International Business Management

International Management: Managing Across
Borders and Cultures

Tenth Edition
Chapter 1
Assessing the Environment:

Political, Economic, Legal,
Technological
Copyright © 2021, 2017, 2014 Pearson Education, Inc. All Rights Reserved
Learning Objectives (1 of 2)
1.1 To understand the global business environment and how it affects the strategic and
operational decisions which managers must make
1.2 To develop an appreciation for the ways in which political and economic factors and
changes influence the opportunities that companies face
1.3 To recognize the role of the legal environment in international business
1.4 To review the technological environment around the world and how it affects the
international manager’s decisions and operations as well as the war for talent around the
globe
1.5 To explore essential skills for developing your career as a manager in a multinational
company
1.4 To review the technological environment around the world and how it affects the
international manager’s decisions and operations as well as the war for talent around the
globe
1.5 To explore essential skills for developing your career as a manager in a multinational
company
DR. AHMED RADY ASSISTANT PROFESSOR EGYPT-JAPAN UNIVERSITY OF

SCIENCE AND TECHNOLOGY (E-JUST)
INTERNATIONAL BUSINESS MANAGEMENT ?
International Management
It is defined as a process of accomplishing the global objectives of a firm by
• Effectively coordinating the procurement, allocation, and utilization of the
human, financial, intellectual, and physical resources of the firm within and
across national boundaries.
• Effectively charting the path toward the desired organizational goals by
navigating the firm through a global environment that is not only dynamic
but often very hostile to the firm’s very survival International Trade:
• When a firm exports goods or services to consumers in another country.
• Foreign Direct Investment:
• When a firm invests resources in business

International business
• The process of developing strategies, designing operating systems, and
working with people around the world to ensure sustained competitive
advantage.
• International business may be defined simply as business transactions
that take place across national borders. Nearly all business enterprises,
large and small, are inspired to carry on business across the globe. This
may include, purchase of raw materials, from foreign suppliers,
assembling products from components made in several countries or
selling products or services to customers in other nations. International
Business
• Multinational Enterprise: A MNE has a worldwide approach to foreign
markets and production and an integrated global philosophy
encompassing both domestic and international markets.

INTERNATIONALIZATION OF BUSINESS:
Meaning of International Business:
International business is a term used to collectively describe all commercial
transactions (private and governmental, sales, investments, logistics, and
transportation) that take place between two or more nations. Usually
private companies undertake such transactions for profit; organizations
undertake them for profit for political reasons.
A multinational enterprise (MNE) is a company that has a worldwide
approach to markets and production or one with operations in more than a
country.
An MNE is often called multinational corporation (MNC) or transnational
company (TCN). Well known MNCs include fast food companies such as
McDonald's and Yum Brands, vehicle manufacturers such as General
Motors, Ford Motor Company and Toyota, consumer electronics companies
like Samsung, LG and Sony, and energy companies such as Exxon Mobil,
Shell and BP. Most of the largest corporations operate in multiple national
markets.

Why study international business?
1. Increasingly, companies are sourcing their human resource requirement globally, Ex.
Sony corporation.
2. Most of the products we consume everyday are supplied to us by global businesses.
We are sure of quality if the products bear such names as Nike, Toyota, Colgate, Gap T-
shirt, and the like. To know these brands is to understand international business
3. Managing an international business is major complex than running a domestic
business. Global business involves production of goods in facilities located in different
countries with resources, human and physical sourced from all parts of the globe and
marketing goods and services to users across the globe.
4. The major impact of international business in this area has been impetus on
governments to open up their borders to international trade and investment,
standardize their systems and procedures, and adopt internationally acceptable values
and attitudes.
5. International business executives play a powerful role in determining the relative
competitiveness of various countries in the global arena.

Advantages of international business:
 Product Flexibility
If you have products that don’t sell well in your local or regional market, you may
find greater demand abroad. You don’t have to dump unsold inventory at deep
discounts. You can search for new markets where your products can sell for even
higher prices than they did in your local market. In fact, you may find new products
to sell abroad that you don’t offer where you are based. You can offer a much wider
range of products when you market globally.
 Less Competition
Company may have come to view competition as a local phenomenon. You can find
international markets that have less competition and move quickly to capture
market share. This can be particularly advantageous when you have access to high-
quality versions of products that are superior to versions in other countries. Though
your local competition may have access to the same quality as you have, you will
have little competition if you find an international market that has been buying an
inferior product

Protection from National Trends and Events
When you market to several countries, you are not as vulnerable to events
in any one country. For example, if you sell soft drinks with high sugar
content, you could discover that your home country frowns upon drinks
that offer extra calories. You may be able to sell the same product in
another country that has a much different attitude toward these drinks. In
addition, a natural disaster in any one market can disrupt business, but you
can compensate by focusing your sales efforts in another part of the world.
Learning New Methods When you do business in another country, you
learn new ways of doing things. You can apply this new knowledge to other
markets. For example, according to the Cite Sales website, Unilever
discovered a market for laundry detergent that would function in Europe’s
high-mineral-content or "hard" water. This product can now be marketed to
parts of the U.S. that have similar water problems.

