenced the works of artists including
Picasso, the Beatles, and Sting.
•
•
•
Western Values. International businesses reach far and wide
through the internet, global media, increased business travel,
and local marketing. Critics say local values and traditions are
being replaced by US companies promoting “Western” values.
A Force for Good. On the positive side, globalization tends to
foster two important values: tolerance and diversity. Advocates
say nations should be more tolerant of opposing viewpoints
and should welcome diversity among their peoples. This view
interprets globalization as a potent force for good in the world.
Deeper Values. Globalization can cause consumer purchases and economic ideologies to converge, but these
are rather superficial aspects of culture. Deeper values that
embody the essence of cultures might be more resistant to
a global consumer culture.
CHAPTER 1 • Globalization Today 25
1.4.5
Globalization and National Sovereignty
National sovereignty generally involves the idea that a nation-state (1) is autonomous, (2) can
freely select its government, (3) cannot intervene in the affairs of other nations, (4) can control
movements across its borders, and (5) can enter into binding international agreements. Opposition
groups allege that globalization erodes national sovereignty and encroaches on the authority of
local and state governments. Supporters disagree, saying that globalization spreads democracy
worldwide and that national sovereignty must be viewed from a long-term perspective.
MENACE TO DEMOCRACY? A main argument leveled against globalization is that it empowers supranational institutions at the expense of national governments. It is not disputed that the
WTO, the IMF, and the United Nations are led by appointed, not democratically elected, representatives. What is debatable, however, is whether these organizations unduly impose their will
on the citizens of sovereign nations. Critics argue that such organizations undercut democracy
and individual liberty by undermining the political and legal authority of national, regional, and
local governments.
Opponents of globalization also take issue with the right of national political authorities to
enter binding international agreements on behalf of citizens. Critics charge that such agreements
violate the sovereignty of local, regional, and national governments. For example, in 1973 ­Britain
joined the group of nations that would become the European Union (EU). But it later exited the
bloc in 2020 after a slim majority of its citizens voted to leave in a public referendum. Those
voting to leave the EU feared that what began as a trade agreement was becoming too much of a
political organization that could supersede British law. They wanted laws that govern British lives
to be enacted and enforced in Britain, not in the EU’s capital, Brussels, Belgium.
GUARDIAN OF DEMOCRACY? Globalization supporters argue that an amazing consequence
of globalization has been the spread of democracy worldwide. In recent decades, the people of
many nations have become better educated, better informed, and more empowered. Supporters
say globalization has not sent democracy spiraling into decline but instead has been instrumental
in spreading democracy to the world.
Globalization supporters say sovereign nations often give up trying to control issues they
cannot resolve. In the mid-1600s, governments in Europe surrendered their authority over religion
because attempts to control it undermined overall political stability. Also, Greece in 1832, Albania
in 1913, and the former Yugoslavian states in the 1990s gave up a measure of sovereignty and
protected their minorities in exchange for international recognition. And over time the United
Nations has involved itself in the domestic affairs of nations to make progress on worthy issues
such as genocide, torture, slavery, refugees, women’s rights, children’s rights, forced labor, and
racial justice. Supporters say lost sovereignty over some economic issues can actually enhance
the greater good.50
1.4.6
Globalization and the Environment
Some environmental groups say globalization causes a “race to the bottom” in environmental
conditions and regulations. But many developing nations, including Argentina, Brazil, Malaysia,
and Thailand, liberalized their foreign investment environments while simultaneously enacting
stricter environmental legislation. Studies show that US firms in pollution-intensive industries
tend to invest in countries with stricter environmental standards. Large international companies
would not have invested in these countries for decades had they been eager to relocate to nations
having poor environmental protection laws. Additional evidence that closed, protectionist economies are worse than open ones at protecting the environment includes Brazil when under military
rule in the past. The former communist nations belonging to the Warsaw Pact also had extremely
poor environmental records.
Globalization opponents claim that Western firms exploit lax environmental laws abroad to
produce goods that are then exported back to the home countries. These claims have no factual
basis and might only perpetuate a false image of corporations. Only an unethical business would
invest abroad to exploit lax environmental protections and then export finished products back
to the United States. Most companies today support reasonable environmental laws worldwide
because they want to expand future markets for their goods and services. They recognize that
healthy future markets require a sustainable approach to business expansion. Finally, to attract
26 PART 1 • GLOBAL BUSINESS ENVIRONMENT
investment, a location must offer low-cost, adequately skilled workers in an environment with
acceptable levels of social, political, and economic stability—not simply lax environmental protection laws.
QUICK STUDY 1.4
1. How would you summarize the debate about globalization’s impact on jobs and wages?
2. What does the evidence tell us about globalization’s effect on income inequality within and
between nations?
3. What are the main arguments surrounding the debate about globalization’s impact on
cultures?
4. What do supporters and opponents of globalization argue regarding national sovereignty
and the environment?
1.5 Workplace Skills
1.5 Identify the skills this
course will help you develop
for your career.
International business today is rapidly changing. Driving disruption across all industries are digitalization strategies, automation of routine physical and cognitive tasks, implementation of artificial
intelligence, and expansion of environmentally friendly policies. E-commerce as a share of total
retail sales grew two to five times faster during the pandemic than it had been growing. Threequarters of people using digital channels for the first time during the pandemic said they would
continue using them.51
Jobs with high levels of human interaction are seeing the greatest acceleration in automation
today. The pandemic drove automation in warehouses, grocery stores, call centers, and manufacturing plants in order to comply with social distancing guidelines and handle variable demand.
