International Business This page intentionally left blank International Business Challenges and Choices Second edition Alan Sitkin and Nick Bowen 1 Great Clarendon Street, Oxford, OX2 6DP, United Kingdom Oxford University Press is a department of the University of Oxford It furthers the University’s objective of excellence in research, scholarship, and education by publishing worldwide Oxford is a registered trade mark of Oxford University Press in the UK and in certain other countries © Oxford University Press 2013 The moral rights of the authors have been asserted 1st Edition copyright 2010 Impression: All rights reserved No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, without the prior permission in writing of Oxford University Press, or as expressly permitted by law, by licence or under terms agreed with the appropriate reprographics rights organization Enquiries concerning reproduction outside the scope of the above should be sent to the Rights Department, Oxford University Press, at the address above You must not circulate this work in any other form and you must impose this same condition on any acquirer British Library Cataloguing in Publication Data Data available ISBN 978–0–19–964696–8 Printed in Italy by L.E.G.O S.p.A.—Lavis TN Links to third party websites are provided by Oxford in good faith and for information only Oxford disclaims any responsibility for the materials contained in any third party website referenced in this work Preface The world has experienced some major upheavals in the three years since the publication of this textbook’s successful first edition, and this new edition reflects these changing circumstances Although the origins of many current trends could perhaps be sensed a few years ago, several have assumed a magnitude that few would have predicted For instance, by the year 2010 some of the world’s larger developing countries had already embarked upon a process of economic, political, and social emergence The speed at which this has happened has been astonishing and is starting to upset many assumptions about the ongoing domination of the older industrialized countries As a result, political discussions about the competition between these two categories of country have become less relevant: leading developing countries like China are no longer waiting to negotiate greater power on the world stage but are simply assuming a bigger role This justifies the decision made in this second edition to devote an entire chapter to the changing geography of international business, which is no longer interesting merely for reasons relating to the location of global manufacturing, but increasingly due to the rising purchasing power of millions of new consumers emerging from a state of poverty This too is changing the focus of international business in 2013 and beyond Similarly, the ecological crisis that some observers had started to recognize a few years (and even decades) ago has worsened, in part because economic growth in countries lacking modern energy-efficient equipment has worsened the twin problems of resource depletion and pollution Whereas environmental management could still be presented in our 2010 edition as a sub-section of corporate responsibility, it now merits its own chapter to detail the new operational and strategic approaches being followed by the increasing number of multinational managers concerned about this trend that is both a potentially catastrophic problem and an exciting new opportunity Lastly, our first edition was written in the aftermath of the subprime crisis which spread out from the United States in 2008 to cause a global credit crunch The main questions in international business at the time was whether this general setback would cause protectionist sentiments, and how long it would take trade and investment volumes to return to their pre-crisis levels Given the state of the global economy in 2013, following a new financial upheaval caused by the European sovereign debt crisis, the whole tone of this discussion has become more ominous The difficulties in which the world economy finds itself at the start of the second decade of the twenty-first century means that many countries would accept any solution to their problems, and no longer worry so much whether help is supposed to come from domestic or international business, or whether globalization is advantageous To some extent, desperation has de-politicized the international business debate, with observers expressing anger at the banking sector but asking fewer ideological questions about the benefits of open borders This too is reflected in our second edition New to this edition: • revised structure to reflect students’ knowledge as they progress through an International Business module; • streamlined coverage of finance to enable greater focus on future trends in emerging markets and sustainability; • addition of longer end-of-part cases to promote a holistic understanding of international business; vi Preface • more in-depth focus of the core international business theories carefully integrated with online coverage of more advanced theories; and • increased number of in-text examples to help students envisage how companies and countries put theory into practice Acknowledgements I would like to express my deepest gratitude to all friends and family members acknowledged in the book’s first edition, not to forget a number of others from locations worldwide (ranging from Abergavenny/Clodock to l’Hexagone, CRESC, and the West Coast) whom there was no room to mention last time Also, since change is the only thing that never changes, I’d like to acknowledge colleagues new and old at the European Business School More locally, there is the privilege I have had since 2010 of serving London Borough of Enfield as a member of the majority group Thanks also to friends from Southgate CLP as well as Bowes constituents Debate sharpens the mind Lastly, there are three acknowledgements that I would like to repeat To my sf Lea and Dani—you make me incredibly happy (not to mention proud) And to my Verena, echt die beste Frau der Welt—may the next 30 years be as great as the past 30 AS For this edition, I would like to thank all those who contributed to the first, including many colleagues, students, and alumni at the European Business School London and Regent’s College I would also like to thank colleagues at the Chartered Institute of Linguists for adding to my understanding of international cultures My thanks also go to friends around the world and, of course, particularly to members of my family: again, my wife, Joan, as always for all her support and love; my three sons and daughters-in-law; my mother, Beryl, still as optimistic as ever at 92; my sister, Jane, with whom I have shared so much over the last six decades; and my two special grand-daughters, Eleanor and Amelia NB The authors would also like to thank the following reviewers: Sjoerd Beugelsdijk, University of Groningen Alfredo D’Angelo, Glasgow University Amit Das, Qatar University Robert Inklaar, University of Groningen Keith Medhurst, INHolland Lutao Ning, Queen Mary, University of London Stefania Paladini, Coventry University Business School Shameen Prashantham, Nottingham University Business School China Paul Ryan, NUI Galway QR Code images are used throughout this book QR Code is a registered trademark of DENSO WAVE INCORPORATED If your mobile device does not have a QR Code reader, try this website for advice: www.mobile-barcodes.com/qr-code-software This page intentionally left blank Outline contents List of case studies and practitioner insights Walk-through of the textbook features Walk-through of the Online Resource Centre Part A Introduction Introduction to international business Theories of international business Part case study Part B Key players International business and national politics Global frameworks Multinational enterprises and foreign direct investment Part case study Part C Cultural perspectives National cultures International corporate cultures Multinational corporate social responsibility Part case study Part D International strategy Modes of internationalization 10 Organization of multinational enterprises Part case study Part E International functions 11 International production 12 International marketing 13 International finance xiv xvi xviii 26 49 51 52 78 104 128 131 132 160 184 207 209 210 234 259 261 262 286 310 www.downloadslide.com Glossary Frugal Characterized by an economic or thrifty use of inputs Functional organization Structure where power is centralized, based on the idea that internal capabilities are key in corporate organization Generic Reference to goods that are not meant for a specific use but serve a variety of applications Geocentric Company