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InternatIonal
busIness
Geringer McNett Minor Ball
DEDICATION
Mike dedicates this book to his parents, Raymond and JoAnn, who have provided
continued support and encouragement for his writing and other life activities.
Jeanne dedicates this book to her best friends, Nick Athanassiou and Raven McCrory,
her finance professor, Dr. N. D. Qui, and her ION research buddies.
Michael dedicates this book to Angela R. Campbell, Anevay Garcia, Delsin Garcia,
and Amy E. Minor, and to the memory of his mother, father, and late wife.
ABOUT THE AUTHORS
J. Michael Geringer Jeanne M. McNett
J. Michael Geringer is the O’Bleness Professor of Inter- Jeanne M. McNett is a researcher at Northeastern
national Strategy at Ohio University. He earned a BS in University in the D’Amore-McKim College of Business
business at Indiana University and MBA and Ph.D. and Professor of Management, Emerita, at Assumption
degrees at the University of Washington. He has authored College. Dr. McNett also has taught at Morris College
or edited over 30 books and monographs, more than and the University of Maryland in their Asian and
140 published papers, and more than 40 case studies; European divisions. She earned her Ph.D. at the Univer-
he serves on the editorial boards of several leading sity of Massachusetts, Amherst, and her MBA at the Cass
international academic journals including editor-in-chief School of Business, City University, London, UK. She
or associate editor for four journals; he served as the has had expatriate assignments in Germany, the UK,
Saastamoinen Foundation chair at the Helsinki School Saudi Arabia, Japan, and Korea. Her interests include the
of Economics in Finland; he was the founding chair of role of culture in international business and the pedagogy
the Strategic Alliances Committee of the Licensing Ex- of international management. Her publications include
ecutives Society; he served as the chair of both the Inter- the Blackwell Encyclopedia of Management, Interna-
national Business and the Strategy and Policy divisions tional Management, second and third editions (Blackwell,
of the Administrative Sciences Association of Canada; 2006; Wiley, 2015); The Blackwell Handbook of Global
and he is past chair of the Academy of Management’s Management (Blackwell, 2004); and A Primer on Sus-
International Management division. His research has ap- tainability (Business Expert Press, 2014). Her teaching,
peared in Strategic Management Journal, Academy of research, and presentations have received awards,
Management Journal, Journal of International Manage- including the Roethlisberger Best Paper of the Year
ment, Columbia Journal of World Business, Management Award from the Journal of Management Education and
International Review, Journal of Management Studies, the Alpha Phi Alpha Teacher of the Year Award. She is
Human Resource Management Journal, Long Range involved in community sailing on Cape Cod and in Open
Planning, Organisation Studies, Thunderbird Interna- University Wellfleet, a community education effort.
tional Business Review, and Journal of Applied Psychol-
ogy, among others. He has received 11 “best paper”
awards for his research, including the Decade Award for
most influential article from the Journal of International
Business Studies. In addition to spending many years
living abroad, he has traveled and worked in dozens of
nations worldwide. His teaching performance has earned
numerous awards in the United States, Canada, Asia,
Africa, Australia, and Europe, including the University
Distinguished Teacher Award. In addition to many ser-
vice activities with various social and nongovernmental
organizations, Geringer is active in consulting and exec-
utive development for multinational corporations and
executives from six continents.
vii
viii About the Authors
Michael S. Minor is professor of marketing and interna- Don A. Ball, a consultant to multinational corporations,
tional business at the University of Texas Rio Grande was a professor of marketing and international business
Valley and interim chair of the marketing department. for several years after leaving industry. He has a degree
He previously served as director of the Ph.D. program in mechanical engineering from Ohio State and a doctor-
and as undergraduate program director there. He was ate in business administration from the University of
educated at the University of North Carolina, American Florida. Ball has published articles in the Journal of
University, and Cornell and holds his Ph.D. from International Business Studies and other publications.
Vanderbilt University. He began his international career Before obtaining his doctorate, he spent 15 years in vari-
in Asia, where he lived for several years. His current ous marketing and production management positions in
research interests are in consumer neuroscience, social Mexico, South America, and Europe.
network behavior, and advertising. He has published in
Journal of Retailing, Journal of Advertising, Journal
of International Business Studies, Psychology and
Marketing, International Studies of Management and
Organization, Cyberpsychology and Behavior, Journal
of Advertising Research, Academy of Management
Learning and Experience, the Wiley Encyclopedia of
Management, and elsewhere. He is the author of Flash
Marketing, and coauthor with John C. Mowen of Under-
standing Consumer Behavior and the forthcoming
Consumer Behavior: A Managerial Approach. He is a
prolific collaborator with current and former Ph.D.
students and has directed some 15 doctoral dissertations.
He is a former member of a country band and currently
plays in the band at his church. A member of BMI, he
has written nearly two dozen songs, some of which are
actually fairly good.
A LETTER TO STUDENTS
Welcome to International Business. We are enthusiastic about the field of international business
and the interesting challenges and opportunities it provides. In preparing International Business
for you, our goal is to create the most accessible and personal learning program, so that our read-
ers can share in the excitement we find in this field. Whether you are an undergraduate or are in
an MBA program, an international business course is a necessary venue for helping you explore
and understand the complexities that face us in today’s ever more global business world. Our
hope is that our content will answer questions about business in different cultures, the impact of
geography, why products are the same (or different) across cultures, why people have different
practices, the continued growth and effect of the Internet on international business, how you can
succeed in this global world and many, many more questions. The field of international business
is exciting and dynamic, so there are always new questions and sometimes there are new answers
to old questions.
Each of the 15 modules provides you with a condensed presentation of international business
topics. Within each module, contemporary, student-focused examples offer you an immediate
appreciation of the critical importance of the concept under discussion. Alongside more tradi-
tional developed-country applications throughout the text, we also integrate extensive examples
that apply to emerging-market contexts, and that highlight key changes occurring in the global
economy. All applications are current, relevant, readable, and challenging. Together they provide
you with a truly global view of business. Eye-catching photos, maps, and figures, plus exclusive
features like Get That Job! From Backpack to Briefcase vignettes and Culture Facts cultural high-
lights, reinforce the appeal and readability of the material, personalize the content, and enhance
your enjoyment and your learning. Looking for an even more personal experience, and an efficient
and effective way to study? Ask your Instructor how you can access this content via SmartBook®
or visit www.learnsmartadvantage.com.
We wish you an exciting journey of discovery within the field of international business, both
in your academic training and in your personal and professional careers!
Sincerely,
[email protected] [email protected]
ix
STORY OF THE LEARNING PROGRAM
International Business was developed to make international business more accessible and
the teaching and learning experience more personal in order to allow all students to
become informed global citizens with a global mind-set.
x
CURRENT AND RIGOROUS COVERAGE OF ESSENTIAL CONTENT
• The text’s presentation of basic concepts includes the latest research and theory
highlighted by engaging, student-centered applications. We believe rigor enriches
learning, and when combined with the exceptional readability and relevance of our
approach to the material, this rigor can motivate the learner to perform at a higher
level. Rigor, readability, and relevance differentiate our book.
