Discussion Question – Module 01: Decision-Making Within the Global Marketplace

Module 01: Decision-Making Within the Global Marketplace
Discussion Question
Question Requirements:
Globalization and Decision-Making
How does globalization impact decision-making processes in different countries, such as Saudi Arabia?
1. Discuss how the interconnectedness of economies, cultures, and technologies on a global
scale influences the choices made by governments, businesses, and individuals in Saudi
Arabia.
2. Share your insights on how Saudi Arabia’s unique position in the global landscape shapes its
decision-making processes and the implications of these decisions on both local and
international levels.
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.
1 2 3 4 5 6 7 8 9 LWI 24 23 22 21 20
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

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Page xi

FOR STUDENTS
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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 universities.21 In late 2017, Facebook, which has close to 200 million
users in Africa, announced plans to open a technology-based incubator space
for start-ups in Lagos, Nigeria, called Ng Hub. As of September 2019, phase
one of the project had been launched and the initial 12 entrepreneurs had
been selected for occupancy and support in the Hub.22 The primary goal of
the project is to provide education and tools to underfunded entrepreneurs,
which will enable the start-ups to grow and attract investment from around
the globe. In addition to the incubator space, Facebook committed to
providing technology-based training to over 50,000 Nigerians.23
MNCs continue to turn to India when expanding their consulting, IT,
and other service-based offerings. Accenture, an American professional
services firm, employs 150,000 people in India, constituting more than a
third of its global workforce. In fact, 85 percent of the 469,000 Accenture
employees worldwide are now located outside the United States.24
Accenture’s Indian operations, with highly specialized knowledge in
artificial intelligence, blockchain technology, and machine learning, are
increasingly driving innovation for the company.25 With offices in 200 cities

across 52 countries, Accenture has focused on providing services for both
developed and growing markets.26 In 2017, Accenture drew 46 percent of its
revenue from outsourcing.27
These trends reflect the reality that firms are finding they must develop
international management expertise, especially expertise relevant to the
increasingly important developing and emerging markets of the world.
Managers from today’s MNCs must learn to work effectively with those
from many different countries. Moreover, more and more small and
medium-sized businesses will find that they are being affected by
internationalization. Many of these companies will be doing business
abroad, and those that do not will find themselves doing business with
MNCs operating locally. And increasingly, the MNCs are coming from the
developing world as previously domestic-oriented companies from countries
like China and India expand abroad through acquisitions or other means.
Table 1-2 lists the world’s top nonfinancial companies from developing
countries ranked by foreign assets in 2016.
Table 1-2
The World’s Top Nonfinancial TNCs from Developing and
Transitioning Economies, Ranked by Foreign Assets, 2016
(in millions of dollars)

■ Globalization and Internationalization

Page 7

International business is not a new phenomenon; however, the volume of
international trade has increased dramatically over the last two decades.
Today, every nation and an increasing number of companies buy and sell
goods in the international marketplace. A number of developments around
the world have helped fuel this activity.

Globalization, Antiglobalization, and Global
Pressures for Change
Globalization can be defined as the process of social, political, economic,
cultural, and technological integration among countries around the world.
Globalization is distinct from internationalization in that internationalization
is the process of a business crossing national and cultural borders, while
globalization is the vision of creating one world unit, a single market entity.
Evidence of globalization can be seen in increased levels of trade, capital
flows, and migration. Globalization has been facilitated by technological
advances in transnational communications, transport, and travel. Thomas
Friedman, in his book The World Is Flat, identified 10 “flatteners” that have
hastened the globalization trend, including the fall of the Berlin Wall,
offshoring, and outsourcing, which have combined to dramatically
intensify the effects of increasing global linkages.28 Hence, in recent years,
globalization has accelerated, creating both opportunities and challenges to
global business and international management.
globalization
The process of social, political, economic, cultural, and technological
integration among countries around the world.

offshoring
The process by which companies undertake some activities at offshore
locations instead of in their countries of origin.

outsourcing
The subcontracting, or contracting out, of activities to endogenous
organizations that had previously been performed by the firm.

On the positive side, global trade and investment continue to grow,
bringing wealth, jobs, and technology to many regions around the world.
While some emerging countries have not benefited from globalization and
integration, the emergence of MNCs from developing countries reflects the
increasing inclusion of all regions of the world in the benefits of
globalization. Yet, as the pace of global integration quickens, so have the
cries against globalization and the emergence of new concerns over
mounting global pressures.29 These pressures can be seen in protests at the
meetings of the World Trade Organization (WTO), International Monetary
Fund (IMF), and other global bodies and in the growing calls by developing
countries to make the global trading system more responsive to their
economic and social needs. These groups are especially concerned about
rising inequities between incomes, and nongovernmental organizations
(NGOs) have become more active in expressing concerns about the potential
shortcomings of economic globalization.30 In addition, an increasing number
of candidates in various election campaigns around the world have criticized
globalization, including the migration of people, as a contributing factor
leading to lost jobs at home and general economic insecurity. The perceived
negative effects from globalization on the U.S. manufacturing industry was a
major issue in the 2016 U.S. presidential election. According to some
analysts, the antiglobalization sentiment may have ultimately swayed the
vote in several key states to then-candidate Donald Trump. It is important to

