11/30/2022

International Business Environment Course Objective

MBA 6011 After completing this course, students should be able to understand:

 How political economy and business strategies of international

companies are interlinked,
Desalegn Amlaku (PhD)  National differences in the cultural, economic, political, social
and legal environments (including a particular focus on doing
(desalegnamlaku@gmail.com)
business in developing and transitional economies);

 The operation of foreign exchange markets; international trade

Department of Management policy, regional integration, and
Faculty of Business and Economics
 The role of international institutions, such as the WTO, IMF and
Addis Ababa University
World Bank.

11/30/2022 Department of Management, MBA, AAU 1 11/30/2022 desalegnamlaku@gmail.com 2

DATE
WEEK
1
LECTURE TOPICS AND ACTIVITIES
Assessing the environment, Political, economic,
legal, technological
PREPARTION/ASSIGNMENT
Chapter 1 Evaluation
Managing interdependence/Social responsibility,
ethics,& sustainability
Discuss: Case study: Face book’s Photo Leak Chapter 2
FORM CASE GROUPS
WEEK
2
GROUP CASE PRESENTATIONS
Case1; Enrich Not Exploit Can New CSR Strategy
Assigned groups present (use
power point) and hand in typed  Group case presentations …………………50%
Help Body Shop Regain Glory case analysis.
Case2 : Eliminating Modern Slavery: Nestle

 Class Participation…………………………10%
WEEK Understanding the role of culture Chapter 3
3

Course WEEK
4
Communicating across Cultures
Case 3 Cross-cultural challenges for a Singaporean
Expatriate in Zurich
Chapter 4

Assigned groups present (use

Contents Case 4: AnujPathak Returns to India power point) and hand in typed
case analysis.
 Exams … ………………………………….40%
WEEK Cross Cultural Negotiation and Decision Making Chapter 5
5 Case 5: Amazon in China Assigned groups present (use
power point) and hand in typed
case analysis.
WEEK Formulating Strategy Chapter 6& Chapter 7
6 Implementing Strategy: Strategic Alliances, Small Independent Reading
Business, Emerging Economy Firms
WEEK Organizational Structure and Control Systems Chapter 8
7
WEEK GROUP CASE PRESENTATIONS Assigned groups present (use
8 Case 6: Souq.com in the MENA power point) and hand in typed
case analysis.
WEEK Staffing, Training, and Compensation for Global Chapter 9
9 Operations
In Class Case: Kelly’s Assignment in Japan
WEEK Developing Global Management Cadre Chapter 10
10 In class case: Expat Tax Breaks for Brexit Bankers.
In class: Experiential Exercise
WEEK Group Case Presentations Assigned groups present (use
11 Case 8: Daimler-Chrysler: Facing a Media power point) and hand in typed
Firestorm case analysis.
Motivating and Leading Chapter 11
WEEK In Class Case 9: Cirque de Soleil's Global HRM Prepare case questions to discuss
12 in class.
Ch.11 Case: How to Bring Cross-Cultural Teams
together
11/30/2022 Department of Management, MBA, AAU 3

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Text books International Business Environment

MBA 6011
 Helen Deresky, and Stewart R. Miller, International Management: Tenth Edition
Managing Across Borders and Cultures. 10th edition, (Pearson
Education, Inc., N.J., 2021)

Chapter 1

Assessing the Environment:

Political, Economic, Legal,
Technological

11/30/2022 Department of Management, MBA, AAU 5 Copyright © 2021, 2017, 2014 Pearson Education, Inc. All Rights Reserved

