STANFORD UNIVERSITY
Graduate School of Business
G203
The Global Context of Management
Fall 2007
The economies of the world are ever more closely linked. Record levels of international trade and investment are achieved every year. Cross-border mergers and acquisitions are booming. The foreign exchange markets handle trillions of dollars of volume daily.
Offshore provision of services has grown immensely. Host governments and nongovernmental organizations operating internationally affect how companies do business far from their home bases and close to home. Indeed, few businesses today can avoid being connected to the world economy, and it is quite likely that the process of globalization will continue apace.
This course is designed to help you begin to prepare yourself to manage in this international environment. Its objectives are:
1.
To acquaint you with the basic facts about the international economy and the major trends and forces shaping it.
2.
To introduce you to the process of learning about an economy with which you are not familiar and to familiarize you with some of the key economies that are shaping the context for global business.
3.
To make you aware of cultural differences and help you begin to gain cultural sensitivity.
4.
To help you appreciate and master the particular problems of strategy, organization, leadership and execution that arise in international businesses.
The course is organized in a complex way. Each of you is assigned to one of six sections, two of which are led by each of William Barnett (Sections 2 & 5), Bruce McKern
(Sections 3 & 4) and John Roberts (Sections 1 & 6). However, the first eight meetings of the class will be in a large lecture format. In the first of these, Roberts will introduce the course and give you your first written assignment, which will involve your researching and reporting in groups on a particular country of your choice. The second class will be the first of four spread over four weeks in which Paul Romer will lecture on the international economy. The other three classes in weeks 2 through 4 will feature presentations on the economies of India, Russia and China by three experts: Dr. Rafiq
Dossani of Stanford’s Asia Pacific Research Center, Nancy Glaser (MBA’85) of Regent
Pacific Management and David Michael (MBA ’92) of Boston Consulting Group. The fifth week you will meet in your CAT seminar groups to present and critique the group papers you have written on different countries.

There will be a one-hour mid-term focused on the material from the first ten classes on
Monday, October 29 over the lunch hour.
In the second half of the course you will meet in your sections. Most of these eight class sessions will involve case discussions, although the sessions focused on culture may also feature some exercises. You will be expected to prepare an individual written analysis of a case (to be distributed) for grading which will be due at the end of week 9. Finally, there will be a final exam that relates to the second half of the course.
There will be required readings for all classes, and frequently there will be exercises to be done in preparation for class.
The basis for grading is as follows:
Graded homework assignments and in-class short responses (weeks 1-4): 5%
Written Group Assignment (week 5): 20%
Midterm (week 6): 20%
Class participation (weeks 5 and 7 through 10): 25%
Individual written case analysis: 20% (week 9)
Final: 10%
CLASS PARTICIPATION AND PREPARATION
This course uses a variety of pedagogical approaches, from large plenary sessions to case study discussions in a regular classroom, to small group discussions in your CAT seminar groups. In each of these situations, you are expected to be fully prepared. In the large plenary sessions during the first half of the course, you will be expected to prepare assigned readings, listen carefully, take notes and ask yourself questions about the arguments being put. You may also be asked to write out and turn in a short response to a question posed in class about the discussion or the material you read as preparation for class. Before some classes, you will be asked to submit graded homework assignments that help you master the definitions of basic economics statistics that you’ll need to understand when you learn about a country.
In the case study discussions, where you will be in a group of approximately 60 students, you will be expected to make substantial contributions to the discussion. Most classes will require preparation of a case plus a chapter from a text or a reading. The instructor will guide the class discussion, provide a framework and ask probing questions, but it is your role to contribute strongly to the discussion with the purpose of drawing useful lessons from each session.
This is a joint process of discovery between you, your fellow students and the instructor.
For it to be successful, you must be prepared by having done the reading and considered the questions posed in the assignment. The instructor will encourage you to contribute regularly and succinctly to the discussion. You will be encouraged to disagree

