James E. Austin's case studies are designed to help managers effectively compete in the Third World business environment. Designed for business school courses and in-house company training programs, this companion to Managing in Developing Countries presents 35 case studies organized around Professor Austin's Environmental Analysis Framework, a powerful, field-tested tool designed to help managers examine, prepare for and compete in the Third World business environment. Through comprehensive and thoroughly tested classroom-tested cases, Austin systematically examines the economic, political, and cultural factors of each country at international, national, industry, and company levels. The cases also reveal the critical strategic issues and operating problems that managers will encounter in developing countries--in governmental relations, finance, marketing, production, and organization.
Frequently asked questions
Yes, you can cancel anytime from the Subscription tab in your account settings on the Perlego website. Your subscription will stay active until the end of your current billing period. Learn how to cancel your subscription.
No, books cannot be downloaded as external files, such as PDFs, for use outside of Perlego. However, you can download books within the Perlego app for offline reading on mobile or tablet. Learn more here.
Perlego offers two plans: Essential and Complete
Essential is ideal for learners and professionals who enjoy exploring a wide range of subjects. Access the Essential Library with 800,000+ trusted titles and best-sellers across business, personal growth, and the humanities. Includes unlimited reading time and Standard Read Aloud voice.
Complete: Perfect for advanced learners and researchers needing full, unrestricted access. Unlock 1.4M+ books across hundreds of subjects, including academic and specialized titles. The Complete Plan also includes advanced features like Premium Read Aloud and Research Assistant.
Both plans are available with monthly, semester, or annual billing cycles.
We are an online textbook subscription service, where you can get access to an entire online library for less than the price of a single book per month. With over 1 million books across 1000+ topics, we’ve got you covered! Learn more here.
Look out for the read-aloud symbol on your next book to see if you can listen to it. The read-aloud tool reads text aloud for you, highlighting the text as it is being read. You can pause it, speed it up and slow it down. Learn more here.
Yes! You can use the Perlego app on both iOS or Android devices to read anytime, anywhere — even offline. Perfect for commutes or when you’re on the go. Please note we cannot support devices running on iOS 13 and Android 7 or earlier. Learn more about using the app.
Yes, you can access Strategic Management In Developing Countries by James E. Austin in PDF and/or ePUB format, as well as other popular books in Business & Business General. We have over one million books available in our catalogue for you to explore.
As the economy floundered during Mexico’s 1982 crisis, Dietrich Hermann, CTM’s controller, scrambled to hedge the company’s $20 million-denominated debt. The cost of hedging seemed unreasonably high, yet the risk of not doing so seemed even greater. Decisions had to be made on the spot, yet standard operating procedures for such transactions called for multiple-level approvals. The race was on! Could the company approve the financial operation before it was too late? Would the banks sign the needed documents in time? With the firm’s survival in his hands, yet seemingly out of his control, Hermann suddenly understood why, when he accepted the controllership of Compañía Telefónica Mexicana, he was told that it would be the challenge of his life. On the other side of the globe, in India, Sundara Raman couldn’t sleep. That morning he had hired a new water carrier to serve the employees in the branch of the state-owned bank he managed. All of a sudden work at the bank seemed to come to an abrupt halt. The word had spread that the new water carrier was an “untouchable.” The next day Raman would have to find a solution to the problem, but which?
Raman’s and Hermann’s problems are just two of many the reader will wrestle with while analyzing the cases we present in this book. The problems are challenging, and the less-developed country (LDC) environments managers must face are complex and diverse. To master the art and science of managing in developing country environments is a demanding task, given their distinctive features. The government seems to be everywhere, controlling prices and foreign exchange, restraining raw material imports, providing credit, buying finished products, regulating expansion, entry, and exit. Conventional strategic planning tools seem inadequate, as demand gyrates, inflation soars, exchange rates tumble, costs change by leaps and bounds, and competitors come and go when borders are opened and closed to international competition.
OBJECTIVES OF THE BOOK
Maybe the picture painted just now is somewhat extreme; not all of those changes take place in every developing country, and in those where they do, not necessarily all come at the same time. Yet the picture is revealing. Managing in LDCs is different and requires new analytical tools and a heightened awareness to cope with the ever changing environment. This book will provide the reader with an opportunity to wrestle, through a series of real-life cases, with the distinctive problems and special opportunities that managers working in, or dealing with, LDCs are likely to encounter. By analyzing the cases students will get their feet wet before having to dive head first into the turbulent yet invigorating waters of LDC management. The hope is also that for managers in developed countries the book will provide vivid illustrations of the issues with which their colleagues in LDCs must deal, thereby improving the understanding of each other’s problems and the ability to interact.