adopts the most suitable marketing strategy, taking into account the values of the company and those of the target market Geographic organization Structure based on the idea that the MNE’s overriding organizational aim is to maximize adaptation to local circumstances Glass ceiling Artificial barriers based on bias that prevent qualified individuals from advancing upward in their organization into managementlevel positions Global corporate ethos Essential set of characteristics that define the ways in which the MNE is organized and has its staff operate and behave Global firm Company designed to serve a single world 419 Hardship posting Traditional overseas assignment (or posting) that was thought to be undertaken in worse conditions than assignments at home and was thus rewarded with additional allowances, special arrangements, and increased remuneration Hedging Where a party offsets a risk through a new deal exposing it to the exact opposite risk The original exposure is called the ‘underlying’ risk The new exposure is called the ‘hedge’ Heterarchy Organizational principle that corporate units are allies and therefore equals in the management of their joint enterprise In an MNE, this signifies that no one unit should take a global lead any more Hierarchy of needs Maslow’s concept sets out a pyramid of layers of human need, from basic needs such as food, water, and shelter to the realization of personal potential and self-fulfilment Home bias Preference for domestic counterparts rather than foreign ones Home/host countries People and companies originate market instead of different national markets from a ‘home country’ When they operate abroad, they are working in a ‘host country’ Global governance Regulatory and supervisory Home currency Currency that a firm uses to calculate functions fulfilled by authorities whose responsibilities exceed national borders Globalization Process whereby the world becomes increasingly interconnected at an economic, political, and social level Goodwill Difference between the price at which a company can be purchased and the break-up value of its assets Greenfield investment Where a firm enters a new market by building new facilities Green premium Surcharge paid for a green product over the equivalent non-green product Green redemption Where a company restores its tarnished environmental reputation through positive actions Gross domestic product (GDP) National income, defined by national consumption plus/minus investment plus/minus government spending plus/minus balance of trade Guanxi Chinese concept in which personal relations and the establishment of mutual trust and obligations are seen as essential for the conduct of business Halo effect Where consumers feel positively about a company because it has a track record of virtuous behaviour its consolidated global accounts Horizontal integration Where a firm establishes a presence in a new market by running activities similar to the ones operating in its home market Horizontal keiretsu Japanese corporate network where similar firms ally with trading companies to ensure the widest possible market coverage Import substitution Trade policy of supporting the domestic production of goods that would otherwise be imported Industrialization policies Concerted efforts by states to increase the role of value-added manufacturing in their national economy or to support industrial sectors they consider strategic Industrial models Manufacturing systems determining the sequencing of operations within factories Also refers to flow of goods before and after industrial transformation, and to the distribution of the income generated Infant industry Sector of activity that has only recently developed in a particular country and whose prospects for survival are uncertain because it lacks the capital and experience to compete with existing (foreign) producers Infographics Graphic visual representations of information, data, or knowledge www.downloadslide.com 420 Glossary Insiderization Where a person or company has become so integrated into a particular host society that locals forget its foreign origins Integration Where different units’ activities are coordinated to the extent that their missions are defined in light of one another Intellectual property rights Exclusive enjoyment of the benefits derived from intangible assets like trademarks, patents, and copyrights Internalization When a company decides to run a particular function itself (using its own employees) instead of delegating it to an external party Internal market Idea that different corporate units deal with one another as buyers and sellers of resources Related to ‘intrapreneurship’, or the notion that individuals behave as entrepreneurs within large organizations International division Structure based on the idea that all foreign environments share certain characteristics that differ from a company’s domestic market and should therefore be combined in a specific division Internationalize Decision to enter foreign markets; involves upstream and/or downstream activities International tax competition Where countries try to attract offshore funds by offering investors lower tax rates than they can find in competitor nations Interventionism Belief that the state has a role to play in ensuring that market mechanisms are both efficient and lead to a fair and viable distribution of income Intra-firm Activities occurring within the confines of one and the same firm Isolationist Refers in international trade to a policy of interacting as little as possible with foreign interests Stands in contradiction with the principle of international division of labour Issuance of securities Act of creating tradable capital market instruments like stocks and bonds that firms sell to investors to raise capital Joint venture Business unit specifically created by different companies to achieve a particular mission Usually involves pooling resources like equity capital, knowledge, processes, and/or personnel Knowledge economy Sum total of the markets that help economic actors to access knowledge Knowledge management Systems that companies use to maximize the benefits of internal and external knowledge Knowledge spillover When companies gain knowledge through proximity to external sources such as universities, research centres, or other companies Lead time Time it takes, once an order has been placed, to deliver a good to the order-giver’s premises Lean production Production philosophy that emphasizes saving resources through less waste, better inventory management, better quality, and shorter industrial cycles Largely derived from the ‘Toyota Production System’ Learning effects Added production efficiency and lower costs that companies gain from accumulating experience in a particular activity Less developed countries (LDCs) Countries whose industrial base and general level of human welfare does not enable most citizens to achieve a decent living standard This is an umbrella term covering a vast range of economic, social, and demographic situations, ranging from ‘emerging’ or ‘newly industrialized’ countries that are on a clear industrialization path to ‘heavily indebted poor countries’ (HIPC) with very poor growth prospects Licensing Contract where a licensor grants permission to a licensee to use one of its assets, usually intellectual property In return, the licensor will receive royalties Life cycle costs Total cost of an item taking all impacts into account, including running costs, environmental impact, and end-of-life disposal Lightweighting Engineering initiatives aimed at reducing the mass of materials comprising a manufactured item Liquidity Volume of funds in a market Markets are liquid if there are sufficient funds so that an asset can be bought or sold without any noticeable impact on price Lobbying Attempts to influence policy-makers, often elected officials Long position Owning more of a commodity in the form of assets than the amounts owed in the form of liabilities Luddism Term used to characterize any resistance to change and innovation in technology It is derived from the actions of the Luddites, who campaigned against the introduction of textile machinery in the early nineteenth century Market failure Where markets perform inefficiently by not allocating resources optimally www.downloadslide.com Glossary Marketing mix Different phases of a corporate marketing strategy—product, price, promotion, and place Market-maker Trader who is always prepared to quote other market participants a price to buy (‘bid’) and sell (‘offer’) a given commodity Market segmentation Identification of customers with similar characteristics so that a commercially viable marketing strategy can be devised and implemented Matrix organization Structure based on the idea