Discussion Question – Module 04: Cultural Dimensions in Decision-Making

Brief Integrative Case 2.1

Page 243

Coca-Cola in India
Coca-Cola is a brand name known throughout the entire world. With
stagnant soft drink sales in markets like Europe and North America, CocaCola has aggressively looked to new, expanding markets to continue to grow
its brand. India, with 1.3 billion consumers, has been a primary target for
Coca-Cola; through acquisitions and clever marketing, the company now
covers 56 percent of India’s $2 billion soft drink market.1
Coca-Cola’s expansion in India has not been without minor setbacks,
however. In 2006–2007, Coca-Cola faced some difficult challenges in the
region of Kerala, India, after it was accused of using water that contained
pesticides in its bottling plants. An environmental group, the Center for
Science and Environment (CSE), found 57 bottles of Coke and Pepsi
products from 12 Indian states that contained unsafe levels of pesticides.2
The Kerala minister of health, R. Ashok, imposed a ban on the manufacture
and sale of Coca-Cola products in the region. Coca-Cola then arranged to
have its drinks tested in a British lab, and the report found that the amount of
pesticides found in Pepsi and Coca-Cola drinks was harmless to the body.3
Coca-Cola then ran numerous ads to regain consumers’ confidence in its
products and brand. However, these efforts did not satisfy the environmental
groups or the minister of health.

India’s Changing Marketplace

During the 1960s and 1970s, India’s economy faced many challenges,
growing only an average of 3–3.5 percent per year. Numerous obstacles
hindered foreign companies from investing in India, and many restrictions on
economic activity caused huge difficulties for Indian firms and a lack of
interest among foreign investors. For many years the government had
problems implementing reform and overcoming bureaucratic and political
divisions. Business activity has traditionally been undervalued in India;
leisure is typically given more value than work. Stemming from India’s
colonial legacy, Indians are highly suspicious of foreign investors. Indeed,
there have been a few well-publicized disputes between the Indian
government and foreign investors.4
Over the last three decades, however, many Western companies are
finding an easier time doing business in India.5 In 1991, political conditions
had changed, many restrictions were eased, and economic reforms came into
force. With more than 1 billion consumers, India has become an increasingly
attractive market.6 In the 15 years from 2003–2018, foreign investment
expanded from US$3 billion to US$38 billion. Imported goods have become
a status symbol for the burgeoning middle class.7,8
Coca-Cola has been targeting India for potential growth, as Indians
consume an average of 12 eight-ounce beverages per year. In comparison,
Brazil consumers drink roughly 240 beverages per year on average. Despite
the relatively low amount of beverages consumed by India on average, India
has been one of Coke’s best emerging market plays. In 2018, a quarter of
Coca-Cola’s sales growth came from India, and in 2019, India surpassed
Japan as Coca-Cola’s fifth largest market.9,10 Coca-Cola is currently
investing US$5 billion to boost its infrastructure within the country, aiming
to increase both revenue and volume in India in the coming years.11
In 2018, FDI in India stood at US$38 billion, compared to US$32
billion in China.12 A 2018 study by the Center for International Development

(CID) at Harvard University found that India will likely maintain its status as
the fastest growing economy for the next decade.13
India’s GDP grew at the impressive average annual rate of 8.5 percent
during the six years spanning 2003–2008. Even the global financial crisis,
which began in September 2008, only cut the rate of growth by 2–3
percentage points, and the economy has continued to grow at the annual rate
of 6–8 percent in the decade since.14,15

Coca-Cola and Other Soft Drink Investment in India
Coca-Cola had experienced previous confrontations with the Indian
government. In 1977, Coke had pulled out of India when the government
demanded its secret formula.16
Circumstances have dramatically improved over the years for soft drink
providers of India. Coke and Pepsi have invested nearly US$2 billion in
India over the years. They employ about 12,500 people directly and support
200,000 indirectly through their purchases of sugar, packaging material, and
shipping services. Coke is India’s number-one consumer of mango pulp for
its local soft drink offerings.17 Coca-Cola in India is also the largest domestic
buyer of sugar and green coffee beans.18 From 1994 to 2003, Coca-Cola
sales in India more than doubled.
In 2008–2009 Coca-Cola announced its plans to invest more than $250
million in India over the next three years. The money would be used for
everything from expanding bottling capacity to buying delivery trucks and
refrigerators for small retailers. The new money meant around a 20 Page 244
percent increase in the total Coca-Cola has invested in India.19
Coca-Cola’s sales in India climbed 31 percent in the three months ended
March 31, 2009, compared to a year earlier. That’s the highest volume
growth of any of Coke’s markets.20

Furthermore, Coca-Cola announced plans in 2012 to invest upwards of
US$5 billion in India, marking a 150 percent increase over the announced
plans from 2011 to invest up to US$2 billion in India over the next five
years. In 2017, Coca-Cola invested an additional US$1.7 billion to improve
agricultural infrastructure in the country.21 Putting these investments in
perspective, Coca-Cola invested a total of just over US$2 billion in its India
operations from 1990 to 2010. Despite the large investment in India, CocaCola will see serious competition from Pepsi in this market. Together Coke
and Pepsi make up 97 percent of the market for carbonated soft drinks in
India. Coke accounted for 60 percent of all sales while Pepsi received 37
percent of the market share.22
Royal Crown Cola (RC Cola) is the world’s third largest brand of soft
drinks. The brand was purchased in 2001 by Cott Beverages and entered the
Indian market in 2003. For production in India, the company hired three
licensing and franchising bottlers. In order to ensure that it was not
associated with the pesticide accusations against Pepsi and Coke, RC Cola
immediately had its groundwater tested by the testing institute SGS India Pvt
Ltd.23

The Charges against Coke
The pesticide issue began in 2002 in Plachimada, India. Villagers thought
that water levels had sunk and the drinking water was contaminated by
Coke’s plant. They launched a vigil at the plant, and two years later, Coke’s
license was canceled. Coca-Cola’s most recent pesticide issue began at a
bottling plant in Mehdiganj. The plant was accused of exploiting the
groundwater and polluting it with toxic metals.24 Karnataka R. Ashok, the
health minister of Kerala, India, banned the sale of all Coca-Cola and
PepsiCo products, claiming that the drinks contained unsafe levels of
pesticides.

The alleged contamination of the water launched a debate on everything
from pesticide-polluted water to the Indian middle-class’s addiction to
unhealthy, processed foods. “It’s wonderful,” said Sunita Narin, director of
CSE. “Pepsi and Coke are doing our work for us. Now the whole nation
knows that there is a pesticide problem.”25
Coca-Cola fought back against the accusations. “No Indian soft drink
makers have been tested for similar violations even though pesticides could
be in their products such as milk and bottled teas. If pesticides are in the
groundwater, why isn’t anyone else being tested? We are continuously being
challenged because of who we are,” said Atul Singh, CEO of Coca-Cola
India.26
Some believe that Coca-Cola was targeted to bring the subject of
pesticides in consumer products to light. “If you target multinational
corporations, you get more publicity,” adds Arvind Kumar, a researcher at
the watchdog group Toxic Links. “Pesticides are in everything in India.”27

India’s Response to the Allegations
After CSE’s discovery of the unsafe levels of pesticides,28 some suggested
the high levels of pesticides came from sugar, which is 10 percent of the soft
drink content. However, laboratories found the sugar samples to be pesticide
free.29
Kerala is run by a communist government and a chief minister who still
claims to have a revolutionary objection to the evils of capitalism.30
Defenders of Coca-Cola claim that this is a large reason for the pesticide
findings in Coca-Cola products. After the ban was placed on all Coca-Cola
and PepsiCo products in the region of Kerala, Coca-Cola took its case to the
state court to defend its products and name. The court said that the state
government had no jurisdiction to impose a ban on the manufacture and sale
of products.31 Kerala then lifted the statewide ban on Coke products.32

In March 2010, after several years of tense battles, the Indian unit of
Coca-Cola Company was asked to pay $47 million in compensation for
causing environmental damage at its bottling plant in the southern Indian
state of Kerala. A state government panel said Coca-Cola’s subsidiary,
Hindustan Coca-Cola Beverages Pvt Ltd (HCBPL), was responsible for
depleting groundwater and dumping toxic waste around its Palakkad plant
between 1999 and 2004. Protests by farmers, complaining about the alleged
pollution, forced Coca-Cola to close down the plant in 2005. Coca-Cola
responded that HCBPL was not responsible for pollution in Palakkad, but the
final decision on the compensation will be taken by the state government.33

Pepsi’s Experience in India
PepsiCo has had an equally noticeable presence in India, and it is not
surprising that the company has weathered the same storms as its rival CocaCola. In addition to claims of excessive water use, a CSE pesticide study,
performed in August 2006, accused Pepsi of having 30 times the “unofficial”
pesticide limit in its beverages (Coke was claimed to be 27 times the limit in
this study).34 These findings, coupled with the original 2003 CSE study that
first tarnished the cola companies’ image, have prompted numerous
consumers to stop their cola consumption. Some have even taken to the
streets, burning pictures of Pepsi bottles in protest.
Indra Nooyi, CEO of PepsiCo Inc. and a native of India, is all too
familiar with the issues of water contamination and water shortages. Yet, in
light of the recent claims made against Pepsi, she has expressed frustration
with the exaggerated CSE findings (local tea and coffee have thousands of
times the alleged pesticide level found in Pepsi products) and the
disproportionate reaction to Pepsi’s water-use practices (pointing out that soft
drinks and bottled water account for less than 0.04 percent of industrial water
usage in India).35

In order to reaffirm the safety and popularity of its products, Page 245
Pepsi has taken on a celebrity-studded ad campaign across India, as well as
continued its legacy of corporate social responsibility (CSR). Some of
Pepsi’s CSR efforts have involved digging village wells, “harvesting”
rainwater, and teaching better techniques for growing rice and tomatoes.36
Pepsi has also initiated efforts to reduce water waste at its Indian facilities.
Although Pepsi sales are back on the rise, Nooyi realizes that she should
have acted sooner to counteract CSE’s claims about Pepsi products. From
here on out, the company must be more attentive to its water-use practices;
but Nooyi also notes, “We have to invest, too, in educating communities in
how to farm better, collect water, and then work with industry to retrofit
plants and recycle.”37

