International business

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Learning Outcomes:

1. Identify and evaluate the significant trade agreements affecting global commerce (Lo 1.1)

2. Identify the major components of international business management (Lo 2.4)

3. Analyze the effects of culture, politics and economic systems in the context of international business (Lo 2.1)

4. Explain the forces driving and evaluating the impact of globalization (Lo 1.3)

5. Carryout effective self-evaluation through discussing economic systems in the international business context (Lo 3.1)

Discussion Questions

1. Discuss the economic reasons for government intervention in markets.
(minimum words: 200, marks:2)

2. Describe the five-step process that businesses can use to think through ethical problems.
(minimum words: 400, marks: 3)

Case study

Please read Case 2: “The Decline of Zimbabwe” available in your e-book (International business: Competing in the global marketplace
(13th ed.), at
page no.627, and answer the following questions:

Assignment Question(s):

3. Why has Zimbabwe’s economic performance been so poor? Discuss.
(minimum words: 400, marks: 3)

4. Do you think Zimbabwe’s economic performance would have been better under a different system of government? Which one? Explain your reasoning.
(minimum words: 500, marks: 4)

5. Discuss the steps needed to be taken now to improve the economic outlook for Zimbabwe?
(minimum words: 400, marks: 3)

Answers

1.
Answer-

2.
Answer-

3.
Answer-

4.
Answer-

5.
Answer-

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Cases 627

modern agricultural
practices and had never
farmed at all. In the
wake of the land reform
program, agricultural
productivity slumped
and the country is now
a net importer of food.

Another drag on
the country’s growth

was the 2008 Indigenisation and Economic Empower-
ment Act, which required that enterprises doing busi-
ness in Zimbabwe have at least 51 percent local
ownership. In practice, this often meant high-ranking
ZANU-PF party members. After the act was passed, a
number of foreign corporations doing business in the
country pulled out.

The country’s mining sector remains potentially lucra-
tive, with large platinum and diamond deposits mined by
private enterprises, but almost all of the licensing reve-
nues due to the state have reportedly disappeared into the
hands of army officers and ZANU-PF politicians. Taxes
and tariffs are high for private enterprises, which discour-
ages private business formation, while state-owned enter-
prises are strongly subsidized. Tourism, once a big
revenue earner, has declined as Zimbabwe’s wildlife has
been decimated by poaching and deforestation. As eco-
nomic activity slumped, the country’s formal unemploy-
ment rate reached a staggering 80 percent.

To complicate matters, Zimbabwe was devastated by
the AIDS epidemic, with HIV infection rates hitting a
high of 40 percent of the population in 1998. Due to
AIDS and other public health problems, life expectancy
fell to just 43.1 years in 2003, down from 61.6 years in
1986. By 2014, with HIV prevalence down to 15 percent,
life expectancy had risen back to 54 years.

With tax revenues collapsing, Mugabe funded govern-
ment programs by printing money. Inflation quickly spi-
raled out of control, reaching 231,000,000 percent in
2008 and requiring the Central Bank to introduce a
100 trillion Zimbabwe dollar note! In April 2009, the
Zimbabwe dollar was suspended (at the time the trillion
dollar note was worth around $0.40 USD). Zimbabwe
allowed trade to be conducted using other currencies,
particularly the U.S. dollar, the South Africa Rand, the
euro, and the British pound.

Despite the country’s economic implosion, the World
Bank still believes that Zimbabwe has enormous potential
for sustained economic growth given its generous endow-
ment of natural resources, its existing stock of public
infrastructure, and comparatively skilled human resources.
Attaining that potential will require a change in leader-
ship and policies.

In 1980, the southern African state of Zimbabwe gained
independence from its colonial master, Great Britain.
Speaking at the time, the late Tanzanian President, Julius
Nyerere, described Zimbabwe as “the jewel of Africa.” It
was a country that boasted a strong economy, abundant
natural resources, and a vibrant agricultural sector. As
part of the independence process, the British bequeathed
Zimbabwe a number of democratic political institutions.