constructively with your fellow students and the instructor, and to look for useful general frameworks.
There will be occasional individual or group presentations and these will depend for their success on your individual contribution. The instructors will make use of cold calls, so you will be expected to be fully prepared for each session.
In the CAT seminar sessions in week 5, your group will be expected to report on the country you have analyzed. You'll be expected to decide ahead of time how you will handle the discussion, set yourselves an agenda for the development of the topic, as well as present your conclusions. The instructor will probe your analysis and push you to consider alternative approaches. As well, you will have read the reports prepared by the other study groups in your seminar group and will be prepared to question them during their presentations.
Because your contribution to the class is essential, your attendance at every class is expected. We realize that personal issues necessitating an absence can occasionally intervene, so if you find it unavoidable to miss a class, please notify your instructor ahead of time. If you miss a class due to illness or some emergency, and cannot give notice beforehand, please let us know as soon as possible. Any unexplained absences will result in a lowering of your grade or possible failure in the course. More than two explained but unexcused absences can also negatively affect your grade. Whether an absence is excused is solely at the discretion of the instructor, but you can assume that giving birth will be accepted as an excuse, but going to a wedding is unlikely to be. If you are absent under any circumstances, it is your responsibility to prepare the assignment for that class, and to hand in a one-page summary analysis of the issues for that session (bullet points are OK). It is your responsibility also to obtain whatever materials were handed out at the session.
***
This is, of course, a new course. Those of us who have worked on developing it and who will teach it are tremendously excited about the course. We hope and expect it will be a central part of your MBA experience and a foundation for your career as a manager in the global economy. Still, we recognize that there are sure to be places where significant improvements are possible, and we seek your feedback on all aspects of the course.

Class Session #1: Introduction
Tuesday, September 25
Lecturer: Professor John Roberts
This session will introduce the course and, more substantively, acquaint you with the task of learning about another economy.
Assignment:
1. Read John McMillan, “How to Learn about a Country” from the case packet.
Using the on-line sources cited by McMillan, find out the GDP per capita of your home country and one other country, the share of international trade in GNP for both, the growth rates of GDP and productivity for both and the inflation and unemployment rates for both. Think about why there might be differences between the figures for the two countries.
2. Go to the GSB web page (www.gsb.stanford.edu), click on Faculty and Research
> Jackson Library > Data Bases > Business Data Bases, A-Z > Country Navigator and register using your @GSB email address. You will then have access to this site for the rest of the academic year.
TMA Country Navigator is designed to inform you about the business culture of various countries. It also provides some basic information on the countries’ economies and governmental systems.
You should complete the questionnaire on the site about your personal style and beliefs. Then compare them with the representative scores for your home country and for a variety of other countries.
Read all the material on your home country (if it is among those listed) or otherwise on the USA. Does the information there seem fundamentally correct?
3. Read the Country Research Project Assignment from the case packet.

Class Session #2: Yali’s Question
Thursday, September 27
Lecturer: Professor Paul Romer
Assignment:
This lecture poses one of the most important questions in global management – and for that matter, in human history. If people are all the same, why are societies, cultures and standards of living throughout the world so different?
To prepare for this lecture, read the Prolog and Chapters 1, 4, 13 and 14 from Jared
Diamond’s book Guns, Germs and Steel . As you read, ask yourself whether you think that the future will be characterized by continued widening of these differences or a new process of narrowing.
Class Session # 3: Potential Output, the Output Gap and Inflation
Tuesday, October 2
Lecturer: Professor Paul Romer
Assignment:
The right level of analysis for beginning to think about broad economic forces is the nation. This lecture will introduce the key concepts that you need to form a simple mental model of a national economy. To prepare for this lecture, read the chapter titled
“Potential Output, the Output Gap and Inflation” and complete the associated homework assignment by the indicated deadline. This reading and assignment are available online.
(We have not distributed paper copies of the chapter but you are free to print a copy if you wish.) Here are the instructions for gaining access to them:
1.
Connect to http://www.aplia.com
.
2.
Click the System Configuration Test link below the Sign In and Register sections to make sure you can access all of the features on Aplia's website. This takes just a few seconds and tells you how to update your browser settings if necessary.
3.
Return to http://www.aplia.com. Click the New Student button and enter your
Course Key: BSSK-DSFU-H8ZC . Continue following the instructions to complete your registration. (If you have used Aplia before, just log in and supply this course key when prompted or click the Enter Course Key button to enroll in this course.)

