TERRORISM, COMPETITIVENESS, AND INTERNATIONAL MARKETING – (3/6)

TERRORISM, COMPETITIVENESS AND INTERNATIONAL MARKETING

SEARCHING FOR CORPORATE EFFECTS

(Third in a series)

Valbona Zeneli, Marshall Center, Germany

Michael R. Czinkota , Georgetown University USA and University of Kent, UK

Gary Knight, Willamette University, USA

The scientific approach is largely driven by hypotheses  which are analyzed as to their likelihood of being acceptable, true and robust. We present thoughts on the odds and consequences of relationships between international marketing and terrorism. We suggest arms length and reliable insights which improve our contextual understanding and decision making. Here are several hypotheses which we postulate are associated with terrorism and corporate action.

First are increases in Marketing Costs, accompanied by disruptions of supply chains. Interruptions in global supply chains tend to cause shortages or delays of critical inputs, which affect corporate strategies and performance, shrink shareholder value, and reduce the  consumption of goods and services. Perhaps the entire “just in time” production processes of a firm and its supply chain may need to be reconfigured.  Increased security measures heighten the complexity of motion which increases costs. Contextual volatility raises the cost of coordination, as suppliers and distributors devote more resources to environmental scanning, information processing, and negotiating with their suppliers for synchronized responses to rapid changes within all affected organizations.

For marketing planning, design, and organization we believe that an increase in the threat or occurrence of terrorism, makes management select its risk as a salient factor in the firm’s international marketing planning, supply chain management and organization of global distribution channels. To develop business strategies which minimize the firm’s exposure, managers tend to avoid direct investment and to require higher returns on investment.  Exports can rise but with higher cost assessments for the development of new infrastructure in terrorism-prone areas.  Terrorism also appears to depress buyer psychology and consumption.

International Experience plays a major role in the firm’s marketing planning, and the design and organization of the firm’s global distribution channels. The acquisition, interpretation and distribution of knowledge are critical for optimizing performance of global supply chains, and achieving superior resilience  and market share. Reducing the firm’s risk due to unfamiliarity with a market, also called the “liability of foreignness”, pays off by decreasing market operational uncertainties, and shrinking  surprises. It pays off to be on site,  a motto which argues for  multi-dexterity in international strategy.  Substantial experience in numerous foreign markets is greater than the sum of its parts, and becomes a strategic asset when a firm must confront terrorism in its global operations.

Organizational Resources of the firm affect its competitive advantage. They can strengthen assets such as in-house knowledge, skilled personnel, superior strategies, and financial reserves. The ability of firms to succeed in light of international business adversity is largely a function of the resources available to explore alternatives.

Resource-restricted firms face greater challenges to create a solid business foundation by researching foreign markets and potential partners.  Conversely, well-resourced firms have a greater capacity to undertake international ventures that will perform well. Therefore, we expect that firms with comparatively abundant resources will be better positioned to undertake sophisticated international marketing preparations. They can incorporate the environmentatl contingencies of terrorism into their planning, their development of supply chains, and their distribution channels, all key components of international success.

Michael Czinkota teaches international business and trade at Georgetown University’s McDonough School of Business and the University of Kent. His key book (with Ilkka Ronkainen) is “International Marketing” (10th ed., CENGAGE).

 

TERRORISM, COMPETITIVENESS, AND INTERNATIONAL MARKETING – (2/6)

Time to Limit the Payoff for Terrorists

Valbona Zeneli, Marshall Center, Germany

Michael R. Czinkota , Georgetown University USA and University of Kent, UK

Gary Knight, Willamette University, USA

Terrorists want more “bang for their buck” by undertaking high-impact events, choosing high visibility targets and directing their violence at less well-guarded “soft targets” such as transportation systems, business and private facilities.

Terrorism in the firm’s external environment is designed to create organizational confusion and contextual volatility, which refers to discontinous changes and requires firms to make frequent, abrupt, unexpected, and untested adjustments to their business strategies and operations. There also tends to be a perhaps misleading belief that terrorism responsive decisions must always be made swiftly.