Coke’s Social Responsibility Commitments
Coca-Cola has recently employed The Energy and Resources Institute
(TERI) to assess its operations in India. The investigations have been
conducted because of claims that Coca-Cola has engaged in unethical
production practices in India. These alleged practices include causing severe
water shortages, locating water-extracting plants in “drought prone” areas,
further limiting water access by contaminating the surrounding land and
groundwater, and irresponsibly disposing of toxic waste. Colleges and
universities throughout the United States, U.K., and Canada have joined in
holding the company accountable for its overseas business practices by
banning Coca-Cola products on their campuses until more positive results
are reported. However, critics have argued that TERI’s assessment would
undoubtedly be biased because the organization has been largely funded by
the Coca-Cola Company.38
Coca-Cola stands behind the safety of its products. “Multinational
corporations provide an easy target,” says Amulya Ganguli, a political

analyst in New Delhi. “These corporations are believed to be greedy, devoted
solely to profit, and uncaring about the health of the consumers.” There is
also a deeply rooted distrust of big business, and particularly foreign big
business, in India.39 This is a reminder that there will continue to be
obstacles, as there were in the past, to foreign investments in India.
In order to reaffirm their presence in India, Coke and Pepsi have run
separate ads insisting that their drinks are safe. Coke’s ad said, “Is there
anything safer for you to drink?” and invited Indians to visit its plants to see
how the beverage is made.40 Nevertheless, in July 2006, Coke reported a 12
percent decline in sales.41
Coca-Cola has undertaken various initiatives to improve the drinking
water conditions around the world. It has formally pledged support for the
United Nations Global Compact and co-founded the Global Water
Challenge, which improves water access and sanitation in countries in
critical need. It is improving energy efficiency through the use of
hydrofluorocarbon-free insulation for 98 percent of new refrigerator sales
and marketing equipment. Specifically, in India, Coke has stated, “More than
one-third of the total water that is used in operations is renewed and returned
to groundwater systems.”42 Among its first water renewal projects was
installation of 270 rainwater catching devices.43 Later, Coca-Cola expanded
the number of rainwater harvesting projects by partnering with the Central
Ground Water Authority (CGWA), State Ground Water Boards, schools,
colleges, NGOs, and local communities to combat water scarcity. According
to Coca-Cola India’s 2007–2008 Environment Report, the company was
actively engaged in 400 rainwater harvesting projects running across 17
states. These efforts were contributing to the company’s eventual target of
being a “net zero” user of groundwater, a goal that it achieved in 2009.44 See
Figure 1 for a timeline of Coca-Cola’s efforts in India.

Figure 1 A Timeline of Coca-Cola in Kerala, India

1977

Coca-Cola pulls out of India when the government demands
its secret formula.
1991
Restrictions are eased in India for easier international
business development.
1999
A report is published by the All-Indian Coordinated
Research Program stating that 20% of all Indian food
commodities exceed the maximum pesticide residue level
and 43% of milk exceeds the maximum residue levels of
DDT.
2002
Villagers in Plachimada, India, make the accusation that
Coke’s bottling plant is contaminating their drinking water.
2003
The Center for Science and Environment produces a study
that finds unsafe levels of pesticides in Coca-Cola products
in India.
January Parliament in India forms a Joint Parliamentary Committee
2004
to investigate the charges by the CSE.
March
A Coca-Cola bottling facility is shut down in Plachimada,
2004
India.
2004
Indian government announces new regulations for
carbonated soft drinks based on European Union standards.
2005
Coca-Cola co-founds the Global Water Challenge, develops
the Global Community-Watershed Partnership, and
establishes the Ethics and Compliance Committee.
August
The CSE produces another report finding 57 Coke and Pepsi
2006
products from 12 Indian states that contain unsafe pesticide
levels.
September India’s high court overturns the ban on the sale of Coke
2006
products in Kerala.
March
Indian unit of Coca-Cola Co. asked by state government to
2010
pay $47 million compensation for causing environmental
damage at its bottling plant in Kerala.
Having inspected its own water-use habits, Coca-Cola has vowed to
reduce the amount of water it uses in its bottling operations. As of Page 246

2018, Coca-Cola had reduced the amount of water needed to make one liter
of Coke to 1.92 liters (compared with 2.70 liters a decade before).45
At the June 2007 annual meeting of the World Wildlife Fund (WWF) in
Beijing, Coca-Cola announced its multi-year partnership with the
organization “to conserve and protect freshwater resources,” and in 2013, the
partnership was expanded to include new goals. E. Neville Isdell, chair and
CEO of the Coca-Cola Company, said, “Our goal is to replace every drop of
water we use in our beverages and their production. For us that means
reducing the amount of water used to produce our beverages, recycling water
used for manufacturing processes so it can be returned safely to the
environment, and replenishing water in communities and nature through
locally relevant projects.” Coca-Cola hopes to spread these practices to other
members of its supply chain, particularly the sugar cane industry. The CocaCola–WWF partnership is also focused on climate protection and protection
of seven of the world’s “most critical freshwater basins,” including the
Yangtze in China. Although Coca-Cola’s corporate social responsibility
efforts have included other projects with the WWF in the past, it hopes that
this official partnership will help achieve larger-scale results.46
As a part of its 2013 goals, Coca-Cola and the WWF committed to
achieve 100 percent replenishment of all water used, 75 percent recycling
rate in developing markets, 30 percent plant-based packaging by 2020, and
25 percent improvement to water efficiency by 2020.47 In addition to its joint
goals with the WWF, Coca-Cola also established its own set of
sustainability-related targets for 2020. These include tracking the carbon
footprint of its beverages, reducing waste in its packaging, tracking the
number of female entrepreneurs that it serves across its supply chain, and
ensuring that its suppliers comply with a variety of human rights standards.48
Coca-Cola has also established EthicsLine, which is a global web and
telephone information and reporting service that allows anyone to report

confidential information to a third party. Service is toll free—24 hours a day
—and translators are available. Coca-Cola is currently focusing on
improving standards through the global water challenge and enhancing
global packaging to make it more environmentally friendly. It is also
working on promoting nutrition and physical education by launching
programs throughout the world. For example, Coca-Cola India announced a
partnership with the Bharat Integrated Social Welfare Agency (BISWA) to
build awareness regarding micro-nutrient malnutrition (or “hidden hunger”)
in the “bottom of the socio-economic pyramid” population in India. The two
partners will work together to establish a successful income-generation
model for communities through self-help groups in Sambalpur in Odisha and
also provide them with affordable alternatives to alleviate “hidden hunger.”
The first product developed by Coca-Cola India to address the issue of
“hidden hunger” is Vitingo, a tasty, affordable, and refreshing orangeflavored beverage fortified with micro-nutrients.
By 2020, the Coca-Cola Company will have invested over US$8 billion
in India, making it one of India’s top international investors. Almost all the
goods and services required to produce and market Coca-Cola are made in
India. The Coca-Cola Company directly employs approximately 25,000 local
people in India; and indirectly, its business in India creates employment for
more than 150,000 people.49 Hindustan Coca-Cola Beverages Pvt Ltd
operates 24 bottling plants, some of which are located in economically
underdeveloped areas of the country. The Coca-Cola system also includes 13
franchise-operated plants.50

Lessons Learned
Yet Coca-Cola was caught off guard by its experience in India. Coke did not
fully appreciate how quickly local politicians would attack Coke in light of
the test results, nor did it respond quickly enough to the anxieties of its

consumers. The company failed to realize how fast news travels in modern
India. India represents only about 1 percent of Coca-Cola’s global volume,
but it is central to the company’s long-term growth strategy. The company
needed to take action fast.51
In what Coke thought to be a respectful and immediate time frame, it
formed committees in India and the United States. The committees worked
on rebuttals and had their own labs commission the tests, and then they
commented in detail. Coke also directed reporters to Internet blogs full of
entries that were pro-Coke. Critics say that Coke focused too much on the
charges instead of winning back the support of its customers. “Here people
interpret silence as guilt,” said Mr. Seth, Coke’s Indian public relations
expert.
Ms. Bjorhus, the Coke communications director, said she could now see
how the environmental group had picked Coca-Cola as a way of attracting
attention to the broader problem of pesticide contamination in Indian food
products. Coca-Cola stands behind its products as being pesticide free. It is
now up to the Indian consumer to decide the success of Coca-Cola in future
years.
Nevertheless, Coca-Cola has been optimistic about its future in India.
While India was still among the countries with the lowest per capita
consumption of Coke, in 2018 it was the fastest-growing region for the
company. Twenty-five percent of Coca-Cola’s growth in sales in 2018 was
attributed to India, while sales in its more established markets like the United
States and Mexico remained flat.

The Global Water Challenge
A decade ago in 2007, one out of every five people globally lacked access to
clean drinking water.52 In August 2006, an international conference was held
in Stockholm, Sweden, to discuss global water issues. A UN study reported

Module 04: Cultural Dimensions in Decision-Making
Discussion Question
Question Requirements:
This week’s discussion will focus on cultural decision-making. Read the case study about Coca-Cola
in India (please see attached).
A case study is a puzzle to be solved, so before reading and answering the specific questions,
develop your proposed solution by following these five steps:
•

Read the case study to identify the key issues and underlying issues. These issues are the
principles and concepts of the course module, which apply to the situation described in the
case study.

•

Record the facts from the case study which are relevant to the principles and concepts of the
module. The case may have extraneous information not relevant to the current module. Your
ability to differentiate between relevant and irrelevant information is an important aspect of
case analysis, as it will inform the focus of your answers.

1. Discuss the cultural differences between the U.S. company Coca- Cola and the country of
India?
2. Did cultural differences impact the decisions in the situation or solution? Provide examples.
3. Discuss how MNEs demonstrate their commitment to working with different countries like
Saudi Arabia and respecting the cultural and natural environments of the country?
Directions:
• Discuss the concepts, principles, and theories from your textbook. Cite your textbooks and cite
any other sources.
• Write a discussion that includes an introduction paragraph, the body, and a conclusion
paragraph to address the assignment’s guide questions.
• Your initial post should address all components of the question with a 600-word limit.

Readings
Required:
Chapter 1 Globalization and International Linkages in International Management: Culture, Strategy,
and Behavior
Chapter 1 PowerPoint slides in International Management: Culture, Strategy, and Behavior
Harvey, M., Fisher, R., McPhail, R., & Moeller, M. (2009). Globalization and its impact on global
managers’ decision processes. Human Resource Development International, 12(4), 353–370.
Recommended:
Neil, E., & Sprusansky, D. (2017). A look at Saudi Arabia Vision 2030. (WAGING
PEACE). Washington Report on Middle East Affairs, 36(1), 53-54.
Nurunnabi, M. (2017). Transformation from an oil-based economy to a knowledge-based economy in
Saudi Arabia: the direction of Saudi vision 2030.(Report). Journal of the Knowledge Economy, 8(2),
536.