that multiple reporting lines broaden employees’ vision of the business and can create synergies Mergers and acquisitions Mergers are when two companies agree to combine their operations into a new company and both have more or less equal powers Acquisitions indicate that one company has become the main shareholder of another Meritocracy Form of social organization in which the leaders have achieved their status by their own efforts—on merit Mission statement Defines in a few words or sentences the reason for existence of any entity or organization It embodies its philosophies, goals, ambitions, and values Mitigation Corporate efforts to lessen the effects of pollution they have already generated Modules Components assembled into a unit that fulfils a particular function in a system Such units can be plugged without alteration into the rest of the system Groups of modules are known as ‘sub-assemblies’ Multi-domestic Management approach emphasizing autonomy of differentiated national markets as opposed to the coordination of unified global or regional markets Multinational enterprises (MNEs) Companies whose regular activities cause them to engage with and/ or operate in more than one country at a time Nearshoring Where operations are outsourced to a low-cost location relatively close to the company’s country of origin Neo-liberalism Belief in minimal interference from government in the economy Net basis Exposure remaining after a firm’s short positions in a given financial category have been subtracted from its long positions in the same category Non-governmental organizations (NGOs) Associations created by members of the general 421 public to address specific problems or promote an overall ethos or policy Non-product ratio Percentage of inputs that are transformed into waste over the course of a production process Nouveau riche French expression referring to a population that has recently come into wealth and whose consumption behaviour is changing Offshore Transactions or actors over which national regulators have no authority Offshoring Where a firm moves an activity that it once ran domestically into a subsidiary that it owns abroad, usually to cut costs Oligarch Dominant business figure, often used in Russia to refer to an entrepreneur who gained control of formerly state-owned assets in the immediate aftermath of the communist regime Oligopoly Market dominated by few sellers, who might therefore have a disproportionate power to collude outside the market framework and fix prices in a non-competitive manner Opportunity cost Cost of doing something in a certain way, thus not receiving the benefits of doing it another way Organic growth Where a company expands by growing its internal capabilities instead of through external acquisitions Organizational dilemma Where employees are confused by the contradictory interests that they are asked to represent at different levels within their organization Outsourcing Where a company delegates to another company certain tasks (like the production of components) that it might otherwise undertake itself Paradigm World view or vision of how things are and /or should be organized Paternalistic Sense of managing a company with a view towards ensuring the well-being of employees and other stakeholders rather than for pure profit maximization motives Pay gap Different levels of payment between the top CEOs (or other employees) and those at other levels, or between male and female employees Performance management The approach within a business to ensuring its increasing effectiveness by improving the performance of its employees and by developing the capabilities of teams and individuals www.downloadslide.com 422 Glossary Philanthropy Long-term charitable donations to worthy causes Pioneering costs Costs associated with the mistakes that companies make when entering an unfamiliar market Pollution haven Country that does not make stringent environmental demands on local producers Polycentric Company adapts its marketing and sales strategy as closely as possible to the target country—that is, the market that it is entering is so particular that the marketing strategy and the products themselves must be adapted to the local conditions Polyvalent Ability to perform many different functions, i.e the opposite of specialization Post-industrial society Defines the development of a late capitalist society with such features as the growth of free markets, greater mass consumption, and, ultimately, more leisure time Prime contractor Company at the heart of a corporate network, whose orders trigger partners’ production plans Procurement Act of purchasing resources or inputs Product organization Structure based on the idea that each product division should be run as an autonomous business Protectionist General attitude that a national government should adopt policies restricting foreign interests’ ability to access its domestic market Psychic distance People’s sense of the degree to which a foreign business culture differs from their own, adding to the sense of ‘foreignness’ Public good Good that is ‘non-exclusive’ (i.e available to everyone) and whose use by some does not decrease its availability for others Pull marketing Form of marketing reflecting the way in which a company is ‘pulled’ into the market by reacting to demand from the market Purchasing power parity Theory that future currency rates will adjust upwards or downwards to ensure that each reaches a level where it allows users to purchase the same basket of goods Push marketing Form of marketing characterized by the way a company ‘pushes’ itself into the market by providing and selling goods that are new and relatively unknown Race to the bottom Where competition among disadvantaged producers forces them to accept lower remuneration for their services Real interest rate Nominal interest rate minus inflation rate Reciprocity Notion that all parties to a transaction should grant and receive benefits of equivalent value Recruitment process outsourcing (RPO) A form of process outsourcing by businesses in which part or all of its staff recruitment is contracted to an outside provider Regime General system organizing interactions between different groups Often refers to a system of regulations and the institutions that formulate and enforce them Regime shopping/arbitrage Decision to locate an MNE’s activities based on the relative laxness of a host country’s requirements (taxes, regulations, etc.) Regional association (RA) Cooperation between neighbouring countries in building an institutional platform where issues of mutual interest can be discussed and decided Relative pricing Price of a given category of goods or services expressed in relation to the price of a different category Reserve currency Currency that, by consensus, is viewed as the safest vehicle for storing value Resource curse Temptation for a country possessing significant natural resources to market its commodities without seeking to develop a value-adding industry Responsiveness Ability and inclination to react quickly to the perceived needs of a situation Safe haven Assets that investors tend to purchase to store value in times of crisis Often includes gold, US$, and Swiss francs Salaryman White-collar worker (based on a Japanese model) who works in the large bureaucracy of a business (or government office) The salaryman has long working hours, low prestige in the corporate hierarchy, and an absence of significant sources of income other than salary; the term is almost always used only for male employees Segmentation Identification of customers with similar characteristics so that a commercially viable marketing strategy can be devised and implemented Shareholder value Idea that the purpose of a company is to maximize returns to shareholders Short position Owing more of a commodity in the form of liabilities than the amounts owned in the form of assets www.downloadslide.com Glossary Sister units Separate corporate entities sharing the same parent company Small and medium-sized enterprises (SMEs) ‘Enterprises which employ fewer than 250 persons and which have an annual turnover not exceeding 50 million euros, and/or an annual balance sheet total not exceeding 43 million euros’ (Extract of Article of the Annex of Recommendation 2003/361/EC) Social contract Idea that people will hand some of their rights over to an authority that offers them order in return Social network A social structure consisting of a set of individuals and/or organizations and the dyadic (or bilateral) links between them Solvent Having sufficient funds to pay for goods or services Sovereign wealth funds Large pools of capital run by government-appointment managers Usually originating from countries with large oil surpluses and/or where