INTRODUCTION INTERNATIONAL BUSINESS
ARIZONA STATE UNIVERSITY
OMT 440 - INTERNATIONAL BUSINESS
WEEK 1
CHAPTER OBJECTIVES:
After studying this chapter, you are expected to be able to :
a)
Explain the various definitions of international business
b)
Explain the scope of international business
c)
Explain globalization and global markets as the beginning of international business
d)
Describe international business activities
e)
Identify multinational companies
The growth of the world economy that leads to the era of globalization today has an
impact on the higher level of business competition between organizations operating at the
domestic, regional and international levels. International markets are becoming
unboundaries. Various international business strategies are formulated by each organization
so that business organizations (companies) are able to exist and dominate the international
market.
This chapter will discuss the meaning and important role of international business,
various factors that affect international business, explain the scope of international business,
globalization and global markets, describe international business activities and identify
multinational companies.
INTERNATIONAL BUSINESS CONCEPTS
Globalization has led to the development of international business activities.
According to Griffin (2010) international business is a business transaction between several
parties in more than one country. Meanwhile, according to Hadi (2010) international business
is a study of economic transactions that include international trade (exports and imports) and
foreign investment (direct and indirect) carried out by individuals and companies or
organizations with the aim of obtaining certain benefits and benefits. Meanwhile, according
to Cavusgil (2008) international business is trade and investment activities carried out by
companies across the borders of one country with another. The growth of international
business activities is increasing in line with the phenomenon of the wider market caused by
globalization.
The most traditional forms of international business are investment and international
trade. International trade refers to the exchange of products and services that cross national
borders. This trade involves products and services. Exchanges in international trade take the
form of exports and imports.
International investment refers to the transfer of assets from one country to another.
These assets include capital, technology, managerial and manufacturing infrastructure. There
are two types of cross-border investments namely:
a)
International Portfolio Investment. International portfolio investment refers to the passive
ownership of overseas securities in the form of stocks and bonds with the aim of earning
a desired rate of return. These capital owners are not active in the management of the
invested assets. These offshore investors tend to design short time horizons for their
holdings.
b)
Foreign Direct Investment. Foreign direct investment refers to an international strategy,
where established companies acquire productive assets abroad. Foreign direct investment
is an entry strategy into foreign markets. Through foreign direct investment, investors
can own all or part of the ownership of productive companies. Companies usually have
long-term plans to invest their capital abroad.
SCOPE OF INTERNATIONAL BUSINESS
International Business is all business transactions by the private sector and
government involving two or more countries. This business activity for the private sector has
the aim of getting the maximum profit, while for the government this business activity is not
only for profit, but also has a goal for social welfare. There are several reasons a company
participates in international business activities, including:
a)
To increase sales. International business allows a company to expand in terms of selling
its products, this is because international business has a very broad market, not limited to
the country where the company is located but also the company can develop its market
abroad. with a broad market, it is likely that the company can increase the number of
sales of goods it produces, for example: The largest telecommunications provider
company in Indonesia, namely PT Telkomsel, established a subsidiary Telkomcel which
operates in the newly established country of Timor Leste. This was done by PT
Telkomsel in order to expand its market, not only within Indonesia, but also abroad.
b)
To acquire resources. Currently, a company that has access to the required resources or a
company that has better access to the factors of production (man, money, material,
method) will certainly win the competition. This happens because the number of
production resources is limited, while the human needs that must be met by companies as
producers are increasingly unlimited. International business activities allow a company
in one country to have access to resources in another country. The company can have
access by making direct or indirect investments in countries that have advantages in
terms of resources. For example: Currently, many multinational companies are investing
heavily in Vietnam by opening factories in Vietnam. This happens because Vietnam is
considered a country that can provide a lot of human resources, skilled and cheap.
c)
To diversify sources of sales and supply. International business can make companies
more creative and innovative to increase their sources of sales and offerings. With a
wider market share and an increasing number of consumers, companies are required to
be able to meet consumer expectations for the products sold. Because consumers' desires
are unlimited, companies must be able to innovate as often as possible, with the aim of
winning the competition with their competitors.
