Chapter 1

THE GLOBALIZED BUSINESS OF SPORTS

Although not everyone agrees that the unbridled globalization of professional sports is all
for the good, the process and possibilities are definitely far reaching. Today’s satellite
television broadcasts enable fans to watch top players and teams in nearly any sport from
almost anywhere on earth. Professional teams scour the world to find and develop the
most talented athletes, and players forsake home country allegiances in their pursuit of
the world’s highest salaries. Further, the more people that tournaments can attract
through attendance and television, the more money that sponsors and advertisers are
willing to pay—and the greater the likelihood that those sponsors and advertisers will
have business operations that span the globe. In addition, sports and nonsports
companies alike pay famous athletes and teams generous sums to endorse their products.
Successful teams have opened shops both domestically and internationally to sell
souvenirs bearing their logos and may make more money on merchandise than from TV
rights and sponsorships combined. Most recently, as teams and leagues have begun to
seek income opportunities outside their home countries, foreign investors have acquired a
U.S. baseball team; another group of foreign investors acquired controlling interest in a
British soccer (football) team, and the National Football League (NFL) of the United
States underwrites flag football games in Chinese schools, and is playing some regular
season NFL games in Europe. Map 1.1 outlines national sports in a variety of countries
and can be used to discuss how culture impacts globalization.

Questions

1-1 Professional athlete A is a star. And professional athlete B is an average player. How
has the globalization of professional sports affected each of these both positively and
negatively?

All athletes playing abroad may generate interest in a player’s native country, due in
part to the ability to watch games taking place anywhere in the world through live
Web stream or satellite television. This gives not just the team owners, league
representatives, but also the players a broadened audience exposure, expanded fan
base and the opportunities for additional revenues. On the negative side, in
undertaking any international sports effort, the athletes and teams must be sensitive
to cultural differences. They need to appreciate differences in the world and
understand how the same sport can be interpreted differently from country to
country. It can also be noted that the average players can benefit by playing and
presenting his skills to professional teams from foreign markets, which can in turn
potentially offer them a contract.

1-2 As you read the chapter, identify and show an example of each international mode of
operations that is illustrated in the globalization of professional sports.

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 Using the NBA as an example in the opening case, it searches globally for talent and
additional markets for its product. This is similar to any manager in almost any
industry, who needs to identify where you can obtain the best inputs at the best price
and where you can best sell the product that you have put together from those inputs.

Chapter 2

SAUDI ARABIA’S DYNAMIC CULTURE: THE JAVA LOUNGE—ADJUSTING

TO SAUDI ARABIAN CULTURE

This case provides a striking example of the challenges presented to foreign

firms by a pervasive, theocratic, national culture. It shows why companies
have had mixed success in Saudi Arabia, a modern yet ancient society
grounded in Islamic law, religious convictions, and behavioral traditions. In
particular, the case highlights the example of the Java Lounge, a new,
up-scale Jeddah restaurant that serves an affluent niche of Saudi consumers.
Further, it describes ways in which a variety of foreign firms have adjusted
their products, facilities, and operating strategies in order to meet
government requirements and yet satisfy the Saudi consumer. It points out
numerous paradoxes one may encounter regarding Saudi legal sanctions,
purchasing patterns, and attitudes toward work. A key point to make when
discussing the case is that even in this very rigid culture, things are changing.
For example, a 2008 royal decree allows men and women to mix in the
workplace. Although this has not had a dramatic impact in practices, it is the
beginning of a potentially more open environment. The case concludes by
noting some of the opportunities that exist in Saudi Arabia—either because
of or in spite of the contrasts and contradictions found there.

Questions

2.1 Assume you are a manager in a multinational company that needs to send a team
of three to five people to Saudi Arabia for about two weeks to investigate the
feasibility of selling your products there. What advice would you give them to help
assure that cultural problems do not impede their success in this task?

Saudi Arabia is a high context culture; information resides in context,

with emphasis on background and basic values. In Saudi Arabia there
is less emphasis on legal paperwork and greater focus on personal
negotiation. Saudis will not take well to pressure tactics that place
them in an uncomfortable position. Confrontation and conflict are to
be avoided.
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 Finally, understanding Islam, which governs every aspect of a Muslim’s
life, enhances how and why Saudi business people act or behave in a
certain manner.

