Book Review: Corporate Diplomacy

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Corporate Diplomacy
by Ulrich Steger
John Wiley & Sons ©2003
304 pages

Strategies for a Volatile Business Environment
Instead of focusing on the emergencies that turn into business crises, environmental management expert Ulrich Steger examines the issues that come earlier. By doing this, he provides timely advice for companies that want to develop early warning systems to alert them to giant problems before they develop. Steger writes that companies must address a public policy agenda that includes social and environmental responsibility as well as other sustainability issues. In an effort to help corporate managers maintain their companies’ credibility amid the constant pressures of globalization, he explains how they can step outside the traditional role of business to fulfill their diplomatic needs.

Steger admits that corporations are, above all, economic entities whose primary purpose is to satisfy customers. Although they must recognize and abide by market forces, they must also recognize the ways they are intertwined withsociety. From the influence of governments to the employees and customers who play multiple roles (economic agents, parents, citizens, lobbyists, etc.), he writes that corporations cannot avoid dealing with the interests, institutions, ideas and rules that fall outside the market domain. These forces, which are a relevant part of business, are made more fragmented, hostile, unpredictable, opportunistic, demanding, media-driven and diffuse by globalization.

Coping With Nonmarket Forces
To help companies cope with the demands of these nonmarket forces while satisfying market demands, Steger offers revealing case studies and statistics that get to the heart of understanding a diffuse business environment. Since expectations for companies are often conflicting and even unreasonable, Steger presents strategies and tools to help specific industries and companies create more transparency in their actions, transfer insight, and document their experiences.

Steger offers companies ways to systematically and professionally manage the business environment in a way that promotes smooth business performance and mutual adaptations between corporations and society. Conflicts of interest and values are part of this equation, as are differences in priorities and disagreements about facts, but he explains that companies that engage in corporate diplomacy are better able to understand what the issues are and respond to them in a reasonable and professional manner.

Steger’s extensive research focuses on the impact of globalization, and reveals the changes and implications that are part of the new environmental conditions it has created. It affects states, regions, organizations and the individual in a variety of ways, including their economics, society, politics and culture. Because globalization fosters a more fluid, volatile, densely interactive and speedy world, Steger writes that companies need to understand the changed business environment as well as the “global village” with which they now must cope.

Managing the Business Environment
There are many players that companies must understand if they want to successfully manage their business environment, Steger explains, and this understanding must also include their own roles in the process. Among these players are those in charge of national security who have become more prominent since Sept. 11, 2001, as well as the activists who oppose globalization and all who represent it, especially companies such as McDonald’s and Coca-Cola.

Steger also takes an investigative look at the empirical evidence on how companies have managed their business environment and the pressures that confront them. By detailing the failures of Monsanto in the battle surrounding genetically modified organisms (GMOs), he offers a template to demonstrate a pattern of typical mistakes that can be made in similar confrontations and the ways they can be avoided. The mistakes he cites include not understanding the real issues that concern consumers, underestimating adversaries, and reacting too little too late to activist pressure. Steger reminds companies that they must never underestimate the importance of stakeholders, and must remember to appear responsive, but not soft, and be proactive, but not too much.

Steger writes that the most important action for any executive responsible for managing the nonmarket environment is to build a company-specific, robust business case that is industry- and company-specific, and looks at economic incentives and consequences.

Why We Like This Book
Corporate Diplomacy offers a fresh perspective on risk management that highlights many vital lessons that have been learned from the history of globalization, and presents an early awareness system that can help companies cushion both political and regulatory impacts, as well as their economic consequences. By offering in-depth case studies of ABB, Daimler-Chrysler and Shell, Steger makes organizations aware of the difficulties in the business environment that top management must tackle with a corporate diplomacy strategy. ~

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