Through industrialization and the evolution of trade across frontiers over centuries, nations came to expand their knowledge of different economic systems and to adopt the arguments in favour of greater economic integration across borders (e.g. thinking on freer trade). Especially influential were insights of Adam Smith that trade based on absolute advantage is mutually beneficial and the later extension by David Ricardo to show that this is true even for countries with no absolute advantages. These insights lead to the demise of more protectionist understandings of cross border economic exchange, as associated with Mercantilism. Contrasting with Mercantilism’s focus on ensuring countries export more than they import to ensure a positive balance of payments. As mercantilism was closely associated with the repetitive conflicts in Europe between 1600 and 1800 and the need for financing.

The arguments in favour of trade as mutually beneficial also laid the foundation for later arguments about economic integration in pursuit of peace. This association between cross border economic integration and conflict between nations has been central to the efforts to realize ‘keeping peace among nations’ and harmonious trade for economic growth and welfare through the European integration project. Today this worldview has culminated in the EU, as well as other forms of market integration and trade and investment opportunity across the continent.

Because the Single European Market represents the largest marketplace in Europe, this book focuses on the EU whilst also referring to non-EU member states as appropriate; especially the EFTA and CEFTA states are taken into consideration.

The EU represents a singular achievement in Europe and in the world. The EU is an organization of sovereign states, not a confederation that represents the most advanced economic integration project worldwide. The member states have created a single market that links collaboration and competitiveness with certain social ideas. It is the driver and the stimulus of Europe, representing the largest economy, the largest trading partner, and the largest donor of development assistance in the world. The EU also has a strong value driven agenda that seeks to ensure citizen welfare. It is also a strong leader on issues such as climate change and human rights. Regionally these concerns for example express themselves in issues such as employment, economic stability and supporting research and development.

Given the inter-state nature of the EU project, the EU has sought to develop an identity through shared values and symbols, so that the diversity of the member countries and their citizens is a source of strength and opportunity. The EU regularly studies the attitudes of its citizens. Amongst the values that are found, it is noteworthy that EU citizens seem to appreciate specific identity and traditionalism. It is found that the majority of EU citizens feel to some extend ‘European’, while they preserve a strong feeling of adherence to particular roots and culture.

The many symbols connected to Europe and the EU often have their origins in the history of the region. The name Europe comes from Greek mythology, where Europa was the daughter of a Phoenician king. Zeus, attracted to her, transformed himself into a white bull and kidnapped her to the island of Crete, of which Europa became the first queen. An important symbol of the EU and of Europe’s unity and identity is the European flag. It symbolizes, traditionally, perfection, completeness and unity. The number of stars is not dependent on the number of member states and the flag is the only emblem of the European Commission. Other important symbols are the European Anthem, composed by Ludwig Van Beethoven, Europe Day on 9 May, and the euro, the single currency of the EU which was launched on 1 January 1999 and introduced to the public in 2002.

(a) There are important terms and concepts that will be used throughout the text. Among them are: the concept of globalization as the compression of time and space that increases the frequency and duration of linkages between any given set of actors in the international environment. Europeanization, which on the one hand implies the European integration of economies and the development of common policies of EU member states and, on the other hand, an advanced form of organizations that reflect the diversity of markets, of cultures, and (b) the diversity within the company as well as in the scope of their operations. Other key terms are: international business, defined as transactions across borders; multinational enterprise (MNE), describing a corporation that has an international market scope; and transnational company (TNC), defining a firm that coordinates and controls operations across borders, without necessarily owning them. In the European business environment, as they constitute the majority of business structures, small- and medium-sized enterprises (SMEs), also play a very particular role.

While the EU is a regional economic and nascent political, integration project, it is also important to understand it within a global context. The EU member states through the EU gain a stronger voice in international arenas and this allows European states and businesses to more confidently and effectively address the increasing complexity and growing velocity of global markets and politics. The degree to which this represents an increasingly Europeanized business perspective is one of the key debates when thinking about how MNEs and domestic and internationally active SMEs do business in Europe and abroad.

The competitiveness of business depends on innovation, efficient knowledge management and entrepreneurship. Hence, the various forms of market integration that characterise the European marketplace provide many advantages to companies in the form of European cost bases, taxation levels, availability of skilled, trained labour, effective linkages between research/academia and the corporate sector to promote internationalization opportunities for products and services across Europe and beyond.

To understand the European market, its diversities and characteristics, the historical development of European integration provides significant insight, and explains some facets of the European business environment that are rather unique. In particular, this marketplace is deeply ‘integrated’ because of its history: The formulation of a plan to work together among European states originates mainly from the period from 1870 to 1945, when Germany and France had fought each other three times. The only hope for lasting peace and prosperity for their economies was to strive for some form of European unity, on an economic and, if possible, political, social and cultural level, driving peace through economic stability.

A number of leaders, in particular Konrad Adenauer (the first post-war chancellor of the new Federal Republic of Germany) and Charles de Gaulle (the first post-war President of the liberated France), were deeply involved the starting process of uniting Europe. This long-term process of integration spans the European Communities’ treaties up to the formulation of a European Constitution and further. It started with the PanEuropa movement in 1923, which aimed at uniting European countries, but which was hindered by its contemporary political and economic tensions. Then, in the post-1945 period, two phenomena emerged: the desire to combat nationalism, and the new power position in Europe, predominated by US–Soviet tensions of the Cold War, forcing business into diverging economic, political and sociocultural systems.

In the international business environment, pre-war and wartime experiences led to the creation of several multilateral organizations that were to have a strong impact on international business, international laws and regulations. The Bretton Woods Conferences in 1944 established a system of fixed exchange rates and two new bodies, the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (World Bank), to facilitate international trade. In 1947, the GATT (General Agreement on Tariffs and Trade), predecessor of the World Trade Organization (WTO) was signed. One year later, in 1948, the General Assembly of the United Nations ratified the Universal Declaration of Human Rights to establish rules governing cross-border relations.

European integration was hence initiated within the context of this broader multilateral collaboration, creating unprecedented cooperation between France and the Federal Republic of Germany, also referred to as the ‘Franco-German engine’. The European Recovery Plan, also known as the Marshall Plan, launched an economic cooperation and a customs union on a small scale. Following the belief that economic stability drives political and geopolitical stability, the relations between European states were mainly improved in regard to their economic and political quality within areas of low politics (directly applicable policy areas) and high politics (security, autonomy and sovereignty-focused areas).

The starting point of European integration is symbolized by the ‘Schuman Declaration’, a proposal for a united Europe by Robert Schuman, French Foreign Minister, on 9 May 1950, a date that is still celebrated as the annual Europe Day. Many other treaties followed the Schuman Declaration. Among the most important ones are the Treaty of Paris in 1951, the Treaties of Rome in 1957, the Single European Act in 1987, the Maastricht Treaty in 1993, the Amsterdam Treaty in 1997, the Nice Treaty in 2001 and the Constitution of the EU. These have all built on and developed the supranationalism initiated in the ‘Schuman Declaration’, which continues to govern most of the European market conditions today. ‘Supranationalism’ stands for projects or governance transcending national boundaries or governmental authority. It requires member states to transfer or delegate some sovereignty, i.e., national independent decision-making power and authority, to a central joint authority.

Each of the subsequent treaties has made important contribution to the EU integration project, broadly the notable contributions for each is summarised here. The Treaty of Paris implemented the creation of the European Coal and Steel Community (ECSC) and laid the basis for the four main European institutions: the Council of Ministers, a Common Assembly (later the European Parliament), the Court of Justice and a High Authority. The ECSC ceased to exist in 2002. The Treaties of Rome created the European Atomic Energy Community (EAEC/EURATOM) and the European Economic Community (EEC). The EEC Treaty set the framework for the institutions governing the communities and its policy framework. It also stipulated the creation of a common market and the removal of trade barriers and launched the Common Agricultural Policy (CAP). The Single European Act (SEA) in 1986 was adopted to progressively enforce an internal market by December 1992. It established a single market of goods, capital and services and the guarantee of free circulation of European citizens inside the community. This act also extended the scope of qualified majority voting (QMV) at the Council of Ministers and increased the Commission’s powers. Then, in 1993, the Maastricht Treaty changed the official name of the EEC to the EU. It assigned the EU with a broad range of objectives, based on a set of guiding principles like the respect for democracy and human rights.

With the aim of complementing the Maastricht treaty, the Amsterdam treaty was signed in 1997, increasing transparency to the citizens and creating an enhanced cooperation procedure. The Treaty of Nice in 2001 consisted mainly of measures preparing for enlargement of the EU from 15 to 25 members, for example reweighting the voting system of the Council of Ministers. Then, in October 2004 a new Constitutional Treaty for Europe was signed in Rome, its objectives encompassing simplification, democracy, transparency, effectiveness and legitimacy for the EU.

By creating a frontier-free single market and a single currency, the EU has given a significant boost to trade and employment in Europe. Its agenda strives for sustainable growth, social inclusion and competitiveness. Each treaty that was signed, made the European business environment more efficient and more accessible as an entity. There is clear evidence of the impact of the treaty develop on European business activity.

The Treaty of Paris was associated with a direct impact on the coal and steel industry and is associated with an increase of trade by 129% in the first five years. The treaty also had clear market stabilization and competitive effects. The Treaty of Rome affected the cross-border logistic of European firms, promoting economic decision making, by harmonizing external tariffs. The treaty also prohibited monopolies and included a series of sectorial specific policies, most importantly creating a free market and increasing market stability for agricultural products, with the establishment of the Common Agricultural Policy. The Single European Act (SEA) followed a series of focused institutional developments, including the creation and implementation of the Schengen Agreement that strengthen the internal free movement of persons in the EU. The SEA with the goal to create a single for goods, capital and services, and citizens within the Community, was the first major revision of the founding treaties of the EU. The SEA had unprecedented Effects of the Europeanization of the European business. This included elimination of internal technical barriers to integration, harmonization of safety and pollution control, certification systems, recognition of qualifications, intellectual and industrial property rights and the establishment of European company law.