Learning Objectives Opening Profile: Small Businesses Steel Themselves for

No-Deal after Brexit (1 of 2)
 To understand the global business environment and how it affects the
strategic and operational decisions which managers must make
 Brexit will bring massive changes to business
 To develop an appreciation for the ways in which political and
 New customs regulations could mean shipping delays
economic factors and changes influence the opportunities that
companies face  Contracts will have to be redrawn and intellectual property protections
reassured
 To recognize the role of the legal environment in international business
 Many companies lack the resources to prepare for a no-deal Brexit
 To review the technological environment around the world and how it
affects the international manager’s decisions and operations as well as
the war for talent around the globe
 To explore essential skills for developing your career as a manager in a
multinational company
 To review the technological environment around the world and how it
affects the international manager’s decisions and operations as well as
the war for talent around the globe
 To explore essential skills for developing your career as a manager in a
multinational company

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Opening Profile: Small Businesses Steel Themselves for

What is International Management?
No-Deal After Brexit (2 of 2)

 The UK entered a transition period  The process of developing strategies, designing operating systems, and
 The UK is no longer in the European Parliament
working with people around the world to ensure sustained competitive
 Brexit will bring massive changes to businesses
advantage.
 New customs regulations could mean shipping delays
 UK businesses will face lost revenue
 Many businesses lack the resources to prepare for a no Brexit deal

What is Globalization?
 Global competition characterized by networks of international
linkages that bind countries, institutions, and people in an
interdependent global economy.
Learning Objective 1.1

To understand the global business

environment and how it affects the
strategic and operational decisions
which managers must make

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Global Trends
Five key global trends:
 Changing balance of growth towards emerging markets
 Need for increased productivity and consumption in developed
countries
 Increasing global interconnectivity
 Increasing gap between supply and demand of natural resources
 Challenge for governments to develop policies for economic growth
and financial stability
Challenges to Globalism
 Backlash against capitalism and rekindling/regeneration of nationalism
 Increased protectionism of high-demand resources
 Need to develop top managers with international understanding and
experience
 Increasing pressure and publicity for companies to consider the social
responsibility of their actions
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2019 Foreign Direct Investment Confidence Index Top
25 Targets for FDI
 The main types of FDI are acquisition of a subsidiary, joint ventures,
licensing, and investing in new facilities or expansion
 The United States is in the lead in 2019, followed by Germany, Canada, the
United Kingdom, and France
 India has dropped to sixteenth from nine since 2016.
 Results show confidence in the economic recovery of the United States and
Europe.
 The phenomenon of rapidly developing economies continues.
Effects of Globalization on Corporations
 Global companies are becoming less tied to specific locations
 Companies that desire to remain competitive will have to develop a
cadre/team of experienced international managers
 Small companies are also affected by and in turn affect globalism
 Advancement in technologies make international business easier for small
companies
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The Globalization of Human Capital Regional Trading Blocs

 Economic agreements to reduce and remove tariff and nontariff barriers

 While firms still offshore manufacturing jobs, some are reshoring jobs to
 Free flow of goods, services, and factors of production
lower shipping costs
 Trade blocs continually expand their borders to include neighboring
 Firms are outsourcing white-collar jobs such as customer handling to other
countries
countries such as India
 Much of today’s world trade takes place within these three regional free-
 For global firms, winning the war for talent is a pressing issue
trade blocs:

 Western Europe, Asia, and the Americas

Regional Economic Groups The European Union (EU)

 A unified market in 27 nations
 Free Trade Area  Political fallout of Brexit has created uncertainty pertaining to:
– Regulations
 Customs Union
– Labor mobility
 Common Market – Trade between the UK and EU member countries
 2018 Global Competitiveness Index shows that Europe has 6 of the top 10
 Economic Union countries
 Political Union  Challenges for global managers:
– “Fortress Europe”
– Multiple cultures in one market
Why regional Economic blocks/integrations in Africa
are not as effect as other parts of the world. Why?