Regional Trading Blocs
Regional economic groups are “agreements among countries in a
geographic region to reduce and remove tariff and nontariff barriers to the
free flow of goods, services and factors of production between each other.”
A free trade area (FTA), involves an agreement between countries that
commits to removing all barriers to trade of goods and services among the
member countries.
A customs union refers to an agreement between countries that involves
the removal of all barriers to the free flow of goods and services between
member countries and establishment of a common trade policy with
nonmember countries.
A common market refers to an agreement between a group of countries
that commit to the removal of all barriers to the free flow of goods and
services, as well as factors of production—such as the free movement of
labor and capital between member countries.

Regional Trading Blocs
In an economic union, member countries commit to the removal of all
barriers to the free flow of goods, services, and factors of production
between member countries.
A political union consists of a central political system that directs and
oversees economic, social, and foreign policies of the member states.
European Union
In a watershed event, British citizens voted to leave the EU in its 2016
United Kingdom European Union membership referendum. As of 2020,
the European Union (EU) will comprise a 27-nation unified borderless
market, as shown in Map 1-2. The political fallout of Brexit has created a
cloud of uncertainty pertaining to regulations, labor mobility, and trade
between the UK and the rest of the EU member countries.

What is Globalization?
Definition of Globalization:
Global competition characterized by networks of international
linkages that bind countries, institutions, and people in an
interdependent global economy.
The worldwide movement toward economic, financial, trade, and
communications integration. Globalization implies the opening of
local and nationalistic perspectives to a broader outlook of an
interconnected and interdependent world with free transfer of
capital, goods, and services across national frontiers. However, it
does not include unhindered movement of labor and, as suggested
by some economists, may hurt smaller or fragile economies if
applied indiscriminately.

The Globalization of the World:
Globalization of Economy
Globalization of markets
Globalization of production
Decline of barriers to trade (WTO)
Increased technological capabilities
Globalization
Trade and investment barriers are disappearing.
Perceived distances are shrinking due to advances in transportation and
telecommunications.
Material culture is beginning to look similar.
National economies merging into an interdependent global economic
system.

Globalization: Pros & Cons
Pros Cons
Increased revenue opportunity through Different nations = different problems.
global sales. Similarities between nations may be
Reduced costs by superficial.
Global planning may be easy, but global
execution is not.
The Largest Global Markets:

Consumer Goods
Industrial Goods and Materials
Commodities such as aluminum, oil and wheat.
Industrial products such as microprocessors, aircraft.
Financial assets such as U.S. Treasury bills and Eurobonds.

Globalization of production
 Refers to sourcing of goods and services
 from locations around the world to take
 advantage of Differences in cost or quality of the factors of
• production
• Labor
• Land
• Capital
Globalization of Production
“The sourcing of goods and services from locations around the globe to take
advantage of national differences in the cost and quality of factors of
production (labor, energy, land and capital).”
Companies hope to lower their overall cost structure and/or improve the
quality or functionality of their product offering - increasing their
competitiveness.

FACTORS CAUSING GLOBALIZATION:
Globalization
Globalization of the economy means reduction of import duties,
removal of Non-Tariff Barriers on trade such as Exchange control, import
licensing etc., allowing FDI and FPI, allowing companies to raise capital
abroad and grow beyond national boundaries and encourage exports.
Both Foreign Trade and Foreign investment volume have grown rapidly
over the last few years.
The IMF defines globalizations as “the growing economic
interdependence of countries worldwide through increasing volume
and variety of cross border transactions in goods and services and of
international capital flows, and also through the more rapid and
widespread diffusion of technology.

Problems in Globalization:
 Millions of Americans have lost jobs due to imports or production shifts abroad.
Most find new jobs that pay less
 Millions of others fear losing their jobs, especially at those companies operating
under competitive pressure.
 Workers face pay cut demands from employers, which often threaten to export
jobs.
 Service and white collar jobs are increasingly vulnerable to operations moving
offshore
 U S employees can lose their comparative advantage when companies build
advanced factories in low-wage countries, making them as productive as those
at home.

