Cultural Factors Influence a Multi-National Company's Decisions on Location Selection - Term Paper Example

? Cultural factors influence a Multi-National Company's decisions on location selection Introduction According to findings, globalization is the process of universalism of political, psychological, technological and economic issues in favor of international business environments. Globalization grounded upon a set of economic assumptions concerning the role that governments and private enterprises have tom play. Studies indicate that, the world economies are becoming more saturated by new global systems relating to economic coordination and control; here competition and strategies are set on a global platform. Transformation firms that differ significantly from national and international firms are making the later firms, are making them accountable to global markets and economic settings. Because of globalization effect, the state ability to regulate its economic activities is declining rapidly, while global markets increase in their dominance over national economic policies. These policies have to be aligned in a way that guarantees multinational companies and competitive advantage. Globalization has created ways for opportunities for increasing number of businesses to cross their countrywide borders and enlarge their market share, lessen expenses, as well as improve proficiency. Multinational companies are going global mainly because, of market saturation in the parent country; they look for new markets to bit competition. The multinational companies take advantage of the economies of scale in the targeted country to increase their business by gaining more stable profits. This as a result has led to increased growth of international movement of products and services rapidly. Cultural factors influence a Multi-National Company's decisions on location selection Cultural factors affect both the brand appearance and affect the structural organization of the company ranging from the management of workers, the sales of the product and the gratification of the consumers. Organizational structure has to be adjustable so that it can meet the cultural aspects in areas with varied cultures. According to research, culture comprises of a set of dogmas, moral principles, language, customs as well as laws apprehended in mutual by a country, a society, or other distinct group of individuals (Haleblian, McNamara and Davison, 2009). Currently, with many refugees in various nations worldwide, there is a wide range of cultural diversity, religious views, traditions as well as ethics, reflecting the dispersed basis of the people. Organizational culture is referred to as a pattern of mutual understanding s around which action is organized. Alternatively, it can be taken to imply a scheme of knowledge, of standards for remarking, considering, appraising, and acting that serve to associate human societies to their environmental settings. From statistics, there has been an increase in developments in the area of transport and communications, which have made the universe a global community. Accordingly, there has been a reduction of trade barriers because of the presence free trade zones in a significant number of nations (Beamish and Lupton, 2009). However, despite the fact that there has been the lessening in trade blockades to entering new global markets, there are still various complications. Managers who deal with multinational organizations currently encounter an exterior setting that is rapidly altering multilayered, unreliable and dynamically competitive. Multinational organizations can help in the creation of competitive benefits; although only under particular conditions. It is of great significance to note that, issues that relate to diverse groups within the workforce are complex and delicate to handle. Therefore, this means that without substantial understanding of the diverse organizational and socioeconomic as well as cultural factors, multinational corporations may not flourish in taking full benefit of the existing resources and chances (Porter, 1998). Therefore, the practices of human resources managers are not always a source of sustained competitive benefit unless they are aligned with cultural and other contextual factors resulting from the universal functioning background of multinational corporations; cultural factors influence a Multi-National Company's decisions on location selection and organizational structure for its joint venture in various ways. Cultural factors influence a Multi-National Company's decisions on location selection and organizational structure for its joint venture in that as multinational companies are utilizing the contemporary international business openings, they are needed to deal with individuals of different societies and cultures in order to attain their economic and business goals. This may include decision making concerning the selection of the location and its organizational structure in its joint ventures. Such tasks are most likely to be extremely challenging because of the dissimilarities in the domestic and nationwide cultures of the diverse areas and regions in which international business takes place and in which multinational companies operate. A good example to illustrate this point includes the Tesco Company, which is a prominent food trader of the United Kingdom has recently expanded its activities outside Britain and has developed trading activities in various nations. The company`s local and global managers have to work in considerably different cultural settings in these diverse locations. Therefore, such differences can affect their collaboration with clients, local suppliers, administrators as well as government leaders. Thus, it is vital for organizational workers to acknowledge cultural dissimilarities, take account of such dissimilarities in their location selection decisions and operations and employ such differences for organizational benefit (Cornel, 2010). In addition, cultural factors influences on the decision made by multinational company in selection of a location and organizational structure in its joint venture through enabling the company align its business goals with the culture or the nature of people at the location of the business. For instance, McDonald organization had to modify its set of choices to accommodate and indulge local food likings within its general strategy of giving consistent food in secure restaurant structures. This is because the influence of countrywide culture on the functioning of business company regularly extents into other realms of doings (Chatman & Jehn, 2004). Accordingly, cultural factors demonstrate significant roles on the organizational attitudes towards handling of local individuals in the intended location, dealing with local business people and suppliers, as well as holding promotion and marketing crusades and coordinating with local legislative and governing powers (McGuire, 2003). The attitudes of