Foundations of International Business Notes
Week 1 – Introduction
Ø International business is considered a social science
Ø Social science is systematic and disciplined method of acquiring verifiable knowledge
– we are understanding the social phenomenon that is happening in international
business
Ø You first need to understand how a country operates in order to better implement
your business strategy
Ø Work – mental and physical tasks to produce goods and services for human needs –
explains why people work
Ø Jobs and professions are ways work can be organized in return for pay, and
economic organizations are the main contexts within which work is performed –
how workers are managed
Ø International business is an overlap of – business and economics, sociology,
geography and politics and law
Ø Politics and law – are not a market-based influence but it does affect the business
environment as they act on behalf of the country or themselves
Ø Math is the thing can overlap between social sciences and natural sciences
Ø All the sciences are considered a philosophy – it is the way we think and try to
understand
Ø Understand what is happening, and more importantly, why and how
Ø Uppsala Model – companies go overseas to countries who have similar sociology first
and then move to others
Ø I: international, study the international environments of business – environment
underpin the business activities
Ø B: business, the context in which the environments are studied – and this is what we
do in that environment
Ø MNE – a firm that engages in foreign direct investments (FDI) and operates in
multiple countries
Ø If you just export – you cannot be considered a MNE because you are just moving
your product overseas – your company is still in the home country
Ø FDI – investments in, controlling and managing value-added activities (e.g., use and
manage a physical asset) in other countries
Ø Entry modes – ways to enter the foreign market – exporting, licensing & franchising,
joint venture, merger & acquisition, direct investment
Ø Greenfield is starting from scratch – brownfield is possibly buying another building
rather than starting from scratch
Ø Globalization is – a process leading to greater interdependence and mutual
awareness among economic, political and social units in the world and among actors
in general
Ø It is beneficial and problematic
§ Create business opportunities, economic growth, cultural evolution etc.
§ Also create social disruptions, e.g., inequality, labor exploitation (modern
slavery), cultural conflicts
Ø Reduced regulatory restrictions on businesses in order to allow for better business
communication – done this through trade agreements and economic relationships –
, and they can provide better information to allow the business to make better
decisions
Ø This helps to provide business opportunities, economic growth and cultural
evolution – this is one of the most efficient ways to grow
Ø However, creates social disruptions such as inequality, labour exploitation and
cultural conflicts
Ø De-globalization – the reversal of globalization – it is widely used to describe the
periods of history when economic trade and investment between countries decline
Ø Trump administration – America First Policy – due to outsourcing of labour out of
America this has caused many Americans to lose their jobs – so Trump is charging tax
for companies who produce outside and import goods
Ø Trade wars such as between USA and China – trade sanctions are when a country
and its partners stop trading with another country
Ø AI and automation in manufacturing à cut the needs to outsource low-end jobs –
machines are cheaper than foreign labour which means you don’t have to outsource
– and machines are more predictable
Ø IBV suggests firms should act according to the rules of the market – rules are
commonly described as rules of the game – these are mainly common sense
Ø Formal rules – regulations, law or policies – (institutions refer to the rules of the
game)
Ø Informal rules – cultural, norms or values – they are not written – we tend to follow
them anyway because we feel that these are the right thing to do
Ø RBV suggests companies should act according to the amount of resources they have
– knowledge, human capital, money, technology, experience
Ø They use their resources in order to penetrate into foreign countries
Ø We need to consider both views about whether a company can be successful
overseas
Ø IBV and RBV matters because of liability of foreignness (LoF) – the inherent
disadvantage that outsider (firms) experience in a new environment because of their
lack of familiarity
Ø All the additional costs that a foreign firm incurs when it enters a foreign market
which a local firm wouldn’t
Ø There is a stigma when you move abroad – the local community will consider you an
outsider and uncomfortable – and you need to use resources in order make people
more comfortable
Ø Injustice – sometimes the rules may not be fair to you – Google fell in the Chinese
market because they didn’t agree to the regulations