the state centralizes control of savings Spread Difference between the market-maker’s ‘bid’ and ‘offer’ prices In the FX markets, this is usually calculated in ‘basis point’ terms (four digits after the zero, i.e .0001) Stakeholder Anyone affected by an organization’s actions Often understood to include employees, local governments, suppliers, consumers, and host communities Standardization Extent to which a company sells exactly the same product in its domestic and international markets Stereotype Simplified and/or standardized conception or image with specific meaning, often held in common by people about another group Stock market capitalization Total number of shares issued multiplied by the share prices for all companies listed on a particular exchange Strategic business unit Identifiable entity within a corporation, large enough to plan strategy and organize resources on its own Strategic change Radical reorganization and restructuring of the direction and operation of a company Strategic trade policy Trade policy of strengthening local firms’ export competitiveness in specific sectors Subsidiaries (Foreign) Unit belonging to a company’s head office 423 Supplier park When industrial suppliers cluster together to provide components and modules to their prime contractor Supply chain management Ways of directing the transformation of a physical good Includes: purchasing supplies and stocks; coordinating and training of suppliers and sub-suppliers; and overseeing the logistical flow of goods and information Sustainability Approach where activities are organized in a way that will ensure their long-term economic, social, and ecological viability Synergy Idea that the value of a newly combined company will be greater than the separate value of its constituents Targeting Designing and aiming of a message at specific types of customers within markets that have been selected as the focus for a company’s offering Tariffs Taxes that governments levy on goods (usually imports) when they cross national borders Tax avoidance Use of legal means to avoid paying taxes Tax evasion Use of illegal means to avoid paying taxes Tax haven Country with particularly low tax rates and regulations Technology transfer Where technology belonging to one country or company is shared with another under a formal partnership arrangement Terms of trade Relationship between the value added inherent to the goods/services that a country imports or exports Time to market Lag between a product’s design and/ or value-chain transformation and its being made available to end users Trade balance Relationship between the value of a country’s exports and imports When exports exceed imports, the country has a trade surplus When imports exceed exports, the country has a trade deficit Trade diversion When imports come from less efficient producers located within an RA instead of from more efficient outside producers Transition In evolution Often used in economics to refer to ex-communist countries shifting towards more market-based economies Transnational firm Companies whose aim, and therefore organization, simultaneously targets global efficiency, local flexibility, and shared learning www.downloadslide.com 424 Glossary Triad/OECD countries World’s older industrialized nations Triad refers to the three regions of Western Europe, North America, and Japan/ Oceania The Organization for Economic Cooperation and Development (OECD) is a Paris-based association whose membership is comprised of the world’s advanced economies Trickle-down economics Idea that policy should reward the economically successful because their gains ultimately benefit the rest of society Often used to justify low tax regimes Triple bottom line Idea that firms should report not only financial but also social and environmental outcomes Turnkey project Large projects where a group of companies, called a consortium, bids to win the right to build an asset (plant, infrastructure) Upgrade Where a company (or country) improves its terms of trade by intensifying the value-added content of its output Upgradeability Ease with which an object can accommodate modernization Upstream Early value chain activities undertaken when processing or transforming a product or service Value chain Succession of acts that successfully add value to an item as it is transformed from a raw material or input stage to a finished product or service Venture capital Funds provided by a small group of investors to support the expansion of a new firm, often in a hi-tech sector Vertical integration Where a firm controls, and/or moves towards controlling, both the upstream and the downstream sides of its value chain Vertical keiretsu Japanese corporate network based on very long-term cooperation between companies specializing in different production activities A vertical network will include a bank for funding purposes Viral marketing Strategy that encourages individuals to pass on marketing messages to others, creating a multiplier effect spreading the message’s exposure and influence Welfare systems Provisions made alongside the productive economy to support vulnerable members of society Usually government-sponsored Working capital Excess of circulating assets over short-term liabilities Indicates level of long-term funding available to companies to help finance their operational cycle Work–life balance Life choices that many people make in order to balance the demands of work with other important areas of their lives, such as family, friends, and hobbies World culture Growing concept of a universal culture that rises above national cultures and emphasizes global events and world organizations Xenophobia Fear of things that are foreign www.downloadslide.com Index Sweden 279 USA 49 –50, 64, 268, 275, 277 A absolute advantage 31–2 Abu Dhabi Investment Authority 66, 67 accountability 189 acquisitions 111, 221–3 adaptation 289 –90, 294 Adler, Nancy 349 advertising 295 – 6, 299, 300 –1 advocacy 122 Africa 44 Chinese investments 213, 414 International Cocoa Association (ICA) 94 African, Caribbean, and Pacific States (ACP) 87 African Economic Community (AEC) 87 ageing populations 141 aircraft producers 269, 272 airlines British Airways (BA) 179, 223, 240 business-to-business (B2B) marketing 302 Ryanair 18 Alibaba Group 163, 176 Allende, Salvador 44 Amazon 304 –5 American Apparel 199 Anglo-American 191, 193 anti-dumping provisions 70 Anti-Slavery International 190 Apple 163, 193, 202, 249, 289, 290, 303 Aquinas, Thomas 28 arbitrage 56 ArcelorMittal 167, 347 ASEAN (Association of Southeast Asian Nations) 83 –5 ASEAN+3 85 Ashbourne Group 341 Asian Development Bank 95 Asian Pacific Economic Corporation (APEC) 85 Association of Southeast Asian Nations (ASEAN) 83 –5 Australia 17 economic partnership with China 414 –15 autarky 33 automotive industry China 64, 375 – 6, 384 –5 environmental impact 384, 385, 394 European Union 315 Germany 30 green car sector 407 India 247– 8, 281, 287, 376 Japan 4, 49, 226, 243, 244, 278, 279, 315 joint ventures 223, 226 Malaysia 368 product adaptation 294 B BA (British Airways) 179, 223, 240 Bangladesh 217, 363 bank lending 320 –2 Barnier, Michel 128 barriers to entry 20 basis points 322 Bava, Zeinal 259, 260 BBC 163, 169 beer 70, 124 –5, 294, 311 ‘beggar thy neighbour’ policies 87, 97 Bell, Daniel 171 Ben and Jerry’s 199 Bhagwati, Jagdish 203 Bimbo 211 biological resources 392 –3 Black and Decker 268 black market 61 BMW 226 BNP Paribas Walmart 20 body language 171, 172 Boeing 269, 272 Bolivia 35 bond markets 321, 322 bonus culture 342 border patrols 42 Borealis Polymers 250 –1 Boston Consulting Group’s growth share matrix 290 bottled water 23, 298 –9 boundaries of the firm 216 –17 Bové, José 62, 304 Bowyer, Matthew 325 BPI Management Consultancy 252 brand ethos 169 brands 288, 303 – Branson, Sir Richard 163 Brazil 372 Bimbo 211 currency 317–18 economic partnership with China 414 political environment 369 Portugal Telecom 259 – 60 Bretton Woods conference 109 Bretton Woods institutions 41, 87–93, 95 British Airways (BA) 179, 223, 240 British Telecom (BT) 273 Browett, John 249 Browne, John 15 brownfield investments 219 –21 bulk purchasing 270 Bush, George W 45 business confidence business cycle 41 business ethics 187 business leadership 154 business-to-business (B2B) marketing 301–2 business-to-consumer (B2C) marketing 301 BYD 384 –5 C call centres 273 Cambodia 194 capital adequacy 322 capital flight 29, 59 capital markets 98 –9, 322 car industry see automotive industry Cargill 140 Caribbean Community (CARICOM) 87 cartels 94 Castells, Manuel 306 Caterpillar 401 centralization 249 –50 Cescau, Patrick 235 Cessna, 272 Ceva Logistics 281 chaebols 275 change management 176 – charities 201–3 Chevron 405 Chiang Mai Initiative (CMI) 129 child labour 187, 