European Dimension of International Business

The course is offered under the financing of the European Jean Monnet Program within the framework of the Jean Monnet Module "International Business - Strategies for Integrated Europe" (620581-EPP-1-2020-1-AT-EPPJMO-MODULE). 

The course is read at the advanced level for the master’s students. Students are supposed to have a prior knowledge of main concepts related to the strategic activities of organizations operating at the domestic and international level. It is recommended that the students taking part in this course have successfully completed the course KU “Principles of International Business” (MA). Building upon this knowledge, the course applies the relevant concepts in the context of EU business practices. 

The goal of this course is to familiarize the students with the institutional environment of the European business and the role played by the European institutions and their policies in framing the strategies of domestic and international firms. 

EU represents nowadays the most highly economically integrated block in the world. This integration is driven to a large extent by the initiatives of multiple pan-European institutions and it is reflected in various policies and measures, which have the direct impact on the activities of the individual firms. 

What were and are the benefits and challenges of “Europeanisation” for business? How European Institutions and their policies shape the strategies of the firms? What makes European companies competitive? How do they respond to the opportunities opened by the creation of the single market, liberalization of the labour movement, as well as by the recent trends of digitalization and environmental protection? 

Building upon the core courses in the International Business curriculum, this elective course aims at answering these questions, thus deepening the students’ understanding of the role of environment in organizational decision-making with specific application to the case of EU. 

Within this course the students are supposed to work in small groups on the business cases illustrating the challenges and opportunities faced by the companies in the EU. Reduction of trade barriers, harmonization of tax policies, introduction of environmental standards, promotion and support of entrepreneurship, regulation of labor movement, investment in digitalization - those are only a few examples of the EU-wide initiatives creating and constantly altering the “rules of the game” for the European businesses. These rules and the ways in which they influence the strategic decisions of the firms will be the focus of the case studies discussed in the course.

Main References: 

JOHNSON, D., & TURNER, C. (2016). European business. London: Routledge. 

SOMERS, F. J. L. (2015). European Business Environment: Doing Business in Europe. London, Taylor & Francis Ltd. 

SUDER, G., & LINDEQUE, J. (2018). Doing business in Europe. London : Sage Publications Ltd. 

SUDER, G., RIVIERE, M., & LINDEQUE, J. P. (2019). The Routledge companion to European business. London, Routledge/Taylor & Francis Group. 

Additional Readings: 

CLARKE, T., & CHANLAT, J. F. (2009). European Corporate Governance: readings and perspectives. London: Routledge. 

ELBASANI, A. (2013). European integration and transformation in the western Balkans: Europeanization or business as usual? London, Routledge. 

MANDL, I., & PATRINI, V. (2018). European born globals: job creation in young international businesses. Abingdon, Oxon: Routledge. 

MAYRHOFER, W., BREWSTER, C., & MORLEY, M. (2016). Human resource management in Europe: evidence of convergence. 

MAYRHOFER, W., & HOLT LARSEN, H. (2006). Managing human resources in Europe: a thematic approach. Abingdon, Routledge. 

RANDLESOME, C. (2016). Business cultures in Europe. Oxford, Butterworth-Heinemann. 

Other Materials: Other class materials such as lecture slides and handouts are to be made available before the actual start of the classes / particular sessions. 

OVERVIEW of the TOPICS

Theoretical Overview

This lecture discusses the strategic decision of engaging in international activities, how they behave, how they differentiate from each other, in which scope they operate, and what factors determine the success or failure of their missions: The industrial organization perspective (IO) , the resource-based view (RBV) and the institutional view (IV). The best-known representative of the IO is the American economist Michael E. Porter, who proposed the five forces framework to understand how the competition within an industry as a whole influences a firm’s strategy and profitability. These forces are the intensity of rivalry among competitors, the threat of entry, the threat of substitutes, the bargaining power of suppliers and the bargaining power of buyers. The stronger the competition within a market is due to these forces, the more difficult it becomes for a firm to gain competitive advantages. Firms try to maximize their opportunities while minimizing the threats. Contrarily to his perspective, the RBV focuses on firm-specific differences to give an answer to the questions above, therefore looking more at internal than external factors. According to this view, firms possess on the one hand intangible and tangible resources along their value chain that can be used to implement their strategies. On the other hand, firms have capabilities allowing them to deploy these resources. As a part of this framework, the VRIO model explains the nature of such resources and capabilities. Are they valuable, rare, inimitable, and organized? Only if the answer to all these questions is yes, a firm can attain a sustained competitive advantage. The IO and the RBV have been criticized for ignoring the context in which companies operate by not taking formal and informal institutions into account. The IV tries to resolve this insufficiency by pursuing the idea that institutions impact the performance of companies by providing a framework within which human interaction takes place. This, institutions reduce uncertainty. They can represent formal constraints, such as laws or regulations, or informal ones, such as norms or codes of behavior (Peng, Wang & Yi, 2008; North, 1994)   

