SI X T H EDI T I ON
INTERNATIONAL
BUSINESS
SI X T H EDI T I ON
Alan M. Rugman
& Simon Collinson
This sixth edition of International Business delivers
a comprehensive guide to the subject from authors
who keep pace with the ongoing developments
in both theory and practice.
Simon Collinson is Professor of International
Business and Innovation at the Henley Business
School, University of Reading.
Cover photograph: © 3D Stock Illustrations / Alamy
CVR_RUGM0979_06_SE_CVR.indd 1
• a brand-new chapter on Innovation,
Entrepreneurship and “Born Global” Firms
with cases on Facebook, Spreadshirt and
SetJam
• the core set of analytical frameworks in
international business that bridge theory
and practice
• 105 case studies drawn from a wide range
of sources, updated for this edition
• practical tools, like the “weighted country
risk assessment” model, for real-world
decision making
• a large set of bibliographic and web-based
resources for independent research.
Visit the companion website at
www.pearsoned.co.uk/rugman to find valuable
online teaching and learning resources
Alan M. Rugman
& Simon Collinson
Alan M. Rugman is Professor of International
Business and Head of the International Business
and Strategy Group at the Henley Business School,
University of Reading.
• a new five-part structure emphasizing
a strategic leadership approach to
international business
SI X T H EDI T I ON
It has been restructured to lend greater emphasis
to the strategic challenges of international business.
The growing importance of emerging economies,
such as China, India and Brazil, is reflected in specific
chapters and case examples that help students
understand how these countries are changing the
competitive dynamics of global business. This links
to a new focus on innovation, adaptability and
entrepreneurship as necessary strategic capabilities
for firms large or small, from mature, emerging
or developing economies.
The book provides essential material for the
successful study of international business:
INTERNATIONAL
BUSINESS
Business is becoming increasingly international, as the interaction, exchange and interdependence
between nations, firms and people around the world keeps on growing. Our complex, fast-moving
global economy continually throws up new management and leadership challenges, which require
clear thinking. This textbook connects tried-and-tested theory, analytical frameworks, data and case
examples to help students of management meet these challenges.
INTERNATIONAL
BUSINESS
Alan M. Rugman
& Simon Collinson
www.pearson-books.com
20/03/2012 16:00
INTERNATIONAL BUSINESS
Visit the International Business, 6th edition Companion Website at
www.pearsoned.co.uk/rugman to find valuable student learning
material including:
A01_RUGM0979_06_SE_FM.indd i
●
Multiple choice questions to test understanding
●
Extensive links to valuable resources on the web
●
An online glossary to explain key terms
●
Electronic ‘flashcards’ to check understanding of key terms and
definitions during revision
3/6/12 11:10 AM
A01_RUGM0979_06_SE_FM.indd ii
3/6/12 11:10 AM
INTERNATIONAL
BUSINESS
SIXTH EDITION
Alan M. Rugman
Henley Business School, the University of Reading
Simon Collinson
Henley Business School, the University of Reading
A01_RUGM0979_06_SE_FM.indd iii
3/6/12 11:10 AM
Pearson Education Limited
Edinburgh Gate
Harlow
Essex CM20 2JE
England
and Associated Companies throughout the world
Visit us on the World Wide Web at:
www.pearsoned.com/uk
First published by McGraw-Hill, Inc. 1995
Sixth edition 2012
© Pearson Education Limited 2000, 2012
The rights of Alan M. Rugman and Simon Collinson to be identified as authors of this work
have been asserted by them in accordance with the Copyright, Designs and Patents Act 1988.
All rights reserved; no part of this publication may be reproduced, stored in a retrieval system,
or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or
otherwise without either the prior written permission of the Publishers or a license permitting
restricted copying in the United Kingdom issued by the Copyright Licensing Agency Ltd,
Saffron House, 6–10 Kirby Street, London EC1N 8TS.
All trademarks used herein are the property of their respective owners. The use of any
trademark in the text does not vest in the author or publisher any trademark ownership rights
in such trademarks, nor does the use of such trademarks imply any affiliation with or
endorsement of this book by such owners.
Pearson Education is not responsible for the content of third-party internet sites
ISBN 978-0-273-76097-9
(Print)
I SBN 978-0-273-76100-6
(PDF)
British Library Cataloguing-in-Publication Data
A catalogue record for this book is available from the British Library.
Library of Congress Cataloging-in-Publication Data
Rugman, Alan M.
International business / Alan M. Rugman, Simon Collinson. — 6th ed.
p. cm.
Includes bibliographical references and index.
ISBN 978-0-273-76097-9
1. International business enterprises—Management. I. Collinson, Simon. II. Title.
HD62.4.R843 2012
658’.049—dc23
2012001440
10 9 8 7 6 5 4 3 2 1
16 15 14 13 12
Typeset in 10/12.5 pt Minion by 73
Printed and bound by Rotolito Lombarda, Italy.
