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Chapter 1
Closing Case: Globalization of BMW, Rolls-Royce, and the MINI
This activity is important because as a manager, you must be able to understand how managing an
international business is different from managing a purely domestic business. Managers in
international companies face a more complex environment in which countries are different
politically, economically, and culturally. These differences influence the way in which business is
conducted within and across borders.
The goal of this exercise is to demonstrate your understanding of international business and the
implications of the globalization of markets and the globalization of production.
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Read the case and answer the questions that follow.
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Bayerische Motoren Werke, which is German for Bavarian Motor Works, is better known globally for
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its acronym BMW (bmwgroup.com). BMW was created as a combination of three German
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manufacturing companies: Rapp Motorenwerke and Bayerische Flugzeugwerke in Bavaria and
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Fahrzeugfabrik Eisenach in Thuringia. Aircraft engine manufacturer Rapp Motorenwerke became
Bayerische Motorenwerke in 1916, and the company added motorcycles to its product repertoire in
1923. BMW expanded to automobiles in 1929 when it purchased Fahrzeugfabrik Eisenach, which
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built Austin 7 cars under a license from Dixi. Fittingly, the first BMW car was called the BMW Dixi.
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Globally, BMW is known for streamlined design, incredible luxury, and top-notch performance. The
company has more than 125,000 employees, delivers about 2.4 million vehicles annually, and has a
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revenue of €95 billion (about $103 billion in U.S. dollars). Its leadership spans products in
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automobiles, motorcycles, and aircraft engines. Innovation is one of the main success factors for the
BMW Group, and innovation is infused into all of BMW’s product lines. The company claims that
focusing on the future is an important part of BMW’s identity and day-to-day work, and the reason
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for its global success. In addition to the well-known BMW brand, BMW also owns the iconic Rolls-
Royce brand and the distinctive MINI automobiles.
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BMW and “driving pleasure” are synonymous, even by people not owning a BMW! BMW creates
driving pleasure from the perfect combination of dynamic, sporty performance; ground-breaking
innovations; and breath-taking design. With a range of car models, a unique feature of BMW is its
“M” designation models that takes the “driving pleasure” to another level. BMW “M” (for
Motorsport) was initially created to facilitate BMW’s racing program but has since become a
supplement to BMW’s vehicles portfolio with specially modified higher trim features. BMW M is part
of an outstanding motorsports heritage and stands for high performance out of passion, with the
latest addition to the line being the BMW M760. It’s the evolutionary link that connects BMW and
Rolls-Royce, bridging the gap between the 7 Series and the entry-level Rolls-Royce Ghost.
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Rolls-Royce is considered the most exclusive luxury automobile brand in the world. This reputation is
rooted in the brand’s long history and rich tradition. Rolls-Royce delivers the promise of effortless
power, luxury, quality, and perfect sanctuary. The entry-level Rolls-Royce Ghost carries a price tag
around $250,000, and the models escalate from that price point. Rolls-Royce has, from its early days
of daring experimentation, created a vision for luxury that is rooted in constantly chasing perfection.
This perfection drives the supreme quality, exquisite hand craftsmanship, and attention to the finest
detail to maintain its global position as the pinnacle luxury automobile manufacturer in the world.
Like Rolls-Royce, the MINI also traces its roots to the United Kingdom.
MINI is a car brand owned by BMW that specializes in small cars. The full platform of MINI cars is
small, with the idea of maximizing the experience and concentrating on the essential. A long-
standing attention to clever solutions with distinctive designs unlocks urban driving and caters to
customers’ individual needs. The most iconic is the MINI Cooper, named after British racing legend
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John Cooper. The MINI Cooper product line has a uniquely sporting blend of classic British mini-car
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heritage and appeal with precise German engineering and construction. According to the MINI team,
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they are targeting affluent urban dwellers in their 20s and 30s who enjoy the fun, freedom, and
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individuality that the MINI cars offer—or perhaps we should just say they target newly graduated
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college students living in cities!
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To help with its targeting of affluent urban dwellers for the MINI or the even more affluent clientele
for the BMW or Rolls-Royce, the BMW Group’s leaders have studied brands outside of the
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automobile industry to create the company’s future retail strategy. Enter the “product genius.”
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BMW’s product genius is a noncommissioned car expert who will spend whatever time it takes or is
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needed to educate customers about their car choices, options, and any issue that the customer
wants to get more information on. This shifts the “performance” from closing the sale of a car to
making the customer satisfied, which lessens the typical pressure most customers feel when walking
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in to a car dealership (and likewise lessens the pressure of the salesperson to sell a car to get
commission).
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Chapter 7
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Closing Case: Boeing and Airbus Are in a Dogfight over Illegal Subsidies
This activity is important because, as a manager, you must be able to understand the political reality
of international trade. Specifically, you should recognize the impact that trade barriers can have on a
firm’s strategy and the role that business firms can have in promoting free trade or trade barriers.
The goal of this exercise is to demonstrate your understanding of the policy instruments that
governments use to intervene in international trade, and the political and economic arguments
behind the use of these policy instruments.
Boeing (boeing.com) and Airbus (airbus.com) are the dominant players in the global market for large
commercial jet aircraft of 100 seats or more. The two companies are locked in a relentless battle for
market share. For decades, these two companies have been accusing each other of benefiting from
government subsidies. In its early years, Airbus received 100 percent of the funds it needed to
develop new aircraft from the governments of four European countries where Airbus’s operations
were based: Germany, France, Spain, and the United Kingdom. These funds were provided in the
form of loans at below-market interest rates. For its part, Airbus claimed that Boeing has long been
the recipient of R&D grants from the U.S. Department of Defense and NASA, which amount to
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indirect subsidies. For example, Boeing's first commercial jet aircraft, the 707, was a derivative of an
aerial refueling tanker, the KC-135, originally developed for the United States Air Force under a
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Pentagon contract.
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The two companies reached an agreement on phasing out subsidies back in 1992, but Boeing walked
away from that deal in 2004, claiming that Airbus was still benefiting from billions in illegal
development subsidies. In 2006, the U.S. government filed a case with the World Trade Organization
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(WTO) alleging that Airbus had received $25 billion in illegal subsidies, mostly in the form of launch
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aid for developing new aircraft. In 2010, the WTO ruled that Airbus had benefited from $18 billion in
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illegal government subsidies, including $15 billion in launch aid. The WTO gave the European
governments until December 2011 to remove the harmful effects of the subsidies.
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In September 2016, the WTO issued another ruling criticizing the Europeans for failing to comply
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with its 2010 ruling and, moreover, for giving another $5 billion to Airbus in the form of
noncommercial loans to help develop its latest aircraft, the A350. In this latest ruling, the WTO stated
that “it is apparent that the A350 could not have been launched and brought to market in the
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absence of launch aid.” In total, the WTO calculated that Boeing had lost 104 wide-bodied jet orders
and 271 narrow-bodied jet orders as a result of Airbus launch subsidies. This latest ruling opens the
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door for the United States to apply retaliatory trade sanctions against noncompliant European
governments.
However, it seems unlikely that the United States will apply retaliatory sanctions any time soon. Part
of the reason is that the United States itself has been countersued by the EU through the WTO for
providing illegal subsidies to Boeing. In November 2016, the WTO ruled that Boeing would receive
around $5.7 billion in illegal tax breaks from Washington State, where Boeing’s main production
facilities are located. The State of Washington had promised to give Boeing these tax breaks between
2020 and 2040 on the condition that the company kept the production of the wings for the wide-
bodied 777X aircraft in the state. According to Airbus, these tax breaks give the 777X an unfair
advantage against its rival aircraft, an assessment that the WTO seems to agree with.
In 2017, the WTO issued a report largely clearing the United States of maintaining unfair support for
Boeing. However, the WTO noted that the U.S. had failed to withdraw tax breaks offered by
Washington State where most of its planes are assembled, and it continued to suggest that those tax
breaks have adverse effects. It remains to be seen what the final outcome will be. The WTO has yet
to rule on how much damage the tax breaks Boeing has received for the 777X program might impose
upon Airbus. For its part, Boeing claims that the benefits from the subsidies to the 777X program
only amount to $50 million a year, an assessment that Airbus vigorously disagrees with. A final ruling
isn’t expected until at least 2018.
Sources: Dominic Gates, “Airbus Scoffs, Boeing Crows as WTO Slams EU for Failing to Address Illegal
Subsidies,” Seattle Times, September 22, 2016; “Boeing Illegally Given $5.7 Billion in Tax Breaks by
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Washington State, WTO Rules,” Associated Press, November 28, 2016; Robert Wall and Doug
Cameron, “EU Failed to Cut Off Illegal Subsidies to Airbus, WTO Rules,” The Wall Street
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Journal, September 22, 2016; and Tom Miles, “WTO Largely Backs Boeing in Trade Row, Faults Tax
Breaks,” Reuters, June 9, 2017.
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Chapter 8
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Closing Case: FDI in the Indian Retail Sector

