EMBA 514
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Business-Gov’t Relations in a Global Environment
Financial Investment Negotiation Simulation
Meredith A. Taylor Black
International Business Programs
Boise State University - COBE
PART ONE:
Who Is This Person? and
Why Are We Here?
Today:
Business, Government, & Biz-Gov’t Negotiations
Business
Perspective: Why
Go Global?
Government
Perspective: To
Intervene or Not
Intervene? That is
the Question!
This Multidimensional,
Multilateral
System in which
we Operate… Be
Prepared!
International
Business, Trade &
Globalization
Globalization 1.0
1492 – 1800
Columbus opens trade from the old
world to the new world
Country to country trade
Mercantilism / Absolute Advantage /
Comparative Advantage
Foley – Global Entrepreneur (1999-2004)
Globalization 2.0
1800 – 2000
Industrial Revolution
Company to company trade
Trade led by falling transportation costs
first, later by falling telecommunications
costs
Globalization 3.0
2000 onward
Rise of software power (Windows,
Internet)
Individual to individual trade
Newfound power for individuals and
groups to go global
Anything that can be digitized, can be
global
Business Perspective:
Why Go Global?
Why Go Global?
• What are the fundamental reasons a company
should expand internationally?
• Why are export sales so important?
• What are the benefits to a company that goes
global?
Foley – Global Entrepreneur (1999-2004)
Just a Few….
• 1) Sales to Other Markets
• Common needs in foreign markets / more
customers
• Improved economies of scale
• 2) Diversification of customers and risk
• Diversification of customers and markets …
• Leads to diversification of risk
• 3) Access to Lower Cost Structures
• Lower labor, material, or other resource costs
>> All of which drives higher profits
Foley – Global Entrepreneur (1999-2004)
Building on International
Success
• More markets, diversification, and lower costs will
always remain the key motivations to go global
• Looking at successful international companies
indicates there are further benefits accrued by going
global
Foley – Global Entrepreneur (1999-2004)
Beyond Traditional Success
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•
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Global branding
Worldwide distribution and manufacturing
Economies of scale and leaning beyond just the U.S.
Global cash flows
Foley – Global Entrepreneur (1999-2004)
Fx Translation
Risk
Risk
Assessment:
Fx Transactional
Risk
International
financial risks
grows as a
company
moves from
indirect
exporting
through to
overseas
manufacturing.
Fx Translation
Risk
Political Risk
Fx Transactional
Risk
Political Risk
Fx Economic Risk
Fx Transactional
Risk
Political Risk
Political Risk
Fx Economic Risk
Fx Economic Risk
Commercial Risk
Commercial Risk
- - - - - Export Sales / No Foreign Direct Investment - - - - - - - -
Fx Economic Risk
Commercial Risk
Commercial Risk
- - - - Foreign
Direct
Investment - - - -
Indirect Export Sales
(EMC, Piggyback)
Direct Export Sales - all
sales denominated in
the home currency of
the seller
Direct Export Sales sales denominated in the
foreign currency of the
buyer
Overseas Sales and
Marketing Office and
Staff
Overseas Manufacturing,
Sales and Marketing and
Staff
Scenario 1
Scenario 2
Scenario 3
Scenario 4
Scenario 5
Foley – Global Entrepreneur (1999-2004)
Government Perspective:
To Intervene or Not Intervene?
That is the Question!
At the Macro/Governmental
Level:
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Economic Development
Protectionism
Trade Promotion
Free v. Fair Trade
Industry-Level Arguments
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National Defense Argument
Infant Industry Argument
Maintenance of Existing Jobs
Strategic Trade Theory
National Trade Policies
• Economic Development Programs
• Export Promotion Strategy (low labor)
• Import Substitution Strategy (high barriers)
• Industrial Policy
• Consider standard settings as well
• Public Choice Analysis
Take a Closer Look:
National Trade Strategies/Policies
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Clearly, it is industrial policy of both the US and the EU in providing respective subsidies to each
producer. Risks are really high in launching a new LCA so from a policy perspective, maybe that is not
such a bad thing. And with the Chinese subsidizing the (heck) out of everything, is this really such a bad
thing for the EU and US to be doing (heresy I know).