Jobs in warehousing and transportation increased due to growth in e-commerce and the delivery
economy. Jobs in food service, sales and service, and less-skilled office support lost most in the
pandemic.52
Automation does eliminate some jobs but it also creates new ones. By 2030, slightly more
than 6 percent of currently employed workers might need to find a different occupation. Job
dislocation is painful. But automation should bring with it more stimulating work as employees
are freed from routine tasks and are able to fulfill more valuable roles. For example, automation
means retailers will need employees with higher-level skills to act as knowledgeable and trusted
advisors to customers seeking advice. Retailers will also require tech-savvy talent to design and
maintain company shopping apps and analyze data in a team-oriented environment.53
The most competitive businesses of the future will focus on constantly upgrading their
employees’ skills to keep pace with technological advancements. Many emerging professions
and jobs of tomorrow will be in technology fields. Companies will seek qualified employees
in areas such as artificial intelligence, cloud computing, data analysis, process automation, and
many others. Skilled businesspeople will also be needed in areas including business services and
administration, business development, risk management, project management, and strategy, to
name a few.54 Some of the most in-demand skills will include critical thinking, ethics and social
responsibility, communication skills, and knowledge application and analysis. Let’s now examine
these more closely.
1.5.1
Skills for Your Career
You are likely taking this course because you want to learn more about how business operates
in today’s global economy. Some of you will one day work for a global company and frequently
travel or live abroad. Some of you will work in government and interact with counterparts in other
countries. And some of you will work at not-for-profit entities to solve pressing global social issues.
Whichever occupation you choose you will benefit from having 21st century workplace
skills. These skills will make you a better match for the needs of your future employer and prepare
you for success in an expanding digital economy characterized by e-commerce, remote work,
and automation. Technology is accelerating change in the workplace skills that companies want
CHAPTER 1 • Globalization Today 27
Today companies seek employees
with what are called 21st century
workplace skills. These skills
can help individuals succeed in
a global and increasingly digital
economy. Workplace skills that
companies want in their future
employees include knowledge
application, reflective thinking,
and communication skills, among
others. This text and accompanying
materials and assignments will
help you develop these capabilities
and workplace skills.
Rawpixel.com/Shutterstock
employees to have so they hit the ground running as soon as they are hired. This course will help
you develop these highly useful capabilities, or employability skills.
The skill called application of knowledge refers to your ability to learn a concept and appropriately apply that knowledge in another setting to achieve a higher level of understanding. You
will be asked to apply your analytical reasoning and research skills in numerous assignments,
projects, mini-cases, and, perhaps, the market entry strategy project developed for use with this
text. You will learn that at the core of global business success is innovation—a process of experimenting, learning, applying knowledge, and assessing success or failure. Throughout the course
you will have ample opportunities to explain why a company succeeded or failed because of the
actions it did or did not take.
Reflective (critical) thinking involves purposeful and goal-directed thinking used to define
and solve problems, make decisions, or form judgments related to a set of circumstances. This
course will help you to develop this key workplace skill. For example, you will use reflective
thinking skills in this course to study how a country designs its political, economic, and legal
systems into a complex arrangement to achieve a specific set of priorities for the nation and its
people. Throughout the text, you will be able to put yourself in the position of a business manager
and make a decision or solve a dilemma that commonly occurs in business today. A closely related
skill is analytical thinking, which involves following a fact pattern to draw a conclusion.
This course also will help to improve your communication skills. Communication is the use
of oral, written, and nonverbal language, along with technology to communicate ideas effectively
and to listen effectively. International business means working across national borders, across
languages, and across cultures. Articulating one’s thoughts and ideas in another language and
culture must be done in a considerate and mindful way so as to not offend another person’s values
and beliefs. You will read about situations in which appropriate communication resulted in successful dealings, and inappropriate communication meant failure of one kind or another. You will
see how managers who are posted abroad for the first time on international assignment must work
effectively with others, remain flexible, and make cultural compromises to succeed.
A keener sense of ethical understanding and social responsibility is another workplace skill
that this course will help you to improve. We define these concepts simply as sets of guiding
principles that influence the way individuals and organizations behave within society. You will
encounter the issues of personal ethical responsibility and reasoning throughout this course as
you read how managers fared after making ethical decisions under specific circumstances. You
will also read about the social responsibilities that companies face regarding topics such as human
rights, fair trade, and sustainable development.
28 PART 1 • GLOBAL BUSINESS ENVIRONMENT
To assist you in developing these and other career skills as you study this course, we created
a unique organizing framework to help you conceptualize international business. We call this the
global business environment.
1.5.2 The Global Business Environment
As we’ve already seen in this chapter, international business differs greatly from business in a
purely domestic context. The most obvious contrast is that different nations can have entirely different societies and commercial environments. The best way to explain what makes international
business special is to introduce a model unique to this text—a model we call the global business
environment. This model weaves together four distinct elements:
1. The global forces
2. The national business environment
3. The international business environment
4. International business management.
The model in Figure 1.6 identifies each of these elements and their subparts that together
comprise the global business environment. Thinking about international business as occurring
within this global system helps us to understand the complexities of international business and
the interrelations between its distinct elements. Let’s preview each of the four main components
in the global business environment.
Global forces are transforming our societies and commercial activities. These global forces
exert pressure on each element shown in Figure 1.6 and influence every aspect of the global business environment. First, the force of globalization increases competition for all firms everywhere
as managers view the entire world as an opportunity. Second, at home and abroad firms must
Figure 1.6
The Global Business
Environment
Global
International
Globalization
Today
(ch. 1)
International
Monetary System
(ch. 11)
National
Business
International
Trade Theory
(ch. 6)
Cross-Cultural
Business
(ch. 3)
Hiring and
Managing
Employees
(ch. 17)
Economic
International Development Managing
International
Financial
of Nations
Operations
Markets
(ch. 5)
(ch. 16)
(ch. 10)
International
Strategy and
Organization
(ch. 12)
Analyzing
International
Opportunities
(ch. 13)
Selecting
Developing
and
and Marketing Managing
Products Entry Modes
(ch. 15)
(ch. 14)
Political,
Economic, and
Legal Systems
(ch. 4)
Regional
Economic
Integration
(ch. 9)
Foreign Direct
Investment
(ch. 8)
Governments
and Trade
(ch. 7)
Ethics, Social
Responsibility
and
Sustainability
(ch. 2)
CHAPTER 1 • Globalization Today 29
remain vigilant to ethical situations, social responsibility issues, and sustainability in all its forms.
Astute managers and executives will consider what their business can do to support these efforts.