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This activity is important because, as a manager, you must be able to understand the costs and
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benefits of FDI for the home and host country as well as the policy instruments that government use
to influence FDI flows.
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The goal of this activity is to demonstrate your understanding of FDI, its costs and benefits, and how
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and why governments might seek to regulate FDI flows.
Historically, the structure of retailing in India was very fragmented, with a large number of very small
stores serving most of the market. Supply chains were also very poorly developed and fragmented.
As recently as 2010, larger format big box stores, chain stores, and supermarkets only accounted for
4 percent of retail sales in the country (compared to 85 percent in the United States). This might
sound like an ideal opportunity for efficient foreign retailers such as Walmart, IKEA, Tesco, and
Carrefour. In theory, these multinational enterprises could enter the market and transform India’s
retail space, making it more efficient and bringing modern retail formats, technology, and supply
chains to the country. This would benefit consumers and producers from farmers to manufacturers.
For example, it has been estimated that up to 40 percent of the food produced by Indian farmers is
currently wasted because chronically underdeveloped supply chains mean that food rots before it
reaches the market.
In practice, small store owners in India have a long history of using their political power to lobby the
government to impose restrictions on direct investment by foreigners in the retail space. Like
incumbents everywhere, their goal has been to limit competition and protect their businesses and
jobs. Until 2011, foreign multi-brand retailers such as Costco, Tesco, and Walmart were forbidden
from owning retail outlets in the country. Even single-brand retailers such as IKEA and Nike had to
partner with a local retailer, were limited to a 51 percent ownership stake, and had to go through a
lengthy bureaucratic approval process.
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By 2011, the Indian federal government had come to the conclusion that foreign investment in
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retailing was needed to improve India’s supply chain, increase consumer choice, and help farmers
bring their products to market. This view was supported by much of Indian industry, which saw the
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modernization of the retailing sector as an important condition for continued economic
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development. Clearly, the government believed that greater foreign capital and technology would
help India grow its economy.
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In late 2011, the Indian government announced a plan to reform foreign direct investment
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regulations. The plan was to allow foreign multi-brand retailers such as Walmart and Tesco to open
retail stores, although they would be limited to a 51 percent ownership stake. At the same time, the
government stated its intention to allow single-brand retailers to set up wholly owned stores,
although anything over a 49 percent foreign ownership stake would still require formal government
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approval. These plans were greeted with strong opposition from small retailers and rival political
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parties, and the government was forced to temporarily shelve them.

