What is business diplomacy?
In this case, diplomacy is not a synonym for being
maddeningly polite. Rather, business diplomacy refers to the basket
of tools that a company can use to make sure it is understood
the way it wishes to be understood - it is the proper and effective
use of messages and information about a company, its policies,
and practices.
This type of diplomacy can have a direct and critical
impact on a company's overseas business. It involves the foreign
contacts, organizations, and institutions that a company must
communicate with to get registered locally, to sanction a deal
with a local firm, to be able to employ the people it wants to
hire, or to pay taxes at an agreed-upon rate. A company also must
use business diplomacy to ensure that it will be regulated in
accordance with local rules and that the playing field is level
in the particular market.
The need for business diplomacy is particularly acute in the former Soviet Union, where a flood of U.S. business interests in the 1990s were met by recalcitrant bureaucrats and a minefield of conflicting trade and investment legislation. American and local industry in-country joined with U.S. embassies to assist these governments in developing as relatively predictable and profitable places to do business.
Some business people point to dealing with corruption
as a major source of concern when doing business overseas. In
the former Soviet Union, corruption remains the "elephant
in the room" during most business discussions. The Foreign
Corrupt Practices Act, which prohibits U.S. companies from paying
off foreign officials to help their business prospects, makes
it crystal clear that the bribes and payouts cannot be a part
of American business dealings. Embassies and American firms need
to repeatedly make it clear to foreign governments and companies
that American firms will not risk their entire business and personal
liability on one deal. This kind of clarity in business negotiations
is part of business diplomacy.
Know your audience
A successful business diplomacy strategy for any foreign market should consist of three distinct parts:
- define the company"s business objectives in that market,
with clear benchmarks and goals;
- outline how these objectives fit into the overall country profile, including political, commercial, regulatory and competitive risk analysis; and
- develop a detailed implementation plan citing responsible company officers, targeting host country personalities and organizations, and tactics to ensure that the business is well protected and positioned to take advantage of changes in the market
Businesses can segment their audiences into three major
groups. First, a company must identify the primary decision maker.
In some cases, this is the country's president or a key cabinet
minister. Next, identify the others who influence the decision
maker. This may be other cabinet members, fundraisers, a classmate,
even a spouse or college roommate.
The third and largest group consists of any others
who have a say in decisions or potential impact on a company's
ability to do business, positive or negative. On a governmental
level, this could include the country's finance minister, the
minister of labor, education minister or customs director. The
list could include parliamentary committees or opposition leaders,
nongovernmental organizations (NGOs), think tanks, even the media.
Peripheral groups that also may be relevant include international
finance institutions (IFIs), business associations, assistance
organizations, embassies, and the United Nations.
What is the message?
Once the "who" has been identified, it"s time
to work on the "what." Diplomacy requires a company
to advocate for itself and its goals. What is the company there
to do? How much will you pay in taxes, environmental fees, social
security, etc? How many jobs will the company create? And how
long does it plan to stay? Is it there for the long term?
Another aspect to business diplomacy involves a thorough description
of the company's attributes. Companies should explain that they
prefer to hire locally and that they will provide training to
increase local hiring. The business can stress its environmental
impact and promise to be a good community member, participating
in the country's arts and culture and supporting local health
clinics and orphanages or other causes.
The style in which a company delivers these messages is important. Diplomacy works hand-in-hand with transparency. Communicate early and often, delivering a complete message. Is a company being heard the way it means to be heard? How can it determine this?
One test to ensure the message is getting across is to monitor the follow-up questions accompanying any interview. Media stories that go awry are a sure sign that a message is not coming across the way it was intended.
Careful diplomacy, of course, is particularly important when there
are problems. Does a company sound defensive or conciliatory?
Ultimately, it is important to remember that when trying to change
behavior, it's best to deliver a constructive message.
Accomplishing your goals
Ultimately, regardless of the diplomatic tools a company uses,
the goal is to get all parts of government and civil society to
buy into the project. The government in general, and tax
police in particular, needs to understand the job creation benefits
a company will bring to the table, among other pluses for the
local economy. The foreign minister should appreciate the extent
of a company's effort to address all legal and regulatory matters.
The finance minister should recognize that the project is a model
for cooperation between the two countries. Parliament and NGOs
needs to understand the lengths a company went to in order to
get environmental impact approvals from the IFIs. Opposition leaders
should know the revenue and jobs creation implications of the
project. And the media need to have facts on how many new jobs
you are bringing and any other relevant local content, such as
a company's support for the local tuberculosis clinic or other
community assistance projects.
New politicians want to differentiate themselves. They will use
a convenient hook, and sometimes that involves piling on to complaints
about business projects. If this includes your project, that's
no good. It's critical to begin advocacy right away to assure
that your company does not present a handy target for a struggling
political campaign.
Ultimately, the goal is to change behavior: from ignorance to support,
from opposition to neutrality. In any transition, revolution or
election brings new actors and new decision makers. The best position
is to know all the candidates, so no matter who comes in, they
know you and appreciate your business's contributions.
Beth Jones, a former Assistant Secretary of State for Europe and Eurasia and Ambassador to Kazakhstan, is executive vice president at APCO Worldwide, where she heads the business diplomacy team.
APCO Worldwide (www.apcoworldwide.com), an award winning and an independently owned global communication consultancy, supports numerous American firms with market entry, public affairs and strategic communication programs in the Russian and CIS markets. APCO also assists Russian and Central Asian companies by developing and implementing corporate positioning programs in the United States and Europe.
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