The Treaty on European Union (TEU) allowed the EU to reach the highest level of international integration, refining economic cooperation, promoting political and social convergence and addressed the conduct of monetary coordination and joint monetary actions. This had further significant effects on the ability of firms to realize European strategies. The Treaty of Amsterdam subsequently enhanced the multilateral promotion labour and employment opportunities, consumer protection, agribusiness and sustainable development, ‘responsible business’ and the protection of the environment, changing business realities in the market, of adaptation and compliance pressures and for some, of market leadership through technological innovation. The foremost benefit of the Treaty of Nice was that it showed the dedication of member state governments to prepare for a bigger and better functioning European business environment. Finally, the Treaty of Lisbon allows for greater subsidiary powers for civil society, which increases the possibilities for citizens’ and corporate interest articulation and corporate political activity. The Treaty’s explicit aim was to create a business-friendly environment, to lead to wealth creation (including employment), a more secure business environment and better functioning Single Market.

As the complexity of the global economic and political environment increased at the start of the 21st century, the EU was challenged by the first voluntary exit of a member state, when the UK narrowly voted to leave: the so-called BREXIT. Arguably, no single event has provided more clear evidence about the tremendous impact the EU has had on Europeanizing European business in the last six decades. BREXIT is however only one of a number of contemporary challenges to face the EU. Prior to it, the Global Financial Crisis (GFC) had hit Europe hard, and a Euro-zone crisis challenged the EU members’ cohesion. Europe also faced one of the largest waves of migration to the region, becoming home to more refugees than ever before, mainly from parts of the Middle East and Africa. Nonetheless, this is also the period when a Banking Union was formed, a Fiscal Stability Treaty was ratified, and a “New Trade Strategy” launched. It also marks a time of active engagement with digitalization and an increasingly knowledge driven European internal market. This was followed by the development of a “White Paper on the Future of Europe”, proposing five scenarios for the future.

The depth and breadth of European integration today is considered unique, when viewed from a global perspective, and is an ongoing process. The open and democratic nature of the European market predestines its future as a growth structure. The most integrated form of market grouping in Europe is the EU, in which many trade and investment conditions that business is interested in are at least partly harmonised or convergent. Other national markets as well as other market groupings also show worthwhile features for trade and investment, entrepreneurship and market entry. While the treaties establishing the EU and its common policies have deepened the integration of members, the market is also undergoing regular geographical enlargement that increases its geographic breadth. This is driven by the EU’s relatively predictable marketplace and political-economic stability. Enlargement, that is, adding in more member states, hence regularly increases the number of countries in the EU. The countries that join become subject to the deep integration required by membership of the EU, and hence have obligations as well as rights and advantages, and give up a certain degree of sovereignty if their candidacy succeeds.

Every round of enlargement can be seen as a further step towards a more integrated Europe taking into account the ideal of establishing an integrated European market that is centred on values of citizen rights and welfare, at the same time that it is driven by the challenges of competitiveness vis-à-vis North America and Asia Pacific. Together with those two regions, Europe has long constituted the ‘triad’, i.e. the three major investment and trade regions in the world economy. With the North American Free Trade Area (NAFTA) and the EU as the most institutionalized trade blocks across the three regions. The Association of South East Asian Nations (ASEAN) now represents the most significant institutionalized integration project within the Asia Pacific. Latin America has increasingly aligned with North America in economic dynamics and prospects for the future. Also, Africa is increasingly using the powers of FTAs (chapter 10) to integrate as a region and into the global economy.

Before BREXIT, 22 countries had joined the original six founding countries of European integration (Germany, France, Italy, Belgium, Luxembourg and the Netherlands) to progressively and continuously deepen and widen business opportunities. The most extensive enlargement took place in 2004 with former Soviet ruled countries for the first time joining the community. This enlargement of ten countries joining the EU at once required an unprecedented scale of adjustments from both the candidate countries and the EU internally. It prepared the ground for the subsequent joining of Bulgaria, Romania and Croatia. Today the next and ongoing enlargement is expected to integrate the countries of the Western Balkans, growing the number of member countries despite the decision of the United Kingdom to withdraw from the EU. BREXIT represents a unique event, as the only time any, let alone a large, EU member state has voluntarily decided to withdraw from the EU. BREXIT has also highlighted the EFTA states relationships with the EU, given the discussion of their integration with the EU as options for the UK post BREXIT.

The integration of the EU has evolved through incremental stages. The willingness of member states to pursue this path is explained by different theories of integration. Four main schools of thought are reflected in European integration theory: Functionalism, Neo-Functionalism, Federalism and Liberal Intergovernmentalism. Functionalism holds that at best, states cooperate in specific areas only, that deeper political integration is not desirable and each state should seek to retain a high level of sovereignty. Neo-Functionalism, similarly to Functionalism, holds that harmonization and cooperation appear when functional or political needs spill over frontiers and into economic issues. Neo-Functionalism, however, recognizes the essential role of socio-political cooperation in the integration process. Federalism provides the basis for the main treaties governing European integration and is guided by the belief that a constitutional framework shall govern extensive relations between member states whilst they remain sovereign. Finally, Liberal Intergovernmentalism emphasises interstate bargaining and institutional compliance in explaining European integration. Liberal Intergovernmentalism is state centric, assumes of rational state behaviour and assumes bargaining takes place in light of state preferences.

Integration theories are the very basis for understanding the interests and beliefs of member states, their people and democratically elected governments. They form the way in which advancing and shaping European integration is decided by the member states. All member states meet and debate to discuss and agree on how the integration process should proceed in various EU constellations and also constitute the members of all EU institutions. In this, each member state is subject to its own nuanced system, political culture and heritage, and its citizens’ will (through the democratic elections of their national governments and the European Parliament) express their particular beliefs and priorities for the EU project. This accounts for the different perspectives of member states on sharing sovereignty with supranational (EU) institutions and explains why the EU has become a mixed system in terms of the structural separation of authority. Not everyone agrees with everything, yet working together is deemed better than alone. The integration theories hence help us understand the ups and downs of European harmonization, in particular its patchwork nature. For companies, this explains why the Single Market is not that ‘single’ and harmonized after all, and firms often call for even more and better market integration. The next chapters will illustrate and analyse what market-related aspects are ‘single’ and which ones are not, and how to manage this unique business context especially on with a multi-country strategy in mind.

Since 1957, the EU underwent six major waves of enlargement. Every enlargement was based on the requirement that candidate states need to fully accept and apply the ‘acquis communautaire’, i.e. the full body of laws and regulations governing the EU. This way, all EU member states are then on equal footing with one another. These common rules harmonize access to countries, establish the foundations of the system that allow harmonization between the member states to become effective and beneficial, and hence provide market opportunities, even if each country retains most of its specific conditions and competitive advantages unique to it through its own particular geographic, historic, resource-, skills- or knowledge-related conditions. The rational is to allow member states to reciprocally gain access to each other’s advantages, becoming collectively stronger by not staying isolated. However, this is not always easy: The accession of Romania, the focus on the accession of the Western Balkan countries by 2025, the longstanding challenges to Turkish accession, the withdrawal of Iceland from the accession process and now BREXIT attest to the challenges of enlargement.

For business, the main advantage of enlargement of market groupings lies in the opening of markets and the reduction of transaction costs if already trading or investing in those markets. The Enterprise Europe Network supports SMEs to adapt to threats and opportunities from enlargement and Europeanization, to find partners, and provide information about prevalent legislation. Enlargement can provide firms with very different opportunities and challenges. Romania for example has struggled with reforms both before and after accession and continues to present firms with a challenging operating environment in terms of corruption, organized crime and judicial reform.

Similarly, the ongoing accession processes for the Western Balkan countries (Albania, Bosnia and Herzegovina, Croatia, the Former Yugoslav Republic of Macedonia, Serbia and Montenegro) and Turkey present firms in existing member countries with yet uncertain prospects. The Western Balkan countries represent a very interesting future market, with over 76 per cent of the Balkan’s total trade comes from the EU. Turkish relations are based on a customs union that was established in 1995 and is expected to remain the main mode of integration with the EU for the foreseeable future. Turkey also presents firms from existing member countries with a very attractive market and location for manufacturing.

Iceland, while representing a relatively small market within the context of existing member economies, while it still pursued access, promised very attractive opportunities for business. Already a member of the EFTA, Iceland is a wealth country with stable political institutions, including those supporting economic activity. Iceland offered especially interesting opportunities in fisheries, which has been a contentious policy area in relations with the EU. Similarly, BREXIT is revealing the degree of cross-border integration of European business and posing some potentially quite significant operational and market access risks to firms in the rest of the EU.

Enlargement thus creates new and reshapes existing business opportunities by increasing market size for firms, expanding coverage and depth of harmonization of member countries’ economic activities. This contributes not only to increasing the potential number of networks, business partners and customers available to firms, but also leads to reductions in transaction costs associated with doing business across borders when for example the same testing procedure or product standard or labelling applies in across the borders. Central to these effects is the implementation of common regulations for the free movement of goods, services, capital and people. This enlarges business opportunities and facilitating exchanges. They create new opportunities and prolong life cycles. Business and trade creation opportunities are diverse.

The new business operations in new locations also induce new risks and uncertainties, new obligations and costs. Nevertheless, on business level further enlargement is considered profitable because costs are typically compensated by the increase in business opportunities and new potential benefits that balance the saturation of certain sectors in the existing EU economies. At the same time, consumer choice and welfare due to enlarged and more transparent consumption options across borders is seen as advantageous to the economy as a whole.

Early access to enlargement country markets is often an essential strategy for European companies to stay competitive. This includes the careful assessment of operational risks and threats, choosing the fitting cross-border location, and the most suitable mode of market entry in the internalization process.

It was observed that within typically a decade of joining the EU, increasing regional integration results in the proximity of European demand structures of accession countries. The gap between labour costs, public aid structures and the ongoing harmonization of norms and standards reduce the main differences between ‘older’ and ‘younger’ accession countries. The successful integration of countries has offered increased business opportunities for European and international firms and has in most cases helped boost growth in formerly weak economies. However, it also increased competition and challenges to corporate performance and strategy.

Most of the European business environment is shaped by the EU member states and their joint interactions, when engaging very regularly in rules and decision-making on EU level. This chapter explains how that works, and analyses what to expect and what this decision-making structure means for the current and future business environment. Understanding this, means being able to better structure cross-border strategy, relationships and to assess and forecast business opportunity.

