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Chapter 06 - International Management
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chapter
International Management
CHAPTER CONTENTS
Learning Objectives 145
Key Student Questions 3
Class Roadmap 146
Key Terms Presented in This Chapter 11
Lecturettes 11
6-1
Discussion Questions 14
Concluding Case 17
Experiential Exercises 19
Examples 20
Supplemental Features 23
Chapter Video 23
Manager’s Hot Seat 23
Self Assessment 23
Test Your Knowledge 24
Expanded PowerPoint Slide Show 24
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LEARNING OBJECTIVES
1 Discuss what integration of the global economy means for indi-

vidual companies and their managers.
2 Describe how the world economy is becoming more integrated

than ever before.
3 Define the strategies organizations use to compete in the global

marketplace.
4 Compare the various entry modes organizations use to enter

overseas markets.
5 Explain how companies can approach the task of staffing over-

seas operations.
6 Summarize the skills and knowledge managers need to manage

globally.
7 Identify ways in which cultural differences across countries influ-

ence management.
KEY STUDENT QUESTIONS
Students have very practical questions about international management - they want to know:
 1. “What implications does globalization have for my job - what can I do

to keep my job from being outsourced?”
2. “How does a manager know when to take a business global?”
While every industry is different, you can offer students the following advice:
• A recent article in Business Week outlines the skills that programmers need to find a job in
the United States.1 It seems that technical skills aren’t enough anymore. In order to be suc-
cessful, programmers also have to show that they can lead and manage teams, think strategi-
cally, and become software architects, not just the implementers of someone else’s vision.
1
Baker, S. and Kripalani, M. “Software:Will Outsourcing Hurt America’s Economy?” Business Week, March 1, 2004, Online at
http://www.businessweek.com/magazine/content/04_09/b3872001_mz001.htm
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• Most managers today don’t really have the choice of whether or not to take a business global
- as soon as they post their first corporate website, they are doing global marketing. What
companies do have, however, is a choice about whether or not to target global markets over
domestic ones. James F. Foley has written a book entitled The Global Entrepreneur, which
discusses some of the reasons why companies decide to go global, including:
o accessing markets beyond their domestic territory
o avoiding a changing domestic environment, especially decreasing customer bases
or when selling seasonal items
o lowering costs
o a strategic plan to increase global brand awareness, achieve worldwide distribu-
tion and manufacturing capacity, and exploit extranational economies of scale
and experience effects.2
CLASS ROADMAP
Management Connection
How IKEA is Making Swedish Design a Global Phenomenon
Dorm rooms and apartments across the U.S. feature furniture and accessories assembled from
kits purchased at IKEA stores or from their website. What began as a Swedish teenager’s dream
is now an international enterprise with stores in 38 countries and revenues of more than $32 bil-
lion a year.
What set IKEA apart is the practicality of the company’s founder, Ingvar Kamprad. IKEA’s vi-
sion is “to create a better everyday life for the many people.” This translates to keeping costs
low so that more people can afford their products. Their designs help make life better by allow-
ing people to enjoy beautiful and functional furniture, even if they are not wealthy.
IKEA has also demonstrated a commitment to efficiency, energy savings, and the environment.
They have installed geothermal and solar systems in stores and continue to improve packaging
in an effort to drive down prices and reduce energy consumption and waste. IKEA also started a
venture capital fund, called the Green Tech Fund, to invest in start-ups that are attempting to
contribute ecofriendly IKEA products.
Approximately 80% of IKEA’s revenues currently come from Europe. However, as they con-
tinue to expand in Asia and other markets, it will be interesting to see if their message continues
to resonate around the globe. Ask students to voice their thoughts as to whether IKEA’s com-
mitment to affordability and sustainability will appeal to consumers around the world.
I. Managing in a (Sometimes) Flat World
2
Foley, J. The Global Entrepreneur. Dearborn Trade, 1999.
6-4
LO 1: Discuss what the integra-

International business has become the norm. tion of the global economy
Thomas Friedman’s The World is Flat means for individual companies
and their managers.
A. Implications of a Flat World
B. The Role of outsourcing
1. outsourcing occurs when an organization con-
tracts with an outside provider to produce one or
more of its goods or services
2. offshoring occurs when companies move jobs to
another country, typically where wages are
lower
3. Managers should ask these questions when con-
sidering offshore business:
a. What is the competitive advantage of the
LO 2: Describe how the world
products they offer?
economy is becoming more inte-
b. Is the business in its early stages? grated than ever before.
c. Can production savings be achieved lo-
cally?
d. Can the entire supply chain be im-
proved? E.G.
Use Example 6.1 – Global environ-
II. The Global Environment ment here
A. European Unification
1. European Union (EU) will allow goods, services,

capital, and human resources to flow freely across
national borders.
2. Unification will create a more competitive Europe.
3. The United States must remain vigilant to ensure
that a Fortress Europe does not close itself to U.S.
goods and services.
B. Asia: China and India’s Ascent
1. Japan dominated world attention during the last dec- E.G.

ade. Use Example 6.2 – Global econ-
2. China has now surpassed Japan as America’s third omy consequences here
largest trading partner, and will soon pass Mexico
(becoming the second largest trading partner) as
well. (Figure 6.2)
LO 3: Define the strategies or-
3. Trade imbalance is a concern with China - U.S. ex-
ganizations use to compete in
ports to China were about $50 billion in 2004, but the global marketplace.
imports were four times as high.
6-5
C. The Americas
1. North American Free Trade Agreement (NAFTA)

is an economic pact that combined the economies of
the United States, Canada, and Mexico into the
world’s largest trading bloc.
2. Industries that have benefited in the short run in-
clude capital-goods suppliers, manufacturers of con-
sumer durables, grain producers and distributors,
construction equipment manufacturers, the auto in-
dustry, as well as the financial industry.
TEXT REFERENCE
D. The Rest of the World Management Connection – Pro-
gress Report
IKEA’s vision has been well received in 38
1. Middle East, Africa, and Latin America comprise a countries with more expansion planned for the
future. It seems they address widely shared
major share of the world’s natural resources and are needs and values. Growth in China has been
among the fastest-growing economies. strong for IKEA even though companies like
Home Depot have stumbled. Chinese families
enjoy viewing the model rooms in IKEA
stores to see how westerners live.
• What pressures do you foresee for global in-
III. Global Strategy tegration? What pressure do you see for local
responsiveness?
A. Pressures for global integration • What global strategy do you think is more
appropriate for IKEA (international, multina-
tional, global, or transnational?)
1. Universal needs create strong pressure for a global strat-
egy.
2. Competitive pressures to reduce costs may force a com-
E.G.
pany to globally integrate manufacturing.
3. Global strategic coordination is another factor that cre-
ates pressure for global integration.
Use Example 6.3 – Global strat-
B. Pressures for local responsiveness emerge when: egy systems here
1. Consumer tastes and preferences differ significantly.