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I would argue that Government should also step in and save GM (getting good returns for the investment
however) and make sure that whatever champion it seeks to serve, pays back to the Government in one
way or another if the project is a success. Ironically, this is how the EU launch aid works for Airbus –
when the plane is a success, the Governments get their money back and then some. But when the plane
is a failure, like the A340, or A300 or maybe even the A380, then they do not and the company gets a big
subsidy. So, very tricky, but I would suggest it is absurd to take the theological position that Governments
should just let the invisible hand do the work. That is Naïve in the extreme and certainly something that
China, Korea, Japan, and Brazil are not doing. Everybody does it to a certain extent. Is it imperfect – you
betcha. So challenge is how to be really targeted and figure out where you will get most bang for the
buck.
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These are really challenging and interesting issues that really cross party lines. Our collective focus of all
responsible republicans and democrats (and that is a dwindling bunch in both parties) is to wake up and
smell the coffee and realize that China and Brazil, and India are quite aggressive industrial targeting and
policy and if we are to compete, we better work our (butts) off and study the right things, and innovate
and figure out how to compete with them. That will have to be done in targeted industries of particular
importance (like LCAs!).
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So, don’t quote me given the pendency of the appeals – and all our work for China!! – but that is how I
see things personally.
Barriers to International Trade
• Tariffs (revenue & trade barrier)
• Export, Transit, Import
• Ad Valorem (percentage of market value)
• Specific (dollar amount/unit of weight or measure)
• Compound (ad valorem and specific)
• Harmonized Tariff Schedule (and World Customs
Organization)
Nontariff Barriers
• Quotas
• Tariff Rate Quota (TRQ)
• Numerical Export Controls
• Product and Testing Standards
• Distribution Network Restrictions
• Public-Sector Procurement Policies
• Local-Purchase Requirements
• Regulatory Controls
• Currency Controls
• Investment Controls
Trade Promotion:
How Is It Accomplished?
• Subsidies
• Think Cotton
• Foreign Trade Zones
• Caldwell
• Maquiladora
• Export Financing Programs
• Exim bank
• Think Loans
• Overseas Private Investment Corporation (OPIC)
• Think Insurance
This Multi-dimensional,
Multilateral System in which
we Operate… Be Prepared!
Let Us Bring It Into Focus
• Again, Why am I Here?
Research: Cotton Dispute & Its
Relation to Ag Negotiations
• WTO 101
• Business-Government Relationship
• Role of Associations/Industries
• Litigation as form of Negotiation
Stakeholders
• Anticipated
• Unanticipated, Can Even Be Cross-Sectoral
Lessons Learned
• Strategy (Multilateral, Multi-dimensional)
• Interactions – What can control, what can you not
control?
• Analysis
Resources
• Will Email ABCs of DC (Business to Government)
• Redman’s The Dance of Legislation (Government Insider)
• Saner’s The Expert Negotiator (Negotiations)
PART TWO: FINS
FINS: Introduction
• Microanalyzer Industry
• Structure
• MNCs
• Megatronics – US
• Eurodata – EU
• Tanaka – Japan
• Governments – Emerging Markets
• Tropicalia
• Paradiso
• Companies
• Tropicalia
• Tropimatics
• Systrop
• Paradiso
• Electro Paradys
• ParaInfo
FINS: Assignments
• Microanalyzer Industry
• Structure
• MNCs
• Megatronics – US (Kelly)
• Eurodata – EU (Elder, Morales)
• Tanaka – Japan (Comeskey, Lange)
• Governments – Emerging Markets
• Tropicalia (Falzone, Bathrick)
• Paradiso (Kilroy, Kunz)
• Companies
• Tropicalia
• Tropimatics (Gonzales, Parker)
• Systrop (Park, McMullin)
• Paradiso
• Electro Paradys (MacMillan, Wees)
• ParaInfo (Ramalingam, Rarick)
FINS: Trade Policy & Export
Incentives Overview

Both members of WTO – Paradiso has actively liberalized
(50 down to 15 in tariffs), Tropicalia still has tight import
controls (25 but still some as high as 50). Both members
of EXCOM, trying to liberalize trade but not perfect.