This chapter therefore focuses on the six main institutions of the EU to better understand how they shape the European business environment, how they are relevant to business interests and provide opportunities for business to influence their decision-making. The six focal institutions are the European Commission, the European Parliament, the Council of the European Union, the European Council, the European Court of Justice, and the Court of the Auditors. There are also a number of other institutions and inter-institutional bodies with specialized roles. These include amongst others, the European Central Bank (ECB; responsible for European monetary policy), the European External Action Service (EEAS; responsible for supporting the High Representative of the Union for Foreign Affairs and Security Policy), the European Committee of the Regions (CoR; represents regional and local authorities) and the European Investment Bank (EIB; finances EU investment projects and helps small and medium-sized enterprises).

The institutions have undergone many adaptations over six decades, as the EU member states have shaped them to better respond to changing demands and external conditions. These changes have over time moved from dealing with specific political and economic challenges to also include changes seeking to improve the effectiveness and efficiency of the institutional decision-making process, as more and more member states, and hence, opinions and interests need to be accommodated in the institutional decision-making processes of the EU. This has led to the institutions, each with their own unique role, to play an essential function in policy formation, in the executive and in the legislative sphere, shaping the harmonization of member states policies and the European business environment as a whole. Importantly, not each opportunity to harmonise the market may be picked up and agreed upon!

The EU institutions through their decision-making can have very significant impact on the operating environment of European business. Firms operating in Europe are hence subject to EU, as well as Member States legislation. Firms need to be familiar with the constraints, functioning, norms and resulting opportunities of the EU institutional decision-making process, and stay informed to avoid additional costs but rather, benefit from additional convergence that may be coming from this institutional environment.

The European Commission, or Commission of the European Communities (CEC), is a politically independent institution that represents the interest of the EU as a whole. Its powers are mainly of an executive nature, but they are also political, legislative and administrative, in cooperation with the powers entrusted to the Council of Ministers and the Parliament. Seated in Brussels, it possesses exclusive powers to initiate legislation and to set up proposals. It manages and implements EU policies and the EU budget, and, together with the European Court of Justice, it enforces European Law. The CEC is composed of a president and his or her vice-presidents, commissioners and departmental staff headed by a director general.

The CEC is organized around Commissioners, nominated by national governments, with each running a directorates general (DG) in charge of a specific policy area. The CEC functions through the articulation of European interests, based on a maximum consensus of diverging approaches, attitudes and impacts. It officially conducts the relations with international organizations as well as non-members for EU member states. The work of the CEC is often complemented by expertise from the outside. National civil servants via committees or other knowledgeable parties, such as Eurogroups (pressure, interest or lobbying groups), are consulted to make sure that the CEC has sufficient knowledge of stakeholders and issues before a rule or legislation is initiated. This provides an opportunity for European business to participate either directly or indirectly and influence decision-making at the CEC.

The European Parliament (EP) is the only directly elected institution of the EU. The Members of the EP (MEPs) act as ‘representatives of the peoples of the States brought together in the Community’ and meet for the plenary sessions in Strasbourg or Brussels. The Parliament shares the power to legislate (co-decision) and authority over the EU budget with the Council and it exercises democratic supervision over all the EU institutions. Historically, the EP evolved from a consultative body of the EC to powers to suggest amendments of CEC or council proposals, to delay legislation and to approve the designation of the commissioners and to dismiss the CEC as a whole via a motion of censure (with a two-thirds majority). Since the Treaty of Nice, co-decision powers of the EP have been expanded, sharing legislative powers with the Council, and expanded to cover new areas. In contrast to some outdated popular opinion, the EP is a powerful institution. MEPs can be contacted directly by all citizens and businesses. This access allows business people and their firms to seek to directly convey their interests and concerns to key decision-makers in the European decision-making institutions.

The Council of the European Union (often referred to as the Council), is of foremost importance in European decision-making. It generally acts upon a proposal from the CEC and decides on issues jointly with the European Parliament, under the normal decision-making procedure. Its meetings in Brussels are attended by one minister from each of the EU’s national governments, the minister changes depending on the policy issue being discussed. The Council is thus a single institution that meets in ten different configurations depending on the subject being considered. There is also always one representative of the CEC who attends the meetings as a non-voting participant, to ensure that institutions are up-to-date about each other’s doings. The meetings are chaired by the minister from the country holding the Council presidency. The presidency of the Council rotates every six months among the member states. The state holding the presidency, together with the preceding state and the successor, constitute the so-called Troika (not to be confused with the Troika of the ECB, IMF and CEC in the Greek debt crisis). The work of the ministers is supported by the Committee of Permanent Representatives of the Member States (Coreper), working parties from national governments and a General Secretariat, which has its own legal service to cover EU activities. The Council uses qualified majority voting (QMV) for about 80 per cent of decisions, and simple majority and unanimous votes for the remaining decisions. National business interests are most directly represented in the Council, as specific business interests cannot directly influence the institution. Business is limited to garner support domestically, in their home countries or another member state, to exercise influence on decision-making via the relevant government minister. This suits more collective (i.e. national) interest representation rather than individual business interests.

The European Council is the institution that defines the general political guidelines of the EU. It is composed of the heads of state of the EU member countries, its president and the president of the CEC. It meet twice a year, chaired by the Member State holding EU presidency. The European Council sets priorities and political directions and resolves issues of a high political nature. As with the Council, this is a political institution. Due to the nature of its membership and general remit to set the overall direction of the EU project as a whole, this institution is not typically considered an attractive or viable arena for the exercise of business interest influence. However, awareness of the direction it takes provides solid, early indication to business for the future market conditions that can be expected across the EU.

The Court of Justice of the European Union (CJEU) represents the judicial authority of the EU and is divided into two courts, the Court of Justice (ECJ) and the General Court. It makes sure that EU legislation is interpreted and applied in the same way in each Member state and has supremacy over member states’ national law. Judges are drawn from the member states of the EU and their number corresponds to that of the member states at a given time. The ECJ is assisted by the Court of First Instance to lighten the workload of the ECJ to only those actions directly appointed to it. The court has an impact on European business activity through its ability to (re)shape specific business actions or conditions in the European business environment. Through its judgements it can act as protective or disruptive to business activity.

Another court of the EU is the European Court of Auditors that audits the collection and spending of EU funds, ensuring also their economic management. Thereby ensuring that EU funds are collected and used correctly, under sound financial management. There is no real opportunity for business interests to directly exercise influence this institution.

The decision-making process of the EU is both multi-institutional and multilateral. It consists of three main procedures which are ‘consultation’, ‘assent’, and the ordinary legislative procedure (previously called ‘co-decision’). Since the Lisbon Treaty most decisions are taken by the ordinary legislative procedure. This means that decisions about the European marketplace are made in an increasingly democratic and transparent manner, so that business and other multi-stakeholder interests can be well presented and considered during the process. Most decisions are also taken by ‘qualified majority voting’ rather than requiring every single country to agree. During their decision-making process, the EU institutions are supported by many agencies like the European Economic and Social Committee (EESC) that expresses the opinions of civil society, or the Committee of the Regions (CoR), that expresses the opinions of regional and local authorities.

The EU uses several non-binding and binding primary legal instruments, as well as a series of legislative tools such as the institutions’ internal regulations and Community action programmes. The binding implementation tools include regulations, directives and decisions. Non-binding tools include recommendations, opinions, joint actions and framework decisions. The legal institutions develop case law, issue judgements, opinions and orders. All EU instruments are part of Community law which has priority over member states’ national law. Different institutions also issue communications, case law, judgments, and orders. Important tools for communications include Commission communications, green papers, white papers and reports.

The budget is funded mainly from the EU’s own resources (accounting for 98 per cent of the budget), with only some other supplemental sources. The budget is based on a principle of revenue and expenses matching, and features in-built schemes to compensate specific EU Member Countries. The European income mainly flows in from Value-Added Tax, averaging typically about 40 per cent of the budget, and from national contributions. It is shared among the institutions and the structural funds which help to boost specific regions, sectors or economic and incentive activities within member states. Among these, agricultural support has a main share of more than 40 per cent of the overall budget.

The legislative and budget tools of the EU are essential to ensure the functioning of its objectives. About 6 per cent of EU expenditure goes to the running of the EU institutions and its translation services for its 23 official languages. They often result from complex member states negotiations over sharing sovereignty and giving up national power. It is important for companies to be aware of these institutions and tools, as they are essential European market regulators. They also tend to influence some market conditions beyond the EU, given they great network of FTAs and other forms of integration that the EU has around the world.

This chapter analyses current the European business environment. The different regional groupings of the EU, EFTA and EEA share many of the same rules and policies relevant to business. Yet not all are the same or equally implemented at the national level by member states. The European business environment thus consists of a multitude of countries that are, at least partly, constituting an integrated market. The creation of a Single European Market (SEM) allows for wide and deep networks of infrastructures, standardization and harmonization of specific market conditions, less costly transactions through trade and investment, and a range of opportunities for corporate activity that don’t exist elsewhere. However, this network also challenges firms to consider if the entire single market grouping or only one or two member county markets should be targeted and if an alternative location in Europe should be considered as most advantageous for their home market or headquarters.

The main impact of increased levels of Europeanization of business is twofold: the opening of significant business opportunities is accompanied by rising competition within markets that were either previously entirely inaccessible or that were difficult to access. Europeanization of business inherently lowers their costs of doing business in the integrated market if competitive, mainly due to economic and political integration automatisms. Consequently and ideally, it is possible to obtain significant cost (scale) economies in the SEM if the mix of factor costs, business skills and resource allocation is optimal. The resulting trade creation benefits companies more than trade diversion would harm their business. The more a firm is aligned with the EU agenda for innovative cutting-edge activity, such as e-commerce and digitalization, and utilizes its multi-country opportunities, the greater the likelihood that the firm will benefit from Europeanization.

Europeanization has contributed to more and more multinationals of all sizes evolving into European transnational companies or home regional multinational enterprises (MNE), providing evidence of a ‘region-specific advantages’ through advanced market integration. This also allows firms to exploit a vast multi-country home market to compete internationally. Especially, small- and medium-sized enterprises frequently operate on a European scale (as home region oriented international businesses), taking advantage of harmonization market rules and simultaneously are exposed to large-scale competition locally, nationally and internationally. These SMEs are often ‘born European’ firms that is born global companies that internationalise from inception or rapidly throughout their first two years focused on the Single Market through a high FTA utilization rate.