2. There are differences in traditional practices
3. There are differences in distribution channels and sales
practices.
4. Host country governments impose economic and politi-
cal demands.
C. Choosing a global strategy (Figure 6.5)
1. The international model is designed to help companies

exploit their existing core capabilities to expand into for-
eign markets.
a. The advantage of this model is that it facilitates the
transfer of skills and know-how from the parent
company to subsidiaries around the globe.
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b. One disadvantage of the international model is that it

does not provide maximum latitude for responding to
local conditions.
2. The multinational model uses subsidiaries in each coun-

try in which the company does business, and provides a
great deal of discretion to those subsidiaries to respond to
local conditions.
a. One advantage of allowing local responsiveness is
that there is less need for coordination and direction
from corporate headquarters.
b. A major disadvantage of this model is higher manu-
facturing costs and duplication of effort.
3. The global model is designed to enable a company to

market a standardized product in the global marketplace
and to manufacture that product in a limited number of
locations where the mix of costs and skills is most favor-
able.
a. Companies that adopt the global model tend to be-
come the low-cost players in any industry.
b. On the downside, because a company pursuing a
purely global approach tries to standardize its prod-
ucts and services, it may be less responsive to con-
sumer tastes and demands in different countries.
4. The transnational model is an organization model char-

acterized by centralization of certain functions in loca-
tions that best achieve cost economies; basing of other
functions in the company’s national subsidiaries to facili-
tate greater local responsiveness; and fostering of com-
munication among subsidiaries to permit transfer of tech-
nological expertise and skills.
a. A distinguishing characteristic is the fostering of
communications among subsidiaries.
b. Achieving such communications across subsidiaries
requires elaborate formal mechanisms, such as trans-
national committees staffed by people from various
subsidiaries who are responsible for monitoring co-
ordination among subsidiaries.
c. These organizations transfer managers among sub-
sidiaries on a regular basis.
d. Achieving coordination among subsidiaries requires
that the head office play a proactive role in coordi-
nating their activities.
I
LO 4: Compare the various en-
try modes organizations use to
enter overseas markets
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IV. Entry Mode

A. Exporting
1. Advantages of exporting are:

a. Provides scale economies by avoiding the costs of
manufacturing in other countries.
b. Is consistent with a pure global strategy.
2. Disadvantages of exporting are:

a. Exporting from the company’s home base may be in-
appropriate if other countries offer lower-cost loca-
tions for manufacturing the product.
b. High transportation costs can make it uneconomical,
E.G.
particularly in the case of bulk products.
c. Host countries can impose tariff barriers.
B. Licensing Use Example 6.4 – Difference

between franchising and licens-
1. An arrangement whereby a licensee in another country ing here
buys the rights to manufacture a company’s product in its
own country for a negotiated fee.
C. Franchising
1. It is used primarily by service companies.
2. The company sells limited rights to use its brand name to

franchisees in return for a lump-sum payment and a share
of the franchisees’ profits.
D. Joint ventures
E.G.
Use Example 6.5 – Joint ventures
1. Joint ventures benefit a company through: here
a. The local partner’s knowledge of the host country’s
competitive conditions, culture, language, political
systems, and business systems
b. The sharing of development costs and/or risks with
the local partner.
c. Two possible disadvantages:
i. In the case of licensing, a company runs the risk
of losing control over its technology to its ven-
ture partner.
ii. Because control is shared with the partner, the
company may lose control over its subsidiaries.
E. Wholly owned subsidiaries
1. An independent company owned by the parent corpora-

tion.
2. The most costly method of serving an overseas market.
6-8
LO 5: Explain how companies

V. Managing Across Borders can approach the task of staffing
overseas
A. When establishing operations overseas, headquarter ex-
ecutives have a choice between sending:
1. Expatriates
a. cost
b. personal security
c. stress (Table 6.3)
2. Host-country nationals
a. availability
b. familiarity with language and culture
c. cost less
3. Third-country nationals
a. can soften political tensions
b. ‘compromise solution’ between expatriate and
host country national
LO 6: Summarize the skills and
B. Skills of the Global Manager knowledge managers need to
manage globally.
1. Failure rate is the number of expatriate managers of
an overseas operation that come home early. Failure
can be prevented by:
a. structuring assignments clearly
b. creating clear job objectives
c. developing performance measurements based on
objectives
E.G.
d. using effective, validated selection and screening Use Example 6.6 – Cultural dif-
criteria ferences here
e. preparing expatriates and families for assign-
ments
f. creating a vehicle for ongoing communication
g. using repatriation to facilitate reentry
h. developing a mentor program that will help in
case of trouble (Table 6.5)
2. Skills and knowledge include:

a. multidimensional perspective
E.G.
b. proficiency in line management and decision Use Example 6.7 – Multidimen-
making sional perspective here
c. having resourcefulness
d. cultural adaptability
e. sensitivity
f. team-building skills
g. mental maturity
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C. Understanding cultural issues LO 7: Identify ways in which

cultural differences across coun-
1. Culture shock is the disorientation and stress associ- tries influence management.
ated with being in a foreign environment.
2. Geert Hofstede’s dimensions of cultural differences:

