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Business Diplomacy: The Competency for the 21st Century

Global firms, of late, are far more exposed and subject to minute public scrutiny given the rising influence of non-state actors like netizens, and face a whole new gamut of complications in their overseas operations than ever before. Traditionally, they used to rely on state diplomacy for their project initiation and business facilitation in foreign markets when in need. However, in the constantly changing chaotic and complex global growth landscape, it is neither feasible nor advisable to expect that conventional diplomatic efforts alone would ensure a smooth entry or operations abroad – especially in markets known for institutional void.

This is where business diplomacy surfaces; firms need to take an extra step to ensure that their leadership or representatives are competent in business diplomacy skills that enable them to meet any eventualities vis-à-vis state or non-state actors, economic or non-economic issues, and maintain – if not grow – their brand equity, firm reputation, and legitimacy intact, even in adverse conditions.

The subtle art of inculcating a credible image of the firm in the mind of every individual stakeholder and transforming him/her into a brand ambassador

So, what is business diplomacy anyway? As regards the body of knowledge and empirical research, business diplomacy is still in its infancy, and is a rather fluid stream of learning that cuts across four major well-defined areas, i.e. international business, international relations, political economy and public policy, and continues flowing in diverse but distinct disciplines. A glance over the existing literature on business diplomacy reveals that many substitute terms are used interchangeably to define the notion, such as business-government interface, business diplomacy management, strategic political management, corporate political strategy, corporate diplomacy, MNC-host government relationships, MNC global governance, corporate political activity, and so on.

In a recent case study on business diplomacy in the context of the POSCO-India project (forthcoming as book chapter), we extracted the following in order to understand the concept:

  1. Distinct tasks of business diplomats
  2. Comprehensive set of competencies
  3. Symptoms of business diplomacy failure

Defining Business Diplomats: To comprehend the constitution of business diplomacy, we juxtaposed the tasks assigned to state diplomats and business diplomats, as below:

Business Diplomacy - Gwalior Knowledge Foundation - Diplomat (2)

Business Diplomacy

Business Diplomacy Competencies: The MISC competency model sums up the essence of what is expected from business diplomats involved in the global business, especially in the high-growth economies.

Business Diplomacy - Gwalior Knowledge Foundation - MISC Competency Model (2)

Business Diplomacy

Business Diplomacy Failure Symptoms: If firms notice four specific symptoms, as indicated below, in the course of their business operations, they might like to reconsider their business diplomacy strategies.

Business Diplomacy - Gwalior Knowledge Foundation - Failure Symptoms (2)

Business Diplomacy

As shown above, business diplomats have a very different terrain and flora-n-fauna to operate in as compared with that for state diplomats. Given the salient features of these differences, business diplomacy, in the context of international business, could be defined as ‘the subtle art of inculcating a credible image of the firm in the mind of every individual stakeholder and transforming him/her into a brand ambassador.’  In other words, business diplomacy ensures the realization of the goal of shared prosperity of all engaged stakeholders via proper alignment of mutual interests while upholding higher ethical standard in business operations. The prerequisite to master this art is to have multidisciplinary/multi-lingual education, genuine appreciation for institutional void, fine-tuned ethno-cultural competency along with an honest vision for shared prosperity.

(Co-author: Soon-ok Heijmans; The case study publication is expected soon; author can be contacted for any feedback or queries)