A01_RUGM0979_06_SE_FM.indd iv
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CONTENTS IN BRIEF
List of Illustrations
Preface
About the Authors
Guide to the Case Studies
Guided Tour
Acknowledgments
xv
xviii
xxi
xxiii
xxx
xxxii
Part One THE WORLD OF INTERNATIONAL BUSINESS
Chapter 1
Chapter 2
Chapter 3
Regional and Global Strategy
The Multinational Enterprise
The Triad and International Business
3
36
71
Part Two THE ENVIRONMENT OF INTERNATIONAL BUSINESS
Chapter 4
Chapter 5
Chapter 6
Chapter 7
International Politics
International Culture
International Trade
International Financial Markets and Institutions
103
132
164
199
Part Three INTERNATIONAL BUSINESS STRATEGIES
Chapter 8
Chapter 9
Chapter 10
Chapter 11
Multinational Strategy
Organizing Strategy
Corporate Strategy and National Competitiveness
Innovation, Entrepreneurship, and “Born Global” Firms
243
272
300
331
Part Four FUNCTIONAL AREA STRATEGIES
Chapter 12
Chapter 13
Chapter 14
Chapter 15
Chapter 16
Production Strategy
Marketing Strategy
Human Resource Management Strategy
Political Risk and Negotiation Strategy
International Financial Management
363
399
430
462
497
Part Five REGIONAL STRATEGIES
Chapter 17
Chapter 18
Chapter 19
Chapter 20
Chapter 21
Chapter 22
Glossary
Index
European Union
Japan
North America
Emerging Economies
China
Corporate Ethics and the Natural Environment
537
569
605
637
669
700
728
738
v
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CONTENTS IN DETAIL
List of Illustrations
Preface
About the Authors
Guide to the Case Studies
Guided Tour
Acknowledgments
xv
xviii
xxi
xxiii
xxx
xxxii
Part One
THE WORLD OF INTERNATIONAL
BUSINESS
Chapter 1
Regional and Global Strategy
3
Objectives of the chapter
3
■ Active Learning Case
Coke goes worldwide with a local strategy
Overview of the book
Country and firm factors
International competitiveness and firm strategy
Globalization
Regionalization
Introduction
World business: a brief overview
Exports and imports
Foreign direct investment
The triad
Today’s international environment
International trade regulation
Technology
4
5
5
6
7
7
7
8
8
10
13
14
15
15
■ International Business Strategy in Action
Amazon.com is not a global business
Small and medium-sized enterprises (SMEs)
Globalization and strategic management
Regional triad strategies
Maintaining economic competitiveness
Multinationals in action
16
17
17
17
19
21
■ International Business Strategy in Action
Tata
The study of international business
From general to strategic emphasis
Framework for this book
Key points
22
25
25
26
28
Key terms
Review and discussion questions
28
28
■ Real Cases
Big oil gets bigger
Wal-Mart
Endnotes
Additional bibliography
Appendix to Chapter 1
29
30
32
32
33
Chapter 2
The Multinational Enterprise
36
Objectives of the chapter
36
■ Active Learning Case
Disneyland in Europe
Introduction
The nature of MNEs
Characteristics of MNEs
Why firms become MNEs
37
38
39
40
43
■ International Business Strategy in Action
Italian family firms
The strategic philosophy of MNEs
Strategic management and MNEs
Strategic management of MNEs:
an introduction
44
45
46
46
■ International Business Strategy in Action
Nestlé
A framework for global strategies:
the FSA–CSA matrix
The FSA–CSA matrix
It’s regional, not flat
Multinationals in action
Solectron
BMW
Levi Strauss
Canon
Zara
Key points
Key terms
Review and discussion questions
48
49
50
52
52
52
53
54
55
55
58
58
58
■ Real Cases
Starbucks
Sony
Endnotes
59
60
61
vi
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CONTENTS IN DETAIL
Additional bibliography
Appendix A to Chapter 2
Appendix B to Chapter 2
62
64
67
71
Objectives of the chapter
71
■ Active Learning Case
72
74
74
75
76
■ International Business Strategy in Action
Aflac
Reduce costs
Gain a foothold in economic blocs
77
77
78
■ International Business Strategy in Action
Lafarge and Cemex: concrete multinationals
Protect domestic markets
Protect foreign markets
Acquire technological and managerial
know-how
FDI and trade by triad members
The triad’s domination of FDI and trade
Triad FDI clusters
Multinationals in action:
regional business strategy
The world’s regional automotive industry
Mergers and acquisitions
Key points
Key terms
Review and discussion questions
79
80
80
81
82
82
82
83
84
92
94
94
94
■ Real Cases
Panasonic and Philips
Toys “ R” Us in Europe and Japan
Endnotes
Additional bibliography
95
96
97
98
Part Two
THE ENVIRONMENT OF
INTERNATIONAL BUSINESS
103
Objectives of the chapter
103
■ Active Learning Case
A01_RUGM0979_06_SE_FM.indd vii
Softwood lumber: not-so-free trade
Government–business cooperation
Economic integration
Trade creation and trade diversion
Levels of economic integration
Economic integration: an overall perspective
Ethics, environment, MNEs,
and the civil society
109
110
112
112
113
114
115
■ International Business Strategy in Action
Non-governmental organizations and political
power
The European Union (EU)
Other examples of economic integration
Economic integration and strategic
management
Strategic alliances and acquisitions
Localization of business operations
Key points
Key terms
Review and discussion questions
116
118
121
122
122
123
125
126
127
■ Real Cases
How environmental regulations can be used
as trade barriers
Embraer vs. Bombardier
Endnotes
Additional bibliography
127
128
130
130
Chapter 5
International Culture
132
Objectives of the chapter
132
■ Active Learning Case
Culture clash at Pharmacia and Upjohn
Introduction
What is culture?
The importance of culture in different business
contexts
Culture has always been important
133
134
134
136
137
■ International Business Strategy in Action
Chapter 4
International Politics
How risky is foreign investment in Russia?
105
106
108
■ International Business Strategy in Action
Chapter 3
The Triad and International
Business
Boeing versus Airbus
Introduction
Reasons for FDI
Increase sales and profits
Enter rapidly growing markets
Introduction
Political ideologies and economics
Government control of assets
vii
104
McDonald’s
National stereotypes and key dimensions of
culture
Culture at two levels
Hofstede’s four dimensions of culture
Trompenaars’ seven dimensions of culture
The GLOBE project’s nine dimensions
of culture
Applying the national culture frameworks
138
139
139
140
141
143
143
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viii
CONTENTS IN DETAIL
“The way we do things here”: the implications
of cultural differences for organizations and
managers
Cross-cultural management
Organization
Leadership
Communication
The corporate response
Multinational organization structures:
imperialist or independent?
Culture clash in cross-border M&A
and joint ventures
145
147
147
148
148
149
150
151
■ International Business Strategy in Action
Danone and Parmalat—going international,
staying local
Culture embodied in national institutions
France: cultural and social characteristics that
create a national distinctiveness
Key points
Key terms
Review and discussion questions
153
155
156
157
157
157
Do not throw your meishi!