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Table 1-2 2018 Global Competitiveness Index

Asia

 China
 India
 Association of Southeast Asian Nations (ASEAN)
 South Asia Association of Regional Cooperation (SAARC)
 Japan
 Asian Tigers:
 Hong Kong
 Singapore
 South Korea
 Taiwan

Copyright © 2021, 2017, 2014 Pearson Education, Inc. All Rights Reserved

Ethiopia: Global Competitiveness Index Economic Freedom Index

Definition: The Overall index of economic freedom has ten components
 Ethiopia is the 126 most competitive nation in the world out of 140 grouped into four broad categories: Rule of Law; Limited Government;
countries ranked in the 2019 edition of the Global Competitiveness Regulatory Efficiency and Open Markets. The overall economic freedom is
Report published by the World Economic Forum scored on a scale of 0 to 100, where 100 represents the maximum freedom.
https://www.theglobaleconomy.com/rankings/economic_freedom/
2022
2010…..139. Ethiopia
1. Singapore 165. G.-Bissau .
2. Switzerlan166. Turkmenista .
d n 2018…..138. Ethiopia
3. Ireland 167. Bolivia
2019…..133. Ethiopia
4. Luxembo 168. Iran
urg 169. Eritrea 2020…..141. Ethiopia
5. New 170. Burundi
Zealand 171. Zimbabwe 2021…..149. Ethiopia
6. Estonia 172. Sudan
7. Netherlan 173. Cuba 2022…..146. Ethiopia
Source: https://tradingeconomics.com/ethiopia/competitiveness-rank ds 174. Venezuela
8. Taiwan 175. North Korea
Copyright © 2021, 2017, 2014 Pearson Education, Inc. All Rights Reserved
9. Australia 2-24
10. Denmark

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Under The Lens: South-East Asia Wakes Up to
Power of Corporate Competition
 Break up of monopolies—anticompetitive practices
 Root out corruption
 Market efficiency—fair competition
 Competition laws
 Government added competition for more benefits to citizens
 Lowered cross-border barriers to trade
 Anticompetitive practices
Tips for Doing Business in China
 Personal connections are important
 Negotiations will be different from the United States and difficult
 Communication must be clear, honest, and fully prepared for culture
differences.
11/30/2022
Comparative Management in Focus: China
Loses Its Allure
 However:
– China’s legal and regulatory system is arbitrary
– China leans toward protecting its local firms
– Political goals and agendas often take precedence over
commercially based decisions, do you agree?
– Discrepancies of business practices make it difficult for SMEs to get
started
The Americas
 From N AF T A (North American Free Trade Agreement) to USMC A (United
States-Mexico-Canada Free Trade Agreement)
 MERCOSUR
 Brazil
 Central America Free Trade Agreement (CAFTA)
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The Global Manager’s Role

Other Regions in the World Exhibit 1-2 An Open Systems Model

 The Russian Federation

 Middle East
 The African Union (AU)
– South Africa
 Less developed countries (LDCs)
– Low Gross National Product (GNP)
– Low Gross Domestic Product (GDP)
– Large, relatively unskilled workforce
– High international debt

Copyright © 2021, 2017, 2014 Pearson Education, Inc. All Rights Reserved

The Political and Economic Environment

 Sustainability—economic, political, social, and environmental—has

Learning Objective 1.2
To develop an appreciation for the ways
in which political and economic factors
and changes influence the
opportunities that companies face
become a significant issue worldwide.
 Top four risks—government regulation, country financial risks, currency
risks /exchange-rate risk/, political and social disturbances
 Regions view risks differently—cyber security is the top risk of North
America
 Ethnicity is a driving force behind political instability
 Religious disputes lie at the heart of differences

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Political Risk (1 of 2) Political Risk (2 of 2)

 Any governmental action or politically motivated event that could

Typical Political Risks Political Risk Assessment
adversely affect the long-term profitability or value of a firm  Expropriation and confiscation  Helps companies manage
 Examples: exposure to risk and minimize
 Nationalization financial loss
– 2019 political unrest in Venezuela
 Terrorism  Two forms:
– 2014 annexation of the Crimean Peninsula by the Russian Federation
 Discriminatory treatment  Consultation with experts
– 2022 Russian-Ukraine war
 Barriers to repatriation of funds  Development of internal staff
capabilities—increasingly
 Interference in managerial common
decision making
 Dishonesty by government
officials

