Assignment

Page i

11e

GLOBAL BUSINESS TODAY
Charles W. L. Hill

University of Washington

G. Tomas M. Hult

Michigan State University

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GLOBAL BUSINESS TODAY, ELEVENTH EDITION

Published by McGraw-Hill Education, 2 Penn Plaza, New York, NY
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Library of Congress Cataloging-in-Publication Data
Names: Hill, Charles W. L., author. | Hult, G. Tomas M., author.
Title: Global business today / Charles W.L. Hill, University of
Washington,
 G. Tomas M. Hult, Michigan State University.
Description: 11e [edition]. | New York, NY : McGraw-Hill Education,
[2020]
Identifiers: LCCN 2018050510| ISBN 9781260088373 (alk. paper) |
ISBN
 1260088375 (alk. paper)
Subjects: LCSH: International business enterprises—Management. |
 International trade. | Investments, Foreign. | Capital market.
Classification: LCC HD62.4 .H548 2020 | DDC 658/.049—dc23 LC
record available
at https://lccn.loc.gov/2018050510

The Internet addresses listed in the text were accurate at the time of
publication. The inclusion of a website does not indicate an
endorsement by the authors or McGraw-Hill Education, and
McGraw-Hill Education does not guarantee the accuracy of the
information presented at these sites.

mheducation.com/highered

Page iiiFor my mother June Hill, and the memory of my
father, Mike Hill

—Charles W. L. Hill

For Gert & Margareta Hult, my parents

—G. Tomas M. Hult

Page iv

about the authors
CHARLES W. L. HILL

University of Washington

Charles W. L. Hill is the Hughes M. and Katherine Blake Professor
of Strategy and International at the Foster School of
, University of Washington. Professor Hill has taught in the
MBA, Executive MBA, Technology Management MBA, Management,
and PhD programs at the University of Washington. During his time
at the University of Washington, he has received over 25 awards for
teaching excellence, including the Charles E. Summer Outstanding
Teaching Award. The Foster School is consistently ranked as a Top-
25 business school. Learn more about Professor Hill at

Charles Hill

A native of the United Kingdom, Professor Hill received his PhD
from the University of Manchester, UK. In addition to the University
of Washington, he has served on the faculties of the University of
Manchester, Texas A&M University, and Michigan State University.

Professor Hill has published over 50 articles in top academic
journals, including the Academy of Management Journal, Academy
of Management Review, Strategic Management Journal, and
Organization Science. Professor Hill has also published several
textbooks, including International (McGraw-Hill) and Global
Today (McGraw-Hill). His work is among the most widely
cited in international business and strategic management.

Beginning in 2014, Dr. Hill partnered with Dr. Tomas Hult in a
formidable co-authorship of the International franchise of
textbooks (International and Global Today).This
brought together two of the most cited international business
scholars in history.

Page v

Professor Hill works on a private basis with a number of
organizations. His clients have included Microsoft, where he has
been teaching in-house executive education courses for two
decades. He has also consulted for a variety of other large
companies (e.g., AT&T Wireless, Boeing, BF Goodrich, Group
Health, Hexcel, Microsoft, Philips Healthcare, Philips Medical
Systems, Seattle City Light, Swedish Health Services, Tacoma City
Light, Thompson Financial Services, WRQ, and Wizards of the
Coast). Professor Hill has also served on the advisory board of
several start-up companies.

For recreation, Professor Hill enjoys skiing and competitive
sailing!

G. TOMAS M. HULT

Michigan State University

Dr. Tomas Hult is Professor of Marketing, Byington Endowed Chair,
and Director of the International Center in the Department
of Marketing in the Eli Broad College of at Michigan State
University. He also teaches for the Broad College’s Department of
Supply Chain Management and Department of Management. Learn
more about Professor Hult at http://broad.msu.edu/facultystaff/hult.