FACTORS CAUSING GLOBALIZATION OF
BUSINESS
More and more companies are seeking to internalize or globalize their
economics for a number of reasons.
1. Developing markets have huge markets
2. Many MNC’s are locating their subsidiaries in low wage countries to take
advantage of low cost production.
3. Changing demographics also adds to increasing globalization
4. Regional trading blocs are adding to the pace of globalization. WTO, EU,
NAFTA, MERCOSUR and FTAA are major alliances among countries. Trading
blocs seek to promote international business by removing trade and
investment barriers.
5. Declining trade and investment barriers have vastly contributed to
globalization.
6. The most powerful instrument that triggered globalization is technology

Disadvantages of globalization:
The negative drivers of globalization included culture which is a major hold
back of globalization. An example of how culture can negatively affect
globalization can be seen in the French film industry. The French are very
protective of this part of their culture and provide huge grants to help its
development. As well as government barriers market barriers and cultural
barriers still exist.
A negative aspect to a countries development is war e.g. tourism in Israel fell
by 40% due to the latest violence. Corporate strategy can also be a negative
driver of globalization as corporation may try to locate in one particular area.
Another negative driver of globalization is “local focus” or “localization” as it
is termed in Richard Douthwaite’s book “Short Circuit”. Douthwaite (1996)
believes that globalization can and should be reversed.

He also believes that localization is the way to do this. He defines localization
as “not meaning everything being produced locally but it means a better a
balance between local, regional, national and international markets and thus
brings less control to multinational corporations”
Another step to reverse globalization would be for governments to club
together to curb the power of multinational by negotiating new trade and
treaties that would remove the subsidies powering globalization and give
local production a chance.

Learning Objective 1.2
TO DEVELOP AN APPRECIATION FOR THE WAYS IN
WHICH POLITICAL AND ECONOMIC FACTORS AND
CHANGES INFLUENCE THE OPPORTUNITIES THAT
COMPANIES FACE

COUNTRY ATTRACTIVENESS:
There are multiple factors determining host country attractiveness in the
eyes of large foreign direct institutional investors, notably pension funds
and sovereign wealth funds. Research conducted by the World Pensions
Council (WPC) suggests that perceived legal/political stability over time
and medium-term economic growth dynamics constitute the two main
determinants
Political, economic, and legal systems of a country raise important ethical
issues that have implications for the practice of international business
The political, economic, and legal environment of a country clearly
influences the attractiveness of that country as a market and/or investment
site

Country attractiveness analysis
Political risks Political risks are probable disruptions owing to internal or external
events or regulations resulting from political action of governments or societal crisis
and unrest.
Economic risks Economic risks expose business performance to the extent that the
economic business drivers can vary and therefore put profitability at stake.
Competitive risks Competitive risks are related to non-economic distortion of the
competitive context owing to cartels and networks as well as corrupt practices. The
competitive battlefield is not even and investors who base their competitive advantage
on product quality and economics are at disadvantage.
Operational risks. Operational risks are those that directly affect the bottom line,
either because government regulations and bureaucracies add costly taxation or
constraints to foreign investors or because the infrastructure is not reliable.

The Global Manager’s Role
3. The international environment - is conceived as the interaction
between domestic and foreign factors and indeed they cover a wide
spectrum of forces
The forces:
 Political environment
 Legal environment
 Cultural environment
 Technological environment
 Economic environment.

A- The Political and Economic
Environment
Sustainability—economic, political, social, and
environmental—has become a significant worldwide issue
Top four risks—government regulation, country financial
risks, currency risks, political and social disturbances
Regions view risks differently—cyber security is the top risk
of North America
Ethnicity is a driving force behind political instability
Religious disputes lie at the heart of differences

Political Risk
Any governmental action or politically motivated event that could adversely
affect the long-term profitability or value of a firm
Examples:
◦ 2019 political unrest in Venezuela
◦ 2014 annexation of the Crimean Peninsula by the Russian Federation

Political Risk
1. Political risks are any governmental action or politically motivated event
that could adversely affect the long-run profitability or value of a firm.
2. Nationalization refers to the forced sale of the MNCs assets to local
buyers, with some compensation to the firm.
3. Expropriation occurs when the local government seizes the foreign-
owned assets of the MNC providing inadequate compensation, if any at
all.
4. Macropolitical risk events are those that affect all foreign firms doing
business in a country or region; e.g., terrorism, the use or threat of use
of anxiety inducing violence for political purposes. Micropolitical risk
events are those that affect one industry or company or a few
companies. Terrorism now poses a severe and random political risk.