2.2 Assume your company is from North America or Europe and considering the
establishment of an office in Saudi Arabia. What additional operating costs might
it have to assume because of the Saudi culture?

Because Muslim men are called to prayer five times a day, business
will normally cease operation during those periods.

Chapter 3

CHINA: COMPLICATED RISKS, BIG OPPORTUNITIES

During its thirty years of communist rule, China prohibited foreign

investment and restricted foreign trade. Then, China enacted the Law on
Joint Ventures using Chinese and Foreign Investment in 1978. China’s
subsequent transformation has been fueled by a landslide of foreign
investments made in response to the country’s market potential, market
performance, improved infrastructure, enormous resources, and strategic
position. Frustrating this process, however, have been the politics of China’s
elaborate bureaucracy, as well as its ill-defined legal system and pervasive
corruption. Historically China has relied upon “the rule of man” and the
belief that legal rights are derived from the power of the individual. Upon
joining the WTO, China agreed to continue to reform its business
environment and to move toward transparent, rules-based,
enforcement-oriented standards. But the business reality is far from the
WTO obligations specifically in the continued controversy over the protection
of intellectual property. Coming full circle, today’s fully-owned Chinese
enterprises are themselves becoming global investors, both by acquiring
foreign firms and investing in foreign lands.

Questions

3.1 Identify three compelling economic reasons to invest in China. Then

identify three compelling reasons not to do so. Recommend a criterion one

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 could use to trade off the opportunities of operating in China versus the risk
of doing so.

Economic reasons for investing in China include the following: (1) While
China’s GDP growth is slowing, it remains among the top performers in
the world. In response to this growth, exports to China have increased,
(2) China’s rapid economic growth has led to a booming consumer
market for goods and services, (3) China’s well educated population
creates a pool of productive labor, at rates that are often less than those
in many other countries.

Compelling reasons not to invest in China can include: (1) China’s current
legal and regulatory system can be inconsistent and arbitrary, (2) Lack of
effective protection of intellectual property rights can be a particularly
damaging issue to American companies, (3) China relies heavily on export
growth, and for this reason the government still seeks to protect local
firms, and especially state-owned enterprises from imports, while
encouraging exports.

Growing global trade in counterfeit goods is a threat to America’s

economy, the competitiveness of companies, and livelihood of their
workers. To combat that problem, the STRATEGY FOR TARGETING
ORGANIZED PIRACY (STOP) was developed to stop the trade in these
goods around the world, and help businesses secure and enforce their
rights overseas.

3.2 What sort of operating safeguards would you advise a company to adopt to
better manage the risks of China’s legal environment?

Success in China requires a strong understanding of your business

capabilities, development of long-term relationships, and in-depth
knowledge of this market. Before making a decision to enter China,
companies should consider their own resources, past experiences, and
willingness to commit a significant amount of time assessing and
cultivating opportunities. Successful entry strategies need to be targeted,
require well-qualified partners, measures to minimize non-payment risks,
and a program for protection of intellectual property rights.

Chapter 5
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 COSTA RICA’s TRADE EVOLUTION

Costa Rica, a Central American country of 4.7 million people, has successfully
transformed its primarily agricultural economy to one that includes strong
technology and tourism sectors as well. Bordering both the Pacific Ocean
and the Caribbean arm of the Atlantic, Costa Rica used international trade
and factor-mobility policies to help achieve its economic objectives. Although
exports of coffee and bananas are still important, high-tech manufactured
products (electronics, software, and medical devices) are now the backbone
of Costa Rica’s economy and export earnings. As in all countries, Costa Rica’s
policies continually evolved, but generally fall into four periods and
categories:

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 • 1800s–1960: a liberal trade regime that promoted the exports of
coffee and bananas
• 1960–1982: a more protectionist regime that promoted import substitution, i.e.,
a policy of developing domestic industries to manufacture goods and provide
services that would otherwise be imported (although results were mixed, the
processing of coffee and cotton seeds increased the value of Costa Rican
exports, and considerable substitution occurred in the pharmaceutical industry).
To address this problem, Costa Rica joined four other countries to form the
Central American Common Market (CACM), which allowed goods produced in
any member country to enter freely into the market of any other member.
• 1983–Early 1990s: a less protectionist regime that promoted the
liberalization of imports, encouraged export promotion, and
provided incentives to attract foreign capital and expertise. The
country also established a private organization (CINDE) to aid
economic development and attract foreign direct investment.
• Early 1990s-Present: a liberal trade regime that seeks the production
of electronics, software, and medical devices via strategic trade policy,
i.e., identifying and targeting industries for international competition.

QUESTIONS

5-1 Using the framework in Table 5.1, explain which of the theories relate to
Costa Rican trade policy during each of the four eras described in the
case.

1800’s-1960 – Absolute Advantage

1960-1982 – Neo mercantilism
1983-Early 1990 – Country Similarity Theory
Early 1990-Present – The Diamond of National Advantage

5-2 Map 5.1 shows that a bit over 50 percent of Costa Rica’s exports go to
only three countries. Which trade theories may help you explain this
concentration, and why?

In 2011, a bit more than 50% of Costa Rica’s exports went to only
three countries: United States (30.4%), Netherlands (10.9%), and
China (11.3%)

Costa Rica has been known principally as a producer of bananas and

coffee, which are still important exports. However, in recent times
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 electronics, pharmaceuticals, financial outsourcing, software
development, and ecotourism have become prime industries in their
economy.

Costa Rica has used international trade and factor mobility policies to
help achieve its economic objectives, as a country’s competitive
position depends on the quantity and quality of its production
factors. Trade pattern theories will also serve as a guide in
determining which partner will primarily trade. Many of the top
trading nations are high-income countries (U.S. and the Netherlands),
while despite its low per capital income, China also has a large
economy because of its large population.

Chapter 6

THE U.S.-VIETNAMESE CATFISH DISPUTE

This case is a great example of attempts to protect a national industry

against international competition. Catfish are farmed in the southern U.S.
and Vietnam. The Vietnamese production has some competitive advantages
including a more conducive climate, lower governmental restrictions, and
lower labor rates. So even with transportation costs, Vietnam exports catfish
to the U.S. The U.S. catfish growers fought back using a variety of means.
They tried to limit the use of the name catfish and petitioned for increased
taxes on imported fish and even tried to bring into question the safety of
overseas fish. The U.S. producers have not been successful in limited
imports and have even been caught up by their own efforts. A key point is
that trade between nations cannot be viewed just by one industry. Vietnam
is the third largest export market for U.S. beef. So, if we successfully limit
the imports of catfish, will Vietnam retaliate by limiting beef imports?

QUESTIONS

6-1List the advantages and disadvantages for the United States to protect its
catfish industry.

Advantages of trade restrictions in the catfish industry include (1)

increased employment, (2) a possible increase in revenues to the
government in the form of higher tariffs, and (3) a possible increase in the
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 competitiveness of domestic producers. Disadvantages include (1) trade
protectionism can in the long term weaken the industry – without
competition, firms can fail to improve their products and services offered
(2) possible retaliation and increase in trade restrictions on U.S. exports to
Vietnam, and (3) consumers could potentially face less choices and higher
prices.

6-2 As you read through the chapter, list the protective measures (instruments)
the United States has not used to protect its catfish industry. Briefly explain
why each would or would not be successful.

The U.S. government has not used quotas, increased tariffs, nor made any
effort to subsidize U.S. catfish producers. Any of these options would not
be successful, since if imposed the Vietnamese government would likely
bring charges of unfair trade practices to the World Trade Organization
(WTO).

