Transcription
A Framework for InternationalBusinessS. Tamer CavusgilGary KnightJohn R. RiesenbergerPEARSONBoston Columbus Indianapolis New York San Francisco Upper Saddle RiverAmsterdam Cape Town Dubai London Madrid Milan Munich Paris Montreal TorontoDelhi Mexico City Sao Paulo Sydney Hong Kong Seoul Singapore Taipei Tokyo
CONTENTSPrefacexviiPART 1 F o u n d a t i o n C o n c e p t s1Chapter 1 What Is International Business?2What Is International Business?2What Are the Key Concepts in International Tradeand Investment? 3The Nature of International Trade 4The Nature of International Investment 5Services as Well as Products 6How Does International Business Differ fromDomestic Business?7The Four Risks in Internationalization7Who Participates in International Business? 9Nongovernmental Organizations (NGOs) 10What Motivates Firms to Go International?10Market Globalization: An Organizing Framework11Drivers of Market Globalization 12Societal Consequences of Market Globalization 13Loss OF NATIONAL SOVEREIGNTY13OFFSHORING AND THE FLIGHT OF JOBSEFFECT ON THE POOR1414EFFECT ON THE NATURAL ENVIRONMENTEFFECT ON NATIONAL CULTURE1415Regional Integration and Economic Blocs 15Levels of Regional Integration 16The Leading Economic Blocs 18Management Implications of Regional Integration 20Summary21 Key Terms 22 Endnotes 22Chapter 2 Theories of International Trade and Investment 24What Theories Explain International Tradeand Investment? 24Why Do Nations Trade? 26MERCANTILISM26ABSOLUTE ADVANTAGE PRINCIPLE27COMPARATIVE ADVANTAGE PRINCIPLE28LIMITATIONS OF EARLY TRADE THEORIES29
viContentsFACTOR PROPORTIONS THEORY30INTERNATIONAL PRODUCT LIFE CYCLE THEORY30How Can Nations Enhance Their Competitive Advantage?The Competitive Advantage of NationsThe Diamond Model3232National Industrial Policy33Why and How Do Firms Internationalize?13133Internationalization Process of the Firm34BORN GLOBALS AND INTERNATIONAL ENTREPRENEURSHIP34How Can Internationalizing Firms Gain and Sustain CompetitiveAdvantage? 34FDI-Based Explanations34MONOPOLISTIC ADVANTAGE THEORYINTERNALIZATION THEORY3435DUNNING'S ECLECTIC PARADIGMNon-FDI-Based Explanations3638INTERNATIONAL COLLABORATIVE VENTURESNETWORKS AND RELATIONAL ASSETS3838Summary. 38 Key Terms 39 Endnotes 39Chapter 3 Organizational Participants That Make InternationalBusiness Happen 41Four Types of Participants in International BusinessParticipants Arranged by Value-Chain Activity4142ILLUSTRATING THE INTERNATIONAL VALUE CHAIN USING DELL INC.Focal Firms in International BusinessThe Multinational Enterprise4343Small and Medium-Sized EnterprisesBorn Global Firms424344International Entry Strategies of Focal Firms45A Framework for Classifying International Entry StrategiesEntry Modes Other than Trade and Investment46Distribution Channel Intermediaries in InternationalBusiness 48Intermediaries Based in the Foreign Market48Intermediaries Based in the Home Country49Online Intermediaries49Facilitators in International Business50Governments in International Business 51Summary 52 Key Terms 53 Endnotes 5345
ContentsChapter 4 Culture and Ethics in International Business 55Culture and Cross-Cultural Risk 55Key Concepts of Culture 57SOCIALIZATION AND ACCULTURATION57THE M A N Y DIMENSIONS OF CULTURE57NATIONAL, PROFESSIONAL, AND CORPORATE CULTURE57Cultural Metaphors and Idioms 57The Role of Culture in International Business 58Interpretations of Culture 59Low- and High-Context Cultures 59Hofstede's Research on National Culture 60INDIVIDUALISM VERSUS COLLECTIVISMPOWER DISTANCE6060UNCERTAINTY AVOIDANCE60MASCULINITY VERSUS FEMININITY61THE FIFTH DIMENSION: LONG-TERM VERSUS SHORT-TERM ORIENTATION61Subjective versus Objective Dimensions of Culture 61THE SUBJECTIVE DIMENSIONOBJECTIVE DIMENSION6163Language 63Overcoming Cross-Cultural Risk: Managerial Guidelines 63Ethics in International Business 65The Value of Ethical Behavior 67Variation in Ethical Standards among Countries 67An Ethical Dilemma 68Linking Ethics, Corruptipn,'and Responsible Behavior 68Corporate Social Responsibility 68The Value of CSR 69The Role of Sustainability in International Operations 70Corporate Governance and Its Implications for Managers 70A Framework for Making Ethical Decisions 71Embracing CSR and Sustainability 72Summary 73 Key Terms 74 Endnotes 74PART 2 The International Business EnvironmentChapter 5 Political and Legal Systems in International Business 78The Nature of Country Risk 78How Prevalent Is Country Risk? 79Political and Legal Environments in International Business 8077vii