A native of Sweden, Dr. Hult received a mechanical engineer
degree in Sweden before obtaining Bachelor and MBA degrees in
the United States, followed by a PhD at The University of Memphis.
In addition to Michigan State University, he has served on the
faculties of Florida State University and the University of Arkansas at
Little Rock. Dr. Hult holds visiting professorships in the International
Group of his native Uppsala University, Sweden, and the
International Division of Leeds University, United Kingdom.
Michigan State, Uppsala, and Leeds are all ranked in the top 10 in
the world in international business research.

Dr. Hult serves as Executive Director and Board Member of the
Academy of International (AIB), President and Board
Member of the Sheth Foundation, and serves on the U.S. District
Export Council. Tomas Hult hosts the radio show globalEDGE
Beat on the Michigan Network.

Hult is one of the world’s leading academic authorities (citations,
publications) in marketing strategy, international business,
international marketing, strategic management, global supply chains,
and complex multinational corporations. He is one of only about 100
Elected Fellows of the Academy of International , an
accolade achieved by only the elite international business scholars.
Dr. Hult was also selected in 2016 as the Academy of Marketing
Science/CUTCO-Vector Distinguished Marketing Educator.

He regularly speaks at high profile events (e.g., European
Commission, Swedish Entrepreneurship Forum, United Nation’s
Conference on Trade and Development, U.S. Department of
Education, World Investment Forum) and publishes influential op-ed
articles (e.g., Time, Fortune, Fortune, World Economic Forum, The
Conversation). Tomas has developed a large clientele of the world’s
top corporations (e.g., ABB, Albertsons, Avon, BG, Bechtel, Bosch,
BP, Defense Logistics Agency, Domino’s, FedEx, Ford, FreshDirect,
General Motors, GroceryGateway, HSBC, IBM, Michigan Economic
Development Corporation, Masco, NASA, Raytheon, Shell, Siemens,
State Farm, Steelcase, Tech Data, and Xerox).

In addition to co-authoring with Charles W. L. Hill the market-
share leading textbooks in international business (Global
Today, now in its 11th edition, and International , now in its
12th edition), Dr. Hult has written several popular business trade
books (e.g., Second Shift; Global Supply Chain Management;
Extending the Supply Chain; and Total Global Strategy).

Tennis, golf, and traveling are his favorite recreational activities.

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brief contents
PART ONE Introduction and Overview

Chapter One Globalization 2

PART TWO National Differences

Chapter Two National Differences in Political, Economic,
and Legal Systems 36

Chapter Three National Differences in Economic
Development 58

Chapter Four Differences in Culture 86

Chapter Five Ethics, Corporate Social Responsibility, and
Sustainability 122

PART THREE The Global Trade and Investment Environment

Chapter Six International Trade Theory 150

Chapter Seven Government Policy and International Trade
184

Chapter Eight Foreign Direct Investment 212

Chapter Nine Regional Economic Integration 240

PART FOUR The Global Monetary System

Chapter Ten The Foreign Exchange Market 270

Chapter Eleven The International Monetary System 294

PART FIVE The Strategy of International

Chapter Twelve The Strategy of International 320

Chapter Thirteen Entering Developed and Emerging
Markets 356

PART SIX International Functions

Chapter Fourteen Exporting, Importing, and Countertrade
382

Chapter Fifteen Global Production and Supply Chain
Management 408

Chapter Sixteen Global Marketing and Analytics
438

Chapter Seventeen Global Human Resource Management
474

GLOSSARY 503

NAME INDEX 511

SUBJECT INDEX 513

ACRONYMS 531

COUNTRIES AND THEIR CAPITALS 532

Page vii

the proven choice for international
business

Current. Application Rich,
Relevant. Accessible and Student
Focused.
Global Today (GBT), the worldwide market leader among
international business products, has set a new standard for
international business teaching. We have focused on creating
resources that

Are comprehensive, state of the art, and timely.
Are theoretically sound and practically relevant.
Focus on applications of international business concepts.
Tightly integrate the chapter topics throughout.
Are fully integrated with results-driven technology.
Take full and integrative advantage of globalEDGE.msu.edu—
the Google-ranked #1 web resource for “international business
resources.”