Chapter 7

CLOSING CASE: Walmart Goes South

Because of its sheer size and volume purchases, as well as its unique
distribution system, Walmart has been able to reduce its prices so
successfully that in 2001, it became the largest company in the world.
Mexico’s first Sam’s Club, a subsidiary of Walmart, opened in 1991 in Mexico
City. Mexico’s retail sector has greatly benefited from the increasing trade
liberalization under NAFTA, as well as the improvements to its transportation
infrastructure encouraged by NAFTA. In addition, NAFTA improved
opportunities for foreign investment in Mexico. One of the country’s largest
retail chains, Comercial Mexicana S.A. (Comerci), has found it increasingly
difficult to remain competitive since Walmart’s aggressive entry into its
market. Walmart’s strong operating presence and low prices since the lifting
of tariffs under NAFTA have put such strong competitive pressures on
Comerci that it must now decide whether its participation with the recently
formed purchasing consortium, Sinergia, will be sufficient for its survival.

Questions

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7-3 Walmart tried to be successful in Germany and failed. However, it has been
very successful in Mexico. How has the implementation of NAFTA affected
Walmart’s success in Mexico?

The implementation of NAFTA has facilitated Walmart’s success in Mexico

in various ways. First, it reduced tariffs on American-sourced goods from
10% to 3%. Second, it encourages Mexico to improve its transportation
system and infrastructure, thus helping solve Walmart’s logistical
problems. Third, it eases restrictions on foreign direct investment; as a
result, many of Walmart’s foreign suppliers have built plants in Mexico,
where they can better serve the whole of the NAFTA region.

7-4 How much of Walmart’s success is due to NAFTA, and how much is due to
Walmart’s inherent competitive strategy? In other words, could any other U.S.
retailer have the same success in Mexico post-NAFTA, or is Walmart a special
case?

The same benefits that have accrued to Walmart following the

implementation of NAFTA are also available to other competitors.
However, Walmart uses its sheer size and volume of purchases to
negotiate prices to rock-bottom levels that are not available to smaller
competitors. It also works closely with suppliers on inventory levels,
using an advanced information system that informs suppliers when
additional merchandise will be needed, thus allowing them to plan
production runs more accurately and pass along the captured cost
reductions. Then, rather than pocketing the accrued cost savings,
Walmart reduces its prices. Retailers who wish to compete with Walmart
will either have to meet Walmart’s prices or position themselves in a
different segment of the market.

7-5 What has Comerci done in its attempt to remain competitive? What are the
advantages and challenges of such a strategy, and how effective do you think
it will be? What else do you think Comercial Mexicana S.A. should do, given
the competitive position of Walmart?

Comerci has attempted to lower its prices, but for many items, it simply
lacks the negotiating power with its suppliers to get prices as low as
Walmart’s. Faced with extinction, Comerci has banded together with two
other Mexican supermarket chains, Soriana and Gigante, to form a
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 purchasing consortium (Sinergia) that allows them to jointly negotiate
better bulk prices from suppliers. To prevent price fixing and
monopolistic behavior, Mexico’s Federal Competition Commission
(CoFeCo) requires that Sinergia issue regular reports regarding the
nature of its purchasing agreements and that it sign confidentiality
agreements with the participating retailing chains. As a representative
body with no assets, Sinergia’s purchases are currently limited to local
suppliers; its future is uncertain. Whether students feel that such a
strategy will be effective or not will depend on the perspective they take.
If they focus primarily on costs, they may be of the opinion that the
strategy will be sufficient. If, however, they are also concerned about
issues such as product and store differentiation and the regulatory role
of government, then they may be of the opinion that it is insufficient.

Comercial Mexicana is considering three basic options as it tries to

survive in the new competitive environment driven by the presence of
Walmart in Mexico: remaining independent, merging with a local retail
chain, or merging with a foreign retail chain. First, the firm needs to
carefully examine the market and determine (a) ways in which it can
differentiate itself from Walmart (such as Target’s slightly upscale market
approach) and (b) whether it possesses or at least has access to sufficient
assets to survive in the current environment. As part of that
decision-making process, Comercial Mexicana also needs to consider
both the available sourcing and market opportunities it enjoys, given its
location within the NAFTA region. Finally, it should assess (a) what it can
offer and (b) what it would desire from a local or foreign partner. With
that information in hand, Comercial Mexicana will be in a better position
to make effective operating decisions.

7-6 What do you think of Walmart’s strategy in Mexico and Central America and
how have bilateral agreements and geographic proximity played a role in its
success? What impact do you think the allegations of bribery in Mexico will
have on the company’s future expansion?

