Theories of International Business
A new scientific truth does not triumph by convincing its opponents and making them see the light, but rather because its opponents eventually die, and a new generation grows up familiar with it.
Max Planck (1858-1947).
Theoretical physicist, Nobel Laureate.
In Chapter One, it was suggested that the reader should observe the daily news for the latest developments in international business and trade and consider their implications for the creation of global business strategies. While it was mentioned with the intention of a light touch, it was no joke. On the day of writing this paragraph – 9th March 2018 – the US, in the form of an Executive Order signed by President Donald Trump, imposed tariff barriers on imports of Steel (25%) and Aluminium (10%), citing national security issues to override WTO rules (Donnan, 2018, 9th March; Economist, 2018, March 10th). Within days, the EU was planning its retaliation, threatening to impose tariffs on a range of non-security related goods such as Jack Daniels Tennessee Whiskey and Harley-Davidson motorcycles (Brunsden, 2018, 16th March).
As an author, it is an odd experience writing what is effectively a daily blog on issues which were discussed in Chapter One as they panned out over a 250-year timeframe from Adam Smith onwards and which sets the scene here for a chapter providing the contemporary context for the design and delivery of 21st Century, competitive, global business strategies. Perhaps those UK and EU executives fretting haplessly about Brexit who we introduced to you earlier have a right to sweat after all. We discussed uncertainty but neglected randomness, a greater terror (see must-read The Black Swan: The Impact of the Highly Improbable by Nassim Nicholas Taleb, 2007; and also, his new best-selling polemic, 2018, Skin in the Game: Hidden Asymmetries in Daily Life, for a discussion of contrasting perceptions on uncertainty and randomness).
Asked what his biggest fear concerning stability in government was, British Prime Minister Harold McMillan (disputedly) replied to the (male) reporter raising the question, “Events, dear boy, events”. Whether he said those exact words or not, there is surely a lesson in the message for executives charged with the conduct of international business on behalf of their corporations. Vigilance is essential, even where change is erratic, unpredictable and, at worst, apparently random.
Porter offered a mammoth 855-page tome as a new paradigm to explain world trade, investment and innovation. Many of the criticisms alluded to above are misplaced or locked within the closed paradigms of their proponents. Others simply require further elaboration, a natural feature of scientific enquiry. Two key themes emerge from a closer reading of Porter’s research, each of which has huge significance in today’s competitive climate.
First, there appears to be a convergence of economic systems around the classical microeconomic models first proposed by Adam Smith and David Ricardo, particularly regarding the structure of markets and the Darwinian impact of competitive forces.
Second, the importance of sophisticated consumers as a key force in the economic process appears to be emerging as a profound driver of international competitiveness and company strategy. As Kenichi Ohmae observed in his influential book The Borderless World (Ohmae, 1990):
… the pressure for globalization is driven not so much by diversification or competition as by the needs and preferences of customers.
In the next chapter, Theories of Strategy and Competition, these two themes are considered as features of modern capitalism within a framework that acknowledges their historical antecedents and considers their contemporary consequences.
Chapter Three References
Beamish, P. W., & Lupton, N. C. (2016). Cooperative strategies in international business and management. Journal of World Business, 51, 163-175.
Britton, S. (1990, 23 November). Conditions of progress. Financial Times, p. 9.
Brunsden, J. (2018, 16 March). Brussels advances retaliation plans against US tariffs. Financial Times, p. 9.
Collinson, S., Narula, R., & Rugman, A. M. (2020). International Business (8 ed.). Harlow: Pearson.
Donnan, S. (2018, 9 March). US steel tariffs likely to be opening shot in bigger trade war with China. Financial Times, p. 6.
Economist. (2017, October 7th). Homage to Formosa: Despite its admirable democratic evolution, Taiwan receives precious little recognition. The Economist, 53.
Economist. (2017, December 9th). The World Trade Organisation: Situations vacant. The Economist, 15.
Economist. (2018, March 10th). The threat to world trade: The rules-based system is in grave danger. The Economist, 68-69.
Egan, C. E. (1995). Creating Organizational Advantage. Oxford: Butterworth Heinemann.
Egan, C. E. (2021). Ten Years That Shook the (Capitalist) World: 1988-1998 (2 ed.). Rugby: Strategic Management Think Tank.
Ghemawat, P. (2007). Redefining Global Strategy: Crossing Borders in a World Where Differences Still Matter. Boston, MA: Harvard Business School Press.
Ghemawat, P. (2018). The New Global Road Map: Enduring Strategies for Turbulent Times. Boston, MA: Harvard Business Review Press.
Giddens, A., & Sutton, P. W. (2021). Sociology (9th ed.). Cambridge: Polity Press.
Lewis, M. (2000). The New New Thing: A Silicon Valley Story. London: Hodder & Stoughton.
Morgan, G. (1990). Organizations in Society. London: MacMillan.
Ohmae, K. (1990). The Borderless World. New York: Harper Collins.
Pettigrew, A. (1985). The Awakening Giant: Continuity and Change in ICI. Oxford: Basil Blackwell.
Pettigrew, A. (1990). Longitudinal field research on change: theory and practice. Organization Science, 1(3), 267-292.
Porter, M. E. (1980). Competitive Strategy: Techniques for Analysing Industries and Competitors. New York: Free Press.
Porter, M. E. (1985). Competitive Advantage: Creating and Sustaining Superior Performance. New York: Free Press.
Porter, M. E. (1990). The Competitive Advantage of Nations. New York: Free Press.
Porter, M. E. (1991). Canada at the Crossroads: The Reality of a New Competitive Environment. Boston, MA: Harvard Business School / Monitor Company.
Ricardo, D. (2018). On the Principles of Political Economy: And Taxation (Classic Reprint). London: Forgotten Books.
Smith, A. (1776). An Inquiry into the Nature and Causes of the Wealth of Nations. Edinburgh: Strathan & Cadell.
Steil, B. (2014). The Battle of Bretton Woods: John Maynard Keynes, Harry Dexter White, and the Making of a New World Order. Princeton, NJ: Princeton University Press.
Taleb, N. N. (2007). The Black Swan: The Impact of the Highly Improbable. London: Penguin.
Taleb, N. N. (2018). Skin in the Game: Hidden Asymmetries in Daily Life. London: Allen Lane.
Vernon, R. (1966). International Investment and International Trade in the Product Cycle. Quarterly Journal of Economics, 80(2), 190-207.
Vernon, R. (1972). The Economic and Political Consequences of Multinational Enterprise: An Anthology. Boston, MA: Harvard University Press.
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