International (now in its 12th edition, 2019), also co-
authored by Charles W. L. Hill and G. Tomas M. Hult, is a more
comprehensive and case-oriented version that lends itself to the core
course in international business for those that want a deeper focus
on the global monetary system, structure of international business,
international accounting, and international finance.

GBT has always endeavored to be current, relevant, application
rich, accessible, and student-focused. Our goal has always been to
cover macro and micro issues equally and in a relevant, practical,
accessible, and student-focused approach. We believe that anything
short of such a breadth and depth of coverage is a serious

deficiency. Many of the students in these international business
courses will soon be working in global businesses, and they will be
expected to understand the implications of international business for
their organization’s strategy, structure, and functions in the context of
the global marketplace. We are proud and delighted to have put
together this international business learning experience for the
leaders of tomorrow.

Over the years, and now through 11 editions, Dr. Charles Hill has
worked hard to adhere to these goals. Since the ninth edition,
Charles’ co-author, Dr. Tomas Hult, has followed the same approach.
In deciding what changes to make, we have been guided not only by
our own reading, teaching, and research but also by the invaluable
feedback we received from professors and students around the
world, from reviewers, and from the editorial staff at McGraw-Hill
Education. Our thanks go out to all of them.

Page viii

Comprehensive and Up-to-Date
To be relevant and comprehensive, an international business
package must

Explain how and why the world’s cultures, countries, and
regions differ.
Cover economics and politics of international trade and
investment.
Tackle international issues related to ethics, corporate social
responsibility, and sustainability.
Explain the functions and form of the global monetary system.
Examine the strategies and structures of international
businesses.
Assess the special roles of the various functions of an
international business.

Relevance and comprehensiveness also require coverage of the
major theories. It has always been a goal to incorporate the insights
gleaned from recent academic scholarship into the book.
Consistent with this goal, insights from the following
research, as a sample of theoretical streams used in the book, have
been incorporated:

New trade theory and strategic trade policy.
The work of Nobel Prize–winning economist Amartya Sen on
economic development.
Samuel Huntington’s influential thesis on the “clash of
civilizations.”
Growth theory of economic development championed by Paul
Romer and Gene Grossman.
Empirical work by Jeffrey Sachs and others on the relationship
between international trade and economic growth.
Michael Porter’s theory of the competitive advantage of nations.
Robert Reich’s work on national competitive advantage.

The work of Nobel Prize–winner Douglass North and others on
national institutional structures and the protection of property
rights.
The market imperfections approach to foreign direct investment
that has grown out of Ronald Coase and Oliver Williamson’s
work on transaction cost economics.
Bartlett and Ghoshal’s research on the transnational
corporation.
The writings of C. K. Prahalad and Gary Hamel on core
competencies, global competition, and global strategic alliances.
Insights for international business strategy that can be derived
from the resource-based view of the firm and complementary
theories.
Paul Samuelson’s critique of free trade theory.
Conceptual and empirical work on global supply chain
management—logistics, purchasing (sourcing), operations, and
marketing channels.

In addition to including leading-edge theory, in light of the fast-
changing nature of the international business environment, we have
made every effort to ensure that this product is as up-to-date as
possible. A significant amount has happened in the world since we
began revisions of this book. By 2016, almost $4 trillion per day were
flowing across national borders. The size of such flows fueled
concern about the ability of short-term speculative shifts in global
capital markets to destabilize the world economy.

The world continued to become more global. As you can see in
Chapter 1 on Globalization, trade across country borders has almost
exponentially escalated in the last few years. Several Asian
economies, most notably China and India, continued to grow their
economies at a rapid rate. New multinationals continued to emerge
from developing nations in addition to the world’s established
industrial powers.

Increasingly, the globalization of the world economy affected a
wide range of firms of all sizes, from the very large to the very small.
We take great pride in covering international business for small- and

medium-sized enterprises (SMEs), as well as larger multinational
corporations. We also take great pride in covering firms from all
around the world. Some sixty SMEs and multinational corporations
from all six core continents are covered in the chapters’ opening
cases, closing cases, and/or Management Focus boxes.

