How are countries different politically, economically, legally?
What are the factors leading to economic development?
How to measure economic development
Protection of property rights Innovation? What about the legal and political systems of the country?
4 Chapter 3 Differences in Culture
What is Culture?
Values and Norms
Culture, Society, and the Nation-State
The Determinants of Culture
Individuals and Groups
Religious and Ethical Systems
Culture and the Workplace
Power distance individualism vs. collectivism uncertainty avoidance masculinity vs. femininity
5 Chapter 3 Learning Goals
Know what is meant by the culture of a society.
Identify the sources that lead to differences in social culture.
Identify the business and economic implications of differences in culture.
Understand how differences in social culture influence values in the work place.
Develop an appreciation for the economic and business implications of cultural change.
6 Chapter 3 Exercise Dominos Pizza commercials from around the world
7 Chapter 3 Critical Thinking
Outline why the culture of a country might influence the costs of doing business in that country. Illustrate your answer with examples.
8 Chapter 3 Critical Thinking
Choose two countries that appear to be culturally diverse. Compare the culture of those countries and then indicate how cultural differences influence (a) the costs of doing business in each country, (b) the likely future economic development of that country, and (c) business practices.
9 Dominos Discussion Questions
1. Dominos has successfully grown its international presence very quickly. Compare and contrast its strategy with that of another well-known international fast food operation, McDonalds. What similarities do you see? Are they any significant differences between the two companies? What has led to the success of Dominos?
10 Dominos Discussion Questions
2. While its pizza appears to be universally accepted, Dominos has had to make some adjustments to its marketing mix. Discuss the different components in the marketing mix and how the company has responded to local needs.
11 Chapter 4 Ethics in International Business
Ethical issues in International Business
Employment Practices Human Rights Environmental Pollution Corruption Moral obligations
What are they?
The Roots of Unethical Behavior
How do they arise?
Philosophical Approaches to Ethics
Friedman Doctrine Cultural Relativism Righteous Moralist Naïve Immoralist
Utilitarian and Kantian Ethics
Ethical Decision Making
Hiring and Promotion Organization Culture and Leadership Decision-Making Processes Ethics Officers Moral Courage
12 Chapter 4 Learning Goals
Be familiar with the ethical issues faced by international businesses.
Recognize an international dilemma.
Discuss the causes of unethical behavior by managers.
Be familiar with the different philosophical approaches to ethics.
Know what managers can do to incorporate ethical considerations into their decision making.
13 Chapter 4 Critical Thinking
QUESTION 1 A visiting American executive finds that a foreign subsidiary in a poor nation has hired a 12-year-old girl to work on a factory floor, in violation of the companys prohibition on child labor. He tells the local manager to replace the child and tell her to go back to school. The local manager tells the American executive that the child is an orphan with no other means of support, and she will probably become a street child if she is denied work. What should the American executive do?
14 Chapter 4 Critical Thinking
QUESTION 2 Under what conditions is it ethically defensible to outsource production to the developing world where labor costs are lower when such actions also involve laying off long-term employees in the firms home country?
15 Chapter 4 Critical Thinking
QUESTION 3 Are facilitating payments ethical?
16 Chapter 4 Critical Thinking
QUESTION 4 Drawing upon John Rawlss concept of the veil of ignorance, develop an ethical code that will (a) guide the decisions of a large oil multinational toward environmental protection, and (b) influence the policies of a clothing company to outsourcing of manufacturing process.
17 Chapter 5 International Trade Theory
An Overview of Trade Theory
Absolute Advantage (Adams Smith)
Comparative Advantage (David Ricardo)
The Gains from Trade/Qualifications and Assumptions
Simple Extensions of the Ricardian Model
The Leontief Paradox
The Product Life-Cycle Theory (Raymond Vernon)
Evaluating the Product Life-Cycle Theory
New Trade Theory (1970s economists)
Increasing Product Variety and Reducing Costs
Economies of Scale, First-Mover Advantages and the Pattern of Trade
Implications of New Trade Theory
National Competitive Advantage Porters Diamond
Related and Supporting Industries
Firm Strategy, Structure, and Rivalry
18 Chapter 5 Learning Goals
Understand why nations trade with each other.
Be familiar with the different theories explaining trade flows between nations.
Understand why many economists believe that unrestricted free trade between nations will raise the economic welfare of countries that participate in a free trade system.
Be familiar with the arguments of those who maintain that government can play a proactive role in promoting national competitive advantage in certain industries.
Understand the important implications that international trade theory holds for business practice.
19 Chapter 5 Critical Thinking
What are some potential costs of adopting a free trade regime? Do you think governments should do anything to reduce these costs? What?
20 Chapter 5 Critical Thinking
The worlds poorest countries are at a competitive disadvantage in every sector of their economies. They have little to export. They have no capital their land is of poor quality they often have too many people given available work opportunities and they are poorly educated. Free trade cannot possibly be in the interest of such nations! Discuss.
21 Chapter 5 Critical Thinking
Unions in developed nations often oppose imports from low-wage countries and advocate trade barriers to protect jobs from what they often characterize as unfair import competition. Is such competition unfair? Do you think that this argument is in the best interests of (a) the unions, (b) the people they represent, and/or (c) the country as a whole?
22 Chapter 5 Critical Thinking
a) Who benefits from the outsourcing of skilled white collar jobs to developing nations? Who are the losers?
b) Will developing nations like the United States suffer from the loss of high skilled and high paying jobs to other countries?
c) Is there a difference between the transference of high paying white collar jobs, such as computer programming and accounting, to developing nations, and low paying blue collar jobs? If so, what is the difference, and should government do anything to stop the flow of white collar jobs out of the country to countries like India?
