CHAPTER 1 - Cao

1. Describe the shifts in the world economy over the past 30 years. What are the implications of these
shifts for international businesses based in Great Britain? North America? Hong Kong?
Cách 1: Over the last three decades, the national economies of the world have become more
interconnected. Money, workers, goods and services all across national borders have become easier
due to the collapse of the Soviet Bloc, less trade restrictions, and new technology such as the
Internet. Companies and workers are facing increasing competition from India, Japan, Brazil,
China, Mexico and other nations. Wages have driven down and some occupations have moved
partly or in whole to nations with cheap labor, cheap land, cheap energy and/or less intrusive
regulations. Businesses increasingly have found customers and suppliers from other nations. The
World Economy is larger and more interconnected. Economic growth has gone up in many
developing or undeveloped nations. The economic balance has shifted.

Great Britain, a former superpower, has become less industrialized due to foreign competition from
Brazil because now it has a smaller economichan Brazil. Britain has involved itself into free trade.
becoming a member of both the CommonkEalth of Nations (Britain's former empire) and the
European Union. Businesses have many opportunities to outsource jobs to cheaper areas in Eastern
Europe and India. Easy migration rules also allow British companies to recruit workers from places
like Poland and India. London remains the world's most prominent financial center. but Singapore
and Hong Kong are increasing in importance. Financial. Insurance, and other London white collar
companies increasingly set up subsidiaries or strategic partnerships across the planet to diversify.
North American companies benefit from a free flow of investment capital and ideas. The North
American Free Trade Agreement has led to increased trade and outsourcing between Mexico,
Canada. and the US. Restrictions on international labor flow in all three countries encourage illegal
immigration and outsourcing. Many manufacturing, high tech, and green companies faced massive
(often foreign govemment-supported) competitive pressures from East Asia and Europe. Many
companies collapsed, but others thrived, often by exporting to burgeoning foreign markets. There
has also been in sourcing. International companies including Japanese car makers often move
production to North America to decrease shipping costs or to generate political goodwill from the
governments. which is still the world's largest market.
Hong Kong is widely known as one of the most business-friendly places in the world. It has free
capital flows, free labor flows, and non-existent trade barriers, and is one of the easiest places on
earth to create a new business. This has enabled Hong Kong to grow from a barren rock to one of
the fourth Asian Tigers. Honk Kong also benefits from ties with Britain's former empire, its access
to China's market, and its location at the crossroads of the most economically dynamic areas over
the last three decades. Hong Kong business is likely to grow in importance and reach.

Cách 2: có vẻ uy tín hơn

The world economy has shifted dramatically over the past 30 years. As late as the 1960s, four trends
described the demographics of the global economy. The first was U.S. dominance in the world
economy and world trade. The second was U.S. dominance in the world foreign direct investment
picture. Related to this, the third fact was the dominance of large, multinational U.S. firms in the
international business scene. The fourth was that roughly fifty percent of the world—the centrally
planned economies of the Communist world—was off-limits to Western international businesses. All
of these demographic facts have changed. Although the U.S. remains the world's dominant
 economic power, its share of world output and world exports have declined significantly since the
1960s. This trend does not reflect trouble in the U.S. economy, but rather reflects the growing
industrialization of developing countries such as China, India, Indonesia, and South Korea. This
trend is also reflected in the world foreign direct investment picture. The share of world output (or
the stock of foreign direct investment) generated by developing countries has been on a steady
increase since the 1960s, while the share of world output generated by rich industrial countries has
been on a steady decline. Shifts in the world economy can also be seen through the shifting power of
multinational enterprises. Since the 1960s, there have been two notable trends in the demographics
of the multinational enterprise. The first has been the rise of non-U.S. multinationals, particularly
Japanese multinationals. The second has been the emergence of a growing number of small and
medium-sized multinationals, called mini-multinationals. The fall of Communism in Eastern
Europe and the republics of the former Soviet Union have brought about the final shift in the world
economy. Many of the former Communist nations of Europe and Asia seem to share a commitment
to democratic politics and free market economies. Similar developments are being observed in Latin
America. If these trends continue, the opportunities for international business may be
enormous. The implications of these shifts are similar for North America and Britain. The United
States and Britain once had the luxury of being the dominant players in the world arena, with little
substantive competition from the developing nations of the world. That has changed. Today, U.S.
and British manufacturers must compete with competitors from across the world to win orders.
Britain’s departure from the European Union suggests a desire for greater sovereignty, yet also
seemingly puts the country in the difficult position of needing its trading partners more than they
need Britain. The changing demographics of the world economy favor a city like Hong Kong. Hong
Kong is well located with easy access to markets in Japan, South Korea, Indonesia, and other Asian
markets. Further, Hong Kong has a vibrant labor force that can compete on par with the
industrialized nations of the world, yet the creeping influence of Beijing in 2019 and 2020 set of
violent protests as citizens demanded to keep their democratic rights. The declining influence of the
United States and Britain on the global economy suggests that companies will look elsewhere for
growth opportunities. Britain is already experiencing an exodus of foreign investment as companies
that once used the country as a jumping off point for the European Union, move their business
elsewhere. Hong Kong is also likely to see companies leave as they seek more stable business
environments for their Asian bases in locations like Singapore.
2. “The study of international business is fine if you are going to work in a large multinational
enterprise, but it has no relevance for individuals who are going to work in small firms.” Evaluate this
statement.
Cách 1:
This statement is FALSE. International business is not only related to large multinationals, small
businesses too needs through understanding of international business. Most of the exporters in US
and abroad are small businesses. In the United States, small businesses constitute a fifth of exports
in value. Many small businesses export and outsource the needs of their company. In turn, they
import key materials from abroad. Therefore, people who are going to work in the small business
sector are required to have knowledge of international business
Cách 2: có vẻ uy tín hơn
People who believe in this view, and the firms that they work for, may find that they do not achieve
their full potential (at best) and may ultimately fail because of their myopia. As barriers to trade
decrease and state of the art technological developments take place throughout the world, new
opportunities and threats exist on a worldwide basis. The rise of mini-multinationals suggests there
are global opportunities even for small firms. But staying attuned to international markets is not
only important from the perspective of seeking profitable opportunities for small firms; it can also
be critical for long-term competitive survival. Firms from other countries may be developing
 products that, if sold internationally, could wipe out small domestic competitors. Scanning
international markets for the best suppliers is also important for small firms, for if a domestic
competitor is able to tap into a superior supplier from a foreign country, it may be able to seriously
erode another firm's competitive position before the small firm understands the source of its
competitor's competitive advantage and can take appropriate counteractions.
3. How have changes in technology contributed to the globalization of markets and production? Would
the globalization of production and markets have been possible without these technological changes?
2 Cách là 2 luồng ý kiến khác nhau về câu possible hay không
Cách 1:
The introduction of technologies such as the Internet, cell phones, satellites, and optical fiber have
resulted in quick, cheap, and easy communication to and from all parts of the world. The
introduction of efficient shipping containers, airfreight, and commercial jet travel have resulted in
quick, cheap, and easy transportation of goods and people internationally.
Communications breakthroughs make management and collaboration possible required for
interlinked global production. Transportation breakthroughs make production profitable.
Transportation breakthroughs allow a company such as McDonalds to profitably supply a global
market with products. Lower prices due to cheap transportation enable a significant global market
to exist. Communications breakthroughs, particularly the internet and mass media stimulate
consumption of services and intellectual products such as songs and Disney movies, creating a
globalized market.
The globalization of products and markets would likely not have been possible without these
technological changes. If it is too expensive or difficult to communicate with a production subsidiary
in China, then, there will be little globalized production. Likewise, if transportation costs make it
less expensive to make goods in the US than to make them in China, then, goods will be produced in
the US. If small businesses can’t cheaply advertise and access customers through the internet, then,
globalized markets will be much more limited.
Thus, it is clear from the above that technological changes played a significant role in globalization
of production and markets.
Cách 2: có vẻ uy tín hơn vì có sự update
Changes in technology have significantly contributed to the globalization of markets and of
production. Improvements in transportation technology have paved the way for companies like
Coca-Cola, Levi Strauss, Sony and McDonalds to make their products available worldwide.
Similarly, improvements in communications technology have had a major impact. The ability to
negotiate across continents has been facilitated by improved communications technology, and the
rapidly decreasing cost of communications has lowered the expense of coordinating and controlling
a global corporation. The power of advances in technology was on full display during the 2020
COVID-19 shutdowns, as companies around the world were transformed into web-based operations
virtually overnight. Finally, the impact of information technology has been far reaching. Companies
can now gain worldwide exposure simply by setting up a homepage on the Internet. This technology
was not available just a few short years ago, yet online sales proved to be vital to the global economy
during 2020 as traditional in-person shopping was replaced with shopping from home. The
globalization of production and markets may have been possible without improvements in
technology, but the pace of globalization would have been much slower. The falling cost of
technology has made it affordable for many developing nations, which has been instrumental in
helping these nations improve their share of world output and world exports. The inclusion of these
nations, such as China, India, Thailand, and South Korea, has been instrumental in the
globalization of markets and production. In addition, improvements in global transportation and
communication have made it relatively easy for business executives from different countries to
converse with one another. If these forms of technology, including air travel, fax capability, email,
 and overnight delivery of packages were not available, it would be much more difficult for
businesses to conduct international trade.
4. “Ultimately, the study of international business is no different from the study of domestic business.
Thus, there is no point in having a separate course on international business.” Evaluate this statement.
Cách 1:
This statement is FALSE. There are many issues that arise in international business that is not
studied in domestic business course. Today’s globalized world needs a good understanding of
international business to compete with other countries. Tariffs, different contract/property laws,
corruption, different business cultures, the foreign exchange market, differing accounting systems,
and the sheer difficulty of coordinating and overseeing international logistics/ research/ marketing/
production/ strategies/etc makes it important to study international business in addition to domestic
business.
Cách 2: có vẻ uy tín hơn
This statement reflects a poor understanding of the unique challenges involved in international
business. Managing an international business is different from managing a purely domestic business
for at least four reasons. These are: (1) countries are different; (2) the range of problems confronted
by a manager in an international business is wider and the problems themselves more complex than
those confronted by a manager in a domestic business; (3) an international business must find ways
to work within the limits imposed by government intervention in the international trade and
investment system; and (4) international transactions involve converting money into different
currencies. Because of these differences, there are ample reasons for studying international business
as a specific field of study or discipline.
5. How does the Internet affect international business activity and the globalization of the world
economy?
Cách 1:
Internet plays a dominant role in today’s world. There is no field left untouched where internet is
not used. It is used in architecture, medicine, education, therapy, meditation etc. Internet plays a
dominant role in the business too. When it comes to international business, then the role of internet
becomes more important. The business transactions take place faster with the help of internet.
Companies who invest in other countries need some connectivity which is established through
internet.
Following are the uses of the internet in the international business:
(i) Fast process of transaction: The transactions are expedited because of the use of the internet. It
helps the users to process the transactions faster than before. The companies at the other end in
some other country gets the information same very day.
(ii) Delivery and logistics is improved: The delivery of the material, documents etc. are completed
faster with the help of internet. This happens because logistics are improved by using the latest
Internet communication techniques.
(iii) Helps in understanding the legal and governmental norms: Internet also provides all
relevant information related to the governmental and legal norms of the foreign country. One can
be prepared accordingly. Moreover, it also provides the recent information about any regulatory
procedure which is newly introduced. This helps the foreign country to enter the home country
prepared with all the expected proceedings.
Internet also affects the globalization of the world economy. The economy of all the countries are
boosted up by using the internet technologies. The countries can understand the expectations of the
home country and thus the foreign direct investment is routed accordingly. This leads to the faster
understanding of the processes. This generates more funds for the developing nations and thus
developed nations can also earn more with the same revenue. Thus, internet plays a dominant role
in the globalization of the world’s economy.
Cách 2: có vẻ uy tín hơn
The Internet has changed the way companies do business. This technology makes it easier for
individuals and companies in different countries to conduct business with one another and has
lowered the cost of communications. These developments will undoubtedly hasten the already rapid
pace of globalization and act as an equalizer between large (resource-rich) and small (resource-
poor) firms. For instance, it does not cost any more for a small software firm to gain visibility via
the Internet than it does for a large software company like Microsoft. As a result, the Internet helps
small companies reach the size of audience that was previously only within the reach of large,
resource-rich firms. Since COVID-19, the Internet has also changed the way meetings are held.
Face-to-face meetings have been replaced with web-based meetings, allowing many businesses,
including many services, to continue to operate even during a pandemic. The Internet has also
transformed production and shipping as inventory levels and distribution can be tracked in real
time allowing for leaner production and faster delivery times.
6. If current trends continue, China may be the world’s largest economy by 2030. Discuss the possible
implications of such a development for
Cách 1: đề là by 2020
The availability of rich natural resources, advancement in the technology and the human resource
would make the country C the global economic power in no time. Some of the possible implications
of the development are as follows:
a. the world trading system
If the country C becomes the world’s largest economy in the coming four years, it might affect the
world trading system to most extent. Being a developing country, C is receiving several benefits and
investments by the World Trade Organization. If it attains the stage of a developed country, then it
would not get any benefits. Moreover, the country C plays a vital role in the regulation and
implication of trade policies
b. the world monetary system
Even the terms of trade between different countries could be effected by the country C. The
currency Yuan might dominate the dollar value and would become a bench mark currency of the
world.
c. the business strategy of today’s European and U.S.-based global corporations
Most of the businesses might shift to the country C and the major part of the work from European
and U.S. global corporations might outsource the work. It would set policies and regulations which
would benefit the country and the corporations as well.
d. global commodity prices
Also, it might become the largest market in the world by attracting foreign investments in the form
of companies. As a result, it might produce more products which would increase the supply
eventually leading to the reduction in the prices
Cách 2: có vẻ update, đề là by 2035
The world trading system would clearly be affected by such a development. Currently, China enjoys
a somewhat privileged status within the World Trade Organization as a “developing” country. Such
a rise to eminence, however, would clearly force it to become a full and equal member, with all the
rights and responsibilities. China would also be able to actively influence the terms of trade between
many countries. On the monetary front, one would expect that China would have to have fully
convertible and trading currency, and that ultimately it could become one of the “benchmark”
currencies of the world. From the perspective of Western global firms, China would represent both
a huge market, and potentially the home base of some very capable competitors. Students should
recognize though, that the ongoing trade war between the United States and China during the
Trump presidency has prompted some companies to move their operations to other locations in the
region such as Vietnam. Finally, commodity prices would probably fall.
