return to Table of Contents Chapter 3. The Commercial Diplomacy  Case—Substance and Content   Key Elements The key content elements in a commercial diplomacy (CD) case are different, in most cases, from those in business management cases. It is essential, therefore, to provide prospective case writers with a review of the fundamental conceptual elements that must be considered in writing a CD case and its related material. This chapter provides the case writer with a basic introduction to the concepts of commercial diplomacy. A more thorough and complete treatment of this subject is provided in the many different books and courses of study available in professional programs in the field. The CD professional has become an active and valuable participant in the process of globalization. With the convergence of the world’s economies, the growth of international trade and investment, the changing regulatory and sectoral differences between nations, and the emergence of global issues such as the natural environment, the value of professional commercial diplomats has grown. CD case writers must include this valuable experience and specialized knowledge in the content of their cases. Their case studies may then be useful tools for teaching the essential concepts of commercial diplomacy. The Arena The arena where commercial diplomacy activity takes place may be as narrow as a negotiation room or as broad as the activities that take place across many borders. In researching his or her case, the writer must be aware of the geographical, political, and jurisdictional extent of the case. The borders of a geographical unit may or may not coincide with the political boundaries, nor even with the jurisdictional ones. As an example, the Foreign Corrupt Practices Act (FCPA) covers corruption that occurs outside of the geographical and political borders of the United States. These illegal acts may have been committed by a non-citizen of the United States working for a foreign subsidiary of an American company. Thus, a case dealing with the FCPA would potentially have a wide range—the entire world outside of U.S. political borders. Other examples of extraterritoriality would be cases focusing on foreign embargoes and suits involving foreign actions. The first is represented by the South African Embargo that was in force several years ago, and the second by the Helms-Burton Act, affecting trade with Cuba. Consequently, the difference in geographical, political, and jurisdictional boundaries must be kept in mind in understanding the arena, or stage, of the case action. This arena is generally far broader than that found in business management cases. Actors and Stakeholders As on any stage or in any arena, there are actors and players in all written cases. These actors or players are also often called characters, stakeholders, and participants. There is no standard terminology among case writers. In this manual, all parties, whether individuals or organizations who are involved either directly or indirectly in the case, will be called participants. For example, in one case on the semiconductor industry [1], the participants include the United States Trade Representatives (USTR) and the Ministry of International Trade and Industry (MITI), their representatives or members, the American and Japanese semiconductor makers, chip buyers, and chip production equipment suppliers. Beyond these, the U.S. Department of Defense and the semiconductor industry and related industries of Europe and Korea are also indirect participants. All participants do not have equal interests. The primary stakeholders are participants who are key individuals, groups, and organizations that have the greatest economic and political interest in the issue at hand. The primary stakeholders in the semiconductor case mentioned are the Japanese and American chip makers and American chip associations. The secondary stakeholders include representatives of governments, that is, MITI and USTR. They are secondary stakeholders because it is in their agencies’ interest to succeed in these negotiations, but the outcome is neither of direct benefit nor loss to their agencies. Secondary stakeholders also include the American, Japanese, and European chip buyers and production equipment suppliers. Another secondary stakeholder is the U.S. Department of Defense, as a purchaser of specialized chips. Another example is provided by the well-publicized conflict between the Boeing Co. (U.S.) and Airbus Industries, a corporation formed and owned by four European governments—the United Kingdom, France, Germany, and Spain [2]. The dispute is based on the fact that enormous government subsidies were given to Airbus, a commercial organization. Boeing felt that this resulted in unfair competition in the aircraft market. The participants included Boeing, Airbus, the governments of the United Kingdom, France, Germany, Spain, various airlines that purchased these aircraft (including many foreign governments), the USTR and Department of Commerce, other U.S. manufacturers (such as McDonnell-Douglas), the Aerospace Industries Association, and others. The primary stakeholders, however, were Boeing and Airbus, including its government owners. Virtually all of the other participants identified here were secondary, but nonetheless important, stakeholders. The Organizations The participants and stakeholders described in the previous section must also be considered in terms of their organizational form and purpose. The organizations involved in commercial diplomacy are spread across a broad spectrum, from private entrepreneurial firms to corporations, and from local governments and national governments to international agencies. They also include interest groups, often called non-government organizations (NGOs). All of these are involved in commercial diplomacy. Dividing these organizations into categories is helpful to the case writer in clearly defining and understanding the stakeholders in the cases to be written. The first major