(Figure 6.6)
a. power distance
b. individualism/collectivism
c. uncertainty avoidance
d. masculinity/femininity
E.G.
3. When working with foreign nationals, it is important
to explain U.S. cultural norms with regard to:
a. Holding meetings
b. Work schedules Use Example 6.8 – Working with
c. E-mail foreign nationals here
d. Fast-trackers
e. Feedback
4. an inpatriate is a foreign national brought in to work TEXT REFERENCE
at the parent company Management Connection – On-
ward
D. Ethical issues in international management Two internal factors are especially relevant
for IKEA as they plan for future growth:
strong control over company values is critical
1. General Dynamics and United Technologies have and developing future managers is another
key area for improvement.
established codes of conduct for international busi- IKEA is owned by a tax-exempt nonprofit or-
ness. ganization in Holland which is controlled by a
five-member executive committee, chaired by
2. Four steps for establishing and reinforcing these founder Ingvar Kamprad, now in his 80s.
codes might include the following: This model limits the amount of information
the company must provide to the public as
a. Vigorously oversee the corporate ethics and cul- well as the taxes it must pay. Some observers
ture see this model as inconsistent with social re-
sponsibility. IKEA has responded by report-
b. Ensure that the company has articulated its val- ing some performance data such as annual
ues. sales and expansion plans. Among IKEA’s
200 top managers, 40% are women and local
c. Let business partners know the standards operations tend to have local managers. Do
d. Include character, integrity, decision-making, you think that IKEA is in danger of losing
control of its values as it employs more local
and other values information in performance re- managers?
views and succession-management processes. In Sweden, workers are paid $19 an hour and
receive five weeks of vacation, but in Dan-
3. Most people embrace five core values, regardless of ville, Virginia workers are paid $8 an hour
religion or nationality: and receive 12 vacation days. What kinds of
problems do you think these inconsistencies
a. compassion may cause? Is IKEA living up to its vision to
b. fairness “provide a better everyday life to the many
people”?
c. honesty
d. responsibility
e. respect for others.
6-10
KEY TERMS PRESENTED IN THIS CHAPTER
Culture shock The disorientation and stress associated with being in a foreign environment
Ethnocentrism The tendency to judge others by the standards of one’s group or culture, which are seen
as superior
Expatriates Parent-company nationals who are sent to work at a foreign subsidiary
Failure rate The number of expatriate managers of an overseas operation who come home early
Global model An organizational model consisting of a company’s overseas subsidiaries and character-
ized by centralized decision making and tight control by the parent company over most aspects of
worldwide operations; typically adopted by organizations that base their global competitive strategy
on cost considerations
Host-country nationals Natives of the country where an overseas subsidiary is located
Inpatriate A foreign national brought in to work at the parent company
International model An organizational model that is composed of a company’s overseas subsidiaries and
characterized by greater control by the parent company over the research function and local product
and marketing strategies than is the case in the multinational model
Multinational model An organizational model that consists of the subsidiaries in each country in which a
company does business, and provides a great deal of discretion to those subsidiaries to respond to
local conditions.
North American Free Trade Agreement (NAFTA) An economic pact that combined the economies of
the United States, Canada, and Mexico into one of the world’s largest trading blocs.
Offshoring Moving work to other countries
Outsourcing Contracting with an outside provider to produce one or more of an organization’s goods or
services
Third-country national Natives of a country other than the home country or the host country of an over-
seas subsidiary
Transnational model An organizational model characterized by centralizing certain functions in loca-
tions that best achieve cost economies; basing other functions in the company’s national subsidiar-
ies to facilitate greater local responsiveness; and fostering communication among subsidiaries to
permit transfer of technological expertise and skills
LECTURETTES
LECTURETTE 6.1: Untangling the Trade Deficit
TRADE DEFICIT
1. There are many misunderstood economic statistics, but there is one that clearly stands out as the most
confusing: the trade deficit. No other number is interpreted so differently by professional economists
and the general public. It is thought that America’s trade deficit exists either because of the skulldug-
gery and unfair trade practices of countries that shut out U.S. products, or because American compa-
nies are failing to compete against their global competitors. In either case, the preferred solution is
often to get tough in trade negotiations for the sake of protecting U.S. jobs.
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2. The U.S. trade deficit rose from $56 billion in 1992 to $155 billion in 1997. The economic troubles
in East Asia prompted predictions that producers in those countries would flood U.S. markets with
imports while reducing their purchases of U.S. Exports, which could increase the 1998 trade deficit
by another $50 billion or more. However, as of September 2011, the U.S. trade deficit stood at $43.1
billion. What occurred to close this gap? (http://www.census.gov/indicator/www/ustrade.html)
COMPONENTS OF THE TRADE DEFICIT
1. Part of the confusion about the trade deficit arises because the U.S. Department of Commerce reports
several versions of the trade deficit, and the differences among them can be tens of billions of dollars.
The biggest trade-deficit number, which was revised in June 1998 from $191 billion to $198 billion
for 1997, is calculated by taking America’s exports of goods and subtracting America’s imports of
goods. The fact that it is a deficit, rather than a surplus, means that imports of goods are $198 billion
larger than exports.
2. In the modern economy, it is surely too limited to consider goods only. In 1997, only36 percent of
the U.S. gross domestic product (GDP) were goods, while 55 percent was services. (The rest is struc-
tures and changes in inventories.) Some services are obviously difficult to trade internationally: It’s
not clear how one ships housecleaning or haircutting services overseas. But many services like fi-
nance, law, expert design, computer programming, and advertising can be and are traded internation-
ally. While the U.S. economy runs trade deficits in goods, it runs substantial and growing surpluses
in service trade.
The goods and services deficit is clearly a better measure of the trade deficit than goods taken alone.
There is no economic justification for arguing that goods like computers should be counted in the
trade statistics, while services like computer programming should not be, or that goods like cars
should be counted in the trade statistics, but the services of car advertising and providing loans to buy
cars should not be.
POPULAR MYTHS
1. Much popular thinking about the trade deficit is based on a few well-known facts about the United
States and Japan. The Japanese economy is more closed to trade than the U.S. economy. In certain
areas, Japanese firms have made considerable inroads into U.S. markets. Japan runs trade surpluses
while the United States has a trade deficit.
2. If one is to believe that trade deficits occur because of how well U.S. firms match up to foreign com-
petition, then one must believe that the competitiveness of U.S. firms collapsed from 1981 to 1987,
surged back toward equality from 1987 to 1991, and has collapsed again since then. If one is to be-
lieve that trade deficits occur because of unfair trade practices then one must believe the following:
From 1981 to 1987, the rest of the world unfairly blocked U.S. exports; but, from 1987 to 1991, it al-
lowed free trade, only to retreat to gross unfairness during the last six years. Again, there is literally
no evidence that trade laws, whether here or abroad, have changed in the dramatic ways that would be
needed to explain what has actually occurred.
THE TRUE MEANING OF TRADE DEFICIT
1. We must return to the question of what a trade deficit really is. All the items on the surplus side of
the current account balance—exports of goods and services, investment income received by U.S.
6-12
investors who have capital abroad, and unilateral transfers to the United States—involve money flow-
ing from elsewhere into this country. Conversely, all the items on the deficit side of the current ac-
count balance involve money flowing abroad. It would be insufficient, however, simply to stop here.
Something else must be considered.
Money flowing out of the United States is in U.S. dollars; money that is earned by U.S. exporters—
say, when an American-built car is sold in Germany—is not originally received in U.S. dollars but,
instead, in foreign currencies. A U.S. company that earns foreign currency by exporting abroad will
seek to convert that money to U.S. dollars at the prevailing exchange rate, and then use those dollars
to pay off its American-based costs.
2. The U.S. trade balance can be viewed as a matter of comparing the amount of U.S. imports of goods,
services, investment income, and transfers—all paid in U.S. dollars—with the value of U.S. exports
of these items—all paid in the form of various world currencies—at the world’s prevailing exchange
rates. Again, the trade deficit means that imports are larger, by $155 billion in 1997.
The existence of the $155 billion trade deficit in 1997 reveals that this many U.S. dollars were earned
and not traded for foreign currencies by foreign companies and investors. They apparently remained
in the form of U.S. dollars!
CAPITAL FLOWS ARE KEY
1. In a world without foreign trade, a nation can only consume what it produces. But in a world with
trade, a nation can borrow from abroad, use the money to consume more goods and services than it
currently produces, and promise to repay later. A nation like the United States, which does this, is
running a trade deficit and the amount of the trade deficit measures both the extra goods purchased
from abroad and the inflow of capital from abroad. Conversely, economies like Japan with trade sur-
pluses are producing more than they consume. They are taking the amount that they earn from pro-
ducing more than they consume and investing it abroad.
2. Thus a trade deficit means that a nation is receiving net investment from abroad. Equivalently, a
trade deficit means that a nation is consuming more than it is producing. Again equivalently, a trade
deficit means that a nation is investing more than its domestic savings. A trade surplus would reverse
these statements.3
LECTURETTE 6.2: Stand Up and Fight
It’s tough being an aggrieved consumer in Big Business-oriented Japan. Mitsubishi hid consumer com-
plaints in a company locker rather than turning them over to the government. Shareholders are angry
about Mitsubishi’s cover-up and poor quality control. The company is accused of poor crisis manage-
ment and public relations skills. A new appreciation in Japan for the rights of consumers is the best
things that could come out of the scandal. The philosophy of management should be a commitment to
please their customers, to develop a competitive edge, and improve their market share in the long run.
Management decisions must create customer satisfaction and strive toward the goals and strategies to be
achieved and in the same vain meet stockholder demands. Profits are an important goal; however, the
long run orientation to pursue profits is consistent with the Japanese philosophy of management.
3 Taylor, Timothy, “Untangling the Trade Deficit,” Public Interest, Winter 99 Issue, 134, p 82
6-13
Japanese judiciary believes it must preserve the social-structure and this means protecting big companies,
not the individual. In Japan, companies have little reason to fear litigation; they pay small heed to con-
sumers’ complaints. Japan has double standards and it is a place where companies can get away with ac-
tions that would never be tolerated in the United States or Europe. Management decisions are built upon
social responsibility and organization politics is an inherent part of the Japanese culture. Japanese firms
operate in the market place in a unique way so they can be competitive and meet industry wide standards
that are acceptable to employers within a given industry.
Consumer complaints have also come from Bridgestone/Firestone, and the company president all but dis-
appeared following allegations from faulty tires. The company has been mum, except for a news confer-
ence to announce the recall. This type of action could be damaging in the long run. This company must
network and meet group performance standards that will be acceptable in the market place. There is a
fine line between creating customer satisfaction and organization politics that exist among the firms
within a given industry. Political overtures are an inherent part of the Japanese culture, and have an im-
pact on the philosophy of management and decisions that are made.
Workers at a uranium reprocessing facility set off a nuclear reaction that caused two deaths and exposed
439 people to radiation. The company was under pressure to cut costs and the government failed to con-
duct adequate inspections. This is a classic illustration of Japanese management and the networking be-
tween the government and firms within this industry.
Milk sold by Snow Brand Milk Products Co., Japan’s largest dairy failed to notify the public of the prob-
lem for two days after 14,500 people fell ill after drinking the tainted milk. Health authorities declared
Snow Brand products safe for consumption before establishing the cause of the poisoning. A reactive ap-
proach, compared to a proactive style of management, is often exercised in making decisions of a social
responsibility philosophy of management.
One of the reasons it is hard for Japanese consumers to get a hearing is that the Product Liability Law
lacks muscle. Activist lawyers are lobbying for new measures to help the legal profession go after com-
panies. The courts need a United States-style “discovery” system that would force defendants in product-
liability cases to turn over relevant documents, which is not the case now. Japanese companies aren’t
afraid of the law. In response, consumers are advocating tougher penalties for offenders.
One of the most critical needs in Japan is for judicial reform. Japan suffers from a serious shortage of
both lawyers and judges. The consumer has no one to turn to when problems arise with products. Con-
sumers need to raise their voices if they expect to change the situation. Tougher inspectors and higher
standards could help, but corporations must improve quality—and heed the complaints of the customers
who keep them in business. There is a need to become socially responsive to meet the needs of stake-
holders that are an inherent part of the Japanese culture.4
4
Kunii, Irene, “Stand up and Fight,” Business Week, September 11, 2000, p 54-55.
6-14
DISCUSSION QUESTIONS
1. Why is the world economy becoming more integrated? What are the implications of this inte-
gration for international managers?
The global economy has become more integrated than ever before. Half a century of emphasis on free
trade by major industrial countries such as the United States, Great Britain, and Germany has resulted
in a gradual lowering of barriers to the free flow of goods, services, and capital among nation states.
This has enabled both large and small companies to view the world, rather than a single country, as
their marketplace. It has also enabled companies to disperse their manufacturing, marketing, and re-
search facilities to locations around the globe where costs and production conditions are most favora-
ble.
Increased integration has the following implications for management:

➢ World trade is growing at a faster rate than the volume of world output.
➢ Foreign direct investment (FDI) is increasing.
➢ Imports are penetrating deeper into the world’s largest economies.
➢ Companies around the world are finding their home markets under attack from foreign com-
petitors.
Today’s managers in developed countries must constantly make decisions about whether and how to
pursue opportunities around the globe. Managers must also consider potential foreign competition
when making even routine strategy decisions.
2. Imagine you were the CEO of a major company. What approach to global competition would
you choose for your firm: international, multinational, global, or transnational? Why?
The approach selected would depend, at least conceptually, on the nature of the company, its goals
and objectives, its strengths and weaknesses, etc. Each of the approaches has advantages and disad-
vantages, and the CEO would need to determine which model was most consistent with the com-
pany’s needs.
If the company has strong core capabilities, the international model (involving the establishment of
subsidiaries in foreign countries) is an attractive one. Skills and know-how flow from the parent com-
pany to the subsidiaries, and thus the parent company maintains a high level of control.
The multinational model, by contrast, gives far more autonomy to the local subsidiary that has its own
functional units and is better able to respond to changes in the local market. This is the preferred ap-
proach if local responsiveness is a critical variable and the management of the parent company is not
overly concerned about maintaining tight control of its worldwide operations.
A CEO would choose the global organization model if the company were attempting to market a
standardized set of products globally with manufacturing conducted in a limited number of markets.
Under this approach, only the marketing and service functions are controlled by the subsidiaries.
Selecting the transnational model results in certain functions (such as research) being centralized in
the parent country with other functions concentrated in any country of the world. The main question
being: Where is the most effective location for this function? A CEO would select this model if he or
she felt comfortable with having key functions outside the home country and had faith in the com-
pany’s personnel’s ability to effectively coordinate activities and communicate among themselves.
6-15
3. Why have franchises been so popular as a method of international expansion in the fast-food
industry? Contrast this with high tech manufacturing where joint ventures and partnerships
have been more popular. What accounts for the differences across industries?
The key to fast food industry is visibility and that means locations. The franchiser has to be able to
promote the product using mass media and this requires as many locations as possible offering identi-
cal products. Franchising is the optimal approach because it allows for rapid expansion in terms of the
number of locations (since the franchisee provides much of the financing). The franchise agreement
requires that the franchisee operate in a specific manner (although as the text points out, maintaining
quality control is not always easy).
By contrast, a high tech manufacturing firm is looking for a limited number of locations where the
emphasis can be placed on quality production. While the manufacturer is highly skilled in the produc-
tion end of the business, it is often not as familiar with the host country’s competitive conditions, cul-
ture, political system, etc., and thus needs a professional and knowledgeable local partner.
In the case of franchising, the cost associated with one or two franchises failing is not particularly
high. They can be readily replaced. However, the risk associated with establishing a high tech manu-
facturing operation is much greater, and thus the manufacturer is usually looking for both hands-on
control and a long-term relationship, and a partnership or joint venture better provides for this need.
4. What are the pros and cons of using expatriates, host-country nationals, and third-country na-
tions to run overseas operations? If you were expanding your business, what approach would
you use?
There are advantages and disadvantages of each option. Expatriates generally have the advantage of
being familiar with the parent company and how it functions. They have well-established contacts
with top management and are familiar with their approach to business. They are, in effect, an exten-
sion of top management. On the negative side, using expatriates is an expensive approach. They tend
to be paid higher salaries and often have families, which also need to be moved and housed overseas.
Using host-country nationals has an advantage in terms of cost. They are often less expensive, and
they don’t normally have to be moved. However, their experience with the parent company and its
culture is less extensive, and thus moving a project forward aggressively may require more communi-
cation and involve more hurdles and challenges.
Third-country nationals suffer from the weaknesses of both the expatriates and host country nationals
in that they (a) have to move from one country to another and (b) may not be as familiar with the
management style and culture of the parent company. They do, however, have the advantage of not
being from the host country, and thus may be able to soften the political tensions between the parent
company and the host country.
Which would you use? Students probably will conclude that the decision will depend on the circum-
stances (what critical problems the company faces and how rapidly it wants to move ahead) and its
resources (whom it has available with the necessary skills). If the critical task is that of establishing
the operation, it might use an expatriate. However, if the main problem involves dealing with the lo-
cal labor force, contractors, etc., one might use a host-country national. A third-country national
might be the best individual if the company wants to smooth its relationships with the local govern-
ment.
6-16
5. If you had entered into a joint venture with a foreign company, but knew that women were not
treated fairly in the culture, would you consider sending a female expatriate to handle the
startup? Why or why not?
This is one of those circumstances where one is “damned if one does and damned if one doesn’t.”
Some students may argue that if the female expatriate has the appropriate skills and experience for the
position, then she certainly should be considered, and that it would be disriminatory not to consider
her. Some may think that all personnel in the company, irrespective of their sex, race, religion, etc.,
should have an equal opportunity when it comes to overseas postings.
The reality, however, is that a female expatriate may find it extremely difficult, if not impossible, to
succeed in business in a country where women are not treated fairly or are expected to play a very
subordinate role. Sending a female to such an environment may not only jeopardize the success of
the project but also harm the individual’s career. Sending a female in this instance could be construed
as setting her up to fail.
6. What are the biggest cultural obstacles that we must overcome if we are to work effectively in
Mexico? Are there different obstacles in France? Japan?
People in different countries have very different shared values and beliefs. As Geert Hofstede indi-
cated, some societies value the quantity of life (accomplishments, money, etc.) far more than the qual-
ity of life (compassion, beauty, etc.). In some countries, the society believes firmly in collective deci-
sion making, whereas in other countries, tremendous emphasis is placed on individualism.
Figure 6.6 positions Mexico in the northeast quadrant and suggests that there is a relatively high level
of both collectivism and power distance in that they tend to see power in organizations as being dis-
tributed unequally. Rather surprisingly, Japan shows somewhat less emphasis on collectivism (alt-
hough it is known for this characteristic), and society sees power more evenly spread in organizations.
France, by contrast, is in the southeast quadrant and places a relatively high emphasis on individual-
ism even though it is somewhat between Mexico and Japan on the power scale.
More pragmatically, students will probably mention the importance of the siesta in Mexico and, pos-
sibly, the prevalence of bribery. In France, they may mention the cultural anti-Americanism, the love
of wine, the August vacation period, and the importance of the tour de France. In Japan, some of
popularly mentioned cultural characteristics are collective decision-making, the relatively low posi-
tion of women in both society and business, the emphasis on continuing meetings at local geisha
houses, etc. While some of these perceptions may be stereotypical (and not universally valid), they
should be considered when dealing with the local culture.
CONCLUDING CASE
CONCLUDING CASE: TRAVEL WISE SPANS THE GLOBE
Case Summary:
Travel Wise is a company that manufactures and sells travel accessories such as wallets, passport
holders, money belts, etc. Its founder, Cindy Kirsch, works closely with the suppliers in India and
6-17
China who produce the goods that Travel Wise sells. She ensures that these manufacturers treat their
employees fairly and pay them a living wage.
Now Travel Wise is thinking about expanding. Adding a line of travel clothing will require that
Kirsch look at manufacturers and designers both in the US and worldwide. If Travel Wise produces
their own guidebooks, Kirsch will have to hire travel writers, establish relationships with travel bu-
reaus, and learn about the publishing business. Finally, if Travel Wise expands their website it will
mean determining where their customers live and where they want to travel.
Chapter Topics Related to the Case:
• Discuss the impact of globalization on a company such as Travel Wise