• The growing role of emerging markets, including the BRIC countries of Brazil,
Russia, India, and China, is stressed in examples throughout the modules.
xi
MODULE WALKTHROUGH
International Business is organized into three sections to maximize its utility to instructors
and students alike. The opening section, Module 1, defines the nature of international busi-
ness and the three environments in which it is conducted, as well as the nature and continu-
ing importance of international institutions and how they affect business. The second
section, comprised of Modules 2 through 8, focuses on the uncontrollable forces at work in
all business environments and discusses their inevitable impact on business practice. We
devote the third and final section, Modules 9 through 15, to a discussion of how managers
deal with all the forces affecting international business.
xii
Module 10: Organizational Design and Control: Explains why the design of organiza-
tions is important to international companies and the various dimensions managers must con-
sider when designing their organizations. Explains why and how decision making is allocated
across subsidiaries of an international company, both wholly owned and jointly owned.
Module 11: Global Leadership Issues and Practices: Covers issues associated with
global leadership, including the importance of creating a global mind-set, what is different
between global leadership and domestic leadership, and the competencies necessary for
effective global leadership. Identifies approaches for selecting and developing effective
global leaders, as well as the challenges of leading global teams and global change.
Module 12: International Markets: Assessment and Entry Modes: Provides approaches
to market screening and environmental analysis. Describes some of the issues market
r esearchers may encounter in foreign markets. Explains international market entry modes.
Module 13: Marketing Internationally: Looks at considerations associated with mar-
keting products internationally and ways in which these considerations differ from domestic
marketing activity.
Addresses issues including discussion of differences between the total product, the physi-
cal product, and the brand name; considerations in deciding which parts of the marketing mix
to standardize, localize, or “glocalize”; and international pricing and distribution strategies.
Module 14: Managing Human Resources in an International Context: Examines
worldwide labor conditions and the international human resource management approach,
including recruitment, selection, training and development, expatriation, and compensation.
Identifies some of the challenges and opportunities of an expatriate position, for the expat and
for his or her family members. Describes compensation packages for expatriate executives.
Module 15: International Accounting and Financial Management: Outlines the ma-
jor accounting issues related to operating in international currencies, explores the benefits
of triple bottom line accounting, reviews capital structure choices, describes why ICs
move funds. Reviews foreign exchange risks and their hedging. Looks at taxation as an
international financial force.
xiii
STUDENT FOCUSED FEATURES
• Student focused introductory example focus on the module’s main ideas with a
narrative to which students can relate and develop a global mind-set.
Microloans give thousands of small entrepreneurs Is it right to profit from loans to theforpoor? Dr.I had
Yunis
small spurts of working capital when they need it, allow thinks not and “refuses to mention the words
a month.
about aComparta-
preparation
only been accepted for this opportunity
month before I was supposed to start, so my
was fairly
study abroad, international
them to establish credit, and let them borrow again in mos and microfinance in the same breath.” But here’s an rushed. I had no background in
hard times. The money helps them start or expand their explanation from the two friends who founded
Mandarin, so I did what I could to learn some basic
Comparta-
phrases before I left. I asked around and found a couple of
internship and volunteer work,
business and boosts the local economy. The microcredit mos in 1990. They suggest that, just likepeople food in a famine,
concept was developed by Muhammad Yunus, a U.S.- money exists in poor countries; the problem and is
who had previously spent time working in China
distribution.
I asked
they brings
them about their experiences and whether
had any private
advice for me. I did a lot of research on the
and early career decisions.
trained Bangladeshi economist, through the Grameen The potential for profit quickly and efficiently
city I was going to be living in and tried to learn all I could
Bank in Bangladesh, which he established to administer capital in touch with the people who need it, say the two.
about everyday life in China. Since I found this opportunity
his program, and by ACCION, a U.S. microcredit organi- They see going public as a way to align the world’s wealth
through AIESEC, my living arrangements and transporta-
zation. Dr. Yunus was awarded the Nobel Peace Prize in with the world’s poor. tion from the airport were already established before I left,
2006 for his work fighting poverty. View a PBS video that explores thiswhich issue wasfurther
a huge benefit.
at
The most important thing I did to help myself adjust to
Performance on microloan repayment shines when www.pbs.org/now/shows/338/. the Chinese culture when I was abroad was make a few
compared with the repayment rates of some sovereign friends I could really trust. I ended up living in a couple of
nations. It also looks very good compared with a default Qu estio n s different places with some great American and Canadian
rate of 13.8 percent among U.S. recipients of federally friends that I made, but it was invaluable having a couple of
1. Is profiting from lending to the poor an ethical
Chinese busi-on whom I could rely for help when
friends
guaranteed student loans. ACCION reports a default
ness model? I needed it. If I ever needed anything—from finding trans-
rate over the life of its program of 3 percent. A Mexican portation to learning how to ask for a haircut—my friends
microloan program, Compartamos, reports a 1 percent 2. Is for-profit microlending a way to reach
were willing of
more the their assistance.
to provide
default rate. Critics point out, though, that one micro- poorwith
I am a business major more effectively,inorinternational
a concentration a mistaken development?
I didn’t really run into any reverse culture shock upon
management and a minor in psychology. At this point, my my return to the United States. I think a large part of that
loan is not going to pull a budding entrepreneur out of Sources: “Yunus Blasts Compartamos,” BusinessWeek, December
major career goal is to spend an extended period of time was due to the fact that I spent only five months in the
poverty, let alone a whole country. A series of loans 13, 2007, http://www.businessweek.com/magazine/content/07_52/
(over a year) working in another country. I know that this country. My experience abroad definitely changed the way
is probably necessary, combined with training probably
and won’t b4064045920958.htm
happen right away, but (April
it is 21, 2014);that
something Haley IDillan, “Microfinance
view certain parts of my life, but I didn’t have any trouble
Leaders
I will surely work on the
toward. Global
I have Economic
always Crisis, Women,
been interested in and For-Profit
assimilating Lend-
back into the U.S. culture.
support. ing,” November
traveling and learning about 4, 2009, cultures,
different http://www.globalenvision.org/2009/10/20/
and inter- I had to leave my first job in China after two months due
Recently, because of their success, several not-for- microfinance-update-interview
national business seemed like a great starting (April
point20,
to be2014); and http://www.
to a contractual problem, so one of my biggest challenges
profit microloan programs have become banks, able andto eventually
ACCION.org (April 21, 2014).
