Counterfeiting, Software Piracy, and Terrorism

Counterfeiting is a common form of corruption and cost businesses well over US $1 trillion in 2008. One of the most highly scrutinized areas of counterfeiting in today’s business world is the theft of intellectual property. Intellectual property is the ownership of ideas, as well as the control over the tangible or virtual representation of those ideas. The piracy of this intellectual property has become a major form of illegal business.

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9/11 In remembrance: Terrorism and International Business

TERRORISM AND INTERNATIONAL BUSINESS:

Michael R. Czinkota, Gary Knight, Gabriele Suder.

The airplanes of 9/11 forced countless multinational corporations (MNCs) to update their strategic planning.  Our work with executives at more than 150 MNCs shows that more than ten years later, companies are still grappling with how best to manage the terrorist threat.

In the two decades before 2001, the rate at which firms launched international ventures was growing rapidly. After 9/11, foreign direct investment fell dramatically as firms withdrew to their home markets. The popularity of international-sounding company and brand names decreased appreciably as managers now emphasize domestic and local affiliations.

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Even Old Lambs Come Home to Roost

History may not repeat itself very often, but when parallels are witnessed, the effects can be major and gruesome. These are tough times for many. There is the ubiquitous occurrence of major terrorism, bringing insecurity to airplanes and airports, train stations, entertainment clubs and schools. There is growing wealth concentration for few, and low income for many others. We now witness the breakups of coalitions thought to be stable, for which the British exit (BREXIT) from EU is only one major signal.

 

A little more than a century ago the world climate was benign and secure for many, globalization was high. National conflict seemed unlikely to emerge between the cousins who ruled England, Russia and Germany. Yet, within only a few years, World War I had led to millions of casualties and major devastations of factories and cities. What are we to do now to demonstrate our strong dedication and willingness to sacrifice in order to avoid a dramatic overall deterioration in global civility, security, and economy?

 

There are many tinderboxes that cause ongoing flames. In order to guarantee spheres of influence the British/French Sykes-Picot agreement signed on May 16, 1916 drew hasty and culturally poorly conceived borders for the Middle East. The accord achieved the termination of the Ottoman Empire but has provided the world with a century of acerbic and painful conflict in the Middle East. Even today, the ongoing conflicts and assassinations in Turkey are just one reflection of disharmony, augmented by religious disagreements, blood feuds, political shortfalls and economic blight.

 

Groups who suffer from deprivations attack others to share their pain. As governments learn to protect possible targets better, terrorists seek and find softer, less protected and less expected targets. In consequence, poor governments, poor companies and poor citizens are the ones least able to protect themselves against attacks. An uncertain environment then leads to less local investment and even more poverty. There must be new steps to mitigate the causes of terrorism.

 

It is ironic and sad to now see a self-inflicted British exit from the EU, which does not better the world, but rather carries the virus for conflict. Large flows of immigrants still need destinies and require support. Britain’s move triggers and encourages other nations to also demand a special lightening of their obligations. But who will be the beast of burden and at what price? Already forward-looking countries find their own solution, often ahead of the more slowly reacting larger powers. Hungary’s early efforts to measure and control immigration was such a step. But in light of disagreements with major players, the nation found itself derided and penalized.

 

Progress in terms of global tranquillity and cohesion needs to be renewed.  Confrontations between friends and adversaries need do not require winners and losers. All need to be willing to learn from each other, acknowledge and respect special needs and make allowances for the human dimension in conflict. With all the resources now available, there must be an ongoing search for and support of the soul of relationships and individuals. Forgiveness can well become a new objective. We all must contribute conscientiously to finding ways to help others by sharing their burden as well as encouraging them to share ours. Those who now sit at the table must let others approach. Dropping crumbs may be biblical, but is perhaps an insufficient reward for a better world.

 

 

On Freedom and International Marketing, Part 3: The Cost of Freedom

This is one of the published series on the linkages between freedom and international marketing.

One keeps healing about the large segment of the world population that is poor and therefore supposedly excluded from any international marketing efforts; the World Bank’s former president called them the $3 billion $2–a-day poor. By contrast, international marketers see them as an attractive $6 billion-a-day opportunity for valuable exchanges!

What’s more is that international marketing provides the opportunity to acquire resources without the deployment of force. Why fight if you can trade? Countries that have been historic enemies such as France, England and Germany are now all united in their close collaboration through international marketing. The field is, therefore, at the very least contributing to freedom from war while providing additional choices for consumption.

But the cost of freedom is rising. Terms like free trade or free choice are misleading since they all come with a price, which international marketers pay in terms of preparing their shipments, scrutinizing their customers, and conforming to government regulations.