This comprises Part 1 of this text.
Each national business environment is composed of unique cultural, political, economic, and
legal characteristics that define business activity within that nation’s borders. This set of national
characteristics can differ greatly from country to country. Still, as nations open up and embrace
globalization, their business environments are being transformed. Globalization can cause powerful synergies and enormous tensions to arise within and across various elements of a society.
Company managers must be attentive to such nuances, adapting their products and practices as
needed. This comprises Part 2 of this text.
The international business environment influences how firms conduct their operations in
both subtle and not-so-subtle ways. No business is entirely immune to events in the international
business environment, as evidenced by the long-term trend toward more porous national borders.
The drivers of globalization are causing the flows of trade, investment, and capital to grow and to
become more entwined—often causing firms to search simultaneously for production bases and
new markets. Companies today must keep their fingers on the pulse of the international business
environment to see how it might affect their operations. This comprises Parts 3 and 4 of this text.
International business management is vastly different from the management of a purely
domestic business. Widely dispersed production and marketing activities today means companies
commonly interact with people in distant locations. The context of international business
management is defined by the characteristics of national business environments and the integrating
power of ­globalization. Businesses should try to anticipate events and forces that can affect
their ­operations by closely monitoring globalization, national business environments, and the
international ­business environment. This comprises Part 5 of this text.
We now conclude this first chapter of International Business. This chapter has only introduced
you to the study of this exciting and dynamic subject. We hope you enjoy the rest of your journey!
QUICK STUDY 1.5
1. Why are certain workplace skills becoming increasingly important?
2. What are some employability skills this course will help you develop for your career?
3. How would you describe the Global Business Environment model used in this text?
Chapter 1: Summary
LO 1.1
LO 1.2
Identify the types of companies active in international business.
• International business is a commercial transaction that crosses the borders of two or
more nations.
• Most international business is conducted by large multinational corporations
(MNCs), which have great economic muscle and do deals often worth billions of
dollars.
• Born global firms adopt a global perspective and conduct international business
from inception. They tend to have innovative cultures, knowledge-based capabilities,
and quickly build competitive advantage.
Explain globalization and the significance of global markets and production.
• Globalization is the trend toward greater economic, cultural, political, and technological interdependence among national institutions and economies.
• Globalization passes through phases of expansion and contraction, with nations now
trading approximately 60 percent of their yearly output.
• The globalization of markets helps companies (1) reduce costs by standardizing
marketing activities, (2) explore international markets if the home market is small or
saturated, and (3) level income streams.
• The globalization of production helps companies (1) access low-cost labor and
become more price competitive, (2) access technical know-how, and (3) access
­natural resources nonexistent or too expensive at home.
30 PART 1 • GLOBAL BUSINESS ENVIRONMENT
LO 1.3
LO 1.4
LO 1.5
Detail the forces that drive globalization.
• The broad forces behind increased globalization are falling barriers to trade and
investment and technological innovation.
• The World Trade Organization (WTO) is designed to support the free flow of trade,
help negotiate the opening of markets, and settle trade disputes. But its effectiveness
has been lower in recent years.
• Some nations are forming smaller, regional trade agreements because negotiating
with fewer nations can be an easier task.
• Innovations in information technology are making it easier, faster, and less costly to
move data, goods, and equipment around the world.
• Specific innovations include global e-commerce, digitalization, communication tools
such as videoconferencing, and advancements in transportation technologies.
Summarize the main arguments in the debate about globalization.
• Globalization opponents say it (1) moves developed-country jobs to developing
­countries, (2) decreases wages, job security, morale, and loyalty in developed nations,
(3) exploits developing-nation workers, and (4) reduces the bargaining power of labor.
• Globalization supporters say it (1) fuels efficiency and increases incomes, (2) promotes
labor market flexibility, (3) provides jobs to developing nations that elevate living
standards, and (4) perhaps strengthens labor rights.
• Inequality within a nation can decrease when a developing country (but perhaps not
a developed nation) integrates itself into the global economy. Inequality between
nations can decrease when a country embraces world trade and investment.
• Evidence suggests that the cultures of developing nations are thriving in an age of
­globalization and that deep elements of culture are not easily abandoned, as critics say.
• Some say globalization reduces national sovereignty. Others say globalization has
helped democracy to spread worldwide and has aided progress on many global issues.
• It seems globalization has not caused an environmental “race to the bottom,” but
instead encourages firms to embrace sustainability as a precondition to fostering
healthy future markets.
Identify the skills this course will help you develop for your career.
• The employability skills this course can help you develop are application of
knowledge, reflective (critical) thinking, communication, and ethics and social
responsibility.
• The global business environment model will help you to understand the nature of
international business today and aid in your skills development.
• Global forces are transforming commercial activity. Globalization influences every
aspect of global business and increases competition everywhere. Businesses must be
vigilant to issues of ethics, social responsibility, and sustainability.
• Separate national business environments comprise unique cultural, political, economic, and legal characteristics that define business activity within every nation.
• The international business environment influences how firms conduct operations,
while globalization further entwines the flows of trade, investment, and capital.
• International business management is vastly different from domestic business.
Companies need to anticipate events and forces in their business environments that
can affect operations.
Key Terms
born global firm
digitalization
digital transformation
digitization
e-commerce
exports
foreign direct investment
GDP or GNP per capita
General Agreement on Tariffs and Trade
(GATT)
globalization
gross domestic product (GDP)
gross national product (GNP)
imports
international business
International Monetary Fund (IMF)
Internet of Things (IoT)
multinational corporation (MNC)
sustainability
World Bank
World Trade Organization (WTO)
CHAPTER 1 • Globalization Today 31
Talk About It
1-1. Today, international businesspeople must think globally about production and sales
opportunities. Many global managers will eventually find themselves living and
working in other cultures, and entrepreneurs might find themselves taking flights to
places they know little about. What can companies do now to prepare their managers
for international markets? How can entrepreneurs and small businesses with limited
resources prepare?
