Ateneo de Zamboanga University

School of Management and Accountancy

Accountancy Department
School Year 2024-25

Course Code: FINMAN3 Course Title: International Business, Trade and

Finance Semester: 2nd

LEARNING PACKET NO. 1

Introduction to International Business

INTENDED LEARNING OUTCOME:

At the end of this learning unit, the learners shall:
1. Explain various concepts in international business.
2. Describe why firms internationalize.
3. Appreciate the need to study international business.

I. CONCEPT NOTES

INTRODUCTION: WHAT IS INTERNATIONAL BUSINESS?

International business (cross-border business) refers to cross-border trade
and investment activities by firms.
■ Primarily, individual firms engage in international business, yet, governments
and international agencies may also conduct international business activities.

Elements of International Business

1] Globalization of markets
2] International trade
3] International investment
4] International business risks
5] Participants: Firms, distribution channel
intermediaries, facilitators and governments.
6] International entry strategies, including
exporting and direct investment

■ Globalization of markets (or the globalization of economies) refers to ongoing

economic integration and growing interdependency of countries worldwide.
■ Online platforms- Amazon, Alibaba, Facebook and Instagram underscore this
integration and are central to globalization.
■ Internationalization refers to the tendency of firms to systematically increase
the international dimension of their business activities. This has resulted in the
widespread diffusion of products, technology, and knowledge worldwide.
■ Macro perspective (trend) - globalization of markets means intense economic
interconnectedness between/among countries.

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■ Micro perspective (focus)- firm level, activity- Value-Chain Perspective-
Firms conduct value-adding activities on a global scale, i.e. organize, source,
manufacture, market, sell, and employ market entry strategies such as exporting,
strategic alliances, and direct investment.
■ The text focuses primarily on the international business activities of the
individual firm.
■ Globalization both compels and facilitates companies to expand abroad-
international expansion is easier due to market and product globalization.
■ A “level playing field” has made cross-border activities appealing to all types of
firms- large and small; manufacturing and service sectors (e.g. banking,
engineering, insurance, and retailing).
■ Globalization impacts everyone, as evidenced by the global financial crisis
(2008). The economic contagion, or interconnectedness was underscored as the
crisis began in the U.S. and rapidly spread to U.S. trade partners, eventually
impacting Canada, Mexico, Japan, China and the world. This manifestation
illustrates the integration and interdependency of national economies throughout
the world.

WHAT ARE THE KEY CONCEPTS IN INTERNATIONAL BUSINESS?

International trade and investment are the most conventional forms of
international business transactions.

International Trade
■ Cross-border exchange of products (merchandise) and services (intangibles)
typically through exporting and importing.
■ Exporting (outbound activity) - entry strategy involving the sale of products/
services to customers located abroad.
■ Importing (global sourcing; inbound activity) - the procurement of
products/services from foreign suppliers for consumption in the home country or a
third country
■ Exporting and importing may include both intermediate (raw materials and
components) and finished products.

International Investment
■ Cross-border investment is the transfer of assets to another country or the
acquisition of assets in that country.
■ The factors of production (assets) include capital, technology, managerial
talent, and manufacturing infrastructure.
■ Trade = products and services cross national borders.
■ Cross-border investment = the firm itself crosses national borders.

Two Types of International Investment:

■ International portfolio investment (typically short-term) is the passive
ownership of foreign securities such as stocks and bonds for the purpose of
generating financial returns.
■ Foreign direct investment (FDI) (typically long-term) is a foreign-market entry
strategy that gives investors partial or full ownership of a productive enterprise.

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The firm establishes a physical presence abroad through acquisition of productive
assets such as capital, technology, labor, land, plant, and equipment.