Terrorists deliberately target non-combatants and insufficiently protected physical facilities. The globalization of commerce, travel, and information flows have enhanced the ease with which terrorism can be carried out, and increased the visibility and availability of potential terrorist targets. Port facilities, industrial clusters, shopping centers and financial districts are among numerous assets susceptible to terrorism via low-tech approaches. The threat is especially salient to firms with business facilities and infrastructure in multiple and diverse locations abroad, each one of which may need tailor-made protective measures. When evil doers make multiple-tap asynchronous attacks, losses can exceed worst-case scenario planning. Institutions and firms of industrialized nations are most vulnerable when they operate in emerging countries. MNE supply chains are vulnerable to potential long-term harm, particularly with firms whose first and second tier suppliers stretch around the world, in and out of risky environments. Any physical movement of goods introduces risk, disruptions and delays, but in developing nations more so.

Perceptions of threats from terrorism reduce the likelihood that firms will expend assets abroad, particularly in emerging economies that might become terrorism-prone areas in future. Companies spend billions annually to manage terrorism-induced risk and comply with terrorism-related government procedures and regulations.

Uncertainty is an attribute of marketing environments, particularly in international markets. Marketing activity is vulnerable to terrorism through disrupted international logistics, supply chain and distribution activities, insufficient information flows, and growing global demand for industrial and consumer goods. The complexity formed by linkages among terrorists, producers, buyers, and public actors reflects how with only 3-4 alternatives for each option, terrorism quickly represents hard to control and large number of scenarios. Furthermore, terrorism can trigger imposition of new regulations and procedures, which can hamper corporate activities. Security can reduce but not eliminate terrorism or fully insulate the firm from attacks. Government regulations aimed at preventing terrorism generate delays and increase the cost of business transactions, affecting company competitiveness.

The marketing organization comprises a bundle of strategic resources. Abundant material and effective alternative capabilities are traditionally associated with superior performance in international marketing ventures. The payoff from strategic resource stock piles is only realized when management activates situation specific organizational responses and behaviors, aligning them with clear and present changes in the corporate environment, not before.

The resource-based view (RBV) helps explain how firms develop and leverage organizational capabilities. Management structures, bundles, and leveraged resources determine the efficiency and effectiveness of company operations and organizational performance and robustness. The allocation of available marketing resources and the creation of new types of marketing tools are fundamental to the creation and maintenance of sustainable competitive advantages. Our research has found that many firms remain ill prepared to cope with terrorism, especially those operating in emerging markets. Firms often still respond passively or only reactively to the outslaught of terrorism. By contrast, we encourage firms to create proactive and innovative solutions for the management of terrorism threat.  This is what corporate innovation should be all about.

Such innovation must permeate organizational culture and be supported by new knowledge and technology enabling responsiveness to new, outwardly unexpected capabilities. Indeed, strongly innovative firms have highly developed and elaborated knowledge-creation routines and learning regimes.  A strong innovative culture supports the firm in developing responses tailor made for rapid deployment with new organizational capabilities. Rather than pursue just unidimensional thinking, ready for one action, firms need to deploy ambidextrous strategies and reinvent the situation specificity of their operations. Thus, management, which possesses a strong innovative culture and substantive awareness of even marginal threats of terrorism, might emerge less scathed from attack from that firms which are focused but limited in their outlook.

 

Michael Czinkota teaches international business and trade at Georgetown University’s McDonough School of Business and the University of Kent. His key book (with Ilkka Ronkainen) is “International Marketing” (10th ed., CENGAGE).

