International Business Management
Chapter 1: International Business: An Overview
Chapter 2: The Cultural Environments Facing Business
Chapter 3: The Political and Legal Environments Facing Business
Chapter 4: The Economic Environment
Chapter 5: International Trade Theory
Chapter 6: Government Influence on Trade
Chapter 7: Regional Economic Integration and Cooperative Agreements
Chapter 8: Factor Mobility and Foreign Direct Investment
Chapter 9: The Foreign-Exchange Market
Chapter 10: The Determination of Exchange Rates
Chapter 11: Government Attitudes Toward Foreign Direct Investment
Chapter 12: International Business Negotiations and Diplomacy
Chapter 13: Country Evaluation and Selection
Chapter 14: Collaborative Strategies
Chapter 15: Control Strategies
Chapter 16: Marketing
Chapter 17: Export and Import Strategies
Chapter 18: Global Manufacturing and Supply Chain Management
Chapter 19: Multinational Accounting and Tax Functions
Chapter 20: The Multinational Finance Function
Chapter 21: Human Resource Management
Part One—Background for International Business
Chapter 1 International Business: An Overview
Part Two—Comparative Environmental Frameworks
Chapter 2 The Cultural Environments Facing Business
Chapter 3 The Political and Legal Environments Facing Business
Chapter 4 The Economic Environment
Part Three—Theories and Institutions: Trade and Investment
Chapter 5 International Trade Theory
Chapter 6 Government Influence on Trade
Chapter 7 Regional Economic Integration and Cooperative Agreements
Chapter 8 Factor Mobility and Foreign Direct Investment
Part Four—The World Financial Environment
Chapter 9 The Foreign-Exchange Market
Chapter 10 The Determination of Exchange Rates
Part Five—The Dynamics of International Business-Government Relationships
Chapter 11 Government Attitudes Toward Foreign Direct Investment
Chapter 12 International Business Negotiations and Diplomacy
Part Six—Operations: Overlaying Tactical Alternatives
Chapter 13 Country Evaluation and Selection
Chapter 14 Collaborative Strategies
Chapter 15 Control Strategies
Part Seven Operations: Managing Business Functions Internationally
Chapter 16 Marketing
Chapter 17 Export and Import Strategies
Manufacturing and Supply
Chapter 19 Multinational Accounting and Tax Functions
Chapter 20 The Multinational Finance Function
Chapter 21 Human Resource Management
Background for International Business
International Business: An Overview
! Define international business and describe how it differs from domestic business.
! Explain why companies engage in international business and why its growth has accelerated.
! Introduce different modes a company can use to accomplish its global objectives.
! Illustrate the role social science disciplines play in understanding the environment of international business.
! Provide an overview of the primary patterns for companies’ international expansion.
! Describe the major countervailing forces that affect international business.
Chapter 1, Study Questions
1. Define international business.
2. Why should you study international business?
3. What advantages can companies gain by engaging in international business?
4. Why has international business grown recently?
5. How is technology growth affecting international business?
6. Why have governments been liberalizing cross-border movements of goods, services, and resources?
7. Give examples of business and government services that ease the conduct of international business.
8. Define and give examples of merchandise and service imports and exports.
9. How do companies benefit from foreign direct investment (FDI)?
10. What is a multinational enterprise (MNE)?
11. What do we mean by a company's physical and societal environments? Why should companies understand them when engaging in international business?
12. How do companies' international involvements (commitments) typically evolve over time?
13. What pressures do companies face to comply or not with the ethical norms of the foreign countries where they do business?
14. Explain the countervailing forces of standardized versus nationally responsive strategies in international operations.
15. Why do countries engage in cross-national relationships despite their ceding of some sovereignty through the engagements?
Comparative Environmental Frameworks
The Cultural Environments Facing Business
! Discuss the problems and methods of learning about cultural environments.
! Explain the major causes of cultural difference and change.
! Examine behavioral factors influencing countries’ business practices.
! Examine cultural guidelines for companies that operate internationally.