International Management
Culture, Strategy, and
Behavior

Eleventh Edition

Fred Luthans
University of Nebraska–
Lincoln

Jonathan P. Doh
Villanova University

Page i

Page ii

INTERNATIONAL MANAGEMENT
Published by McGraw-Hill Education, 2 Penn Plaza, New York, NY 10121. Copyright © 2021 by
McGraw-Hill Education. All rights reserved. Printed in the United States of America. No part of this
publication may be reproduced or distributed in any form or by any means, or stored in a database or
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limited to, in any network or other electronic storage or transmission, or broadcast for distance
learning.
Some ancillaries, including electronic and print components, may not be available to customers
outside the United States.
This book is printed on acid-free paper.
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ISBN 978-1-260-57053-3
MHID 1-260-57053-3
Cover Image: Nawi Cove, Sydney, Australia: Leonid Andronov/Shutterstock; hands with city and
globe: Jacob_09/Shutterstock; businesspeople: Robert Kneschke/Shutterstock
All credits appearing on page or at the end of the book are considered to be an extension of the
copyright page.
The Internet addresses listed in the text were accurate at the time of publication. The inclusion of a
website does not indicate an endorsement by the authors or McGraw-Hill Education, and McGrawHill Education does not guarantee the accuracy of the information presented at these sites.
mheducation.com/highered

Page iii

Dedicated in Memory of
Rafael Lucea,
A Passionate Advocate for Global Business Education
and Experience

Preface

Page v

global business environment in recent years has been characterized by
Thesubstantial
and often unforeseen change. By some accounts, the degree
of uncertainty and volatility in global political and economic affairs has
increased as several long-term trends have come to a halt or, in some cases,
reversed. Political conflicts, economic disruptions, and realignment of
security arrangements have all created challenges for global business.
Around the world, support for global economic integration and engagement
appears to be on the decline. The vote by the United Kingdom to separate
from the European Union and the withdrawal of the United States from the
Trans-Pacific Partnership, a proposed trade agreement among 12 Pacificfacing nations, are two stark examples of this broad trend. Some see the
United States as retreating from its long-held position as the leading
advocate of trade and economic interdependence. Further, trade tensions
have risen not just between the U.S. and China, two world powers
jockeying for global leadership, but also between the U.S. and its key allies,
such as the European Union and Canada. Concurrently, nationalist
sentiments in the United States, Europe, Asia, and elsewhere have resulted
in raised barriers to both legal and illegal immigration. Exacerbating these
pressures, longstanding concerns about the uneven impacts of globalization
on jobs, wages, and incomes have resurfaced, as have broader questions
about the costs of economic globalization to both developed and developing
countries and their citizens.
At the same time, however, trade and investment agreements continue
to operate, and new economic arrangements are implemented. Businesses,

professionals, and citizens continue to engage in global commerce,
investment, and people-to-people exchanges. Rapid advances in social
media have not only accelerated globalization but also called into question
issues of privacy, security, and access to private information (see opening
articles in Chapters 1 and 2). In addition, concerns about climate change
and other environmental issues have prompted companies, in conjunction
with governments and nongovernmental organizations, to consider alternate
approaches to business and governance (see Chapter 3 opening article).
Some of these developments have challenged longstanding beliefs
about the power and benefits of globalization and economic integration, but
they also underscore the interconnected nature of global economies.
Although many countries and regions around the world are closely linked,
important differences in institutional and cultural environments persist, and
some of these differences have become even more pronounced in recent
years. The challenges for international management reflect this dynamism
and the increasing unpredictability of global economic and political events.
Continued growth of the emerging markets is reshaping the global balance
of economic power, even though differences exist between and among
regions and countries. Although many emerging markets continued to
experience growth during a period when developed countries’ economies
stagnated or declined, others, like Russia and Brazil, have faced major setbacks. Further, some developed economies, such as Greece, Italy, Spain,
and Portugal, are finally emerging from the formidable challenges of the
European debt crisis that began over a decade ago.
The global political and security environment remains unpredictable
and volatile, with ongoing conflicts in the Middle East and Africa. The
Syrian civil war has resulted in mass migration—and broad dislocations—
across North Africa and Europe (see Chapters 1 and 2 for further

discussion). Additionally, allegations of Russian interference in domestic
affairs—including major elections—in Europe and the United States have
escalated tensions. On the economic front, the global trade and integration
agenda seems stalled, largely due to domestic political pressures and Page vi
increased protectionism in Europe and North America. Examples
include the United States’ threat to withdraw from—and subsequent
renegotiation—of the NAFTA (now called the United States-MexicoCanada Agreement), the application of tariffs on a range of imports from
China and elsewhere in 2018 and 2019, and the previously mentioned
withdrawal of the United States from the Trans-Pacific Partnership.
As mentioned, the advent of social networking has transformed the
way citizens interact; how businesses market, promote, and distribute their
products globally; and how civil society expresses its concerns that
governments provide greater freedoms and accountability. Concurrently,
companies, individuals, and even students can now engage in broad “mass”
collaboration through digital, online technology for the development of new
and innovative systems, products, and ideas. Both social networking and
mass collaboration bring new power and influence to individuals across
borders and transform the nature of their relationships with global
organizations. Although globalization and technology continue to link
nations, businesses, and individuals, these linkages also highlight the
importance of understanding different cultures, national systems, and
corporate management practices around the world. The world is now
interconnected geographically, but also electronically and psychologically;
as such, nearly all businesses have been touched in some way by
globalization. Yet, as cultural, political, and economic differences persist,
astute international managers must be in a position to adapt and adjust to
the vagaries of different contexts and environments.

In this new, eleventh edition of International Management, we have
retained the strong and effective foundations gained from research and
practice over the past decades while incorporating the important latest
research and contemporary insights that have changed the context and
environment for international management. Several trends have emerged
that pose both challenges and opportunities for international managers.
First, more nationalistically oriented politicians have gained power in
many regions of the world, including in the United States, Brazil, and the
Philippines and across Europe, especially the Central European economies
of Poland, Hungary, and the Czech Republic. These leaders and their
governments are challenging previous assumptions about the benefits and
inevitability of globalization and integration. The looming exit of the
United Kingdom from the European Union and the implementation of
tariffs by the United States have complicated international trade for
multinational corporations. Second, while emerging markets remain vitally
important to global growth, many of these economies have slowed in the
past few years. China’s economic growth has significantly decelerated as it
has matured. In South America, Brazil continues to recover from a deep
recession, and Argentina has battled accelerating inflation. Third, the
development of new technology, such as artificial intelligence and robotics,
will result in fundamental changes to the global job market. Fourth,
increasing electronic connectivity in developing countries will continue to
help accelerate those economies and facilitate international business of all
sorts. However, barriers and limitations imposed by governments could
threaten this progress.
Although we have extensive new, evidence-based material in this
edition, we continue to strive to make the book even more user-friendly and
applicable to practice. We continue to take a balanced approach in the

eleventh edition of International Management: Culture, Strategy, and
Behavior. While other texts stress culture, strategy, or behavior, our
emphasis on all three critical dimensions—and the interactions among them
—has been a primary reason the previous editions have been the marketleading international management text. Specifically, this edition has the
following chapter distribution: environment (three chapters), culture (four
chapters), strategy (four chapters), and organizational behavior/human
resource management (three chapters). Because the context of international
management changes rapidly, all the chapters have been updated and
improved. New real-world examples and research results are integrated
throughout the book, accentuating the experiential relevance of the
straightforward content. As always, we emphasize a balance of research and
application.
For the new, eleventh edition, we have incorporated important Page vii
new content in the areas of the emergence of protectionism and its impact
on international trade, the use of social media and other communication
connectivity in global affairs, the role that advanced technologies are
beginning to fill in international business, and other important global
themes. We have incorporated the latest research and practical insights on
pressure for both MNCs and governments to adopt more sustainable
practices, and the strategies many companies are using to differentiate their
products through such “green” management practices. We have updated the
discussion of a range of contemporary topics, including ongoing global
conflicts.
A continuing and relevant end-of-chapter feature in this edition is the
“Internet Exercise.” The purpose of each exercise is to encourage students
to use the Internet to find information from the websites of prominent
MNCs to answer relevant questions about the chapter topic. An end-of-

book feature is a series of Skill-Building and Experiential Exercises for
aspiring international managers. These in-class exercises represent the
various parts of the text (culture, strategy, and behavior) and provide handson experience.
We have extended from the tenth edition of International Management
the chapter opening discussions called “The World of International
Management” (WIM), based on very recent, relevant news stories to grab
readers’ interest and attention. Many of these opening articles are new to
this edition and all have been updated. These timely opening discussions
transition the reader into the chapter topic. At the end of each chapter, there
is a pedagogical feature that revisits the chapter’s subject matter: “The
World of International Management—Revisited.” Here we pose several
discussion questions based on the topic of the opening feature in light of the
student’s entire reading of the chapter. Answering these questions requires
readers to reconsider and to draw from the chapter material. Suggested
answers to these “WIM—Revisited” discussion questions appear in the
completely updated Instructor’s Manual, where we also provide some
multiple-choice and true-false questions that draw directly from the
chapters’ World of International Management topic matter for instructors
who want to include this material in their tests.
The use and application of cases are further enhanced in this edition.
All cases have been updated, and several new ones have been added. The
short, within-chapter country case illustrations—“In the International
Spotlight”—can be read and discussed in class. These have all been revised,
and five have been added—Kenya, Argentina, Turkey, U.A.E, and Vietnam.
In addition, we have updated or replaced all of the additional “You Be the
International Management Consultant” exercises, which present a current
challenge or dilemma facing a company in the subject country of the