North, D. C. (1994). Economic Performance Through Time. The American Economic Review, 84 (3): pp. 359 - 368. 

Peng, M., Wang, D. Y. L. & Yi, J. (2008). An institution-based view of international business strategy: a focus on emerging economies. Journal of International Business Studies, 39: pp. 920 - 936. 

Scott, W. R. (1995). Institutions and organizations. Thousand Oaks: Sage Publications, 4th Edition     

Past and Present of European Integration 

Before analyzing how the environment of the EU impacts companies operating in Europe, it is important to first look at the EU itself, notably at how the complex EU integration took place and where it stands today. The integration process describes market liberalization, normalization of competition and economic development within the EU. The first step towards a European integration was made with the decision to combine the coal and steel industries, which were of strategic importance after the second world war, of Belgium, France, Germany, Italy, Luxembourg, and the Netherlands with the Treaty of Paris, signed in 1951. The Treaties of Rome, entering into force in 1958, further strengthened integration by creating the European Economic Community (EEC) and the European Atomic Energy Community (EAEC). With this, a common European market was created, introducing the four freedoms of movement: of people, goods, services, and capital. Other highly relevant implications of these treaties were the establishment of a Common Customs Tariff regarding the external borders, a common commercial policy, or the development of the Common Agricultural Policy (CAP). The Single European Act (SEA), ratified in 1987, depicted the first substantial change to the previous treaties and aimed at completing the single market, resulting in advantages for businesses such as simplified cross-border mobility, lower barriers to entry and greater levels of employment and investment. In the following, the Treaty on European Union (TEU), signed in Maastricht in 1992, distributed powers within three distinct pillars. Firstly, the European Community was to promote and improve the single market. Secondly, the common foreign and security policy (CFSP) was created. Thirdly, cooperation in the fields of justice and home affairs was developed (JHI). The Treaty of Amsterdam, entering into force in 1999, then increased powers for the EU, strengthened the position of the European Parliament (EP) and provided for even closer cooperation. Next, the Treaty of Nice, signed in 2001, had the objective of preparing the EU for further enlargement and make the institutions within the union more efficient. Lastly, trough the Treaty of Lisbon, signed in 2007, the EU became a legal entity. It also clarified the powers of the EU and furthermore introduced a clause allowing member states to exit the union, a procedure which was carried out with the Brexit for the first time 15 years later (European Parliament, 2018). Today, we look at different scenarios of how the EU might proceed in the future as discussed in the White Paper on the Future of Europe in 2017, it could for example roll back on integration to return to nothing but a single market, it could concentrate on doing less while becoming more efficient, or it could decide to cooperate even further together (European Commission, 2017). 

European Commission (2017). White paper on the future of Europe: reflections and scenarios for the EU27 by 2025. Online resource.

European Parliament (2018). Fact Sheets on the European Union. The historical development of European Integration. Online resource.

Johnson, D., & Turner, C. (2016): European business. London: Routledge, 3rd edition. 