Managing Political Risk Managing Terrorism Risk

Avoidance and Adaptation
• Equity sharing
• Participating management
• Localization of the operation
• Development assistance
Dependency and Hedging  Develop a benevolent image through charitable contributions
• Input control
 Maintain a low profile and minimize publicity
• Technology control
 Using teams to monitor terrorist activities
• Expatriate position control
 Hiring counterterrorism consultants
• Distribution control
• Political risk insurance (OPIC and F
CIA)
• Local debt financing

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Economic Risk Categories of Economic Risk

 Closely related to political risk 1. Loss of profitability due to abrupt changes in monetary and fiscal policies
 Determined by a country’s ability or intention to meet its financial
2. Loss of profitability due to changes in foreign investment policies
obligations
 Historically, most industrialized nations have posed little risk of economic 3. Risk of currency exchange-rate volatility results in currency translation
instability
exposure
 However, the level of economic risk in Europe is of concern in the
eurozone due to debt problems in Greece

The Legal Environment (1 of 2)

 Consists of the local laws and legal systems of those countries in which an
international company operates, and of international law, which governs
relationships between sovereign countries.
Learning Objective 1.3
 The United Nations Convention on Contracts for the International Sale of
Goods (CISG).
To recognize the role of the legal
environment in international
business

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The Legal Environment (2 of 2) Other Regulatory Issues

Types of Legal Systems Approaches to Contract Law

 Protectionist policies, such as tariffs or quotas and other import and trade
 Common law  Common law: details must be written in
the contract to be enforced restrictions
 Civil law
 Civil law: assumes promises will be  The attractiveness of the tax system
 Islamic law enforced without specifying the details
 The level of government involvement in the economic and regulatory
 In Asia the contract may be in the environment varies among countries
relationship, not on the paper

The Technological Environment

 The appropriability of technology

 The International Convention for the Protection of Industrial Property (the

Paris Union)
Learning Objective 1.4
 Inappropriate use of technology by JVs, franchisees, licensees, and
employees
To review the technological environment  Appropriateness of technology for the local environment
around the world and how it affects the
international manager’s decisions and
operations as well as the war for talent
around the globe

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Globalization of Information Technology Management in Action: Google to Set Up German Team

to Tackle Privacy and Safety Issues

 The speed and accuracy of information transmission are changing the

 A team of engineers in Germany will tackle privacy issues
nature of international managers jobs'
 Big tech companies face a backlash over harm caused by their products and
 Cultural barriers are being lowered gradually
services
 Technology gets dispersed around the world by MNEs
 Google is struggling to balance its advertising focused business with a new
 Explosive growth of information technology is both a cause and effect of emphasis on privacy
globalism
 Activists caution that default settings still allow Google to collect data

Global E-Business

 E-Business—the integration of systems, processes, organizations, value

chains, and entire markets using Internet-based and related technologies
and concepts Learning Objective 1.5
 E-Commerce—marketing and sales process via the internet

 B2B—Business to Business (Example: Alibaba in China, large proportion

is SMEs)
To explore essential skills for developing
your career as a manager in a multinational
 B2C-Business to Customer (Example: Amazon.com)
company

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Developing Skills to Enhance Your Career

 Communication

 Critical thinking

 Collaboration

 Knowledge application/analysis

 Business ethics/social responsibility

Case Study: Facebook Faces Fresh Probe After

Photo Leak
 Who are Facebook's stakeholders? What are the social responsibilities of
the company? To what level of CSR or CSV is the company adhering at the
time of this case?

 What other privacy issues can arisen around the world? What has/should
Mark Zuckerberg done about it to placate the public and preserve the
brand?
 What is your personal opinion about the problems of privacy from using
Facebook?

 What regulations or restrictions for Facebook should have been in place?

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