Analysis of International Business Case Studies: FDI in Conflict Zones

This report provides an analysis of international business case studies, focusing on foreign direct investment (FDI) in high-conflict zones. It examines the factors that influence FDI decisions, including the economic environment, governance structures, and the motivations of firms investing in volatile areas. The report critically discusses the challenges faced by organizations operating in these regions, such as corruption, political instability, and ethical considerations related to corporate social responsibility. It explores the relationship between FDI and corruption, the impact of weak institutions, and the importance of ownership structures. The analysis considers the roles of home country governments, the advantages of location, and the ethical responsibilities of businesses. The report concludes by emphasizing the need for organizations to carefully analyze the advantages of location, governance, and ownership structures when making FDI decisions in high-conflict zones.

Running head: ANALYSIS OF INTERNATIONAL BUSINESS CASE STUDIES
ANALYSIS OF INTERNATIONAL BUSINESS CASE STUDIES
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1ANALYSIS OF INTERNATIONAL BUSINESS CASE STUDIES
Executive Summary
The report is based on the analysis of the case study related to the research of risky
investments which are made by the various organizations in the high conflict zones. The
different factors that affect the foreign direct investment related decisions to be made by the
organizations are discussed and analysed in the report. The various issues that need to be
taken care by the organizations in the developed countries in case of making foreign
investment are analysed in the report. The report is concluded by stating that the
organizations in the developed countries need to analyse the issues related to the advantages
of the location, governance of the country and structures of ownership.

2ANALYSIS OF INTERNATIONAL BUSINESS CASE STUDIES
Table of Contents
Introduction....................................................................................................................3
Critical Analysis of the case study.................................................................................4
Conclusion....................................................................................................................11
References....................................................................................................................12

3ANALYSIS OF INTERNATIONAL BUSINESS CASE STUDIES
Introduction
Foreign Direct Investment or FDI can be defined as the investment which is made to
form the ownership within a particular business in a country by another business entity that
operates in another country. The concept of foreign direct investment includes the
acquisitions and the mergers made by the business organizations, establishing new facilities
in foreign areas and reinvestment of the profits that are earned from the overseas operations.
FDI can also be defined as the sum of long-term capital, short-term capital and equity capital.
Foreign direct investments are made by the business entities based on the economy of the
country where the investment is to be made and the growth rate of the country. There are
three major types of FDI
that can be defined namely, horizontal FDI, platform FDI, vertical FDI (Driffield, Jones &
Crotty, 2013).
The rapid growth in the population of the world has further helped in the increase of
globalisation which facilitates the growth of FDIs in the various countries. The increase in
FDI is related to the economic growth of the country where the investments are made by the
business entities of the other countries. FDI investments can also be made to improve the
infrastructure of the organizations and boost the developments as well. The local population
in the areas where the foreign investments are made can benefit a lot from the growth of the
company and the improvement of the infrastructure (Perri & Peruffo, 2016).
The report will be based on the analysis of a case study which is based on the
discussion related to the FDI investments that are made in the high conflict zones. The
problems that are faced by the business organizations due to the investments that are made in
the conflict related areas are also analysed in the report. The analysis will further critically
discuss the issues caused due to the investments made in the conflict zones.