category of organizations is business. These include private firms in all industries, ranging from the exploration and exploitation of natural resources, agriculture, manufacturing, to services of all kinds, such as finance, health care, and insurance. The second major category of organizations is the public institutions of government at all levels and their associated agencies. International agencies to which governments belong, such as the WTO and IMF, must also be included in this category. There are also quasi-government agencies, such as the Federal Reserve System, that provide private goods and services, but have strong governmental ties. Finally, the third category consists of non-governmental organizations, or NGOs, also called intermediate or interest groups. These organizations are essential to the functioning of a pluralistic democratic political system. They may range from trade associations, labor unions, and political parties to fan clubs, ethnic associations, and societies for the arts. Interest groups provide an organized basis for the attainment of the common objectives of their individual members, and they can heavily influence the outcome of events. Another category consists of groups that may have common interests but are essentially unorganized, such as taxpayers, voters, or consumers. Adam Smith understood that even unorganized consumers could attain a common objective, despite their individual choices. A group of similar ilk is the media. Although unorganized, the press has a common objective to inform the public in an unbiased manner. Institutions Of the organizations previously described, the most visible and relevant in commercial diplomacy are the public institutions. These include legislatures, executive departments, regulatory and administrative agencies, judiciaries, and international organizations. These institutions establish policies and laws governing social, political, and economic behavior. They also act as forums in which competing groups may contest issues. Public institutions are not monolithic bodies, but are comprised of individuals, all of whom can take individual positions and attempt to influence committees, agencies, and other governmental bodies. Consequently, contesting issues within public institutions is a highly complex endeavor. Understanding the procedures of these institutions and how to work within them is an essential part of the commercial diplomat’s work, and therefore also an important element in CD cases.   The Issues An issue is defined here as a matter of discussion, debate, dispute, or public concern. The primary issues requiring the involvement of commercial diplomacy professionals are those related to international trade and investment and other policy conflicts arising from globalization. Trade issues may involve tariffs, quotas, dumping, offsets, or others. Investment issues often involve barriers to direct investment, joint venture restrictions, or technology-mandated joint ventures. Non-market policy issues may involve the natural environment, health and safety, and labor standards, to name a few. Other issues may be related to subsidies, industry standards, intellectual property rights, competition policy, or other regulatory matters. Also, some issues are relevant to specific market sectors such as telecommunications, transportation, pharmaceuticals, and computers, among others. These issues, primarily of the non-market type, do affect economic activities, although political, legal, and institutional solutions are required. Consequently, the integration of different disciplines is often necessary to reach final solutions.   Policies The preceding discussion used the phrase policy issues in the broadest sense. Policies are the guiding principles and procedures, plans, or courses of action intended to influence or determine decisions and actions. Nations have trade policies, investment policies, competition policies, and so on. As signatories to international agreements, nations tend to have similar policies in some respects, yet some of their policies may also be at great odds with those of other nations. Differing national and regional policies are often at the heart of a case dispute. A clear understanding of how policies are formed and implemented is important to the case writer. Legal Environment The laws, regulations, and rules used to apply policies are also important elements of a commercial diplomacy case. Laws are generally passed by a legislative body of a country in support of that country’s specific policies. Laws, therefore, are established by the authority invested in a nation’s political structure. They may also be established by precedence, that is, made by judicial findings and added to the body of rules called the legal system. Regulations are the means to control or direct according to the laws that are in force, and these in turn can be acted on with the force of law. A rule is the authorization, prescribed direction of conduct, especially one governing the procedure needed to perform the dictates of regulation. One element of the legal environment that has provided material for an excellent CD case is intellectual property rights. The opening paragraph of a case negotiation simulation on an intellectual property dispute between the U.S. and Korea illustrates the breadth of this area [3]. To preserve their competitive advantages in the global marketplace, makers of pharmaceutical and chemical products depend upon patent protection; creators of computer software, publishers of books, songwriters and performers, and moviemakers depend upon copyright protection; producers of famous brand names—NIKE, Coach, Nicole Miller, for example—depend upon trademark protection. In all of these industries, companies invest considerable capital and resources into perfecting their products, and they want to be fully compensated for their efforts not only in the U.S. market, but also in foreign markets. This area of international intellectual property rights may be the