NAFTA eliminated tariffs and other import controls on goods moving

between the three countries, This meant that Walmart’s suppliers could
send products to be assembled in Mexico where labor is cheap,
environmental protections weak, taxes low, and protection from further
regulation and government oversight even greater than in the U.S., and
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 then send the finished products back home to sell at prices far cheaper if
produced in the United States. The impact in Central America will be
similar now that the CAFTA-DR agreement has been ratified by Congress.
Walmart Stores were accused of illegally bribing Mexican officials to
speed up getting building permits and to gain other favors. This will force
Walmart to incur a loss to ongoing investigations by itself and
government agencies. The expansion will continue, however at a slower
pace. (

Chapter 11

ECOMAGINATION AND THE GLOBAL GREENING OF GE

In 2005, CEO Jeffery Immelt of GE announced a new and ambitious strategy

designed to demonstrate that an ecologically conscious conglomerate can
cultivate the bottom line while doing its duty toward the global environment.
GE surprised both investors and industrial customers who had long seen GE
as an ally in the struggle against environmental activists. The initiative, called
Ecomagination, consisted of three parts: 1) reducing greenhouse emissions,
2) doubling investment in R&D in “clean” technologies, and 3) increasing
revenues from those same technologies. A new initiative added two
additional commitments: 4) reduce global water use and 5) keep public
informed. With half its markets outside the United States and many
countries already enforcing limitations stipulated by the Kyoto Protocol, GE
felt it was pursuing its own best interests to develop a greener company. GE
feels that markets exist for cleaner technology and that it can not only help
the environment, but also strengthen its strategic position with such a move.
The plan has been met with mixed reactions and the big question is: Can GE
bring about sufficient ecological and economic results to satisfy a worldwide
constituency of customers, shareholders, governments, and societies?

Questions

11-1 What are the major challenges GE faces in adopting a green strategy
while keeping all of its stakeholders happy?

Challenges: (1) Address customer needs: Meet growing customer

demand for more energy-efficient products with associated
environmental benefits, (2) Devise a consistent strategy: Create a

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 strategy to create value from clean tech and environmental
challenges innovation that reinforces GE’s business strategy, (3)
Promote innovation: Increase innovation in product design around
energy and environmental challenges, and (4) Maintain leadership:
Build on ecomagination’s initial success (2005-2010) to broaden the
strategy and further extend GE’s leadership in clean tech and
corporate sustainability.

11-2 From the standpoint of environmental impact, do you think it is more

important for GE to reduce its carbon footprint or to develop products
that fit their Ecomagination strategy of being energy efficient?

The Ecomagination strategy has always been to encourage the

development of quality GE products that deliver significant operating
and environmental benefits to customers.

Chapter 12

VALUE CREATION IN THE GLOBAL APPAREL INDUSTRY

Zara, a large clothing retailer headquartered in northwest Spain, has used an

innovative strategy to power its global expansion. The company has grown
to more than 1,292 stores in 72 countries since its founding in 1975. Zara
has made extensive use of information technology and e-business methods
to implement dramatic reductions in the time it takes to design,
manufacture, and distribute fashionable clothing at moderate prices. Zara
has achieved extraordinary speed and flexibility and can take a new design
from the catwalk in Paris to its store shelf in New York in as little as two
weeks, compared with the industry average of nine months to six weeks.
Rather than having seasonal clothing collections, Zara has “live collections” in
which no style lasts more than four weeks. The company purchases much of
its fabric not yet dyed so it can make color changes quickly during and
between seasons. Unlike many of its competitors, Zara produces its most
time- and fashion-sensitive products internally. It employs more than 15,000
people in 20 company-owned factories to produce about 40 percent of Zara’s
finished product. These factories are highly automated to control costs and
further speed production. Sophisticated distribution centers in Spain, Brazil,
and Mexico are used to keep inventory moving efficiently from factory and

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supplier to store. Most clothes are only in the distribution center a few
hours, and none is ever there more than three days. Stores are located in
high-profile locations, and store managers and staff choose their
merchandise and keep in close touch with local trends. By constantly
rotating merchandise, Zara creates a climate of scarcity and opportunity for
loyal customers.