4ANALYSIS OF INTERNATIONAL BUSINESS CASE STUDIES
Critical Analysis of the case study
The major focus of the case study is related to the examination of the investments that
are made by the western business organizations in the high conflict areas. The strategy of the
business organizations behind the investments made in the conflict zones is analysed in the
case study. The sample that has been taken for the analysis are mainly the number of
organizations which have invested in countries with low rates of income and weak
institutions. The western firms are the major investors in the conflict zones and this trend is
examined in detail in the case study. The foreign direct investments that are made by the
business organizations have a significant effect on the economy of the countries where the
investments are made. The motivation factors related to the firms which tend to invest more
in the conflict zones are analysed in the case study (Driffield, Jones & Crotty, 2013).
The analysis in the case study is based in the links between the business organizations
and the government of the countries where investment is made. The major focus of the study
is based on the complex factors related to the business firms and the factors related to the host
country where the firms are investing. The organizations which wish to invest or explore the
markets in the conflict zones are mostly discouraged or criticised by the press and the
industry as well. The example that has been discussed in the case study is related to a small
and newly opened organization in Europe which desired to explore the oil and gas reserves in
the areas of Sudan. Almost 500 multinational organizations have been involved in the
investments that were made in the conflict regions in the world (Johns et al., 2015).
FDI has been given utmost importance by the professionals and it has also termed as a
vehicle used for the purpose of development of the countries. The major area of focus is
however the ways by which the business organizations are motivated to make these
investments in the areas which are heavily affected by conflicts. As discussed by, Cortina,
Köhler & Nielsen (2015), FDIs are of great importance for the purpose of stimulating growth

5ANALYSIS OF INTERNATIONAL BUSINESS CASE STUDIES
in the countries, building facilities and encouraging huge developments. FDIs have played a
major role in the economic development of the various countries and the ways by which the
business environment is improved in these areas. However, there many factors related to the
countries where FDIs are taking place which can adversely affect the importance of the
investment for the country. The inflow of FDIs is affected by the institutions of the various
countries which receive the investments. The countries which have weak institutions deter the
investments that are to be made by the foreign business organizations. According to, Singh,
(2016), the importance of the interaction between the international business, political capital
and the risk is high. However, the authors have made least analysis about the factors that
motivate the business firms which invest in the volatile areas. The major purpose of this case
study is therefore to analyse the gaps that are present in the analysis and find the factors that
act as motivators for the business organizations.
The relationship between the institutions and the international business is analysed in
the case study in detail. The extreme issues that are being faced by the business organizations
are related to the increase in terrorism in the various developing countries and the impact that
this issue has on the operations of the firms. The relationship and the link between FDI and
corruption in the countries where the business firms are investing is analysed in the report.
The business organizations which invest in the unstable locations have to face the risk of
increases the inequality in the income. The countries which fall in the conflict zones and the
post-conflict zones have to face many problems including lack of the structure of governance,
protection of the property rights and corruption. According to, Kolk, (2016), the investment
of capital in the various areas is important for the improvement of the infrastructure and
development of private sector as well. The research in the case study relates to the analysis of
the role of corruption in the government to ensure short-term development.

6ANALYSIS OF INTERNATIONAL BUSINESS CASE STUDIES
The analysis is performed based on two major theoretical frameworks among which
the first is related to the discussion of the role that the institutions play in the influencing the
markets. The second framework is used to explain the importance of the structures of
ownership related to the explanation of FDI. The major questions that are being addressed in
the research are, the types of investments or trades that are sensitive to the conflict areas. The
product markets or the sectors that are susceptible to the cross-national variations in the
conflicts. The approaches that are taken by different organizations to react to the increase in
conflict and the process that they can apply to mitigate the conflicts (Driffield, Jones &
Crotty, 2013).
As discussed by, Hamilton & Webster, (2015), the institutions related to international
business are important as the weak institutions tend to deter the firms from investing in the
areas. The organizations are deterred from making investments in these areas not only due to
the levels of corruption or the strict levels of law and order, they are most importantly
deterred due to the levels of unfamiliarity. The advantage of the ownership of the firms can
be experienced when the organizations invest in areas which have weak institutions and the
environment of business is also risky in nature. The organizations which belong to the areas
with stable business environment and low conflict are not likely to invest in high conflict
zones.
The framework related to Corporate Social Responsibility and the political dimension
can be added to the existing research that has been conducted in international business. The
CSR related framework discusses that the organizations need to fulfil the economic
responsibilities. This framework states that the organizations which operate in the low
conflict zones need to understand the regulations not only of their own country. They need
should also try to interpret the regulations and laws of the countries which are within the
conflict zones (Cravino & Levchenko, 2016). The mitigating efforts of the home country of

