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INTERNATIONALBUSINESS
INTER
NA
TION
AL
BU
SINESS
ALAN M. RUGMAN AND SIMON COLLINSON
RU
GM
AN
CO
LLINS
ON
4TH EDITION
4THEDITION
“This excellent text provides a focused, comprehensive and relevant coverage ofcontemporary international business. Theory and practice are combined, making a highlyreadable text, and its wealth of case material makes it a text that students should findboth stimulating and challenging.”
Jean Barclay, Sheffield Hallam University
Outsourcing. Emerging economies. Environmental impacts. These are just three of the many key issuescurrently facing international businesses, all of which are examined in the fourth edition of this well-respected textbook.
Taking a regional approach, the text challenges some of the underlying assumptions behind globalization andfocuses on both the dominant economies – the EU, the US and Japan – as well as emerging markets, such asBrazil, India and China, of world trade. The book also integrates analysis of the competitive environment andthe internal resources of the firm to provide a strategic view of international business.
The text is an engaging and comprehensive account of the realities of international business today. It will beinvaluable for anyone studying international business as part of a degree programme and aiming to attain aconfident and thorough understanding of the subject.
Key features include:
• 100 up-to-date cases on organizations such asAmazon, Carrefour and Kodak
• Detailed exploration of culture, corporateresponsibility and the natural environment
• Specific coverage of key geographical regions ofinternational business
• Analysis of the environment and firm provides centralstrategic focus
• Interactive teaching and learning resources includinganimation and video at www.pearsoned.co.uk/rugman
Alan M. Rugman is Professor of International Business and L. Leslie Waters Chair inInternational Business, Indiana University and Associate Fellow at Templeton College,University of Oxford.
Simon Collinson is Senior Lecturer in International Business at Warwick BusinessSchool, the University of Warwick.
An imprint ofwww.pearson-books.com
Cover image © Alamy Images
“Professor Rugman brings his diverse and knowledgeable background tothis highly successful textbook, making it the most practical, interestingand current international business management text available.”
Marcel Kohler, University of KwaZulu-Natal
“The book is well written, richlyillustrated with real-life cases andgives an excellent overview of thefield. The fourth edition particularlyaddresses a number of topics that areoften overlooked, or underestimated,in other international businesspublications.”
Dr Matthijs Wolters, Vrije UniversiteitAmsterdam
0273701746_04_COVER 15/11/05 11:39 am Page 1
INTERNATIONAL BUSINESS
Visit the International Business, fourth edition, Companion Websiteat www.pearsoned.co.uk/rugman to find valuable student learningmaterial, including:
● Engaging interactivities to reinforce learning
● Video clips that illustrate core international business issues
and stimulate discussion
● Multiple-choice questions to test understanding
● Extensive links to valuable resources on the web
● An online glossary to explain key terms
● Interactive online flashcards that allow the reader to check
definitions against the key terms during revision
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We work with leading authors to develop the strongest
educational materials in business, bringing cutting-edge
thinking and best learning practice to a global market.
Under a range of well-known imprints, including
Financial Times Prentice Hall, we craft high quality print
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INBU_A01.QXD 11/11/05 12:00 AM Page ii
INTERNATIONAL BUSINESS
Alan M. RugmanKelley School of Business, Indiana University
Simon CollinsonWarwick Business School, The University of Warwick
Richard M. Hodgetts(deceased)
Fourth Edition
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Pearson Education Limited
Edinburgh GateHarlowEssex CM20 2JEEngland
and Associated Companies throughout the world
Visit us on the World Wide Web at:http://www.pearsoned.co.uk
First published by McGraw-Hill, Inc. 1995Fourth edition 2006
© Pearson Education Limited 2000, 2006
The rights of Alan M. Rugman and Simon Collinson to be identified as authors of this work have beenasserted by them in accordance with the Copyright, Designs and Patents Act 1988.
All rights reserved; no part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise without either the prior written permission of the Publishers or a license permitting restricted copying in the United Kingdom issued by the Copyright Licensing Agency Ltd, 90 Tottenham Court Road, London W1T 4LP.