• Describe the various methods available for a company like Travel Wise to use to enter the foreign
market arena
• Discuss the concepts of exporting and
• Identify and discuss the impact of cultural differences on international operations
Case Discussion Questions:
QUESTIONS
1. What type of entry mode would you recommend that Travel Wise use for its new line of clothing
in U.S. markets? In foreign markets? Should the clothing be outsourced to suppliers overseas, or
should Travel Wise consider building its own manufacturing facility here in the United States?
Suggested Response:
Travel Wise is already importing products into the U.S. and they will want to continue to do this with
their new clothing line. However, they may want to engage in joint ventures with designers in their
primary markets, so that they can provide clothing that meets the tastes and styles of all of their cli-
ents. They should also continue to maintain strict control over their clothing manufacturers, as this
will sustain their reputation worldwide.
2. What features and services might Travel Wise offer on its expanded Web site that would appeal
to travelers from Europe, Asia, and other parts of the world?
Suggested Response:
Needs of travelers will differ depending on their country and culture. Travel Wise may want to in-
clude information about U.S. customs and travel in the U.S. if their website is being accessed by trav-
elers from Europe and Asia. They may also want to include features like simple translation guides
(perhaps with an audio pronunciation feature) and currency converters.
3. What types of relationships must Travel Wise forge in other countries to produce accurate, up-to-
date, insightful travel guides?
Suggested Response:
Travel Wise will need to contact a wide range of people in a number of different organizations to cre-
ate a good travel guide. Locals will know the best restaurants and shops, tour guides, curators, and
6-18
others will give them information about tourist sites, and government agencies can provide additional
information on government run tourist sites and regulations, etc.
EXPERIENTIAL EXERCISES
EXERCISE 6.1 - UNDERSTANDING MULTINATIONAL CORPORATIONS
Objectives
1. To gain a more thorough picture of how a multinational corporation operates.
A. Suggested Responses
1. The firm selected is Daimler Chrysler Corporation, an international operation in the business of
transportation. A new business structure was put in place, with three equal automotive pillars:
Mercedes-Benz cars, Chrysler, and heavy trucks. Today, Daimler Chrysler still hasn’t made
money for its shareholders.
2. As the Daimler Chrysler story shows, today’s manager must constantly make decisions about
whether and how to pursue global opportunities. Of course, these opportunities need to be evalu-
ated carefully, not just from a competitive or financial standpoint, but from a cultural and mana-
gerial standpoint as well. It is often the case that global opportunities look good on paper, but
don’t pan out if managers are unable to work in a different international context. Chrysler Corp.
was acquired in 1998 by Daimler Benz, which has its own transplant factory building Mercedes
SUVs in Vance, AL. Daimler Chrysler owns a controlling stake in Mitsubishi Motors and 10 per-
cent of Hyundai Motor.
3. The management board for Daimler Chrysler has been reduced from 17 members to 13, with 8
Germans and 5 Americans. This indicates that there is a strong European influence that is a part
of this company.
4. The characteristics of this automotive manufacturer are built upon a strategy of international ex-
pansion. This company has increased its market share in the U.S. and European market and will
continue to increase its market share in these international markets, especially in the Asian mar-
ket. The management of Daimler Chrysler has already cut production by eliminating shifts at
most of its North American plants. Chrysler, which lost $2 billion last year, is managing to ex-
pand its lineup while chopping nearly 30 percent from its five-year product-development budget.
Cars such as the Crossfire will add cachet yet not but the budget. Nearly 40 percent of its compo-
nents were borrowed from Mercedes.
Teaching Tips:
1. Divide the students into teams with each team focusing on a specific company.
2. Divide the class into three groups and have one focus on an U.S. company, another on a Japanese
company, and the third on a European company. Have the groups present their findings. Com-
pare and contrast the results.
6-19
EXERCISE 6.2 - CROSS-CULTURAL COMMUNICATION SIMULATION
Purpose:
To demonstrate the difficulties of cross cultural communication and the need for cultural awareness in
business
Activity Instructions:
1. Explain to the group the context of the simulation and that they will be role playing the part of a
manager employed by one of three firms: a construction company, a hotel development company
or a bank. Each of these firms is unique and is characterized by particular traits, customs, philos-
ophies and practices; they are fictitious cultures. You may want to reproduce the three companies
and their cultures on a handout to assist and participants during the activity.
2. Explain the ground rules.
• Everyone must participate for the exercise to work