The Nature of International Trade

■ Macro-International Trade: Aggregate export and import flows of products and
services between nations.
■ Micro-International Business: Cross-border transactions of an individual business
enterprise.
■ Gross domestic product (GDP) is the total value of products and services
produced in a country during a year.
■ Due to the global recession, world trade declined in 2009, ending a 27-year
boom period.
■ Trade revived and returned to normal levels in 2012.
■ Remarkable- since 2008, annual rate of growth in world exports surpassed
world GDP by almost 2x (5.3 percent versus 2.8 percent).

Trade Growth > GDP Growth:

[1] Significant rise of emerging markets during the past three decades, which are
home to growing middle class households equipped with substantial disposable
incomes.
[2] Advanced (or developed) economies such as the U.S. and the European Union
are now sourcing many of the products from low-cost manufacturing locations such
as China, India, and Mexico.
[3] Advances in information and transportation technologies, decline of trade
barriers, and liberalization of markets fuel the rapid growth of trade.
■ Entrepôt economies (intermediate depot; exports = imports): Singapore, Hong
Kong and Malaysia export more than 100 percent of their respective GDPs.
■ Such countries import a large volume of products, some of which they process
into higher value-added products and some they simply re-export to other
destinations.

The Nature of International Investment

■ Foreign Direct Investment (FDI) - (asset ownership and long time frame) is
the ultimate commitment-level of internationalization, and thus this text focuses
primarily on FDI (most common mode of entry strategy) as opposed to
International Portfolio investment.
■ New legal business entity, recognized by the host country and subject to its
regulations.

■ Motivations for firm FDI: (Note how these fit into the value chain)
(1) Primary Activity: Set up manufacturing/assembly facilities to produce
products/services;
(2) Primary Activity: Open a sales/representative office to conduct
marketing or distribution activities; or
(3) Support Activity: Establish a regional headquarters

■ FDI and Competitive Advantage:

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Large, resourceful companies with substantial international operations are better
able to leverage FDI to:
(1)Manufacture/assemble products in low-cost labor countries (or for other
resources), i.e. China, India, Russia, Brazil, and Mexico:
■ Example-
◘ Ford invested some $3 billion to build a new car factory in Mexico to
manufacture Fiesta automobiles.
(2)Global challengers originating in rapidly developing economies invest in western
markets:
■ Examples-
◘ Chinese company Haier purchased General Electric’s appliance division for
$5.4 billion, in 2016.
◘ Turkey in 2014- Yildiz paid over three billion dollars to acquire British
based cookie and snack maker, United Biscuits.
◘ India's Mittal Steel Co. acquired the Belgium-based Arcelor SA in August
2006, creating a $38 billion conglomerate -- the world's largest steel company.
◘ Russian oil and gas firm Lukos established thousands of service stations in
the U.S. and Europe.
■ September 11, 2001 interrupted FDI inflows with the worldwide panic that
ensued following the terrorist attacks in the U.S.; then interrupted again in 2008
by the global recession. Stability in world economy is key.
■ Developed (Advanced) economies = Japan, Australia, Canada, the U.S., and
most countries in Western Europe. Dollar volume of FDI has grown immensely
since the 1980s, in developed economies.
■ Developing economies = Parts of Africa, Asia, and Latin America.
■ Significant- is the growth of FDI into developing economies (surpassing advanced
economy inflows in 2010) despite widespread poverty, lower incomes, less-
developed industrial bases, and less investment capital than advanced economies,
and represent the need for modern industrial infrastructure.

Services as Well as Products

■ Key international players: Tangible merchandise (products) and intangibles
(services- e.g. banks, consulting firms, hotels, construction companies, retailers,
airlines, etc.).
■ International trade in services accounts for about one-quarter of all global trade
and is growing faster than products, however the value of merchandise trade is
still much greater than the value of services trade.
■ Service industries that are rapidly internationalizing:
Industry Representative Activities Representative
Companies
Architectural, Construction, power utilities, A B , Bechtel Group,
construction, design, engineering services, Halliburton, Kajima, Philip
and for airports, hospitals, dams Holzman, Skanska A B
engineering
Banking, Banks, insurance, risk Bank of America, C I G N A,
finance, and evaluation, management Barclays, H S B C, Ernst &

