In the previous chapters, we dealt with general problems by first formulating all necessary constraints and then passing the problem to an LO or MILO solver, but in a way, we have been oblivious to the problem’s structure. However, it is often advantageous to analyze this structure, as it can enable us to find better solution methods. In this chapter, we consider a very general class of problems with special structure – the network problems. In the following example, we illustrate the key ideas.

The distribution of the world’s natural resources is highly unequal. Norway is blessed with an abundance of oil, making it among the richest countries in the world, whereas its equally cold neighbor Finland has to live by its wits without such resources. Much of Algeria and Namibia is arid desert, whereas Brazil and Indonesia are lush and tropical. Chile is loaded with copper and Australia with iron ore and coal, while South Korea and Bangladesh are bereft of any natural resources.

Welcome to International Management Behavior: Global and Sustainable Leadership, ninth edition!

This book is not just a book about global business. It is about people who conduct business – and manage other types of organizations – in a global environment. It discusses and explores typical situations that managers encounter: the problems and opportunities; the frustrations and rewards; the successes and failures; the decisions they must make and the actions they must take.

International management is not an impersonal activity, and it should not be studied solely in an impersonal way. It is important to understand trade theories, to be able to weigh the pros and cons of exporting versus licensing, or to understand the advantages of a joint venture versus a wholly owned subsidiary. But eventually theory must give way to practice; strategizing and debating alternatives must give way to action. Working globally means interacting with colleagues, customers, and suppliers from other countries to achieve a specific outcome. We focus on these interactions, on getting things done with and through other people in an international context.

In the first part of this chapter, we examine how to measure the size and composition of the overall economy. We use these methods to see how saving and investment levels imply how much will be loaned to or borrowed from the rest of the world. Then we define in greater detail the nature of the trade and financial links between the economy and the rest of the world economy. At the end, we discuss how borrowing from the rest of the world affects the status of a country as a net debtor or creditor.

In Chapter 5, we claimed that the watershed between easy and difficult problems is their convexity status. Convex optimization problems are, however, a very broad class and one of their downsides is that the dual problem is not always readily available; see the discussion in Section 5.3. In view of the computational benefits of concurrently solving the primal and dual problems, a natural question arises: Is there a subclass of convex optimization problems that are expressive enough to model relevant real-life problems and, at the same time, allow us for a systematic derivation of the dual akin to linear optimization?

Think about a relationship you have with somebody in your class or workplace. Your initial relationship might be built upon what you know about that person, your shared values and common beliefs – maybe even their personal appearance. The strength of that relationship will change as soon as you start to interact with them. A friendly smile, cheerful greeting and some positive small talk will probably make you think that you might want to get to know this person a little more. Conversely, if you feel ignored, disliked or realise that you value different things, you will probably avoid them in the future. This is what we refer to in this text as student engagement – the relationship that is formed and reformed between students and education.

The exchange rate is the key relative price for an economy open to international trade and finance. The price Americans pay for Japanese automobiles imported into the United States depends on how many dollars it takes to buy 100 yen, i.e., the dollar/yen exchange rate. The stronger the dollar, the more yen it will buy, and therefore the cheaper the imported cars will be. At the same time, a strong dollar makes it harder for US firms to profitably sell heavy earth-moving equipment like bulldozers (say those made by Caterpillar) to the rest of the world. The strength of the dollar against other currencies also affects other sectors, besides trade in manufactured goods. A strong dollar is good for a US tourist visiting Madrid, but places in the United States that cater to foreign tourists, such as Las Vegas, do better business when the dollar is weak.

After decades of roaring growth, the “East Asian Miracle” – as touted in a 1993 book published by the World Bank – seemed to be in full swing. Yet a mere four years later, the region was engulfed in chaos. What became known as the Asian Financial Crisis unfolded in July 1997. As foreign exchange reserves were depleted, the Bank of Thailand was forced to let the Thai baht float freely. The currency immediately depreciated by 21%. By January 1998, the baht was 54% weaker against the dollar than it had been six months earlier. The turmoil was not restricted to Thailand; Singapore, Malaysia, Indonesia, and the Philippines also experienced stresses on their balance of payments as capital flows reversed course, with net flowing out rather than in.

In a 2008 interview on ‘Meet the Press’ on US television, then President-elect Barack Obama, while discussing his intention to implement a stimulus plan to get the economy moving, qualified that ‘things are going to get worse before they get better.’ Things did indeed get worse. By the last quarter of 2008, the US economy was shrinking at an annual rate of 8%, as it sank into its deepest and longest recession since the Great Depression. In Figure 13.1, the blue line shows the drastic decline in the growth rate. Household consumption was trending downward at a rate of nearly 5% per year, business investment in factories and equipment was falling at a rate of 21% per year, and new-home construction was plummeting by a disastrous annual rate of 33%. Clearly, if something could be done, it should be, and swiftly.

Competing with Integrity and Ethical Decision-Making challenges students to consider their responsibilities as a business leader more broadly than simply from financial, market, or legal perspective. There can also be human, social, or legal consequences from their decisions. The human and social impact of decisions should be considered at the time these decisions are being made. The distinction between integrity and ethics is explored, and differences between ethical and legal behavior are discussed. Major moral philosophies and ethical frameworks are presented and compared. Examples are provided from multiple industries. The Foreign Corrupt Practices Act (FCPA), the Corruption Perceptions Index from Transparency International, and the Integrative Social Contracts Theory (ISCT) are presented. Ethical use of artificial intelligence is seen as an emerging concern for global leaders. The chapter ends with a set of personal guidelines for dealing with ethical dilemmas for global leaders to consider.

In the first part of this chapter, we examine how to measure the size and composition of the overall economy. We use these methods to see how saving and investment levels imply how much will be loaned to or borrowed from the rest of the world. Then we define in greater detail the nature of the trade and financial links between the economy and the rest of the world economy. At the end, we discuss how borrowing from the rest of the world affects the status of a country as a net debtor or creditor.