Class Session #4: India
Thursday, October 4
Lecturer: Dr. Rafiq Dossani
India is the second most populous country in the world and in recent years it has been growing rapidly. Its IT and Business Process Outsourcing businesses have attracted international attention. Still, the vast majority of India’s population is desperately poor. In this session, Dr. Dossani, an expert on India, will lecture on the country and on doing business there.
Assignment:
1.
Read: The Competitive Advantage of India. IB-58 Rev (to be distributed)
2.
Read the material on India from Country Navigator.
3.
Read A.Kohli and R. Mullen, Democracy, Growth and Poverty in India, in
A.Kohli, C. Moon and G. Sorensen, eds., States, Markets and Just Growth:
Development in the Twenty-first Century, 2003, Tokyo: United Nations
University Press, p. 193-226
4.
Read Dossani, R., “India: Not What it Seems,” (drawn from India Arriving ,
American Management Association, forthcoming November 2007, Chapter 1)
5.
Questions:
(1) What was the logic underlying India's development strategy? Why did
India’s development proceed so slowly and what was the role of government?
(2) Why did India take so long, compared to China, to adopt market-oriented economic policies? How well-entrenched is India's recent change of direction?
(3) What our India's sources of competitive advantage today? How do you see these developing?
(4) What are the key problems you think India faces in becoming a major force in international trade and investment?
(5) What are the best options for a US company considering India as a partner?
Class Session #5: The Core of Macroeconomics
Tuesday, October 9
Lecturer: Professor Paul Romer
One of the key concepts economists use to understand an economic context is that of an institution. This lecture describes the two key types of national economic institutions: stabilizing institutions and structural institutions.

To prepare for this lecture, read the chapter titled “The Core of Macroeconomics” and complete the associated homework assignment by the indicated deadline.
Class Session #6: Russia
Thursday, October 11
Lecturer: Ms. Nancy Glazer (MBA ’85)
Russia, the largest country in the world, spreads across two continents and eleven time zones. It has immense reserves of natural resources that make it a tempting target for international investment. However, its political and legal systems and nationalist tendencies make it a risky place and not an easy one in which to do business. Ms. Glaser, an expert on Russia,, will talk about the opportunities and challenges of doing business there.
Assignment:
1.
Read: The Competitive Advantage of Russia. IB-44 Rev (to be distributed)
2.
Read the material on Russia from Country Navigator.
3.
Questions:
(1) What are the key differences between the market system of the Western countries and the economic system which operated in the Soviet Union until the recent reforms? How did each system attempt to solve the key economic issue of allocating scarce resources to the needs of the people?
(2) How do you explain the relatively low inflow of foreign direct investment into Russia over the last decade?
(3) In what ways do foreign corporations strengthen or weaken the economic reforms in Russia?
(4) How do you explain the recent changes in Russia's policies towards natural resources, for example the forced transfer of petroleum exploitation rights from a foreign oil company to a state-owned enterprise?
(5) What are the attractions of Russia today to a foreign company seeking to do business? Which sectors look most promising?
(6) What can a foreign company do to mitigate the risks of investing in Russia?
Class Session #7: China
Tuesday, October 16
Lecturer: Mr. David Michael (MBA ’92)
China’s economic advance in the last three decades has been the most important economic phenomenon of our time. Every business seems to be concerned with China –

as a market, a supplier or a competitor. Mr. Michael, the head of BCG’s Greater China practice, will share his insights into this fascinating country.
Assignment:
1.
Read: The Competitive Advantage of China. IB-57 Rev (to be distributed)
2.
Read the material on China from Country Navigator
3.
Questions:
(1) What was the logic underlying China's development strategy?
(2) How important was growth in exports to China's economic performance?
How important was foreign direct investment?
(3) What explains China's attractiveness to foreign investors?
(4) What benefits does China get from foreign investment?
(5) What appear to be the major weaknesses Chinese enterprises face in expanding globally today?
Class Session #8: The Core for an Open Economy
Thursday, October 18
Lecturer: Professor Paul Romer
Once you have a workable mental model of a closed national economy (that is, one that does not trade with the rest of the world), you must then understand how the model changes when the economy opens and interacts with the rest of the world.
To prepare for this lecture, go online to read the chapter titled “The Core of an
Open Economy” and do the associated homework assignment by the indicated deadline.
Class Session #9: Student presentations Country Climate Project
Tuesday, October 23
Meet in CAT seminar groups.
Class Session #10: Student presentations Country Climate Project
Thursday, October 25
Meet in CAT seminar groups.