single most important legal issue for American trade policy makers today. The hierarchy of political governance—policy, laws, regulations, and rules—becomes part of the complexity of real world commercial diplomacy and of the details of individual case studies. It is important for the case writer to recognize each of them. Instruments The instruments of trade and investment policy, based on law and described by regulations and rules, are frequently the basis for conflicts between parties. For example, one specific instrument, tariffs, has been a major focus of international trade agreements and differences among trading nations for the last 50 years. These instruments of trade policy include tariffs, quotas, offsets, countervailing duties, and administrative guidance. Others that can be included are subsidies, voluntary export restraints, and rebates. The case writer must understand these differences in trade instruments and be knowledgeable about instruments in other policy areas such as investment policy, technology policy, and competition policy. Instruments of policy implementation are often the subjects of disputes and conflicts in CD cases. Coalition Building In commercial diplomacy, as in war, there is strength in numbers. Because of this, efforts by stakeholders to build coalitions are an important aspect of CD cases. Coalition building is the construction of a formidable collection of separate individuals or groups into a unified whole for the purpose of achieving a specific objective. If the attainment of an objective requires a majority, then coalition building becomes a process of joining together a sufficient number of minorities to reach a majority. Many coalitions are ad hoc and focused on specific issues. Others are longer term, such as trade associations, which may exist for decades. The members of a short-term or ad hoc coalition may find themselves on different sides on the next issue campaign, while long-term coalitions generally have more stable memberships. Coalitions are built a number of ways. Lobbying—the personal provision of information, usually to domestic government officials—is one such mechanism. In the semiconductor case mentioned earlier, for example, this type of coalition building led to the formation of a Congressional Support Group. Coalitions can also be built by mobilizing the constituents of various government officials. This is called a grassroots strategy, and is based on reaching as many individuals as possible by the broad dissemination of information and then organizing them to take individual but common actions. Coalitions are also built by members of common groups such as businesses (trade organizations, chambers of commerce); employees (unions, credit unions); professionals (engineering societies, the law bar); fan clubs (Elvis Presley Fan Club); and activists such as environmentalists (Sierra Club). In fact, there are over 20,000 national societies that may be called interest groups in the U.S. All of these coalition-building examples involve the extensive use of information, the subject addressed in the section that follows. Information Information refers to what participants know about the issues, the alternative courses of action and their consequences, and, finally, the attitudes of those involved in the issues. Information is important in many ways. Information can be useful in lobbying, in resolving issues, in clarifying subjects under scrutiny, and in determining differences in views among protagonists. Interest groups generate pro and con information regarding issues. In writing case studies, the volume of information on the case and the amount that should be included in the case study itself is an important aspect. Also, case writers must consider whether or not to include only factual information or to also include disinformation deliberately or mistakenly provided by participants in the case. Information about issues in the real world can be disseminated in a number of ways. The mass media is one means of not only distributing information, but also of influencing public opinion. Testimony before government legislators and agencies is also a means of providing information that will become widespread. Advisory panels and special committees issue reports, and these also become sources of broadcast information. Judicial findings that must be communicated to the public, such as in class action suits, are another means. Relative to coalition building, which demonstrates strength in numbers, information may be considered a force multiplier. Regardless of the coalition’s numbers, their efforts can be multiplied by the amount of information they hold and disseminate. Public Opinion Newspapers, TV, radio, and magazines are the principal vehicles and influences in shaping public opinion on issues of all types. The media is a reporter of events, an interpreter of news, an investigative mechanism, and lastly, a means of supporting or advocating a direction of change in policy. The media itself may shape public opinion, but special interests can influence the media to provide the advocacy that they are seeking. In the field of commercial diplomacy, issues can be at the center of media attention in a number of different countries at the same time. In the semiconductor case mentioned earlier, the general press, as well as the trade press, continued to report on the issue over a period of 15 years. During this time, editorials and opinion pieces were heavily tilted toward protection and support of the U.S. chip industry in the U.S., while the Japanese press continued to provide reasons to support their home industry and to reject the complaints of U.S. chip makers. Influencing the media writer as an individual or as part of a group is not a minor task in major issue conflicts. It becomes an essential one, and the experience and events that result need to be considered in writing cases. The Human Influence A tendency among academics in reporting events is to ignore the human emotions that are