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

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

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.

Religions, Christmas, and International Marketing

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Historically, the religious tradition in the United States, based on Christianity and Judaism, has emphasized hard work, thrift, and a simple lifestyle. These religious values have certainly evolved over time; many of our modern marketing activities would not exist if these older values had persisted. Thrift, for instance, presumes that a person will save hard-earned wages and use these savings for purchases later on. Today, Americans take full advantage of the ample credit facilities that are available to them. The credit card is such a vital part of the American lifestyle that saving before buying seems archaic. Most Americans feel no guilt in driving a big SUV or generously heating a large house.

Christmas is one Christian tradition that remains an important event for many consumer goods industries in all Christian countries. Retailers have their largest sales around that time. However, Christmas is a good illustration of the substantial differences that still exist among even predominantly Christian societies. A large U.S.-based retailer of consumer electronics discovered these differences the hard way when it opened its first retail outlet in the Netherlands. The company planned the opening to coincide with the start of the Christmas selling season and bought advertising space accordingly for late November and December, as retailers do in the United States. The results proved less than satisfactory. Major gift giving in Holland takes place, not around December 25, Christmas Day, but on St. Nicholas Day, December 6. Therefore, the opening of the company’s retail operation was late and missed the major buying season.

From a marketing point of view, Christmas has increasingly become a global phenomenon. For many young Chinese, Christmas is not regarded as a religious holiday but simply represents “fun.” Fashionable bars charge up to $25 for entrance on Christmas Eve, and hotel restaurants charge $180 for a Christmas Eve function. The week around Christmas is the top grossing week for movie theaters in China, as young Chinese head out to theaters together instead of watching pirated DVDs at home. Santa Claus is increasing in popularity in the predominantly Sunni Muslim country of Turkey. In Istanbul shopping centers, children stand in line to sit on Santa’s lap and ask for gifts. Stores sell Santa suits and statues.

With billions of people celebrating Christmas and exchanging wishes of peace, perhaps we will see at least some of the inspired and faithful take personal steps which reduce the barbarities which humanity commits against itself in the many ongoing wars. Also, a time of remembrance of the difficult travels of Joseph and Mary, with Jesus soon to be born, might help us soften our stance against refugees and migrants in the world. Remember, we all – but for the mercy of God- could be the ones looking for succor and support.

Here is a holiday greeting from Prof. Czinkota and Prof. Skuba.

Merry Christmas!

Pressure by Cuba will not pay off

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This past week, United States relations with Cuba were back in the spotlight. The Trump administration announced new restrictions on travel and trade with Cuba. The rollback of Obama’s measures towards the island’s government is a promise President Trump had made some months ago. The steps are reasonable, since  Obama’s agreement with Cuba was insufficient  and inequitable. The U.S. gave much and received little in return.

It has been more than a year since the normalization of relations. Clearly, Cuba has been unwilling to change rapidly, and past treaties were insufficiently in achieving a new robust track. One example is the continued discriminatory practices against Americans in the island. On a recently booked trip I had to Cuba, for example, it turned out that hotel rates were unjustifiably much higher for Americans than for Europeans, so I cancelled my plans.

The intention of the hotel was to give a silent retaliation for the years of economic embargo. The focus was on individuals that had no say on the matter and also no ability to change or improve American relations with Havana.

In fact, with the new tight restrictions, American individuals can no longer visit Cuba and groups need a license from the Treasury Department to visit the country. The Cuban tourism industry will feel the effects of U.S. government encouragement of Americans to stay in private houses and avoid hotels and restaurants connected to or owned by the military and security services.

After decades of adverse relationships, isn’t it time to bury the hatchet and bring out the peace pipe. For that, Cuba needs to take a step back and accept new policies which are fair, non-discriminatory and welcoming to visitors, both American and Cuban alike. As a fair trade and commerce relationship is not yet a reality, the United States government needed to demonstrate a stronger position in order to encourage appropriateness.

In addition, it is important to note that seeking improved relations with Havana does not mean forgetting the violations against human and civil rights during the Castro government. The population’s welfare is equally relevant as economic aspects in diplomatic relations, and actions such as expropriations and unjustified prison sentences should still be remembered and repaired. Curative marketing evaluates, carries physical accosting, debt, and destruction until true restitution is made.

Much remains to be done by Cuba, particularly since the United States has already long ago initiated important steps to reflect its own atonement. Cuban pressure to repay for earlier inequities will not work. Only if both parties commit to a fair relationship, will we see commerce between the countries grow and bring benefits and economic growth.

Ambassador Jaeger and Christian Forstner at the First Year Seminar

As we are heading to the end of our Fall semester seminar, we have still three more guests to come and talk to students at the Georgetown McDonough School of Business. Yesterday, Nov. 15th, we had the pleasure to hear from two of these guests: Mr. Christian Forstner and Ambassador Kurt Jaeger.

Mr. Forstner is the Director of the Hanns Seidel Foundation’s Washington D.C. office, working with interested partners across the political spectrum to promote strong German-American ties. Part of his responsibilities is to facilitate high-level political dialog between German and American, covering topics such as international trade policy and transatlantic security and defense policy.

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Mr. Forstner first started working at the Hanns Seidel Foundation in 2000, as Director at Moscow’s office. He also served the EU Commission as a Team Leader for the Technical Assistance to the Commonwealth of Independent States (TACIS) project.

Mr. Forstner has a master’s degree in Political Science, European History and Russian Literature from University of Munich and Moscow University of Foreign Languages, and developed several publications on EU affairs, security policy, and Russian and U.S. politics.
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Ambassador Kurt Jaeger was appointed to the United States in August of 2016. He has over 25 years of experience in international regulatory affairs,

Mr. Jaeger was Ambassador of Liechtenstein to the European Union (EU) and Belgium from 2010 to 2016. Previously, he worked at the Swiss Federal Office for Civil Aviation for six years, being responsible for international air transport regulation and policy, and then became Executive Assistant to the Director General for Civil Aviation.

Before becoming Ambassador, Mr. Jaeger was also elected as one of three members of the Board of the European Free Trade Association (EFTA) Surveillance Authority in charge of monitoring and enforcing the application of EU law in the European Economic Area (EEA) by the three EFTA-States Iceland, Liechtenstein, and Norway.

Ambassador Jaeger has a degree from the University of Fribourg, Switzerland, with a license en droit and with an LL.M. from McGill University, Montreal.

To know more about the First Year Seminar previous guests, please click here.