GLOBALIZATION

1.​ A company does not have to be the size of multinational giants to facilitate, and benefit from, the
globalization of markets. In the United States, for example, according to the International Trade Administration,
more than 300,000 small and medium-size firms with fewer than 500 employees exported in 2017, accounting for
98 percent of the companies that exported that year.
2.​ Globalization of production can help companies lower their overall cost structure or improve the quality or
functionality of their product offering: The globalization of production refers to the sourcing of goods and services
from locations around the globe to take advantage of national differences in the cost and quality of factors of
production. By doing this, companies hope to lower their overall cost structure or improve the quality or
functionality of their product offering, thereby allowing them to compete more effectively.
3.​ Most global markets currently are not markets for consumer products—where national differences in tastes
and preferences are still often important enough to act as a brake on globalization—but markets for industrial goods
and materials that serve a universal need the world over.
4.​ Early outsourcing efforts were primarily confined to manufacturing activities. Increasingly, however,
companies are taking advantage of modern communications technology, particularly the Internet, to outsource
service activities to low-cost producers in other nations.
5.​ The lowering of barriers to international trade enables firms to view the world, rather than a single country,
as their market.
6.​ By 2017, some 27 percent, or 540 firms, of the Top 2000 global firms are now U.S. multinationals, a drop of
236 firms in only about a decade and a half. Japanese and U.K. firms also saw declines in inclusion among the Top
2000 firms in the world. The globalization of the world economy has resulted in a relative decline in the dominance
of U.S. firms in the global marketplace
7.​ Globalization critics argue that the decline in unskilled wage rates is due to the migration of low-wage
manufacturing jobs offshore and a corresponding reduction in demand for unskilled workers.
8.​ Supporters of free trade and greater globalization argue that tougher environmental regulations and stricter
labor standards go hand in hand with economic progress. In general, as countries get richer, they enact tougher
environmental and labor regulations.
9.​ A concern voiced by critics of globalization is that today's increasingly interdependent global economy shifts
economic power away from national governments and toward supranational organizations such as the World Trade
Organization, the European Union, and the United Nations.
10.​ International business differs from domestic business because of the greater complexity of managing an
international business. In addition to the problems that arise from the differences between countries, a manager in an
international business is confronted with a range of other issues that the manager in a domestic business never
confronts.
11.​ In 2008 and 2009, the __Group of Twenty (G20)______ became the forum through which major nations
attempted to launch a coordinated policy response to the global financial crisis, which started in America.
12.​ The Uruguay Round provided: enhanced protection for patents, trademarks, and copyrights
13.​ ____GNI____ per person figures can be misleading because they don't consider differences in the cost of
living.
14.​ GNI per capita can be adjusted by ____PURCHASING POWER____ to account for differences in the cost
of living.
15.​ In a __planned economy______, the state owns all means of production.
16.​ Amartya Sen is a Nobel Prize-winning economist who has argued that economic development should be
assessed less by material output measures such as GNI per capita and more by the capabilities and opportunities that
people enjoy. According to Sen, development should be seen as a process of expanding the real freedoms that
people experience.
17.​ Why does education lead to economic development? Nations that invest more in education will have higher
growth rates because an educated population is a more productive population. A survey of 14 statistical studies that
looked at the relationship between a country's investment in education and its subsequent growth rates concluded
investment in education did have a positive and statistically significant impact on a country's rate of economic
growth.

NATIONAL DIFFERENCES IN POLITICAL ECONOMIC AND LEGAL SYSTEM

18.​ Discuss Samuel Huntington's views on Islamic fundamentalism? According to Samuel Huntington's thesis,
global terrorism is a product of the tension between civilizations and the clash of value systems and ideology. He
maintains that while many societies may be modernizing, they are not becoming more Western. Huntington
theorizes that modernization in non-Western societies can result in a retreat toward the traditional, such as the
resurgence of Islam in many traditionally Muslim societies. According to him, the rise of Islamic fundamentalism is
a response to the alienation produced by modernization.
19.​ Since the 1980s, there has been a transformation from centrally planned command economies to
market-based economies. What is the rationale for this transformation? The rationale for economic transformation
has been the same the world over. In general, command and mixed economies failed to deliver the kind of sustained
economic performance that was achieved by countries adopting market-based systems, such as the United States,
Switzerland, Hong Kong, and Taiwan. As a consequence, even more states have gravitated toward the market-based
model.
20.​ Is privatization by itself enough to guarantee economic growth? Why? Explain using an example. As
privatization has proceeded around the world, it has become clear that simply selling state-owned assets to private
investors is not enough to guarantee economic growth. If the newly privatized firms continue to receive subsidies
from the state and if they are protected from foreign competition by barriers to international trade and foreign direct
investment, they will have little incentive to restructure their operations to become more efficient. For privatization
to work, it must also be accompanied by a more general deregulation and opening of the economy. For example,
when Brazil decided to privatize its state-owned telephone monopoly, Telebrás Brazil, the government also split the
company into four independent units that were to compete with each other and removed barriers to foreign direct
investment in telecommunications services. This action ensured that the newly privatized entities would face
significant competition and thus would have to improve their operating efficiency to survive.
21.​ What are the factors that determine the costs of doing business in a country? A number of political,
economic, and legal factors determine the costs of doing business in a country. With regard to political factors, a
company may have to pay off politically powerful entities in a country before the government allows it to do
business there. With regard to economic factors, one of the most important variables is the sophistication of a
country's economy. As for legal factors, it can be more costly to do business in a country where local laws and
regulations set strict standards with regard to product safety, safety in the workplace, environmental pollution, and
the like (since adhering to such regulations is costly).
22.​ Why does doing business in a country with a relatively unsophisticated economy result in increased costs?
One of the most important economic variables is the sophistication of a country's economy. It may be more costly to
do business in relatively primitive or undeveloped economies because of the lack of infrastructure and supporting
businesses. At the extreme, an international firm may have to provide its own infrastructure and supporting
business, which obviously raises costs. When McDonald's decided to open its first restaurant in Moscow, it found
that to serve food and drink indistinguishable from that served in McDonald's restaurants elsewhere, it had to
vertically integrate backward to supply its own needs. The quality of Russian-grown potatoes and meat was too
poor, so to protect the quality of its product, McDonald's set up its own dairy farms, cattle ranches, vegetable plots,
and food-processing plants within Russia. This raised the cost of doing business in Russia, relative to the cost in
more sophisticated economies.
23.​ What are the factors that contribute to the risks of doing business in a country? The risks of doing business
in a country are determined by a number of political, economic, and legal factors. Political risk has been defined as
the likelihood that political forces will cause drastic changes in a country's business environment that adversely
affect the profit and other goals of a business enterprise. An economic risk can be defined as the likelihood that
economic mismanagement will cause drastic changes in a country's business environment that hurt the profit and
other goals of a particular business enterprise. A legal risk can be defined as the likelihood that a trading partner will
opportunistically break a contract or expropriate property rights.
24.​ collectivism: A political system that stresses the primacy of collective goals over individual goals
25.​ socialists: Group that believed nation's resources and industries should be owned and operated by the
government on behalf of the people
26.​ communists: socialism could only be achieved though revolution and totalitarian dictatorship
27.​ social democrats: those committed to achieving socialism by democratic means
28.​ privatization: state-owned enterprises sold to private investors
29.​ individualsm: individual should have freedom in his or her economic and political pursuits
30.​ Typically, political systems that place a high emphasis on individualism tend to be democratic.

DIFFERENCES IN CULTURE

31.​ Values are abstract ideas about what a group believes to be good, right, and desirable (e.g. the concept of
good vs evil ).
32.​ Folkways include rituals and symbolic behavior.
33.​ Social stratum refers to the structured layers within societies that are created by human interactions and
power differentials, influencing individuals' access to resources and capacity to make choices independently.
34.​ A caste system is a closed system of stratification in which social position is determined by the family into
which the person is born.
35.​ the term ___society_____ refers to a group of people sharing a common set of values and norms.
36.​ Cross-cultural literacy refers to: an understanding of how cultural differences can affect business.
37.​ ___Mores_____ include such factors as indictments against theft, adultery, incest, and cannibalism.
38.​ ___Value_____ is/are best defined as shared assumptions about how things ought to be.
39.​ The system of values and norms that are shared among a group of people and that when taken together
constitute a design for living best defines: culture
40.​ Social rules and guidelines that prescribe appropriate behavior in particular situations are best described as:
norms
41.​ __Folkways______ are the routine conventions of everyday life.
42.​ Cultural myopia refers to a firm's failure to understand host-country cultural differences.
43.​ The most important aspect of a country's cultural differences, particularly important in foodstuffs and
beverages, is the impact of __traditions__.
44.​ The norms and values systems that are shared among the employees of a company are referred to as:
organizational culture
45.​ democracy: political system in which government is by the people, exercised either directly or through
elected representatives
46.​ Totalitarianism: one person or political party exercises absolute control over all spheres of human life and
prohibits opposing political parties
47.​ Communist Totalitarianism: found in states where the communist party monopolizes power
48.​ Theocratic Totalitarianism: political power is monopolized by a party, group, or individual that governs
according to religious principles
49.​ Tribal Totalitarianism: a political party that represents the interests of a particular tribe monopolizes power
50.​ Right-Wing Totalitarianism: permits some individual economic freedom, but restricts individual political
freedom
51.​ market economy: all productive attactivities are privately owned
52.​ cross-culture literacy: an understanding of how cultural differences across and within nations can affect the
way in which business is practiced
53.​ culture: a system of values and norms that are shared among a group of people and that when taken together
constitute a design for living
54.​ values: ideas about what a society believes to be good, right, desirable, or beautiful
55.​ norms: social rules and guidelines that prescribe appropriate behavior in particular situations
56.​ society: a group of people who share a common set of values and norms
57.​ folkways: routine conventions of everyday life
58.​ Mores: refers to norms that are widely observed, have greater moral significance than other norms, and are
central to the functioning of a society and to its social life
59.​ social structure: how a society is organized in terms of its values, norms, and relationship that are part of
society's fabric
60.​ group: association of two or more individuals who have a shared sense of identity and who interact with
each other in a structured ways on the basis of a common set of expectations about each other's behavior
61.​ social strata: hierarchical social categories often based on family background, occupation, and income
62.​ religion: a system of shared beliefs and rituals that are concerned with the realm of the sacred
63.​ ethical system: a set of moral principles, or values, that are used to guide and shape behavior
64.​ power distance: how a society deals with the fact that people are unequal in physical and intellectual
capabilities
65.​ Individualism versus collectivism: the relationship between the individual and his or her fellows
66.​ uncertainty avoidance: the extent to which different cultures socialize their members into accepting
ambiguous situations and tolerating ambiguity
67.​ Masculinity vs. Femininity: the relationship between gender and work roles
68.​ long-term versus short-term orientation: the extent to which a culture programs its citizens to accept delayed
gratification of their material, social, and emotional needs
69.​ Ethnocentrism: Belief in the superiority of one's nation or ethnic group.

ETHICS

70.​ The utilitarian approach to ethics is: assesses an action in terms of its consequences or outcomes; i.e., the net
benefits and costs to all stakeholders on an individual level. It strives to achieve the greatest good for the greatest
number while creating the least amount of harm or preventing the greatest amount of suffering.
71.​ Milton Friedman's basic position is that the only social responsibility of business is to increase profits, so
long as the company stays within the rules of law.
72.​ The Friedman doctrine is the belief that ethics the social responsibility of business is to increase its profits.
73.​ Most moral philosophers see value in utilitarian and Kantian approaches to business ethics.
74.​ The principle of utilitarianism invites us to consider the immediate and the less immediate consequences of
our actions
75.​ Kantian ethics says that the morality of an action depends on a moral law that is universal and absolute and
not on the consequences of the action
76.​ The ___tragedy of the commons_____ occurs when a resource held in common by all, but owned by no one,
is overused by individuals, resulting in its degradation.
77.​ Which of the following was designed to allow GM to operate ethically in South Africa as long as the
company did not obey the apartheid laws in its own South African operations? Suvillian principles
78.​ The ___Convention on International Business Transactions_____ obliges member states to make the bribery
of foreign public officials a criminal offense and excludes facilitating payments made to expedite routine
government action from the convention.
79.​ An international U.S.-based company sets up a production unit in a developing country with poor
environmental regulations. This contributes to the: global tragedy of the commons.
80.​ The idea that businesspeople should consider the social consequences of economic actions when making
business decisions and that there should be a presumption in favor of decisions that have both good economic and
social consequences is known as: social responsibility
81.​ Which of the following, in a business setting, is taken to mean benevolent behavior that is the responsibility
of successful enterprises?: noblesse oblige
82.​ BP, one of the world's largest oil companies, has made it part of the company policy to undertake "social
investments" in the countries where it does business. There was no economic reason for BP to make this social
investment, but the company believes it is morally obligated to give something back to the societies that have made
its success possible. BP's actions are an example of: noblesse oblige
83.​ __Business ethics______ are the accepted principles of right or wrong governing the conduct of business
people.
84.​ __Strawman____ approaches to business ethics are raised by business ethics scholars primarily to
demonstrate that they offer inappropriate ethical decision making in a multinational enterprise
85.​ ___Friedman_____ arguments suggest that improving working conditions beyond the level required by the
law and necessary to maximize employee productivity will reduce profits and are therefore not appropriate.
86.​ According to the ___cultural relativism_____ point of view, a firm should adopt the ethics of the culture in
which it is operating.
87.​ According to the ____righteous moralist____, even if a manager of a multinational sees that firms from
other nations are not following ethical norms in a host nation, that manager should maintain the standards of the
company's home country.
88.​ A British firm that sets up production units in China is accused of releasing untreated chemical waste into
water bodies. The manager of the firm defends the firm stating that, factories in China set up by French and
American firms also release untreated chemical waste into water bodies. What approach to business ethics is the
manager using? Naive immoralist
89.​ Business ethics that either deny the value of business ethics or apply the concept in a very unsatisfactory
way are termed: straw man.
90.​ The ___utilitarian_____ approaches to ethics hold that the moral worth of actions or practices is determined
by their consequences.
91.​ ___Rights theories_____ recognize that human beings have fundamental rights and privileges that transcend
national boundaries and cultures.
92.​ According to __the Friedman doctrine______, the social responsibility of business is to increase profits, so
long as the company stays within the rules of law.
93.​ According to the Friedman doctrine: businesses should not undertake social expenditures beyond those
mandated by the law and required for the efficient running of a business.
94.​ command economy: government plans the goods and services that a country produces, quantity in which
they are produced, and the prices at which they are sold
95.​ mixed economy: certain sectors of the economy are left to private ownership and free market mechanisms
while other sectors have significant state ownership and government planning
96.​ legal system: refers to the rules, or laws, that regulate behavior, along with the processes by which the laws
of a country are enforced and through which redress for grievances is obtained
97.​ common law: based on tradition, precedent, and custom
98.​ civil law: based on detailed set of laws organized into codes
99.​ theocratic law: based on religious teachings
100.​ contract law: the body of law that governs contract enforcement
101.​ property rights: the legal rights over the use to which a resource is put and over the use made of any income
that may be derived from that resource
102.​ intellectual property: A product of the intellect, such as an expressed idea or concept, that has commercial
value
103.​ business ethics: accepted principles of right or wrong governing the conduct of business people
104.​ ethical strategy: a strategy, or course of action, that does not violate these accepted principles
105.​ Sullivan principles: A 1977 code of conduct that required multinational corporations in South Africa to do
business in a nondiscriminatory way.
106.​ tragedy of commons: when a resource held in common by all, but owned by no one, is overused by
individuals, resulting in its degradation
107.​ global tragedy of the commons: moving production to locations where they are free to pump pollutants into
the atmosphere or dump them in oceans or rivers, thereby harming these valuable global commons
108.​ ethical dilemmas: situations in which none of the available alternatives seems ethically acceptable
109.​ personal ethics: the generally accepted principles of right and wrong governing the conduct of individuals
110.​ Friedman Doctrine: the only social responsibility of business is to increase profits, so long as the company
stays within the rules of law
111.​ cultural relativsm: belief that ethics are nothing more than the reflection of a culture and that a firm should
adopt the ethics of the culture in which it's operating
112.​ righteous moralist: a multinational's home country standards of ethics should be followed in foreign
countries
113.​ Naive Immoralist: if a manager of a multinational sees that firms from other nations are not following ethical
norms in a host nation, that manager should not either
114.​ utilitarian approach to ethics: the moral worth of actions or practices is determined by their consequences
115.​ Kantian Ethics: people should be treated as ends and never purely as means to the ends of others
116.​ rights theories: recognize that human beings have fundamental rights and privileges that transcend national
boundaries and cultures
117.​

ENTRY MODE
1.​ Which of the following is an advantage of establishing a joint venture? When the development costs and/or
risks of opening a foreign market are high, a firm might gain by sharing these costs and or risks with a local partner.
2.​ When an exporting firm finds that its local agent is also carrying competitors' products, the firm may switch
to a __wholly owned subsidiary___ to handle local marketing, sales, and service.
3.​ Which of the following is an advantage of franchising? A firm is relieved of many of the costs and risks of
opening a foreign market on its own
4.​ What is the primary advantage of licensing? It helps a firm avoid the development costs associated with
opening a foreign market.
5.​ A firm can establish a wholly-owned subsidiary in a country by building a subsidiary from the ground up,
called the __greenfield strategy__.
6.​ Firms entering markets where there are no incumbent competitors to be acquired should choose: greenfield
investments
7.​ Early entrants to a market that are able to create switching costs that tie the customer to the product are
capitalizing on __first-mover advantages___.
8.​ According to the __hubis hypothesis__, top managers typically overestimate their ability to create value
from an acquisition.
9.​ If a high-tech firm sets up operations in a foreign country to profit from a core competency in technological
know-how, which of the following entry strategies is best? Wholly owned subsidiaries
10.​ Which of the following is a disadvantage of licensing? It does not give a firm the tight control over strategy
that is required for realizing experience curve and location economies.
11.​ first-mover advantage: advantages accruing to the first to enter a market
12.​ late-mover advantage: handicaps experienced by being a late entrant in a market
13.​ greenfield investment: involves the establishment of a new operation in a foreign country
14.​ Eclectic Paradigm: attempts to combine the two other perspectives into a single holistic explanation of
foreign direct investment
15.​ acquisition: merging with an existing firm in the foreign country
16.​ exporting: involves producing goods at home and then shipping them to the receiving country for sale
17.​ licensing: involves granting a foreign entity the right to produce and sell the firm's product in return for a
royalty fee on every unit sold
ORGANIZATION
1.​ The worldwide product division structure: is weak in local responsiveness.
2.​ A large-scale entrant is more likely than a small-scale entrant to be able to capture first-mover advantages
associated with ____: scale economies
3.​ Firms pursuing a(n) _____ attempt to create value by transferring core competencies from home to foreign
subsidiaries: international strategy
4.​ In which of the following organizational structures are the domestic operations and foreign operations
isolated from each other leading to coordination problems? International division structure
5.​ In a(n) _offset___, one party agrees to purchase goods and services with a specified percentage of the
proceeds from the original sale and this party can fulfill the obligation with any firm in the country to which the sale
is being made.
6.​ Centralization and decentralization differ because: centralization ensures that decisions are consistent with
organizational objectives, while decentralization can result in decisions at variance with organizational goals.
7.​ Which of the following would be a typical responsibility of a product division in a product divisional
structure? Operating decisions
8.​ Which of the following is an argument favoring centralization? It can avoid the duplication of activities.
9.​ Which of the following is an argument favoring decentralization? It permits greater flexibility.
10.​ A firm's __vertical differentiation___ determines where in its hierarchy the decision-making power is
concentrated.
11.​ A(n) __worldwide product division structure___ tends to be adopted by firms that are reasonably diversified.
12.​ A __worldwide area___ structure encourages fragmentation of the organization into highly autonomous
entities.
13.​ Which of the following is a problem that arises due to an international division structure? The heads of
foreign subsidiaries are not given as much voice in the organization as the heads of domestic functions or divisions.
14.​ Horizontal differentiation proceeds along 2 dimensions: Product Division and Geographic area. Philosophy
is that responsibility for operating decisions pertaining to a particular product should be shared by the product
division and the various areas of the firm:
15.​ organizational structure: formal division of the organization into subunits, location of decision making
responsibilities, establishment of integrating mechanisms to coordinate the activities of subunits
16.​ control systems: the metrics used to measure the performance of subunits and make judgments about how
well managers are running those subunits
17.​ organizational structure: refers to the norm and value systems that are shared among the employees of an
organization
18.​ vertical differentiation: refers to the location of decision-making responsibilities within a structure
19.​ horizontal differentiation: refers to the formal division of the organization into subunits
20.​ integrating mechanisms: the mechanisms for coordinating subunits
21.​ international division: an organizational structure that is typically set up when a firm initially expands
abroad, often engaging in a home replication strategy
22.​ worldwide area structure: favored by firms with low degree of diversification and a domestic structure based
on function
23.​ Worldwide Product Division Structure: adopted by firms that are reasonably diversified and originally had
domestic structures based on product divisions
24.​ global matrix structure: organizational architecture: refers to the totality of a firm's organization, including
formal organization structure, control systems and incentives, processes, organizational culture, and people
25.​ knowledge network: a network for transmitting information within an organization that is based not on
formal organizational structure, but on informal contacts between managers within an enterprise and on distributed
information systems
26.​ personal control: control achieved by personal contact with subordinates
27.​ bureaucratic control: control achieved through a system of rules and procedures that directs the actions of
subunits
28.​ output control: involves setting goals for subunits to achieve and expressing those goals in terms of
relatively objective performance metrics such as profitability, productivity, growth, market share, and quality
29.​ cultural control: exists when employees "buy into" the norms and value systems of the firm
30.​ Performance Ambiguity: exists when the causes of a subunit's poor performance are not clear

GLOBAL PRODUCTION AND SUPPLY CHAIN MANAGEMENT

1.​ Logistics is the activity that controls the: transmission of physical materials through the value chain.
2.​ The Six Sigma methodology: is a direct descendant of the total quality management philosophy.
3.​ Deming, the proponent of total quality management, argued that: management should train employees in
new skills
4.​ Which of the following is a factor that transforms a low-cost location to a high-cost location? Appreciation
of local currency
5.​ ___lean production__ allows the company to produce a wider variety of end products at a unit cost that at
one time could be achieved only through the mass production of a standardized output.
6.​ The term __mass customization___ has been coined to describe the ability of companies to use flexible
manufacturing technology to reconcile the goals of low cost and product personalization.
7.​ A(n) _flexible machine cell____ is a grouping of various types of machinery, a common materials handler,
and a centralized cell controller.
8.​ Which of the following statements is true of products with high value-to-weight ratios? Their transportation
accounts for a very small percentage of the total costs.
9.​ Concentration of production is appropriate when: the product serves universal needs.
10.​ Decentralization of production is appropriate when: volatility in key exchange rates is expected.
11.​ Flexible manufacturing technology is also known as _____. lean production
12.​ At Six Sigma, a production process would be highly accurate and create just _____. 3.4 defects per million
units
13.​ RSA is a bicycle manufacturing company. Which of the following is a make-or-buy decision that the
company will have to make? Should the company outsource production to a low-cost vendor?
14.​ A firm that operates with matrix-type structures in which both product divisions and geographic areas have
significant influence would use which of the following strategies? Transnational strategy
15.​

STRATEGY OF IB
1.​ Which of the following terms refers to the use of a specialized third-party trading house in a countertrade
arrangement? Switch trading
2.​ Which of the following is a disadvantage of the localization strategy? Duplication of functions
3.​ The valuable asset of firms, whose competitive advantage is based on management know-how, is their
_brand name___.
4.​ Which of the following is NOT true of a strong corporate culture? A strong culture leads to high
performance.
5.​ __Localization___ strategy is most appropriate when there are substantial differences across nations with
regard to consumer tastes and preferences, and where cost pressures are not too intense.
6.​ The percentage increase in net profits over time measures: profit growth.
7.​ __Profitability___ can be defined as the rate of return that the firm makes on its invested capital, which is
calculated by dividing the net profits of the firm by total invested capital.
8.​ Firms pursuing a global standardization strategy: have a high need for coordination and cultural controls.
9.​ Identify an advantage of adopting a low minimum efficient scale. It allows the firm to accommodate
demands for local responsiveness.
10.​ A firm benefits by basing each value creation activity it performs at that location where
11.​ economic, political, and cultural conditions, including relative factor costs, are most conducive to the
performance of that activity. Firms that pursue such a strategy can realize: location economies.
12.​ Which of the following is true of the international strategy? The strategy is not viable in the long-run.
13.​ The emphasis on local responsiveness in firms pursuing a localization strategy creates strong pressures for:
decentralizing operating decisions to foreign subsidiaries
14.​ Global learning based on the multidirectional transfer of skills between subsidiaries and the corporate center
is a central feature of a firm pursuing a(n) __transnational___ strategy.
15.​ There is low interdependence, performance ambiguity, and costs of control in firms pursuing a(n):
localization strategy.
16.​ Responding to pressure for __being locally responsive___ requires that a firm differentiate its product
offering and marketing strategy from country to country.
17.​ profitability: the rate of return the firm makes on its invested capital
18.​ Profit Growth: the percentage increase in net profits over time
19.​ value creation: the difference between V (the price that the firm can charge for that product given
competitive pressures) and C (the costs of producing that product)
20.​ low-cost strategy: A firm has high profits when it creates more value for its customers and does so at a lower
cost
21.​ differentiation strategy: increasing the value of a product offering in the eyes of consumers
22.​ value chain: operations of a firm composed of a series of distinct value creation activities: production,
marketing & sales, materails management, R&D, HR, IS, and firm infrastructure
23.​ primary activities: have to do with the design, creation, and delivery of the product; its marketing; and its
support and after-sale service
24.​ core competence: refers to skills within the firm that competitors cannot easily match or imitate
25.​ location economies: economies that arise from performing a value creation activity in the optimal location
for that activity, wherever in the world that might be
26.​ global web: When different stages of value chain are dispersed to those locations around the globe where
value added is maximized or where costs of value creation are minimized
27.​ experience curve: refers to the systematic reductions in production costs that occur over the life of a product
28.​ economies of scale: refer to the reductions in unit cost achieved by producing a large volume of a product
29.​ universal needs: exist when the tastes and preferences of consumers in different nations are similar if not
identical
30.​ global standardization strategy: focus on increasing profitability and profit growth by reaping the cost
reductions that come from economies of scale, learning effects, and location economies
31.​ localization strategy: focuses on increasing profitability by customizing the firm's goods or services so that
they provide a good match to tastes and preferences in different national markets
32.​ transnational strategy: trying to simultaneously achieve low costs through location economies, economies of
scale, and learning effects; differentiate their product offering across geographic markets to account for local
differences; and foster a multidirectional flow of skills between different subsidiaries in the firm's global network of
operations
33.​ international strategy: taking products first produced for their domestic market and selling them
internationally with only minimal local customization
34.​
HRM
1.​ Which of the following is mainly concerned with the selection of employees for particular jobs? Staffing
policy
2.​ A(n) _Geocentric staffing policy____ seeks the best people for key jobs throughout the organization,
regardless of nationality.
3.​ When individuals gain knowledge of the most efficient ways to perform particular tasks, they are saving
costs through: learning effects.
4.​ An ethnocentric staffing policy is one in which: all key management positions are filled by parent-country
nationals.
5.​ The idea that valuable knowledge does not reside just in a firm's domestic operations but can also be found
in its foreign subsidiaries is called __global learning___.
6.​ If a company recruits host-country nationals to manage subsidiaries while parent-country nationals occupy
key positions at corporate headquarters, the firm is following a(n): polycentric staffing policy.
7.​ Historically, Unilever measured the performance of national operating subsidiary companies according to
profitability. In this example, profitability is a(n): control system.
8.​ Expatriate failure refers to: the premature return of an expatriate manager to his or her home country
9.​ A polycentric approach may be effective for firms pursuing a(n): localization strategy.
10.​ A Japanese firm prefers expatriate Japanese managers to head its foreign operations because these managers
have been socialized into the firm while employed in Japan. This indicates that the firm: follows an ethnocentric
staffing policy to maintain a unified corporate culture.
11.​ Which of the following is a drawback of the polycentric approach to staffing? Host-country nationals have
limited opportunities for advancement beyond senior positions in their subsidiary.