xiv
work with people from different parts of was finding another place to work so I wouldn’t have to cut
the world. short my time abroad. Chinese culture is strongly based on
I worked in Dalian, China, for five months during the relationships, or guanxi, so I knew that my best shot for
summer and fall of my senior year. I worked with AIESEC finding another job was to ask everyone I knew if they were
(an acronym for the Association Internationale des Étudi- aware of any jobs that were available for me. After a month
ants en Sciences Économiques et Commerciales and the of searching, I was offered a job at a kindergarten because
translation exposure world’s largest student-led organization) to get an interna- my friend’s boss knew the owner of the school and they
Potential change in the TRANSLATION EXPOSURE tional internship, because I couldn’t afford to study were in need of a foreign English teacher.
value of a company’s financial abroad. I chose to go to China because I wanted to chal- Another bigatchallenge for me was getting around in
position due to exposure Translation exposure occurs when subsidiary financial statements are consolidated the
lenge myself. The culture is extremely different from what I China without really knowing the language. Hand gestures
created during the corporate level for the grew
companywide financial reports. Because
up with in the United States, and I wanted to live
the foreign subsidiaries
can get you pretty far in most cases, but other things like
Use the globalEDGE website (http://globalEDGE.msu. 2. You work for a domestic cheese producer in the
edu/) to complete the following exercises: food and beverage industry and you are planning
to start exporting your products. As a starting
1. You are an executive who is in charge of new market
point you would like to examine trade patterns to
development for an international company. You are
identify the top-10 countries that import the high-
currently conducting an initial market research on
est amount of food and beverage goods. In the
Qatar, Vietnam, and New Zealand in order to under-
“Insights by Industry” section of globalEDGE,
stand their overall market attractiveness. Locate
locate the Food and Beverage Industry and check
each country in the “Insights by Country” section of
its “Trade Statistics” page. Which countries are
globalEDGE and check their “Ease of Doing Busi-
the top-10 importers in the industry; what are
ness” rankings in their respective “Indices” pages.
their import volumes? In the same page, check
Also check their “Economy” pages and take a brief
also the top-10 traded goods for this specific in-
look at their economic snapshot graphs. Which of
dustry. Is your product in the top-10 imported or
these three has a stronger economy? Which country
• End-of-module
is more promisingmini-case to market?
as a potential new sparksWhy?class exportedand
discussion products globally?
applies concepts
to a situation facing or international managers.
MINICASE
ARE YOU REALLY BUYING AMERICAN?
Consider the following scenario of a “typical” American fam- work, stopping for gas at the Shell station. At the grocery
ily: The Osbornes, Jesse and Ann, live in the suburbs of store, she fills her cart with a variety of items, including
Chicago. Jesse is a manager at Trader Joe’s specialty grocery Ragu spaghetti sauce, Hellmann’s mayonnaise, Carnation
store chain. Ann is an advertising executive for Leo Burnett Instant Breakfast drink, a case of Arrowhead water,
Worldwide. CoffeeMate nondairy coffee creamer, Chicken-of-the-Sea
Ann listens to the new Adam Lambert CD on her Alpine canned tuna, Lipton tea, a half-dozen cans of Slim-Fast,
car stereo in her Jeep Cherokee while driving home from Dannon yogurt, and several packages of Stouffer’s Lean
What Is International Business and What Is Different about It? 5
C
• Culture Facts appear in the margin of each module, helping to build your
CULTURE CULTURE FACTS @internationalbiz
interest as you read and to stimulate
you alreadyclass
know, ofdiscussion by illuminating
every introductory course. To assist you in learning theFACTS
Key Terms
international
23 @CompanyName Text for what
business language, we’ve included a glossary at the end of the book and listed the most
company is referencing. Tas asja
cultural differences international managers face.
important terms at the end of each module. They also appear in bold print where they are asd asd #culture #funfacts #cool
SUMMARY
first used in the text, with their definitions in the margin.
8 Module 1 The Challenging Context of International Business
import penetration, plus the massive amounts of overseas
• Quotations
What from
LO the 1-1 notable thinkers highlight
andkey points.
“
investment, means that firms of all sizes face competitors
ger17226_mod01_002-027.indd 24
WE HAVE to SEND OUR
of China and
Is International
Show how
in the international Business
foreign environment of India and therefore is working
international
environment. business organizations
International differs from whose ac- from everywhere in the world. This increasing internation-
5/23/15 3:23 PM
LO 1-1
alization of business is requiring managers to have a
BEST AND BRIGHTEST What Is Different about It?
domestic business.
tions affect the international environment are also properly part of it.
These organizations include (1) worldwide bodies (e.g., World Bank),
global business perspective gained through experience,
Show how international
business differs from
education, or both.
OVERSEAS AND MAKE SURE (2) regional economic groupings of nations (North American Free Trade
International business is business whose activities are
domestic business.
Agreement,carried European Because
out across national
Union, international
Mercosur), borders.
and (3) business
International
organizations is abound
busi- relatively new discipline and is extremely dynamic, you
THEY HAVE THE TRAINING by industryness differs
agreements willfrom finditsthat
(Organization domestic
the counterpart
of definitions
Petroleum in
ofthat
Exporting a number itCoun- of terms vary among users. To avoid confusion due
involves three environments—domestic, foreign, and LO 1-4
THAT WILL ALLOW THEM to tries, or OPEC). to the range of ofone.different
Although definitions
the kinds of ofIdentify termsthe in kinds
international business, wefirmswill employ the
BE THE GLOBAL LEADERS • Key Terms are highlighted and defined in
Decision Making
international—instead
forces Isare following same indefinitions,
the Complex
More the domestic
Those who work which
and in theare
foreign envi-generally
international accepted by
to internationalize
of drivers that
their
are leading
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managers. international business
WHO WILL MAKE GE the margin of the text.
purely domestic
ronments,
environment find that their
business
valuesenvironment.
of foreign forces
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that
Consider
isdiffer,
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FLOURISH in THE sess. Theinternational
must make decisions international
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defined
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transportation, domestic
not only environmental
tourism,must take advertising,
into ac- are as follows,
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construction, (1) political—
retailing, wholesaling, foreign business
FUTURE.
”
forces and the foreign environmental
count the domestic forces but also must evaluate the influence of 10 for- forces and preferential trading agreements, (2) technological—
eign national(2)environments.
between andthe mass foreign
Instead communications.
ofenvironmental
having to consider forces Foreign
the ofeffects
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a indenotes
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technology, (3) market—global
—Jack Welch, outside its home or
single set ofcountries
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when doan or domestic
affiliate
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counterparts, market;
does they many
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former CEO of General Electric tend with 10with setscustomers
of 10 forces, in another.
both individually and collectively,isbecause product lines and production helps reduce costs by achiev- domestic market
country. This term sometimes used ing
interchangeably
economies of scale,
with
and (5)
“international are
competitive—firms
business” by
there may be some interaction.
