InternatIonal busIness Geringer McNett Minor Ball CONNECT WITH SMARTBOOK® WORKS A B C D More C students 30.5% 33.5% 22.6% 8.7% 4.7% earn B’s A B C D *Study: 690 students / 6 institutions 19.3% 38.6% 28.0% 9.6% 4.5% Without Connect Over 20% more students Pass Rate - 70% pass the class with Connect *A&P Research Study Without Connect Pass Rate - 57% More than 60% 100% – – Extremely 80% – of all students agreed 60% – – Very Connect was a 40% – very or extremely – Moderately 20% – helpful learning tool Jan - Dec 2011 Jan - Mar 2012 – Slightly 0 – – Not at all *Based on 750,000 student survey responses Jan–Dec 2011 Jan–Mar 2012 > AVAILABLE ON-THE-GO http://bitly.com/TryConnect > Shop and Sign In Let’s see how confident you Connect Insight helps you track are on the question. your performance on assignments. What you know (green) and what you still need to review (yellow), based on your answers COMPARE AND CHOOSE WHAT’S RIGHT FOR YOU PRINT SMARTBOOK ASSIGNMENTS BOOK SmartBook—all in one digital product for maximum savings! Pop the pages into your own binder or carry just the pages Looseleaf you need. The #1 Student Choice! Bound Book The first and only book that adapts to you! Access Code The smartest way to get from a B to an A. > Buy directly from the source at http://shop.mheducation.com. I N T E R N AT I O N A L B U S I N E S S J. Michael Geringer OHIO UNIVERSITY Jeanne M. McNett NORTHEASTERN UNIVERSITY Michael S. Minor UNIVERSITY OF TEXAS, RIO GRANDE VALLEY Donald A. Ball INTERNATIONAL BUSINESS Published by McGraw-Hill Education, 2 Penn Plaza, New York, NY 10121. Copyright © 2016 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 retrieval system, with- out the prior written consent of McGraw-Hill Education, including, but not 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 0 RMN/RMN 1 0 9 8 7 6 5 ISBN 978-1-259-31722-4 MHID 1-259-31722-6 Senior Vice President, Products & Markets: Kurt L. Strand Vice President, General Manager, Products & Markets: Michael Ryan Vice President, Content Design & Delivery: Kimberly Meriwether David Managing Director: Susan Gouijnstook Brand Manager: Anke Braun Weekes Director, Product Development: Meghan Campbell Product Developer: Gabriela G. Velasco Marketing Manager: Michael Gedatus Marketing Director: Robin Lucas Digital Product Analyst: Kerry Shanahan Director, Content Design & Delivery: Terri Schiesl Program Manager: Mary Conzachi Content Project Managers: Mary Powers (Core), Danielle Clement (Assessment) Buyer: Jennifer Pickel Design: Matt Diamond Content Licensing Specialists: Shawntel Schmitt (Image), DeAnna Dausener (Text) Cover Image: John Lund/Getty Images Compositor: Aptara®, Inc. Printer: R. R. Donnelley All credits appearing on page or at the end of the book are considered to be an extension of the copyright page. Library of Congress Cataloging-in-Publication Data Geringer, J. Michael (John Michael) International business / J. Michael Geringer, Michael S. Minor, Jeanne M. McNett.—1st edition. pages cm ISBN 978-1-259-31722-4 (alk. paper)—ISBN 1-259-31722-6 (alk. paper) 1. International business enterprises. 2. International trade. 3. International finance. 4. International economic relations. I. Minor, Michael S. II. McNett, Jeanne M., 1946– III. Title. HD2755.5.G47 2016 658'.049—dc23 2015020683 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 McGraw-Hill Education does not guarantee the accuracy of the information presented at these sites. mheducation.com/highered BRIEF CONTENTS module 1 The Challenging Context of International Business 2 module 2 International Trade and Investment 28 module 3 Sociocultural Forces 60 module 4 Sustainability and Natural Resources 90 module 5 Political Forces That Affect Global Trade 122 module 6 Intellectual Property Rights and Other Legal Forces 150 module 7 Economic and Socioeconomic Forces 180 module 8 The International Monetary System and Financial Forces 208 module 9 International Competitive Strategy 232 module 10 Organizational Design and Control 258 module 11 Global Leadership Issues and Practices 282 module 12 International Markets: Assessment and Entry Modes 308 module 13 Marketing Internationally 328 module 14 Managing Human Resources in an International Context 354 module 15 International Accounting and Financial Management 392 bonus module A International Institutions from a Business Perspective 416 bonus module B Export and Import Practices 446 bonus module C Global Operations and Supply Chain Management 470 Glossary 501 Company Name Index 509 Subject Index 516 v DEDICATION Mike dedicates this book to his parents, Raymond and JoAnn, who have provided continued support and encouragement for his writing and other life activities. Jeanne dedicates this book to her best friends, Nick Athanassiou and Raven McCrory, her finance professor, Dr. N. D. Qui, and her ION research buddies. Michael dedicates this book to Angela R. Campbell, Anevay Garcia, Delsin Garcia, and Amy E. Minor, and to the memory of his mother, father, and late wife. ABOUT THE AUTHORS J. Michael Geringer Jeanne M. McNett J. Michael Geringer is the O’Bleness Professor of Inter- Jeanne M. McNett is a researcher at Northeastern national Strategy at Ohio University. He earned a BS in University in the D’Amore-McKim College of Business business at Indiana University and MBA and Ph.D. and Professor of Management, Emerita, at Assumption degrees at the University of Washington. He has authored College. Dr. McNett also has taught at Morris College or edited over 30 books and monographs, more than and the University of Maryland in their Asian and 140 published papers, and more than 40 case studies; European divisions. She earned her Ph.D. at the Univer- he serves on the editorial boards of several leading sity of Massachusetts, Amherst, and her MBA at the Cass international academic journals including editor-in-chief School of Business, City University, London, UK. She or associate editor for four journals; he served as the has had expatriate assignments in Germany, the UK, Saastamoinen Foundation chair at the Helsinki School Saudi Arabia, Japan, and Korea. Her interests include the of Economics in Finland; he was the founding chair of role of culture in international business and the pedagogy the Strategic Alliances Committee of the Licensing Ex- of international management. Her