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In early 2012, the Indian government managed to secure approval for plans to allow foreign single-
brand retailers to open wholly owned stores, but imposed the requirement that a single-brand
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retailer had to source 30 percent of its inventory from India. One of the first retailers to respond to
these changes was IKEA, which announced that it would invest $1.9 billion and set up 25 stores in
the country. More generally though, many analysts viewed the 30 percent sourcing requirement as a
major impediment to entering India. Both Apple and Nike, for example, would have to establish
significant production facilities in the country in order to meet that requirement and set up their own
brand stores.
In early 2018, the government modified the 30 percent requirement, giving single-brand retailers five
years after their initial entry to reach the 30 percent figure. The government also allowed single-
brand retailers to establish wholly owned subsidiaries without having to go through the cumbersome
government approval process.
In late 2012, the federal Indian government allowed foreign investors to open multi-brand retail
stores in India, but limited ownership to 51 percent. Moreover, in a nod to the strength of the
political opposition, the federal government made this requirement subject to approval by individual
states within the country, allowing some to opt out. Several states have done so, which reduces the
attractiveness of India as a market for foreign retailers.
At the same time, India has allowed 100 percent ownership of online retail marketplaces in India.
Amazon took advantage of this to enter the country in 2014 and has committed to invest $5 billion in
India. Unlike in the United States, however, Amazon does not sell goods that it has taken ownership
of because that would classify the company as a multi-brand retailer, limit its ownership stake in
Indian operation to 51 percent, and require it to take an Indian partner. Instead, Amazon only sells
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goods offered through its marketplace platform by third parties. However, Amazon is investing
heavily in fulfillment centers and logistics infrastructure to enable it to deliver goods efficiently to
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Indian customers. Its investment may help to boost the efficiency of supply chains in the country.
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Sources: Greg Bensinger, “Amazon Plans $3 Billion Indian Investment,” The Wall Street Journal, June
7, 2016; Vibhuto Agarwal and Megha Bahree, “India Retreats on Retail,” The Wall Street
Journal, December 8, 2011; “India Online,” The Economist, May 5, 2016; Newley Purnell, “Jeff Bezos
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Invests Billions to Make Amazon a Top E-Commerce Player in India,” The Wall Street
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Journal, November 19, 2016; and K.R. Srivats, “Cabinet Okays 100% FDI in Single Brand Retailing via
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Automatic Route,” Business Line, January 10, 2018.