For example, if management agrees someto writers,labor’s demands although at onethat foreign will not be
subsidiary, our practice.
defending their home An markets international
from foreign competitorscompany (IC) is a international company (IC)
chances are it will have to LO offer 1-2 company
a similar settlement with operations
at another subsidiary in because
multiple of the by entering the foreign competitors’ markets.
nations. A company with operations in
tendency of unions to exchange Describe the history
information andborders.
across future ofFurthermore,
international 24 as we shall Module 1 The Challenging Context of International Business multiple nations
observe throughout this text, business. International business
not only are there many sets of forces, but there are also differs from domestic business in that a firm operating across
extreme differences among them. borders must deal with the forces ofLO three1-5 kinds of environments—domestic, foreign,
International business has a long and Inimportant CRITICAL
history, firmCompare THINKINGthe key arguments QUESTIONS for and are against the out within
• Icons in the margin highlight where each learning objective is addressed, identify
Self-Reference Criterionextending
and
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common cause of years of theintoadded
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complexity
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activities carried
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public one
health, country
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some managers will ascribe of tohuman LO 2-1
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Why, foreign
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or international
of a global firm is in no position to enforce its wishes
eign production manager, goods facingand ideas that
a backlog have come
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her workers trade.
extra pay
McGraw-Hill Connect to further enhance your comprehension and learning.
for overtime. When they fail Rapid Appreciate the magnitude
environmental
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for- of that firm.” Is this statement
true or false? Please explain your rationale.
always want to earn more alization
money.” This eign
in imports
themanager
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hasmarkets
failed foreign
tois understand
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that thethe work-
their of making
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own
7. What market
of international trade andexamplesisof globalization can you identify
ers prefer time off to more world’s
money. economic center
This unconscious
always present. of gravity Letfrom
reference ustoEurope and
the manager’s
first 2.the
examine Give own thesehave
ization
examples forces
to been how
show theand an then
subject see how
of many
international busi- they
heated debates operate
in
within your in community?
the How would you classify
self-reference criterion
Unconscious reference to your
cultural values, called the self-Americas
national business blunders. Successful
referenceand back
three
to Asia.
criterion , is probably the biggest cause ofness
environments.
managers are careful to examine a problem
inter- recent years.
manager
in
might Key argumentsone
manipulate in support
of the con- how it has grown.
of the globaliza- each of these examples (as international invest-
own cultural values when tion of business include
trollable forces in answer to a change in the (1) free trade enhances socioeco- ment, international trade, other)?
judging behaviors of others in terms of the local cultural traits as well as their own. nomic development
uncontrollable forces. and (2) free trade promotes more 8. Why is there opposition to globalization of trade
A solid understandingLO of the 1-3business concepts and techniques employed in the and better
a new and different
3. Although forces jobs.in theKey concerns
foreign with the are
environment globalization of and integration of the world’s economy? Is there a
environment United States and other advanced Discussindustrial
the dramatic nations internationalization
is a requisite for success of in interna- business include (1) globalization has produced uneven
THE INFLUENCE OF EXTERNAL AND the same as those in the domestic environment, way the debate can move beyond a simplistic argu-
• A summary, key terms, critical thinking questions, and a globalEDGE
tional business. However, business.because transactions take place across national borders, results across nationsWhyand people,
so? (2) globalization has
CFACTS
INTERNAL ENVIRONMENTAL FORCES
CULTURE CULTURE FACTS @internationalbiz
People living in cultures in which
three environments—domestic, foreign, and international—may be involved,
research assignment wrap up the module.
unequal wealth and power are instead of just one. Thus, Globalincompetition
international business, as
is mounting thethe international
number of interna-
4. Why,
manager
they operate
has
differently. is this
had deleterious effects on labor and labor standards, and
in your opinion, do the authors regard the
(3) globalization has contributed to a decline in environ-
ment for or against globalization and toward how
best to strengthen the working of the global econ-
omy in order to enhance the welfare of the world
use of the self-reference criterion as “probably the
more acceptable, such as China, three choices in deciding tional what The
companiesto do termwith
expands environment
a concept
rapidly.orThe as
a technique
huge used here
employed
increase in means
biggest
in
mental and all the
health forces
conditions. influencing the life and
and itsdevelop- environment
inhabitants? What might this require?
Russia, and India, are less likely domestic operations: (1) transfer it intact, (2) adapt it to local conditions, or cause of international business blunders”?
to help people in need or donate ment of the firm. The forces themselves
Can you think can
of an be classified
example? as external or9. internal.
You have decided All the
The to take forces
a job in yourinfluencing
hometown
to charitable causes than are (3) not use it overseas. International managers who have discovered that there are
Key Terms 23
after graduation. the
forces Why should life and
you development
study interna- of
people from nations with low differences in the environmental KEYexternal forces areforces
TERMS are commonly
better prepared
scores on inequality acceptance, to follow. To be sure, no one can be an expert on all these forces for all nations,
to decide which called
5. Discuss
option uncontrollable
some possible conflicts
ernments and foreign-owned companies.
forcesbetween , whichhost gov- are the external
tional business? the firm
such as Canada, Australia, the that management has no direct control over, although it can exert influence—such as lob-
UnitedSUMMARY
States, and Ireland. but just knowing that differences may exist will cause people to “work with their
#unequalwealth #unequalpower In other bying
antennas extended.” controllable forceswhen
words, for a change
(p. 6) they in foreign
enter internationala lawbusiness and heavily
business, (p.they
5) promotinginternational a new product company (IC) that requires a change uncontrollable forces
(p. 5)
domestic environment (p. 6) foreign direct investment (FDI) (p. 13)
#acceptable #nodonations will know they must look outin foraimportant
cultural theyconsist of the international environment (p. 7) The external forces that
(p. 17)attitude. External forces following:criterion
variations in many of the forces
economic globalization
take as given in the domestic import
environment. penetration, plus
It is to the study of the foreign
massive environment
these three amounts environ- of(p. 6)
overseas RESEARCH
self-reference TASK http://globalEDGE.msu.edu/
(p. 8)
management has no direct
LO 1-1 ments that
environment (p.
24 this text isexporting
directed.(p. 13)
5)
investment, means that firms importing
of all sizes(p. 13)
face competitors transnational corporation (p. 12)
control over
Show how international business differs from 1. everywhere
Module
from
1
Competitive: The Challenging
in the kinds
world.