Sport can be local and global: Manchester United
Endnotes
Additional bibliography
158
159
161
162
Chapter 6
International Trade
164
Objectives of the chapter
164
■ Active Learning Case
165
166
167
167
168
170
170
172
■ International Business Strategy in Action
Microsoft shows the world is not flat
Barriers to trade
Reasons for trade barriers
Commonly used barriers
Tariffs
173
175
175
175
177
■ International Business Strategy in Action
The courier wars
US trade policy
Non-tariff barriers to trade
Quotas
“Buy national” restrictions
Customs valuation
A01_RUGM0979_06_SE_FM.indd viii
181
182
182
182
183
183
183
184
186
186
187
■ Real Cases
■ Real Cases
Trade of the triad and China
Introduction
International trade theory
Theory of absolute advantage
Theory of comparative advantage
Factor endowment theory
International product life cycle theory
Other important considerations
Technical barriers
Antidumping legislation, subsidies, and
countervailing duties
Agricultural products
Export restraints
Other economic developments
Countertrade
Trade in services
Free trade zones
Key points
Key terms
Review and discussion questions
178
179
180
180
181
181
Job losses and offshoring to China
Dumping on trade complaints
Endnotes
Additional bibliography
Appendix to Chapter 6: Balance of payments
188
189
190
190
192
Chapter 7
International Financial Markets
and Institutions
199
Objectives of the chapter
199
■ Active Learning Case
Barclays Bank international financial dealings
Introduction
Foreign exchange markets
Foreign exchange markets in the United States
Determination of the exchange rate
Purchasing power parity
International Fisher effect
Combined equilibrium relationships
Other factors determining exchange rates
Protecting against exchange risk
Alternatives to minimize exchange risk
200
201
202
203
208
208
208
209
210
211
211
■ International Business Strategy in Action
Wall Street and world financial markets
Foreign money and capital markets
MNEs and national money markets
MNEs and national capital markets
Regional money and capital markets
The eurocurrency market
Eurocurrency interest rates
Other market characteristics
Criticisms of the euromarkets
Eurobonds and euroequities
212
214
214
215
215
215
217
217
218
219
■ International Business Strategy in Action
AngloGold Ashanti
The IMF system
Unresolved problems with the IMF system
220
221
224
MNEs and international financial markets
and institutions
225
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CONTENTS IN DETAIL
Key points
Key terms
Review and discussion questions
225
225
226
■ Real Cases
HSBC
World financial crises
Endnotes
Additional bibliography
Appendix to Chapter 7: Regional aspects of
multinationality and performance
Introduction
Organization structures
Early organization structures
ix
274
275
275
■ International Business Strategy in Action
227
228
230
230
233
Part Three
INTERNATIONAL BUSINESS
STRATEGIES
Sanofi-Aventis
The international division
Global organization structures
277
278
279
■ International Business Strategy in Action
Making matrix work
Strategic management and organizing strategy
Analysis of key structural variables
Coordination
Key points
Key terms
Review and discussion questions
284
287
287
288
293
294
294
■ Real Cases
Chapter 8
Multinational Strategy
243
Objectives of the chapter
243
■ Active Learning Case
Vodafone and the triad telecom market
Introduction
Strategic orientations
244
246
247
■ International Business Strategy in Action
Arthur Andersen, Accenture, and McKinsey
Strategy formulation
External environmental assessment
Internal environmental assessment
Goal setting
Strategy implementation
Location
249
250
250
254
257
258
258
■ International Business Strategy in Action
Fuji Xerox and Xerox
Ownership
Functional strategies
Control and evaluation
Common methods of measurement
Key points
Key terms
Review and discussion questions
259
260
261
262
263
264
265
265
■ Real Cases
Mountain Equipment Co-op: a small business
Benetton
Endnotes
Additional bibliography
266
267
268
270
Chapter 9
Organizing Strategy
272
Objectives of the chapter
272
■ Active Learning Case
Procter & Gamble
A01_RUGM0979_06_SE_FM.indd ix
273
LVMH: organizing luxury products
in the international arena
Command Alkon: a small business
Endnotes
Additional bibliography
295
296
296
297
Chapter 10
Corporate Strategy and National
Competitiveness
300
Objectives of the chapter
300
■ Active Learning Case
Worldwide operations and local strategies of ABB
Introduction
The single diamond
Determinants and external variables
Critique and evaluation of the model
The double diamond
Canada and the double diamond
301
302
302
303
304
306
306
■ International Business Strategy in Action
Nokia and Ericsson
Mexico and the double diamond
Integration and responsiveness
Integration versus national responsiveness
310
311
315
315
■ International Business Strategy in Action
Kodak
Balancing the trade-offs
Competitiveness in the triad
Key points
Key terms
Review and discussion questions
316
318
320
323
324
324
■ Real Cases
There is no global beer, only local
IBM
Endnotes
Additional bibliography
325
326
327
329
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x
CONTENTS IN DETAIL
Chapter 11
Innovation, Entrepreneurship,
and “Born Global” Firms
331
Objectives of the chapter
331
■ Active Learning Case
Facebook: Global and local?
Introduction
International dimensions of innovation
The location of innovation activities in the MNE
The innovative MNE as a differentiated
network
337
339
340
341
342
344
■ International Business Strategy in Action
Spreadshirt: open innovation
Dynamic capabilities and small firms
Life cycles, networks, and clusters
The practical challenges for internationalizing
SMEs
How do SME managers know which markets
to enter?
Modes of entry and adaptation for success in
foreign markets
Key points
Key terms
Review and discussion questions
346
347
347
349
349
351
353
353
354
■ Real Cases
GE Healthcare in India: Locally driven
innovation
SetJam: the mini multinational
Endnotes
Additional bibliography
www resources
354
355
356
358
360
Part Four
FUNCTIONAL AREA STRATEGIES
Chapter 12
Production Strategy
363
Objectives of the chapter
363
■ Active Learning Case
The GE production process and Six Sigma
A01_RUGM0979_06_SE_FM.indd x
365
366
369
370
370
■ International Business Strategy in Action
332
333
334
335
■ International Business Strategy in Action
Innovation networks at IBM
International small-and-medium-sized
enterprises (SMEs)
What are small firms?
