INTRODUCTION TO INTERNATIONAL BUSINESS:Introduction and overviewNational Differences in Political economy Brian Chen July 9, 2007
Agenda • Introduction to Course • About the GSI • Overview of the Course • Course Expectations • Course Grading and Policy • About the Sections • Chapter 1: Introduction and Overview • Chapter 1 Exercise: Case – Wipro • Chapter 2: National Differences in Political Economy • Chapter 2 Exercise: Case – The Poorest Continent
About the GSI • Fourth-Year PhD Candidate in Business and Public Policy Group, Haas School of Business, UC Berkeley • Research Interests: • Health Care Management and Health Policy, Regulation, Law and Economics, International Law and Business • Education: • Harvard College 1992, Stanford Law School 1997 • Work Experience: • Air Liquide (Paris, France); Teisan KK (Tokyo, Japan), Baker & McKenzie (Taipei, Taiwan); Sullivan & Cromwell (New York), Orrick Herrington & Sutcliffe (San Francisco), Kaohsiung Medical University (Kaohsiung, Taiwan)
Overview of the Course • Course is divided into two major themes: • (1) The political, economic, and financial landscape of international business • Instills awareness of the issues a firm might encounter in international business: • Globalization of the marketplace, differences that remain in the global marketplace (culture, ethics, etc), the international trade /investment environment, political economy of trade, foreign exchange and international monetary system • (2) Firm Strategies to undertake in order to operate in a global arena • With an awareness of the political, economic, and financial landscape of international business, how do firms operate transnationally? • Strategy in general, entry strategy, alliances, exporting/importing, global production/outsourcing/logistics, global marketing, R&D, global human resource management, international financial management • Note that Midterm Examination is placed right between the two parts of the course
Course Expectations • Thorough knowledge of the landscape of international business and issues arising therefore in the course of conducting international business • To perform well in the course: • Thorough grasp of material as demonstrated in examinations • Participation in class and section • Excellent participation grade *may* help move your grade one level up (e.g., from B+ to A-)
Grading Policy: The Bad News • Word about academic honesty: • No plagiarism: pasting sentences or paragraphs from various sources without attribution DOES constitute plagiarism. Copying from another student also constitutes plagiarism • No dishonesty in attendance: Signing in for one or more other students constitutes academic dishonesty • No dishonesty in examination: No talking or exchanging notes during examination • Students caught committing an act of academic dishonesty will automatically fail the course
Grading Policy: The Good News • Final course grade is determined by a rough curve • Many UC Berkeley undergraduate courses curved around a C+. This course was curved around a B last semester • Spring 2007: the top 13 received an A, the next 24 an A-, the next 28 a B+, the next 21 a B, the next 11 a B-, the next 2 a C+, the next 7 a C, the next 6 a C-, and a D for the bottom 3 students • In other words, 1/3 of the class received some type of A • And to emphasize: active participation in section and in class can only help you
About the Sections • Goal: To apply concepts learned in class through discussion • GSI is merely a facilitator and an agenda-setter • Format: • (1) One – slide review of the previous section • (2) Review of important points in lecture • (3) If necessary, “overflow” material from the class • (4) Two to four lecture-related topics to discuss in small groups and in class • Topics may be drawn from the textbook, from the professor, or self-prepared by the GSI
Section Expectations • Quality trumps quantity • HOWEVER, NO POINT IS EVER DEDUCTED FOR “WRONG” ANSWERS • Again, to emphasize, there is only upside potential by participating in section discussions • GSI will attempt to permit a diverse group of students to answer questions on a voluntarily basis • However, in the event of lack of participation, GSI may cold call • Foreign students are especially welcome to share their experiences, so please do not allow perceived linguistic barriers to get in way
Chapter 1: Introduction and Overview • Globalization: Definition, Market, Production • Is the globalization of markets “universal”? • Global Institutions • GATT, WTO, IMF, World Bank, UN • Drivers of globalization • Declining barriers • Technological change • How the Global Economy is Changing • Output is shifting • FDI destination is shifting East • MNE
Chapter 1: Introduction and Overview • Globalization Debate • Jobs and income security • Labor policies and the environment • National Sovereignty
Chapter 1 Discussion Questions • Describe the shifts in the world economy over the past 30 years. What are the implications of these shifts for international businesses based in Europe? North America? Hong Kong/Taiwan?
Chapter 1 Discussion Questions • “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.
Chapter 1 Discussion Questions • 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?
Chapter 1 Discussion Questions • “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.
Chapter 1 Discussion Questions • How might the Internet and the associated World Wide Web affect international business activity and the globalization of the world economy?
