1、Global business todayChapter 1: Globalization1. Describe the shifts in the world economy over the last 30 years. What are the implications of these shifts for international businesses based in Great Britain? North America? Hong Kong?Answer: The world economy has shifted dramatically over the past 30
2、 years. As late as the 1960s, four stylized facts 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 la
3、rge, multinational U.S. firms in the international business scene. The fourth was that roughly half of the globe - 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 w
4、orlds 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.
5、 This trend is also reflected in the world foreign direct investment picture. As depicted in Figure 1.2 in the textbook, 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 out
6、put 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 t
7、he 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 abou
8、t 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 busines
9、s 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.
10、S. and British manufacturers must compete with competitors from across the world to win orders. The changing demographics of the world economy favor a city like Hong Kong. Hong Kong (which is now under Chinese rule) is well located with easy access to markets in Japan, South Korea, Indonesia, and ot
11、her Asian markets. Hong Kong has a vibrant labor force that can compete on par with the industrialized nations of the world. The decline in the influence of the U.S. and Britain on the global economy provides opportunities for companies in Hong Kong to aggressively pursue export markets. 2. The stud
12、y 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 smaller firms. Evaluate this statement.Answer: People who believe in this view, and the firms that they work for, may find that they do n
13、ot 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 the mini-multinationals sugg
14、ests 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 develop
15、ing products that, if sold internationally, may 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
16、 a small firms competitive position before the small firm understands the source of its competitors competitive advantage and can take appropriate counter actions. 3. How have changes in technology contributed to the globalization of markets and of production? Would the globalization of production a
17、nd markets have been possible without these technological changes?Answer: Changes in technology have contributed to the globalization of markets and of production in a very substantive manner. For instance, improvements in transportation technology have paved the way for companies like Coca-Cola, Le
18、vi 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 communica
19、tions has lowered the expense of coordinating and controlling a global corporation. 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
20、 ago. 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 nati
21、ons 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 relative
22、ly easy for business executives from different countries to converse with one another. If these forms of technology, including air-travel, fax capability, e-mail, and overnight delivery of packages were not available, it would be much more difficult for businesses to conduct international trade.4. U
23、ltimately, 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.Answer: This statement reflects a poor understanding of the unique challenges involved in interna
24、tional 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 comple
25、x 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 currenci
26、es. As a result of these differences, there are ample reasons for studying international business as a specific field of study or discipline.5. How might the Internet and the associated World Wide Web impact international business activity and the globalization of the world economy?Answer: According
27、 to the text, the Internet and World Wide Web (WWW) promise to develop into the information background of tomorrows global economy. This improved technology will not only make it easier for individuals and companies in different countries to conduct business with one another, but will also further d
28、ecrease the cost of communications. These improvements will undoubtedly hasten the already rapid pace of globalization. Another distinct attribute of the Internet and the WWW is that they act as an equalizer between large (resource rich) and small (resource poor) firms. For instance, it does not cos
29、t any more for a small software firm to gain visibility via the WWW than it does for a large software company like Microsoft. As a result, the WWW helps small companies reach the size of audience that was previously only within the reach of large, resource rich firms. 6. If current trends continue,
30、China may emerge as the worlds largest economy by 2020. Discuss the possible implications of such a development for(1) The world trading system.(2)The world monetary system.(3)The business strategy of todays European and U.S. based global corporations.(4)Global commodity prices.Answer: The world tra
31、ding 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 responsi
32、bilities. China would also be in a position to actively affect 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 it could become one of the “benchmark” currencies of the world. From the perspec
33、tive of Western global firms, China would represent both a huge market, and potentially the home base of some very capable competitors. Finally, commodity prices would probably fall. 7. Read the Country Focus in this chapter on the Ecuadorian rose industry, the answer the following questions: a) How
34、 has participation in the international rose trade helped Ecuadors economy and its people? How has the rise of Ecuador as a center for rose growing benefited consumers in developed nations who purchase the roses? What do the answers to these questions tell you about the benefits of international tra
35、de?b) Why do you think that Ecuadors rose industry only began to take of 20 years ago? Why do you think it has grown so rapidly? c) To what extent can the alleged health problems among workers in Ecuadors rose industry be laid at the feet of consumers in the developed world and their desire for perf
36、ect Valentines Day roses?d) Do you think governments in the developed world should place trade sanctions on Ecuador roses if reports of health issues among Ecuadorian rose workers are verified? What else might they do to improve the situation in Ecuador?a) Ecuador is the worlds fourth largest produc
37、er of roses. In fact, roses represent the countrys fifth largest export. The industry is vital to Ecuadors economy, creating tens of thousands of jobs, jobs that pay significantly above the countrys minimum wage. Taxes and revenues from the rose growers have also helped to pave roads, build schools,
38、 and construct sophisticated irrigation systems. For Ecuadors consumers, the success of the industry means bigger, more vibrant flowers than were previously available. Most students will recognize that the conditions in Ecuador give the country a distinct advantage in rose growing, and that by focus
39、ing on the industry, Ecuador has been able to benefit from international trade. Consumers in other countries also benefit from Ecuadors flower exports with better products. b) Ecuadors rose industry began some 20 years ago, and has been expanding rapidly ever since then. Most students will probably
40、focus advances in technology as a key to the industrys success. Roses are a very fragile, perishable product. Modern technology enables growers to used refrigerated air transport to get the product to markets around the globe. Without that ability, the growers would be limited to the market immediat
41、ely surrounding the country. c) Students will probably be divided on this issue with some students arguing that consumers are to blame for the problems, and others placing the blame on the growers. Students taking the first perspective will probably suggest that most consumers purchase their roses w
42、ith little consideration for how they are grown. Rather, most consumers simply focus on their beauty and price. Students blaming the growers might argue that growers, because they feel the effect of less-than-perfect roses in the form of smaller profits, will be motivated to find ways to produce eve
43、r more perfect flowers. Certainly, the use of pesticides and other products can produce a better crop. In the end, there is probably blame on both sides. If more consumers were aware of the health problems resulting from the improper use of pesticides, they would probably demand some changes. Simila
44、rly, if pressure were put on the growers to use pesticides safely, health problems could be reduced. d) Trade sanctions are a tool that is often employed by governments that are making a statement against a specific action or actions. In the case of Ecuador, trade sanctions certainly would be an opt
45、ion, as would publicizing the situation so that more consumers were aware of the conditions. In the end though, it is important to consider the effect of the sanctions or other measures on people like Maria who might lose their livelihood as a result. Chapter 2: National Differences 1. Free market e
46、conomies stimulate greater economic growth, whereas state-directed economies stifle growth! Discuss.Answer: In a market economy, private individuals and corporations are allowed to own property and other assets. This right of ownership provides a powerful incentive for people to work hard, introduce
47、 new products, develop better advertising campaigns, invent new products, etc., all in the hopes of accumulating additional personal capital and wealth. In turn, the constant search on the part of individuals and corporation to accumulate wealth enriches the entire economy and creates economic growt
48、h. In contrast, in a command economy, private individuals and corporations are not allowed to own substantial quantities of property and other assets. The objective of a command economy is for everyone to work for “the good of the society.” Although this sounds like a noble ideal, a system that asks
49、 individuals to work for the good of society rather than allowing individuals to build personal wealth does not provide a great incentive for people to invent new products, develop better advertising campaigns, find ways to be more efficient, etc. As a result, command economies typically generate less innovation and are less efficient than market economies. 2. A democratic political system is an essential conditi
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