GLOBAL BUSINESS 2e, Chapter 1: Globalizing Business
Chapter 1
GLOBALIZING BUSINESS
Learning Objectives
After studying this chapter, you should be able to:
1. explain the concepts of international business and global business.
2. give three reasons why it is important to study global business.
3. articulate one fundamental question and two core perspectives in the study of
global business.
4. identify three ways of understanding what globalization is.
5. state the size of the global economy and its broad trends and understand your
likely bias in the globalization debate.
General Teaching Suggestions
Begin with motivation: help students see how the course relates to them regardless of
whether they are convinced that they will never be involved in international business.
(That should be challenged by pointing out that even if they work for a company that
only does business in the local area that company could be acquired by an overseas based
firm, that if they work for a local government that they might eventually need to work
with overseas controlled contractors and firms that serve that government entity, etc.)
Help them to see applications to the goods and services they buy and the nation’s
economy. Suggestion: break the class up into groups that are given the task of showing
the relevance of the course in a variety of situations.
Opening Case Discussion Guide
Avon Fights Recession – One Lipstick at a Time provides a means of helping students to
see how an older form of doing business (direct selling) can adapt to changing
technologies and economic conditions in a global economy.
_______________________________________________________________________
CHAPTER OUTLINE: KEY CONCEPTS AND TERMS
Sections I through VI of Chapter 1
_______________________________________________________________________
I. WHAT IS GLOBAL BUSINESS?
1. Key Concept
IB is typically defined as (1) a business (firm) that engages in international
(cross-border) economic activities and (2) the action of doing business abroad.
Global business is defined in this book as business around the globe. This book
goes beyond competition in developed economies. It devotes extensive space to
competitive battles waged in emerging economies and the base of the global
economic pyramid.
2. Key Terms
Base of the pyramid is part of the view of the global economy as a pyramid. The
vast majority of humanity, about four billion people, lives at the base of this
pyramid making less than $2,000 a year.
© 2011 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be 1
different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
, GLOBAL BUSINESS 2e, Chapter 1: Globalizing Business
BRIC stands for Brazil, Russia, India, and China.
Emerging economies (emerging markets) are countries that are starting to
emerge as new players in the world economy.
Foreign direct investment (FDI) is direct investment in, control, and
management of value-added activities in other countries.
Global business is defined in this book as business around the globe. The
activities include both (1) international (cross-border) activities covered by
traditional IB books and (2) domestic business activities.
Gross domestic product (GDP) A nation’s total output of goods and services.
Gross National Income is GDP plus income from nonresident sources abroad.
International business (IB) is defined as (1) a business firm that engages in
international (cross border) economic activities and/or (2) the action of doing
business abroad.
Multinational enterprise (MNE) is defined as a firm that engages in foreign
direct investment by directly investing in, controlling, and managing value-
added activities in other countries.
Purchasing power parity (PPP) is an adjustment to reflect the differences in
cost of living in various countries.
Triad refers to the developed economies in the three regions that consist of
North America, Western Europe, and Japan.
II. WHY STUDY GLOBAL BUSINESS?
1. Key Concept
Reasons for reading this book and taking this course: to better compete in the
corporate world that will require global expertise and to enhance your
understanding of what is going on in the global economy.
2. Key Terms
Expatriate Manager (expat): A manager who works abroad, or ―expat‖ in
short.
Group of 20 (G-20): The group of 19 major countries plus the European Union
(EU) whose leaders meet on a biannual basis to solve global economic problems.
International premium: Managers who work abroad (expats) often command a
significant pay raise when working overseas.
III. A UNIFIED FRAMEWORK
1. Key Concept
Our most fundamental question is: What determines the success and failure of
firms around the globe? The two core perspectives are (1) the institution-based
view and (2) the resource-based view. We develop a unified framework by
organizing materials in every chapter according to the two perspectives guided by
the fundamental question.