TỰ LUẬN
1.​ Những thành tố của Văn hoá? Lấy ví dụ chứng minh cho những ảnh hưởng của chúng đến hoạt động
kinh doanh quốc tế?
Culture comprises various elements—often referred to as cultural determinants—that shape how people within a
society think, behave, and interact. These key cultural components include Social Structure, Religion, Language,
Education, Political Philosophy, Economic Philosophy, and Manners and Customs. Each of these plays a distinct
role in influencing international business activities.
Social structure refers to how a society is organized, including its emphasis on individualism versus collectivism
and the degree of social stratification. In a society that prioritizes collectivism, such as many East Asian countries,
teamwork and group consensus are paramount, which can affect decision-making processes and corporate
structures. Conversely, in Western cultures that prize individualism, employees often expect more autonomy and
personal recognition, shaping hiring and promotion practices. A U.S.-based company operating in Japan might
adapt its management style to encourage group harmony and collective responsibility. This adaptation could include
promoting team-based incentives rather than individual bonuses, thus aligning with local cultural expectations and
boosting employee morale. Social structure reflects the foundational organization of a culture, encompassing social
groups, institutions, social status systems, the relationships among these statuses, and the processes by which social
resources are allocated.

Social structure can influence business decisions, from product choices to advertising methods and the cost of doing
business in a particular country. Three important factors in social structure used to distinguish cultures are: social
groups, social status, and social mobility.

Religion is a system of beliefs and rituals that guides moral conduct, often intertwining closely with ethics. Major
world religions—Christianity, Islam, Hinduism, Buddhism—can dictate acceptable business practices, holiday
observances, dietary restrictions, and moral standards. In predominantly Muslim countries, businesses often adjust
working hours during Ramadan and provide prayer rooms, demonstrating respect for religious practices. This
accommodation can build trust and loyalty among local employees and customers. Religion is a system of beliefs
and rituals concerning the spiritual element of human life. Human dignity and prohibitions often stem from religious
beliefs. Different religions have different perspectives regarding work, saving, and consumption. It is especially
important for businesses to research how religion affects local business practices in nations governed by a religious
government. For instance, when dealing in religious-themed artwork like paintings, books, and statues, the potential
for controversy is high. In Islam, consuming pork and alcohol is forbidden. If a business deals with these products,
it will undoubtedly face losses in markets where Islam is dominant. Religion is not confined by national borders—it
can exist simultaneously in many regions of the world. Different religions can also dominate different areas within
the same country. The relationship between religion and society is complex, sensitive, and deep-rooted.

Some of the major religions include Christianity, Islam, Hinduism, Buddhism, Confucianism, Judaism, and Shinto.

Language encompasses both spoken and unspoken communication. Although English is widely considered the
language of international business, understanding local languages—and nonverbal cues such as gestures and body
language—is crucial. When marketing products in China, a firm must pay attention to subtle nuances in Mandarin
and local dialects to avoid mistranslations. An error in product naming or advertising slogans can damage brand
reputation and lead to costly mistakes.

Education levels influence people’s skill sets, consumer behavior, and the broader workforce’s adaptability to
complex technologies or job requirements. A company introducing advanced software in a country where the
population has relatively lower digital literacy may need to invest in training programs or partner with educational
institutions to ensure that both employees and consumers understand how to use the product effectively.

Political philosophy shapes policies regarding trade restrictions, property rights, and legal frameworks. Such
regulations affect how foreign firms enter a market, handle disputes, and safeguard intellectual property. In certain
countries with strict government controls, foreign investors might face stringent licensing procedures or be required
to form joint ventures with local partners. This can affect the company’s level of autonomy in operation and
strategic decision-making.

Economic philosophy deals with how a society organizes its economy, including market-based or centrally planned
approaches. Countries with more open, market-driven economies typically encourage foreign direct investment with
fewer restrictions, whereas more protectionist economies may impose tariffs or quotas on imports. When entering an
emerging market with high import tariffs, a multinational corporation might choose local manufacturing to avoid
excessive costs. This decision directly flows from the host country’s economic policies and philosophical stance on
trade.

Manners and customs cover daily routines, gifting etiquette, negotiation styles, and social courtesies. They require
substantial cultural sensitivity. In some cultures, offering a thoughtful gift to a new business partner is expected and
considered a sign of respect. In others, such gifts might be perceived as inappropriate or construed as bribery.
Understanding these distinctions helps maintain strong business relationships.

2.​ Phân tích các áp lực cạnh tranh trong mọi ngành kinh doanh sản xuất (Mô hình Porter)

Theo Michael Porter, trong kinh doanh doanh nghiệp cần quan tâm tới 5 sức mạnh bên ngoài tương ứng với 5 áp lực
cạnh tranh.

1. Nguy cơ thay thế (Threat of Substitutes)

In Porter’s model, the term “substitute products” refers to products from other industries. Economists note that a
threat of substitution arises when demand for one product is influenced by changes in the price of a substitute. The
price elasticity of demand for a product is affected by the change in the price of a substitute. The more substitute
goods there are, the higher the elasticity of demand (meaning even a small price change can lead to a large shift in
quantity demanded) because buyers have more alternative choices. Hence, the existence of substitute goods limits a
company’s ability to raise prices in a particular industry.

Competition triggered by the threat of substitutes often comes from products outside the industry. For example, the
price of aluminum beverage cans competes with that of other types of packaging such as glass bottles, steel cans, or
plastic containers. These days, new tires are not so expensive as to force people to patch old tires for continued use.
However, in the trucking industry, new tires are relatively expensive and wear out quickly, so tire patching
businesses still survive. In the baby diaper market, cloth diapers are a substitute, thus putting an upper limit on the
price of disposable diapers.

Although the threat of substitutes typically enters the industry via price competition, other aspects also factor into
this threat. Consider the substitutability of various forms of television: a local TV station broadcasts signals over the
air for household televisions, yet this service can be overshadowed by new technologies. Changes in entertainment
media also intensify the competition among entertainment options that can be substituted for one another.
Exceptions may occur in remote areas, where cable television cannot easily contend with free over-the-air
broadcasts (offering fewer entertainment programs).

2. Sức mạnh của khách hàng (Buyer Power)

Buyer power is the influence that customers have over a particular industry. Generally, if buyers are very powerful,
the buyer-industry relationship moves closer to what economists call a “monopsony” (many suppliers but only one
buyer). In such a market condition, the buyer can dictate prices. If buyers are strong, they can force prices down,
reducing the profit margin of the industry. Although true monopsonies are quite rare, there is often an unbalanced
relationship between an industry and its customers. Buyers wield significant power when:

They are highly concentrated: A small number of large buyers account for a major share of total purchases.

They purchase a large amount of the product in a context where the distribution channel or product is standardized.
For example, the massive retail markets of Circuit City or Sears gave these companies enough leverage to set prices
with home-appliance manufacturers.​
They have the ability to merge with or even acquire the producing firm. For instance, major automotive
manufacturers could potentially buy a tire company.

3. Sức mạnh của nhà cung cấp (Supplier Power)

Supplier power reflects the ability of suppliers to determine the terms of their transactions with a company. Weak
suppliers may have to accept the conditions that a company sets, enabling the firm to reduce costs and increase
production profits. By contrast, dominant suppliers can exert pressure on the industry in various ways—for
example, by raising the price of inputs, thereby claiming some of the industry’s profits. Several factors determine
supplier power:

Degree of supplier concentration: Supplier power grows significantly if there are only a few suppliers. If a supplier
faces competition from numerous other suppliers, it may have to accept less favorable terms because the company
can easily switch to a different supplier. A higher level of supplier concentration increases suppliers’ bargaining
power.​
Standardization of inputs: When inputs are standardized, competition among suppliers increases and their power
diminishes. A good example is the relationship between tire manufacturers (suppliers) and carmakers.​
Switching costs: The higher the cost of switching suppliers, the more adverse the terms a company must endure.
Changing suppliers could be extremely expensive for the manufacturer. A clear illustration is Microsoft (as a
supplier) and computer manufacturers—once locked into Microsoft’s software ecosystem, switching costs can be
prohibitively high. The potential for suppliers to integrate downstream—such as a beverage producer purchasing
bars and pubs, or Baxter International (a medical device manufacturer) buying American Hospital Supply—also
heightens supplier power.​
Buyer’s strength: In commercial transactions, the strength of buyers naturally reduces supplier power. This is
especially apparent when buyers unite to boycott a supplier’s products.

4. Potential of new market entrants

According to Porter, “potential entrants” are businesses not yet in the industry but which could influence it in the
future. The number and strength of potential entrants depend on factors such as: the industry’s attractiveness (profit
margins, number of competitors, etc.), barriers to entry (technical requirements, capital, distribution systems,
branding), and special resources under control (restricted access to raw materials, patents, government protection,
etc.).

5. Rivalry Among Existing Competitors

Firms already operating in an industry directly compete with each other, creating reverse pressure on the entire
market and contributing to overall competitive intensity. Within a given industry, the following elements increase
the competitive pressure on rivals:

Industry conditions: Demand, growth rate, number of competitors, etc.​

Industry structure: Whether the industry is fragmented or concentrated (a fragmented industry has a large number of
competitors, none of which can dominate the rest, whereas a concentrated industry has one or a few firms exerting
significant control).​
Exit barriers: Similar to entry barriers, exit barriers are factors that make it difficult for firms to leave the industry.

3.​ Những Business Strategy, thuận lợi và khó khăn

1. International Strategy: Under an International Strategy, a firm initially develops its products and competencies in
the home market and then transfers them to foreign markets with minimal adaptation. This strategy is most
appropriate when: The firm has a valuable core competence lacking among local competitors.; There is weak
pressure to adapt products to local needs.; Cost pressures are relatively low.

Advantages

Leverage of Home Expertise: The firm can exploit product and marketing successes achieved domestically and
replicate them abroad.​
Centralized Control: Development and key decisions (e.g., R&D, product design) remain at headquarters, which can
simplify coordination.​
Lower Costs Compared to Highly Localized Approaches: Standardized production at home or minimal adaptation
abroad can reduce complexity.

Disadvantages

Weak Local Responsiveness: When local consumer preferences or regulatory requirements differ significantly from
the home market, the firm may lose out to competitors who tailor products more closely.​
Limited Exploitation of Location Economies: The company may miss opportunities to reduce costs or enhance
innovation by locating certain operations (e.g., manufacturing or R&D) in foreign regions that have unique
advantages.​
Vulnerability to Increased Localization Demands: If local customers eventually expect more specialized products,
the International Strategy becomes less effective.

Example

McDonald’s (in its early international expansion): Focused on replicating its core menu items and brand concept
from the U.S. to foreign markets with minimal changes—beyond basic adjustments like beef or chicken options.
Such an approach worked well where local demand for “American fast food” was high and adaptation requirements
were relatively minor.
2. Localization Strategy: Under a Localization Strategy, also known as a Multi-Domestic Strategy, the firm
customizes products and marketing to match the demands of each national market. Firms adopting this strategy
often set up full-scale operations (production, marketing, R&D) in each key country. This approach is suitable
when: Local responsiveness demands are high; Cost pressures are moderate or low; Markets differ significantly in
tastes, infrastructure, or regulations.​

Advantages

Close Alignment with Local Tastes: Tailored products and marketing ensure a strong competitive position where
cultural or consumer preferences vary widely.​
Better Compliance with Local Regulations: High local involvement often means the firm can adapt more quickly to
legal requirements.​
Greater Brand Acceptance: Being seen as “local” can strengthen customer loyalty.​
Disadvantages

High Costs: Maintaining separate R&D, manufacturing, and marketing in multiple countries can be expensive and
reduces scale economies.​
Little Exploitation of Experience-Curve Effects: Producing smaller batches and repeating efforts across different
locales limits cost efficiencies.​
Potential Failure to Transfer Unique Competencies: If each subsidiary operates largely independently, the firm may
not fully share or leverage innovations across markets.

Example

Nestlé: Often customizes product formulations (e.g., different sweetness levels or flavors in various countries) and
marketing campaigns to local preferences. This fosters strong market acceptance but increases complexity and costs.

3. Global Standardization Strategy: Under a Global Standardization Strategy, the firm aims to minimize costs by
standardizing products and centralizing key functions (e.g., R&D, manufacturing) in locations offering the greatest
efficiencies. This strategy is most effective when: Cost pressures are very high. Pressures for local adaptation are
low. Product demand is relatively uniform worldwide.

Advantages

Significant Cost Reductions: Large-scale production and a single global marketing approach can greatly lower
per-unit costs.​
Exploitation of Location Economies: The firm can choose optimal global sites for manufacturing or R&D based on
cost, skills, or resource availability.​
Easy Brand Consistency: A uniform product line helps present a cohesive brand image worldwide.

Disadvantages

Weak Local Responsiveness: Overly standardized products risk alienating consumers in markets with unique needs
or tastes.​
Potential Price War: If rivals also adopt a low-cost strategy, the competition may shift to price-cutting, hurting
profitability.​
Less Flexibility: Centralized decision-making can be slow or less responsive to sudden local trends or regulatory
changes.

Example
Intel: Produces standardized microprocessors with relatively uniform global specifications. Local adaptation is
minimal, and cost optimization is paramount.​
4. Transnational Strategy

A Transnational Strategy attempts to simultaneously achieve cost efficiencies (similar to a Global Standardization
Strategy) and local responsiveness (similar to a Localization Strategy). This approach is relevant when: Both cost
pressures and local demands are high. The firm needs to adapt certain aspects of its product or marketing, but also
wants to benefit from economies of scale or location. Knowledge flows between subsidiaries can enhance
innovation, which is then transferred across markets.​
Advantages

Balancing Cost Savings and Localization: Companies can centralize or standardize some activities while
customizing others.​
Global Learning: Substantial knowledge exchange among subsidiaries fosters continuous improvement, as local
subsidiaries can develop unique competencies that may be deployed elsewhere.​
Exploitation of Location Economies: Critical operations, such as R&D or manufacturing, can be located where they
yield maximum advantage.​
Disadvantages

High Complexity and Organizational Challenges: Managing dual pressures (cost vs. customization) often demands
sophisticated coordination mechanisms and advanced organizational structures.​
Internal Conflicts: Different subsidiaries may have conflicting objectives—e.g., cost-focused units vs. locally
adaptive units.​
Substantial Investment in Systems: Requires strong information technology, shared culture, and managerial
capabilities to coordinate multiple global and local objectives.

Example

Unilever: Strives to standardize certain product components globally (e.g., formulas for detergents, soaps) to
achieve scale economies, but adapts marketing and some product attributes for specific local preferences. This
strategy provides cost efficiency while still meeting local customer needs.​
4.​ ANALYZE THE MAIN FACTORS AFFECTING THE CHOICE OF INTERNATIONAL BUSINESS
STRATEGY

a. Cost pressures: require firms to reduce the costs of value creation activities by focusing on standardized
production in the best location in the world to achieve location economies and experience curve economies.
Pressure to reduce costs can be particularly strong in industries where price is the main competitive weapon. These
are often products that serve a common need and where consumer tastes and preferences in different countries tend
to be similar. Examples include sugar, oil, steel, computers, car tires, etc. These are common goods and have a high
demand. Pressures for cost reductions can also be strong in industries where major competitors are low-cost, or
where capacity exceeds consumption, or where consumers are powerful. To address this problem, companies often
relocate production to low-cost locations and launch globally standardized products to achieve experience curve
economies.

b. Local Responsiveness

*Differences in consumer tastes and preferences. Strong pressures for locality arise when consumer tastes and
preferences differ significantly across countries – perhaps for historical or cultural reasons. In such cases, products
and/or advertising messages must be tailored to appeal to local consumer tastes and preferences. This often prompts
headquarters to delegate production and marketing functions to subsidiaries in other countries.

* Differences in infrastructure and traditional practices: Adapting products to the customs and infrastructure of
different countries may require outsourcing manufacturing functions to foreign subsidiaries.​
For example, the consumer electronics system in North America is based on 110 volts; whereas in some European
countries, 240 volts is the standard. Therefore, domestic electrical equipment must be adapted to the differences in
infrastructure. Traditional customs also often differ between countries. For example, people drive on the left side of​
the road in the UK, creating a right-hand drive requirement, but in neighbouring France, people drive on the right,
creating a left-hand drive requirement. Cars have to be adapted to accommodate this difference in traditional
customs.

* Differences in distribution channels: A company's marketing strategy must accommodate differences in

distribution channels across countries. This requires headquarters to delegate marketing functions to subsidiaries
operating in different countries. For example, in detergents, five retail groups control 65% of the German market,
but no single group controls more than 2% of the market in neighboring Italy. Thus, retail groups have a large sales
force in Germany, but a relatively small one in Italy. Resolving these differences requires detergents to use different
marketing approaches.

* Host Government Demands Economic: and political demands imposed by host governments can become local
pressures. At the same time, the threat of protectionism, nationalism, and local laws - all require that international
production activities be locally appropriate. However, local pressures mean that a firm cannot fully reap the benefits
of experience curve and location economies. For example, it cannot serve the global market from a low-cost
location, produce a globally standardized product, and market it worldwide to reap experience curve cost
economies. In addition, local pressures imply that the company cannot transfer its superior capabilities and
distinctive products from one country to another. McDonald's must also adapt its products to national differences in
preferences and tastes, such as modifying its menu to suit local tastes. (Example: McDonald's in China) d.
Marketing considerations Some companies that pursue a global strategy use the same advertising messages and
themes to sell their products worldwide. However, many other companies find that their products require physical or
promotional changes to suit the tastes of consumers in their target markets. These products still require different
marketing strategies to reflect the distinct cultures, politics, and laws or economics of different national markets

5.​ WHAT ARE THE MAJOR STRATEGIES AT THE CORPORATE LEVEL AND THE BUSINESS
LEVEL?

a. Corporate level strategy: For companies with more than one industry, sector, or business unit, the first step is to
form a corporate level strategy. On the one hand, it determines the national markets and industries in which the
company will operate. On the other hand, it also involves determining the overall goals for the company's different
business units and determining the major paths and solutions of each unit in achieving the identified goals. There
are four important paths to form a corporate level strategy: growth, stability, retrenchment and combination.

* Growth strategy: This is a strategy designed to increase the size or scope of operations (or types of operations) of
a company. Size is the breadth and magnitude of a company's operations; scope is the types of operations a company
undertakes. Common metrics used to measure growth include: geographic area, number of business locations,
market share, sales revenue and number of employees, number of industries or business sectors, etc.

*Internal growth - organic growth is a corporate strategy based on growth generated by the firm itself. Other growth
methods include mergers and acquisitions, joint ventures, and strategic alliances. Firms often join forces with
competitors to reduce competition, diversify product lines, or expand their geographic footprint. The primary
motivation for joining forces with suppliers is to increase control over quality, costs, and delivery times.​ ​
​​ ​

* Reduction strategy: It is a planned strategy to reduce the size and scope of a company's business activities.
Companies often downsize when economic conditions worsen or competition increases. Companies can implement
this strategy by closing factories with excess capacity and laying off workers. Companies reduce the scope of their
operations by selling unprofitable businesses or businesses that are no longer directly related to overall goals.
Weaker competitors often choose a retrenchment strategy when the national business environment becomes highly
competitive.

b. Business Level

* Low-cost leadership strategy: Companies pursuing a low-cost leadership strategy also try to reduce administrative
costs and the costs of key activities, including marketing, advertising, and distribution.​
The factors that underpin low-cost leadership can help protect a company from competitors because of its high
initial costs. Similarly, achieving low-cost leadership depends on scale of production. This means that the company
must have a large market share. The downside of this strategy is that customer loyalty is low, because all else being
equal, consumers will buy from the low-cost producer. The low-cost strategy is particularly appropriate for products
sold in large volumes and aimed at price-sensitive customers. This strategy is often well suited to companies with
standardized products and a strong emphasis on marketing.​ ​ ​ ​

* Differentiation Strategy: Differentiation strategy is a strategy in which a company designs its products so that
consumers perceive them as unique and different from the rest of the industry. Because consumers perceive the
company's products as unique and different from the rest of the market, a company pursuing a differentiation
strategy can charge higher prices and gain greater customer loyalty than a low-cost leader. Differentiation strategies
tend to push a company into a lower market share position, because they may lead to a monopoly or serve only a
limited customer base. Companies pursuing this type of strategy must find ways to increase consumer loyalty to
offset the lower market share and higher costs of producing and marketing a unique product. Enhancing the
reputation for quality is one way to differentiate a product. • A distinctive brand impression also differentiates a
product. Another differentiating factor is product design.

c. Functional level: Functional strategy is a strategy that focuses on specific activities to transform raw materials
into products. The formation of functional strategies begins with an analysis of the company's support capabilities to
the primary activities and support activities to create value for consumers.

6.​ WHAT IS CENTRALIZED MANAGEMENT AND DECENTRALIZED MANAGEMENT? WHAT

ARE THE MAIN VIEWS SUPPORTING THESE TWO MANAGEMENT MECHANISM ?

Centralized Decision Making refers to decisions made at the highest levels of the management system, typically at
the headquarters of the organization.

Decentralized Decision Making refers to decision-making being carried out at lower levels of the management
system.

It is important to note the following two basic points:

-​ It is rare for companies to be completely centralized or completely decentralized in decision-making.​

Companies usually choose the method that allows their decisions to be most effective.​

-​ International companies may make centralized decisions in one market region while decentralizing decisions
in other markets. Several factors affect this choice, such as the need to adjust products and the capabilities of
managers at different locations.

a. Arguments in Support of Centralized Management

There are four main arguments in favor of centralized management:

-​ Coordination Facilitation:​
For example, a company with a production subsidiary in Taiwan and an assembly subsidiary in Mexico may need
to coordinate their activities to ensure smooth production and assembly processes. This can be achieved if
production and assembly decisions are made at the company’s headquarters.
-​ Alignment with Company Objectives:​
Centralized management ensures that decisions made at lower levels align with the company’s overall goals. When
decisions are decentralized to lower levels of management, there’s a risk that those decisions might not align with
the company’s highest objectives. Centralizing critical decisions minimizes this risk.
-​ Power and Authority for Major Organizational Changes:​
Centralizing power and authority with top-level managers or a small group allows them to make necessary major
organizational changes effectively.
-​ Avoidance of Activity Duplication:​
Centralization can help avoid the duplication of activities when different departments perform similar tasks. For
instance, many international companies centralize their research and development functions in one or two locations
to ensure the work is not duplicated. Similarly, production activities might also be centralized in key locations for
the same reason.​
b. Arguments in Support of Decentralized Management

There are five main arguments supporting decentralized management:

-​ Avoiding Overload of Top-Level Managers:​

Top-level managers may be overwhelmed with decision-making responsibilities if they are granted full authority to
make all decisions, potentially leading to mistakes. Decentralized management allows top-level managers to focus
on core issues while delegating routine matters to lower management.
-​ Motivation of Managers:​
Behavioral scientists have long argued that people work better when they have a higher degree of personal freedom
and control over their work. Decentralized management gives lower-level managers more control, leading to
increased motivation and productivity.
-​ Increased Flexibility:​
Decentralized management creates greater flexibility, particularly in responding to environmental changes.
Decisions do not always need to be "submitted to higher levels" except in exceptional cases, allowing for quicker
adjustments to market dynamics.
-​ Better Decision-Making at Local Levels:​
Decentralization can lead to better decisions because they are made by individuals with better information at local
levels, compared to top-level managers who might not have as much insight into day-to-day operations.
-​ Enhanced Control in Smaller Units:​
Decentralized management allows for the creation of relatively independent, smaller units within an organization.
Managers in these units are fully responsible for their operations. The more responsibility they have for decisions,
the less they can deny accountability for poor performance within their units.

7.​ WHAT ARE THE TYPES OF INTERNATIONAL ORGANIZATIONAL STRUCTURES?