Chapter 2, Study Questions
1. Define culture.
2. What factors affect companies’ cultural awareness needs and their managers’ abilities to gain the awareness?
3. What are the advantages and shortcomings of using the nation as a proxy for a culture?
4. What features influence cultural stability and cultural change?
5. What are major ways that societies rank people (social stratification systems)? Why should managers understand these systems in international business?
6. Explain the difference between ascribed and acquired group memberships, and give examples of each.
7. Describe the major theories that explain why motivation may differ from one country to another.
8. Explain the following concepts:
a. Power distance
b. Individualism versus collectivism
9. What cultural factors help to explain why some societies are more willing to take risk than other societies? How do differences among countries in risk taking behavior affect business?
10. Contrast the following concepts:
a. low-context versus high-context cultures
b. monochromic versus polychronic cultures
11. What influences how much adjustment companies and managers must make in foreign countries?
12. What are the elements of a "silent language?"
13. What are the disadvantages of excessive ethnocentrism and excessive polycentrism?
14. What factors should companies consider when trying to minimize resistance to changes they might introduce to foreign societies?
The Political and Legal Environments Facing Business
! Discuss the different functions that political systems perform.
! Compare democratic and totalitarian political regimes and discuss how they can influence managerial decisions.
! Describe how management can formulate and implement strategies to deal with foreign political environments.
! Study the different types of legal systems and the legal relationships that exist between countries.
! Examine the major legal issues in international business.
Study Questions, Chapter 3
1. What is the role of business in the four steps (interest articulation, interest aggregation, policy making, and policy implementation and adjudication) as countries develop and implement political policies?
2. What is a political ideology, and how does it affect international business?
3. What is the ultimate test of any political system, especially one that is pluralistic?
4. Contrast the attributes of democracy and totalitarianism.
5. Compare companies’ ease of operations in centralized versus decentralized democracies.
6. What are the major indicators for political rights and for civil liberties?
7. What are the major characteristics of the "not free" category of countries?
8. List and explain the different forms of totalitarianism.
9. What is meant by political risk?
10. What are the major types and causes of political risk?
11. What is the difference between micro and macro political risk?
12. Compare the individualistic and communitarian paradigms concerning governmental intervention in the economy.
13. What should a company's political strategy involve?
14. Contrast common law, civil (codified) law, and theocratic law.
15. Contrast national differences in legal safeguards for product liability.
16. What are the impacts of laws on international business?
The Economic Environment
! Learn the criteria for dividing countries into different economic categories.
! Learn the differences among the world’s major economic systems.
! Discuss key economic issues that influence international business.
! Assess the transition process certain countries are undertaking in changing to market economies—and how this transition affects international firms and managers.
Study Questions, Chapter 4
1. What are the key economic forces affecting business operations?
2. Contrast ways of comparing countries by income.
3. What are meant by the quality of demand and the quantity of demand?
4. What are the functions of the World Bank?
5. Compare the relative wealth and population of low, middle, and high income countries.
6. What factors are considered when determining how economically free a country is?
7. Contrast market, command, and mixed economies.
8. What factors are considered when determining how economically free a country is?
9. What are the key macroeconomic conditions affecting international business strategy?
10. What are the adverse effects of inflation on international business?
11. What is a balance of payments, and what are its major components?
12. Why do companies monitor countries' balance of payments?
13. Most formerly command economies are going through economic transition. What is meant by economic transition?
14. What is privatization?
15. What are the obstacles to privatization?
Theories and Institutions: Trade and Investment
International Trade Theory
! Explain trade theories.
! Discuss how to increase global efficiency through free trade.
! Introduce prescriptions for altering trade patterns.
! Explore how business decisions influence international trade.
Study Questions, Chapter 5
! Why is the understanding of international trade theory useful to managers in international business?
! Explain the arguments for and against mercantilism and neomercantilism.
! What is the difference between absolute advantage and comparative advantage?
! What assumptions underlie the theories of specialization in international trade? What are the limitations of these assumptions?