McCormick, J. (2020). European Union Politics. London: Macmillan, 3rd edition     

Internationalisation of European Business – the Airbus case 

One example of a company that is highly integrated within the European Union and is therefore especially interesting to look at within the framework of this course, is the aerospace group Airbus. The success of the Airbus is deeply connected to the development of the European integration. The company emerged from a consortium of national aviation companies, involving Germany, France, Spain, and the UK. The company organizes its supply chain around ‘Centers of Excellence’, which are positioned in different countries. This ‘Global Design’ enables it to take advantage of locational advantages, accelerate production times, reduce time-to-market, and respond to local particularities. Airbus’ growth was not only favored by a cooperative mentality in the industry, which can be traced back to high R&D costs, but also by support of the EU and its policy making. Airbus received launch aid from European governments and profited from the four freedoms of movement and harmonization of professional services in the EU, initiatives such as ACARE, pushing for far-reaching partnerships amongst aeronautic firms, or the European Single Sky policy, aiming at managing air traffic as safe, efficient, and environmentally friendly as possible. Challenges for Airbus arise due to regulatory barriers, common external trade tariffs vis-.-vis third-country relations, or costly non-tariff barriers, handicapping especially SME suppliers. As Airbus runs two large industrial sites in the UK, manufacturing complex components for the company, Brexit constitutes a major challenge for the company, resulting in additional administrative costs, tariff costs, higher transaction costs, workforce issues, and disruptions of the supply chain, such as delays. The UK’s commitment is highly needed for R&D purposes and the maintenance of an integrated supply chain, therefore the new terms of trade agreement between the UK and EU remain highly relevant for Airbus (Suder & Lindeque, 2018). 

Francis, J. G. & Pevzner, A. F. (2006/2007). Airbus and Boeing: Strengths and Limitations of Strong States. Political Science Quarterly, 121 (4): pp. 629 – 651. 

Knorr, A., Bellmann, J. & Schomaker, R. (2012). Subsidies in Civil Aircraft Manufacturing. European State Aid Law Quarterly, 11 (3), pp. 585 – 600. 

Suder, G., & Lindeque, J. (2018). Doing business in Europe. London: Sage Publications Ltd., 3rd edition.  

Competition policy  

Competition is an important element in open market economies, as it maximizes welfare by contributing to long-term economic growth, leading to cost efficiency, lower prices, higherquality products, larger choice for consumers and triggering innovation. The EU has globally seen one of the strictest competition policy systems; its rules also apply to non-EU companies operating on the single market. Its aim is to safeguard a fair single market within the EU by ensuring that companies within the EU compete on equal terms in all member states. Article 101 of the Treaty on the Functioning of the EU (TFEU) prohibits market actors to make agreements which would restrict competition, for example by forming cartels. Article 102 of the same treaty forbids companies to abuse a dominant position, for instance by charging unfair prices. The competition policy also concerns further topics such as merger examinations or state aid. Competition rules are enforced by the European Commission (EC) through powers of investigation and sanction. New challenges emerge due to the rise of the digital economy (Szczepański, 2019). 

European Commission (2021). Statement by Executive Vice-President Vestager on the Commission decision to accept commitments by Aspen to reduce prices for six off- patent cancer medicines by 73% addressing excessive pricing concerns. Online resource.

European Commission (2022). Antitrust Overview. Online resource. 

Szczepański, M. (2019). EU competition policy. Key to a fair single market. Online resource.  

Industrial Policy and Digitalization 

The industry plays an important role within the EU, as it employs around 35 million people and accounts for 80% of goods exports. It presents itself as a leader worldwide with setting high social, labor, and environmental standards. The industry policy, anchored in article 173 of the 7 TFEU, is designed to help the industry to adjust to structural changes, to support SMEs (which depict 99% of all European firms), to foster cooperation, and to exploit innovation potential, thereby increasing sustainable growth, and reinforcing competitiveness. With the 2020 Industrial Strategy, the focus lies on accelerating the so-called twin transitions while remaining competitive on the global market. On the one hand, the EU industry needs to transform towards climate neutrality, as the EU has set the aim to become climate-neutral by 2050 with the European Green Deal. Therefore, the industry must adapt measure to become greener and more circular. On the other hand, the EU industry has to drive forward digitalization if it wants to become a global digital leader and obtain digital sovereignity. There are several important points, for example: R&D and innovation have to be strengthened in areas such as artificial intelligence, and investments are needed to enhance critical digital infrastructure, such as the 5G network. Digital technologies will also play a key role in achieving the objectives of the European Green Deal, enabling green solutions (European Commission, 2021).  

European Commission (2020). Communication from the Commission to the European Parliament, the European Council, the Council, the European Economic and Social Committee and the Committee of the Regions. A new Industrial Strategy for Europe. Retrieved online from: https://eur-lex.europa.eu/legalcontent/ EN/TXT/PDF/?uri=CELEX:52020DC0102&from=EN (26.06.2022).