 7. Reread the Management Focus on Boeing and answer the following questions:
a. What are the benefits to Boeing of outsourcing manufacturing of components of the Boeing 787 to
firms based in other countries?
Boeing has traditionally outsourced some of the production of its aircraft, but it took outsourcing to
a new level with the Dreamliner 787, outsourcing 65 percent of its value to suppliers located around
the world. This strategy allowed each company including Boeing to focus on what it does best,
allowing for greater efficiency and lower costs. Some students may also suggest that by using
suppliers located in customer countries, Boeing could introduce a “local” element to the Dreamliner
and gain goodwill with its customers.
b. What are the potential costs and risks to Boeing of outsourcing?
With its new strategy, Boeing also encountered many problems, including challenges in
coordinating its globally dispersed production chain. Production was frequently delayed, and the
aircraft was ready for sale much later than Boeing had anticipated. Some students may note that
while Boeing was able to benefit from the expertise of its suppliers, by outsourcing, the company
also lost the ability to increase its own knowledge and skills.
c. In addition to foreign subcontractors and Boeing, who else benefits from Boeing’s decision to outsource
component part manufacturing assembly to other nations? Who are the potential losers?
Workers in the countries to which the outsourcing takes place benefit. In specific, these workers
may receive competitive wages for the skills they provide to the companies developing and
manufacturing the products in-country. Knowledgeable workers within Boeing would not have the
opportunity to use their skills and―in some cases―could lose their jobs as a result.
d. If Boeing’s management decided to keep all production in America, what do you think the effect would
be on the company, its employees, and the communities that depend on it?
Based on the design of the Boeing 787, there are some core competencies that Boeing must develop
to manufacture the product. In the short term, it would be difficult for Boeing to experience that
learning curve, but if the company is able to work through these problems, it may have more
knowledge and capabilities to apply in different projects in the future. As a result, employee skills
would be applied and potentially widened. By keeping these employees working, the communities
that depend on the company and its employees would enjoy a certain level of success. However, for
Boeing in particular, the financial investment to make for all production within the company could
be a daunting proposition and may have an impact on profitability, as well.
e. On balance, do you think that the kind of outsourcing undertaken by Boeing is a good thing or a bad
thing for the American economy? Explain your reasoning.
CHỌN 1 TRONG 2 PHE VÀ GIẢI THÍCH:
1. This action is good for the American economy as it allows an American company to focus on its core
strengths. In addition, this line of thought could be supported by the notion that, because of this
focus on core strengths, the economy would become more competitive.
2. This approach is bad for the American economy due to the loss of jobs and commerce within the
United States. Those holding this view will cite the danger of increased unemployment or the lack of
jobs fitting the specific skills of the employees who may no longer be needed in the aerospace
industry in the United States.
CHAPTER 2 - Trà
1. Free market economies stimulate greater economic growth, whereas state-directed economies stifle
growth. Discuss.
State-directed economies make the decisions regarding production. The state directs on
behalf of the public at large. If an entrepreneur comes up with an innovation, but is not on the state
planning board, then, whatever new process or invention individual come up with most likely to go
nowhere. In addition, individual would not spend time, money, and effort discovering some new
invention or strategy, if all the benefits of his efforts go to the state.
 In a free market economy, an entrepreneur has the ability and incentive to invent, produce,
and become more efficient. Therefore a free market economy stimulates economic growth, while a
state-directed economy stifles it.
2. A democratic political system is an essential condition for sustained economic progress. Discuss.
Democracy: The political system in which the government is controlled by the people of the
nation by their elected representatives. Democracy and individual are similar but the democratic
values or individual values dominate the system. In democratic system, people have more freedom
when compared to collectivism. Even though, the government intervention is required in some
aspects of the market, the people can make independent decision following the law.
However, democratic system cannot be considered as most important for economic progress
due to the following reasons: • Economic development is dependent on political and economic
stability of the country. If the economic planning and policies are inconsistent to the economic
environment, the rate of development will decline. • As the government is controlled by the public
representatives, the people play an important role. If there is any conflict between the proposals
made by the government and people, it cannot contribute to the economic development. • The
resources available in the nation contribute more to the economy. Hence, economic progress is not
possible if there are few resources. • Apart from the political system, several factors of economic
environment such as recession, inflation etc. impact the economic progress of the country There are
some countries with totalitarian system which have been developed into strong economies. The
economic development is determined by several national and international factors irrespective of
the political system. Hence, democratic political system may or may not contribute for the economic
development.
3. What is the relationship between corruption in a country (i.e., government officials taking bribes)
and economic growth? Is corruption always bad?
The cost of bribes, extortion payments, and other illegal or “legal” expenses reduces business
profits and decreases efficiency. As a result, there is less foreign investment and trade. The loss of
investment, trade, and efficiency results in lower economic growth.
Corruption is always bad for society. It acts as a hidden tax on businesses and introduces
distortions and inefficiencies into the economy. Unlike taxes, the money is spent on the goods by the
bribe taker rather than spending on society.
4. You are the CEO of a company that has to choose between making a $100 million investment in
Russia or Poland. Both investments promise the same long-run return, so your choice is driven by risk
considerations. Assess the various risks of doing business in each of these nations. Which investment
would you favor and why?
The investment choice is between Russia and Poland. It has been assumed that the long-term
return on investment is the same for both countries. Therefore the evaluation would be based on the
perceived risk of investing in either country. Poland is a democracy which has transited out of the
Soviet Bloc having elected its first government in 1989. Russia has had many elections after the
breakup of the Soviet Union but it does not have a democracy. Although it has elected officials, they
are only for name sake. There is no political freedom in that country. It seems to be regressing into
the old Communist type of government. Therefore the political risk in Russia is much higher than
that in Poland.
Although Poland is still a mixed economy, it is rapidly trying to reform its economy and move
towards a more market based economy. Russia still has large state owned establishments and
whatever private industries exist, they do so under the patronage of either the state or the oligarchs.
Therefore the economic risk is also higher in Russia than in Poland.
The level of corruption in Russia is many times higher than that in Poland. Poland is carrying
out measures to reform its tax system and its various legal systems. These systems are very opaque
in Russia.
 Therefore it can be concluded that it would be better to invest in Poland than in Russia.
5. Read the Management Focus feature titled Did Walmart Violate the Foreign Corrupt Practices Act?
What is your opinion? If you think it did, what do you think the consequences will be for Walmart?
As per the stated case, WXY Ltd was held responsible for offering bribe to the local
government authorities. The purpose was to attain the ownership of the land on which they wanted
to build up their store. This led to the huge scandal which was highlighted by many renowned
newspapers. This case was then shifted by the WXY ltd to the Mexican government as the rules and
regulations in Mexico were liberal as compared to the Arkansas. This basically led to the violation
of the foreign corrupt practices Act. The government of Arkansas tried hard to bring back the case
from the Mexican government but all the documents and files were shifted to the Mexican
headquarters. The consequences for WXY Ltd in this case may be in the form of huge fines and
imprisonment of the executives for few years.
CHAPTER 3 - Vy
1. What is the relationship among property rights, corruption, and economic progress? How important
are anticorruption efforts in the effort to improve a country’s level of economic development?
Cách 1:
The stronger the set of property rights, the more effective the operation of the economy; while the
greater the presence of corruption in the economy the slower its progress and the higher the
possibility of halting future growth. This is why it is important to improve a country’s anti-
corruption because the absence of it will open more opportunities for the country and would attract
more possibilities that can result in the economy’s development.
Cách 2:
Countries that have strong property rights and don't participate in corruption tend to have more
economic progress. Organizations don’t want to enter a country where their products can be easily
copied without being compensated, which is the need for strong property rights. In addition,
organizations want to operate in a market that is free from corruption because they don’t want to
have to deal with having to pay for things outside of normal business, like “demands from state
bureaucrats for kickbacks in return for granting an individual or firm a license to do business in a
certain area” (Hill, 2019, p. 66-67). Anti-corruption efforts are important to improve a country’s
level of economic development because “it is estimated that corruption costs the world economy 5%
of GDP a year, equivalent to $3.6 trillion” (World Economic Forum, n.d.). This cost is in addition to
limiting a country’s economic progress.
2. You are a senior manager in a U.S. automobile company considering investing in production
facilities in China, Russia, or Germany. These facilities will serve local market demand. Evaluate the
benefits, costs, and risks associated with doing business in each nation. Which country seems the most
attractive target for foreign direct investment? Why?
Cách 1:
Any of the three countries would be a good choice for investment, however, they also have their
downsides which could affect our way of investment. If I decided to invest it in Russia there would
be a barrier to entry and it will be burdensome on my part although this was a large country and
have a higher possibility of higher revenue. On the other hand, Germany’s automobile industry is
so powerful and it would be risky for us to enter this kind of market. This is why China would be
the best choice for foreign direct investment, plus the labour costs here are lower and there is a
large potential domestic market
Cách 2:
If you choose Germany it is well known that the automobile industry is very big there, and it will
face many competitors. In Russia, you have the problem of there being trade barriers, meaning that
there will most likely be an obstacle to the entry of automobile companies. Lastly, China has low-
cost labor and a large potential domestic market. China seems best for foreign direct investment.
 3. Reread the Country Focus on India, and answer the following questions:
a. What kind of economic system did India operate under during 1947– 1990? What kind of system is it
moving toward today? What are the impediments to completing this transformation?
Cách 1:
The economic system that India operated in during 1947 was a mixed economy and it is
characterized by a large number of state-owned enterprises, centralized planning, and subsidies.
India embarked on an ambitious economic reform with the hope to transform the country however
there are impediments that halted this process. Attempts to reduce import tariffs have been stalled
by political opposition from employers, employees and politicians, the privatization program has
been slowed and extreme poverty continues to plague the country.
Cách 2:
The economic system that developed in India after 1947 was a mixed economy characterized by a
large number of state-owned enterprises, centralized planning, and subsidies. In 1991, India's
government embarked on an ambitious economic reform program. Much of the industrial licensing
system was dismantled, and several areas once closed to the private sector were opened. In addition,
investment by foreign companies was welcomed and plans to start privatizing state-owned
businesses were announced. India has posted impressive gains since 1991, however, there are still
impediments to further transformation. Attempts to reduce import tariffs have been stalled by
political opposition from employers, employees, and politicians. Moreover, the privatization
program has been slowed thanks to actions taken by the Supreme Court. Finally, extreme poverty
continues to plague the country.
b. How might widespread public ownership of businesses and extensive government regulations have
affected (i) the efficiency of state and private businesses and (ii) the rate of new business formation in
India during the 1947–1990 time frame? How do you think these factors affected the rate of economic
growth in India during this time frame?
The mixed economy that developed in India after 1947 was characterized by a large number of
state-owned enterprises, centralized planning, and subsidies. This system not only constrained the
growth of the private sector but also consequently limited the effects of competition that typically
promote efficiency and productivity in a free market system. The system even limited the actions of
private companies, requiring them to get government approval for routine business activities.
Production quotas and high import tariffs also stunted the development of a healthy private sector,
as did restrictive labor laws that made it difficult to fire employees. Foreign exchange restrictions,
limitations on foreign investment, controls on land use, and managed prices further exacerbated the
situation. It would appear that India's rate of economic growth was negatively affected during this
time frame. By 1994, India's economy was still smaller than Belgium's despite having a large
population. Both GDP and literacy rates were very low, and some 40 percent of the population lived
in poverty.
c. How would privatization, deregulation, and the removal of barriers to foreign direct investment
affect the efficiency of the business, new business formation, and the rate of economic growth in India
during the post- 1990 time period?
Cách 1:
Privatization is the transfer of government services or assets to the private sector while deregulation
means the removal of regulations or restrictions, especially in a particular industry. If this was
implemented in India during 1990, the government would not have the full authority over the
economic state and the business owners would have the chance to drive the economy into a better
state. Although the ambitious reform of India’s government resulted in some positive effects, their
actions continue to limit efficiency gains for private companies and poverty is still evident.
Cách 2:
 In 1991, India's government embarked on an ambitious economic reform program. So far, the
response to the program has been impressive. The economy expanded at an annual rate of about 6.3
percent from 1994 to 2004. Foreign investment is up from $150 million in 1990 to $6 billion in 2005.
Certain sectors of the economy including information technology and pharmaceuticals have done
particularly well. Still, problems persist. Actions taken by the government continue to limit
efficiency gains for private companies and the country's high rate of poverty is still a major
problem.
d. India now has pockets of strengths in key high-technology industries such as software and
pharmaceuticals. Why do you think India is developing strength in these areas? How might success in
these industries help generate growth in the other sectors of the Indian economy?
Cách 1:
India now possesses strengths in industries such as software and pharmaceuticals because they have
a strong global position and have been proving low-cost generic versions of drugs, they have
invested well in this industry and this is now paying off. Because of these industries, the rest of the
country’s economies also continue to prosper giving a positive impact on the growth of the country.