23 Chapter 5 Critical Thinking
Drawing on the new trade theory and Porter's theory of national competitive advantage, outline the case for government policies designed to build a national competitive advantage in biotechnology. What kind of policies would you recommend the government adopt? Are these policies at variance with the basic free trade philosophy?
24 Chapter 6 The Political Economy of International Trade
Instruments of Trade Policy
Import Quotas and Voluntary Export Restraints
Local Content Requirements/ Administrative Policies
The Case for Government Intervention
Political Arguments for Intervention
Protecting jobs and industries national security retaliation protecting consumers furthering foreign policy objectives protecting human rights
Economic Arguments for Intervention
The infant industry argument strategy trade policy
The Revised Case for Free Trade (or, counter-arguments to the case for government intervention)
Retaliation and Trade War
Development of the World Trading System
From Smith to the Great Depression ? 19471979 GATT, Trade Liberalization, and Economic Growth ? 19801993 Protectionist Trend ? The Uruguay Round and the World Trade Organization ?WTO Experience to Date ?The Future of the WTO Unresolved Issues and the Doha Round
25 Chapter 6 Learning Goals
Describe the policy instruments used by governments to influence international trade flows.
Understand why governments sometimes intervene in international trade.
Articulate the arguments against strategic trade policy.
Describe the developments of the world trading system and the current trade issues.
Explain the implications for managers of developments in the world trading system.
26 Chapter 6 Critical Thinking
Do you think that governments should consider human rights when granting preferential trading rights to countries? What are the arguments for and against taking such a position?
27 Chapter 6 Critical Thinking
Whose interests should be the paramount concern of government trade policy - the interests of producers (businesses and their employees) or those of consumers?
28 Chapter 6 Critical Thinking
Given the arguments relating to the new trade theory and strategic trade policy, what kind of trade policy should business be pressuring government to adopt?
29 Chapter 6 Critical Thinking
You are an employee of an U.S. firm that produces personal computers in Thailand and then exports them to the U.S. and other countries for sale. The personal computers were originally produced in Thailand to take advantage of relatively low labor costs and a skilled workforce. Other possible locations considered at that time were Malaysia and Hong Kong. The US government decides to impose punitive 100 ad valorem tariffs on imports of computers from Thailand to punish the country for administrative trade barriers that restrict U.S. exports to Thailand. How do you think your firm should respond? What does this tell you about the use of targeted trade barriers?
30 Boeing versus Airbus
Boeing 787 Dreamliner
31 Subsidy Dogfight Boeing v. Airbus
What are the facts?
Boeings development of Boeing 7E7 (now 787), which promises as much as 20 reduction in operating costs
Alliance with three Japanese companies
1992 Agreement limits state aid that both companies can receive from respective governments
Does 1992 Agreement extend to other parties in the project? Japanese MET? State of Washington and Kansas
Airbus applies for launch aid for A350, direct competitor to 787
Dispute now before WTO as to the legality of the various subsidies
32 Boeing v. Airbus
Airbus receives subsidies from UK, France, German and Spain
Why is this bad?
13.5 billion government subsidies between 1970 and 1990 (25.9 billion if commercial interest rates applied)
Loans at below market interest rates and tax breaks
Airbus is believed to have financed 80 of the cost of aircraft for a term of 8 to 10 years at an annual interest rate of approximately 7
In contrast, US Export Import Bank required 20 down payments from Boeing customers, financed only 40 of the cost of an aircraft directly, and guaranteed financing of the remaining 40 by private banks at an average interest rate to 8.5 for 10 years
Airbus received government 3.7 billion launch aid and 2.8 billion in indirect subsidies for the development of the A380 superjumbo and need not repay the aid if the aircraft is not a commercial success
Catalyst for latest dispute launch aid for A350, direct competitor to B-787 (700 million by UK, 30 launch aid from EU)
33 Boeing v. Airbus
Airbus success due not to subsidies but to good products and strategy
Boeing benefited from US government aid for a long time
Planes were built under government WWI, WWII. Boeing 707, for example, was subsidized by the US government
1991 EC study contended that Boeing/McDonnell Douglas received 18 to 22 billion in indirect aid between 1976 and 1990. US Dept of Defense gave as much as 6.34 billion from 1976 to 1990, and NASA gave 8 billion to commercial aircraft production. Moreover, tax exemptions gave an addition 1.7 billion to Boeing and 1.4 billion to MD
Boeing rejected these claims, saying no additional 5 for commercial work for every defense contract only 3 of Boeings RD from Department of Defense, and only 4 from NASA funding
Airbus contends Boeing received some 12 billion from NASA to develop technology, much of it found its way to commercial jet aircraft
Airbus further contends Boeing would receive as much as 3.2 billion in tax breaks from Washington, 1 billion in loans from the Japanese government
34 Boeing v. Airbus
How might the repayable launch aid for Airbus change its decision making on launching a new aircraft? What are the potential consequences for (a) Boeing, (b) airlines, and (c) the profitability of both Boeing and Airbus?
35 Boeing v. Airbus
When Airbus originally received government aid back in the 1960s, it was a new enterprise. Today it is the global market share leader in the commercial aerospace business. How do gains in market share effect the legitimacy of claims for subsidies?
36 Boeing v. Airbus
Do you think that RD contracts from NASA and the Pentagon benefit Boeings commercial aerospace business? How?
37 Boeing v. Airbus
At this point, what do you think is the most equitable solution to the long running battle between the US and EU on subsidies for commercial aircraft development?