! Why are larger countries usually less dependent on international trade than small countries are?
! Explain the logic of the factor proportions theory.
! How do technological complexities complicate managers’ use of factor proportions theory to determine where to locate their production?
! In what type of country are new products more likely to be produced? Why?
! How and why does production shift from one country to another as many products go through their life cycles?
! Why does most world trade occur among countries with similar characteristics?
! Why do many developing countries worry about excess dependence in world trade?
! What is a strategic trade policy?
! What problems have existed when countries have targeted the development of specific industries?
! What are the four conditions in the Porter Diamond? What are the limitations of the Porter Diamond in explaining countries' competitive advantages?
! What strategic advantages may companies gain by engaging in importing and exporting?
! Chapter 6
! Government Influence on Trade
! ! Evaluate the rationale for government policies that enhance and restrict trade.
! ! Examine the effects of pressure groups on trade policies.
! ! Compare the protectionist rationales used in developed countries with those used in developing economies.
! ! Study the potential and actual effects of government intervention on the free flow of trade.
! ! Give an overview of the major means by which trade is restricted, regulated and liberalized.
! ! Profile the GATT and the World Trade Organization.
! ! Show that government trade policies create business uncertainties and business opportunities.
! Study Questions, Chapter 6
1. What is protectionism? Why should you study about protectionism?
2. What is meant by the conflicting results of trade policies?
3. Why might import restrictions not create more domestic employment?
4. Explain the rationale for and problems of making the infant industry argument work as intended.
5. Why do emerging economies sometimes impose import restrictions to increase their levels of industrialization?
6. What is meant by the terms of trade?
7. Compare import substitution policies with export-led development policies.
8. Why might governments enact export restrictions? What are the possible negative consequences of these restrictions?
9. Explain the price control objectives from import restrictions.
10. Explain the optimum tariff theory.
11. What are the noneconomic rationales for governmental intervention in the free movement of trade?
12. Define and explain the different types of tariffs (duties).
13. List and define the types of nontariff barriers that limit the quantity of goods traded.
14. What are the main arguments for limiting trade in services?
15. What are the functions of the World Trade Organization (WTO)?
16. When a company faces import competition that threatens its market position, what alternatives might it follow?
Regional Economic Integration
and Cooperative Agreements
! Define different forms of economic integration and describe how each form affects international business.
! Describe the static and dynamic effects as well as the trade creation and diversion dimensions of economic integration.
! Present different regional trading groups such as the European Union (EU), the North American Free Trade Agreement (NAFTA) and Asia-Pacific Economic Cooperation (APEC).
! Describe the rationale for and success of commodity agreements.
! Discuss the effects of economic integration on the environment.
Study Questions, Chapter 7
1. Why are regional trading groups important for MNEs’ strategies?
2. Why is geographic proximity an important reason for economic integration?
3. What are the types of economic integration and the differences among these types?
4. Explain the static effects of economic integration.
5. Explain the dynamic effects of economic integration.
6. What is the difference between trade creation and trade diversion resulting from economic integration?
7. What are the functions of the European Commission, European Council, European Parliament, and European Court of Justice?
8. What is the euro and the rationale for it?
9. What was the rationale for NAFTA?
10. What are the rules of origin and local content provisions of NAFTA?
11. What have been the impacts of NAFTA on trade and employment?
12. What are the major regional trading groups in Africa, Latin America, and Asia?
13. What is the purpose of commodity agreements?
14. Contrast the buffer stock system and the quota system for commodity agreements.
15. What is the relationship between the environment and international cooperative agreements?
Factor Mobility and Foreign Direct Investment
! Show why the production factors of labor and capital move internationally.
! Evaluate the relationship between foreign trade and international factor mobility.
! Explain why investors and governments view direct investments and portfolio investments differently.
! Describe companies’ motivations for and advantages from foreign direct investment.
! Demonstrate how companies make foreign direct investments.
! Show the major global patterns of foreign direct investment.