There are many different ways in which companies organize themselves and carry out international business
activities. However, there are four common types of organizational structures that international companies choose to
implement.

a. International Division Structure

The International Division Structure is an organizational framework that separates international business activities
from domestic operations by creating a dedicated international division with its own management (see Figure 6.3).
This international division is then subdivided into units corresponding to the countries in which the company
operates.

However, the International Division Structure can lead to the following issues:

1.​ Dependence on Domestic Managers: International managers often depend on domestic managers for
financial resources and technical expertise that can provide the company with a competitive edge in international
markets.​

2.​ Centralized Control: The general manager of the international division typically holds responsibility for all
operations in every country. While this policy facilitates coordination across countries, it reduces the autonomy of
managers at the individual country level.​

Example:

●​ Coca-Cola initially adopted an international division structure when expanding globally. The company set up
an international division separate from its domestic operations, which allowed for more streamlined coordination of
its international marketing and production activities.​
b. Worldwide Area Structure

The Worldwide Area Structure is an organizational structure in which all of the company's global activities are
organized by country or region (see Figure 6.4).

The more countries a company operates in, the more likely it is to organize by region rather than by country.
Typically, a regional general manager is responsible for each country or region. Each regional unit operates like an
independent entity, with most decisions being made by the regional or country manager. These units often have their
own departments such as procurement, production, marketing, sales, R&D, and accounting. The company’s
headquarters is responsible for overall strategy and coordinating activities between different regional units.

This structure is most suitable for companies that view each national or regional market as unique. It is especially
useful when there are significant cultural, political, or economic differences between countries or regions.

Example:

●​ Nestlé uses a worldwide area structure in which its operations are organized regionally, with a focus on
tailoring products to local preferences. The company has distinct regions for Europe, Latin America, and
Asia-Pacific, each with its own management team and operational focus.

c. Worldwide Product Division Structure

The Worldwide Product Division Structure is an organizational structure that divides the company's activities across
the globe based on product groups.

This structure overcomes some of the coordination limitations of the international division structure, making it
suitable for companies offering a wide range of diverse products and services. Because the focus is on products,
both domestic and international management teams for each product line must coordinate their activities to avoid
conflicts.

Example:

●​ Procter & Gamble (P&G) employs a worldwide product division structure. The company divides its global
operations into product categories such as beauty, health care, and home care. Each division operates as an
independent entity, allowing P&G to manage its diverse product lines effectively on a global scale.

d. Global Matrix Structure

The Global Matrix Structure is an organizational design that splits the chain of command between product-based
divisions and geographic regions.

This structure is designed to balance the dual focus of managing products and geographic regions by creating two
dimensions of reporting: one for products and one for regions. Employees in a global matrix structure have dual
reporting relationships, typically reporting to both a product division head and a regional manager.

Example:

●​ IBM operates with a global matrix structure, where the company’s employees report to both global product
managers (e.g., for hardware or software) and regional managers (e.g., for North America or Europe). This allows
the company to remain agile in managing both product innovation and local market responsiveness.
8. ANALYZE THE ADVANTAGES AND DISADVANTAGES OF ENTERING THE WORLD MARKET BY
DIRECT EXPORT AND INDIRECT EXPORT? THEIR MAIN FORMS

a. Concept

Exporting is the activity of sending goods and services from one country to another. Exporting is considered a
low-risk and low-cost method of entering foreign markets. From a business perspective, exporting involves selling
goods and services. In international business, exporting occurs in two main forms: direct exporting and indirect
exporting.

b. Forms of Exporting

• Direct Exporting

Direct exporting refers to a company’s direct sales of goods and services to its customers in foreign markets.​
For companies with international experience, direct selling to foreign markets is a common form of international
business activity. Customers are those who wish to buy and consume the company’s products. To enter international
markets through direct exporting, companies usually utilize the following two main forms:

●​ Sales Representative​
A sales representative is a form of selling where the sales are made on behalf of the company, but not under its own
name. The representative receives a salary and commission based on the value of the goods sold. In practice, the
sales representative acts as the company’s salesperson in foreign markets. The company directly contracts with
customers in the foreign market.​

●​ Distributor Agent​
A distributor agent is someone who buys goods from the company to sell through a distribution channel in the
assigned market. The company controls the distribution scope and channels in the foreign market. The distributor
agent assumes full responsibility for the risks associated with selling the goods in the defined market and profits
from the difference between the purchase price and the selling price.​

• Indirect Exporting

Indirect exporting is the sale of goods and services by a company to foreign markets through intermediaries (via
third parties). The main intermediaries involved in export business are: agents, export management companies
(EMCs), and export trading companies. These intermediaries do not take ownership of the company’s goods but
assist in exporting them to foreign markets.

●​ Agent​
An agent is an individual or organization that represents the exporter to perform certain activities in foreign
markets.​
The agent performs a task on behalf of the company and receives compensation. The agent does not own or take
possession of the goods. The agent is responsible for establishing a contractual relationship between the company
and the customer in the foreign market.​

●​ Export Management Company (EMC)​

An export management company is a firm that takes on the responsibility of managing the export of goods for the
exporter. The EMC acts on behalf of the exporting company, making it an indirect exporter. The EMC handles the
export procedures and charges a service fee for their efforts. Essentially, the EMC provides management services
and earns a fee from those activities.​

●​ Export Trading Company (ETC)​

An export trading company operates as an independent distributor, connecting foreign customers with domestic
exporters to ship goods abroad.​
ETCs engage in activities directly related to exporting, such as providing export-import services and trade,
establishing and expanding distribution channels, funding trade projects, investing, and even performing specific
production tasks (e.g., packaging, printing).​
Export trading companies have extensive experience in foreign markets and employ experts in export services.
They generate revenue from providing export services and bear the costs of their activities. They may also offer
export experts to other companies.​

●​ Freight Forwarder​
A freight forwarder is a company that handles transportation services and other related activities in the
export-import process, such as customs declarations, customs duties, shipping, and insurance.​
Freight forwarders also engage in export activities and develop various types of logistics services to deliver goods
to the final recipient. They operate like logistics service providers, offering services like packaging, insurance for
goods, and all relevant customs clearance operations.​
c. Advantages and Disadvantages of Market Entry via Exporting

• Advantages:

Entering foreign markets through exporting allows companies to increase sales, gain international business
experience, utilize surplus capacity, and generate foreign exchange for the country. Especially, this market entry
mode involves less risk, lower costs, and is easy to implement during the initial stages of international market entry.

• Disadvantages:

Entering foreign markets via exporting may create challenges for the company in establishing direct contact with
end consumers. This means that the company may not have strong mechanisms to compete effectively, as it lacks
direct consumer relationships and may face higher competition from local players.

9. WHAT ARE LICENSE AGREEMENTS AND FRANCHISE AGREEMENTS? ANALYZE THEIR

ADVANTAGES AND DISADVANTAGES

●​ Licensing

a. Concept Licensing is a form of foreign market entry in which a company (the licensor) grants another company
(the licensee) the right to use intangible assets it owns for a specified period of time. In return, the licensee must pay
royalties to the licensee. This amount is usually calculated on the basis of sales revenue and paid periodically.
Intangible assets may include copyrights, patents, inventions, formulas, designs, methods, programs, product labels
and registered product names.

There are currently 3 types of license contracts.​

- An exclusive license agreement grants the licensee the exclusive right to use intangible assets in the production
and sale of products in a specified geographical area.​
- A typical license agreement grants the licensee the right to use the intangible asset within a specified territory but
does not grant exclusive rights within that territory.

A cross-licensing agreement is formed when companies want to exchange intangible assets with each other. This
agreement allows each company to use the other company's technology in the production of its own goods, thereby
reducing the cost of research and development. This is a very broad agreement, valid in most areas, except for some
patents on semiconductor manufacturing of company

* Advantages 1 Most licensing agreements require the licensee to source the​

necessary capital through the construction of special production facilities or the use of existing surplus. Therefore,
the basic advantage of licensing is that the company does not have to bear the development capital when entering
foreign​
markets. For companies with limited factors but possessing production know-how, licensing is the best advantage
for development in foreign markets through leveraging the resources of partners.

* Advantage 2: Because it does not have to spend time building and starting its new facilities, the licensor will have
the conditions to quickly penetrate the market. For the method of penetration through contracts, due to the available
infrastructure as well as information channels and resources of the licensee, the licensor can skip the initial stages,
quickly participate in business activities and quickly dominate the market.

*Advantage 3: License contracts are a less risky form of international market penetration than other forms. This is
basicall shown in the fact that when penetrating the market through a licensing contract, the company will collect a
certain amount of money - the licensing fee - and the fee is always large or equal to 0. That is, in the worst case,
when the business partner is ineffective, the company will still not lose money on licensing activities.

* Advantage 4: Licensing agreements can help companies enter markets that are restricted by trade barriers and
investment barriers. If a company wants to enter a market where the government of the partner country does not
allow foreign investment or only allows investment at the joint venture level, it is impossible for the company to
implement other market penetration methods, but can only do so through a licensing contract. For markets with
large import barriers such as high import taxes and strict import policies, using other forms of penetration such as
foreign trade business forms will not be as effective as using a licensing contract. In addition, licensing also means
that the company will allow the partner to produce on their own territory, thus avoiding transportation costs - which
obviously account for a significant proportion. * Advantage 5 Licensing contracts can help the company limit the
phenomenon of counterfeit goods appearing in the black market in foreign markets. Manufacturers can to some
extent curb pirates by selling licenses to foreign companies to market their products at more competitive prices. The
companies that buy the licenses will then be responsible for combating pirated products in their markets. Therefore,
to limit the phenomenon of counterfeit goods in foreign markets, companies can use the form of penetration through
license contracts.

The basic disadvantage of licensing contracts is that it is very difficult for the licensor to control the activities of the
licensee; from this, three basic problems arise: • Failure to take advantage of the experience effect. • Failure to take
advantage of the location's economics.Difficulty in coordinating strategies.

Disadvantage 2: Market entry through licensing agreements can create future competitors. These agreements are
often signed for a period of several years, or even decades or more, during which time the licensee can become very
successful in producing and selling goods that use the company's intangible assets.

Disadvantage 3: Licensing intangible assets to different partners in different countries poses a major problem for
companies - quality management. Failure to control the quality of the partners' output will put the company at risk
of losing market share and reputation.

Disadvantage 4: Conflict of interest between parties can make business operations ineffective. This can happen due
to the fact that revenue is not always proportional to profit, the goal of the licensor is to capture market share,
expand the market through reducing product costs; but the goal of the licensee is to increase sales based on
increasing selling prices. ​ ​ ​ ​ ​
Franchise contract (franchising)

a. Concept​
Franchise contract (franchising contract) is a business cooperation contract through which the franchisor grants and
allows the franchisee to use the company name and then gives them the brand, model and continues to help the
business activities of that partner, in return, the company receives an amount of money that the partner pays to the
company Franchising​
is a special form of licensing

Advantage: Basically, the advantages for the franchisor of franchising are the same as the advantages for the
licensor of licensing. First is​
capital. Capital is always the biggest concern for companies when they want to expand their business. But in the
franchise system, the person who invests capital to expand the business is the franchisee. This helps the franchisor
to expand the business with other people's capital and reduce costs and risks for market penetration. At the same
time, having to invest capital is a driving force for the other party. The franchisee must strive to operate effectively,
bringing more profits to the franchisor. Take advantage of​
the franchisee's knowledge of the local market. Taking advantage of this knowledge will help the company more
easily penetrate the market, grasp market information and customer tastes.

Disadvantage1 The disadvantages of franchising are generally less than those of licensing, because franchising is
often used for service companies, which often have less need to coordinate operations between markets to achieve
location economies and experience effects. However, franchising still has the disadvantage of difficulty in
coordinating global strategies. Obviously, the franchisor cannot, for the sake of its global development goals,
require the franchisee in one country to spend capital to support the franchisee in another country.

Disadvantage 2: In addition, similar to licensing, the parties to a franchise agreement also may have conflicting
interests.

Disadvantage 3: quality management. The basis of the franchise agreement is that the brand of a franchisee will
convey to customers the quality of the company's products.​
The geographical distance between franchisors in different countries can make the quality of the products different.
In addition, the number of franchisees, will bring great difficulties in quality management.One way to mitigate this
disadvantage is to establish subsidiaries in countries where the company wants to expand. These subsidiaries can be
wholly owned by the company or established through a joint venture agreement with a foreign company. These
subsidiaries assume the rights and obligations of the parties in establishing franchise operations in the countries or
territories. ​ ​ ​

10. WHAT IS A WHOLE-OWNED BRANCH? ANALYZE THEIR ADVANTAGES AND

DISADVANTAGES.

a. Concept: This is a form of foreign market penetration through investment, in which the company will establish a
branch in the host country, 100% owned and fully controlled by the company. A 100% owned branch can be
established by completely new construction (such as factories, offices and equipment), or by acquiring a company in
the host market, taking over its existing facilities and operations. Acquisitions are an especially good strategy when
the local firm is carrying valuable product labels, brand names, and​
technological processes.

b. Advantages of Wholly Owned Subsidiaries Entering international markets through a wholly owned subsidiary
gives managers complete control over day-to-day operations in the target market, as well as direct access to the
subsidiary's high technology, processes, and other intangible assets. The owner's complete control reduces
competitors' access to the firm's advantages - this is especially important for high-technology companies. Managers
also have control over the subsidiary's production volume and prices

c. Disadvantages of Wholly Owned Subsidiaries Market entry through a wholly owned subsidiary can be a very
expensive decision. Companies must either provide internal financing or raise capital through the financial markets.
Obtaining the necessary funds is difficult for small and medium-sized companies.

Typically, only large companies are equipped to establish wholly owned international subsidiaries. However,
nationals of a country living abroad can benefit from their special knowledge and capabilities in such cases. In
addition, the risks are often high, as a wholly owned subsidiary requires a significant amount of resources from the
company. The sources of risk include political and social instability as well as general instability in the target
market. Such risks can put both the company's personnel and assets at serious risk. The sole owner of the subsidiary
also assumes the entire risk of a boycott or rejection by customers. Parent companies can reduce such risks by
learning more about consumers in the market before entering it.​ ​ ​ ​

11. WHAT ARE JOINT VENTURES AND STRATEGIC ALLIANCES? PRESENT THEIR ADVANTAGES
AND DISADVANTAGES.​ ​ ​ ​ ​

a. Concept: In certain situations, companies may wish to share ownership of a business partner. A separate company
that is formed and jointly owned by at least two independent legal entities to achieve common business goals is
called a joint venture. The partners in a joint venture may be private companies, government agencies, or
government-owned companies. Each party may contribute anything the partners consider valuable, including
management capabilities, marketing expertise, market access, production technology, financial capital, and research
and development knowledge and experience. b. Types of joint ventures There are four main types of joint ventures,
each of which involves only two partners. However, these types can also be applied to joint ventures​
with more than one partner.​ ​ ​ ​ ​

Advantages of Joint Ventures Joint ventures have several important advantages for companies seeking to enter
foreign markets. Many companies rely on joint ventures to reduce risk. Generally, a joint venture is less risky than a
wholly owned company, because each partner risks only its own contribution. Thus, a joint venture is especially
wise when entry requires a large investment or when there is significant political or social instability in the target
market. Similarly, a company can use a joint venture to learn more about the domestic business environment before
establishing a wholly owned subsidiary. In practice, many joint ventures are often bought out by one partner after
they have gained enough experience in the domestic market. On the other hand, companies can use joint ventures to
enter international markets that they would otherwise miss out on. For example, some governments require foreign
companies to share ownership with domestic companies, or provide incentives for them to form joint ventures. Such
requirements are common in developing countries. The goal is to improve the competitiveness of domestic
companies by giving them the opportunity to partner with and learn from those international partners. Companies
can gain access to another company's international distribution network through joint ventures. d. Disadvantages of
Joint Ventures One of the disadvantages of joint ventures is that they can lead to ownership disputes between the
parties. Disputes are most common when management is divided equally—that is, when each party has top
management representation in the joint venture, often referred to as a 50:50 joint venture. Because no one party's
manager has final decision-making power, this can lead to management paralysis, which can cause problems with
delays in responding to market changes. Disputes can also arise when there is no consensus on future investments
and profit sharing. Parties can reduce the likelihood of disputes and inability to make decisions by establishing
unequal ownership, where one party holds 51% or more of the ownership, which equates to voting rights and final
decision-making power. A more complex joint venture (often referred to as a consortium) is also often characterized
by unequal ownership. For example, the ownership of a four-party joint venture might be 20-20-20-40, with the
40% owner having the final say in the company. In addition, loss of control in a joint venture can occur when the
local government is one of the partners. This is most common in industries that are considered culturally sensitive or
important to national security, such as broadcasting, infrastructure, and defense. As such, the profitability of the
joint venture may be affected by the local government’s cultural or security-based incentives.​

GLOBALIZATION
(Discuss the causes of globalization and its impacts + deglobalization)
1. ​ Toàn cầu hóa (Globalization)
●​ Khái niệm
Globalization is a worldwide trend, through which economies in the world lose their borders and connect to each
other. The companies are no longer imprisoned in their borders and can implement a wide range of business
activities around the world. In this context, globalization refers to the increasing integration and interdependence of
the world economy. Globalization consists of two aspects: market globalization and production globalization.

Globalization of markets: refers to the shift from an economic system in which national markets are separate
entities, isolated by trade barriers as well as spatial, temporal, and cultural constraints, to a system where national
markets merge into a global market.
(The removal of trade barriers makes international trade easier. Consumer tastes and preferences converge to
global standards. Businesses offer essentially similar products.)
Ví dụ 1: When consumer preferences and tastes across different countries begin to converge around certain global
standards, this creates a global market. Consumer products like Citigroup credit cards, Coca-Cola beverages, Sony’s
PlayStation video games, McDonald’s hamburgers, Starbucks coffee, and IKEA furniture are prime examples. By
offering similar basic products worldwide, these businesses contribute to the creation of a global market.
- ​ Toàn cầu hóa hóa sản xuất (globalization of production): It is the trend of individual companies to disperse
parts of their production processes to various locations around the world in order to exploit the advantages offered
by differences in the costs and quality of production factors.
VD1: Apple is an American company which produces its products in China because China has a large and relatively
inexpensive labor force, which makes it cheaper to produce goods there than in many other countries; invested
heavily in infrastructure, including transportation and communication networks, which makes it easier and more
efficient to manufacture and transport goods; a large pool of skilled workers, particularly in the electronics industry
→ produce its products more efficiently and cost-effectively, which helps the company to remain competitive in the
global market.
❖Nguyên nhân của toàn cầu hóa (Cause of globalization)

The first reason is the rapid growth of the global economy. Any country that does not integrate and learn will
inevitably fall behind. This process requires businesses to continuously innovate, upgrade product quality, and seek
broader markets.

The second reason is advances in technology and communication, especially in telecommunications and information
technology. This has made it easier for countries to connect and communicate through the Internet, email, mobile
phones, etc. → helping to shrink the gaps of time and space, enabling fast information exchange and connection.

The third reason is the increasing development of international links and multinational companies. These have a
significant impact on the economic situation of the country. Specifically, the consolidation of companies into large
conglomerates further reinforces their importance to the national economy.

Finally, global issues such as natural disasters, epidemics, environmental pollution, etc., require international and
regional cooperation to solve effectively.
❖Drivers of Globalization:
The reduction of trade barriers has opened up opportunities for the development of theories about market
globalization and production globalization. Meanwhile, technological changes have created a practical foundation
for the globalization process.
❖ Reduction of Trade Barriers:
The reduction of trade barriers, aimed at facilitating the free flow of goods, services, and capital, has formed the
foundation for the trend of expanding globalization. This is a key factor in driving economic growth and
international integration. Some important factors related to the reduction of trade barriers include:

Free Trade Agreements (FTAs): Countries have signed free trade agreements to reduce or eliminate trade barriers
such as tariffs and import/export restrictions.

Strengthening International Cooperation: Countries have enhanced cooperation and negotiation to achieve free trade
agreements and reduce trade barriers. Organizations like the World Trade Organization (WTO) have played a crucial
role in promoting the reduction of trade barriers and advancing free trade globally.
❖ Technological Changes:
The rapid development of technology, particularly in the fields of media, information processing, and transportation,
has also created a strong impetus for globalization. Key factors related to technological change include:

Information Technology and Telecommunications: The development of the Internet, mobile networks, and other
information technologies has created a global connected environment, enabling the rapid and efficient exchange of
information and data. This has opened up opportunities for international communication, business transactions, and
information exchange in a quick and easy manner.

Transportation and Logistics Technology: Advances in transportation technology, such as containerization and
supply chain management systems, have reduced transportation costs and enhanced the ability to transport goods
internationally. This has facilitated export and import activities and the flow of goods on a global scale.

Media and Social Media: The development of media and social media has created a global network that allows for
widespread dissemination of information and opinions. This has created opportunities for accessing international
markets, promoting products, and building brand image on a global scale.
❖Impact of Globalization:
Jobs, Income: Globalization helps create new job opportunities for workers and boosts economic productivity. Many
companies can seek cheaper labor or shift production activities to countries with lower labor costs. However, this
can also lead to job losses in traditional industries and affect the incomes of workers who are impacted.
Additionally, globalization often leads to an increase in unemployment rates. Globalization creates a demand for
higher-skilled labor at a lower cost. However, countries with relatively weak institutions may not be capable of
producing highly skilled workers.Ví dụ 1: công ty Mỹ Hardwood Industries đã đóng cửa các cơ sở ở Mỹ với giá
nhân công 9 USD/giờ để tới Honduras với giá nhân công chỉ 48 cent/ giờ. Điều này làm mức lương của người Mỹ
tầng lớp dưới giảm đi đáng kể trong vòng một phần tư thế kỷ qua.
VD: In recent years, Nigerian workers have migrated to European countries such as Italy, Spain, France, and the UK
in search of job opportunities and a better life. The duration and scale of labor migration from Nigeria have
increased significantly, particularly in the 2010s
Labor Policy: For countries, globalization can lead to competition in establishing labor policies and wage levels. To
compete in the global business environment, some countries may relax labor regulations and standards to attract
investment and manufacturers. However, globalization can also promote the establishment of global labor standards
and the sharing of workers' rights through trade agreements and international efforts.
Ví dụ 1: China has become a global manufacturing hub, attracting numerous foreign investors. This has also placed
significant pressure on domestic workers, requiring them to work for low wages and under poor working conditions.
The Chinese government has had to implement measures to protect workers' rights, including strengthening
collective bargaining rights and promoting workplace safety and sanitation regulations.
Environment: Globalization can have negative impacts on the environment, such as increased emissions causing
pollution and unsustainable resource exploitation, due to the expansion of production and international
transportation activities. However, globalization also creates opportunities for sharing technology and knowledge
between countries to address global environmental issues.
Ví dụ 1: One positive effect of globalization as it relates to the environment is that it facilitates coming together of
people from different backgrounds to tackle environmental issues. Professor Stephen Blair Hedges, director of the
Center for Biodiversity at Temple University, and Philippe Bayard, CEO of Sunrise Airways and president of
Société Audubon Haiti, a leading conservation group, worked together to establish Haiti’s first private nature
reserve. The protected areas of the reserve act as havens for species most at risk of extinction, a particularly dire
threat given the connection made between forest cover and biodiversity, as Haiti is known as one of the most
deforested countries in the world.
Culture: Globalization can contribute to the blending and fusion of cultures as countries exchange information,
ideas, cultural products, and values. This can lead to increased diversity and the influence of global media, but it
also presents challenges in preserving and maintaining local cultural diversity.
Example 1: Hollywood Film: "Avengers: Endgame" is a superhero movie produced by Marvel Studios, one of the
leading Hollywood film production companies. The film became a global hit and one of the highest-grossing films
of all time. Its tremendous success has had a significant impact on local film industries, prompting film studios in
various countries to adjust their film production strategies in order to attract audiences
National Sovereignty: Globalization can create tighter connections between countries and limit the power of
national governments in making decisions. Trade agreements and international organizations may require countries
to comply with rules and commitments, impacting the sovereignty and autonomy of certain nations.
Example 1: Palestine is a disputed territory between Israel and Palestine. Through international relations and
interaction with the global community, Palestine has received support from various countries and international
organizations in its efforts to promote sovereignty and independence.

Phi toàn cầu hóa (Deglobalization)

●​ Khái niệm
is the reverse process of globalization, characterized by the reduction of interdependence and integration between
certain units across the world. In this process, countries and economies become less reliant on others and focus more
on internal affairs. This may include minimizing or abolishing free trade agreements, limiting imports and exports,
increasing tariffs, and implementing measures to protect the domestic market.
● Drivers of Deglobalization:

Deglobalization is often driven by factors such as political instability, the rise of nationalism and protectionism, and
concerns related to security and the environment.

● Reasons for Opposition to Globalization:

In developing countries, this reaction stems from concerns that globalization threatens national traditions due to the
overwhelming influx of foreign goods and ideas.

Countries dependent on foreign economies, goods, technology, and politics lack control over their own domestic
affairs, making them vulnerable to external influence and control.
International production and transportation processes increase emissions and contribute to environmental pollution,
raising concerns among nations. Furthermore, the spread of global consumer culture can erode local cultural
diversity and impose values and trends from stronger cultures.

Globalization can lead to unequal competition between nations and businesses. Wealthy nations and multinational
corporations may have a competitive edge over smaller nations and businesses, leading to the concentration of
power and resources among a few wealthier

Local workers lose jobs or suffer wage cuts because of globalization (due to international trade, offshoring of
production, and immigrants taking jobs...).

