Welcome to class of
International Business Diplomacy
by
Dr. Satyendra Singh
University of Winnipeg
Canada
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
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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 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?
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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)
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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
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
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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
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Beijing
Chongqing
Guangzhou
Hong Kong
Shanghai
…
Timeline: Example of Danish-Chinese relations
(Thogersen, 2012)
What does a presidential visit include?
 Presidential visit generates businesses
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Even though high costs of travel and security…with 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
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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…
Privileges and Diplomatic Immunity