All trademarks used herein are the property of their respective owners. The use of any trademark in the text does not vest in the author or publisher any trademark ownership rights in such trademarks, nor does the use of such trademarks imply any affiliation with or endorsement of this book by such owners.
ISBN 13: 978-0-273-70174-3ISBN 10: 0-273-70174-6
British Library Cataloguing-in-Publication DataA catalogue record for this book is available from the British Library.
Library of Congress Cataloging-in-Publication Data
Rugman, Alan M.International business / Alan M. Rugman, Simon Collinson, Richard M. Hodgetts.—4th ed.
p. cm.Includes bibliographical references and index.ISBN 0-273-70174-6 (paperback)1. International business enterprises—Management. I. Collinson, Simon. II. Hodgetts,
Richard M. III. Title.
HD62.4.R843 2005658'.049—dc22 2005054646
10 9 8 7 6 5 4 3 2 109 08 07 06
Typeset by 72 in 10/12.5 Minion Printed by Mateu Cromo Artes Graficas, Spain
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Contents in Brief
List of Figures, Tables, and Maps xvPreface xixAbout the Authors xxGuide to the Case Studies xxiiiGuided Tour of the Book xxviiiGuided Tour of the Companion Website xxxAcknowledgments xxxii
Part One THE WORLD OF INTERNATIONAL BUSINESS
Chapter 1 Regional and Global Strategy 3
Chapter 2 The Multinational Enterprise 36
Chapter 3 The Triad and International Business 67
Part Two THE ENVIRONMENT OF INTERNATIONAL BUSINESS
Chapter 4 International Politics 99
Chapter 5 International Culture 127
Chapter 6 International Trade 157
Chapter 7 International Financial Markets and Institutions 191
Part Three INTERNATIONAL BUSINESS STRATEGIES
Chapter 8 Multinational Strategy 225
Chapter 9 Organizing Strategy 252
Chapter 10 Production Strategy 278
Chapter 11 Marketing Strategy 310
Chapter 12 Human Resource Management Strategy 339
Chapter 13 Political Risk and Negotiation Strategies 370
Chapter 14 International Financial Management 404
Part Four INTERNATIONAL BUSINESS STRATEGIES IN ACTION
Chapter 15 Corporate Strategy and National Competitiveness 441
Chapter 16 European Union 470
Chapter 17 Japan 501
Chapter 18 North America 539
Chapter 19 Emerging Economies 568
Chapter 20 Ethics and the Natural Environment 606
Glossary 631Subject Index 643Company Index 654Name Index 657
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Contents
List of Figures, Tables, and Maps xvPreface xixAbout the Authors xxGuide to the Case Studies xxiiiGuided Tour of the Book xxviiiGuided Tour of the Companion Website xxxAcknowledgments xxxii
Part One
THE WORLD OFINTERNATIONAL BUSINESS
Chapter 1
Regional and Global Strategy 3
Objectives of the chapter 3
■ ACTIVE LEARNING CASE
Coke goes worldwide with a local strategy 4
Introduction 5
World business: a brief overview 6Exports and imports 6Foreign direct investment 7The triad 10
Today’s international environment 12International trade regulation 12Technology 13Small and medium-sized enterprises (SMEs) 13
■ INTERNATIONAL BUSINESS STRATEGY IN ACTION
Amazon.com 14
Globalization and strategic management 15Regional triad strategies 15Maintaining economic competitiveness 16Multinationals in action 19
■ INTERNATIONAL BUSINESS STRATEGY IN ACTION
The Italian tile industry 20
The study of international business 22From general to strategic emphasis 22
Framework for this book 23
Key points 25
Key terms 25Review and discussion questions 25
■ REAL CASES
Big oil gets bigger 26Wal-Mart 27
Endnotes 29Additional bibliography 29Appendixes to Chapter 1 31
Chapter 2
The Multinational Enterprise 36
Objectives of the chapter 36
■ ACTIVE LEARNING CASE
Disneyland in Europe 37
Introduction 38
The nature of multinational enterprises 39Characteristics of multinational enterprises 39The internationalization process 41Why firms become multinational enterprises 43
■ INTERNATIONAL BUSINESS STRATEGY IN ACTION
Italian family firms 44
The strategic philosophy of multinational enterprises 45