Europeanization reflects the arguments for global trade liberalization, as epitomised in the World Trade Organization (WTO), but the European integration project goes far beyond free trade and has realised significant economic integration as well, further deepening the integration of the SEM. Europeanization of the business environment is thus rooted in the arguments of classical trade theories of absolute (Adam Smith) and comparative (David Ricardo) advantage as a fundamental intellectual foundation for pursuing European economic integration and rejecting the ideology of Mercantilism and its zero-sum understanding of cross-border trade. But if this is the point of departure theoretically, the most convincing arguments on the functioning of the Single European Market are given by the Heckscher-Ohlin model, Vernon’s Product Life Cycle and New Trade Theory.

The Heckscher-Ohlin model provides an explanation of patterns of trade and investment that is based on the factor endowments, specifically labour and capital, of locations in the SEM. Vernon’s Product Life Cycle explains changing trade and investment patterns in the SEM in terms of the technological maturity of a product or service in relation to location factor endowments and market conditions. F.T. Knickerbocker on herd behaviour is argued to explain the patterns of foreign direct investment (FDI) that reflect the preference of many European businesses for growing market share through mergers and acquisitions and not trade.

Two theoretical arguments put the competitiveness of European business in global perspective. New Trade Theory explains how economies of scale that European business can realise, by taking advantage of the free movement of goods, services, labour and capital and market integration, provides a source of competitive advantage for business outside the SEM. Michael Porter’s theory of national competitive advantage explains the international competiveness of European business by showing how economic integrations allows home country factor condition weakness to be compensated by regional market integration, thereby strengthening the competitiveness of the businesses.

Successful European trade and investment is dependent on the capability of firms to exploit unique and demanding opportunities. European business has the opportunity to move to international markets from a home base that is ideally solid and competitive. It is also very complex and the so-called market imperfection theories stipulate that corporations favour FDI to export or licensing strategies because of market impediments. Because of this, horizontal FDI is of particular interest when market imperfections, transaction costs, location advantages and life cycles serve to decrease the efficiency of less risky modes of international business. However, there are also potential disadvantages for host countries, for example, profits from investments might be transferred to the home country of the investing business and suppliers might come from abroad. Therefore, a bargaining approach to secure greater benefits than costs leads to the general policies of the EU towards FDI, and offshoring and outsourcing become more and more important.

When FDI takes place, the right location decision is crucial. It implies that a firm opts to seek direct or indirect gains outside of its home country with regard to its comparative advantage. According to John Dunning, the main advantages for a firm can be distinguished as ownership-specific advantages, internalization advantages of differing degrees and location-specific advantages. Location decisions are either motivated by offensive internationalization or defensive internalization. Because relocations are always complex, their success is crucial and depends on many different factors, for example the ability to set up a competitive and secure international value chain. Generally, one can say, that the consideration of relocation or location change is often necessary when a firm needs to adapt to local externalities, research and development spillovers, the cost of knowledge transfer and/or transport. Depending on which mode to entry the company chooses, it reflects different answers to a multitude of variables that are priorities for the firm in order to operate successfully. The firm also needs to keep in mind that the distribution of marketable wealth is more uneven than the distribution of income; that labour, in contrast to capital, remains relatively immobile. Thus, European FDI is related to different motives that can be described as either market-seeking, resource-seeking, efficiency-seeking or strategic asset-seeking according to Dunning. The pattern of business investment according to these motives reflects the distribution of basic and advanced factor endowments across European countries.

The dynamic environment of global economy preconditions that demand and cost conditions continuously change, which makes it important for the company to constantly monitor ‘uncontrollable’ variables of markets. Common policies help make some variables more predictable. The EU uses a common competition policy with the objective to preserve and stimulate efficiencies and effectiveness in the European market. It additionally controls mergers and acquisitions, competitive behaviour, and, by use of industrial policy, supports countries in need of support/aid.

Because the EU industrial policy does not focus on sectoral action, a general framework allows companies to benefit from a single market, specialization, rationalization, and internal and external economies of scale. The Common Commercial Policy (CCP), the first EU coherent common policy, addresses the common conclusion on tariff and trade agreements, the negotiation of changes in tariffs, and the achievement of uniformity in measures of liberalization. Numerous other bilateral and multilateral agreements and policies are established to regulate the market and create a more competitive environment for companies based upon rules agreed by all on some aspects, with its advantages and disadvantages.

Other common policies today cover the Common Agricultural Policy (CAP), the Common Foreign and Security Policy (CFSP) and a range of sectors from fisheries to transport and other issue areas including employment policies and foreign aid.

Finally, one can conclude that international corporate structures and externalization of production are phenomena that are well founded in the evolution of globalization and Europeanization. Today European business in this context European business is affected by related issues such as supranational taxation, the promotion and development of the knowledge economy and protection for intellectual property and the effects of European monetary policy in the Eurozone. The very performance and nature of the business environment constructed in Europe is motivation to companies worldwide in their call for more regional integration.

This chapter deals with the complexity of business management as it Europeanizes and the inherently multicultural nature of the Single European Market (SEM). It in particular addresses how business management deal with the partly integrated and increasingly convergent business environment, when it comes to benefiting from the free movement of people and skills, goods and services mobility, the simultaneous convergence and divergence in consumption patterns across national markets and the variations in national cultures and the consequences for managing people, teams and developing human resources management (HRM) policies. Contemporary challenges for the EU, such as the migration crisis between 2015 and 2017, add the diversity created by the ongoing enlargement of the EU.

It is important to recognize that while there are some commonly recognized traits and values that characterise a ‘European approach’ to business, the Europeanization of business in the EU is uneven and featured by simultaneous trends of convergence and persistent divergence, reflecting national culture and identities in a multicultural business environment. This is reflected in the focus of this chapter on the comprehension of business attitudes and etiquettes resulting in workplace behaviours, internal and external stakeholder negotiation skills and people’s effectiveness across the very closely located European borders and cultures.

European business and society in many ways benefits from both the convergence and ongoing instances of divergence of cultural values and traits across the EU member countries. Convergence most certainly reduces the complexity and challenges of managing European businesses for example, but at the same time on going divergence, if approached with ample cross-cultural understanding and intelligence, contributes to tolerance and knowledge expansion in the business environment and management.

Europe constitutes a microcosm of diversity, defined as the “differences between individuals on any attribute that might lead to the perception that another person is different from self” (Guillaume et al., 2017). At the same time Europeans share an increasing set of common traits. For example, in general, people in Europe worry increasingly about the impact of environmental hazards, climate change, natural and humanitarian crises, conflict and terrorism, civil destabilization, poverty, epidemic diseases. The needed responses to these borderless phenomenon in many ways reflect the founding arguments of the EU and the associated striving for peace through multilateral coordination. It is these set of commonly held beliefs on which the desire for steady growth, open boundaries and a cosmopolitan community are based. This vision and understanding of the Europeanization of business management is facing significant contemporary challenges, not least increasing populism.

Efficient European management is also prepared to cope with various languages wherein the challenge of finding one common language for negotiations evolves. It is important to remember that the interpretation of contexts that influence business operations also includes non-verbal signals, like the interpretation of space; time; body and facial expressions; social patterns and behaviours and agreements.

The challenge for companies that work across borders and cultures is to reduce the gap that employees may perceive between ‘other’ cultures and their ‘own’, and to help them leverage these differences for management. This can be difficult, as managers’ mind-sets have been shaped by a range of strong influences; including parents, institutions, social networking, media and publications. Learning to manage the resulting diversity shortens the period of time that it takes to understand different ways of doing, of working and of knowledge, so that efficiency is maintained or increased because of synergies rather than lost because of ‘culture shocks’. Achieving synergy or the creation of new value from the interaction of different cultures, on the other hand, is in most cases only partially obtainable, and it is situation-dependent. Furthermore, following the argument that diversity adds value, complete and entire synergy in full Europeanization would kill that value of diversity, and hence be negative for the corporation. At the same time, when convergence in values does take place, as with the focus on sustainable development in Europe, then communication between cultures is made much easier. Awareness of the value of both synergy and diversity in Europe is expected. If business people do not display this awareness and understanding when doing business in or with Europe based businesses, this will normally be perceived as negative and limited.

Management across borders necessitates an expertise of cross-cultural management methodology that can be acquired through exposure, experience or training. The selection of adapted staff for Europeanization is key to cross-border efficiency and to the creation of trust and confidence between cultures, and hence success in new market entry or expansion. While each business case is different, common models and concepts help to calculate potential options to exploit and traps to avoid. Cross-cultural management and negotiation can be analysed and the challenges faced can be conceptualized, by using a number of different models of cultures such as the well know work of Geert Hofstede.

Hofstede’s five fundamental cultural dimensions of power distance, uncertainty avoidance, individualism–collectivism, masculinity and time orientation, offer explanations for cultural differences. These in combination with training and experience can be used to think about how to approach cross-cultural management and negotiations. Power distance helps managers think about different attitudes to hierarchy or seniority of counterparties in a firm or negotiation. Individualism/collectivism enables decisions to be made about whether to emphasis the individual or group in management or negotiation decisions and arguments. It overlaps with the dimension masculinity/femininity, which reflect a preference for approaches that emphasise achievement and hierarchy or quality of life and care for others as part of success respectively. The degree of uncertainty avoidance in a culture reflects the willingness to take risk in managerial decision-making or negotiation strategies for example. The more risk averse a culture, the greater the degree rules and formality will be integrated into processes. Long-term orientation is focused on the collective approach to time in decision-making. Even though Hofstede’s dimensions are accused of some rigidity, they are very helpful for people dealing with HRM and people involved in negotiations across cultures. With regard to the diversity of Europe, managers need to be aware of the differences, and sound cross-cultural management is required to start from the very basis of well-adapted recruitment and staffing policies.

The impact of Europeanization on HRM is significant, due to the central role of national cultures in the functional area of European business. It is directly affected by European diversity and marked by signs of both convergence and divergence in practice. Reflecting the simultaneous influence of both EU and member state institutions on the business function. The national institutional contexts of firms continue to exercise significant influence on the function of HRM and need to be understood within the context of the national business system of a country. Europeanization however is also influencing the role and in relation to the free movement of people in the EU making the hiring and management of all EU nationals more equal, through for example the harmonization of labour laws and non-discrimination.

