IMS 5200.

582 COURSE SYLLABUS

School of Management
The University of Texas at Dallas

Instructor Habte G. Woldu

Office Phone 972-883-6357
Email Address wolduh@utdallas.edu
Office Location SM 4.805
Offline Office Hours T,R and F 4:30-5:45
Web site http://www.utdallas.edu/~wolduh

Course Information
Course Number/Section IMS 5200.582
Course Title Global Business
Term and Dates Summer 2007

Course Pre-requisites

The course is designed for graduate students who had already taken international business,
calculus for business and statistics in their undergraduate studies.

Course Description

The course deals with economic relations in a global economy characterized by increasing
interdependence of nations. Students through the foundations of neoclassic and
contemporary economic theories will learn about absolute and comparative advantage of
nations in international trade. The course also introduces new theories of international trade
that have relevance in the current global economic situation. Students through various
graphs will be able to see the impacts of trade barriers and protectionist government
policies on the economic welfare of nations. Furthermore, students in this course will learn
about the challenges of globalization such as environmental questions, child labor by
multinational firms, the north-south dialogue on terms of trade as well as the clash between
multinational firms and developing countries on employment, transfer pricing and
technology sharing. In addition, students through group research and case reports will
present their findings to the class.

Student Learning Objectives

Students upon finishing the course are expected to manage the following core issues:

1 Analyze the international trade dynamics and its trends and directions in the global
marketplace

2 Understand the impact of trade barriers on the welfare of a nation and how it affects the
world economy

3 Recognize the significance of regional economic integration in the global economy

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4 Understand why international firms need to be sensitive towards issues such as
multiculturalism, human rights, environmental regulations, transfer pricing practice and
immigration.

Course Objectives:

1. Understand the dynamics of trade and the changes of leadership in the

global economy
2. Recognize why the current terms of trade benefits more the developed
countries more than the developing countries
3. Recognize how Ricardo’s approach to specialization based on cost
comparative advantage theory will help both the rich and poor nations
4. Understand the negative impact of tariff imposition on societies on both sides
of the trade
5. Recognize the dilemma of nations in choosing between economic efficiency
and national security
6. Rationalize why the protectionist economic policy is not beneficial for
developed and developing countries
7. Understand why regional arrangements such as the expansion of EU and
NAFTA can be in contrast to the objectives of multilateralism which has been
fostered by GATT and WTO for many years.
8. Recognize the impact of globalization on the environment, child labor and the
widening of income gap between the rich and the poor.
9. Recognize why MNE can be seen as a threat to developing countries’
sovereignty.

Textbooks and some other bookstore materials are available at the UTD Bookstore
or Off-Campus Books

Required Textbook

Carbaugh, Robert, International Economics, 11th Special Editions, South-Western, 2007.

Suggested Readings/Texts

Friedman, Thomas, The World is flat: A Brief History of the Twenty-First Century, Farrar,
Straus and Giroux, 2005

Maidment, Fred, International Business, Annual Edition, McGraw-Hill/Dushkin, 14th edition,

2005-2006 and 2006-2007

Yergin, D. and Stanislaw, J., Commanding Heights: The Battle for the World Economy, PBS
Series, 2002

Suggested Readings/Journals

The Economist, Wall Street-international section and Journal of International Business

Studies

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Suggested Selected Reading Articles

1 “The Anxiety behind Globalization and Trade”. Globalization carries consequences

that can generate “winners and losers”.
http://www.wnyc.org/shows/lopate/episodes/11102005

2 Weller, Christian and Harsh, Adam, Free markets and poverty

http://www.wnyc.org/shows/lopate/episodes/11102005

3 Buckley, Ross, The Rich Borrow and the Poor Repay: The Fatal Flaw in
International Finance
http://www.wnyc.org/shows/lopate/episodes/11102005

4 Edward, Peter. “Examining Inequality: Who Really Benefits from Global Growth?
World Development. Vol. 34, Issue 10. October 2006. 1667-1695.

5 Budman, Matthew, Looking ahead to our place in the next economy

http://www.wnyc.org/shows/lopate/episodes/11102005

6 “Governing China: Caught between right and left, town and country. A new
lawon property rights defines the ideological struggle at the heart of China’s
economic reform.” The Economist. 8 Mar. 2007.