Study Questions, Chapter 8
1. From an economic standpoint, why do production factors move from one country to another?
2. Explain the relationship between international trade and factor mobility from the standpoint of cost reduction.
3. Define direct investment.
4. Why are governments concerned about whether a foreign investment is controlled by the parent?
5. According to appropriability theory and internalization theory, why would companies want to control their foreign operations?
6. Compare the advantages of making a foreign direct investment by buying an existing facility abroad versus starting up a new facility abroad?
7. Why might foreign direct investment stimulate trade rather than substitute for it?
8. How do transportation costs, plant capacity utilization, and scale of process technology influence companies’ production locations (home versus foreign country) to serve foreign markets?
9. What is the relationship between country-market size and import restrictions as a motivator for foreign direct investment?
10. How/why might the country-of origin of a product influence companies to engage in foreign direct investment?
11. What advantages might companies gain through international vertical integration?
12. What is rationalized production? What advantages might companies gain through rationalized production?
13. How might companies' and governments' risk minimization objectives influence companies to make foreign direct investments?
14. Why does most foreign direct investment originate from and go to developed countries?
15. What sector has recently accounted for the fastest growth in foreign direct investment?
The World Financial Environment
The Foreign-Exchange Market
! Learn the fundamentals of foreign exchange.
! Identify the major characteristics of the foreign-exchange market and how governments control the flow of currencies across national borders.
! Understand why companies deal in foreign exchange.
! Describe how the foreign-exchange market works.
! Examine the different institutions that deal in foreign exchange.
Study Questions, Chapter 9
1. What are foreign exchange and the exchange rate?
2. Explain the differences among spot transactions, forward transactions, and future contracts.
3. For what purposes are U.S. dollars so widely traded?
4. What are the three biggest markets (locations) for foreign exchange trades?
5. Define a foreign exchange bid, offer, and spread.
6. How is a currency cross-rate calculated?
7. What is a foreign exchange option?
8. What is meant by a discount or premium between the spot and forward exchange rates?
9. What are meant by convertibility, partial convertibility, and non-convertibility of currencies?
10. What are meant by an exotic currency, a hard currency, and a soft or weak currency?
11. What is a multiple exchange rate system?
12. Why do companies use foreign exchange?
13. What is arbitrage?
14. What is currency speculation?
15. What institutions do companies use for exchanging currencies?
The Determination of Exchange Rates
! Describe the International Monetary Fund and its role in the determination of exchange rates.
! Discuss the major exchange-rate arrangements countries use.
! Identify the major determinants of exchange rates in the spot and forward markets.
! Show how managers try to forecast exchange-rate movements using factors such as balance-of-payments statistics.
! Explain how exchange-rate movements influence business decisions.
Study Questions, Chapter 10
1. What is the International Monetary Fund (IMF)? What are its objectives?
2. What is a Special Drawing Right (SDR)? How is it used?
3. List and define the categories of exchange rate regimes.
4. What is a black market?
5. What is the role of central banks? How do they carry out this role?
6. In what forms do central banks hold their assets?
7. How does a floating exchange rate system work?
8. How does a government maintain a currency value in a managed fixed rate system?
9. Explain the adjustment system that enables an automatic fixed rate exchange regime to work.
10. Explain how inflation affects currency values according to the purchasing-power parity (PPP) theory.
11. What is the Big Mac index, and what are its limitations?
12. What is the relationship between the Fisher Effect and the International Fisher Effect in terms of currency values?
13. What aspects of exchange rate movements do managers need to be concerned?
14. What is the difference between fundamental forecasting and technical forecasting of exchange rates?
15. What are the key factors to monitor when trying to predict exchange-rate movements?
Why do we need to bother with predicting exchange-rate changes?
The Dynamics of International Business-Government Relationships
Government Attitudes Toward
Foreign Direct Investment
! Examine the conflicting objectives of MNE stakeholders.
! Discuss problems in evaluating the activities of MNEs.
! Evaluate the major economic impacts—specifically, balance of payments and growth—of MNEs on home and host countries.