7ANALYSIS OF INTERNATIONAL BUSINESS CASE STUDIES
the organizations are taken into consideration in this case. The governance structures of the
firm are also important to increase the investments in the high conflict zones. The ability of
the organizations to invest in the high conflict countries is also affected by the support that is
provided them by their own governments.
According to, Hutzschenreuter, Kleindienst & Lange, (2016), the decisions related
FDI are not only made on the firm level, however it also involves the role that the
government of that country plays in the decision that is taken by the firm. The strongest
government institutions are mainly present in all the developed countries including, Japan,
US, Germany and UK. The expectations are high that the business organizations which
operate in these developed countries will invest in the organizations which are present in the
conflict zones or the developing countries.
The theory related to international business can also be extended to relate the Foreign
Direct Investment and corruption related factors. The argument is related to the high costs of
transactions that are generated in the countries governed by weak institutions which deters
the foreign investment. The main factors that can be related to this phenomenon are high
levels of corruption and the political interference in these countries. The framework focusses
mainly on the transition economies where extreme political corruptions are present. The most
significant factor in this case is the link between the location advantages and the sectoral
differences. The extraction of natural resources for the purpose profit in the conflict zones
can be related to the response that is provided to the demands in the market.
According to, Picciotto, S., & Mayne, (2016), another major factor related to the
analysis of foreign direct investment also needs to focus of the advantages related to
internationalisation. The analysis of the foreign direct investment needs to be focussed on the
business-state relations. The theory mainly suggests that the business firms which are larger

8ANALYSIS OF INTERNATIONAL BUSINESS CASE STUDIES
in size are more prone to invest in the conflict zones as compared to the business firms which
are of smaller size.
The ethical responsibilities of the organizations and the structures of ownership are
also important to analyse the foreign direct investments in the high conflict zones. The ethical
responsibilities of the business firms are determined mainly by three major factors which are,
(a) the ways by which the business firms view their own ethical responsibilities, (b) the
pressure that is experienced from the stakeholders from outside the host country of the
company and (c) the assumptions that are made by the organizations about the expectations
from the country where they operate. These three types of pressures are different for the
various firms and research depicts that the business organizations which are not quite
concerned about their corporate social responsibilities are much more likely to invest in the
high conflict regions (Buckley & Ghauri, 2015).
The relationship between ownership concentration and CSR is discussed is analysed
in the case study. The persistence related to ownership concentration mainly reflects the
weakness of the institutions of the countries and the absence of these intermediaries in the
capital markets. The strategic decisions related to the organizations with concentrated
ownership are mainly taken by a small group of people and it does not involve many
stakeholders of the company. The interest levels of these organizations are also high in case
of expanding their business operations in the other countries. The organizations have formal
memberships of the corporate groups and they also have huge informal networks which tend
to facilitate their link with the internal capital markets and they are able to easily raise the
capital that is important for expansion (Welch & Björkman, 2015).
According to, Doh et al., (2017), the organizations which have concentrated
ownership tend to face low amount of scrutiny from the various stakeholders of the company.