We all are paying a higher price due to global terrorism. As freedom suffers, so does international marketing. In most instances, terrorism is not an outgrowth of choice but rather the lack of it. Terrorists may succeed in reducing the freedom of others but not in increasing their own. Who is typically most affected by terrorist acts? Attacks aimed at businesses, such as the infamous bombings of U.S. franchises abroad, do not bring big corporations to their knees. The local participants, the local employees, the local investors, and the local customers are affected most. Who can protect themselves against such attacks and who can afford to protect targets? Only the more wealthy countries and companies can. They have the choice of where to place their funds, with whom to trade, and whether to hold the enemy at bay through a security bubble created by changing business forn1ats via exporting or franchising. The poor players do not have choices. The local firms, the nations with economies in development, and the poor customers continue to be exposed to further acts of terrorism with very limited indigenous ability to influence events.

The Cost of Terrorism Keeps on Rising

The recent attacks in Paris by the Islamic state (ISIS) has again turned the spotlight onto terrorism. The Islamic state group which has emerged from Iraq and taken over large portions of Iraq and Syria is also threatening Europe and other regions. The invocation of terrorism has never gone away regionally, with almost daily reports of killings, bombs, and suicide missions. But now terrorism has become ubiquitous, and reaches nations which typically resolve conflicts through peaceful means. Since 2001, apart from many local killings, there have been separate large scale attacks on the United Kingdom, Spain, India and Russia. Where we used to differentiate our analysis from a philosophical, existential, and economic perspective between the ‘civilized’ and the ‘uncivilized’ world, we now have to cast our vote between barbarous and non-barbarous adversaries.

One major impact of terrorism will be on travel and tourism. The New York Times recently reported that current numbers of tourists are already showing a slight decrease to areas that have experienced terrorist attacks. This is especially significant for France which had 84 million foreign visitors last year and for which travel and tourism accounts for nearly 9 percent of its economy. Flight cancellations to Paris were felt days after the attack. Bookings for future trips has dropped by a third as compared to last years numbers. A similar situation occurred in the United States after the Sept. 11, 2001 attacks and according to statistics from the United States Office for Travel and Tourism, it took five years for international visits to exceed their 9/11 numbers.

Tight security regulations and very strict border control are some of the factors that contributed to the decrease in foreign visits. Europe which relies heavily on tourism may be heavily affected by the recent Paris attacks if movement across the 26 countries in the Schengen region will be restricted. Already, we are seeing temporary border controls being erected in light of the migration crisis in the Middle East and Africa. Once in place, new security measures might be hard to dismantle again.

With the Euro zone experiencing the slowest growth in years, the Paris attacks may do great harm to the already weak economies in the region. Last month, Forbes reported that spending during the busiest business month of the year may be curbed. The transfer of goods across boundaries could greatly affect the manufacturing industries in the region. And with businesses poised to expand to countries in the Middle East, the recent attacks may halt those plans.

Another outcome of the terrorism threat has been a rise of public-private partnerships, in which governments and firms collaborate to counter terrorism. For example, global police agencies now partner regularly with private firms to combat cyber crime and attacks on critical computer infrastructure. Governments and activist groups now use social media to organize campaigns fighting against threats ranging from dictators to disease. But nations also have begun to curtail social media when they are contrary to government interests.

Policy measures intended to increase security may lessen the efficiency of global transportation and logistical systems. The unintended consequences of such actions may increase market imperfections and raise business costs further, and may alter the environment in many ways more harmful to business interests than the terrorist events that provoked them. While everyone can agree on the need to guard against terrorism a key question is always : Who pays?

From a global perspective, terrorism’s effects are present for many firms, even those who see themselves as quite remote from any location affected by terrorism. Today’s climate of global commerce involves extensive interaction with countless distributors and customers. Producers and marketers rely on suppliers and suppliers’ suppliers to obtain goods and components. Such extensive networks increase the exposure of firms to events that take place at a far distance. Even firms perceived as having little international involvement may depend on the receipt of imported goods and are therefore subject to shortages or delays of inputs and the disruption of company operations.

In an article by Professor Sheffi of MIT, he cites the importance of having to understand that in today’s business climate of global competition and rapid response, firms no longer have the luxury of just aiming for “survival” in case of a terror attack. Instead, firms need to be flexible in order to be able to withstand shocks. They must offer assured continuity to their suppliers, their clients, their employees, and other stakeholders in order to inspire confidence in the relationship. Flexible firms will recover more quickly and can more readily sustain performance in the aftermath of terrorism’s direct and indirect consequences. Firms need to develop continuity plans to deal with crises. Such plans may, for example, facilitate a shift of production to different regions of the world in the wake of unanticipated disruptive events. Particularly for firms that engage in massive outsourcing, the reliance on a single or even limited number or locations of suppliers, is quite risky. Ongoing business relationships after a terrorist incident need to be a principal goal of any firm. Apart from the importance of such an achievement for the viability of the firm, business continuity also denies terrorists their achievements.

Especially small and medium-size enterprises, have limited resources and competing priorities. Managers are disinclined to plan for contingencies that (a) may occur at some distant future time (e.g., not this quarter); (b) involve high levels of uncertainty and are therefore difficult to measure and plan for; and (c) shareholders and stakeholders view as relatively unimportant. A key challenge for policy makers, therefore, is to stimulate managers to invest the time and money to deal with the threat and possible effects of terrorism and other emergencies.