1-2. National governments can influence the pace of globalization through agreements
to lower barriers to international trade and investment. Some experts believe governments and politics are playing too big of a role in the global economy. Do you think
national governments will grow more or less important to international business
activity in the future?
Teaming Up
Imagine that you and several of your classmates own a company that manufactures cheap
sunglasses. To lower production costs, you decide to move your factory from your developed
country to a more cost-effective location.
1-3. Which elements of the national business environment might influence your decision of
where to move production?
1-4. What aspects of the globalization of production and marketing do you expect will
­benefit your company following the move?
Ethical Challenge
You are the CEO of a major US apparel company that contracts work to garment manufacturers
abroad. Employees of one contractor report 20-hour workdays, pay below the minimum wage,
overcrowded living conditions, physically abusive supervisors, and confiscation of workers’
passports so they cannot quit. Local officials say labor laws are adhered to and enforced, though
abuses appear widespread. You send inspectors to the offending factory abroad, but they uncover
no labor violations. A labor-advocacy group claims that supervisors coached workers to lie to
your inspectors about conditions and threatened workers with time in makeshift jails without
food if they talked.
1-5. Should you implement a monitoring system to learn the truth about what is happening?
1-6. Do you help the factory improve conditions, withdraw your business from the country,
or simply do nothing?
1-7. How might your actions affect your global corporate reputation, brand image, and
brand value?
1-8. How might your actions affect relations with the factory owner and your ability to do
business in the country?
Writing Assignments
1-9. When going international, companies today often research new locations as potential
markets as well as potential sites for operations. What specific benefits can companies
gain from the globalization of markets and production? Explain.
1-10. Opponents of globalization say that it has many negative consequences for jobs and
wages, income inequality, culture, sovereignty, and the environment. What are some
positive outcomes of globalization for each of these topics?
32 PART 1 • GLOBAL BUSINESS ENVIRONMENT
PRACTICING INTERNATIONAL MANAGEMENT CASE
Apple’s Global Strategy
S
teve Jobs, Steve Wozniak, and Ronald Wayne formed Apple in
April 1976, in Cupertino, California, with Wozniak designing
and hand-building the Apple I computer. Apple later introduced the
first Macintosh computer in 1984. As we read in the profile of Apple
at the start of this chapter, it is one of the world’s most successful
companies, with extremely loyal customers.
Annual sales revenue is $274 billion, around $50 billion of
which is generated in the US market. Other key markets include
Europe ($69 billion), China ($40 billion), Japan ($21 billion), and
the Asia Pacific ($20 billion). Although $138 billion in revenue
comes from iPhone sales, around $54 billion now comes from services, including iCloud, Apple Music, Apple TV+, Apple Arcade,
Apple News+, and Apple Fitness+. Around $31 billion in revenue is
generated by wearables, home products, and accessories, including
the Apple Watch, AirPods, HomePod, and Beats.
A theory in international business says a country should produce goods and services where it is most productive to do so, and
then trade with other nations for things it needs but does not produce. For Apple and its home country, the United States, this means
importing products that require labor-intensive parts and assembly
(like electronics) and exporting high value-added products (like the
iPhone). This theory is the bedrock of globalization and trade.
Globalization benefits Apple greatly and its business model
depends on it. Apple’s parts and components come from a global
manufacturing network of firms from up to 50 countries, depending
on where a part is made and which company makes it. Rather than
hire US workers, Apple subcontracts assembly to places where
labor costs are lower, particularly China. Through Taiwanese
manufacturer, Foxconn, Apple produces hundreds of thousands
of devices daily at the new factory town of Zhengzhou in Henan
province. The local government paid $1.5 billion to help build hightech ­factories and housing for 400,000 workers and constructed a
$10 billion ­airport. Apple could not find this scale of operations and
this level of local cooperation anywhere else in the world.
Apple’s production strategy served it well for years. Labor costs
in China account for only about 4 percent of the iPhone’s total cost.
The greatest cost is incurred in California, where Apple performs
design, engineering, and marketing tasks. Another reason Apple
produces in China is alternative suppliers of some components
are located nearby and parts can be obtained quickly. As Chinese
incomes improved, Apple began to also sell devices in China.
Sales revenue in China grew from $2.8 billion in 2010 to a peak of
$59 billion 2015, then fell to around $40 billion in 2020.
Apple’s heavy dependence on China as the cornerstone of its
strategy had advantages but also drawbacks. First, as factory work
flooded into China, demand for labor grew and its cost rose. Apple
responded by moving some product assembly to Vietnam and other
nations with lower labor costs. Second, businesspeople and politicians in the United States began referring to China as a “strategic
competitor.” US–China tensions grew and soon the two superpowers were in a trade war. The US government then placed sanctions
on Apple’s Chinese competitor, Huawei.
Third, US–China relations soured further after the pandemic’s
arrival in 2020. Nationalist sentiment increased in both countries.
The US government actively encouraged a “supply chain restructuring” initiative, or “decoupling,” of the US and Chinese economies.
Finally, critics pressured Apple to not subcontract work to China for
several reasons, including allegations of human rights violations, poor
conditions at some factories to which Apple subcontracts, and censorship of the internet there. Apple’s app store for China once even
removed virtual-private-network apps, which had allowed Chinese
internet users to bypass the government’s firewall and to access the
uncensored internet.
Apple responded to all these events by moving some iPad production to Vietnam and India, and moved some smart speaker, earphones, and computer assembly to Malaysia. It is not abandoning
China as a key production base, at least not yet, but it is diversifying production away from reliance on a single country. Apple says
southeast Asia is where it plans to expand production for many
core products.
When the US government sanctioned Huawei, a host of other
Chinese smartphone makers rushed to offer consumers a non-US
brand phone. Device makers Xiaomi, Oppo, and Vivo quickly
improved their designs and cameras and went head-to-head against
Apple with lower-priced phones. The trio saw double-digit growth
rates and each now commands around 20 percent of China’s domestic smartphone market.55
Thinking Globally
1-11. Why should Apple purchase parts and components that are
made outside the United States and subcontract assembly to
China and other nations?