The international activities of SMEs
International business theory and international
new ventures
Introduction
Research, development, and innovation
Speed-to-market
Generation of goods and services
Global sourcing
Gap Inc.: a successful “Hollow Corporation”
Manufacturing of goods
372
373
■ International Business Strategy in Action
The dark side of outsourcing: Boeing’s problems
with its 787
Developing a strong service orientation
International logistics
Transportation
Packaging
Storage
Different kinds of global production systems
Strategic management and production
strategy
Technology and production design
Continuous improvement
Alliances and acquisitions
Key points
Key terms
Review and discussion questions
374
378
380
380
382
383
383
384
384
385
385
392
392
392
■ Real Cases
Flextronics
Nike
Endnotes
Additional bibliography
393
395
396
397
Chapter 13
Marketing Strategy
399
Objectives of the chapter
399
■ Active Learning Case
Volkswagen in the United States
Introduction
International market assessment
Initial screening: basic need and potential
Second screening: financial and economic
conditions
Third screening: political and legal forces
Fourth screening: socio-cultural forces
Fifth screening: competitive environment
Final selection
Product strategies
Little or no modification
Moderate to high modification
400
401
402
402
402
403
403
404
404
405
405
405
■ International Business Strategy in Action
364
Kola Real Group
408
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CONTENTS IN DETAIL
Promotion
Nature of the product
Advertising
410
410
410
■ International Business Strategy in Action
IKEA in international markets
Personal selling
Pricing
Government controls
Market diversity
Currency fluctuations
Price escalation forces
Place
Different distribution systems
Choosing the best distribution system
Strategic management and marketing strategy
Ongoing market assessment
Internet marketing and “open innovation”
Key points
Key terms
Review and discussion questions
411
412
413
413
414
414
415
415
416
416
417
417
421
422
422
423
■ Real Cases
Bang & Olufsen
Brazilian soap operas: a world market
Endnotes
Additional bibliography
423
425
427
428
Chapter 14
Human Resource Management
Strategy
430
Objectives of the chapter
430
■ Active Learning Case
The Coca-Cola Company thinks local
Introduction
Selection and repatriation
International screening criteria and selection
procedures
Repatriation of expats
Training and development
Types of training
431
432
433
434
436
437
437
■ International Business Strategy in Action
P&O, Carnival, and Dubai Port World
Compensation
Common elements in an international
compensation package
Compensation trends and comparisons
Labor relations
Labor relations practices
439
440
441
442
444
445
■ International Business Strategy in Action
German management and unions
Industrial democracy
Industrial democracy in action
A01_RUGM0979_06_SE_FM.indd xi
Strategic management and IHRM strategies
Language training
Cultural adaptation
Competitive compensation
Specially designed HRM programs
Key points
Key terms
Review and discussion questions
xi
449
449
451
451
453
454
455
455
■ Real Cases
Offshoring to India
Executive search firms
Endnotes
Additional bibliography
456
457
459
460
Chapter 15
Political Risk and Negotiation
Strategy
462
Objectives of the chapter
462
■ Active Learning Case
Kodak in China: changing the rules of
the game
Introduction
Generic PEST analysis
Political risk
Deregulation and political risk
The nature of political risk
Sources of political risk
Country analysis and political risk assessment
Online risk information resources
Quantifying risk vulnerability
Accounting for country risk
Negotiation strategies
Behavioral characteristics of the participants
in negotiations
463
465
465
467
468
469
470
471
471
472
475
476
478
■ International Business Strategy in Action
Political risk for De Beers
479
■ International Business Strategy in Action
Dell goes to Brazil
Transparency and corruption: politically
sensitive political risk
Strategic management and political risk
Use of integrative and protective/defensive
techniques
Key points
Key terms
Review and discussion questions
481
484
485
486
488
489
490
■ Real Cases
446
448
448
Yukos and the Russian oligarchs
Problems with ports
Endnotes
491
492
494
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xii
CONTENTS IN DETAIL
Additional bibliography
www resources
Chapter 16
International Financial
Management
Objectives of the chapter
494
496
497
Chapter 17
European Union
537
497
Objectives of the chapter
537
■ Active Learning Case
■ Active Learning Case
British Airways
Introduction
Determining parent–subsidiary relationships
Polycentric solution
Ethnocentric solution
Geocentric solution
Managing global cash flows
Internal funds flows
Funds positioning techniques
Multilateral netting
498
499
501
501
501
501
502
502
503
505
■ International Business Strategy in Action
Tax havens
Managing cash
508
509
■ International Business Strategy in Action
Sovereign wealth funds
Exchange risk management
Transaction risk
Translation risk
Economic risk
An example of exchange risk management
Developing forecasting and reporting
systems
Capital budgeting in the MNE
Use of NPV
Institutional features
International financing in the MNE
Financial structure
Control: identifying objectives, evaluating
affiliate performance, and making performance
consistent with goals
Strategic international finance
Establishing overseas operations
Reducing financial risk
Alliances
Cost cutting
Key points
Key terms
Review and discussion questions
511
513
513
513
513
515
517
518
519
521
522
522
524
524
525
526
526
526
527
528
528
■ Real Cases
Skandia
Repsol’s acquisition of YPF
Endnotes
Additional bibliography
A01_RUGM0979_06_SE_FM.indd xii
Part Five
REGIONAL STRATEGIES
529
530
531
532
France Telecom
The EU environment
Emergence of a Single European Market
The competitive status of the EU
Conducting a strategic analysis
Using competitive intelligence
538
539
540
543
546
546
■ International Business Strategy in Action
Ford and Volvo
Evaluating locations
Strategy issues
Overall strategic analysis for the EU
Exporting
Strategic acquisitions and alliances
Marketing considerations
547
548
549
549
552
554
554
■ International Business Strategy in Action
Deutsche Bahn: more than a railway
Manufacturing considerations
Management considerations
Barriers to EU market access
Key points
Key terms
Review and discussion questions
555
557
559
559
561
562
562
■ Real Cases
Accor budget hotels
Carrefour
Endnotes
Additional bibliography
563
565
566
567
Chapter 18
Japan
569
Objectives of the chapter
569
■ Active Learning Case
Doing business in Japan
Introduction
Political, social, and cultural characteristics
A traditionally strong government role in the
economy
Distinctive cultural characteristics
Economic characteristics
Japan and China: the new Asian powerhouse?
