Effective International Management - Essay Example

Management Report on Effective International Management Executive Summary In the past few decades, the globalization of businesses has been accelerating in a rapid rate such that any particular management control and strategy deemed as effective in different countries has become the central focus of multinational organizations. The concern for a management strategy and control has become increasingly important because people from different countries tend to have diverse work-related cultures, as well as the fact that people with different cultural backgrounds have different attitudes towards management strategies and controls. This, in essence, suggests that management strategies and controls effective in one country may not necessarily be effective in another country (or even dysfunctional or completely ineffective). Such cross-cultural differences may arise internally, for instance by influencing the work-related behaviors of certain employees, and the interface between external labor market and the organization, such as retaining and recruiting employees. In the past, scholars have concluded numerous empirical studies focusing on the relationship between the national culture and the various aspects of management, such as strategic decision-making and long-term planning. However, only a portion of these studies critically examines the relation between national culture and effective global management of organizations. Such studies are limited in use, especially when designing the structure and operation of control management in multinational organizations (Higgs). The purpose of this paper is to provide a comprehensive managerial report to the senior management of an information and technology company operating in China and France, emphasizing on effective international management for optimal and successful operation of the organization in the two countries. Introduction The debate over the organizational need for multinational enterprises to become increasingly similar to those in the subsidiary stations as been persistent. Determining factors such as the growing importance of multinational enterprises, technological convergence, and the institutionalization of international corporate standards such as the ERP system and the ISO 9000 contribute to isomorphic tendencies of multinationals. In recent times however, some researchers claim that the global spread of managerial concepts such as decentralization and downsizing, as well as shareholder-value concepts are increasingly making organizations similar in a global context. However, a faction of other researchers has opposed the views of isomorphism, emphasizing on the resilience of national cultures. According to them, the difference of institutions at the national level results in persistent heterogeneity among other organizations in different countries, regardless of operating in the same industry and subject to similar external influences (Adler, Doklor, and Redding, 2001:297). From this viewpoint, in different national contexts, effective international management should have significant different results at the organizational level. Such studies are contradictory, especially in efforts to determine which perspective receives the backing of empirical tests. Framing the issue of effective international management in such instances as either leading to divergence or convergence seems like a rhetoric trick, but it an excellent starting point for this management report. This paper seeks to examine critically the aspects of management with emphasis on multinational organizations in China and France, with emphasis on the national cultures of the two countries, as well as external factors such as business policies and regulations (Higgs). China China is among the widely recognized countries currently experiencing vast profitability and economic growth. The country is capable of producing goods more efficiently and effectively than most of the other countries in the world. The country has a Gross Domestic Product exceeding $3500 billion and a population of more than 1.3 billion people, making it desirable for companies to market their products and services. However, venturing into the Chinese market requires consideration of a number of factors, including the economic condition, the national culture, the political stability of the country, and the ability to finance the organization. Other factors for consideration include overall socio-economic conditions and the public’s ability to purchase. In additional, there is need to consider environmental factors. After overcoming all these challenges, a company can successfully venture into the Chinese market (Kwintessential). Chinese Business Environment China is currently under a communist rule, which essentially means that the Chinese government maintains control over the social, economic, and socio-economic activities of the country. The country has a relatively stable government, though senior government officials in recent time admitted that effectively maintaining the stability requires the government to create 30 million new jobs for the citizens. The same officials show pessimism in the possibility of the job growth as the major exporters, Europe and the United States, are experiencing economic difficulties from the Europe Debt Crisis. Despite the firm controlling hand of the government, political unrests still occur. For example, more than 8000 people risked incarceration for initiating campaigns to force the government to grant the citizens freedom of expression and religion, a swell as institution of election of government officials. According to social analysts, the past peaceful protests that occurred in the country could turn violent in the future, a fact they attribute to social repression on the general population (Adler, Doklor, and Redding, 2001:299). In order to operate an organization successfully in China, there is need to analyze the economic stability of the nation. The country’s economic condition reveals a trend from accelerated growth to dormancy in 2008 due to the global recession, and a reversal trend in the year 2011. The short-term growth of the information technology sector is stagnant temporarily, analysts believe that the competition patterns remain stable, a direct result of market expansion in the sector. Another encouraging statistic is the steady increase of productivity per individual in the global market due to requirement of application upgrades by product users in the market. These factors appear promising, but other factors present a different outlook. According to some market analysts, 2012 and 2013 will be among the worst years for the macro economy of China. These analysts predict that the gross domestic product of the country will drop by about 5.3%, which will significantly affect the information technology market. This will obviously carry over into the financial sector as financial lenders and enterprises may experience future losses resulting from lack of demand (Kwintessential). Strict regulations by the Chinese