Critical Thinking and Discussion Questions
1. Describe the shifts in the world economy over the past
30 years. What are the implications of these shifts for
international businesses based in Great Britain? North
America? Hong Kong?
2. “The study of international business is fine if you are
going to work in a large multinational enterprise, but it
has no relevance for individuals who are going to work
in small firms.” Evaluate this statement.
3. How have changes in technology contributed to the
globalization of markets and production? Would the
globalization of production and markets have been
possible without these technological changes?
4. “Ultimately, the study of international business is no
different from the study of domestic business. Thus,
there is no point in having a separate course on
international business.” Evaluate this statement.
5. How does the Internet affect international business
activity and the globalization of the world economy?
6. If current trends continue, China may be the world’s
largest economy by 2020. Discuss the possible
Research Task
Use the globalEDGE website (globaledge.msu.edu) to
complete the following exercises.
1. As the drivers of the globalization continue to pressure
both the globalization of markets and globalization of
production, we continue to see the impact of greater
globalization on worldwide trade patterns. HSBC, a
large global bank, analyzes these pressures and trends
to identify opportunities across markets and sectors,
through its trade forecasts. Visit the HSBC Global
Connections site, and use the trade forecast tool to
identify which export routes are forecasted to see the
greatest growth over the next 15 to 20 years. What
patterns do you see? What types of countries dominate
these routes?
Who Makes the Apple iPhone?
In its early days, Apple usually didn’t look beyond its own backyard to
manufacture its devices. A few years after Apple started to make the Ma-
cintosh computer back in 1983, Steve Jobs bragged that it was “a ma-
chine that was made in America.” As late as the early 2000s, Apple still
manufactured many of its computers at the company’s iMac plant in Elk
Grove, California. Jobs often said that he was as proud of the Apple’s man-
ufacturing plants as he was of the devices themselves.
32 Part One Introduction and Overview
implications of such a development for (a) the world
trading system, (b) the world monetary system,
(c) the business strategy of today’s European and
U.S.-based global corporations, and (d) global
commodity prices.
7. Reread the Management Focus on Vizio and answer
the following questions:
a. Why is the manufacturing of flat-panel TVs
migrating to different locations around the world?
b. Who benefits from the globalization of the flat-
panel display industry? Who are the losers?
c. What would happen if the U.S. government
required that flat-panel displays sold in the United
States had to also be made in the United States? On
balance, would this be a good or a bad thing?
d. What does the example of Vizio tell you about the
future of production in an increasingly integrated
global economy? What does it tell you about the
strategies that enterprises must adopt to thrive in
highly competitive global markets?
http://globalEDGE.msu.edu
2. You are working for a company that is considering
investing in a foreign country. Investing in countries
with different traditions is an important element of
your company’s long-term strategic goals. As such,
management has requested a report regarding the
attractiveness of alternative countries based on the
potential return of FDI. Accordingly, the ranking of
the top 25 countries in terms of FDI attractiveness is a
crucial ingredient for your report. A colleague
mentioned a potentially useful tool called the “Foreign
Direct (FDI) Confidence Index.” The FDI Confidence
Index is a regular survey of global executives conducted
by A.T. Kearney. Find this index, and provide
additional information regarding how the index
is constructed.
closing case
By 2004, however, Apple had largely turned to foreign manufacturing.
The shift to offshore manufacturing reached its peak with the iconic iPhone,
which Apple first introduced in 2007. All iPhones contain hundreds of parts,
an estimated 90 percent of which are manufactured abroad. Advanced
semiconductors come from Germany and Taiwan, memory from Korea and
Japan, display panels and circuitry from Korea and Taiwan, chip sets from
Europe, and rare metals from Africa and Asia. Apple’s major subcontractor,
the Taiwanese multinational firm, Foxconn, performs final assembly in
China.
Apple still employs some 43,000 people in the United States, and it has
kept important activities at home, including product design, software engi-
neering, and marketing. Furthermore, Apple claims that its business sup-
ports another 254,000 jobs in the United States in engineering,
manufacturing, and transportation. For example, the glass for the iPhone is
manufactured at Corning’s U.S. plants in Kentucky and New York. But an
additional 700,000 people are involved in the engineering, building, and
final assembly of its products outside of the United States, and most of
them work at subcontractors like Foxconn.
