WHAT IS MANAGEMENTnovella.mhhe.com/olc2/dl/572538/dias1_im_ch03_FINAL1.doc · Web viewVI. Strategies for Reaching Global Markets. Learning objective 6. Discuss the different strategies

BUSINESS IN GLOBAL MARKETS

Other Teaching Tools 3.3

Video Notes 3.4

Brief Chapter Outline and Learning Goals 3.5

Lecture Outline and Lecture Notes 3.7

Career and Study Skills Notes 3.15

CAREER DEVELOPMENT: Developing Skills for a Successful Career 3.15

STUDY SKILLS: Rate Your Study Skills 3.16

Lecture Links 3.17

LECTURE LINK 3-1 The Great Trade Protection Debate 3.17

LECTURE LINK 3-2 Europe is Shrinking 3.17

LECTURE LINK 3-3 Why There Are No Indian Wal-Marts 3.18

LECTURE LINK 3-4 Foreign Etiquette Tips 3.19

LECTURE LINK 3-5 Bribery Pitfalls 3.20

LECTURE LINK 3-6 E-Mail by Snail-Mail 3.20

Bonus Internet Exercise 3.21

BONUS INTERNET EXERCISE 3-1 Which Country? 3.21

Critical Thinking Exercises 3.22

CRITICAL THINKING EXERCISE 3-1 Trade Agreements 3.22

CRITICAL THINKING EXERCISE 3-2 Evaluating Global Expansion 3.24

CRITICAL THINKING EXERCISE 3-3 Currency Shifts 3.26

Bonus Cases 3.29

BONUS CASE 3-1 Entering the Import/Export Business 3.29

BONUS CASE 3-2 Cooling Off the Sweatshops 3.31

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BONUS CASE 3-3 Walt Disney Imagineering: The Mouse that Doesn’t 3.33Come with a Computer (Video Case)

BONUS CASE 3-4 The China Challenge 3.35

3.2 INTRODUCTION TO BUSINESS: Instructor’s Resource Manual

OTHER TEACHING TOOLS

For a description of each of these valuable teaching tools, please see the Preface in this manual.

Student Learning ToolsStudent Online Learning Center (OLC) www.mhhe.com/diasbusinessStudent Study GuideSpanish Translation Glossary (OLC)Spanish Translation Quizzes (OLC)

Instructor Teaching ToolsAnnotated Instructor’s Resource ManualIRCD (Instructor’s Resource Manual, Test Bank, PowerPoints, EZtest)Asset Map Online Learning Center (OLC) www.mhhe.com/diasbusinessPageOutPowerPoint Presentations (on IRCD and OLC)Test Bank Business Videos on DVD Enhanced Cartridge optionSpanish Translation Glossary (OLC)

CHAPTER 3: Business in Global Markets 3.3

http://www.mhhe.com/diasbusiness

http://www.mhhe.com/diasbusiness

VIDEO NOTES

Twenty videos are available, geared to individual chapter topics. The teaching notes for these videos are also included in the Video Notes section of this Instructor’s Resource Manual, beginning on page V.1.

VIDEO 3: “Walt Disney Imagineering: The Mouse that Doesn’t Come with a Computer”)

This video focuses on challenges faced by Walt Disney Imagineering, the group of artists and craftspeople who design and create Disney-themed venues. Disney manage-ment has successfully responded to differing expectations in global markets.

(BONUS CASE 3-3, “Walt Disney Imagineering: The Mouse that Doesn’t Come with a Computer,” on page 3.33 of this manual relates to this video.)


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BRIEF CHAPTER OUTLINE AND LEARNING GOALS

CHAPTER 3

Business in Global Markets

I. UNDERSTANDING GLOBALIZATIONLEARNING OBJECTIVE 1Define global business.

II. GLOBAL TRADELEARNING OBJECTIVE 2Understand the importance of global trade.

A. Why Trade Globally?

III. COMPARATIVE ADVANTAGE AND ABSOLUTE ADVANTAGELEARNING OBJECTIVE 3Discuss the roles of comparative and absolute advantage in global trade.

IV. MEASURING TRADELEARNING OBJECTIVE 4Discuss the two indicators for measuring global trade.

A. Balance of Payments and Trade DeficitsB. Unfair Trade Practices

V. TRADE PROTECTION AND AGREEMENTSLEARNING OBJECTIVE 5Describe different types of trade protections and trade agreements.

A. The General Agreement on Tariffs and Trade and the WTOB. Common MarketsC. Organization of the Petroleum Exporting Countries (OPEC)D. The North American Free Trade Agreement (NAFTA)

VI. STRATEGIES FOR REACHING GLOBAL MARKETSLEARNING OBJECTIVE 6Discuss the different strategies for reaching global markets.


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A. LicensingB. ExportingC. FranchisingD. Contract ManufacturingE. International Joint Ventures and Strategic AllianceF. Foreign Direct Investment

VII. FORCES AFFECTING TRADE IN GLOBAL MARKETSLEARNING OBJECTIVE 7Explain the forces affecting the global trade market.

A. Sociocultural Forces1. Religion2. Human Resource Management3. Communication

B. Economic and Financial ForcesC. Legal and Regulatory ForcesD. Physical and Environmental Forces

VIII. THE FUTURE OF GLOBAL TRADE

IX. SUMMARY


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LECTURE OUTLINE AND LECTURE NOTES

CHAPTER OPENING PROFILEBrett Bats (Text pages 70-71)

The opening profile focuses on Joe Sample and his firm, Brett Bats. Brett Bats pioneered a new, stronger wood technology, but found that the process was too expensive to produce profitably in the U.S. Instead, he found a production facility in China that could produce the bats cost-effectively. The profile covers some of the concerns that face entrepreneurs in global trade, such as communication, cultural dif-ferences, and increased travel.

LECTURE OUTLINE LECTURE NOTES

I. UNDERSTANDING GLOBALIZATIONLEARNING OBJECTIVE 1Define global business. (Text page 72)

A. GLOBAL BUSINESS is any activity that seeks to provide goods and services to others across national borders while oper-ating at a profit.

B. Both large and small businesses engage in global business.

POWERPOINT 3-1Chapter Title(Refers to text page 70)

POWERPOINT 3-2Learning Objectives(Refers to text page 71)


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II. GLOBAL TRADELEARNING OBJECTIVE 2Understand the importance of global trade. (Text pages 72-74)

A. Most major U.S. companies plan to expand globally.

1. There are 300 million people in the U.S., but there are 6 billion potential customers in the world.

a. Of these, approximately 75% live in developing areas.

b. These developing countries will eventually have the resources to buy goods from other countries.

2. America buys and sells billions of dolars’ worth of goods to and from other countries.

a. Major league sports teams play games in other countries.

b. Indian companies provide low-cost labor for U.S. firms.

c. Thomas Friedman believes that technology is helping to “flatten the world.”

3. The U.S. is the largest exporting and importing nation in the world.

a. EXPORTING is selling products to another country.

b. IMPORTING is buying products from another country.

c. Competition is intense: The U.S. must compete against aggressive competitors in Germany, Japan, and China.

B. Why Trade Globally?

TEXT FIGURE 3.1 World Population by Con-tinent (Box in text on page 73)

TEXT REFERENCE Real World Business Apps(Box in text on page 73)Angela Wilson owns a small jewelry design business that sells through small boutiques in the Southwestern U.S. She has just received an order from one of her major clients that exceeds her production capacity. This chapter dis-cusses many of the opportu-nities and challenges Angela will face if she decides to use a low-cost off-shore supplier.