Currently, the development of international business activities is increasingly advanced, this
is because there are aspects that cause this activity to grow faster, including:
a)
Rapid improvements in technology and its expansion made transportation faster and
communication systems made it possible to do things remotely.
b)
Liberalization in government policies with respect to the movement of trade and
resources across borders.
c)
The development of institutions that are needed to support and facilitate international
trade. These institutions are established by businesses and governments so that the
existence of these institutions reduces corporate risk.
d)
An increase in global competition, where business competition is not only between
companies in one country, but also competition is followed by other companies in one
region / region and even between continents.
Many activities can be carried out by companies to be involved in international business,
including:
a)
Export-Import Activities. These export and import activities are the key to a country's
economic transactions. If in a country's balance sheet export activities are higher than
import activities, then it can be ascertained that the country is a developed country with
a large income, while if on the contrary where import activities are higher than exports,
then the country can be said that the rate of economic growth is not advanced because
the country tends to depend on other countries.
b)
Investment Activity. Investment is an activity where companies invest their capital.
This investment can be in the form of foreign direct investment (FDI) where the
company invests its capital in physical form in the destination country. Another way of
investing is by investing in the capital market, where companies involved in
international business buy shares or make acquisitions.
GLOBALIZATION AND THE GLOBAL MARKET
Globalization is a process of international integration that occurs due to the exchange
of worldviews, products, thoughts and other aspects of culture. According to Hill (2014),
globalization refers to changes to a more integrated and interdependent world economy.
Globalization has several aspects, namely:
a)
Market Globalization. Market globalization refers to the merging of historical
differences and separate national markets into one large global market share. The
collapse of barriers across trade borders has made international sales easier.
b)
Globalization of Production. Globalization of production refers to the sourcing of
goods and services from locations around the world to take advantage of country
differences in the cost and quality of factors of production.
The term globalization has been used increasingly since the mid-1980s and more
frequently since the mid-1990s. In 2000, the International Monetary Fund (IMF) identified
four basic aspects of globalization, namely trade and transactions, movement of capital,
investment, migration, movement of people and liberation of knowledge. In addition,
environmental challenges such as climate change, water and air pollution, border crossing
and overfishing of the oceans are also linked to globalization. The process of globalization is
influenced and affected by business and economic systems, socio-cultural resources and the
natural environment.
The global market is a world-scale market that is open to all business actors. The
global market has experienced rapid development in recent years due to several factors,
including: More and more people travel between countries which directly become global
consumers, more and more transportation World trade is increasing along with the increasing
demand of the world market. The development of the global market leads to more
opportunities for a company when engaging in the global market. Some of these opportunities
include:
a)
Companies can open factories in other countries with lower labor costs.
b)
The company can open branch offices and factories in several places around the world to
facilitate and cheapen the distribution of its products.
c)
Companies can gain more target consumers by introducing their products in other
countries with more potential.
Commensurate with the opportunities, the global market also has many risks. Many
obstacles and constraints will be faced by business people in the global market, including:
a)
Cultural and taste differences. A product that sells well in one country may not appeal
at all to people in another country.
b)
Differences in purchasing power. If a product sold through the free market has a price
that is too high or too low in the target country, it is likely that the product will not get
many buyers.
c)
National regulations. Products that are in high demand in one country may not be sold
in another if that country has specific regulations restricting them.
INTERNATIONAL BUSINESS ACTIVITIES
International business activities begin with trade between countries. This happens
because no country in the world can fulfill all the needs of its own people. If we look further
back, international business activities have actually been carried out since the kingdom era,
where at that time there were trading activities between one kingdom and another, not only
within one continent but between continents. Today, trade activities between countries are
often called export-import. Exporting means selling domestic products abroad, while
importing buys foreign goods for domestic use. In export-import activities, there are two
types of trade, namely (1) Tangible Trade, which is trade in tangible goods/products such as
clothing, electronic devices, and raw materials. (2) Intangible trade is trade in intangible
services/products, such as financial services activities. Companies that enter international
business generally involve themselves in stages from the simplest ones that do not contain
risks to the most complex stages and contain very high business risks.