viiiContentsPolitical mocracy's Link to Economic Freedom and Openness83The Relationship between Political Systems and EconomicSystems 83COMMAND ECONOMYMIXED ECONOMYMARKET ECONOMYLegal Systems8485Common LawCivil Law83848585Religious Law86Mixed Systems86Types of Country Risk Produced by Politicaland Legal Systems 87Types of Country Risk Produced by Political Systems "" 87GOVERNMENT TAKEOVER OF CORPORATE ASSETSEMBARGOES AND SANCTIONSBOYCOTTS AGAINST FIRMS OR NATIONSWAR, INSURRECTION, AND VIOLENCETERRORISM8787878888Types of Country Risk Produced by Legal Systems88COUNTRY RISK ARISING FROM THE HOST COUNTRY LEGAL ENVIRONMENTCOUNTRY RISK ARISING FROM THE HOME COUNTRY LEGAL ENVIRONMENTManaging Country Risk90PROACTIVE ENVIRONMENTAL SCANNING90STRICT ADHERENCE TO ETHICAL STANDARDS90ALLIANCES WITH QUALIFIED LOCAL PARTNERSPROTECTION THROUGH LEGAL CONTRACTS9091The Nature of Government Intervention91Rationale for Government Intervention92DEFENSIVE RATIONALE92OFFENSIVE RATIONALE93Instruments of Government InterventionTariffs9395Nontariff Trade BarriersInvestment Barriers9696Subsidies and Other Government Support ProgramsConsequences of Government Intervention98978889
ContentsHow Firms Can Respond to Government InterventionStrategies for Managers 99RESEARCH TO GATHER KNOWLEDGE AND INTELLIGENCECHOOSE THE M O S T APPROPRIATE ENTRY STRATEGIESTAKE ADVANTAGE OF FOREIGN TRADE ZONES99999999SEEK FAVORABLE CUSTOMS CLASSIFICATIONS FOR EXPORTED PRODUCTSTAKE ADVANTAGE OF INVESTMENT INCENTIVES AND OTHER GOVERNMENTSUPPORT PROGRAMS100LOBBY FOR FREER TRADE AND INVESTMENT100Summary 100 Key Terms 101 Endnotes 101Chapter 6 The International Monetary Environment and FinancialManagement in the Global Firm 103Exchange Rates and Currencies 103How Exchange Rates are Determined 106The Contemporary Exchange Rate System 107The Monetary and Financial Systems 108Financial Management in the Global Firm 110Raising Funds for the Firm's International ActivitiesManaging Cash Flow 112Capital Budgeting 113Managing Currency Risk 114Foreign Exchange Trading 114Hedging, Speculation, and Arbitrage111115Hedging Instruments 116Managing Accounting and Tax Practices117International Taxation / 118Summary 119 Key Terms 121 Endnotes 121Chapter 7 Emerging Markets, Developing Economies, and AdvancedEconomies 123Advanced Economies, Developing Economies, and EmergingMarkets 123Advanced EconomiesDeveloping Economies124125Emerging Market Economies 125What Makes Emerging Markets Attractive for InternationalBusiness 128Emerging Markets as Target Markets 128Emerging Markets as Manufacturing Bases 129Emerging Markets as Sourcing Destinations129100ix
ContentsAssessing the True Potential of Emerging Markets 129Per-Capita Income as an Indicator of Market Potential 129Middle Class as an Indicator of Market Potential 130Risks and Challenges of Emerging Markets 131Strategies for Doing Business in Emerging Markets 132Customize Offerings to Unique Emerging Market Needs 132Partner with Family Conglomerates 133Target Governments in Emerging Markets 134Summary 134 Key Terms 135 Endnotes 135PART 3International Business Strategyand Implementation 137Chapter 8 Strategy and Organization in the International Firm 138Strategy in International Business 138EFFICIENCY 139FLEXIBILITY 139LEARNING 139Building the GJobal Firm 140Visionary Leadership 140Organizational Culture 141Organizational Processes 141The Distinction between Multidomestic and Global Industries 142The Integration-Responsiveness Framework 143Pressures for Global Integration 144Pressures for LocaJ.,Responsiveness 144Strategies Based on the Integration-Responsiveness Framework 145HOME REPLICATION STRATEGY 146MULTIDOMESTIC STRATEGY 146GLOBAL STRATEGY 146TRANSNATIONAL STRATEGY 147Organizational Structure 147Centralized or Decentralized Structure? 148Organizational Structures for International Operations 149Export Department 150International Division Structure 151Geographic Area Structure (Decentralized Structure) 151Product Structure (Centralized Structure) 152Functional Structure (Centralized Structure) 153Global Matrix Structure 154Summary 155 Key Terms 156 Endnotes156
