Cross Cultural Issues in International Business - Essay Example

?Introduction Globalization has made it possible for the international organizations to expand at the global level. With fewer barriers to entry, international firms are entering into new markets and expanding their manufacturing as well as customer base. However, expanding into an international market also poses significant challenges as entering into a new market requires significant strategic insights. Besides evaluating the external environment of the host country, organizations also need to evaluate and manage cross cultural issues also. 2. (Chen,Sun,& McQueen, 2010) Cross culture management is considered as everybody’s challenge and increasing globalization as well as movement of labor force from one place to another has made it possible that people from diverse cultures will work together. Intense competition at the global level therefore requires that firms should effectively manage their cross cultural team work most efficiently. Failure to do so may create more problems for the firms and may ultimately result into the downfall of the firms. It has been suggested that working in an environment which is diverse in nature pose significant challenges for the firms to overcome those obstacles and operate with same level of efficiency and competitiveness they usually perform with in their local markets. AB Volvo is a Swedish Manufacturer of trucks, buses, construction equipment and cars. It also offers marine systems and financial services in different markets thus diversifying itself at product as well as at market level. Being one of the well-known global brands for trucks, Volvo Track, its brand for trucks, has been setting a manufacturing plant in China. This paper will discuss and explore the cross cultural management issues for Volvo in Chinese market. VOLVO – A Brief Introduction AB Volvo is a Swedish Manufacturer of Trucks, buses and cars and has been operating in European market. It also offers financial services in markets where it operates thus have been diversifying itself into different products and markets. The company was officially formulated in 1927 when it rolled out its first car and since then has really transformed itself as one of the leading manufacturers of trucks in the world. It operates various business including Volvo Trucks, Mack Trucks, Renault, Volvo Construction Equipment, Financial services as well as other business segments. It has been manufacturing and exporting buses and trucks since 1930s and really became successful outside Sweden after the World War II. It has also been manufacturing marine engines and became one of the leading manufacturers of marine engines in the world. Over the period of time, the firm has either acquired new businesses or sold its existing business. Firm sold its car business back in 1999 to Ford Motors. This sell out was considered as necessary to refocus the firm’s business strategy on the production and marketing of commercial vehicles only. It has now proved itself as one of the leading manufacturers of Trucks and Buses at the global level. It has also decided to set up its manufacturing facilities in China with the aim to capture the Chinese market as well as set up the base to serve Asian market. Volvo in China China represents one of the most important markets for Volvo as it anticipates selling more trucks in the future in Chinese market. Though there are already other foreign and local players in the market however, the firm is expecting an increase in its sales of trucks in the Chinese market. Apart from the truck business, Volvo Cars have also been purchased by a Chinese manufacturer from Ford Motors Co however it has been hard for the Chinese firm to establish the factories and start the production on normal footings in order to get a foothold in the Chinese markets. China being culturally and linguistically different country however, also offers significant cross cultural management issues also. From managing employee relations, customer services to having relationship with the government officials, China pose a significant challenge for any organization to gain a strong foothold in the country. Hofstede’s Cultural Dimensions in China Before discussing any potential cross cultural issues it is important to discuss about the Hofstede’s cultural dimensions in China. It is critical to measure and explore as to what are different cultural dimensions and how China scores on it. Power Distance This dimension indicates that all the individuals in the society are not equal and that power distance actually signifies the attitude of the overall culture towards this power distance. It defines the extent to which the less powerful members of the organization actually accept and expect that the power is unequally distributed. China has a power distance index of 80 as compared to 31 in Sweden suggesting that China ranks high on this dimension. A higher level score on this dimension therefore signifies that Chinese people accepts inequality as a norm and therefore also expect that the same practices will be applied to them while working within the organizations. This also suggests that the relationship between the subordinates and superiors are mostly polarized in nature and subordinates have relatively no defense available against the use of authority by the superiors.( Dong & Liu, 2010) What is also critical to note that a higher PDI in China would also suggest that the employee should not have aspirations to look beyond their position and status within the organization? This suggests the organizations have greater control on the way employees will actually behave and act and leadership roles may be hard to assume.( Conte & Novello 2008) For a EU based organization, this factor may pose significant challenge because people in China expects an authority figure to direct their behavior. For an organization which is focused more upon given autonomy and decision making power to the employees, this factor can contribute towards much of cultural accommodation in order to direct the behavior of employees. Individualism Individualism actually signifies the degree to which individualism is being maintained within the society. It also suggests as to how individuals develop their self-image and define themselves in terms of I or We. It also highlights as to whether people take care of them and their families on their own or there any collectivist and group thinking behind the person’s abilities to move within the society. This also suggests that if individuals show their loyalty to the groups, the individual needs of the persons will be taken care of.