2. Key Terms
Institution based view suggests that the success and failure are enabled and
constrained by institutions
Institutions are the structures that define the rules of the game
© 2011 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be 2
different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
, GLOBAL BUSINESS 2e, Chapter 1: Globalizing Business
Institutional framework is the formal and informal institutions that govern
individual and firm behavior in a country.
Liability of foreignness is the inherent disadvantage that foreign firms
experience in host countries because of their nonnative status.
IV. WHAT IS GLOBALIZATION?
1. Key Concept
Some view globalization as a recent phenomenon, and others believe that it is a
one-directional evolution since the dawn of human history. We suggest that
globalization is best viewed as a process similar to the swing of a pendulum.
2. Key Terms
BRIC is a newly coined acronym for Brazil, Russia, India, and China.
Globalization can be viewed as a new force sweeping through the world in
recent times, a long-run historical evolution since the dawn of human history, and
a pendulum that swings from one extreme to another from time to time. The last
(pendulum) view suggests that globalization is the ―closer integration of the
countries and peoples of the world which has been brought about by the
enormous reduction of the costs of transportation and communication, and the
breaking down of artificial barriers to the flows of goods, services, capital,
knowledge, and (to a lesser extent) people across borders.‖
Risk management: The identification and assessment of risk and the preparation
to minimize the impact of high-risk unfortunate events.
Scenario planning: Planning for multiple high or low risk scenarios.
Semiglobalization avoids total isolation and total globalization and calls for
more than one-way for doing business around the globe.
V. GLOBAL BUSINESS AND GLOBALIZATION AT A CROSSROADS
1. Key Concept
MNEs, especially large ones from developed economies, are sizable economic
entities. Current and future business leaders need to be aware of their own
hidden proglobalization bias.
2. Key Term
Nongovernment organization (NGO) is a term that includes environmentalists,
human rights activists, and consumer groups.
VI. ORGANIZATION OF THE BOOK
1. Key Concepts
Part I is foundations. This part contains an overview of international business and
the two leading perspectives—institution- and resource-based views.
Part II covers tools. This involves trade, foreign investment, foreign exchange,
and global and regional integration.
Part III covers strategy. This includes strategy for small firms, ways to enter
foreign markets, management of competitive dynamics, alliances and
acquisitions, and strategizing, structuring, and learning.
© 2011 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be 3
different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
, GLOBAL BUSINESS 2e, Chapter 1: Globalizing Business
Part IV builds excellence in different functional areas. The areas include
marketing and supply chain, human resource management, corporate governance,
and corporate social responsibility.
_______________________________________________________________________
END-OF-CHAPTER GUIDE
*Review Question Answers
*Critical Discussion Question Answers
*Global Action
*Video Case
*Closing Case
REVIEW QUESTION ANSWERS
1. What is the traditional definition of IB? How is global business defined in this
book?
International business (IB) is defined as (1) a business firm that engages in
international (cross border) economic activities and/or (2) the action of doing
business abroad.
Global business is defined in this book as business around the globe. The
activities include both (1) international (cross-border) activities covered by
traditional IB books and (2) domestic business activities, particularly strategizing
to compete with foreign businesses moving into a firm’s own domestic territory.
2. Discuss the importance of emerging economies in the global economy? Use
current news.
Emerging economies already command a significant part of global GDP.
However, the improving economies of some countries are not keeping pace with
their expanding populations. Current news examples will vary.
3. What is your interest in studying global business? How do you think it may apply
to your future?
The important thing is not so much the answer as the extent to which the student
demonstrates thought in providing the answer. Students should mention that it
will help to prepare them to work in a global business, perhaps even as an expat.
4. If you were to work as an expatriate manager, where would you like to go and
what would you like to do? Why?
Expatriate Manager (expat) is a manager who works abroad. The important thing
is not so much the answer as the demonstration of thought.
5. How would you describe an institution-based view of global business?
Institutions are the “rules of the game.” Doing business around the globe
requires intimate knowledge about the formal and informal rules governing
competition in various countries.