POWERPOINT 3-3Understanding Globaliza-tion (Refers to text pages 72-74)

BONUS CASE 3-1Entering the Import/Export BusinessGordon and Carole Segal started an import/export busi-ness with $17,000 and one employee. Today Crate & Barrel has 144 stores and is expanding into Canada. (See complete case, discussion questions, and suggested an-swers on page 3.29 of this manual.)


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III. COMPARATIVE ADVANTAGE AND ABSOLUTE ADVANTAGE

LEARNING OBJECTIVE 3Discuss the roles of comparative and absolute advantage in global trade. (Text pages 74-76)

A. GLOBAL TRADE is the exchange of goods and services across national bor-ders.

B. COMPARATIVE ADVANTAGE THEORY states that a country should sell to other countries those products that it produces most effectively and efficiently and should buy from other countries those products that it cannot produce as effectively or effi-ciently.

1. Examples: England selling wool and France selling wine

2. Every country has a comparative ad-vantage in something.

3. Comparative advantage has been the basic principle of free economic ex-change since David Ricardo sug-gested the theory in the 19th century.

C. ABSOLUTE ADVANTAGE occurs when a country has a monopoly on producing a specific product or is able to produce it more efficiently than all other countries.

1. South Africa once had an absolute ad-vantage in diamond production.

2. Most absolute advantage situations in-volve scarce natural resources.

SELF CHECK QUESTIONS (Text page 76)1. What is comparative advantage? Provide an example of

a country that has a comparative advantage.

POWERPOINT 3-4Comparative Advantage and Absolute Advantage(Refers to text pages 74-75)


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IV. MEASURING TRADELEARNING OBJECTIVE 4Discuss the two indicators for measuring global trade. (Text pages 76-78)

A. Balance of Payments and Trade Deficits1. BALANCE OF TRADE is a ratio of a

country’s exports to imports.a. A favorable balance of trade, or

TRADE SURPLUS, exists when a country exports more than it im-ports.

b. A TRADE DEFICIT, an unfavor-able balance of trade; occurs when a country imports more than it exports.

2. BALANCE OF PAYMENTS is the dif-ference between money coming into a country (from exports) and money leaving the country (for imports) plus money flows from other factors such as tourism, foreign aid, military expen-ditures, and foreign investment.a. A favorable balance of payments

means more money is flowing into than flowing out of the country.

b. An unfavorable balance of pay-ments means more money is leav-ing than coming into the country.

3. Since 1976 the U.S. has run a trade deficit.

4. The U.S. exports a much lower per-centage of its products than other countries do.a. In the early 1980s, no more than

10% of American businesses ex-ported products.

POWERPOINT 3-5Measuring Trade (Refers to text pages 76-78)

TEXT FIGURE 3.3The Top Trading Partners of the United States (Box in text on page 77)

TEXT REFERENCE Study Skills: Rate Your Study Skills (Box in text on page 78) An additional exercise and discussion is available in this chapter on page 3.16 of this


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V. TRADE PROTECTION AND AGREEMENTS

LEARNING OBJECTIVE 5Describe different types of trade protections and trade agreements. (Text pages 79-85)

A. The political atmosphere between nations is often the greatest barrier to global trade.1. TRADE PROTECTIONISM is the use

of government regulations to limit the import of goods and services. a. Advocates believe that trade pro-

tectionism allows domestic pro-ducers to survive and grow, pro-ducing more jobs.

b. Countries often use trade protec-tionism measures to protect their industries against dumping and foreign competition.

c. Another barrier to international trade is the overall political atmos-phere between nations.

2. Governments sometimes charge a TARIFF, a tax on imports, making im-ported goods more expensive.a. Protective tariffs are import taxes

designed to raise the price of im-ported products so that domestic products can be more competi-tively priced.

b. Revenue tariffs are designed to raise money for the government.

c. The HARMONIZED TARIFF SCHEDULE is a publication of the U.S. government that lists the tar-iffs and quotas for every imported good.

POWERPOINT 3-6Trade Protection and Agreements (Refers to text pages 79-80)

CRITICAL THINKING EXERCISE 3-1Trade AgreementsThis Internet exercise intro-duces students to the most important international trade agreements. (See complete exercise on page 3.22 of this manual.)

LECTURE LINK 3-1The Great Trade Protection DebateThis lecture link focuses on the consequences of the 1930 Smoot-Hawley Act. (See complete lecture link on page 3.17 of this manual.)


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VI. STRATEGIES FOR REACHING GLOBAL MARKETS

LEARNING OBJECTIVE 6Discuss the different strategies for reaching global markets. (Text pages 86-93)

A. There are many ways an organization can participate in global trade.

B. Licensing1. LICENSING is selling the right to man-

ufacture a product or use a trademark to a foreign company (the licensee) for a fee (a royalty).

2. In a licensing agreement, one com-pany allows another company to pro-duce goods under their name.

3. The advantages of licensing are:a. A company can gain additional

revenues from a product it would not have normally produced do-mestically.

b. A company can gain from the sale of start-up supplies, component materials, and consulting services from the licensing firm.

c. Companies such as Coca-Cola and Disney often enter foreign markets through licensing agree-ments.

d. Licensing works well for small companies that developed a new product.

4. The problems of licensing are:a. Often a firm must grant licensing

rights to its product for an ex-tended period.

b. If a product experiences remark-

TEXT FIGURE 3.5Strategies for Reaching Global Markets (Box in text on page 86)

POWERPOINT 3-10Strategies for Reaching Global Markets (Refers to text page 86)

TEXT REFERENCE Career Development Developing Skills for Successful Career (Box in text on page 87) An additional exercise and discussion is available in this chapter on page 3.15 of this manual.

POWERPOINT 3-11Strategies for Reaching Global Markets (Refers to text pages 86-90)


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VII. FORCES AFFECTING TRADE IN GLOBAL MARKETS

LEARNING OBJECTIVE 7Explain the forces affecting the global trade market. (Text pages 93-101)

A. Succeeding in any business takes work and effort, and has many challenges.

B. Sociocultural Forces1. The term CULTURE refers to the set

of values, beliefs, rules, and institu-tions held by a specific group of peo-ple.

a. Primary components of culture in-clude social structures, religion, manner and customs, attitudes, language, and personal communi-cation.

b. Geert Hofstede suggests there are five main dimensions of culture that affect communication among nations (See Text Figure 3.6.).

c. American businesspeople are no-toriously bad at adapting to cul-tural differences among nations.

d. They have been accused of ETH-NOCENTRICITY, which is an atti-tude that one’s own culture is su-perior to all others.

e. In contrast, foreign businesspeo-ple are very good at adapting to U.S. culture.

f. Example: German and Japanese car makers have adapted to the U.S. market.

2. Religion is an important part of any so-ciety’s culture and can have a signifi-

BONUS INTERNETEXERCISE 3-1Which Country?This Internet exercise asks students to go online to eval-uate a possible expansion into one of two countries. (See complete exercise on page 3.21 of this manual.)

POWERPOINT 3-14Forces Affecting Trade in Global Markets (Refers to text pages 94-97)

TEXT FIGURE 3.6Hofstede’s Five Dimensions of Culture (Box in text on page 95)

LECTURE LINK 3-4Foreign Etiquette TipsThe author of Business Eti-quette for Dummies gives tips for avoiding embarrass-ing cultural gaffes. (See com-plete lecture link on page 3.19 of this manual.)



