Solution Manual For
Global Business Today 7th Canadian Edition By Charles W. L. Hill, Thomas McKaig, Frank
Cotae, Jacqueline Musabende
Chapter 1-16
CHAPTER 1
GLOBALIZATION
LEARNING OBJECTIVES.
1. Define the terms globalization, globalization of markets, and globalization of production.
2. Examine the rise and functions of global institutions.
3. Recognize why globalization and innovation are now proceeding at a rapid rate.
4. Describe the changing demographics of the global economy.
5. Explain the main arguments in the debate over the impact of globalization on job
security, income levels, labour and environmental policies, and national sovereignty.
6. Show how the process of globalization is giving rise to numerous opportunities and
challenges that business managers must confront in Canada and beyond.
7. Understand how establishing and committing to a global supply chain code of conduct
can result in sustainable international operations.
CHAPTER SUMMARY
This opening chapter introduces the reader to the concepts of globalization and international
trade, providing 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 role 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 in world trade. This
discussion is complemented by a description of the changing world order, and the rise of China
and the global economy of the twenty-first century. It also addresses some of the changing views
towards globalization. The chapter ends with a candid overview of the pros and cons of
globalization and how to manage in the global marketplace.
OPENING CASE: Tim Hortons and Burger King
Summary
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,Tim Hortons is a Canadian multinational coffeehouse and restaurant chain. Based in Toronto,
Tim Hortons serves coffee, doughnuts, and other fast-food items. It is generally seen as a
Canadian example of a successful corporation. Besides being an economic juggernaut, it has
reached cultural identification status in Canadian communities. Despite its success in Canada and
in several international markets, the company identified the domestic market as mature, with
weak international presence and costs. Burger King, a multinational corporation with operations
mainly in the United States, identified a need to diversify its portfolio by securing presence and
growth in new markets and a better competitive position, alongside increasing profit margins.
Both companies‘ management evaluated each other‘s operations as they pursued synergies for
operational improvements, competitor‘s position, and future growth.
In 2014 the two companies officially merged—an $11.4 billion transaction, resulting in the
creation of a new company—Restaurant Brands International. The new company, based in
Canada and global in reach, registered sales of $23 billion annually and operated 18,000
restaurants. As a true lesson in globalization, Burger King, while headquartered in the United
States, is owned by 3G Capital, a Brazilian investment firm. Therefore, Tim Hortons has become
a holding of 3G Capital.
The transaction did come with conditions: the government of Canada needed to approve the
transaction and Tim Hortons and Burger King were to retain their own operations and
headquarters—in Canada and the United States, respectively. Government approval was
needed—as a rule, Industry Canada allows foreign takeovers only after a review that determines
if the deal is a ―net benefit‖ to the country. The transaction and cross-border acquisition were
allowed to move forward.
In 2020, after an assessment of the benefit of the transaction, a complex picture emerged: a
modest increase in sales, increased earnings per share, and a consolidated net income increase of
70 percent between 2015 and 2018. The transaction is an example of a cross-border acquisition
as well as a market entry strategy where government rules and market analysis played their part
in the absence of barriers and protectionism.
Questions
1. How did Tim Hortons and Burger King merger globalize Restaurant Brands
International (RBI)?
Answer: The Tim Hortons and Burger King merger expanded Restaurant Brands International
(RBI) globally by combining operational strengths, enhancing competitiveness, and driving
growth strategies.
2. What role did government approval and regulations play in the Tim Hortons and Burger
King merger?
Answer: Government approval, particularly from Industry Canada, was key for the Tim Hortons
and Burger King merger, ensuring compliance with regulations and conditions to safeguard
Canadian interests, ultimately facilitating the creation of Restaurant Brands International (RBI).
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,INTRODUCTION
A) Globalization refers to the trend towards a more integrated global economic system.
Teaching Tip: Ask students how globalization impacts them on a daily basis, using the example
of a Canadian who drives a German-designed car (see second paragraph that begins with, ―The
global dispersal of production …‖).
