0273701746_04_COVER 15/11/05 11:39 am Page 1 INTERNATIONAL BUSINESS “This excellent text provides a focused, comprehensive and relevant coverage of ALAN M. RUGMAN AND SIMON COLLINSON contemporary international business. Theory and practice are combined, making a highly readable text, and its wealth of case material makes it a text that students should find both stimulating and challenging.” Jean Barclay, Sheffield Hallam University Outsourcing. These are just three of the many key issues currently facing international businesses, all of which are examined in the fourth edition of this well- respected textbook.
INTERNATIONAL BUSINESS Taking a regional approach, the text challenges some of the underlying assumptions behind globalization and focuses on both the dominant economies – the EU, the US and Japan – as well as emerging markets, such as Brazil, India and China, of world trade. The book also integrates analysis of the competitive environment and the 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 be invaluable for anyone studying international business as part of a degree programme and aiming to attain a 4TH EDITION confident and thorough understanding of the subject.
“Professor Rugman brings his diverse and knowledgeable background to this highly successful textbook, making it the most practical, interesting and current international business management text available.” Marcel Kohler, University of KwaZulu-Natal “The book is well written, richly Key features include: illustrated with real-life cases and • 100 up-to-date cases on organizations such as gives an excellent overview of the Amazon, Carrefour and Kodak field. The fourth edition particularly • Detailed exploration of culture, corporate addresses a number of topics that are 4TH responsibility and the natural environment often overlooked, or underestimated, EDITION • Specific coverage of key geographical regions of in other international business international business publications.” COLLINSON RUGMAN • Analysis of the environment and firm provides central Dr Matthijs Wolters, Vrije Universiteit strategic focus Amsterdam • Interactive teaching and learning resources including animation and video at www.uk/rugman Alan M. Rugman is Professor of International Business and L. Leslie Waters Chair in International Business, Indiana University and Associate Fellow at Templeton College, University of Oxford.
Simon Collinson is Senior Lecturer in International Business at Warwick Business School, the University of Warwick.com An imprint of Cover image © Alamy Images INBU_A01.QXD 11/11/05 12:00 AM Page i INTERNATIONAL BUSINESS Visit the International Business, fourth edition, Companion Website at www.uk/rugman to find valuable student learning material, 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 INBU_A01.QXD 11/11/05 12:00 AM Page ii 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 and electronic publications which help readers to understand and apply their content, whether studying or at work. To find out more about the complete range of our publishing please visit us on the World Wide Web at: www.QXD 11/11/05 12:00 AM Page iii Fourth Edition INTERNATIONAL BUSINESS Alan M. Rugman Kelley School of Business, Indiana University Simon Collinson Warwick Business School, The University of Warwick Richard M.QXD 11/11/05 12:00 AM Page iv Pearson Education Limited Edinburgh Gate Harlow Essex CM20 2JE England and Associated Companies throughout the world Visit us on the World Wide Web at: http://www.uk First published by McGraw-Hill, Inc.
1995 Fourth 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 been asserted 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: 978-0-273-70174-3 ISBN 10: 0-273-70174-6 British Library Cataloguing-in-Publication Data A 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. Includes bibliographical references and index. International business enterprises—Management.049—dc22 2005054646 10 9 8 7 6 5 4 3 2 1 09 08 07 06 Typeset by 72 in 10/12.5 Minion Printed by Mateu Cromo Artes Graficas, Spain INBU_A01.QXD 11/11/05 12:00 AM Page v Contents in Brief List of Figures, Tables, and Maps xv Preface xix About the Authors xx Guide to the Case Studies xxiii Guided Tour of the Book xxviii Guided Tour of the Companion Website xxx Acknowledgments 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 631 Subject Index 643 Company Index 654 Name Index 657 v INBU_A01.QXD 11/11/05 12:00 AM Page vi Contents List of Figures, Tables, and Maps xv Key terms 25 Preface xix Review and discussion questions 25 About the Authors xx ■ REAL CASES Guide to the Case Studies xxiii Big oil gets bigger 26 Guided Tour of the Book xxviii Wal-Mart 27 Guided Tour of the Companion Website xxx Endnotes 29 Acknowledgments xxxii Additional bibliography 29 Appendixes to Chapter 1 31 Part One THE WORLD OF INTERNATIONAL BUSINESS Chapter 2 The Multinational Enterprise 36 Chapter 1 Objectives of the chapter 36 Regional and Global Strategy 3 ■ ACTIVE LEARNING CASE Disneyland in Europe 37 Objectives of the chapter 3 Introduction 38 ■ ACTIVE LEARNING CASE The nature of multinational enterprises 39 Coke goes worldwide with a