International Business Competing in the Global Marketplace 14e C h a r l e s W. H i l l UNIVERSITY OF WASHINGTON Final PDF to printer INTERNATIONAL BUSINESS Published by McGraw Hill LLC, 1325 Avenue of the Americas, New York, NY 10019. Copyright ©2023 by McGraw Hill LLC. All rights reserved.
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1 2 3 4 5 6 7 8 9 LWI 27 26 25 24 23 22 ISBN 978-1-265-03854-0 MHID 1-265-03854-6 Cover Image: antishock/Shutterstock All credits appearing on page or at the end of the book are considered to be an extension of the copyright page. 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 LLC, and McGraw Hill LLC does not guarantee the accuracy of the information presented at these sites.com/highered hiL38546_fm_ise.indd ii 11/10/21 11:34 AM For my daughters, Elizabeth, Charlotte, and Michelle — C h a r l e s W. H i l l about the AUTHOR C h a r l e s W.
H i l l University of Washington Charles W. Hill is a Professor of Management in the Foster School of Business at the University of Washington. Professor Hill has taught in the MBA, Executive MBA, Technology Management MBA, and PhD programs at the University of Washington. His teaching responsibilities include strategic management, interna- tional business, and microeconomics.
During his time at the University of Washington, he has received over 25 awards for teaching excellence, including the Charles E. Summer all faculty Outstanding Teaching Award. 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 Business (McGraw-Hill) and Global Business Today (McGraw-Hill). His work is widely cited in international business and strategic management. A recent study that measured scholarly influence based on cumulative citations between 1996 and 2019 ranked Professor Hill in the top 1 percent of all scholars in the world across 22 major disciplines.
Professor Hill works on a private basis with a number of organizations. His clients have included Microsoft, where he taught in-house executive education courses for two decades. He has also consulted for a variety of other large companies (e., AT&T Wireless, Boeing, BF Goodrich, Group Health, Hexcel, Philips Healthcare, Philips Medical Systems, Seattle City Light, Swedish Health Services, Tacoma City Light, Thompson Financial Services, WRQ, and Wizards of the Coast). Hill has served on the advisory board of several start-up companies.
For recreation, Professor Hill enjoys skiing and competitive sailing! iv brief CONTENTS part one Introduction and Overview Chapter 1 Globalization 2 part two National Differences Chapter 2 National Differences in Political, Economic, and Legal Systems 40 Chapter 3 National Differences in Economic Development 64 Chapter 4 Differences in Culture 94 Chapter 5 Ethics, Corporate Social Responsibility, and Sustainability 130 part three The Global Trade and Investment Environment Chapter 6 International Trade Theory 160 Chapter 7 Government Policy and International Trade 198 Chapter 8 Foreign Direct Investment 230 Chapter 9 Regional Economic Integration 260 part four The Global Monetary System Chapter 10 The Foreign Exchange Market 296 Chapter 11 The International Monetary System 324 Chapter 12 The Global Capital Market 354 part five The Strategy and Structure of International Business Chapter 13 The Strategy of International Business 376 Chapter 14 The Organization of International Business 408 Chapter 15 Entering Developed and Emerging Markets 444 part six International Business Functions Chapter 16 Exporting, Importing, and Countertrade 476 Chapter 17 Global Production and Supply Chain Management 502 Chapter 18 Global Marketing and Business Analytics 534 Chapter 19 Global Human Resource Management 572 Chapter 20 Accounting and Finance in International Business 604 part seven Integrative Cases How the iPhone Is Made: Apple’s Global Production System 632 Kenya: An African Lion 634 Poland: Eastern Europe’s Economic Miracle 636 v Culture and Business in Saudi Arabia 638 Microsoft Goes Carbon Neutral 640 A Tale of Two Nations: Ghana and South Korea 642 American Steel Tariffs 644 Starbucks’ Foreign Direct Investment 646 The Cost of Brexit 648 Managing Foreign Currency Exposure at 3M 650 Pakistan Takes Another IMF Loan 652 Saudi Aramco 654 Red Bull 656 Dow Chemical’s Global Matrix Structure 658 Walmart International 660 IKEA Entering India, Finally! 662 Higher Education Exporting and International Competitiveness 664 Blockchain Technology and Global Supply Chains 666 Marketing Sneakers 668 Global Mobility at Shell 670 Glossary 672 Indexes 683 vi THE PROVEN CHOICE FOR INTERNATIONAL BUSINESS RELEVANT. COMPREHENSIVE AND UP-TO-DATE It is now more than a quarter of a century since work To be relevant and comprehensive, an international busi- began on the first edition of International Business: ness package must Competing in the Global Marketplace. By the third edition ∙ Explain how and why the world’s cultures, the book was the most widely used international business c ountries, and regions differ. text in the world.
Since then its market share has only increased. The success of the book can be attributed to a ∙ Cover economics and politics of international number of unique features. Specifically, for the fourteenth trade and investment. edition we have developed a learning program that ∙ Tackle international issues related to ethics, corporate social responsibility, and sustainability.