Course Access and Navigation

Lectures notes and other assignments will be uploaded to the WebCT-

http://webct.utdallas.edu. Please see the course access and navigation
information.
If you have any problems with your UTD account or with the UTD WebCT server,
you may send an email to: assist@utdallas.edu or call the UTD Computer
Helpdesk at: 972-883-2911.

Grading Information

Weights

Individual Participation 15 %
Group Project 15 %
Midterm Examination 30 %
Final Examination 40 %
Bonus-special assignment 5%
Total 105%

Grading criteria

Scaled Score Letter Equivalent

90 - 100 A
80 - 89 B

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 70 - 79 C
60- 70 D
Less than 60 F

Course Policies

Make-up exams
Make-up exams are allowed only if the situation was extraordinary. A student who
takes a make-up exam will earn a maximum of 80% if the reasoning for retaking
the exam was not convincing to the instructor.

Late Work
Not accepted unless there is any special situation preventing a student to complete
the work on time.
The same guidelines that apply to traditional classes should be observed in the
virtual classroom environment. Please use proper netiquette when interacting with
class members and the professor.

Participation in the weekly discussion topics

All students are expected to participate in individual and group activities and share the
group assignment works. Instructor will ask each group member to evaluate all other group
members’ participation.

Groups will be selected for case studies and report during the first week of the course. A
Peer Evaluation Form will be submitted by each student. Based on the evaluation
information, instructor will assign a group participation grade for each student.
Relevant information will be posted under Groups icon. Each group will work on a separate
case and a 3 page written report will be submitted on the specific assignment due dates as
indicated in the course schedule table. The report should include:

a) problem definition
b) method/s applied to solve the problem
c) solutions
d) conclusion

Assignments & Academic Calendar

dates Lecture/topics Weekly Discussion Group Project Assignments
on Mini Cases
Week 1
Chapter 1, An overview of Self introduction Group Projects will be assigned
Lecture 1 the international
June 7/07
economy and
globalization

Movie: The commanding

heights: That Battle of
Ideas

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 Week 2 Chapter 2, Foundation of
modern trade theory and Video: commanding
Lecture 2 heights -part two
comparative advantage
June 14/07
1 Bike Imports Force
Schwinn to
Downshift p.4 text

2 Even Boeing 777

is not all American

Chapter 3, Sources of Gr. Project 1: absolute advantage

Lecture 3 comparative advantage Babe Ruth and in international trade-Smith
Principle of
Comparative Gr. Project 2: cost comparative
Advantage p.41 text advantage-Ricardo

Week 3 Chapter 4, Tariffs and the Do Companies Have Gr. Project 3: competing in the
concept of tariffs to Outsource world of steel industry
Lecture 4 Products to Low-
Wage Counties to Gr. Project 4: The effect of
Chapter 6 Trade
June 21/07 Remain tariff on small country welfare
regulations and industrial Competitive? Pp 56-
policies 57
Petition of the
Candle Makers p.
138 text
Week 4
Midterm (Ch. 1-4) Video: Commanding
June 28/07 Heights-part three

Week 5
Chapter 7, Trade policies “Does a Flat
Lecture 5 in developing countries World” Make Gr. Project 5. Bananas Vs.
Ricardo Wrong? computer chips in
July 5/07 P.80 text international market

Free Discussion:
Fair or Unfair terms
of trade in
developing countries

Week 6 Chapter 8, Regional trading

arrangements Gr. Project 6 : Evaluating the
Lecture 6 socio-economic performance
of EU members EU’s
July 12/07 enlargement.