Political Risk
The Political Risk Cont.
 Expropriation of corporate assets without prompt and adequate
compensation
 Forced sale of equity to host-country nationals, usually at or below
depreciated book value
 Discriminatory treatment against foreign firms in the application of
regulations or laws
 Barriers to repatriation of funds (profits or equity)
 Loss of technology or other intellectual property (such as patents,
trademarks, or trade names)
 Interference in managerial decision making
 Dishonesty by government officials, including canceling or altering
contractual agreements, extortion demands, and so forth

Political Risk Assessment
B. Political Risk Assessment
1. International companies must conduct some form of political risk assessment in
order to manage their exposure to risk and to minimize financial losses.
2. Risk assessment by multinational corporations usually takes two forms: the use
of experts or consultants and the development of internal staff and in-house
capabilities. Both means may be used. The focus must be on monitoring political
issues before they become headlines. The ability to minimize negative effects on
the firm or to be the first to take advantage of opportunities is greatly reduced
once developments have been reported in the news.
3. For autonomous international subsidiaries, most of the impact from political risks
will be at the level of ownership and control of the firm. For global firms, the
primary risks are likely to be from restrictions (on such things as imports,
exports, and currency) with the impact of the local level of the firm’s transfers of
money, products, or component parts.

Political Risk
Typical Political Risks Political Risk Assessment
• Expropriation and confiscation • Helps companies manage exposure
to risk and minimize financial loss
• Nationalization
• Two forms:
• Terrorism
a) Consultation with experts
• Discriminatory treatment b) Development of internal staff
capabilities—increasingly
• Barriers to repatriation of funds
common
• Interference in managerial decision
making
• Dishonesty by government officials

Managing Political Risk
1. After assessing the potential political risk of investing or maintaining
current operations in a country, managers face perplexing decisions on
managing political risk. On one level, they can decide to suspend their
firm’s dealings with a certain country at a given point—either by the
avoidance of investment or by the withdrawal of current investments
(by selling or abandoning plants and assets). On another level, if they
decide that the risk is relatively low in a particular country or that a
high-risk environment is worth the potential returns, they may choose
to start (or maintain) operations there and accommodate that risk
through adaptation to the political regulatory environment. That
adaptation can take many forms, each designed to respond to the
concerns of a given local area.

2.Taoka and Beeman suggested these means of adaptation:
a. Equity sharing includes the initiation of joint ventures with
nationals to reduce political risks.
b. Participative management refers to actively involving nationals,
including those in labor organizations or government, in the
management of the subsidiary.
c. Localization of the operation by modifying the subsidiary’s name,
management style, and so forth, to suit local tastes. Localization
seeks to transform the subsidiary from a foreign firm to a national
firm.
d. Development assistance includes the firm’s active involvement in
infrastructure development (foreign-exchange generation, local
sourcing of materials or parts, management training, technology
transfer, securing external debt, and so forth).

3. In addition to avoidance and adaptation, two other means of risk
reduction available to managers are dependency and hedging.
a. Dependency—keeping the subsidiary and host nation dependent on the
parent corporation. It can be maintained with four methods:
1. Input control—parent controls the key inputs.
2. Market control—parent controls the means of distribution.
3. Position control—key positions in the hands of expatriate or
home office managers.
Finally, even if the company cannot diminish or change political

risks: Hedging (minimizing losses associated with political events)
can take place through political risk insurance and local debt
financing

Avoidance and Adaptation Dependency and Hedging
• Equity sharing • Input control
• Participating management • Technology control
• Localization of the operation • Expatriate position control
• Development assistance • Distribution control
• Political risk insurance (OPIC and FCI
A)
• Local debt financing

Managing Terrorism Risk
No longer is the risk of terrorism for global businesses focused only on
certain areas such as South America or the Middle East. That risk now
has to be considered in countries such as the United States, which had
previously been regarded as safe. Eighty countries lost citizens in the
World Trade Center attack on September 11, 2001. Many companies
from Asia and Europe had office branches in the towers of the World
Trade Center; most of those offices, along with the employees from
those countries, were destroyed in the attack.
According to the 2018 Global Terrorism Index (GTI), Iraq, Afghanistan,
Nigeria, Syria, and Pakistan have sat atop the ranking every year since
2013. Other notable countries listed in the 2018 GTI include India (8th),
Egypt (9th), the Philippines (10th),Turkey (12th), the United States (20th),
the United Kingdom (28th), and France (30th).

Managing Terrorism Risk
1. Develop a benevolent image through charitable contributions
2. Maintain a low profile and minimize publicity
3. Using teams to monitor terrorist activities
4. Hiring counterterrorism consultants

Economic Risk
1. A country’s level of economic development generally determines its
economic stability and therefore, its relative risk to a foreign firm.
Recently, the level of economic risk in Europe was a great concern
around the world, in particular regarding concerns in the eurozone
brought about by debt problems in Greece. In 2019, the Heritage
Foundation published its annual Index of Economic Freedom (excerpted
in Table 1-3), which covers 186 countries and is based on 12 specific
freedoms such as rule of law, trade freedom, business freedom,
investment freedom, and property rights—all of which reduce economic
risk
2. A country’s ability or intention to meet its financial obligations
determines its economic risk. The economic risk incurred by a foreign
corporation usually falls into one of two main categories; its investment
in a specific country may become unprofitable if (1) the government
abruptly changes its domestic monetary or fiscal policies, or (2) the
government decides to modify its foreign-investment policies. The
second situation would threaten the ability of the company to repatriate
its earnings and would create a financial or interest-rate risk.

