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IMS 5200.


School of Management
The University of Texas at Dallas

Instructor Habte G. Woldu

Office Phone 972-883-6357
Email Address
Office Location SM 4.805
Offline Office Hours M,W 9:30-11:30 or 10:00 – 12:00 am
Web site

Course Information
Course Number/Section IMS 5200.595
Course Title Global Business
Term and Dates Spring 2007

Course Pre-requisites

The course is designed for graduate students who had already taken international business,
calculus for business and statistics in their undergraduate studies.

Course Description

The course deals with economic relations in a global economy characterized by increasing
interdependence of nations. Students through the foundations of neoclassic and contemporary
economic theories will learn about absolute and comparative advantage of nations in
international trade. The course also introduces new theories of international trade that have
relevance in the current global economic situation. Students through various graphs will be
able to see the impacts of trade barriers and protectionist government policies on the
economic welfare of nations. Furthermore, students in this course will learn about the
challenges of globalization such as environmental questions, child labor by multinational
firms, the north-south dialogue on terms of trade as well as the clash between multinational
firms and developing countries on employment, transfer pricing and technology sharing. In
addition, students through group research and case reports will present their findings to the

Student Learning Objectives

Students upon finishing the course are expected to manage the following core issues:

1 Analyze the international trade dynamics and its trends and directions in the global

2 Understand the impact of trade barriers on the welfare of a nation and how it affects the
world economy

3 Recognize the significance of regional economic integration in the global economy

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4 Understand why international firms need to be sensitive towards issues such as
multiculturalism, human rights, environmental regulations, transfer pricing practice and

Course Objectives:

1. Understand the dynamics of trade and the changes of leadership in the global
2. Recognize why the current terms of trade benefits more the developed
countries more than the developing countries
3. Recognize how Ricardo’s approach to specialization based on cost
comparative advantage theory will help both the rich and poor nations
4. Understand the negative impact of tariff imposition on societies on both sides
of the trade
5. Recognize the dilemma of nations in choosing between economic efficiency
and national security
6. Rationalize why the protectionist economic policy is not beneficial for
developed and developing countries
7. Understand why regional arrangements such as the expansion of EU and
NAFTA can be in contrast to the objectives of multilateralism which has been
fostered by GATT and WTO for many years.
8. Recognize the impact of globalization on the environment, child labor and the
widening of income gap between the rich and the poor.
9. Recognize why MNE can be seen as a threat to developing countries’

Textbooks and some other bookstore materials are available at the UTD Bookstore
or Off-Campus Books

Required Textbook

Carbaugh, Robert, International Economics, 11th Special Editions, South-Western, 2007.

Suggested Readings/Texts

Friedman, Thomas, The World is Flat: A Brief History of the Twenty-First Century, Farrar,
Straus and Giroux, 2005

Maidment, Fred, Internatioanl Business, Annual Edition, McGraw-Hill/Dushkin, 14th edition,

2005-2006 and 2006-2007

Yergin, D. and Stanislaw, J., Commanding Heights: The Battle for the World Economy, PBS
Series, 2002

Suggested Readings/Journals

The Economist, Wall Street-international section and Journal of International Business Studies

Suggested Selected Reading Articles

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1 “The Anxiety behind Globalization and Trade”. Globalization carries consequences
that can generate “winners and losers”.

2 Weller, Christian and Harsh, Adam, Free markets and poverty

3 Buckley, Ross, The Rich Borrow and the Poor Repay: The Fatal Flaw in
International Finance

4 Hubert, Murray and Slater, Joanna, In search of a Ready Scapegoat, Far Eastern
Economic Review, November 13, 2003

5 Budman, Matthew, Looking ahead to our place in the next economy

Course Access and Navigation

Lectures notes and other assignments will uploaded to the WebCT- Please see the course access and navigation information.
If you have any problems with your UTD account or with the UTD WebCT server,
you may send an email to: or call the UTD Computer Helpdesk
at: 972-883-2911.

Grading Information


Individual Participation 15 %
Group Project 15 %
Midterm Examinational 30 %
Final Examination 40 %
Bonus-special assignment 5%
Total 100%

Grading criteria

Scaled Score Letter Equivalent

90 - 100 A
80 - 89 B
70 - 79 C
Less than 70 F

Course Policies

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Make-up exams
Make-up exams are allowed only if the situation was extraordinary. A student who
takes a make-up exam will earn a maximum of 80% if the reasoning for retaking the
exam was not convincing to the instructor.