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 insurance young
Education, Management training, technical Berlitz, Kumon Math &
training, and training, language training Reading Centers, N O V A,
publishing Pearson, Elsevier
Entertainmen Movies, recorded music, Time Warner, Sony, Virgin,
t Internet- based entertainment MGM
Information E-commerce, e-mail, funds Infosys, E D I, Hitachi,
services transfer, data interchange, data Qualcomm, Cisco
processing, computer
services
Professional Accounting, advertising, legal, Leo Burnett, EYLaw,
business management consulting McKinsey,
services A. T. Kearney, Booz Allen
Hamilton
Transportatio Aviation, ocean shipping, Maersk, Santa Fe, Port
n railroads, trucking, airports Authority of New Jersey, S N
C F (French railroads)
Travel and Transportation, lodging, food Carlson Wagonlit, Marriott,
tourism and beverage, aircraft travel, British Airways
ocean carriers, railways
■ Challenges unique to services:
◘ Not all services can be exported.
◘ Physical presence in host country is a prerequisite for many services.
■ More than $2 trillion worth of services are sold abroad every year.
■ Larger, developed economies account for the greatest proportion of services- as
services typically comprise more than 2/3 of the GDPs of these countries.
■ CASE IN POINT: EBay
The giant Internet retailer earned $9 billion in 2017, of which more than 50
percent came from international sales. EBay expanded to India, China,
Korea, and Europe in anticipation of most of its future revenue growth
coming from abroad. When developing its business in India, eBay acquired
the Mumbai-based e-retailer Baazee.

The International Financial Services Sector

■ Banking and financial services are the most active cross-border services.
■ Explosive growth of global capital markets is attributed to:
(1) Internationalization Banks/Financial institutions → increased
amount of cheap, local investment capital, stimulating local financial markets
and encouraging savings
(2) International Flow of Money → into pension funds and portfolio
investments
■ Developing economies- banks/financial institutions have fostered economic
activity by increasing the availability of local investment capital, which stimulates
the development of financial markets and encourages savings.

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■ International banking is primarily conducted by very large banks.
■ Governments worldwide imposed many new regulations in the banking industry
following the global financial crisis that arose in 2007–2008.
■ Consumers and local businesses generally prefer to deal with local banks,
obtaining financial services from homegrown “brick-and-mortar” branches and
personnel who understand local conditions.
■ China is now home to three of the world’s five largest banks, specifically ICBC,
China Construction Bank, and the Agricultural Bank of China.
■ London long has been the banking hub of Europe, but the status may be
threatened if the United Kingdom ends its membership in the European Union (EU)
under the Brexit arrangement.

HOW DOES INTERNATIONAL BUSINESS DIFFER FROM DOMESTIC

BUSINESS?
■ Complexity- Macro forces differ from country to country- economic conditions,
national culture, legal and political systems- vary by country.
■ Risk- Uncontrollable variables- the firm has little or no control over these.
■ Foreign environments involve new risks that firms must manage.
■ Instagram (opening case)- exemplifies how distinctive conditions in each
country lead businesses and consumers to utilize services differently, from country
to country.

The Four Risks of Internationalization/ International Business

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Cross-Cultural Risk
■ Situation where a cultural misunderstanding places some human value at risk.
■ Differences in language, lifestyles, mind-sets, customs, and religion.
■ Cross-cultural literacy - critical to embrace culturally-valued mind-set and/or
work style.
■ Cultural blunders- hinder the effectiveness of foreign managers.
■ Language- critical dimension of culture- a window to value systems.
■ Language challenges impede effective communication.
■ Cultural differences may lead to inappropriate business strategies and ineffective
customer relations.

Country Risk or Political Risk

■ Differences in host country political, legal and economic environments may
adversely impact firm profitability.
■ Government intervention: restricts market access; imposes bureaucratic
procedures hindering business transactions; and limits the amount of income that
firms may repatriate from foreign operations- varies by country.
■ Economic freedom differs among nations- The Index of Economic Freedom from
the Heritage Foundation ranks countries according to a myriad of economic
freedom variables.