( Selmer, 2010) China has a score of 20 on this as compared to a score of 71 in Sweden suggesting that China is a highly collectivist society. It suggests that people normally work for the group and prefer the groups over their individual behaviors. This could be one of the key factors to look for in terms of hiring and promotions as preferences for family may be on the top priority of Chinese managers. Personal relationships of the employees among themselves may be stronger but not necessarily that the overall relationships of employees with the organization could be cordial too. Masculinity / Femininity A high masculine score means the society may be driven by the competition and willingness to achieve success and ambitions. A low score on femininity means society cares for others and there are certain values which are being followed by the organizations. China’s score on masculinity is 66 suggesting that the Chinese society is success oriented and it can be easily assessed that many Chinese can actually sacrifice their family lives and leisure over the work. This cultural norm can provide Volvo a readymade access to a hardworking and dedicated labor force and managers who can put their best to the work. Since this is a cultural norm within Chinese society therefore this factor will serve the purpose of Volvo in China.( Zhao & Chen, 2008) Uncertainty avoidance   This cultural factor deals with the society’s orientation towards understanding as to whether what future will hold. It outlines society’s drive to control the future or just let it happen and let things unfold on their own. The ambiguity related with the future therefore outlines as to how each society actually deals with the anxiety created over an unknown future. China has a low score of uncertainty avoidance i.e. 30 indicating that Chines society can change and make the laws which suits the actual situation. The overall pragmatism therefore is relatively high in society and Chinese people are considered as entrepreneurial in nature. Long term orientation This cultural factor is mostly related with the teachings of Confucius and suggests the society’s search for virtue. This also suggests the extent to which the society actually shows its concern for the future oriented society rather than focus on the historic short term point of view. China scores high on this cultural factor suggesting that the Chinese society is highly future oriented in nature and the order is observed. The relationships are often based upon the status and the overall focus is on the long term. It is because of this that the Chinese people tend to prefer to work with one employer and look for job security and long term relationships with the organization as well as the managers. Due to this cultural factor, Chinese also focus on making long term investments such as in real estate. How this can affect Volvo? The above discussion suggests that Volvo may face significant challenges in terms of managing employee relationships. Chinese employees favor authority and believe that the directions must come from the top with little initiative on their own. In order to overcome this cultural barrier, Volvo therefore has to ensure that it is able to transform its corporate culture in China and gradually tailor it according to its global corporate culture. One of the core values of the corporate culture of Volvo is based upon invoking and maintaining mutual trust among the teams. This core value of the organization may fit into the overall corporate culture to be developed in China. However, the core value of giving autonomy to the individuals and expecting them to take decisions on their own may not go well with the Chinese people. Volvo has to train and develop its Chinese employees to understand the importance of taking individual decisions and how it can affect their own growth within the company. The group dynamics are strong and it may be possible that the hiring and promotions of the employees may not be based upon the merit and defined organizational criteria. Volvo therefore needs to put in place an effective compensation and promotion policies which can ensure equitable and just system within the organization. It needs to focus more on training its employees and make them aware of its global corporate culture and how they can actually tailor their management style to suit with the corporate culture of Volvo. Other Common Issues One of the common issues is the mutual trust among the team vs the individual trust between the team members. Chinese people tend to have higher tendency to formulate personal relationships and personal trust is considered as superior as compared to the mutual trust. Volvo need to ensure that all the employees within the organization share same level of stories and symbols about the organization and formulate cohesive teams with focus on the development of mutual trust.( Yng Ling, Ang, & Lim, 2007) It is also important to note that Chinese often like the authority figure to direct their behavior and assume relatively low level of personal responsibility. This can outline that Volvo may find it difficult to put in place an appropriate corporate culture in place. The choice between an autocratic as well as the democratic corporate culture to be put in place can be a significant challenge for the firm. Chinese employees tend to follow directions from their superiors rather than taking their own initiatives thus establishing a democratic corporate culture may be difficult to achieve.( Satow,& Wang, 1994) Volvo managers may also fail to recognize issues like Guanxi, loss of face and the overall harmony maintained among different corporate settings. Volvo managers need to understand as to how Chinese employees react and behave with their managers. The overall subtleties of the communications, gestures, reporting issues as well as how Chinese employees actually socialize with their managers as well as employees may also be other significant cultural challenges to face with. Potential Solutions In order to overcome the different cross cultural issues, Volvo may take into consideration following steps: Cultural Complexity One of the key to actually overcome the cross cultural issues is to recognize the overall cultural diversity and complexity of the Chinese culture. China is a relatively big country with various sub-cultures and it is therefore important that Volvo first need to recognize the cultural complexity and make its strategy to actually manage the culture on priority basis. Maintaining closer relationship with the Chinese Managers Chinese managers tend to develop personal relationships and value more these relationships over other organizational relationships. It is therefore critically important to develop the closer relationships with the Chinese managers at both the formal as well as informal level. Create Mutual Respect Another important solution is to avoid the loss of face and provide the mutual respect for