VIII. THE FUTURE OF GLOBAL TRADEA. New markets present new opportunities for

trade and development.B. Advanced communications have made dis-

tant markets instantly accessible, particu-larly the People’s Republic of China.1. China’s population of 1.3 billion repre-

sents a tremendous business opportu-nity.

2. China is a fast-growing economy that is shifting its economic philosophy from central planning to free markets.

3. Investments in China, once considered too risky, are now becoming more practical.

4. Concerns still remain about China’s one-party political system, trade imbal-ances, and human rights policies.

5. The U.S. Congress granted China per-manent normal trading rights, paving the way for China to join the WTO in 2001.

C. Other Global Opportunities1. Russia’s 150 million potential cus-

tomers are prized by global traders.2. Other potential markets include India,

Taiwan, Indonesia, Thailand, Singa-pore, the Philippines, Korea, and Malaysia.

TEXT REFERENCE Career Spotlight: So, You Want to Be … Involved in Global Business(Box in text on page 102)There are many ways to be-come involved in global business.

TEXT REFERENCE Real World Business Apps(Box in text on page 103)After studying the concepts discussed in this chapter, An-gela has a clearer understand-ing about contract manufac-turing and growing her busi-ness.

BONUS CASE 3-4The China ChallengeMTV China’s Li Yifei has shown that women business-people can be successful in traditionally male societies. (See complete case, discus-sion questions, and suggested answers on page 3.35 of this manual.)

IX. SUMMARY


CAREER AND STUDY SKILLS NOTES

CAREER DEVELOPMENT BOX

Developing Skills for a Successful Career (Text page 87)

Instructor’s Notes for Text Box Three:(Objectives to consider and implement to increase stu-dents’ knowledge, usage and understanding of the concepts).

Have you analyzed the POTENTIAL of your career considering the overall skills necessary to contribute to a job/company as you see below? This analysis is important to the value of your position as companies evaluate you for hire. Your ability to find this out and put it in some usable format is important and something you will need to become experienced at doing. Let’s look more at this concept.

STUDENT EXERCISE:Have students do an honest assessment of how becoming a good, valuable employee is a process

of understanding a wide range of skills and knowledge that creates a larger view in terms of what it re-quires to be a return on the company’s investment. Have students look at the list of skills and rate them-selves. Upon completion, discuss similar high rankings and also where there might be some common low scores. Ask students how much they learned about themselves in the process.

Assessment Objectives:

At this point, placing a numeric value on your own assessment of where you think your current skills are with regards to the industry hiring needs is important. Take a look at the following questions and use this evaluation estimate as a guide to where you are currently in your skill set as it relates to the job industry and the job opportunities that might exist for an entry- or mid-level job.


STUDY SKILLS BOX

Rate Your Study Skills (Text page 78)

Instructor’s Notes for Text Box Three:(Objectives to consider and implement to increase stu-dents’ knowledge, usage and understanding of the concepts).

How good are your study skills? What are your strengths when it comes to study knowledge, preparation, and execution? What has been your history? How would you grade yourself? Where might you need the most help? Consider your answers to these questions.

Study skill assessment is important for many reasons. Before we can improve, fix or change our current study history, we need to do an honest assessment. Therefore, if you can, give yourself a grade for the following: 1-study knowledge, 2-study preparation, 3-study execution. What does your report card look like? Are you going out to celebrate or are you grounded for a poor report card? What can be done to improve your performance?

STUDENT EXERCISE:Get the students to begin thinking of how they perceive themselves as having poor, average good,

or very good study habits. Before a student can improve this skill, he/she must honestly look at past and current study patterns and see where strengths and weaknesses might be. Review the grades and get into a discussion about why students have graded themselves accordingly. Explain to them how improved work in these areas might help them do better in their classes and in the long run, make them better learners of information regardless of whether it is for a class, a job, or in any learning environment they might en-counter.


LECTURE LINKS

LECTURE LINK 3-1

The Great Trade Protection Debate

The subject of trade protection generates intense debate. Some media stories refer to “Smoot-Hawley.” When the subject comes up, this question is inevitably asked: “What is Smoot-Hawley and why does this term appear ever so often?” Some history may help clarify the issue.

The date: June 13, 1930 (Friday the 13th). The time: 2:13 p.m. The place: the U.S. Senate. The Great Depression had started, and the air was full of talk about trade protection. Over 1,000 economists warned the government that protectionism was dangerous and petitioned it not to pass the Smoot-Hawley Act. (Hawley was a professor of economics at Willamette University. Smoot was a banker and wool man-ufacturer.) But, by a vote of 44 to 42, the bill passed. It was an act conceived by Republican congressmen, passed by a Republican Congress, and signed into law by conservative, Republican President Herbert Hoover.

The bill imposed duties of up to 60% on almost everything imported into the United States. The concept was to protect the Western sugar beet farmer by raising the duty for sugar; protect the Northwest-ern wheat farmer by raising the duty on wheat; and protect the Imperial Valley cotton farmer by raising the duty on cotton from Egypt. The list went on: cattle and dairy products, hides, shoes, velvet, silk, china, pocket knives, watch parts, and so on.

The result was world trade fell by one third, and a global trade war started. Exports dropped from $4.8 billion to $1.7 billion from 1929 to 1932. Imports dropped from $5.4 billion to $2.4 billion. Other countries were plunged into depression as world trade fell. In 1934, Congress passed the Reciprocal Trade Agreement Act to reduce tariffs, but it was too little, too late.

The issue of world trade regulation continued. From 1987 until 1993, the GATT discussions often reached impasse points or stalemates. A collapse of the negotiations would have actually pleased protec-tionists. Instead the GATT agreement was passed by 124 nations in 1994; it was replaced by the WTO in 1995. Still the growth of several key trading blocs such as NAFTA and the EU raised the fear that a new wave of protectionism might surface. These trading blocs allow for free trade among nations in the same trading bloc, but may lead to greater protectionist legislation and less free trade between nations in com-peting trading blocs. Many wondered if Smoot-Hawley is lifting its head again.i

LECTURE LINK 3-2

Europe is Shrinking

At the end of the 20th century, massive changes took place in Europe—the Berlin Wall came down and communism disappeared as the Soviet Union collapsed. While the public’s attention was fo-cused on these historic events, another extraordinary change was quietly taking place.

According to the United Nations, Europe’s population will shrink by more than 90 million people in the next 50 years, roughly twice the number killed worldwide during World War II. For more than two decades the total fertility rate—the average number of children each woman will bear in her lifetime—has remained below the 2.1 level required to replace the population.

In the late 1990s Europe’s population began to fall. Demographers doubt that the fertility rate will return to replacement level in the near future. Some speculate that the decline may not be limited to Eu-


rope. The world’s population could actually decline by the end of the 21st century—a trend unseen since the 14th century Black Death.

Among the first nations to experience the population implosion will be historically fertile Italy. With births below replacement level since 1977, Italy is projected to lose nearly a quarter of its current population by 2050. Contraceptive use is at record levels, and women are earning more college degrees than men, leading many to seek careers first and families second. Couples who do start families are wait-ing longer to have their first child.

Germany has one of the world’s lowest birthrates: fewer babies were born in 2005 than in the last year of World War II. A United Nations report estimated that by 2050 Germany will need 3.5 million working-age immigrants each year to maintain its population ratio and fund pension, health care, and other programs.