organizational workers of particular constituencies or states are likely to be expressively swayed by the extent of individualism and power space in societies. Associates of communities with high levels of individualism and low authority space are unlikely to react positively to authoritarian and command and control human resource policies. However, associates of collectivist and high authority distance communities may essentially like to be told what to take part in, and operate successfully in demanding and ranked organizations. This is in line with the porters quote “every culture has what is called a ‘power distance index’ that shows attitude hierarchy” (Porter, 1998). This implies that multinational companies must adjust their organizational structures and location decisions in line with local cultural factors in order to augment the running as well as the performance of their workers. Cultural factors may also influence multinational company structurally especially in areas demanding marketing and promotion plans or decisions. For instance, some regions promote open and liberal way of business promotion, while in other nations; such strategies are possible to be unsuitable and unsuccessful in conventional nations (Chatman & Jehn, 2004). Advertisements that are viewed to be ordinary and repetitive in the west can lure strong disapproval and disrespect and ascertain to be unsuccessful and even destructive to organizational welfares if employed in conventional regions that are subjugated by religions. For instance, advertisements about pork, may be taken cool in the west but in many Islamic nations tat do by cultural and religious practices oppose anything to do with pigs may take it negatively and this will impact on the performance of the business in the region chosen. Therefore, it is vital for multinational company to put into consideration the cultural factors of an intended business decision and location or its operations to avoid future issues that involve advertising and marketing strategies. It is essential that the organization align its marketing strategies depending with the culture of the region in order to avoid contradictions or being seen as doing against the culture of the people around its location in its joint ventures. In addition, multinational companies should put into consideration issues concerning business negotiation practices while making decisions in the selection of a location and organizational structure of its joint venture. In most cases, cultural differences have an essential influence in the behavior of business negotiations. For instance, a considerable number of areas and in particular those with great power space in most Islamic or Arab nations, offer women with far less significant power in sections of commercial, and trade activities are subsequently ruled by men in such locations and nations. This is strengthened by the porter`s quote, “every culture has what is called power distance index” that signifies every people`s cultural significance (Porter, 1998). It may thus be hard for female administrators of multinational companies to start and carry out negotiations in such settings and with administrations, whose cultures and working surroundings are mainly ruled by men. Furthermore, it is normal for organizations in socialist nations (for instance, Russia, China and other communist countries) to put great importance on informal associations and linkages with groups and relations for the captivating of trade decisions and developing of business associations (Rugman and Collinson, 2012). Managers of multinational companies may regularly feel disorderly and hard at comfort in such environments, where trade choices are influenced by a variety of aspects that seem to be unassociated and unnecessary to the business in question. Because of such issues, managers at multinational companies have to base their decisions concerning the selection of a location and organizational structure of its joint venture by putting into consideration cultural factors or issues of the location in mind. Cultural factors are very influential and inevitable especially in large organizations such as multinational companies. This is because such businesses or organizations comprise people from different areas and nations and thus their culture should be highly valued at all levels (Wahaha, 2008). Multinational companies and other organizations who participate in global trade activities continually experience such cultural contests in their worldwide process. It is thus vital that managers of multinational companies to become accustomed to local conditions, markets, and cultures and ensure that their practices are consonance with local cultural factors (Rober, 2009). By failing to do this can have an undesirably effect on their activities in various ways and could cause marketing and operating failures. Failing to put such issues into consideration by multinational companies in the process of making decision concerning the selection of a location as well as organizational structure in their joint ventures could lead to significant organizational losses in terms of moneys and effort (Barney, 2006). A good example that can illustrate this point is Wal-Mart Company, which is the largest international store was forced to notably shut down its business activities in some nations such as South Korea and Germany just because it failed completely to comprehend the consequences of putting into consideration the cultural factors of the local of these nations. Research shows that Wal-Mart withdrew from Korea by marketing about sixteen shops to a major local discount chain company at a lower price and moved out of Germany and in the process lost about ten million dollars on sales of seven hundred and fifty million dollars (Burman and Evans, 2008). Therefore, cultural factors are quite significant for multinational companies in the process of making location selection and organizational structure in their joint venture. In order to avoid such misfortunes, it is essential for multinational companies to pay attention to aspects of culture and counter cultural challenges through a number of ways including developing associations with existing businesses, by using executives with substantial global skills and offering extensive training and positioning to administrators to deal with such cultural challenges. Multinational company`s decisions concerning the selection of location and organization structure for joint venture is highly influenced by cultural factors. This because, the cultural factors help the organization to learn how act in its new location that it intends to locate and how to structure its organization (Frynas and Mellahi, 2011). This is because cultural factors form the guiding principles that govern how people behave and understand things in the society. In business, culture plays the center stage and every cultural issue that has to be addressed seriously. This will enable the companies to avoid doing