Cách 2:
India's gains in information technology and pharmaceuticals are impressive. The country has
emerged as a vibrant global center for software development, and India's pharmaceutical
companies have taken a strong global position by selling low-cost generic versions of drugs that
have come of patent in the developed world. As these industries continue to prosper, other sectors of
the economy should also see the benefit of spillover effects.
e. Given what is now occurring in the Indian economy, do you think the country represents an
attractive target for inward investment by foreign multinationals selling consumer products? Why?
Cách 1:
The economy of India has become better nowadays and thus is a good destination for investment, in
fact, the foreign investment rose in 2005. However, there are many constraints with regards to
investing or creating business in this country because of their laws and regulations limiting the
exchange of some particular products and services. They have some cultures that are very different
in the rest of the world which can also pose risk to an investor.
Cách 2:
Foreign investment is up in India. In fact, foreign investment rose from $150 million in 1990 to $6
billion in 2005. However, whether India is an attractive destination for foreign multinationals selling
consumer products remains to be seen. Certainly, the large population will serve to attract some
companies, but the fact that some 40 percent of the population is living in abject poverty will scare
other companies away. Moreover, it is still not easy to run a company in India thanks to laws
limiting everything from who can be fired to who can which products.
CHAPTER 4 - Zino
1. Outline why the culture of a country might influence the costs of doing business in that country.
Illustrate your answer with examples.
source: Studocu
Culture has always been one of the most common characteristics to identify a nation; therefore, this
factor would have a significant influence on the cost of doing business in a particular country.
First, it is undeniable that the norms and habits of people in a nation would affect the operation of a
company. For example, Vietnamese people have myriads of delicious dishes such as banh my, banh
bot loc, etc with low prices; therefore, fast food chains such as McDonald or Popeyes had severe
difficulty selling their products here due to higher prices. Only KFC seems to run their business
well, and many foreigners joke that this is because Colonel Sanders somehow looks like President
Ho Chi Minh. Obviously, the people's habits have a great impact on the business as it could weaken
their ability to make profit.
Secondly, religions could apparently be a factor that affects the company's expenditure in doing
their business. In Muslim countries, especially in Ramadan month, people who follow Islam have to
have a diet from sunrise to sunset, and they are not allowed to put anything in their mouth during
daylight. However, they can eat later in the evening, and they have to spend half of their sleeping
time to enjoy their meals. This would lead to reducing the labor productivity in firms that do their
business in Muslim countries; therefore, it would delay several business activities and may affect
hugely to the profit of the organisation
Source: Quizlet
Doing business globally is a common practice these days. As we break the technological barriers
and accelerate towards building a global economy we are faced with challenges of cultural diversity
among countries.
Today Business environment has become more dynamic, more competitive and increasingly
complex and add a little of cultural diversity to the mix, we have a whole new ball game on our
hands. The challenges of cultural diversity not only influences the way we conduct Business
international but it also impacts the cost of running business overseas. China being one of the
upcoming global business market contenders has opens its business door to the western world.
Coming from an age of communism, conducting business practices for international companies
have become more challenging, especially the costs of running business. In order to establish a
reputation companies need to heavy invest in learning the way each country does business, it might
be a classic case of business deals happening at the dinner table so to speak. Most deals regardless of
the cultural influence do tend to occur outside the more conventional office environments.
Sometimes it pays to know the correct approach and the right people, as they say in the game it's
not what you know but rather whom you know. We face challenges to understand cultural diversity
and become more dynamic, more competitive in an increasingly complex business environment.
This implies closer attention to be given to understanding the needs of customers around the world,
building new relationships and capabilities in diverse markets, evaluating the work force to balance
talent and productivity with cost and competitiveness and navigating a regulatory environment with
consistent standards of integrity across the globe.
An example to illustrate is how IT jobs are being outsourced to countries such as India. The labour
market over there is getting extensively cheaper and highlight by the book My Job Went to India :
52 Ways to Save Your Job (Pragmatic Programmers) is a good read of how companies are
benefiting from the cultural diversity of countries. The front cover on this book represents and
person showing how they would work for food. Literally that's the benefit that some of the
international companies are getting in outsourcing their service to countries such as India and
China. Mainly because of the cultural social status that exists people are trying to build their
economic viability by working for international business and working for almost peanuts. Not only
has this being a plus and encourage more western business to outsource their operation side to
reduce their operation cost but also provided greater economic acceleration in nations such as India
and China.
There has being recent interest even within Australia to expand its aligns with India for information
and operational management and in China for labour management. In return the countries are
gaining reputable opportunities to expand there aligns internationally. It's no secret that China has
request the talents of Australian sporting officials to assist their preparation towards 2008
Olympics. This has provided Australia with an opportunity to learn the Chinese culture and their
method of doing business. Both countries are benefiting from this exchange of skills for
opportunities. The benefits of cultural influence have shown that the initial invest may lead to large
gain just like the fruits of labour.
2. Do you think that business practices in an Islamic country are likely to differ from business practices
in a Christian country? If so, how?
Source: study.com
Yes, the business practices in an Islamic country are likely to differ from business practices in the
United States. This is because the Islamic culture is different, and they believe in engaging their
religion in all aspects of their lives, including businesses and daily activities. Islamic countries are
more attached to their culture than other religions available in the United States, such as
Christianity. In addition, Islamic culture prohibits several activities and foods, and as a result, it
creates differences with other religions all over the world and causes differences in business
operations in the United States where everyone operates on their own will and deals in businesses
that will generate profits.
Source: quizlet
The cultural differences between a Muslim country and the US will cause business practices to
differ dramatically. The public role women can take, appropriate etiquette (including simple things
like not passing objects with the left hand), holidays, and wining and dining all differ from patterns
in the US. But beyond these, the underlying ideal and understanding of the role of business differs.
Since Muslims are stewards of property for God, rather than owners, they are more likely to use
their resources carefully and may be less likely to give up or sell something to a person who may not
practice the same stewardship. The importance of fairness to all parties in all relations means that
over-aggressiveness and self-interest may not be well received, and breaking an agreement, even if
technically/legally permissible, may be viewed as inappropriate and the sign of a huge character
flaw. Finally, the prohibitions on interest payments in some Muslim countries means that the
wording of the terms of an agreement must be careful so that "fair profits" are not construed as
being "interest payments.
3. Choose two countries that appear to be culturally diverse. Compare the cultures of those countries,
and then indicate how cultural differences influence (a) the costs of doing business in each country, (b)
the likely future economic development of that country, and (c) business practices.
Source: mybusinessedu
I would like to choose two countries such as America and China that appear to be culturally diverse
in terms of cost involved, future economic development, and business practices. In the United States,
doing business can be very easy as everyone does businesses in comparison to China. However,
cultural differences teach different values, norms, beliefs, language, educational institutes, religions,
and aesthetics etc. so that for instance what might be polite in the U.S. could be highly insulting in
China. Some of the major cultural differences between America and China are as follows:
a) Cost of doing business in each country: In the US, it could be easy to set up any businesses due
to liberal policies regarding business activities whereas China has strict policies to open up new
businesses. Unlike the US, China has more economical factors of production such as men, machine,
material and management. China has totalitarian economic system so that it could take years to get
permissions for doing business activities. On the contrary, America has free market economic
system so that running everything is quite easy but of course labor costs are very high in the US.
b) The likely future economic development: Although there are no much more differences in the
economic growth, according to world bank report, economic growth of China were10.6% in 2010,
9.5% in 2011, 7.8% in 2012, 7.7% in 2013, and 7.4% in 2014 whereas American’s economic growth
were 2.5% in 2010, 1.6% in 2011, 2.3 % in 2012, 2.2% in 2013, and 2.4% in 2014 respectively. The
difference in economic growth indicates that China is going to be world’s economic growth by 2025,
followed by the US, India and Japan respectively.
c) Business Practices: Chinese businessmen want to value more on building relationship with
buyers but American don’t like to do so. In the same way, Chinese want to interact face-to-face
whereas American avoids this system. While this can slow down the pace of business, trust is at a
premium in the Chinese business culture. Don't be surprised if a business partner asks you about
your personal life or even your finances. This is a sign of interest, not indication of rudeness or
disrespect. While making business decisions, Chinese believe in group decision, and finally say by
the “boss”, American, on the other hand, believe in individual and made by a single person. Chinese
are quite, reserved and often make a clumsy communication but most of American are outspoken,
eloquent and make an effective communication.
In short, we can say that there will always be differences in doing businesses in different cultures or
nations. Thus, businessmen should be able to address these differences before entering into an
international business so that they can be successful and achieve a competitive advantage over its
rivals.
Source: quizlet
Responses to this question will obviously vary based on the countries chosen by the students, and
their knowledge of the countries. Hopefully the student can present some information on the
dimensions of culture including values, norms, social structure, religion, language, and education of
the countries and also describe the key differences and similarities of the countries along these
dimensions.
4. Reread the Country Focus about Secularism in Turkey. Then answer the following questions:
a. Can you see anything in the values and norms of Islam that is hostile to business? Explain.
b. What does the experience of the region around Kayseri teach about the relationship between Islam
and business?
c. What are the implications of Islamic values toward business for the participation of a country such
as Turkey in the global economy or becoming a member of the European Union?
a. Yes . There are several aspects of Islam that are hostile to business . However, such restrictions
are there in every religion and not only in Islam . Countries which focus heavily on religions are
poor examples of globalization in general.
In Islam , if one follows religion strictly, he will likely pray five times a day. This overall reduces the
productivity and utilization of the employee . Out of these five prayers , three of them fall in the
normal business hours and thus will impact working hours . In addition , if we consider lunch and
other breaks , the individual will likely be out of work for nearly 3 hours a day . This is not very
competitive and can be hostile to business . In addition to this , Islam in general prohibits women to
work freely . This means diversity and inclusiveness is often impacted . It has been shown that
diversity and inclusiveness results in higher productivity . These factors make Islam hostile to
business .
b . The experience of Kayseri teach that there may be various interpretation for success in business
in Islamic world . While some people may translate the success of the area to Islamic forces , others
may see external factors for it . While there may be tenets of the religion that supports business ,
there are also other aspects that hinders business practices . Thus we need to look at it from a
holistic point of view . Merely attributing it to one factor is not the appropriate approach in
understanding relationship between Islam and business .
c. When a country like Turkey wants to be globalized or get integrated in the European Union , they
need to consider that influence from the outside may cause them to mo ose of their Islamic values .
This is not a big deal if a country is secular ( like Turkey ) . However , for a strictly theocratic nation
, the challenges may be stiffer . There are compromises required from both the sides ( EU and
Turkey ) and proactive effort in cross cultural or cross religion areas need to be covered .
5. Reread the Management Focus on China and Its Guanxi (các mối liên hệ cá nhân; con ông cháu
cha) and answer the follow questions:
a. Why do you think it is so important to cultivate guanxi and guanxiwang in China?
b. What does the experience of DMG tell us about the way things work in China? What would likely
happen to a business that obeyed all the rules and regulations, rather than trying to find a way around
them as Dan Mintz does?
 c. What ethical issues might arise when drawing on guanxiwang to get things done in China? What
does this suggest about the limits of using guanxiwang for a Western business committed to high
ethical standards?
a. It is very important to cultivate both guanxi and guanxiwang in China in order to adapt to the
culture of the country . In China , guanxi is considered as a personal ties and social position that is
more important than the law . There are many businesses in China that even a business plays under
the rules but doesn't try to bend them in their favor , they failed to succeed.
There are so many laws that without guanxi and guanxiwang nothing would get done and a business
would go out of business . The connections that a businessman makes can either make or break a
deal . A deal gone well will give that businessman prestige and allow for him easy access to other
resources in the future.
b. The experience of DMG tell us that things or people don't work for free in China . If you ask for
a favor , you need to repay for it . There is always a cost . The business that tried to follow all of the
rules would never get any business .
c. In China , it is not a bribery . Adapting to Chinese mentality " guanxi " is ethical for them and
important to the community and to their relations . As to Western mentality in United States , it is
considered as bribery and nepotism that is illegal . The ethical issue is also a law in the United States
, bribery . The question is should we do business with people who expect favors in turn for a favor ?
What if that is the only way to do business ? These are hard questions . A Western business could
never follow through with guanxiwang if they were committed to high ethical standards . They
would have to go against their beliefs to work in China . What is happening today ? Is Shanghai
different or the same ? Guanxi and guanxiwang is still the way businesses go about their business .
It is the way it works and everyone is expected to give back when given to . It is not bribery in China
as it is in the United States . This is a quote on guanxi:
Keep in mind that " Guanxi " can take on many forms . It does not have to be based on money . It is
completely legal in their culture and not regarded as bribery in any way . So , there is no need to
feel uncomfortable about it . Trustworthiness of both the company and individual is an important
component . Following through on promises is a good indication of this . Treating someone with
courtesy while others treat him or her unfairly is another aspect . Frequent contact fosters
friendship as well . Chinese feel obligated to do business with their friends first . There are risks
with this system , as well . When something goes wrong , the relationships are challenged , and
friendships quickly disappear . " Guanxi " can also be very one - sided . When " Guanxi " is
involved , there is a risk of obtaining an invoice of twice the amount that you bargained for . [ 1 ]
CHAPTER 6 - Hoa
1. Mercantilism is a bankrupt theory that has no place in the modern world. Discuss.
In its purest sense, mercantilism is a bankrupt theory that has no place in the modern world. The
principle tenet of mercantilism is that a country should maintain a trade surplus, even if that means
that imports are limited by government intervention. This policy is bankrupt for at least two
reasons. First, it is inconsistent with the general notion of globalization, which is becoming more and
more prevalent in the world. A policy of mercantilism will anger potential trade partners because it
will exclude their goods from free access to the mercantilist country's market. Eventually, a country
will find it difficult to export if it imposes oppressive quotas and tariffs on its imports. Second,
mercantilism is bankrupt because it hurts the consumers in the mercantilist country. By denying its
consumers access to either "cheaper" goods from other countries or more "sophisticated" goods
from other countries; the mercantilist country's ordinary consumers suffer.