• Do not show or tell anyone about your cultural information outside of your culture.
• Remain in your role throughout the exercise.
• Each culture will make name tags according to their cultural description.
3. Divide the participants into three groups. Distribute culture sheets relevant to each particular cul-
ture. Have them separate into three different rooms to prepare their name tags and to discuss their
verbal and non-verbal communication and behaviors. Allow them 15-20 minutes spending time
with their company and becoming acclimated to its ways of personal and professional interaction.
During this time, members of the company must select (in a manner consistent with their culture)
one participant to be their leader. Each group/company must also decide on the goal(s) they ex-
pect to achieve at the kick-off meeting.
4. Have participants join the kick-off meeting.
Teaching Tip:
Time: 45-60 min.
1. Resources/Set-up: Copies of simulation description (see chapter), copies of cultural information

sheets, name tags and colored markers (red, blue, green) or colored dots (red, blue, green), space
to hold the meeting, separate rooms for each culture to practice behaviors and non-verbal and ver-
bal communication, food items (optional).
EXAMPLES
Example 6.1 – Global Environment: In June, 2007, the “Fast Company” magazine did a cover
story on “China’s New Creative Class: How a Dynamic, Business-Savvy Generation is Poised to
Redefine Product Design, Architecture, Fashion, and Entertainment.” Profiled inside were nine
young Chinese people, all of whom are at the heart of China’s creative revolution - the founder of
a gallery showcasing China’s new street culture, a member of the Creative Committee for the
6-20
2008 Olympics, the publisher of an art magazine, a furniture and ceramics maker, an actress, ar-
chitects, a DJ, a graphic designer, and a fashion designer. If you read a little more closely, you
begin to realize how truly global all these people are - the fashion designer studied in London, the
architects have offices in Beijing, but are working on a huge project in Toronto, the DJ built his
skills in Japan, the furniture designer is selling her works in Milan, the Olympic Committee mem-
ber worked in New York before coming home to Beijing, and the actress, Ziyi Zhang, is an inter-
national star. China is no longer just a manufacturer for Wal-Mart - it is looking to use innova-
tion and creativity to awe the world.5
Example 6.2 – Global economy consequences: Naresh Goyal, the founder and chairman of Jet
Airways, is ready for his airline to take off. Jet Airways is the largest private airline in India. To-
day, Jet Airways is expanding its service worldwide - from India to London, Brussels, New York,
Toronto, Shanghai, and even Johannesburg. Part of the expansion is based on the fact that Indian
expertise is in demand all over the world, and Indians who leave their home country for work in
other countries still want to come back to visit family and friends. Additionally, part of the ex-
pansion is because Jet Airways is having a difficult time competing in its own domestic market,
where several new low-cost carriers have pushed fares unacceptably low.6
Example 6.3 - Global strategy systems: To compete in the global marketplace, GE uses a multi-
national system that consists of independent company subsidiaries in other countries and provides
great discretion to those subsidiaries to respond to local conditions. For example, in India, GE
has a stake in GE Capital International Services (GECIS.) GECIS is now an independent com-
pany, and GE owns less than half of it, which allows for even greater local flexibility.7 Other sys-
tems include international (extending current strength into other countries), global (centralized
decision making for a company’s foreign arms), and transnational organization models (basing
functions of a company in the country that is most favorable).
Example 6.4 – Difference between franchising and licensing: Students often want to know
more about the differences between franchising a business and licensing a business (or a business
opportunity.) According to an article at Entrepreneur.com8, there are four key areas of difference
between the two:
Common Name
• Franchise: A franchisee's business is identified by the franchisor's trademark.
• Business Opportunity: The licensee may not be identified by the company's
trademark.
Support
• Franchise: A franchisee receives training, marketing and other support on a
continual basis.
• Business Opportunity: The licensee may receive very little, if any, in the way
of support from the company—except for sources of products.
5
Chen, Aric. “The Next Cultural Revolution.” Fast Company, June, 2007, Vol. 116, pp. 65-75.
6
The Economist. “Taking Flight.” Sept. 8, 2007, pg. 70.
7
O’Connell, P. “GE’s Indian adventure.” Business Week, August 22, 2005. Online at http://www.businessweek.com/magazine/con-
tent/05_34/b3948459.htm
8
Seid, Michael H. and Ainsley, Kay Marie. “Franchisees and licensees - what’s the difference?” Entrepreneur.com,
http://www.entrepreneur.com/article/0,4621,276740,00.html .
6-21
Standards
• Franchise: A franchisee typically offers products and services on an exclu-
sive or semi-exclusive basis and has minimal standards of performance set by
the franchisor.
• Business Opportunity: The licensee can usually handle a variety of different
lines of products and services—some of which may compete with each other.
Fees
• Franchise: Franchisees typically pay a continuing royalty based on the gross
sales of their business.
• Business Opportunity: The licensee's payments aren't typically based on sales
but on the purchase of products they make from the licensor.
Example 6.5 – Joint ventures: CNH Case New Holland is a manufacturer and supplier of agri-
cultural equipment. Owned by Fiat, the Italian automobile manufacturer, CNH is a conglomerate
of some of the biggest names in the agricultural equipment business - International Harvester,
New Holland Machine Company, and Case in the American market, Steyer in the Austrian mar-
ket, and Braud in the French market. Today, CNH continues to create joint ventures with busi-
nesses all across the globe - with the Shanghai Tractor and Internal Combustion Engine Corpora-
tion (STEC), with the BNP Paribas Lease Group in France, with the Kobelco Construction Ma-
chinery Co., Ltd. in Italy - the list goes on and on. CNH has distributorships in 160 countries - it
is truly a global business.9
Example 6.6 – Cultural differences: High costs and difficulties associated with expatriation, to-
gether with the impact of cultural differences are leading some companies to develop local man-
agers in the countries in which they operate. To accomplish this, Enrique Tarelli, Outplace-
ment/Career Management Director for Sociologia de Empresa in Argentina, uses an immersion
process aimed at acquiring a wide range of competencies, such as, knowledge, developing rela-
tionships with people all over the world, the ability to operate at the highest standards, and inter-
acting with culturally different environments.10
Example 6.7 – Multidimensional perspective: When Texas Pacific Group, a private-equity firm
was looking for a new manager to help oversee venture deals, they went global - to Vivek Paul,
the vice chairman of Wipro Ltd., an Indian information-technology and outsourcing company.
Mr. Paul demonstrated multidimensional perspective by leading companies from different busi-
nesses and cultural adaptability by working with countries that are based in different countries.11
Example 6.8 – Working with foreign nationals: Straddlers. Navigators. Learners. These are
the terms the employees at Grupo Gallegos, an advertising agency in Long Beach, CA, use to de-
scribe different sorts of Hispanics in the U.S. Who are they? The Learners are foreign born, and
they speak Spanish primarily. On average, they have 3 children, and 65% of them rent their
homes. The Straddlers immigrated to the U.S. at a young age. Most of them are in blue collar or
semi-professional jobs, and while they are bilingual, they still speak mostly Spanish. Navigators
speak primarily English, although they know some Spanish. 78% of them have at least some col-
lege, 60% of them own their own homes, and their average household income is $76,000 a year.
What is interesting is how different the cultures of all of these groups can be, even though most
people would simply lump them together under the title of “Hispanic.”. With Learners, most
9
http://www.cnh.com/about/about.asp.
10
Tarelli, Enrique. “How to transfer responsibilities from expatriates to local nationals.” SHRM Information Center. January 2003.
11
Sender, H. “Texas Pacific brings in Paul of Wipro, Ltd.” Wall Street Journal, June 30, 2005.
6-22
advertising agencies use what Gallegos refers to as “abuelita advertising” - commercials showing
a mother and grandmother in the kitchen, both talking about how great a particular product is.
But Gallegos recently reached out to Straddlers in a unique way. In an ad for Tecates Beer, a
young man named Basilio puts up with people mispronouncing his name all day, but when he
walks into a bar full of Latinos, they all say his name correctly as they raise their Tecates beers.12
SUPPLEMENTAL FEATURES
Please see the following materials in the Asset Gallery on the text website.
CHAPTER VIDEO
• Tim Hortons: Donuts to Dollars
Canadians are crazy about donuts. They consume more donuts per capita than any country in the world.
Part of the credit for meeting this consumer need goes to Tim Horton, an all-star Maple Leaf hockey
player who opened his first donut shop in Ontario in 1964. Over the next 45 years, more than 3,000 Tim
Hortons have sprung up across Canada making it a cultural icon.
The company sponsors youth hockey leagues and with its polite service, coffee, and donuts, even the
most hardened Canadian news commentators have become fans of this company. Don Schroeder, the
CEO of Tim Hortons, describes the donut shop as the “modern day pub.” Don’t let the friendliness and
positive vibes fool you, this is big business with revenues in excess of $2 billion in 2008. Tim Hortons is
the fast food king of Canada. What is the secret? It is the coffee, not the donuts. In Canada, seven out of
every ten cups of coffee that are served by retail are sold at Tim Hortons. Drinking coffee is a ritual and
many people drink coffee two or three times a day.
In the U.S., Tim Hortons is a small player in the donut industry. While they outnumber McDonalds in
Canada, they have only 500 stores in the U.S., compared to nearly 14,000 McDonalds, more than 11,000
Starbucks, and 6,000 Dunkin’ Donuts.
What is ahead for Tim Hortons? Do you think they will be able meet their goal of adding the same num-
ber of stores in the U.S. that they have in Canada? What obstacles might hinder their progress?
MANAGER’S HOT SEAT (MHS)
• Cultural Differences: Let’s Break a Deal
SELF-ASSESSMENT
There is no Self-Assessment for this chapter.
12
Gorney, Cynthia. “How Do You Say ‘Got Milk” en Español?” The New York Times, Sept. 23, 2007,
6-23
TEST YOUR KNOWLEDGE
• Hofstede’s Model of National Culture