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■ Hong Kong, Singapore and Australia typically occupy the top three countries in
terms of having the highest levels of economic freedom, see
(http://www.heritage.org). Ireland also ranks high in terms of a liberal economic
environment; whereas China and Russia are the opposite- governments regularly
intervene in business.
■ Critical Legal Dimensions: Laws and regulations, e.g. intellectual property
protection, product liability, taxation policies, inflation, national debt, and
unbalanced international trade, may encumber firm operations and performance.

Currency or Financial Risk

■ Risk of adverse fluctuations in exchange rates.
(Exchange rates- the value of one currency in terms of another).
■ Inflation and other harmful economic conditions create uncertainty of returns
due to the growing interconnectedness of national economies.
■ When international transactions are conducted in more than one national
currency → currency risk.
■ The value of a firm’s earnings may be substantially reduced when currencies
fluctuate significantly.
■ Examples- 2015-16 Rising value of U.S. dollar relative to most currencies cut
into revenues of U.S. multinational firms, e.g. Apple, Caterpillar, and Pfizer. Procter
and Gamble’s Duracell battery business experienced a 31 percent decline in profits
due to weaker currencies in its foreign markets

Commercial Risk
■ Poor development/execution of business strategies, tactics or procedures,
resulting on firm loss, e.g. partnering selections, market entry timing, pricing,
product features, and promotional themes
■ Failures in international markets are far more costly than domestic business
blunders.
■ Firm reputation and profitability may also be at risk from marketing harmful
products, failing customer expectations, or providing inadequate customer service.
■ Commercial risk is often affected by currency risk, because fluctuating exchange
rates can affect various types of business deals.
■ Two new types of risk — cyber risk and social media risk — have emerged in
international business. Both are the result of vulnerabilities in affected
organizations.
— Cyber risk results from attacks on, or breaches of, the firm’s information
systems. Recent data breaches have afflicted eBay, Uber, Tesco Bank, and
Sony Playstation Network.
— Social media risk refers to rapid and widespread circulation of unfavorable
“buzz” about the firm. Such negative news is accelerated and amplified by
social media. In 2015, for example, regulators announced that Volkswagen
had installed software in its vehicles aimed at evading environmental
regulations intended to reduce engine pollutants. When the scandal went viral
on Twitter, Facebook, and other sites, Volkswagen’s brand image was
damaged. By late 2015, Volkswagen’s buzz score had descended to its lowest
point in several years.

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Risks: Always Present but Manageable
■ These types of risks are omnipresent in international business.
■ Managers need to understand their implications, anticipate them, and employ
proactive measures to reduce their adverse effects.
■ Example from 2015: the Greek debt crisis has lingered for several years and
affects not only the European Union but creditors elsewhere.

WHO PARTICIPATES IN INTERNATIONAL BUSINESS? (Four categories)

[1] Focal firm- The initiator of an international business transaction, which
conceives, designs, and produces offerings intended for consumption by customers
worldwide. Focal firms are primarily MNEs and SMEs.