Late Work
Not accepted unless there is any special situation preventing a student to complete
the work on time.
The same guidelines that apply to traditional classes should be observed in the
virtual classroom environment. Please use proper netiquette when interacting with
class members and the professor.

Participation in the weekly discussion topics

All students are expected to participate in individual and group activities and share the group
assignment works. Instructor will ask each group member to evaluate all other group
members’ participation.

Groups will be selected for case studies and report during the first week of the course. A Peer
Evaluation Form will be submitted by each student. Based on the evaluation information,
instructor will assign a group participation grade for each student. Relevant information will
be posted under Groups icon. Each group will work on a separate case and a 3 page written
report will be submitted on the specific assignment due dates as indicated in the course
schedule table. The report should include:

a) problem definition
b) method/s applied to solve the problem
c) solutions
d) conclusion

Assignments & Academic Calendar

dates Lecture/topics Weekly Discussion Group Project Assignments

on Mini Cases
Week 1
Chapter 1, An overview of Self introduction
Lecture 1 the international
economy and
Week 2 Chapter 2, Foundation of Discussion 1: Even
modern trade theory and Boeing 777 is not all
Lecture 2 American
comparative advantage
Chapter 3, Sources of Discussion 2: Nike Gr. Project 1a: absolute
Lecture 3 comparative advantage and Reebok respond advantage in international trade-

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Gr. Project 1b: cost comparative


Week 3 Chapter 4, Tariffs and the Discussion 3: Gr. Project 2: determining trade
Lecture 4 concept of tariffs Unfair terms of trade international trade directions
3/28 in developing beyond cost comparative
countries advantage
Chapter 6 Trade
regulations and industrial Discussion 4:
policies competition in the
world of steel
Week 4 Gr. Project 3: Economic
4/4 Midterm (Ch. 1-4) performance of EU members
after accession.

Week 5 Gr. Project 4: The effect of

Chapter 7, Trade policies Discussion 5: tariff on small country welfare
4/11 in developing countries WTO rulings rage

Week 6 Chapter 8, Regional trading Discussion 6: Fair Gr. Project 5: Does Foreign
arrangements Trade movement Direct Investment follow
4/18 helps Poor farmers export
in LDC
Chapter 9, International Review for final
factor movements and examination
multinational enterprise
Week 7 Special Review Session

2/25 Final examination Ch. 6-9

Case Assignment Profiles

Case 1: Specialization in trade: Smith’s Absolute Cost Advantage

Given that two nations have equal resources and both agreed to specialize in the
production of a product that is most efficient, determine:

a) Specialization between the two nations

b) The range of terms of trade (negotiation terms)
c) the best of terms of trade (democratic distribution of trade benefit)
d) the net benefit for each of them
e) What are the limitations of production and export based on such assumption?

product Ethiopia Italy

Coffee (in quintals) 20 5
Tea (in quintals) 5 10

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Case 2: Specialization in trade: Ricardo’s Cost Comparative Advantage

Given that two nations have equal resources and both agreed to specialize in the
production of a product that is most efficient, determine:

f) Specialization between the two nations

g) The range of terms of trade (negotiation terms)
h) the best of terms of trade (democratic distribution of trade benefit)
i) the net benefit for each of them
j) What are the limitations of production and export based on such assumption?

product Ethiopia Italy

coffee 10 ton 2 ton
tea 20 ton 6 ton

Case 3: Determine the effect of tariff on the welfare of United States.

a) Based on the following data, determine the equilibrium point of the demand and
supply for fountain pens in the absence of international trade (determine, price
and quantity of demand and supply)
b) Determine the level of consumer and producer surplus, in the absence of
international trade.

c) Assuming that the US government enters a free trade agreement with Mexico,
the price for a fountain pen will be $20. What will be
a. The total consumption level
b. The total number of locally produced fountain pens
c. The total number of imported fountain pens
d. The total amount of producers and consumers surplus
in the new free trade situation? In order to answer the above questions,
you need to plot the above numbers on a graph paper

d) Assuming that the US government imposes a 100% tariff on the import of

fountain pens from Mexico, what will be
a. The total consumption level?
b. The total number of locally produced fountain pens?
c. The total number of imported fountain pens?
d. The total amount of producers and consumers surplus?
e. The total revenue the US government collects?
f. The total amount of deadweight loss?
g. The total amount of consumer’s loss?