The international business activities include:
a)
Export. Selling products made in the country for resale to other countries. This export
activity can be categorized into incidental exports, which occur due to the arrival of
foreigners in the country then these foreigners buy goods and then sent to the foreigner's
country. And active exports are business relationships that are routine and continuous
and these transactions will become more active over time.
b)
Import. Importing is buying products made in other countries for domestic use or resale.
c)
License. A license is a contractual agreement in which a company in one country
licenses the use of its intellectual property rights (patents, trademarks, brand names,
copyrights or trade secrets) to a company in a second country for a royalty payment.
d)
Franchising. Franchising is a special form of licensing, which occurs when a company
in one country (the franchisor) authorizes a company in a second country (the franchisee)
to use its operating system as well as brand names, trademarks, and logos for a royalty
payment.
e)
Management Contracts. A management contract is an agreement where a company in
one country agrees to operate a facility or provide other management services to a
company in another country for an agreed fee.
MULTINATIONAL COMPANIES
International business activities certainly involve various parties, both individuals and a
business entity (company). These parties include:
1. Exporter Group:
a. Producers. Producers are companies that produce goods that will be traded in
international trade.
b. Confirming House. A Confirming House is a local company established to be a branch
office of a foreign company in the country where the foreign company sells its products.
c. Trader. A business entity that is licensed by the government in the form of an Exporter
Recognition Letter and has an Export Identification Number (APE). Export traders work
for and on behalf of their domestic producers.
d. Agent. Agents are the connecting party between producers and consumers, where export
traders can also be referred to as export traders.
e. Trading House. Trading houses are companies that have the status of General Exporters
in the sense that these exporting companies can export a wide range of commodities and
have marketing networks and representative offices in world trade centers.
2. Importer Group:
a. Entrepreneur. Entrepreneurs in this group of importers are commonly referred to as
import merchants, which are business entities granted permission by the government in
the form of an Import Recognition Identification Mark to import goods that are
specifically mentioned in the permit, and do not apply to other goods other than those
that have been permitted.
b. Aproved Importer. Aproved Importers are importers who receive preferential treatment
from the government to import commodities deemed important by the government.
c. Limited Importers. A limited importer is a business entity granted a special license, be it
a Foreign Investment or Domestic Investment company, to import machinery and raw
materials needed in the country.
d. General Importers. A general importer is an importer who imports a wide range of trade
goods. These general importers are usually in the form of trading companies or trading
houses.
e. Sole Agent Importer. Sole agent importer is a single agent appointed by a foreign
company that markets its products in the destination country.
3. Promotion Group:
a. Manufacturer's Branch Office. The manufacturer's branch office located in the country
where the product is marketed will certainly carry out promotional activities for the
goods to be sold in the destination country.
b. Representative Offices of Chambers of Commerce and Industry at home and abroad.
Representative offices of chambers of commerce and industry are parties that also
function to assist entrepreneurs engaged in international trade activities. The activities
carried out by the representative office of the chamber of commerce and industry are
promotion and opening trade access to the intended countries.
c. Trade Grant Mission. Trade grant missions are one of the promotional activities in
international trade, where in this trade grant mission, a wide range of national products
are introduced and offered to foreign markets.
d. National Export Development Agency. The National Export Development Agency is an
agency established by the government, in this case the Ministry of Trade, to carry out
activities to develop and promote Indonesian commodities abroad.
4. Support Group:
a. Transportation Business Entity. Transportation business entities in international trade are
commonly called Freight Forwarders. The function of the freight forwarder is to collect
cargo, organize packing and book the cargo that is traded.
b. Foreign Exchange Bank. Foreign exchange banks in international trade have the function
of providing credit and financing both in export credit and money advance guarantee
when issuing a Letter of Credit (L/C). In addition, foreign exchange banks also function
as parties that can open L/Cs, accept L/Cs, submit documents and negotiate documents.
c. Maskapi Pelayaran. This shipping company serves as a means of transportation in export
and import activities. The shipping company must ensure that the goods it carries must
arrive at the destination at the specified time.
d. Insurance Companies. Insurance companies in international trade function as risk takers
from exporters and importers for the risk of goods both on land and at sea.
e. Trade Attaches at Embassies. Trade attachés located in each embassy serve to assist
international trade activities such as issuing legal and promotional documents.
f. Surveyor. Surveyor is a body that has a function as a check on the quality, packing
method, validity of documents for goods to be exported or imported. In Indonesia, this
surveyor is handed over to PT Sucofindo.
g. Customs. Customs is a tool of a country's government that serves as a safeguard for the
traffic of goods and documents used in international trade activities. Customs is what
decides whether an item is allowed to enter or exit a country to another destination
country.
