GLOBAL BUSINESS

GLOBAL BUSINESS

Third Edition

Mike W. Peng, Ph.D. Jindal Chair of Global Business Strategy

Executive Director, Center for Global Business Jindal School of Management University of Texas at Dallas

Fellow, Academy of International Business

Australia Brazil Japan Korea Mexico Singapore Spain United Kingdom United States

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Global Business, Third Edition Mike W. Peng

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To Agnes, Grace, and James

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Preface ix

About the Author xix

Part 1 Laying Foundations 1

Chapter 1: Globalizing Business 2

Chapter 2: Understanding Formal Institutions: Politics, Laws, and Economics 32

Chapter 3: Emphasizing Informal Institutions: Cultures, Ethics, and Norms 62

Chapter 4: Leveraging Resources and Capabilities 92

PengAtlas 1 118

Integrative Cases 124

Part 2 Acquiring Tools 139

Chapter 5: Trading Internationally 140

Chapter 6: Investing Abroad Directly 174

Chapter 7: Dealing With Foreign Exchange 204

Chapter 8: Capitalizing on Global and Regional Integration 232

PengAtlas 2 264

Integrative Cases 270

Part 3 Strategizing around the Globe 285

Chapter 9: Growing and Internationalizing the Entrepreneurial Firm 286

Chapter 10: Entering Foreign Markets 310

Chapter 11: Managing Global Competitive Dynamics 336

Chapter 12: Making Alliances and Acquisitions Work 364

Chapter 13: Strategizing, Structuring, and Learning around the World 394

PengAtlas 3 424

Integrative Cases 428

Part 4 Building Functional Excellence 465

Chapter 14: Competing on Marketing and Supply Chain Management 466

Chapter 15: Managing Human Resources Globally 492

Brief Contents

iv

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Brief Contents v

Chapter 16: Financing and Governing the Corporation Globally 522

Chapter 17: Managing Corporate Social Responsibility Globally 552

PengAtlas 4 578

Integrative Cases 582

Glossary 598

Name Index 607

Organization Index 617

Subject Index 621

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Preface ix

About the Author xix

Part 1 Laying Foundations 1

Chapter 1: Globalizing Business 2

What Is Global Business? 4

Why Study Global Business? 10

A Unified Framework 14

What Is Globalization? 18

Global Business and Globalization at a Crossroads 21

Organization of the Book 25

Chapter 2: Understanding Formal Institutions: Politics, Laws, and Economics 32

Understanding Institutions 35

What Do Institutions Do? 36

An Institution-Based View of Global Business 38

Political Systems 40

Legal Systems 43

Economic Systems 47

Debates and Extensions 48

Management Savvy 54

Chapter 3: Emphasizing Informal Institutions: Cultures, Ethics, and Norms 62

Where Do Informal Institutions Come From? 64

Culture 65

Cultural Differences 70

Ethics 78

Norms and Ethical Challenges 80

Debates and Extensions 81

Management Savvy 84

Chapter 4: Leveraging Resources and Capabilities 92

Understanding Resources and Capabilities 94

Resources, Capabilities, and the Value Chain 96

From SWOT to VRIO 100

Debates and Extensions 104

Management Savvy 109

Part 1 Integrative Cases 124

1.1 Coca-Cola in Africa 124

1.2 Whose Law Is Bigger: Arbitrating Government-Firm Disputes in the EU 126

1.3 Fighting Counterfeit Motion Pictures 128

1.4 Brazil’s Embraer: From State-Owned Enterprise to Global Leader 131

1.5 Microsoft in China 136

Part 2 Acquiring Tools 139

Chapter 5: Trading Internationally 140

Why Do Nations Trade? 143

Theories of International Trade 145

Realities of International Trade 158

Debates and Extensions 163

Management Savvy 166

Chapter 6: Investing Abroad Directly 174

Understanding the FDI Vocabulary 176

Why Do Firms Become MNEs by Engaging in FDI? 180

Realities of FDI 186

How MNEs and Host Governments Bargain 190

Debates and Extensions 192

Management Savvy 195

Chapter 7: Dealing with Foreign Exchange 204

What Determines Foreign Exchange Rates? 206

Evolution of the International Monetary System 214

Strategic Responses to Foreign Exchange Movements 218

Debates and Extensions 221

Management Savvy 225

Table of Contents

vi

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Chapter 11: Managing Global Competitive Dynamics 336

Competition, Cooperation, and Collusion 339

Institutions Governing Domestic and International Competition 343

Resources Influencing Competitive Dynamics 346

Attacks, Counterattacks, and Signaling 350

Local Firms versus Multinational Enterprises 351

Debates and Extensions 352

Management Savvy 356

Chapter 12: Making Alliances and Acquisitions Work 364

Defining Alliances and Acquisitions 367

Institutions, Resources, Alliances, and Acquisitions 368

Formation of Alliances 374

Evolution and Dissolution of Alliances 376

Performance of Alliances 378

Motives for Acquisitions 379

Performance of Acquisitions 383

Debates and Extensions 384

Management Savvy 386

Chapter 13: Strategizing, Structuring, and Learning around the World 394

Multinational Strategies and Structures 396

How Institutions and Resources Affect Multinational Strategies, Structures, and Learning 404