• International Cultural Diversity
EXPANDED POWERPOINT SLIDE SHOW
Expanded PowerPoint Slides include most Basic PowerPoint slides, along with additional material that
can be used to expand the lecture.
EXPANDED POWERPOINT EXPANDED POWERPOINT EXPANDED POWERPOINT

SLIDE 1 SLIDE 2 SLIDE 3
Learning Objectives: LO 1 –
Chapter Title LO 5 – LO 7
LO 4
EXPANDED POWERPOINT EXPANDED POWERPOINT

SLIDE 4 SLIDE 5 EXPANDED POWERPOINT
Consequences of a Global Econ- Figure 6.1: Growing SLIDE 6
omy Proportion of Goods Consequences of a Global
Economy

EXPANDED POWERPOINT
SLIDE 7 SLIDE 8
SLIDE 9
Figure 6.2: Relative Growth The Role of Outsourcing
Factors to Consider…
6-24

SLIDE 10 SLIDE 11 EXPANDED POWERPOINT
The Global Environment Table 6.1: Key Issues of the SLIDE 12
Global Environment Figure 6.4: The Global Economy

EXPANDED POWERPOINT
SLIDE 13 SLIDE 14
SLIDE 15
European Unification Figure 6.5: U.S. Trading Part-
Question
ners

The Americas Organizational Models International Model

Multinational Model Global Model Transnational Model
6-25

Table 6.2: Comparison of Entry Entry Mode International Licensing
Modes
EXPANDED POWERPOINT
SLIDE 25 EXPANDED POWERPOINT EXPANDED POWERPOINT
Franchising SLIDE 26 SLIDE 27
Joint Ventures Expatriates
EXPANDED POWERPOINT
SLIDE 28 EXPANDED POWERPOINT EXPANDED POWERPOINT
Managing across Borders SLIDE 29 SLIDE 30
Skills of the Global Manager Table 6.4: Indentifying
International Executives

Table 6.5: How to Prevent Ethnocentrism and Culture Power Distance, Individualism,
Failed Global Assignments Shock and Collectivism
6-26

Uncertainty, Avoidance, Figure 6.6: 40 Countries Question
Masc/Fem

EXPANDED POWERPOINT
SLIDE 37 SLIDE 38
SLIDE 39
Inpatriate Americans tend to have…
Worker from other countries
EXPANDED POWERPOINT
SLIDE 40
Video: Tim Hortons
6-27

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Chapter 06 - International Management

Management Leading and Collaborating in

Solution Manual: https://testbankpack.com/p/solution-manual-

Test Bank: https://testbankpack.com/p/test-bank-for-manage-

Learning Objectives 145

Key Student Questions 3

Class Roadmap 146

Key Terms Presented in This Chapter 11

Manager’s Hot Seat 23

Test Your Knowledge 24

Expanded PowerPoint Slide Show 24

1 Discuss what integration of the global economy means for indi-

2 Describe how the world economy is becoming more integrated

3 Define the strategies organizations use to compete in the global

4 Compare the various entry modes organizations use to enter

5 Explain how companies can approach the task of staffing over-

6 Summarize the skills and knowledge managers need to manage

7 Identify ways in which cultural differences across countries influ-

KEY STUDENT QUESTIONS

 1. “What implications does globalization have for my job - what can I do

I. Managing in a (Sometimes) Flat World

LO 1: Discuss what the integra-

1. European Union (EU) will allow goods, services,

B. Asia: China and India’s Ascent

1. Japan dominated world attention during the last dec- E.G.

1. North American Free Trade Agreement (NAFTA)

1. Consumer tastes and preferences differ significantly.

C. Choosing a global strategy (Figure 6.5)

1. The international model is designed to help companies

b. One disadvantage of the international model is that it

2. The multinational model uses subsidiaries in each coun-

3. The global model is designed to enable a company to

4. The transnational model is an organization model char-

IV. Entry Mode

1. Advantages of exporting are:

2. Disadvantages of exporting are:

B. Licensing Use Example 6.4 – Difference

1. It is used primarily by service companies.

2. The company sells limited rights to use its brand name to

E. Wholly owned subsidiaries

1. An independent company owned by the parent corpora-

LO 5: Explain how companies

2. Skills and knowledge include:

C. Understanding cultural issues LO 7: Identify ways in which

2. Geert Hofstede’s dimensions of cultural differences:

KEY TERMS PRESENTED IN THIS CHAPTER

LECTURETTE 6.1: Untangling the Trade Deficit

COMPONENTS OF THE TRADE DEFICIT

THE TRUE MEANING OF TRADE DEFICIT

CAPITAL FLOWS ARE KEY

LECTURETTE 6.2: Stand Up and Fight

Increased integration has the following implications for management:

CONCLUDING CASE: TRAVEL WISE SPANS THE GLOBE

Chapter Topics Related to the Case:

• Discuss the impact of globalization on a company such as Travel Wise

Case Discussion Questions:

EXERCISE 6.1 - UNDERSTANDING MULTINATIONAL CORPORATIONS

1. To gain a more thorough picture of how a multinational corporation operates.

EXERCISE 6.2 - CROSS-CULTURAL COMMUNICATION SIMULATION

• Everyone must participate for the exercise to work

4. Have participants join the kick-off meeting.

1. Resources/Set-up: Copies of simulation description (see chapter), copies of cultural information