6. How would you describe a resource-based view of global business?
© 2011 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be 4
different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 1
GLOBALIZING BUSINESS
Learning Objectives
After studying this chapter, you should be able to:
1. explain the concepts of international business and global business.
2. give three reasons why it is important to study global business.
3. articulate one fundamental question and two core perspectives in the study of
global business.
4. identify three ways of understanding what globalization is.
5. state the size of the global economy and its broad trends and understand your
likely bias in the globalization debate.
General Teaching Suggestions
Begin with motivation: help students see how the course relates to them regardless of
whether they are convinced that they will never be involved in international business.
(That should be challenged by pointing out that even if they work for a company that
only does business in the local area that company could be acquired by an overseas based
firm, that if they work for a local government that they might eventually need to work
with overseas controlled contractors and firms that serve that government entity, etc.)
Help them to see applications to the goods and services they buy and the nation’s
economy. Suggestion: break the class up into groups that are given the task of showing
the relevance of the course in a variety of situations.
Opening Case Discussion Guide
Avon Fights Recession – One Lipstick at a Time provides a means of helping students to
see how an older form of doing business (direct selling) can adapt to changing
technologies and economic conditions in a global economy.
_______________________________________________________________________
CHAPTER OUTLINE: KEY CONCEPTS AND TERMS
Sections I through VI of Chapter 1
_______________________________________________________________________
I. WHAT IS GLOBAL BUSINESS?
1. Key Concept
IB is typically defined as (1) a business (firm) that engages in international
(cross-border) economic activities and (2) the action of doing business abroad.
Global business is defined in this book as business around the globe. This book
goes beyond competition in developed economies. It devotes extensive space to
competitive battles waged in emerging economies and the base of the global
economic pyramid.
2. Key Terms
Base of the pyramid is part of the view of the global economy as a pyramid. The
vast majority of humanity, about four billion people, lives at the base of this
pyramid making less than $2,000 a year.
© 2011 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be 1
different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
, GLOBAL BUSINESS 2e, Chapter 1: Globalizing Business
BRIC stands for Brazil, Russia, India, and China.
Emerging economies (emerging markets) are countries that are starting to
emerge as new players in the world economy.
Foreign direct investment (FDI) is direct investment in, control, and
management of value-added activities in other countries.
Global business is defined in this book as business around the globe. The
activities include both (1) international (cross-border) activities covered by
traditional IB books and (2) domestic business activities.
Gross domestic product (GDP) A nation’s total output of goods and services.
Gross National Income is GDP plus income from nonresident sources abroad.
International business (IB) is defined as (1) a business firm that engages in
international (cross border) economic activities and/or (2) the action of doing
business abroad.
Multinational enterprise (MNE) is defined as a firm that engages in foreign
direct investment by directly investing in, controlling, and managing value-
added activities in other countries.
Purchasing power parity (PPP) is an adjustment to reflect the differences in
cost of living in various countries.
Triad refers to the developed economies in the three regions that consist of
North America, Western Europe, and Japan.
II. WHY STUDY GLOBAL BUSINESS?
1. Key Concept
Reasons for reading this book and taking this course: to better compete in the
corporate world that will require global expertise and to enhance your
understanding of what is going on in the global economy.
2. Key Terms
Expatriate Manager (expat): A manager who works abroad, or ―expat‖ in
short.
Group of 20 (G-20): The group of 19 major countries plus the European Union
(EU) whose leaders meet on a biannual basis to solve global economic problems.
International premium: Managers who work abroad (expats) often command a
significant pay raise when working overseas.
III. A UNIFIED FRAMEWORK
1. Key Concept
Our most fundamental question is: What determines the success and failure of
firms around the globe? The two core perspectives are (1) the institution-based
view and (2) the resource-based view. We develop a unified framework by
organizing materials in every chapter according to the two perspectives guided by
the fundamental question.
