Brian Chen

July 14, 2008

Introduction to Course
About the GSI
Overview of the Course
Course Expectations
Course Grading and Policy
About the Sections

Chapter 1: Introduction and Overview

Chapter 1 Exercise: Globalization Exercise

Chapter 2: National Differences in

Political Economy

Chapter 2 Exercise: Case The Troubled Giant

Fifth-Year PhD Candidate in Business and

Public Policy Group, Haas School of Business,
UC Berkeley
Research Interests:

Education:

Health Care Management and Health Policy,

Regulation, Law and Economics, International Law
and Business
Harvard College 1992, Stanford Law School 1997

Work Experience:

Air Liquide (Paris, France); Teisan KK (Tokyo, Japan),

Baker & McKenzie (Taipei, Taiwan); Sullivan &
Cromwell (New York), Orrick Herrington & Sutcliffe
(San Francisco), Kaohsiung Medical University
(Kaohsiung, Taiwan)

Course is divided into two major themes:

(1) The political, economic, and financial landscape of

international business
Instills awareness of the issues a firm might encounter in

international business:

Globalization of the marketplace, differences that remain in the

global marketplace (culture, ethics, etc), the international trade
/investment environment, political economy of trade, foreign
exchange and international monetary system

(2) Firm Strategies to undertake in order to operate in a

global arena
With an awareness of the political, economic, and financial

landscape of international business, how do firms operate

transnationally?

Strategy in general, entry strategy, alliances,

exporting/importing, global production/outsourcing/logistics,
global marketing, R&D, global human resource management,
international financial management

Note that Midterm Examination is placed right between the

two parts of the course

Thorough understanding of the landscape

of international business and issues
arising therefrom in the course of
conducting international business
To perform well in the course:
Thorough grasp of material (lecture and
cases) as demonstrated in examinations
Participation in class and section
Excellent participation grade *may* help move
your grade one level up (e.g., from B+ to A-)

Word about academic honesty:

No plagiarism: pasting sentences or paragraphs

from various sources without attribution DOES
constitute plagiarism. Copying from another
student also constitutes plagiarism
No dishonesty in attendance: Signing in for one or
more other students constitutes academic
dishonesty
No dishonesty in examination: No talking or
exchanging notes during examination
Students caught committing an act of academic
dishonesty will automatically fail the assignment
or the course

Final course grade is determined by a rough

curve
Many UC Berkeley undergraduate courses curved
around a C+. This course was curved around a B
last semester
Spring 2007: the top 13 received an A, the next
24 an A-, the next 28 a B+, the next 21 a B, the
next 11 a B-, the next 2 a C+, the next 7 a C, the
next 6 a C-, and a D for the bottom 3 students
In other words, 1/3 of the class received some
type of A
And to emphasize: active participation in section
and in class can only help you

Goal: To apply concepts learned in class

through discussion
GSI is merely a facilitator and an agendasetter
Format:

(1) One-slide review of the previous section

(2) Review of important points in lecture
(3) If necessary, overflow material from the class
(4) Two to four lecture-related topics to discuss in
small groups and in class
Topics may be drawn from the textbook, from the

professor, or self-prepared by the GSI

Quality trumps quantity

HOWEVER, NO POINT IS EVER DEDUCTED FOR
WRONG ANSWERS
Again, to emphasize, there is only upside
potential by participating in section discussions
GSI will attempt to permit a diverse group of
students to answer questions on a voluntarily basis
However, in the event of lack of participation, GSI
may cold call
Foreign students are especially welcome to share
their experiences, so please do not allow perceived
linguistic barriers to get in way

Globalization: Definition, Market, Production

Global Institutions

GATT, WTO, IMF, World Bank, UN

Drivers of globalization

Is the globalization of markets universal?

Declining barriers
Technological change

How the Global Economy is Changing

Output is shifting
FDI destination is shifting East
MNE

Globalization Debate
Jobs and income security
Labor policies and the environment
National Sovereignty

Understand what is meant by the term

globalization.
Be familiar with the main drivers of
globalization.
Appreciate the changing nature of the global
economy.
Understand the major arguments in the
debate over the impact of globalization.
Appreciate how the process of globalization
is creating opportunities and challenges for
business managers.

(1) Describe how international business has

affected you in your daily life. Think about who
made the clothes youre wearing, what type of
food you ate for breakfast or lunch (muesli cereal,
sushi, Italian-style coffee), what type of cell phone
you have and where it was made, where your car
was designed and manufactured, where the
components for your computer were
manufactured, and so on.
(2) Why (or why not) are so many of the products
you use made abroad? Which are the ones made
abroad? (Think about an integrated world
economy vs. distinct national economies )

Describe the shifts in the world economy

over the past 30 years. What are the
implications of these shifts for
international businesses based in Europe?
North America? Hong Kong/Taiwan?

The study of international business is

fine if you are going to work in a large
multinational enterprise, but it has no
relevance for individuals who are going to
work in small firms. Evaluate this
statement.

How have changes in technology

contributed to the globalization of
markets and production? Would the
globalization of production and markets
have been possible without these
technological changes?

When grading:
Questions asking mere facts are weighted
less
Questions asking for inferences and
requiring careful analysis are weighted
more
As much as possible, consider both sides
of the issue
Imagine as many likely scenarios as
possible when asked to make a guess

Does globalization cause poverty?