Context
This and
international of numbers
International
business
increasing
Use the
(p. 5)of competitors,
Business
internation-
globalEDGE website
their forces
uncontrollable
(http://globalEDGE.msu.
locations,
(p. 5) and2. their
You work for a domestic cheese producer in the
The relationships among the forces in the three environments we have been discussing
domestic business. form the basis of our international business alization activities.
of business is requiring edu/)
environments model, shown in managers
Figure to havethe
to complete
1.1. a following exercises: food and beverage industry and you are planning
global business perspective gained through experience, to start exporting your products. As a starting
The external or CRITICAL
uncontrollable forces THINKING in both theQUESTIONS
domestic and the
2. Distributive: foreign environments
national and 1. You international
are an executiveagencies who is in charge available
of new market for distributing goods
International business is business whose activities are education, or both. point you would like to examine trade patterns to
surround the internal forces controlled by management. The domestic environment of
development for an international company. You are
carried out across national borders. International busi- and services. identify the top-10 countries that import the high-
ness differs from its domestic counterpart 1. Business is business,
in that it and every firm has to find 6. “Acurrently
nation whose conducting an initial
GNI is smaller thanmarket
the salesresearch
volumeon est amount of food and beverage goods. In the
involves three environments—domestic, ways to produce
foreign, and andLO
3. 1-4
market Economic:
its goods. Why, variables
then, (such aas
ofQatar,globalgross firm isnational
Vietnam, and
in noNew
position income
Zealand in order
to enforce [GNI],
itstowishes
under- unit labor“Insights cost, and by Industry” section of globalEDGE,
might managers be unable to successfully apply on stand
the theirsubsidiary
local overall marketof that attractiveness.
firm.” Is this Locate
statement
international—instead of one. Although the kinds
ger17226_mod01_002-027.indd 23 of
Identify personal
the kindsconsumption
of drivers that are expenditure)
leading firms that influence a firm’s ability to 5/23/15
each country in the “Insights by Country” section of
do business.
locate the Food and Beverage Industry and check
3:23 PM
forces are the same in the domestic and theforeign
techniques envi-and concepts they have learned
to internationalize in
their operations. true or false? Please explain your rationale. its “Trade Statistics” page. Which countries are
ronments, their values often differ, and their own country
changes
4. Socioeconomic: characteristics
in the to other areas of the world? 7. What globalEDGE andand
examples distribution
of check their “Ease
globalization of
canthe of
you human
Doing Busi- population.
identify the top-10 importers in the industry; what are
2. Give examples ness” your rankings in their respective “Indices” pages.
values of foreign forces are at times more difficult to as-to show The5. how an international
Financial:
five major kinds of busi- all based
variables
drivers, such within
onas
Also interest
change,
check
community?
that
their rates,
“Economy”
How would
inflation
pages and
you
rates,
take
classify
a and
brief taxation.
their import volumes? In the same page, check
sess. The international environment is ness manager
defined as themightare manipulate one of thefirms
leading international con- to globalizeeach their
look
of these examples (as international invest-
operations
at their economic snapshot graphs. Which of
also the top-10 traded goods for this specific in-
interactions
ger17226_mod01_002-027.indd 8 (1) between the domestictrollable environmentalforces in are 6.as Legal:
answer to a change
follows, theanmany
with in the foreign
example for each kind: and
ment, (1)domestic
international
political— laws
trade,
5/23/15 governing
3:20 other)?
PM
these three has a stronger economy? Which country
how international dustry.firms
Is your product in the top-10 imported or
uncontrollable
forces andforces. exported products globally?
forces and the foreign environmental must trading
preferential operate. agreements, (2) 8. Why is there opposition to globalization of trade
technological—
is more promising as a potential new market? Why?
(2) between the foreign environmental 3. Although
forces offorces two in the foreign
advances environment are
in communications technology, (3) and integration of the world’s economy? Is there a
market—global
countries when an affiliate in one countrythe same
does as those infirms
business 7. Physical:
the become
domestic elements
environment,
global customers, (4) ofcost—globalization
nature way the suchdebate as
ofcan topography,
move beyond a simplisticclimate, and natural resources.
argu-
they operate differently.
with customers in another.
8.Why
product is this
lines
Political:
ingdoeconomies
andso?production helps reducement
elements
of regard
scale, and
of nations’ costsfor or against globalization and toward how
by achiev-
political
best to strengthen
climates such as nationalism, forms of
are the working of the global econ-
4. Why, in your opinion, the authors the (5) competitive—firms
use of the self-reference defending government,
criterion their home markets
as “probably and
the international Momy
from foreign I Ncompetitors
IC
in organizations.
orderA StoEenhance the welfare of the world
LO 1-2 biggest cause of international by entering the foreign
business competitors’ markets.
blunders”? and its inhabitants? What might this require?
ARE YOU REALLY BUYING AMERICAN?
Describe the history and future of international Can you think of an example? 9. You have decided to take a job in your hometown
business. 5. Discuss some possible conflicts between host gov-
ernments and foreign-owned LO 1-5companies.
Consider
ily:tional
the followingWhy
after graduation. scenario
should of a “typical”
you study American
interna- fam- work, stopping for gas at the Shell station. At the grocery
business? Jesse and Ann, live in the suburbs of store, she fills her cart with a variety of items, including
The Osbornes, xv
International business has a long and important history, Chicago. Jesse is a manager at Trader Joe’s specialty grocery Ragu spaghetti sauce, Hellmann’s mayonnaise, Carnation
Compare the key arguments for and against the
store chain. Ann is an advertising executive for Leo Burnett Instant Breakfast drink, a case of Arrowhead water,
extending thousands of years into the past. Politics, the globalization of business. Worldwide. CoffeeMate nondairy coffee creamer, Chicken-of-the-Sea
arts, agriculture, industry, public health, and other sectors
of human life have been profoundly influenced by the RESEARCH TASK
Economic globalization refers to the tendency
Ann listens to the new Adam Lambert CD on her Alpine canned tuna, Lipton tea, a half-dozen cans of Slim-Fast,
http://globalEDGE.msu.edu/
toward
car stereo in her anJeep Cherokee while driving home from Dannon yogurt, and several packages of Stouffer’s Lean
goods and ideas that have come with international trade. international integration and interdependency of goods,
Rapid urbanization of populations Use combined with industri-website
the globalEDGE (http://globalEDGE.msu.
technology, information, labor, and capital, 2. You work
or the for a domestic cheese producer in the
process
alization in the emerging markets ger17226_mod01_002-027.indd
is quickly shiftingthe thefollowing 5 5/23/15 3:20 PM
edu/) to complete exercises: food and beverage industry and you are planning
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xviii
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portant element of some accreditation standards. International Business is designed spe-
cifically to support instructors’ assurance of learning initiatives with a simple yet
powerful solution. Each test bank question for International Business maps to a specific
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The statements contained in International Business are provided only as a
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xix
ACKNOWLEDGMENTS
Any effort to create a valuable new package of learning Many thanks go to the reviewers who provided their
materials such as International Business involves the valuable feedback in the development of this first
efforts not only of the authors and their invaluable editorial edition.