Price in $ Quantity of Quantity of

Pencils Supplied Pencils
0 0 1000
10 100 900

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20 200 800
30 300 700
40 400 600
50 500 500
60 600 400
70 700 300
80 800 200
90 900 100
100 1000 0

Case 4: Even the Boeing 777 isn’t all American: Neither is the Airbus A330 all

In the current global economy it is increasingly difficult to say what is a “U.S.” product or
“European” content. Today, goods are produced efficiently in many different locations
and combined in all sorts of ways to fulfill buyer needs in many places. Nevertheless,
there are as many opponents as there are proponents of the idea of depending on
others to produce strategic products such as Boeing 777 and Airbus. The two opposed
views originate from political and economic outlooks.
It has come to the attention of Boeing that the Chinese are willing to buy a big number of
Boeing 777 fleets. However, the Chinese have indicated that they (the Chinese) will be
interested in the production of certain part of the aircraft. This condition was not well
received by the management at Boeing headquarter. The situation gets more
complicated as Airbus has expressed willing to share products with the Chinese. This
leaves Boeing either to accept the demand from China or to lose the market for Airbus.
a) Discuss the dilemma Boeing is facing
b) How would you attempt to solve the problem?
c) Provide the different possible alternative solutions
Provide the best option that might help to reconcile the two sides.

Case 5: Competition in the World Steel Industry

The relatively low production costs of foreign steelmakers encourage foreign steel
producers to participate in the US market. As a result of increased competition, the
average US cost of steel production came down from $685 in 1982 to $482 per ton in
1999. Global cost comparison still shows that cost of steel production in the US is higher
than its competitors. The American public, interest groups, economists and government
officials are divided on the issue of allowing cheaper steel production into the American
Economists think that the US economic is going to suffer heavily if we deny industries
imported steel production at a competitive price. In fact, the economists argue that, the
US consumers are the ones who suffer from the effect of a protected expensive industry
and as a result, the economy will suffer. On the other hand, labor union and government
officials and special interest group argue that the steel industry is a strategic industry
which we can’t afford to lose it. They argue that, steel is used heavily in the defense
industry and is an intermediary product for many industrial products; therefore, its
absence or dependency on others will make the national economy highly vulnerable to
international shocks

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What are the pros and cons of keeping the industry alive by imposing heavy tariffs and
quotas on imported steel products? After presenting the pros and cons of protecting the
industry, forward your position and justify it by providing current publication focusing on
the issue.

Case 6: Does Foreign Direct Investment Follow Export?

There are many arguments which attempt to explain why foreign direct investment
enters a specific international market. Some believe that foreign direct investment is
taking place in order to take advantage of lower wages available in a foreign country,
while others indicate that FDI is entering a foreign market in order to get access to key
resources. There is also a group of authors who believe that the success of export in a
specific country leads to a second phase of market entry mode which includes joint
venture interment, wholly owned investment, contract manufacturing and management
and strategic alliances, in short foreign direct investment entry.

By analyzing the historical data from 1990-2005, examine if the American Foreign Direct
Investment is positively associated with the American Export to a specific country.
Consider a) US-Mexico b) US-China C) US-Saudi Arabia export over the last 15 years).

Plot your data on a graph to show the trend.. Hint. Plot the export and FDI on the x-axis
and the years on the y-axis. Produce three separate graphs for a, b, c groups. You may
also express the export and FDI figures as per capita rather than absolute values. US
per capital export are derived by dividing the total annual amount of US export by US
population for that particular year.

Discuss if there are other variables that might better explain the motives behind US FDI
in the three mentioned countries

Scholastic Honesty
The University has policies and discipline procedures regarding scholastic
dishonesty. Detailed information is available on the Scholastic Dishonesty web page.
All students are expected to maintain a high level of responsibility with respect to
academic honesty. Students who violate University rules on scholastic dishonesty
are subject to disciplinary penalties, including the possibility of failure in the course
and/or dismissal from the University. Since such dishonesty harms the individual, all
students and the integrity of the University, policies on scholastic dishonesty will be
strictly enforced.

Withdrawal from Class

The administration of this institution has set deadlines for withdrawal of any college-
level courses. These dates and times are published in that semester's course
catalog. Administration procedures must be followed. It is the student's responsibility
to handle withdrawal requirements from any class. In other words, I cannot drop or
withdraw any student. You must do the proper paperwork to ensure that you will not
receive a final grade of "F" in a course if you choose not to attend the class once you
are enrolled.

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Incomplete Grade Policy

As per university policy, incomplete grades will be granted only for work unavoidably
missed at the semester’s end and only if 70% of the course work has been
completed. An incomplete grade must be resolved within eight (8) weeks from the
first day of the subsequent long semester. If the required work to complete the
course and to remove the incomplete grade is not submitted by the specified
deadline, the incomplete grade is changed automatically to a grade of F.

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