Zimbabwe’s birth as an independent nation was a dif-
ficult one. In 1965, the minority white rulers of what was
then known as Rhodesia unilaterally declared indepen-
dence from Britain, setting up an apartheid state where
blacks were excluded from power. The British govern-
ment wanted majority rule, stated that the declaration of
independence was an illegal rebellion, and imposed sanc-
tions on Rhodesia. Other nations that followed suit in-
cluded the United States. An armed conflict ensued, with
two guerrilla movements waging war against Rhodesia’s
white government. One of those guerrilla movements, the
Zimbabwe African National Union (ZANU) was headed
by Robert Mugabe, who aligned himself and his move-
ment with the Maoist version of communism. A combina-
tion of international sanctions and guerrilla activity
eventually forced the white minority rulers of Rhodesia to
end their rebellion. In 1979, Rhodesia reverted to British
colonial status.

The following year, Zimbabwe gained legal indepen-
dence. Robert Mugabe was elected as the country’s first
prime minister. Thirty-seven years later, Mugabe was still
in power, now as President. His ZANU-PF party had won
every election since independence. Once a largely cere-
monial position, Mugabe had systematically consolidated
power in the Presidency and restricted his political oppo-
nents. He was re-elected as President in 2013 in a general
election that, like many in the Mugabe era, was widely
seen as rigged. The country has also been beset by en-
demic corruption. Corruption watchdog Transparency
International recently ranked Zimbabwe as one of the
most corrupt nations in the world.

Zimbabwe’s economic performance in recent years
ranks among the worst in the world. Although the econ-
omy maintained a positive economic growth rate through
the 1980s and 1990s, it has deteriorated rapidly since
2000. Between 1999 and 2009, Zimbabwe saw the lowest
economic growth rate ever recorded, with an annual
decline of 6.1 percent in GDP.

The decline occurred after Mugabe launched a “fast-
track” land reform program that encouraged seizure by the
state without compensation of land owned by white farm-
ers. At the time, some 4,000 white farmers were the back-
bone of the country’s strong agricultural sector. The land
was given to members of the ZANU-PF party and other
supporters of Mugabe, who lacked experience with

The Decline of Zimbabwe

McGraw-Hill Education

628 Part 7 Cases

Chifera, “What Happened to Zimbabwe, Once Known as the
Jewel of Africa?” VoaZimbabwe, April 17, 2015; “The Real
Balancing Rocks on Every Zimbabwe Dollar,” Slate, January 23,
2017; “Diamonds in the Rough,” Human Rights Watch Report,
June 26, 2009; “Zimbabwe,” The World Bank, http://www.
worldbank.org/en/country/zimbabwe/overview.

Case Discussion Questions
1. Why has Zimbabwe’s economic performance been

so poor?
2. Do you think Zimbabwe’s economic performance

would have been better under a different system of
government? Which one? Explain your reasoning.

3. What steps need to be taken now to improve the
economic outlook for Zimbabwe?

Mugabe showed no signs of giving up the reins of
power. In February 2017, he held a lavish 93rd birthday
party for himself and stated that he wanted to stand for
another five-year term as president in 2018. However, much
to the surprise of many observers, in November 2017,
Mugabe was forced to resign from office after his own
party started impeachment proceedings against him. He
was quickly replaced by his former vice president,
Emmerson Mnangagwa, whom Mugabe had fired on
November 6 in an action that precipitated the impeach-
ment hearings. Mnangagwa has stated that he will get rid
of Mugabe’s more ruinous policies in an effort to improve
Zimbabwe’s battered economy. Mugabe himself passed
away in September of 2019, although the country still
struggles with his legacy.

Sources
“Will Emmerson Mnangagwa Be Better than Robert Mugabe?”
The Economist, November 30, 2017; “How Robert Mugabe
Ruined Zimbabwe,” The Economist, February 26, 2017; Irwin