WHY BUSI­NESSES NEED DIPLO­MACY

Busi­ness diplo­macy is fo­cused on cre­at­ing long-term pos­i­tive re­la­tion­ships with both busi­ness and non-busi­ness stake­hold­ers through com­mu­ni­ca­tion and en­gage­ment. By Fa­had Alam­mar.

NZ Business - - CONTENTS -

Busi­ness diplo­macy is fo­cused on cre­at­ing longterm pos­i­tive re­la­tion­ships with both busi­ness and non-busi­ness stake­hold­ers through com­mu­ni­ca­tion and en­gage­ment. By Fa­had Alam­mar.

Glob­al­i­sa­tion has changed the in­ter­na­tional busi­ness land­scape; busi­nesses now op­er­ate in dif­fer­ent coun­tries, deal with mul­ti­ple ju­ris­dic­tions, en­gage in ne­go­ti­a­tion and the devel­op­ment of trade stan­dards and treaties and face in­creas­ing geopo­lit­i­cal risks and pres­sure.

This is cou­pled with de­creas­ing gov­ern­men­tal sup­port for firms op­er­at­ing in­ter­na­tion­ally; many em­bassies around the world, for ex­am­ple, do not of­fer their busi­nesses the sup­port they need. Firms en­gag­ing in in­ter­na­tion­al­i­sa­tion are likely to face cul­tural clashes, con­flicts and dis­putes in host coun­tries where they have to rely on them­selves to solve these is­sues.

Ac­cel­er­ated by the in­ter­net, there is also mount­ing crit­i­cism from civil so­ci­ety and the in­creas­ing power of stake­hold­ers, which busi­nesses are sel­dom pre­pared to han­dle. For ex­am­ple, while a cri­sis may spread across in­ter­na­tional me­dia within an hour, it takes com­pa­nies, on av­er­age, 21 hours to re­spond, mak­ing them vul­ner­a­ble to ru­mours and spec­u­la­tions. Busi­nesses now need the ca­pa­bil­ity to cope and deal with the pres­sure of mul­ti­ple stake­hold­ers and spe­cial in­ter­est groups. This re­quires com­pa­nies to es­tab­lish re­la­tion­ships with mul­ti­ple busi­ness and non-busi­ness stake­hold­ers – not to sell goods and ser­vice, but to seek com­mon ground and to iden­tify al­liances and op­por­tu­ni­ties.

To sur­vive in this com­plex and rapidly chang­ing busi­ness en­vi­ron­ment, busi­nesses need to de­velop com­pe­ten­cies in what is termed busi­ness diplo­macy – the adop­tion of the mind­set and skills of diplo­macy for busi­nesses. In par­tic­u­lar, busi­ness diplo­macy is the abil­ity to es­tab­lish and main­tain pos­i­tive re­la­tion­ships with mul­ti­ple stake­hold­ers, lo­cally and glob­ally, to shape and in­flu­ence the en­vi­ron­ment and ul­ti­mately cre­ate a favourable con­di­tion for the busi­ness and seize new op­por­tu­ni­ties.

It con­sists of many es­sen­tial el­e­ments such as de­vel­op­ing cul­tural and his­tor­i­cal aware­ness and knowl­edge, pos­i­tive com­mu­ni­ca­tion and en­gage­ment, con­sid­er­ing other per­spec­tives and ethics, and the abil­ity to iden­tify pos­si­ble al­liances and trends.

Many New Zealand com­pa­nies that wish to form part­ner­ships or ex­pand into emerg­ing mar­kets over­seas are en­coun­ter­ing bar­ri­ers. These [per­haps] in­clude a lack of home and for­eign gov­ern­ment sup­port, an in­abil­ity to gain ac­cess to the mar­ket, lan­guage and cul­tural bar­ri­ers and a lack of knowl­edge in man­age­ment and in­ter­na­tional prac­tice.

Busi­ness diplo­macy can of­fer a way to over­come these bar­ri­ers. Busi­nesses equipped with diplo­matic com­pe­ten­cies and knowl­edge should be able to de­velop and dis­cuss plans with com­pa­nies, gov­ern­ments, and mul­ti­ple stake­hold­ers, look for com­mon­al­ity of in­ter­ests, un­der­stand dif­fer­ent laws and prac­tices of var­i­ous gov­ern­ments, and be fa­mil­iar with the man­age­ment style of var­i­ous coun­tries.

Fon­terra’s ac­tive re­ac­tion to the milk pow­der scan­dal in China in 2008 is an ex­am­ple of busi­ness diplo­macy in prac­tice that helped the com­pany main­tain its ex­ter­nal and in­ter­nal le­git­i­macy and rep­u­ta­tion.

Fon­terra quickly dis­tanced it­self from Sanlu (its part­ner in China), made a one-off US$5 mil­lion do­na­tion to a char­i­ta­ble foun­da­tion in China and, most sig­nif­i­cantly, got the New Zealand Gov­ern­ment in­volved, which helped el­e­vate the is­sue to a bi­lat­eral trade is­sue.

In this case Fon­terra demon­strated com­pe­tency in busi­ness diplo­macy by en­gag­ing with non-busi­ness stake­hold­ers, align­ing its in­ter­est with its home gov­ern­ment, and dis­tanc­ing it­self from po­ten­tial risk to its rep­u­ta­tional cap­i­tal.

As a part of my cur­rent PhD in ex­plor­ing busi­ness diplo­macy, I have con­ducted in­ter­views with chief ex­ec­u­tives, diplo­mats and busi­ness ex­ec­u­tives from dif­fer­ent na­tion­al­i­ties and back­grounds. All par­tic­i­pants recog­nise the value of busi­ness diplo­macy and be­lieve that it should be prac­tised and ex­er­cised by busi­nesses, whether small or large, around the world. In par­tic­u­lar, par­tic­i­pants be­lieve that there are a set of spe­cific diplo­matic knowl­edge and skills that busi­nesses need to adopt in or­der to suc­ceed in to­day’s global en­vi­ron­ment.

It is im­por­tant, though, not to con­fuse busi­ness diplo­macy with the po­lit­i­cal ac­tiv­ity of cor­po­ra­tions that is mostly con­cerned with power, lob­by­ing, or in­flu­enc­ing politi­cians and pol­i­cy­mak­ers.

Busi­ness diplo­macy is fo­cused on cre­at­ing long-term pos­i­tive re­la­tion­ships with both busi­ness and non-busi­ness stake­hold­ers through com­mu­ni­ca­tion and en­gage­ment. It can en­hance busi­nesses’ rep­u­ta­tion and le­git­i­macy, iden­tify new op­por­tu­ni­ties, mit­i­gate po­ten­tial risks and cre­ate new al­lies from around the world. For New Zealand busi­nesses it should be part of be­ing ready and pre­pared to han­dle to­day’s in­creas­ingly com­plex op­er­at­ing en­vi­ron­ment.

Fa­had Alam­mar is a PhD can­di­date at Massey’s School of Man­age­ment. His cur­rent PhD the­sis is fo­cused on em­pir­i­cally in­ves­ti­gat­ing the con­cept of busi­ness diplo­macy and its re­lated el­e­ments among diplo­mats and busi­ness peo­ple.

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