Mid-term Exam
Monday, October 29, 12:00 noon to 1:00 pm
Class Session #11: Culture
Tuesday, November 6
Meet in Sections.
Cultural differences are a crucial fact in international dealings of all sorts, but they present particular challenges in business settings. In order to help you begin to understand culture as a phenomenon and to be sensitive to differing cultures, in this session we will examine a particular culture with which you are all familiar (or rapidly becoming so) – the predominant culture in the United States of America.
Assignment:
1.
Read “An Introductory Note on National Culture” from the case packet
2.
Review the material on the USA from Country Navigator.
3.
Questions:
(1) How would you describe the key characteristics of American culture? Think about how people interact with each other in social and business relationships and what people seem to believe is important. Find examples of advertisements, movies, proverbs, social customs or business practices which demonstrate key aspects of the culture.
(2) If you have had experience in a different culture, what are the most critical differences you notice between that culture and American culture? Come to class ready to talk about the differences and similarities and give examples.
4. Come to class with your three examples from question (1) or (2) in a form to hand in, along with a one paragraph explanation each of the aspects of culture the item represents.
Class Session #12: The Dimensions of Culture
Friday, November 9
Meet in Sections
In this session we will drill down on the dimensions on which cultures differ.
Assignment:

1. Read: “Cultural Foundations of Global Business” Chapter 7 in Steers, R.M. and
L. Nardon, Managing in the Global Economy, M.E. Sharpe: Armonk, N.Y, 2006, pp. 119-148
2. Read and prepare the Novo Nordisk case.
3. Study Questions:
(1) In what ways do Danish and U.S. cultures differ?
(2) The case says that there were people in Novo Nordisk’s U.S. operations who knew about the change in the FDA regulations, but that this information did not reach the parties who could act on it or if it did reach them, they did not act. How could this happen? What factors might lead to such a disaster? Is it a matter of cultural conflict? Exclusively so?
(3) Novo’s response to the quality crisis was to increase empowerment while demanding accountability and follow-up. Was this an appropriate response?
If so, why? If not, why not? How would you evaluate the NNWoM?
(4) What is your evaluation of the facilitation process? What has been its role?
What should be its role (if any) going forward? How (if at all) does it need to be changed to be useful in the future? To what extent is it a general managerial tool as a way of enhancing coordination in many contexts? To what extent does it seem particularly adapted to Danish culture?
Class Session #13: Cultural Conflicts
Tuesday, November 13
Meet in Sections
In this session we will discuss a number of culturally loaded decision problems, including bribery/extortion, discrimination, stereotyping, …
Assignment:
1. Read and prepare the short case, Industrial Products Corporation Thailand (B)
(in case packet). What should Simpson do about the smuggling allegations against IPC?
2. InBev: An Intercultural Merger
In 2004, the Belgian brewing company Interbrew, merged with the leader in the Brazilian market, AmBev, to form the largest brewer in the world, InBev, with some 15% of the global market. Interbrew was a company with a great tradition, founded in the 14th century and governed by a board which included
European aristocrats. It was known to be a formal and conservative company.
AmBev, on the other hand, was a young, aggressive, successful company with an emphasis on speed, innovation, informality and performance.

Based on data in Country Navigator, what advice would you give to the CEO of InBev, Mr. Carlos Alves de Brito (MBA ’89), about leading his very multicultural team of senior managers from Brazil, Belgium, France and
Germany?
3. Read the story of Jude Shao (MBA ’93) at http://www.gsb.stanford.edu/news/bmag/sbsm0308/feature_shao.shtml
. How do you evaluate Shao’s decisions and actions?
[Additional materials will be assigned].
Class Session #14: Entering Markets in Other Countries
Friday, November 16
Meet in Sections
In this session we turn to the problems of managing strategically in international contexts.
The case examines Proctor & Gamble’s problems in entering the Japanese market.
Assignment:
1.
Read and prepare the Proctor & Gamble Japan case.
2.
Questions:
(1) What are the problems P&G is experiencing in Japan?
(2) What are the particular competences P&G is trying to exploit in the
Japanese market?
(3) What appear to be the major differences facing P&G in operating in
Japan as compared with the United States?
(4) Why did P&G have these problems?
(5) Should P&G stay in Japan?
(6) Make a clear recommendation on what actions Ed Artzt should take if the company decides to persevere in Japan.
Class Session #15: Local-Global Tensions
Tuesday, November 27
Meet in Sections
In this session we examine the fundamental tension faced by international businesses: how to be responsive to the differing needs of local markets while realizing the potential efficiency advantages of operating globally. The case concerns Daimler Benz’s attempts