Through the analysis of the cases, we hope readers will (1) deepen their understanding of the managerial realities of developing countries’ environments, their commonalities and their diversity, and (2) increase their ability to deal systematically with the strategic and operating issues, problems, and opportunities facing them. As will become apparent, the problems are tough but manageable, and the opportunities are exciting and abundant.
IMPORTANCE OF LDCs
If indeed the difficulties of LDC management are great, one might ask, Why bother? The answer is simple: Developing countries are much too important in economic and human terms to be ignored. Given the interdependence of today’s global economy, the incentives to learn how to handle the problems are significant. Firms that master the intricacies of operating in LDCs can achieve competitive advantage, while contributing to economic development in the Third World.
Over two-thirds of the world’s surface area belongs to developing countries, and so most of the world’s supplies of certain minerals and agricultural products come from those countries. LDCs are, and can be expected to remain, key suppliers of many vital commodities.
Some three-quarters of our planet’s 5 billion people live in developing countries. Since LDC workers receive low wages relative to their DC counterparts, developing countries have an enormous pool of low-cost labor that gives them a potential comparative advantage in labor-intensive products. The global sourcing strategies of many DC-multinationals, along with the increased emphasis on export-led development strategies of many LDCs, make it realistic to expect that these countries will continue to play an increasingly vital role as exporters of manufactured goods and of services to DCs. Developed country imports of manufactured goods from low- and middle-income countries increased forty-five-fold, from $4 billion to $180 billion, in the twenty years between 1967 and 1987.1 (Imports from other developed countries increased only fourteen times during the same period.) In general, while total exports by DCs grew at an average rate of 3.3% between 1980 and 1987, LDC exports grew at 5.0%—a reversal of the relative growth rates of DC and LDC exports during the 1965-80 period.2
The demand for goods by the developing countries’ 4 billion inhabitants is enormous. LDCs’ population is expected to grow during the next decade at an average annual rate of 1.9%, more than twice the DCs’ rate of growth. By the year 2000, in the developing countries there will be 5 billion potential customers, 1 billion more than today! Even with relatively low levels of per capita GNP, 5 billion people represent monumental markets. The demand, moreover, is not only for consumer goods. LDCs are continually increasing their manufacturing capacity, creating what appears to be an insatiable demand for producer and capital goods. This demand is heightened by the large infrastructure development needs of such countries: additional transportation, education, and health care facilities; expanded energy generation and distribution systems; and effective telecommunications networks, to name some. In short, LDCs’ demand for goods translates into opportunities for exports from DCs and for productive investments in LDCs by multinational corporations and local investors alike.
Developing countries need capital to develop. LDCs have imported capital from private lenders, investors, and governments. The total amounts of capital transferred and its sources have fluctuated widely. Capital flows to LDCs more than doubled between 1970 and 1981, reaching U.S. $135.7 billion, and then were halved in the next five years.
While government lending, in the form of development assistance and as nonconcessional flows, has traditionally represented the bulk of capital transferred to LDCs, private flows became increasingly important in the late 1970s and early 1980s, reflecting the recycling of petrodollars by the international banks. Capital flows to LDCs peaked in 1981; that year private lenders provided over half of all transfers. By 1986, not only had the total amount transferred shrunk, but the private portion of those transfers fell to less than one-third of the total as the international banks cut their lending in the face of the LDC debt crisis.
The large indebtedness accumulated during the 1970s and early 1980s has created a critical situation for most developing countries. Real interest rates soared while commodity prices and LDC-exports plummeted, as recession in the industrial countries sharply reduced their demand for imports. The result was an ever growing debt that could not be serviced adequately. In the ten years between 1979 and 1989, debt for all LDCs climbed from approximately one-quarter to one-half of GNP. The result is that today approximately one out of every four dollars of LDC exports must be devoted to debt service payments, hobbling these countries’ development efforts.
As LDCs struggled to service their debt, as developed countries curtailed the flow of new funds, and as eroding confidence gave rise to massive capital flight from LDCs, the net flow of funds reversed itself. Since 1984 the developing countries became net suppliers of capital to the industrial nations. With ever increasing need for new funds, ongoing debt servicing repayments, and the imperative of alleviating the human suffering pervasive in so many LDCs, these countries need a new reversal in the flow of funds. With declining private bank lending, the importance of attracting new foreign direct investment and official assistance has become paramount in most LDC governments’ financing agendas. LDCs will continue as important actors in the international financial markets.
LDC DIVERSITY
Developing countries stand out by their differences as much as by their similarities, and providing a broad picture, as we have done above, risks creating an impression of homogeneity. LDCs, of course, differ in many ways, including geography, culture, surface area, population, resource endowments, economic growth patterns, industrial structure, political stability, economic stability, and health status. One of our objectives in choosing the cases in this book has been to provide the reader with a broad picture that highlights this diversity. While we cannot be comprehensive in this endeavor, the reader will find in the next few paragraphs that the cases chosen capture considerable diversity.