! Provide an overview of the major political controversies surrounding the activities of MNEs.
Study Questions, Chapter 11
1. Why does the size of many MNEs concern many countries?
2. What stakeholders must companies satisfy? Why is this process more difficult for companies operating internationally?
3. What factors make it difficult to evaluate whether the overall effects of FDI are sufficiently positive?
4. How does foreign direct investment usually affect the balance of payments of a host and home country in the short term? In the long term?
5. How can MNEs contribute to the growth and employment of countries where they invest?
6. What assumptions underlie the premises that home-country labor loses or gains through an outflow of FDI?
7. Under what circumstances will an inflow of FDI most likely generate growth?
8. Under what conditions might foreign direct investment hurt the economy of a host country?
9. Explain and give examples of extraterritoriality.
10. What are governments' political and legal concerns about MNEs?
11. What types of payments are legal and illegal under the Foreign Corrupt Practices Act (FCPA) of the United States?
12. Why are the controversies concerning the Foreign Corrupt Practices Act (FCPA) of the United States?
13. How/why do stakeholders concerns relate to companies degree of commitment to international operations?
14. Why are host governments generally more concerned about investments by large than about small companies?
International Business Negotiations and Diplomacy
! Show the common and conflicting interests between countries and MNEs.
! Illustrate negotiations between business and government in an international context.
! Trace the changing roles of home-country governments in settling MNE’s disputes with host governments.
! Clarify the role of companies’ public affairs and political behavior in international business.
! Profile the major types of intellectual property.
! Explain the positions of companies and governments in the uneven global enforcement of intellectual property rights.
Study Questions, Chapter 12
1. Contrast the bargaining and the hierarchical views concerning the terms by which companies can operate in foreign countries.
2. What are main sources of bargaining strength for countries when negotiating with foreign direct investors?
3. What are the main sources of bargaining strength for companies when negotiating with foreign governments?
4. How do joint company activities alter the bargaining strength between companies and foreign governments?
5. List some of the investment incentives governments sometimes offer foreign investors. What are the problems companies can encounter when they accept these investment incentives?
6. How do renegotiations between host governments and investors differ from original negotiations? (Consider the theory of the obsolescing bargain.)
7. What cultural and language problems inhibit international negotiations?
8. What different cultural strategies can companies follow when negotiating with foreign counterparts or foreign governments?
9. How have home-country governments helped protect the foreign direct investments of companies headquartered in their countries?
10. What is dependencia theory?
11. What are intellectual property rights (IPRs)?
12. What factors have led to the increased unauthorized use of intellectual property rights (IPRs)?
13. What are the arguments for and against the protection of intellectual property rights?
14. How might consumers gain or lose through lack of protection (pirating) of intellectual property rights?
15. How might good corporate citizenship in international operations help a company’s performance?
Operations: Overlaying Tactical Alternatives
Country Evaluation and Selection
! Discuss company strategies for sequencing the penetration of countries and for committing resources.
! Explain how clues from the environmental climate can help managers limit geographic alternatives.
! Examine the major variables a company should consider when deciding whether and where to expand abroad.
! Provide an overview of methods and problems when collecting and comparing information internationally.
! Describe some simplifying tools for determining a global geographic strategy.
! Introduce how managers make final investment, reinvestment and divestment decisions.
Study Questions, Chapter 13
1. How does the ranking of countries help companies in their conduct of international business?
2. What is the relationship between companies' international market and production location decisions?
3. When deciding where to locate production and sales efforts, how and why might companies use scanning techniques?
4. What are the major indicators/variables that most companies consider when deciding where to operate abroad?
5. What is meant by the liability of foreignness? How might this influence location decisions for foreign operations?
6. Compare the advantages of locating foreign operations to avoid where competitors have gone versus locating where competitors are.
7. How does the concept of liquidity preference influence international location decisions?
8. What problems might managers encounter when examining and comparing published data on different countries?
9. What are the major types of published data that managers can use to compare countries, and how do they differ in terms of cost and specificity?
