Does Your Company Have a Foreign Policy?
DOES YOUR COMPANY HAVE A
FOREIGN POLICY AND THE INSTRUMENTS TO EXECUTE IT?
By Ambassador Riaan Eksteen
(Note: Statistics used are related to the time of writing the document in October 2009)
Any company operating across its own country's borders must have a foreign policy.
Somebody must be responsible and give credence to it. It is imperative for such a
company to do so for precisely the same reasons a country has a foreign policy.
Commercial interests have now become a key part of foreign policy. Business needs to
understand foreign affairs and how to be comfortable in that environment.
Most companies think about foreign policy as something that the government alone
conducts. However, a business foreign policy would not only aim at understanding and
influencing the way its own government works; it would devote even more time to figuring
out how foreign governments are likely to behave. It is thus imperative that companies —
not just multinational corporations — understand foreign politics and the way they could
affect business prospects and decisions.
The underlying reason for any country's foreign policy is to promote and protect the
country's interests abroad. Top executives and their management teams must be au fait
with foreign policy issues, their demands that impact on their companies, and their
decisions and operations abroad. They must maintain constructive relations with the host
country's government, body politic and institutions.
All executives read newspapers, listen to the radio and watch television. They thus read,
hear and watch what is going on in the world. But, do they really comprehend what is
happening so that they appreciate and recognise the opportunities and threats
developments in the countries their companies are present and operating in — or in a
neighbouring country, sub-continent — hold for their companies?
How do they translate these developments into action plans whereby opportunities and
challenges are exploited and threats and disasters avoided? Or do they just simply suffer
from the CNN-effect: don't pay any attention to any development or story unless and until
CNN starts reporting it.2
Top management, while recognising that demand — or, for that matter, that vacuum —
may not have the tools at its disposal or the desire to concentrate on the opportunities
and problems which must be addressed in its overseas endeavours. Companies also
need to educate boards of directors in the reality of doing business abroad. Issues such
as economic opportunities, political and economic uncertainties and risks, corruption,
human rights, environmental protection, need for long-term horizons, and extreme
flexibility in planning and operations require corporate directors with a level of experience
not often found. As firms expand abroad, the qualifications for corporate governance will
need to change, with understanding of global realities given much more priority.
A "no crisis" world does not exist. With little prior notice the fall-out from political and social
unrest abroad ends up at the front door of a company in various forms. The staying-at-
home syndrome does not have a place in any progressive minded company. Events tend
to gain their own momentum, which if not "mastered" will be more and more difficult to
handle successfully. When they do turn into crisis it is not possible to deal with them by
improvisation. High-level international and strategic advice is required by corporations
and private entities operating on the international scene regardless of how insignificant
such an involvement may initially be regarded to be by the management or members of
the companies.
Expertise, experience, credibility and dedication are required to develop close and lasting
relationships and, also, to define these strategic needs and opportunities for clients in
foreign countries and environment. Foreign relations and how they manifest themselves
in various ways must be understood. Knowing, understanding and interpreting the political
environment in any country are vital ingredient for successfully identifying the
personalities and all who are involved in the make-up of that country. They are also vital,
for entering, establishing, operating and performing in that country. Being able to access
a considerable contact base ensures a comprehensive view of what is unfolding. Political
and socio-economic matters internally and externally are constantly in a state of flux.
Companies must be able to react to them promptly. Being comprehensively involved
abroad can be a complicated, intricate endeavour.3
Information is the commodity on which the future is built. Opportunities are the lifeblood
of companies. The experience of an external advisor may be a further key to success. An
intellectual guide and interpreter are basic requirements to ensure the continued success
of a company aboard.
A multinational company must have a Corporate Advisor on Foreign Affairs/Policy who
can work easily across international boundaries. Such a person can play a critical role in
guiding and advising on corporate strategy and policy decisions in this field and engage
in strategic dialogue with the company.
As companies become more exposed to the outside world and business becomes more
international, none dare leave this vital aspect of its operations to chance or fate. The
sales revenues of the world's largest company, Wal-Mart Stores Inc., are larger than the
GDPs of all but 25 countries. At 2.1 million, its employees outnumber the populations of
almost 100 nations. The world's largest investment manager, a low-profile New York
company named BlackRock, manages $3.5 trillion in assets — greater than the national
reserves of any country. In 2010, a private philanthropic organisation, the $33.5 billion
endowed Gates Foundation, distributed more money for causes worldwide than the World
Health Organisation had in its annual budget. An international company like ExxonMobil,
with sales around $350 billion in 2011, operates in more than twice as many countries as
a significant, wealthy country like Sweden has embassies. In 2010, Sweden's defence
expenditures were about one-sixth of Exxon's budgeted expenditures. The energy
behemoth has more free capital to distribute worldwide, plays a much bigger role in the
economic lives of more countries, and mobilises more resources to influence political
outcomes than do the Swedes. So the question arises: Which entity, Sweden or Exxon,
probably has a greater impact on the outcome of global climate talks? On the adoption of
environmental policies worldwide?
Comparing the sizes of companies with those of countries is a fraught business, with
imperfect metrics, but consider this: The 1,000th-largest company in the world has annual
sales greater than the GDPs of 57 economies. That company, Owens-Illinois, makes
glass bottles; its sales exceeded $7 billion in 2010, more than the GDPs of Benin,
Bermuda, Haiti, Kosovo, Liechtenstein, Moldova, Monaco, Nicaragua, Niger, Rwanda,4
Tajikistan, and dozens of others. In fact, of the world's 500 largest companies, according
to Fortune magazine, all 500 would rank among the top 100 economies on the planet.
(GDP is a complex, if misleading, value-added metric, and it does not directly compare
with a company's sales. But the comparison does give a sense of scale.) The
phenomenon of corporate power is, of course, hardly new. The British East India
Company ran the Indian subcontinent and managed one of the world's largest armed
forces; Andrew Carnegie and Henry Ford built small cities for their thousands of workers,
complete with employee housing and schools. Over the past century, however, the state-
like roles of companies have grown and changed, becoming more common and more
complex as multinational corporations themselves have grown bigger.
A company can outperform its rivals only if its unique and valuable position is based on
and backed by a different set of activities. To achieve operational effectiveness a
company's management must not only be able to maintain those differences, but also
perform differently and better. At home and abroad competitive strategy counts. It is all
about being different and better. Not leaving a vacuum. Or making complacency part of
its philosophy. A quality company always searches for ways to strengthen, improve and
extend its position at home and abroad. In maintaining its unique position, such a
company will find a role for foreign activities as a central and focused part of its
establishment.
Being in command at home is as important as being able to operate authoritatively and
decisively in international arenas.
The reverse of “Think Globally” and “Act Locally” is often applied by companies, with
disastrous consequences.
Riaan Eksteen
Cape Town
October 2009