189, 194, 272 Chile 44 China absolute advantage and 31, 32 African ventures 213, 414 automotive industry 64, 375 – 6, 384 –5 Bimbo 211 bottled water 23 BYD 384 –5 car industry 64 corporate social responsibility 200 cultural characteristics 147 currency 96–7, 98, 316 domestic consumption 23, 60 economic power 364 –5 environmental challenges 384, 385, 402 external drivers 20 greenfield vs brownfield investments 220 guanxi 123, 143, 275 international joint ventures 225, 226 –7 internationalization behaviour 382 –3 natural resources minerals 392 need to discover new locations 414 –15 political environment 369, 383 product outsourcing 271, 272 quality of manufactured goods 23, 272 subsidies to solar panel manufacturers 71–2 technological capability 368 trade data 12 www.downloadslide.com 426 Index China prices 377 Chinese British Business Council 215 Chinese Value Survey 146 Chinese walls 359 Chiquita 191 Christianity 136, 137, 138 Chrysler 170 Cisco 354 – classical economics 29 –31 clearing process 326 Clinton, Bill 86, 91 clothes manufacturing 263 clusters 39, 242 co-determination 352 Coca-Cola 193, 309 –10 cocoa-bean prices 94 codes of conduct 196, 198 –9 coffee business collectivism 143, 144, 145, 150 communism 43, 45, 46 communitarianism 143, 144, 145, 150 company configuration comparative advantage 32 –3 competition 20 –1 international tax competition 57 race to the bottom 56 competitive advantage 38 –9 competitive strategies 294 configuration Confucian values 146, 200 consolidation 111 consumption 153 control 251 control systems 166 convergence of international markets 239, 242 coordination 251 corporate culture 162 control systems 166 cultural differences 171–3 cultural web 165 departmental culture 173 – external factors 164, 170 –3 four diversity model 164 –5 global corporate ethos 169 internal factors 173 –5 international business negotiations 169 –70 interpersonal relationships 174 –5 missions 168 –9 models 162 –5 multicultural teams 168 national origins 167 organizational structure 166 power structures 166 rituals and routines 167 social aspects 175 stories 165 strategic change 176 – symbols 166 values 168 –9 visions 168 –9 corporate finance 21 corporate governance 67, 328 corporate revenues 56 corporate social responsibility 186 accountability 189 arguments against 189 –90 arguments for 188 –9 Asia and the developing world 200 –1 child labour and 187, 189, 194 corruption and 187, 194 –5 enforcement 199 –201 environment and sustainability 192, 195 – ethical compliance 191 ethical fit 186 Europe 200 externalities and 188 free riders and 188 green marketing 401 human rights 192 –3 international codes 196 –9 international contexts 191 labour relations 193 – moral cost of cheap food 190 NGOs and international charities 201– 3, 203 – Pepsi 185 philanthropy and 187, 200 stakeholders 188 supply chain management 193 – triple bottom line 189, 200 UN conventions 196, 197 USA 199 variability of multinational business ethics 187 voluntary codes 196, 198 –9 whistle-blowing 207 corruption 187, 194 –5, 369 Cotton, David 398 cotton industry 65 countervailing duties 72 coupling 100 credit spread 322 crisis-related paradigm changes 42 critical mass 18 cronyism 150 cross-cultural training 344 – cultural adaptation 299 –301 cultural web 165 culture 134, 155 achieved status vs ascribed status 143, 144 attitudes towards technology 151 business leadership 134 characteristics of specific countries 147 corporate see corporate culture cronyism 150 education and training 151–2 effect on demand and consumption 153 employment relationship 150 –1 food and national tastes 133 hierarchy of needs 135 individualism vs communitarianism/ collectivism 143, 144, 145, 150, 151 indulgence vs restraint 146 inner direction vs outer direction 143, 144 language 137– 8, 140, 300 layers 134 long-term orientation (time) 146 masculinity vs femininity 145 medicine and pharmaceutical products 155 – misunderstandings 143 national models 142 high-context and low-context cultures 142 –3, 166, 171 personal growth 135 – power distance 144 –5, 147 regulatory framework 149 –50 religion 136 –7, 138, 139, 150, 299 –300 sequential time vs synchronous time 143, 144 specificity vs diffuseness 143, 144 stereotyping 147– uncertainty avoidance/risk aversion 145 – 6, 147 universalism vs particularism 143, 144 visual and graphic communication 148 –9 world demography 140 –2 currency controls 97 currency markets see foreign exchange current account 12 Curtis, Richard 204 D Dacia 223 Dahl, Stephan 144 Daimler-Benz 170 Danone 290, 376 Dauman, Philippe 346 Davydova, Viktoria 293 de Gaulle, Charles 45 De Gucht, Karel 128 de-skilling 240 debt finance bank lending 320 –2 market funding 322 –3 debt relief 94 defaults 100 deferred differentiation 277– 8, 289 Dell 268, 273 – demand conditions 39 demography 140 –2 Dennis, Robert 291 departmental cultures 173 – dependency theories 35 deregulation 98, 99 design 268 Deutsche Bank 169, 172 developmental capitalism 64 –5 Dickens, Charles 187 disclosure 323 Disney Corporation 228 dividend repatriation restrictions 70 –1 division of labour 31 Donaldson, Thomas 187 Dow Chemicals 398 downstream activities 8, 264, 292 Dubai 151, 152 dumping 70 Dunning, John 38 Dutch agribusiness 17 Dyson 19 E e-books 255 economic patriotism 61– 4, 378 economic theories post-Second World War 36 –7 competitive advantage 38 –9 New Trade Theory 38 product life cycle (PLC) 18 –19, 37 pre-Second World War 28 absolute advantage 31–2 classical economics 29 –31 www.downloadslide.com Index comparative advantage 32 –3 factor proportions 31, 35 – 6, 217 infant industries 34 mercantilism 28 –9 trade as exploitation 34 see also policy framework economies of scale 7, 118 economies of scope 241 ecosphere 390 see also environmental challenges; environmental standards education 151–2 Electrolux 403 emerging economies consumer markets 372 –3 consumers’ different requirements 376 – frugal innovations 376 – market demand 373 – predicted rise in per capita demand 374 solvency 372, 373 new competitors 378 future MNE leaders 378 – 81 managerial philosophies 380 –1 national political interest 383 regional categorization 382 –3 resource-seeking 381 sense of mission 383 South–South and South–North flows 381–3 technology-seeking 381–2 operational locations 364 –5 changing political environments 368 –9 corruption 369 difficult operating conditions 369 –70 ‘ease of doing business’ rankings 371 environmental standards 371 GDP growth rates 366 minimum monthly wage 367 predicted size of economy in 2050 365 price instability 370 regulatory environment 370 relations with MNEs 370 –1 rise of the Global South 365 – stages of emergence 366 – technological capability 367– upgrading terms of trade 370 urbanization 373, 374 see also less developed countries employment legislation 352 –3 employment measures 67, 71 employment relationship 150 –1 endogenous growth 366 energy consumption 390 –2 Enron 177, 195 environmental challenges 390 abatement processes 394 annual environmental costs 395 biological resources 392 –3 China 384, 385, 402 depletion of natural resources 390 ecosphere 390 energy 390 –2 environmental responsibility external drivers 396 –7 internal drivers 387– finite planet 390 global warming 396 green business see green business initial responses 391–2 managerial awareness 396 – mineral stocks 392 mitigation 394 pollution 393 – South Africa 389 environmental industry see green business environmental management systems 397 environmental standards 70 auditing frameworks 397 certificate categories and bodies 198 corporate social responsibility 192, 195 – emerging economies 371 outsourcing and 272 –3 equilibrium 29, 31 equity arrangements 221–7 equity finance 323 –5 Ericsson 335 ethical behaviour 187 ethical compliance 191 ethical dilemmas 194 ethical fit 186 ethical premium 198 ethical reporting groups 196 ethnocentrism corporate culture 171 emerging economies 378 human resources management 337 marketing 290, 292 European Bank for Reconstruction and Development 95 European Free Trade Association (EFTA) 83 European Union (EU) 20, 82 –3 car-makers 315 employment legislation 352 –3 government procurement agreement (GPA) framework 128 immigration 79 state intervention 68 Eurozone debt crisis 100 –1, 128, 222 Evans, Paul 336 exogenous growth 366 expatriation 338 – 41 exploitation 34 export growth 11 expropriation 107, 370 external drivers 19 global competition 20 –1 international finance 21 regulatory framework 20 technology 20 externalities 188 externalization 270 F Facebook 306 –7 factor conditions 39 factor mobility 36 factor proportions 31, 35 – factory locations 280 –2 Fair Labor Association 193 fair trade 193 Fairley, Josephine 114 FDI see foreign direct investment federative organizations 246 femininity 145 films 295 427 financial