If we look at the above explanation of the actors of international trade, we can
conclude that in international business the actors are not much different. Companies involved
in international business are usually called multinational companies. Multinational companies
are business organizations with activities in more than two countries. This multinational
company is usually in the form of foreign direct investment. A multinational company can
operate in more than 100 countries by employing thousands of people outside its home
country. The expansion of multinational corporations began after World War II. At that time
companies from the United States began to expand their business by opening factories and
operations in developing countries, followed by British companies and then multi-national
companies from Japan. The management of multinational companies is unique because these
companies are different in their operational activities, starting from financial management,
these companies carry out financial management using the international paradigm, where
international transactions occur, where there are currency differences that are usually a
problem.
In terms of human resources, multinational companies employ employees from
various countries, ethnicities and nations, this is a challenge when the company has to instill
corporate values to its employees, because of their diverse backgrounds. Some examples of
multinational companies operating in Indonesia are:
Table 1.1: Multinational Companies Operating in Indonesia
Adidas
Honda
Nestle
Freeport
IBM
Nike, Inc.
Coca Cola
LG Electronics
Schlumberger
Sony
Toshiba
Toyota
Chevron Corp
McDonald's
Shell
International Business is growing because of globalization. Technology, especially
information technology, is developing rapidly, so the flow of globalization is difficult to
block, and the result is what it is today, when each country has no clear boundaries apart from
the landscape. With the unification of the world, business is also growing because there is no
country in this world that can meet the needs of its own people. With the development of
international business, there is also an equal distribution of prosperity among countries in the
world.
ENVIRONMENT INTERNATIONAL BUSINESS:
CHAPTER OBJECTIVES:
After studying this chapter, you are expected to be able to :
a)
Identify the cultural environment of international business
b)
Analyze the political and legal environment of international business
c)
Identify the international business technology environment
d)
Identify ethics and social responsibility
e)
Explain international organizations.
International business activities will never be separated from the environment that
surrounds them. Environmental factors have a significant impact on international business
activities. There are several environments that surround international business including the
cultural environment, political and legal environment, and technological environment. The
role of the environment in international business is to form an ethics and social responsibility
that will be applied by the parties involved in it. This will be the concern of international
organizations that focus on their respective fields.
CULTURAL ENVIRONMENT
In 1870, anthropologist Edward Taylor defined culture as something complex that
includes knowledge, beliefs, art, morals, laws, customs and other abilities acquired by
humans as members of society. In addition, Hofstede also argues that culture is a collective
programming of the mind that distinguishes members of one human group from another.
Sociologists Zvi Namenwirth and Robert Weber see culture as a system of ideas that
is a design for living. From the opinions of some experts above, we can conclude that culture
is a collection of values, beliefs, behaviors, and attitudes that distinguish one society from
another. Culture is something intangible, widespread, difficult to learn.
Culture comes from the values and norms that apply in a society. According to Hill
(2014:93) Values are abstract ideas about what groups of people value believed to be good,
right and desirable. In other words, values are shared assumptions about how things should
be. Still according to Hill (2014: 93) norms are social rules and guidelines that formulate
appropriate behavior in certain situations, and society is a group of people who share a set of
values and norms.
Culture is formed from several elements, namely:
a)
Social Structure. Social structure is one of the elements that form culture because the
social structure consists of individuals who form families and members of a group. In
these social groups there are social strata that can be seen from various points of view,
marital status, economic status and so on.
b)
Values/behavior. Values are a collection of principles and standards accepted by
members of a society. Behavior, on the other hand, includes the actions feelings and
thoughts that result from these values.
c)
Languages. There are more than 3,000 languages in the world and more than 10,000
different dialects. Language is the main differentiator between social groups in society.
From language we can distinguish between cultures. Language differences can cause
differences in perception that lead to conflict. International business people must really
master the counterpart's language so that there are no misunderstandings arising from
language differences.
d)
Communication. Communication is part of culture, because with this communication
every member of society can relate. Communication can be divided into two, namely
verbal communication through language and non-verbal communication through
behavior.
e)
Religion. Religion places restrictions on the role of individuals in society, religion also
influences the products consumed by society, for example, for Muslims who follow
Islam there are halal and haram foods.