2. Is free trade fair? Discuss!
Cách 1: Free trade means trade between two countries without any restrictions, free trade should be
consider as fair because it provides a producer a fair price and farmers receives a stable minimum
 price. It makes long term relationships between buyers and producers, it also provides equal
employment opportunities for all and working conditions are safe
Cách 2: Free trade refers to the flow of goods and services across the boundaries without any tariff
and non-tariff barriers. Free trade shall be fair if all participating countries are benefitted. Free
trade increases flow of goods and services though, it does not prove advantageous to all.
Underdeveloped countries do not have well developed technologies and firms, thus firms from
developing countries could not compete with developed countries. Hence, developed countries tend
to gain disproportionately. Trade between equally developed countries could be beneficial but
trade between developed and developing countries proves beneficial to former.
Hence, some forms of restrictions and barriers are prerequisite for making trade advantageous to
all participating countries.
3. Unions in developed nations often oppose imports from low-wage countries and advocate trade barriers
to protect jobs from what they often characterize as “unfair” import competition. Is such competition
“unfair”? Do you think that this argument is in the best interests of (a) the unions, (b) the people they
represent, and/or (c) the country as a whole?
The correct answer is b. This argument is in the best interests of the people they represent.
Explanation:
Trade unions in developed countries tend to support trade restrictions, because products made in
countries with lower wages are generally cheaper than those made in those developed countries. For
example, a pan loaf that costs about 3 dollars in the United States, can cost about 0.75 dollars in
Mexico. Therefore, import value, including tariffs, is less than that of national production. This
means that, if barriers to trade are not established, many workers lose their jobs due to the fact that
national production is terminated due to the possibility of importing said products.
4. What are the potential costs of adopting a free trade regime? Do you think governments should do
anything to reduce these costs? What?
While there are many benefits to adopting free trade, there are some potential costs. One of the
biggest costs is that the local economy becomes more vulnerable to fluctuations in the global
economy.As the saying goes, if you are a small, open economy, you get a cold whenever the U.S.
sneezes.
Countries can protect themselves to some degree by having somewhat larger but flexible welfare
programs. If someone loses their job, they need income support and probably job training to get
them back to work. Some people will lose their jobs. It can be socially beneficial to ease the
transition, for example by subsidies that have the effect of biasing the market so that new businesses
set up in places where the job losses will be greatest. Also governments can provide or subsidise
retraining programmes so that job-losers are personally enabled to move into the larger number of
new jobs that free trade will create.
5. Reread the Country Focus “Is China Manipulating Its Currency in Pursuit of a Neo-Mercantilist
Policy?” a. Do you think China is pursuing a currency policy that can be characterized as neo-
mercantilist? b. What should the United States, and other countries, do about this?
The exports of China has been growing faster than its imports and some critics suggests that China
is limiting imports through substitution policy, and other says that the currency of China is
low/cheap which keeps its exports price low. Hence China has been criticized a neo-merccantilist
policy.

United Nations along with other nations should keep pressure on China to open its markets to
import and due to low value of China’s currency US needs to push for a revaluation.
6. Reread the Country Focus on moving U.S. whitecollar jobs offshore. a. Who benefits from the
outsourcing of skilled white-collar jobs to developing nations? Who are the losers? b. Will developed
nations like the United States suffer from the loss of high-skilled and highpaying jobs? c. Is there a
 difference between the transference of high-paying white-collar jobs, such as computer programming
and accounting, to developing nations, and low-paying bluecollar jobs? If so, what is the difference,
and should government do anything to stop the flow of white-collar jobs out of the country to countries
such as India?
1. The ones who benefit from the outsourcing of skilled white-collar jobs to developing nations are the
developing nations themselves that are getting these white-collar jobs. It will create more and better
jobs in that country. The company will also benefit from this as well. They will increase their profits
because of the lower cost of producing their products through less labor costs. By doing this it will
give the company a much more competitive advantage in the global market.
The losers in the outsourcing of skilled white-collar jobs to developing nations will be the country
where to company is from. The people who held those white-collar jobs prior to them moving to a
developing country will lose their jobs. This will hurt not only the people themselves but the country
as a whole. “Unfortunately, with fewer jobs available for unskilled workers, people may find
themselves in exceptional poverty. Poverty does not benefit the US economy since it reduces
consumer spending and tax revenues” (www.wisegeek.com, 2013).
2. Yes they will. They will lose these jobs to the developing countries as mentioned in the reading. “For
a Saudi Arabian chemical plant Fluor is designing, 200 young engineers based in the Philippines
earning less than $3,000 a year collaborate in real time over the Internet with elite U.S. and British
engineers who make up to $90,000 a year (Hill, 2011). It makes you wonder why a company
wouldn’t do this. When the costs are lowered, the companies will be more competitive in the world.
Their profits will increase, and they will be able to expand more. The growing company will be able
to create more jobs for the people in developed countries like the United States.
3. The difference between the transference of high-paying white-collar jobs to developing nations and
low-paying blue-collar jobs is that the low-paying jobs are outsourced because they have a large
workforce and require lots of money to pay these employees. Whereas the high-paying white-collar
jobs require more money to pay each individual employee, but does not come close to the low-
paying employees total. Companies outsource for the good of the company. If they were to
outsource their high-paying white collar jobs they would start to look greedy. The government
should prevent this from happening, because it is unnecessary for these companies to do this, and if
it is necessary then it should be limited. Each country needs jobs for their own people as well as
helping out globally. They need to regulate the outsourcing of jobs to keep their own countries
people employed.
7. Drawing upon the new trade theory and Porter’s theory of national competitive advantage, outline the
case for government policies that would build national competitive advantage in biotechnology. What
kinds of policies would you recommend that the government adopt? Are these policies at variance with
the basic free trade philosophy?
Porter’s theory of national competitive advantage argues that four broad attributes of a nation
shape the environment in which local firms compete, and that these attributes promote or impede
the creation of competitive advantage. These attributes are: factor endowments, demand
conditions, related and supporting industries, and firm strategy, structure, and rivalry. Porter goes
on to argue that firms are most likely to succeed in industries in which the diamond (which are the
four attributes collectively) is favorable. Porter adds two factors to the list of attributes described
above: chance and government policy. The New Trade theory addresses a separate issue. This
theory argues that due to the presence of substantial scale economies, world demand will support
only a few firms in many industries. Underpinning this argument is the notion of first-mover
advantages, which are the economic and strategic advantages that accrue to early entrants into an
industry. One could argue that when the attributes of a nation are conductive to the production of a
product, and when the manufacturers of that product have experienced some “chance” events that
have provided them first-mover advantages, the governmental policies of that nation should
 promote the building of national competitive advantage in that particular area. This could be
accomplished through government R&D grants, policies that favor the industry in capital markets,
policies towards education, the creation of a favorable regulatory atmosphere, tax abatements, and
the like. Ask your students whether they think this policy is at variance with the basic free trade
philosophy. One could argue that it is, because the government intervention is creating the basis for
comparative advantage. Conversely, one could argue that if a country establishes a comparative
advantage in a particular area that is based on a unique set of attributes (such as Swiss production
of watches), world output will be favorably impacted by letting that country pursue its area of
comparative advantage.
8. The world’s poorest countries are at a competitive disadvantage in every sector of their economies.
They have little to export. They have no capital; their land is of poor quality; they often have too many
people given available work opportunities; and they are poorly educated. Free trade cannot possibly be
in the interests of such nations. Discuss
Poor countries have number of barriers for their national growth. Surrounding conditions make
them more dependable upon other countries for their common needs.
Free trade is not possible: Custom duties, taxes and other charges are main source of income for
country. They import products from different countries and impose heavy duties upon them. That’s
why free trade is not possible. Complex international trade procedures: These countries make
complex their procedures and documentation to charge more duties from foreign countries. That is
not favorable for liberalization and globalization for international trade. Product costs are high:
Due to heavy custom duties, unavailability of raw materials and poor resources condition like
transport add extra expense. Thus final price of product become so high. That is not affordable for
majority of customers. HDI is low and poverty index is high: On that case. We found that Human
development index of these countries are so low and poverty index are high.
Đọc thêm
Characteristics of Poor Countries
Low capital: Industries are not developed. Less investor is available. Source of income of citizens of
poor countries are limited. They have less manufacturing units. Resources of country are
underdeveloped or no developed: Roads, Electricity, transports, etc. are not developed. That’s why
setting up organization or doing investment is risky factors. Literacy Rate is low: Less people are
educated thus we found less skilled labors. But at present stage both skilled and unskilled labor are
necessary for using good technology and production.
Raw Materials Unavailability: Raw materials are less available or unavailable. It may be gathered
from distance sources that incur high expenses. Poor infrastructure for production of product &
services: Due to undeveloped mode of every sector , Production infrastructure is not suitable.
Markets are not available: Market for products are not available. People want low cost product
because they have less sources of income. Customers are less available for good products: High
quality products are costly. They are not beared by customers because their purchasing power is
low. More dependent families: Less people earn and more people want to consume. It means more
people are dependent upon income generating members. Lands are not suitable for agriculture:
Lands are mostly barren due to poor irrigation system, mismanagement of water, unavailability of
modern agriculture methods application and tools, etc. People depend upon still upon ancient
irrigation system. Cheap labors are available: Labors are easily available at low costs but they are
mostly unskilled. So they are useless in technical works or in high rated projects.
Poor Technological Development: Due to poor infrastructure of R&D and unskilled employees,
technological innovations may not possible and even tuff task. Natural Disaster are bane: In the
time of flood, earthquake, Tsunami, Draught, etc. People are becoming helpless. Because they have
not good rescue system and disaster control systems available. Industries are also feeling insecure
due to heavy losses. Poor Health sector: well in case of infection or viral desease they have no good
 health services available so the infection of deseases are become high. Death rates increase. E.g.
African countries are badly affected with such cases. Most of the time they depend upon UNO,
WHO or other countries for help. Dirty Political structure & corruption rate is high: Mostly in
these countries, Rich persons dominate the politics. They exploit poor for their own interests. For
every work bribes are required Cross cultural Barriers: Due to different language and culture,
Business adaptability in these countries are tuff. Less persons know 1 international languages.
Economic development is low: It leads nation growth is low. GDP and per capita income are also
low. Also the value of currency in these countries is low. Judiciary or Legal procedures are so
complex: Industries feel so uncomfortable due to lengthy legal procedures and sanctions. Export are
less : Due to low production exports are less found but in other hand imports are more because they
are more depend upon neighbor countries for their needs.
CHAPTER 7 - Hiếu
1. Do you think governments should consider hu- man rights when granting preferential trading rights to
countries? What are the arguments for and against taking such a position?
Cách 1: Yes, governments most definitely should consider human rights if you are going to engage
in preferential trading rights (i.e. lowering tariffs, etc). Protecting human rights is an important
part of foreign policy for many. It can improve the human rights policies of the ones they are
trading with. It is also the moral thing to do when engaging in trade. Myanmar is a good example.
The US imposed trade sanctions with them due to poor human rights, but after they started turning
it around the US began to open those trade sanction.
The only argument against this stance could be the potential for limited trade from major exporting
countries that have poor human rights policies.
Cách 2: I do think governments should consider human rights when granting preferential trading
rights to countries. In the world I live in I have strong beliefs that every individual should be
granted basic human rights, in whatever country they reside in. Yes, trading with countries such as
China can bring a boost to the economy, but at what cost? I would rather pay the extra cash in
order to ensure the person who was making the item did it in a safe environment with basic human
rights. Countries such as China are frequently a violator of human rights, and trading with the U.S.
is very important to China. This gives the U.S. a kind of leverage when trying to influence China’s
human rights policies, and we have used this leverage in the past, and I feel we should continue to
do so showing other Countries what we are willing to do in order to provide ethical international
business. Although, in doing this we run the risk of China choosing to trade with a country other
then the U.S. If we were to forget about human rights, and were too just trade with China it could
also make human rights better without even trying. This could happen by the income levels
increasing due to trade, which in return, could provide greater wealth for the people who will then
be able to mandate, and obtain better treatment.

2. Whose interests should be the paramount con- cern of government trade policy: the interests of
producers (businesses and their employees) or those of consumers?
Cách 1: The long run interests of consumers should be the primary concern of governments.
Unfortunately consumers, each of whom may be negatively impacted by only a few dollars, are less
motivated and effective lobbyists than a few producers that have a great deal at stake. On the flip
side of the coin, employees may lose jobs if there are more efficient foreign competitors, some would
argue that this is just the nature of competition, and that the role of government should be to help
these employees get jobs where they can be efficiently employed rather than to protect them from
reality in inefficient firms.
Cách 2: The long run interests of consumers should be the primary concern of governments, based
on a utilitarian approach (the most good). Unfortunately consumers, each of whom may be
negatively impacted by only a few dollars, are less motivated and effective lobbyists than are a few
 producers who may have a great deal at stake. While in some instances it may be argued that
domestic consumers will be better off if world-class domestic producers are nurtured and allowed to
gain first mover advantages in international markets, it is doubtful that the government will be
better than international capital markets at "picking winners", and will more likely pick the firms
with the greatest political clout. While employees may well lose jobs if there are more efficient
foreign competitors, some would argue that this is the nature of competition, and that the role of
government should be to help these employees get jobs where they can be efficiently employed
rather than to protect them from reality in inefficient firms.
3. Given the arguments relating to the new trade theory and strategic trade policy, what kind of trade
policy should business be pressuring government to adopt?
