Global Business Competitiveness and Sustainability

Globalization has been under extreme pressure in the wake of the financial crisis. Multinational firms are weighing the costs and benefits of international scale and scope, and are increasingly under pressure to hire local, to source local, and to pay taxes domestically. At the same time global competitive pressures have intensified.

This book reviews international business practices from the multinational firm perspective, and provides pathways forward concerning competitiveness and sustainability in global markets. What sets this book apart from others is that the benefits and pitfalls of globalization are addressed. Chapter coverage focuses on the functional areas of the business and how they are impacted by international expansion. Practical case studies supplement chapter coverage and highlight both positive and negative developments in the global business arena. Readers should expect to be challenged on what will be the limits of the multinational firm in the future, and how multinational firms can continue to prosper while at the same time adhere to sustainable business initiatives.

Equally useful to both undergraduate and graduate students of international business as well as professional development programs, Global Business: Competitiveness and Sustainability provides a necessary tonic for dealing with today?s troubled seas of globalization.

Chapter One: Global Business: Competitiveness and Sustainability 1

Globalization: Detractors and Supporters 2

Global Business: The Balance of Competitiveness and Sustainability 4

Thematic Definition of the Field of International Business 10

Chapter Two: International Marketing 11

What Must Be Done: The International Marketer’s Dilemma 11

To Centralize or Decentralize: The First Key Decisions 12

Ethnocentric, Geocentric, & Polycentric Approaches 14

Product Decisions 14

Promotional Tools 16

Personal Selling 17

Sales Promotions 18

Publicity and Public Relations 18

Pricing Decisions 18

Pricing Methods 19

Placement Decisions: Distribution of Products 22

The Importance of Placement 22

Factors Involved in Distribution Decisions 23

Summary 26

Discussion Questions 27

Bibliography 28

Appendix: A Checklist for Export Marketing 30

Chapter Three: International Finance 33

Financing International Business 33

Working Capital Management 33

Intra-company Pooling 36

Hedging Against Inflation 37

Managing Blocked Funds 37

Transfer Pricing 39

Capital Budgeting and Financial Structure of an MNC 40

Exchange Control Restrictions on Remittances 40

Political Risks 40

Tax Considerations 40

Sources of Funds 41

Currency of Borrowing Investments 41

Different Inflation Rates 42

Letters of Credit in International Trade 43

International Capital Markets 43

The Emergence of International Capital Markets 44

National Financial Markets 45

The Euromarkets 46

International Equities Markets 49

Emerging Markets 51

Summary 52

Discussion Questions 53

Bibliography 54

Chapter Four: International Accounting 55

What is Accounting? 55

Differences in Accounting Practices Among Countries 56

Factors Affecting Accounting Systems 56

What Type of Differences Emerge? 57

Differences in Valuation 58

The Impact of Accounting Differences 58

Differences in Disclosure 59

Segmentation of Accounting 60

Social Reporting 62

Policy Formation and Harmonization 63

Determining Policy 63

Policymaking in the United States 63

Policymaking in other Countries 63

Harmonization 64

Regional Harmonization Efforts 65

Special Accounting Problems 66

Differences in Currency Exchange Rates 67

Consolidation Problems 70

Inflation 72

Transfer Pricing and Costing 73

Other International Accounting Issues 74

Accounting for Expropriation 74

Planning and Control 74

Auditing 75

Summary 75

Discussion Questions 75

Bibliography 77

Chapter Five: International Taxation 79

Why Taxes? 79

Types of Taxes 80

Income Taxes 80

Transaction Taxes 81

Value-Added Taxes 81

Excise Taxes 82

Extraction Taxes 82

Tariffs (Border Taxes) 82

Tax Compliance and Tax Enforcement 82

International Taxation 85

Taxes: MNC 85

Taxes: U.S. Controlled Foreign Corporations 85

Double Taxation 86

Tax Treaties 86

Foreign Tax Credits for U.S. Corporations 87

Special Issues and Problems in International Taxation 89

Tax Havens 89

Transfer Pricing 90

Unitary Taxes 90