A specific case of how the Europeanization of HRM is in the promotion of equal opportunities in European businesses. Gender equality is a clear example. Although, women are often better educated now and hold more jobs than ever before, the ‘glass ceiling’ is still relatively intact and only few women manage to break through. The EU is concerned with this problem and it established a legal base in the European Community Treaty to promote gender equality in economic life and ensure that women will be able to attain the same possibilities for both genders in business management and all fields of activity. It is this potential of HRM for realizing European values of citizen welfare promotion that make it so critical a European business function. Other areas of Europeanization that exhibit similar insights include information and consultation of employee representatives, the freedom of movement and right to work of EU citizens, the Europeanization of labour laws, employee skills and training and the role of European business in transferring these practices to third countries, often in neighbouring regions of the EU.

The migration crisis of 2015–2017 is one example of how the European business environment can lead to additional challenges for businesses, in many cases however firms in the member states used their cross-cultural management competences to positively contribute to alleviating the impact on the migrants and European society. The HRM function played an important role in enabling these firms to offer employment, training and integration of migrants, many of them refugees.

The Europeanization of corporate culture and subsidiary management is also of critical importance. As firms Europeanize, their organizational structure, whether functional, international division, area and products, matrix structures and their hybrids, needs to be adapted to the demands of the multicultural and diversity of the European business environment. As well as suited to responding to ongoing deepening and broadening of the SEM. This implies developing the capability to exploit instances of harmonization across EU member countries, while being ambidextrous enough to also be able to adapt to unique features of national contexts in the EU. This can be realized through the development of a dynamic capability or the ability integrate, build and reconfigure in response to changing market conditions. Examples of firms that are typically highly adapted to being able to navigate the complexity of operating across diverse cultural contexts include Born Globals that internationalize early and a specific case of this type of firm, the Born European that seek to exploit the full potential of the SEM from inception.

Business leadership is another critical area of business management for the European business. The necessary qualities of leadership and management can vary from one culture to another, the meaning of trust, the way it can be generated and the call for leaders characterized by adaptability, listeners and actors at ease with diversity. Leaders and managers need to understand how people act and react in national, international, and even locally based organizations, and leverage the opportunity stemming from diversity. As such, it is important for business management to focus on culture in some detail, to study the system of shared ideas, the value of diversity; conceptual designs supporting learned behaviours; beliefs, values, norms; patterns of symbols and artefacts; and the sum of all of these in relation to the specific corporate culture of one’s firm.

Trust and diversity go hand in hand as key issues within the Europeanization of business management in Europe, as strategically assessing diversity management, in a holistic manner, is fundamentally based on trust considerations. Developing trust in a diverse workforce enables knowledge transfer, learning, collaboration and effective business relationships generally. There are different perspectives on whether trust is universal or culturally determined. Understanding these two perspectives can help understand which conditions, strategies and structures of a firm generate symmetries or asymmetries of trust across the locations in which it is active.

Cultures, structures, roles and behaviours are ongoing but ever-changing challenges for the European firm that trades and invests across this diverse marketplace, and the firm coming into the European market, from the inside and the outside. Knowledge and expertise of multiculturalism have become factors of survival for any firm involved in global markets. For all of this, Europe is a microcosm and an excellent playing field for business to develop the capabilities to not only adapt to differences, but also to create new value out of the different patterns of Europeanization and persistent differences in national culture.

European economics are characterized by the harmonization of rules that attempt to maximize the benefit gained from trade and financial integration through risk-sharing, spill-over of macroeconomic fluctuations, as well as product and consumption co-movements. A main step towards common measures was the introduction of the euro as single currency, which provided euro-zone members with a unique chance for cohesion and stimulated financial flows in an unprecedented manner.

European economic and monetary harmonization has been a long-term goal. In 1969, at the European Summit, the Heads of State and Government of Member States created the Economic and Monetary Unit (EMU), aiming at limiting exchange rate volatility. After the collapse of the Bretton Woods system, monetary integration was relaunched with the creation of the European Monetary System (EMS) in 1979. The Single European Act and the Maastricht Treaty further smoothed the path for realising a single currency. Then, in 1996, the Stability and Growth Pact set rules regarding government debt and deficit levels, the aim was to limit risks of divergence in member state economies that would undermine the common currency by too great a difference in the needed monetary policy needed for each member state. The 2008 financial crisis or Eurozone Crisis clearly illustrated these risks and challenges in addressing them once they emerge.

The Euro was introduced in stages. From 1999 onwards, the euro-zone experienced a transition period with the introduction of the euro in accounting processes. Finally, on 1 January 2002, the euro was introduced to daily usage by the general public as the new currency of 12 member states. Seven further member states have joined since the Euro’s introduction. Until then, the European Currency Unit (ECU) had been the official currency of the EU, being composed of fixed proportions of Community currencies. Unlike the euro, the ECU was used for no-cash transactions and mainly in terms of loan issues on the international capital market by the Community institutions.

The euro is the natural progression towards a complete economic union. It decreases a company’s costs in terms of foreign exchange risk and hence permits lower transaction costs. It is also a means to make the single European market much more attractive to foreign investors, by promoting macroeconomic stability and growth. Originally, it served two initial objectives: on the one hand, the euro should ensure inflationary and employment stability, and, on the other hand, it should enable EU members to stay competitive. Indeed, the euro-zone saw tremendous economic growth together with high levels of FDI between 1998 and 2001, though this is not a permanent consequence. Other advantages of the euro are that it facilitates the access to capital markets and that it allows for price and purchase transparency for goods and services within the EU. But the euro also brought some challenges to master budgetary deficits of member states and the legitimacy of budgetary statistics. Disadvantages also include increased cross-border competition, squeezed margins and a more complex management of European countries. The most prominent benefits and consequences of the introduction of the Euro and Eurozone will now briefly be described.

The removal of exchange rate risk for European businesses within the Eurozone is a major source of reduced transaction costs due to no more translation and transaction risks.

The EU created the European Central Bank (ECB) to implement the euro-zone economic and monetary policy. It was set up in 1998 under the Maastricht Treaty and it has exclusive rights to issue banknotes and to set interest rates. The ECB is also responsible for the holding and management of the official reserves of the euro area countries. It also is responsible for seeking to ensure the two primary goals of the monetary union are realised, namely, (1) ensuring inflationary and employment stability; and enable EU members to remain competitive in a globalized market. Its efforts in this regards were most clearly and publically exhibited in the ECB’s response to the 2008 global financial crisis. There is strong evidence of the introduction of the Euro contributing to significant economic value creation in a number of countries, such as Austria, Portugal and Spain in the first ten years. This has also been recognized by European business leaders

One major benefit of a single currency and market is a homogenous monetary policy that expects full financial transparency from each Member State. Some challenges have appeared since the introduction of the euro. A challenge for many Eurozone member countries was the loss of monetary policy independence, which, until then, had been used by EU member countries to respond to national economic crises and any loss in international competitiveness, though monetary policies such as setting interest rates or currency devaluations. These implications of a limited monetary and fiscal policy freedom were even more tremendous when taking different business cycles into account. Also, changeover cost, concerning prices, money and machinery should not be neglected. The experience of Greece after the 2008 financial crisis has most starkly illustrated the challenges of membership for countries that have not been able to adapt to the constraints that the Eurozone places on member countries. Arguably the subsequent bailout programmes managed by the European Commission, International Monetary Fund (IMF) and European Central Bank constitute an example of ongoing Europeanization of Greece’s economy in response to the challenges it has faced. This can be observed in the manner that the Troika is using the crisis to reform many institutions of the Greek economy, that previously had not converged with European norms. The Troika sought reforms of employment practices in the civil service and labour laws more generally, the state pension, value added tax, to name a few areas. While these changes where argued as needed to address the crisis, they would also address a number of differences in policy to other major EU member countries.

As the EU increasingly progresses towards economic union, with the Eurozone leading, fiscal policy is becoming increasingly important and greater efforts at Europeanization are being made. As a result, monetary and fiscal policy freedom has been restricted within Europe. The implications of this are tremendous when one looks at differing business cycles. When EU member countries’ business cycles are not aligned they can absorb the effects of national economic crises, but when business cycles align the potential for amplifying crisis increases significantly. That is why membership of the Eurozone needs to have benefits of continued membership that far outweigh the benefit of leaving during a crisis. The Greek experience would seem to support this view of the Eurozone.

The EU is seeking to avoid tax competition between members and to create a Common Consolidated Corporate Tax Base (CCCTB). The goal is that any European business could file a single consolidated tax return for their activity in the EU and the consolidated taxable revenues would then be taxed in each member state according to a simply formula. The Europeanization / harmonization of the value added tax (VAT) system across Member Countries is another area of ongoing reform being addressed by the Commission. In the long run, the EU is working on a common VAT system with the tax charged by the seller of goods. Finally, in the EU 27, environmental taxes accounted for 2.4 per cent of GDP and range from 1.6 per cent GDP 5.7 per cent for member countries. Environmental taxes are an interesting area of comparison, as they are highly related to the shared European values of sustainable development and taking an international leadership role in responding to climate change.

Europeanization of financial activities is ongoing and seen most clearly in stock exchange consolidation, the Single Euro Payments Area (SEPA) and harmonization of rules governing financial statements. The consolidation of these stock exchanges constitutes an essential basis for the harmonization of capital market conditions for corporate benefit, by creating a broader and deeper market. This integration leads to increased market liquidity and reduced market fragmentation, which leads to increasing investment and performance ratios of capital assets in Europe and can reduce capital flight. Such changes drive efficiency in the capital markets to the benefit of European business competitiveness.

Three exemplary examples of Europeanization of the financial system are of particular interest, namely the Europeanization of the financial markets for financing business, the Europeanization of the payment system and the harmonization of the reporting of business activities.

The consolidation of European stock exchanges constitutes an essential basis for the harmonization of capital market conditions for corporate benefit, by creating a broader and deeper market. In this type of convergence, costs are reduced and cross-border trading is facilitated, as economies of scale both in operations and in trading are realized.