Cách 1: Businesses should urge governments to target technologies that may be important in the
future. Government should provide export subsidies until the domestic firms have established first
mover advantages in the world market. Government support may also be justified if it can help
domestic firms overcome the first-mover advantages enjoyed by foreign competitors and emerge as
viable competitors in the world market. In this case, a combination of home market protection and
export-promoting subsidies may be called for.
Cách 2: The NTT was adopted to identify the trade patterns internationally. This theory explains
why companies are trading internationally and are partners in selling similar goods and services to
each other. The products that are dealt with are largely and globally are having a great impact on
the economy that is international. In this the companies who are having the advantage of having a
vast selling background and the sale of the products are more and have vast growth then the
companies form the monopolistic competition in the market.
Strategic Trade Policy:
The government uses this trade policy by shifting the profits from internationally to the domestic
level. The government use this policy to enhance the level of the welfare of the economy.
The import and export and the research and development are facing strategic competition in the
global market has an effect on the development of the international market.
2). The strategic trade policy the business are pressuring on the government are as follows:
 The business should urge the government to adopt the advanced technologies for the business and
use the subsidies so that there should be developed in work and the companies should progress.
 Until the domestic firms have stepped into the global market, the government should provide
subsidies to the companies so that they get developed and do not face any financial issues.
 There is a large competition in the market, so to stand in that market the government should
provide the necessary advantages like proper resources and technology that help them to grow and
develop in the market.
 To adopt the level of the international market, so the government is shifting to the domestic markets
to not face the losses in the future.
4. You are an employee of a US firm that produces personal computers in Thailand and then exports
them to the United States and other countries for sale. The personal computers were originally
produced in Thailand to take advantage of rela- tively low labor costs and a skilled workforce. Other
possible locations considered at the time were Malaysia and Hong Kong. The US government decides
to impose punitive 100 % ad valorem tariffs on imports of computers from Thailand to punish the
country for administrative trade barriers that restrict US exports to Thailand. How should your firm
respond? What does this tell you about the use of targeted trade barriers?
Cách 1: As long as the manufacturing requirements haven't changed significantly, looking at
Malaysia or Hong Kong again for production would appear obvious. By the U.S. government
introducing a specific ad valorem tariff on Thai computer imports, it would be easy to get around
these by looking at other locations. Hence such targeted trade barriers can often be easily
circumvented without having to locate production facilities in an expensive country like the U.S.
 Cách 2: As long as the manufacturing requirements have not changed significantly, looking at
Malaysia or Hong Kong again for production would appear obvious. When the U.S. government
introduces a specific ad valorem tariff on Thai computer imports, it forces manufacturers to get
around these restraints by developing other strategies, including looking at other locations. Another
approach would be to produce the computers in sections and then assemble them in the United
States, depending on the legislation. Or continue to manufacture in Thailand and assemble them in
Malaysia or Hong Kong. Such targeted trade barriers can often be easily circumvented. Targeted
trade barriers, as with most forms of government intervention, are usually ineffective.
Cách 3: Asia clearly really likes a competitive advantage in production of computers, which in turns
perhaps due to lessen labor costs, tax bonuses by the govt and support of related industries ( that
may contain industries that offer inputs for the purpose of the computers). this benefits allows this
to produce for lower cost and gives lower prices, when compared to other personal computers made
in UNITED STATES. The problem will begin if the contract price makes the value exceed the price
tag on a computer made domestically inside USA. Whenever that happens therefore US consumers
will buy domestically produced computers as they are cheaper than imported ones.
As a firm there is nothing much that can be done as US tariff imposition is in retaliation for Thai
policies that discourage US imports. One option is to lobby the Thai government to stop such
policies that impede free trade, so that US can be asked to follow suit and remove/reduce the tariff.
The other option is that the firm looks at higher efficiency levels so that its costs are reduced. If the
lower cost +100% tariff can be brought below the US domestic price then some Thai exports can
survive, though the level will be lower than that under free trade.
5. Reread the Management Focus “Protecting U.S. Magnesium.” Who gains most from the anti-
dumping duties levied by the United States on imports of magnesium from China and Russia? Who are
the losers? Are these duties in the best national interests of the United States?
US Magnesium and the company’s employees gain the most from the anti-dumping taxes on
Chinese and Russian magnesium imports.
The Russian companies, Chinese companies, and magnesium consumers such as Alcoa are the losers
in this scenario.
No, it is not in the US’s best interests. US Magnesium was unable to supply Alcoa or the rest of the
market with enough magnesium for Alcoa to operate in the US. While saving US Magnesium and
400 workers, the US has lost Alcoa’s workers and other business that depends on magnesium as non
US based companies have a competitive advantage because they can buy cheaper
magnesium.
CHAPTER 8 - Sỹ
1. In 2008, inward FDI accounted for some 63.7 per-cent of gross fixed capital formation in Ireland but
only 4.1 percent in Japan (gross fixed capital formation refers to investments in fixed assets such as
factories, warehouses, and retail stores). What do you think explains this difference in FDI inflows into
the two countries?
 Brainly:
This difference in FDI inflows into Ireland and Japan is accounted for by the prospects of economic
growth.
Explanation:
Ireland is a growing economy. Japan's economy has been shrinking for some years now. Ireland
has improved its competitiveness. It is providing a better open, transparent, conducive, and
dependable investment environment for both foreign and domestic firms to thrive. It has eased the
doing of business in the economy, provided access to imports and exports trade, and boasts of a
relatively flexible labor market. These are backed by enhanced protection of intellectual property
rights.
 Studypool: Chọn 1 trong 4 cái =))
Answer 1:
Foreign Direct Investment (FDI) as defined by World Trade Organization (WTO) is the act
whereby investor from one, which is their motherland, acquires an asset from a foreign state with
the intention of managing the asset. FDI is very much significant in the developing nations like those
in Latin America, Asia, and Africa because it mainly boosts the economic growth of those countries.
Therefore, in 2008 Ireland had a high FDI than Japan because it is less developed compared to
Japan which is already an industrialized country. Japan, being an industrialized state, do not
require more industries like factories because if they are established more in the state like in
Ireland, it will be a surplus to the country hence resulting in wasting of resources. Raw materials
are another cause of the difference in FDI growth. A country like Ireland which is less developed
compared to Japan has a lot of raw materials which require being mined and utilized to bring
development to the country. Therefore, investors from the developed countries see the opportunity
of the raw materials hence start-up industries there to exploit the raw materials and also through
the process creating employment to the locals and economic growth at large. Another cause of the
difference in FDI between Ireland and Japan is opportunities for income. Ireland being a
developing nation has a lot of opportunities which have not yet been utilized. Hence this is the
reason why it had more industries established in2008 than Japan. Some of the opportunities
include manufacturing and processing industries which are less compared to those in Japan,
information, and communication technology (ICT) opportunity, hospitality sector like hotels and
catering, mining and processing opportunities among others. Investors came to Ireland to exploit
those opportunities so that they may increase their income.
Answer 2:
This can be for many reasons. For example, Ireland can be perceived as a better destination for
their investments against Japan. Ireland can also be easier to establish operations in which is
appealing to companies because it is less work and less regulations to take into account. Japan has
many regulations that companies have to take into account that may not be worth doing when
Ireland is more favorable and has way less regulations. It all depends on whether which country has
a more favorable growth prospect and in this case it is Ireland. When is comes down to it the gross
capital formation is the total amount of capital invested in that particular country. So Ireland
having a much higher gross fixed capital formation is a great look to how successful a company
would be because of all the investment made in that place.
Answer 3:
Foreign Direct Invest (FDI) inflows essentially stem from the attractiveness of the host country and
their respective policies towards FDI. In this situation, Ireland received more FDI than Japan
because to foreign countries, Ireland was the more attractive nation for their specific investments.
When deciding whether to invest in a host nation or not, the home country will look at the relative
openness of the economy as an indicator. Ireland is a developed nation that has few barriers to
trade which invites foreign firms to enter their economy. On the other hand, Japan has historically
been a nation that has implemented protectionist policies and regulations by favoring domestic
markets over trading on the global stage, in efforts to spur growth their economy. They
implemented non-tariff barriers to trade such as quotas, high standards, etc. Moreover, these
barriers made Japan less attractive for FDI because these policies and general attitude are difficult
to infiltrate and/or overcome. Additionally, Ireland is a country that, at the time before the financial
crisis, had a stable and strong economy and favorable political climate, which made it a target for
FDI. Overall, FDI only occurs if a home nation will experience greater benefits than losses and in
2008, Ireland’s benefits were greater than their losses, compared to Japan where costs were
ultimately high and risky.
Answer 4:
 As the professor said, gross capital formation summarizes the total amount of capital invested in
factories, stores, office buildings etc. If investment in capital is high, a country has ideal growth
prospects. This entire discussion boils down to one term FDI. FDI is Foreign Direct Investment.
Foreign Direct Investment is an investment made by a company or individual in one country in
business interests in another country, in the form of either establishing business operations or
acquiring business assets in another country, such as ownership or controlling interest in a foreign
country. When looking at Ireland vs Japan their opinions on FDI are different. Ireland is FDI
friendly where Japan discourages inward FDI. One reason that Ireland could have better FDI is
because of having a well-educated and inexpensive workforce compared to Japan, which is more
expensive. It could also be seen to be easier for companies to establish operations in Ireland
compared to Japan. However, Japan does send red flags to companies because of their regulations
that cause stress to companies. Ireland tends to be the country to go to because companies see it to
be an easier path and more successful for them long term, I think this explains the difference in FDI
inflows.
2. Compare and contrast these explanations of FDI: internalization theory and Knickerbocker's theory of
FDI. Which theory do you think offers the best explanation of the historical pattern of FDI? Why?
 Chegg:
Internalization theory: firms use foreign direct investment rather than licensing for three reasons.
First, licensing can leak technology that gives the firm a competitive advantage. Second, a firm does
not strongly control the licensee in how the product is made, promoted, priced and other strategic
areas. Multinationals that license can be at a competitive disadvantage to those that don't. Third,
not everything is licensable. For these reasons, a firm will use FDI rather than licensing.
Knickerbocker's theory: oligopolistic industries exist when only a few large firms dominate an
industry. Whatever one firm does has a massive impact on the other firms. Therefore the firms pay
attention to the other firm's actions, including FDI. If one firm has successful FDI in another nation,
then the other firm's export market to that nation is obliterated. The investing firm may obtain a
first mover advantage or discover something that could grant a competitive advantage. Therefore
the other firms will initiate FDI to said nation.
Internalization theory gives the best explanation
Reason: Knickerbocker only addresses FDI in an oligopolistic environment. FDI is not limited to
oligopolistic environments. Internalization theory follows a logical framework that addresses
exports and licensing while matching with what happens historically.
3. What are the strengths of the eclectic theory of FDI? Can you see any shortcomings? How does the
eclectic theory influence management practice?
The eclectic theory of FDI is useful in explaining how the location-specific advantage is responsible
for deciding the direction of FDI. It adds on to the theory of internalization by adding the factor
endowments of the location to basic assets of the investing firm, which ultimately defines the
rationale and direction for the FDI.
This theory does not seem to have any short-comings since it even explains the effect of secondary
factors related to location which have been termed as externalities.
This theory is very useful in management practice since it clearly helps one to develop a sound
rationale for investment in any country. It evaluates the various factors related to the location, both
favorable and unfavorable along with the strength of the firm's assets related to technology, capital
and management skills to arrive at a final rationale and direction.
4. Read the Management Focus on Cemex, and then answer the following questions:
1. Which theoretical explanation, or explanations, of FDI best explains Cemex's FDI?
CEMEX’s utilized acquisitions as their FDI form. The textbook notes that “Cemex believed that it
could create significant value by acquiring inefficient cement companies in other markets and
 transferring it’s skills in customer service, marketing, information technology, and production
management to those units.” The textbook goes on to say that Cemex worked to acquire established
cement makers in other countries. The very definition of an acquisition approach to FDI is buying
up existing companies in a new market, which is what CEMEX did.
CEMEX used the internalization theory for FDI. They primarily did so because of their perceived
strength of management, marketing, production and IT as it relates to production. CEMEX
believed they were a leader in providing low cost cement with high rates of customer service as a
result of their radically different IT system that matched consumer demand and production. By
applying the knowledge and established best practices they possessed as a company to a new
company in a foreign market, they achieved profit. In addition, other FDI strategies, like exporting
and licensing, did not align with CEMEX business model or corporate culture.
2. What is the value that Cemex brings to a host economy? Can you see any potential drawbacks of
inward investment by Cemex in an economy?
The benefits CEMEX brings to a host country includes resource-transfer effects and economic
growth. Resource-transfer effects include things like technology spillover, which can stimulate
economic growth. With CEMEX bringing their IT solutions to a host country, there would logically
be technology spillover as employees gain additional training and education. Economic growth
would occur from the increased tax revenue to the host country.
Potential drawbacks of inward investment by CEMEX in a host country's economy include
elimination of jobs and the exploitation of the labor pool. Sometimes when an acquisition occurs,
jobs are eliminated. This would have a negative effect on the host country’s economy. The
exploitation of labor can occur in developing countries that do not have clear or enforced labor
laws. Employees can quickly become overworked and underpaid without government regulation
and inspection.
3. Cemex has a strong preference for acquisitions over greenfield ventures as an entry mode. Why?
Acquisitions can be executed much faster than establishing a new company from the ground up in a
greenfield investment. The faster a company gets into a new market, the faster they acquire that
company’s market share, resources, brand and local market knowledge. Building a factory would
be required for CEMEX in a new country, which would be expensive and time consuming.
Acquiring these assets in an acquisition is a much more cost-effective plan. Additionally,
acquisitions largely reduce market entry barriers in new, unknown markets.