remember that even though globalization does contribute to changes in
industry and manufacturing, as well as the loss of some jobs, these problems
are typically the result of a range of factors, of which globalization is just
one.
Who benefits from globalization? Proponents believe that everyone
benefits from globalization, as evidenced in lower prices, greater availability
of goods, better jobs, and access to technology. Theoretically, individuals in
established markets will strive for better education and training to be
prepared for future positions, while citizens in emerging markets and
underdeveloped countries will reap the benefits of large amounts of capital
flowing into those countries, which will stimulate growth and development.
Critics disagree, noting that the high number of jobs moving abroad as a
result of the offshoring of business services jobs to lower-wage countries
does not inherently create greater opportunities at home and that the main
winners of globalization are the company executives. Proponents claim that
job losses are a natural consequence of economic and technological change
and that offshoring actually improves the competitiveness of American
companies and increases the size of the overall economic pie.31 Critics point
out that growing trade deficits and slow wage growth are damaging Page 8
economies and that globalization may be moving too fast for some
emerging markets, which could result in economic collapse. Moreover,
critics argue that when production moves to countries to take advantage of
lower labor costs or less regulated environments, it creates a “race to the
bottom” in which companies and countries place downward pressure on
wages and working conditions.32

International Management in Action

Tracing the Roots of Modern Globalization
Globalization is often presented as a new phenomenon
associated with the post–World War II period. In fact,
globalization is not new. Rather, its roots extend back to
ancient times. Globalization emerged from long-standing
patterns of transcontinental trade that developed over many
centuries. The act of barter is the forerunner of modern
international trade. During different periods of time, nearly
every civilization contributed to the expansion of trade.

Middle Eastern Intercontinental Trade
In ancient Egypt, the King’s Highway, or Royal Road,
stretched across the Sinai into Jordan and Syria and into the
Euphrates Valley. These early merchants practiced their trade
following one of the earliest codes of commercial integrity: Do
not move the scales, do not change the weights, and do not
diminish parts of the bushel. Land bridges later extended to
the Phoenicians, the first middlemen of global trade. Over
2,000 years ago, traders in silk and other rare valued goods
moved east out of the Nile basin to Baghdad and Kashmir
and linked the ancient empires of China, India, Persia, and
Rome. At its height, the Silk Road extended over 4,000 miles,
providing a transcontinental conduit for the dissemination of
art, religion, technology, ideas, and culture. Commercial
caravans crossing land routes in Arabian areas were forced
to pay tribute—a forerunner of custom duties—to those who
controlled such territories. In his youth, the Prophet

Muhammad traveled with traders, and prior to his religious
enlightenment the founder of Islam himself was a trader.
Accordingly, the Qur’an instructs followers to respect private
property, business agreements, and trade.

Trans-Saharan Cross-Continental Trade
Early tribes inhabiting the triad cities of Mauritania, in ancient
West Africa below the Sahara, embraced caravan trade with
the Berbers of North Africa. Gold from the sub-Saharan area
was exchanged for something even more prized—salt, a
precious substance needed for retaining body moisture,
preserving meat, and flavoring food. Single caravans,
stretching 5 miles and including nearly 2,500 camels, earned
their reputation as ships of the desert as they ferried gold
powder, slaves, ivory, animal hides, and ostrich feathers to
the northeast and returned with salt, wool, gunpowder,
porcelain pottery, silk, dates, millet, wheat, and barley from
the east.

China as an Ancient Global Trading Initiator
In 1421, a fleet of over 3,750 vessels set sail from China to
cultivate trade around the world for the emperor. The voyage
reflected the emperor’s desire to collect tribute in exchange
for trading privileges with China and China’s protection. The
Chinese, like modern-day multinationals, sought to extend
their economic reach while recognizing principles of
economic equity and fair trade. In the course of their global
trading, the Chinese introduced uniform container

measurements to enable merchants to transact business
using common weight and dimension measurement systems.
Like the early Egyptians and later the Romans, they used
coinage as an intermediary form of value exchange or specie,
thus eliminating complicated barter transactions.

