Welcome to class of

International Business Diplomacy

by
Dr. Satyendra Singh
University of Winnipeg
Canada
http://abem.uwinnipeg.ca
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

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. (Ruel et al., 2013)
 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
Its a free market economy
Buyers and sellers can meet without embassys assistance
Its internet age easy and fast availability of information
Diplomats are generalists
Do not understand business
Theyre overloaded with issues other than trade and investment
Cannot measure embassys 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 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
BD 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
Its 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; theyre unaware of
its existence
Or, 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

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
Locations of Danish Embassies in China

Beijing
Chongqing
Guangzhou
Hong Kong
Shanghai

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 securitywith the entourage
Leads to signing of MoU
Technology transfer, weapons
Consortia deals
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

 Criteria for successful
Memorandum of Understanding (MoU)
Direct/indirect involvement of business
Involve universities

Build on a match on common interest

Assigned financial resources to realize pilot

projects

Follow up activities by authorities toensure

implementation
 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 countrys 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)

Diplomatic Ceremony
Diplomatic Ceremony
Privileges and Diplomatic Immunity
Privileges and Diplomatic Immunity
 Diplomatic
Disagreements