5. You are the international manager of a U.S. business that has just developed a revolutionary new
personal computer that can perform the same functions as existing PCs but costs only half as much to
manufacture. Several patents protect the unique design of this computer. Your CEO has asked you to
formulate a recommendation for how to expand into western Europe. Your options are (a) to export
from the United States, (b) to license a European firm to manufacture and market the computer in
Europe, or (c) to set up a wholly owned subsidiary in Europe. Evaluate the pros and cons of each
alternative, and suggest a course of action to your CEO.
 Quizlet:
In considering expansion into Western Europe, an international manager might consider three
options: FDI, licensing, and export.
With export, assuming there are no trade barriers, the key considerations would likely be transport
costs and localization. While transport costs may be quite low for a relatively light and high value
product like a computer, localization can present some difficulties. Power requirements, keyboards,
and preferences in models all vary from country to country. It may be difficult to fully address these
localization issues from the US, but not impossible.
Since there are many computer manufacturers and distributors in Europe, there are likely to be a
number of potential licensees. But a licensing arrangement implies that valuable technological
 information may have to be disclosed and that the firm's competitive advantage may be lost if the
licensees uses or disseminates this proprietary knowledge improperly.
FDI (setting up a wholly owned subsidiary) is clearly the most costly and time consuming approach,
but the one that best guarantees that critical knowledge will not be disseminated and that
localization can be done effectively. FDI will also place you in the market into which you want to sell
and allow you to be near the consumer. Given the fast pace of change in the personal computer
industry, it is difficult to say how long this revolutionary new computer will retain its competitive
advantage. If the firm can protect its advantage for a period of time, FDI may pay off and help
assure that critical knowledge is not lost. If the innovation is not core and can be easily copied, then
licensing would allow the firm to get the quickest large-scale entry into Europe and make as much
as it can before losing advantage.
 Studymode (thấy không trustworthy lắm vì thấy sai chính tả tùm lum):
I am the international manager of a US business that has just invented a revolutionary new
personal computer that can perform the same functions as existing PCs but costs only half as much
to manufacture. Several patents protect the unique design of this computer. My CEO has asked me
to formulate a recommendation for how to expand into Western Europe. My options are (1) to
export from the US, (2) to license a European firm to manufacture and market the computer in
Europe
There are pros to exporting out of the U.S. If my company is solely based out of the U.S it is easy for
me to have eyes and hands on abilities to manage my company and the cost of having this is cheap.
It is cheap because I am already here. The down side to this is that it is much more expensive to pay
employees wages here in the united states. The cost of doing business overseas when solely based out
of the United States becomes very expensive. The cost of employees, the cost of the warehouse
depending on weather or not it is leased or bought, the cost of exporting basically all of your
product except what is bought in the United States. These are all the down sides of doing business
over seas when based solely out of the United States. Now these are all also the advantages of doing
business overseas if we were to license a European firm to manufacture and market the computer in
Europe. Unfortunately The travel expense would be costly but at the same time you would save
tremendously in shipping costs. This of course is all assuming your biggest customer base is on that
side of the world. If the biggest customer base is in fact in the United States then this entire theory
should be completely reversed. Another downside to option number two is that you give a great deal
of trust to another company and are betting on that companies management skills. If you contract a
poor company to produce your computers you run the risk of having a poor product release and in
turn risk your companies reputation. This is a risk that can somewhat be managed by proper
research and small trial and error test runs. This obviously isn’t a decision that is made quickly and
without much fore thought.
I would recommend that we do a cost analysis and determine exactly what the cost of doing business
is and what exactly we can afford without stepping to much into our profit margin. I would be
willing to pay alittle more for a better company that would be able to produce a quality product.
This is justified because of the fact that we have figured out a way to produce a product for half the
cost. This being said, I think that the profit margin is already set pretty high so there is room to
budge for spending having to do with quality assurance. A reputation is very hard to build but once
it is built it is very easy to turn it into a bad one. If we start off on the right foot then we aren’t going
to have to worry about trying to recover a major mistake. Proper research and a well thought out
stategy can prevent us from coming back and doing this from the beginning all over again.
CHAPTER 9 - Quốc Trung
1) NAFTA has produced significant net benefits for the Canadian, Mexican, and U.S economies. Discuss.
The North America Free Trade Agreement (NAFTA) was passed in 1994. Starting with eliminating
the majority of taxes on products traded between the three countries followed with a gradual phase-
 out of other tariffs. The Agreement contributed to more exports. The two-way trade between
Mexico and the U.S has more than quadrupled since the agreement was implemented. Another
direct effect is more investments. The U.S is the largest foreign direct investment in Mexico.
Investments in Mexico have helped increase the efficiency of U.S domestic production. Also more
jobs were created. Even though some jobs were lost, more and better jobs were created. In
conclusion this agreement has benefited all three countries from more free trade.
2) What are the economic and political arguments for regional economic integration? Given these
arguments, why don’t we see more substantial examples of integration in the world economy?
The economic argument for regional integration is mostly positive. It’s based on the presence of
extra gains from the free flow of trade and investment between the countries involved in the
agreement. The political argument is that it is mainly based on geography. The participating
countries have to be neighboring countries, and many neighboring countries have border disputes
lessening the possibilities for regional integration.
3) What in general was the effect of the creation of a single market and a single currency within the EU
on competition within the EU? Why?
i) a single market on competition within the EU is an increase in competition between companies from
the EU countries. Trade barriers are swept away which makes it easy for companies to get involved
in cross-border trade and extend the number of markets they serve without spending a lot of extra
money. This should help to contain inflation and will therefore be beneficial to consumers.
ii) a single currency combined with a single market within the EU have on competition is the price
transparency across Europe.
4) Do you think it is correct for the European Commission to restrict mergers between American
companies that do business in Europe? (For example, the European Commission vetoed the proposed
merger between WorldCom and Sprint, both U.S. companies, and it carefully reviewed the merger
between AOL and Time Warner, again both U.S. companies)
In my opinion, I do not think it is right for the European Commission to restrict merger between
American companies that do business in Europe. However, I do believe that upholding some legal
laws that limit certain restrictions to ensure the legality of American business done in Europe. By
doing so, the European Union creates a positive economic unity throughout Europe. The monetary
stability with the use of the Euro, the ability to strengthen individual countries, and the free border
makes Europe a strong country. The ability to restrict, propose, and review any American business
done in Europe gives them the power to control many political and economic issues within the
country. In reality by them limiting the international business sets boundaries on what American
business can do in European grounds
5. What were the causes of the 2010–2012 sovereign debt crisis in the EU? What does this crisis tell us
about the weaknesses of the euro? Do you think the euro will survive the sovereign debt crisis?
Introduction
The European sovereign debt crisis is also referred to as the Eurozone crisis. This is a crisis that has
been in existence since 2008. It affected countries such as Greece, Portugal, Ireland, Spain, and
Cyprus. This crisis when these European countries faced many challenges such as an increase in
public debts, the collapse of financial institutions, etc. During this crisis period, these Eurozone
countries faced many challenges in meeting their financial obligations i.e. being unable to repay or
refinance their government debt.
Causes of the 2010-2012 sovereign debt crisis in the EU
 Fiscal shortcomings: Countries within the Eurozone had unsustainable fiscal policies to control
currency within their specific economies. This resulted to slow growth of the economy, for example,
Greece spent many years and failed to undertake its fiscal reforms which has resulted to the slow
growth of their economy.
 Institutional weaknesses: Many countries within the Eurozone did not have sufficient tools to
enforce national budgetary policies by their institutions. This resulted in a deficit in economic and
fiscal integration that supports currency union within the Eurozone.
 Lack of effective economic policy: EU policymakers did not ensure that all the monetary
instruments were made available to address all the macroeconomic imbalances within the zone. The
inflow of cheap credit from outside the European Union, made possible by the introduction of the
Euro, and the convergence of interest rates, led to an asset bubble in vulnerable economies that the
EU institutions could not prevent.
What does this crisis tell us about the weaknesses of the euro?
It shows that Euro is weakened by its depreciation against other currencies outside the Eurozone
that is stable for example the US dollar. Depreciation of the Euro was as a result of currency
instability in the Eurozone, slow growth rate of the Eurozone economy, poor monetary policies
implemented, etc. that are exhibited as a result of the sovereign debt crisis
Do you think the euro will survive the sovereign debt crisis?
No. Since countries within the Eurozone had poor or slow economic growth, experienced
instabilities in their pricing, had poor monetary systems, etc. it will be difficult for Euro to survive
the debt crisis. This is because other currencies such as dollars are stable and it is, therefore, likely
to weaken the Euro by enhancing surplus imports from the Eurozone countries and limiting exports
by these
6. How should a U.S. firm that currently exports only to ASEAN countries respond to the creation
of a single market in this regional grouping?
Disadvantage as an outsider. CAREFUL CONSIDERATION
An Australian business firm that is currently exporting to only ASEAN countries should seriously
consider opening a facility somewhere in this grouping, as the economics of a common market
suggest that outsiders can be at a disadvantage to insiders. The opening of borders within the
ASEAN bloc also has the potential to increase the size of the market for the firm. Of course it is
possible, after careful consideration, that exporting may still be the most appropriate means of
serving the market.

7. How should a firm with self-sufficient production facilities in several ASEAN countries respond to
the creation of a single market? What are the constraints on its ability to respond in a manner that
minimizes production costs?
The creation of the single market means that it may no longer be efficient to operate separate
duplicative production facilities in each country. Instead, the facilities could either be linked so that
each specializes in the production of only certain items or several sites should be closed down and
production consolidated at the most efficient locations. Existing differences between countries as
well as the need to be located near important customers may limit a firm’s ability to fully
consolidate or relocate production facilities for production cost reasons. Minimizing production
costs is only one of many objectives. For example, location of production near R&D facilities can be
critical for new product development. The location decision needs to examine long-run economic
success, not just cost minimization.
8) After a promising start, Mercosur, the major Latin American trade agreement, has faltered and made
little progress since 2000. i. What problems are hurting Mercosur? ii. What can be done to solve these
problems
The Mercosur trade agreement will make it much easier for European companies to sell
to Mercosur nations by abolishing these barriers. With measures on non-tariff obstacles to trade in
 products, the pact intends to enhance EU exports to Mercosur. Imported products should no longer
be subject to discriminatory tax treatment.
 Mercosur has gone from being a regional economic integration bloc that has achieved exceptional
integration achievement to a stagnated bloc that has failed to reach the early aspirations.
 This research goes beyond existing regional integration ideas that are concentrated on Europe
CHAPTER 13 - Trường Giang
1. In a world of zero transportation costs, no trade barriers, and significant differences between nations
with regard to factor conditions, firms must expand internationally if they are to survive. Discuss
The theory of comparative advantage suggests that activities should take place in the
countries that can perform them most efficiently, given that different countries are endowed with
different factors of production. If there are no barriers or costs to trade, then it is likely that many
industries will be based out of the countries that provide the best set of factor endowments. Given
location economies, a company can develop a global web of value-creation activities to take
advantage of differing factor endowments in differing locations. For firms already located in the
countries with the most favorable factor endowments for their industry, however, there may not be
a need to expand internationally at a certain point in time. As factor endowments evolve, the firm
may want to disperse its value-creating activities to those markets that offer comparative
advantages. If the firm is in a competitive market (think of the example of Clear Vision), it will
benefit from international expansion that includes its value-creating activities because of the Cost
position and product differentiation opportunities such expansion can confer. A firm may be able to
survive in a local market without international expansion, as long as the local market is not targeted
by competitors who have taken advantage of the economies offered by dispersing their value-
creation activities internationally. An example is an inefficient, high-priced locally-owned
supermarket that has not yet faced the entry of Wal-Mart in its market.
2. Plot the position of the following firms on figure 13.6: Procter & Gamble, IBM, Apple, Coca-Cola,
Dow Chemical, Intel, and McDonald's. In each case, justify your answer.
Procter & Gamble would be located in the middle right-hand portion of the graph. This is a
position of high pressures for local responsiveness and moderate pressures for cost reductions. P&G
sells personal and home care products, which do face pressures for local responsiveness. Although
these products are not commodities, there are many competitors in the industry, which implies a
moderate degree of cost pressures. IBM would be in the upper middle portion of the graph. This is a
position of moderate pressure for local responsiveness and high pressure for cost reductions. There
is a moderate amount of pressure for local responsiveness for IBM products due to language
differences and differing voltage requirements for electronic products across countries. IBM is in a
very competitive industry, and cost pressures are high. Apple manufactures computers and other
electronic products. Apple, because it must customize its product offering according to the technical
standards prevailing in a given country would be in the lower right hang side of the graph. Dow
Chemical would be located in the upper left hand portion of the graph. Dow sells products that are
commodity-like by nature. As a result, cost pressures would be high and local responsiveness
pressures would be low for these products. Finally, McDonald's and Coca-Cola would be located in
the middle left hand portion of the graph. Pressures for local responsiveness would be love because
a selling feature for both companies is the "American experience," and cost reduction pressures
would be moderate.
4. In what kind of industries does a localization strategy make sense? When does a global
standardization strategy make most sense?
Finding the balance between standardization and localization of the web content is one of the
preeminent dilemmas that companies face when tapping international markets. Currently,
localization strategy is the develop trends of multinational companies. “A localization strategy
focuses on increasing profitability by customizing the firm’s good or services so they provide a good
 match to tastes and preferences in different national markets.” Firms often use these ways to change
themselves to match local market. Most companies apply localization strategy and successful, such
as KFC, Coca Cola, MTV, Motorola, P&G, etc. Several companies have created standardized
products and communications that have offended people in international markets. E.g. Food
industry – McDonalds, Burger King and KFC are global chains but they customize their servings
for local taste and cultures, Automobile industry, Internet based industry giants – Amazon, EBay
follow these localization strategies for better catering to the wants and needs of a demographic.
