Tuesday, March 21, 2006


Power of persuasion
By ND Batra
From The Statesman

In its bid to take over Arcelor, Mittal Steel needs a better communication strategy and more effective global corporate diplomacy to persuade Europeans that the Mittals are no stealers and come as friends. As corporate India expands globally, it must communicate well. Excellent communication is the key to effective corporate public affairs and global diplomacy. Without a comprehensive communications strategy that takes into account significant stakeholders who interact with the company and form its business environment, global corporate diplomacy cannot be effective. The recent failure of Dubai Ports World in its attempt to take over the management of US ports is a case in point.

In this age of global transparency of the 24-hour news cycle and the Internet, and of reporting standards established by global watchdogs like the Global Reporting Initiative, companies can neither run nor hide. Companies just cannot afford not to communicate about a problem that concerns stakeholders in their business environment. And since they have to communicate, they must do it efficiently. At the heart of communication is persuasion, even when a company is just trying to inform stakeholders. Power to persuade is the soft power that companies exercise to win the hearts and minds of people. But to do so in a multi-channel environment over which they do not have much control, needs diplomatic finesse, especially when a company has to operate in a foreign environment.

Consider how the following factors affect the global corporate communication environment:

(a) Companies have become de-localised (Mittal Steel, IBM, for example). They are no longer woven into the fabric of local communities as they used to be in the pre-digital age. Company employees do their work in a virtual environment and their mobility makes them less concerned with what is happening in their neighbourhood. In an environment like this, it would take extraordinary efforts for global companies to communicate and present their position in a persuasive manner. China’s CNOOC did not know how to talk to Americ when it tried to take over Unocal.
(b) Perception is reality and many people perceive global companies as more powerful than the government, which draws enhanced critical scrutiny from the media and NGOs. The image of power that global companies project raises expectations as well as fear in the minds of the people. Growing expectations of corporate responsibility create unusual challenges for corporate communications and diplomacy.
(c) Because of the recent corporate scandals in the USA that has put many top corporate executives in jail, the American people expect greater openness and transparency from companies. This may not be true of some rapidly developing countries in Asia, where companies may get away with behavior that may not be acceptable in the USA, Japan or Europe. Since expectation of corporate behaviour differs from country to country, corporate communications strategies must take such variables into account.
(d) Effective communication takes place in a cultural context. Understanding the host country’s political culture is very important for corporate communication and diplomacy to be effective, a lesson corporate India must learn quickly. Political culture includes the legal system, and the rules and regulations which must not be violated in the host country. Although good corporate behaviour is not rewarded, bad behaviour is not only punished but also sullies the reputation of the company. Companies should be problem solvers and should not become part of the problem.
(e) Each country has abiding cultural symbols and icons which make global corporate communication quite a challenge. What is culturally and politically correct in one country may not be so in another country. Not understanding national cultural differences can create a nightmare for companies doing business abroad. While these general observations about the global communication context are important, in order to be effective, global corporate communication must be aimed at specific groups or audiences that are especially relevant to the company. Such groups are: customers, financial analysts, government authorities, and non-business stakeholders such as NGOs.

Customers are the most important constituency for a company. They are the reason for doing business and a very important source of a company’s strength. In a competitive environment, where one product may not be qualitatively much different from the other, keeping the customer coming back to the company requires communication at multiple levels — product, price, image, trust and most of all, reputation, the company. How a company presents itself publicly, through signs, symbols and slogans, and how customers perceive it would determine its place in the marketplace. Trust and reputation are the basis of communication with customers.

The US transparency law (Sarbanes-Oxley Act of 2002), for example, was enacted in the aftermath of Enron’s collapse and other scandals. Communicating effectively with market analysts and financial journalists is very important because it is through them that a company manages its image of financial strength and growth. Raising false expectations for short-term benefits can destroy a company’s reputation. Sometimes, when analysts and financial journalists, instead of being impartial and objective, become reporters and critics, they become part of the vicious conveyer belt, destroy public trust and provoke harsher regulations.

Corporate behaviour is regulated by rules and regulations, which are framed in the public interest and in consultation with the industry. But once the rules are in place, not only authorities but also public interest groups, many of which have established a global network to monitor compliance, closely watch companies’ errant behaviour.

Microsoft’s ordeal in the USA and Europe for anti-trust violation is a case in point. Worldwide, there are thousands of NGOs who have made it their business to scrutinise the behaviour of local, regional and multinational companies to protect the public and environment from exploitation. With clear and well-defined demands, global NGOs that have a huge and broad-based financial and legal support system can swing into campaign mode against a corporation and even a country, very quickly and very efficiently.

Think how Greenpeace International stopped asbestos-laden French carrier Clemenceau from coming to Gujara (India). Cooperating and communicating with international NGOs requires special diplomatic efforts.

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