In the context of international business, where business activities involve countries and
nations that have different cultures, each international business activity must be able to
modify its behavior in one country to another. There are several cultural characteristics that
affect international organizations, namely:
a)
Power Distance. High power distance means people accept inequalities among
institutions, organizations and people.
b)
Uncertainty Avoidance. This means that members in a society are uncomfortable with
uncertainty and ambiguity, thus favoring beliefs that promise certainty and conformity.
c)
Individualism and Collectivism. Individualism reflects the value of a loosely bound
social framework where each person is expected to fend for themselves.
d)
Masculinism and Feminism. Masculinity refers to the cultural preference for heroic
achievement, assertiveness, work-centeredness and material success, while feminism
reflects the value of cooperative relationships and group decision-making and quality of
life.
POLITICAL AND LEGAL ENVIRONMENT:
International Business is a business activity that takes place across countries. Business
activities certainly depend on the political and legal environment of a country in relation to
THE POLITICAL ENVIRONMENT AND ITS
FUNCTIONS
other countries. The political and legal environment is closely related because the
political system applied by a country will certainly produce certain policies (laws). For
example, a country with a political environment that applies the principles of democracy will
certainly produce policies (laws) that tend to support openness in economic activities carried
out by the country, meaning that its economic policies will tend to be open.
In international business, a company leader must have a good strategy in dealing with
the market environment and the non-market environment. The market environment includes
the interaction between individual households and firms to allocate their resources, while the
non-market or political environment includes public institutions such as government agencies
and non-governmental organizations. In order for a company to be successful, its
management must carefully examine the relationship between the company's policies and the
political, legal and economic environment to maximize efficiency.
The functions of the political process are:
a)
Articulation of interests. Interest articulation is a process of inputting various needs,
demands and interests through group representatives who enter the legislature, so that
the interests, demands and needs of their groups can be represented and protected in
government policy.
b)
Interest aggregation. Interest aggregation is the way in which the demands of different
groups are combined into government policy alternatives.
c)
Policy making. Policy making is a decision made by pre-policy makers. The policy
made is based on the results of a consensus that represents various interests.
d)
Implementation of policies and courts by law. The implementation of policies that have
been made must of course be carried out with full responsibility and this policy has
binding rules and has legal consequences, so that if there is a violation, it will be the
responsibility of the court to provide legal consequences.
The political spectrum has two extremes:
1. Democracy, where citizens participate widely in the decision-making process. The
characteristics of a democratic country include:
a)
Freedom of opinion, expression, press and organization
b)
There are elections where voters elect representatives to represent them.
c)
Limited time for representatives
d)
An independent and fair court system
e)
Relatively impartial bureaucracy
f)
Community access to decision-making processes
2. Totalitarianism, where the decision-making process is controlled by a small group of
people. Characteristics of totalitarianism include:
a)
A single political party
b)
Individuals or groups of individuals who monopolize political power
c)
Neither have nor recognize and allow opposition.
In the political system and management decisions, there is a dichotomy between
government control and consumer control of the political system and the economic system.
Company leaders should be aware of the critical functions that the government plays in the
economy. Political action is a sensitive area so the following steps are needed to deal with the
political environment:
a)
Identify specific issues facing the company such as protection, environmental standards
and workers' rights.
b)
Define the political nature of the issues
c)
Identify potential political action from other companies and NGOs.
d)
Identify the importance of institutions and key people: legislature, courts, government
agencies
e)
Formulate strategies: main objectives, alternatives and possible effectiveness
f)
Determine the impact of implementation
g)
Choose the most suitable strategy and implement it
h)
If necessary, lobby educational institutions (experts) and decision-makers.
Legal system category:
a)
A common law system based on tradition, example, and custom and usage, in which
the courts play an important role in interpreting the law in accordance with its
characteristics.
b)
A civil legal system based on a set of laws organized in codes.
c)
Theocratic legal systems that are based on religious exemplars, such as Islamic Law.