Week 7 Chapter 9, International Swimming Gr. Project 7: Does Foreign

factor movements and Upstream: The Direct Investment follow
Lecture 7 Case of Vietnamese export
multinational enterprise

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 Catfish p. 164
July 19/07
How to Bring
Developing
Countries in from
the Cold p. 234 text
Week 8 Final examination Ch. 6-9
July 26/07

Case Assignment Profiles

Case 1: Specialization in trade: Smith’s Absolute Cost Advantage

Given that two nations have equal resources and both agreed to specialize in the production
of a product that is most efficient, determine:

Profiles of Cases for Discussion:

Case 1 Smith’s Absolute Advantage in International Trade:

Smith, in his essay “ Wealth of Nations” negates the idea of Mercantilism by

demonstrating how two nations who have absolute advantage in the production of
one product benefit from specialization and international trade. Bases on the
information in table 1 determine:
a) Specialization between the two nations (which country specializes in
coffee of tea?)
b) The range of terms of trade (negotiation terms)
c) the best of terms of trade (democratic distribution of trade benefit)
d) the net benefit for each country.
e) the limitations of production and export based on such assumption

Table 1
product Ethiopia Italy
Coffee (in quintals) 20 5
Tea (in quintals) 5 10

Case 2 Ricardo’s Cost Comparative Advantage in International Trade

Given that two nations have equal resources and both possess cost comparative
advantage, they may agree to specialize in the production of a product that is most
efficient, determine:

f) Specialization between the two nations

g) The range of terms of trade (negotiation terms)
h) the best of terms of trade (democratic distribution of trade benefit)
i) the net benefit for each of them

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 j) What are the limitations of production and export based on such assumption?

product Ethiopia Italy

coffee 10 ton 2 ton
tea 20 ton 6 ton

Case 3: Competition in the World Steel Industry

The relatively low production costs of foreign steelmakers encourage foreign steel
producers to participate in the US market. As a result of increased competition, the
average US cost of steel production came down from $685 in 1982 to $482 per ton in
1999. Global cost comparison still shows that cost of steel production in the US is
higher than its competitors. The American public, interest groups, economists and
government officials are divided on the issue of allowing cheaper steel production into
the American markets. Economists think that the US economic is going to suffer
heavily if we deny industries importing steel production at a competitive price. In fact,
the economists argue that, the US consumers are the ones that would suffer from the
effect of a protected expensive industry. On the other hand, labor unions and
government officials and special interest group argue that the steel industry is a
strategic industry which we can’t afford to lose it. They argue that, steel is used heavily
in the defense industry and is an intermediary product for many industrial products;
therefore, its absence or dependency on others will make the national economy highly
vulnerable and subject to monopolistic price.

What are the pros and cons of keeping the industry alive by imposing heavy tariffs and
quotas on imported steel products? After presenting the pros and cons of protecting
the industry, forward your position and justify it by providing current publication
focusing on the issue.

Case 4: Determine the effect of tariff on the welfare of the United States.

a) Based on the following data, determine the equilibrium point of the demand and
supply for fountain pens in the domestic determine, price and quantity of
demand and supply)
b) Determine the level of consumer and producer surplus, in the absence of
international trade.

c) Assuming that the US government enters a free trade agreement with Mexico,
the price for a fountain pen will be $20. What will be
a. The total consumption level
b. The total number of locally produced fountain pens
c. The total number of imported fountain pens
d. The total amount of producers and consumers surplus
in the new free trade situation. In order to answer the above questions,
you need to plot the above numbers on a graph paper

d) Assuming that the US government imposes a 100% tariff on the import of

fountain pens from Mexico, what will be
a. The total consumption level?

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 b. The total number of locally produced fountain pens?
c. The total number of imported fountain pens?
d. The total amount of producers and consumers surplus?
e. The total revenue the US government collects?
f. The total amount of deadweight loss?
g. The total amount of consumer’s loss?

Price in $ Quantity of Quantity of

Pencils Supplied Pencils
Demand
0 0 1000
10 100 900
20 200 800
30 300 700
40 400 600
50 500 500
60 600 400
70 700 300
80 800 200
90 900 100
100 1000 0

Case 5: The cost of bananas and computer chips in the world market

While there is a general concession on the fact that the market should be the one that
determines on how commodities should be exchanged in the world market, there are
those who would say that, agriculture-based countries will never have a fair share in
the current economic order which favors industrial products over agriculture based
commodities. This means, many families in the developing countries will have to work
in the banana plantation fields for a long period of time in order to exchange their
banana products with computer chips which can be produced in a matter of hours. In
other words, there is a direct correlation between the type of products nations produce
and exports and their level of economic growth. Developing countries blame
developed countries for the existing rich-poor income gap and for the looming poverty
through out the world. Assess how agricultural and industrial products are exchanged
in the world markets and provide suggestions on to how to deal with the situation.
Hint: should developing countries create cartels (closed economy growth strategy) in
order to boost the price of the primary products or should they encourage foreign
capital to flow in order to break the impasse through growth-based economic strategy
(open economic strategy) ? In order to be able to answer this question, you may
compare closed and open economies of developing countries in the last 20 years and
evaluate their economic performance and their ability to diversify their exportable
products.