And unfortunately, global terrorism and the attendant geopolitical
risks keep emerging in various places globally, many new and
inconceivable just a decade ago. These represent a threat to global
economic integration and activity. Plus, with the United Kingdom
opting to leave the European Union (Brexit), which has implications
past 2019, the election of President Donald Trump in the United
States (who espouses views on international trade that break with
the long established consensus), and several elections around the
world, the globe—in many ways—has paid more attention to
nationalistic issues over trade. These topics and many more are
integrated into this text for maximum learning opportunities.

Page ix

WHAT’S NEW IN THE 11TH EDITION
The success of the first ten editions of Global Today (and
its longer, more in-depth textbook option and companion,
International , now in the 12th edition) was based in part on
the incorporation of leading-edge research into the text, the use of
the up-to-date examples and statistics to illustrate global trends and
enterprise strategy, and the discussion of current events within the
context of the appropriate theory. Building on these strengths, our
goals for the 11th edition have focused on the following:

1. Incorporate new insights from scholarly research.
2. Make sure the content covers all appropriate issues.
3. Make sure the text is up-to-date with current events,

statistics, and examples.
4. Add new and insightful opening and closing cases in most

chapters.
5. Incorporate value-added globalEDGETM features in every

chapter.
6. Connect every chapter to a focus on managerial implications.

As part of the overall revision process, changes have been made to
every chapter in the book. All statistics have been updated to
incorporate the most recently available data. As before, we provide
the only textbook in International that ensures that all
material is up-to-date on virtually a daily basis. The copyright for the
book is 2020, but you are likely using the text somewhere between
the years 2019 to 2022. We keep the textbook updated to each
semester you use the text in your course! We do this by integrating
Connect and globalEDGETM features in every chapter.

Specifically, combining McGraw Hill’s Connect platform with the
Google number-one-ranked globaledge.msu.edu site (for
“international business resources”), we can add up-to-date materials
and exercises to each chapter to add value to the material and

provide relevant data and information. This keeps chapter material
constantly and dynamically updated for teachers who want to infuse
Connect and globalEDGETM material into the chapter topics, and it
keeps students abreast of current developments in international
business.

In addition to updating all statistics, figures, and maps to
incorporate most recently published data, a chapter-by-chapter
selection of changes for the 10th edition include the following:

CHAPTER 1: GLOBALIZATION
New opening case: GM and Its Chevrolet Supercar, The
Corvette ZR1
New materials on international trade, trade agreements, world
production, and world population
Explanations of differences in cross-border trade and in-country
production; the value of trade agreements; and population
implications related to resource constraints
Revised Management Focus: Boeing’s Global Production
System
Revised Management Focus: Wanda Group
New closing case: Globalization of BMW, Rolls-Royce, and the
MINI

CHAPTER 2: NATIONAL
DIFFERENCES IN POLITICAL,
ECONOMIC, AND LEGAL SYSTEMS

New opening case: Transformation in Saudi Arabia
New Country Focus: Putin’s Russia
Updated data on corruption
Updated Country Focus: Corruption in Brazil
New closing case: The Decline of Zimbabwe

CHAPTER 3: NATIONAL
DIFFERENCES IN ECONOMIC
DEVELOPMENT

New opening case: Brazil’s Struggling Economy
Updated statistics and discussion in section Differences in
Economic Development
Updated Country Focus: Property Rights in China
Updated statistics and discussion in section States in Transition
New closing case: Economic Development in Bangladesh

Page x

CHAPTER 4: DIFFERENCES IN
CULTURE

New opening case: China, Hong Kong, Macau, and Taiwan
Deeper treatment of culture, values, and norms
Revised the foundation that most religions are now pro-business
Updated the Hofstede culture framework with new research
New Country Focus: Determining Your Social Class by Birth
New Country Focus: Turkey, Its Religion, and Politics
New Management Focus: China and Its Guanxi
New closing case: The Swatch Group and Cultural Uniqueness

CHAPTER 5: ETHICS, CORPORATE
SOCIAL RESPONSIBILITY, AND
SUSTAINABILITY

New opening case: Sustainability Initiatives at Natura, the
Bodyshop, and Aesop
Deeper focus on corporate social responsibility and
sustainability at the country, company, and customer levels
New Management Focus: “Emissionsgate” at Volkswagen
New closing case: Woolworths’s Corporate Responsibility
Strategy