Legal issues in international business:
a)
Trade and investment regulations
b)
Protection of intellectual property
c)
Financial flow regulation
d)
Taxation
e)
Reporting purposes
f)
Ownership regulations
g)
Contractual relationship
h)
International treatment
i)
Dispute resolution
TECHNOLOGY ENVIRONMENT
Technology is knowledge about tools and methods in producing goods and services.
Technology has made business processes more effective, efficient and productive. In this
case, effectiveness means delivering the desired results, efficiency means producing goods
and services using the least amount of resources while productivity is the ratio of output to
input.
The technological environment, especially information technology, has led to the
growth of e- commerce, the buying and selling of goods over the internet.
Technological advances are one of the considerations for people in fulfilling their
needs. The rapid development of technology, people call it the HiTech or NewTech era, the
convenience and quality offered by technological advances is a plus in the eyes of the public.
Now that technology has become a common and essential necessity, it has affected
the business world, which is highly dependent on the evolving schemes of people's lives.
The development of information technology that is getting higher, more sophisticated,
and more powerful without realizing it has an influence on the development of the business
world. The development of technology in the computer field also affects performance in all
aspects of the business, especially in the field of administration such as database systems.
With the existing level of technology, employee performance can improve. Both in
terms of improving the quality of company management, saving production costs, increasing
innovation and services, and expanding networks, time efficiency, as well as in terms of
accuracy or accuracy, employee work becomes lighter, with this, employee productivity can
also increase. However, these employees are required to be able to master technology in order
to carry out their work in their company and create skilled, capable, expert and ready-to-use
personnel in carrying out jobs and using technology. Companies that use IT-based business
strategies have proven effective in developing businesses, which use IT conservatively so as
to provide benefits to the company through the use of existing resources in a supportive
environment to meet market needs and meet business expectations.
ETHICS AND SOCIAL RESPONSIBILITY
The importance of ethics in the business world is superlative and global. New trends
and issues arise every day that can create a significant burden for organizations and
consumers. Nowadays, the need for ethical behavior in organizations has become essential to
avoid lawsuits. Possible social scandals of corporate irregularities and misleading practices
have affected the public perception of many organizations
Morf (1999:265) argues: "Ethics are moral principles that individuals inject into their
decision-making process and that help towards the final outcome of conforming to their
norms in society". In addition, ethical principles have a profound function to shape behavior.
Truly global companies must come to grips with the legal and moral atmosphere in
which they operate. But above all, they need to establish an environment that fosters ethical
behavior, because in the final analysis, doing otherwise cuts into their profitability. Getz
(1990:567) analyzes international codes of conduct in four entities: (1) the Organization for
Economic Cooperation and Development (OECD) which is the main policy for industrialized
countries (2) the International Chamber of Commerce (ICC), which is concerned with fair
treatment between multinational corporations, (3) the International Labor Organization
(ILO), which is concerned with direct investment in developing countries, and (4) the Center
for Transnational Corporations (CTC), which aims to maximize the contribution of
transnational corporations to economic development and growth and to minimize the
negative effects of their activities.
However, a growing momentum for such a movement can be observed, as
international organizations, especially those involved in international business, finance, labor,
economics and the environment are developing rules and policies that can be considered the
building blocks of a universal code of business ethics. Until such a uniform body of rules is
drawn, signed and enforced, global companies and organizations would do well to develop
their own codes of ethics, applicable to all their officers regardless of location.
Many ethical issues and dilemmas in international business are rooted in political
systems, laws, economic progress and cultures that differ greatly between countries. As a
result, what is considered good in one country is not necessarily considered good in another.
Because managers work for institutions that transcend national and cultural boundaries,
managers of multinational corporations must be sensitive to the differences and must choose
ethical activities in various circumstances because of the potential for ethical problems.
In international business settings, the most common ethical issues are labor customs, human
rights, environmental regulations, corruption, and the moral obligations of multinational
corporations.
In doing business, there are several responsibilities carried by business people,
including responsibilities to consumers, investors, employees and to the wider community
and the environment (Dias & Shah, 2009: 122). The first responsibility is the responsibility to
consumers because a company must be able to satisfy consumers by providing good quality
products and services. The second responsibility is the responsibility to investors. In the sense
that the company is obliged to maintain the trust of investors who have invested. The third
responsibility is the responsibility to employees which is manifested by creating jobs in
accordance with the competence of employees. In addition, the company is also responsible
for the welfare of its employees through the provision of pensions when the employee has
exceeded productive age. The last form of responsibility is responsibility to the social
community and the environment.