Worldwide Learning, Innovation, and Knowledge Management 408

Debates and Extensions 412

Management Savvy 415

Part 3 Integrative Cases 428

3.1 Wikimart: Building a Russian Version of Amazon 428

3.2 Private Military Companies 431

3.3 Amazon, Bookoff, and the Japanese Bookselling Industry 435

3.4 Huawei’s Intellectual Property War 438

3.5 Is A Diamond (Cartel) Forever? 446

3.6 The TNK-BP Joint Venture 452

Chapter 8: Capitalizing on Global and Regional Integration 232

Global Economic Integration 234

Organizing World Trade 237

Regional Economic Integration 240

Regional Economic Integration in Europe 242

Regional Economic Integration in the Americas 248

Regional Economic Integration in the Asia Pacific 250

Regional Economic Integration in Africa 252

Debates and Extensions 253

Management Savvy 256

Part 2 Integrative Cases 270

2.1 Canada and the United States Fight Over Pigs 270

2.2 Foreign Direct Investment in the Indian Retail Industry 272

2.3 The Fate of Opel 274

2.4 Jobek do Brasil’s Foreign Exchange Challenges 276

2.5 The EU–Korea Free Trade Agreement 279

Part 3 Strategizing around the Globe 285

Chapter 9: Growing and Internationalizing the Entrepreneurial Firm 286

Entrepreneurship and Entrepreneurial Firms 289

Institutions, Resources, and Entrepreneurship 289

Growing the Entrepreneurial Firm 293

Internationalizing the Entrepreneurial Firm 298

Debates and Extensions 301

Management Savvy 303

Chapter 10: Entering Foreign Markets 310

Overcoming the Liability of Foreignness 312

Where to Enter? 315

When to Enter? 318

How to Enter? 320

Debates and Extensions 326

Management Savvy 329

Contents vii

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3.7 Geely’s Acquisition of Volvo 455

3.8 Hilton Welcomes Chinese Travelers at Home and Abroad 459

Part 4 Building Functional Excellence 465

Chapter 14: Competing on Marketing and Supply Chain Management 466

Three of the Four Ps in Marketing 468

From Distribution Channel to Supply Chain Management 474

The Triple As in Supply Chain Management 475

How Institutions and Resources Affect Marketing and Supply Chain Management 478

Debates and Extensions 481

Management Savvy 483

Chapter 15: Managing Human Resources Globally 492

Staffing 495

Training and Development 500

Compensation and Performance Appraisal 502

Labor Relations 505

Institutions, Resources, and Human Resource Management 506

Debates and Extensions 511

Management Savvy 513

Chapter 16: Financing and Governing the Corporation Globally 522

Financing Decisions 525

Owners 526

Managers 528

Board of Directors 532

Governance Mechanisms as a Package 534

A Global Perspective 536

Institutions, Resources, and Corporate Finance and Governance 538

Debates and Extensions 543

Management Savvy 544

Chapter 17: Managing Corporate Social Responsibility Globally 552

A Stakeholder View of the Firm 555

Institutions, Resources, and Corporate Social Responsibility 561

Debates and Extensions 568

Management Savvy 569

Part 4 Integrative Cases 582

4.1 ESET: From a “Living-Room” Firm to a Global Player in the Antivirus Software Industry 582

4.2 Dallas Versus Delhi 586

4.3 Microfinance: Macro Success or Global Mess? 587

4.4 Sino Iron: Engaging Stakeholders in Australia 589

4.5 Foxconn 595

Glossary 598

Name Index 607

Organization Index 617

Subject Index 621

viii Contents

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Preface

The first two editions of Global Business aspired to set a new standard for interna- tional business (IB) textbooks. Based on the enthusiastic support from students and instructors in Australia, Brazil, Britain, Canada, China, Egypt, France, Hong Kong, India, Indonesia, Ireland, Israel, Lithuania, Malaysia, Puerto Rico, Russia, Slovenia, South Africa, South Korea, Taiwan, Thailand, and the United States, the first two editions achieved unprecedented success. A Chinese translation is now available and a European adaptation (coauthored with Klaus Meyer) has been suc- cessfully launched. In short, Global Business is global.

The third edition aspires to do even better. It continues the market-winning framework centered on one big question and two core perspectives pioneered in the first edition, and has been thoroughly updated to capture the rapidly moving research and events of the past few years. Written for undergraduate and MBA students around the world, the third edition will continue to make IB teaching and learning more (1) engaging, (2) comprehensive, (3) fun, and (4) relevant.

More Engaging As an innovation in IB textbooks, a unified framework integrates all chapters.

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