Ví dụ 2: Brexit - quá trình Anh rút khỏi Liên minh châu Âu (EU): The EU is an economic and political union of
European countries, aiming to create a single market and enhance cooperation among member states. However, the
British believed that the EU had diminished the UK's sovereignty and increased dependence on other countries.
Therefore, the decision to leave the EU was seen as a way to restore independence, regain control over domestic
policies, reduce reliance on other countries, and focus more on internal affairs.Debate globalization (Chỉ ra ít nhất 3
luận cứ để ủng hộ và phản đối toàn cầu hóa)
●​ Globalization advantage
Economic Growth: It helps enhance trade and investment between countries, creating new business opportunities
and economic growth. Businesses can seek new sources of supply and consumption markets, which helps strengthen
competitiveness and reduce product costs.
Enhanced International Cooperation: Countries cooperate to address global issues such as climate change, security,
environmental pollution, and sustainable development, sharing knowledge, technology, and experiences. They also
work together to combat global pandemics like COVID-19 (sharing knowledge, technology, experiences, etc.).
Poverty and Inequality Reduction: It helps boost trade and investment, creates new job opportunities, reduces
poverty, and helps decrease inequality between countries and within a country’s different social classes.
Cultural Diversity: Integration allows countries to gain a better understanding of each other's cultures, learn from
positive aspects, and eliminate outdated practices, thereby strengthening their own culture. It also facilitates cultural
and educational exchange, promoting peace and enhancing solidarity between nations.
●​ Deglobalization

Globalization leads to dependence on developed countries: Smaller nations or developing countries must rely on
developed countries to import goods and technology, which makes them vulnerable to control and influence.

Globalization causes trade imbalances between countries: Developed countries can leverage their technological and
capital advantages to produce goods at lower costs, pushing products from smaller and weaker nations out of the
market. This creates trade imbalances and weakens the economies of smaller nations.

Job losses in developed countries: Jobs in manufacturing are outsourced to developing countries with lower
production costs and wages, leading to job losses in the developed world.

Threat to traditional cultures: Globalization can erode native cultures and create a blend of cultures, especially in
smaller and weaker nations. These countries often lack the resources and capabilities to compete, leading to
homogenization, cultural blending or loss, and a decline in their economic status.

3. ​ Despite the global popularity, it is important not to overly emphasize the view that national markets
are giving way to the global market.
There are always significant differences between national markets, including consumer preferences and tastes,
distribution channels, accompanying cultural value systems, business systems, and legal regulations. These
differences often require companies to adjust their marketing strategies, product features, and management practices
to best adapt to the conditions of a specific country.

Thị trường về hàng tiêu dùng có phải là thị trường mang tính toàn cầu rộng rãi nhất hiện nay không? No. The
broadest global markets today are not in consumer goods—where national differences in tastes and preferences can
still be significant enough to act as a brake on globalization.

The broadest global markets today are those for industrial goods and raw materials that meet common global needs.
These include markets for commodities like aluminum, crude oil, and wheat; industrial products like
microprocessors, DRAMs (computer memory chips), and commercial airliners; computer software; and financial
assets ranging from U.S. Treasury bills to European bonds and futures on the Nikkei index or the euro.

4. Similar to the case of market globalization, businesses must be cautious not to overemphasize the globalization of
production. Significant obstacles will continue to pose challenges for companies in their efforts to optimally
distribute their production activities across multiple locations worldwide.
These obstacles include: formal and informal trade barriers between countries, barriers to foreign direct investment,
transportation costs, and issues related to economic and political risks.
Example: Government regulations have essentially limited hospitals' ability to outsource the reading of MRJ
endoscopy results to experts from developing countries who specialize in X-ray work at lower costs.

CULTURAL ENVIRONMENT & ETHICS IN IB

(Assess the ethical and social responsibilities of international business- lý thuyết)
ETHICAL ISSUE
Khái niệm (Giáo trình): The term ethics refers to accepted principles of right or wrong that govern the conduct of a
person, the members of a profession, or the actions of an organization. Business ethics are the accepted principles of
right or wrong governing the conduct of business people, and an ethical strategy is a strategy, or course of action,
that does not violate these accepted principles
Employment Practices

Định nghĩa: Ethical Issues in International Business: Employment Practices​

Employment practices in international business refer to the ethical issues that companies face in managing human
resources and treating workers globally, ensuring that employment conditions and workers' rights are upheld in all
countries. Some ethical issues related to employment practices include: poor working conditions, discrimination,
exploitation, child labor, forced labor, and unfair wages. These issues highlight the need for businesses to adhere to
ethical standards and local labor laws while balancing the pressures of operating in different countries with varying
labor regulations. Companies must ensure they are not complicit in practices that harm workers and must promote
fair and just employment conditions across their global operations.

Example 1: The lack of formal labor contracts and worker benefits is a serious issue in Mexico, particularly in
agriculture and manufacturing sectors, where wages are often low and working conditions are harsh. The absence of
labor contracts or benefits leads to exploitation, no legal protection in case of disputes with employers, and
decreased labor productivity, which negatively impacts the country's competitiveness.

Example 3: According to Reuters (USA), Bangladesh is an attractive destination for foreign businesses due to its
abundant, low-cost labor, high-volume production, and low shipping costs. However, the garment industry in
Bangladesh has faced numerous issues, including labor exploitation, with wages as low as 3,000 taka/month
(approximately 782,000 VND), which is below the country's minimum wage. Additionally, workers, particularly
women, face intense pressure, with some working continuously for 14-16 hours a day for fashion brands.

1. ​ Human Rights
Khái niệm: the basic rights and freedoms that are entitled to every individual, regardless of their race, gender,
nationality, religion, or any other status. These rights include the right to life, liberty, and security of person,
freedom of speech and expression, freedom of religion, and the right to a fair trial.
VD1: According to a 2015 UNICEF report, Bangladesh has approximately one million child laborers aged 10-14
working in factories and other locations, where labor exploitation, basic wage issues, and poor working conditions
for minors are not adequately addressed. However, the actual number of child laborers is likely much higher than
reported.
2. ​ Environment Regulations
Khái niệm: refer to the rules and standards related to environmental protection in international business activities.
They focus on managing and monitoring the impact of business operations on the environment, including cultural
and ethical factors.

VD1: The untreated waste discharge by the Taiwanese company Formosa in Ha Tinh has destroyed the marine
ecosystem and significantly impacted the livelihoods and jobs of local fishermen.

3. ​ The moral obligation of multinational corporations

Khái niệm: refer to the responsibilities and ethical standards that a company must adhere to in its business
operation. There are principles and ethical values that a company must apply and demonstrate in its decision and
actions, not only at its headquarters but also in the countries and territories where it operates.

VD3: In 2018, reports indicated that Google had developed a censored version of its search engine to enter the
Chinese market. Google faced criticism for being willing to engage in censorship and information filtering as
required by the Chinese government, disregarding freedom of speech and press.

4. Corruption: a problem in almost every society in history and continues today.

Khái niệm: refers to the abuse of power or position for personal gain, often at the expense of others. Corruption can
take many forms, including bribery, embezzlement, nepotism, and cronyism, among others. Causes of Corruption:
- Lowering wages for civil servants compared to those in the private sector. Certain employees may resort to taking
bribes in order to compensate for the difference in wages.
- Price controls. Corruption thrives when governments intervene by putting these in place to keep prices lower for
certain goods and services.
- Eliminating foreign competition through trade restrictions, tariffs, and trade barriers, thereby opening up the
possibility of a semi-monopoly by domestic players. The latter are more likely to resort to corrupt behavior to keep
restrictions in place for foreign companies to keep their place in the market.
- Corporations and groups may receive government grants and subsidies when they aren't the intended recipients
VD1:Carl Kotchian - president of the American aerospace company Lockheed, made a $12.6 million payment to
Japanese agents and government officials to secure a large order for Lockheed’s TriStar jet from Nippon Air. When
the payments were discovered, U.S. officials charged Lockheed with falsification of its records and tax violations.
Although such payments were supposed to be an accepted business practice in Japan (they might be viewed as an
exceptionally lavish form of gift giving), the revelations created a scandal there, too.The payment was nothing more
than a bribe, paid to corrupt officials, to secure a large order that might otherwise have gone to another
manufacturer, such as Boeing. Kotchian clearly engaged in unethical behavior—and to argue that the payment was
an “acceptable form of doing business in Japan” was self-serving and incorrect.

ENTRY MODES (Các hình thức xâm nhập thị trường)

Analyze the basic forms of the entry modes (first mover …, các hình thức,…, phân tích ưu điểm, nhược điểm, phân
tích dưới góc độ kiểm soát nguồn lực và chi phí)
I. ​ FIRST MOVER
→ First mover là doanh nghiệp hoặc tổ chức đầu tiên thâm nhập vào một thị trường mới tại nước ngoài.
❖​ Lợi ích

Create a strong brand impression and differentiate from competitors.

Control and utilize critical resources ahead of competitors, securing early market dominance.

Leverage exclusive advantages to attract customers and build a loyal customer base.

Lead in technology, seizing opportunities to create differentiation and breakthroughs in products and services.

First movers can influence market shaping by establishing industry standards and regulations to educate customers
and employees.

❖​ Hạn chế

Requires significant investment, high costs in research and development, infrastructure development, and educating
consumers and employees.

Followers can learn from the experiences and improve upon the failures of pioneers.

May face the risk of being replaced by new technologies or market trends if the company fails to adapt and
innovate.

II. ​ ENTRY MODES

1. ​ Exporting ( Xuất khẩu)

Định nghĩa: Exporting is the activity of selling products and services from one country to another. This is the fastest
mode of entry into the international business.

Lowest level of commitment

Various export options

Manufacturing in one country, selling in another

First-entry mode typically used

Many multinational companies still export​

→ The first step in entering international markets

Các hình thức xuất khẩu:

Direct Exporting: This is a form of exporting where the buyer and seller negotiate directly, exchanging benefits
without involving intermediaries. This method is suitable for large companies that have sufficient resources.

Indirect Exporting: This is a form of exporting through intermediaries. Intermediaries may include agents or
export-import trading companies. This method is suitable for smaller businesses new to exporting and international
trade or those lacking sufficient resources.

Cooperative Exporting (Piggybacking): When a company sells its products abroad using another company’s
distribution facilities. This allows a company to leverage the distribution networks of a partner company to enter
foreign markets with lower costs and risks.

Ưu điểm Nhược điểm

Xuất khẩu trực tiế · The company works directly with the · Requires significant capital and
end partner. experience.
· It allows the company to actively · Being tied to the foreign market may
monitor trends and developments in the dilute control in the home market, and
market. there may be trade restrictions.
· Easier and more flexible to adjust
marketing strategies.

Xuất khẩu gián ti · Operations and procedures are -

managed by a professional third party. • Higher overall costs, leading to lower
· Requires less experience. profit margins.
· No need to invest time or budget in • Lower opportunity to seize new
finding buyers. opportunities, potentially missing out on
· High flexibility due to existing profitable chances.
relationships with intermediaries, • Dependent on a third party.
helping increase brand visibility and • Less control over the product.
sales. • Cannot study the market or build direct
customer relationships.

Xuất khẩu hợp tá · Easy access to international markets. · Less control over product marketing
· Learning from the partner’s since the partner will implement their own
experience. methods.
· Reduced costs. · "Double impact": Since the two
· Higher sales as a result of assistance companies collaborate, there is mutual
from the partner and their existing dependency. If one partner faces negative
customer base. publicity, the other will also be affected.

-​ Lợi thế:

Fast Entry, Low Cost: Exporting is the quickest way to access international markets at a low cost, as it does not
require complex processes related to legal matters or infrastructure development. Exporting allows the company to
leverage its existing resources to enter foreign markets without bearing significant responsibility. Legal procedures
are simpler compared to other entry modes, and the company does not need to adapt to local cultures.
Market Expansion: Exporting is one of the ways for a business to expand its market. When domestic production
capacity exceeds local demand or when market share competition is too high in the home country, this is a viable
option for the business to fully utilize its resources and generate revenue.

Avoids Substantial Costs of Establishing Manufacturing or Operations in the Host Country: Exporting helps
businesses avoid the significant costs involved in setting up manufacturing facilities or long-term operations in the
host country.

Test Your Products in International Markets Before Making a Bigger Investment in the Overseas Market: Exporting
provides an opportunity to test products in international markets before committing to larger investments in those
markets. This helps reduce risks and gather valuable market insights.

Protect Your Patents, Goodwill, Trademarks, and Other Intangible Assets: Exporting can help safeguard a
company’s intellectual property, including patents, trademarks, goodwill, and other intangible assets, without the
need for direct market establishment or full operations in the foreign market.

Realize Substantial Scale Economies from Its Global Sales Volume Before Entering: Exporting allows companies to
take advantage of significant economies of scale from global sales volume before fully entering the foreign market,
improving operational efficiency and profitability.

-​ Bất lợi

+ ​ Competition from Local Products: In foreign markets, the company will face competition from established
local competitors who have a deep understanding of the market and local culture.

Unpredictable Developments in Exporting Countries: The situation and developments in exporting countries can
change constantly, and exporters must proactively stay updated on these changes to develop appropriate marketing
and export strategies.

Quality Standards: Many goods exported to other countries must meet the quality, packaging, and design standards
of the local markets.

Exporting from the Firm's Home Base May Not Be Appropriate: If lower-cost locations for manufacturing the
product can be found, exporting from the home country may not be the best choice. The optimal location for
manufacturing should be based on favorable factor conditions. For example, many U.S. electronics firms have
moved some of their manufacturing to the Far East due to the availability of low-cost, highly skilled labor. They
then export from that location to the rest of the world, including the United States.

Tariff Barriers Can Make Exporting Uneconomical: Tariffs and other trade barriers can make exporting less
profitable or even unfeasible.

Dependence on Foreign Import Quotas: Exporters may be limited by the import quotas set by foreign countries,
which can restrict the volume of goods they can export to those markets.

Example 2: Exporting is a crucial part of the development strategy that Trung Nguyên established from the
beginning. Currently, Trung Nguyên has expanded to over 50 countries (including the US, UK, Japan, Australia...),
reducing its reliance on the domestic market. Trung Nguyên entered the US market through indirect exporting via
intermediaries: in the UK (Dragon Coffee) and Canada (H&O Company Coffee). Trung Nguyên's G7 coffee quickly
dominated the market, solidifying its position as the number one instant coffee brand in Vietnam and "taking the
bell to foreign lands" with export orders to the US and Europe (Indirect Exporting).

2. ​ Licensing and Franchising

 a)​ Cấp phép (Licensing)
Khái niệm: The company allows another organization or individual in a foreign country to use its intellectual
property, technology, or brand to produce and sell goods or services in that market, in exchange for a licensing fee.
- ​ Lợi thế:

Low risk level; Can tap into smaller markets and markets with high barriers, increasing brand visibility; Ability to
simultaneously penetrate multiple markets; Low investment costs due to avoiding high import tariffs, saving on
marketing and distribution costs, as these activities are carried out by the licensee. As a result, profits can be earned
quickly without requiring excessive investment; Greater role than contract manufacturer

-​ Nhược điểm

Weak control: When granting licensing rights, the licensor loses most control over the production and marketing of
the product or service. The licensee can modify or adjust aspects of the product or service without the licensor's
consent, even failing to meet the specified quality standards. This can negatively impact the brand if the licensee
encounters scandals or issues.

The licensee may become a competitor of the licensor in the future once the licensing agreement expires. They can
use the technology and take away customers from the licensor, limiting future market growth.

Licensor's income, specifically royalties, will not be as high compared to producing and marketing the product
themselves.

There is a risk related to trust, as the licensee might report lower sales to reduce royalty payments.

VD4: Coca-Cola has licensed its famous trademark to clothing manufacturers, which have incorporated the design
into clothing.

b, Nhượng quyền (Franchising): Initially, franchising will require more capital, making it suitable for large,
established companies with a strong brand image. This is commonly seen in industries such as food, hospitality,
services, restaurants, and food retail stores.

Cấp phép Nhượng quyền

Ý nghĩa A licensing agreement is an Franchising is an agreement in which

arrangement in which a company (the the franchisor allows the franchisee to
licensor) sells the rights to use its use its business model or brand for a
intellectual property or produce its fee, to operate the business as an
products to the licensee, in exchange independent branch of the parent
for royalty payments. company (the franchisor).

Quản lý bởi Luật hợp đồng Quy định nhượng quyền hoặc Luật
Công ty như trường hợp có thể.

Đăng ký Không cần thiết Bắt buộc

Đào tạo và hỗ trợ Không cung cấp Cung cấp

The licensor has the right to control the

Mức độ kiểm soát In franchising, the franchisor has
use of intellectual property by the
significant control over the processes
licensee, but does not have control over
and operations of the franchisee's
the licensee's business operations.
business.

Quá trình It relates to the one-time transfer of Continuous support

assets or rights. from the franchisor is
required.

Cơ cấu chi phí Thỏa thuận Tiêu chuẩn

-​ Ưu điểm

Low financial investment costs, no need for significant capital investment

Independent franchisee

The franchisor has knowledge of the local market, allowing for the exploitation of local management talent

Ability to simultaneously penetrate multiple foreign markets quickly and cost-effectively

Franchise units have strong management motivation and lower political risk acceptance

-​ Nhược điểm

May require training costs and processes

Requires monitoring and evaluating the operations, financial control, and product quality of the franchisee, while
providing ongoing support

The franchisee may leverage the knowledge gained and become a future competitor

Disagreements with the franchisee may occur, including legal disputes

VD2: Pho 24 is a typical franchise brand from Vietnam. The brand has opened 70 stores, with 70% of its domestic
outlets located in major cities such as Ho Chi Minh City, Hanoi, Da Nang, Nha Trang, and Binh Duong, while 30%
of its international stores are located in Jakarta (Indonesia), Manila (Philippines), Phnom Penh (Cambodia), Macau -
Hong Kong, and Tokyo (Japan). Pho 24 plans to open more stores in all major cities of Vietnam as well as in
international markets with large Asian populations.

3. JOINT VENTURE
Khái niệm: Two or more companies forming a separate company in which all partners have equity and management
voice; variable equity share; not all partners provide finance, could be factory, labor etc. In some markets where
there are restrictions on foreign investment, joint ventures (JVs) may be the only way to access new markets. For
smaller organizations lacking financial resources and/or specialized management capabilities, joint ventures can be
an effective means of acquiring the necessary capital when entering new markets. Many governments insist on JVs
for entry into the market.
-​ Ưu điểm

Minimize capital and other necessary resources as multiple parties combine their resources to generate business
profits.

Leverage each partner's strengths and expertise to create a competitive advantage for the joint venture.

Reduce risks by sharing the risks and benefiting together with partners.

new market's characteristics and helps overcome legal barriers, while also enabling the development of a suitable
business strategy.

The reputation of the joint venture partner brings credibility to the joint venture in the local market, especially with
key suppliers and customers already in place.

-​ Nhược điểm

Market attractive but difficult, requiring huge investments/resources to gain considerable/acceptable market share.

Potential issues and conflicts may arise regarding ownership disputes between partners due to disagreements on
business practices, development strategies, or profit-sharing ratios.

The risk of "big fish eating small fish" may occur if the company lacks experience and has a small scale.

Language, mindset, and cultural barriers between collaborating parties can lead to communication issues and
management challenges.

Low level of control, as each partner can only control certain aspects of the joint venture.

VD1: In the north, Starbucks entered a joint venture with Beijing Mei Da Coffee Company. In the east, Starbucks
partnered with Taiwan-based Uni-President. In the south, Starbucks worked with Hong Kong’s Caterers based on
Maxim. Each partner brought different strengths and local expertise, helping Starbucks gain valuable insights into
the tastes and preferences of local Chinese consumers.

4. ACQUISITION (Mua bán và sáp nhập)

It is a way to enter a market by acquiring an established brand rather than attempting to compete and launch the
company's products in the market. Acquisition of a going concern; part-share or 100%. This method is suitable for
large companies with high investment capital.

- ​ Ưu điểm:
Quickly penetrate international markets:
Acquisition allows companies to get ahead and minimize their competition.
The acquired company already has management experience and resources in place.
No need to spend effort and costs on brand creation, as the acquired company already has an established brand and
reputation.
-​ Nhược điểm:
+​ High cost option
There may be cultural conflicts between the acquiring company and the acquired company, leading to
communication and coordination issues.
It often takes time to integrate and apply the acquiring company's organizational culture to the acquired company.

Examples 2: In 2011, one of the major deals where an Indian company acquired a Vietnamese business was the
Marico acquisition. The Indian company Marico spent $60 million to acquire the Vietnam-based International
Consumer Products Joint Stock Company (ICP), which owns the men's shampoo brand X-Men. After the
acquisition, ICP's business performance significantly improved. The company’s net revenue in 2011 increased by
45% compared to 2010, and profits nearly quadrupled, rising from 12.3 billion VND to 47.7 billion VND.

6. ORGANIC GROWTH (WHOLLY OWNED SUBSIDIARY)

Build company without help of partner ; 100% ownership. Suitable for large companies that already have a
sufficiently large overseas market due to the high level of commitment ; Level of experience important; Maybe
equity regulations. Chi phí cao nhất, Rủi ro cao nhất
- ​ Examples Hyundai, Tesco

VD1: Companies like Walmart, Costco, and other large retailers report their quarterly revenues to provide investors
and analysts with insights into their organic growth. Walmart increased its same-store sales by 2.5% in the 53 weeks
ending on January 31, 2020, excluding fuel—an obvious example of organic growth that Walmart's CEO attributes
to a strategy focused on increasing same-store sales when opening new locations by improving the in-store customer
experience.

Advantages Limitations

Indirect Limited commitment Minimal risk Flexibility Potential opportunity loss

Lack of control
Lack of contact with market

Direct Better contact More control Better sales effort Investment in sales
organization Dilution of
control from home Internal
communications
Distributor/ Agent Low investment Specialization Immediate sale Lack of commitment Short
term goals Limited resources
Licensing No investment Minimal risk Limited returns
Exploit small markets Quick way to obtain entr Builds up potential
competition Restricts future
market development Requires
quality and financial control
Lack of control over
technology
Inability to realize location
and experience curve
economies
Inability to engage in global
strategic coordination
Franchising Limited financial investment Taps local manag May require training
Improved managerial motivation Low developm Need for financial and
and risks product quality control (Lack
Possible circumvention of import barriers Stron of control over quality) Legal
potential position
Inability to engage in global
strategic coordination
Contract manufacturing No investment required Avoids tariff barriers Q Need for quality control
of entry Flexible Supply limitations
Lower manufacturing costs

Joint Venture Spreads risk Potential problems and

Shared development costs and risks (Reduces c conflict between partners
other resources required) Communications and
management

Politically acceptable problems

Typically no ownership restrictions Access to Partial control Lack of control over
and contacts in local markets technology
(Access to local partner’s knowledge) Inability to engage in global strategic
coordination
Inability to realize location and experience
economies
 Acquisition Rapid entry Integration with existing operation
Access to distribution channels Existing mana Communication and coordination
experience Established brand names, reputati problems Fit with existing business
competition

Organic Grow State of the art technology Integrated product High investment cost Need to build
Operational efficiency 100% of profit business Slow entry

INTERNATIONAL BUSINESS STRATEGY

Understand and explain difference level of international strategy
(corporate strategy, business strategy, functional strategy)
1. International Strategy
(also called the “exporting strategy”): the company exports the same standardized products and services to foreign
markets without taking local tastes into account (the company centralizes all information, authority, and
decision-making for international markets at the headquarters. A dedicated department manages all these
international operations) → the early stages of global expansion that many follow
Example 2: Hermès - Founded in Paris in the 19th century, the luxury design house is still controlled by the
founder’s descendants. The products are mainly manufactured in France, and the firm is exclusively headquartered
in Paris. With more than 300 stores worldwide, they benefit from a strong international presence: In 2021, Hermès
generated more than 90% of its turnover outside France. The same bags, scarves, and perfumes are sold in each
Hermès store.
2. Localization Strategy:
Focuses on increasing profitability by customizing the firm’s goods or services so that they provide a good match to
tastes and preferences in different national markets.
-​ Most appropriate when there are substantial differences across nations with regard to consumer tastes and
preferences and where cost pressures are not too intense.
Example1: Large companies in the food industry, such as Procter & Gamble. In China, Procter & Gamble offers a
range of skincare products that are specifically designed for the Chinese market.
Example2: McDonald's adapts its menu to local tastes and preferences in different countries. For example, in India,
McDonald's offers a range of vegetarian options, while in Japan, it offers a Teriyaki Burger.
Example3: Coca-Cola uses local advertising campaigns and packaging designs to appeal to local consumers. For
example, in China, Coca-Cola launched a campaign featuring Chinese celebrities to promote its products.

3. Global standardization Strategy:

Coordinate their operations in foreign markets to make the most of the advantages offered by each country while
centralizing all decisions at the headquarters. → require a strong global presence to start.
Example1: Apple - They offer iPhone and MacBook, have the same design and features across the world under one
strong brand, while their products are made in multiple countries.
Example2: McDonald's offers the same menu items and customer experience across different markets. The
company's menu, restaurant design, and service standards are consistent across the world.
Example3: Nike offers the same products and brand image across different markets. The company's logo,
advertising campaigns, and product design are consistent across the world.
4. Transnational Strategy:
A combination of global and multidomestic strategies. Decisions are made together by the headquarters and the
interconnected foreign subsidiaries, while the products and services are tailored to local markets
Example1: the cosmetic giant L’Oréal: They offer strong brands both from the US, like Maybelline, and from
France, like Lancôme.
Example2: Nestle offers standardized products across different markets while also adapting to local tastes and
preferences. The company's products, such as KitKat and Nescafe, have a global brand image but are adapted to
local markets.

Structure Glo STRATEGY

Controls
Localization International Global Standard Transnational

Vertical differ Decentralized Core Some centralizati Mixed centralizatio

competency; decentralization
more
centralized,
rest
decentralized
Horizontal dif Worldwide area Worldwide Worldwide produ Informal matrix
product
divisions
Need for coor Low Moderate High Very high

Integrating me None Few Many Very many

Performance a Low Moderate High Very high

Need for cultu Low Moderate High Very high

 controls

INTERNATIONAL ORGANIZATION
Understand the related issues in global organization design (centralization, decentralization)
1. ​ Centralization
●​ Khái niệm:

Centralization is the process of consolidating decision-making and planning authority at the center of an
organization. Activities related to organizing and planning are concentrated within a specific group, which is
typically defined by a particular location (geographical, administrative, etc.).

●​ Ưu điểm:

Centralization can facilitate coordination and integration: In terms of information, all data is concentrated in the
hands of leaders for resolution and approval. This allows leaders to have the most comprehensive and overall view
of all activities within the organization. From this perspective, they can make decisions that promote coordination
between different functions. In terms of operations, concentrating production stages at one location ensures that
complex processes, such as those in semiconductors and electronics, are not fragmented or lacking information.