Strategic management and multinational enterprises 46
Strategic management of MNEs: an introduction 46
■ INTERNATIONAL BUSINESS STRATEGY IN ACTION
Nestlé 48
A framework for global strategies:the CSA-FSA matrix 49
The competitive advantage matrix 50
Multinationals in action 52Solectron 52BMW 52Levi Strauss 53Canon 54Zara 54
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CONTENTS
Key points 57Key terms 57Review and discussion questions 58
■ REAL CASES
Starbucks 58Sony 59
Endnotes 61Additional bibliography 61Appendixes to Chapter 2 63
Chapter 3
The Triad and International Business 67
Objectives of the chapter 67
■ ACTIVE LEARNING CASE
Boeing versus Airbus 68
Introduction 69
Reasons for foreign direct investment 70Increase sales and profits 71Enter rapidly growing markets 72Reduce costs 72
■ INTERNATIONAL BUSINESS STRATEGY IN ACTION
Aflac 73
■ INTERNATIONAL BUSINESS STRATEGY IN ACTION
Lafarge and Cemex: concrete multinationals 74
Gain a foothold in economic blocs 75Protect domestic markets 76Protect foreign markets 76Acquire technological and managerial know-how 76
Foreign direct investment and trade by triad members 77
The triad’s domination of FDI and trade 77Triad FDI clusters 78
Multinationals in action: regional business strategy 79
The world’s regional automotive industry 80Mergers and acquisitions 86
Key points 87Key terms 87Review and discussion questions 88
■ REAL CASES
Matsushita and Philips 88Toys Us in Europe and Japan 89
Endnotes 90Additional bibliography 91Appendix to Chapter 3 93
“R”
Part Two
THE ENVIRONMENT OFINTERNATIONAL BUSINESS
Chapter 4
International Politics 99
Objectives of the chapter 99
■ ACTIVE LEARNING CASE
How risky is investment in Russia? 100
Introduction 101Political ideologies and economics 102Political systems 102Economic systems 103
■ INTERNATIONAL BUSINESS STRATEGY IN ACTION
Softwood lumber: not-so-free trade 104
Government control of assets 105Government–business cooperation 106
Economic integration 108Trade creation and trade diversion 108Levels of economic integration 109Economic integration: an overall perspective 110Ethics, environment, MNEs, and the civil society 111
■ INTERNATIONAL BUSINESS STRATEGY IN ACTION
Non-governmental organizations and political power 112
The European Union (EU) 114Other examples of economic integration 116
Economic integration and strategic management 118Strategic alliances and acquisitions 118Localization of business operations 119
Key points 121Key terms 122Review and discussion questions 122
■ REAL CASES
How environmental regulations can be used as trade barriers 123Embracer vs. Bombardier 124
Endnotes 125Additional bibliography 125
Chapter 5
International Culture 127
Objectives of the chapter 127
■ ACTIVE LEARNING CASE
Culture clash at Pharmacia and Upjohn 128
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CONTENTS
Introduction 129What is culture? 129
The importance of culture in different business contexts 131
Culture has always been important 132
■ INTERNATIONAL BUSINESS STRATEGY IN ACTION
McDonald’s 133
National stereotypes and key dimensions of culture 134
Culture at two levels 134Hofstede’s four dimensions of culture 134Trompenaars’ seven dimensions of culture 135The GLOBE project’s nine dimensions of culture 137Applying the national culture frameworks 138“The way we do things here:” Theimplications of cultural differences for organizations and managers 139
Cross-cultural management 141Organization 141Leadership 142Communication 142The corporate response 143Multinational organization structures:imperialist or independent? 144Culture-clash in cross-border M&A and JVs 145
■ INTERNATIONAL BUSINESS STRATEGY IN ACTION
Danone and Parmalat—going international, staying local 146
Culture embodied in national institutions 148
France: cultural and social characteristics that create a national distinctiveness 149
Key points 150Key terms 151Review and discussion questions 151
■ REAL CASES