Business characteristics
Manufacturing strengths
570
572
572
572
573
574
578
578
579
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CONTENTS IN DETAIL
Strong applied R&D
Keiretsu
579
579
■ International Business Strategy in Action
Kirin Beer goes international
Distribution, retailing, and customer
orientation
Japanese corporations
A changing nation
Restructuring capital markets
Deregulation, increased M&A, and inward FDI
582
■ Real Cases
590
591
Chapter 20
Emerging Economies
637
Objectives of the chapter
637
592
592
593
593
594
595
596
596
596
599
601
602
604
Chapter 19
North America
605
Objectives of the chapter
605
■ Active Learning Case
606
608
608
609
610
■ International Business Strategy in Action
A01_RUGM0979_06_SE_FM.indd xiii
627
630
631
631
632
633
634
635
Renault and Nissan: no pain, no gain
Canon Group
Endnotes
Additional bibliography
www resources
Bombardier
Canada’s multinationals
Multilateral agreement on investment (MAI)
Business opportunities in Canada
Franchising
Mexico
Mexico’s economy
Mexico and NAFTA
Regional trade agreements
Doing business in Mexico
Mexico and NAFTA
Key points
Key terms
Review and discussion questions
Jumex of Mexico
GlaxoSmithKline in the United States
Endnotes
Additional bibliography
■ Real Cases
NAFTA
Introduction
Canada
Canada’s economy
Differences in the business environment
■ International Business Strategy in Action
583
584
586
587
589
■ International Business Strategy in Action
Wal-Mart takes Seiyu
Restructuring corporations
The decline of manufacturing and distribution
keiretsu
The growth of outward FDI and offshore
manufacturing
The decline of lifetime employment and
changing HRM practices
Diversification strategies
Conclusions
Key points
Key terms
Review and discussion questions
xiii
611
616
619
621
623
623
623
625
625
626
■ Active Learning Case
Acer Taiwan goes international
Introduction
Triad firms and emerging economy firms:
why the mutual interest?
An overview of emerging economies, by region
Asia–Pacific and the Middle East
Central and Eastern Europe
Latin America and the Caribbean
Africa
638
639
640
641
644
648
648
649
■ International Business Strategy in Action
From Oserian to Tesco: the Kenyan cut flower
industry
Shifting patterns of comparative and competitive
advantage
Flying Geese model
Emerging economies as sources of innovation
Market access to the triad
650
652
653
655
657
■ International Business Strategy in Action
Korean chaebols: Hyundai and Samsung
Key points
Key terms
Review and discussion questions
658
660
661
661
■ Real Cases
The Indian IT, software, and services industry
Bumrungrad International in Thailand
Endnotes
Additional bibliography
www resources
661
664
665
666
668
Chapter 21
China
669
Objectives of the chapter
669
■ Active Learning Case
Oxford Instruments in China
Introduction
670
671
3/6/12 11:10 AM
xiv
CONTENTS IN DETAIL
Unprecedented scale, scope, and speed
of growth
The role of government
MNE investment into China
672
675
676
■ International Business Strategy in Action
Airbus in China
Foreign R&D investment
Getting into China
Outward investment and the new multinationals
from China
677
680
682
685
■ International Business Strategy in Action
Haier abroad
Key points
Key terms
Review and discussion questions
689
691
692
692
■ Real Cases
Citigroup in China
Nanjing Auto makes the MG
Endnotes
Additional bibliography
www resources
692
694
696
697
699
Chapter 22
Corporate Ethics and the Natural
Environment
700
Objectives of the chapter
700
■ Active Learning Case
The environment, NGOs, and MNEs
Introduction
Developing effective strategies
Going where the action is
703
703
■ International Business Strategy in Action
3M
International business research frameworks
Theories of international business
Practical applications of the theory
The five partners business network framework
Forging new business networks
Coping with changing environments
Political environment
Economic environment
The trade and investment framework
Environment and MNEs
704
705
705
706
707
707
709
709
710
713
715
■ International Business Strategy in Action
Is The Body Shop an ethical business?
The pattern of MNE responses
Key points
Key terms
Review and discussion questions
716
718
720
721
721
■ Real Cases
Dell: B2C
Maersk Group
Endnotes
Additional bibliography
721
723
725
726
Glossary
Index
728
738
701
702
Supporting resources
Visit www.pearsoned.co.uk/rugman to find valuable online resources
Companion Website for students
■ Multiple choice questions to test understanding
■ Extensive links to valuable resources on the web
■ An online glossary to explain key terms
■ Electronic ‘flashcards’ to check understanding of key terms and definitions during revision
For instructors
■ An Instructor’s Manual containing teaching notes and guidance on case studies
■ Powerpoint slides that can be downloaded and used for presentations
■ Testbank of over 2000 assessment questions
Also: The Companion Website provides the following features:
■ Search tool to help locate specific items of content
■ E-mail results and profile tools to send results of quizzes to instructors
■ Online help and support to assist with website usage and troubleshooting
For more information please contact your local Pearson Education sales representative or visit
www.pearsoned.co.uk/rugman
A01_RUGM0979_06_SE_FM.indd xiv
3/6/12 11:10 AM
LIST OF ILLUSTRATIONS
Figures
1.1 Model for this book
27
2.1 The multinational enterprise and its
environment
40
2.2 Entry into foreign markets: the
internationalization process
41
2.3 The strategic management process in action
46
2.4 The basic components of international business 49
2.5 The FSA–CSA matrix
50
3.1 Wal-Mart’s globalization: regional distribution
of stores
85
3.2 General Motors: revenue 2006–2009
89
3.3 Toyota Motors: revenue 2006–2009
91
3.4 Daimler AG: revenue 2006–2009
92
4.1 The European Union’s institutions
120
5.1 Cross-cultural business contexts
136
5.2 Hofstede’s power distance against
individualism for 20 countries
140
5.3 Excerpts from Trompenaars’ cultural
attitudes survey
146
5.4 Management dimensions of culture
148
5.5 Shared characteristics stemming from
common cultural influences
155
6.1 The international product life cycle
171
6.2 Impacts of a tariff
177
7.1 Foreign exchange market for euros in
New York
202
7.2 US foreign exchange markets
203
7.3 Exchange rate determination
210
7.4 History of the LIBOR rates, January 1,
1999–December 31, 2010
217
7.5 Three-month eurocurrency deposit rates
(year-end)
218
7.6 Special drawing right (October 15, 2004)
223
7.7 Multinationality and performance
233
8.1 The five-forces of industry competitiveness
251
8.2 The five-forces model applied to the
semiconductor industry
252
8.3 A basic value chain
255
8.4 Generic strategies in worldwide shipbuilding 257
8.5 The control and evaluation process
263
9.1 An export department structure
276
9.2 Use of subsidiaries during the early stages of
internationalization
276
9.3 An international division structure
278
9.4 A global product structure
279
9.5 A global area structure
281
9.6 A global functional structure
282
9.7 Geographic matrix structure
282
9.8
9.9
9.10
9.11
10.1
10.2
10.3
10.4
10.5
10.6
10.7
11.1
11.2
11.3
11.4
11.5
12.1
12.2
12.3
12.4
13.1
13.2
14.1
14.2
14.3
15.1
15.2
15.3
15.4
15.5
15.6
16.1
16.2
A multinational matrix structure
A mixed structure
Transnational network structure
Organizational epigrams
Porter’s single-diamond framework
The four stages of national development
and the historical position of select nations
The single-diamond view
Canadian–US double diamond
The shape of North America
US–Mexican double diamond
Integration and national responsiveness
Internationalization drivers for the innovative
multinational firm
Structural, strategic, and organizational
dilemmas for the innovative multinational firm
Global MNE structures for managing
innovation
Risk vs. reward: country market
attractiveness for SME managers
Foreign market selection criteria for
international and non-international SMEs
Global R&D: markets and hierarchies
Cost reduction approaches: the United
States versus Japan
Product- and service-dominated businesses
Global production systems: where is the
value added?
