International Business Diplomacy

Although host countries and MNEs may hold resources that, if combined, could ach ieve objectives for both, conflict may cause one or both parties to withhold tho se resources, thus preventing the full functioning of international business act ivities. Both MNE managers and host-country governmental officials must respond to intere st groups that may perceive different advantages or no advantage at all to the b usiness-government relationship. Therefore the relationship's final outcome may n ot be the one expected from a purely economic viewpoint. Negotiations increasingly are used to determine the terms under which a company m ay operate in a foreign country. This negotiating process is similar to the dome stic processes of company acquisition and collective bargaining. The major diffe rences in the international sphere are the much larger number of provisions, the general lack of a fixed time duration for an agreement, and the need to agree o n valuation of a company's property. The terms under which an MNE may be permitted to operate in a given country will be determined to a great extent by the relative degree to which the company need s the country, and vice versa. As the relative needs evolve over time, new terms of operation will reflect the shift in bargaining strength. Generally, a company's best bargaining position is before it begins operation. O nce resources are committed to the foreign operation, the company may not be abl e to move elsewhere easily. Since international negotiations are conducted largely between parties whose cul tures, educational backgrounds, and expectations differ, it is very difficult fo r these negotiators to understand each other's sentiments and present convincing arguments. Role-playing offers negotiators a means of anticipating responses and planning an approach to the actual hat-gaining. Historically, developed countries used military intervention and coercion to ensu re that the terms agreed on between their investors and host countries would be carried out. A series of international resolutions have caused the near demise o f these methods for settling disputes. Recently, developed countries have used t he promise of giving or withholding loans and/or aid and the threat of trade san ctions. Several bilateral treaties have been established in which host countries agree t o compensate investors for losses from expropriation, civil disturbances, and cu rrency devaluation or control. These agreements often are not clear about the me ans of settlement for the losses. International organizations or groups in countries not involved in a dispute are frequently used to arbitrate trade disputes among individuals from more than on e country. This method has been used very rarely to settle investment disputes, h owever, because governments are reluctant to relinquish sovereignty over what oc curs within their borders. To prevent companies from playing one country against another or countries from playing one company against another, groups of governments or companies occasiona lly have banded together to present a unified front in order to improve the term s under which international business is carried out. Public relations may be used by both companies and countries to develop a good i mage, overcome a bad one, and create useful proponents for their positions. If su ccessful, this strategy may result in better terms of operation for either side. International agreements have been made to protect important intangible property such as patents, trademarks, and copyrights. Since millions of dollars are ofte n spent in the development of these assets, worldwide protection is important for their owners, Recently, a big problem for companies has been the pirating of intangible assets in countries that have not signed international agreements or do not actively enf orce their own laws on protection of IPR.