1-12. Why did the Apple iPhone lose market share in China?
What specific actions, if any, do you think Apple could
have taken with regard to its presence in China to prevent
the loss of market share?
1-13. Assume you are part of the top executive team at Apple.
How do you personally feel about doing business in China,
which appears to have large differences with how business
is done in the United States?
1-14. Based on your personal feelings in the previous question
about doing business in China, do you recommend that
Apple make any changes in its strategy going forward?
Explain your answer.
CHAPTER 1 • Globalization Today 33
Appendix
World Atlas
As globalization marches across the world, international business
managers can make more informed decisions if they know the locations of countries and the distances between them. This atlas presents the world in a series of maps and is designed to assist you in
understanding the global landscape of business. We encourage you
to return to this atlas frequently to refresh your memory, especially
when you encounter the name of an unfamiliar city or country.
Familiarize yourself with each of the maps in this appendix,
and then try to answer the following 20 questions. For each
question, select all answers that apply.
Map Exercises
1. Which of the following countries border the Atlantic
Ocean?
a. Bolivia
d. Japan
b. Australia
e. United States
c. South Africa
2. Which of the following countries are found in Africa?
a. Guyana
d. Pakistan
b. Morocco
e. Niger
c. Egypt
3. Which one of the following countries does not border the
Pacific Ocean?
a. Australia
d. Mexico
b. Venezuela
e. Peru
c. Japan
4. Prague is the capital city of (capitals are designated with
red dots) ________________________.
a. Uruguay
d. Tunisia
b. Czech Republic
e. Hungary
c. Portugal
5. If transportation costs for getting your product from your
market to Japan are high, which of the following countries
might be good places to locate a manufacturing facility?
d. Indonesia
a. Thailand
b. Philippines
e. Portugal
c. South Africa
6. Seoul is the capital city of ________________________.
a. Vietnam
d. China
b. Cambodia
e. South Korea
c. Malaysia
7. Turkey, Romania, Ukraine, and Russia border the body of
water called the ________________________ Sea.
a. Mediterranean
d. Black
b. Caspian
e. Adriatic
c. Arabian
8. Thailand shares borders with ________________________.
a. Cambodia
d. Malaysia
b. Pakistan
e. Indonesia
c. Singapore
9. Which of the following countries border no major ocean
or sea?
a. Austria
d. Niger
b. Paraguay
e. all of the above
c. Switzerland
10. Oslo is the capital city of ________________________.
a. Germany
d. Australia
b. Canada
e. Norway
c. Brazil
11. Chile is located in ________________________.
d. South America
a. Africa
b. Asia
e. Central Europe
c. the Northern
Hemisphere
12. Saudi Arabia shares borders with
________________________.
a. Jordan
d. United Arab Emirates
b. Kuwait
e. all of the above
c. Iraq
13. The body of water located between Sweden and ­Estonia is
the ________________________ Sea.
a. North
d. Norwegian
b. Baltic
e. Mediterranean
c. Black
14. Which of the following countries are located on the
­Mediterranean Sea?
a. Italy
d. France
b. Croatia
e. Portugal
c. Turkey
15. The distance between Sydney (Australia) and
Tokyo (Japan) is shorter than that between
________________________.
a. Tokyo and Cape Town (South Africa)
b. Sydney and Hong Kong (China, SAR)
c. Tokyo and London (England)
d. Sydney and Jakarta (Indonesia)
e. all of the above
16. Madrid is the capital city of ________________________.
a. Madagascar
d. Spain
b. Italy
e. United States
c. Mexico
34 PART 1 • GLOBAL BUSINESS ENVIRONMENT
17. Which of the following countries is not located in central
Asia?
a. Afghanistan
d. Kazakhstan
b. Uzbekistan
e. Suriname
c. Turkmenistan
18. If you were shipping your products from your production facility in Pakistan to market in Australia, they would
likely cross the ________________________ Ocean.
a. South Atlantic
d. South China
b. Pacific
e. Atlantic
c. Indian
19. Papua New Guinea, Guinea-Bissau, and Guinea are alternative names for the same country.
a. true
b. false
20. Which of the following countries are island nations?
a. New Zealand
d. Australia
b. Madagascar
e. all of the above
c. Japan
Answers
(1) c. South Africa, e. United States; (2) b. Morocco, c. Egypt,
e. Niger; (3) b. Venezuela; (4) b. Czech Republic; ­
(5) a. Thailand, b. Philippines, d. Indonesia; (6) e. South
Korea; (7) d. Black; (8) a. Cambodia, d. Malaysia; (9) e. all of
the above; (10) e. Norway; (11) d. South America; (12) e. all
of the above; (13) b. Baltic; (14) a. Italy, c. Turkey, d. France;
(15) a. Tokyo and Cape Town (South Africa), c. Tokyo and
London (England); (16) d. Spain; (17) e. Suriname;
(18) c. Indian; (19) b. false; (20) e. all of the above.
Self-Assessment
If you scored 15 correct answers or more, well done! You seem
well prepared for your international business journey. If you
scored fewer than 8 correct answers, you might wish to review
this atlas before continuing.
AR CTIC O C E AN
A RCT I C O CEA N
O
ALASKA
SW
N
ICELAND
ED
RW
A
EN Y
GREENLAND
C A N A D A
UNITED
KINGDOM DENMARK
Gul f of
Al a s ka
FINLAND
R U S S I A
ESTONIA
LATVIA
LITHUANIA
RUSSIA
BELARUS
NETHERLANDS
POLAND
GERMANY
BELGIUM
CZECH
IRELAND
REP. SLOVAKIA UKRAINE
AUSTRIA
HUNGARY MOLDOVA
SLOVENIA
ROMANIA
CROATIA
BOSNIASERBIA
HERZEGOVINA
KOSOVO BULGARIA
ANDORRA
LUX.