Multinational Enterprise (MNE) [Also known as Multinational Corporation

(MNC)]
■ MNE owns a worldwide network of subsidiaries and affiliates located in multiple
countries; large firm with a home office and substantial resources.
■ Multinational enterprises have historically been the most important type of focal
firm; adding value in multiple countries, through subsidiary affiliates, leveraging
R&D, procurement, manufacturing, and marketing activities, to exploit economic
advantages.
■ FDI (Foreign Direct Investment) - Key entry strategy.
■ Examples-
◘ Alcon - Swiss pharmaceutical firm that established major R&D facilities in
the U.S., leveraging local talent in the chemicals sector
◘ Verizon Wireless - located much of its technical support operations in
India, taking advantage of high-quality, low-cost customer support personnel
◘ Royal Dutch Shell - owns several oil refineries and nearly 2,000 gasoline
stations in Canada.
■ Affiliates- Network of subsidiaries that MNEs collaborate with.
■ Typical MNEs - Nestlé, Sony, Citibank, Unilever, Nokia, Ford, Barclays, DHL,
Four Seasons Hotels, and Shell Oil.
■ Recently, the largest MNEs have been firms in the oil industry (such as Exxon-
Mobil and Royal Dutch Shell) and the automotive industry (General Motors and
Honda), as well as retailing (Walmart).
■ MNEs – For many, more than 50 percent of total sales/profits comes from
international operations, e.g. Exxon, Honda, and Coca-Cola.
■ 1970- fewer than 7,500 MNEs worldwide; today at least 75,000.
■ The U.S. is home to 132 of the top 500 MNEs, a number that has declined
over time as other countries’ firms increase in size.
■ China has the second-most MNEs (110 firms) and rising. Europe is home
to many top MNEs: Germany (29 firms), France (20 firms), and the United
Kingdom (19 firms).
■ Global Challengers from Emerging Market Countries: New Contenders-
Large MNEs have begun to appear in emerging market countries, such as China,
Mexico, and Russia- leveraging home-country natural resources and low-cost labor,
posing legitimate competitive challenges for advanced economy- incumbents in
world markets.

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■ Examples-
◘ The Mexican firm Cemex is one the world’s largest cement producers.
◘ Russia’s Lukoil has big ambitions in the global energy sector.
◘ In China, Mobile dominates the cell phone industry in Asia.
◘ China- Most top firms are state-owned enterprises; owned by the Chinese
government, which provides them substantial advantages.

Small and Medium-Sized Enterprises (SME)

■ SME is a company with 500 or fewer employees (in Canada and the U.S.).
■ SME- 250 or fewer employees in the EU and elsewhere.
■ Small firms comprise 90–95 percent of all firms in most economies.
■ Even MNEs start small.

■ SMEs Strategies for Success:

(1) SMEs are more innovative, entrepreneurial, flexible, adaptable, and have
quicker response times.
(2) SMEs are less bureaucratic.
(3) SMEs are better able to serve niche markets.
(4) Due to limited financial and human resources, SMEs tend to minimize fixed
investments costs and outsource, e.g. FedEx and DHL.
SMEs OVERALL
■ Exporting- Primary foreign market entry strategy as FDI is more expensive.
■ Niche markets- Target specialized products too small to interest large MNEs.
■ Success – Enabled by foreign intermediaries, facilitators, and global logistics
specialists such as FedEx and DHL.
■ Proficiencies- Information and communications technologies enable SMEs to
identify global market niches and efficiently serve specialized buyer needs.
■ International business complexities are considerably more challenging for SMEs
than MNEs - requiring specialized knowledge, commitment of resources, and
considerable time to develop foreign business partnerships.
■ SMEs are gaining equal footing with MNEs in marketing sophisticated products
around the world.

■ Born Global Firms

Young, entrepreneurial SMEs that initiate international business close to inception
(within 3 years), and are found in both advanced economies, e.g. Australia and
Japan, as well as emerging markets such as China and India.
■ Export to 20 or more countries, generating over 25 percent of their sales from
abroad.
◘ Example- Logitech (www.logitech.com), a born global firm based in
Switzerland specializing in accessories for mobile phones and personal computers,
especially mice and keyboards. Within a few years of founding, Logitech expanded
it sales to countries around Asia, Europe, and North America.
◘ In its first 5 years, the firm expanded its sales to 60 countries, exporting
about 70 percent of its total production.
◘ Biggest markets: France, Germany, Italy, Spain, and the Americas, recently
opening a subsidiary in North America.