 

TERRORISM, COMPETITIVENESS, AND INTERNATIONAL MARKETING – (1/6)


MARKETING ACROSS BORDERS UNDER CONDITIONS OF TERRORISM

An introductory note: Over the coming weeks, we will post a series of Prof. Czinkota’s work with Prof. Valbona Zeneli, from the Marshall Center in Germany and Prof. Gary Knight, of Willamette University, USA. The work presented here is based on the research titled “Terrorism, Competitiveness and International Marketing: An Empirical Investigation” which was published in the International Journal of Emerging Markets, 2018.  We thank Ms. Niparat Pitchayanonnetr our departmental assistant for her editorial contributions. The series presents insights into what has been labelled a key challenge to the global business world today.
Here is our first post in the series which, together with future postings, you can freely distribute with proper credit to the authors and source.

Valbona Zeneli, Marshall Center, Germany

Michael R. Czinkota , Georgetown University USA and University of Kent, UK

Gary Knight, Willamette University, USA

Terrorism refers to the risk or actual encounter of violent acts designed to cause fear and intimidation.  Despite posing an important threat to internationally-active firms, there is a paucity of empirical research that addresses the distinctive challenges that terrorism poses to the international marketing activities of firms.  Here we first provide a theoretical background on terrorism and its effects on international marketing in emerging markets.  We then relate terrorism to operational costs, marketing planning, supply chain management and distribution activities in the multinational enterprise (MNE).  We recognize significant costs in the international marketing budget of MNEs. Firms with substantial resources and international experience appear to have more alternatives, which allow them to cope better with the effects of terrorism than their less endowed peers.

Terrorism is a salient threat to organizational competitiveness in international marketing. It is the premeditated use or threat to use violence by individuals or subnational groups to obtain a political or social objective through the intimidation of a large audience beyond that of the immediate non-combatant victims.

For terrorists, perception matters! Terrorist attacks around the world have increased greatly in the past decades, spanning 92 countries and over 28,000 fatalities in 2015 alone. Most attacks are directed at civilians, businesses, and business-related infrastructure. The five countries most exposed to terrorist attacks in recent years are Iraq, Afghanistan, Pakistan, India and Nigeria.

Emerging markets are particularly affected by terrorism since their businesses and citizens have less of an opportunity to protect themselves. Among the possible environmental contingencies that can affect marketing organizations – such as weak economic conditions, rising energy prices, financial crises – terrorism is identified as potentially the most serious threat. Since terrorists select their targets with high flexibility, intensity and precision, international firms seek competitive advantage through the expansion of production, distribution, and the marketing of products and services across multiple national boundaries. Terrorism sharply reduces corporate enthusiasm to expand. Measures to counter terrorism in turn are based of restricted freedom of movement and increased government regulation, both of which impair global commerce. The border-crossing effect of terrorism creates slowdowns for international transactions reaching 2.5% of merchandise value, which is comparable to the average level of global tariffs.

International trade depends on the efficiency and cost-effectiveness of global transportation systems. Terrorism increases the transaction costs of international commerce and delays global supply chains and distribution channels. Terrorism’s main impact reaches far beyond its immediate and direct effects. Key are the long term results from the indirect effects that occur in national and global economies. These include widespread anxiety and uncertainty that affect buyer demand, shifts or interruptions in the supply of needed inputs, new government regulations and procedures enacted to deal with terrorism, and longer-term perceptions that alter patterns of global trade and investment. Terrorism can also affect managerial attitudes towards risk, shift the risk absorption capacity of firms, and reduce the likelihood of embarking on international ventures or new investments abroad.

Our Google search of the NGram viewer system analyzed the extent of terrorism-related writings, and checked for correlations with the key terms ‘trade,’ ‘investment’ and ‘risk’. The results indicate a rapid increase of concern about terrorism since 1998. This development serves as an indicator of the growing preoccupation (in the English-speaking literature at least) with terrorism. Concurrently, and as expected in terms of theory-based postulations, actual risk increased while trade and investment interests declined.