to build a global van, truck and bus business in the face of significant differences across markets.
Assignment:
1. Read: Saloner, Shepard and Podolny, Strategic Management, John Wiley &
Sons, Inc., New York, 2001, Chapter 13 (pp. 329–349).
2. Read and prepare the DaimlerChrysler Commercial Vehicles Division case.
3. Questions
(1) What do we mean by a global market or a global industry? Is the commercial vehicles market a global one? Why or why not? Is the industry global? In what sense?
(2) What organizational challenges does the CVD confront in trying to expand its presence in Asia? How should the CVD address these challenges?
The merger with Chrysler seems to imply some increasing centralization of decision-making in the organization. What are the pros and cons of this centralization? Should the CVD accept or resist the movement toward greater centralization?
In the case, Dr. Lauk asserts that only “global players” will survive in this industry. Do you agree or disagree? Why? Is CVD global now? In what sense? What should Lauk do to make CVD more global? Would this be a good idea?
Assignment Due
Thursday, November 29
Your individual case analyses are due today at 5:00 PM. Submit electronically to your instructor.
Class Session #16: Global Strategy
Friday, November 30
Meet in Sections
Operating in several markets presents new challenges for strategy and its implementation, but it also offers new options. The case examines CEMEX’s emergence over the last fifteen years from a regional player in Mexico to one of the global leaders in its industry.
Assignment:

1.
Read Yip, George, “Making Global Competitive Moves,” Chapter 7 of Total
Global Strategy II, Prentice Hall, 2003.
2.
Read and prepare the CEMEX case.
3.
3.
Questions
(1) Why are global companies emerging in the cement business? What is the advantage of being global?
(2) The case indicates that Cemex’s move into Spain was a “strategic” move to counter Holderbank. What might be the detailed logic behind this?
(3) What is the basis for Cemex’s competitive advantage? How does the strategy of expanding via foreign acquisitions exploit this? How has this strategy evolved?
(4) How should Cemex have viewed the developments in Southeast Asia in 1997-98? Should it have looked to make acquisitions there? What factors should enter the decision? What risks does it face in investing there? Is there a way to mitigate the risk if it decides to expand there?
(5) What do you make of Cemex’s recent acquisitions in the US and
Europe?
Class Session #17: Local Sources of Global Advantage
Tuesday December 4
Meet in Sections
An important option in international business is to exploit the particularities of different locales to gain international advantage. The case, on Singapore International Airlines, shows how SIA used its home base in Singapore as an important contributor to its global success.
Assignment:
1.
Read Michael Porter, The Competitive Advantage of Nations, HBR
Reprint 90211
2.
Read and prepare the Singapore Airlines case
3.
Questions:
(1) What are the key driving forces and dynamics in the international airline industry in the late 1990s?
(2) What are the alternative strategic positions a firm could seek in the international airline industry and what is critical to the success of each alternative?

(3) How important for success is the size of the company? Does a large international network confer benefits? How important is it for an airline to respond to the specific characteristics of different nationalities among its passengers?
(4) How important to SIA’s success is its country of origin?
(5) Does SIA face threats to its successful strategy? What changes, if any, do you recommend? How would they be implemented?
Class Session #18: Leadership and Entrepreneurship in the Global Context
Friday, December 7
Meet in Sections
Today we look at the roles of corporate headquarters and of local managers in setting strategy. In the case we examine the leadership of the CEO in the face of entrepreneurial activity by the local manager.
Assignment:
1.
Read and prepare the BRL Hardy case.
2.
Questions success?
(2) What was the source of the tension between Stephen Davies and
Christopher Carson? How effectively has Steve Millar handled their differences?
(3) Should Millar approve Carson’s proposal to launch D’istinto ? Why or why not? concerning the conflicting proposals for Banrock Station and Kelly’s
Revenge ? What would you decide to do as Carson? As Millar?

Contact Information
Please ensure that you are set up to receive email from the Coursework system, as we will make frequent use of it.
Here is how to contact the instructors. Generally email is preferred, but if necessary do use the phone. Barnett, McKern and Roberts are on campus most days and can arrange meetings on reasonably short notice.
William Barnett, (Sections 2&5) barnett_william@gsb.stanford.edu
, K310, 723-1421
Assistant: Sandra Berg, L318, 723-4494
Bruce McKern, (Sections 3&4) mckern_bruce@gsb.stanford.edu
, Office TBA, 723-2270
Assistant: Betsy Reid, L260, 723-3747
John Roberts, (Sections 1&6) roberts_john@gsb.stanford.edu
, L239, 723-9345,
Assistant: Betsy Reid, L260, 723-4737
Paul Romer, romer_paul@gsb.stanford.edu
, L235, 723-8442,
Assistant: Catherine Haga, L372, 723-6310