Chapter 12

CHAPTER 12 INTERNATIONAL BUSINESS NEGOTIATIONS AND DIPLOMACYCase: Saudi Aramco - As of 1996 the ten companies holding the largest oil reserves in the world were all state-owned companies. - U.S. Policy toward U.S. oil companies historically has included such objectives as ensuring sufficient and cheap oil supplies for U.S. needs and strengthening the U.S. political position in strategic areas worldwide. - "Seven Sisters" I - INTRODUCTION The operating terms of international companies: a) Are influenced by governments of home and host countries b) Shift as priorities shift and as strengths of parties change II - GOVERNMENTAL versus COMPANY STRENGTH A - Hierarchical View of Governmental Authority Governments have regulations affecting international business. Companies may accept these as givens. Companies may: a) comply with, b) b)circumvent, or c) avoid operating because of the regulations. B - Bargaining View MNEs and host countries have mutually useful Assets Bargaining School Theory: negotiated terms for a foreign investor's operations depend on how much the investor and host country need each other's assets. Bargaining Relationship: zero-sum or positive-sum C - Country Bargaining Strength The biggest bargaining strengths for countries are: - Large Markets - Political Stability Mercedez plant in Alabama; US$ 300 million in tax breaks. D - Company Bargaining Strength Company bargaining assets include: a) Technology b) Marketing Expertise c) Ability to Export Output d) Job creation Large investments are more prone to be scrutinized D - Joint Company Activities To counter production dominance by foreign companies, countries have encouraged their own manufacturers to consolidate E - Home-Country Needs The home country government has economic objectives of its own Has direct political relations with the host country III - NEGOTIATIONS IN INTERNATIONAL BUSINESS Negotiations are used as a means of deciding the terms by which a company may initiate, carry on, or terminate operations in a foreign country. A - Bargaining Process - Acceptance zones - Range of provisions B - Cultural Factors - high - low context cultures C - Preparation for Negotiations - The choice of negotiators - The location of negotiations IV - HOME COUNTRY INVOLVEMENT IN ASSET PROTECTION Historically most foreign investment disputes concerned expropriation, particularly in developing countries. A - The Use of Bilateral Agreements To improve foreign-investment climates for their investors, many industrial countries have establish bilateral treaties with other countries, often after long and difficult negotiations Us Companies are offered protection: - SBA, Overseas Private Investment Corporation(OPIC) and Eximbank. - World Bank (Multilateral Investment Guarantee Agency) - Eximbank V - MULTILATERAL AGREEMENTS AND SETTLEMENTS - Multilateral settlements of disputes may be handled, or by - a neutral country or group in countries that are not involved. The World Bank sponsored "The International Center for Settlement of Investment Disputes" The World Bank also established the Multilateral Investment Guarantee Agency which offers insurance against losses from expropriations, war, currency convertibility, etc VI - MULTINATIONAL AGREEMENTS: IPRs Intellectual Property Rights (IPRs) are associated with both industrial property, such as inventions and distinctive identifications of companies and products, and artistic property, such as books, recordings, films, and computer programs. Countries differ substantially in their protection of IPRs, through laws and their enforcement. Generally LDCs offer less protection. A - PATENTS Paris Convention - 1883 gave rise to the creation of the International Bureau for the Protection of Industrial Property Rights (BIRPI) - It grants reciprocity to country members - Provides grace period of protection before protection is filed in other country members. Most important contemporary cross-national patent agreements: a) Patent Cooperation Treaty b) The World Intellectual Property Organization c) The European Patent Convention B - TRADEMARKS Companies may spend millions of dollars to develop brand names. If a brand name is not protected by a trademark, then other companies may produce under the same brand name. In the U.S. trademarks can be protected for up to three years without being used as long as a company files an intention o use it. C - COPYRIGHTS The Universal Copyright Convention (UCC) and the Berne Convention D - PIRACY Losses to Consumers Deterrents: greater border surveillance, stiffer penalties, cessation of aid to countries WTO: agreement on Trade-Related Aspects of Intellectual Property Rights WTO also allows countries to take trade sanctions against countries that do not protect intellectual property rights. VII - ROLE OF PUBLIC AFFAIRS Governments are also concerned with the actions of MNEs A - CODES OF CONDUCT - Center on Transnational CorporationsInfant Formulas Employment Practices, Environmental Practices International Business Research return to classnotes