generated. However, real events produce human emotions, and these are often central to CD cases. Actors and stakeholders, as individuals, may be happy, sad, frustrated, impatient, irritated, agitated, pleased, and so on down the list of hundreds of emotions experienced by men and women. These emotions are part of the story being told. They reflect the events, the decisions, the acceptance or rejection of claims, and the tenor of meetings attended. It is important to add realism to a case by describing the emotions shown. The best stories always relate the emotions of the characters. Why not CD cases? The Actions Actions taken by case participants range across all spheres of business, government, and interest group behavior. The actions of specific firms, industries, nations, and regional agencies have all been noted in commercial diplomacy case studies. These actions may be the result of an international policy conflict or a commercially adverse action taken by a foreign party, but the number and type of actions that may take place are too broad even to attempt to categorize here. However, the case writer’s research must carefully depict the actions of all actors and stakeholders if possible, especially the ultimate actions, namely, decisions. The Decisions In all evaluative CD cases, the decisions have been made. These may stop, start, modify, penalize, or reward the participants’ actions in the case. The case writers must provide the reader with enough information on how the decision was made and implemented so that he or she may judge its suitability. In a decision-focusing case, the decision is not reported. The case writers are placed in the role of decision maker and asked to determine the available alternatives, analyze them, and select the best possible decision. The case epilogue will indicate the actual decision made, but this decision may not have been the best as judged by the class. Formal Analysis The analytical tools and skills employed by CD professionals are often part of the case events. Authors may wish to judge the use of these tools when reviewing a case, and therefore these analytical tools and their application should be understood by the case writer, the case reader, and the case teacher. But, first, a general look at formal analysis is in order. The term analysis generally applies to any approach that attempts to explain a phenomenon or answer a question. In the physical sciences in particular, the analysis applied is often called the scientific method. The scientific method is often described as a simple set of steps:   Defining the problem—It is first necessary to have an idea as to exactly what the problem is so that an investigative direction can be selected. Observing the evidence—An accumulation of information so that the analyst feels that he or she clearly understands the nature of the problem. Forming the hypothesis—The analyst uses intuition and logic to perceive patterns of behaviors and draws tentative conclusions. Experimentation—A method of testing to validate or reject the tentative conclusions. Formalizing the theory—Results of testing are made known so that others may further investigate the problem.   In the social sciences or so-called "soft" sciences of economics, political studies, law, sociology, and others, the scientific method is also softened or modified. The modification is such that the paradigms of these soft sciences are found not by physical experimentation, but generally by observation of human behavior under common everyday conditions. In other words, statements of behavior, statistical analysis of data, recurring observation of case histories as research cases, and pure, simple logic and intuition replace physical experimentation. The analysis of a CD case is based on economics, political science, and other social sciences and is therefore less well-defined and less subject to absolute confirmation; nonetheless, a logical method must be applied. These disciplines do have a set of tools dependent on accumulated past knowledge and logic, statistical studies and mathematical models, and repeated observations of trained observers. However, to repeat the fundamentals of economics, political science, law, business management, sociology, and psychology here in this manual would be too lengthy a task. At this point, however, the introduction of specific tools useful in the commercial diplomacy analysis is appropriate. Analytical Tools There are four major analytical tools that continue to arise in CD situations and cases. These tools of analysis are policy analysis, commercial analysis, economic analysis, and political analysis. Policy analysis involves analyzing the policy at issue, including any relevant laws, regulations, and rules. The policy issues may include health, safety, environment, national security, competitive policy, technology policy, and even specific regulatory aspects related to various industries such as telecommunications, financial services, agriculture, and others. Commercial analysis focuses on the impact of issues on sales, exports, imports, profits, costs, prices, market share, breakeven analysis, jobs, wages, and similar measures. Commercial analysis encompasses the measures related to business functions such as production, marketing, human resources, as well as others. Economic analysis in commercial diplomacy focuses primarily on macroeconomics, since many micro-economic aspects are specific enough to fall under commercial analysis as described above. Economic analysis here involves the impact of an issue on the overall economy, including price levels, wages, growth, and distributional effects on broad classes of producers, consumers, and workers. Political analysis involves identification of the participants and particularly the stakeholders affected by the issue and their actions or decisions. It includes the benefits and costs that accrue to the stakeholders. It also involves an assessment of the participants’ political power and the likelihood of their increasing