Ø Being a foreigner – with countries that are likely to be exclusive – it is difficult for
foreign countries to be successful as the people favor Japanese companies
Ø Paying more to get the same – foreign firms may have to pay more
tax so the country can protect domestic industries
Ø Paying extra to enter the game or stay in the game
Ø LoF exist because of regulations, norms, culture and languages –
which makes the company pay more
Ø For example, if you trade with Spain – your goods need to go through the Greek port
in order to reach Spain – if you do not know this it will be costly
,Ø If you know people, it will be easier to negotiate – and gain better information –
Maori culture is very much connection based – more about the idea of family – you
need to be respectful in order to do business with them
Ø MNE’s address LoF by having legitimacy – by complying with the rules but
sometimes it can be way too costly – they can sometimes challenge the rules which
can give firm specific legitimacy – this can be very risky but high reward
Ø You can negotiate with governments to reduce taxes if you bring in a large amount
of employment opportunities
Ø Organizational Legitimacy – you need it for market entry, product approval, public
acceptance and prepare for competition
Ø Advanced economies (AEs) are the economies with well-established institutional
frameworks that facilitate international trade and investment, typically with middle-
to high-level income and stable economic growth
Ø There are emerging and advanced economies as well as very under-developed
economies – but the first tow contribute the majority of transactions
Ø EEs are the economies with recently established institutional frameworks that
facilitate international trade and investment, typically with low- or middle-level
income and rapid and above average economic growth
Ø Big in opportunities, low in stability, high in potential social issues
Ø OECD was established to develop policies for a better life
Ø OECD secretariat for G7 and G20 – and provide guidelines to Multinational’s –
OECD’s still dominate the market but their share has fallen from 73% to 64%
Ø BRICS contributed to 50% of the economic growth in the last 20 years – and account
for 19.3% of the world GDP
, Week 2 – Formal Institutions
Ø Institutions are the mechanisms of social orders, which govern the behavior of
individuals within a given community
Ø The arrangements constructed by a group, society, or culture to achieve a common
goal that function to provide stability and meaning to social life
Ø A collection of norms that regulate the interaction of individuals to each other
Ø Each rule carries out the arrangements that inform the actions of individual actors
(i.e., people) and organizations (companies and government agencies which are
controlled by people) in the society
Ø Institutions: understood as “the formal and informal rules of the game”
Ø Institutional environments – place with special meanings – such as hospital or library
Ø It is crucially important to IB because IB an interdisciplinary subject that involves the
investigations of people, business, and stakeholders in the context of different
societies
Ø Political conflicts with government – firms are caught in the middle as governments
make policies that companies need to follow – and the barriers can be costly
Ø You have to deal with different cultures and languages
Ø IB is about doing business in different societies – the rules can conflict with each
other
Ø 1st pillar is the regulatory institutions – they have legal right to write rules to control,
restrain and prescribe humans
Ø 2nd pillar is the normative institutions – they are morally unwritten rules – obligate
and inform human action and affect honor
Ø 3rd pillar is cognitive institutions – culturally shared and supported unwritten rules –
inspire human action – affect the certainty and confusion
Ø The formal and informal rules that prescribe managerial decision makings and firm
activities in international business
Ø Understanding the institutions in which multinational firms operate against, we can
better understand the what, why, and how questions about the strategies and
actions of multinational firms
Ø A theoretical perspective suggesting that firm performance is, at least in part,
determined by the institutional frameworks governing them
Ø Institutions are only a part that affect businesses – we also need to consider their
resources
Ø Companies resources also determine how well you will do in the foreign market –
even having connections with governments is a resource as other companies may
not have it
Ø 1st you should determine how many resources you have and then make decisions
about how to allocate resources according to society’s rules – so allocate to the most
important areas
Ø IBV changes continuously – because society always changes – this means the rules of
the society will also change
Ø India and Brazil have these very fast-changing societies – even stable economies can
bring large change such as the US – they have changed from investing overseas to