10. Explain how grids and matrices can be used as tools to compare countries.
11. How does the interdependence of operations in different countries complicate managers' comparative evaluation of countries?
12. Why do companies often treat foreign reinvestment decisions differently than new foreign investment decisions?
13. What are meant by diversification versus concentration strategies for international location decisions? Under what circumstances would one strategy be preferable to the other?
14. Why do companies engage in international harvesting or divestment?
15. Why do most companies examine expansion proposals one at a time rather than comparing various expansion proposals?
! Explain the major motives that guide managers when they choose a collaborative arrangement for international business.
! Define the major types of collaborative arrangements.
! Describe some considerations for not entering into arrangements with other companies.
! Discuss what makes collaborative arrangements succeed or fail.
! Discuss how companies can manage diverse collaborative arrangements.
Study Questions: Chapter 14
! Explain the special challenges that confront MNEs trying to control foreign operations.
! Describe organizational structures for international operations.
! Show the advantages and disadvantages of decision-making at headquarters and at foreign subsidiary locations.
! Highlight both the importance of and the methods for global planning, reporting and evaluation.
! Give an overview of some specific control considerations affecting MNEs, such as the handling of acquisitions and the dynamics of control needs.
! Summarize major means of control.
! Introduce the differences between a branch and a subsidiary.
Chapter 15: Study Questions
Operations: Managing Business Functions Internationally
! Introduce techniques for assessing market sizes for given countries.
! Describe a range of product policies and the circumstances in which they are appropriate.
! Contrast practices of standardized vs. differentiated marketing programs for each country in which sales are made.
! Emphasize how environmental differences complicate the management of marketing worldwide.
! Discuss the major international considerations within the marketing mix: product, pricing, promotion, branding and distribution.
Study Questions: Chapter 16
Export and Import Strategies
! Identify the key elements of export and import strategies.
! Compare the direct and indirect selling of exports.
! Identify the key elements of import strategies and importing.
! Discuss the roles of several types of third-party intermediaries and trading companies in exporting.
! Show how freight forwarders help exporters with the movement of goods.
! Identify the methods of receiving payment for exports and the financing of receivables.
! Discuss the role of countertrade in international business.
Study Questions, Chapter 17
Global Manufacturing and Supply Chain Management
! Describe different dimensions of global manufacturing strategy.
! Examine the elements of global supply chain management.
! Show how quality affects the global supply chain.
! Illustrate how supplier networks function.
! Explain how inventory management is a key dimension of the global supply chain.
! Present different alternatives for transporting products from suppliers to customers along the supply chain.
Study Questions, Chapter 18
Multinational Accounting and Tax Functions
! Examine the major factors influencing the development of accounting practices in different countries and the worldwide harmonization of accounting principles.
! Explain how companies account for foreign-currency transactions and translate foreign-currency financial statements.
! Illustrate how companies report their impact on the environment.
! Investigate the U.S. taxation of foreign-source income.
! Examine some of the major non-U.S. tax practices and show how international tax treaties can alleviate some of the impact of double taxation.
Study Questions: Chapter 19
The Multinational Finance Function
! Describe the multinational finance function and how its fits in the MNE’s organizational structure.
! Show how companies can acquire outside funds for normal operations and expansion.
! Discuss the major internal sources of funds available to the MNE and show how these funds are managed globally.
! Explain how companies protect against the major financial risks of inflation and exchange-rate movements.
! Highlight some of the financial aspects of the investment decision.
Study Questions, Chapter 20
Human Resource Management
! Illustrate the importance of human resources in international business.
! Explain the unique qualifications of international managers.
! Evaluate issues that arise when companies transfer managers abroad.
! Examine companies’ alternatives for recruitment, selection, compensation, development and retention of international managers.
! Discuss how national labor markets can affect companies’ optimum methods of production.
! Describe country differences in labor policies and practices.
! Highlight international pressures on MNEs’ relations with labor worldwide.
! Examine the effect of international operations on collective bargaining.
Study Questions: Chapter 21