European Trade Imperative
The concept of the alphabet came to the Greeks via trade
with the Phoenicians. During the time of Alexander the Great,
transcontinental trade was extended into Afghanistan and
India. With the rise of the Roman Empire, global trade routes
stretched from the Middle East through central Europe,
through Gaul, and across the English Channel. In 1215, King
John of England signed the Magna Carta, which stressed the
importance of cross-border trade. By the time of Marco Polo’s
writing of The Description of the World at the end of the 13th
century, the Silk Road from China to the city-states of Italy
was a well-traveled commercial highway. His tales, chronicled
journeys with his merchant uncles, gave Europeans a taste
for the exotic, further stimulating the consumer appetite that
propelled trade and globalization. Around 1340, Francisco
Balducci Pegolotti, a Florentine mercantile agent, authored
Practica Della Mercatura (Practice of Marketing), the first
widely distributed reference on international business and a
precursor to today’s textbooks. The search for trading routes
contributed to the Age of Discovery and encouraged
Christopher Columbus to sail west in 1492.

Globalization in U.S. History
The Declaration of Independence, which set out grievances
against the English crown, upon which a new nation was
founded, cites the desire to “establish Commerce” as a chief
rationale for establishing an independent state. The king of
England was admonished “for cutting off our trade with all
parts of the world” in one of the earliest antiprotectionist free
trade statements from the New World.
Globalization, begun as trade between and across
territorial borders in ancient times, was historically and is
even today the key driver of world economic development.
The first paths in the creation of civilization were made in the
footsteps of trade. In fact, the word meaning “footsteps” in the
old Anglo-Saxon language is trada, from which the modern
English word trade is derived. Contemporary globalization is
a new branch of a very old tree whose roots were planted in
antiquity.
Sources: Thomas Cahill, Sailing the Wine Dark Sea: Why Greeks Matter (New
York: Doubleday, 2003), 10, 56–57; Charles W. L. Hill, International Business, 4th
ed. (New York: McGraw-Hill Irwin, 2003), 100; Gavin Menzies, 1421: The Year
China Discovered America (New York: William Morrow/HarperCollins, 2003), 26–
27; Milton Viorst, The Great Documents of Western Civilization (New York: Barnes
& Noble Books, 1994), 115 (Magna Carta), 168 (Declaration of Independence).

India is one country at the center of the globalization debate. As Page 9
noted previously, India has been the beneficiary of significant foreign

investment, especially in services such as software and information
technology (IT). India’s public debt has declined to about 65 percent of GDP
over the last 10 years, increasing macroeconomic stability and lowering its
vulnerability to external risks. Additionally, India continues to outpace
China as the fastest growing large economy, with GDP expanding by over 7
percent in 2018.33 Despite this growth, infrastructure challenges still remain.
Limited clean water, power, paved roadways, and modern bridges have made
it increasingly difficult for companies to expand. There have even been
instances of substantial losses for companies using India as an offshore base,
as occurred when several automakers, including Ford, Hyundai, RenaultNissan, and Daimler, experienced the destruction of inventory and a weeklong production stoppage due to flooding in southern India.34 It is possible
that India will follow in China’s footsteps and continue rapid growth in
incomes and wealth; however, it is also possible that the challenges India
faces are greater than the country’s capacity to respond to them. See In the
International Spotlight at the end of this chapter for additional insights into
India.
This example illustrates just one of the ways in which globalization has
raised particular concerns over environmental and social impacts. According
to antiglobalization activists, if corporations are free to locate anywhere in
the world, the world’s poorest countries will relax or eliminate
environmental standards and social services in order to attract first-world
investment and the jobs and wealth that come with it. Proponents of
globalization contend that even within the developing world, it is
protectionist policies, not trade and investment liberalization, that result in
environmental and social damage. They believe globalization will force
higher-polluting countries such as China and Russia into an integrated global
community that takes responsible measures to protect the environment.
However, given the significant changes required in many developing nations

to support globalization, such as better infrastructure, greater educational
opportunities, and other improvements, most supporters concede that there
may be some short-term disruptions. Over the long term, globalization
supporters believe industrialization will create wealth that will enable new
industries to employ more modern, environmentally friendly technology. We
discuss the social and environmental aspects of globalization in more detail
in Chapter 3.
These contending perspectives are unlikely to be resolved anytime
soon. Instead, a vigorous debate among countries, MNCs, and civil society
will likely continue and affect the context in which firms do business
internationally. Business firms operating around the world must be sensitive
to different perspectives on the costs and benefits of globalization and adapt
and adjust their strategies and approaches to these differences.