team, but also the insights, support, and encouragement of
numerous other individuals and institutions. To the long list Brad Ward, Kellogg Community College
of individuals to whom we are indebted, we want to add Bruce D. Keillor, Youngstown State University
Rachida Aissaoui, Ohio University; Nicholas Athanassiou, Chin-Chun Hsu, University of Nevada—Las Vegas
Northeastern University; Joseph R. Biggs, California Poly- Constant Cheng, School of Management, George Mason University
Denny McCorkle, University of Northern Colorado
technic State University—San Luis Obispo; Lorna Jean
Eugene Lyle Seeley, Utah Valley University
Edmonds, Ohio University; Paul Frantz, Long Beach State Francis Sun, Woodbury School of Business at UVU and Goodman
University; Colette Frayne, California Polytechnic State School of Business at Brock University
University—San Luis Obispo; Wendell McCulloch, Long Hormoz Movassaghi, School of Business, Ithaca College
Beach State University; Bill Pendergast, California Poly- John Finley, Columbus State University
technic State University—San Luis Obispo; Jere Ramsey, Linda C. Ueltschy, Dept. of Marketing, Florida Gulf Coast
California Polytechnic State U niversity—San Luis Obispo; University, Fort Myers, Florida
Hugh Sherman, Ohio University; Mary Tucker, Ohio Uni- Lynn Wilson, DIBA, Saint Leo University
versity; Ike U
zuegbunam, Ohio University; Ed Yost, Ohio Mamoun Benmamoun, Saint Louis University
University; and . . . we also wish to acknowledge Melinda Mandeep Singh, Western Illinois University
Zuniga and Yana Saltaeva, who helped with research. Mark Fenton, University of Wisconsin—Stout
Michael Engber, Columbia College
We would like to offer our special thanks to the out-
Mitchell L Lautenslager, Fox Valley Technical College
standing editorial and production staff from McGraw- Paul J. Myer, University of Maine Business School
Hill Higher Education who worked so hard and so well Sam C. Okoroafo, University of Toledo
to make this project succeed and stay on schedule, par- Stanford A. Westjohn, University of Toledo
ticularly Anke Weekes, Gabriela G. Velasco, Elisa Thomas Lynn Wilson, Saint Leo University
Adams, Michael Gedatus, Mary E. Powers, Sharon Yusufu Jinkiri, Belhaven University
O’Donnell, and Karen Nelson. We feel honored to work
with such a talented and professional team.
xx
CONTENTS
module 1 Which Nations Account for the Most Exports and
Imports? 32
The
Direction of Trade 32
Challenging
Context of The Increasing Regionalization of Trade 32 | Major
Trading Partners: Their Relevance for Managers 33 |
International Major Trading Partners of the United States 33
Business Explaining Trade: International Trade Theories 35
What Is International Mercantilism 35 | Theory of Absolute Advantage 35 |
Business and What Is Theory of Comparative Advantage 37 | How Exchange
Different about It? 5 Rates Can Change the Direction of Trade 38 | Some
The Influence of External and Internal Environmental Newer Explanations for the Direction of Trade 41 |
Forces 5 | The Domestic Environment 6 | The Foreign Summary of International Trade Theory 45
Environment 6 | The International Environment 7
Foreign Investment 45
Is Internationalization of Business a New Trend, and Will It Portfolio Investment 46 | Foreign Direct Investment
Continue? 10 (FDI) 46 | Does Trade Lead to FDI? 51
The Growth of International Firms and International Explaining FDI: Theories of International Investment 51
Business 11
Monopolistic Advantage Theory 52 | Strategic Behavior
Expanding Number of International Companies 12 | Theory 52 | Internalization Theory 52 | Dynamic
Foreign Direct Investment and Exporting Are Growing Capabilities 53 | Eclectic Theory of International
Rapidly 13 Production 53
What Is Driving the Internationalization of Business? 14 Summary 55 | Key Terms | Critical Thinking Questions |
Political Drivers 14 | Technological Drivers 14 | Market globalEDGE Research Task | Minicase | Notes
Drivers 15 | Cost Drivers 15 |Competitive Drivers 15
What Is Globalization and What Are the
Arguments for and against the Globalization of
module 3
Business? 17 Sociocultural
Arguments Supporting Globalization 17 | Concerns with Forces
Globalization 18
What Is Culture
Summary 23 | Key Terms | Critical Thinking Questions | and Why Is It
globalEDGE Research Task | Minicase | Notes Important? 61
xxi
xxii Contents
Patents 158 | Trademarks 160 | Trade Names 160 | The Floating Currency Exchange Rate System 212
Copyrights 161 | Trade Secrets 161
Current Currency Arrangements 213 | The Bank for
Standardizing Laws around the World 163 International Settlements 215
Some Specific National Legal Forces 165 Financial Forces: Fluctuating Currency Values 216
Competition Laws 165 | Trade Obstacles 167 | Tort Fluctuating Currency Values 216 | Why Foreign
Law 167 | Miscellaneous Laws 170 | Foreign Corrupt Currency Exchange Occurs 217 | Exchange Rate
Practices Act 171 | Accounting Law 173 Quotations and the FX Market 218 | Causes of Exchange
Rate Movement 219 | Exchange Rate Forecasting 220
Summary 175 | Key Terms | Critical Thinking Questions |
globalEDGE Research Task | Minicase | Notes Financial Forces Governments Can Exert 222
Currency Exchange Controls 222 | Taxation 222 |
Inflation and Interest Rates 224
module 7
Balance of Payments 226
Economic and
Socioeconomic Summary 229 | Key Terms | Critical Thinking Questions |
globalEDGE Research Task | Minicase | Notes
Forces
International Economic
Analyses 181 module 9
Levels of Economic Development 183 International
Dimensions That Describe the Economy and Their
Competitive
Relevance for International Business 186 Strategy
Measuring the Size of an Economy 186 | Economic What Is International
Growth Rate 190 | Income Distribution 191 | Private Strategy, and Why Is It
Consumption 193 | Unit Labor Costs 195 | Other Necessary? 233
Economic Dimensions 197
Why Plan Globally? 234
Socioeconomic Dimensions of the Economy and Their
Relevance for International Business 200 The Process of Global
Strategic Planning 234
Total Population 200 | Age Distribution 201 |
Population Density and Distribution 203 | Other Step 1: Analyze
Socioeconomic Dimensions 203 Domestic, International,
and Foreign
Summary 205 | Key Terms | Critical Thinking Questions | Environments 235 | Step 2: Analyze Corporate
globalEDGE Research Task | Minicase | Notes Controllable Variables 236 | Step 3: Define the
Corporate Mission, Vision, and Values Statements 238 |
Step 4: Set Corporate Objectives 240 | Step 5: Quantify
module 8 the Objectives 240 | Step 6: Formulate the Competitive
Strategies 240 | Step 7: Prepare Tactical Plans 246
The
International Strategic Plan Features and Implementation
Facilitators 246
Monetary
Sales Forecasts and Budgets 246 | Facilitation Tools for
System and Implementing Strategic Plans 246 | Performance
Financial Measures 247
Forces Kinds of Strategic Plans 247
The International Monetary System: A Brief History 209 Time Horizon 247 | Level in the Organization 248 |
The Gold Standard 210 | The Bretton Woods Methods of Planning 249
System 211 | The Central Reserve/National Currency New Directions in Planning 250
Conflict 212
Another random document with
no related content on Scribd:
I am very anxious to know how your Highness is progressing with the Latin [he
wrote on one occasion]. I say this, Señora, because a certain style of Latin is too
difficult to be mastered by those who are much occupied with other matters.