The SEPA is an ambitious part of the Single Market initiatives that is eliminating any differences that might possibly remain in the euro area between national and cross-border retail payments and cross-border transfers of money. Europe has harmonized rules governing financial statements in order to guarantee the protection of investors.

Within the adoption of the International Accounting Standards (IAS), most of Europe has harmonized rules governing financial statements in order to guarantee the protection of investors. The main objectives are a better integration of financial markets and activities; and easier cross-border and international securities trading.

While equally important to large multinational enterprises (MNEs) the sources of financing for small and medium-sized enterprises, including micro-firms, and those ventures that would struggle to attract large scale traditional capital are of particular interest within the European business environment. European business can be financed via the financial markets, European bank financing, European venture capital and private equity and business angels. The preferences of businesses for these alternatives and their availability varies across member states due to the historic institutional developments in each member country.

While the financial markets are available to all firms to finance their businesses, it is typically the larger businesses that are able to most effectively make use of market equity and debt financing. European small- and medium-sized enterprises are often most likely to be heavily reliant on bank financing. While start-ups and micro-firms may use a mix of bank financing and access to European venture capital. European business of all sizes may at some stage take advantage of private equity. Business Angel investment is the most significant source of external equity finance for young companies.

The institution that is the main financing institution of the EU is the European Investment Bank (EIB). The EIB helps, in conjunction with the EU institutions’ political and economic objectives, to finance capital projects via long-term grants and it helps small- and medium-sized projects with global loans. The EIB is the world’s largest borrower on capital markets. Other sources of funding include these flagship Framework Programme, through FP8 (Horizon 2020) then FP9, which is the EU’s main instrument for funding research and development.

In order for the EU to remain competitive as an economic and monetary union, it still has to face a few challenges. Among these is the retirement and pension fund system, which, due to demographic changes, creates huge problems in many member states. Concluding, one can say that with more convergence and divergence of European finance, economic and financial crises can be dealt with in a better, more efficient way which will help the EU to maintain its position in the world economy.

The need to excel through innovation and creativity to differentiate your product or service is a determinant force of marketers in Europe. It is reflected in communication and brand-building strategies, and influenced by standardization vs. adaptation requirements for marketing strategies within and across the region and its markets. In Europe, harmonization and diversity establish paradigms in marketing that are shaped on the basis of European-wide strategy and on the opportunities of standardization versus niche positions. These strategies depend, in a similar fashion as in international marketing, on the definition of the product, the market and the timing. But European marketing has been recognized as different from the typical ‘international marketing’ theory. The products and services are positioned in a highly integrated market and as such, diversity management and strategic partner relationships are even more essential. Consumers from different member states can for example exhibit both harmonization in their behaviour, as well as continued divergence in preferences, depending on the product and service. This can be true for offerings from the same firm.

The main question of how European marketing approaches consumers is: Does ongoing European integration allow for business in general, and the marketer in particular, to approach the market as one single entity, that is using a standardized approach, or not? This chapter shows that (and how) the view of Europe as a homogeneous market is erroneous and a ‘singular’ view can only be considered appropriate for a few strongly branded products and services. The more the market converges, the more the European consumer prefer to be considered as unique and locally rooted.

It is important for marketing in Europe that despite the loss of barriers, the increasing harmonization of educational standards, and the continuous evolution of financial product ownership, market heterogeneity reigns through consumers wanting to be seen as unique and locally rooted. In this way, to think of Europe in terms of market standardization is a huge mistake. Rather, it is necessary to know how to adapt marketing approaches and strategies to different markets. This requires the European marketer to know the European consumer/customer, assess the product or service and the related target market conditions. The market conditions can include considerations of market segmentation, political and legal conditions, economic conditions and demographic characteristics. European marketers also need to consider the social and environmental concerns of consumers, as well as the impact of culture on consumer behaviour.

The basis of successful marketing is the screening and assessment of opportunities. For the analysis of the market, four different tools are traditionally used. The first one is qualitative marketing research, which is used for exploratory purposes. Secondly, quantitative marketing research allows one to draw conclusions in regard to a specific hypothesis. Then, observational tools go a step further and demand a direct involvement of the researcher in terms of an observation of social phenomena and lastly, experiments may follow, complement or stay alone. None of these tools grants a guarantee for the success of a marketing operation and normally more than one of these tools are used, based on secondary data. Marketing research, at its best, is a long-term exercise in which the consumer database is continuously updated.

The use of big data and business analytics increasingly refines the insights that marketers create value from. For example, online retailers use instantaneous analytics feedback on their online selling activity. The EU has responded by working on establishing a Single Digital Market, yet the market is likely to remain inhibited by restrictions on data location, concerns about conditions for data reuse and privacy, and barriers to data portability. The best market research is a long-term exercise, in which a consumer database and big data collation is continuously updating the corporate understanding of consumers, their purchasing behaviour and the risk factors that may lead to changes in this behaviour and that need adjustments.

The traditional approach to international marketing focuses on the definition of the most adapted marketing mix for a product or service, which includes the four Ps: product, price, promotion and place. These 4Ps are a wonderful tool dealing primarily with the micro-level of marketing decisions, see more detailed summary below. At the same time, segmentation aims at identifying distinguished groups of consumers whose purchasing behaviour differs significantly from others’. Several segmentations can be used and combined by marketers in which niches are then identified. Nevertheless, not all segmentations are useful. Only a sound assessment of the business environment makes it possible to best price, promote and locate a product in a market as complex as the European one. The growing sharing economy is an example of how technology is expanding the use of traditional marketing channels in particular through its peer-to-peer technology and assumptions in regard to concepts of ownership, assets, and employment.

Among the particularities in the European market that need to be studied for a better understanding are, first, politico-legal conditions like administrative risks, customs and entry procedure, product requirements, export and import quotas, and financial control. The differences in those criteria demand the marketer to constantly adapt the marketing mix in order to achieve the optimal result, as the legal and political conditions in Europe are only partially harmonized. In the same way, stable economic conditions are best for successful marketing because economic conditions have a strong impact on consumer behaviour and together with national income, they may be taken into account for EU-wide consumption differences. Also, personal income and the quality of life of Europeans will alter the marketing mix. Another particularity then consists in demographic conditions. Through demographic movements, the levels of demand, size and development of a market can be determined as well as the level of financial, physical and supporting human resources infrastructures.

Furthermore, when considering the particularities of the European market, the social agenda and environmental sustainability, as well as sociocultural conditions are crucial for marketing across borders, because the first are influenced by the EU’s vital interest in economic growth and welfare and, the second because they define norms and values, behaviours and perceptions, and consumer preferences. The study of consumer behaviour in relation to culture provides determinant information to firms and organizations. These can be divided into core cultural values that persist over a long time and secondary beliefs and values which may change at a much faster pace. These values are mainly rooted in religion and as such, in Europe mainly in Christianity. Also not to be underestimated are language barriers, symbols and colours and the way the media is perceived. Lastly, the manner in which a product can be positioned into different markets is largely influenced by geopolitical and geohistorical conditions. Examples for these are language, a socialist background, global terrorism, or geopolitical interests of governments. These values are reflected in the growing preference of European consumers and business customers for sustainable products and services and the strong push to develop the circular economy that evaluates the sustainability of the entire product life cycle. These trends are supported by the institutionalization of labelling regimes that give consumers confidence in the origin, quality and sustainability of products and services in the European market.

After having analysed the market and market conditions, European marketers need to be sure of the targeting process. Three different marketing strategies exist to develop an answer of how to bring the product to the consumer. With the pull strategy, where consumer demand is created through all promotional efforts. In a push strategy, the product is pushed through the distribution channel into the retailer and in the third strategy, called contact strategy, a direct contact with the consumer is established through canvassing and follow-up.

The impact of the EU the social and the sustainability agenda on the preferences and behaviours of consumers in Europe has created many new opportunities for European business and also challenges European business markets to reassess their target markets of the past. Developments in digitalization have arguably led to greater individualization and are also leading to major changes in the way that work is done. Such phenomenon include Industry 4.0, the integration of automation and data exchange trends emerging from manufacturing technologies that encompass cyber-physical systems, the Internet of things, cloud computing and cognitive computing, and more. These changes not only create new opportunities for developing products and services to consumers, but also create new business-to-business marketing opportunities as new firms emerge to exploit the technologies.

Ultimately, questions arise around pricing, which has a huge effect on returns on investment and revenues. Pricing also shapes the perception of a good or service in terms of quality, image and positioning. The purchasing power of the segment needs to be taken into account as well as different pricing strategies like transfer pricing and prestige pricing. In Europe, price differences are relatively small compared on a worldwide basis, even though there are some exceptions, and price differences within the euro-zone also tend to decrease with time. Altogether, one can say that prices reflect what is happening in the market. Nonetheless, the European marketer needs to be aware of the strong impact of economic conditions, national income and quality of life, as well as changing demographic characteristic on purchasing preferences and power of the various segments of European consumer.

Strong European brands are expected to have relatively homogeneous pricing across the internal market. Firms with European operations and supply chains are also expected to have relatively standardized prices. Pricing in the form of EU-wide standardization is based on the company setting a price as the product leaves production, with adaptations in terms of foreign exchange rates in non-euro-zone countries, and in terms of variances in the regulatory field; this is facilitated through the Single Market and the euro-zone effects because adjustments are not necessary. Price differentiation is defined, rather, at a regional or local level and is based on the distinction of cultural differences and consumer perception in different markets. This strategy allows for adaptation to market conditions, local competition, terms and conditions and price awareness, but it may also invite grey market or parallel import activities across borders. The more locally/nationally embedded a product or service, the more likely price divergence is to be visible.

Promotion is crucial to the marketing mix in the cases of standardization and segmentation developed above. Advertising is key to perception and this in turn is key to competitive positioning and pricing. The attractiveness of European promotion versus national approaches in member states however remains a challenging choice for firms. In terms of placement, the marketer in Europe quickly recognizes that channel structures and the degree of retailer power is not the same in all EU countries. Ultimately, good promotion is key to the most reached perceptions and high demand. Here, legal conditions influence the European market because laws on advertising and promotion activities vary across European countries. A tool that can be of help is the AIDA tool box, which summarizes the main stages in communication and marketing. The marketer needs to raise Awareness of the European business’ product or service offering in the desired manner; this awareness then needs to be converted into Interest in the offering on the part of the customer, stimulating a subsequent Desire to buy the product or service and be converted in to a purchasing Action on the part of the customer/consumer.