Tax Incentives for International Business 91

Foreign Sales Corporations 91

Domestic International Sales Corporations 92

U.S. Possessions Corporations 92

Influence of U.S. Tax Law on Corporate Operations 93

Taxation of Individual Foreign Source Income 93

Expenses of U.S. Expatriates 94

Summary 94

Discussion Questions 95

Bibliography 96

Chapter Six: International Staffing and Labor Issues 97

Organizing a Multinational Corporation 97

Function Structure 98

Regional Structure 98

Product Structure 98

Matrix Structure 98

International Staffing 98

Recruitment 98

Selection 99

Training 100

Motivation 101

Managerial Staffing 101

Value to Firm 101

Branch Manager versus Home Office: Who Is In Charge? 102

Branch Managers: Who Should Firms Choose? 103

Choosing Branch Managers: Selection Criteria 104

Labor Pool 104

Corporate Policies 104

Desired Local Image 104

Local Employee Incentives 104

Existing Methods of Selection 105

Potential For Culture Shock 105

Training Branch Managers 105

Alternative Models 106

Compensating Branch Managers 107

Wages 107

Taxes 107

Repatriating Branch Managers 107

Reverse Culture Shock 107

Ethical Issues 108

Female Managers Overseas 108

Overseas Assignments as Dumping Grounds 109

International Labor Issues 109

Managing an International Work Force 109

Wages and Benefits 110

Job Security and Layoffs 111

Labor Productivity 112

Technology 112

Labor Unions 113

MNC Tactics 122

Counter-Tactics by Labor 123

International Unions 123

Codetermination 124

Summary 124

Discussion Questions 125

Bibliography 126

Chapter Seven: Managing Global Operations and Technology 127

Operations, Technology, and International Competition 127

International Production and Operations 128

Worldwide Standardization 128

Supply 128

Control 129

Controlling Strategically 129

Areas to Control 129

Designing the Local Operations System 132

Plant Location 133

Plant Layout 133

Materials Handling 133

Staffing 133

Production and Operations Management 133

Productive Activities 134

Supportive Activities 135

Just-In-Time System 136

International Technology 136

Diffusion of Technology 137

Technology Development 137

Technology Transfer 138

Choice of Production Technology 139

Pricing Technology Transfers 141

Protecting Technology 142

Management Information Systems 142

MIS in an MNC 142

Corporate Reports 143

International Data Processing: Integration Issues 144

Should International Firms Go Global? 145

Summary 146

Discussion Questions 147

Bibliography 148

Chapter Eight: Global Business Cases 149

Global Business Cases 149

Competitiveness Cases:

Myanmar: The Last Global Frontier 150

(G. Jason Goddard)

Increasing Market Share at Acme Industries 154

(Van R. Wood VCU et al)

Attractiveness of Global Markets 166

(Gregory Keller Wright State)

Hedging with Foreign Exchange 175

(Anonymous)

Sustainability Cases:

Lilly Pharmaceuticals: Triple Bottom Line and Values-Based Leadership 183

(Joseph Petrick, Wright State)

Corporate Diversity Initiative 190

(Anonymous)

International Real Estate Investor 196

(G. Jason Goddard)

Cooperative Workforce Development: Public-Private Sustainable Linkages 206

(Jennifer Winner & Riad Ajami)

Privilege Capital 213

(Martina Roskova)

Glossary 223

Index 232

About the Authors 238

Riad A. Ajami is currently Professor of International Management and Global Strategy at the Raj Soin College of Business at Wright State University, USA. Professor Ajami is the Editor-in-Chief of the Journal of Asia-Pacific Business and Editor-in-Chief of the Haworth International Business Press Series in Asia-Pacific Business. He has appeared on national television and radio, including, among others, Nightline, the PBS News Hour, NBC News, CNN, National Public Radio and CBS Radio.

G. JasonGoddard is Vice President at Wells Fargo Bank, where he has been a commercial lender for over 20 years. He obtained his MBA from the University of North Carolina at Greensboro, USA. Mr. Goddard is currently Adjunct Professor at Wake Forest University and UNC-Greensboro, and is the Associate Editor of the Journal of Asia-Pacific Business, where he has authored numerous articles. Mr. Goddard teaches the investment real estate course at Wake Forest University, USA, and has taught international business and international finance at UNCG and in Ludwigshafen Germany at the University of Applied Sciences.