globalization see international financial system financial IGOs 95 financial intermediaries 359 financial markets 21 Financial Transaction Tax 204 financialization 111 firm strategy 39 first-mover advantage 38 flagship suppliers 275 – flexible working 352, 353 food retailing green business 405 – India 53 moral cost of cheap food 190 national tastes 133 Ford 268, 275 Fordist industrial model 277– foreign direct investment (FDI) 6, 13 –14, 115 corporate perspective 118 –19 home country perspective 115 –16 host country perspective 116 –17 performance requirements 70 –1 recent trends 120 trade vs FDI 216 –17 foreign exchange 96 –7, 312 denomination 312 exposure 312 –13 commercial risk 313 net basis 313 non-transactional risks 314 –15 operational risk 313 –14 risk management 315 –17, 319 –20 transactional risks 313 –14 hedging 314 effect on company’s earning patterns 319 –20 long-term ‘natural’ hedging 316 –17 short-term financial hedging 317–19 home currency 312 long position 312 market supply and demand 317 purchasing power parity 320 safe havens 316 short position 312 Fortis 163 Fortune Magazine 7, 336 four diversity cultures modes 164 –5 France corporate culture 175 corporate social responsibility 200 cultural characteristics 151, 154 immigration 79 PAUL bakery 297– protectionism 73 – wineries 21, 215 franchising 215, 228 free riders 188 free trade 34, 41 free trade zones 72, 280 Friedman, Milton 43, 44, 189, 191 frugal innovations 376 – Fuji 293 functional organization 238 funding debt finance bank lending 320 –2 market funding 322 –3 equity finance 323 –5 internal sources 326 www.downloadslide.com 428 Index funding (cont’d) netting 326 –7 transfer pricing and tax implications 327–30 treasury operations 330 –1 working capital 320 G G8/G20 94, 95 Gaidar, Yegor 46 Galbraith, J K 187 Gates, Bill 173 General Agreement on Trade and Tariffs (GATT) 69, 88 –9, 109 General Motors (GM) 49 –50, 64, 275, 277 generic products genetically modified (GM) food 68 geocentrism corporate culture 171 human resource management 337 marketing 292 geographic organization 239 Georgiou, Achilleas 121 Germany advertising messages 299 beer 70, 294 car industry 30 corporate social responsibility 187, 191, 200 cultural characteristics 147, 154 export focus 32, 128 failure of Walmart 292, 346 small and medium-sized enterprises 112 solar energy business 19 trade data 12 unification 30 Glass Ceiling Commission 349 –50 GlaxoSmithKline (GSK) 351 Glencore 66 194 global assignments 341– global business confidence global competition 20 –1 global corporate ethos 169 global crises 98, 100 –1 global culture see culture global firms global governance 57, 87 Asian approach 128 –9 European approach 128 Global Reporting Initiative (GRI) 196, 198 Global South see emerging economies; less developed countries global transformations 236 global value chains 367 global warming 396 globalization 4, anti-globalizers 202 costs and benefits 22 de-globalization fears 10, 14 expatriate staff 338 – 41 first ‘golden era’ 108 –9 food retailing 53, 133 global vs regional focus 239 – 43 juggling global and local perspectives 243 –7 poorer nations and 12 –13, 14 second ‘golden era’ 109 –10 state power and 54 – 67 glocalisation 244, 290 Golden Straitjacket 43, 58 goodwill 220 Google 306 Gorbachev, Mikhail 46 Gore, W L 336 government procurement agreements (GPA) 128 Grameen Bank 363 Grant Thornton scale graphic communication 148 –9 Green, Sir Philip 292 Green and Black’s 114 green business 65, 399 buildings 406 –7 clean ventures 407–9 food 405 – funding for start-ups 408 growth sectors 405 –7 marketing 401 consumer goods 403 green marketing mix 402 –3 green places 404 green pricing 403 – greenwashing 405 halo effect 404 professional goods 403 promotions 404 –5 operational greening 399 – 401 disassembly 399 lightweighting 399 non-product ratio 400 supply chain management 399 – 401 upgradeability 399 solar energy 19, 71–2, 376, 408 –9, 410 –11 transportation 401, 407 water 406 green premiums 407 green redemption 404 greenfield investments 219 –21 Greenpeace 402 Greenwood, Luan 151 gross domestic product (GDP) 3, growth share matrix 290 guanxi 123, 143, 275 Gulf states 150, 151 H Hall, Edward 142 Hamilton, Alexander 34 Hampden-Turner, C 143, 164 Handy, Charles 162, 163 health care 229 Heckscher, Eli 35 – hedging 314 long-term ‘natural’ hedging 316 –17 market-makers 317 short-term financial hedging 317–19 spread 317 Heineken 311 heterarchy 246 hierarchy 151, 250 highly indebted poor countries (HIPCs) 93, 364 Hillman, David 204 Hirdaramani Group 165, 168, 169, 192 Hofstede, Geert 144, 145, 146, 150, 151 Hollande, François 74, 204 home bias 5, 28, 62 home currency 312 home/host countries Honda 287 horizontal integration 108 House, Robert 154 HSBC 290 human resource management 336 –7 changes in employment and the workplace 352 –3 Cisco 354 – conflict between headquarters and subsidiary mentalities 359 – 60 cross-cultural training 344 – employment legislation 352 –3 Ericsson 335 ethnocentric, polycentric and geocentric 337 expatriation 338 – 41 international assignments 341– performance management 346 – recruitment process outsourcing (RPO) 340 –1 redundancies 342, 343 remuneration packages 346 –7 stress 351 teleworking 354 – women in international business 348 –51 work–life balance 171, 172, 352, 353 human rights 192 –3 Hymer, Stephen 38, 237, 238 I IBM 105 IKEA 302 immigration 79 import quotas 69, 70 in-sourcing 270 India automotive industry 247– 8, 281, 287, 376 corporate social responsibility 200 Ericsson 335 food retailing 53 Hero scooters 287 IBM 105 in-house universities 253 managerial philosophy 380, 381 Metro 220 political environment 369, 383 semiconductor sector 34 services outsourcing 271 Inditex 230 –1 individualism 143, 144, 145, 150, 151 Indonesia 352 indulgence 146 industrial districts 39 industrial models 277 Fordism 277– Japanese model 278 –9 polyvalent approach 279 industrialization policies 68 infant industries 34, 70, 72 influence 68 input costs 19 insiderization institutional investors 324 integration 108 Intel 215, 220 intellectual property rights Inter-American Development Bank 95, 185 InterContinental Hotels 214 www.downloadslide.com Index intergovernmental organizations (IGOs) 57, 80 Bretton Woods institutions 41, 87–93, 95 financial IGOs 95 G8/G20 94, 95 Organization for Economic Cooperation and Development (OECD) 9, 94 –5 producer IGOs 93 – internal drivers acquisition of resources 19 expanding sales 17–18 risk diversification 18 –19 internal market 246 internalization 16 internalization advantages 38 international assignments 341– international business challenges and choices 22 definition economic theories see economic theories foreign direct investment (FDI) see foreign direct investment negotiations 169 –70 political economy see policy framework regional performances 11–12 strategic drivers see strategic drivers trade data 10 –13 see also multinational enterprises International Cocoa Association (ICA) 94 international divisions 237 International Energy Agency (IEA) 391 international financial institutions 95 international financial system 21, 57–9, 95 – coupling 100 defaults 100 disclosure 323 foreign exchange see foreign exchange funding see funding global crises 98, 100 –1 international capital markets 98 –9 regulation 323 International Labour Organization (ILO) 352 International Monetary Fund (IMF) 87, 88, 92 –3, 95 Special Drawing Rights 96 international negotiations 66 International Organization for Standardization (ISO) 278 –9 international tax competition 57 international transportation 283 – internationalization ad hoc arrangements 229 Bimbo 211 boundaries of the firm 216 –17 commitment to 213 degrees of internationalization 213 –14 diversity of motives 213 emerging MNEs 382 –3 equity arrangements 221–7 fundraising 215, 228 greenfield vs brownfield investments 219 –21 horizontal 217, 218 –19 Inditex 230 –1 joint ventures 214, 224 –7 ladder of choices 212 licensing 215, 227– management contracts 229 managerial mindsets 214 –15 mergers and acquisitions 221–3 mode of entry 212, 214 non-equity arrangements 227–9 organic growth 211, 212 pioneering costs 214 SMEs 215 –16 Sumitomo 223 – trade vs FDI 216 –17 turnkey projects 227 Uppsala model 213, 236, 264 value chains 216 vertical 217–18, 219 Internet 296 online behaviour 355 see also social media networks Internet marketing 304 –5 interpersonal relationships 174 –5 intervention see state intervention interventionism 41 intra-firm transfers 108 Ireland 56 Irizar, Maite 281 Islam 136, 137, 138, 150 Ive, Sir Jonathan 289 Izuta, Takahiro 223 J Japan 10, 17, 31 advertising messages 299 car-makers 49 copy-cat products 289 corporate culture 174 –5, 243, 244 corporate social responsibility 200 cultural characteristics 147 dollar weakness and 315 economic