Global and Regional Integration
One important dimension of globalization is the increasing economic
integration among countries brought about by the negotiation and
implementation of trade and investment agreements. Here we provide a brief
overview of some of the major developments in global and regional
integration.
Over the past six decades, succeeding rounds of global trade
negotiations have resulted in dramatically reduced tariff and nontariff
barriers among countries. Table 1-3 shows the history of these negotiation
rounds, their primary focus, and the number of countries involved. These
efforts reached their crest in 1994 with the conclusion of the Uruguay Round
of multilateral trade negotiations under the General Agreement on Tariffs
and Trade (GATT) and the creation of the World Trade Organization
(WTO) to oversee the conduct of trade around the world. The WTO is the

global organization of countries that oversees rules and regulations Page 10
for international trade and investment, including agriculture,
intellectual property, services, competition, and subsidies. However, in the
25 years since the Uruguay Round, the momentum of global trade
agreements has slowed. Trade talks at WTO Ministerial Conference in
Seattle in 1999 were postponed after protesters disrupted meetings and trade
representatives from developed and developing countries were unable to
agree on an agenda. In November 2001, the members of the WTO
successfully launched a new round of negotiations at Doha, Qatar, to be
known as the “Development Round,” reflecting the recognition by members
that trade agreements needed to explicitly consider the needs of and impact
on developing countries.35 However, after a lack of consensus among WTO
members regarding agricultural subsidies and the issues of competition and
government procurement, progress again slowed. At the most recent
meeting, held in Geneva in July 2008, disagreements among the U.S., China,
and India over access to agricultural imports from developing countries
resulted in an impasse after nine days of discussions.36 Although there have
been attempts to restart the negotiations, they have remained stalled,
especially in light of rising protectionism.37
World Trade Organization (WTO)
The global organization of countries that oversees rules and regulations
for international trade and investment.

Table 1-3
Completed Rounds of the Negotiations under the GATT and
WTO

A Closer Look

Outsourcing and Offshoring
The concepts of outsourcing and offshoring are not new, but
these practices are growing at an extreme rate. Offshoring
refers to the process by which companies undertake some
activities at offshore locations instead of in their countries of
origin. Outsourcing is the subcontracting or contracting out of
activities to external organizations that had previously been
performed within the firm and is a wholly different
phenomenon. Often the two combine to create “offshore
outsourcing.”
Offshoring
began
with
manufacturing
operations. Globalization jump-started the extension of
offshore outsourcing of services, including call centers, R&D,

information services, and even legal work. American Express,
GE, Sony, and Netflix have all used attorneys from Pangea3,
a Mumbai-based legal firm, to review documents and draft
contracts. These companies benefit from the lower costs and
higher efficiency that companies like Pangea3 can provide
compared to domestic legal firms. This is a risky venture, as
legal practices are not the same across countries, and the
documents may be too sensitive to rely on assembly-line
lawyers. It also raises the question as to whether or not there
are limitations to offshore outsourcing. Many companies,
including Deutsche Bank, spread offshore outsourcing
opportunities across multiple countries such as India and
Russia for economic or political reasons. The advantages,
concerns, and issues with offshoring span a variety of
subjects. Throughout the text we will revisit the idea of
offshore outsourcing as it is relevant. Here in Chapter 1 we
see how skeptics of globalization wonder if there are benefits
to offshore outsourcing, while in Chapter 2 we see how these
are related to technology, and finally in Chapter 14 we see
how offshore practices affect human resource management
and the global distribution of work.
Sources: Pete Engardio and Assif Shameen, “Let’s Offshore the Lawyers,”
BusinessWeek, September 18, 2006, 42; Tony Hallett and Andy McCue, “Why
Deutsche Bank Spreads Its Outsourcing,” BusinessWeek, March 15, 2007;
“Offshoring Your Lawyer,” The Economist, December 16, 2010,

Partly as a result of the slow progress in multilateral trade Page 11
negotiations, the U.S. and many other countries have pursued bilateral and
regional trade agreements. In 1994, the United States, Canada, and Mexico
enacted the North American Free Trade Agreement (NAFTA), which,
removed most barriers to trade among these countries and created the
world’s largest free trade zone. A number of economic developments
occurred because of this agreement, which was designed to promote
commerce in the region. Some of the more important developments include
(1) the elimination of tariffs as well as import and export quotas; (2) the
opening of government procurement markets to companies in the other two
nations; (3) an increase in the opportunity to make investments in each
other’s country; (4) an increase in the ease of travel between countries; and
(5) the removal of restrictions on agricultural products, auto parts, and
energy goods. In the more than 25 years since NAFTA was first
implemented, trade between its member countries has quadrupled. Despite
the successes, NAFTA, like other free trade agreements, was not immune
from some criticism. In recent years, disruptions caused to specific
industries, including the shifting of manufacturing jobs from the United
States to Mexico, the continued tariffs on dairy exports to Canada, and the
inability of Mexican farmers to compete with subsidized U.S. farmers,
resulted in discussions to revise the deal. In 2018, the original NAFTA
countries agreed to a renegotiated trade agreement, called the United
States–Mexico–Canada Agreement (USMCA), which is expected to
replace NAFTA following its ratification by each country. USMCA
maintains the key…
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