Centralization ensures decisions are consistent with the organization's goals: When decisions are decentralized to
lower-level managers, the varied interpretations of each individual may lead to decisions that contradict the
objectives set by senior management.

A significant level of influence to implement necessary changes: Centralizing power in one person or a group of
managers gives their decisions significant influence. These decisions can be powerful enough to change an
organization, especially when swift decision-making is required.

Centralization limits redundancy in activities among subsidiaries or units within the organization: By centralizing
certain areas at specific locations, activities between different sites or units within the organization are less likely to
overlap, thus minimizing resource waste within the organization.

●​ Nhược điểm:

Centralization can lead to information overload: Centralizing planning and decision-making within a specific group
results in many pieces of information needing to be processed in one place. This can reduce the decision-making
efficiency of senior managers, as they are overwhelmed by too much information to handle effectively.

Centralization creates a gap in information flow between leaders and lower levels: Senior leaders may not have a
complete understanding of the actual situation at a specific area or location. This creates a gap in receiving
information from lower-level managers. Senior leaders may misinterpret the information being presented to them.

Centralization increases decision-making time: Decisions with smaller scope and impact may take longer if they
have to be approved by senior leaders. This delay in decision-making can slow down operations and responsiveness.

Lack of flexibility and creativity: The ability to change or adapt quickly to evolving situations or sudden
adjustments becomes slower and less flexible, as decisions have to be made by the highest levels or a centralized
organization. Additionally, creativity and innovation may be stifled because decision-making is limited to a few
individuals at the top, reducing the opportunities for fresh ideas and changes.
Example2: Coca-Cola is one of the large multinational companies that uses a centralized organizational model to
manage and operate its activities globally. Strategic and important decisions of the company are centralized at
Coca-Cola's headquarters in Atlanta, Georgia, USA. These decisions are then communicated and implemented
across Coca-Cola's offices and factories worldwide.

2. ​ Decentralization
●​ Khái niệm:

Decentralization is the distribution of decision-making authority, planning, or delegation to other positions rather
than concentrating power in a single location or a central group.

●​ Ưu điểm:

Increases flexibility: When unexpected incidents occur or projects require quick, urgent decisions, decentralization
allows for more effective and timely actions to resolve situations. It also facilitates adaptation to changes that are
momentary or region-specific (e.g., local strategies benefit from decentralization as it allows for better alignment
with local conditions).

More practical decisions: Managers who directly supervise activities in various departments will have a more
realistic view and can make decisions that are better suited to the specific situation of that department.

Decentralization increases responsibility: Each individual becomes more aware of their own responsibility and is
accountable for their actions, preventing reliance on others or shifting blame. Additionally, decentralization helps
individuals understand their importance and the unique value they bring to the organization.

Optimizes time: With more personnel involved in information processing and decision-making, the time required to
reach decisions is reduced.

Encourages more creativity and management methods: Decentralization fosters increased management effectiveness
and quality of decisions. Having more people involved in decision-making broadens creativity, as opposed to
centralized decision-making, where creativity is limited to a fixed group.

●​ Nhược điểm:

Decentralization makes it difficult to synchronize decisions: As decisions and management are distributed to many
members within the network, coordinating activities and decisions can become challenging. This is especially true
when members within the network disagree or have conflicts regarding decisions.

Decentralization requires managers or employees with higher qualifications to make appropriate decisions:
Decision-making and planning authority cannot be exercised by just any employee. Decentralization requires
employees to have solid expertise to ensure that decisions made do not negatively affect the organization.

Example1: Procter & Gamble uses a decentralized organizational structure to distribute decision-making authority
across different levels of the hierarchy. The company encourages employees to take ownership of their projects and
make decisions independently, which has led to the development of many successful products.

INTERNATIONAL HUMAN RESOURCES MANAGEMENT + INTERNATIONAL MARKETING + GLOBAL

PRODUCTION
Identify fundamental issues in international firms’ operations
(marketing, human resource, supply chain, etc.)
I. ​ HUMAN RESOURCES MANAGEMENT:
Human resource management (HRM) refers to the activities an organization carries out to use its human resources
effectively. These activities include determining the firm’s human resource strategy, staffing, performance
evaluation, management development, compensation, and labor relations
1. ​ Staffing policy
-​ Concerned with selecting employees who have the skills required to perform particular jobs.
-​ Can be a tool for developing and promoting a corporate culture.
●​ The Ethnocentric Approach:
-​ Is one in which all key management positions are filled by parent-country nationals.
-​ The policy is congruent with an international strategy.
-​ Advantages:

Consistency in corporate culture: By hiring employees from the parent company's country, the company can
maintain consistency in corporate culture across all its locations. This helps build a strong brand and reputation
worldwide.

Knowledge and skill transfer: Foreign managers can transfer knowledge and skills from the parent company to local
employees. This helps improve the quality of work and enhance the professional skills of the local workforce.

· ​ Disadvantages:

Cultural myopia: A drawback of ethnocentric staffing is that it can result in cultural myopia, where the company
fails to understand and respond effectively to the cultural differences in the host country.

Lack of diversity: The ethnocentric approach can lead to a lack of diversity in the workforce. This can limit the
company’s ability to understand and meet the needs of local customers and markets.

High costs: Hiring foreign managers can be expensive, as the company needs to provide relocation packages,
housing, and other benefits. This can increase the company's operational costs.

Conflict and inequality: Local employees may feel that their ideas and perspectives are not valued, leading to
resistance to change and a lack of motivation. This can impact the company's ability to innovate and adapt to the
local market.

➢ Pursuing for 3 reasons:

+ First, the firm may believe the host country lacks qualified individuals to fill senior management positions.
This argument is heard most often when the firm has operations in less developed countries.
+ Second, the firm may see an ethnocentric staffing policy as the best way to maintain a unified corporate culture.
+ Third, if the firm is trying to create value by transferring core competencies to a foreign operation, as firms
pursuing an international strategy are, it may believe that the best way to do this is to transfer parent-country
nationals who have knowledge of that competency to the foreign operation
➢ Despite this rationale for pursuing an ethnocentric staffing policy, the policy is now on the wane in most
international businesses
For two reasons:
+ First, limits advancement opportunities for host-country nationals.
This can lead to resentment, lower productivity, and increased turnover among that group. Resentment can be
greater still if, as often occurs, expatriate managers are paid significantly more than home-country nationals.
+ Second, can lead to cultural myopia - the firm’s failure to understand host-country cultural differences that require
different approaches to marketing and management. (The adaptation of expatriate managers can take a long time,
during which they may make major mistakes)

Example 2: Samsung believes that using Korean employees for management positions is the best way to ensure
alignment with the company's culture and core values. Therefore, they often prioritize using employees from the
parent country for key management positions at their branches and subsidiaries worldwide.

2. ​ The Polycentric Approach:

Requires host-country nationals to be recruited to manage subsidiaries, while parent-country nationals occupy key
positions at corporate headquarters.
- ​ Advantages:
+​ First, the firm is less likely to suffer from cultural myopia. Host-country managers are unlikely to make the
mistakes arising from cultural misunderstandings to which expatriate managers are vulnerable.
+​ Second, it may be less expensive to implement, reducing the costs of value creation.
+​ Local knowledge and expertise: By hiring local employees, the company can benefit from their knowledge
of the local market, culture, and language. This can help the company to adapt to local conditions and respond to the
needs of local customers.
+​ Improved relations with local communities: By hiring local employees, the company can build better
relationships with local communities. This can help to improve the company's reputation and reduce the risk of
cultural misunderstandings
- ​ Disadvantage:
+ Lack of consistency in corporate culture: The Polycentric Approach can lead to a lack of consistency in the
company's corporate culture across all its locations. This can make it difficult to maintain a strong brand and
reputation worldwide.
+ Communication barriers: Local employees may not speak the same language as the parent company's employees,
which can lead to communication barriers. This can affect the quality of work and productivity.

+ ​ Limited career opportunities for expatriate managers: The Polycentric Approach can limit the career
opportunities for expatriate managers, as they may not be able to advance to senior positions in the company.

Example 1: McDonald's recognizes that in order to succeed in providing food services in each country, they need to
properly understand the cultural requirements of the local market. By using the Polycentric Approach, McDonald's
allows its branches and subsidiaries worldwide to recruit local employees with the knowledge, skills, and
understanding of the market for management positions.

3. ​ The Geocentric Approach:

-​ Seeks the best people for key jobs throughout the organization, regardless of their nationality.
-​ This approach is consistent with building a strong, unifying culture and informal management network and
is well suited to both global standardization and transnational strategies.
-​ Immigration policies of national governments may limit a firm’s ability to pursue this policy.
- Advantages:
+​ Access to the best talent: By hiring the best person for the job, regardless of their nationality, the company
can access the best talent from around the world. This can help to improve the quality of work and increase the level
of expertise in the workforce.
 +​ Diversity and inclusion: The Geocentric Approach can help to promote diversity and inclusion in the
workforce. This can help to improve the company's performance and reputation and to reduce the risk of cultural
misunderstandings.
+​ Flexibility: The Geocentric Approach can provide the company with flexibility in its staffing decisions.
The company can hire employees from different countries based on their skills, experience, and qualifications.
+​ Establishing an international presence: The Geocentric Approach helps organizations build and maintain
an international standing, position themselves as global entities, allowing them to compete effectively on a global
scale.
- Disadvantages:
+​ Communication barriers: Hiring employees from different countries can lead to communication barriers.
This can affect the quality of work and productivity.
+​ Cultural differences: Hiring employees from different countries can lead to cultural differences. This can
affect the company's ability to understand and respond to the needs of local customers and markets.

+​ Legal and regulatory issues: Hiring employees from different countries can lead to legal and regulatory
issues.
The company needs to comply with the laws and regulations of each country where it operates.
Example 1: Microsoft often recruits and develops employees from various countries, helping to create a diverse and
global team. This allows them to benefit from the talents and creativity of employees worldwide and to develop
solutions that meet the needs of international customers.

Staffing Approach Ethnocentric Polycentric Geocentric

Strategic Appropriateness International Localization Global standardization and transnatio

Advantages - Overcomes - Alleviates cultural - Uses human resources efficiently

lack of qualified myopia - Helps build strong culture and info
managers in host - Inexpensive to management networks
nation Unifies implement
culture
- Helps transfer
core
competencies
Disadvantages - Produces - Limits career mobility - National immigration policies may
resentment in - Isolates headquarters implementation
host country from foreign - Expensive
- Can lead to subsidiaries
cultural myopia
II. ​ INTERNATIONAL MARKETING:
1. ​ LÝ THUYẾT
2. ​ CASE STUDY
a)​ Levi's go global
b)​ How Unilever reaches rural consumers in emerging markets
III. ​ GLOBAL PRODUCTION:
Production & Logistics are linked because a firm’s ability to perform its production activities efficiently depends on
a timely supply of high-quality material and information inputs, for which purchasing and logistics are critical
functions
1. PRODUCTION: activities involved in creating a product Where to produce:
-​ Country factors
-​ Product factors
-​ Technical factors

2. SUPPLY CHAIN: the procurement and physical transmission of material through the supply chain, from
suppliers to customers
- ​ complicated by distance, time, exchange rates, and customs barriers, etc.
- ​ Efficient logistics can have a major impact upon a firm's bottom line
●​ LOGISTICS: is the part of the supply chain that plans, implements, and controls the effective flows and
inventory of raw material, component parts, and products used in manufacturing
The effect is to lower the total costs of value creation by reducing both production and after-sales service costs. This
creates an increased overall reliability in global production and supply chain management.
3. OUTSOURCING - OFFSOURCING:
●​ OUTSOURCING: The work is done overseas
●​ OFFSOURCING: Someone else does the work for us
●​ MAKE OR BUY DECISIONS:
The make-or-buy decision is often based largely on two critical factors: cost and production capacity. Cost issues
include such things as acquiring raw materials, component parts, and any other inputs into the process, along with
the costs of finishing the product. The production capacity is really presented as an opportunity cost. Does the firm
have the capacity to produce the product at a cost that is at least no higher than the cost of buying it from an external
supplier?
- Vertical integration – making component parts in-house → where to purchase raw materials and component
parts; issues of product success, specialized knowledge, and strategic fit can lead to the make (produce) decision
+ Lower costs
+ Facilitating investments in highly specialized assets
+ Take control of your entire process
+ Protecting proprietary product technology
+ Improving scheduling
- Buying component parts from an outside supplier Gives the firm greater flexibility
+ Quality control and competitive priorities management
+ Helps drive down the firm’s cost structure
+ Helps the firm capture orders from international customers (Offsets)
+ Company lacks the needed expertise to make a product or component part
For example, many computer users favor Intel microchips in their computers, so many of the large computer
manufacturers opt to buy chips from Intel instead of making them in house for that reason.

CÂU HỎI THÊM

1. What is the link between international business strategy and its human resource policy, especially with
the expatriate managers (Mối liên hệ giữa chiến lược kinh doanh quốc tế và chính sách nhân sự của nó là gì,
đặc biệt là với các nhà quản lý người nước ngoài)

An effective human resource management policy allows companies to expand into global markets efficiently.
Human resources play a vital role in successfully implementing international business strategies. In companies that
pursue a localization strategy, the polycentric staffing approach is the most common and there are relatively few
foreigners or issues related to salaries. Foreign employees are more often recruited in companies with an
international business strategy, and a geocentric staffing approach is used. In this case, salaries are typically based
on the host country’s standards, with adjustments for different living costs and taxes, as outlined in the balance-sheet
approach. Companies pursuing global or transnational strategies typically use an age-based geocentric staffing
approach, where the best individuals (regardless of nationality) are selected for positions in any country. Here,
salary issues for expatriates can become particularly complex, as they must account for local standards, costs, and
expectations, as well as global standards across the company.

2. You are a marketing manager of a food company that wants to distribute products in India. However, the
distribution channels in India are fragmented, and the relationship between domestic food companies and
wholesalers is close. It is hard to distribute to wholesalers. What distribution strategy will you recommend to
the company?

Direct-to-Consumer (DTC) Distribution:​

The company can sell products directly to consumers through online platforms or physical stores. This approach
allows the company to bypass wholesalers and directly reach the end customers. It can leverage social media
platforms and digital marketing to promote products and build a loyal customer base. Additionally, the company can
gather valuable customer insights and feedback to improve its products and services.

Franchising:​
Partnering with local entrepreneurs who can establish and operate stores in different regions of India. This approach
will help quickly expand the company’s reach and leverage the local knowledge and expertise of franchise partners.
The company can provide training and support to its franchisees to ensure they maintain the company’s standards
and values. This method will also help the company build a strong brand presence across different regions of India.

Collaboration with E-commerce Platforms:​

India has a rapidly growing e-commerce market, and partnering with popular e-commerce platforms such as
Amazon, Flipkart, and BigBasket can help the company reach a larger audience. These platforms have established
logistics and distribution networks, which can help overcome challenges posed by fragmented distribution channels.
The company can also leverage the customer data and insights provided by these platforms to refine its marketing
and distribution strategies.

Partnerships with Local Retailers:​

This approach will help the company utilize the existing distribution channels of local retailers and reach customers
in various regions of India. By offering attractive profit margins and incentives, retailers can be encouraged to stock
and promote the company’s products. This strategy will also help the company build strong relationships with local
retailers and gain valuable insights into local market trends and customer preferences.

3. What is a popular entry mode that small and medium companies use a lot these days, especially with their
information technology?
A strategy that is favored by many small and medium-sized enterprises (SMEs) and startups is exporting. There are
several reasons for choosing this approach:

· ​ Safety with low costs and risks:​

Young businesses do not need to invest heavily in infrastructure or develop strategies to adapt to local conditions but
can still quickly bring their products to foreign markets.

· ​ Increased speed and flexibility of engaging target markets:​

Particularly due to advancements in information technology and e-commerce platforms, this process has been
accelerated, allowing businesses to engage with a larger pool of potential customers.

· ​ Initial learning experience in international business:​

This is an opportunity for SMEs to engage with international markets and customers. Through this process, they can
learn and understand the requirements of different markets, which helps them improve their products, services, and
business processes to meet international standards and customer needs.

However, SMEs still face certain risks when choosing to export products, such as:

· ​ International customers not accepting the product:

o This may occur because the exporter has not fully researched market needs, culture, consumer trends, or the
competition, which may have too much influence and market share.

o Without significant marketing budgets, it is difficult to increase product recognition among customers.

· ​ Risks in partnerships:​
For companies entering the market for the first time, they often choose to collaborate with intermediaries to
facilitate market entry. However, this partner can pose risks related to product quality, fulfilling commitments, and
protecting the exporter’s interests.

· ​ Trade barriers and high transport costs, particularly for bulk products.​
Nevertheless, compared to other methods, exporting remains a relatively viable and low-risk approach for SMEs
looking to expand internationally.

4. Should businesses move production to China these days? This is a “make” or “buy” process?
●​ Ưu điểm:

Lower labor costs: China has a large labor force, and labor costs are generally lower compared to many other
countries.

Access to a large market: With the largest population in the world, China is a highly lucrative potential market for
businesses.

Established supply chain: China has a well-established manufacturing industry and supply chain, making it easier
for businesses to source raw materials and components.
●​ Nhược điểm:

Political and economic risks: The economic and political environment in China can be unpredictable, and businesses
may face risks such as regulatory changes, tariffs, and currency fluctuations.

Intellectual property concerns: China is known for issues related to intellectual property theft, and companies may
face challenges in protecting their intellectual property.

Ethical concerns: China has been criticized for labor practices, including low wages, poor working conditions, and
human rights violations.

→ Whether a business should shift its production to China depends on various factors and cannot be determined
solely by the cost of production. It must also consider factors such as resources, the cost of quality control measures
that need to be implemented, the distance from where raw materials must be sourced, foreign input requirements,
the complexity of contracts with parties, responsibility for managing outsourced production operations, the
business's risk tolerance, and the specific stage of development the company is in. It is essential to weigh the pros
and cons to maximize benefits and have a plan in place for addressing any potential issues or risks that may arise.

"Make process": If a business decides to "make" its products in China, it means establishing its own manufacturing
facilities in China and producing the products there. This approach offers the business greater control over the
production process, quality, and intellectual property. However, it also requires significant investment, expertise,
and resources to set up and manage these manufacturing facilities.

"Buy process": If a business decides to "buy" its products from Chinese manufacturers, it means outsourcing the
production to suppliers in China. This approach can provide cost savings, access to established supply chains, and
flexibility in production volumes. However, it also requires careful selection and management of suppliers to ensure
product quality, reliability, and adherence to ethical standards.

→ The decision between the "make" or "buy" process depends on the business's specific needs, capacity, capital,
and current circumstances.

5. Greenfield venture: What potential cost that a company will face when setting up a greenfield venture in
other countries?

· ​ Infrastructure costs: Developing infrastructure, including stores, company facilities, transportation

networks, and other necessary physical facilities for a new project, can be a significant cost.

· ​ Legal costs: The complex local legal processes and regulations involved in setting up a new project, such
as business licenses, real estate permits, etc., may require legal fees and consulting services to handle.

· ​ Labor costs: Companies may need to invest in recruitment and training processes for staff. Additionally,
there could be extra costs associated with compliance with labor laws and providing employee benefits.

· ​ Technology and equipment costs: Deploying necessary technological infrastructure and purchasing
advanced equipment or specialized machinery is a considerable financial burden.

· ​ Marketing costs: Significant investment is required in market research, brand development, promotional
activities, and establishing distribution channels.
· ​ Supply chain and logistics costs: Establishing a new project in a different country often requires building or
setting up a new supply chain. This includes finding suppliers and establishing warehouse networks, all of which
incur significant costs.

6. Why is diversity good for an international business? What actions can a company take to foster greater
diversity?
●​ Why is diversity good for an international business?

Diversity will expand and strengthen the customer base for international businesses because the workforce, coming
from various countries, brings unique experiences, expertise, and an understanding of local and regional markets.
This allows the business to better understand and meet customer needs while providing creative and flexible
solutions tailored to different markets.

Through this diversity, a company can broaden its business scope by offering a wider range of products and
capturing a larger market share across various countries worldwide.

The increased creativity, as well as the broader perspectives in decision-making, helps the company make more
comprehensive and effective decisions. This approach allows international businesses to avoid groupthink and make
better decisions that reflect the needs and benefits of their diverse stakeholders.

Moreover, diversity enhances the company’s reputation. It’s not only about business areas, revenue streams, and the
credibility and experience the company possesses but also about its integration across languages, cultures, work
styles, and management approaches.

●​ What actions can a company take to foster greater diversity?

Establish diversity and inclusion policies: Regulations regarding dress codes, hairstyles, skin color, language, and
body standards should be adjusted to make employees feel welcome and ease their integration. Additionally,
policies regarding national, religious, or cultural holidays should be set up to create an open and inclusive
environment, expanding diversity.

Offer diversity training programs: Provide skill enhancement courses, learning opportunities, and knowledge
expansion for employees. These may include courses to promote cultural exchange, language skills development,
and fostering integration and diversity, enabling effective teamwork regardless of race, background, or other factors.

Diverse leadership teams: Leadership at all levels should adopt a broader approach to recruitment and treat
employees equally, using uniform criteria for evaluating all candidates. This helps in creating a more fair
recruitment process. Leaders should not be restricted to one nationality, region, or gender; instead, leadership
diversity is essential to have a broader vision and further development.

Incentive and benefits programs for employees: Offer flexible working schedules, options to work in-office or
remotely, holidays, travel opportunities, and competitive salaries to create a flexible, dynamic environment that
encourages creativity, innovation, and higher productivity within the company.

Monitor and measure progress and performance: Companies should track and measure the progress in promoting
diversity and inclusion. This can be done through regular surveys, focus groups, and other feedback mechanisms to
collect data on areas needing improvement, challenges faced by employees, and other concerns.

7. What are the possible implications of tighter national immigration policies for an international business?
Limited access to skilled labor: Stricter immigration policies may restrict the ability of international businesses to
hire skilled foreign workers. This could lead to a shortage of qualified talent in certain industries, especially those
that rely heavily on foreign expertise.

Increased recruitment costs: Companies may need to pay for sponsorship fees or invest in legal support to ensure
compliance with immigration regulations. These additional costs can increase the company's budget, especially for
small businesses with limited resources.

Loss of diversity and innovation: Recruitment restrictions may hinder the ability to attract a workforce with
international relations, diverse perspectives, experiences, skills, cultural understanding, and the ability to work in a
multinational environment. Limiting access to global talent pools can impede an international business's ability to
innovate and adapt to changing market demands.

Difficulties in international expansion: Strict immigration policies may create challenges for expanding operations
into other countries. Without support or difficulties in transferring human resources and assets between countries,
international businesses may face barriers and high costs when attempting to expand their operations. This can limit
partnerships and investments.

8. If current trends continue, China may be the world’s largest economy by 2030. Discuss the possible
implications of such a development for
a. the world trading system.
The world trading system would clearly be affected by such a development. Currently China enjoys a somewhat
privileged status within the World Trade Organization as a ―developing country. Such a rise to eminence, however,
would clearly force it to become a full and equal member, with all the rights and
responsibilities. China would also be in a position to actively affect the terms of trade between many countries. On
the monetary front, one would expect that China would have to have fully convertible and trading currency, and it
could become one of the ―benchmark currencies of the world. From the perspective of Western global firms, China
would represent both a huge market, and potentially the home base of some very capable competitors. Finally,
commodity prices would probably fall.

The world’s poorest countries are at a competitive disadvantage in every sector of their economies. They have little
to export. They have no capital; their land is of poor quality; they often have too many people given available work
opportunities; and they are poorly educated. Free trade cannot possibly be in the interests of such nations. Poor
countries have no barriers for their national growth. Surrounding conditions make them more dependable upon other
countries for their common needs.
b. the world monetary system.
China does not allow its currency to float and therefore must make large-scale purchases of dollars to keep the
exchange rate within certain target levels. Although the renminbi (RMB) has appreciated against the dollar in real
terms by about 40% since reforms were introduced in July 2005, some analysts contend that it remains
highly undervalued. China’s undervalued currency makes its exports less expensive" and its imports more
expensive" than would occur under a floating exchange rate system. In order to maintain its exchange rate target"
the government must purchase foreign currency (such as the dollar) by expanding the money supply. This makes it
much more difficult for the government to use monetary policy to combat inflation. economists argue that China's
industrial policies have sharply limited competition and the growth of the private sector" caused over-capacity in
many industries'' and distorted markets by artificially lowering the costs of various factor costs (such as
capital"water" land" and energy) below market levels in order to promote targeted industrial sectors. Such policies
have come at the expense of other (non-industrial) sectors of the economy", such as services.
c. the business strategy of European and US global corporations
China’s rapid economic growth and emergence as a ma0or economic power have given China's leadership increased
confidence in its economic model. Many believe the key challenges for the US are to convince China that it has a
stake in maintaining the international trading system, which is largely responsible for its economic rise" and to take
a more active leadership role in maintaining that system; and that further economy and trade reforms are the surest
way for China to grow and modernize its economy. For example, by boosting domestic spending and allowing its
currency to appreciate, China would import more, which would help speed economic recovery in other countries,
promote more stable and balanced economic growth in China, and lessen trade protectionist pressures around the
world. Lowering trade barriers on imports would boost competition in China, lower costs for consumers, and
increase economic efficiency. However, many U.S. stakeholders are concerned that China’s efforts to boost
development of indigenous innovation and technology could result in greater intervention by the state, which could
negatively affect U.S. IP-intensive firms. Failure by China to take meaningful steps to rebalance its economy could
increase tensions with its trading partners, especially if China’s share of global exports continues to increase rapidly,
and if that increase is viewed as being the result of non market policies that give Chinese exports an unfair
competitive advantage.
d. Global commodity prices
China’s unusually fast growing commodity intensity likely reflects the rapid expansion in the tradable export sector
and large-scale fixed asset investment. Both activities are commodity intensive. China’s role in international
commodity trade only matters to the extent that it affects the relative distribution of supply and
demand of different commodities across countries. For example, China’s strategic policy decision to strive for
self-sufficiency in key grains but rely on imports of oilseeds has likely had major implications for global agricultural
trade patterns. In terms of broad commodity groups, China has come to play a dominant role in base metals markets
and, to a somewhat lesser extent, agricultural raw material markets. In contrast, China has not yet assumed a large
role in global food and energy markets although its share of world imports is rising gradually.
At higher frequencies, China’s influence on commodity markets will mainly reflect the business cycle, seasonality,
and unanticipated transitory changes in its supply-demand balance. In general, we should expect unanticipated
shocks to have a larger impact (all else equal), since market participants may be able to adjust commodity
inventories to smooth out the effects of anticipated fluctuations in supply and demand. As a result, this paper
considers the effect of unanticipated demand shocks and also leaves aside supply-side spillovers which may be
important in some cases.