2. Key Terms
Institution based view suggests that the success and failure are enabled and
constrained by institutions
Institutions are the structures that define the rules of the game
© 2011 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be 2
different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
, GLOBAL BUSINESS 2e, Chapter 1: Globalizing Business
Institutional framework is the formal and informal institutions that govern
individual and firm behavior in a country.
Liability of foreignness is the inherent disadvantage that foreign firms
experience in host countries because of their nonnative status.
IV. WHAT IS GLOBALIZATION?
1. Key Concept
Some view globalization as a recent phenomenon, and others believe that it is a
one-directional evolution since the dawn of human history. We suggest that
globalization is best viewed as a process similar to the swing of a pendulum.
2. Key Terms
BRIC is a newly coined acronym for Brazil, Russia, India, and China.
Globalization can be viewed as a new force sweeping through the world in
recent times, a long-run historical evolution since the dawn of human history, and
a pendulum that swings from one extreme to another from time to time. The last
(pendulum) view suggests that globalization is the ―closer integration of the
countries and peoples of the world which has been brought about by the
enormous reduction of the costs of transportation and communication, and the
breaking down of artificial barriers to the flows of goods, services, capital,
knowledge, and (to a lesser extent) people across borders.‖
Risk management: The identification and assessment of risk and the preparation
to minimize the impact of high-risk unfortunate events.
Scenario planning: Planning for multiple high or low risk scenarios.
Semiglobalization avoids total isolation and total globalization and calls for
more than one-way for doing business around the globe.
V. GLOBAL BUSINESS AND GLOBALIZATION AT A CROSSROADS
1. Key Concept
MNEs, especially large ones from developed economies, are sizable economic
entities. Current and future business leaders need to be aware of their own
hidden proglobalization bias.
2. Key Term
Nongovernment organization (NGO) is a term that includes environmentalists,
human rights activists, and consumer groups.
VI. ORGANIZATION OF THE BOOK
1. Key Concepts
Part I is foundations. This part contains an overview of international business and
the two leading perspectives—institution- and resource-based views.
Part II covers tools. This involves trade, foreign investment, foreign exchange,
and global and regional integration.
Part III covers strategy. This includes strategy for small firms, ways to enter
foreign markets, management of competitive dynamics, alliances and
acquisitions, and strategizing, structuring, and learning.
© 2011 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be 3
different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
, GLOBAL BUSINESS 2e, Chapter 1: Globalizing Business
Part IV builds excellence in different functional areas. The areas include
marketing and supply chain, human resource management, corporate governance,
and corporate social responsibility.
_______________________________________________________________________
END-OF-CHAPTER GUIDE
*Review Question Answers
*Critical Discussion Question Answers
*Global Action
*Video Case
*Closing Case
REVIEW QUESTION ANSWERS
1. What is the traditional definition of IB? How is global business defined in this
book?
International business (IB) is defined as (1) a business firm that engages in
international (cross border) economic activities and/or (2) the action of doing
business abroad.
Global business is defined in this book as business around the globe. The
activities include both (1) international (cross-border) activities covered by
traditional IB books and (2) domestic business activities, particularly strategizing
to compete with foreign businesses moving into a firm’s own domestic territory.
2. Discuss the importance of emerging economies in the global economy? Use
current news.
Emerging economies already command a significant part of global GDP.
However, the improving economies of some countries are not keeping pace with
their expanding populations. Current news examples will vary.
3. What is your interest in studying global business? How do you think it may apply
to your future?
The important thing is not so much the answer as the extent to which the student
demonstrates thought in providing the answer. Students should mention that it
will help to prepare them to work in a global business, perhaps even as an expat.
4. If you were to work as an expatriate manager, where would you like to go and
what would you like to do? Why?
Expatriate Manager (expat) is a manager who works abroad. The important thing
is not so much the answer as the demonstration of thought.
5. How would you describe an institution-based view of global business?
Institutions are the “rules of the game.” Doing business around the globe
requires intimate knowledge about the formal and informal rules governing
competition in various countries.
6. How would you describe a resource-based view of global business?
© 2011 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be 4
different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