“International Spotlight.” Students are invited to respond to a question
related to this challenge. The revised or newly added “Integrative Cases”
positioned at the end of each main part of the text were created exclusively
for this edition and provide opportunities for reading and analysis outside
class. Review questions provided for each case are intended to facilitate
lively and productive written analysis or in-class discussion. Our “Brief
Integrative Cases” typically explore a specific situation or challenge facing
an individual or team. Our longer and more detailed “In-Depth Integrative
Cases” provide a broader discussion of the challenges facing a company.
These two formats allow maximum flexibility, so that instructors can use
the cases in a tailored and customized fashion. Accompanying many of the
in-depth cases are short exercises that can be used in class to reinforce both
the substantive topic and students’ skills in negotiation, presentation, and
analysis. The cases have been extensively updated, and several are new to
this edition. Cases concerning the controversies over drug pricing, TOMS
shoes, Russell Athletics/Fruit of the Loom, Euro Disneyland and Disney
Asia, Google in China, IKEA, Nike, Walmart, Danone, Chiquita, CocaCola, and others are unique to this book and specific to this edition. In
addition, two brand-new cases written specifically for this edition explore
Starbucks’ entrance into India via a joint venture with the Tata Group and
Didi’s successful response to Uber’s move into China. Of course,
instructors also have access to Create (
McGraw-Hill’s extensive content database, which includes Page viii
thousands of cases from major sources such as Harvard Business
School, Ivey, Darden, and NACRA case databases.
Along with the new or updated “International Management in Action”
boxed application examples within each chapter and other pedagogical
features at the end of each chapter (i.e., “Key Terms,” “Review and

Discussion Questions,” “The World of International Management—
Revisited,” and “Internet Exercise”), the end-of-part brief and in-depth
cases and the end-of-book skill-building exercises and simulations in the
Connect resources complete the package.
International Management is generally recognized to be the first
“mainstream” text of its kind. Strategy casebooks and specialized books in
organizational behavior, human resources, and, of course, international
business, finance, marketing, and economics preceded it, but there were no
international management texts before this one, and it remains the market
leader. We have had sustainability because of the effort and care put into the
revisions. We hope you agree that this eleventh edition continues the
tradition and remains the “world-class” text for the study of international
management.

Instructor Library
The Connect Instructor Library is your repository for additional resources
to improve student engagement in and out of class. You can select and use
any asset that enhances your lecture.
To help instructors teach international management, this text is
accompanied by a revised and expanded Instructor’s Resource Manual, Test
Bank, and PowerPoint slides, all of which are in the Connect Library.

Acknowledgments
We would like to acknowledge those who have helped to make this book a
reality. We will never forget the legacy of international management
education in general and for this text in particular provided by our departed
colleague Richard M. Hodgetts. Special thanks also go to our growing
number of colleagues throughout the world who have given us many ideas

and inspired us to think internationally. Closer to home, Jonathan Doh
would like to thank Villanova University and its leadership, especially
Provost Pat Maggitti, Villanova School of Business Dean Joyce Russell,
Associate Dean Wen Mao, and Herb Rammrath, who generously endowed
the Chair in International Business Jonathan now holds, and Bob Moran,
who endowed Villanova’s Center for Global Leadership. Additionally, for
this new, eleventh edition, we would like to thank Heui Chan Lee, who
researched and drafted chapter opening World of International Management
features. Fred Luthans would like to give special recognition to two
international management scholars: Henry H. Albers, former Chair of the
Management Department at the University of Nebraska and former Dean at
the University of Petroleum and Minerals, Saudi Arabia, to whom previous
editions of this book were dedicated; and Sang M. Lee, former Chair of the
Management Department at Nebraska, founding and current President of
the Pan Pacific Business Association, and close colleague on many ventures
around the world over the past 30 years.
In addition, we would like to acknowledge the help that we received
from the many reviewers from around the globe, whose feedback guided us
in preparing the eleventh edition of the text. These include
Luke H. Cashen, Nicholls State University
Imran Chowdhury, Pace University
Lauryn A. De George, University of Central Florida
John Donnellan, New Jersey City University
Sharon Segrest, University of South Florida St. Petersburg
Our thanks, too, to the reviewers of previous editions of the Page ix
text:
Thomas M. Abbott, Post University

Yohannan T. Abraham, Southwest Missouri State University
Janet S. Adams, Kennesaw State University
Irfan Ahmed, Sam Houston State University
Joseph S. Anderson, Northern Arizona University
Chi Anyansi-Archibong, North Carolina A&T State University
Kibok Baik, James Madison University
R. B. Barton, Murray State University
Lawrence A. Beer, Arizona State University
Koren Borges, University of North Florida
Tope A. Bello, East Carolina University
Mauritz Blonder, Hofstra University
Gunther S. Boroschek, University of Massachusetts-Boston
Charles M. Byles, Virginia Commonwealth University
Constance Campbell, Georgia Southern University
Scott Kenneth Campbell, Georgia College & State University
M. Suzanne Clinton, University of Central Oklahoma
Lauryn De George, University of Central Florida
Helen Deresky, SUNY Plattsburgh
Dr. Dharma deSilva, Center for International Business Advancement
(CIBA)
David Elloy, Gonzaga University
Val Finnigan, Leeds Metropolitan University
David M. Flynn, Hofstra University
Jan Flynn, Georgia College and State University

Joseph Richard Goldman, University of Minnesota
James Gran, Buena Vista University
Robert T. Green, University of Texas at Austin
Annette Gunter, University of Central Oklahoma
Jerry Haar, Florida International University-Miami
Jean M. Hanebury, Salisbury State University
Richard C. Hoffman, Salisbury State University
Johan Hough, University of South Africa
Julie Huang, Rio Hondo College
Mohd Nazari Ismail, University of Malaya
Steve Jenner, California State University-Dominguez Hills
James P. Johnson, Rollins College
Marjorie Jones, Nova Southeastern University
Jae C. Jung, University of Missouri-Kansas City
Ann Langlois, Palm Beach Atlantic University
Robert Kuhne, Hofstra University
Christine Lentz, Rider University
Ben Lever III, College of Charleston
Robert C. Maddox, University of Tennessee
Curtis Matherne III, East Tennessee State University
Douglas M. McCabe, Georgetown University
Jeanne M. McNett, Assumption College
Lauryn Migenes, University of Central Florida
Alan N. Miller, University of Nevada, Las Vegas

Ray Montagno, Ball State University
Rebecca J. Morris, University of Nebraska-Omaha
Ernst W. Neuland, University of Pretoria
William Newburry, Rutgers Business School
Yongsun Paik, Loyola Marymount University
Valerie S. Perotti, Rochester Institute of Technology
Richard B. Peterson, University of Washington
Suzanne J. Peterson, University of Nebraska-Lincoln
Joseph A. Petrick, Wright State University
Juan F. Ramirez, Nova Southeastern University
Richard David Ramsey, Southeastern Louisiana University
Manjula S. Salimath, University of North Texas
Owen Sevier, University of Central Oklahoma
Mansour Sharif-Zadeh, California State Polytechnic University-Pomona
Emeric Solymossy, Western Illinois University.
Jane H. Standford, Texas A&M University-Kingsville
Dale V. Steinmann, San Francisco State University
Randall Stross, San Jose State University
George Sutija, Florida International University
Deanna Teel, Houston Community College
David Turnipseed, University of South Alabama-Mobile
Katheryn H. Ward, Chicago State University
Li Weixing, University of Nebraska-Lincoln
Aimee Wheaton, Regis College

Marion M. White, James Madison University
Timothy Wilkinson, University of Akron
George Yacus, Old Dominion University
Corinne Young, University of Tampa
Zhe Zhang, University of Central Florida-Orlando
Anatoly Zhuplev, Loyola Marymount University
Finally, thanks to the team at McGraw-Hill who worked on this book: Terri
Schiesl, Managing Director; Michael Ablassmeir, Director; Laura Hurst
Spell, Associate Portfolio Manager; Sarah Blasco, Development Editor;
Lisa Granger, Marketing Manager; and Melissa M. Leick, Senior Content
Project Manager. Last but by no means least, we greatly appreciate the love
and support provided by our families.
Fred Luthans and Jonathan P. Doh

Page x

FOR INSTRUCTORS

You’re in the driver’s seat.
Want to build your own course? No problem. Prefer to use our
turnkey, prebuilt course? Easy. Want to make changes
throughout the semester? Sure. And you’ll save time with
Connect’s auto-grading too.

They’ll thank you for it.

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George Doyle/Getty Images

Adaptive study resources like SmartBook® 2.0 help your
students be better prepared in less time. You can
transform your class time from dull definitions to
dynamic debates. Find out more about the powerful
personalized learning experience available in
SmartBook 2.0 at
www.mheducation.com/highered/connect/smartbook

Make it simple, make it

Solutions for your

affordable.

challenges.

Connect makes it easy with seamless
integration using any of the major
Learning Management Systems—

A product isn’t a solution. Real solutions
are affordable, reliable, and come with
training and ongoing support when you

Blackboard®, Canvas, and D2L,
among others—to let you organize
your course in one convenient
location. Give your students access to
digital materials at a discount with our
inclusive access program. Ask your
McGraw-Hill representative for more
information.

need it and how you want it. Our Customer
Experience Group can also help you
troubleshoot tech problems—although
Connect’s 99% uptime means you might
not need to call them. See for yourself at
status.mheducation.com
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Page xi

FOR STUDENTS
Effective, efficient studying.
Connect helps you be more productive with your study time and get
better grades using tools like SmartBook 2.0, which highlights key
concepts and creates a personalized study plan. Connect sets you up
for success, so you walk into class with confidence and walk out with
better grades.

Study anytime, anywhere.

“I really liked this app—it made
it easy to study when you don’t

Download the free ReadAnywhere app and access
your online eBook or SmartBook 2.0 assignments
when it’s convenient, even if you’re offline. And since
the app automatically syncs with your eBook and
SmartBook 2.0 assignments in Connect, all of your
work is available every time you open it. Find out more
at www.mheducation.com/readanywhere

have your textbook in front of
you.”
– Jordan Cunningham,
Eastern Washington University

No surprises.
The Connect Calendar and Reports tools keep you on
track with the work you need to get done and your
assignment scores. Life gets busy; Connect tools help
you keep learning through it all.

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McGraw-Hill works directly with Accessibility
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Page xii

The eleventh edition of International Management:
Culture, Strategy, and Behavior is still setting the
standard. Authors Jonathan Doh and Fred Luthans have
taken care to retain the effective foundation gained from
research and practice over the past decades. At the
same time, they have fully incorporated important new
and emerging developments that have changed what
international managers are currently facing and likely to
face in the coming years.

New and Enhanced Themes
•

Thoroughly revised and updated chapters to reflect the most
critical issues for international managers.

•

New or revised opening World of International Management
(WIM) features written by the authors on current international
management challenges; these mini-cases were prepared expressly
for this edition and are not available elsewhere.