9. How does the internet affect international business activity and the globalization of the world economy?

Creating a global business environment: The Internet has removed spatial and temporal barriers, allowing
businesses to interact and transact directly with customers worldwide, opening new opportunities and expanding
global business scale.

Developing e-commerce: Websites, online stores, and e-commerce platforms have become increasingly popular
thanks to the Internet. This has expanded consumer markets and enhanced the ability of businesses to reach new
customers globally.
Enhancing information and communication: The Internet has provided a rich and fast source of information for
international businesses, helping them quickly and effectively gather market data, competitor insights, and other
crucial information. This enables them to make strategic business decisions and optimize their operations.

Boosting advertising and marketing: The Internet has transformed the way businesses advertise and market their
products and services. Online advertising has become a key tool for reaching and engaging with a global customer
base.

Connecting partners and suppliers: Businesses can find and establish relationships with suppliers and business
partners through the Internet. This enhances their ability to source and collaborate on a global scale.

Improving remote management and interaction: The Internet provides tools and platforms for remote management
and interaction. This allows businesses to manage global operations and interact with employees across different
countries more effectively.

10. How have changes in technology contributed to the globalization of markets and production? Would
the globalization of production and markets have been possible without these technological changes?

Technological change has provided the practical foundation for globalization: Thanks to technological
advancements, companies today can establish operations anywhere in the world where it makes the most sense,
coordinate activities across facilities, and ship products to customers worldwide more cost-effectively than ever
before. Developments in transportation and communication technologies have made it easier and more efficient to
move goods and services across borders. This has led to increased international trade and investment, as well as
outsourcing software development and manufacturing to countries with lower labor costs. The development of
communication technologies, such as wireless, fiber optics, and information systems, alongside the rapid growth of
the Internet, has taken global business to unprecedented levels. Businesses can now communicate and collaborate
with partners and customers around the world in real-time, creating a global culture and the emergence of a global
market for consumer products. In particular, the Internet has enabled companies to access a global customer base
and has allowed consumers to access goods and services from all over the world.

Ví dụ: Moore's Law: Every 18 months, the processing power of microchips will double, and their production cost
will decrease by half. By using services like Skype, Messenger, and WhatsApp, the cost of an international call has
reduced so significantly that it is nearly zero. Dell has leveraged the Internet to coordinate and manage its globally
dispersed production system so efficiently that they keep only a 3-day inventory at the manufacturing locations
(Just-in-time model). Dell uses modern communication technology to outsource its customer service operations to
India. When a customer in the U.S. calls Dell for service, the call is transferred to Bangalore, India, where
English-speaking staff handle the call.

11. “The study of international business is fine if you are going to work in a large multinational enterprise,
but it has no relevance for individuals who are going to work in small firms.” Evaluate this statement.
There is nothing to claim that international business is only fine if we are going to work in a large multinational
enterprise but not if we are working in small firms.
The study of international business would benefit all businessmen and employees whether they are working in big
or small firms. Obviously, employees and company owners of multinational companies can use international
business expertise to generate earnings and improve their business strategy. However, it will also encourage small
company owners to think big and expand their operations globally. Small firms should not ignore events occurring
outside their frontiers because what happens in one nation has an impact on the entire world. Thus, in order to avoid
negative effects and make the firms grow more and more, small firms should have an understanding of international
business to build appropriate business strategies, and choose the right form of market entry if they want to continue
to reach out to the world market.
12. "Ultimately, the study of international business is no different from the study of domestic business. Thus,
there is no point in having a separate course on international business." Evaluate this statement
Disagree with the assertion due to some reasons:
- ​ Firstly, there are differences in the two definitions between international business and domestic one.
Obviously, international business involves the trade of products and services across national borders, whereas
domestic business is conducted inside the borders of the home country.
- ​ Secondly, the level of competition which firms will face in overseas markets will most likely be more
aggressive and sophisticated than in local markets.
+​ For domestic enterprise, both the firm's producer (the seller) and its clients (the buyer) live in the same
nation, the trade agreement is based on the country's practices, laws, and cultures. Therefore, a domestic firm has
several advantages, such as cheap transaction costs, less time between production and sale of goods, reduced
transportation costs, stimulates small-scale companies, and so on.
+​ International firms’ transactions, on the other hand, are conducted beyond the limits of the home country.
All economic activity involving cross-border transactions is classified as international or external business. It covers
all business activity involving two or more regions, such as sales, investment, and logistics.
Multinational corporations benefit from a diverse consumer base and do not have to rely on a single country for
resources. Furthermore, international business promotes international commerce and investment. However, there are
various disadvantages that function as a barrier to entry in the worldwide market, such as tariffs and quotas, as well
as political, socio-cultural, economic, and other aspects that impact international commerce.
- ​ Finally, there are no two countries with the same political and judicial systems. Each country has its own
foreign firm and product policies. The key is to comprehend that once a firm enters a foreign market, it must follow
the norms and laws of that country, not its own.
In a nutshell, carrying out international commercial operations and managing them is significantly more challenging
than running a local firm. Most businesses find it challenging to expand worldwide due to changes in the political,
economic, and socio-cultural environments between nations. However, in order to become a great company
entrepreneur, we must understand both domestic and international studies, which will provide us with a larger
picture to analyze the business from both sides.
13. ​ What is the link between an international business’s strategy and its human resource
management policies, particularly with regard to the use of expatriate employees and their pay scale?
An international business strategy is a methodology used by businesses to expand to global markets and obtain a
competitive advantage. It is essential to have a management function that engages in recruitment, selection, and
training of employees and maintaining proper relations between employees and the administration. Effective
management policy enables companies to expand to global markets effectively.
Human resource plays a vital role in the successful implementation of international business strategy.
- ​ In firms pursuing a localization strategy, a polycentric staffing approach is most common and there are
relatively few expatriates or the associated pay issues.
- ​ Expatriates are more common in firms with international strategies, and an ethnocentric staffing approach
is utilized. In this situation the pay is often based on home country levels, with adjustments as required for differing
living costs and taxes as outlined by the balance sheet approach.
- ​ Firms pursuing global standardization or transnational strategies most often use a geocentric approach to
staffing, where the best individuals (regardless of nationality) are chosen to fill positions in any country. Here the
pay issues for expatriates can become particularly complex, as allowance must be made for home country norms,
host country costs and expectations, and global norms across the company.

14. ​ Research suggests that many expatriate employees encounter problems that limit both their
effectiveness in a foreign posting and their contribution to the company when they return home. What are the
main causes and consequences of these problems, and how might a firm reduce the occurrence of such
problems?
Main causes
- Expatriates are unable or unwilling to accept or accommodate themselves to the new culture and norms. This
results in a diminished ability to engage with local managers or firms and in establishing business relationships,
which is as a direct result of a lack of commensuration between their behavior and local customs.
- They fail because of family and personal issues and lack of cultural skills that haven’t been part of the
selection process. The firm does not provide training to staff (cultural, language, and technical training,…) before
the postings abroad.
The lack of family and friends abroad, language barriers, and employment restrictions create feelings of isolation.
Firms are also often ill-prepared to handle the returning employees' return to their home country. This creates
resentment and discontent in the returning employee that often negatively affects the work contributions of that
employee and their commitment to the firm.
Consequences
- Expatriate employees who encounter problems may struggle to perform their job effectively, which can impact
their productivity and the success of the company's operations in the host country.
- Expatriate employees who are unhappy or struggling may become disengaged and less committed to their job,
which can lead to decreased job satisfaction and increased turnover.
- Companies may incur additional costs associated with expatriate employees who encounter problems, such as the
need to provide additional support or training, or the cost of repatriating an employee who is unable to complete
their assignment.
How to reduce the occurrence of such problems?
- Firms should ensure that they have a through program that addresses cultural training, language training, and
practical training
- Good human resource planning that identifies candidates with key skills and a global mindset.
- The firm must make preparations in each foreign region where employees work to address the educational
needs of their children, the spouses’ employment concerns, and the emotional stability of the employee and his
entire family.
- Training for employees and their spouses prior helps build cultural understanding, language, leadership skills,
experience and home country reentry training.
15. ​ Imagine you are the marketing manager for a U.S. manufacturer of disposable diapers. Your
firm is considering entering the Brazilian market. Your CEO believes the advertising message that has been
effective in the United States will suffice in Brazil. Outline some possible objections to this. Your CEO also
believes that the pricing decisions in Brazil can be delegated to local managers. Why might the CEO be
wrong?

Although newborn diapers function the same in all cultures and product quality standards may be the same,
sensitivities to bodily functions vary. between cultures. Therefore, advertising messages may need to be changed to
be culturally appropriate in each country. Likewise, in some countries it may be acceptable to display an ad with a
picture of a man changing a diaper, while in other countries the message may be misinterpreted or cause
controversies in the community. Another consideration is the level of noise generated by a competitor's product
advertising messages, which may be different in Brazil. Although local demand and price elasticity decisions will
play an important role in Brazil, pricing should not be decided solely by local regulators. Since this is a global
business, your company will likely compete in Brazil with some of the same competitors as elsewhere. As a result,
pricing decisions in one country can have an impact on pricing and competition in other markets. Similarly, your
company may want to position and value the same brand in different South American countries.
16. ​ Within 20 years, we will have seen the emergence of enormous global markets for
standardized consumer products. Do you agree with this statement? Justify your answer.

I don't fully agree with this statement because:

Currently, we cannot deny the advancements in technology, supply chains, and transportation, which have made it
easier and more cost-effective for companies to produce and distribute standardized consumer products globally.
Additionally, the rise of e-commerce platforms and online marketplaces has enabled consumers to easily access and
purchase these products from anywhere in the world. As a result, we see that the introduction of standardized global
consumer products is being widely accepted and consumed across different countries and cultures.

However, the statement is not entirely accurate.

One of the main challenges in the market today is the increasing demand for personalized and customized products
according to consumer preferences. As consumers become more aware of their personal needs and tastes, they are
more likely to seek products that fit their specific tastes and requirements. The trend towards personalization and
customization is spreading widely, and this will likely limit the growth of standardized consumer products in some
markets.

Furthermore, cultural differences (including the importance of religion and consumer culture) and regulations
between countries and regions also affect the demand for standardized consumer products. For example, some
countries may have different safety standards, labeling, and packaging regulations, or they may restrict or prohibit
certain products. These factors can require companies to adapt their products to meet local requirements.

17. ​ You work for a company that designs and manufactures personal computers. Your company’s
R&D center is in Michigan. The computers are manufactured under contract in Taiwan. Marketing strategy
is delegated to the heads of three regional groups: a North American group (based in Chicago), a European
group (based in Paris), and an Asian group (based in Singapore). Each regional group develops the
marketing approach within its region. In order of importance, the largest markets for your products are
North America, Germany, Great Britain, China, and Australia. Your company is experiencing problems in its
product development and commercialization process. Products are late to market, the manufacturing quality
is poor, costs are higher than projected, and market acceptance of new products is less than hoped for. What
might be the source of these problems? How would you fix them?

The origins of issues in the product development and commercialization process can stem from various factors in
the current setup. Below are some potential problems and corresponding solutions:

Communication and Coordination Issues:​

The geographical dispersion of different teams (e.g., R&D in Michigan, manufacturing in Taiwan, and regional
marketing teams at different locations) can lead to communication gaps, delays, and misalignment. To address this,
the company should focus on improving communication channels and establishing effective coordination
mechanisms. This could include regular meetings, project management tools, and assigning communication liaisons
between teams.

Lack of Collaboration and Integration:​

If R&D, production, and marketing teams are not working closely together, it can lead to issues like delayed product
delivery and poor market acceptance. Encouraging cross-functional collaboration, sharing insights, and involving all
stakeholders from the early stages of product development can help align efforts and minimize delays.
Quality Control in Manufacturing:​
Poor product quality may indicate issues with the quality control process at the manufacturing facility in Taiwan.
Implementing strict quality control measures, such as regular inspections, testing, and evaluations, can help identify
and address quality issues early on.

Lack of Focus on Customer Needs:​

If market acceptance of the product is lower than expected, it could be due to a lack of focus on customer needs
during the product development process. To address this, the company could gather more customer feedback
throughout the development process, conduct focus groups to test new product concepts, or increase the
involvement of regional marketing teams during product development.

Improper Planning:​
Early or late product launches and higher-than-expected costs may be the result of inadequate planning and
budgeting. To solve this issue, the company can implement stronger project management processes to ensure that
timelines and budgets are realistic and are consistently on track.

18. ​ Under what conditions is it ethically defensible to outsource production to the developing
world where labor costs are lower when such actions also involve laying off long-term employees in the firm’s
home country?

Ethical protection when outsourcing production to developing countries, where labor costs are lower, and involving
the layoff of long-term employees in the host country, can be implemented under the following conditions:

Provide support for laid-off employees:​

The company should commit to providing support for laid-off employees, including offering information, career
counseling, relocation programs, or other reasonable benefits. The goal is to help employees transition and find new
job opportunities.

Ensure labor rights:​

The company should ensure that its suppliers in the outsourcing production process comply with basic labor rights,
including reasonable wages, legal working hours, safe working conditions, and other rights. The company should
also regularly monitor and audit compliance with these standards.

Build mutually beneficial relationships:​

The company should consider building mutually beneficial relationships with suppliers in developing countries.
This includes establishing a sustainable partnership, promoting knowledge sharing, technology transfer, and joint
development.

19. ​ A visiting American executive finds that a foreign subsidiary in a less developed country has
hired a 12-year-old girl to work on a factory floor, in violation of the company’s prohibition on child labor.
He tells the local manager to replace the child and tell her to go back to school. The local manager tells the
American executive that the child is an orphan with no other means of support, and she will probably
become a street child if she is denied work. What should the American executive do?
The American executive seems to be following the righteous moralist perspective. This theory is based on the belief
that a company should adhere to the ethical standards of its home country and apply these standards uniformly
across its international operations. The executive is focused on the company’s prohibition against child labor and
wants to ensure the company complies with this policy, regardless of the local context.
Following the righteous moralist ethical theory, the American executive should act in a way that aligns with the
ethical standards of the home country (in this case, the company's prohibition on child labor) and apply these
standards universally, regardless of the local context.
The righteous moralist would prioritize upholding the company's prohibition on child labor, regardless of the local
economic context or the child’s personal circumstances. Therefore, the child should be immediately removed from
the factory floor, as continuing to employ a child in violation of company policy is ethically unacceptable.
Recognizing the dire situation of the child (as she is an orphan with no means of support), the executive should
ensure that the company provides support to the child: Financial support to ensure the child can survive in the short
term, or funding for education if she is of school age. Referral to local NGOs or social services that can provide
long-term support for orphaned children. Establishing a welfare program within the company or partnering with
local charities to assist vulnerable children and families in the region. The American executive should engage with
local authorities and organizations to ensure the child’s safety and well-being. The company could work with local
organizations to address the issue of child labor in the community, offering alternatives to children in similar
situations.
20. ​ A manager from a developing country is overseeing a multinational’s operations in a country
where drug trafficking and lawlessness are rife. One day, a representative of a local “big man” approaches
the manager and asks for a “donation” to help the big man provide housing for the poor. The representative
tells the manager that in return for the donation, the big man will make sure that the manager has a
productive stay in his country. No threats are made, but the manager is well aware that the big man heads a
criminal organization that is engaged in drug trafficking. He also knows that the big man does indeed help
the poor in the rundown neighborhood of the city where he was born. What should the manager do?
The manager should not donate because he knows that he is indirectly funding the illegal drug trafficking
organization. It would be unethical to do so, and if the curator really wants to help the poor, it can legally donate in a
variety of ways. For example, calling local charity fund sponsors… Although the manager knows that it is good for
the "big man" to help the poor, it is illegal to participate in the drug trafficking ring. The best thing the manager
should do is not make any donations as he is aware that the big man at the head of a criminal organization is
engaged in drug trafficking. By implication," big man" is indirectly providing funds to the drug trafficking
organization. In addition, the act of helping the poor in the neighborhood is not a justification for running a drug
trafficking organization of "Big Man". The manager should act by reporting the "big man" mistake to the relevant
local authorities and providing them with any information he has about the "big man" so that they can handle
everything appropriately. If he does this, he is carrying his own social responsibility function and the company. And
maybe his company's reputation goes up because of the high ethics that the company brings
The righteous moralist theory asserts that a company should adhere to the ethical standards and values of its home
country, regardless of the host country’s cultural norms or practices. This approach advocates for applying universal
ethical principles and moral standards that do not compromise the integrity of the business, even when local
practices might be considered acceptable or customary. The big man’s request is linked to a potential bribe or
unethical transaction, even if it is framed as a "donation." This request involves cooperating with a criminal
organization, even if the "big man" helps the poor. From the perspective of righteous moralism, the manager’s
responsibility is to uphold the ethical standards of the home country, where such practices (like offering bribes or
cooperating with criminal organizations) would be considered unethical and possibly illegal. The manager should:
Refuse the request for the "donation" outright, recognizing that it is essentially a bribe tied to a criminal
organization. Report the situation to higher management and consult with the legal department to ensure the
company maintains its ethical standards. Take a firm stand on the company’s policies regarding bribery, criminal
activity, and corruption, regardless of the local customs or pressure.By following the righteous moralist approach,
the manager ensures that the company maintains its integrity, adheres to its ethical guidelines, and avoids becoming
entangled with illegal activities or organizations.

21. ​ Milton Friedman stated in his famous article in The New York Times in 1970 that “the social
responsibility of business is to increase profits.”. Do you agree? If not, do you prefer that multinational
corporations adopt a focus on corporate social responsibility or sustainability practices?
Milton Friedman’s view that the “social responsibility of business is to increase profits” has been a highly debated
topic. According to Friedman, the primary role of businesses is to generate profits for their shareholders, and any
social responsibility actions outside of this goal would be outside the scope of the company's role. He argued that
the business leader's responsibility is to the shareholders, and actions like charitable giving or other social
responsibilities should be left to individuals, not the company.
While this viewpoint is widely recognized, I do not entirely agree with it, especially in the context of modern global
business. Multinational corporations (MNCs) today face immense pressure from various stakeholders—not just
shareholders, but also employees, customers, local communities, governments, and the environment. This broader
set of responsibilities means that a company's success cannot be measured solely by its profitability. Focusing only
on profit generation could lead to significant negative consequences, including environmental degradation,
exploitation of workers, and unsustainable practices.
Instead, I would argue that businesses should adopt a focus on corporate social responsibility (CSR) and
sustainability practices, and I will explain this preference based on utilitarianism and righteous moralist ethical
theories.
Utilitarianism is an ethical theory that promotes actions that maximize the overall well-being or happiness of the
greatest number of people. Under this theory, businesses should evaluate their actions in terms of how they affect all
stakeholders, not just shareholders.
For multinational corporations, adopting CSR and sustainability practices can contribute to the overall well-being of
society by ensuring fair labor practices, reducing environmental damage, supporting local communities, and
maintaining transparency. By considering the well-being of employees, consumers, the environment, and society as
a whole, businesses can generate positive outcomes that are more than just financial profits. Sustainability practices
help in reducing environmental harm, which, in the long run, benefits the entire planet, aligning with the greatest
happiness principle of utilitarianism.
For example, a multinational company investing in clean energy, fair wages for workers, and ethical sourcing
practices creates a positive societal impact, which leads to higher overall happiness and stability in the long term.
These efforts will often improve the company's reputation, attract loyal customers, and contribute to long-term
profitability. Therefore, utilitarianism advocates for businesses balancing profit with ethical and social
responsibilities to benefit society as a whole.
The righteous moralist theory holds that there are universal ethical standards that businesses must follow regardless
of the cultural or geographical context. A righteous moralist would argue that a company should follow global
ethical principles, such as human rights, fair labor practices, and environmental protection, even if such principles
are not always common in the countries where they operate. This means that businesses should focus on CSR and
sustainability practices that align with universal ethical standards, regardless of local customs or legal frameworks.
In this context, a multinational corporation should not justify harmful business practices (e.g., child labor, pollution)
simply because they are accepted in a particular country or region. Instead, they should adopt higher ethical
standards that protect the rights of workers, ensure environmental sustainability, and contribute positively to local
communities. The righteous moralist would argue that businesses have a responsibility to operate in a way that
supports universal human rights and contributes to the well-being of society at large, even at the expense of higher
costs or reduced profits in the short term.
For example, Google has also supported a number of renewable energy projects around the world. The focus on the
environment and renewable energy have bolstered the brand images of these companies. If we consider that
branding involves using corporate social responsibility to show how one company is unique from its competitors,
Google does this well with its Google Green Project (Google Green Project) that indicates Google builds
technology that helps people do more for the planet.
22. “The choice of strategy for a multinational firm must depend on a comparison of the benefits of that
strategy (in terms of value creation) with the costs of implementing it (as defined by organizational
architecture necessary for implementation). On this basis, it may be logical for some firms to pursue a
localization strategy, others a global or international strategy, and still others a transnational strategy.” Is
this statement correct?

Yes, the statement is correct. The choice of strategy for a multinational firm should indeed depend on comparing the
benefits of the strategy in terms of value creation with the costs of implementation, including the necessary
organizational architecture. For example, a company like Coca-Cola achieves value creation by standardizing its
products globally, allowing it to leverage economies of scale. However, implementing this strategy requires a robust
global supply chain and consistent branding across markets, which can be costly. Thus, Coca-Cola's global strategy
focuses on both cost-efficiency and brand consistency, while still catering to local tastes through product
adjustments in certain markets.

Different strategies, such as localization, global, and transnational, offer distinct advantages and challenges. For
instance, McDonald's uses a localization strategy in many countries, offering region-specific menu items to cater to
local tastes, such as the "McAloo Tikki" in India. This allows McDonald's to appeal to local preferences but incurs
higher costs due to the need for menu customization and local supply chains. On the other hand, Apple employs a
global strategy where it standardizes its products and services across the world. By doing so, Apple achieves
economies of scale, reduces production costs, and maintains a consistent brand image globally, but may not fully
cater to regional preferences in product features or pricing.

The transnational strategy is a balance between global integration and local responsiveness. Nestlé, for example,
uses a transnational strategy to adapt its products to local tastes while benefiting from global operational
efficiencies. It standardizes some aspects of production and marketing globally, but at the same time, it adapts its
products to meet local demands, such as offering different flavors of Kit Kat in various countries. This strategy
allows Nestlé to achieve both cost efficiency and local relevance, though it requires a complex organizational
structure to manage both global integration and local adaptation.

