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Welcome to class of
International Business Diplomacy
byDr. Satyendra Singh
University of WinnipegCanada
What is International Business Diplomacy (IBD)? An approach to building and maintaining positive relationships with host
governments, NGOs, and stakeholders.
Objectives Business development
Value creation International trade (Internationalization)
Functions Representation Communications
Corporate political activity/strategy vs IBD
(Ruel et al., 2013)
Corporate Political Activity/Strategy MNCs Influence public policy makers at home and abroad in favor of
firms using their international business power International Business Diplomacy
IBD activities Create long-term positive relationship with foreign government and NGOs in order to create legitimacy and operate businesses.
IBD Activities Intelligence
Information search, dealing with enquires, Support (lobby), promote (advocacy)
Assistance Trade fairs (e.g., export promotion), trade missions,
networking Problem solving
Trade disputes (e.g., creditors), issues (marketing, culture…)
Partner search and negotiation Bring home business partner to the target market, and
vice-versa
Arguments against IBD activities
No need for IBD Firms can do it themselves It’s a free market economy Buyers and sellers can meet without embassy’s assistance It’s internet age easy and fast availability of information
Diplomats are generalists Do not understand business They’re overloaded with issues other than trade and investment
Cannot measure embassy’s business performance Diplomats help friends
Encourages corruption within the diplomatic services
Why is IBD important now?
Before WW2 Only recognized states were diplomatic actors
Now, supranational organizations EU, UN, WTO, IMF…
Non-government organization Amnesty international, Human Rights Watch, The
Red Cross…
International Business Oil (Exxon, Shell…), Financial firms (Deutsche
bank, JP Morgan…), Automobile (Toyota, Mercedes…), Technology (Apple, Samsung…)
How do IBD Activities add value?
IBD activities are visible in media Draw attention, marketing value at low cost
IBD have network Can influence high-level contacts valuable for SMEs
IBD have high trust factor Can attract FDI easily
Intelligence gathering in embassy is centralized Creates efficiency by not reinventing the wheel by all
firms
Why IBD activities be expanded?
Advance countries (West) need to internationalize
Emerging markets drive business from the WestWest needs to market tech transfer, innovation in EM to maintain competitive advantage
EM are still controlled by their governmentsSo need diplomatic level communications
Firms from EM also internationalizeBD help achieve this objective (eg., FDI…)
What IBD activities MNCs conduct?
Direct stakeholder dialogue
Events Forums Meetings Industry associations Social projects Social partnerships …However, not all firms have the skills to engage in these IBD
activities It’s challenging for SMEs
Barrier to Internalization by SMEs(OECD, 2009)
Lack of working capital to finance exports
Limited information to locate/analyze market Inability to contact overseas potential customers Lack of managerial time, skills and knowledge
IBD generally focuses on SMEs to alleviate the barriers, but SMEs do not use IBD services; they’re unaware of its existenceOr, SMEs try to find their own way overseas
e-IBD services provided via embassies websites (on 5-pt scale, average score of all countries)
(Gesink, 2012)
Complexities incase of trading block
Some members think unilateral action is as efficient (eg. Negotiations) Others like Denmark prefer EU to promote business interests
Strategic sector for Denmark identified by Govt
Strategic sectors identified by governments must match IBD activities in embassies in strategic countries
What does a presidential visit include?
Presidential visit generates businesses Even though high costs of travel and security…with the entourage Leads to signing of MoU Technology transfer, weapons… Consortia deals
Criteria for successful Memorandum of Understanding (MoU)
MoUs are very important because MoUs are taken seriously and provide direction for implementation Valuable to both countries/parties Most valuable tool to enhance commercial relations between
countries However, MoUs should be prioritized
Role of a Minister
Provides input for the process of IBD activities Political focus and strategic policies are needed to
contribute to export promotion, bilateral meetings and MoUs
Who is in the embassy?
Business promoters Understand commercial issues
Civil servants Maintain PR and keep happy Ministry of Trade
Generalists Business in broader diplomatic and political arena Keep happy Ministry of Foreign Affairs
Types of Diplomats
Elite-oriented Comes from upper class Knows a lot of people and has connections Meetings, parties, social gathering Conferences
Treaty-oriented Law degree and expert in legal matters Negotiates treaties based on country’s law and preferences
Structure-oriented Professor expert in political/economic/social issue of host country Bring insights to home government to take further action
(Galtung and Ruge, 1965)