A global strategy is effective when differences between countries are small and competition is
global. Global standardization strategy makes sense in some aspects. Firstly, firms could implement
economic of scale to reducing cost in product research, product development, product marketing
and produce. Secondly, the strategy helps enterprise have effective control on product global
marketing; implement global standardization strategy not only reduce the difficulty marketing
management but also concentrate marketing resources. Thirdly, global standardization strategy o
the benefit of establish unified product image in the world, strengthen firms’ reputation and helpful
to product identification for consumers. These are the advantages of global standardization
strategy. By taking full advantages of global standardization strategy, McDonalds’ become one of
the most famous fast food restaurants in the world. In global marketing aspect, McDonald’s use the
unitary brand image and standardization distribute to achieve economic of scale; in distribute
management aspect, McDonalds’ carry out operating franchise, for instance, McDonalds’ requires
all chain store follow the staff rule in store location, decoration, promotion and other aspects. The
global standardization strategy brought global image for McDonalds’.
5. What do you see as the main organizational problems that are likely to be associated with
implementation of a transnational strategy?
Transnational strategy is a strategy that firms pursue to try to achieve low costs through
location economics, economies of scale, and learning effects; differentiate their product offering
across geographic markets to account for local differences;and foster a multidirectional flow of
skills between different subsidiaries in the firm’s global network of operations. This strategy is
difficult to achieve because it places conflicting demands on the company. It’s difficult to implement
with simultaneous requirements for strong central control and coordination to achieve efficiency
and local flexibility and decentralization to achieve local market responsiveness. The strategy
implementation problems of creating a viable organizational structure and control systems to
manage this strategy are immense. Also, Implementation difficulties include communication
issues,trust issues, multiple roles, flexibility and cultural issues, among many others. The main
organizational problems that are likely to be associated with the implementation of transnational
strategy are cultural differences, language barriers, handling the functions of virtual teams,
technical challenges, and sound knowledge of local market. Differentiating the product to respond
to local demands indifferent geographic markets would be difficult due to cultural differences and
language barriers. If different members of a virtual team are located at different geographies, then
they will be difficult handling the functions of virtual teams.They would be technical challenges
because systems would need to be up to date and functioning smoothly at all times. Lastly, if there is
not a clear understanding of the consumer’s preferences, then the sound knowledge of local market
wouldn’t be understood. However, this strategy does confront significant pressures for cost
reductions and for local responsiveness.The book provides example of how Caterpillar redesigned
its products, invested in large-scale component manufacturing facilities, and augments the
centralized manufacturing with assembly plants in each of its major global markets to reduce its
overall cost structure and double output per employee. So, this strategy does work but it's difficult
and complex to making it work.
CHAPTER 14 - Duy
Question 1. The choice of strategy for a multinational firm must depend on a comparison of
the benefits of that strategy (in terms of value creation) with the costs of implementing it (as defined by
organizational architecture necessary for implementation. On this basis, it may be logical for some
firms to pursue a localization strategy, and still others a transnational strategy”. Is this statement
correct?
Yes, that statement is correct. As different business operating in different industries faces
different pressures. Some businesses face high cost pressures without facing high local
responsiveness and vice versa, some have to deal with both. Therefore, when a firm considers its
strategy, it must take into account the correlation between the benefits and the value it generates
over the cost of adopting the strategy. Why? Because if that strategy only helps the firm creating a
certain amount of value while the cost to apply that strategy is ten times bigger, we can not consider
that that strategy is suitable for the company. It is also impossible to use localization strategy for an
industry where price are the main weapon and the product has a high standardization over the
world because it definitely just increase the cost. Each strategy has its pros and cons and only
responds to certain pressures. For example, applying transnational strategy means a very high
application cost and lots of ambiguity. They must also ensure that the profit and value that the firm
will receive must be higher than the cost. Therefore, the choice of strategy must fit the needs of each
firm, for every firm has different problems and goals.
Question 2. Discuss this statement. "An understanding of the causes and consequences
of performance ambiguity is central to the issue of organizational design in multinational firms."
Statement can be interpreted as making the point that organizational design has to consider
the performance ambiguities that will ultimately be created as result of the design. Different
organizational designs can remove performance ambiguities, shift them to a different level in the
hierarchy, or create new performance ambiguities. It makes sense to analyze the cause of
performance ambiguities as a part of the organizational design process. It also makes sense to
analyze the opportunities for performance ambiguity that a new design might present.
It is important for management to be able to cope with the challenges of performance
ambiguity, which as Charles Hill explains “exists when the causes of a subunit’s poor performance
are not clear”. One of the main causes for performance ambiguity is unsatisfactory presentation on
some level of the company. Companies often learn from their mistakes; however, it is critical to
understand the reasons for the poor performance and to address them accordingly. Multinational
corporations have independent units and sometimes resolving performance ambiguity issue could
be quite difficult. David Kill and Frances Shin suggest that “it is crucial that the same integrated
pattern recognition paradigm be utilized to map performance to input features (i.e. possible causes)
to promote organizational learning”.
Thus when crafting a new organizational design, not only mast the causes of existing performance
ambiguities be addressed, bur the likely consequences in the form of new performance ambiguities
must also be considered. Thus, how an international company is organized (the architecture) may
be the main reason why company does or does not perform.
Question 3. Describe the organizational architecture that a transnational firm might adopt to
reduce the cost of control.
One of the core issues is that businesses must control their operating costs. This is a decisive
factor, not only impact on whether or not to cut costs but also play a decisive role in the success or
failure of the enterprise. Understanding costs, factors affecting the cost, enterprises can control the
cost, thereby saving costs, spending will be more effective and ultimately increase the operating
profit of enterprises in accordance with that also increased. Therefore, cost management is a top
concern for managers, because the profits are more or less directly affected by the costs.
A firm can reduce its costs of control by implementing these control systems when and where they
are needed. Personal controls are generally used in small firms, but the principles translate. Directly
overseeing subordinates’ actions will give managers a better understanding of the individual’s and
overall performance. Cultural controls exist when employees believe in the norms and value systems
of that firm. Having bureaucratic controls set in place will give managers a guideline of parameters
to stay within, whether that is their subunits’ budget or how much capital they are able to spend in
a given time period. Output controls align with bureaucratic controls. Output controls set goals for
subunits to achieve and are expressed in profitability, productivity, growth, market share, and
quality. The goals set for subunits fall within the rules and procedures of how the firm acts.
A transnational firm should adopt more bureaucratic and output controls in order to reduce these
costs. The ultimate goal is to achieve cultural control, but that cannot happen without a strong and
welcoming working environment.
Question 4. What is the most appropriate organizational architecture for a firm that is
competing in an industry where a global strategy is most appropriate?
When a global strategy is appropriate, a company believes that its market is the world, and
that it seeks economies of scale through the development and manufacture of a standardized
product. An appropriate organizational architecture would be moderate decentralization with
worldwide product divisions. A worldwide product division structure tends to be adopted by firms
that are reasonably diversified and, accordingly, originally had domestic structures based on
product divisions. As with the domestic product divisional structure, each division is a self-
contained, largely autonomous entity with full responsibility for its own value creation activities.
The headquarters retains responsibility for the overall strategic development and financial control
of the firm. There needs to be a lot of coordination, many integrating mechanisms, and a strong
culture. Examples of companies pursuing global strategies are Intel, Motorola, and Texas
Instruments. The benefit of the global strategy are economical economies of scale: production of
large quantities of goods in a short time, increase your income per employee: by creating quality
products and creating trust for consumers and minimize costs due to specified standards.
Question 5. If a firm is changing its strategy from an international to a transnational strategy,
what are the most important challenges it is likely to face in implementing this change? How can the
firm overcome these changes?
The most important challenges are likely to be related to control, as the firm moves from at
least a partial reliance on output measures and bureaucratic methods to one that will require many
formal and informal controls and integration mechanisms. Significant performance ambiguities
may occur with transnational strategies. A way to address these challenges is with a very strong
culture and many integrating mechanisms. Examples of companies addressing the complex
challenges of a transnational strategy are Ford, GM, Caterpillar, and ABB.
Coordination is highest in transnational firms, too. Trying to integrate the right mechanisms
can muddy the waters for a firm transitioning strategies. Cooperation and coordination are
essential for creating a successful strategy. Coordination can be hindered due to managers having
different tasks. Marketing managers concern themselves with promotion, market share, pricing,
etc,.. whereas production managers worry themselves with production issues like capacity
utilization, cost control and quality control. Communication between managers can be inhibited due
to the fact that marketing managers and production managers “do not speak the same language”.
Different managers have different goals when working with an unstandardized product. Lack of
respect can also become an issue between managers, which is an unnecessary challenge that can
arise.
These challenges can be overcome. Liaison can be created. Each person in each subunit can be
assigned responsibility for coordinating with another subunit on a regular basis. People will
establish a permanent relationship. Integrating this all the way up the hierarchy of power can
reduce the lack of respect between others. If interaction is high, it may take longer to reach liaison,
but firms can counter it by implementing a matrix structure. In a matrix structure, all roles are
viewed as integrated roles. Firms can keep a close eye on local responsiveness and the pursuit of
location and experience curve economies.
Question 6. Reread the Management Focus on Walmart's international division and answer the
following questions:
a. Why did the centralization of decisions at the headquarters on Walmart's international
division create problems for the company's different national operations? Has Walmart's response
been appropriate?
The headquarter first thought that centralization will help them get into other countries
cause the methods and ways they used were already proved in domestic market. The centralization
wasn’t that bad when they started because there were not many things to care about.
However, by the international division gets bigger, they had to deal with bunch of things from lot of
different countries. When Wal-Mart began its international expansion, it set up an international
division to handle all foreign operations. However, over time, this approach proved to be
challenging. Managers in foreign countries had to get permission from Bentonville before they could
make any changes in strategy or operations. Not only did this approach slow decision-making, also
meant that decisions were being made by managers who were removed from the local situation.
Wal-Mart began to change this approach when it acquired Britain’s ASDA supermarket chain.
Today, the company has given greater responsibility to local managers particularly in
merchandising and operations.
Wal-Mart’s main business strategy is EDLP-Every Day Low Priced which is the key-point of
their success. To accomplish this strategy, they mainly focused on efficiency of distribution
structure. All those strategies core values are Timed and Responsed. Shorten the time for
everything includes distribution, storing, etc directly affected lower the price of goods which could
be best response to customer need. In other words, Wal-Mart has been successful since they always
managed their time and response to customer. Those points were same for Wal-Mart international
division strategy. Their international division was like these days at the early stage. The
international division was centralized so the branches needed to get approval for every action and
decision from headquarter in USA. However, this centralization process made whole process slow
and it harmed the core value of Wal-Mart. Also, they realized that the system can’t be same in other
countries. It needed to be changed and modified in order to fully get into each local market place.
By the late 1990ds they started to change their policy for international division. They gave more
responsibility to each division so that they don’t have to wait for approval and response from
headquarter. By this change, each international divisions could meet their local market’s need more
rapidly and effectively.
b. Do you think that having an international division is the best structure for managing
Wal-mart's foreign operations? What problems might arise with this structure? What other structure
might work?
Most students will probably suggest that while the international division may have been a good
strategy at the beginning of Wal-Mart’s expansion into foreign markets, as foreign revenues have
grown, approach no longer works. Many students will probably suggest that Wal-Mart consider
moving towards a transnational approach where it could respond to local markets and at the same
time, respond to the pressure to minimize costs. That it can negotiate on a global basis with key
suppliers and can simultaneously introduce new merchandise into its stores around the world
For example, the division has developed a knowledge management system whereby stores in one
country, let's say Argentina, can quickly communicate pictures of items, sales data, and ideas on
how to market and promote products to stores in another country, such as Japan. The division is
also starting to move personnel between stores in different countries as a way of facilitating the flow
of best practices across national borders. Finally, the division is at the cutting edge of moving Wal-
mart away from its U.S.-centric mentality and showing the organization that ideas implemented in
foreign operations might also be used to improve the efficiency and effectiveness of Wal-mart's
operations at home
Question 7. Reread the Management Focus on the rise and fall of the matrix structure at Dow
Chemical, then answer the following questions:
a. Why did Dow first adopt a matrix structure? What were the problems with this
structure? Do you think these problems are typical of matrix structures?
Dow Chemical initially adopted the matrix structure because it would allow the company to
be responsive to both local market needs and corporate objectives. However, when it was first
adopted, the structure did not work well. The dual chain of control led to turf battles and a lack of
accountability, however, Dow felt that by making the structure more flexible it could still work. The
company had moved into the pharmaceuticals business where local responsiveness was important as
was the need to be conscious of costs. Many students will probably agree that the dual chain of
command associated with the matrix structure makes it challenging, however at least according to
Dow, there are ways to make it work. In fact, Dow credits the structure for much of its success prior
to the mid-1990s.
b. What drove the shift away from the matrix structure in the late 1990s? Does Dow's
structure now make sense given the nature of its businesses and the competitive environment it
competes in?
In the mid-1990s, Dow divested itself of its pharmaceuticals activities, and changed its
structure to reflect its new strategy. The company shifted to global business divisions as a way to
reduce costs and streamline decision-making. Dow felt that given its new focus on bulk chemicals,
the new structure would work better. The change was also driven by realization that the matrix
structure was just too complex and costly to manage in the intense competitive environment of the
1990s, particularly given the company's renewed focus on its commodity chemicals where
competitive advantage often went to the low-cost producer.
Question 8. Reread the Management Focus on Lincoln Electric, then answer the following
questions:
a. To what extent are the organization culture and incentive systems of Lincoln Electric
aligned with the firm’s strategy?