23. Discuss this statement: “An understanding of the causes and consequences of performance ambiguity is
central to the issue of organizational design in multinational firms.”
Performance ambiguity refers to the difficulty in clearly attributing outcomes to specific subunits or individuals
within an organization, particularly when interdependencies exist between subunits (Page 25). This concept is
critical in multinational firms due to their complex structures, geographic dispersion, and varying strategic
orientations (e.g., localization, global standardization, transnational)
Statement can be interpreted as making the point that organizational design has to consider the performance
ambiguities that will ultimately be created as result of the design. Different organizational designs can remove
performance ambiguities, shift them to a different level in the hierarchy, or create new performance ambiguities. It
makes sense to analyze the cause of performance ambiguities as a part of the organizational design process. It also
makes sense to analyze the opportunities for performance ambiguity that a new design might present.
It is important for management to be able to cope with the challenges of performance ambiguity, which as Charles
Hill explains "exists when the causes of a subunit's poor performance are not clear". One of the main causes for
performance ambiguity is unsatisfactory presentation on some level of the company. Companies often learn from
their mistakes; however, it is critical to understand the reasons for the poor performance and to address them
accordingly. Multinational corporations have independent units and sometimes resolving performance ambiguity
issues could be quite difficult. David Kill and Frances Shin suggest that "it is crucial that the same integrated pattern
recognition paradigm be utilized to map performance to input features (i.e. possible causes) to promote
organizational learning".
Thus when crafting a new organizational design, not only must the causes of existing performance ambiguities be
addressed, but the likely consequences in the form of new performance ambiguities must also be considered. Thus,
how an international company is organized (the architecture) may be the main reason why the company does or
does not perform.
24. Describe the organizational architecture that a transnational firm might adopt to reduce the costs of
control.
A transnational firm aiming to reduce control costs typically adopts a hybrid organizational structure, such as a
global matrix, which balances global integration and local responsiveness. This structure combines product
divisions (for global efficiency) with geographic units (for regional adaptation), decentralizing operational decisions
(e.g., pricing, sourcing) to empower local managers while centralizing strategic functions like R&D. For example,
an automotive firm might centralize electric vehicle development globally but allow regional units to tailor
manufacturing processes. This dual accountability minimizes bureaucratic oversight, as decentralized
decision-making reduces reliance on rigid hierarchical controls.
To coordinate interdependent subunits without escalating costs, transnational firms rely on integrating mechanisms.
Cross-functional teams (e.g., members from R&D, manufacturing, and regional sales) resolve workflow conflicts,
while informal knowledge networks enable seamless information sharing across borders. These mechanisms reduce
the need for complex reporting systems. Additionally, a strong organizational culture—emphasizing shared norms
like collaboration and innovation—aligns priorities globally. For instance, Unilever’s “One Unilever” culture fosters
cohesion across 190 countries, reducing friction and the need for top-down control.
Finally, transnational firms prioritize output and cultural controls over bureaucratic rules. Output metrics (e.g.,
global revenue targets paired with local customer satisfaction scores) evaluate performance holistically, while
cultural controls ensure employees internalize the firm’s global-local balance. Nestlé, for example, pairs global
efficiency goals with decentralized empowerment, allowing regional managers to adapt products without
micromanagement. By blending these elements, transnational firms lower control costs: the matrix structure
streamlines accountability, integrating mechanisms enhance coordination, and cultural alignment replaces rigid
oversight, enabling efficiency and flexibility.
25. What is the most appropriate organizational architecture for a firm that is competing in an industry
where a global strategy is most appropriate? (Cơ cấu tổ chức phù hợp nhất cho một công ty đang cạnh tranh
trong một ngành mà chiến lược toàn cầu là phù hợp nhất là gì?)
For firms adopting a global strategy (prioritizing cost efficiency, standardization, and centralized control), the most
appropriate organizational architecture is a worldwide product division structure (Pages 19, 31). This structure
organizes the firm into global product-based divisions (e.g., smartphones, laptops), each managing its entire value
chain—from R&D to production—under centralized oversight. Headquarters retains decision-making authority over
critical areas like product design, pricing, and technology to ensure global consistency and economies of scale. For
example, a tech giant like Intel centralizes chip development and manufacturing globally, while regional units focus
on sales support, maintaining uniformity across markets. This architecture minimizes redundancy and maximizes
efficiency through vertical differentiation (centralized control) and horizontal differentiation (product-based
subunits). Unlike a matrix or area structure, which adds complexity or prioritizes localization, the worldwide
product division structure streamlines operations by eliminating overlapping regional units. Formal integrating
mechanisms, such as global committees and standardized processes, ensure coordination (Page 21). For instance, a
global automaker might use centralized engineering teams to design a unified vehicle platform, while plants
worldwide follow identical production protocols to reduce costs. The structure aligns with output and bureaucratic
controls (Pages 23–24), using global metrics (e.g., cost-per-unit, market share) to evaluate performance. Strict rules
govern procurement and quality assurance, reducing variability. For example, Samsung’s semiconductor division
centralizes R&D in South Korea but deploys standardized manufacturing processes globally, ensuring efficiency
and consistency. By centralizing core functions and decentralizing non-critical tasks, this architecture supports the
global strategy’s emphasis on scale, uniformity, and competitive pricing, avoiding the inefficiencies of structures
tailored for local adaptation.
26. If a firm is changing its strategy from an international to a transnational strategy, what are the most
important challenges it is likely to face in implementing this change? How can the firm overcome these
challenges?
The most important challenges are likely to be related to control, as the firm moves from at least a partial reliance
on output measures and bureaucratic methods to one that will require many formal and informal controls and
integration mechanisms. Significant performance ambiguities may occur with transnational. challenges like
structural complexity and performance ambiguity. For instance, a firm transitioning from a centralized international
division to a global matrix structure (Page 20) may face confusion due to dual reporting lines (e.g., product
managers vs. regional heads). This was evident when Procter & Gamble (P&G) adopted a matrix structure to
balance global brands like Tide with local market needs. Employees initially struggled with conflicting priorities,
slowing decision-making. Additionally, interdependence between subunits (e.g., R&D in one country,
manufacturing in another) creates ambiguity in attributing success or failure, complicating performance evaluations
(Page 25). To overcome these challenges, firms must revise control systems and strengthen cultural alignment. For
example, Unilever addressed resistance to its transnational shift by fostering a collaborative culture through
initiatives like “One Unilever,” which emphasized shared goals across regions. The company also introduced hybrid
incentives, rewarding managers for both global efficiency (e.g., cost savings) and local innovation (e.g.,
region-specific product launches). Similarly, Siemens used knowledge networks (Page 22), creating digital
platforms for engineers in different countries to co-develop renewable energy solutions, reducing silos and
improving coordination without heavy bureaucracy. Leadership and phased implementation are critical. When
Philips transitioned to a transnational strategy, it gradually rolled out a matrix structure, starting with pilot units in
healthcare and lighting. Cross-functional teams with members from R&D, manufacturing, and regional sales were
formed to align priorities. Leadership held global workshops to communicate the strategy’s benefits, while
retraining programs helped employees adapt to decentralized decision-making. By combining structural adjustments
(e.g., integrating mechanisms), cultural controls, and clear communication, Philips mitigated inertia and
successfully balanced global innovation with local market responsiveness.

1. Drawing on John Rawls’ concept of the veil of ignorance, develop an ethical code that will (a) guide the
decisions of a large oil multinational toward environmental protection and (b) influence the policies of a
clothing company in their potential decision of outsourcing their manufacturing operations.
Based on John Rawls’ concept of the "veil of ignorance", the following ethical code can be developed to guide the
decisions of multinational corporations (MNCs) regarding environmental protection and outsourcing manufacturing
operations.
According to John Rawls, a decision is fair and ethical if it would be accepted by all individuals when designing a
social system under a veil of ignorance—a conceptual tool in which individuals are unaware of their own status,
nationality, or position in society. This veil enables impartial judgment and can serve as an ethical compass for
international business managers facing difficult ethical dilemmas. In multicultural international settings, this
concept offers especially powerful guidance.
(a) Multinational Oil Companies – Environmental Protection
Although in some host countries oil MNCs may not be penalized for oil spills or environmental violations due to lax
regulations, they must consider ethical dilemmas beyond legal obligations. Under the veil of ignorance,
decision-makers must assume they or their families could be directly affected by environmental harm. Therefore,
MNCs should adopt stringent environmental protection policies regardless of local enforcement standards. These
may include:

●​ Proactive investment in clean technologies and sustainable extraction methods,

●​ Transparent environmental impact assessments,
●​ Community engagement in environmental decision-making,
●​ Alignment with global environmental standards, not just local laws.
These actions reflect a commitment to social responsibility and address society’s expectations for environmental
stewardship.
(b) Clothing Companies – Ethical Outsourcing Practices
Many apparel companies engage in outsourcing to reduce operational costs by subcontracting production to
third-party suppliers in low-cost countries. This practice implies that manufacturing takes place in jurisdictions with
different labor and environmental standards. Applying the veil of ignorance, decision-makers should assume they
could be local workers or residents affected by the outsourced operations. As a result, firms should:

●​ Establish policies to minimize environmental pollution in supplier countries,

●​ Monitor suppliers’ compliance with waste management protocols and sustainable manufacturing practices,
●​ Promote fair labor standards, including health and safety regulations.
By doing so, companies not only meet the expectations of global civil society but also mitigate reputational risks
and contribute to sustainable global supply chains.
1. Do you think facilitating payments (speed payments) should be ethical? Does it matter in which country,
or part of the world, such payments are made?

From the perspective of cultural relativism, ethical standards are not universal but instead depend on the cultural
norms and practices of a specific society. According to this theory, if facilitating payments (or speed payments) are
socially accepted and embedded in the local way of doing business, then they may be considered ethically
permissible within that cultural context.
For example, in some developing countries where government bureaucracy is slow and inefficient, it may be
common and culturally accepted to offer small payments to expedite services. In such places, speed payments might
be seen less as corruption and more as a practical necessity to get things done. From the cultural relativist view,
imposing external ethical standards—such as Western anti-bribery laws—could be viewed as disrespecting local
customs and cultural imperialism.
However, this theory also faces criticism. While cultural relativism promotes respect for different cultural values, it
may fail to protect human rights or long-term institutional integrity. If every unethical practice is justified based on
local norms, companies might participate in systemic corruption or ignore broader global standards. Still, within
cultural relativism, the ethicality of facilitating payments depends on local acceptance, and thus, it does matter
which country or part of the world the payment is made in
1. Licensing propriety technology to foreign competitors is the best way to give up a firm's competitive
advantage. Discuss.

The statement is fundamentally accurate—licensing proprietary technology to foreign competitors significantly

increases the risk of intellectual property loss. Therefore, licensing should generally be avoided when a firm
possesses proprietary technology that forms the basis of its competitive advantage.

However, licensing can still be a viable strategic option under certain conditions. If a licensing agreement can be
structured to minimize the risk of intellectual property misappropriation by the licensee, then it may be suitable. For
example, licensing to a partner in a non-competing or geographically isolated market or including strict contractual
clauses for IP protection can reduce risks.

In particular, when a firm believes its technological edge is temporary, and that rapid imitation by competitors is
likely, it may be strategic to license its technology as widely and quickly as possible. This approach can facilitate
global acceptance of the firm’s technology before imitation spreads. Additionally, licensing to potential rivals may
discourage them from developing competing technologies that could surpass the original innovation. Moreover, by
positioning its technology as an industry standard, the firm can secure a steady stream of royalty income.
Nevertheless, outside of such carefully calculated scenarios, the risk of losing control over proprietary know-how
often outweighs the benefits of licensing, and firms should exercise caution.

​
* STRATEGY + ENTRY MODE

Localization Strategy: This strategy focuses on adapting products and strategies to meet the specific needs of local
markets. As a result, the need for centralized control over foreign operations is relatively lower. Decision-making is
decentralized, and subsidiaries are granted autonomy to customize services according to local market demands.
Therefore, entry modes that allow for higher levels of local control, such as joint ventures or wholly-owned
subsidiaries, are often preferred. These modes enable closer coordination with local partners or subsidiaries,
facilitating the customization of offerings and responsiveness to local market dynamics.

International Strategy: An international strategy primarily involves exporting products to foreign markets. Since the
company operates from its home country, the need for control over foreign operations is very limited. The focus is
on leveraging existing core competencies and replicating domestic success in international markets. Therefore, entry
modes such as exporting or licensing, which require minimal control over foreign operations, are typically chosen.
These modes allow the company to maintain control over its products and intellectual property while accessing
international customers efficiently.

Global Standardization Strategy: The global standardization strategy aims to achieve economies of scale and
uniformity across markets. Under this strategy, the company centralizes decision-making and emphasizes the
standardization of products, processes, and marketing strategies. Therefore, there is a relatively higher need for
control to ensure consistent implementation of standardized practices. An entry mode that provides greater control,
such as wholly owned subsidiaries or acquisitions, is typically preferred. These modes allow the company to
directly supervise and enforce global standardization across its international operations.

Transnational Strategy: This refers to the transnational strategy, which seeks a balance between global integration
and local responsiveness. The company aims to achieve both efficiency and adaptability, requiring a certain level of
control over foreign operations to ensure coordination, knowledge sharing, and alignment with global strategy,
while still allowing for local customization. An entry mode that facilitates shared control and collaboration, such as
strategic alliances or joint ventures, is often considered. These modes enable effective coordination between the
company and its partners, supporting both global integration and local responsiveness.

è It is important to note that the choice of entry mode is influenced by numerous external factors beyond the firm’s
control, including market conditions, the legal and regulatory environment, available resources, and risk tolerance.
Companies must carefully assess these factors alongside their strategic objectives and core competencies to
determine the most appropriate entry mode for their international operations.

2. A small Canadian firm that has developed valuable new medical products using its unique bio-technology
know-how is trying to decide how best to serve the European Union market. Its choices are given below. The
cost of investment in manufacturing facilities will be a major one for the Canadian firm, but it is not outside
its reach. If these are the firm’s only options, which one would you advise it to choose? Why?
a. Manufacture the products at home, and let foreign sales agents handle marketing
b. Manufacture the products at home, and set up a wholly owned subsidiary in Europe to handle marketing
c. Enter into an alliance with a large European pharmaceutical firm. The products would be manufactured in
Europe by the fifty-fifty joint venture and marketed by the European firm.

Bài làm
“Manufacture the products at home, and set up a wholly owned subsidiary in Europe to handle marketing”.
Producing the products in Canada while establishing a wholly owned subsidiary in Europe would be a more
attractive entry mode in this case. The company would be able to build an entirely new marketing system within the
EU and retain tight control over the development of its innovative medical biotechnology products at home. Given
that the company has the financial and resource capacity, it is well-positioned to minimize the risks associated with
setting up a foreign subsidiary. Moreover, wholly owned operations provide full control, allowing the firm to benefit
from economies of scale and market stability within the European market.

From a resource-based view (RBV) and strategic control perspective, owning a subsidiary enables the firm to
protect its proprietary know-how and brand reputation, which is crucial in a high-value, innovation-driven industry
like biotechnology. In the long term, this strategy is more beneficial than relying solely on domestic production and
third-party exporters, which may limit the firm’s flexibility and responsiveness to local market dynamics. Therefore,
establishing a wholly owned subsidiary in Europe for marketing while keeping production and technological
capabilities in Canada allows for strong international expansion with sustained competitive advantage.

5. Under what circumstances are joint ventures to be preferred to wholly owned subsidiaries as the most
appropriate mode for entering foreign markets?

Joint ventures offer numerous advantages for companies as a mode of entry into foreign markets. One key benefit is
the ability to partner with local firms to leverage their knowledge of the local market, including consumer behavior,
regulations, and distribution networks. This local responsiveness enhances the firm's ability to tailor its strategies
and operations to the specific needs of the host country.

Another significant advantage of joint ventures, compared to wholly owned subsidiaries, is the opportunity to share
costs and risks associated with international expansion. Entering a new market can involve substantial financial and
operational uncertainties, and sharing these burdens with a local partner can make the process more manageable and
less risky.

In certain scenarios, forming a joint venture may be the only viable option to enter a foreign market—especially in
countries where government regulations restrict foreign ownership or where political risks (such as expropriation or
policy instability) are high. In such environments, a joint venture can serve as a strategic safeguard, aligning the
foreigReread the Management Focus on the Jollibee Phenomenon, then answer the following questions:

a) What explains the pattern of Jollibee's international expansion? Why do you think it entered the countries it did?
Điều gì giải thích mô hình mở rộng quốc tế của Jollibee? Bạn nghĩ tại sao nó xâm nhập vào các quốc gia mà nó đã
làm?
Jollibee có xu hướng nhắm mục tiêu đến những quốc gia mà nó sẽ dễ dàng được chấp nhận. Ban đầu, Jollibee tập
trung mở rộng sang các nước láng giềng như Indonesia. Sau đó, Jollibee mở rộng sang Trung Đông và hướng đến
đội ngũ lớn người Philippines xa xứ. Hoa Kỳ, nơi cũng có một số lượng lớn người Philippines, trở thành mục tiêu
tiếp theo của công ty.
b) Jollibee's expansion into the United States has been quite limited. Why might this be so? Việc mở rộng sang Hoa
Kỳ của Jollibee khá hạn chế. Tại sao có thể như vậy?
Jollibee đã mở tám cửa hàng ở Hoa Kỳ—tất cả đều ở California. Nhiều sinh viên có thể sẽ gợi ý rằng đây chỉ đơn
giản là một phần mở rộng của chiến lược Jollibee nhằm chỉ nhắm mục tiêu vào những thị trường mà khả năng chấp
nhận sản phẩm cao.
c) Jollibee now seems to be focusing on India and China for overseas growth. Why are these countries attractive to
Jollibee? Jollibee dường như đang tập trung vào Ấn Độ và Trung Quốc để phát triển ở nước ngoài. Vì sao những
quốc gia này hấp dẫn Jollibee?
Trung Quốc và Ấn Độ dường như hấp dẫn Jollibee chỉ vì quy mô của họ. Tại Trung Quốc, công ty điều hành hơn
100 cửa hàng phục vụ đồ ăn Trung Quốc. Các cửa hàng được điều hành dưới một tên địa phương. Tại Ấn Độ,
Jollibee đang cân nhắc việc mua lại một nhà hàng thức ăn nhanh của Ấn Độ.
d) Why is Jollibee considering entering India via an acquisition? Tại sao Jollibee xem xét thâm nhập vào Ấn Độ
thông qua việc mua lại?
Một số sinh viên có thể gợi ý rằng mong muốn thâm nhập thị trường Ấn Độ của Jollibee thông qua mua lại hơn là
đầu tư vào lĩnh vực địa lý phản ánh chiến lược tổng thể của công ty khi thâm nhập những thị trường có khả năng
được chấp nhận cao. Vì Ấn Độ không có nhiều người Philippines sinh sống nên Jollibee có thể thoải mái hơn khi
điều hành một chuỗi địa phương nơi sản phẩm đã được chấp nhận. Bởi vì Jollibee không có danh tiếng toàn cầu nên
nó phải tìm những cách khác để cạnh tranh.
6. Reread the opening case on JCB then answer the following questions:
a) Do you think entering India via a joint venture was the optima choice for JCB in 1979? What other options did it
have? Bạn có nghĩ rằng vào Ấn Độ thông qua một liên doanh là sự lựa chọn tối ưu cho JCB vào năm
1979? Nó có những lựa chọn nào khác?
Các lựa chọn chế độ đầu vào có sẵn cho JCB vào năm 1979 rất hạn chế. Hàng rào thuế quan cao khiến chiến
lược xuất khẩu thông thường của nó trở nên kém hấp dẫn và chính phủ Ấn Độ không cho phép các công ty con
thuộc sở hữu hoàn toàn. Với những hạn chế đó, liên doanh có lẽ là sự lựa chọn tốt nhất cho phương thức gia
nhập.
b) Why do you think JBC picked India for its first foreign direct investment? Bạn nghĩ tại sao JBC lại chọn Ấn Độ
để đầu tư trực tiếp nước ngoài đầu tiên?
JCB bị Ấn Độ thu hút vì tiềm năng tăng trưởng của quốc gia này, tuy nhiên, do thuế quan cao nên xuất khẩu không
phải là một lựa chọn. JCB tham gia thị trường thông qua liên doanh với Escorts, một tập đoàn kỹ thuật của Ấn Độ.
c) Was JCB right to gain full control of its Indian joint venture in the 2000s? JCB có quyền kiểm soát hoàn toàn
liên doanh tại Ấn Độ vào những năm 2000 không?
Hầu hết các sinh viên có thể sẽ đồng ý rằng chiến lược sở hữu hoàn toàn của JCB là phù hợp. Công ty cảm thấy liên
doanh đã hạn chế khả năng mở rộng của mình và việc kiểm soát hoàn toàn là cần thiết để tận dụng triệt để công
nghệ và sự đổi mới của mình.
Chapter 13: Strategy
1. In a world of zero transportation costs, no trade barriers, and nontrivial differences between nations with
regard to factor endowments, firms must expand internationally if they want to survive. Agree or disagree?
Discuss about this sentence?

I agree with the statement to a large extent. In a hypothetical world where transportation costs are zero, trade
barriers are nonexistent, and factor endowments differ significantly across countries (such as labor, land, capital,
and natural resources), firms that operate solely within domestic markets will face serious competitive
disadvantages if they do not expand internationally.

According to the Heckscher-Ohlin theory and new trade theory, countries tend to specialize in the production of
goods that utilize their abundant and cheaper factors of production. Firms from countries with advantageous factor
endowments (e.g., low-cost labor or abundant raw materials) can produce goods more efficiently and export them at
lower prices. Without trade barriers or transport costs to level the playing field, firms in other countries would find it
difficult to compete unless they also expand operations internationally—for instance, by setting up production in
low-cost regions to maintain competitiveness.
Moreover, firms that do not internationalize risk losing economies of scale, market share, and innovation capacity.
In contrast, multinational enterprises (MNEs) can exploit location economies, access larger customer bases, and
spread R&D and fixed costs over a wider scale. In such an interconnected and liberalized world, global expansion is
not just an opportunity—it becomes a strategic necessity for survival.

Example: Consider a European clothing company. In this world, it would be difficult to compete solely from
Europe, where wages are high, if its rivals are producing in Vietnam or Bangladesh with lower labor costs. To
survive, the firm must either outsource or relocate manufacturing to those countries, thus expanding internationally.

2. In what kind of industries does a localization strategy make sense? When does a global standardization
strategy make the most sense.

A localization strategy makes the most sense in industries where there is high pressure for local responsiveness.
This is common when consumer tastes and preferences differ significantly across countries, when differences in
infrastructure, distribution channels, or cultural traditions require product or service adaptation, or when local
government regulations demand tailored solutions. For example, the automotive industry often needs to adjust car
models based on road conditions, emissions standards, and consumer preferences in different countries. Similarly,
the fast-food industry must customize menus to reflect local dietary habits and cultural expectations (e.g.,
McDonald’s offering vegetarian options in India).

In contrast, a global standardization strategy is most appropriate when there is strong pressure to reduce costs and
minimal pressure for local adaptation. This typically applies to industries where products can be standardized and
sold in the same form worldwide, benefiting from economies of scale and low production costs. Examples include
the semiconductor industry and the bulk chemical industry, where product specifications are largely the same
globally and price competition is intense. These industries benefit from centralized production and uniform global
marketing strategies to maintain competitiveness.

3. What do you see as the main organizational problems that are likely to be associated with implementation
of a transnational strategy?

Implementing a transnational strategy—which aims to achieve global integration while simultaneously responding
to local responsiveness—is inherently complex and often comes with significant organizational challenges. One
major issue is communication difficulties. Operating across multiple countries with diverse languages, time zones,
and communication styles can lead to information distortion, misinterpretations, and delays in decision-making.

Another critical problem is cultural differences. Aligning global coordination efforts with local cultural norms and
business practices can result in conflicts, misunderstandings, and resistance from local subsidiaries. Moreover, legal
and technical barriers may differ significantly between countries, requiring constant adaptation and regulatory
compliance that increases managerial burden.

Furthermore, there is often a lack of adequate market knowledge at the headquarters, leading to ineffective
decisions. Companies also struggle with limited organizational oversight over foreign operations, which may result
in inefficiencies or loss of strategic control. The need for coordination across borders, such as GM’s need to align
activities between Europe and Latin America, can face internal resistance due to the loss of local autonomy. This
can further lead to resource duplication if entities operate in silos rather than synergizing, ultimately undermining
the efficiency and effectiveness of the transnational strategy.

Ví dụ, với GM, một số hoạt động ở Châu Âu có thể cần hợp tác với các hoạt động ở Mỹ Latinh. Các hành động liên
quan đến việc mất quyền tự chủ như vậy có thể hoạt động như một rào cản đối với việc thực hiện.
4. Case Procter & Gamble
1. What strategy was Procter & Gamble pursuing when it first entered foreign markets in the period up until the
1980s?

When Procter & Gamble (P&G) initially entered foreign markets, they adopted a Localization Strategy. This was
clearly reflected in their reliance on foreign subsidiaries to produce, market, and distribute products across different
countries. In many cases, these subsidiaries even operated their own manufacturing facilities and customized
product packaging, branding, and marketing messages to align with local consumer preferences and
tastes—hallmarks of a localization approach.

At that time, high import tariffs significantly increased product costs, making it essential to establish local
subsidiaries to reduce the final price of goods. Since P&G did not face intense pressure to reduce costs—they were
generating strong revenue streams—the cost of setting up subsidiaries and hiring local labor was justified and still
yielded substantial profits.

This localization strategy proved to be one of P&G’s most effective international market entry strategies until the
1980s. It allowed them to respond effectively to national differences, ensuring market acceptance and strong
performance in diverse international markets.

2. Why do you think this strategy became less viable in the 1990s?

P&G’s Localization Strategy initially worked well and significantly contributed to the company’s growth. By
tailoring its products to meet local preferences, P&G was able to differentiate its offerings in each market and
respond effectively to high local responsiveness pressures. However, this approach also incurred substantial costs
related to manufacturing, marketing, and customization, which the company could afford at the time because it was
not under intense pressure to reduce costs during the 1980s.

However, in the 1990s, as global trade barriers shifted and new tariffs emerged, the cost of P&G’s products in
foreign markets increased sharply, making them less competitive. High import tariffs restricted product mobility and
made it difficult for P&G to engage in cross-border trade, which negatively impacted both sales and profits.

This situation created significant pressure on P&G to revise its global strategy by finding ways to reduce production
costs and enhance global competitiveness. The company needed to balance between cost efficiency and local
responsiveness, signaling a potential shift from a pure Localization Strategy to a Transnational Strategy to stay
competitive in a more integrated and cost-sensitive global market.

3. What strategy does P&G appear to be moving toward? What are the benefits of this strategy? What are the
potential risks associated with it?

P&G appears to have transitioned toward a Transnational Strategy in response to increasing pressures for both
global integration and local responsiveness. In 1999, the company launched its second major restructuring initiative
of the decade, called “Organization 2005,” aiming to transform P&G into a truly global enterprise. The company
dismantled its regional structure and reorganized into seven self-contained global business units, each responsible
for product development, marketing, and profitability. These units were tasked with streamlining production into
fewer, larger facilities, building global brands where possible, and accelerating product innovation and rollout.
This strategic shift reflects the essence of a transnational strategy, where firms strive to reduce costs through global
scale efficiencies while also being locally responsive when necessary. By consolidating manufacturing and focusing
on brand standardization, P&G aimed to leverage economies of scale, access lower production costs, and improve
bargaining power with suppliers. At the same time, it retained the flexibility to adapt products when required by
specific local market conditions.

However, this strategy also comes with risks. The consolidation of production facilities may lead to high
restructuring and coordination costs, including redeployment of staff and managerial adjustments. Furthermore,
product standardization may not satisfy the diverse preferences of all local markets, and the push for global
integration might result in losses in specific regions where local adaptation is essential. This illustrates the complex
balance that defines the transnational strategy.

Chapter 14: centralization, decentralization

1. The International Division at Walmart
When Walmart started to expand internationally in the early 1990s, it decided to set up an international division to
oversee the process. The international division was based in Bentonville, Arkansas, at the company headquarters.
Today the division oversees operations in 14 countries that collectively generate more than $60 billion in sales. In
terms of reporting structure, the division is divided into three regions-Europe, Asia, and the Americas-with the CEO
of each region reporting to the CEO of the international division, who in turn reports to the CEO of Wal mart.
Initially, the senior management of the international division exerted tight centralized control over merchandising
strategy and operations in different countries. The reasoning was straightforward; Walmart's managers wanted to
make sure that international stores copied the format for stores, merchandising, and operations that had served the
company so well in the United States.