CHAPTER 6: INTERNATIONAL TRADE
THEORY

New opening case: “Trade Wars Are Good and Easy to Win”
Discussion of President Donald Trump’s approach to
international trade
Updated Country Focus: Is China Manipulating Its Currency in
Pursuit of a Neo-Mercantilist Policy?
New closing case: The Trans Pacific Partnership (TPP) Is Dead;
Long Live the CPTPP!
Updated Appendix: International Trade and the Balance of
Payments with new data and revised discussion

CHAPTER 7: GOVERNMENT POLICY
AND INTERNATIONAL TRADE

New opening case: U.S. and South Korea Strike a Revised
Trade Deal
New section: The World Trading System Under Threat, which
discusses the potential ramifications of Brexit and the trade
policies of the Trump administration
New Closing Case: Boeing and Airbus Are in a Dogfight over
Illegal Subsidies

CHAPTER 8: FOREIGN DIRECT
INVESTMENT

New opening case: Geely Goes Global
Updated statistics and discussion in the section Foreign Direct
Investment in the World Economy
New Management Focus: Burberry Shifts Its Entry Strategy in
Japan
New closing case: FDI in the Indian Retail Sector

CHAPTER 9: REGIONAL ECONOMIC
INTEGRATIONS

New opening case: NAFTA 2.0?
Extended discussion of Brexit and its ramifications
New section The Future of NAFTA, which discusses the
renegotiation of NAFTA by the Trump administration
New closing case: Free Trade in Africa: TFTA and CFTA

CHAPTER 10: THE FOREIGN
EXCHANGE MARKET

New opening case: The Fluctuating Value of the Yuan Gives
Chinese a Lesson in Foreign Exchange Risk
New closing case: The Mexican Peso, the Japanese Yen, and
Pokemon Go

CHAPTER 11: THE INTERNATIONAL
MONETARY SYSTEM

New opening case: Can Dollarization Save Venezuela?
Updated statistics discussion of floating exchange rates through
to early 2018
New Country Focus: China’s Exchange Rate Regime
New Closing Case: Egypt and the IMF

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CHAPTER 12: THE STRATEGY OF
INTERNATIONAL BUSINESS

New opening case: Red Bull, a Leader in International Strategy
Deeper discussion of the rise of regionalism
Integration of global strategy thoughts
New Management Focus: IKEA’s Global Strategy
New Management Focus: Unilever’s Global Organization
New closing case: Sony Corporation: An International
Innovator?

CHAPTER 13: ENTERING
DEVELOPED AND EMERGING
MARKETS

New opening case: IKEA Entering India, Finally!
New scope of the chapter to include entering developed and
emerging markets, as well as aspects of less developed
markets
New closing case: Cutco Corporation—Sharpening Your Market
Entry

CHAPTER 14: EXPORTING,
IMPORTING, AND COUNTERTRADE

New opening case: Spotify and SoundCloud
New material on company readiness to export and import
material
New and revised material on globalEDGETM Diagnostic Tools,
with a focus on Company Readiness to Export (CORE)
New Management Focus: Embraer and Brazilian Importing
New Management Focus: Exporting Desserts by a Hispanic
Entrepreneur
New Management Focus: Two Men and a Truck
New closing case: Tata Motors and Exporting

CHAPTER 15: GLOBAL PRODUCTION
AND SUPPLY CHAIN MANAGEMENT

New opening case: Procter & Gamble Remakes Its Global
Supply Chains
Revised and new material on global logistics, global purchasing,
and global operations
Revised sections Strategic Roles for Production Facilities,
Make-or-Buy Decisions, and Global Supply Chain Functions
New material in the sections Role of Information Technology,
Coordination in Global Supply Chains, and Interorganizational
Relationships
New Management Focus: IKEA Production in China
New Management Focus: Amazon’s Global Supply Chains
New closing case: Alibaba and Global Supply Chains