Economic Risk
3. The risk of exchange-rate volatility results in currency translation
exposure to the firm when the balance sheet of the entire corporation
is consolidated and may cause a negative cash flow from the foreign
subsidiary.
4. Currency translation exposure occurs when the value of one country’s
currency changes relative to another.
5. The four primary methods of analyzing economic risk: quantitative,
qualitative, combination of both, and the checklist approach.

Economic Risk
1. Closely related to political risk
2. Determined by a country’s ability or intention to meet its financial
obligations
3. Historically, most industrialized nations have posed little risk of
economic instability
4. However, the level of economic risk in Europe is of concern in the
eurozone due to debt problems in Greece

Categories of Economic Risk
1. Loss of profitability due to abrupt changes in monetary and fiscal policies
2. Loss of profitability due to changes in foreign investment policies
3. Risk of currency exchange-rate volatility results in currency translation
exposure

TO RECOGNIZE THE ROLE OF THE LEGAL
ENVIRONMENT IN INTERNATIONAL BUSINESS

B- The Legal Environment
Legal system - The legal system of a country refers to the rules, or
laws, that regulate behavior along with the processes by which the laws
are enforced and through which redress for grievances is obtained. The
legal system of a country is of immense importance to international
business. A country’s laws regulate business practice, define the
manner in which business transactions are to be executed, and set
down the rights and obligations of those involved in business
transactions. The legal environments of countries differ in significant
ways. As we shall see, differences in legal systems can affect the
attractiveness of a country as an investment site or market.

What Is A Legal System?
Legal system - the rules that regulate behavior along
with the processes by which the laws are enforced
and through which redress for grievances is
obtained
◦ the system in a country is influenced by the prevailing
political system
Legal systems are important for business because
they
◦ define how business transactions are executed
◦ identify the rights and obligations of parties involved in
business transactions

There are three types of legal systems
1. Common law - based on tradition, precedent, and custom
The common law system evolved in England over hundreds
of years. It is now found in most of Great Britain’s former
colonies, including the United States. Common law is based
on tradition, precedent, and custom. Tradition refers to a
country’s legal history, precedent to cases that have come
before the courts in the past, and custom to the ways in
which laws are applied in specific situations.

Civic law - based on detailed set of laws organized into codes
A civil law system is based on a detailed set of laws organized into
codes. When law courts interpret civil law, they do so with regard to
these codes. More than 80 countries, including Germany, France, Japan,
and Russia, operate with a civil law system. A civil law system tends to
be less adversarial than a common law system, since the judges rely
upon detailed legal codes rather than interpreting tradition, precedent,
and custom. Judges under a civil law system have less flexibility than
those under a common law system. Judges in a common law system
have the power to interpret the law, whereas judges in a civil law
system have the power only to apply the law.

Theocratic law - law is based on religious teachings
A theocratic law system is one in which the law is based on religious
teachings. Islamic law is the most widely practiced theocratic legal
system in the modern world, although usage of both Hindu and Jewish
law persisted into the twentieth century. Islamic law is primarily a moral
rather than a commercial law and is intended to govern all aspects of
life.10 The foundation for Islamic law is the holy book of slam, the
Koran, along with the Sunnah, or decisions and sayings of the Prophet
Muhammad, and the writings of Islamic scholars who have derived
rules by analogy from the principles established in the Koran and the
Sunnah. Because the Koran and Sunnah are holy documents, the basic
foundations of slamic law cannot be changed

The Legal Environment (2 of 2)
Types of Legal Systems Approaches to Contract Law
• Common law • Common law: details must be written in
the contract to be enforced
• Civil law
• Civil law: assumes promises will be
• Islamic law enforced without specifying the details
• In Asia the contract may be in the
relationship, not on the paper

How Are Property Rights
And Corruption Related?
Property rights - the legal rights over the use to which a resource
is put and over the use made of any income that may be derived
from that resource
In a legal sense, the term property refers to a resource over which an
individual or business holds a legal title; that is, a resource that it owns.
Resources include land, buildings, equipment, capital, mineral rights,
businesses, and intellectual property (ideas, which are protected by
patents, copyrights, and trademarks). Property rights refer to the legal
rights over the use to which a resource is put and over the use made of
any income that may be derived from that resource.