We believe that terrorism will continue to be a significant factor in international marketing for decades to come. The rise of terrorism signals a new type of threat relevant to both developed and emerging economies. As governments increase security of public facilities, the likelihood of attacks against the softer targets of firms’ international operations is likely to increase.  Emerging economies need to find ways to increase their security in order to retain their attractiveness for foreign sourcing and investments. Corporate preparedness for the unexpected is a vital task. Innovative managers develop appropriate resources, and undertake planning and strategies to accommodate dislocations and sudden shocks. Terrorism represents an organizational crisis whose ultimate effects may be unexpected and unknown, posing a significant threat to the survival or performance of the firm.  Terrorism presents the firm with a dilemma that requires new decision-making and behaviors that will result in organizational change.  Firms that neglect to devote resources and capabilities to respond flexibly to terrorist triggered disruptions, risk sudden, sometimes even, total loss of competitive advantage. We follow the thinking of former U.S. Secretary of Defense Donald Rumsfeld who stated: “There are known knowns, which are things we know that we know. There are known unknowns; that is to say, there are things that we now know we don’t know. But there are also unknown unknowns, these are things we don’t know we don’t know”. The goal should be to analyze the role of terrorism under all three conditions.

Michael Czinkota teaches international business and trade at Georgetown University’s McDonough School of Business and the University of Kent. His key book (with Ilkka Ronkainen) is “International Marketing” (10th ed., CENGAGE)

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Breakfast of Champions


kent

Breakfast

On Monday (11th December, 2017) morning we hosted a get together for selected post graduate students.  These were drawn from course reps but also selected by Program Directors who identified individuals whose contribution to the programs was really making a difference.   Students were asked to offer brief feedback on…

– I feel good, because….

– I’d love to do more of….

– my best class experience was…

– on Campus, I enjoy most…

– millennials need classes to focus on ….

– …. will help me most with a job

Things students said in their two minute talk included:

  • I feel good being part of an academic community.
  • Each day, I improve.
  • Kent offers an entrepreneurial course, designed around asking professionals in the finance industry. As such, not only do I get academic skills but I’m gaining professional skills too.
  • I value the Bloomberg Room.
  • Professors are all very helpful and I’m learning relevant skills
  • Being on the program gives me different cultural perspectives.
  • I have found seminars really help me in developing my skills – it’s great to talk with so many different nationalities.

Thanks to Michael for his idea, for organizing the medals and for being thoroughly affable. Thanks to Tamsin for helping with arrangements.  Thanks also to Martin, Radu, Jaideep, Shaomin, Omar, Irena and Maddy for coming along.

Sometimes even rankings can be Christmas presents

GoogleRankingCongratulations to Professor Dr. Michael R. Czinkota on being recognized as one of the world’s leading authors on international business and marketing for publications during the period 1980-2015! Throughout the 35 years, Professor Czinkota has always stayed in the top 20 of the prolific authors list from different sources.

“An analysis of significant contributions to the international business literature” in the Journal of International Business Studies rated Professor Czinkota among the top 3 most prolific authors worldwide, 1980-1989.

An analysis in the Asian Pacific Journal of Management ranked Professor Czinkota as #4 in the Journal of World Business, #7 in the Journal of International Marketing and #14 in all 6 leading business journals in the world for the time period 1996-2006.

More recently, Professor Czinkota was recognized among the top 8 pioneering researchers in international marketing around the world. He was also ranked among the top 20 most prolific international marketing authors during the period 1995-2015 in an anthology by Leonidou, Katsikeas, Samiee and Aykol. (2018)

In December 2017 – right before Christmas, Professor Czinkota occupied the first place of Global Google citations for export promotion and export management. He also ranked in second place for trade policy and place 8 for International Marketing, which is an exciting present for Christmas.

Professor Czinkota teaches at the McDonough School of Business of Georgetown University and at the Kent Business School, University of Kent. He was awarded the Significant Contribution to Global Marketing award by the American Marketing Association in 2007. Professor Czinkota is the co-author of International Marketing, 10th Edition, Cengage (with I. Ronkainen); International Business, 8th Edition, Wiley (with I. Ronkainen and M. Moffett) and Fundamentals of International Business, 6th Edition, (with I. Ronkainen and M. Moffett), Wessex. His blog also was named the third most successful international business blog.