publications include ecutives Society; he served as the chair of both the Inter- the Blackwell Encyclopedia of Management, Interna- national Business and the Strategy and Policy divisions tional Management, second and third editions (Blackwell, of the Administrative Sciences Association of Canada; 2006; Wiley, 2015); The Blackwell Handbook of Global and he is past chair of the Academy of Management’s Management (Blackwell, 2004); and A Primer on Sus- International Management division. His research has ap- tainability (Business Expert Press, 2014). Her teaching, peared in Strategic Management Journal, Academy of research, and presentations have received awards, Management Journal, Journal of International Manage- including the Roethlisberger Best Paper of the Year ment, Columbia Journal of World Business, Management Award from the Journal of Management Education and International Review, Journal of Management Studies, the Alpha Phi Alpha Teacher of the Year Award. She is Human Resource Management Journal, Long Range involved in community sailing on Cape Cod and in Open Planning, Organisation Studies, Thunderbird Interna- University Wellfleet, a community education effort. tional Business Review, and Journal of Applied Psychol- ogy, among others. He has received 11 “best paper” awards for his research, including the Decade Award for most influential article from the Journal of International Business Studies. In addition to spending many years living abroad, he has traveled and worked in dozens of nations worldwide. His teaching performance has earned numerous awards in the United States, Canada, Asia, Africa, Australia, and Europe, including the University Distinguished Teacher Award. In addition to many ser- vice activities with various social and nongovernmental organizations, Geringer is active in consulting and exec- utive development for multinational corporations and executives from six continents. vii viii About the Authors Michael S. Minor Don A. Ball Michael S. Minor is professor of marketing and interna- Don A. Ball, a consultant to multinational corporations, tional business at the University of Texas Rio Grande was a professor of marketing and international business Valley and interim chair of the marketing department. for several years after leaving industry. He has a degree He previously served as director of the Ph.D. program in mechanical engineering from Ohio State and a doctor- and as undergraduate program director there. He was ate in business administration from the University of educated at the University of North Carolina, American Florida. Ball has published articles in the Journal of University, and Cornell and holds his Ph.D. from International Business Studies and other publications. Vanderbilt University. He began his international career Before obtaining his doctorate, he spent 15 years in vari- in Asia, where he lived for several years. His current ous marketing and production management positions in research interests are in consumer neuroscience, social Mexico, South America, and Europe. network behavior, and advertising. He has published in Journal of Retailing, Journal of Advertising, Journal of International Business Studies, Psychology and Marketing, International Studies of Management and Organization, Cyberpsychology and Behavior, Journal of Advertising Research, Academy of Management Learning and Experience, the Wiley Encyclopedia of Management, and elsewhere. He is the author of Flash Marketing, and coauthor with John C. Mowen of Under- standing Consumer Behavior and the forthcoming Consumer Behavior: A Managerial Approach. He is a prolific collaborator with current and former Ph.D. students and has directed some 15 doctoral dissertations. He is a former member of a country band and currently plays in the band at his church. A member of BMI, he has written nearly two dozen songs, some of which are actually fairly good. A LETTER TO STUDENTS Welcome to International Business. We are enthusiastic about the field of international business and the interesting challenges and opportunities it provides. In preparing International Business for you, our goal is to create the most accessible and personal learning program, so that our read- ers can share in the excitement we find in this field. Whether you are an undergraduate or are in an MBA program, an international business course is a necessary venue for helping you explore and understand the complexities that face us in today’s ever more global business world. Our hope is that our content will answer questions about business in different cultures, the impact of geography, why products are the same (or different) across cultures, why people have different practices, the continued growth and effect of the Internet on international business, how you can succeed in this global world and many, many more questions. The field of international business is exciting and dynamic, so there are always new questions and sometimes there are new answers to old questions. Each of the 15 modules provides you with a condensed presentation of international business topics. Within each module, contemporary, student-focused examples offer you an immediate appreciation of the critical importance of the concept under discussion. Alongside more tradi- tional developed-country applications throughout the text, we also integrate extensive examples that apply to emerging-market contexts, and that highlight key changes occurring in the global economy. All applications are current, relevant, readable, and challenging. Together they provide you with a truly global view of business. Eye-catching photos, maps, and figures, plus exclusive features like Get That Job! From Backpack to Briefcase vignettes and Culture Facts cultural high- lights, reinforce the appeal and readability of the material, personalize the content, and enhance your enjoyment and your learning. Looking for an even more personal experience, and an efficient and effective way to study? Ask your Instructor how you can access this content via SmartBook® or visit www.learnsmartadvantage.com. We wish you an exciting journey of discovery within the field of international business, both in your academic training and in your personal and professional careers! Sincerely, Mike Je anne D on Michael [email protected] [email protected] ix