the managers. It is always important to maintain a certain level of respect while conducting meetings and following certain protocols which need to be followed in order to maintain mutual respect. Re-evaluation of Employee Contracts It is important to re-evaluate and re-model the employment contract because the overall expectations of employees are different in China as compared to countries like Sweden. Volvo need to change its employment contracts in order to make them more suitable for the Chinese employees besides making it compliant with the local labor laws prevailing in China. Labor laws in China are relatively rigid and employers have relatively little discretion in terms of hiring of the local employees. Training and Development It is also important to impart training and development to the employees and managers in order to make them more aware of the global corporate culture and organizational practices. Though Chinese managers may be limited to work in the Chinese market however, since Volvo is a global organization therefore it is critical that Volvo must impart tailored training and development to managers. (Branine, 2005) Maintaining a right mix of executive team It is critical to maintain a right mix of executive team comprising both the local as well as international managers. Adapting a geo-centric approach in terms of maintaining the right mix of executive team can ensure diversity in the top management of the organization. It is also important to keep highly competitive people on the top positions regardless of the connections as well as status of the employees. Personal Reflection Working in an International Team Working in an international team is one of the key experiences for any employee as it offers a richer experience of learning from a diversified range of people. It adds more value and provides tools to actually understand as to how to better make decisions. My experience of working in the international team was extra ordinary as it offered me an opportunity to learn from culturally diverse people. I have also been able to learn as to how to look for different cultural responses of the individuals in different organizational set ups. How did I work better? My approach was to actually understand as to what the requirements of the team are and how I can put in my efforts to actually improve the overall performance of the team. I was aware of my role and it was also clear to me regarding the overall goal of the team and what is the role of each team member. I also attempted to develop cordial relationships with my team members to understand their perceptions and thinking. This has actually allowed me to better understand as to how I can gain the trust and the respect of the team members. I worked better by understanding my role better and how I can actually better adjust myself with the team. What were the Problems? One of the key problems was to actually understand the team dynamics because until one don’t understand as to how a team works, it is relatively not possible to achieve the desired objectives of the team. My first problem was to understand the roles and responsibilities of team members. Understanding the expectations of the team members is considered as important because it provides a clear direction as to what is expected from each other. Secondly I faced the problem of socialization with different team members and the way they behave in the team settings. The relatively different approaches in terms of meetings, greetings, manners of conducting meetings and developing the professional and informal relationships with the team members were some of the challenges I have to overcome.( Xiao,& Boyd, 2010) How did group resolve the problems? The major responsibility was on the team leader to keep open communication with all the team members and provide them necessary space to communicate their concerns and issues. If the problems were of the group level, team leader will actually take the feedback of all the team members and would come up with different sets of solutions. These solutions were than evaluated and discussed at the group level to choose which solution may best suit the problem resolution. Mutual adjustment Yes there were mutual adjustments because everyone knew that team has to achieve a common objective. If mutual adjustments were not made, it would not have been possible to actually achieve the team objectives and successful deliver the results. Adjustments were made in terms of how team members considered the strengths and weaknesses of each member and utilized their own strengths to overcome the challenges faced by other team members. What did I learned? I did learned a lot specially about how to work with people who belongs to different cultures and how to formulate working relationships with the team members. I also learned a great deal about different cultures and the organizational practices adapted by them. This exposure has also offered me an opportunity to actually learn to manage the cultural differences and how to reconcile them in order to achieve the organizational objectives. Above all, it was a satisfying personal experience for me as it helped me to grow as a better person. References 1. Branine, M (2005) "Cross-cultural training of managers: An evaluation of a management development programme for Chinese managers", Journal of Management Development, 24(5), pp.459 – 472 2. Chen,J , Sun, P & McQueen, R (2010) "The impact of national cultures on structured knowledge transfer", Journal of Knowledge Management, 14 (2), pp.228 – 242 3. Conte,V & Novello D, (2008) "Assessing leadership in a Chinese company: a case study", Journal of Management Development, 27(10), pp.1002 – 1016 4. Dong K, & Liu, Y (2010) "Cross-cultural management in China", Cross Cultural Management: An International Journal, 17(3), pp.223 – 243 5. Satow,T & Wang, Z (1994) "Cultural and Organizational Factors in Human Resource Management in China and Japan: A Cross-cultural Socio-economic Perspective", Journal of Managerial Psychology, 9(4), pp.3 – 11 6. Selmer, J (2010) "Expatriate cross-cultural training for China: views and experience of “China Hands”", Management Research Review, 33(1), pp.41 – 53 7. Xiao, H & Boyd, D (2010) "Learning from cross-cultural problems in international projects: a Chinese case", Engineering, Construction and Architectural Management, 17(6), pp.549 – 562 8. Yng Ling, F, Ang,A & Lim, S (2007) "Encounters between foreigners and Chinese: Perception and management of cultural differences", Engineering, Construction and Architectural Management, 14(6), pp.501 - 518 9. Zhao,J & Chen, L (2008) "Individualism, collectivism, selected personality traits, and psychological contract in employment: A comparative study", Management Research News, 31 (4), pp.289 – 304 Read More