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Chapter 12
Closing Case: Sony Corporation: An International Innovator?

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This activity is important because, as a manager, you must be able to understand how businesses can
expand revenue and profits by expanding in foreign markets. Successful firms focus on value creation
and strategic positioning.
The goal of this exercise is to demonstrate your understanding of international business strategy:
value creation, strategic positioning, value chain operations, global expansion opportunities, cost
pressures, and choosing a strategy that fits with the core business model of a company in its industry.
Read the case below and answer the questions that follow.
Sony Corporation (sony.com) is one of the most well-known companies in the world. With a heritage
from Japan as a multinational conglomerate that was founded in 1946, the company is
headquartered in Kōnan, Minato, Tokyo. Sony has annual sales of about 7 trillion Japanese yen (65
billion U.S. dollars), 128,000 employees, and some 100 global subsidiaries and affiliates. The global
strategy of Sony has been as an innovator in its industries of electronics, semiconductors, computers,
video games, and telecommunications equipment.
Strategically, Sony's products and services can be classified into 12 core business segments: TV and
video, audio, digital camera, professional products and solutions, medical, semiconductors,
smartphones and Internet, game and network services, pictures, music, and financial services. To
integrate these 12 segments, Sony has a vision of "using our unlimited passion for technology,
content and services to deliver groundbreaking new excitement and entertainment." The mission is
even clearer. Sony is "a company that inspires and fulfills your curiosity."
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This "strategic curiosity" has served Sony well as a global innovator for more than seven decades. For
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example, in 1960 Sony launched the world's first direct-view portable transistor TV and in 1961
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developed the world's first transistor-based videotape recorder. The strategy for the future is through
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the stunning reality of visuals that can be created by big-screen TVs and dynamic sound, Sony plans
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to transform the viewing experience from "watching" to "feeling."
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Behind the scenes, Sony has also spent more than 50 years honing its technological excellence in the
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field of broadcasting and in the professional products. The company's products are widely used in
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the production of movies and television shows, as well as in live sporting events. This has resulted in
a high global market share for Sony and the company receiving a number of Emmy Awards—one of
the most prestigious prizes in the broadcasting industry. Moving forward, Sony is placing a strategic
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emphasis on providing new value through end-to-end solutions that meet the needs of various
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customers by incorporating technologies enhanced in the area of content creation.
Beyond the 12 core segments that have served Sony well strategically for a long time, the company is
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embarking on global initiatives to create new business opportunities. They are accelerating research
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and development (R&D) activities to bring about innovations that can, if successful, become new
strategic business segments serving customers' needs and wants. To strategically evaluate and
nurture potential opportunities, Sony divides these into new business ventures (Life Space UX, Seed
Acceleration Program, and Sports Entertainment) and R&D opportunities (Future Lab Program and
Sony Computer Science Laboratories Inc.).
On the business venture side, Life Space UX is a concept that is defined by delivering unique
experiences and facilitating new ways to transform a person's living space. The Seed Acceleration
Program's goal is to gather and nurture new business ideas from beyond the boundaries of existing
Sony organizations (which is very similar to many organizations' strategies that are innovatively new).
Additionally, with its range of products and services designed to enrich various everyday life
situations, Sony is focused on a new business venture of providing discoveries and experiences in
sports.
The Future Lab Program is a part of Sony's heavy investment in R&D. It embraces an approach to
technological R&D that emphasizes an open creative environment and direct lines of communication
with society, with the end goal being to co-create new lifestyles and customer value. At Sony
Computer Science Laboratories Inc.—often abbreviated to Sony CSL—value is assessed based on
achievements that can contribute to humanity and society, to new science and technology, to
industrial progress, and to product development.
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Chapter 1

Closing Case: Globalization of BMW, Rolls-Royce, and the MINI

Read the case and answer the questions that follow.

Closing Case: FDI in the Indian Retail Sector

and why governments might seek to regulate FDI flows.

Read the case and answer the questions that follow.

parties, and the government was forced to temporarily shelve them.

Automatic Route,” Business Line, January 10, 2018.

Closing Case: Sony Corporation: An International Innovator?

customers by incorporating technologies enhanced in the area of content creation.

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