European Commission (2021). Communication from the Commission to the European Parliament, the European Council, the Council, the European Economic and Social Committee and the Committee of the Regions. 2030 Digital Compass: the European way for a Digital Decade. Retrieved online from: https://eur-lex.europa.eu/legalcontent/ EN/TXT/HTML/?uri=CELEX:52021DC0118&from=en (26.06.2022). 

Liu, Tze-Chang (2022). Digital policy in European countries from the perspective of the Digital Economy and Society Index. Policy and internet, 14 (1): pp. 202 – 651.    

Managing People in Europe 

When talking about companies doing business in the EU, labor law is of course one of the most important topics to look into, as it defines which rights and which obligations employers, and workers have. However, the EU only sets the minimum requirements (for example regarding the working time directive, which awards employees at least four weeks of paid leave per year), the member states can opt for more benevolent arrangements for workers. Also, while the EU 10 expresses recommendations and directives, it is the task of the national and local governments to implement and enforce them – the EU cannot act alone in that regard (European Commission, 2022). In this context, the free movement of people should also be mentioned. According to article 45 of the TFEU, all EU workers have the fundamental right to move freely within the union, without facing discrimination in regard to their nationality, which translates to an equal treatment with nationals, for example concerning employment, renumeration or working conditions (Official Journal of the European Union, 2012). With the ‘European Pillar of Social Rights’, the EU has formulated 20 principles in three key areas, aiming for high standards concerning equal opportunities to the labor market, fair working conditions, and social protection and inclusion for all citizens (European Commission, 2017). The following action plan proposes ambitious but concrete measures of how these objectives can be achieved in practice until 2030. One such aspiration is for example to further lower the amount of people who are at risk of poverty or social exclusion. A relevant cue here is the minimum wage, a directive through which the European Commission wants to achieve adequate wages which allow all workers to make a decent living (European Commission, 2021)  

European Commission (2017). European Pillar of Social Rights. Retrieved online from: https://ec.europa.eu/info/sites/default/files/social-summit-european-pillar-social-rightsbooklet_ en.pdf (27.06.2022). European Commission (2021). The European Pillar of Social Rights Action Plan. Retrieved online from: https://ec.europa.eu/info/strategy/priorities-2019-2024/economy-workspeople/ jobs-growth-and-investment/european-pillar-social-rights/european-pillar-socialrights- action-plan_en (27.06.2022). 

European Commission (2022). Labour Law. Retrieved online from: https://ec.europa.eu/social/main.jsp?catId=157&langId=en (27.06.2022).

Official Journal of the European Union (2012). Consolidated Version of the Treaty on the Functioning of the European Union. Retrieved online from: https://eur-lex.europa.eu/legalcontent/ EN/TXT/PDF/?uri=CELEX:12012E/TXT&from=EN (27.06.2022).  

Overall, I found the course very informative and educational. It gave me a lot of insights both into the development of the EU, but also clearly highlighted how the EU affects our daily lives. Through the various policies as well as laws, the members of the EU states are allowed free access and trade in/with other member states. This is unique in this form and also represents one of the largest institutions in the world. Furthermore, it became clear to me that a united EU has many advantages and that progress and change can only happen through close cooperation and support. The approach in the course, i.e. the mixture of lectures, group work and guest lectures, contributed very well to internalize what was learned and made the course varied and exciting. 

I really liked the course! It gave a good overview on how the EU act as an institution in Europe and what it means for organizations and firms! The group project was really fun!

In general, I really enjoyed this course. As I am already in my third semester, I had a good basic knowledge about the topics discussed in class and was able to participate in the discussions in the classroom. I would definitely recommend not doing the course in the first master semester for this reason. I think the course nicely bridges the gap between theory and practice, as we learned how the topics where playing out in practical cases. I was also very happy that we could choose the company for our business case ourselves. This allowed us to choose a company that we found truly interesting and therefore at least myself enjoyed the group work surely more than if I had for example to work on a case of a company I wasn't that interested in. I also thought it was a very good idea that the course was taking place in blocks so that we had some free weeks in which we could really get going with our projects.