◦ Property rights can be violated through
1. Private action – theft, piracy, blackmail
In this context, private action refers to theft, piracy, blackmail, and the like by
private individuals or groups. Although theft occurs in all countries, a weak
legal system allows for a much higher level of criminal action in some than in
others.
1. Public action - legally - ex. excessive taxation or illegally - ex. bribes or blackmailing
Public action to violate property rights occurs when public officials, such as
politicians and government bureaucrats, extort income, resources, or the
property itself from property holders. This can be done through legal
mechanisms such as levying excessive taxation, requiring expensive licenses or
permits from property holders,

The Foreign Corrupt Practices Act makes it
illegal for U.S. companies to bribe foreign
government officials to obtain or maintain
business over which that foreign official has
authority
◦ facilitating or expediting payments to secure or
expedite routine government action are permitted

How Can Intellectual
Property Be Protected?
Intellectual property - property that is the

product of intellectual activity
Intellectual property refers to property that is the product
of intellectual activity, such as computer software, a
screenplay, a music score, or the chemical formula for a new
drug. Patents, copyrights, and trademarks establish
ownership rights over intellectual property.

How Can Intellectual
Property Be Protected?
◦ Can be protected using
1. Patents – exclusive rights for a defined period to the
manufacture, use, or sale of that invention
2. Copyrights – the exclusive legal rights of authors,
composers, playwrights, artists, and publishers to
publish and disperse their work as they see fit
3. Trademarks – design and names by which merchants
or manufacturers designate and differentiate their
products

What Is Product Safety
And Liability?
Product safety laws set certain standards to which

a product must adhere
Product liability involves holding a firm and its
officers responsible when a product causes injury,
death, or damage
◦ liability laws tend to be less extensive in less developed nations

TO R E V I EW T HE T ECHN OLOGICA L E N V I RONM ENT A ROU N D
T HE WOR L D A N D HOW I T A F F EC TS T HE I N T ERNATIONA L
MAN AGER’S DECI S I ONS AN D OP E R ATI ONS AS WE LL AS T HE
WA R FOR TA L ENT A ROU N D T HE G LOBE

C. The Technological Environment
Jack Ma, cofounder and Executive Chairman CEO of Alibaba Group, has
made several bold predictions for the digital age that will shape business for
decades to come. He asserted that data lies at the heart of the digital age.
He predicted, “In the next 30 to 40 years, globalization will empower 80
percent of countries, businesses, and people that have not benefited from
globalization.” From Mr. Ma’s predictions, it is clear that the digital age will
introduce a whole new level of global competition. For instance, he pointed
out that “globalization . . . is increasingly in the hands of the people and the
‘netpreneurs.”

A. In a global information society, it is clear that corporations must incorporate
into their strategic planning and their everyday operations the accelerating
macro-environmental phenomenon of technoglobalism, in which the rapid
developments in information and communication technologies (ICTs) are
propelling globalization and vice-versa. Investment-led globalization is
leading to global production networks, which results in global diffusion of
technology to link parts of the value-added chain in different countries.
B. The Internet is propelling electronic commerce around the world. In fact, the
ease of use and pervasiveness of the Internet raises difficult questions about
ownership of intellectual property, consumer protection, residence location,
taxation, and other issues.
C. New technology specific to a firm’s products represents a key competitive
advantage to firms and challenges international businesses to manage the
transfer and diffusion of proprietary technology, with its attendant risks.
Whether it is a product, a process, or a management technology, an MNC’s
major concern is the appropriability of technology—that is, the ability of the
innovating firm to profit from its own technology by protecting it from
competitors. Especially difficult is managing the transfer of technology to
venture partners who might become future competitors.

D. An MNC can enjoy many technological benefits from its global
operations. Advances resulting from cooperative research and
development (R&D) can be transferred among affiliates around the
world, and specialized management knowledge can be integrated and
shared. However, the risk of technology transfer and pirating is
considerable and costly.
E. Although firms face few restrictions on the creation and
dissemination of technology in developed countries, less developed
countries often impose restrictions on licensing
F. The most common methods of protecting proprietary technology are
through patents, trademarks, trade names, copyrights, and trade
secrets. The International Convention for the Protection of Industrial
Property, often referred to as the Paris Union, is adhered to by over 80
countries for protection of patents.

G. One of the risks to a firm’s intellectual property is the inappropriate
use of the technology by joint-venture partners, franchisees, licensees,
and employees (especially those who move to other companies).
H. Global managers will want to evaluate the appropriateness of
technology for the local government—especially in less developed
countries. Studying the possible cultural consequences of the transfer of
technology, managers must assess whether the local people are ready
and willing to change their values, expectations, and behaviors at work
and to use new technological methods.

