{"id":24,"date":"2015-07-29T12:12:48","date_gmt":"2015-07-29T12:12:48","guid":{"rendered":"https:\/\/courses.candelalearning.com\/intlbusx1xmaster\/?post_type=chapter&p=24"},"modified":"2017-01-09T19:23:46","modified_gmt":"2017-01-09T19:23:46","slug":"what-forms-do-international-businesses-take","status":"publish","type":"chapter","link":"https:\/\/courses.lumenlearning.com\/cerritos-internationalbusiness\/chapter\/what-forms-do-international-businesses-take\/","title":{"raw":"Reading: What Forms Do International Businesses Take?","rendered":"Reading: What Forms Do International Businesses Take?"},"content":{"raw":"
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Learning Objectives<\/h3>\r\n
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  1. Know the possible forms that international businesses can take.<\/li>\r\n\t
  2. Understand the differences between exporting, importing, and foreign direct investment.<\/li>\r\n\t
  3. See how governments and nongovernmental organizations can be international businesses.<\/li>\r\n<\/ol>\r\n<\/div>\r\n
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    The Forms of International Business<\/h2>\r\nIt probably doesn\u2019t surprise you that international businesses can take on a variety of forms. Recognizing that international business, based on our broad definition, spans business, government, and nongovernmental organizations (NGOs), let\u2019s start by looking at business.\r\n\r\nA business<\/span><\/span> can be a person or organization engaged in commerce with the aim of achieving a profit. Business profit is typically gauged in financial and economic terms. However, some level of sustained financial and economic profits are needed for a business to achieve other sustainable outcomes measured as social or environmental performance. For example, many companies that are for-profit businesses also have a social and environmental mission. Table 1.1 \"Sample Three-Part Mission Statement\" provides an example of a company with this kind of mission.\r\n
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    Table 1.1 Sample Three-Part Mission Statement<\/th>\r\n<\/tr>\r\n
    Social and Environmental Mission<\/th>\r\nProduct Mission<\/th>\r\nEconomic Mission<\/th>\r\n<\/tr>\r\n<\/thead>\r\n
    Part of being a responsible company is working hard to help solve the world\u2019s environmental problems and, importantly, also helping those who buy our products to make more responsible choices.[footnote]\u201cInvesting in People, Investing for the Planet,\u201d SC Johnson, accessed November 21, 2010, http:\/\/www.scjohnson.com\/en\/commitment\/report\/CEO-Letter.aspx<\/a>.[\/footnote]<\/span><\/td>\r\nTo make, distribute, and sell the finest quality products with a continued commitment to promoting business practices that respect the Earth and the environment.[footnote]\u201cBen & Jerry\u2019s,\u201d Unilever, accessed November 21, 2010, http:\/\/www.unileverusa.com\/brands\/foodbrands\/benandjerrys<\/a>.[\/footnote]<\/span><\/td>\r\nTo create long-term value and capture the greatest opportunity for our stakeholders by delivering sustainable, profitable growth in sales, earnings, and cash flow in a global company built on pride, integrity, and respect.[footnote]\u201cOur Business Purpose,\u201d Amtrak, accessed November 21, 2010, http:\/\/www.aramark.com\/AboutARAMARK\/BusinessPurpose<\/a>[\/footnote].<\/span><\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n<\/div>\r\nOn the one hand, while companies such as Ben & Jerry\u2019s (part of Unilever) and SC Johnson are very large, it\u2019s hard to imagine any business\u2014small or large\u2014that doesn\u2019t have international operating concerns. On the other hand, the international<\/em> part of a firm\u2019s business can vary considerably, from importing to exporting to having significant operations outside its home country. An importer<\/span><\/span> sells products and services that are sourced from other countries; an exporter<\/span><\/span>, in contrast, sells products and services in foreign countries that are sourced from its home country. Beyond importing and exporting, some organizations maintain offices in other countries; this forms the basis for their level of foreign direct investment<\/span><\/span>. Foreign direct investment means that a firm is investing assets directly into a foreign country\u2019s buildings, equipment, or organizations. In some cases, these foreign offices are carbon copies of the parent firm; that is, they have all the value creation and support activities, just in a different country. In other cases, the foreign operations are focused on a small subset of activities tailored to the local market, or those that the entity supplies for operations every place in which the firm operates.\r\n\r\nWhen a firm makes choices about foreign operations that increase national and local responsiveness, the organization is more able to adapt to national and local market conditions. In contrast, the greater the level of standardization\u2014both within and across markets\u2014the greater the possible level of global efficiency. In many cases, the choice of foreign location generates unique advantages, referred to as location advantages<\/span><\/span>. Location advantages include better access to raw materials, less costly labor, key suppliers, key customers, energy, and natural resources. For instance, Google locates its computer-server farms\u2014the technological backbone of its massive Internet services\u2014close to dams that produce hydroelectric power because it\u2019s one of the cheapest sources of electricity.[footnote]Stephanie N. Mehta, \u201cBehold the Server Farm! Glorious Temple of the Information Age!,\u201d Fortune<\/em>, August 1, 2006, accessed April 27, 2010, http:\/\/money.cnn.com\/magazines\/fortune\/fortune_archive\/2006\/08\/07\/8382587\/index.htm<\/a>.[\/footnote]<\/span> Ultimately, managerial choices regarding the trade-off between global efficiency<\/em> and local responsiveness<\/em> are a function of the firm\u2019s strategy and are likely to be a significant determinant of firm performance.\r\n\r\n<\/div>\r\n