Nevertheless my belief in your powers of intelligence is so great that, if you really
make up your mind to do it, I am convinced you will succeed as you have done with
other languages.
We must tell you [wrote the Queen to her ambassador in England] that the
Princess, our daughter, is very determined not to marry; on which account we are
obliged to give the Infanta, Doña Maria, to the King of Portugal.
Since the days, when still almost in his cradle, he had been
suggested as a husband for Joanna “La Beltraneja,” both gossip and
statesmanship had been busy weaving his matrimonial fate. The
threads were often broken abruptly; but one design ran clear through
all, the circumvention of the growing power of France.
We have already noticed Louis XI.’s desire to establish his
influence over Navarre, as shown in his support of Eleanor, Countess
of Foix, and her French husband, and in the marriage of his sister
Madeleine with their son Gaston.[7] His hopes were realized by
Eleanor’s accession to the throne on the death of her father, John II.
of Aragon in 1479, though she did not live to enjoy for more than a
few weeks the sovereignty she had purchased at the price of a sister’s
blood. She was succeeded by her grandson, Francis Phœbus, and he
on his death in 1483 by his sister, Catherine.
7. See page 43.
Ferdinand and Isabel at once suggested the marriage of this
eligible heiress of thirteen with their five-year-old son; but her
mother Madeleine of Valois, infinitely preferred to ally her child with
one of her own race; and Catherine carried her inheritance to the
French House of Albret. Spain was for the moment foiled; but a
wedding many years later, its more than doubtful claims on Navarre
enforced by arms, was yet to gain for Ferdinand the southern half of
the mountain kingdom, whose double outlook across the Pyrenees
had been the source of so much crime and bloodshed.
Another alliance proposed for Prince John was with Anne of
Brittany, heiress of a duchy, whose independence had always
threatened the peace of France. It would have been a fitting revenge
for French interference in Navarre and Aragon; but here again Spain
was forestalled; and Anne of Beaujeu, regent of France on the death
of her father Louis XI., succeeded in marrying her younger brother,
Charles VIII., to Anne of Brittany thus linking to the French Crown
the most important of its great provincial dependencies.
As it happened, this marriage was to set free a bride for the
Spanish Infante, Margaret of Hapsburg, daughter of Maximilian,
King of the Romans, a Princess betrothed in her early youth to the
Dauphin Charles and even sent to France for her education, but now
repudiated in favour of a more advantageous match. Maximilian was
by no means a proud man, but even his careless nature burned with
resentment at his daughter’s return home under such circumstances;
and he welcomed the idea of her union with a son of Ferdinand the
Catholic, France’s antagonist for so many years. To make this
Hapsburg-Aragonese friendship the more obvious and complete, the
wedding became a double one; and Philip, Archduke of Austria and
Count of Flanders, Maximilian’s son and heir, took as his bride the
Spanish sovereigns’ second daughter, Joanna.
With many misgivings Isabel bade the latter good-bye and
consigned her to the grand fleet in the harbour of Lerida that was to
convey her to the Netherlands and bring back from thence the Prince
of Asturias’ betrothed. The Infanta Joanna, in spite of her careful
training, had shown at times an alarming lack of mental balance. She
could be clever and witty, but also morose or, if roused, recklessly
passionate in her speech. From a home, where the air breathed
decorum and self-control, she now went to a pleasure-loving Court
presided over by a fickle Adonis. Would she cling tenaciously to the
orthodox views in which she had been bred amid surroundings
palpably lax and cynical? Would she know how to keep her jealousy
in leash, if Philip “the Fair,” as in all probability, proved faithless?
Would she hold her head high and steer her course with dignity amid
the many political pitfalls, that would be laid for her in a strange
land?
The Queen could only sigh in answer to these questions. Joanna in
many ways resembled her grandmother and namesake, the Admiral’s
daughter, Joanna Enriquez, and that passionate temperament would
in a moment of crisis be its own councillor. Advice and warning were
of little avail.
The Spanish bride in her ship of state sailed away northwards; and
Isabel watched the clouds gather with gloomy forebodings. Weeks
passed, and she was tortured with anxiety till at length news came
that, although the fleet had been compelled to shelter in English
harbours and several of the vessels had been lost, yet her daughter
was safe in Flanders and soon to be married at Lille.
Early in March, 1497, Margaret of Austria after an equally
adventurous voyage, whose dangers induced her to compose light-
heartedly her own epitaph, landed in Spain and was welcomed with
all the state and ceremony befitting a future Queen.
How this matrimonial venture, introducing into the close air of the
Spanish Court a Paris-bred gaiety and insouciance, would have stood
the test of time we cannot tell. The Prince and his bride were young;
and, if her contempt of convention scandalized the Castilian grandee,
he could blame her youth and build hopeful arguments on feminine
adaptability. Thus the brief honeymoon, a triumphal progress from
one large town of the kingdom to another, was a period of unmixed
rejoicing in Spain. All promised well. Even the Princess Isabel had
put aside her long mourning and consented at last to share the
throne of Portugal with her patient suitor, demanding however with
the fanaticism of her race, so strangely in contrast with her natural
sweetness, that Emmanuel’s wedding-gift to her should be the
expulsion of the Jews from the land to which she went.
The glory of the Faith! The glory of Spain! Were they in truth
achieved? the Queen must have asked herself, as she and Ferdinand
attended their daughter’s second wedding in the border town of
Alcantara.
Fortune’s wheel never stands still in this world [says Bernaldez sorrowfully]. It
gives and it takes away; it exalts and it humbles; to the poor and miserable it grants
long years of which in their weariness they would fain be quit; while to the wealthy,
to Princes, to Kings, and great lords,—to all for whom according to human
understanding life is a boon, it decrees naught but death.
In the very midst of the wedding rejoicings came the news that the
Prince of Asturias, never robust, had fallen ill of a fever in
Salamanca; and Ferdinand, hurrying as fast as he could to his
bedside, only arrived when the end was all too certain. On October 4,
1497, at the age of nineteen, Prince John died. Apart from the private
grief of his parents for a son, whose character had held the promise
of all that is best in manhood, his death was a national calamity; and
for weeks the shadow of mourning hung alike over cottage and
castle.