it. It also involves the views, political involvement, and impact of legislators and other political figures, and other factors likely to affect the political process leading to a decision in the case. Public opinion is also an aspect of political analysis, as is the activist efforts of interest groups. These analytical tools—policy, commercial, economic, and political—are the core of CD assessment of events and cases. CD Skills The previous section described specific tools for the analysis of cases in commercial diplomacy. Here, the skill sets of the commercial diplomat are enumerated. They are: Negotiation Mediation, Dispute Settlement Conflict Resolution Consensus Building and Coalition Politics Managing Relations with Politicians and the Media Managing the Government/Business Interface   Each of the above skills requires training, which is provided in the curricula meant to develop practitioners. Each of these, of course, can also be developed through extensive practice. The CD Case Analysis In the previous pages, many of the elements of commercial diplomacy have been presented and discussed. The immediately preceding sections focused on how commercial diplomats specifically use analytical tools and bring their skills to bear upon the issues in which they are involved. To recap the last three section titles, they consisted of: Formal Analysis Analytical Tools CD Skills   We will now turn to how all of these analyses, skills, and capabilities are used in the analysis of the case. The CD case analysis consists of three broad areas: Integrative Analysis Influencing Actions Negotiation and Settlement Each of these is described separately below. Integrative Analysis In writing the CD case, the author must keep in mind that the student must attempt to assess the integrative analyses used by participants. From this standpoint, the material presented in the case must invite the following types of questions:   What analytical tools did the case participants use—formal analysis, commercial diplomacy analysis in terms of commercial, political, institutional, legal, policy analysis, or some other type? What information and data did the participants assemble? How was the data presented to them? Was a good case presented by the participants from the standpoint of a logical approach? How much advance work did the participants do in preparation of meetings and negotiations?   These types of questions are meant to illustrate the degree to which the case participants have employed integration analysis; however, other questions of this type may be used as well. Influencing Actions The case writer must also describe various actions the case participants took to influence outcomes. These actions include consensus building, public advocacy, and negotiation. The questions that must be invited to be asked are of the following types: What campaign literature was used—white papers, ads, editorial opinion (op-ed) pieces, press releases, testimony, speeches, etc.? Who was lobbied? Were other stakeholders educated? Mobilized? Were coalitions built at home? Abroad? Which parts of the bureaucracy were mobilized? How many resources were dedicated to the effort? Were they sufficient? Did the participants seek to shape public opinion? Or did they ignore it? Did they seek to influence the experts, think-tanks, and interest groups? Through what means did they do so—conferences, sponsored research? These questions are meant to illustrate how the case participants employed time and resources to influence the outcome through the mobilization of others. Negotiation and Settlement In the area of negotiation and settlement, an important part of most commercial diplomacy cases, the case writer must focus on the participants’ negotiations and dispute settlement. In this area, the key questions that the writer must keep in mind when writing the case are: What part of their legal, political, institutional, and other environment did the participants accept as given, and what part did they decide to challenge? What were their legal cases, if any? What choices did they confront in developing a negotiation or dispute resolution strategy? What did the participants decide to do? How did they approach the negotiations? Did they seek to pre-negotiate common positions with stakeholders in other nations? These questions illustrate how participants may approach and achieve the settlements they seek. The discussion has now covered the final aspects of case analysis with which the case writer must be concerned. A Final Note This chapter discussed the various elements of commercial diplomacy. Many of them are essential to the written case, however not each and everyone of them is intended to be included in the final documents. The case writer must choose those elements necessary to write a successful teaching case. Summary The substance and content of a case in commercial diplomacy are different from business management cases and much different from those of research cases in medicine or cases used in law schools. This chapter attempts to relate the substance and content to be found in most CD cases. The subjects discussed have included the stage and arena, the participants and stakeholders, the organizations, institutions, and the human emotions involved in a case. The discussion has not been as extensive as a textbook treatment, nor was it meant to be. It does, however, provide a short guide that the CD case writer may use as a reference for further investigation.   References U.S.-Japan Competition and Trade in the Global Semiconductor Industry. available at www.commercialdiplomacy.org/case_semiconductor.htm Salter, M. I., and Coleman, W. Airbus versus Boeing (B): The Storm Intensifies, 1988. Boston, MA: Harvard Business School Ryan, M. P., and Bednarike, J. N. (1993). Negotiation Simulation—Drugs, Books and Videos: U.S.-Koran Dispute Over Intellectual Property Rights, Case 710-95-N. Washington, D.C.: Institute for the Study of Diplomacy, Georgetown University. continue to next page top