Group Project 6 : The economic benefit of European enlargement

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 The European Union has been determined to increase its member counties. On May
1st, 2004, ten new countries accessed the union, making a total of 25 countries. Eight
of the ten accessing countries belong to the former Soviet Bloc countries,
furthermore two more ex-Soviet Bloc countries have recently joined the 25 countries
in January 2007, making it a total of 27 members. The West European citizens have
a mixed feeling about the economic integration of two “unequal partners”. Some
critics say that this union is going to erode the high standard of living West
Europeans enjoyed for years, while other indicate that, in order for West Europe to
be competitive with the rest of the world, it needs these emerging countries for
market expansion and long term economic growth.

Based on the following premises, determine whether the European enlargement was
beneficial to the newly accessing countries, the old European countries or both
groups.

a) Assess the economic growth of both groups of countries. Hint, compare the
GNP growth of the two groups of countries in pre-enlargement (1999-2003)
and post-enlargement (2004-present) periods.

b) Assess the level of globalization using the formula for economic openness,
i.e. (im+ex)/GNP*100 , for both regions in both periods of time

c) See if the monetary situation of the newly annexed countries has improved.
Use inflation rate and local currency exchange stability and interest rate to
evaluate the improvement achieved in financial stability.

d) Assess the unemployment rate and wage increase in order to evaluate social
stability and satisfaction.

Case 7: Does Foreign Direct Investment Follow Export?

There are many arguments which attempt to explain why foreign direct investment
enters a specific international market. Some believe that foreign direct investment is
taking place in order to take advantage of lower wages available in a foreign country,
while others indicate that FDI is entering a foreign market in order to get access to key
resources. There is also a group of authors who believe that the success of export in a
specific country leads to a second phase of market entry mode which includes joint
venture interment, wholly owned investment, contract manufacturing and management
and strategic alliances, in short foreign direct investment entry.

By analyzing the historical data from 1990-2005, examine if the American Foreign
Direct Investment is positively associated with the American Export to a specific
country. Consider a) US-Mexico b) US-China C) US-Saudi Arabia export over the last
15 years).

Plot your data on a graph to show the trend.. Hint. Plot the export and FDI on the x-
axis and the years on the y-axis. Produce three separate graphs for a, b, c groups.
You may also express the export and FDI figures as per capita rather than absolute
values. US per capital export are derived by dividing the total annual amount of US
export by US population for that particular year.

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Discuss if there are other variables that might better explain the motives behind US
FDI in the three mentioned countries

Scholastic Honesty
The University has policies and discipline procedures regarding scholastic
dishonesty. Detailed information is available on the Scholastic Dishonesty web
page. All students are expected to maintain a high level of responsibility with
respect to academic honesty. Students who violate University rules on scholastic
dishonesty are subject to disciplinary penalties, including the possibility of failure in
the course and/or dismissal from the University. Since such dishonesty harms the
individual, all students and the integrity of the University, policies on scholastic
dishonesty will be strictly enforced.

Withdrawal from Class

The administration of this institution has set deadlines for withdrawal of any
college-level courses. These dates and times are published in that semester's
course catalog. Administration procedures must be followed. It is the student's
responsibility to handle withdrawal requirements from any class. In other words, I
cannot drop or withdraw any student. You must do the proper paperwork to ensure
that you will not receive a final grade of "F" in a course if you choose not to attend
the class once you are enrolled.

Incomplete Grade Policy

As per university policy, incomplete grades will be granted only for work
unavoidably missed at the semester’s end and only if 70% of the course work has
been completed. An incomplete grade must be resolved within eight (8) weeks
from the first day of the subsequent long semester. If the required work to
complete the course and to remove the incomplete grade is not submitted by the
specified deadline, the incomplete grade is changed automatically to a grade of F.

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