authorities may carry over into the financial business practices of the country, which may only compound the issue. Chinese Business Culture The Chinese business culture is also an important factor to consider, as it is unique. Chinese people adhere to certain sets of ethics in business, with an auspicious emphasis on business. Humility and patience are among the integral features of the Chinese business culture. In addition, Chinese people value relationships, or “Guanxi”. The relationships explicitly mean exchange of favors. The relationships are perceived as advantageous to the business partners, as the Guanxi policy significantly minimizes disappointments, frustrations, and risks. The Chinese business culture sharply contrasts with the western culture. Chinese business people prefer to deal with people they consider trustworthy. Thus, organizations from the west wishing to conduct business in China have to prove their trustworthiness. Another interesting feature of the Chinese business culture is the independence from money. All business partners receive equal treated. In addition, a company that maintains its words is sure to engage in business with the Chinese people, a prime example being the companies that stood by the country in the 1989 political instability (Adler, Doklor, and Redding, 2001:302). According to Geert Hofstede analysis, China is similar to Hong Kong in that the long-term orientation factor ranks highest. Nonetheless, China ranks lower than the rest of Asian countries in terms if the individualism factor. This is primarily a result of the communists rule and the emphasis on collectivist culture. According to Hofstede, china has a long-term orientation of 118, which is similar to other Asian cultures. This shows the society’s attitude of perseverance and time perspective. In other words, the long-term orientation is a measure of how able a society is in overcoming obstacles with time, if not by strength and will. The lower rank in individualism among Asian countries us manifest in committed and close member ‘group’, it be either extended family or extended relationships. This is because loyalty in a collectivist culture is paramount (Kwintessential). The Chinese society fosters strong relationships with every member taking responsibility of other fellow members in a group. Other Information Foreign exchange of funds and taxation is another area of interest in evaluating the risks of investing in China. To effectively analyze this factor, there is need to review Hong Kong. Multinational corporations typically perceive Hong Kong as a location for conducting business, especially manufacturing and establishing headquarters. Currently, the city plays an integral role in China’s booming economy: taxation. In the past decade, Hong Kong established an agreement with China, creating a Special Administrative Region that promotes attractive and lucrative business area for investment by outside companies. For instance, there are new tax rules that reduce tax withholdings on capital gains and dividends. These laws compete with other business areas in the world that offer tax friendly policies to promote investment (Adler, Doklor, and Redding, 2001:307. In essence, Hong Kong thus acts as a medium for business investor to gain return, as the currency is easily convertible, as well as the favorable tax rates. Another advantageous aspect of China is business financing. The World Bank has special interest in information technology, and offers borrowers with two types of business funding: development loans and investment loans. The latter would be helpful to an organization in supporting social and economic development. However, the financial institution needs prove of how the organization seeks to benefit the country socially, economically, environmentally, and financially. Apart from World Bank, many other financial institutions may lend finances to organizations, including the Asian Development Bank (Higgs). France France, a diverse and modern country, encompasses a wealth of identities and landscapes resulting from the amalgamation of historical and cultural differences. Being the largest nation in Western Europe, France takes pride in its prominent culture and history. These cultural identities play an integral role in the business culture of the country, where appropriate understanding, mutual trust, and conduct are central to the success of an organization. The French republic has a population of more than 62 million people, and a gross domestic product of purchasing power parity of more than $1.6 billion. The per capita GDP purchasing power parity exceeds $27500 (Communicaid). French Business Culture Among the key values and concepts of the French culture is centralization. The country has a long history of centralization evident in its transportation system, government, business, and geography. This particular outlook has its origin in the earlier monarchs, and despite democratization, they remain part of the French presidency. In the business world, centralization occurs in form of concentrated authority that lies with a single individual. Another important aspect is individualism and individuality. France has a distinguished individuality, which is an important cultural characteristic that highlights the country’s passion for freedom and uniqueness of opinion, both in business and in society. Nonetheless, individuality is different from individualism, which in France refers to having an equal but separate sense of place in society (Communicaid). In the French business environment, individualism refers to a greater concern for social status and judgment as an individual. The other important aspect of the French culture is uncertainty avoidance, which is essentially the attention to rules and regulations. The French have low tolerance to ambiguity and uncertainty, which forms a significant factor for those conducting business in the country, especially in the reluctance to take risks. The country has been crucial in the events in the Europe and the rest of the world. After the loss of an empire, world wars, and numerous social and political upheavals, France remains a vital element in the European community with a strong sense of heritage and pride. Today, the country’s business market boasts of accommodating international investors as well as being an important world supplier of industrial and agricultural products (Communicaid). However, it is important to understand the national culture prior to investment. French Working Environment Among the working practices of the French people include a well structures and highly organized business establishments, with emphasis on administrative practices and rules over flexibility or effectiveness. In addition, arriving ten to fifteen minutes after the scheduled time is not necessarily late and thus generally acceptable. In addition, deadlines are open to negotiations. Hierarchically and structurally, the French business culture is vertical and strongly hierarchical, with the senior management adopting an authoritative and dictatorial approach. Nonetheless, it