Why are so many people opposed to
globalization?
Does globalization diminish cultural
diversity?
Can globalization be controlled?

Political Systems: Collectivism/Socialism vs.

Individualism; Democracy vs. Totalitarianism
Economic Systems: Market Economy vs.
Command Economy vs. Mixed Economy
Legal Systems: Common Law, Civil Law,
Theocratic Law
Contract Law: Property Rights, Private Action,
Public Action, Foreign Corrupt Practices Act
Intellectual Property: Patent, Copyrights,
Trademarks, (TRIPS)

Determinants of Economic Development

Measuring economic development: PPP, GDP,

Amartya Sen
Political Economy:
Innovation as engine of growth.
Innovation requires market economy
Innovation requires strong property rights
But what is the right political system?
Does progress lead to democracy?

Geography and Education on development

States in transition: What is the general

trend in political economy worldwide?

Understand how the political systems of countries

differ.
Understand how the economic systems of countries
differ.
Understand how the legal systems of countries differ.
Be able to explain what determines the level of
economic development of a nation.
Discuss the macro-political and economic changes
taking place worldwide.
Describe how transition economies are moving
towards market based systems.
Articulate the implications for management practice
of national differences in political economy.

QUESTION 1: What political factors

explain Indonesias poor economic
performance? What economic factors?
Are the two related?

The political factors are totalitarianism,

corruption and red tape. The economic
factors are the flight of foreign capital
and poor infrastructure. Yes, they are
related.

For 30 years, Indonesia was run under a

dictatorship style government where internal
dissent was repressed. Today, while a
democracy is in place, the country continues
to be plagued by corruption and red tape.
Foreign capital is fleeing the country, and the
infrastructure is in desperate need of
improvement. All of these factors have
contributed to the nations poor economic
climate. Indonesias political and economic
situations are intertwined, and that to fix one
area, changes will have to made to the other.

For thirty years, Indonesias economy grew steadily under the ironclad rule of President Suharto
but at the heavy cost of internal suppression of dissent. This suppression of dissent robbed
Indonesias economy of the vitality and incentives associated with a free-market economy in which
individual property owners, who in the process of seeking to accumulate wealth enrich the entire
economy and create economic growth. While Indonesia has since overthrown the dictatorial
government, corruption and red tape remain rife at almost all levels of government in Indonesia. A
World Bank study revealed how excessive red tape in Indonesia hurts business activities: An
entrepreneur in Indonesia must wait an average of 151 days to complete the necessary paperwork to
start a business, compared to 30 days in Malaysia and a mere 8 days in Singapore, severely hampering
the Indonesian entrepreneurs speed and desire to participate in the economy. In turn, the excessive
red tape translates into long lines of government bureaucrats, whose low salaries make it attractive for
them to seek a bribe at every step of the business transaction, further distracting and detracting the
entrepreneur from legitimate business pursuits.
In addition to these political factors, Indonesia also suffers from economics factors that hinder
growth. Indonesias poor infrastructure makes it difficult to conduct business: A poor infrastructure in
roads signifies that it is difficult to transport goods and services to the consumers, and may even
hinder export-related businesses if companies cannot ship the finished intermediary or final products to
their intended customers abroad. The unreliability of the electric grid means that production and even
administrative activities can be interrupted at any moment. Together, these inhospitable business
climates decrease business confidence in Indonesia, leading to capital flight and a decrease in
investments, shaking the very foundation of economic growth.
The political and economic factors that hinder growth in Indonesia are indeed intertwined. The
unfriendly political environment makes it less likely that foreign or domestic capital would be interested
in investing in Indonesia because of the business costs associated with red tape and corruption. In
turn, the lack in investment feeds the desire of government officials to continue to seek bribes and
create red tape in order to supplement their low income due to a stagnant or slow-growing economy.

QUESTION 2: Why do you think foreign

firms have been exiting Indonesia in
recent years? What are the implications
for the country? What is required to
reverse this trend?

QUESTION 3: Why is corruption so

endemic in Indonesia? What are its
consequences?

QUESTION 4: What are the risks facing

foreign firms that do business in
Indonesia? What is required to reduce
these risks?

How is the case related to the course

material?

Do not be surprised if the questions ask

for the same answers from different
angles.
However, this is not always the case.
Use your judgment.
REMEMBER: The best answers support
their claims with facts or logic.

Free market economies stimulate greater

economic growth, whereas state-directed
economies stifle growth. Discuss.

A democratic political system is an

essential condition for sustained
economic progress. Discuss.

What is the relationship between

corruption in a country (i.e., bribe taking
by government officials) and economic
growth? Is corruption always bad?

The Nobel Prize-winning economic

Armatya Sen argues that the concept of
development should be broadened to
include more than just economic
development. What other factors does
Sen think should be included in an
assessment of development? How might
adoption of Sens views influence
government policy? Do you think Sen is
right that development is about more than
just economic development? Explain.

You are the CEO of a company that has to

choose between making a $100 million
investment in Russia or the Czech
Republic. Both investments promise the
same long-run return, so your choice is
driven by risk considerations. Assess the
various risks of doing business in each of
these nations. Which investment would
you favor and why?
Consider: political risks, economic risks,
legal risks

Many Factories in Chinas South Sound

Last Whistle
The Forbidden City of Terry Gou
Look Whos Pumping Out Engineers?
How are they related to the course
material?
What do they teach us?
Do you agree with the message(s) of the
articles?