FINS: MNC Issues
MNCs:
• Invest in Tropicalia or Paradiso, or both?
• What type of plant to build (size, assembly or
subassembly manufacturing, local market or
export-oriented)?
• Will you be able to finance the deals? Accept the
risks?
• All have same issues, just different competitive
situation, resource and management constraints,
and bargaining power.
FINS: Company Issues
Local Companies:
• Enter the industry at all?
• Go alone or in a partnership?
• Build assembly or subassembly plants?
• What size plant to build?
• Position yourselves between the governments and
MNCs?
FINS: Government Issues
Governments:
• What kind of industry structure and ownership to
allow?
• Invest wholly owned subsidiaries or not?
• How many companies allowed to enter?
• Total foreign ownership?
• How create and leverage bargaining power?
• Will you give incentives? Invest in industries
yourself?
• Strike a deal with other govt to allow free trade and
coordinate foreign investment policies?
Issues Between MNCs and Local
Companies
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License, subcontract, joint venture, other arrangement?
Ownership percentages in joint venture?
Management responsibilities and control?
Technology payments and contractual provisions
Local market or export?
Size and type of plant?
Pricing of imported subassemblies and components?
Pricing of exported subassemblies or microanalyzers?
Issues Between MNCs &
Governments
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Plant size and type?
Number of manufacturers allowed?
Amount of tariff protection?
Foreign ownership percentage allowed?
Technology licensing fees and conditions?
Pricing regulations on final products and imported parts?
Export and local content requirements?
Tax and financial incentives?
Issues Between Local Companies
and Governments
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Incentives and special consideration for local companies?
Degree of support in negotiating with MNCs?
Number of manufacturers allowed?
Amount of tariff protection?
Tax, financial and export incentives?
Plant location?
Issues Between Local Companies
• Cooperate or compete?
• If cooperative relationship, independent operations, or
joint operations?
• If cooperative relationship, they face many of the same
issues as those listed before.
Issues Between Governments
• Cooperate or compete?
• If cooperative relationship, independent operations, or
joint operations?
• If cooperative relationship, is it a free trade area or also a
joint negotiating stance?
FINS: Timeline
STEP ONE:
• Strategy Reports by Next Tuesday, March
26, 2012 by 5:00 PM – Email MTB.
• 1-3 page paper, double spaced,
explaining negotiation strategy plan.
• CANNOT negotiate before Evening of
March 26th.
FINS: Timeline
STEP TWO:
• Negotiations
• Try to implement your strategies,
but if need to alter – keep track (will
need to explain in final report).
• Watch out for Press Releases!
What do I mean?
Several representatives of
the Zion’s trade delegation
held hostage by their Tropicalian
“hosts” Tuesday.
Tropicalia is no Paradise.
Reprinted with permission from Pravda Paradiso
ZION’S, TROPICALIA April 3, 2012 – Today’s trade summit deteriorated into a hostilities
including the Tropicalian abduction of key business leaders from around the world.
Members of the Megatronics, Parainfo, Eurodata, and Tropimatics delegation were held for
ransom Tuesday evening as talks broke down. After intense negotiations between the
governments of Paradiso and Tropicalia, the delegation was released. Details of the
resolution have not yet been disclosed.
April 4, 2012 Quotable:
“Clearly signs of friendship were merely a ruse to put the business future of our region in
jeopardy. Viva la Revolution!” – PM Sanchez-Webster, PDRP
“Muy bien” - General Raphael Miguel McLean, PDRP
TANAKA CO.
Phone: 81 52-521-2121
www.tanaka.com
Fukue, Japan
For Immediate Release:
Senior management at Tanaka Company announced they’ve successfully
patented breakthrough technology that speeds up the processing
capability of its microanalyzer units.
This new technology will also
improve overall field performance of each unit reducing maintenance and
technical support costs significantly. According to Jason Woolsey,
Tanaka’s Senior Manager “The Fukue R&D staff has been working on this
for quite some time and are ready to start implementing these
enhancements this year.”