The Globalization of Information
Technology
I. The Globalization of Information Technology
The rapid advancement in IT and its applications around the world has had,
and will continue to have, a transformative effect on global business for
businesses of all sizes. The speed and accuracy of information transmission
are changing the nature of the global manager’s job by making geographic
barriers less relevant. Indeed, managers and families around the world
recognize the necessity of being able to access IT and are giving priority to
that access over other lifestyle accoutrements
J. Global E-Business is an important aspect of the changing technological
environment.
1. E-business is the integration of systems, processes, organizations, value
chains, and entire markets using Internet-based and related technologies
and concepts. It enhances global competitiveness by providing efficiencies
throughout the value chain. For instance, with a global portal, businesses
can contact and negotiate with suppliers and buyers worldwide.

Technology
2. E-commerce refers directly to the marketing and sales process via the
Internet. The Internet and e-business provide a number of advantages in
global business such as the following:
 Convenience in conducting business worldwide; facilitating
communication across borders contributes to the shift toward globalization
and a global market
An electronic meeting and trading place, which adds efficiency in
conducting business sales
 A corporate intranet service, merging internal and external information
for enterprises worldwide
 Power to consumers as they gain access to limitless options and price
differentials
 A link and efficiency in distribution

Technology
3. Although most media attention has focused on e-commerce and the
end consumer, greater opportunities exist in B2B (business-to-
business) transactions. However, problems include internal obstacles
and politics, difficulties in coordination and in balancing global versus
local e-commerce, languages and cultural differences, and local laws.
4. Barriers to e-business also include a lack of readiness of partners in

the value chain, such as suppliers. In other areas of the world, barriers
to creating global e-businesses include

TO EXPLORE ESSENTIAL SKILLS FOR
DEVELOPING YOUR CAREER AS A MANAGER
IN A MULTINATIONAL COMPANY

Developing Skills to Enhance Your Career
A. Communication
In a multinational setting, cross-border communication becomes challenging as individuals
may speak and listen in a nonnative language as well as differ with respect to the use of
verbal and nonverbal communications.
B. Critical Thinking
Critical thinking refers to purpose-driven and goal-oriented thinking that helps to identify and
solve problems, make decisions, and critique actions. The end-of-chapter discussion
questions, application exercises, and experiential exercises are intended to think about
concepts and framework at a deeper level.
C. Collaboration
Collaborative learning occurs when individuals work together on projects, tasks, and problem
solving. Several of the application exercises and experiential learning exercises are intended
to be group-based.

Developing Skills to Enhance Your Career
D. Knowledge Application and Analysis
Knowledge application and analysis refers to the ability to learn particular
concepts and frameworks and then apply them in various situations.
E. Business Ethics/Social Responsibility
Business ethics are sets of moral principles that shape individual and organizational
behavior within their operating environments. Corporate social actions (e.g.,
environmental protection, work conditions) that go above and beyond what is
required by law.

Copyright
This work is protected by United States copyright laws and is
provided solely for the use of instructors in teaching their
courses and assessing student learning. Dissemination or sale of
any part of this work (including on the World Wide Web) will
destroy the integrity of the work and is not permitted. The work
and materials from it should never be made available to
students except by instructors using the accompanying text in
their classes. All recipients of this work are expected to abide by
these restrictions and to honor the intended pedagogical
purposes and the needs of other instructors who rely on these
materials.

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International Management: Managing Across

Borders and Cultures

Assessing the Environment:

DR. AHMED RADY ASSISTANT PROFESSOR EGYPT-JAPAN UNIVERSITY OF

DR. AHMED RADY ASSISTANT PROFESSOR EGYPT-JAPAN UNIVERSITY OF

DR. AHMED RADY ASSISTANT PROFESSOR EGYPT-JAPAN UNIVERSITY OF

DR. AHMED RADY ASSISTANT PROFESSOR EGYPT-JAPAN UNIVERSITY OF

DR. AHMED RADY ASSISTANT PROFESSOR EGYPT-JAPAN UNIVERSITY OF

DR. AHMED RADY ASSISTANT PROFESSOR EGYPT-JAPAN UNIVERSITY OF

DR. AHMED RADY ASSISTANT PROFESSOR EGYPT-JAPAN UNIVERSITY OF

DR. AHMED RADY ASSISTANT PROFESSOR EGYPT-JAPAN UNIVERSITY OF

DR. AHMED RADY ASSISTANT PROFESSOR EGYPT-JAPAN UNIVERSITY OF

DR. AHMED RADY ASSISTANT PROFESSOR EGYPT-JAPAN UNIVERSITY OF

DR. AHMED RADY ASSISTANT PROFESSOR EGYPT-JAPAN UNIVERSITY OF

The Largest Global Markets:

DR. AHMED RADY ASSISTANT PROFESSOR EGYPT-JAPAN UNIVERSITY OF

DR. AHMED RADY ASSISTANT PROFESSOR EGYPT-JAPAN UNIVERSITY OF

DR. AHMED RADY ASSISTANT PROFESSOR EGYPT-JAPAN UNIVERSITY OF

DR. AHMED RADY ASSISTANT PROFESSOR EGYPT-JAPAN UNIVERSITY OF

DR. AHMED RADY ASSISTANT PROFESSOR EGYPT-JAPAN UNIVERSITY OF

DR. AHMED RADY ASSISTANT PROFESSOR EGYPT-JAPAN UNIVERSITY OF

DR. AHMED RADY ASSISTANT PROFESSOR EGYPT-JAPAN UNIVERSITY OF

DR. AHMED RADY ASSISTANT PROFESSOR EGYPT-JAPAN UNIVERSITY OF

DR. AHMED RADY ASSISTANT PROFESSOR EGYPT-JAPAN UNIVERSITY OF

DR. AHMED RADY ASSISTANT PROFESSOR EGYPT-JAPAN UNIVERSITY OF

DR. AHMED RADY ASSISTANT PROFESSOR EGYPT-JAPAN UNIVERSITY OF

DR. AHMED RADY ASSISTANT PROFESSOR EGYPT-JAPAN UNIVERSITY OF

DR. AHMED RADY ASSISTANT PROFESSOR EGYPT-JAPAN UNIVERSITY OF

DR. AHMED RADY ASSISTANT PROFESSOR EGYPT-JAPAN UNIVERSITY OF

DR. AHMED RADY ASSISTANT PROFESSOR EGYPT-JAPAN UNIVERSITY OF

DR. AHMED RADY ASSISTANT PROFESSOR EGYPT-JAPAN UNIVERSITY OF

• Dishonesty by government officials

DR. AHMED RADY ASSISTANT PROFESSOR EGYPT-JAPAN UNIVERSITY OF

DR. AHMED RADY ASSISTANT PROFESSOR EGYPT-JAPAN UNIVERSITY OF

DR. AHMED RADY ASSISTANT PROFESSOR EGYPT-JAPAN UNIVERSITY OF

Finally, even if the company cannot diminish or change political

DR. AHMED RADY ASSISTANT PROFESSOR EGYPT-JAPAN UNIVERSITY OF

DR. AHMED RADY ASSISTANT PROFESSOR EGYPT-JAPAN UNIVERSITY OF

DR. AHMED RADY ASSISTANT PROFESSOR EGYPT-JAPAN UNIVERSITY OF

DR. AHMED RADY ASSISTANT PROFESSOR EGYPT-JAPAN UNIVERSITY OF

DR. AHMED RADY ASSISTANT PROFESSOR EGYPT-JAPAN UNIVERSITY OF

DR. AHMED RADY ASSISTANT PROFESSOR EGYPT-JAPAN UNIVERSITY OF

DR. AHMED RADY ASSISTANT PROFESSOR EGYPT-JAPAN UNIVERSITY OF

DR. AHMED RADY ASSISTANT PROFESSOR EGYPT-JAPAN UNIVERSITY OF

DR. AHMED RADY ASSISTANT PROFESSOR EGYPT-JAPAN UNIVERSITY OF

DR. AHMED RADY ASSISTANT PROFESSOR EGYPT-JAPAN UNIVERSITY OF

DR. AHMED RADY ASSISTANT PROFESSOR EGYPT-JAPAN UNIVERSITY OF

DR. AHMED RADY ASSISTANT PROFESSOR EGYPT-JAPAN UNIVERSITY OF

DR. AHMED RADY ASSISTANT PROFESSOR EGYPT-JAPAN UNIVERSITY OF

DR. AHMED RADY ASSISTANT PROFESSOR EGYPT-JAPAN UNIVERSITY OF

DR. AHMED RADY ASSISTANT PROFESSOR EGYPT-JAPAN UNIVERSITY OF

DR. AHMED RADY ASSISTANT PROFESSOR EGYPT-JAPAN UNIVERSITY OF

DR. AHMED RADY ASSISTANT PROFESSOR EGYPT-JAPAN UNIVERSITY OF

DR. AHMED RADY ASSISTANT PROFESSOR EGYPT-JAPAN UNIVERSITY OF

Intellectual property - property that is the

DR. AHMED RADY ASSISTANT PROFESSOR EGYPT-JAPAN UNIVERSITY OF

DR. AHMED RADY ASSISTANT PROFESSOR EGYPT-JAPAN UNIVERSITY OF

Product safety laws set certain standards to which