International Terrorism and Marketing: managing the unthinkable Prof. Michael R. Czinkota Georgetown University [email protected].

International Terrorism and International Terrorism and Marketing: managing the Marketing: managing the

unthinkableunthinkable

Prof. Michael R. CzinkotaProf. Michael R. Czinkota

Georgetown UniversityGeorgetown University

[email protected]@georgetown.edu

Part I: Definition and ConcernsPart I: Definition and Concerns

International terrorism is the systematic threat or use of violence across borders to attain a political goal or communicate a political message through fear, coercion, or intimidation of particular persons or the general public (Czinkota,Knight and Liesch, 2004)

A key distinction from other disasters: Terrorists respond to preventive measures

Measurement ConcernsMeasurement Concerns

1. Terrorism has direct and indirect effects immediate consequence subsequent actions, regulations, new

policies

2. Analyses at three levels: primary –individual and firm micro- industry, value chain macro- global environment

Measurement Concerns (cont.)Measurement Concerns (cont.)

3. Ongoing uncertainties about: meaning of terms clarity of data

4. Different threats and perceptions

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marketing, music, physics, psychology…

Part IIPart IIWhy Marketing ?Why Marketing ?

1.1. Marketing deals with consumers and marketsMarketing deals with consumers and markets Terrorists disrupt consumer demandTerrorists disrupt consumer demand Terrorism affects supplyTerrorism affects supply

2. Marketers are the first responders2. Marketers are the first responders Imports and exportsImports and exports Distribution and logisticsDistribution and logistics Communication with buyers and suppliersCommunication with buyers and suppliers Administration of pricing shiftsAdministration of pricing shifts

Why Marketing ? (cont.)Why Marketing ? (cont.)

3.3. Marketers are trained to develop empathyMarketers are trained to develop empathy Practice of ProfessionsPractice of Professions Understand unintended consequencesUnderstand unintended consequences

4.4. Marketers are well trained to cope with Marketers are well trained to cope with cultural issuescultural issues

Use of LanguageUse of Language Power of PersuasionPower of Persuasion

Part IIIPart IIISome Research PropositionsSome Research Propositions

based on a Meta Analysisbased on a Meta Analysis

Firms may increasingly consider Firms may increasingly consider terrorism when evaluating foreign terrorism when evaluating foreign

marketsmarkets

Terrorism may Become the Next Terrorism may Become the Next Segmentation BaseSegmentation Base

■ The more a country or region is affected by terrorism, the less The more a country or region is affected by terrorism, the less foreign firms may be likely to purchase from that areaforeign firms may be likely to purchase from that area

■ Firms may make essential inputs themselves rather than buy them Firms may make essential inputs themselves rather than buy them from suppliers in terrorism threatened environments abroadfrom suppliers in terrorism threatened environments abroad

■ Firms may diversify their base of suppliers in Firms may diversify their base of suppliers in order to assure greater flexibility and order to assure greater flexibility and continuitycontinuity

■ To reduce their exposure to terrorism, firms To reduce their exposure to terrorism, firms may decrease their foreign direct investment may decrease their foreign direct investment activities and substitute exportsactivities and substitute exports

■ Terrorists want Terrorists want “bang” for the buck“bang” for the buck

■ (Rich) governments (Rich) governments can protect targetscan protect targets

■ (Rich) companies (Rich) companies can change can change business modelsbusiness models

■ Protection leads to Protection leads to softer targetssofter targets

IV. SOME EARLY IV. SOME EARLY RESEARCH RESULTSRESEARCH RESULTS

FactsFacts

633 survey and interview responses633 survey and interview responses Firms from US, EU, Asia, and Latin AmericaFirms from US, EU, Asia, and Latin America Mostly International and Global Firms Mostly International and Global Firms 1/3 large, 1/3 medium, and 1/3 small in size1/3 large, 1/3 medium, and 1/3 small in size ¾ have 10+ years of international business ¾ have 10+ years of international business

experienceexperience ½ sell more than 20% of production abroad. ½ sell more than 20% of production abroad.

Chief ConcernsChief Concerns

Fluctuating Exchange RatesFluctuating Exchange Rates Rising Oil PricesRising Oil Prices Effects and Threats of Effects and Threats of

Terrorism Terrorism

Direct Threats

-0.93

-1 -0.8 -0.6 -0.4 -0.2 0

Expectation of Future Threats

-0.4

0.21

-0.5 -0.4 -0.3 -0.2 -0.1 0 0.1 0.2 0.3

EU

US

Shareholders Reward Investment Shareholders Reward Investment in Preparationin Preparation

-0.61

-0.46

-0.8 -0.6 -0.4 -0.2 0

EU

US

Costs Have Risen

0.37

0 0.05 0.1 0.15 0.2 0.25 0.3 0.35 0.4

Prices Have Risen

-0.01

-0.012 -0.01 -0.008 -0.006 -0.004 -0.002 0

More Cautious Expansion

-0.74

-0.8 -0.7 -0.6 -0.5 -0.4 -0.3 -0.2 -0.1 0

Terrorism Contingency Plans

NEUTRAL

Terrorism Influencing Supply Chain Design

-0.23

-0.25 -0.2 -0.15 -0.1 -0.05 0

Terrorism Influencing Marketing Strategy Design

-0.25

-0.3 -0.25 -0.2 -0.15 -0.1 -0.05 0

Terrorism Insurance

0.33

0 0.05 0.1 0.15 0.2 0.25 0.3 0.35

Allocation of Terrorism Premiums

-0.24

-0.3 -0.25 -0.2 -0.15 -0.1 -0.05 0

Government Has Slowed Us Down

0.05

-0.25

-0.3 -0.25 -0.2 -0.15 -0.1 -0.05 0 0.05 0.1

EU

US

Safety Stock Increases

-0.55

-0.38

-0.6 -0.5 -0.4 -0.3 -0.2 -0.1 0

EU

US

We Can Track Anti-Terrorism Expenditures

-0.21

-0.47

-0.5 -0.4 -0.3 -0.2 -0.1 0

EU

US

We Have Intensified Investment Abroad

0.1

-0.24

-0.3 -0.25 -0.2 -0.15 -0.1 -0.05 0 0.05 0.1 0.15

EU

US

We Have Shifted to an Export Orientation

-0.5

-0.19

-0.6 -0.5 -0.4 -0.3 -0.2 -0.1 0

EU

US

Some Early ConclusionsSome Early Conclusions

How quickly we forgetHow quickly we forget We are still unpreparedWe are still unprepared We do not plan sufficientlyWe do not plan sufficiently Cost/Price tension Cost/Price tension Cost components cannot be isolatedCost components cannot be isolated

The Good NewsThe Good News

We are not terrified We are not terrified More similarities than differencesMore similarities than differences Trade relations are strongTrade relations are strong Continued interest in international activitiesContinued interest in international activities Cultural convergence is the Cultural convergence is the

direction direction