In the diversity of Europe, we can expect marketing to develop into segments that grow in size due to increased harmonization in the environment – without necessarily becoming one single segment for all goods and services. This development is in contrast to marketing in the USA where changes can be seen from standardized marketing towards a diversity one. Consequently, a convergence on marketing will take place. The composition of European markets of various degrees of maturity and convergence opens up a set of important opportunities and increasingly also the emergence of pan-European brands. The true key to success lies in adapting a marketing strategy to the cross-roads of international and regional segmentation.

Lobbying in Europe is part of the business practice of public affairs management that encompasses government affairs, lobbying or political communication, media and socio-political relations. Lobbying in the EU can somewhat compare to efficient marketing, this time not marketing a product or service, but the company, its sector of activity and interests. For European companies, lobbying has evolved into a key activity for sustainable development because the EU is the biggest market creator in Europe and companies are tremendously affected by the rules and changes that are fixed by EU legislation. Furthermore, Europeanization also significantly affects risk avoidance and anticipation of critical future events, which may make or break business operations, customer choices and investment policies. In this context, one may note that with each wave of enlargement, European lobbying also increased.

Transparency International EU (2017) notes that an estimated 30.000 lobbyists work in Brussels, a 50 per cent increase from estimates in 2010; that more than 6000 lobbying passes are provided by the European Parliament per year. The EU reports almost 12.000 organizations are registered on the voluntary EU lobby register (http://ec.europa.eu/transparencyregister). Whether directly, through an industry association or lobbyist, European business engages the public policy process when it lobbies legislators or participates in public consultations, for example at the Commission. Where public policy can be understood to encompass the decisions and instruments used by government(s) or the EU institutions to respond to diverse often complex social, environmental, economic and cultural problems, issues and circumstances.

The main function of lobbying is to engage with political and social stakeholders, external to the company, to make one’s voice heard and known, and thereby to influence a given legislator (person or administration) and hence the political economy. Not only does it allow European business to exercise influence, but in many EU institutions it provides the needed inputs for efficient policy decision-making. The term lobbying is generally used interchangeably with public affairs management or interest intermediation. The main lobbying tool consists in the exchange of information and expertise, and all companies on the playing field that want to do lobbying best need to regard the three keys to long-term competitiveness (resilience, flexibility, speed of action), which allow gain from the political economy and prevent or minimize potential corporate disaster.

In continental Europe, lobbying remained a local, regional and national exercise until its current art and techniques were imported from the UK. Its development was shaped by the necessity for business to tackle issues covered by the step-wise progression of European integration and by decisions concerning corporate and industrial activity. Corporate public affairs management in Europe has a different face from in the Anglo-Saxon world, which is the most researched.

Players on the lobbying field, often in the shape of pressure or issue groups, can be divided into many different categories and they can be both non-profit-making organizations or profit-making organizations and act mainly in the most densely lobbied locations in the world, Brussels and Washington. EU ‘pressure’ groups are generally welcomed by the EU institutions, once they have shown they are worth listening too because (or if) they provide high-value information about an issue. Pressure groups can use different strategies to reach their aims. EU pressure groups can vary in terms of their size, financial means, expertise and quality of knowledge. It is also not the case that larger and better financed groups are always preferred/in a stronger position; less well financed and lower-resourced groups are often sought for their unique and down-to-earth expertise.

The setting in which this process takes place and a lobbying campaign is played out, is often named the ‘lobbying arena’ or ‘playing field’. Within this setting all players engage into ‘individualist’ action, which might be complemented by ‘collectivist’ partnerships, such as cooperation between competing firms in the market, which come together on an issue of interest for both parties. The subsequent lobbying strategies can be categorized into three predominant approaches, which are separated by their main objective, either dissuasive (negative), risk minimalizing (reactive) or constructive (proactive) engagement in the policy process.

A standard strategy is ideally that of ‘venue shopping’, which is considered as seeking out opportunity-rich lobbying arenas and which is used in all three techniques to a different degree of intensity. Venue shopping is particularly relevant to the EU, as the EU institutions creates diverse opportunities for firms to choose their lobbying arena. A corporation can exploit the multiplicity of access points for an issue efficiently if it engages in writing, influencing and utilizing timeframes adapted to the validated strategy of constructive lobbying, risk minimization or dissuasive lobbying. The way decisions are made in lobbying can be compared to a project being managed within a corporation and, at the same, follows the concepts applying to project management.

The multilevel nature of the European business environment institutions means that in Europe the act of venue shopping can look very different. Within the context of the EU, the venue or lobbying arena is very likely to be an EU institution, while outside the EU, as for example for businesses in the EFTA countries, the lobbying arena tends to be national. Such differences reflect the locus of power in terms of decision-making and influence, which for many areas of interest to European businesses in the EU means engaging with the EU institutions in Brussels, Luxembourg and Strasbourg.

There are many ways of lobbying and a majority of pressure groups appear to constitute the process of best practice. This process establishes an image close to that of a brand, with its reputation and credibility, and maximizes the opportunities for the company to be heard and as such to be taken into account by the different levels and actors. Overall, the adaptation of lobbying strategies is dependent on several vital factor endowments, which are defined by the resources available, interlinkages, and which may change any given moment through interior or exterior events.

In order for any actor to best convert their lobbying strategy into reality, an agenda-oriented time frame of action is set and the selected area needs to be screened and analysed. The earlier an actor gets involved in the process, the higher his/her chances are to influence a decision and that is why it is key for any actor to possess knowledge of issues and access points to legislators and possible partners. At this point then, the EU lobbyist can rather be seen as an adviser who advocates and influences the arena and who organizes the campaign for clients.

The agenda-setting defines the competition that takes place at any moment in the decision-making process and, given the rising number of actors, it is crucial to be well known and valued and to have the timing right to the political objectives of the policymaker. This time frame can be developed in six phases (according to Van Schendelen) and describes typically a period shorter than ten years. The life-cycle theory is very useful for a company because it helps define the time when lobbying may help raise attention and key moments for actions, no matter which strategy is executed.

Depending on the nature of the issue, the actors and the arena as a whole, lobbying takes place in different locations. In the EU, the main venues are concentrated in Brussels, Luxembourg and Strasbourg but all national governments are key points. Generally, all regulatory institutions attract interest and, in particular, those of business. The best strategy is always to lobby at any of the stages in the policy-making process at a national and international level and to complete the actions with other actors and organizations. This requires a constant flow of updated information.

The most important of the EU institutions, see chapter 4 as well for summaries of the potential for influence at each institution, for lobbying strategies are the European Parliament (EP) and the European Commission (CEC). Although opportunities also exist for seeking influence via the Council of Ministers and the European Court of Justice. The Council is however considered a very difficult institution to access and an indirect lobbying strategy via national governments may often be preferred as a result for this institution.

Both the EP and the Commission are reliant on being well informed in their work as part of the Ordinary Legislative Process, seen in the Commission’s consultative approach and the EP’s need for being responsive to stakeholders. As a result lobbying activity at both these venues is significant. There is an important nuance to the differences between the EP and CEC. The CEC seeks out expertise and then brings experts on any given policy area into the initial phases of public policy work as part of it open consultative approach. The EP in contrast provides a list of all Members of the European Parliament’s (MEP) names and contact details and any areas of expertise or specialized responsibility, as a result lobbyist can approach MEPs

The CEC and the EP have established rules of conduct for lobbying together with its actors. The level of implication and the strategy of any lobbyist depend strongly on the accessible resources like financial means, knowledge, economic intelligence and networks. The opportunity network is complex and dense and it distributes costs and benefits between interests unevenly. A long-term investment is required and attention to details and mediation between actors may be key for the willingness of officials to grant access to information and discussion.

The level of implication and the strategy of any lobbyist depend strongly on their resources. These resources include financial means, knowledge and economic intelligence, and available networks of actors and sympathizers. While all lobbying needs to be financed, knowledge of the different EU venues for lobbying and their process is critical and increasingly supported via professionalized training. Information that European business has about their sectors and economic conditions is also a key resource that can be used in the lobbying process to gain access and influence. The networks of actors are different at the various EU institutions and developing these networks constitutes a key resource for the lobbyist.

As lobbying has grown in the EU, sets of behavioural norms, rules, procedures (formal and informal) and organizational structures that allow for high involvement in any lobbying have been developed at the EU institutions, especially the Commission and EP. The Transparency Register aims to provide a transparent overview of advisory bodies and to allow for public scrutiny of European lobbying activity. This represents another dimension of the increasingly professionalized nature of EU lobbying.

Importantly in light of the European Ideal that the EU institutions continue to strive for in their work adds an element of values beyond economic concerns. Geopolitical and societal developments thus also shape the most efficient formula for interest representation in the EU. Thus not only European business interest are present in the lobbying arenas and this has resulted in the emergence of a dense and mature pressure group system in the EU, that includes business, labour representatives, non-governmental organization (NGOs) and many other interests.

As the EU develops the public policy issues also become more complex, the 2008 financial crisis, the 2015–2017 migration crisis and the UK BREXIT decision are all issues that have and continue impact European business. These are also examples of Common Europeanized issues, that that require business interests to understand the nature of the EU institutions and show the need for firms to engage in the public policy formation and implementation.

Finally, one can say that Europeanization has largely influenced the way in which business deals with public affairs and vice versa. A company cannot afford to miss out on these opportunities that may reduce threat scenarios. Despite all the efforts made, there is no guarantee of results in the marketplace of lobbying but yet, companies just need to be there.

This chapter is the concluding chapter of the textbook. It covers issues that are crucial to international competitiveness and the relations that the EU pursues with its trading partners, placed into a concluding discussion of the role of Europe in advanced globalization.

Previous chapters defined the foremost concern of Europeanization as seeking to gather nations and people of Europe together to secure a peaceful and prosperous future and to spread European values of freedom, democracy, human rights and peace. As such, the development of European international relations and international trade have gone hand in hand; some have referred to Europe as a Trade Power. As the EU is characterized by the belief that economic stability and cooperation are the foundation of geopolitical stability, trade and foreign investment constitute an essential part of international relations, that is, the relations that countries establish between each other.