investing within US
Week 1 – Introduction
Ø International business is considered a social science
Ø Social science is systematic and disciplined method of acquiring verifiable knowledge
– we are understanding the social phenomenon that is happening in international
business
Ø You first need to understand how a country operates in order to better implement
your business strategy
Ø Work – mental and physical tasks to produce goods and services for human needs –
explains why people work
Ø Jobs and professions are ways work can be organized in return for pay, and
economic organizations are the main contexts within which work is performed –
how workers are managed
Ø International business is an overlap of – business and economics, sociology,
geography and politics and law
Ø Politics and law – are not a market-based influence but it does affect the business
environment as they act on behalf of the country or themselves
Ø Math is the thing can overlap between social sciences and natural sciences
Ø All the sciences are considered a philosophy – it is the way we think and try to
understand
Ø Understand what is happening, and more importantly, why and how
Ø Uppsala Model – companies go overseas to countries who have similar sociology first
and then move to others
Ø I: international, study the international environments of business – environment
underpin the business activities
Ø B: business, the context in which the environments are studied – and this is what we
do in that environment
Ø MNE – a firm that engages in foreign direct investments (FDI) and operates in
multiple countries
Ø If you just export – you cannot be considered a MNE because you are just moving
your product overseas – your company is still in the home country
Ø FDI – investments in, controlling and managing value-added activities (e.g., use and
manage a physical asset) in other countries
Ø Entry modes – ways to enter the foreign market – exporting, licensing & franchising,
joint venture, merger & acquisition, direct investment
Ø Greenfield is starting from scratch – brownfield is possibly buying another building
rather than starting from scratch
Ø Globalization is – a process leading to greater interdependence and mutual
awareness among economic, political and social units in the world and among actors
in general
Ø It is beneficial and problematic
§ Create business opportunities, economic growth, cultural evolution etc.
§ Also create social disruptions, e.g., inequality, labor exploitation (modern
slavery), cultural conflicts
Ø Reduced regulatory restrictions on businesses in order to allow for better business
communication – done this through trade agreements and economic relationships –
, and they can provide better information to allow the business to make better
decisions
Ø This helps to provide business opportunities, economic growth and cultural
evolution – this is one of the most efficient ways to grow
Ø However, creates social disruptions such as inequality, labour exploitation and
cultural conflicts
Ø De-globalization – the reversal of globalization – it is widely used to describe the
periods of history when economic trade and investment between countries decline
Ø Trump administration – America First Policy – due to outsourcing of labour out of
America this has caused many Americans to lose their jobs – so Trump is charging tax
for companies who produce outside and import goods
Ø Trade wars such as between USA and China – trade sanctions are when a country
and its partners stop trading with another country
Ø AI and automation in manufacturing à cut the needs to outsource low-end jobs –
machines are cheaper than foreign labour which means you don’t have to outsource
– and machines are more predictable
Ø IBV suggests firms should act according to the rules of the market – rules are
commonly described as rules of the game – these are mainly common sense
Ø Formal rules – regulations, law or policies – (institutions refer to the rules of the
game)
Ø Informal rules – cultural, norms or values – they are not written – we tend to follow
them anyway because we feel that these are the right thing to do
Ø RBV suggests companies should act according to the amount of resources they have
– knowledge, human capital, money, technology, experience
Ø They use their resources in order to penetrate into foreign countries
Ø We need to consider both views about whether a company can be successful
overseas
Ø IBV and RBV matters because of liability of foreignness (LoF) – the inherent
disadvantage that outsider (firms) experience in a new environment because of their
lack of familiarity
Ø All the additional costs that a foreign firm incurs when it enters a foreign market
which a local firm wouldn’t
Ø There is a stigma when you move abroad – the local community will consider you an
outsider and uncomfortable – and you need to use resources in order make people
more comfortable
Ø Injustice – sometimes the rules may not be fair to you – Google fell in the Chinese
market because they didn’t agree to the regulations