The main responsibility to society in business is to prosper the surrounding
community, one of which is through the opening of employment opportunities, as well as
concerning several points that have been slightly reviewed earlier. In its business activities,
the company is seriously required to pay attention to the applicable ethics. The important
point of ethics here, according to the author, will have a broad impact even though it may
appear as a 'behind-the-scenes effect' in the sense that by paying attention to existing ethics, a
conducive work environment can be created and as a form that the company does have
attention to quality. One thing that must be considered is the position of superiors who will
indeed be an example for their subordinates in carrying out ethics and how far they pay
attention to this moral ethics.
Here, the author also emphasizes corporate social responsibility. CSR is not
something foreign anymore, because in the era of globalization with the fact that international
companies are mushrooming, CSR should be a mandatory agenda, for example by providing
scholarships, entrepreneurship capital, and various other ways. One thing that makes the
author sanction this commitment to social responsibility is that it is not matched by a
comprehensive commitment or often becomes nothing more than a business strategy.
INTERNATIONAL ORGANIZATIONS:
An international organization is a form of organization from a combination of several
countries or forms of functional units that have a common goal of achieving an agreement
which is also the content of an agreement or charter.
The order of the subjects of international law is adjusted according to their authority.
At the top level are states that have full international authority due to their status as the
original subjects of international law since the 16th century. Next follow intergovernmental
organizations or international organizations that have special powers. International
organizations are placed after states on the grounds that international organizations only have
rights and obligations under international law in certain instances.
As explained earlier, one of the aspects of establishing an international organization is
the legal aspect, and legal/juridical personality is included in this aspect. The legal
personality possessed by an international organization is absolutely essential to enable the
international organization to function in international relations, especially the capacity to
carry out legal functions such as making contracts, making agreements with a state or filing
claims with other states. The juridical personality of an international organization will not
disappear even if it is not included in the main instrument of establishment of the
international organization.
The juridical personality possessed by international organizations can be divided into two
definitions, namely juridical personality in relation to national law, and juridical personality
in relation to international law.
a)
Jurisdictional personality in relation to national law can be seen especially when an
international organization will establish a permanent secretariat or headquarters of the
organization through a headquarters agreement. For example, headquarters
agreements made by the UN with the United States, the Netherlands, Switzerland and
Austria; ASEAN with Indonesia. In general, headquarters agreements regulate the
diplomatic privileges and immunities held by international civilian officials, tax
exemptions, and others.
b)
Juridical personality in relation to international law means that international
organizations have rights and obligations under international law. These rights and
obligations include having the authority to sue and be sued before the court, acquire and
own movable objects, have immunity, and privileges. The issue of juridical personality
of international organizations was first raised in the Reparation for Injuries Suffered in
the Service of the United Nations (Reparation for Injuries Case). With the emergence
of this case, the jurisdictional personality of international organizations became
undoubted.
SUMMARY:
International business activities will never be separated from the environment that
surrounds them. Environmental factors have a significant impact on international business
activities. There are several environments that surround international business including the
cultural environment, political and legal environment, and technological environment. The
role of the environment in international business is to form an ethics and social responsibility
that will be applied by the parties involved in it. This will be the concern of international
organizations that focus on their respective fields.
Culture comes from the values and norms that apply in a society. According to Hill
(2014:93) Values are abstract ideas about what groups believe to be good, right and desirable.
In other words, values are shared assumptions about how things should be. Still according to
Hill (2014:93) norms are social rules and guidelines that formulate appropriate behavior in
certain situations, and society is a group of people who share a set of values and norms.
Technology is knowledge about tools and methods in producing goods and services.
Technology has made business processes more effective, efficient and productive. In this
case, effectiveness means delivering the desired results, efficiency means producing goods
and services using the least amount of resources while productivity is the ratio of output to
input.
The importance of ethics in the business world is superlative and global. New trends
and issues arise every day that can create a significant burden for organizations and
consumers. Nowadays, the need for ethical behavior in organizations has become essential to
avoid lawsuits. Possible social scandals of corporate irregularities and misleading practices
have affected the public perception of many organizations.