Lincoln had a strong respect for the ability of the individual and believe that, correct
motivated, ordinary people could achieve extraordinary performance. Lincoln Electric stresses that
individuals should be rewarded for their individual efforts, and that everyone who works for the
company should be treated equally. Accordingly, employee pay depends on individual output,
everyone eats in the same cafeteria, parks in the same lot, and so on. Because employees can boost
their pay significantly by working harder and being innovative, the company as a whole becomes
more productive. Lincoln competes in a business that is very competitive, where cost minimization
is a key source of competitive advantage. Lincoln's culture and incentive systems both encourage
employees to strive for high levels of productivity, which translates into the low costs that arc
critical for its success. These aspects of Lincoln's organizational architecture are aligned with the
low-cost strategy of the company.
b. How was the culture at Lincoln Electric created and nurtured over time?
Lincoln Electric has a long tradition of equality and fairness. Lincoln has a strong respect for
the ability of the individual and believe that, correctly motivated, ordinary people could achieve
extraordinary performance. He emphasized that Lincoln should be a meritocracy where people
were rewarded for their individual effort. Strongly egalitarian, Lincoln removed barriers to
communication between workers and managers, practice an open-door policy. Since 1934,
employees have been assessed both objectively and subjectively. Objective criteria include the level
and quality of an individual’s output- production workers receive no base salary but are paid
according to the number of pieces they produce, while subjective criteria include attitudes and
 dependability- workers have responsibility for the quality of their output and must repair any
defects spotted by quality inspectors before the pieces are included in the piecework calculation..
Workers actually have the ability to double their base pay- Lincoln’s factory workers have been
able to earn a pay that often exceeds the average manufacturing wage in the area by more than 50
percent and receive a bonus on top of this that in good years could double the base pay. Even so,
because productivity is so high, Lincoln Electric is the low cost leader in the industry.
c. Why did the culture and incentive systems work well in the United States? Why did it
not take in other country?
In the United States, a country that encourages individualism, Lincoln Electric’s emphasis on
individual performance has been very successful. However, in other countries, this approach has
met with some resistance. In some countries, Lincoln Electric’ pay-per-output approach was
considered exploitative. In Germany, it was actually illegal! In addition, in some countries the
incentive of more money for more output was not valued. In countries where Lincoln Electric
expanded through acquisition, unionized employees opposed the compensation approach.
CHAPTER 15 - Tú Thanh
Questions 1. Review the Management Focus on Tesco. Then answer the following questions:
a. Why did Tesco’s initial international expansion strategy focus on developing nations?
Tesco’s global expansion strategy has been rather unique in the grocery industry. Rather than
competing head-to-head with established retailers in developed markets like the United States and
Western Europe, Tesco chose to pursue markets with strong growth potential, but little current
competition. The strategy allows the company to use its expertise to grow international market
share, without incurring the costs of establishing itself in already crowded markets.
b. How does Tesco create value in its international operations?
The keys to Tesco’s success in its international operations is its ability to spot markets with strong
underlying growth trends, identify existing companies in those locations that have a deep
understanding of the local market, form a joint venture with those companies and transfer its
expertise in the industry to the venture, and later buy the partner out. The strategy is highly
successful, supplementing the company’s UK earnings with an additional €7.6 billion in revenues in
2007. Tesco is now the number four company in the global grocery industry.
c. In Asia, Tesco has a history of entering into joint-venture agreements with local partners. What are the
benefits of doing this for Tesco? What are the risks? How are those risks mitigated?
Tesco’s strategy of entering foreign markets via joint ventures has proven to be highly successful.
The company is able to bring its expertise in retailing as well as its financial strength to the venture
where it is paired with the partner’s knowledge of the local market. Local managers are hired to
run the operations, with only support coming from expatriate managers. This format allows Tesco
to use its core strengths to get into the market, and then later, after the ventures have become
established, buy out its partner.
d. Tesco’s entry into the United States represented a departure from its historic strategy of focusing on
developing nations. Why do you think Tesco made this decision? How is the U.S. market different from
other markets that Tesco has entered?
Most students will probably agree that while Tesco’s entry into the crowded market in the United
States represents a departure from its traditional strategy of focusing on developing nations with
little existing competition, the strategy still reflects the company’s traditional strategy in that the
format the company has chosen to use, Tesco Express, still avoids the head-to-head competition that
the company has steered clear of in developing markets. In that sense, the strategy could prove to be
highly successful. The company can enter the market using its Tesco Express format, avoid major
competition while it gains brand recognition and experience in the market, and then later, expand
into the traditional grocery business.
2. Licensing proprietary technology to foreign competitors is the best way to give up a firm’s competitive
advantage. Discuss.
 The statement is basically correct - licensing proprietary technology to foreign competitors does
significantly increase the risk of losing the technology. Therefore licensing should generally be
avoided in these situations. Yet licensing still may be a good choice in some instances.
 When a licensing arrangement can be structured in such a way as to reduce the risks of a firm’s
technological know-how being expropriated by licensees, then licensing may be appropriate.
 A further example is when a firm perceives its technological advantage as being only transitory, and
it considers rapid limitation of its core technology by competitors to be likely. In such a case, the
firm might want to license its technology as rapidly as possible to foreign firms in order to gain
global acceptance for its technology bẻo imitation occurs.
 By licensing its technology to competitors, the firm may deter them from developing their own,
possibly superior, technology.
 And by licensing its technology the firm may be able to establish its technology as the dominant
design in the industry
 In turn, this may ensure a steady stream of royalty payments. Such situations apart, however, the
attractions of licensing are probably outweighed by the risks of losing control over technology, and
licensing should be avoided
3. Discuss how the need for control over foreign operations varies with firms’ strategies and core
competencies. What are the implications for the choice of entry mode?
Organizations adopt various strategies to achieve competitive advantage in the global market. The
organizations need to control their foreign operations according to their strategies and core
competencies. Control of foreign activities is necessary for a company due to the following reasons:
 Foreign business can disclose a company’s confidential information outside its boundaries, leading
towards imitation of the technology.
 The company would need to share its ownership with other companies while undergoing
partnership.
 Brand image of a company might be affected due to the price reduction strategy adopted by the
company, in order to remain competitive in the market.
The need for control over foreign operations strategies and a company’s distinctive competencies
has a direct relationship with its mode of entry to that particular market. The entry modes like joint
ventures and franchising can increase the risk of losing control over the new innovation or technology.
Therefore, the entry mode of a company should be properly structured before its implementation.
Apart from joint venture and franchising, the company may also adopt wholly owned subsidiary
mode for entry into foreign markets. Licensing should be done for newly invented products or
technologies, in order to reduce their imitation that is one of the major risks involved in global
business.
4. A small Canadian firm that has developed valuable new medical products using its unique
biotechnology know-how is trying to decide how best to serve the European Union market. Its choices
are given below. The cost of investment in manufacturing facilities will be a major one for
the Canadian firm, but it is not outside its reach. If these are the firm’s only options, which one would
you advise it to choose? Why?
a. Manufacture the products at home, and let foreign sales agents handle marketing.
 Pros
 Full control in production activities
 Easy to set up plan and expand manufacturing
 Better control over human resources
 Foreign sales agents will have better understanding of European markets
 Lower exit costs if product fails
 Cons
 Lack of knowledge in European pharmaceutical regulations
 Foreign agents may harm the brand name if not carefully handled
 Extra costs in shipping the product
b. Manufacture the products at home, and set up a wholly owned subsidiary in Europe to handle
marketing.
 Pros
 Full control in production activities
 Easy to set up plan and expand manufacturing
 Better control over human resources
 Brand name will not be harmed since marketing is handled by same company
 Cons
 Extra resources to be spent on marketing
 Lack of knowledge in European pharmaceutical regulations
 Shipping costs
 Lack of marketing knowledge in European markets
 Higher exit costs if product fails
c. Enter into an alliance with a large European pharmaceutical firm. The products would be
manufactured in Europe by the 50–50 joint venture and marketed by the European firm.
 Pros
 Risk is shared between firms
 No shipping cost
 Expertise of European firm will be useful in understanding regulations and marketing in European
markets
 Cons
 Less control in production activities
 Profit has to be shared
 Exit costs will be moderate
 Other firm may spoil brand image
CHAPTER 16 - Tuyết
1. firm based in California wants to export a shipload of finished lumber to the Philippines. The would-be
importer cannot get enough credit from domestic sources to pay for the shipment but insists that the
finished lumber can quickly be resold in the Philippines for a profit. Outline the steps the exporter
should take to successfully export this product to the Philippines
1) The Filipino importer places an order with the Californian exporter and asks if he would be willing
to ship under a letter of credit.
2) The Californian exporter agrees to ship under a letter of credit and specifies relevant
Information such as prices and delivery terms.
3) The Filipino importer applies to the Bank of Philippines for a letter of credit to be issued in favor
of the Californian exporter for the merchandise the importer wishes to buy.
4) The Bank of Philippines issues a letter of credit in the Filipino importer’s favor and sends it to the
Californian exporter’s bank, the Bank of California.
5) The Bank of California advises the exporter of the opening of a letter of credit in his favor.
6) The Californian exporter ships the goods to the Filipino importer on a common carrier. An official
of the carrier gives the exporter a bill of lading.
7) The Californian exporter presents a 90-day time draft drawn on the Bank ofPhilippines in
Accordance with its letter of credit and the bill of lading to theBank of California. The exporter
endorses the bill of lading so title to the goods is transferred to the Bank of California.
8)The Bank of California sends the draft and bill of lading to the Bank ofPhilippines.
The Bank of Philippines accepts the draft, taking possession of the documents and promising to pay
the now-accepted draft in 90 days.
9) The Bank of Philippines returns the accepted draft to the Bank of California.
10) The Bank of California tells the Californian exporter that it has received the accepted bank draft,
which is payable in 90 days.
11) The exporter sells the draft to the Bank of California at a discount from its face value and receives
the discounted cash value of the draft in return.
12) The Bank of Philippines notifies the Filipino importer of the arrival of the
documents. She agrees to pay the Bank of the Philippines in 90 days. The Bank ofPhilippines
releases the documents so the importer can take possession of theshipment.
13) In 90 days, the Bank of Philippines receives the importer’s payment, so it has funds to pay the
maturing draft.
14) In 90 days, the holder of the matured acceptance (in this case, the Bank of
California) presents it to the Bank of Philippines for payment. The Bank
ofPhilippines pays.
2. You are the assistant to the CEO of a small textile firm that manufactures quality, premium-priced,
stylish clothing. The CEO has decided to see what the opportunities are for exporting and has asked
you for advice as to the steps the company should take. What advice would you give to the CEO?
In light of the fact that the CEO has indicated his intention to export the production we assume
that he would not be interested in branding and selling the product in local markets and also that he
is keen in exporting its product. As I have been asked for advice, my first step would be to tap into
some of the government information sources that are available online that are free of charge, to
check the good international market for the company product. I would take help of resources which
can be easily checked on the internet, as it would help in knowing about the foreign market
potential of their products. Another approach would be taking assistance from an export
management company, and as it would be paid service so would involve cost. Expertise services can
even tell whether it is worthy or not to export, and also help in providing details on initiating an
export program. On the basis of collected information I would advise the CEO.
1. An alternative to using a letter of credit is export credit insurance. What are the advantages and
disadvantages of using export credit insurance rather than a letter of credit for exporting (a) a luxury
yacht from California to Canada, and (b) machine tools from New York to Ukraine?
A. Luxury yacht: Not a lot of people buy Yachts, but a lot of businesses are capable of making them.
So more or less the buyer is in position to dictate terms. And asking the buyer to open a letter of
credit may result in the loss of sale.
But to protect against the risk of losing payment, the seller can opt for export credit insurance. Here
on advantage of export credit insurance is the exporter is more likely to make the sale in a
competitive market such as this. If there is a default, the insurance should cushion the blow.
However, Canada and California are not known for opaque or radically different legal systems, are
not far away, and do not have linguistic or other barriers. In the event of default, the yacht is likely
to be returned.
b. Machine tools. Again, one advantage is that the new yorker exporter is more likely to make the
sale. The exporter's position however is strong due to the fact not a lot of people make machine tools
as the are hard to make and have a higher fixed costs.
Thus, letter credit is the most viable option in this case.
2. How do you explain the continued existence of countertrade? Under what scenarios might its use
increase still further by the year 2020? Under what scenarios might its use decline?
In a countertrade, one person or group trades their items of value for the other person’s items, and
it fulfills all requirements of the trade. No actual currency is needed or used, other than the goods
 exchanged. .The conditions which can lead to countertrade are currency crises and monetary
instability. When the forex market is limited, if traders do not have funds to purchase their goods,
this situation can lead to countertrade. As long as countries lack hard currencies and foreign
exchange reserves, but they trade, countertrade is inevitable. If countries work on trade barriers
that decrease world trade, or if the monetary systems of countries strengthen significantly, then
countertrade may decrease.
3. How might a company make strategic use of countertrade schemes as a marketing weapon to generate
export revenues? What are the risks associated with pursuing such a strategy?
Countertrade is nothing more than an alternative means of operating an international sale when
conventional means of payment are not possible, risky or costly, or nonexistent. Some countries,
mostly developing countries, are likely to prefer having countertrade rather than others. Having
said this, however, if a company is willing to enter a countertrade agreement, it may grab an export
opportunity to a competitor that is willing to make a countertrade agreement. Companies those are
willing to entertain countertraction as a means of financing, will have an advantage over those firms
that prefer traditional forms of financing. In some cases, it may be risky in the sense that some
companies engaging in countertrade must be willing to invest in an in-house trading department
dedicated to arranging and managing countertrade deals, and must be aware of the quality of the
products received in countertrade deals.