•

Discussions of the rise of protectionism and its impact on
international business.

•

New and updated discussions of major issues in global ethics,
technology, sustainability, and other cutting-edge research.

•

Greater attention to shifting demographic trends and global talent
management, emphasizing the impact of new advanced
technology will have on the global economy.

•

Renewed emphasis on major emerging regions, economic
challenges in major countries such as Brazil and Argentina, and
specific case illustrations on how companies are managing these
challenges.

Thoroughly Revised and Updated Chapter Content
•

New or revised opening WIM discussions on topics including the
global influences of social media using the case of Facebook; the
impact of sanctions and political uncertainty when doing business
in Iran; the role of social networking in political change in the
Middle East; sustainability as a global competitive advantage
using examples of Patagonia, L’Oreal, and Unilever; cultural
challenges in global mergers and acquisitions; the competitive
dynamics between Apple and Xiaomi and Amazon and Alibaba;
Airbnb’s entry into China and Cuba; Netflix’s strategies for global
expansion; and many others. These features were written
expressly for this edition and are not available elsewhere.

•

Updated and strengthened emphasis on ethics, technology, and
sustainability.

•

Extensive coverage of current geopolitical issues impacting
international business, including Brexit, increased nationalism and
protectionism across Europe and the United States, trade disputes
between China and the United States, rising tensions with Russia,

renewed sanctions on Iran, the renegotiation of trade deals such as
USMCA and CPTPP, and the economic slowdown in China, to
name a few.
•

Revised or new “In the International Spotlight” inserts that profile
the key economic and political issues relevant to managers in
specific countries.
Page xiii

Continues to Set the Standard…
Thoroughly Updated and/or New Cases, Inserts, and
Exercises
•

Completely new “In the International Spotlight” country profiles
at the end of every chapter, including the addition of profiles on
Argentina, Kenya, Turkey, United Arab Emirates, and Vietnam.

•

“You Be the International Management Consultant” exercises,
many new to this edition, present an actual company’s challenge
in that country and invite students to recommend a course of
action.

•

New “International Management in Action” features, including
discussions on timely topics such as the trade disputes between
the United States and China, the Huawei controversy, and the

shifting cultural dynamics associated with increasing percentages
of Millennials and Gen Z in the workforce, to name a few.
•

Thoroughly updated cases (not available elsewhere): TOMS
shoes, Russell Athletics/Fruit of the Loom, Euro Disneyland and
Disney Asia, Google in China, IKEA, Nike, Walmart, Danone,
Chiquita, Coca-Cola, and others are unique to this book and
specific to this edition.

•

Brand new end-of-part cases developed exclusively for this
edition (not available elsewhere): How Starbucks Convinced
Indians to Embrace Coffee and How Didi Fought Uber in China
and Won; Next, Taking on the World.

•

Brand new “World of International Management” chapter opening
discussions, including topics such as Netflix’s expansion to
emerging markets, Starbucks’ strategy for Italy and China, the
Cambridge Analytica scandal at Facebook, the impact of Iranian
sanctions on international businesses, and the expansion of
Airbnb, to name a few.

•

New and revised graphics throughout.

•

Timely updates throughout, based on the latest research, including
a discussion of the influence of new technology on the global
economy, the impact of protectionism on the international
business community, and the continued push toward a sustainable
future, to name a few.

Totally Revised Instructor and Student Support

The following instructor and student support materials can be found in
Connect® at connect.mheducation.com for the eleventh edition.

•

The Instructor’s Manual offers a summary of Learning Objectives
and a teaching outline with lecture notes and teaching tips, as well
as suggested answers to questions found throughout and at the
conclusion of each chapter. Suggested answers are also provided
for all the cases found in the book.
Page xiv

•

The test bank offers over 1,000 test items consisting of true/false,
multiple choice, and essay. Answers are provided for all test bank
questions.

•

PowerPoint Presentations consisting of approximately 30 slides
per chapter give instructors talking points, feature exhibits from
the text, and are summarized with a review and discussion slide.

•

Create: Instructors can now tailor their teaching resources to
match the way they teach! With McGraw-Hill Create,
create.mheducation.com, instructors can easily rearrange chapters,
combine material from other content sources, and quickly upload
and integrate their own content, like course syllabi or teaching
notes. Find the right content in Create by searching through
thousands of leading McGraw-Hill textbooks. Arrange the
material to fit your teaching style. Order a Create book and
receive a complimentary print review copy in 3–5 business days
or a complimentary electronic review copy (echo) via e-mail
within one hour. Go to create.mheducation.com today and register.

AACSB Tagging
McGraw-Hill Education is a proud corporate member of AACSB
International. Understanding the importance and value of AACSB
accreditation, International Management recognizes the curriculum
guidelines detailed in the AACSB standards for business accreditation by
connecting selected questions in the text and the test bank to the six general
knowledge and skill guidelines in the AACSB standards. The statements
contained in International Management are provided only as a guide for the
users of this textbook. The AACSB leaves content coverage and assessment
within the purview of individual schools, the mission of the school, and the
faculty. While the International Management teaching package makes no
claim of any specific AACSB qualification or evaluation, we have within
International Management labeled selected questions according to the six
general knowledge and skills areas.

About the Authors

Page xv

Villanova University, John Shetron.

JONATHAN P. DOH is Associate Dean of Research, the Herbert G.
Rammrath Chair in International Business, co-faculty Director of the Center
for Global Leadership, and Professor of Management at the Villanova
School of Business. Jonathan teaches, does research, and serves as an
executive instructor and consultant in the areas of international strategy and
corporate responsibility. Previously, he was on the faculty of American and
Georgetown Universities and a trade official with the U.S. government.
Jonathan is author or co-author of more than 85 refereed articles published
in leading international business and management journals, more than 30
chapters in scholarly edited volumes, and more than 90 conference papers.
Recent articles have appeared in journals such as Academy of Management
Review, California Management Review, Journal of International Business
Studies, Journal of Management, Journal of Management Studies, Journal
of World Business, Organization Science, Sloan Management Review, and

Strategic Management Journal. He is co-editor and contributing author of
Globalization and NGOs (Praeger, 2003) and Handbook on Responsible
Leadership and Governance in Global Business (Elgar, 2005) and coauthor
of the previous edition of International Management: Culture, Strategy, and
Behavior (10th ed., McGraw-Hill/Irwin, 2015), the best-selling
international management text. His current research focus is on strategy for
and in emerging markets and global corporate responsibility and
sustainability. His scholarly books include Multinationals and Development
(with Alan Rugman, Yale University Press, 2008), NGOs and
Corporations: Conflict and Collaboration (with Michael Yaziji, Cambridge
University Press, 2009), and Aligning for Advantage: Competitive Strategy
for the Social and Political Arenas (with Tom Lawton and Tazeeb Rajwani,
Oxford University Press, 2014). He has been an associate, consulting, or
senior editor for numerous journals and was editor-in-chief of Journal of
World Business from 2014 to 2018. Jonathan has also developed more than
a dozen original cases and simulations published in books, journals, and
case databases and used at many leading global universities. He has been a
consultant or executive instructor for ABB, Anglo American, Bodycote,
Bosch, China Minsheng Bank, Hana Financial, HSBC, Ingersoll Rand,
Medtronic, Shanghai Municipal Government, Siam Cement, and the World
Economic Forum, among others. Previously, he was an external adviser to
the Global Energy Resource Group of Deloitte Touche. Jonathan served for
five years as a member of the Executive Committee of the Academy of
Management Organizations and Natural Environment Division, a role that
culminated in service as chair of the division in 2016. He was ranked
among the top 15 most prolific international business scholars in the world
for the period 2001-2009 (Lahiri and Kumar, 2012) and in 2015 was elected
a fellow of the Academy of International Business. He has been an

associate editor, special issue editor, senior editor, or consulting editor of
several academic journals. From 2014 to 2018, he was Editor-in-Chief of
Journal of World Business and is currently Senior Associate Editor of
Journal of Management Studies. He is a frequent keynote speaker to
academic and professional groups in Europe, Asia, and Latin America. He
holds a Ph.D. in strategic and international management from George
Washington University.
Page xvi

Courtesy of University of Nebraska-Lincoln College of Business Administration

FRED LUTHANS is University and the George Holmes Distinguished
Professor of Management, Emeritus at the University of Nebraska-Lincoln.
He is also a senior research scientist for HUMANeX Ventures Inc. He
received his B.A., M.B.A., and Ph.D. from the University of Iowa, where
he received the Distinguished Alumni Award in 2002. While serving as an
officer in the U.S. Army from 1965 to 1967, he taught leadership at the U.S.
Military Academy at West Point. He has been a visiting scholar at a number
of colleges and universities and has lectured in numerous European and
Pacific Rim countries. He has taught international management as a visiting

faculty member at the universities of Bangkok, Hawaii, Henley in England,
Norwegian Management School, Monash in Australia, Macau, Chemnitz in
Germany, and Tirana in Albania. A past President of the Academy of
Management, in 1997 he received the Academy’s Distinguished Educator
Award. In 2000 he became an inaugural member of the Academy’s Hall of
Fame for being one of the “Top Five” all-time published authors in the
prestigious academy journals. For many years he was co-editor-in-chief of
the Journal of World Business and editor of Organizational Dynamics and
is currently co-editor of Journal of Leadership and Organizational Studies.
The author of numerous books, his seminal Organizational Behavior is now
in its thirteenth edition and the 2007 groundbreaking book Psychological
Capital (Oxford University Press) with Carolyn Youssef and Bruce Avolio
came out in a new version in 2015. He is one of very few management
scholars who is a Fellow of the Academy of Management, the Decision
Sciences Institute, and the Pan Pacific Business Association. He received
the Global Leadership Award from the Pan Pacific Association and has
been a member of its Executive Committee since it was founded over 30
years ago. This committee helps organize the annual meeting held in Pacific
Rim countries. He has been involved with some of the first empirical
studies on motivation and behavioral management techniques and the
analysis of managerial activities in Russia; these articles were published in
the Academy of Management Journal, Journal of International Business
Studies, Journal of World Business, and European Management Journal.
Since the very beginning of the transition to market economies after the fall
of communism in Eastern Europe, he has been actively involved in
management education programs sponsored by the U.S. Agency for
International Development in Albania and Macedonia, and in U.S.
Information Agency programs involving the Central Asian countries of

Kazakhstan, Kyrgyzstan, and Tajikistan. Professor Luthans’s recent
international research involves his construct of positive psychological
capital (PsyCap). For example, he and colleagues have published their
research demonstrating the impact of Chinese workers’ PsyCap on their
performance in the International Journal of Human Resource Management
and Management and Organization Review. He is applying his positive
approach to positive organizational behavior (POB), PsyCap, and authentic
leadership to effective global management and has been the keynote at
programs in China (numerous times), Malaysia, South Korea, Indonesia,
Philippines, Singapore, Taiwan, Japan, Vietnam, Costa Rica, Mexico, Chile,
Fiji, Germany, France, England, Spain, Norway, Finland, Denmark,
Netherlands, Italy, Russia, Macedonia, Albania, Morocco, South Africa,
New Zealand, and Australia.