Questions

12-1 Zara believes that finding store managers capable of effectively running
the retail properties is the primary constraint on its global expansion.
What skill do you think Zara seeks in its ideal candidates? Why should
they be difficult to find?

Zara’s managers and sales associates are in charge of transmitting

sales analysis, the product life cycles, and store trends to the
designers. This allows the designers in Spain to develop the right
products with the season to meet demand. Since these
responsibilities go beyond that of a traditional store manager’s
responsibility, it may be difficult to find individuals who are
comfortable with these additional responsibilities.

12-2 From the beginning, Zara’s business model differed from the norm.
Today, its strategy depends on managing the connections between its
various activities, notably design, sourcing production, and store
operations. What do Zara’s managers, working out of “The Cube,” see as
the most effective way to manage the relationships among these
activities?

Communication and information technology are absolutely vital to

managing the constant interface of their various business activities
and management of the huge variety of product information.

Chapter 13

Burger King

Burger King is the world’s largest flame-broiled fast-food restaurant chain

with 12,000 restaurants in all 50 states and it operates in 74 countries and
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territories. Even with all this global expansion, it is still in less than 40
percent of the world’s countries, providing many opportunities. Burger King
differentiates itself in two ways, the flame-broiled cooking method and the
flexibility it offers customers popularized by its “have it your way” marketing
theme. Expansion is normally done through franchising, but if a market is
sufficiently attractive and not ready for franchisees, they will enter with
owned operations. Some global expansion has not gone well, but when
conditions changed they have reentered these markets, for example in
Colombia. Like so many companies, they have expanded into the BRICs and
are evaluating if the Brazilian expansion model can make them successful in
Russia.

Questions

13-1 Discuss the risks that an international restaurant company such as

Burger King would have by operating abroad rather than just
domestically.

Large franchisee-based companies like Burger King have a very

structured approach when entering new markets. Burger King,
through success and failure, refined the criteria for entering and
reentering markets to support success. They also have resources
that support growth. Many local firms do not have sufficient
resources for expansion to compete with large corporations.
However, local firms can watch and learn and apply the successful
methods of foreign fast-food companies. Local firms can also modify
their menus to support local tastes. Availability of suppliers is also a
factor if the market is not large enough to support multiple
customers.

13-2 How has the Burger King headquarters location influenced its
international expansion? Has this location strengthened or weakened its
global position?

Burger King’s Miami headquarters location influenced its expansion

strategy. Many consumers travel through this region and are
exposed to the company. Brand recognition and acceptance made it
easier to enter geographically local markets. Early expansion
strategy was based on employees’ familiarity with markets, and the
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 Latin American and Caribbean group was ideal. Although this
expansion has increased the number of locations, the revenue
percentage is not large because many of these countries do not have
large populations. Burger King has also not expanded to some
markets that could be potentially more profitable, like India, Pakistan,
Nigeria, Russia, and South Africa.

Chapter 14

A Little Electronic Magic at Alibaba.com

Electronic commerce is changing the way companies around the world do

business. The Internet has opened up a whole new era of business
opportunities, making virtual information, on any product from virtually any
market accessible readily and inexpensively. Alibaba.com is a Web site that
facilitates transactions between importers and exporters around the world.
Other Web sites that have created similar online marketplaces include
www.koreatradeworld.com, focused on products from South Korea,
www.trade-India.com for Indian products, and www.bizeurope.com for
Europe. These electronic trading venues have changed the mechanics of
importing and exporting and opened up tremendous opportunities,
especially for smaller enterprises. The impact has been especially dramatic
for small Chinese manufacturers, who now have ready access to a global
market for their products.

Questions

14-2 Do you think most international trade might eventually take place
through Web sites like alibaba.com? How might that influence your
interest in importing and exporting?

With the rapid growth of the use of these sites and the
corresponding increase in trade among SMEs, it is very reasonable to
speculate that eventually most trade between SMEs might take place
in this context. Importing and exporting rises dramatically with
powerful tools such as these at a company’s disposal.

