Global Business Today Eleventh Edition Chapter 1

Global Business Today Eleventh Edition Chapter 1 Copyright © 2020 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw- Hill Education.1-2 Learning Objectives 1-1 Understand what is meant by the term globalization.1-2 Recognize the main drivers of globalization.1-3 Describe the changing nature of the global economy.1-4 Explain the main arguments in the debate over the impact of globalization.1-5 Understand how the process of globalization is creating opportunities and challenges for management practice.

Chapter Summary This opening chapter introduces the reader to the concepts of globalization and international trade and provides an introduction to the major issues that underlie these topics. The components of globalization are discussed, along with the drivers of globalization and the role of the General Agreement on Tariffs and Trade (GATT) and its successor the World Trade Organization (WTO) in lowering trade barriers. The influence of technological change in facilitating globalization is also discussed, along with the role of multinational firms in international business.

The chapter also describes the changing demographics of the global economy, with a special emphasis on the increasingly important role of developing countries, especially China, in world trade. This discussion is complemented by a description of the changing world order, which was brought on by the collapse of communism in Eastern Europe and republics of the former Soviet Union. The chapter ends with a candid overview of the pros and cons of the trend towards globalization.

Chapter Opening Activity Conduct this activity during the first week of class, as an icebreaker.

After students introduce themselves, ask them what their aspirant professional job will be after graduation. Organize the responses into groups on the whiteboard: accountants, supply chain managers, ERP managers, business owner or entrepreneur, marketing and sales reps, etc. Then, ask what additional skills they will need to do those jobs with international customers, suppliers, and co-workers.

The idea is to help students understand they are unlikely to be successful unless they understand globalization and develop cultural competencies. Skills they might name include: comfortable with rapid change; can understand national cultural differences; can work in diverse cultures; can adapt to diverse management, leadership, and participation styles; can understand differences in intercultural communication; can build relationships, be a lifelong learner, and others.

Instructor Manual 1 / 4

Global Business Today Eleventh Edition Chapter 1 Copyright © 2020 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw- Hill Education.1-3 Chapter Outline GM and Its Chevrolet Supercar, the Corvette ZR1

opening case

Summary The opening case explores global auto giant GM’s strategy to sell its vehicles in markets around the world. With its 180,000 strong workforce that collectively speaks 70 different languages, the multinational company has developed eight distinctive brands designed to appeal to consumers in more than 125 countries. One of GM’s most popular brands is Chevrolet. GM sells vehicles under the Chevrolet brand name in every market around the world including the iconic Corvette.The Corvette was originally introduced in 1953 and remains one of GM’s most recognized cars around the world.

Discussion Questions

• Discuss globalization and how GM epitomizes the phenomenon. How has globalization, and

specifically the globalization of markets and production, facilitated the company’s success?

Globalization refers to a world where cultural differences between countries are disappearing, barriers to cross-border trade and investment are decreasing, communication and technology are rapidly advancing, and national economies are becoming globally integrated systems. In short, globalization suggests a more integrated and interdependent world economy. For GM, the process of globalization has been important to the company’s ability to focus on just eight brands, down from twenty, yet still appeal to buyers in more than 120 countries. GM sells a Chevrolet, perhaps its most recognized brand, somewhere in the world every eight seconds! To support the eight global brands, GM relies on 180,000 employees located across five different continents.

• Why has China become such an important market for GM? How is GM responding to the high

demand for its products in China?

In recent years, China has become one of GM’s most important markets. The company currently sells about 5 million of its total sales of about 9 million vehicles in China each year. Students will probably focus on China’s rapidly emerging middle class, reduced barriers to cross-border trade and investment, and greater similarities between cultures as being important factors in GM’s success in the market. GM is increasing its commitment to China by investing in five new plants that will complement its existing operations in the country.

Teaching Tip: Students can explore GM’s operations and brands at the company's website at

http://www.gm.com.