Brief Contents

Page xvii

Part One
Environmental Foundation
1

Globalization and International Linkages

2

The Political, Legal, and Technological
Environment

3

Ethics, Social Responsibility, and Sustainability
Brief Integrative Case 1.1: Advertising or Free Speech?
The Case of Nike and Human Rights
Brief Integrative Case 1.2: TOMS Puts Its Right Foot
Forward
In-Depth Integrative Case 1.1: Student Advocacy and
“Sweatshop” Labor: The Case of Russell Athletic
In-Depth Integrative Case 1.2: The Ethics of Global Drug
Pricing

Part Two
The Role of Culture
4

The Meanings and Dimensions of Culture

5

Managing Across Cultures

6

Organizational Cultures and Diversity

7

Cross-Cultural Communication and Negotiation
Brief Integrative Case 2.1: Coca-Cola in India
Brief Integrative Case 2.2: Danone’s Wrangle with
Wahaha
In-Depth Integrative Case 2.1a: Euro Disneyland
In-Depth Integrative Case 2.1b: Disney in Asia
In-Depth Integrative Case 2.2: Walmart’s Global
Strategies

Part Three
International Strategic Management
8

Strategy Formulation and Implementation

9

Entry Strategies and Organizational Structures

10

Managing Political Risk, Government Relations,
and Alliances

11

Management Decision and Control
Brief Integrative Case 3.1: Google in China: Protecting
Property and Rights
In-Depth Integrative Case 3.1: How Starbucks Convinced
Indians to Embrace Coffee
Page xviii

Part Four
Organizational Behavior and Human Resource
Management
12

Motivation Across Cultures

13

Leadership Across Cultures

14

Human Resource Selection and Development
Across Cultures
Brief Integrative Case 4.1: IKEA’s Global Renovations
In-Depth Integrative Case 4.1: How Didi Fought Uber in
China and Won; Next, Taking On the World
In-Depth Integrative Case 4.2: Chiquita’s Global
Turnaround

Skill-Building and Experiential Exercises
Glossary
Indexes

Table of Contents

Page xix

Part One
Environmental Foundation
1

Globalization and International Linkages
The World of International Management: An
Interconnected World
Introduction
Globalization and Internationalization
Globalization, Antiglobalization, and Global Pressures
for Change
Global and Regional Integration
Changing Global Demographics
The Shifting Balance of Economic Power in the Global
Economy
Global Economic Systems
Market Economy
Command Economy
Mixed Economy
Economic Performance and Issues of Major Regions
Established Economies
Emerging and Developing Economies
Developing Economies on the Verge
The World of International Management—Revisited

Summary of Key Points
Key Terms
Review and Discussion Questions
Answers to the In-Chapter Quiz
Internet Exercise: Global Competition in Fast Food
Endnotes
In the International Spotlight: India

2

The Political, Legal, and Technological
Environment
The World of International Management: Social Media
and Political Change
Political Environment
Ideologies
Political Systems
Legal and Regulatory Environment
Basic Principles of International Law
Examples of Legal and Regulatory Issues
Privatization
Regulation of Trade and Investment
Technological Environment and Global Shifts in
Production

Page xx

Trends in Technology, Communication, and Innovation
Biotechnology
E-Business
Telecommunications

Technological Advancements, Outsourcing, and
Offshoring
The World of International Management—Revisited
Summary of Key Points
Key Terms
Review and Discussion Questions
Internet Exercise: Hitachi Goes Worldwide
Endnotes
In the International Spotlight: Turkey

3

Ethics, Social Responsibility, and Sustainability
The World of International Management: Sustaining
Sustainable Companies
Ethics and Social Responsibility
Ethics and Social Responsibility in International
Management
Ethics Theories and Philosophy
Human Rights
Labor, Employment, and Business Practices
Environmental Protection and Development
Globalization and Ethical Obligations of MNCs
Reconciling Ethical Differences across Cultures
Corporate Social Responsibility and Sustainability
Corporate Governance
Corruption
International Assistance
The World of International Management—Revisited

Summary of Key Points
Key Terms
Review and Discussion Questions
Endnotes
In the International Spotlight: Argentina
Brief Integrative Case 1.1: Advertising or Free Speech?
The Case of Nike and Human Rights
Endnotes
Brief Integrative Case 1.2: TOMS Puts Its Right Foot
Forward
Endnotes
In-Depth Integrative Case 1.1: Student Advocacy and
“Sweatshop” Labor: The Case of Russell Athletic
Endnotes

Page xxi

In-Depth Integrative Case 1.2: The Ethics of Global Drug
Pricing
Endnotes

Part Two
The Role of Culture
4

The Meanings and Dimensions of Culture
The World of International Management: Culture Clashes
in Cross-Border Mergers and Acquisitions
The Nature of Culture
Cultural Diversity
Values in Culture
Values in Transition

Cultural Dimensions
Hofstede
Trompenaars
Integrating Culture and Management: The GLOBE Project
Culture and Management
GLOBE’s Cultural Dimensions
GLOBE Country Analysis
The World of International Management—Revisited
Summary of Key Points
Key Terms
Review and Discussion Questions
Internet Exercise: Renault-Nissan in South Africa
Endnotes
In the International Spotlight: Kenya

5

Managing Across Cultures
The World of International Management: Taking a Bite
Out of Apple: Corporate Culture and an Unlikely Chinese
Start-up
The Strategy for Managing across Cultures
Strategic Predispositions
Meeting the Challenge
Cross-Cultural Differences and Similarities
Parochialism and Simplification
Similarities across Cultures
Many Differences across Cultures
Cultural Differences in Selected Countries and Regions

Using the GLOBE Project to Compare Managerial
Differences
Managing Culture in Selected Countries and Regions
The World of International Management—
Revisited

Page xxii

Summary of Key Points
Key Terms
Review and Discussion Questions
Internet Exercise: Haier’s Approach
Endnotes
In the International Spotlight: Poland

6

Organizational Cultures and Diversity
The World of International Management: The
Fundamentals of Strong Multinational Teams
The Nature of Organizational Culture
Definition and Characteristics
Interaction between National and Organizational Cultures
Organizational Cultures in MNCs
Family Culture
Eiffel Tower Culture
Guided Missile Culture
Incubator Culture
Managing Multiculturalism and Diversity
Phases of Multicultural Development
Types of Multiculturalism
Potential Problems Associated with Diversity

Advantages of Diversity
Building Multicultural Team Effectiveness
The World of International Management—Revisited
Summary of Key Points
Key Terms
Review and Discussion Questions
Internet Exercise: Lenovo’s International Focus
Endnotes
In the International Spotlight: Nigeria

7

Cross-Cultural Communication and Negotiation
The World of International Management: Netflix’s
Negotiations: Global Expansion Strategies
The Overall Communication Process
Verbal Communication Styles
Interpretation of Communications
Communication Flows
Downward Communication
Upward Communication
Communication Barriers
Language Barriers
Perceptual Barriers
The Impact of Culture
Nonverbal Communication
Achieving Communication Effectiveness
Improve Feedback Systems
Provide Language Training

Page xxiii

Provide Cultural Training
Increase Flexibility and Cooperation
Managing Cross-Cultural Negotiations
Types of Negotiation
The Negotiation Process
Cultural Differences Affecting Negotiations
Negotiation Tactics
Negotiating for Mutual Benefit
Bargaining Behaviors
The World of International Management—Revisited
Summary of Key Points
Key Terms
Review and Discussion Questions
Internet Exercise: Working Effectively at Toyota
Endnotes
In the International Spotlight: China
Brief Integrative Case 2.1: Coca-Cola in India
Endnotes
Brief Integrative Case 2.2: Danone’s Wrangle with
Wahaha
Endnotes
In-Depth Integrative Case 2.1a: Euro Disneyland
Endnotes
In-Depth Integrative Case 2.1b: Disney in Asia
Endnotes
In-Depth Integrative Case 2.2: Walmart’s Global
Strategies

Endnotes

Part Three
INTERNATIONAL STRATEGIC MANAGEMENT
8

Strategy Formulation and Implementation
The World of International Management: Starbucks’
Caffeinated Push for Global Growth
Strategic Management
The Growing Need for Strategic Management
Benefits of Strategic Planning

Page xxiv

Approaches to Formulating and Implementing Strategy
Global and Regional Strategies
The Basic Steps in Formulating Strategy
Environmental Scanning
Internal Resource Analysis
Goal Setting for Strategy Formulation
Strategy Implementation
Location Considerations for Implementation
Combining Country and Firm-Specific Factors in
International Strategy
The Role of the Functional Areas in Implementation
Specialized Strategies
Strategies for Emerging Markets
Entrepreneurial Strategy and New Ventures
The World of International Management—Revisited
Summary of Key Points

Key Terms
Review and Discussion Questions
Internet Exercise: Infosys’ Global Strategy
Endnotes
In the International Spotlight: United Arab Emirates

9

Entry Strategies and Organizational Structures
The World of International Management: Airbnb
Entry Strategies and Ownership Structures
Export/Import
Wholly Owned Subsidiaries
Mergers/Acquisitions
Alliances and Joint Ventures
Licensing
Franchising
The Organization Challenge
Basic Organizational Structures
Initial Division Structure
International Division Structure
Global Structural Arrangements
Transnational Network Structures
Nontraditional Organizational Arrangements
Organizational Arrangements from Mergers,
Acquisitions, Joint Ventures, and Alliances
The Emergence of the Network Organizational
Forms
Organizing for Product Integration

Page xxv

Organizational Characteristics of MNCs
Formalization
Specialization
Centralization
Putting Organizational Characteristics in Perspective
The World of International Management—Revisited
Summary of Key Points
Key Terms
Review and Discussion Questions
Internet Exercise: Organizing for Effectiveness
Endnotes
In the International Spotlight: Mexico