Selected examples of product modification
in the international arena
Product life cycles: two different approaches
The management of multinational enterprises
Cost of expatriate managers
Labor unions worldwide, 1995 (percentage
of labor force that is unionized)
Kodak’s structure in China
PEST framework for country analysis
Types and levels of political risk
FDI drivers: the strategic objectives of
MNEs, host-country attractiveness, and
host-government requirements
Zones of acceptance in the negotiating
process (in millions of US $)
Select examples of the use of integrative
and protective/defensive techniques
Financial management in the MNE
Common examples of internal sources
and flows of funds
283
285
286
292
303
305
307
308
313
313
315
335
336
336
350
351
367
375
379
383
405
409
433
443
445
464
466
469
477
483
487
500
503
xv
A01_RUGM0979_06_SE_FM.indd xv
3/6/12 11:10 AM
xvi
LIST OF ILLUSTRATIONS
16.3 Multilateral dollar flows between
subsidiaries
16.4 Centralized netting process in action
17.1 Productivity: percentage increase in output
per hour, 1992–2008
17.2 Business strategies for the EU
17.3 Pan-European manufacturing systems
17.4 Competition and shelter-based strategies
18.1 Trends in Japan’s trade by country/region:
exports from Japan
18.2 Trends in Japan’s trade by country/region:
imports to Japan
18.3 The Fuyo keiretsu group before restructuring
18.4 Bank group consolidation in Japan
18.5 Cross-border M&A activity in Japan
18.6 The global distribution of Renault and Nissan
sales (main markets), 2008
18.7 Renault–Nissan alliance combined worldwide
sales and production sites
20.1 What is the attraction for triad and non-triad
firms investing in each other’s home regions?
505
507
544
551
558
561
576
576
581
588
589
597
598
640
20.2 “Flying Geese” model: changing national-level
specialization
20.3 “Flying Geese” model: the shifting location
of industrial production
20.4 “Flying Geese” pattern of shifting
comparative advantage
20.5 Accelerated structural transformation
(are the geese flying faster?)
20.6 Firm-specific advantages (FSAs) for the
new multinationals
20.7 The growth of India’s IT industry
22.1 Network linkage and the changing shape
of international distribution systems
22.2 Network linkages for successful MNEs
22.3 FDI and NAFTA
22.4 NAFTA and the EU
22.5 Different perceptions of the WTO
22.6 Institutional alternatives for trade and
investment
22.7 MNE strategies and civil society
22.8 Segmentation of the Maersk Group activities
653
653
654
654
656
662
708
708
713
714
717
718
719
724
Tables
1.1 World trade, 2008
9
1.2 Intra-regional trade in the triad, 1980–2008
10
1.3a Foreign direct investment in the United States,
2008 (by US$ size ranking)
11
1.3b Foreign direct investment by the United States,
2008 (by US$ size ranking)
12
1.4 Comparative differences in the study of
international business, 1950–2010
26
1A The top 25 importers in the world, 2008
33
1B The top 25 exporters in the world, 2008
33
1C Inward stocks of world foreign direct
investment, 2008 (by US$ size ranking)
34
1D Outward stocks of world foreign direct
investment, 2008 (by US$ size ranking)
35
2.1 The world’s largest 500 multinational
enterprises, 2010 ranking
39
2.2 The international expansion of four MNEs
46
2.3 The top 100 economies and MNEs, 2010 ranking 57
2A The 25 largest US MNEs, 2010 ranking
64
2B The 25 largest European MNEs, 2010 ranking
65
2C The 25 largest Japanese MNEs, 2010 ranking
66
2D The 25 largest MNEs from emerging economies,
2010 ranking
67
2E Dunning’s “eclectic” theory of international
production
68
3.1 Fifteen years of intra-regional FDI in the triad,
1993–2008
74
3.2 The largest MNEs by size of their foreign
subsidiaries, 2008
75
3.3a Ten years of triad FDI
82
3.3b Ten years of triad trade
83
3.4 The regional nature of the motor vehicles
and parts industries, 2010 ranking
86
A01_RUGM0979_06_SE_FM.indd xvi
3.5 General Motors, revenue 2006–2009
(US$ million)
89
3.6 Toyota Motors: revenue 2006–2009 (US$ million) 91
3.7 Daimler AG, revenue 2006–2009 (US$ million)
92
5.1 World population percentages in terms of home
region, language, and religion
135
5.2 Average and intra-country ranking of work
goals: a seven-nation comparison
147
5.3 Organization types reflecting cultural
predispositions
151
6.1 Members of the Organization of the Petroleum
Exporting Countries (OPEC), January 2007
176
6.2 Common non-tariff barriers to trade
180
6.3 Overview of the US balance of current
account, 2008
184
6A Balance of payments: IMF presentation
193
6B US international transactions, 2008
197
6C US merchandise trade, 2008
198
7.1 Exchange rates in the inter-bank market,
June 26, 2010
205
7.2 Currency futures contract specifications at
the Chicago Mercantile Exchange
206
8.1 Typical strategic orientations of MNEs
248
8.2 Typical goals of an MNE
258
9.1 Factors that encourage centralization or
decentralization of decision making in
multinational operations
289
10.1 FDI position by Canada, the United States,
and Mexico, 2000–2009
312
10.2 AD and CVD orders by product category,
as of July 20, 2007
321
11.1 Various definitions of small-and-mediumsized enterprises (SMEs)
341
3/6/12 11:10 AM
LIST OF ILLUSTRATIONS
11.2 Types of international SMEs by trade and
FDI up and down the value chain
12.1 The cost of arriving late to market (and still
be on budget)
12.2 The Mitsubishi and Mitsui keiretsu in Japan
13.1 The effect of MNE pricing on final consumer