The evolution of European international relations and international trade has gone hand in hand with this principle. Foreign market commitment by European firms plays a crucial role in the European competitiveness in final products and services, as well as in its participation in the Global Value Chain (GVC) of components. The EU accounts for about 15 per cent of the world’s trade in goods (Eurostat, 2017), is the largest importer of services in the world, and its largest investment host and provider. It is also the world’s most integrated region for intermediates serving the global value chain. It claims the status of most open market to developing market trade and investment, with the advantages of the single market and its external relations bring through one common commercial and trade policy. The openness of the EU market is illustrated in its average applied tariff for goods imported into the EU that is, relative to the rest of the world, relatively low: More than 70 per cent of imports enter the EU at zero or reduced tariffs. It is similarly open to services.

As part of its Common Commercial Policy, the EU is entitled to negotiate bilateral trade partnerships and agreements with countries or regional groups of countries as one single entity. This international trade mandate is based on a common external tariff uniformly applied to all members. It thus first and foremost complements the EU’s custom union and its other Single Market features. The following should be noted:

• The EU still has a fragmentation of foreign policy making due to Member State interest divergence.
• The EU has exclusive trade negotiation powers in most sectors, yet there are exceptions.
• The EU’s trade policy aims to simultaneously promote economic welfare and social and environmental standards.
• The EU is dedicated to openness and free trade, but is not weak, and rigorously counteracts unfair trade practices and uses trade disputes mechanisms.

The EU is an active user of free trade agreements (FTA) in developing relationships with non-EU countries and other regional groupings, with more than 76 FTAs in place. The EU is considered by other markets as an interesting case to study for effective FTA implantation, especially as the EU has a rating of FTA-governed market access utilization of more than 90 per cent. This means that almost all business in Europe utilizes the provisions that policymakers have negotiated.

Because of its role as a highly integrated, large market, the EU entertains privileged relations not only with major trading partner countries, but also with most other market groupings. This reflects the fact that the EU is the world’s largest market with more than 500 million people, creating many opportunities for businesses all over the world, also through its trade and investment relations with other countries and regions. However the growth rate in the EU is relatively low compared to other world regions and the European Commission in 2011 estimated that soon 90 per cent of world growth would be generated outside of Europe. The EU’s Market Access Strategy is instrumental to allow for international business for European firms and to support firms exporting from the EU, but barriers to European business in non-European markets remain, especially in the BRICS, Switzerland, Algeria and Egypt.

This outward perspective reflects the increasingly fragmented nature of production of goods and services that has reinforced the importance to sustain and grow participation in the high value-added activities of the regional and global value chain. GVC related trade in components is estimated to constitute 80 per cent of global trade. These trends are further explored in a focus on a number of key EU–third country relationships, including Australia, Brazil, Canada, China, India, Japan, New Zealand, Russia and non-EU Eastern Europe and Central Asia, South Korea, Switzerland and the USA.

The EU is Australia’s largest trading partner for the 15th year in a row, in parallel with the newer, booming China relations. Together with the USA, it remains the dominant source of FDI for Australia, its third largest merchandise trading partner, second largest source of imports, and fourth largest market for exports overall. The EU and Australia have actively engaged in trade negotiations to support this relationship. Relatedly, the EU–New Zealand relationship is strong. The Joint Declaration on Relations of 1999 set a solid basis for cooperation across a wide range of issues, reflecting the relationship with Australia.

Brazil, part of MERCOSUR (see below), holds a special interest in the EU, which is its biggest trade partner and also its biggest foreign investor. For EU companies, the Brazilian market remains challenging because of remaining trade barriers.

While the USA ranks first among its trading partners, the EU is the first source of Chinese foreign investment ahead of both the USA and Japan. The EU–China trade relationship is the sixth largest worldwide, the USA–China one is on third place. The EU and China exchange on average over €1 billion a day in goods.

India is fastest growing economy in the world with 1.25 billion people, a relatively young population. With India, current relations are based on the 2000 EU–Indian summit meeting and the 2011 FTA negotiations. The EU is India’s biggest trading partner and a main provider of foreign investment. Relations started via trade agreement and now embrace political and business, cultural cooperation and joint research projects. Challenging negotiations of a FTA continue.

Relations with Japan, the most mature Asian economy in this area, have always been challenging but important. European business has progressively become the major foreign investor in Japan. Outside ASEAN, the 2018 EU–Japan Economic Partnership Agreement excels in promoting free trade by removing most duties paid by EU companies, which amounted to an estimated €1 billion annually.

The EU is by far Russia’s most important trade partner, in scale and scope, and its main inward investor. The relationship is featured by partnership and cooperation agreements (concerning trade, cooperation in science, energy, transport and the environment), political dialogue and joint actions to combat crime, drugs and money laundering. But the relationship is also strained, with sanctions recently imposed by the EU on Russia due its moves into Crimea and Eastern Ukraine, the relationship is further complicated by Russia’s strategy in Syrian conflict, and its information interference in international news and online media. These sanctions did not harm the interdependence between the trade partners, yet have reduced its scale.

The FTA with South Korea has removed the quasi-entirety of tariffs and represents another example of the EU engagement with the Asian region. One benefit from its provisions is that the goods exported are evidenced to ‘originate’ in the EU or South Korea (wholly or in specific proportion), as in most FTAs.

No other country has as many agreements with the EU as Switzerland. It is part of the European Economic Area (EEA). More than 100 bilateral agreements shape this relationship. Switzerland also participates in the Schengen and Dublin agreements on border control and asylum policy, reflecting the high labour mobility between Switzerland and the EU. Very rare are the trade barriers that remain, such as tariff issues in seasoned meat, or service-related issues such as non-recognition of professional qualifications by Switzerland, or the so-called “Swissness” legislation challenging the EU understanding of country-of-origin rules.

The EU has strong trade relations with the USA ever since it’s very beginning. Together, they account for almost half of global GDP, almost 30 per cent of global merchandise trade, and almost 40 per cent of world trade in services. 15 million jobs in the EU and the USA are dependent on this relationship, and more along their global value chains. This trade relation constitutes the largest bilateral trade and investment relationship in the world. However, the USA’s relative significance has declined in particular in goods exports, and its position was overtaken by China. Figure 10.5 illustrates the ranking and US$ level of exports by country. The two partners EU and USA had pursued an ambitious partnership agenda to promote further trade and investment through a Transatlantic Trade and Investment Partnership (TTIP). Yet negotiations stopped until further notice in 2016 when the USA elected President Trump, and both sides decided to re-determine what ambitions are shared, and whether and how to proceed with new negotiations.

The EU also has a range of regional and pluri-lateral relationships. Of all the relations, those with the North American Free Trade Agreement (NAFTA), comprising the USA, Canada and Mexico, is the main trade partner of the EU. Relations with African market groupings include, amongst other, the East African Community (EAC), the Eastern and Southern African countries (ESA), Southern African Development Community, the African Union and more. Relations with the African Union, established in 1999, have thrived particularly since pro-democracy movements in 2011. The union was launched to promote peace, solidarity and cooperation, and encompasses 53 member states. The Cotonou Agreement, succeeded by Caribbean Forum of African, Caribbean and Pacific States (CARIFORUM) links the EU to 77 ACP countries. The Fourth Lomé Convention frees the ACP countries from customs duties on 94 per cent of their exports to the EU.

Asia, as a whole, accounts for 21 per cent of EU external exports, and is the third largest regional trading partner, after non-EU Europe (31 per cent) and NAFTA (28 per cent). Asia also exports more than NAFTA and the EU. The EU and most Asian countries have intensive economic relations. FTA negotiations stimulate trade and investment bilaterally with ASEAN (Association of Southeast Asian Nations) members, including Malaysia, Thailand, Philippines and Indonesia. ASEAN is arguably the regional integration project that is most similar in development and goals to the EU, seeking to accelerate economic growth, social progress and cultural development. The FTAs reached with Singapore (where more than 8000 European companies are present) and Vietnam are comprehensive, while the negotiations on the Myanmar agreement is limited to investment protection. The Asia-Pacific Economic Cooperation (APEC) is a regional economic forum that was founded in 1989 and the largest Asian market grouping with privileged EU relations. The EU is also supportive of integration at the Pacific Rim level, and a Trans-Pacific Partnership (TTP).

In the Balkan region, the EU is the largest donor, with trade relations growing further. In particular, the Western Balkan countries have established ‘Stabilisation and Association Agreements’ with the EU. The EU supports the Central America Common Market, and has had close links with Latin America since the 1960s; the EU is the leading donor in the region, first foreign investor and second most important trade partner. The GCC countries (Saudi Arabia, Kuwait, Bahrain, Qatar, the United Arab Emirates, and the Sultanate of Oman) constitute their own customs union, and hold a Cooperation Agreement with the EU to facilitate trade relations and to strengthen stability. Union for the Mediterranean, also sometimes referred to as EURO-MED, represents a partnership that was relaunched in 2008, for financial support, peace and the promotion of democracy, within a framework of political, economic and social relations. It includes the EU and the southern Mediterranean partners.

Doing Business in Europe is a dynamic, ever-changing challenge and opportunity, in a market characterized by deep and vast economic integration. The best adapted company is a networked, strategically internationalising, flat organization with a highly diversified workforce. But this is not the only structure to succeed in the European business environment, that mainly Single yet diverse Market. Most of the European nations continue to make the (sometimes costly) decision to continue their engagement in a profoundly democratic, peace-enhancing and collaborative regionalism that is open to the world. Europeanization was always a term with two meanings, where the first applied to whole economies, and the second, to companies. Europeanization in the first sense is considered as an advanced case of globalization compared with other forms of market grouping and regional economic integration. The term Europeanization used in its second sense in connection with business corporations, describes advanced forms of organizations that reflect: (a) the diversity of markets and cultures; and (b) the diversity within the company as well as in the scope of their operations. Due to the ambition of Europeanization of member countries, doing Business in Europe remains and will continue to be a dynamic, ever-changing challenge and opportunity, in a market characterized by deep and vast economic integration. Europe continues to provide business with opportunities and challenges that stem from harmonization, (de)regulation and the schism between functionalist and federalist objectives of its Member States, providing a fascinating topic of study.