∙ Is comprehensive, state of the art, and timely. ∙ Explain the functions and form of the global mon- ∙ Is theoretically sound and practically relevant. ∙ Focuses on applications of international business ∙ Examine the strategies and structures of concepts. ∙ Maintains a tight integrated flow between ∙ Assess the special roles of the various functions of chapters.
an international business. ∙ Focuses on the implications of international busi- ness concepts for management practice. Relevance and comprehensiveness also require coverage of the major theories. It has always been a goal to incor- ∙ Makes important theories accessible and interest- porate the insights gleaned from recent academic scholar- ing to students.
ship into the book. Consistent with this goal, insights ∙ Incorporates ancillary resources that turbo-charge from the following research, as a sample of theoretical the text and make it easier to teach your course. streams used in the book, have been incorporated: Over the years, and through now fourteen editions, I have ∙ New trade theory and strategic trade policy. worked hard to adhere to these goals.
It has not always ∙ The work of Nobel Prize–winning economist been easy. An enormous amount has happened over the Amartya Sen on economic development. last 25 years, both in the real world of economics, poli- tics, and business, and in the academic world of theory ∙ Samuel Huntington’s influential thesis on the and empirical research. Often I have had to significantly “clash of civilizations.” rewrite chapters, scrap old examples, bring in new ones, ∙ Growth theory of economic development champi- incorporate new theory and evidence into the book, and oned by Paul Romer and Gene Grossman.
phase out older theories that are less relevant to the mod- ∙ Empirical work by Jeffrey Sachs and others on the ern and dynamic world of international business. That relationship between international trade and eco- process continues in the current edition. As noted later, nomic growth. there have been significant changes in this edition, and ∙ Michael Porter’s theory of the competitive advan- that will no doubt continue to be the case in the future.
In tage of nations. deciding what changes to make, I have been guided not only by my own reading, teaching, and research, but also ∙ Robert Reich’s work on national competitive by the invaluable feedback I receive from professors and advantage. students around the world who use the book, from review- ∙ The work of Nobel Prize–winner Douglass North ers, and from the editorial staff at McGraw Hill. My and others on national institutional structures and thanks go out to all of them.
the protection of property rights. vii ∙ The market imperfections approach to foreign global economy and the practice of international busi- direct investment that has grown out of Ronald ness. The world has changed, and the text of the book Coase and Oliver Williamson’s work on transac- reflects this reality. tion cost economics.
∙ Bartlett and Ghoshal’s research on the transna- What’s New in the 14th Edition tional corporation. The success of the first thirteen editions of International ∙ The writings of C. Prahalad and Gary Hamel Business was based in part on the incorporation of on core competencies, global competition, and leading-edge research into the text, the use of the global strategic alliances. up-to-date examples and statistics to illustrate global ∙ Insights for international business strategy that can trends and enterprise strategy, and the discussion of be derived from the resource-based view of the current events within the context of the appropriate firm and complementary theories.
Building on these strengths, our goals for the twelfth edition have focused on the following: ∙ Paul Samuelson’s critique of free trade theory. ∙ Recent empirical work of multiple academics, 1. Incorporate new insights from scholarly research. including Paul Romer, Jeffrey Sachs, and David 2.
Make sure the content covers all appropriate issues. Autor, on the economic consequences of freer 3. Make sure the text is up-to-date with current trade. events, statistics, and examples.
∙ Conceptual and empirical work on global supply 4. Add new and insightful opening and closing cases chain management—logistics, purchasing (sourc- in most chapters. ing), operations, and marketing channels. Incorporate value-added globalEDGETM features In addition to including leading-edge theory and empiri- in every chapter.
cal research, in light of the fast-changing nature of the 6. Connect every chapter to a focus on managerial international business environment, I have made every implications. effort to ensure that this product is as up-to-date as possi- 7. Provide 20 new integrated cases that can be used ble.
A significant amount has happened in the world as additional cases for specific chapters but, more since the first edition of this book. For much of the last importantly, as learning vehicles across multiple 70 years, the world has moved toward a rules-based multi- chapters. national order that has governed cross-border trade and 8. Add a new feature to the managerially focused investment.
The goal has been to lower barriers to inter- chapters of the book (Chapters 13–20) that looks national trade and investment, allowing countries to ben- at how changes in the macro environment affect efit from the gains to trade. The result has been greater international business practice. globalization and a fertile environment in which interna- tional businesses could thrive. Perhaps the high point of As part of the overall revision process, changes have been this movement was the establishment of the World Trade made to every chapter in the book.
All statistics have Organization (WTO) in 1995 and the decade that fol- been updated to incorporate the most recently available lowed. Since 2016, however, the world has lurched away data. Important current events have been incorporated from this consensus. Most notably, under the leadership into the text and discussed at length.
Within the book you of President Donald Trump, America unilaterally raised will find comprehensive discussion of the ongoing trade trade barriers and entered into a trade war with China.