END-OF-CHAPTER PROBLEMS
3.3) What are the implications for international business of differences in the
dominant or ethical system of a country?
Differences in the dominant religion of a country affect relationships,
attitudes toward business, and overall economic development. First, differences in religion require
inter-cultural sensitivity. This
sensitivity requires things like simply knowing the religious holidays,
accepting that some unexpected things may happen "because of Allah's
will," or understanding how interpersonal relationships may be different
between "believers" and "non-believers." (Hence
non-believers may be treated differently.)
Second, religious beliefs can significantly affect a country’s attitude
toward business, work, and entrepreneurship.
In one country successfully beating a competitor may be considered a
great achievement while in another it may be thought of as showing a lack of
compassion, or disruptive to the society and persons involved, both attitudes
that may be derived from underlying religious beliefs. Likewise, hard work may be either rewarded
positively or viewed as something of secondary importance to spiritual peace
and harmony. Third, different dominant
religions may affect the overall competitiveness and potential for economic
growth of a nation, and hence attractiveness of a country for international
business.
Basic,
unarticulated assumptions about what has value, what is right and wrong, and
what constitutes good are embedded in our religions. Should rules or laws apply to all people all
the time (in the US, the answer here is
probably yes); or should they change depending on the circumstances of the
particular situation (in Asia, the answer would be, of course)? Religion plays a basic, influential role in
our most fundamental values and the norms that arise from them. So if an international business venture faces
a different dominant religion in its foreign market, managers there will have
to make special efforts to understand what really underlying practice
differences are.
4.3) 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?
This question is likely to stimulate
some lively discussion, particularly if students have personally felt the
impact of this practice. Many American
companies are outsourcing not only blue collar work, but white collar positions
to the developing world. Students are
facing a tenuous job market where positions that they may have sought when they
began their college degrees are being “shipped abroad.” Some students will
argue that companies have to do what is best for all stakeholders, and if that
means taking advantage of cheaper labor costs elsewhere, then that is the
appropriate strategy. Others however,
will probably argue that companies owe a social debt to their home countries,
and that loyalty from long term employees should be rewarded.
5.1) Mercantilism is a bankrupt theory that has no place in the modern
world. Discuss.
In its purest sense, mercantilism is a bankrupt theory that has no place in
the modern world. The principle tenant
of mercantilism is that a country should maintain a trade surplus, even if that
means that imports are limited by government intervention. This policy is bankrupt for at least two
reasons. First, it is inconsistent with the general notion of globalization,
which is becoming more and more prevalent in the world. A policy of mercantilism will anger potential
trade partners because it will exclude their goods from free access to the
mercantilist country’s markets.
Eventually, a country will find it difficult to export if it imposes
oppressive quotas and tariffs on its imports.
Second, mercantilism is bankrupt because it hurts the consumers in the
mercantilist country. By denying its
consumers access to either “cheaper” goods from other countries or more
“sophisticated” goods from other countries, the mercantilist country’s ordinary
consumers suffer.
5.7) Drawing on the new trade theory and
Porter's theory of national competitive advantage, outline the case for
government policies designed to build a national competitive advantage in
biotechnology. What kind of policies
would you recommend the government adopt? Are these policies at variance with
the basic free trade philosophy?
Porter’s theory of national
competitive advantage argues that four broad attributes of a nation shape the
environment in which local firms compete, and that these attributes promote or
impede the creation of competitive advantage.
These attributes are: factor endowments, demand conditions, related and
supporting industries, and firm strategy, structure, and rivalry. Porter goes on to argue that firms are most
likely to succeed in industries in which the diamond (which are the four
attributes collectively) is favorable.
Porter adds two factors to the list of attributes described above:
chance and government policy. The New
Trade theory addresses a separate issue.
This theory argues that due to the presence of substantial scale
economies, world demand will support only a few firms in many industries. Underpinning this argument is the notion of
first-mover advantages, which are the economic and strategic advantages that
accrue to early entrants into an industry. One could argue that when the
attributes of a nation are conductive to the production of a product, and when
the manufacturers of that product have experienced some “chance” events that
have provided them first-mover advantages, the governmental policies of that
nation should promote the building of national competitive advantage in that
particular area. This could be
accomplished through government R&D grants, policies that favor the
industry in capital markets, policies towards education, the creation of a
favorable regulatory atmosphere, tax abatements, and the like. Ask your students whether they think this
policy is at variance with the basic free trade philosophy. One could argue that it is, because the
government intervention is creating the basis for comparative advantage. Conversely, one could argue that if a country
establishes a comparative advantage in a particular area that is based on a
unique set of attributes (such as Swiss production of watches), world output
will be favorably impacted by letting that country pursue its area of
comparative advantage.