Geography and Culture
We include cases that take place in Latin America (Brazil, Colombia, Ecuador, Mexico, Nicaragua, Peru, and Puerto Rico), in Africa (Nigeria, Zaïre, and Zambia), and in diverse regions of Asia (Bangladesh, China, India, Indonesia, Korea, Pakistan, Sri Lanka, and Thailand). Geographic diversity also gives our sample cultural variety.
Economic Growth and Level of Economic Development
In the “Citibank in Zaïre” case we find a major international bank struggling to put together a syndicated loan for Zaïre, a country that in the 1965-87 period had a negative (-2.4%) average growth in GNP per capita. Zaïre’s per capita GNP was a scant U.S. $150 in 1987. This contrasts sharply with “Daidong Mould and Injection Co.’s” home country, Korea, where per capita GNP grew during the same twenty-two-year period by an impressive average annual rate of 6.2%, reaching U.S. $2,690 by 1987.3
The relatively high per capita GNP places Korea among the so-called newly industrialized countries (NICs). Brazil and Mexico (1987 GNP per capita of U.S. $2,020 and $1,830, respectively) are other NICs included in our sample.
Size and Population
“Nike in China” exposes the reader to the largest developing country. China’s enormous land mass—more than 9,500 square kilometers (sq. km.)—harbors the greatest population in the world—more than a billion. India, another mega-population country with some 800 million inhabitants, is where “The Untouchable Water Carrier” case is set.
In sharp contrast with vast India and China stands tiny Nicaragua. This country, where the “Standard Fruit Co.” and “Pandol Brothers, Inc.” cases take place, has barely 3.5 million inhabitants and occupies 130,000 sq. km. It would require some two hundred ninety Nicaraguas to make one country with China’s population! When we look at “Industrias del Maiz,” we find ourselves in Ecuador, another small country, with under 10 million inhabitants and 284,000 sq. km. Yet not all small countries are small along both dimensions, population and geography. The site of “Population Services International’s” (PSI) social marketing program for birth control contraceptives is Bangladesh, the world’s most densely populated country with more than 110 million inhabitants crowded into less than 160,000 sq. km. Bangladesh’s 685 inhabitants per sq. km. contrast sharply with Zaïre’s 14.
Industrial Structure and Resource Endowment
Our sample countries include diverse industrial structures. We find “EMBRAER” exporting aircraft from Brazil, where agriculture represents only 11% of the GDP, while PSI works in Bangladesh, where almost half of the country’s gross domestic product comes from agriculture.
When agriculture represents a small percentage of a country’s GDP, one might assume that the country is fairly industrialized, but such a conclusion can be erroneous. For example, in Peru, home of “Industrias del Maiz’s” parent, agriculture represents only 11% of GDP, the same as in Brazil. That results not from a comparable level of industrial development in Peru but from the large role played by mining in that country’s economy. Our sample includes a sprinkling of countries that are natural- resource-rich—Peru, Indonesia, Nigeria, and Zaïre—and countries that are natural-resource-poor, such as Korea and Sri Lanka.
Political Stability and Economic Systems
We include several cases that take place in Mexico. That country’s political stability, with more than sixty-five years of uninterrupted peaceful presidential transitions, contrasts sharply with the turbulent revolutionary changes taking place while “Pandol Brothers, Inc.” develops an export market for Nicaraguan bananas.
Not only do we include countries with different rates of political change, our sample includes also countries with vastly different economic systems. “The Leather Industry in India” case reflects India’s rather centralized economic system; and “Nike” must operate in China’s highly controlled economy. The “Thai Polyester Fiber” company, by contrast, operates in Thailand’s free-market economy, and “The Cut Flower Industry in Colombia” case is an example of private sector cooperation, rather than central government control.
Economic Stability
One of the great challenges often facing LDC managers is coping with economically unstable high-inflation environments, so we include cases in Brazil, Nicaragua, and Mexico, all with 1980-87 average inflation rates of over 50%. But not all LDCs suffer from high inflation, as is seen in the cases in Thailand, China, India, Zaïre, and Korea, countries with rates well below 10%.
Physical Quality of Life Indicators
Our sample of countries includes variety along other dimensions. In Sri Lanka, China, and Korea, life expectancy at birth hovers around seventy years, while in Zaïre, Nigeria, and Bangladesh, a newborn is hardly expected to live past the age of fifty. Infant mortality rates are around 100 per thousand live births in Zaïre and Nigeria and about 30 in China and Sri ...