Do not throw your “meishi”! 152Cultural differences in international sports 153
Endnotes 154Additional bibliography 155
Chapter 6
International Trade 157
Objectives of the chapter 157
■ ACTIVE LEARNING CASE
Trade of the triad and China 158
Introduction 160
International trade theory 160Theory of absolute advantage 161Theory of comparative advantage 162Factor endowment theory 163International product life cycle theory 164Other important considerations 165
■ INTERNATIONAL BUSINESS STRATEGY IN ACTION
China’s organic food exports 166
Barriers to trade 167Reasons for trade barriers 167Commonly used barriers 168Tariffs 169
■ INTERNATIONAL BUSINESS STRATEGY IN ACTION
The EU–US courier wars 171
US trade policy 172
Non-tariff barriers to trade 172Quotas 173“Buy national” restrictions 173Customs valuation 174Technical barriers 174Antidumping legislation, subsidies, and countervailing duties 174Agricultural products 175Export restraints 175
Other economic developments 175Countertrade 175Trade in services 176Free trade zones 177
Key points 178Key terms 179Review and discussion questions 179
■ REAL CASES
Outsourcing to China 180Dumping on trade complaints 181
Endnotes 182Additional bibliography 182Appendix to Chapter 6 184
Chapter 7
International Financial Marketsand Institutions 191
Objectives of the chapter 191
■ ACTIVE LEARNING CASE
Barclays Bank international financial dealings 192
Introduction 193
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CONTENTS
Foreign exchange markets 194Foreign exchange markets in the United States 195
Determination of the exchange rate 200Purchasing power parity 200International Fisher effect 201Combined equilibrium relationships 201
■ INTERNATIONAL BUSINESS STRATEGY IN ACTION
The Wall Street crash of 2001 203
Protecting against exchange risk 203Alternatives to minimize exchange risk 204
Foreign money and capital markets 205MNEs and national money markets 206MNEs and national capital markets 206
Regional money and capital markets 207The eurocurrency market 207Eurocurrency interest rates 209Other market characteristics 209Criticisms of the euromarkets 210Eurobonds and euroequities 211
■ INTERNATIONAL BUSINESS STRATEGY IN ACTION
AngloGold Ashanti 212
The IMF system 213Unresolved problems with the IMF system 215
MNEs and international financial markets and institutions
Key points 216Key terms 217Review and discussion questions 217
■ REAL CASES
HSBC 218World financial crises 219
Endnotes 220Additional Bibliography 221
Part Three
INTERNATIONAL BUSINESSSTRATEGIES
Chapter 8
Multinational Strategy 225
Objectives of the chapter 225
■ ACTIVE LEARNING CASE
Vodafone and the triad telecom market 226
Introduction 227
Strategic orientations 228
■ INTERNATIONAL BUSINESS STRATEGY IN ACTION
Arthur Andersen, Accenture, and McKinsey 229
Strategy formulation 230External environmental assessment 231Internal environmental assessment 234Goal setting 238
Strategy implementation 239Location 239
■ INTERNATIONAL BUSINESS STRATEGY IN ACTION
Fuji Xerox and Xerox 240
Ownership 240Functional strategies 242
Control and evaluation 243Common methods of measurement 244
Key points 245Key terms 246Review and discussion questions 246
■ REAL CASES
Mountain Equipment Co-op: a small business 247Benetton 248
Endnotes 249Additional bibliography 250
Chapter 9
Organizing Strategy 252
Objectives of the chapter 252
■ ACTIVE LEARNING CASE
Procter & Gamble 253
Introduction 254
Organizational structures 254Early organizational structures 255The international division 256Global organizational structures 256
■ INTERNATIONAL BUSINESS STRATEGY IN ACTION
Aventis 257
■ INTERNATIONAL BUSINESS STRATEGY IN ACTION
Making matrix work 263
Strategic management and organizing strategy 266Analysis of key structural variables 266Coordination 267
Key points 272Key terms 272Review and discussion questions 273
■ REAL CASES
LVMH: organizing luxury products in the international arena 273
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