Without babies to replenish the labor force and pay taxes, Europeans will find it hard to fund the pensions of longer-living retirees. To stay in the black, governments will need to take unpopular steps, such as raising the retirement age, cutting benefits, hiking taxes, and increasing legal immigration.

Or do what France has done. Since World War I, France has been awarding medals for childbear-ing to women of “good character” to restore its war-devastated population. Today, with France again in need of more children, the country has relaxed its medal rules: the mothers don’t have to be married; and they don’t even have to be French. ii

LECTURE LINK 3-3

Why There Are No Indian Wal-Marts

If you needed to buy a bag of rice or a CD player in Delhi, India, you wouldn’t be able to go to the local Wal-Mart to buy it. You’d probably wind up at the Big Bazaar store, where electronic equipment is displayed alongside women’s panties and tennis balls next to handbags. The feeling at Big Bazaar, and at most Indian stores, is like a typical bazaar. Colorful, chaotic, and a little cluttered. Most shopkeepers know that this is the way Delhi residents like it.

The Big Bazaar, one of 90 owned by Pantaloon, India’s largest retail group, draws up to 8,000 customers a day with its wide array of merchandise and air conditioning. Fueling this commercial boom is India’s growing middle class which now makes up a third of the country’s 1.1 billion population.

Retailers like Wal-Mart and Tesco have long eyed the huge Indian market, but you won’t find ei-ther store in the country. Those big retailers can’t enter the Indian market, thanks to restrictions on foreign investment. Even the promise of lower prices and more efficient supply chains haven’t been enough to overcome the political power of India’s 12 million shopkeepers. These small entrepreneurs account for 97% of the country’s $258 billion in annual retail sales. Large Indian companies are also urging the gov-ernment to slow down reforms that would open the market to foreign competition. Opponents of foreign investment estimate that eight million people would lose their jobs if Wal-Mart or similar stores took just 20% of the retail trade.

India’s Commerce Minister Kamal Nath is considering an incremental plan that would create new jobs, while not replacing or displacing employment in small neighborhood shops. Nath’s plan would ini-tially limit companies like Wal-Mart to India’s six biggest cities and allow them to open only one store a year in each city. These stores would have to be at least 100,000 square feet, so they couldn’t be located in inner-city neighborhoods. The plan has not gotten much traction due to delays by the business lobby and factions in India’s government.

Retail sales are increasing in India by an average of 10% a year, and spending on luxury goods is rising nearly twice as fast. With two-thirds of India’s population under 35, consumer demand is clearly


growing. However, India’s two political parties say they have no intention of relaxing their position and do not expect government reforms in the foreseeable future.iii

LECTURE LINK 3-4

Foreign Etiquette Tips

As more businesses engage in global trade, cultural pitfalls increase. Every day business deals are jeopardized or lost when foreign associates are offended by Americans unaware of other countries cus-toms, culture, or manners. Sue Fox, the author of Business Etiquette for Dummies, provides the following tips for avoiding embarrassing gaffes.

Argentina: It is rude to ask people what they do for a living. Wait until they offer the information.

Bahrain: Never show signs of impatience, because it is considered an insult. If tea is offered, always ac-cept.

Cambodia: Never touch or pass something over the head of a Cambodian, because the head is considered sacred.

China: As in most Asian culture, avoid waving or pointing chopsticks, putting them vertically in a rice bowl, or tapping them on the bowl. These actions are considered extremely rude.

Dominican Republic: When speaking to someone, failure to maintain good eye contact may be inter-preted as losing interest in the conversation.

France: Always remain calm, polite, and courteous during business meetings. Never appear overly friendly, because this could be construed as suspicious. Never ask personal questions.

Greece: If you need to signal a taxi, holding up five fingers is considered an offensive gesture if the palm faces outward. Face your palm inward with closed fingers.

India: Avoid giving gifts made from leather, because many Hindus are vegetarian and consider cows sa-cred. Also, keep this in mind when taking Indian clients to restaurants. Don’t wink, because it is seen as a sexual gesture.

Japan: Never write on a business card or shove the card into your back pocket when you are with the giver. This is considered disrespectful. Hold the card with both hands and read it carefully. It’s considered polite to make frequent apologies in general conversation.

Malaysia: If you receive an invitation from a business associate from Malaysia, always respond in writ-ing. Avoid using your left hand because it is considered unclean.

Mexico: If visiting a business associate’s home, do not bring up business unless the associate does.

Singapore: If you plan to give a gift, always give it to the company. A gift to one person is considered a bribe.

Spain: Always request your check when dining out in Spain. It is considered rude for wait staff to bring your bill beforehand.

Vietnam: Shake hands only with someone of the same sex who initiates it. Physical contact between men and women in public is frowned upon.iv


LECTURE LINK 3-5

Bribery Pitfalls

The passage of the Sarbanes-Oxley Act in 2002 raised the stakes for corporate responsibility. CEOs and CFOs now have to personally sign off on company financials, making those executives much more wary of letting a bribe slide through. Conducting business globally exposes U.S. companies to all sorts of potential minefields that don’t exist at home.

The Corruption Perception Index, based on bribery data and surveys conducted by Transparency International, a nongovernment organization dedicated to fighting bribery, finds sings of “rampant cor-ruption” in no fewer than 60 countries. Bangladesh and Haiti are the worst of that group. Russia and sev-eral other former Soviet republics are included.

Non-U.S. companies face far fewer constraints when dealing with this shadowy business world. While the 35 signatories of the Organization of Economic Cooperation and Development 1997 conven-tion made it a crime to bribe foreign officials, there has been little enforcement of new laws by national governments, other than by the U.S.

That bribery gap has been costly for American companies. During a 12-month period in 2004, ac-cording to the U.S. Commerce Department, competition for 47 contracts worth $18 billion may have been affected by bribes that foreign firms paid to foreign officials.

Since 1977, the Foreign Corrupt Practices Act has barred all issuers of U.S.-traded equities from bribing foreign government officials to acquire or retain business. But while it is illegal for U.S.-listed companies and employees to take part in bribes, some authorities suggest that until a few years ago com-panies didn’t routinely report corruption in their overseas operations. The concept was that companies didn’t have to turn themselves in on a potential crime.

SEC policy and the Sarbanes-Oxley rules, however, now call for disclosure of both the incidents and the steps a company takes to address them.v

LECTURE LINK 3-6

E-Mail by Snail-Mail

Modern India is a paradox. Though it’s a global technology powerhouse, life for many of its peo-ple hasn’t changed much in centuries. A quarter of Indians live below the poverty line, and only about 6% use the Internet. That created a market opportunity for India Post’s ePost system. Using ePost, farmers in India’s remote regions can send and receive e-mail messages even if they have never seen a computer.

ePost receives e-mail messages at local post offices, where they are printed and hand delivered. In reverse, rural patrons can handwrite letters and have them translated into e-mails. Delivery by ePost-gram costs less than 25 cents a page and usually takes a day, compared with about a week by snail-mail. Ac-cording to ePost general manager R. R. P. Singh, “You can talk about any technology you like—but somewhere the last mile has to be walked by somebody.”

Now India Post is aiming the service at corporate customers with bigger budgets, promoting ePost as a way to easily and affordably reach India’s unconnected majority. A recent upgrade to the tech-nology allows e-mailers to reach 9,999 addresses at once, bringing even remote villagers the wonders of corporate spam.vi


BONUS INTERNET EXERCISEVII

BONUS INTERNET EXERCISE 3-1

Which Country?