local Characteristics of multinational strategy 4 enterprises 39 Introduction 5 The internationalization process 41 World business: a brief overview 6 Why firms become multinational Exports and imports 6 enterprises 43 Foreign direct investment 7 ■ INTERNATIONAL BUSINESS STRATEGY IN ACTION The triad 10 Italian family firms 44 Today’s international environment 12 The strategic philosophy of multinational International trade regulation 12 enterprises 45 Technology 13 Strategic management and multinational Small and medium-sized enterprises (SMEs) 13 enterprises 46 ■ INTERNATIONAL BUSINESS STRATEGY IN ACTION Strategic management of MNEs: an Amazon.com 14 introduction 46 Globalization and strategic management 15 ■ INTERNATIONAL BUSINESS STRATEGY IN ACTION Regional triad strategies 15 Nestlé 48 Maintaining economic competitiveness 16 A framework for global strategies: Multinationals in action 19 the CSA-FSA matrix 49 ■ INTERNATIONAL BUSINESS STRATEGY IN ACTION The competitive advantage matrix 50 The Italian tile industry 20 Multinationals in action 52 Solectron 52 The study of international business 22 BMW 52 From general to strategic emphasis 22 Levi Strauss 53 Framework for this book 23 Canon 54 Key points 25 Zara 54 vi INBU_A01.QXD 11/11/05 12:00 AM Page vii CONTENTS Key points 57 Part Two Key terms 57 Review and discussion questions 58 THE ENVIRONMENT OF ■ REAL CASES INTERNATIONAL BUSINESS Starbucks 58 Sony 59 Chapter 4 Endnotes 61 Additional bibliography 61 International Politics 99 Appendixes to Chapter 2 63 Objectives of the chapter 99 ■ ACTIVE LEARNING CASE How risky is investment in Russia? 100 Chapter 3 Introduction 101 The Triad and International Business 67 Political ideologies and economics 102 Political systems 102 Objectives of the chapter 67 Economic systems 103 ■ ACTIVE LEARNING CASE ■ INTERNATIONAL BUSINESS STRATEGY IN ACTION Boeing versus Airbus 68 Softwood lumber: not-so-free trade 104 Introduction 69 Government control of assets 105 Reasons for foreign direct investment 70 Government–business cooperation 106 Increase sales and profits 71 Economic integration 108 Enter rapidly growing markets 72 Trade creation and trade diversion 108 Reduce costs 72 Levels of economic integration 109 ■ INTERNATIONAL BUSINESS STRATEGY IN ACTION Economic integration: an overall perspective 110 Aflac 73 Ethics, environment, MNEs, and the civil society 111 ■ INTERNATIONAL BUSINESS STRATEGY IN ACTION ■ INTERNATIONAL BUSINESS STRATEGY IN ACTION Non-governmental organizations and Lafarge and Cemex: concrete multinationals 74 political power 112 Gain a foothold in economic blocs 75 The European Union (EU) 114 Protect domestic markets 76 Other examples of economic integration 116 Protect foreign markets 76 Acquire technological and managerial Economic integration and strategic management 118 know-how 76 Strategic alliances and acquisitions 118 Localization of business operations 119 Foreign direct investment and trade by triad members 77 Key points 121 The triad’s domination of FDI and trade 77 Key terms 122 Triad FDI clusters 78 Review and discussion questions 122 Multinationals in action: regional ■ REAL CASES business strategy 79 How environmental regulations can be The world’s regional automotive used as trade barriers 123 industry 80 Embracer vs. Bombardier 124 Mergers and acquisitions 86 Endnotes 125 Key points 87 Additional bibliography 125 Key terms 87 Review and discussion questions 88 ■ REAL CASES Chapter 5 Matsushita and Philips 88 International Culture 127 Toys ”R“ Us in Europe and Japan 89 Endnotes 90 Objectives of the chapter 127 Additional bibliography 91 ■ ACTIVE LEARNING CASE Appendix to Chapter 3 93 Culture clash at Pharmacia and Upjohn 128 vii INBU_A01.QXD 11/11/05 12:00 AM Page viii CONTENTS Introduction 129 Introduction 160 What is culture? 129 International trade theory 160 The importance of culture in different Theory of absolute advantage 161 business contexts 131 Theory of comparative advantage 162 Culture has always been important 132 Factor endowment theory 163 ■ INTERNATIONAL BUSINESS STRATEGY IN ACTION International product life cycle theory 164 McDonald’s 133 Other important considerations 165 ■ INTERNATIONAL BUSINESS STRATEGY IN ACTION National stereotypes and key dimensions China’s organic food exports 166 of culture 134 Culture at two levels 134 Barriers to trade 167 Hofstede’s four dimensions of culture 134 Reasons for trade barriers 167 Trompenaars’ seven dimensions of culture 135 Commonly used barriers 168 The GLOBE project’s nine dimensions Tariffs 169 of culture 137 ■ INTERNATIONAL BUSINESS STRATEGY IN ACTION Applying the national culture frameworks 138 The EU–US courier wars 171 “The way we do things here:” The US trade policy 172 implications of cultural differences for organizations and managers 139 Non-tariff barriers to trade 172 Quotas 173 Cross-cultural management 141 “Buy national” restrictions 173 Organization 141 Customs valuation 174 Leadership 142 Technical barriers 174 Communication 142 The corporate response 143 Antidumping legislation, subsidies, and Multinational organization structures: countervailing duties 174 imperialist or independent?