WHAT IT’S ALL ABOUT?
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 has been no empirical research that addresses the distinctive challenges that terrorism poses for the international marketing activities of firms. We first provide a theoretical background on terrorism and its effects on international marketing, especially in emerging markets. We then develop hypotheses that relate terrorism to operational costs, marketing planning, supply chain management and distribution activities in the multinational enterprise (MNE). We find that terrorism accounts for significant costs in the international marketing budget of MNEs, as well as in planning and the design of supply chains and distribution channels. Firms with significant resources and international experience appear to cope better with the effects of terrorism.
Terrorism has emerged as a salient threat to organizational competitiveness in international marketing. Terrorism 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 noncombatant victims. Terrorist attacks around the world have increased, spanning 92 countries and over 28,000 fatalities only in 2015 (excluding Iraq). Most attacks are directed at civilians, businesses, and business-related infrastructure. The five countries most affected by terrorist attacks in recent years are Iraq, Afganistan, Pakistan, India and Nigeria.
Emerging markets are particularly negatively 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 – weak economic conditions, rising energy prices, financial crises – terrorism is potentially the most serious threat for them. While firms seek competitive advantages through the expansion of production, distribution, and the marketing of products and services across multiple national boundaries, threats of terrorism negatively affect these activities. On the other side, measures to counter terrorism restrict freedom of movement and increase government regulation, both of which impair global commerce, and they primarily concentrate on border-crossing creating slowdowns for international transactions.
International trade depends on the efficiency and cost-effectiveness of global transportation systems. Trans-oceanic water shipments account for over 90 percent of international merchandise trade by volume.
Terrorism can increase the transaction costs of international commerce and engender disruptions and delays in global supply chains and distribution channels.Terrorism’s main impacts result 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 alter managerial attitudes towards risk, exceeding the risk absorption capacity of firms, and reducing the likelihood they will embark on international ventures or new investments abroad.
A Google search, based on Google’s NGram viewer system, focused on the extent of terrorism-related writings, and checked their correlations with the key terms ‘trade,’ ‘investment’ and ‘risk’. The results indicate a rapid increase for 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 expectations, risk increased while trade and investment interests declined.
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 that both developed and emerging economies need to deal with in the future. As governments increase security of public facilities, the likelihood of attacks against firms’ international operations is likely to increase. Emerging economies need to find ways to increase their security to keep their attractiveness for foreign investors. Corporate preparedness for the unexpected is a vital task. Innovative managers develop appropriate resources, and undertake planning and strategy-making to accommodate dislocations and sudden shocks. Terrorism represents an organizational crisis whose ultimate effects may be unknown, posing a significant threat to the survival or performance of the firm. Terrorism presents the firm with a dilemma that requires decision-making and behaviors that will result in organizational change. Firms that neglect to devote resources and capabilities to respond flexibly to changes risk the loss of competitive advantage.
Valbona Zeneli, Marshall Center, Germany
Michael R. Czinkota , University of Kent, UK and Georgetown University USA
Gary Knight, Willamette University, USA