The Internet gives students access to endless information sources. One of the most surprising sources is the online database maintained by the CIA. The agency’s World Factbook gives extensive data about each country’s geography, government, economy, communications, etc. Go to the CIA Factbook Website (www.cia.gov/cia/publications/factbook/index.html.). (Sometimes the web address for a location changes. You might need to search to find the exact location mentioned.)

For this exercise assume you are the owner of a small electronics firm based in the American Midwest. Your research department has developed a cellular phone that translates conversations into any of twenty-four languages. From conversations with business associates and friends, you have identified two especially attractive overseas markets—Brazil and Australia.

Use the CIA World Factbook to research these two countries.

1. What is the total population for each country? Which country’s population is growing the fastest? What is the median age?

2. Compare the government types for each country. What type of legal system does each have?

3. Which country has the largest number of cellular phones in use? What percent of the population uses cellular phones?

4. Based on your research, which country, Brazil or Australia, would you choose to introduce your product? Why?


http://www.cia.gov/cia/publications/factbook/index.html

CRITICAL THINKING EXERCISES

CRITICAL THINKING EXERCISE 3-1

Trade Agreements

Countries around the world have formed trading agreements for economic prosperity and ease of currency exchange (see the discussion of the EU agreement). The purpose of this exercise is to better un-derstand trading agreements and what impact they have had on the economies that have participated and what problems or difficulties have occurred in making these agreements work as planned.

For this exercise, the two trade agreements that will be evaluated are the NAFTA trade agreement and the formation of the EU (European Union). Along with gaining a general understanding of these two trade agreements, you will also learn about the WTO (World Trade Organization), WB (World Bank) and the IMF (International Monetary Fund) as they are all partners in assisting trade rules and regulations among countries around the world.

Before you begin, use the internet and get familiar with NAFTA, EU, WTO, WO, and the IMF. Once you have a basic understanding, you can use this knowledge to answer the questions below:

1. When was the NAFTA agreement drafted and what countries are part of the agreement? What were the general guidelines of the agreement?

2. What are the basics of the agreement of the European Union (go to Wikipedia for a basic, general overview of the EU)? How many states are part of the EU and when was the original agreement made?

3. What is the role of the World Trade Organization? What are the benefits of the WTO?

4. How do the World Bank and the International Monetary Fund assist the WTO?

5. Overall, what have been the benefits of the trade agreements? How important are these agree-ments as we conduct business in the new world economy?


NOTES ON CRITICAL THINKING EXERCISE 3-1

1. When was the NAFTA agreement drafted and what countries are part of the agreement? What were the general guidelines of the agreement?

The NAFTA agreement began January 1, 1994. The agreement removes most barriers among trade and investment between Canada, Mexico and the United States. The NAFTA agreement removes tariffs for agriculture trade among these countries.

2. What are the basics of the agreement of the European Union (go to Wikipedia for a basic, gen-eral overview of the EU)? How many states are part of the EU and when was the original agree-ment made?

The European Union is a political and economic community of twenty-seven member states lo-cated primarily in Europe. Its traces its roots to the EEC were formed in 1957. In 1993 the Maastricht Treaty established the current legal framework. The EU creates a single market by a system of laws which apply in all member states guaranteeing the freedom of movement of people, goods, services and capital.

3. What is the role of the World Trade Organization? What are the benefits of the WTO?

It is the only global international organization dealing with the rules of trade between nations. The benefits of the WTO are:

(1) helps to promote peace;(2) disputes are handled constructively;(3) rules make it easier for all;(4) freer trade cuts the costs of living;(5) provides more choice of products and qualities;(6) trade raises incomes;(7) trade stimulates economic growth;(8) basic principles make life more efficient;(9) governments are shielded from lobbying;(10) the system encourages good government.

4. How do the World Bank and the International Monetary Fund assist the WTO?

The World Bank (vital source of financial and technical and assistance to developing countries around the world) and the International Monetary Fund (international organization that oversees the global financial system by observing exchange rates and balance of trade payments) help to facilitate closer cooperation between the multilateral institutions who have key roles with the formulation and im-plementation of different elements of framework for global economic policy.

5. Overall, what have been the benefits of the trade agreements? How important are these agree-ments as we conduct business in the new world economy?

The benefits of trade agreements have been primarily in creating a better understanding among neighboring countries of how each can help improve each trading partner’s economy by eliminating barri-ers that slow and hasten trade. In the new world economy, this will be beneficial as the flow of goods and services are accepted by more trading partners and in the process, this acceptance can improve the stan-dard of living among all trading partners.



Evaluating Global Expansion

Greenwich Industries entered the Latin American market in the 1950s by forming a joint venture with Industro Viejes in Santo Ignezeto to manufacture bicycle parts. The joint venture flourished in the 1960s, and Greenwich eventually bought out 100% ownership. The company earned steady profits from the Latin American subsidiary until a military junta overthrew the government in the late 1970s. The rul-ing generals expropriated all foreign owned companies, including the Santo Ignezeto bicycle parts plant.

Today Santo Ignezeto is ruled by a democratic government that has been in power for ten years. Industro Viejes has approached Greenwich about another joint venture. The government is offering an at-tractive incentive package to attract foreign investment.

You have been assigned to travel to Santo Ignezeto and begin planning and staffing.

1. What are the potential problems that face the new venture?

2. What are the potential advantages of this venture for the company?

3. Would you recommend entering the joint venture? Why or why not?

4. If Greenwich Industries partners with Industro Viejes, would you recommend hiring local man-agers or American managers for the top and middle management positions? Why or why not?


NOTES FOR CRITICAL THINKING EXERCISE 3-2

1. What are the potential problems that face the new venture?

All of the risks of international commerce are here—currency shifts, cultural differences, infra-structure, etc. In the previous joint venture, Greenwich Industries had its plant expropriated, so this will be an ongoing concern, despite the current government stability.

2. What are the potential advantages of this venture for the company?

Locating a plant in a Latin American country will probably mean lower-cost labor, thus reducing the cost of producing bicycle parts and lowering the prices to consumers. There is also the potential for expanding Greenwich’s consumer base. In most Latin American countries, low per-capita income means fewer people can afford a car. Bicycle transportation is more common and presents an opportunity to en-ter a new market with both production and revenue potential.

3. Would you recommend entering the joint venture? Why or why not?

Using the answers to questions 1 and 2, balance the risks and potential advantages, and make the decision.

4. If Greenwich Industries partners with Industro Viejes, would you recommend hiring local man-agers or American managers for the top and middle management positions? Why or why not?

Local managers would be more in touch with the area job market and local customs. In a new en-terprise, however, more control and oversight is needed in the early years. A compromise might involve American top management at the beginning, shifting to local managers as the business matures.



Currency Shifts

As the text discusses, one of the hurdles of international trade is the constant shift in exchange rates. Just how much do exchange rates change over a 30 day period? Let’s find out by choosing five countries of interest to you and recording the exchange rate for their currency (Great Britain’s pound, Japan’s yen, Mexico’s peso, or the European euro.) for 30 days. The rates are available daily in The Wall Street Journal (in the “Currency Markets” chart in the “Money and Investing” section). They are also available on many Websites, such as Yahoo Finance (www.finance.yahoo.com) or CNNMoney (http://money.cnn.com/markets/currencies/). The published chart shows the amount of foreign currency per dol-lar. What effect would such currency shifts have on your business trade with each of these countries? (Sometimes the web address for a location changes. You might need to search to find the exact location mentioned.)