Brooke Brennan, another member of senior
management is excited about the performance improvements their
products will have. “In the past, we have relied upon superior production
capabilities that allowed us to offer quality products at a lower cost. This
new technology, will give us an added technological edge over the
competition while at the same time reducing maintenance and support
costs to the customer.” Tanaka has hired Pat Morita to oversee
implementation of this new technology at their production facilities. Mr.
Morita is well known around the Japanese regions for his innovative
approaches and many inventions. When asked for a quote Mr. Morita
replied, “Walk on road, hmm? Walk left side, safe. Walk right side, safe.
Walk middle, sooner or later get squish just like grape. New technology
helps
us
not
get
http://en.wikipedia.org/wiki/Pat_Morita
squish
like
grape.”
Press Release
Issue date: Thursday 12th April 2012
ParaInfo™
ParaInfo and Euro-Tan form Joint Venture
ParaInfo(PI), a Paradiso based Electronics and Technology firm and Euro-Tan(EuT), the Europe and East Asia
based Technology Joint Venture Company, are pleased to announce the formation of a strategic joint venture to
meet the growing needs for Micro Analyzer technology solutions across America, Europe, Middle East, Asia and
Exotica.
Mr. Michael Zeigler, CEO of ParaInfo, said, “We are delighted with the joint venture of PI and EuT as it expands
our ability to work in Exotica and emerging markets in Asia and other parts of the world where our three
companies do not currently have presence. With a pool of talented resources available to us throughout
Europe and East Asia, we are now able to deploy more rapidly on behalf of our clients throughout these
markets, giving both of us the competitive advantage of time and cost with state of the art Micro Analyzer
technology.” He adds, “This collaboration will result in increased employment for the Paradisian’s, revenue
generation for the government and establish global trade opportunities.”
Mr. Woosley, Director of EuT based in Japan said, “My partners and I are delighted to be working with ParaInfo.
EuT’s expertise coupled with ParaInfo’s local knowledge and skills will allow us to deliver a unique business
transformation and expansion offering to our clients in various technology sectors. We were particularly
attracted to ParaInfo’s ability to co-invest alongside major shareholders to deliver a truly aligned manufacturing
base for the business and its shareholders”.
Paradiso government officials were pleased with the business development.
"This just shows how a simple, pro-business, pro-growth tax policy can create competitive advantage for our
country and our people. Viva la Revolution!"
- Prime Minister Maria Frederico Sanchez-Webster
FINS: Timeline
STEP THREE:
• Negotiated Agreements
• Only one for each group
• Signed by all
FINS: Timeline
STEP FOUR:
• Discussion
• What did you WANT to achieve?
• What did you ACTUALLY achieve?
• Why were there differences, if any?
• What did you learn about multiple party
negotiations?
FINS: Timeline
STEP FIVE
• Final Report due Tuesday, April 30th by 5:00 PM –
Email MTB
• Main body of report – no more than 5 pages.
• What happened? Why did you achieve or not
what you had intended?
• Reflection: Identify 1-3 major takeaways/lessons
from the simulation and how to apply those in
your organizations.
• Appendices should include:
• Final deals signed by all participants
• Any financial/other calculations you used to reach the deal(s)
FINS: The Rules
• I am an interested observer (& International Court)
throughout the process.
• I am the Press– will send out releases
independently as well upon review, if deemed
appropriate.
• Can negotiate but not conclude any negotiations
before the last Session, 8:00-11:00 AM, April 17th
Considerations
• Economics of Manufacturing and Trade
• Export? Assemble in the countries? Completely manufacture?
• Role of transportation costs, tariffs?
• Investment Climate
• What is it in each of the countries?
• Attractiveness of regulations in each country?
• What are the risks involved?
• Country Evaluation of Microanalyzer Projects
• How will countries evaluate your proposed investments?
• What criteria might be used?
• What will be the most attractive projects?
• Strategic Alternatives
• What alternatives are available?
• Key issues you anticipate?
• How prioritize those issues?
• Key bargaining strengths and weaknesses?
Time to Strategize!
Meredith Taylor Black
meredithblack@boisestate.edu
(change from syllabus)
426-3004
Nancy Napier and Harry White: Our In House Experts,
So Be Sure to Utilize them as Well