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■ Born Globals Strategies for Success:
(1) Born globals account for a substantial proportion of national exports in
countries like Australia, Denmark, Ireland, and the U.S.
(2) Born globals offer leading-edge products with strong potential to generate
international sales.
(3) They leverage the Internet and communications technologies to facilitate early
and efficient international operations.
(4) Born globals emergence is linked with international entrepreneurship, where
innovative, smaller firms pursue business opportunities regardless of national
borders.
(5) Entrepreneurs are creative, proactive, adaptable and risk-takers.
(6) Born globals leverage communications and transportation technologies, falling
trade barriers, and niche markets to compete globally.
■ The widespread emergence of born globals means that any firm, regardless of
size or experience, can succeed in international business.

[2] Distribution channel intermediary- A specialist firm that provides various

logistics and marketing services for focal firms as part of international supply
chains, both in the home country and abroad.

[3] Facilitator- A firm or an individual with special expertise in banking, legal

advice, customs clearance, or related support services that assists focal firms in
the performance of international business transactions.
■ Freight forwarder- A specialized logistics service provider that arranges
international shipping on behalf of exporting firms.

[4] Governments- (public sector) act as suppliers, buyers, and regulators.

◘ Russia, China, and Brazil - State-owned enterprises account for a
substantial portion of economic value added, even in these rapidly liberalizing
emerging markets.
◘ France, Australia, and Sweden- Governments in these advanced
economies have significant ownership of companies in telecommunications,
banking, and natural resources.
◘ The recent global financial crisis led governments to step up their
involvement in business, especially as regulators.

Governments and Nongovernmental Organizations (NGOs)

■ Governments are central participants in international trade and investment.
State-owned enterprises (SOEs) account for a substantial portion of economic
value added in many countries, even rapidly liberalizing emerging markets such as
Russia, China, and Brazil. Governments in advanced economies such as France,
Australia, and Sweden have significant ownership of companies in
telecommunications, banking, and natural resources.
■ Non-profit international organizations include charitable groups and non-
governmental organizations (NGOs).
■ Non-profits serve special causes- education, research, health care, human
development, and the natural environment.
■ Examples: (Nonprofit Organizations)

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 ◘ Bill and Melinda Gates Foundation.
◘ British Wellcome Trust - supports health and education.
◘ CARE- dedicated to reducing poverty.
■ Examples: (MNE- operating charitable foundations)
◘ GlaxoSmithKline (GSK) -
● Canada, France, Italy, Romania, Spain & U.S.

WHY DO FIRMS INTERNATIONALIZE?

Firms internationalize seeking growth and profit opportunities, enhancing their
competitive advantage.
■ Strategic (Proactive) motive - tap foreign market opportunities and/or acquire
new knowledge.
■ Reactive motive- serve a key customer that has expanded abroad.

Nine specific motives:

1. Seek growth opportunities through market diversification.
2. Earn higher margins and profits.
3. Gain new ideas about products, services, and business methods.
4. Serve key customers better that have relocated abroad.
5. Locate closer to supply sources, benefit from global sourcing advantages, or
gain flexibility in product sourcing.
6. Gain access to lower-cost or better-value factors of production.
7. Develop economies of scale in sourcing, production, marketing, and R&D.
8. Confront international competitors more effectively or thwart the growth of
competition in the home market.
9. Invest in a potentially rewarding relationship with a foreign partner.

WHY STUDY INTERNATIONAL BUSINESS?

This may be considered from various perspectives: global economy, national
economy, the firm, and the manager.
● Global Economy - Dimensions in the world that influence all nations.
MACRO ● National Economy - Set of factors that influence all firms competing in a
single country.
● Firm - Focuses on each company and its competitors.
MICRO ● Manager - Individual variables: Ambiguity tolerance, Interpersonal skills,
Self-confidence, Goal commitment, etc.

