What is International Business Diplomacy (IBD)?

1. Welcome to class ofInternational Business DiplomacyDr. Satyendra SinghProfessor, Marketing and International BusinessUniversity of WinnipegCanadas.singh@uwinnipeg.cahttps://abem.uwinnipeg.cahttps://www.abem.ca/conference

10. 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

11. Corporate political activity/strategy vs IBD • 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.

12. 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

13. 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

14. 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…)

15. 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

16. Why IBD activities be expanded? • Advance countries (West) need to internationalize • Emerging markets drive business from the West • West needs to market tech transfer, innovation in EM to maintain competitive advantage • EM are still controlled by their governments • So need diplomatic level communications • Firms from EM also internationalize • IBD activities help achieve these objectives (e.g., FDI…)

17. 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

18. 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 existence • Or, SMEs try to find their own way overseas

19. e-IBD in Netherlands (on 5-pt scale) (Gesink, 2012)

20. e-IBD activities in top 10 countries(on 5-pt scale) (Gesink, 2012)

21. e-IBD services provided via embassies websites (on 5-pt scale, average score of all countries) (Gesink, 2012)

22. Factors influencing IBD activities

23. Process of IBD • IBD activities lead to: •  Export promotion, bilateral meetings, agreements • Benefits business/increases export or trade • Job creation and domestic growth • Public welfare to the benefit of the society • Political focus and strategic policies

24. Other Actors, Shapers and Drivers (than IBD) Diplomats Politicians Business Public Opinion Municipalities … …

25. Complexities incase of trading block • Some members think unilateral action is as efficient (e.g. Negotiations) • Others like Denmark prefer EU to promote business interests

26. Strategic sector for Denmark identified by Govt • Food products and agriculture • Climate and energy • Water and environment technology • Maritime transport and infrastructure • Health, medicine and welfare technology • Research, innovation and education urbanization (Source: Ministry of foreign affairs, Denmark, 2012) Strategic sectors identified by governments must match IBD activities in embassies in strategic countries

27. Locations of Danish Embassies in China • Beijing • Chongqing • Guangzhou • Hong Kong • Shanghai • …

28. Timeline: Example of Danish-Chinese relations (Thogersen, 2012)

29. 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

30. Memorandum of Understanding (MoU) • MoUs are very important because • MoUs are taken seriously and provides direction for implementation • Valuable to both countries/parties • Most valuable tool to enhance commercial relations between countries • However, MoUs should be prioritized

31. Criteria for successful Memorandum of Understanding (MoU) • Direct/indirect involvement of business • Involve universities • Build on a match on common interest • Assign financial resources to realize pilot projects • Follow up activities by authorities to ensure implementation

32. Development of Growth • Rise in export following presidential visit

33. Role of a Minister Set priorities Network creation Relationship building Conflict resolution/reduce barrier Indirect sales … • Provides input for the process of IBD activities • Political focus and strategic policies are needed to contribute to export promotion, bilateral meetings and MoUs

34. 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

35. Types of Diplomats • Elite-oriented • Come from upper status • Know 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)

36. Diplomatic Ceremony…

37. Diplomatic Ceremony…

38. Diplomatic Ceremony

39. Privileges and Diplomatic Immunity

40. Privileges and Diplomatic Immunity…

41. Privileges and Diplomatic Immunity… Can also be given to IDP Internal Displaced People -- stateless, refugees,…

42. Diplomatic Disagreements