costs
13.2 International market penetration: location of
subsidiaries, holdings, and joint ventures
14.1 Employer incentive practices around
the world
14.2 A cultural assimilator situation
14.3 Cost of living in select cities (New York ⫽ 100),
2009
14.4 HRM practices in select countries
15.1 Changes in national regulations on FDI,
1992–2008
15.2 Political risk: sources, agents, and effects
15.3 The Weighted Country Risk Assessment
Model
15.4 Twelve examples of the differences in verbal
behaviors among Japanese, American, and
Brazilian negotiators
16.1 Shifting profits by transfer pricing
16.2 Transfer pricing through tax havens
16.3 Net cash positions of subsidiaries
16.4 Exchange risk hedging techniques
16.5 International sources of credit (including
markets and intrafirm transfers)
17.1 Economic profile of the big three
(in US dollars)
17.2 Hourly compensation costs in manufacturing
17.3 The world’s most competitive economies
17.4 Comparison of location factors
17.5 Direction of EU trade
540
544
545
550
553
17.6 EU antidumping cases investigated by sector,
2002–2009
18.1 Economic and trade data for Japan
18.2 Japan’s FDI imbalance (millions of US$)
18.3 Japan’s FDI inflows and outflows by source
and destination, 2008
18.4 The top 40 Japanese firms
19.1 Direction of US trade, 1999–2008
19.2 Direction of Canada’s trade, 1999–2008
19.3 Direction of Mexico’s trade, 1999–2008
19.4 The largest 25 Canadian-owned companies,
by revenues, 2010 ranking
19.5 The largest foreign-owned companies
in Canada, by revenues, 2010 ranking
19.6 The largest Canadian-based firms, by degree
of multinationality, 2010 ranking
19.7 The sales of the 50 largest firms in North
America, 2010 ranking
20.1 FDI inflows, by host region and economy,
1990–2008 (millions of dollars)
20.2 FDI from developing countries, 1990–2008
(billions of dollars)
20.3 The top 50 non-financial TNCs from developing
economies ranked by foreign assets, 2007
(millions of dollars, number of employees)
21.1 China: key economic indicators
21.2 China: key trade indicators, 2010
21.3 Direct investment flows, outward and inward
(billions of US $)
21.4 Common examples of synergies between
foreign multinationals and local Chinese
firms
21.5 Top 25 Chinese (mainland) firms in the
Forbes 2000 list, 2010 ranking
22.1 The world’s major trade agreements
14
377
506
Japan 2008
North America, Canada, Mexico, and United States
South and East Asia
343
369
386
415
418
443
452
453
454
468
470
473
483
504
505
506
514
522
xvii
560
575
575
576
585
607
607
607
617
618
619
620
642
643
645
673
673
674
684
686
711
Maps
The European Union timeline
Ford Fiesta production network
World tax havens
A01_RUGM0979_06_SE_FM.indd xvii
577
609
672
3/6/12 11:10 AM
PREFACE
In the Sixth Edition, in the strategy section of Part Three,
there is a new chapter on “Innovation, Entrepreneurship
and ‘Born Global’ Firms.” Innovation is the lifeblood of
any firm, large or small. By persistently creating new and
better products and services, new production processes,
management practices and business models, they can
stay ahead of the competition. Multinational firms have
an added competitive advantage. Small firms lack the
scale and scope advantages of large multinationals but
can still benefit from a diversity of options for sourcing
inputs and accessing markets if they internationalize.
However, they arguably face greater challenges and
risks than large firms when they do expand abroad.
Those that succeed against the odds provide lessons
for all entrepreneurs and innovators. Five new cases
feature in this chapter: “Facebook: Global and Local?”,
“Innovation Networks at IBM,” “Spreadshirt: Open
Innovation,” “GE Healthcare: Product Innovation
Driven by Local Needs in India,” and “SetJam: the Mini
Multinational.”
The book is also reorganized into five parts, of which
three parts focus on strategies. Part One introduces the
world of international business. Part Two discusses
the environment of international business. Part Three
focuses on international business strategies. Part Four
deals with functional area strategies. Part Five pays
specific attention to regional strategies. The major
changes are in Part Three which now include the
new Chapter 11 “Innovation, Entrepreneurship and
‘Born Global’ Firms,” and the former Chapter 15
“Corporate Strategy and National Competitiveness”
which now becomes Chapter 10. This chapter discusses
the integration and responsiveness framework of
multinational business strategy as well as the diamond
and double diamond approach to international
competitiveness. This now provides a more logical
development of the key frameworks in the text which
are: the FSA/CSA framework in Chapter 2 and throughout Parts One and Two; integration and responsiveness
in Chapter 10 and throughout Parts Three and Four;
the diamond and double diamond in Chapter 10; and
the five-partners flagship framework in Chapter 22.
In addition, all tables and figures in the text and cases
have been updated. As listed in the Guide to the Case
Studies, all the cases have been updated and several new
cases have been added. About 75 of the 105 cases have
been revised and/or updated. There are seven new case
studies (five new cases for the new Chapter 11), one
new case each for Chapters 12 and 22 respectively. At
the end of each chapter the bibliographies have been
substantially revised and updated.