10

Managing Political Risk, Government Relations,
and Alliances
The World of International Management: Iran: Risks and
Political Uncertainty
The Nature and Analysis of Political Risk
Macro and Micro Analysis of Political Risk
Terrorism and Its Overseas Expansion
Analyzing the Expropriation Risk
Managing Political Risk and Government Relations
Developing a Comprehensive Framework or
Quantitative Analysis
Techniques for Responding to Political Risk
Managing Alliances
The Alliance Challenge

The Role of Host Governments in Alliances
Examples of Challenges and Opportunities in Alliance
Management
The World of International Management—Revisited
Summary of Key Points
Key Terms
Review and Discussion Questions
Internet Exercise: Nokia in China
Endnotes
In the International Spotlight: Brazil

11

Management Decision and Control
The World of International Management: Global Online
Retail: Amazon versus Alibaba
Decision-Making Process and Challenges

Page xxvi

Factors Affecting Decision-Making Authority
Cultural Differences and Comparative Examples of
Decision Making
Total Quality Management Decisions
Decisions for Attacking the Competition
Decision and Control Linkages
The Controlling Process
Types of Control
Approaches to Control
Performance Evaluation as a Mechanism of Control
Financial Performance
Quality Performance

Personnel Performance
The World of International Management—Revisited
Summary of Key Points
Key Terms
Review and Discussion Questions
Internet Exercise: Looking at the Best
Endnotes
In the International Spotlight: Japan
Brief Integrative Case 3.1: Google in China: Protecting
Property and Rights
Endnotes
In-Depth Integrative Case 3.1: How Starbucks Convinced
Indians to Embrace Coffee
Endnotes

Part Four
Organizational Behavior and Human Resource
Management
12

Motivation Across Cultures
The World of International Management: Motivating
Employees in a Multicultural Context: Insights from
Emerging Markets
The Nature of Motivation
The Universalist Assumption
The Assumption of Content and Process
The Hierarchy-of-Needs Theory
The Maslow Theory

International Findings on Maslow’s Theory
The Two-Factor Theory of Motivation
The Herzberg Theory
International Findings on Herzberg’s Theory
Achievement Motivation Theory

Page xxvii

The Background of Achievement Motivation Theory
International Findings on Achievement Motivation
Theory
Select Process Theories
Equity Theory
Goal-Setting Theory
Expectancy Theory
Motivation Applied: Job Design, Work Centrality, and
Rewards
Job Design
Work Centrality
Reward Systems
Incentives and Culture
The World of International Management—Revisited
Summary of Key Points
Key Terms
Review and Discussion Questions
Internet Exercise: Motivating Potential Employees
Endnotes
In the International Spotlight: Vietnam

13

Leadership Across Cultures

The World of International Management: Global
Leadership Development: An Emerging Need
Foundation for Leadership
The Manager-Leader Paradigm
Philosophical Background: Theories X, Y, and Z
Leadership Behaviors and Styles
The Managerial Grid Performance: A Japanese
Perspective
Leadership in the International Context
Attitudes of European Managers toward Leadership
Practices
Japanese Leadership Approaches
Differences between Japanese and U.S. Leadership
Styles
Leadership in China
Leadership in the Middle East
Leadership Approaches in India
Leadership Approaches in Latin America
Recent Findings and Insights about Leadership
Transformational, Charistmatic, and Transactional
Leadership
Qualities for Successful Leaders
Culture Clusters and Leader Effectiveness
Leader Behavior, Leader Effectiveness, and
Leading Teams

Page xxviii

Cross-Cultural Leadership: Insights from the GLOBE
Study

Positive Organizational Scholarship and Leadership
Authentic Leadership
Ethical, Responsible, and Servant Leadership
Entrepreneurial Leadership and Mindset
The World of International Management—Revisited
Summary of Key Points
Key Terms
Review and Discussion Questions
Internet Exercise: Taking a Closer Look
Endnotes
In the International Spotlight: Germany

14

Human Resource Selection and Development
Across Cultures
The World of International Management: The Challenge
of Talent Retention in India
The Importance of International Human Resources
Getting the Employee Perspective
Employees as Critical Resources
Investing in International Assignments
Economic Pressures
Sources of Human Resources
Home-Country Nationals
Host-Country Nationals
Third-Country Nationals
Subcontracting and Outsourcing
Selection Criteria for International Assignments

General Criteria
Adaptability to Cultural Change
Physical and Emotional Health
Age, Experience, and Education
Language Training
Motivation for a Foreign Assignment
Spouses and Dependents or Work-Family Issues
Leadership Ability
Other Considerations
Economic Pressures and Trends in Expat Assignments
International Human Resource Selection
Procedures

Page xxix

Testing and Interviewing Procedures
The Adjustment Process
Compensation
Common Elements of Compensation Packages
Tailoring the Package
Individual and Host-Country Viewpoints
Candidate Motivations
Host-Country Desires
Repatriation of Expatriates
Reasons for Returning
Readjustment Problems
Transition Strategies
Training in International Management
The Impact of Overall Management Philosophy on
Training

The Impact of Different Learning Styles on Training and
Development
Reasons for Training
Types of Training Programs
Standardized vs. Tailor-Made
Cultural Assimilators
Choice of Content of the Assimilators
Validation of the Assimilator
The Cost-Benefit Analysis of Assimilators
Positive Organizational Behavior
Future Trends
The World of International Management—Revisited
Summary of Key Points
Key Terms
Review and Discussion Questions
Internet Exercise: Coke Goes Worldwide
Endnotes
In the International Spotlight: Russia
Brief Integrative Case 4.1: IKEA’s Global Renovations
Endnotes
In-Depth Integrative Case 4.1: How Didi Fought Uber in
China and Won; Next, Taking On the World
Endnotes
In-Depth Integrative Case 4.2: Chiquita’s Global
Turnaround
Endnotes
Page xxx

Skill-Building and Experiential Exercises
Personal Skill-Building Exercises
1. The Culture Quiz
2. “When in Bogotá …”
3. The International Cola Alliances
4. Whom to Hire?

In-Class Simulations (available in Connect,
connect.mheducation.com)
1. “Frankenfoods” or Rice Bowl for the World: The U.S.EU Dispute over Trade in Genetically Modified
Organisms
2. Cross-Cultural Conflicts in the Corning-Vitro Joint
Venture
Glossary
Name and Organization Index
Subject Index

Page 1

PART ONE
ENVIRONMEN
TAL
FOUNDATION

Page 2

Chapter 1
GLOBALIZATION AND
INTERNATIONAL LINKAGES
OBJECTIVES OF THE CHAPTER
Globalization is one of the most profound forces in our contemporary
economic environment, although support for free trade and open
borders is not universal. The practical impact of globalization can be
felt on all aspects of society, and effective management of
organizations in an increasingly complex global environment is crucial
for success. In nearly every country, increasing numbers of large,
medium, and even small corporations are engaging in international
activities, and a growing percentage of company revenue is derived
from overseas markets. Yet, continued economic and political
uncertainties in many world regions, the rise of more nationalistic
political movements, and continued concerns about the impact of
immigration have caused some to question the current system for
regulating and overseeing international trade, investments, migration,
and financial flows. Nonetheless, international management—the
process of applying management concepts and techniques in a
multinational environment—continues to retain importance.
Although globalization and international linkages have been part
of history for centuries (see the International Management in Action
box “Tracing the Roots of Modern Globalization” later in the chapter),
the principal focus of this opening chapter is to examine the process

of globalization in the contemporary world. The rapid integration of
countries, advances in information technology, and the explosion in
electronic communication have created a new, more integrated world
and true global competition. Yet, the complexities of doing business in
distinct markets persist. Since the environment of international
management is all-encompassing, this chapter is mostly concerned
with the economic dimensions, while the following two chapters are
focused on the political, legal, and technological dimensions and
ethical and social dimensions, respectively. The specific objectives of
this chapter are
1.

ASSESS the implications of globalization for countries,
industries, firms, and communities.

2.

REVIEW the major trends in global and regional integration.

3.

EXAMINE the changing balance of global economic power and
trade and investment flows among countries.

4.

ANALYZE the major economic systems and recent
developments among countries that reflect those systems.

The World of International Management

An Interconnected World

O

n the morning of April 10, 2018, Facebook founder and
president Mark Zuckerberg, dressed in a suit and tie rather
than his typical gray T-shirt and hoodie, headed to the Hart Senate
Office Building in Washington, D.C. Surrounded by intense media
coverage, Zuckerberg was facing perhaps the most serious and highprofile crisis in his young company’s history: a breach of data privacy
for nearly 90 million Facebook users.

The trouble for Facebook began back in March 2018, when it
was revealed that Aleksander Kogan, a university research associate,
and Cambridge Analytica, a British political consulting firm, had
released a third-party Facebook application called “This Is Your
Digital Life.” Although the application itself was simply a personality
quiz, users of the application unknowingly enabled Cambridge
Analytica to collect detailed information from their Facebook profiles.
Personal information such as home location, current city, interests,
and birthdates was gathered from users of the application, as well as
from their Facebook friends. Only a few hundred thousand people
actually downloaded the application, yet 87 million people had their
personal data compromised. Using the information gathered through
the application, Cambridge Analytica was able to profile Facebook
users based on personality, age, location, and interests. These users
could then be targeted with political advertisements that would be
more likely to influence their political opinion.
Even before the Cambridge Analytica scandal was revealed in
March 2018, Facebook was already facing serious integrity issues
and eroding public trust due to its lack of content control and
oversight. The Russian government’s utilization of social media to
interfere in the 2016 U.S. presidential election, including the spread of
misinformation, went unchecked and unrestricted by Facebook. More
than 3,000 advertisements and 80,000 posts, originating from
Russian-based operatives and designed to incite political divisions,
were posted to the site in the two years prior to the election.
Facebook first estimated in October 2017 that up to 10 million users
had been targeted by Russian-purchased election advertisements but
later confirmed that as many as 125 million U.S. users could have
seen posts or advertisements from Russian-based operatives.

Page 3
Although Zuckerberg had persevered through numerous
crises in Facebook’s young history, including a tumultuous initial
public offering and a questionable company culture, nothing had quite
prepared him for the outrage that he was now facing. Facebook’s
stock price was in freefall, users were exiting the social network in
large numbers, and U.S. senators from both sides of the political aisle
wanted answers. At the height of the Cambridge Analytica scandal,
Facebook lost nearly US$134 billion in its market value. As

Zuckerberg took his seat before the U.S. Senate’s Commerce and
Judiciary committees, many wondered: Could Zuckerberg’s
reputation—and perhaps Facebook as a whole—survive?