patriotism 63 failure of Kodak 293 innovation 289 kanban 279 keiretsus 253, 275 manufacturing model 278 –9 MNE paradigm 110 natural disasters 273, 275, 276 Olympus 207– Sumitomo 223 – supply chains 273 Toyota 4, 49, 226, 243, 244, 278, 279, 315 voluntary export restraints 69 Javidan, Mansour 154 JCB 63 – jeans 9, 18 –19 Jevons Paradox 392 job-sharing 353 Jobs, Steve 173, 174, 249 Johnson, Gerry 165 Johnson Controls 168 joint ventures 214, 224 –7 K kanban 279 Karsan, Nooruddin (Rudy) 340 keiretsus 253, 275 Kenexa 340 –1 Keynes, John Maynard 31, 41, 42 Klaus, Vaclav 189 Klein, Naomi 303 – 429 knowledge economy 264 knowledge management 264 –5 design 268 national research efforts 265 – research by MNEs 266 –7 knowledge spillovers 39, 265, 368 Kodak 293 KPMG 225 – Kuznets curve 396 L labour relations 193 – Lang, Jack 73 language 137– 8, 140, 300 law of diminishing returns 34 lead times 273 leadership 154 lean production principles 273 learning 252 –3 learning effects 38 Lenovo 402 Leontief, W 36 Less developed countries (LDCs) 10, 12, 14 categorization 364 infant industries 34, 69 –70 micro-finance 363 neo-liberal agenda and 43 – special and differentiated treatment 90 see also emerging economies leveraging 323, 324 Levi Strauss 19, 401 Levitt, Theodore 239, 242 liberalization 21 LIBOR (London Interbank Offered Rate) 322 licensing 215, 227– lightweighting 399 liquidity 330 List, Friedrich 34 lobbying 115, 121–3 local contents ratios 70 location advantages 38 logistics 107– 8, 279 – 80 green business 401, 407 logos 166 London Interbank Offered Rate (LIBOR) 322 long-term orientation (time) 146 Love, Andy 58 luxury products 295 M Ma, Jack 163, 176 macro-economic policy 72 Mahathir Mohamad 34 Malaysia 368 management contracts 229 manufacturing 277 factory locations 280 –2 industrial models 277 Fordism 277– Japanese model 278 –9 polyvalent approach 279 international transportation 283 – logistics 107– 8, 179 – 80 Manwani, Harish 235 maquiladoras 269 market entry 212, 214 www.downloadslide.com 430 Index market failure 43 market funding 322 –3 market-makers 317 market mechanisms 29 –31, 34 market position 297 market research 297 market segmentation 297 marketing 288 branding 288, 303 – business-to-business (B2B) 301–2 business-to-consumer (B2C) 301 cultural adaptation 299 –301 errors and failures 290, 292 –3 green places 404 green products 401 consumer goods 403 green marketing mix 402 –3 greenwashing 405 halo effect 404 pricing 403 – professional goods 403 promotions 404 –5 Internet marketing 304 –5 phases of marketing strategy 293 place 296 pricing 295 product 293 –5 promotion 295 – push vs pull 288 –9 standardization vs adaptation 289 –90, 294 targeting 297 Zafesoft 291 marketing mix 293 Marks & Spencer 215, 292, 347 Markusen, James 38 Marx, Karl 34 masculinity 145 Maslow, Abraham 135 mass production 277– matrix organization 245 McDonald’s 18, 199, 304, 404 McDonagh, William 399 mercantilism 28 –9 Mercosur 86 mergers 111, 170, 221–3 Merkel, Angela 204 Metro 220 Mexico 31, 85 – Bimbo 211 maquiladoras 269 Pepsi 18 micro-finance 363 Microsoft 163, 253, 267, 289, 306 migrant workers 79, 190 Mill, John Stuart 34 Milne, Shona 172 minerals 392 Minkov, Michael 146 mission statements 168 –9 Mitsubishi 226 Mittal 389 Mittal, Lakshmi 167, 347 MNEs see multinational enterprises mode of entry 212, 214 modules 264 monetarism 43 Monsanto 68 multicultural teams 168 multi-divisional (M-form) structure 238 multi-domestic units 109 Multi Fibre Agreement 194 Multilateral Agreement on Investment (MAI) 71 multinational corporate social responsibility see corporate social responsibility multinational enterprises (MNEs) –7, 106 accumulation of value in value chains 7, –10, 216 advocacy 122 consolidation 111 corporate culture see corporate culture drivers 106 – economies of scale evolving paradigms 108 –11 expropriation 107 financialization 111 foreign direct investment (FDI) 6, 13 –14, 115 corporate perspective 118 –19 home country perspective 115 –16 host country perspective 116 –17 recent trends 120 funding 107 horizontal integration 108 India 105 integration 108 internationalization see internationalization intra-firm transfers 108 lobbying 115, 121–3 logistics 107– mergers and acquisitions 111 mobility of MNEs 56 multi-domestic units 109 offshoring 109 organization see organizational structure; organizational theory political environment and 107 prime contractors 110, 111 regional characteristics 111–12 regional MNEs 241–3 SAB Miller 124 –5 sister units 108 size 55 – vertical integration 109, 118 multinational funding see funding multi-sourcing 270 Mun, Thomas 29 N NAFTA (North American Free Trade Agreement) 31, 85 – Nardi, Elisa 339, 346 national politics see state intervention; state power natural resources 381, 390 –3, 414 –15 nearsourcing 242, 263 negotiation 169 –70 neo-liberalism 40, 42, 43, 44, 46 neo-mercantilism 62 Nestlé 168 netting 326 –7 networks 39 New Trade Theory 38 Newhouse, Jonathan, Jr 293 NGOs (non-governmental organizations) 71, 193, 201–3, 203 – Nigeria 191, 193, 194, 371 Nike 198, 199, 269 Nissan 278 Nokia 168 –9, 267, 330 –1 non-governmental organizations (NGOs) 71, 193, 201–3, 203 – non-product ratio 400 non-tariff barriers (NTBs) 69 North American Free Trade Agreement (NAFTA) 31, 85 – Novartis 220 O Obama, Barack 45 OECD (Organization for Economic Cooperation and Development) 9, 94 –5 offshore transactions 10, 109 Ohlin, Bertil 35 – oil prices 94 Olayan Group 161, 163, 165, 168, 169 oligarchies 369 oligopoly 94 Olympic Games (London 2012) 148 Olympus 107– O’Neill, Jim 204, 365, 373, 375 OPEC (Organization for Petroleum Exporting Countries) 94 openness 59 – 60 opportunity cost 33 organic growth 211, 212 Organization for Economic Cooperation and Development (OECD) 9, 94 –5 Organization for Petroleum Exporting Countries (OPEC) 94 organizational culture see corporate culture organizational dilemmas 244 organizational structure 166, 236 –7 functional organization 238 geographic organization 239 global vs local focus 239 – 41 federative organizations 246 heterarchy 246 internal market 246 managers’ mentality and 243 matrix organization 245 MNEs as alliances of equals 245 –7 organizational dilemma 244 parenting theory 243 rise of regional MNEs 241–3 strategic business units 247 transnational approach 243 –5 historical MNE configurations 237–9 international divisions 237 multi-divisional (M-form) 238 product organization 238 responsiveness 238 Tata 247– Unilever 235 unitary (U-form) 237– organizational theory 249 centralization 249 –50 control 251 coordination 251 hierarchy 250 learning 252 –3 push vs pull paradigms 253 – specialization 250 –1 www.downloadslide.com Index Ortega Gaona, Amancio 230, 231 outsourcing 14, 263, 268 –9 limitations on 271–3 multi-sourcing 270 product outsourcing 269 –70 recruitment process outsourcing (RPO) 340 –1 services outsourcing 270 –1 ownership advantages 38 P paradigms parenting theory 243 Parsons, Talcott 236 particularism 143, 144 Pascual, Philippe 252 paternalism 382 patriotism 61– 4, 378 PAUL bakery 297– Peak Oil 390 Pearson 220 pension funds 17 Pepsi 185 performance management 346 – personal growth 135 – pharmaceutical industry 155 – 6, 228 philanthropy 187, 200 Philippines 271 pioneering costs 214 pizza 133 Poland 79 policy framework 39 – 40 emerging economies 368 –9 interventionism 41 national politics see state intervention; state power neo-liberalism 40, 42, 43, 44, 46 shifts in dominant paradigm 41 changes in place 43 –5 changes over time 42 –3 crisis-related changes 42 policy IGOs 94 –5 pollution 393 – see also environmental challenges; environmental standards pollution havens 397 Polman, Paul 202 polycentrism corporate culture 171 human resource management 337 marketing 292 polyvalent approach 279 Pons, Trevor 341 Porsche 314 Porter, Michael 38 Portugal Telecom 259 – 60 post-industrial society 170 –1 power distance 144 –5, 147 power structures 166 Prebisch, Raul 35 price instability 370 PriceWaterhouseCoopers (PwC) 352 pricing 295 prime contractors 110, 111 private equity finance 324 Proctor & Gamble 202, 376, 403 producer IGOs 93 – product adaptation 294 product life cycle (PLC) 18 –19, 37 product organization 238 product outsourcing 269 –70 Professional Women’s Network (PWN) 350 promotion 295 – protectionism 14, 44, 58 France 73 – psychic distance public procurement contracts 128 purchasing power parity 320 push/pull paradigms 253 – marketing 288 –9 research and development 267 Putin, Vladimir 47 Q quality circles 244 quality standards 70, 278 –9 quantitative restrictions (QRs) 69 –70 quotas 69, 70 R race to the bottom 56 ratings agencies 322 Reagan, Ronald 43 reciprocity 68 recruitment process outsourcing (RPO) 340 –1 Reding, Viviane 348 redundancies 342, 343 refrigerators 403 regime shopping 56 regional associations 