GREECE
CUBA DOMINICAN
HAITI
BELIZE
GUATEMALA HONDURAS
EL SALVADOR NICARAGUA
COSTA RICA
PANAMA
REPUBLIC
WESTERN
SAHARA
MAURITANIA
PUERTO
RICO
TRINIDAD &
VENEZUELA TOBAGO
COLOMBIA
ALGERIA
GUYANA FRENCH
GUIANA
SURINAME
SENEGAL
GAMBIA
GUINEA-BISSAU GUINEA
SIERRA LEONE
MALI
BURKINA
FASO
IVORY
COAST
LIBERIA
ECUADOR
NIGERIA
CHAD
C H
I L E
URUGUAY
ARGENTINA
UNITED ARAB
EMIRATES
OMAN
SUDAN
ANGOLA
SOUTH
KOREA
C H I N A
NEPAL
PA C I F I C
OCEAN
TAIWAN
BURMA
HONG KONG
LAOS
VIETNAM
THAILAND
PHILIPPINES
CAMBODIA
SRI
LANKA
JAPAN
BHUTAN
BANGLADESH
INDIA
ERITREA YEMEN
CAMEROON REPUBLIC
EQUATORIAL CONGO
UGANDA
GUINEA
REPUBLIC
KENYA
GABON
CONGO
RWANDA
DEMOCRATIC BURUNDI
BRUNEI
MALAYSIA
INDIAN
OCEAN
SINGAPORE
INDONESIA
PAPUA
NEW
GUINEA
MALAWI
ZAMBIA
MOZAMBIQUE
NAMIBIA
PARAGUAY
ARABIA
QATAR
SOUTH
SUDAN DJBOUTI
SOMALIA
CENTRAL
ETHIOPIA
AFRICAN
BOLIVIA
O C E A N
S OU TH
ATL A N TIC
OC E A N
ZIMBABWE
MADAGASCAR
BOTSWANA
SWAZILAND
SOUTH
AFRICA
AUSTRALIA
LESOTHO
NEW
ZEALAND
CHAPTER 1 • Globalization Today Map A.1
The World
NIGER
EGYPT
SAUDI
REPUBLIC
(ZAIRE) TANZANIA
BRAZIL
PERU
PAKISTAN
LIBYA
NORTH
KOREA
SYRIA
AFGHANISTAN
LEBANON
IRAQ
IRAN
ISRAEL
JORDAN KUWAIT
TUNISIA
MOROCCO
GHANA
TOGO
BENIN
OC E A N
GEORGIA
UZBEKISTAN
KYRGYZSTAN
ARMENIAAZERBAIJAN
ITALY MONT.
N. MACEDONIA
ALBANIA
TURKEY
TURKMENISTAN TAJIKISTAN
PORTUGAL SPAIN
N OR TH
MEXICO
P A C I F I C
MONGOLIA
FRANCE
ATL A N TIC
HAWAII
KAZAKHSTAN
SWITZ.
UNITED
STATES OF
AMERICA
35
36 PART 1 • GLOBAL BUSINESS ENVIRONMENT
A R CT IC O CE A N
Bea u fo rt
Sea
Bering
Sea
ICELAND
GREENLAND
Baffin
Bay
ALASKA
Fairbanks
Anchorage
Labr ador
S ea
Whitehorse
G u l f of
A la ska
Juneau
Churchill
Prince Rupert
Vancouver
O C E A N
Tacoma
Goose Bay
C A N A D A
Edmonton
P A C I F I C
Hudson
Bay
Moosonee
Saskatoon
Calgary
Seattle
Winnipeg
Regina
Spokane
St. John’s
Thunder Bay
Halifax
Montreal
Ottawa
Augusta
Portland
Helena
Bismarck
Concord
Toronto
Boston
Minneapolis
Hartford
Providence
Detroit
New
York
Milwaukee
Cleveland Pittsburgh Philadelphia
Des Moines Chicago
Washington, D.C. Baltimore
Carson City
Sacramento
Omaha
Salt Lake
Indianapolis
Denver
Richmond
San Francisco
City
Cincinatti
Kansas City
Charleston
Norfolk
St. Louis
Las Vegas
Wichita
Nashville Charlotte
Albuquerque
Tulsa
Los Angeles
Columbia
Memphis
Phoenix
Oklahoma City
Atlanta
Little
San Diego
Rock
Savannah
Tijuana
Fort
Tucson
Jackson
El Paso
Worth Dallas
Jacksonville
Ciudad Juárez
Mobile
Austin
Orlando
New
Hermosillo
Houston
Orleans Tampa
San
Antonio
Chihuahua
Miami Nassau
Corpus Cristi
UNITED STATES
BERMUDA
ATL AN T IC
OC EA N
Torreón
Monterrey
MEXICO
Gu l f of
Me xi co
Tampico
Guadalajara
Leon
BAHAMAS
Havana
Mérida
Port-Au-Prince
JAMAICA
Mexico City
TURKS &
CAICOS
ISLANDS
HAITI
Anguilla Barbuda
PUERTO
DOMINICAN RICO
REPUBLIC
Port-Au-Prince
Curaçao
(Neth.)
Aruba
(Neth.)
Map A.2
North America
Antigua
Montserrat (Br.)
Guadeloupe (Fr.)
Domínica
Martinique (Fr.)
St. Lucia
Barbados
St. Vincent &
St. Kitts
& Nevis
Ponce
Santo
Domingo
C a r ib b e a n Sea
ATLANTIC
OCEAN
Virgin
Islands
(U.S. & Br.)
the Grenadines
Bonaire
(Neth.)
Grenada
Tobago
Port of
Spain
Trinidad
Acapulco
DOMINICAN PUERTO
REPUBLIC
RICO
HAITI
Ponce
CUBA
Santo
Domingo
Kingston
Cari bbe an Sea
GUATEMALA
Guatemala
BELIZE
HONDURAS
Tegucigalpa
El Salvador NICARAGUA
EL SALVADOR
Managua
Panama
COSTA RICA
San José
PANAMA
CHAPTER 1 • Globalization Today 37
CURAÇAO
(Neth.)