9ANALYSIS OF INTERNATIONAL BUSINESS CASE STUDIES
This can help the organizations in engaging in the activities which can be otherwise be a
reason for criticism in case of the other type pf organizations. Among the various factors that
are related to the foreign direct investments including, CSR, politics and corruption, the
effects of CSR are least discussed in the previous researches. This research is based on the
CSR activities of the organization related to the perspective of the external stakeholders of
the firm. The relationship between FDI and the concentrated ownership firms is much more
complex as compared to the discussions that are made in the previous researches.
The reasons behind the investment made by the business firms in the conflict
countries are analysed in the case study. The research studies previously made by the authors
have depicted the extent up to which the political instability in the countries deters the foreign
direct investment. The authors have previously suggested that the western firms tend to invest
more in the areas which are politically unstable and the locations are ethically questionable as
well. The various models that has been used in the research to explain the propensity of
foreign direct investment based on the intangible assets, size, age and subsidiaries. These
variables help in explaining the marginal decisions that are taken by the organizations to
invest in the regions where conflicts are present (Lien & Filatotchev, 2015).
The sample that has been chosen for the analysis is around 2509 organizations which
have invested in the conflict areas. The research further states that the existing research about
the factors that deter the foreign investments may be true, however, it is not true for all the
organizations. The findings from the research have utmost importance in case of the
organizations which need to take decisions regarding the investment to be made in the low-
income countries. The case findings have huge implications for the general research that has
been previously done based on the relationship between the foreign direct investment and the
development of the countries. The research in the case study was mainly based on the link
between institutional quality of the countries and the foreign direct investments. The analysis

10ANALYSIS OF INTERNATIONAL BUSINESS CASE STUDIES
in the case study however ignores the factors related to the motivation for the business
organizations which invest in the conflict areas.
According to, Enderwick, (2017), motivation acts as an important factor for the
organizations which invest in the countries with high conflict. The research can however be
extended towards considering the prospects for the contribution of FDI in the development of
the countries after the conflict period has passed. The argument has been raised by, (), that
the development of the countries which is assisted by FDI depends upon the transfer of the
resources which are specific for the firms and the interaction levels with the advantages that
are provided by the locations. The results that are obtained from the research suggest that the
advantage that is acquired by the organization from ownership can act as important
motivators for the foreign direct investments that are made in the conflict zones. The
expectation of the firms is related to the improvement of the economic performance of the
host country of the organization (Driffield, Jones & Crotty, 2013).
The research has depicted that the organizations which belong to the countries in high
importance to CSR are less interested in investing in the high conflict zones. The reason
behind this choice of the business organizations is the behaviour of the consumers in the high
conflict zones. The consumer behaviour helps the organizations in becoming socially
responsible. The organizations which belong to the countries with weak culture of CSR are
much more keen on investing in the high conflict zones. As argued by, Holmes et al., (2016),
previously, the CSR activities that are performed by the organization need to be
contextualised taking into account the development of the institutions and economy of the
country. The research made in this case study however suggests that the CSR related
activities of the organizations are voluntary in nature and they can choose to comply with the
regulations or further go beyond the limits and become socially responsible.

11ANALYSIS OF INTERNATIONAL BUSINESS CASE STUDIES
The organizations which belong to the countries with high conflict may not
necessarily have a weak CSR, they can have different interpretations for the ways by which
CSR can regulated and the scope of the CSR related activities. This depicts that the
ownership of business is important and the governance related to international business also
holds huge importance. As discussed earlier by, Alcácer, Cantwell & Piscitello, (2016), the
factors related to the levels of corruption are important for the research related to
international business expansion strategies and FDIs. The study performed in this case relates
to the importance of the characteristics of the firm and the characteristics of the home country
of the organization. The research therefore emphasizes that the governance of the home
country is important in the decisions that are taken by the organization to invest in the
countries with high conflict. The CSR of the organizations however, require analysis on the
country level so that the motivation level of such countries related to the investment that is to
be made in the high conflict zones.
Conclusion
The analysis of the case study depicts that the foreign direct investment related
decisions taken by the business firms depend on many factors which include, political factors
and the CSR related activities of the organizations. The various factors related to the
propensity of FDIs include, age, intangible assets and many other factors. The results and
findings of the research have depicted that the foreign direct investments made in the
organizations belonging to a conflict zone can further help in the development of the
countries. The condition of the countries after the conflict period can also be developed with
the foreign direct investment made by the organizations belonging to the developed countries.
The developing countries have been found to be the most affected by the conflicts in the
economic and political areas. Therefore, the expectations related to investments are high from
the organizations which belong to the developed countries and the low conflict zones as well.