Country Country Country Country Country(Currency) (Currency) (Currency) (Currency) (Currency)

___________ ___________ ___________ ___________ ___________

(__________) (__________) (__________) (__________) (__________)

1. ___________ ___________ ___________ ___________ ___________

2. ___________ ___________ ___________ ___________ ___________

3. ___________ ___________ ___________ ___________ ___________

4. ___________ ___________ ___________ ___________ ___________

5. ____________ ___________ ___________ ___________ ___________

6. ___________ ___________ ___________ ___________ ___________

7. ___________ ___________ ___________ ___________ ___________

8. ___________ ___________ ___________ ___________ ___________

9. ___________ ___________ ___________ ___________ ___________

10. ___________ ___________ ___________ ___________ ___________

11. ___________ ___________ ___________ ___________ ___________

12. ___________ ___________ ___________ ___________ __________

13. ___________ ___________ ___________ ___________ ___________

14. ____________ ___________ ___________ ___________ ___________


http://money.cnn.com/markets/currencies/

http://money.cnn.com/markets/currencies/

http://www.finance.yahoo.com/

CRITICAL THINKING EXERCISE 3-3 (continued)

Country Country Country Country Country(Currency) (Currency) (Currency) (Currency) (Currency)

___________ ___________ ___________ ___________ ___________

(__________) (__________) (__________) (__________) (__________)

15. ___________ ___________ ___________ ___________ ___________

16. ____________ ___________ ___________ ___________ ___________

17. ___________ ___________ ___________ ___________ ___________

18. ___________ ___________ ___________ ___________ ___________

19. ___________ ___________ ___________ ___________ ___________

20. ___________ ___________ ___________ ___________ ___________

21. ___________ ___________ ___________ ___________ ___________

22. ___________ ___________ ___________ ___________ ___________

23. ___________ ___________ ___________ ___________ ___________

24. ___________ ___________ ___________ ___________ ___________

25. ___________ ___________ ___________ ___________ ___________

26. ___________ ___________ ___________ ___________ ___________

27. ___________ ___________ ___________ ___________ ___________

29. ___________ ___________ ___________ ___________ ___________

30. ___________ ___________ ___________ ___________ ___________


NOTES FOR CRITICAL THINKING EXERCISE 3-3

What effect would such currency shifts have on your business trade with each of these countries?

The principle is this: If the currency of another country goes up, that means they can buy more U.S. goods more cheaply, and that is good for exporters. If the value of their currency goes down, that means that goods and services from the United States are more expensive, and that would hurt your busi-ness.


BONUS CASES

BONUS CASE 3-1

Entering the Import/Export Business

Gordon and Carole Segal went to the Caribbean on their honeymoon. While there, they were fas-cinated by the variety of elegant, functional housewares they saw: French copper, German cutlery, and so on. A few months later, Gordon was doing the dishes (Arzberg dinnerware) when he got the inspiration to start an importing firm. He had experience in restaurants and real estate. Carole was a teacher. Neither had any experience in retailing.

With $17,000 in capital and one employee, the couple opened the first Crate & Barrel store in an old elevator factory in Chicago’s Old Town district. It took a while to learn the business. In fact, the cou-ple forgot to buy a cash register and went several days without one. This was in 1962.

At first, the Segals and their company, Euromarket Designs, Inc., imported only quality items they had seen and used themselves. Eventually, they toured the continent searching for more items. They learned that European tradespeople were often reluctant to sell to Americans because of past bad experi-ences with department store buyers. For example, these buyers would place large orders; the manufactur-ers would expand to fill the orders; and then, when there were no reorders, the manufacturers were stuck. Often, the Segals had to spend days negotiating to buy goods.

When the store opened, sales were $8,000 the first month. The second month they fell to $4,000, the third month to $2,000. About half the initial inventory was sold at cost due to ignorance, not charity. Eventually things got straightened out, and the Segals opened a second store in 1968 in suburban Wil-mette, Illinois (outside Chicago). A third store opened in 1971.

Crate & Barrel now has 144 stores. They were the ones who set the image for new housewares stores. Glassware, dinnerware, flatware, and cookware are piled floor to ceiling on open shelves. Empha-sis is on the product, not the display case.

The Segals’ honeymoon shopping trip in the Caribbean led to a major retail chain in the United States. The Segals sold a majority stake in the company in 1998 to Otto Group, but Gordon is still consid-ered the public face of the company.

By 2006 Crate & Barrel was planning its first international expansion, opening a store in Toronto just across the Canadian border. Expansion into Europe, however, will take more time. The company has undertaken a study of every product in its inventory to determine what products would easily translate abroad and what merchandise would have to be redesigned. Early results: Crate’s overstuffed furniture may not fit in smaller European apartments. And its measuring spoons would have to be redesigned to ac-commodate the British definition of teaspoon.

DISCUSSION QUESTIONS FOR BONUS CASE 3-1

1. How much thought have you given to the import/export business as a career? The Segals im-ported European goods to America. Would you enjoy selling American goods in Europe?

2. What are some of the successful stores you have seen that sell imported goods? Have you ever talked to the owners about their experiences? Do so and report back to the class.


3. Why is the global market an attractive career possibility for tomorrow’s college graduates relative to the U.S. market?

ANSWERS TO DISCUSSION QUESTIONS FOR BONUS CASE 3-1

1. How much thought have you given to the import/export business as a career? The Segals im-ported European goods to America. Would you enjoy selling American goods in Europe?This is a good opportunity to discuss living conditions in other countries and the kinds of prod-

ucts available in America not often found in other countries, including air conditioning, large refrigerators and freezers, certain franchises such as taco places and copy services, not to mention computers and cell phones.

2. What are some of the successful stores you have seen that sell imported goods? Have you ever talked to the owners about their experiences? Do so and report back to the class.This is a good project for the class. Because you are dealing with local businesses, class interest

should be high.

3. Why is the global market an attractive career possibility for tomorrow’s college graduates rela-tive to the U.S. market?The world market is much larger (6.6 billion versus 300 million people), growing much faster,

less competitive, more in need of available goods and services, and potentially more interesting and chal-lenging. At least it is a subject worth talking about and investigating.


BONUS CASE 3-2

Cooling Off the Sweatshops

In the late 1800s and early 1900s, labor conditions in the United States were certainly less than ideal. The average workweek was 60 hours, but it was not unusual for workers to spend 80 hours on the job every week. Children toiled in unsafe conditions sometimes 10 hours a day, six days a week; wages were low and fears of unemployment high; and job benefits such as sick leave and medical care were nonexistent. Labor unions, religious groups, and social reformers were active, attempting to ignite efforts to reform the workplace and end the existence of “sweatshops,” where workers often spent their entire lives in atrocious working conditions. Efforts by reformers, plus the publication of the novel The Jungle by Upton Sinclair, heightened public awareness of the abuses existing in the workplace. Sinclair por-trayed the dark side of Chicago’s meat-packing industry, whose inhuman conditions often destroyed the lives and spirit of workers.