I never heard [says Commines] of so solemn and so universal a mourning for any
Prince in Europe. I have since been informed by ambassadors that all the
tradesmen put themselves into black clothes and shut up their shops for forty days
together; the nobility and gentry covered their mules with black cloth down to their
very knees, so that there was nothing of them to be seen but their eyes; and set up
black banners on all the gates of the cities.
Even the hope that an heir at least would be left to their Prince was
destroyed when the young widow, nerve-stricken at her sudden loss,
gave birth a few months later to a still-born daughter.
AVILA FROM BEYOND THE CITY WALLS
The first keen blade of sorrow that transfixed the Queen’s soul [says Bernaldez]
was the death of the Prince; the second the death of Doña Isabel her eldest
daughter, Queen of Portugal; the third the death of her grandson Don Miguel, for
in him she had found consolation. From this time the life of the famous and very
virtuous Queen Isabel, protector of Castile, was without pleasure; and her days and
her health were alike shortened.
CHAPTER XII
THE ITALIAN WARS
1494–1504
A cloud of grief hung over Spain, but abroad her sun was rising. The
union of Castile and Aragon, the Conquest of the Moors, the
campaign against heresy, the discovery of unknown islands in the
West—all these had brought her prominently before the eyes of
Europe; while yet another harvest of glory still remained for
Ferdinand’s diplomacy to reap on foreign shores.
In the early years of his rivalry with France the Pyrenees had
formed his battleground, but for all his efforts, political or military,
he had never succeeded in regaining Roussillon or Cerdagne nor in
undermining French influence in Navarre. Diplomacy is a game
where the practised hand will always be at an immense advantage;
and Louis XI. proved more than a match for the young Aragonese
opponent who was to succeed him eventually as the craftiest
statesman in Europe.
Qui nescit dissimulare nescit regnare is said to be the only
paternal sermon to which the Dauphin Charles was ever subjected;
but since Louis XI.’s craven fear of his son denied the boy all but the
most rudimentary education, there was little likelihood that he
would be able to make use of so subtle a maxim. Ill-developed in
brain as in body, his weak but obstinate nature nourished its vanity
on schemes requiring the strength of a Hannibal or an Alexander for
their realization. His father had with tireless energy extended the
boundaries of France north, east, and south; employing the weapons
of force, bribery, and lies, as the moment demanded. His success,
save on moral grounds, might have prompted the continuation of his
policy; but Charles chafed not at its immorality only its apparent
pettiness of scope. To make peace with his neighbours, if necessary,
by the surrender of lately-won possessions; and then, freed from
Christian molestation, to lead an army in person that should add the
kingdom of Jerusalem to French dominions—this was the fantasy
that floated ever before his eyes.
A crusade! Mediæval Europe had heard that project discussed for
many centuries. It had seen warriors take the Cross for reasons true
and false, had watched their victories and their failures, and, by the
end of the fifteenth century, was sufficiently disillusioned to smile in
private when the idea was mentioned. The recovery of the Holy
Sepulchre was a good excuse for governments to impose extra taxes,
or for Venice to induce the weak-minded to wage her trade-wars in
the Levant. If the Turk, as he threatened, grew stronger it might
indeed become a matter of serious politics; but in the meantime, save
in Spain or Bohemia, religious fervour stood at a discount.
Yet European statesmen were ready enough to twist the young
French monarch’s desire for high-sounding glory to their own
advantage. Ludovico, “Il Moro,” virtual ruler of Milan for his nephew
Duke Gian Galeazzo Sforza, saw in an alliance with Charles VIII. a
way of extricating himself from political troubles that were likely to
overthrow the balance of power in Italy, and with it his own
dominion.
“This Ludovico was clever,” says Philip de Commines who knew
him, “but very nervous and cringing when he was afraid; a man
without faith if he thought it to his advantage to break his word.”
At the time when Charles VIII., grown to years of manhood if not
discretion, was centring his hopes on Jerusalem, Ludovico Sforza
lived in a perpetual state of fear. Of old in alliance with the
Aragonese House of Naples and the Medici at Florence, he had
regarded with calm eyes the hostility of Venice on the eastern border
of his duchy and the growing ambitions of the Papacy in Romagna.
These five Powers,—Milan, Naples, Rome, and the republics of
Venice and Florence, had controlled the peninsula, and in
Machiavelli’s words made it their object “first that no armed
foreigner should be allowed to invade Italy, second, that no one of
their own number should be suffered to extend his territory.”
Slowly the balance thus established had been shaken, and mutual
suspicion began to darken the relations between Naples and Milan.
King Ferrante’s grand-daughter Isabella was wife of the rightful
Duke, Gian Galeazzo, and in her letters home made piteous
complaints of his uncle’s tyranny. Her husband was fully old enough
to reign but was kept instead a prisoner at Pavia, his natural delicacy
of constitution aggravated by this restraint. She herself was relegated
to a merely secondary position; and her relations, who had intended
her to act as their political agent, not unnaturally resented the forced
seclusion in which she lived.
The usurper on his side, noting the coldness of Ferrante and his
son Alfonso, Duke of Calabria, was haunted by a perpetual nightmare
of his own downfall through Neapolitan intervention. Such a
revolution would please Venice, who liked nothing better than to see
her ambitious neighbour involved in trouble, while little help could
be expected from the selfish Papacy, or from Florence which, torn by
factions since the death of the wise Lorenzo de Medici in 1492, was
too weak to prove either a formidable foe or ally.
In his need of support Ludovico looked beyond the Alps, and
instantly his quick brain suggested the rôle which Charles VIII.
might play. It was little more than half a century since the last
representative of the Angevin claims on Naples had been defeated
and driven away from that southern kingdom by his Aragonese rival,
Alfonso V.[8] Since that date the House of Anjou had been
incorporated with the French Crown, and thus Charles stood heir to
its Italian ambitions; Naples but a stepping-stone on the road to his
conquest of Jerusalem.
8. See page 25.
They spared no effort to relieve themselves and their men from fatigue and
danger, not killing one another in battle, but making prisoners who were
afterwards released without ransom. They would attack no town by night, nor
would those within make sorties against their besieging foe. Their camps were
without rampart or trench. They fought no winter campaigns.
At our first entrance into Italy [says Commines sadly] we were regarded like
saints, and everybody thought us people of the greatest goodness and sincerity in
the world; but that opinion lasted not long for our own disorders and the false
reports of our enemies quickly convinced them of the contrary.
One of the greatest strokes of good fortune for a man [says Guicciardini] is to
have an opportunity of showing that in the things he does for his own interest he is
moved by the thought of the public good. This is what shed glory on the enterprises
of the Catholic King. What he did for his own security and aggrandizement often
looked as if it were done for the advancement of the Christian Faith or the defence
of the Church.