CHAPTER 16: GLOBAL MARKETING
AND BUSINESS ANALYTICS

New opening case: Fake News and Alternative Facts
Revised section Globalization of Markets and Brands
New section on Analytics; reordered with International
Marketing Research to provide a better flow of the chapter
material
Revised section International Marketing Research
Inclusion of more social media topics throughout
Revised positioning of the Product Development and R&D
section
New Management Focus: Global Branding, Marvel Studios, and
Walt Disney Company
New Management Focus: Burberry’s Social Media Marketing
New closing case: ACSI and Satisfying Global Customers

CHAPTER 17: GLOBAL HUMAN
RESOURCE MANAGEMENT

New opening case: Global Mobility at Shell
New section: Building a Diverse Global Workforce, which looks
at the benefits, challenges, and policies for building a diverse
global workforce in a multinational enterprise
New Closing Case: Sodexo: Building a Diverse Global
Workforce

Page xii

Beyond Uncritical Presentation
and Shallow Explanation
Many issues in international business are complex and thus
necessitate considerations of pros and cons. To demonstrate this to
students, we have adopted a critical approach that presents the
arguments for and against economic theories, government policies,
business strategies, organizational structures, and so on.

Related to this, we have attempted to explain the complexities of
the many theories and phenomena unique to international business
so the student might fully comprehend the statements of a theory or
the reasons a phenomenon is the way it is. We believe that these
theories and phenomena are explained in more depth in this
work than they are in the competition, which seem to use
the rationale that a shallow explanation is little better than no
explanation. In international business, a little knowledge is indeed a
dangerous thing.

Practical and Rich Applications
We have always believed that it is important to show students how
the material covered in the text is relevant to the actual practice of
international business. This is explicit in the later chapters of the
book, which focus on the practice of international business, but it is
not always obvious in the first half of the book, which considers
macro topics. Accordingly, at the end of each chapter in Parts Two,
Three, and Four—where the focus is on the environment of
international business, as opposed to particular firms—there is a
section titled Focus on Managerial Implications. In this section, the
managerial implications of the material discussed in the chapter are
clearly explained. Additionally, most chapters have at least one
Management Focus box. The purpose of these boxes is to illustrate
the relevance of chapter material for the practice of international
business.

A Did You Know? feature in each chapter challenges students to
view the world around them through the lens of international
business (e.g., Did you know that sugar prices in the United States
are much higher than sugar prices in the rest of the world?). The
authors recorded short videos explaining the phenomenon.

In addition, each chapter begins with an opening case that sets
the stage for the chapter and ends with a closing case that
illustrates the relevance of chapter material for the practice of
international business.

To help students go a step further in expanding their application-
level understanding of international business, each chapter
incorporates two globalEDGETM research tasks designed and
written by Tomas Hult. The exercises dovetail with the content just
covered.

Integrated Progression of Topics
A weakness of many texts is that they lack a tight, integrated flow of
topics from chapter to chapter. This book explains to students in
Chapter 1 how the book’s topics are related to each other.
Integration has been achieved by organizing the material so that
each chapter builds on the material of the previous ones in a logical
fashion.

PART ONE
Chapter 1 provides an overview of the key issues to be addressed
and explains the plan of the book. Globalization of markets and
globalization of production is the core focus.

PART TWO
Chapters 2 through 4 focus on country differences in political
economy and culture, and Chapter 5 on ethics, corporate social
responsibility, and sustainability issues in international business.
Most international business textbooks place this material at a later
point, but we believe it is vital to discuss national differences first.
After all, many of the central issues in international trade and
investment, the global monetary system, international business
strategy and structure, and international business functions arise out
of national differences in political economy and culture.

PART THREE
Chapters 6 through 9 investigate the political economy of global
trade and investment. The purpose of this part is to describe and
explain the trade and investment environment in which international
business occurs.

PART FOUR
Chapters 10 and 11 describe and explain the global monetary
system, laying out in detail the monetary framework in which
international business transactions are conducted.

PART FIVE
In Chapters 12 and 13, attention shifts from the environment to the
firm. In other words, we move from a macro focus to a micro focus …