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    International Forms of Government<\/h2>\r\nGovernmental bodies also take on different international forms. Among political scientists, government<\/span><\/span> is generally considered to be the body of people that sets and administers public policy and exercises executive, political, and sovereign power through customs, institutions, and laws within a state, country, or other political unit. Or more simply, government is the organization, or agency, through which a political unit exercises its authority, controls and administers public policy, and directs and controls the actions of its members or subjects.\r\n\r\nMost national governments, for instance, maintain embassies and consulates in foreign countries. National governments also participate in international treaties related to such issues as trade, the environment, or child labor. For example, the North American Free Trade Agreement (NAFTA) is an agreement signed by the governments of the United States, Canada, and Mexico to create a trade bloc in North America to reduce or eliminate tariffs among the member countries and thus facilitate trade. The Kyoto Protocol is an agreement aimed at combating global warming among participating countries. In some cases, such as with the European Community (EC), agreements span trade, the environment, labor, and many other subjects related to business, social, and environmental issues. The Atlanta Agreement, in turn, is an agreement between participating governments and companies to eliminate child labor in the production of soccer balls in Pakistan.[footnote]\u201cAtlanta Agreement,\u201d Independent Monitoring Association for Child Labor, accessed November 12, 2010, http:\/\/www.imacpak.org\/atlanta.htm<\/a>.[\/footnote]<\/span> Finally, supraorganizations such as the United Nations (UN) or the World Trade Organization (WTO) are practically separate governments themselves, with certain powers over all member countries.[footnote]United Nations website, accessed January 20, 2010, http:\/\/www.un.org<\/a>; World Trade Organization website, accessed January 20, 2010, http:\/\/www.wto.org<\/a>.[\/footnote]<\/span>\r\n\r\n<\/div>\r\n
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    Nongovernmental Organizations<\/h2>\r\nNational nongovernmental organizations (NGOs)<\/span><\/span> include any nonprofit, voluntary citizens\u2019 groups that are organized on a local, national, or international level. International NGOs (NGOs whose operations cross borders) date back to at least 1839.Steve Charnovitz, \u201cTwo Centuries of Participation: NGOs and International Governance,\u201d Michigan Journal of International Law<\/em> 18, no. 183 (Winter 1997): 183\u2013286.<\/span> For example, Rotary International was founded in 1905. It has been estimated that, by 1914, there were 1,083 NGOs.[footnote]Oliver P. Richmond and Henry F. Carey, eds., Subcontracting Peace: The Challenges of NGO Peacebuilding<\/em> (Burlington, VT: Ashgate, 2005), 21; United Nations, \u201cChapter X: The Economic and Social Council,\u201d Charter of the United Nations<\/em>, accessed April 28, 2010, http:\/\/www.un.org\/en\/documents\/charter\/chapter10.shtml<\/a>[\/footnote].<\/span> International NGOs were important in the antislavery movement and the movement for women\u2019s suffrage, but the phrase \u201cnongovernmental organization\u201d didn\u2019t enter the common lexicon until 1945, when the UN was established along with the provisions in Article 71 of Chapter 10 of the UN charter,[footnote]United Nations, \u201cChapter X: The Economic and Social Council,\u201d Charter of the United Nations<\/em>, accessed April 28, 2010, http:\/\/www.un.org\/en\/documents\/charter\/chapter10.shtml<\/a>.[\/footnote]<\/span>\u00a0which granted a consultative role to organizations that are neither governments nor member states.\r\n\r\nDuring the twentieth century, globalization actually fostered the development of NGOs because many problems couldn\u2019t be solved within a single nation. In addition, international treaties and organizations, such as the WTO, were perceived by human rights activists as being too centered on the interests of business. Some argued that in an attempt to counterbalance this trend, NGOs were formed to emphasize humanitarian issues, developmental aid, and sustainable development. A prominent example of this is the World Social Forum\u2014a rival convention to the World Economic Forum held every January in Davos, Switzerland.\r\n
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    Key Takeaways<\/h3>\r\n