Chapter 1 Discussion Questions • If current trends continue, China may be the world’s largest economy by 2050. Discuss the possible implications of such a development for • a. The world trading system • b. The world monetary system • c. The business strategy of today’s European and U.S.-based global corporations
Wipro Case: Discussion Questions • How did outsourcing work to Wipro improve General Electric’s ability to compete in the global economy? Does such outsourcing harm or benefit the American economy?
Wipro Case: Discussion Questions • Did General Electric help to create Wipro? How?
Wipro Case: Discussion Questions • If India’s information technology companies continue to prosper, over time what do you think will happen to the income differential between software programmers in the United States and India? What are the implications for the American economy?
Wipro Case: Discussion Questions • Since 2000, Wipro has moved abroad, establishing sales offices in 35 nations and design centers in nine. Why is Wipro doing this? What would happen to the company if it did not follow this strategy?
Wipro Case: Discussion Questions • What does the rise of Wipro teach you about the nature of the global economy in the first decade of the 21st century?
Some suggestions regarding case writeups When grading: • Questions asking mere facts are weighted less • Questions asking for inferences and requiring careful analysis are weighted more • As much as possible, consider both sides of the issue • Imagine as many likely scenarios as possible when asked to make a guess
Assigned Articles • Call Center? That’s so 2004! • Outsourcing Jobs: Myths and Realities • WSJ Article: Silicon Valley Sours on India • How are they related to the course material? • What do they teach us? • Do you agree with the message(s) of the articles?
Time Permitting: Globalization Debate • Does globalization cause poverty? • Why are so many people opposed to globalization? • Does globalization diminish cultural diversity? • Can globalization be controlled?
Chapter 2: National Differences in Political Economy • Political Systems: Collectivism/Socialism vs. Individualism; Democracy vs. Totalitarianism • Economic Systems: Market Economy vs. Command Economy vs. Mixed Economy • Legal Systems: Common Law, Civil Law, Theocratic Law • Contract Law: Property Rights, Private Action, Public Action, Foreign Corrupt Practices Act • Intellectual Property: Patent, Copyrights, Trademarks, (TRIPS)
Chapter 2: National Differences in Political Economy • Determinants of Economic Development • Measuring economic development: PPP, GDP, Amartya Sen • Political Economy: • Innovation as engine of growth. • Innovation requires market economy • Innovation requires strong property rights • But what is the right political system? • Does progress lead to democracy? • Geography and Education on development • States in transition: What is the general trend in political economy worldwide?
Chapter 2: Discussion Questions • Free market economies stimulate greater economic growth, whereas state-directed economies stifle growth. Discuss.
Chapter 2: Discussion Questions • A democratic political system is an essential condition for sustained economic progress. Discuss.
Chapter 2: Discussion Questions • What is the relationship between corruption in a country (i.e., bribe taking by government officials) and economic growth? Is corruption always bad?
Chapter 2: Discussion Questions • The Nobel Prize-winning economic Armatya Sen argues that the concept of development should be broadened to include more than just economic development. What other factors does Sen think should be included in an assessment of development? How might adoption of Sen’s views influence government policy? Do you think Sen is right that development is about more than just economic development? Explain.
Chapter 2: Discussion Questions • You are the CEO of a company that has to choose between making a $100 million investment in Russia or the Czech Republic. Both investments promise the same long-run return, so your choice is driven by risk considerations. Assess the various risks of doing business in each of these nations. Which investment would you favor and why? • Consider: political risks, economic risks, legal risks
Assigned Articles • How Rising Wages Are Changing the Game in China? • Look Who’s Pumping Out Engineers? • Grassroots Democracy • Right Time for Africa • Taking Care of Business • How are they related to the course material? • What do they teach us? • Do you agree with the message(s) of the articles?
The Poorest Continent: Discussion Questions • How is the case related to the course material?
The Poorest Continent: Discussion Questions • What do you think are the three main reasons for the persistence of poverty in sub-Saharan Africa?
The Poorest Continent: Discussion Questions • What steps can be taken by the nations of sub-Saharan Africa to address the causes of poverty? Can the governments of developed nations help in this process? Should they? How?
The Poorest Continent: Discussion Questions • Can international businesses play a role in helping nations in the region to reduce poverty and ignite economic growth?
The Poorest Continent: Discussion Questions • Currently sub-Saharan receives very little in the way of foreign direct investment from firms based in developed nations. If nations in the region start to take the actions you identified in the answer to question 2, what do you think will happen to the flow of foreign direct investment? Will this benefit the region’s economies? How?