They believed, naively perhaps, that centralized control over merchandising strategy and operations was the way to
make sure this was the case. By the late 1990s, with the international division approaching $20 billion in sales,
Walmart's managers concluded this centralized approach was not serving them well. Country managers had to get
permission from their superiors in Bentonville before changing strategy and operations, and this was slowing
decision making. Centralization also produced information overload at the headquarters, and led to some poor
decisions. Walmart found that managers in Bentonville were not necessarily the best ones to decide on store layout
in Mexico, merchandising strategy in Argentina, or compensation policy in the United Kingdom. The need to adapt
merchandising strategy and operations to local conditions argued strongly for greater decentralization. The pivotal
event that led to a change in policy at Walmart was the company's 1999 acquisition of Britain's ASDA supermarket
chain. The ASDA acquisition added a mature and successful $14 billion operation to Walmart's international
division. The company realized that it was not appropriate for managers in Bentonville to be making all-important
decisions for ASDA. Accordingly, over the next few months, John Menzer, CEO of the international division,
reduced the number of staff located in Bentonville that were devoted to international operations by 50 percent.
Country leaders were given greater responsibility, especially in the area of merchandising and operations. In
Menzer's own words, "We were at the point where it was time to break away a little bit You can't run the
world from one place. The countries have to drive the business .... The change has sent a strong message[to country
managers] that they no longer have to wait for approval from Bentonville." Although Walmart has now
decentralized decisions within the international division, it is still struggling to find the right formula for managing
global procurement. Ideally, the company would like to centralize procurement in Bentonville so that it could use its
enormous purchasing power to bargain down the prices it pays suppliers. As a practical matter, however, this has not
been easy to attain given that the product mix in Walmart stores has to be tailored to conditions prevailing in the
local market. Currently, significant responsibility for procurement remains at the country and regional level.

However, Walmart would like to have a global procurement strategy such that it can negotiate on a global basis with
key suppliers and can simultaneously introduce new merchandise into its stores around the world. As merchandising
and operating decisions have been decentralized, the international division has increasingly taken on a new role-that
of identifying best practices and transferring them between countries. For example,
the division has developed a knowledge management system whereby stores in one country, let's say Argentina, can
quickly communicate pictures of items, sales data, and ideas on how to market and promote products to stores in
another country, such as Japan. The division is also starting to move personnel between stores in different countries
as a way of facilitating the flow of best practices across national borders. Finally, the division is at the cutting edge
of moving Walmart away from its U.S.-centric mentality and showing the organization that ideas implemented in
foreign operations might also be used to improve the efficiency and effectiveness of Walmart's operations at home.

Questions
1. Why did the centralization of decisions at the headquarters on Walmart's international division create
problems for the company's different national operations? Has Walmart's response been appropriate?

The centralization of decision-making within the International Division at Walmart’s headquarters created several
critical challenges. Firstly, it significantly slowed down the decision-making process, as information had to follow a
rigid hierarchical path—from regional CEOs to the CEO of the International Division and ultimately to Walmart’s
global CEO. In urgent situations, regional managers lacked the autonomy to address issues promptly within their
local operations, having to await approval from headquarters. This delay often reduced problem-solving efficiency
or even exacerbated the issue. Additionally, for market-specific issues, reporting back to headquarters—which
lacked a deep understanding of local contexts—proved ineffective, especially when regional executives had better
knowledge of the local environment. Furthermore, channeling all information back to headquarters resulted in
information overload, impairing strategic responsiveness.

Upon recognizing this strategic misstep, Walmart decentralized decision-making within its International Division,
cutting half of the staff at its Bentonville headquarters. Country managers were granted more decision-making
autonomy and no longer required formal approval from Bentonville. However, the company continued to face
challenges in localizing in-store product offerings to suit market-specific demands and struggled to find an effective
system to manage global procurement and merchandising. Walmart's market entry strategies included acquiring
local retailers to leverage existing infrastructure and experience, establishing wholly owned stores in certain
countries, and transferring operational knowledge across markets to improve overall performance and operational
efficiency.

2. Do you think that having an international division is the best structure for managing Walmart's foreign
operations? What problems might arise with this structure? What other structure might work?

Having an International Division was not the most effective organizational structure for managing Walmart’s
overseas operations. In the early stages, centralizing decision-making within this division created significant
inefficiencies, which eventually compelled Walmart to restructure its organization. In the following phase, the
International Division underwent downsizing and decentralization, transferring decision-making authority to
regional and country-level executives. However, this still did not represent the optimal solution.

The structure only began to deliver strategic value when the International Division took on a new role: identifying
best practices and transferring them across countries. This shift helped Walmart move away from a U.S.-centric
mindset, recognizing that innovations developed abroad could also enhance efficiency and effectiveness in domestic
operations. This approach fostered organizational learning and helped Walmart better adapt to local markets while
leveraging global capabilities.

For a company like Walmart, a Worldwide Area Structure could also be highly effective. This structure would allow
the company to apply its proven domestic systems globally, while still customizing operations to fit local market
characteristics, thus reducing the risk of failure in unfamiliar regions. Additionally, a Matrix Structure could be
well-suited for Walmart’s size and scope, combining functional, product, and geographic divisions. This would
promote better coordination, responsiveness, and resource sharing across global operations while ensuring local
flexibility.

2. “The choice of strategy for a multinational firm must depend on a comparison of the benefits of that strategy (in
terms of value creation) with the costs of implementing it (as defined by organizational architecture necessary for
implementation). On this basis, it may be logical for some firms to pursue a localization strategy, others a global or
international strategy, and still others a transnational strategy.”

Yes, the statement is correct. The choice of strategy for a multinational enterprise (MNE) must indeed be based on a
cost-benefit analysis, weighing the value creation potential of the strategy against the organizational complexity and
implementation cost it entails. Different firms operate under varying pressures of cost reduction and local
responsiveness, which heavily influence which strategic approach—localization, global standardization,
international, or transnational—is most appropriate.

For example, firms facing strong pressure for local responsiveness, such as those in the food and beverage industry,
may benefit from a localization strategy, which tailors products to specific market needs—but this comes with
higher costs due to decentralized operations. On the other hand, industries like semiconductors, where cost
minimization and standardization are critical, may favor a global strategy to achieve economies of scale.

Furthermore, a transnational strategy, which attempts to balance both local responsiveness and global integration,
requires a sophisticated organizational structure and extensive coordination, making it resource-intensive.
Therefore, the strategic choice must be aligned with the firm’s industry context, internal capabilities, and long-term
objectives—highlighting that there is no one-size-fits-all approach. Each strategy must deliver value that justifies its
cost of implementation

4. Reread the Management Focus “IKEA Production in China,” and then answer the following questions:
a. What are the benefits to IKEA of shifting so much of its global production to China?

China is an attractive manufacturing location for Philips for several reasons. The country offers low labor costs, a
well-educated workforce, a strong economy, membership in the World Trade Organization (WTO), and a stable
exchange rate pegged to the U.S. dollar. Additionally, China's rapidly expanding industrial base hosts many of the
suppliers Philips relies on, making it a strategic hub for efficient production and supply chain integration.

b. What are the risks associated with a heavy concentration of manufacturing assets in China?

Philips’ heavy reliance on China as a primary manufacturing hub may expose the company to significant risks. If
political tensions, economic instability, or other disruptive events occur, these could interrupt manufacturing
operations and jeopardize Philips’ ability to supply global markets. Such disruptions could lead to supply chain
delays, increased costs, or loss of market competitiveness, emphasizing the importance of diversifying production
locations to mitigate potential risks.

c. What strategies might IKEA adopt to maximize the benefits and mitigate the risks associated with moving so
much product?

Some students might suggest that Philips, by concentrating too much of its manufacturing in China, has essentially
put all its eggs in one basket. A more balanced approach would be to diversify its production across multiple
geographic locations. This risk-hedging strategy can help the company mitigate potential supply chain disruptions
caused by unforeseen events such as political tensions, trade restrictions, or natural disasters. By dispersing
production, Philips can increase its operational resilience, ensure more stable global supply, and better adapt to the
dynamic international business environment.

Chapter 19
1. What are the main advantages and disadvantages of the ethnocentric, polycentric, and geocentric
approaches to staffing policy? When is each approach appropriate? Những ưu điểm và nhược điểm chính
của các phương pháp tiếp cận dân tộc, đa trung tâm và địa tâm đối với chính sách nhân sự là gì? Khi nào thì
mỗi cách tiếp cận phù hợp?

●​ The ethnocentric staffing policy is one in which key management positions are filled by nationals from the
home country.​
Advantages of the ethnocentric approach include:​
(1) Overcoming a lack of qualified managers in the host country,​
(2) Ensuring a unified corporate culture, and​
(3) Facilitating the transfer of core competencies.​
Disadvantages include:​
(1) Resentment in the host country, and​
(2) Risk of cultural myopia.​
→ This approach is typically suitable for firms pursuing an international strategy.​

●​ The polycentric staffing policy involves hiring host-country nationals to manage subsidiaries, while
parent-country nationals occupy key positions at headquarters.​
Advantages of the polycentric approach include:​
(1) Reducing the risk of cultural myopia, and​
(2) Lower implementation costs.​
Disadvantages include:​
(1) Limited career mobility for host-country nationals, and​
(2) Isolation of headquarters from foreign subsidiaries.​
→ This approach is generally appropriate for firms pursuing a localization strategy.​

●​ The geocentric staffing policy seeks the best people for key positions throughout the organization, regardless
of nationality.​
Advantages of the geocentric approach include:​
(1) Effective use of human resources, and​
(2) Promotion of a strong corporate culture and informal management networks.​
Disadvantages include:​
(1) Immigration policies may restrict implementation, and​
(2) High implementation costs.​
→ This approach is best suited for firms pursuing a global standardization or transnational strategy.

4. In what ways can organized labor constrain the strategic choices of an international business? How can an
international business limit these constraints?
Organized labor can significantly constrain companies’ choices regarding location decisions. Both multinational and
domestic firms often prefer to establish new facilities in regions with relatively peaceful labor conditions and
harmonious industrial relations. Workers may protest or even threaten disruption if a company decides to relocate
operations, which paradoxically may reinforce the company’s decision to move in search of a more favorable labor
environment.

Organized labor has attempted to counteract multinational corporations by:​

(i) Forming international labor organizations,​
(ii) Lobbying for national legislation that restricts MNCs, and​
(iii) Seeking regulation through international institutions such as the United Nations.​
However, these broader efforts have had limited success.

Multinational corporations often retain a powerful advantage—their ability to offer or withdraw employment
opportunities. In today’s labor market, this grants them significant leverage. As a condition for opening or
expanding operations, companies can negotiate favorable terms with local unions, even encouraging competition
among unions to secure membership and influence.

8. Can you point out the reasons for the failure of sending experts to work in a foreign environment? From
the perspective of international human resource management, what options do you think can limit these
failures?
·Causes of Failure in International Assignments:

1.​ Lack of Adaptation to the New Environment: One major cause of expatriate failure is the employee’s
inability to adapt to the host country’s culture, environment, and regulations. Cultural differences, language barriers,
work styles, and management practices can create stress and discomfort. Without proper adjustment, the employee
may become ineffective and fail to meet assignment objectives.​

2.​ Family-Related Issues: Family challenges often affect expatriate performance. Spouses and children may
struggle to adapt, face health or educational issues, or feel socially isolated. These personal pressures can impact the
expatriate’s mental well-being and work efficiency.​

3.​ Lack of Skills and Training: Some expatriates may not possess the necessary skills or cultural competence to
work effectively in the international setting. Deficiencies in communication, local cultural knowledge, or
cross-cultural management can hinder performance and team collaboration.​

4.​ Insufficient Support and Poor Management: Ineffective international human resource management can also
lead to failure. Lack of post-departure support, poor team coordination, and failure to address challenges quickly
may lead to disengagement and demotivation.​

Strategies to Minimize Expatriate Failure:

1.​ Rigorous Selection Process: Firms should carefully evaluate candidates’ technical skills, cross-cultural
competence, and adaptability when selecting employees for international assignments.​
2.​ Pre-Departure Training and Post-Arrival Support: Providing cultural, language, and legal training before
departure, and offering continued mentoring and assistance after arrival, can help expatriates adjust smoothly.​

3.​ Repatriation Programs: Planning a structured return process (repatriation) can prevent reverse culture shock,
ease reintegration into the home organization, and maintain employee satisfaction.​

4.​ Supportive Work Environment: Building a positive team environment in the host country can foster
belonging and collaboration, increasing assignment success.​

5.​ Personal Development Opportunities: Offering training, new projects, or advancement programs can boost
motivation, enhance engagement, and encourage commitment to the organization.

LEVI STRAUSS GOES LOCAL

1. ​ What marketing strategy was Levi Strauss using until the early 2000s? Why did this strategy appear to
work for decades? Why was it not working by the 2000s?

The “Global Standardization Strategy” — selling the same product worldwide — initially brought success to Levi’s
due to its ability to capitalize on economies of scale and minimize costs. During the early stages, Levi’s products
were viewed as a global trend, and consumers were willing to pay for a globally recognized brand.

However, after the year 2000, this strategy became less effective. New fashion trends emerged, increasing the
diversity of consumer preferences across different markets. Levi’s struggled to maintain its sales as it faced high
production costs and could not meet the growing demand for product differentiation. Additionally, consumer
awareness and expectations for personalized styles rose, which emphasized the limitations of a one-size-fits-all
approach. As a result, the global standardization strategy became outdated, and adapting to local preferences
became essential for sustaining competitiveness.

2. ​ How would you characterize Levi Strauss's current strategy? What elements of the marketing mix are now
changed from nation to nation?

In its new strategy, Levi’s adopted a Localization Strategy, clearly differentiating its approach for each national
market by targeting various customer segments based on specific needs. This shift empowered its foreign
subsidiaries with independent production capabilities and enabled them to customize products and marketing
messages according to local preferences and cultural contexts. Here's how the company adjusted its marketing mix:

●​ Product: Levi’s transitioned from offering a single, global product to designing region-specific fits that cater
to different body types and cultural preferences (e.g., adjusting length, cuts, and styles). It also used different fabrics
suited to climate and comfort in each region, and expanded its product line through the Levi’s Signature collection
to target more diverse market segments.​

●​ Price: Pricing strategies were adapted based on the purchasing power and demand in each market. For
instance, jeans in the U.S. cost around $25, while prices in India were lower due to the growth of the Signature line.
Meanwhile, jeans were more expensive in Spain and the UK compared to the U.S., reflecting market-specific
positioning.​

●​ Place: Levi’s closed its last factories in the U.S. and relocated manufacturing overseas to cut costs and
improve efficiency. It also established region-specific management structures to better respond to local market
conditions.​

●​ Promotion: The company moved from using a unified global advertising message to developing tailored
promotional campaigns for each region, ensuring cultural relevance and stronger resonance with local consumers.​

This strategic shift enabled Levi’s to balance cost-efficiency with local responsiveness, enhancing both brand
relevance and competitiveness in diverse international markets.

3. ​ What are the benefits of the company's new marketing strategy? Is there a downside?

Advantages:

●​ Increased customer reach: Expanding into multiple markets helps Levi’s access a broader base of consumers.​

●​ Market and cultural alignment: Offering products tailored to specific regional preferences and cultural
nuances helps meet local consumer demands more effectively, generating higher revenues.​

●​ Product diversification and brand differentiation: The company enhances brand identity by offering diverse
product lines that reflect regional tastes while maintaining the brand’s global image.​

●​ Lower production costs: Shifting manufacturing to low-cost regions reduces overall production expenses,
contributing to cost competitiveness.​

●​ Customer re-engagement through pricing: Levi’s can attract price-sensitive customers by offering
lower-priced products through its own branded retail outlets.​

●​ Localized marketing: Adapting promotional strategies to regional markets enhances brand awareness and
improves market penetration.​

●​ Enhanced competitive advantage: By leveraging patents, trademarks, and product differentiation, Levi’s
creates barriers to entry that make it harder for new competitors to enter the denim market.​
Disadvantages:
●​ High adaptation costs: Tailoring products to fit local body types, cultures, and climates increases production
and marketing expenses.​

●​ Pricing challenges: Constantly lowering prices or pursuing a low-cost strategy may erode brand premium
positioning, making it difficult to raise prices in the future.​

●​ Price discrimination issues: Varying prices across markets may lead to consumer dissatisfaction or
perception of unfairness, especially with the transparency enabled by global online retail.

4. ​ What does the Levi Strauss story tell you about the "globalization of markets"?

The story of Levi Strauss suggests that consumer tastes and preferences may be becoming increasingly global, and
standardized consumer products could become the norm. In fact, Levi’s experience demonstrates that within the
global denim market, there are strong similarities across segments—such as the youth market worldwide.

However, Levi Strauss also highlights the importance of recognizing significant cultural and preference differences
across nations. Therefore, it is crucial for companies to identify their competitive advantage within each specific
market. While standardization may offer cost efficiencies and global branding strength, a deep understanding of
local tastes, customs, and demographics is essential to truly succeed in diverse international markets.

➡️ This underlines the need for firms to develop tailored competitive strategies and maintain cultural sensitivity
when operating globally, balancing between global integration and local responsiveness.

ĐỀ TỰ LUẬN NGOÀI

1.Explain the characteristics of a group-oriented or collectivist society. (1 point). Identify two disadvantages
of collectivism in business practice. (0.5 point)

Societies that are group-oriented or emphasize collectivism prioritize collective goals over individual goals.
According to the lecture slides, collectivism stresses the primacy of society as a whole, often equated with socialist
ideologies where the means of production, distribution, and exchange are owned by the state. The political system
may involve more centralized control and limited individual freedom, and decisions are made for the benefit of the
collective rather than individuals. This contrasts with individualist societies that value freedom and personal
achievement. A business example of a collectivist society could be China under a socialist-influenced system, where
many strategic industries are state-owned and business decisions are aligned with government planning.

Two disadvantages of collectivism in business practice include:

Reduced individual initiative: Since rewards are shared among the group, there may be less motivation for
employees to innovate or outperform, leading to lower productivity.​
Bureaucratic inefficiency: Centralized decision-making and state ownership can result in slower business processes
and lack of responsiveness to market demands, which is common in command economies.

COUNTRY ATTRACTIVENESS - DIAMOND MODEL

1. Factor conditions

Human Resources

Vietnam’s consumer finance sector benefits significantly from its young, dynamic, and cost-effective
workforce, which is a critical resource for companies like HC that rely heavily on sales and debt
recovery teams. For instance, HC’s operational model requires the deployment of both a mobile sales
team (cash loan walk-in team) to engage customers directly in their neighborhoods and a telesales
team for remote customer interaction. These roles are well-suited to Vietnam's abundant labor
supply, characterized by a growing pool of young professionals eager to participate in the
burgeoning service sector.

Infrastructure
The country’s advancing technical infrastructure supports the integration of modern financial
technologies. HC’s significant investment in an automated loan review system exemplifies how
companies can leverage this infrastructure to deliver faster and more efficient services. This
innovation reduces the loan approval time, making HC's offerings more appealing to customers who
prioritize convenience. However, the uneven development of infrastructure between urban centers
and rural areas presents challenges. Urban areas like Hanoi and Ho Chi Minh City benefit from
well-developed digital ecosystems, while rural regions often lack access to the same level of
connectivity and resources. Addressing this disparity will be crucial for companies seeking to
expand their market share across the country.

Regulatory Environment

The regulatory environment in Vietnam further enhances the country’s factor conditions. The State
Bank of Vietnam provides a stable framework by closely monitoring credit growth, ensuring
compliance with safety ratios, and managing risks. For example, the requirement to control bad debts
and maintain credit quality ensures that the sector operates efficiently and sustainably. While this
regulatory oversight fosters long-term stability, it may also pose challenges for companies aiming to
rapidly scale their operations, as they must navigate stringent legal requirements and maintain
compliance at all times.

2. Demand

Market Scale and Purchasing Power

Vietnam’s consumer finance market is characterized by strong and increasing demand, driven by a
growing middle class, urbanization, and rising consumer purchasing power. The demand for
installment loans, in particular, is fueled by the desire to finance essential goods such as motorbikes,
electronics, and household appliances. These products align closely with HC’s offerings, including
installment loans for motorbikes, electronics, and cash loans for broader consumer needs. For
example, HC’s partnerships with retailers allow customers to access financing directly at the point
of sale, simplifying the purchasing process and meeting immediate consumer demands.

Supplier and Substitute Products

The expanding middle class, particularly in urban areas, has created fertile ground for consumer
finance growth. Urban consumers, with their increasing disposable incomes, are more willing to
adopt financial products to improve their quality of life. This is evident in the popularity of loans for
education, healthcare, and home improvement. However, rural areas present a different dynamic.
While demand exists, purchasing power in these regions remains limited, and access to financial
products is often hindered by a lack of infrastructure and financial literacy. Companies like HC
must develop tailored strategies to tap into this potential, such as deploying mobile teams or
investing in financial education initiatives.

Entry and Competitiveness Intensity

Vietnam’s consumer finance sector is highly competitive, with a mix of traditional banks and
specialized financial companies vying for market share. HC faces significant pressure from banking
institutions, which often have established customer bases and a broad range of financial
products. This competition has driven HC to innovate, focusing on faster loan approvals and
simplified processes to attract customers. The intensity of competition ensures that consumers
benefit from improved services and competitive pricing, further stimulating demand across the
sector.

3. Supporting Industry

The strength of Vietnam’s related and supporting industries plays a critical role in the development
of the consumer finance sector. HC’s strategic partnerships with mobile phone stores, electronics
retailers, and motorbike shops demonstrate the importance of collaboration across industries. These
partnerships enable HC to integrate financing options seamlessly into the retail experience, allowing
customers to access installment loans directly at the point of sale. This not only simplifies the
purchasing process but also enhances customer satisfaction by providing immediate financial
solutions.​
Vietnam’s growing payment infrastructure also supports the sector’s development. HC’s ability to
collaborate with convenience stores, postal services, and banks ensures that customers have
multiple channels for making payments. This extensive network increases accessibility and
convenience, making it easier for consumers to manage their loans. Furthermore, HC’s investment
in a debt recovery system, which combines telephonic communication and on-site visits, reflects
the critical role of supporting industries in maintaining financial stability. By integrating debt
recovery into its operational model, HC minimizes the risks associated with non-performing loans
and ensures the sustainability of itsbusiness.​
These related and supporting industries not only facilitate HC’s operations but also create a
robust ecosystem that benefits the broader consumer finance market. The interplay between
financial institutions, retailers, and payment providers highlights the interconnected nature of
Vietnam’s economy, where collaboration drives growth and innovation.

4. Strategy/Structures

Structure: The consumer finance sector in Vietnam has a mix of established local players,
foreign-owned firms, and emerging fintech startups. This intense competition among these
companies fuels innovation, pushing companies to continuously improve their products and services
to stay ahead in the market. The competitive landscape is further complicated by the coexistence of
state-owned enterprises, which follow traditional Vietnamese management structures, and
international firms that bring distinct management styles. This creates a dynamic and diverse
environment where firms must adapt to both local and global best practices to succeed.

Strategy: Companies are focusing on enhancing customer experiences by providing easier access
to financial products and faster loan approval processes. This digital shift is crucial for firms like
HC, who are investing heavily in technical infrastructure to streamline loan applications, improve
customer convenience, and gain a competitive edge. HC’s strategy is designed around providing
"expedient and proficient services," which allows the company to offer efficient and seamless
experiences, positioning it as a strong competitor in the crowded market.

Furthermore, HC’s approach includes forming strategic partnerships with retailers, such as mobile
phone stores, electronics shops, and motorbike dealerships. These partnerships enable HC to extend its
reach, offer on-site lending, and integrate its services into the retail ecosystem. By tapping into these
established distribution channels, HC can lower operational costs and effectively expand its market
presence.

HC’s commitment to nationwide coverage is evident in its strategy to implement a national sales
system and recruit talent across the country. This focus on scale ensures the company can serve a
broad consumer base, meet growing demand, and enhance its competitive position in the market.
Through these strategic initiatives, HC is well-positioned to navigate the competitive landscape and
differentiate itself in Vietnam’s rapidly evolving consumer finance sector.

5. Government
The government has an ongoing effort to implement more robust policies, particularly in areas
such as data protection, lending rates, and digital finance, to create a secure and transparent market
environment. These regulatory actions aim to strike a balance between market growth and consumer
protection, ensuring the sector develops sustainably.

Additionally, the government closely monitors financial stability in the rapidly growing
consumer finance space, as any disruptions or risks could severely impact market confidence and
overall growth. Economic policies are also a key lever, directly and indirectly influencing the demand
for credit, which, in turn, shapes the consumer finance market. By adjusting these policies, the
government can either encourage or limit credit growth, thereby influencing the sector’s expansion.

The State Bank of Vietnam also plays an active role in regulating credit growth, ensuring that
financial institutions in the sector remain solvent and that the overall financial system stays stable. As
seen in HC's case, companies must adapt their strategies to comply with regulatory requirements while
still pursuing growth opportunities. The government's efforts to stimulate innovation further support
the sector’s evolution, particularly with the rise of fintech.

6. Chance

Economic growth and consumer demand present a significant opportunity for consumer finance
companies like HC to tap into a large and expanding customer base in Vietnam. The consumer
finance landscape in Vietnam has evolved from a concentrated to a dynamic and diversified market.
With rising disposable incomes and a growing middle class, the demand for consumer goods and
financing options is increasing, creating a favorable environment for companies like HC to offer their
products. At the same time, rapid advancements in technology, particularly through fintech, are
revolutionizing how financial products are delivered and accessed. Innovations in mobile banking,
e-commerce, and automated lending are changing the traditional consumer finance model, providing
faster, more convenient services and increasing competition among financial institutions.

HC’s investment in a mobile sales team and telesales service allows the company to capitalize on the
growing adoption of digital platforms by Vietnamese consumers. By embracing digital technologies,
HC can offer quick, accessible, and user-friendly financial services that meet the evolving preferences
of customers, especially with increasing digital awareness and the rise of online financial services like
mobile loans and e-wallets.
 ​ Conclusion: Vietnam's consumer finance sector holds a competitive advantage due to a
young, cost-effective labor force and improving infrastructure that supports efficient services. The
growing middle class, rising incomes, and urbanization drive strong demand for financial
products. Government regulations provide market stability, and technological advancements,
especially in fintech, create opportunities for innovation. However, challenges like infrastructure
disparities between urban and rural areas and regulatory complexities must be addressed. To
remain competitive, companies like HC must adapt, innovate, and integrate digital technologies to
serve underserved markets, ensuring long-term success.