Social Media Has Changed How We Connect
Although Facebook and other social media applications have faced
considerable scrutiny in regard to data privacy, one thing is certain:
We currently live in a world interconnected and transformed by social
media. Through online networking, the way we connect with others
has drastically changed. The volume of content being created and
shared is staggering, with virtually anyone on the globe only a few
clicks away. In fact, the average number of links separating any two
random people on Facebook is now only 3.57.1 Statistics from some
of the most used social networking applications underscore how
social media has connected people across the globe:

Facebook

Source: “41 Facebook Stats That Matter to Marketers in 2019.” Hootsuite, November
13, 2018. Instagram.

Instagram
•

Over 1 billion people create content on Instagram every
month.2

•

Over 80 percent of Instagram users are from outside the
United States.3

•

Ninety-five million new photos are uploaded and shared
every day.4

Snapchat
•

Snapchat reached 100 million active members in less than
four years—outpacing the growth of Facebook or
Instagram.5

•

By the end of 2018, Snapchat had over 186 million daily
users.

•

Fifty-eight percent of active daily users are located outside
the United States.

•

More than 3 billion “snaps” are sent every day, equating to
more than 10 billion video views.

•

Ninety-four percent of 18- to 24-year-olds in the U.S. are on
Snapchat.6

Certainly, social networks are a part of many people’s lives. Yet, has
the virtual world of social media networks made a permanent impact
in the world of international business?

Social Media Has Changed Global Business
Strategy
Marriott International, an American-based hotel company, has
strategically leveraged social media to improve the customer
experience across its many global locations. A key component of this
strategy is Marriott’s “M Live” studios, which serve as centralized
social media “command centers” for the company. M Live employees,
equipped with conference rooms and large shared screens, monitor
customers’ posts, comments, and pictures across a variety of social
networking platforms in real time.7,8
The M Live strategy has improved the way that Marriott engages
its global customer base. With more than 6,500 properties around the
globe, creating personalized interactions with guests was nearly
impossible before social media. Marriott was dependent on
Page 4
call centers and e-mails to answer questions and complaints.

Communication was slow and generic, often eroding customer
patience and resulting in negative feedback. By using social media,
however, Marriott representatives at M Live centers are able to
engage in instant and meaningful interactions, whether the customer
is located in the U.S., the United Arab Emirates, or Uganda. The M
Live employees, who are equipped to respond in a variety of
languages, can engage with social media posts, interact one-on-one
with customers, and monitor conversations from around the globe.9
By utilizing social media, Marriott can offer a more personalized
service to its customers. An example of this is M Live’s use of “geotags.” Geo-tags, which are often included on public social networking
posts, are digital markers that give the physical location of the person
uploading a photo or post to a website. These tags give M Live
employees the ability to search for posts that were uploaded by
customers who are physically located at one of their properties—even
if the customer does not tag Marriott in his or her post—and to
interact with that guest in a positive way. For example, if a pair of
customers post a photo of themselves celebrating a first wedding
anniversary at a Marriott hotel in Orlando, the M Live command
center can find that post through the geo-tag in real time, call the
local hotel’s concierge, and have a bottle of champagne sent to the
couple’s room.10
By 2018, Marriott had opened its fourth M Live location and now
has command centers in London, Hong Kong, and the United States,
covering the European, North and South American, and Asian
markets. Social media will continue to be a valuable tool for Marriott
as the company expands to new locations in the developing regions
of the world, creating positive customer experiences that help build
the brand’s reputation.11,12,13

Social Media Has Impacted International
Diplomacy
World leaders have turned to social media as a way to express
options and gauge public support. According to a 2018 study, 97
percent of all governments have an official Twitter presence, 93
percent maintain a Facebook account, and 81 percent utilize
Instagram. Additionally, over 900 government ministers and 1,400
ambassadors maintain individual Twitter accounts. Citizens in most
countries can now directly access their governments through these
social networks. For example, the Dutch government responds to
policy comments and questions for 12 hours a day, every weekday,
through Twitter. The Nepalese government’s “Hello Government”
Twitter account focuses on replying to questions from citizens, and
more than 85 percent of Rwandan President Paul Kagame’s tweets
are replies to other users.14
Open dialogue between world leaders is also becoming
commonplace on social media platforms. The international reaction to
the United States’ withdrawal from the Paris Climate Agreement in
2017 provides a good example. Various global leaders used Twitter to
openly urge U.S. President Trump to reconsider his decision. Fiji
Prime Minister Frank Bainimarama tagged President Trump’s
personal Twitter account to ask him “not to abandon the Paris
Agreement,” and the prime ministers of the Nordic counties used
Twitter to appeal tor President Trump “to show global leadership.”
French President Emmanuel Macron called on President Trump to
“Make Our Planet Great Again,” and the French Foreign Ministry
tagged Ivanka Trump (President Trump’s daughter and adviser) in a
tweet asking her to change her father’s mind.15

The United Nations (U.N.) has increasingly embraced social
media as a tool to enhance diplomacy and understanding worldwide.
The U.N. maintains official accounts on Twitter, YouTube, Flickr,
Pinterest, Tumblr, Instagram, Snapchat, and LinkedIn, and, as of
2019, boasts over 4 million followers on its primary Facebook page.
As part of its 2018 United Nations Climate Change Conference, the
U.N. utilized various social media platforms to spread information
regarding gender inequity and the U.N.’s sustainable development
goals worldwide. The hashtag “#COP24” was used to link activities
across various networks, while YouTube and Facebook served as
primary platforms for disseminating information and videos to its
global audience (refer to Chapter 3, Table 3-4, for a further discussion
of the U.N.’s sustainable development goals).16
Social media networks have accelerated technological
integration among the nations of the world. People across the globe
are now linked more closely than ever before. This social
phenomenon has implications for businesses, as corporations can
now leverage networks such as Facebook to achieve greater
success. Understanding the global impact of social media is key to
understanding our global society.
Despite the challenges and privacy concerns that social
networking platforms face, such as Facebook’s Cambridge Analytica
scandal, discussed in the beginning of this section, social media has
transformed the world in which we live. The pace of interconnectivity
across the globe continues to increase with the new communication
tools that social networking provides. Social media has altered the
way that we interact with each other, and businesses, like Marriott,
have gained advantages by leveraging online networks. In this
chapter, we examine the globalization phenomenon, the growing

integration among countries and regions, the changing balance of
global economic power, and examples of different economic systems.
As you read this chapter, keep in mind that although there are
periodic setbacks, globalization continues to move at a rapid pace
and that all nations, including the United States, as well as individual
companies and their managers will have to keep a close watch on the
current environment if they hope to be competitive in the years
ahead.

■ Introduction
Management is the process of completing activities with and through other
people. International management is the process of applying management
concepts and techniques in a multinational environment and adapting
management practices to different economic, political, and cultural contexts.
Many managers practice some level of international management in Page 5
today’s increasingly diverse organizations. International management
is distinct from other forms of management in that knowledge and insights
about global issues and specific cultures are a requisite for success. Today
more firms than ever are earning some of their revenue from international
operations, even nascent organizations, as illustrated in the chapter opening
World of International Management.
management
The process of completing activities efficiently and effectively with and
through other people.

international management
The process of applying management concepts and techniques in a
multinational environment and adapting management practices to
different economic, political, and cultural environments.

Many of these companies are multinational corporations (MNCs). An
MNC is a firm that has operations in more than one country, international
sales, and a mix of nationalities among managers and owners. In recent years
such well-known American MNCs as Apple, Oracle, Coca-Cola, Ford Motor
Company, ExxonMobil, Caterpillar, Walmart, Microsoft, and Google have
all earned more annual revenue in the international arena than they have in
the United States. In addition, MNCs from developing economies, such as
India, Brazil, and China, are providing formidable competition to their North
American, European, and Japanese counterparts. Names like Cemex,
Embraer, Haier, Lenovo, LG Electronics, Huawei, Telefonica, Santander,
Reliance, Samsung, Li & Fung, Airtel, Tata, and Infosys are becoming wellknown global brands. Table 1-1 lists the world’s top nonfinancial companies
ranked by foreign assets through 2017.
MNC
A firm having operations in more than one country, international sales,
and a nationality mix of managers and owners.

Table 1-1
The World’s Top Nonfinancial MNCs, Ranked by Foreign Assets,
2017
(in millions of dollars)

Globalization, coupled with the rise of emerging market MNCs, has
brought prosperity to many previously underdeveloped parts of the world.
This is especially true in China, where luxury items, like automobiles, have
become increasingly attainable. In 2005, automobile sales in China totaled
only 5.8 million units, representing less than 9 percent of global sales, while
automobile sales in the United States exceeded 17.4 million units. Just 13
years later, in 2018, over 28 million automobile units were sold in China,
accounting for over a quarter of global sales and far surpassing the 17
million units sold in the U.S.17 Moreover, a number of emerging market auto
companies are becoming global players through their exporting, foreign
investment, and international acquisitions, including the purchase of Volvo
by Chinese automaker Geely and Tata’s acquisition of Jaguar Land Rover.
Procter & Gamble (P&G), an American consumer products MNC
headquartered in Cincinnati, Ohio, has invested heavily in its Singapore
operations over the last 10 years. P&G’s Singapore Innovation Center
(SgIC) functions as the primary research and development center for the
company’s hair, skin, and home care products. Initially costing US$185
million, the SgIC employs more than 500 engineers and scientists, focuses
on more than 18 different fields of study, and has successfully introduced
several major products into the global marketplace. Inspired by the success

of the SgIC, P&G invested a further US$100 million in 2017 to establish the
P&G Singapore E-Center, a digital innovation hub that focuses on improving
the supply chain and end-to-end logistics of the company. The Asian market,
with nearly 2 billion customers and 25 different brands, is particularly
important for P&G’s future growth plans.18,19,20
In the last few years, Africa’s emerging markets have benefited Page 6
from significant investments made by technology-focused MNCs. Google
A.I., a division of Google that specializes in developing artificial intelligence
technology, announced the opening of a major research center in Accra,
Ghana, in 2018. The new center, which focuses on developing Artificial
Intelligence (A.I.) tools for the health care, education, and agriculture
sectors, aims to employ highly educated engineers and researchers from
local u…
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