Caribbean Sea
Barranquilla
Cartagena
Medellín
Montería
Cúcuta San Cristóbal
Bucaramanga
Manizales
Ibagué Bogotá
Buenaventura
NO R T H
Caracas Port of Spain TRINIDAD &
Cumaná
TOBAGO
Valencia
Maturín
Maracaibo
Barquisimeto
Ciudad
Bolívar
ATLA NT IC
Ciudad Guayana
Georgetown
GUYANA
VENEZUELA
Neiva
Cali
Popoyán
Pasto COLOMBIA
Cayenne
SURINAME FRENCH
GUIANA
ECUADOR Quito
Guayaquil
Ambato
O CE A N
Paramaribo
Mackenzie
Belém
Manaus
Iquitos
Campina Grande
Caruaru
Trujillo
B R A Z I L
P E R U
Lima
Salvador
Cuzco
BOLIVIA
Itabuna
La Paz
Arequipa
Goiânia
Santa Cruz
Arica
Sucre
OC E AN
Campo
Grande
Antofagasta
CHILE
Uberlândia
Córdoba
Pelotas
Santa Fe
Rio Grande
Paraná
Río Cuarto
Viña del Mar
Rosario
URUGUAY
Mendoza
Valparaíso Santiago
Buenos Aires
Rancagua
La Plata Montevideo
San Juan
Concepción
Bahia Blanca
O CEA N
Temuco
ARGENTINA
FALKLAND/MALVINAS
ISLANDS (UK)
Port Stanley
Tierra del Fuego
Map A.3
South America
S O U TH
ATLA NTIC
Talcahuano
Valdivia
Brasilia
Uberaba
Belo Horizonte
Araraquara
Bauru
Juiz
dé Fora
Campinas
PARAGUAY
Niterói
São Paulo
Rio de Janeiro
Ponta
Santos
Asunción Grossa
Salta
Curitiba
San Miguel
de Tucumán
Posadas
Corrientes
Santiago
del Estero
Santa
Maria
Pôrto Alegre
Potosi
Iquique
PAC I FI C
Fortaleza
Teresina
Chiclayo
Callao
São Luís
Natal
Recife
38 PART 1 • GLOBAL BUSINESS ENVIRONMENT
A RCTIC O CEA N
Reykjavik
Norwegian
Sea
ICELAND
Arkhangel’sk
Oulu
FAROE IS.
(Denmark)
SHETLAND IS.
(U.K.)
ORKNEY IS.
(U.K.)
Bergen
Oslo
IRELAND
Belfast
Manchester
Dublin
Liverpool
UNITED
Cork
Göteborg
DENMARK
Copenhagen
ESTONIA
LATVIA
lti
Sea
ea
Glasgow
Nort h
NORTHERN
Edinburgh
Malmo
KINGDOM
Cardiff
ENGLAND
BELGIUM
Paris
LUX.
Frankfurt
Moscow
LITHUANIA
RUSSIA
Birmingham
Nizhniy Novgorod
Riga
Gdansk
Hamburg
Amsterdam
GERMANY
Poznan POLAND
London The Hague
Berlin
NETHERLANDS
Channel
Dortmund
Warsaw
Lódz
English
Brussels
Leipzig
Le Havre
Bonn
WALES
St. Petersburg
Tallinn
Stockholm
SCOTLAND
IRELAND
R U S S I A
Helsinki
c S
OC E AN
NORWAY
Ba
ATL AN T I C
FINLAND
SWEDEN
Smolensk
Vilnius
Minsk
BELARUS
Kursk
Kiev
Prague
Kharkov
Krakow
L’vov
CZECH
UKRAINE
Stuttgart
REPUBLIC
Rostov
SLOVAKIA
Nantes
LIECH. Munich
Vienna
Ba y o f
Bratislava
MOLDOVA
F R A N C E Zurich
AUSTRIA
Bern
Budapest
Chisinau
Bi s c a y
Graz
SWITZERLAND
HUNGARY
Odessa
Bordeaux
ROMANIA
La Coruña
SLOVENIA
Lyon
Milan
Bilbao
Timisoara
Ljubljana
Sevastopol
I T A L Y Venice CROATIA Zagreb Belgrade
Toulouse
Porto
Bucharest
BOSNIAGenoa
Nice
Bologna
HERZEGOVINA SERBIA
MONACO
Andorra la Vella
Black Sea
Marseilles
PORTUGAL
Sarajevo
Florence SANANDORRA
MARINO
KOSOVO BULGARIA
Madrid
Lisbon
MONTENEGRO Pristina
Sofia
Corsica
Barcelona
e a Podgorica
S PA I N
Skopje
Rome
Istanbul
Valencia
Tirana N. MACEDONIA
Naples
Bari
Seville
Palma
Thessaloniki
Sardinia
ALBANIA
Murcia
Taranto
BALEARIC IS.
Tyrrhenian
Malaga
St. Nazaire
Strasbourg
Ad
ria
tic
S
Gibraltar
Cartagena
Sea
M e d
GREECE
i t
Palermo
e r
Messina
Ionian
r a
Athens
Sea
n Sicily
e
a
n
Valleta
Iráklion
S e
MALTA
a
Crete
Map A.4
Europe
CYPRUS
CHAPTER 1 • Globalization Today 39
A RC T IC OC EAN
Bering
Sea
Murmansk
Nordvik
St Petersburg
EUROPEAN
R U S S I A
Moscow R U S S I A
Bl
Istanbul
ac
Volgograd
k
KURIL IS.