ContentsChapter 9 Global Market Opportunity Assessment158Assessing Global Market Opportunities158Task One: Analyzing Organizational Readiness toInternationalize 161Task Two: Assessing the Suitability of Products and Services forForeign Markets 162Factors Contributing to Product Suitability for InternationalMarkets 163Key Issues to Resolve in Measuring Product Potential163Task Three: Screening Countries to Identify Target MarketsScreening Countries for Exporting164SCREENING METHODOLOGY FOR POTENTIAL COUNTRY MARKETSASSESSING THE EXPORT'POTENTIAL OF EMERGING MARKETSCountry Screening for Foreign Direct InvestmentCountry Screening for Sourcing164165165166167Task Four: Assessing Industry Market Potential168Practical Methods for Managers to Assess IndustryMarket Potential 169Data Sources for Estimating Industry Market PotentialTask Five: Choosing Foreign Business PartnersCriteria for Choosing a Partner169170171r Searching for Prospective Partners171Task Six: Estimating Company Sales PotentialDeterminants of Company Sales Potential172172Practical Approaches to Estimating Company Sales PotentialOTHER TECHNIQUES1.74 'ASSESSING THE MARKETIn Conclusion 175Summary 176 175Key Terms 176 Endnotes 177Chapter 10 Exporting and Countertrade 178An Overview of Foreign Market Entry StrategiesInternationalization of the Firm178181Diverse Motives for Pursuing InternationalizationCharacteristics of Firm InternationalizationExporting as a Foreign Market Entry StrategyExporting and the Global Economy183Exporting: A Popular Entry Strategy183Services Sector ExportsAdvantages of Exporting184185181183181173xi
xiiContentsLimitations of Exporting 185A Systematic Approach to Exporting186STEP ONE: ASSESS GLOBAL MARKET OPPORTUNITY186STEP TWO: ORGANIZE FOR EXPORTING 187STEP THREE: ACQUIRE NEEDED SKILLS AND COMPETENCIESSTEP FOUR: EXPORT MANAGEMENT 188Importing188188Managing Export-Import TransactionsDocumentation 189Shipping and Incoterms 189188Payment Methods in Exporting and Importing189CASH IN ADVANCE190LETTER OF CREDIT 191OPEN ACCOUNT 191Export-Import Financing 192Commercial Banks 192Factoring, Forfaiting, and Confirming 192Distribution Channel Intermediaries 193Buyers and Suppliers 193Intracorporate Financing 193Government Assistance Programs 193Multilateral Development Banks 194Identifying and Working with Foreign IntermediariesWorking with Foreign Intermediaries 194When Intermediary Relations Go Bad 195194Countertrade: A Popular Approach for Emerging Marketsand Developing Economies 197Magnitude and Drivers of Countertrade 197Types of Countertrade197Risks of Countertrade 198Why Consider Countertrade? 198Summary 199 Key Terms 200 Endnotes 200Chapter 11 Foreign Direct Investment and Collaborative VenturesInternational Investment and Collaboration 201Trends in FDI and Collaborative Ventures 202Motives for FDI and Collaborative VenturesMarket-Seeking Motives 202Resource or Asset-Seeking Motives 203Efficiency-Seeking Motives 204202201
ContentsCharacteristics of Foreign Direct Investment 204Key Features of Foreign Direct Investment 205Corporate Social Responsibility and FDI 205Most Active Firms in FDI 206Service Firms and FDI 207Leading Destinations for FDI 207Factors to Consider in Choosing FDI Locations 208Types of Foreign Direct Investment 209Greenfield Investment versus Mergers and Acquisitions 209The Nature of Ownership in FDI 209Vertical versus Horizontal Integration 210International Collaborative Ventures 210Equity Joint Ventures 211Project-Based Nonequity Ventures 211Differences between Equity and Project-Based NonequityVentures 211Consortium 211Cross-Licensing Agreements 212Managing Collaborative Ventures 212Understand Potential Risks in Collaboration 213- Pursue a Systematic Process for Partnering 213Ensure Success with Collaborative Ventures 213The Experience of Retailers in Foreign Markets 215Challenges of International Retailing 216International Retailing Success Factors 216Summary 217 Key Terms 217 Endnotes 218Chapter 12 Licensing, Franchising, and Other Contractual StrategiesContractual Entry Strategies221Unique Aspects of Contractual Relationships 221Types of Intellectual Property 222Licensing as an Entry Strategy 223Trademark and Copyright Licensing 223Know-How Licensing 224The World's Top Licensing Firms 224Advantages and Disadvantages of LicensingAdvantages of Licensing 225Disadvantages of Licensing 226225220xiii
