CHAPTER 1  They later decided not to censor search results on its

INTRODUCTION Chinese service, a decision that followed after a cyber-

Topics Covered: attacks targeting primarily Gmail accounts of human
 International business rights activists.
 Who has an interest in international business  In the interim, Google shut down its censored Chinese
 Forms of international businesses version and gave mainlanders an uncensored search
 Globalization debate engine in simplified Chinese, delivered from its servers in
 Relationship between international business and ethics Hong Kong.
Opening Case: Google, Inc.
 Opened google.cn in 2006 to serve 94 million
International Business — relates to any situation where the
households at that time production or distribution of goods or services crosses country
 Access to the site by persons outside China was slow and borders.
— The entities involved in international
unreliable business range from large multinational firms with thousands of
 Google’s entry in China gave it access to a very huge employees doing business in many countries around the world
to a small one-person company acting as an importer or
market exporter.
 It however faced the Chinese authorities who are
Globalization — the shift toward a more interdependent and
notorious for Internet censorship integrated global economy—creates greater opportunities for
 For giving in to the wishes of the Chinese authorities on international business.

what can be accessed or not in google.cn, google *Knowledge of both strategic management and
executives faced congressional hearings in the US. entrepreneurship will enhance your understanding
of international business.
Strategic management — is the body of knowledge that answers — is an individual or organization whose
questions about the development and implementation of good interests may be affected as the result of what another
strategies and is mainly concerned with the determinants of firm individual or organization does.
performance. One of the basic tools of strategy is SWOT
(strengths, weaknesses, opportunities, threats) assessment. Stakeholder analysis needs to be done.
Stakeholder analysis is a
Entrepreneurship — is the recognition of opportunities and the technique you use to identify and assess
use or creation of resources to implement innovative ideas for the importance of key people, groups of
new, thoughtfully planned ventures. people, or institutions that may
significantly influence the success of your
*Entrepreneurship, like strategic management, will help you to activity, project, or business.
think about the opportunities available when you connect new
ideas with new markets.  Individuals or organizations will have an interest in
international business if it affects them in some way -
Intrapreneurship — is a form of entrepreneurship that takes positively or negatively.
place inside a business that is already in existence.

Entrepreneurship vs. Intrapreneurship What forms do international business take?

 An entrepreneur is starting a business, while an  International businesses can take on a variety of forms
intrapreneur is developing a new product or service in an  Based on the broad definition, international business
already existing business. spans business, government, and nongovernmental
organizations (NGOs)
*the ideas of entrepreneurship can be applied not only in new  International part of a firm’s business can vary
ventures but also in the context of existing organizations. considerably, from importing to exporting to having
significant operations outside its home country (i.e.,
Who is Interested in International Business? foreign direct investment)
Foreign direct investment means that a
 Stakeholders (i.e., owners/management, government, firm is investing assets directly into a
industry associations, trade groups, supplier & labor) foreign country’s buildings, equipment,
or organizations.
 Flattening world perspective
International Forms of Government  The Flat-world view is largely credited to Thomas
Friedman and his 2005 best seller, The World Is Flat.
National governments also participate in international
Many people consider globalization a modern
treaties related to such issues as trade, the environment, or
phenomenon, but according to him, this is its third stage.
child labor.
“Globalization 1.0,” The first stage of
Examples: To reduce or eliminate tariffs, NAFTA was global development with Columbus’s
created by Mexico, US & Canada, ASEAN for Southeast Asia, discovery of the New World and ran from
EU for 27 countries in Europe. To combat global warming, 1492 to about 1800.
Kyoto Protocol was created. Supraorganizations such as the “Globalization 2.0,” from about 1800 to
United Nations (UN) or the World Trade Organization (WTO)
2000, was disrupted by the Great
are practically separate governments themselves, with
Depression and both World Wars and
certain powers over all member countries.
was largely shaped by the emerging
power of huge, multinational
Nongovernmental Organizations corporations.
“Globalization 3.0” began around 2000,
National nongovernmental organizations (NGOs)
with advances in global electronic
include any nonprofit, voluntary citizens’ groups that are
interconnectivity that allowed individuals
organized on a local, national, or international level.
to communicate as never before.

THE GLOBALIZATION DEBATE

How the world got flat
 Flattening world perspective
Friedman identifies ten major events that helped
 Multidomestic perspective
reshape the modern world and make it flat:
 Dimensions of CAGE analytical framework
1. 11/9/89: When the walls came down and the windows went
up. The fall of the Berlin Wall ended old-style communism and
planned economies. Capitalism ascended.
2. 8/9/95: When Netscape went public. Internet browsing and e- The ten factors had powerful roles in making the world
mail helped propel the Internet by making it commercially viable smaller, but each worked in isolation until, Freidman writes, the
and user friendly. convergence of three more powerful forces:
3. Work-flow software. With more powerful, easier-to-use I. new software and increased public familiarity with the
software and improved connectivity, more people can share Internet,
work. II. the incorporation of that knowledge into business and
personal communication
4. Open-sourcing. Providing basic software online for free gives
III. the market influx of billions of people from Asia and the
everyone source code, thus accelerating collaboration and
former Soviet Union who want to become more
software development.
prosperous—fast.
5. Outsourcing. The Internet lets firms use employees worldwide
and send specific work to the most qualified, cheapest labor,
“We live in a multidomestic world, not a flat one”
wherever it is.
Pankaj Ghemawat — a international business professor which
6. Offshoring. When it comes to jobs leaving and factories being
takes strong issue with the view that the world is flat and instead
built in cheaper places.
espouses a world he characterizes as “semi-globalized” and
7. Supply-chaining. Walmart demonstrates that improved “multidomestic”.
acquisition and distribution can lower costs and make suppliers
Ghemawat’s research suggests that to study “barriers to
boost quality.
cross-border economic activity” you will use a “CAGE”
8. Insourcing. This kind of service collaboration happens when analysis.
firms devise new service combinations to improve service (e.g.,
CAGE Framework
collaboration with freight forwarders)
C-Culture
9. Informing. Google revolutionized information searching.
A-Administration
10. The steroids: Digital, mobile, personal, and virtual.
Technological advances range from wireless communication to G-Geography
processing, resulting in extremely powerful computing
E-Economics
capability and transmission.
 — Each of these CAGE dimensions shares the common APPROACHES IN EVALUATING ALTERNATIVE ACTIONS:
notion of distance. CAGE differences are likely to matter
most when the CAGE distance is great.
— When CAGE differences are small, there will likely be a 1.) Utilitarian Approach
greater opportunity to see business being conducted
2.) Rights- based Approach
across borders.
3.) Fairness or Justice Approach
1.) Culture - refers to a people’s norms, common beliefs, and
practices. 4.) Common Good Approach
- Cultural differences between two countries reduce 5.) Virtue Approach
their economic exchange.
2.) Administration - Bilateral trade flows shows that
administratively similar countries trade much more with each
other.
3.) Geography - as distance goes up, trade goes down, since
distance usually increases the cost of transportation.
4.) Economics - refers to differences in demographic and
socioeconomic conditions.

ETHICS AND INTERNATIONAL BUSINESS

Ethics deals with morality about what is considered
“right” and “wrong” behavior for people in various situations.
While business ethics emerged as a field in the 1970s,
international business ethics didn’t arise until the late 1990s.