When explaining its decision to assemble the iPhone in China, Apple
cites a number of factors. While it is true that labor costs are much lower
in China, Apple executives point out that labor costs only account for a very
small proportion of the total value of its products and are not the main Foxconn employees assemble electronic components in China.
driver of location decisions. Far more important, according to Apple, is the
ability of its Chinese subcontractors to respond very quickly to requests
You need a million screws? That factory is a block away. You need a screw
from Apple to scale production up and down. In a famous illustration of this
made a little bit different? That will take three hours.”
capability, back in 2007 Steve Jobs demanded that a glass screen replace
All this being said, there are drawbacks to outsourcing to China. Several
the plastic screen on his prototype iPhone. Jobs didn’t like the look and
of Apple’s subcontractors have been targeted for their poor working condi-
feel of plastic screens, which at the time were standard in the industry, nor
tions. Criticisms include low pay of line workers, long hours, mandatory
did he like the way they scratched easily. This last-minute change in the
overtime for little or no additional pay, and poor safety records. Some former
design of the iPhone put Apple’s market introduction date at risk. Apple
Apple executives say that there is an unresolved tension within the com-
had selected Corning to manufacture large panes of strengthened glass,
pany; executives want to improve working conditions within the factories of
but finding a manufacturer that could cut those panes into millions of
subcontractors such as Foxconn, but that dedication falters when it conflicts
iPhone screens wasn’t easy. Then a bid arrived from a Chinese factory.
with crucial supplier relationships or the fast delivery of new products.
When the Apple team visited the factory, they found that the plant’s owners
were already constructing a new wing to cut the glass and installing Sources: Gu Huini, “Human Costs Are Built into iPad in China,” The New York Times,
equipment. “This is in case you give us the contract,” the manager said. January 26, 2012; C. Duhigg and K. Bradsher, “How U.S. Lost Out on iPhone Work,”
The New York Times, January 22, 2012; and “Apple Takes Credit for Over Half a
The plant also had a warehouse full of glass samples for Apple, and a team Million U.S. Jobs,” Apple Intelligence, March 2, 2012, http://9to5mac.
of engineers available to work with Apple. They had built onsite dormitories com/2012/03/02/apple-takes-credit-for-514000-u-s-jobs/#more-142766.
so that the factory could run three shifts seven days a week in order to
meet Apple’s demanding production schedule. The Chinese company got CASE DISCUSSION QUESTIONS
the bid.
1. What are the benefits to Apple of outsourcing the assembly of the
Another critical advantage of China for Apple was that it was much
iPhone to foreign countries, and particularly China? What are the
easier to hire engineers there. Apple calculated that about 8,700 industrial
potential costs and risks to Apple?
engineers were needed to oversee and guide the 200,000 assembly-line
workers involved in manufacturing the iPhone. The company had estimated 2. In addition to Apple, who else benefits from Apple’s decision to
that it would take as long as nine months to find that many engineers in the outsource assembly to China? Who are the potential losers here?
United States. In China it took 15 days. 3. What are the potential ethical problems associated with outsourcing
Also important is the clustering together of factories in China. Many of assembly jobs to Foxconn in China? How might Apple deal with these?
the factories providing components for the iPhone are located close to Fox- 4. On balance, do you think that the kind of outsourcing undertaken by
conn’s assembly plant. As one executive noted, “The entire supply chain is Apple is a good thing or a bad thing for the American economy?
in China. You need a thousand rubber gaskets? That’s the factory next door. Explain your reasoning?

Endnotes
1. Figures from World Trade Organization, Statistics Database, 4. T. Levitt, “The Globalization of Markets,” Harvard Business
2013. Review, May–June 1983, pp. 92–102.
2. Thomas L. Friedman, The World Is Flat (New York: Farrar, 5. U.S. Department of Commerce, Internal Trade Administra-
Straus and Giroux, 2005). tion, “U.S. Exporters in 2011: A Statistical Overview,” July
3. Ibid. 29, 2013.

Chapter One Globalization 33