xivContentsFranchising as an Entry Strategy 227Who Are the Top Global Franchisors? 228Advantages and Disadvantages of Franchising229The Franchisor Perspective 229The Franchisee Perspective 230Managerial Guidelines for Licensing and Franchising 230Other Contractual Entry Strategies 231Turnkey Contracting 231Build-Operate-Transfer Arrangements (BOT) 232Management Contracts 232Leasing 232The Special Case of Internationalization by ProfessionalService Firms 233Guidelines for Protecting Intellectual PropertySummary235Chapter 13 Global Sourcing Key Terms235 233Endnotes236238Outsourcing, Global Sourcing, and OffshoringDecision 1: Outsource or Not? 239239Decision 2: Where in the World Should Value-Adding ActivitiesBe Located? 239Global Sourcing 240Offshoring242Scope of Global Sourcing 243Diversity of Countries that Initiate and ReceiveOutsourced Work 243Strategic Choices in Global Sourcing 245Benefits of Global Sourcing 246Cost Efficiency 246Ability to Achieve Strategic Goals 247Risks of Global Sourcing 248Strategies for Minimizing the Risks of Global SourcingImplementing Global Sourcing through Supply-ChainManagement 250Information and Communications Technology 251Logistics and TransportationTransportation Modes 252252249
ContentsGlobal Sourcing and Corporate Social Responsibility 253Potential Harm to Local and National Economy from GlobalSourcing 253Public Policy on Global Sourcing 253Summary 254 Key Terms 255 Endnotes 255Chapter 14 Marketing in the Global Firm 257Global Marketing Strategy 257Targeting Customer Segments and Positioning 258Standardization and Adaptation of InternationalMarketing 259Standardization 260Adaptation 261Standardization and Adaptation: A Balancing Act 262Global Branding and Product Development 263Global Branding 263Global Product Development 264International Pricing 265Factors That Affect International Pricing 265A Framework for Setting International Prices 267Managing International Price Escalation 268Managing Pricing under Varying Currency Conditions 269Transfer Pricing 269Gray Market Activity (Parallel Imports) 271International MarketingCdmmunications 272International Advertising 272International Promotional Activities 273International Distribution 274Global Account Management 275Summary 275 Key Terms 276 Endnotes 276Chapter 15 Human Resource Management in the Global Firm278TheStrategic Role of Human Resources in InternationalBusiness 278Three Employee Categories 279Differences between Domestic and International HRM 279Key Tasks in International Human Resource Management 280XV
xviContentsInternational Staffing Policy 281Cultivating Global Mindsets 283Cultural Intelligence 284Expatriate Assignment Failure and Culture Shock 284Preparation and Training of International Employees 284Preparing Employees for Repatriation 285Charting Global Careers for Employees 286International Performance Appraisal 286Compensating Employees 287International Labor Relations 287Distinctive Features of Labor around the World 288Cost, Quality, and Productivity of Labor 289Workforce Reduction 289Trends in International Labor 289Firm Strategy in International Labor Relations 290Diversity in the International Workforce 290Success Strategies for Women Managers in InternationalBusiness 291Summary 292 Key Terms 292 Endnotes 293Glossary297Author Index307Subject Index310
Business S. Tamer Cavusgil Gary Knight John R. Riesenberger PEARSON . RESEARCH TO GATHER KNOWLEDGE AND INTELLIGENCE 99 CHOOSE THE MOST APPROPRIATE ENTRY STRATEGIES 99 . Centralized or Decentralized Structure? 148 Organizational Structures for International Operations 149