A real-life tragedy at the Triangle Shirtwaist Company on March 25, 1911 also intensified the ef-forts aimed at eliminating sweatshops in the United States. Triangle employed young women in the gar-ment industry. A fire at the company’s factory led to the death of 126 young women, who could not exit the building due to locked doors and the lack of a fire escape. News reports faulted the company and brought to light the harsh conditions in which these women worked. The fallout from Sinclair’s book and the Triangle Shirtwaist Company fire generated an impassioned public outcry and eventually led to strong federal legislation that improved working conditions throughout the United States.

The issue of sweatshops is again a hot topic in the media. However, today’s issue does not deal directly with U.S. workers. The issue is also championed not just by unions and other such organizations but by college students. At college campuses across the country, students are demanding assurances that clothing bearing their universities’ names and logos are produced under humane conditions in global mar-kets. United Students Against Sweatshops (USAS) represents students at some 100 colleges across the na-tion. The organization demands that universities employ a vigorous monitoring campaign that forces companies to publicly disclose the location of foreign factories so human rights groups can independently monitor their actions. They also demand that employers pay a so-called living wage that meets the basic needs of workers in various global markets.

Apparel industry leaders Nike, Reebok, and Liz Claiborne, responded by agreeing to join the Fair Labor Association (FLA), a sweatshop-monitoring group established by a presidential task force of ap-parel makers and human rights groups. Students, however, argue that this group is nothing more than a publicity stunt, with a weak code of conduct and very little accountability. The USAS and UNITE (the largest garment-workers union in the United States) founded the Workers Rights Consortium (WRC) in 1999 as an alternative to the Fair Labor Association.

Apparel companies contend that their businesses involve thousands of factories operating in very diverse economies. They claim the idea of establishing a formal living-wage structure is impossible and could in fact place significant burdens on the industry and workers in the global economies they seek to help. Edward Graham, a senior fellow at the Institute for International Economics agrees. He says that multinational companies offer the best paying jobs around in developing countries. If they did not, work-ers would refuse to take them. Political leaders in many developing nations fear that if wage standards are imposed on companies like Nike, Levi Strauss, and others, it could price them out of global markets. Since these countries depend on foreign investment money, the loss of such investment could shatter their nation’s economies. Economists fear that the concept of a living wage will cost many workers their jobs. They also agree that it is difficult to define a living wage down to the penny and say that the term living wage is an emotional term rather than a definable economic term. Still, Juan O. Somavia, director-general of the International Labor Organization predicts in five years labor rules around the globe will establish standards. This emotional debate will certainly rage on.viii



1. An argument can be offered that developed (industrialized) countries in the world experienced poor working conditions as their economies matured. Therefore, over time, workers in developing countries will gain the same benefits as their counterparts in countries such as the United States, Germany, and Japan. What’s your opinion?

2. What role, if any, should the U.S. government take in this issue of setting fair wages in develop-ing countries? What is your definition of a “fair” (living) wage? Would it vary by country?

3. Would you buy an apparel item with your college name or logo on it if you knew it was produced in a country where workers toiled in sweatshops? Why or why not?


1. An argument can be offered that all developed (industrialized) countries in the world experienced poor working conditions as their economies matured. Therefore, over time, workers in developing countries will gain the same benefits as their counterparts in countries such as the United States, Germany, and Japan. What’s your opinion?This should open quite a discussion in class because the topic is current and emotion-laden. It is

important to look at this issue from all sides, so several student opinions should be aired. There is no doubt that more can be done to help workers in other countries achieve better working conditions, but is it possible to set wages without in-depth knowledge of the local market?

2. What role, if any, should the U.S. government taking in this issue of setting fair wages in develop-ing countries? What is your definition of a “fair” (living) wage? Would it vary by country?The U.S. government can urge other countries to establish fair wages, but it has no authority to

demand such wages. The U.S. government, on the other hand, can and should investigate and solve and problems with below-standard wages and conditions in the United States. Teaching by example is the key.

Each student will have his or her own definition of “fair” wages. Students who have already been out in the real job market may have a different interpretation than those who have never worked. There may also be differences in student responses depending on the age of the student, geographic location, and other variables.

3. Would you buy an apparel item with your college name or logo if you knew it was produced in a country where workers toiled in sweatshops? Why or who not?This is an opinion question, but, again, one that should generate lively debate. The apparel should

be less expensive if produced in such a country, but what are the moral issues? And what, exactly, is a “sweatshop?” Does the definition change from country to country? What is a “fair” wage? These are is-sues that can be explored, but not necessarily answered.


BONUS CASE 3-3

Walt Disney Imagineering: The Mouse that Doesn’t Come with a Computer (Video Case)

(NOTE: This case can be used with the Video on DVD for this chapter.)

What could be more American than Mickey Mouse? M-I-C-K-E-Y-M-O-U-S-E. How would you say that in Chinese or Japanese or French? Would it have the same meaning, the same appeal? Those are the questions Disney faced when planning to take the Disneyland experience overseas. Would the “Hap-piest Place on Earth” be equally happy for people who hadn’t been exposed since birth to Mickey Mouse, Donald Duck and the other Disney characters?

Walt Disney Imagineering is the creative arm of the Walt Disney Company. It is the function of the people in Imagineering to come up with the solutions to the questions posed above. The problem may be easier to solve than you imagine because people all over the world have similar likes, fears, and imagi-nations. Just because they come from a different culture and speak a different language doesn’t mean that they won’t be equally enchanted by Cinderella, Snow White, and Mickey. On the other hand, there may be huge differences in the way people react. So, what can you do to minimize the potential for dishar-mony? One answer is to hire local people to help in every phase of the project. They know the culture. They know the language. And they know what people like and dislike—in the specific country or town or village.

Taking Disney to China would have many positive benefits for both countries. It would create jobs in China and bring new entertainment. For the United States, a Chinese Disneyland would create a more favorable balance of trade and possibly lead the way toward more trade with China. Chinese labor is less expensive than U.S. labor, so a Disney park could perhaps be built for less—if local architects, engi-neers, and set designers were used. Then everything would have to be planned with a Chinese audience in mind.

The same would be true in other countries. For example, in Japan people like to shop for gifts, so the gift shop might be bigger and have more clerks. In France, the people may prefer to drink wine in-stead of Coke. Local laws must be considered and local tastes. In short, taking a business overseas is a real challenge. It involves more than copying what you have done in the United States. It means listening to what locals have to say and then adapting your offerings accordingly.

Ethically, would it be fair to pay U.S. employees a different wage than locals? After all, locals may pay much less for rent, autos, etc. What if the locals found out you were paying them less? What eth-ical issues do you see with spreading the American culture to other countries? Are you OK with spreading American dress styles, movies, food, and music to the rest of the world? Are you open to having other cultures have an equal effect in you?

Speaking of food, is it is good idea to open fast-food restaurants in Disney parks selling the same kind of food sold in the U.S. parks? Would people in other countries be willing to spend the same amount of money to enter the parks? Are there alternative ways to charge for the experience? Which of the Dis-ney characters would appeal the most to people from China? How would you find out?


1. Working in another country can be a fun and challenging experience. If you had to choose one country to live in other than the United States, where would it be? What American companies are located there?


2. What products have you bought lately that were made in a different country? What countries produced them? Did you have any difficulty accepting the fact that the product came from there? Did you have any difficulty with the directions or the follow-up service? What does that tell you about global marketing and global business?

3. Imagine yourself trying to sell someone from France on the idea of visiting the Disney park. What issues might you expect to encounter? What issues may you encounter when trying to get someone visiting from France to go to the Disneyland park in the United States?


