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 in Netherlands (on 5-pt scale)

(Gesink, 2012)

e-IBD activities in top 10 countries

(on 5-pt scale)

(Gesink, 2012)

e-IBD services provided via embassies websites (on 5-pt scale, average score of all countries)

(Gesink, 2012)

Factors influencing IBD activities

Process of IBD

Other Actors, Shapers and Drivers (than IBD)

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

Locations of Danish Embassies in China

Timeline: Example of Danish-Chinese relations

(Thogersen, 2012)

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

Development of Growth

Rise in export following presidential visit

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)

Privileges and Diplomatic Immunity