Ø Being a foreigner – with countries that are likely to be exclusive – it is difficult for
foreign countries to be successful as the people favor Japanese companies
Ø Paying more to get the same – foreign firms may have to pay more
tax so the country can protect domestic industries
Ø Paying extra to enter the game or stay in the game
Ø LoF exist because of regulations, norms, culture and languages –
which makes the company pay more
Ø For example, if you trade with Spain – your goods need to go through the Greek port
in order to reach Spain – if you do not know this it will be costly
,Ø If you know people, it will be easier to negotiate – and gain better information –
Maori culture is very much connection based – more about the idea of family – you
need to be respectful in order to do business with them
Ø MNE’s address LoF by having legitimacy – by complying with the rules but
sometimes it can be way too costly – they can sometimes challenge the rules which
can give firm specific legitimacy – this can be very risky but high reward
Ø You can negotiate with governments to reduce taxes if you bring in a large amount
of employment opportunities
Ø Organizational Legitimacy – you need it for market entry, product approval, public
acceptance and prepare for competition
Ø Advanced economies (AEs) are the economies with well-established institutional
frameworks that facilitate international trade and investment, typically with middle-
to high-level income and stable economic growth
Ø There are emerging and advanced economies as well as very under-developed
economies – but the first tow contribute the majority of transactions
Ø EEs are the economies with recently established institutional frameworks that
facilitate international trade and investment, typically with low- or middle-level
income and rapid and above average economic growth
Ø Big in opportunities, low in stability, high in potential social issues
Ø OECD was established to develop policies for a better life
Ø OECD secretariat for G7 and G20 – and provide guidelines to Multinational’s –
OECD’s still dominate the market but their share has fallen from 73% to 64%
Ø BRICS contributed to 50% of the economic growth in the last 20 years – and account
for 19.3% of the world GDP
, Week 2 – Formal Institutions
Ø Institutions are the mechanisms of social orders, which govern the behavior of
individuals within a given community
Ø The arrangements constructed by a group, society, or culture to achieve a common
goal that function to provide stability and meaning to social life
Ø A collection of norms that regulate the interaction of individuals to each other
Ø Each rule carries out the arrangements that inform the actions of individual actors
(i.e., people) and organizations (companies and government agencies which are
controlled by people) in the society
Ø Institutions: understood as “the formal and informal rules of the game”
Ø Institutional environments – place with special meanings – such as hospital or library
Ø It is crucially important to IB because IB an interdisciplinary subject that involves the
investigations of people, business, and stakeholders in the context of different
societies
Ø Political conflicts with government – firms are caught in the middle as governments
make policies that companies need to follow – and the barriers can be costly
Ø You have to deal with different cultures and languages
Ø IB is about doing business in different societies – the rules can conflict with each
other
Ø 1st pillar is the regulatory institutions – they have legal right to write rules to control,
restrain and prescribe humans
Ø 2nd pillar is the normative institutions – they are morally unwritten rules – obligate
and inform human action and affect honor
Ø 3rd pillar is cognitive institutions – culturally shared and supported unwritten rules –
inspire human action – affect the certainty and confusion
Ø The formal and informal rules that prescribe managerial decision makings and firm
activities in international business
Ø Understanding the institutions in which multinational firms operate against, we can
better understand the what, why, and how questions about the strategies and
actions of multinational firms
Ø A theoretical perspective suggesting that firm performance is, at least in part,
determined by the institutional frameworks governing them
Ø Institutions are only a part that affect businesses – we also need to consider their
resources
Ø Companies resources also determine how well you will do in the foreign market –
even having connections with governments is a resource as other companies may
not have it
Ø 1st you should determine how many resources you have and then make decisions
about how to allocate resources according to society’s rules – so allocate to the most
important areas
Ø IBV changes continuously – because society always changes – this means the rules of
the society will also change
Ø India and Brazil have these very fast-changing societies – even stable economies can
bring large change such as the US – they have changed from investing overseas to
investing within US