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Global Business Today Eleventh Edition Chapter 1 Copyright © 2020 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw- Hill Education.1-4 Lecture Note: To extend the discussion, consider discussing GM’s focus on increasing sales in China over other parts of Asia, https://www.forbes.com/sites/rachelpremack/2017/11/26/general- motors-may-hack-off-yet-another-global-arm-as-south-korean-business-suffers/#375947af313f.

Introduction

• Globalization refers to the trend towards a more integrated global economic system where

barriers to cross-border trade and investment are declining, perceived distance is shrinking thanks to advances in transportation and telecommunications, and material cultures are more similar across borders.

• The effects of globalization can be seen everywhere, from the cars people drive and the food

they eat to the jobs they have and the clothes they wear.

Lecture Note: To extend this discussion, consider

http://review.chicagobooth.edu/economics/2018/article/globalization-close-its-holy-cow-moment and https://hbr.org/2017/07/globalization-in-the-age-of-trump. The first provides an alternative perspective of globalization and in particular, the role of services. The second explores globalization under the Trump Administration.

Lecture Note: The U.S. Census Bureau offers an extensive website that maintains, among other things, monthly statistics on trade between the United States and its trading partners:

https://www.census.gov/foreign-trade/index.html.

Teaching Tip: Having a global mindset is becoming an important variable in the hiring selection process at some companies. Ask your students what it means to have a global mindset. Then, ask students to think about where they stand on the global mindset tips provided in https://trainingindustry.com/articles/strategy-alignment-and-planning/5-ways-to-develop-a- global-mindset.

What Is Globalization?

• Globalization refers to the shift towards a more integrated and interdependent world

economy.

Video Note: To explore globalization from the perspective of Volvo’s global strategy, consider Volvo Cars: CEO: It’s Important to Build Cars in the U.S. in the International Business Library at . Click “Ctrl+F” on your keyboard to search for the video title.

provides an ongoing stream of updated video suggestions correlated by key concept and major topic. Every new clip posted is supported by teaching notes and discussion questions. Please feel free to leave comments in the library that you feel might be helpful to your colleagues. 3 / 4

Global Business Today Eleventh Edition Chapter 1 Copyright © 2020 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw- Hill Education.1-5

THE GLOBALIZATION OF MARKETS

• The globalization of markets refers to the merging of historically distinct and separate

national markets into one huge global marketplace in which the tastes and preferences of consumers in different nations are beginning to converge upon some global norm. The global acceptance of Coca-Cola, Citigroup credit cards, IKEA furniture, and McDonald's hamburgers are all examples. Firms, large and small, not only benefit from the globalization of markets, but they also, by offering the same basic products worldwide, facilitate the trend.

• Yet there are still significant differences between markets that frequently require that

marketing strategies, product features, and operating practices be customized for a country. In fact, most global markets are for industrial goods and materials that serve a universal need around the world like microprocessors, rather than for consumer products. In many industries, there is no such thing as a “German market” or an “American market,” there is only a global market.

Video Note: To explore the role of globalization and global markets, consider Starbucks CEO Howard Schultz on First Roastery in Italy in the International Business Library at http://bit.ly/MHEIBVideo. Click “Ctrl+F” on your keyboard to search for the video title.

THE GLOBALIZATION OF PRODUCTION

• The globalization of production refers to the sourcing of goods and services from locations

around the globe to take advantage of national differences in the cost and quality of factors of production (such as land, labor, capital, and energy), thereby allowing them to compete more effectively against their rivals.

Video Note: To explore the role of globalization and the globalization of production, consider Was Your T-Shirt Made in North Korea? in the International Business Library at http://bit.ly/MHEIBVideo. Click “Ctrl+F” on your keyboard to search for the video title.

Did You Know Video Clip The video clip asks: “Did you know that your iPhone was assembled in China? It’s not what you might think.”

Discussion Questions

• Why do labor costs made up such a small percentage of the cost to produce an iPhone?

Because most of the costs to make one iPhone are in COGS (cost of goods sold), which are about $290 of the $650 price. About $200 is in materials, and the rest is spent on transportation, warranty, costs, and manufacturing including labor. Labor costs are between $13 and $25 per phone.

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