B) Globalization raises a multitude of issues for businesses to consider. These include both new
opportunities like:
• Expanding revenues
• Driving down costs, and
• Boosting profits.
It also includes new challenges like:
• How best to expand into a foreign market,
• Whether and how to customize product offerings, marketing, human resource practices,
and business strategies take into account cultural differences, and
• How best to address efficient foreign competitors entering their home marketplace.
C) The Opening Case, Globalization of Production at Boeing, describes how a multinational
conglomerate is managing globalization, and the challenges that arise for the company.
Teaching Tip: Give students time to review the opening case in class, if necessary. Discussion
questions could include:
• How is a national company defined?
• Is Boeing now an American company?
• What are other examples of similar ―American‖ companies with large global supply
chains (e.g. Apple, Nike)? How are they defined (e.g. if they make or sell products
outside the U.S.)?
Discussion of the Bombardier case provides a natural lead-in to the next topic - the globalization
of the world economy and the drivers of globalization.
LO1 WHAT IS GLOBALIZATION?
A) Globalization involves a shift towards a more integrated and interdependent economy.
Markets, production, and consumers are each becoming globalized.
The Globalization of Markets
B) The globalization of markets refers to the trend across many industries with historically
distinct national markets to merge into one single global marketplace where consumer tastes and
preferences in different nations are beginning to converge upon a new global norm for their
products (e.g. Coca-Cola, McDonalds). At the same time, significant differences between
countries means that product features and marketing strategies still need to be customized to
local conditions (e.g. automakers will produce different models based on factors such as local
fuel costs, income levels, and cultural values).
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, Teaching Tip: To gain insight into current challenges that Canadian firms have when going
global visit Export Development Canada at http://www.edc.ca.
The Globalization of Production
C) The globalization of production refers to the practice of many industries to source goods and
services from multiple locations in an attempt to take advantage of national differences in the
cost and quality of components of production, thereby allowing them to compete more
effectively against their rivals. The Opening Case and examples in this chapter illustrate how
production is dispersed, but at the same time highlight that trade and investment barriers still
exist due to transportation costs, political environments and economic risk.
LO2 THE EMERGENCE OF GLOBAL INSTITUTIONS
A) Post-World War II, a number of global institutions have been created to help manage,
regulate, and police the global marketplace, and to promote the creation of multinational treaties.
• The World Trade Organization (WTO) (which replaced the General Agreement on Tariffs
and Trade (GATT) in 1995) ensures that nations adhere to treaty rules.
• The International Monetary Fund (IMF) monitors the world‘s currencies and provides
stability to the international monetary system, while its partner organization, the World
Bank works primarily with developing countries to reduce poverty and promote economic
development.
• The United Nations (UN) maintains international peace and security, develops friendly
relations among nations, fosters cooperation in solving international problems, and promotes
human rights through various bodies such as the International Court of Justice.
Teaching Tip: Discuss the roles of these international organizations generally. Questions could
include:
• What are their various strengths and weaknesses?
• How well do they function?
• Are they still relevant today? How? Or why not?
LO3 DRIVERS OF GLOBALIZATION
Two macro factors underlie the trend toward greater globalization: the reduction of barriers to
the free flow of goods, services, and capital that has been advanced since the end of World War
II, and technological change.
Declining Trade and Investment Barriers
Under the GATT, established after World War II, over 100 nations negotiated decreases in tariffs
and made significant progress on a number of non-tariff issues (e.g. intellectual property, trade in
services). With the establishment of the WTO in 1995 (replacing the GATT), a mechanism now
exists for dispute resolution and the enforcement of trade laws. The WTO‘s slow processes,
however, indicate a lack of consensus about the benefits of reducing trade barriers.
This removal of barriers to trade has taken place in conjunction with increased international trade
(the export of goods or services to consumers in another country), world output, and foreign
direct investment.
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