57, 80 –1 African, Caribbean, and Pacific States (ACP) 87 African Economic Community (AEC) 87 ASEAN+3 85 Asian Pacific Economic Cooperation (APEC) 85 Association of Southeast Asian Nations (ASEAN) 83 –5 Caribbean Community (CARICOM) 87 European Free Trade Association (EFTA) 83 European Union see European Union Mercosur 86 North American Free Trade Agreement (NAFTA) 31, 85 – regional MNEs 241–3 regulatory framework 20, 149 –50 emerging economies 370 relative pricing 11 religion 136 –7, 138, 139, 150, 299 –300 remote workers 354 – remuneration packages 346 –7 Renault 14, 223, 278 renewable energy 408 –9, 410 –11 research and development 265 –7 resource curse 381 responsiveness 238 restraint 146 retreat of the state 54, 383 return on equity (ROE) 268 Ricardo, David 32 –3, 34, 35, 44 Rifkin, Jeremy 390 right of nations 28 ring-fencing 323 risk aversion 145 – 6, 147 risk diversification 18 –19 431 risk premium 322 rituals 167 Robin Hood Tax Campaign 204 Rose, Sir Stuart 347 Roussinova, Denitza 140 routines 167 Roy, Arundhati 195 Rugman, Alan 213 Russia 46 –7 cultural characteristics 147 internationalization behaviour 382 oligarchs 369 services outsourcing 271 Vimpelcom 215 Vogue magazine 293 Ryanair 18 S SA 8000 186, 198 SAB Miller 124 –5 safe havens 316 Sainsbury’s 399 – 400 Sams, Craig 114 Samsung 318 Samuelson, Paul 33 sanctions 68 –9 Santander 273 Sara Lee 211 Sarkozy, Nicolas 74 Saudi Arabia 143, 352 Olayan Group 161, 163, 165, 168, 169 Schremp, Jürgen 170 Schumpeter, Joseph 30, 34 SEAT 278 sector ethos 169 securitization 322 self-actualization 135 semiconductor sector 34 services outsourcing 270 –1 Servitje, Daniel 211 Shahid, Parvez 375 shareholder value 21 Shell 191, 193, 220, 371, 404 Shields, Christine 84 Siemens 64 Singapore 217 Nokia 330 –1 sister units 108 Sloan, Alfred 277 small and medium-sized enterprises (SMEs) 5, 112 –13 equity funding 324 Green and Black’s 114 internationalization 215 –16 Smith, Adam 29, 31, 32, 33, 34, 44 social capital 112 social media networks 296 Facebook 306 –7 social responsibility see corporate social responsibility solar energy business 19, 71–2, 376, 408 –9, 410 –11 solvency 32 South Africa 194 environmental challenges 389 SAB Miller 124 –5 South Korea 27 chaebols 275 currency 318 sovereign wealth funds (SWFs) 65, 66, 324 www.downloadslide.com 432 Index Spain Inditex 230 –1 migrant workers 190 specialization 250 –1 stakeholders 188 Standard Chartered bank 84 standardization 289 –90, 294 standards 70, 278 –9 Staples 401 Starbucks 215, 292 state actors corporate governance and 67 emerging economies 383 state-capitalism 66 state intervention external motives influence 68 reciprocity 68 sanctions 68 –9 FDI tools 70 –1 France 73 – general intervention tools macro-economic policy 72 subsidies 71–2 internal motives development 68 jobs 67 safety-security 68 performance requirements 70 –1 trade tools non-tariff barriers 69 –70 tariffs 69 state-owned enterprises (SOEs) 66 state power bolstering factors 59 degree of openness 59 – 60 developmental capitalism 64 –5 domestic setting 59 – 61 economic patriotism 61– international negotiations 66 sovereign wealth funds (SWFs) 65, 66 state-capitalism 66 tax revenues 61 globalization and 54 – 67 retreat of the state 54, 383 undermining factors 54 –5 global governance 57 international finance 57–9 mobility of MNEs 56 size of MNEs 55 – technology 55 Steinway pianos stereotyping 147– Stewart, John 356 STMicroelectronics 115 stock brokers 359 stock market capitalization 324 stories 165 strategic business units 247 strategic corporate change 176 – strategic drivers 16 external 19 global competition 20 –1 international finance 21 regulatory framework 20 technology 20 internal acquisition of resources 19 expanding sales 17–18 risk diversification 18 –19 stress 351 subsidiaries subsidies 71–2 Sumitomo 223 – supermarkets 296, 297 supplier parks 273 supply chain management 8, 193 – 4, 268 bulk purchasing 270 clusters of suppliers 39, 242 Dell 268, 273 – externalization 270 green business 399 – 401 in-sourcing 270 international outsourcing 14, 263, 268 –9 limitations on 271–3 multi-sourcing 270 product outsourcing 269 –70 services outsourcing 270 –1 lead times 273 lean production principles 273 supermarkets 296 supply relationships 274 –5 flagship model 275 – short-term/long-term 275 sustainability 192, 195 – see also environmental challenges; environmental standards Sweden Ericsson 335 Volvo 279 Switzerland 316 symbols 166 T targeting 297 tariffs 69 Tata 247– tax avoidance 328 tax evasion 328 tax havens 195, 328 –9 tax revenues 61 team-building 175 teamwork 150 –1 technical standards 70 technology as external driver 20 cultural attitudes 151 emerging economies 367– undermining state power 55 technology transfers 71 teleworking 354 – terms of trade Tesco 297 TFG Radiant group 227 Thatcher, Margaret 42 Thomas, Randall S 346, 347 tobacco industry 300 –1 Tobin, James 203 – Topshop 292 Total Quality Management (TQM) 278 toy-makers 272 Toyota 4, 49, 226, 243, 244, 278, 279, 315 trade balance 29 trade data 10 –13 trade diversion 80 Trade Related Aspects of Intellectual Property Rights (TRIPs) 66, 90 Trade Related Investment Measures (TRIMs) 71 trade theory 28 see also economic theories trade unions 352 training 151–2 transfer pricing 327–30 transnational firms 243 –5 transportation 283 – treasury operations 330 –1 Triad trickle-down economics 30 TRIMs (Trade Related Investment Measures) 71 triple bottom line 189, 200 TRIPs (Trade Related Aspects of Intellectual Property Rights) 66, 90 Trompenaars, Fons 143, 144, 164 turnkey projects 227 U Uganda 62 –3 Ukraine 271 uncertainty avoidance 145 – 6, 147 unemployment 67 Unilever 235, 376, 403 Unilever News Corporation 202 unitary (U-form) structures 237– United Kingdom advertising messages 299 British Airways (BA) 179, 223, 240 call centres 273 cultural characteristics 154 economic patriotism and 63 – globalization and 58 Marks & Spencer 215, 292, 347 United States automotive industry 49 –50, 64, 268, 275, 277 Bimbo 211 CEO pay 346 –7 corporate culture 174 –5 corporate social responsibility 199 cotton industry 65 dollar as benchmark 96, 97 downtrend against Japanese yen 315 domination of the Bretton Woods institutions 93 economic patriotism 63 political model 40 Starbucks 215 state intervention 67 trade data 11–12 universalism 143, 144 Unocal 199 upgradeability 399 Uppsala model 213, 236, 264 upstream activities 8, 264, 292 clusters of suppliers 39, 242 urbanization 373, 374 V Value at Risk (VAR) 331 value chains 7, –10, 216, 264 Dell 273 – global value chains 367 values Asian cultural values 146, 200 corporate culture 168 –9 ethical fit 186 values ethos 169 www.downloadslide.com Index Van Grondelle, Marc 226 Veblen, Thorstein 153 venture capital 324 Vernon, Raymond 37 vertical integration 109, 118 vertical internationalization 217–18, 219 Via Campesina 62, 304 Vimpelcom 215 viral marketing 304 Virgin Media 339, 346 vision 168 –9 Visteon 280 visual communication 148 –9 Vitoria, Francisco de 28 Vivo Energy 220 Vogue magazine 293 Volkswagen 278 voluntary export restraints (VERs) 69, 70 Volvo 226, 279 W Walmart 292, 346, 398, 401 War on Want 193, 204 Washington Consensus 44, 92 water supply 406 privatization 35 Waterfield, Chuck 363 Weber, Max 249 Welch, Jack 243 welfare systems 42, 45 whistle-blowing 207 Willetts, Judy 44 Wimbledonization 63 wind power 408 –9, 410 wine producers 21, 32 –3, 215 women in business 348 –51 Woodford, Michael 207– working capital 320 work–life balance 171, 172, 352, 353 World Bank 87, 88, 92 –3, 95 World Business Council for Sustainable Development 390 world culture 147– world demography 140 –2 World Trade Organization (WTO) 20, 31, 45, 57, 80, 87, 88 –91, 95 dispute resolution 68, 90 Doha deadlock 91–2 fairness 90 most-favoured nation (MFN) 89 national treatment 89 –90 433 non-tariff barriers 69 –70 special and differentiated treatment for LDCs 90 Trade Related Aspects of Intellectual Property Rights (TRIPs) 66, 90 Trade Related Investment Measures (TRIMs) 71 World Values Survey 146 World Wildlife Fund 390 X xenophobia 22, 28 Y Yeltsin, Boris 46 Yip, George 236 Yun Ma 163, 176 Yunus, Muhammad 363 Z Zafesoft 291 Zara 230, 231 Zola, Émile 187 Zuckerberg, Mark 163, 306 .. .International Business This page intentionally left blank International Business Challenges and Choices Second edition Alan Sitkin and Nick Bowen 1 Great Clarendon Street,... expand your knowledge and understanding Challenges and choices This feature highlights the challenges and choices that business practitioners face in each particular subject area Key terms and. .. link between politics, economics, and international business ✦ analyse the internal and external drivers of international business Case study 1.1 International business in the wake of a crisis—looking