Omsk
Se
a
Tblisi
Yerevan
ARMENIA
Beirut SYRIA
Damascus
Jerusalem
ISRAEL Amman
IRAQ
Caspian
Sea
AZERBAIJAN
Baku
Astana
Aral
Sea
KAZAKHSTAN
Lake
UZBEKISTAN
Balkhash
Khabarovsk
Lake
Baikal
Irkutsk
Novosibirsk
GEORGIA
TURKEY
Harbin
S e a
Basra
MONGOLIA
Sea of
NORTH
Shenyang KOREA Japan
TURKMENISTAN
KUWAIT
IRAN
Kuwait
Kabul
Peshawar Islamabad
Lahore
BAHRAIN
Sana’
YEMEN
Muscat
OMAN
Karachi
NEPAL
New Delhi
Katmandu
Hyderabad
Arabian
Sea Mumbai
(Bombay)
Thimphu
BANGLADESH
Calcutta
INDIA
Hyderabad
Colombo
Dhaka
Bay of
Bengal
Chennai
(Madras)
INDIAN
OCEAN
BHUTAN
SOUTH
KOREA
East
Shanghai China
Xi’an
Sea
Wuhan
Chengdu
Fuzhou
Chonqing Changsha
PA C I F I C
T’ai-pei
TAIWAN
Guangzhou Hong Kong
Kunming
Macau
Mandalay
Hanoi
BURMA
LAOS
THAILAND
Hue
South
China
Sea
Da Nang
Yangon
Bangkok CAMBODIA
Phnom Penh
SRI LANKA
OCEAN
Manila
PHILIPPINES
VIETNAM
Ho Chi Minh City
(Saigon)
MOLUCCA IS.
BRUNEI
George Town
Kuala Lumpur
M A L AY S I A
SINGAPORE
I
A
S I
E
D O N
Pontianak
N
Jakarta
Map A.5
Asia
Tokyo
Pyongyang
JAPAN
Seoul
Osaka
Nagasaki
C H I N A
AFGHANISTAN
Jeddah Riyadh
Manama
Mecca
Doha QATAR
SAUDI UAE Abu Dhabi PAKISTAN Delhi
ARABIA
Beijing
Dushanbe TAJIKISTAN
Vladivostok
Changchun
Ulaanbaatar
Bishkek
Tehran
Tashkent
KYRGYZSTAN
Baghdad Hamadan
Ashkhabad
JORDAN
R e d
Lensk
Yekaterinburg
Ankara
LEBANON
Sea of
Okhotsk
EAST
TIMOR
40 PART 1 • GLOBAL BUSINESS ENVIRONMENT
Tangier
Oran
Rabat
Meknès
Casablanca
Madeira
Annaba
Algiers
Constantine
Tunis
Me
TUNISIA Tripoli
Marrakesh
dite
Canary Is. MOROCCO
E GYP T
F’Dérik
Aswan
Niamey
Ouagadougou
Ndjamena
Kano
Kaduna
Porto
Novo
Malabo
EQUATORIAL
GUINEA
Gul f of
Guinea
São Tomé &
Principe
Douala
Bangui
Libreville
GABON
CONGO
El Obeid
Kisangani
Mbandaka
Mwanza
AT LA N T IC
Livingstone
NAMIBIA
BOTSWANA
Gaborone
Cape Town
Bulawayo
SEYCHELLES
Dar-es-Salaam
Mahajanga
MOZAMBIQUE
Beira
Maputo
Mbabane
Maseru
SWAZILAND
Durban
LESOTHO
East London
Port Elizabeth
Antisiranana
Moçambique
Antananarivo
MADAGASCAR
Fianarantsoa
Pretoria
IN DIA N
OC E A N
Mombasa
Blantyre
Harare
Johannesburg
SOUTH
AFRICA
Kismayu
COMOROS
Lilongwe
ZIMBABWE
Francistown
Mogadishu
MALAWI
Lusaka
Windhoek
Nairobi
Lubumbashi
ZAMBIA
Namibe
Map A.6
Africa
Kampala KENYA
RWANDA
A N GO LA
Huambo
Socotra
Berbera
SOMALIA
UGANDA
DEMOCRATIC Bujumburo
REPUBLIC
BURUNDI
OF THE
TANZANIA
CONGO
Luanda
DJIBOUTI
Addis
Ababa
Kigali
Brazzaville
Benguela
Djibouti
ETHIOPIA
Ango
Yaoundé
Asmera
ERITREA
SOUTH
SUDAN
CENTRAL
AFRICAN
REPUBLIC
Kinshasa
Matadi
O CE A N
Kassala
Khartoum
NIGERIA
GHANA BENIN
IVORY
TOGO Ibadan Abuja
COAST
Lomé
Lagos
CAMEROON
Abidjan Accra
Atbarah
CHAD
a
BURKINO
FASO
S U D A N Port Sudan
NIGER
Se
LIBERIA
d
Bamako
GUINEA
GUINEA
BISSAU Conakry
Freetown
MALI
Tombouctou
Dakar
Banjul GAMBIA
Bissau
Cairo
Suez
Asyut
Marzuq
MAURITANIA
Monrovia
El Faiyum
L I B YA
In Salah
SENEGAL
SIERRA
LEONE
Alexandria
Re
Nouakchott
n Sea
Benghazi
ALGERIA
El Aaiun
WESTERN
SAHARA
rranea
Réunion
Mauritius
CHAPTER 1 • Globalization Today 41
BORNEO
SULAWESI
Banjarmasin
Ujung
Pandang
B ay of
Jayapura
I N
D O N E S I A
Dili
Mataram
EAST TIMOR
Timor Sea
NEW
BRITAIN
Honiara
Darwin
Katherine
I NDIAN
Coral
Wyndham
OCEAN
SOLOMON
ISLANDS
Port
Moresby
Arafura Sea
Kupang
B is cay
PAPUA
NEW
GUINEA
Cairns
Derby
Sea
Mackay
Port Headland
Nouméa
Rockhampton
Alice Springs
NEW
CALEDONIA
(France)
A U S T R A L I A
Brisbane
PA C I F I C
Coff’s Harbour
OCEAN
Lismore
Geraldton
Port Macquarie
Kalgoorlie
Perth
Port-Vila
Townsville
Tennant Creek
Carnarvon
VANUATU
Port Augusta
Fremantle
Bunbury
Albany
Great
Aus tral ian
Bight
Elizabeth
Adelaide
Broken Hill
Dubbo
Wagga Wagga
Ballarat
Geelong
Newcastle
Sydney
Wollongong
Canberra
Melbourne
TASMANIA
Launceston
Hobart
Ta s m a n
NEW
ZEALAND
Auckland
Wellington
Sea
Christchurch
Dunedin
Map A.7
Oceania
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