The additional material in the book consists of the
following:
■
Chapter 1. The Active Learning Case “Coke goes
worldwide with a local strategy” and the two The
Real Cases “Big oil gets bigger” and “Wal Mart”
have been greatly updated. Data on the two cases
International Business Strategy in Action “Amazon.
com” and “Tata” have also been updated.
■
Chapter 2: The Active Learning Case “Disneyland
in Europe” has been updated. Data on the cases
“Starbucks,” “Italian Family Firms,” and “Sony”
have been updated.
■
Chapter 3. The regional automotive industry
discussion has been substantially rewritten and
updated. The Active Learning Case “Boeing versus
Airbus” and the International Business Strategy in
Action “Large and Cemex: concrete multinationals”
have been extensively updated. Data on the cases
“Panasonic and Philips” and “Toys ‘R’ Us” in Europe
and Japan have been updated.
■
Chapter 4. The Active Learning Case “How risky is
investment in Russia?” and the Real Case “Embraer
versus Bombardier” have been substantially updated.
■
Chapter 5. The International Business Strategy
in Action cases, “McDonald’s” and “Danone and
Parmalat—Going international, staying local” have
been updated as has the Real Case “Sport can be local
and global: Manchester United.”
■
Chapter 6. The Active Learning Case “Trade of the
Triad and China” and the International Business
Strategy in Action case “Microsoft shows the world
is not flat” have been updated. Data on the Active
Learning Case “Trade of the triad and China” and
the Real Case “Job losses and offshoring to China”
have been updated and the cases have been revised.
xviii
A01_RUGM0979_06_SE_FM.indd xviii
3/6/12 11:10 AM
PREFACE
■
■
Chapter 7. Data on the Active Learning case
“Barclays Bank International Financial Dealings”
and the International Business Strategy in Action
case “AngloGold Ashanti” have been updated. The
Real Case “HSBC” has been substantially revised and
updated.
Chapter 8. The Active Learning case “Vodafone” and
answers have been greatly revised. Data and facts on
the two cases of International Business Strategy in
Action “Arthur Andersen, Accenture and McKinsey”
and “Fuji Xerox and Xerox” have been updated. Data
on the Real Case “Mountain Equipment Co-op: a
Small Business” and “Benetton” have been updated.
■
Chapter 9. The International Business Strategy
in Action case “Sanofi-Aventis” has been greatly
updated. Data and facts on the Active Learning Case
“Procter & Gamble”, the two Real Cases on “LVMH:
organizing luxury products in the international
arena” and “Command Alkon: A Small Business”
have been updated.
■
Chapter 10 (old Chapter 15): New text and examples
relating to the diamond, double-diamond, and integration/responsiveness frameworks to the earlier
FSA–CSA matrix have been added. The Active
Learning Case “Worldwide Operation and Local
Strategies of ABB,” the International Business
Strategy in Action case “Nokia and Ericsson,” and
the Real Case “There is No Global Beer, only Local”
have been substantially revised and updated. Data on
the case “IBM” have been updated.
■
■
■
Chapter 11 (new chapter) This chapter has five
new cases: The Active Learning Case is about the
social network “Facebook: Global and Local?”;
two International Business Strategy in Action cases
“Innovation Network at IBM” and “Spreadshirt: Open
Innovation”; and two Real Cases “GE Healthcare:
Product Innovation Driven by Local Needs in India”
and “SetJam: The Mini Multinational.” The entire
text of this chapter is new.
Chapter 12 (old Chapter 10). The International
Business Strategy in Action case “Greening the
Supply Chain” is replaced by the new case “The Dark
Side of Outsourcing: Boeing’s Problems with Its
787.” The International Business Strategy in Action
“Gap Inc.: A Successfully ‘Hollow Corporation’” and
the two Real Cases “Flextronics” and “Nike” have
been greatly revised and updated.
Chapter 13 (old Chapter 11). The Active Learning
Case “Volkswagen in the United States,” the
A01_RUGM0979_06_SE_FM.indd xix
xix
International Business Strategy in Action case “IKEA
in International Markets,” and the Real Case “Bang
& Olufsen” have been revised and updated.
■
Chapter 14 (old Chapter 12). The International
Business Strategy in Action “P&O, Carnival, and
Dubai Port World” and “German Management Gets
Tough” (now retitled as “German Management
and Unions”) and the Real Case “Executive Search
Firms” have been extensively revised and updated.
■
Chapter 15 (old Chapter 13). The Weighted Country
Risk Assessment Model has been revised with a new
approach to calibrating the country comparisons.
The International Business Strategy in Action cases
“Political Risk for De Beers” and “Dell goes to Brazil”
have been updated. The text on “Transparency and
Corruption” has been updated and revised. The Real
Case on “Yukos and the Russian oligarchs” has been
updated and the footnotes and references extensively
revised.
■
Chapter 16 (old Chapter 14). The International
Business Strategy in Action case “Tax Havens”
has been revised and updated. Data and facts on
the Active Learning Case “British Airways,” the
International Business Strategy in Action “Sovereign
Wealth Funds,” and the Real Case “Skandia” have
been updated.
■
Chapter 17 (old Chapter 16). Material on the composition and challenges of the EU has been revised. The
Real Case “Accord Budget Hotels” and the Active
Learning Case “France Telecom” have been updated.
The International Business Strategy in Action case on
“Ford and Volvo” has been updated as have sections
of the text on evaluating locations. A new table and
accompanying material on the World Bank “Doing
Business” country analysis tool have been added
along with a new section on regional incentives. All of
the remaining cases have been revised and updated.
■
Chapter 18 (old Chapter 17). The International
Business Strategy in Action “Kirin Beer Goes
International” and the two Real Cases “Renault and
Nissan: No Pain, No Gain” and “Canon” have been
greatly revised and updated.
■
Chapter 19 (old Chapter 18). Data on the International Business Strategy in Action “Bombardier”
and Real Case “GlaxoSmithKline in the United
States” have been updated.
■
Chapter 20 (old Chapter 19). The Active Learning
Case “Acer Taiwan Goes International” has been
updated. Data and facts on the International Business
3/6/12 11:10 AM
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