is important to work with all the levels of organization. The final decisions are a reserve for the highest individual (Communicaid). Organizations with employees working in France are fully liable for their social charges. Tax obligations for employees vary depending on their residency or non-residency. For residents, all forms of incomes are subject to French taxes. On the other hand, non-residents only pay taxes for income earned in the country. The employer deducts contributions for social security from the salary, but not income tax. Employees have the mandate to fill returns and pay income taxes retrospectively. Other taxes that may affect multinational enterprises include business taxes, which are essentially local taxes levied on behalf of local departments and municipalities. The tax is equivalent to the rental value of the business real estate and an additional fixed assets percentage. However, the rate cannot exceed 3.5% of the organization’s benefit (Communicaid). France is among the global economy shapers, and this constant international interaction means that the business environment of the country is conversant with the international business culture. Other Information Corporate taxation is another significant factor to consider. In recent times however, the government has reduced corporate taxes to improve competition and attract investment both internationally and regionally. The country has established tax treaties with majority of the developed countries that offer protection against double taxation for foreign businesses and investors. According to one study, the overall corporate tax rate is about 35%, compared to other neighboring European countries like Germany with 39%, Spain with 36%, and Italy with 38%. An organization conducting business in France is liable to French tax for the earnings in the country. The structure of the organization determines the liability of a business to corporate tax, as sole proprietors and of private limited company need to submit profit in the annual income tax return. Nonetheless, the government offers reduced corporate tax rates for small businesses, although there is additional social security levy for businesses with huge profits. Unlike in other European countries, the corporate tax in France allows deductions of capital depreciation during computation of taxable profits. Thus, losses may be carried forward indefinitely, while there is provision of offsetting current losses against previous income up to the previous three years (Communicaid). Discussion Multinational organizations must identify a clear and concise framework for understanding and analyzing national cultural differences. Consultants and researchers such as Hofstede and Trompenaars came up with such frameworks. As far as this amangement report is concerned, the primary focus is on Hofstede’s basic model. The later identifies four important dimensions that influence national cultural differences: collectivism and individualism, power-distance, uncertainty avoidance, and masculinity and femininity. The individualism dimension reflects how much individuals value self-determination as opposed to determination by will of an organization or group. The second dimension, power-distance, concerns involvement in decision-making. Cultures with low power-distance are indicative of employees’ willingness to participate in a participative management style. In contrast, high power-distance cultures indicate that employees will tend to behave and work in a particular manner, as they will submit to the directions of the organization or hierarchy (Hofstede, 2002:34). The uncertainty avoidance dimension refers to tolerance to uncertainty or ambiguity by the business people and employees. Cultures with high uncertainty avoidance tend to embrace well-defined, formal rules and regulations that govern business conduct. The last dimension, masculinity, is the most difficult to implement in an organizational context. Practically, however, the difficulty emerges in linguistic and terminology, but in Hofstede works, it relates to values. In societies with high masculine cultures, the dominant values relate to material acquisition and assertiveness. On contrast, low masculine cultures emphasizes on the values of relationship among people, as well as concern the quality of life and others (Hofstede, 2002:91). Recommendations Most multinational enterprises perceive cultural diversity within their area of operation as a difficulty rather than an opportunity to gain competitive advantage. In many circumstances, valuing and understanding cultural diversity is seldom an element of the organization’s practice and thinking. However, this area has developed significantly with the concept of globalization. It may be that effective performance of multinational management teams concerns with the values of the organization as much as the development processes. However, it is important to understand and indentify cultural differences, as well as potential demerits and merits that an organization may experience because of the concept. Drawing upon Hofstede’s work, there are three types of organizations with reference to cultural competitive strengths. The first organizational type is parochial, which tends to ignore the impacts of cultural diversity on an organization. This is the most common type of multinational organizations, but they result in problems with no direct attribution to culture (Hofstede, 2002:98). The second is ethnocentric, which identifies cultural diversity as a potential problem for the organization. Consequently, this form of organization minimizes sources of such diversity by focusing on a mono-cultural workforce, but ignores the potential advantages of a multicultural workforce. Lastly, there is the synergetic organization that understands the positive and negative impacts of cultural diversity, and embarks on training employees on take advantage of cultural differences (Hofstede, 2002:34). Nonetheless, there be problems that need management, as well as realization and organization. This report explicitly recommends the adoption of the synergetic organization for both the china and France subsidiaries. Other proposals drawing upon Hofstede’s framework may fall under three classes. The first is building awareness on cultural difference as well as the individual’s culture. The second concerns building skills that assist in identifying impacts of cultural diversity from problems and adapting behaviors for effective results in different cultural settings. The last is about developing knowledge on the impacts of cultural diversity and the weaknesses and strengths of different cultures. Other actual team designs to cope with national cultural diversity include developing consistency and cohesion in teamwork, developing a shared understanding and vision, establishing quality dialogue between members, and establishing feedback mechanisms to assess and review team processes (Hofstede, 2002:121). Bibliography Adler, N., Doklor, R., and Redding, R., 2001. 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