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14-3 Identify a product you would like to import. Visit www.alibaba.com, go to
the advanced search field, and enter it. Select required criteria and click
on “Search.” Review the list of companies that qualify. Find a suitable
seller. Analyze this process for ease, usefulness, and potential value.

This process is very easy, useful, and has tremendous potential value.
It takes only seconds to find a long list of potential suppliers. One
drawback is the urge to contact too many suppliers to find the best
possible terms. The method of contact is made very easy by the use
of templates and drop-down menus that help to standardize
requests. If the suppliers will respond to these requests in a timely
manner, the process has huge potential value.

14-4 Identify and describe three Web sites like Alibaba to export and import.

Benefits
Low cost
Access to many suppliers/buyers
Quick transaction time
More transparency in transaction
Lower risk of fraud
Easy to make contacts with SMEs

Costs
Listings are free
Searches are free
Personalized Web pages cost additional
Certification costs some

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14-5 Visit www.alibaba.com and www.europages.com. Compare and contrast these Web
sites.

Student answers may vary, but the content should address any emphasis on a specific
region, the broadness of appeal, and the method of access provided, certifications, or
other aspects of the sites. (LO: 4, Learning Outcome: To identify the resources and
assistance that help international traders, AACSB: Use of Information Technology)

14-6 Please provide three recommendations that you would offer an SME, based on the
opportunities and constraints of electronic Web sites like Alibaba, as it considers
engaging in exporting or importing.

Pros

1. Huge range of suppliers

2. Can often find the largest suppliers online
3. They can offer tools and information to help you through the process
4. Easy to contact many suppliers at once and quickly

Cons

1. Risk of fraud (some businesses may not be what they seem)

2. Less of a relationship is established compared to meeting in person
3. Can take a lot of time and effort to communicate back and forth by email

Finally, these sites are primarily set up to assist firms looking identify suppliers for the
goods they want to import and not for finding customers for goods they may want to
export.

14-7 How transparent do sites like Alibaba.com make the import-export transaction? Would
you still worry about fraud?

These sites increase transparency and reduce the risk of fraud. Alibaba
allows suppliers to post information about their companies, including video
tours of their facilities. In addition, Alibaba has developed the TrustPass
designation. In order to obtain this designation, companies must pass an
authentication and verification test from a third-party credit agency. Also
available is the “Gold Supplier” designation, which also requires third-party
verification of trustworthiness. These mechanisms greatly reduce the risk
of fraud, but do not eliminate it entirely. Mechanisms such as letters of
credit should still be used to safeguard transactions from commercial risk

Chapter 15
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 Melia Hotels International

Melia Hotels International is a Spanish hotel chain founded by Gabriel Escarre in

1956, leasing his first hotel in Majorca. The company is one of Spain’s largest
domestic operators of holiday resorts, and the 17th biggest hotel chain worldwide. It
currently operates 350 hotels in 35 countries. Eighty percent of its current income
comes from its international operations. International expansion has been the
result of a variety of investment and collaborative strategies.

Questions

15-1 After reading the chapter, explain the advantages for Malia to own its hotels
versus manage them for other organizations.

Within the hotel industry, direct investment, particularly if the ownership is

100%, the owner then has the right to control over four non mutually
exclusive dimensions: (1) Daily operations of the hotel, e.g., the hiring and
scheduling of personnel and the securement of suppliers, (2) Physical
assets (primarily property ownership and the maintenance thereof, (3)
Organizational routines and tacit elements of the company, such as the
culture and systems to gain both efficiency and effectiveness, and (4)
Codified assets, such as the brand and reservation system.

15-2 After reading the chapter, discuss the advantages and risks for Malia in its
non-equity joint venture with Jin Jiang.

The Shanghai Jin Jiang International Hotel Group is the largest hotel chain in
China. Over the years, no Spanish hotel chains have had any success in
carrying out Chinese operations. Malia finally changed that in 2009 with a
contractual agreement with Xintian, and later with a co-management
agreement with Jin Jiang. This agreement enabled Malia to learn more
about the Chinese customers, boosting the ability to expand within China.
However, in partnering, one risks the chance of developing competitors
because partners may gain access to critical and core services, especially
knowledge controlled by Malia.

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