Facilitator of the Global Economy and Interconnectedness

■ Since the General Agreement on Tariffs and Trade (GATT) (1947), following World
War II, international business has transformed the world with unprecedented
growth in trade and investment.
■ 1980s: Political/Economic transformations of Emerging Markets (some 30
countries) have given new impetus to worldwide economic interconnectedness.
■ Fast-growth developing economies- Brazil, Russia, India, and China [BRICs] -
have registered substantial market liberalization, privatization, and
industrialization, fueling global economic transformation.

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■ Emerging markets-
◘ Located on every continent.
◘ Home to the largest proportion of the world population.
◘ Increasingly immersed in foreign trade.
■ Facebook- numerous emerging markets, including China, India, and Poland.
■ Two MEGATRENDS underlying the changing business landscape- globalization
and technology
◘ Globalization - accelerates the development of the latest technologies.
◘ Technology - facilitates globalization to progress more rapidly.
■ The Internet/e-commerce and production/process technologies make
international business a viable, cost-efficient and increasingly imperative mandate
for firms of all sizes and resource levels.
■ Technological advances both accelerate, and are accelerated by, globalization.

Contributor to National Economic Well-Being

■ International business promotes economic prosperity through efficient resource
allocation, increased consumer options and world interconnectedness.
■ Governments have increasingly opened their borders to foreign trade and
investment.
■ International trade is a pivotal engine for job creation.
◘ It is estimated that every $1 billion increase in exports creates more than
20,000 new jobs.
◘ Cross-border trade directly supports at least 11 million U.S. jobs.
◘ One of every seven dollars of U.S. sales is made abroad.
◘ One of every three U.S. farm acres, and one of every six U.S. jobs, is
producing for export markets.
◘ On average, exporting firms create jobs faster and provide better pay, than
non-exporting firms.
■ International business is both a CAUSE and a RESULT of increasing
national prosperity.

A Competitive Advantage for the Firm

■ To sustain a competitive advantage in the global economy, firms must
participate in cross-border business and acquire the necessary skills, knowledge,
and competence.
■ Examples-
◘ Procter & Gamble sells shampoo, disposable diapers, and other
consumer products in more than 150 countries.
◘ MTV broadcasts its programming in some 140 countries.
◘ Nestlé sells its food and beverage products worldwide, obtaining nearly all
its revenue from foreign operations.
■ Global Sourcing- Firms secure cost-effective factor inputs by establishing
manufacturing in emerging markets like Malaysia, Mexico, and Poland, or sourcing
from foreign suppliers.
■ Examples-
◘ Microsoft cuts the costs of its operations by having much of its software
written in India.

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 ◘. Renault achieves efficiency by assembling cars at low-cost factories in
Romania.

A Competitive Advantage for You

■ Every day we are impacted by a variety of international business transactions.
■ Traveling abroad leads to exciting challenges and learning experiences.
■ Global managers of the world’s leading corporations fashioned their managerial
skills in international business.
■ In this text you will learn about the merits of gaining international business
proficiency, through the experiences of people like you, in a special feature called
You Can Do It: Recent Grad in IB.

An Opportunity to Support Sustainability and Corporate Citizenship

■ With trade barriers declining and global power increasing, environments are
increasingly characterized by limited resources, vulnerable human conditions, and
stakeholder consciousness.
■ Corporate citizenship dictates that companies consider stakeholders in decision-
making and develop sustainable, socially responsible policies and practices.
■ This means employing both economic and social goals; transcending legal
requirements by proactively implementing ethical standards.
■ Proactive development and implementation of Corporate Social Responsibility
(CSR) –
Examples:
◘ Starbucks will only sell coffee from Rain Forest Alliance certified growers
(www.rainforest-alliance.org),
◘ Philips, Unilever, and Walmart follow business practices that promote
sustainable development.
◘ McDonald’s purchases beef from farmers certified for animal welfare and
environmental standards.
◘ McDonald’s sells only organic milk in Austria, Germany, Sweden, and the
United Kingdom.

Source: Cavusgil, S.T., Knight, G., & Riesenberger, J.R. (2019b). International Business: The New
Realities, (5th Edition, Series Global Edition). Pearson

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