1. Working in another country can be a fun and challenging experience. If you had to choose one country to live in other than the United States, where would it be? What American companies are located there?

Good challenging and interesting question. Should cause lots of discussion.

2. What products have you bought lately that were made in a different country? What countries pro-duced them? Did you have any difficulty accepting the fact that the product came from there? Did you have any difficulty with the directions or the follow-up service? What does that tell you about global marketing and global business?

Great discussion starter about the benefits and drawbacks of free trade.

3. Imagine yourself trying to sell someone from France on the idea of visiting the Disney park. What issues might you expect to encounter? What issues may you encounter when trying to get some-one visiting from France to go to the Disneyland park in the United States?

Great discussion starter about cultural differences, including cultural icons, income levels, enter-tainment options and preferences, and more.


BONUS CASE 3-4

The China Challenge

MTV has had tremendous influence on the music, style, innovation, and attitude of the teenage and 20-plus population. Imagine bringing MTV’s marketing power to China, the most populous nation on earth, and a country with not only emerging economic potential but also increasing demand among its young people. Viacom, the owner of MTV, envisions such a future and has entrusted Li Yifei, president of MTV Networks China, to make it happen.

Viacom’s chief executive chose Li Yifei for the job because of what he called the three Cs—char-acter, competence, and commitment. Li added one more C—Chinese. Li brings an interesting background and credentials to the job. A native of Beijing (China’s capital city), Li was a national champion in tai chi (a form of martial arts) at 13 and a supporting actor in China’s first action movie. She earned the opportu-nity to attend the most elite foreign-language university in Beijing. At age 21, she left China to come to the United States after receiving a scholarship to attend Baylor University in Waco, Texas. Li earned a master’s degree in political science at Baylor and also observed firsthand the differences between the U.S. and Chinese cultures.

After graduation, she was one of 40 students selected for a prestigious internship at the United Nations. There she had the opportunity to produce the television program “U.N. Calling Asia.” After de-ciding that diplomacy was not her career calling, Li became manager of the Beijing office of Burson-Marsteller, a large public relations company. She assisted the firm’s clients in business dealings with the Chinese bureaucracy, helped handle complicated paperwork the government required, and assisted with cultural details involved with trade contacts of all kinds. Her work caught the eye of Viacom, and she was hired as the general manager of MTV Networks China in 1999.

To call her job a challenge would be an understatement. With a population of 1.3 billion and an emerging middle class, China is projected to be the second-largest advertising market in the world in the next 10 years. However, China is not really just one market. It’s fragmented into many local and cable stations and has a state-owned TV network, making the Chinese system very complex. Li is in charge of bringing everything together.

To add to this challenge, Li must adapt her management style to fit the Chinese culture. Tradi-tional media regulators in China are very conservative and not typically concerned with program ratings (as regulators are in the United States). They are not receptive to broadcasting attractive, sometimes scantily clad vee-jays who work for a foreign network. When dealing with her mostly male Chinese busi-ness associates, Li reins in her usual straightforward, confident business style, since Chinese culture ex-pects a woman to be soft and humble when conducting business. Li also knows it’s easier to gain access to markets in China if you have the support of a Chinese partner.

With to this understanding of Chinese culture, Li has created a win-win situation for Viacom and China. For example, she has persuaded over 300 Chinese cities to carry MTV programming and con-vinced CCTV, China’s state-owned national TV network, to co-produce the Chinese version of the MTV awards. She has also been instrumental in helping Viacom lay plans for a 24-hour MTV China channel through a partnership with Beijing Television.

Li Yifei is a strong example of an emerging global businessperson, that is, a person who speaks different languages, understands cultural and economic differences, and visualizes the vast potential and challenges of global markets. Fortune magazine has named her one of its “25 Rising Stars of the Next Generation of Global Leaders.” Li places great value on her time spent in the United States and strongly believes that people from different cultures can have an effective dialogue. Her dream, and the mission of Viacom, she says, is to narrow the cultural divide: “I strongly believe that different cultures can have ef-fective dialogue as long as we have tolerance. It’s a matter of attitude.”



1. Do you think a female manager such as Li Yifei would be as successful in another industry, such as manufacturing?

2. Why do you think Li has been successful in a male-oriented society such as China?

3. If you were Li’s boss at MTV, would you offer her a promotion? If so, what position in the com-pany would you recommend? Why?


1. Do you think a female manager such as Li Yifei would be as successful in another industry, such as manufacturing

Students’ opinions on this question will be varied. She has the basic management skills to suc-ceed in her present position. Such skills may be readily transferable to another industry. On the other hand, some may feel that the music industry is a fast paced, creative industry that would embrace a multi-cultural female manager, where the culture of another industry may not.

2. Why do you think Li has been successful in a male-oriented society such as China?

Factors such as Li’s personality, background, cultural roots, and competitive spirit may be cited, but this list is far from complete.

3. If you were Li’s boss at MTV, would you offer her a promotion? If so, what position in the com-pany would you recommend? Why?

Interesting discussion question. Her success in China would argue for another international posi-tion. Or management may want to give her a completely different assignment to broaden her experiences, perhaps grooming her for a future senior management position.


ENDNOTES

i Sources: Louis S. Richman, “What’s Next After GATT’s Victory?” Fortune, January 10, 1994, pp. 66-71; Tim Lang, “The New Protectionism: Global Trade Rules Protect Corporations,” The Nation, July 15, 1996, p. 29; John McGinnis, “Restraining Leviathan: If Free Trade Is Federalism’s Heir, Protectionism Is the Best Way to Ensure a Future for Big Government,” National Review, March 11, 1996, p.40.; Robert W. Staiger, “Economic Theory and the Interpretation of GATT/WTO,” The American Economist, September 22, 2002; and Mohamed Ariff, “Pitfalls Aplenty on the Fast Track to Trade,” New Strait Times, April 11, 2006.

ii Sources: Scott Elder, “Europe’s Baby Bust,” National Geographic, September 2003; “The Population Divide,” The Register-Guard, May 14, 2006; and “Europe Facing Culture Dilemma,” The Clarion-Ledger, March 29, 2006, p. 10A.

iii Source: “John Elliott, “Why There Are No Indian Wal-Marts,” Fortune, May 25, 2006.

iv Source: Gary Stoller, “Doing Business Abroad? Simple Faux Pas Can Sink You,” USA Today, August 24, 2007.

v Source: David M. Katz, “The Bribery Gap,” CFO, January 2005.

vi Source: Lee Gimpel, “E-mail by Snail Mail,” Fast Company, March 2007.

vii The Internet is a dynamic, changing information source. Web links noted in this manual were checked at the time of publication, but content may change over time. Please review the website before recommending it to your stu-dents.

viii Sources: Diana Fu, “Sweatshops Provoke More Than a Moral Outcry,” University Wire, January 29, 2003; Nicholas Stein, “Now Way Out of Competition to Make Products for Western Companies Has Revised an Old Form of Abuse: Debt Bondage,” Fortune, January 20, 2003, p. 102-110; Douglas Lavin, “Globalization Goes Upscale,” The Wall Street Journal, February 1, 2002, p. A18; Beth Coombs, “USC Questions Possible WRC Membership,” University Wire, June 5, 2002.


Documents

WHAT IS MANAGEMENTnovella.mhhe.com/olc2/dl/572538/dias1_im_ch03_FINAL1.doc · Web viewVI. Strategies for Reaching Global Markets. Learning objective 6. Discuss the different strategies