things that are contrary to the cultural aspects of the place where the organization intends to position its business undertakings. In conclusion, this paper had the aim of researching on the manners in which cultural factors influence a Multi-National Company's decisions on location selection and organizational structure for its joint venture. It has been illustrated by several researches that the cultures of constituencies, states as well as countries are always exceptional and varies from each other in many ways. Research shows that such variations are seen in the outlooks, insights and behavior of the people of these cultures and thus affect their trade, buying as well as consumption choices. Therefore, it is because of such issues that it is vital for multinational companies to put into consideration differences in cultural factors. In addition, this will help while they make their decision by having these facts in mind; and this will guide planning at all level starting from decisions concerning the selection of a location and structural organization in their joint ventures. By failing to acknowledge the culture of a location, multinational organization is sure of encountering failures and experiences of significant losses in financial terms and other losses. A good example the research used to illustrate this point includes Wal-Mart Company, which failed in two very prevalent international markets. This hover demonstrates that even those successful companies can make mistakes in recognizing the consequences of local cultural aspects and in their development of organizational structure in their joint ventures. The managers of multinational companies are thus needed to increase their concentration in order improve their understanding of cultural consequences in their venture so that they can truly utilize the huge international business openings that are accessible in current period. Examples of some of the cultural factors that influence multinational companies’ decisions include the way individuals do communicate when carrying on with business negotiations, the way in which they get involved in the business, as well as the way they spend their time in business. For instance, the use of body language demonstrates the mannerism in business, which views the way individuals use different gestures and the conducts the gestures reflect to other party. This implies that an illustration of one society or nation could be implying something very dissimilar from another nation. In business, some of the gestures used by different individuals like laughing or uncomfortable smile, could cost ones business loss of immense amounts of money when may be a transaction is damaged because of misapprehensions when certain gestures are used to imply something else which to them is optimistic and to the other party could be frustrating (Winter, 2003). On the other hand, shaking of head to some individuals implies that they are listening but to others it is an indication of disagreeing with some statements. Therefore, in business situation, such issues could result into miscomprehension (Cornel, 2010). This is the reasons why it is necessary that multinational companies put into consideration cultural factors in its decision-making concerning the selection of a location and how to organize its structures. For any business established in a mix of different cultural practices, the organization has to balance its activities in order to maintain its dominance and attractiveness towards both cultures (Adkins and Caldwell, 2004). Any offense or sign of disrespect through culturally harmful products will have adverse negative influence on the particular business in question. Concerning this, it is essential to consider in detail various cultural issues and their impact on the business and the multinational company. High cultural diversity in a region like New Zealand for instance, promotes high level of cultural practices such as humility, equality, inventiveness, relaxed attitude and restrictions (Black, 2003). Therefore, all this factors are the basis for concern of multinational corporations desiring to launch a business in a new location. Thus, it should put such concerns while making its decisions in the selection of location and organization of its structure to avoid going against the culture of that nation. The factors of culture in the public and business have a straightforward association with each other. For instance, they both develop interesting situations when they associate in a mutual platform, which is a great way to get accustomed to the challenging times (Cummings & Worley, 2004). In various parts of the world, individuals approve various cultures grounded on their own understanding. Individuals in various areas react to certain gestures and indications in various manners. This is because cultural practices are employed in almost every aspect of human being and for this issue, in some locations they are a great effect to the industries. It is because of this that multinational companies consider aspects of culture in their decisions concerning location selection and management of the structure of the organization (Bligh, 2006). In conclusion, globalization has increased the influence of global market policies in any targeted country. This hassled to restructuring of state policies to favor globalization. Through globalization, cultural assimilation has increased among different nationals working globally. The factor will unite the whole world to have a common set of goals, revolves around cultures ad its influence on globalization strategies. Globalization has seen nations come together to ensure business stability. Culture takes the central position for any multinational company that wants to be successful, it has been noted that, culture determines the decision to locate a business in any areas of choice. This relates with the human resource and products to be produced around the area. It has been noted that culture influences corporate strategies of the multinational company. It is recommended that a multinational company should carry out research related to the cultural issues of a location of choice. This will help the organization to make good decisions and come up, with relevant strategies that recognizes the culture and will influence the acceptance of the c0ompnay and its products right from the start. References Adkins, B. and Caldwell, D. (2004). "Firm or subgroup culture: Where does fitting in matter most?" Journal of Organizational Behavior, 25(8) pp. 969–978. onlinelibrary.wiley.com Barney, J. B. (2006). "Organizational Culture: Can It Be a Source of Sustained Competitive Advantage?” Academy of Management Review, 11(3), pp. 656–665. www.uk.sagepub.com/.../Chapter%206%20-%2023%20Barney.pdf Beamish, P.W. and Lupton, N.C. (2009). Hard copy. ‘Managing Joint Ventures. 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Strategic Management Journal 24(991-995). onlinelibrary.wiley.com CULTURAL FACTORS IN MULTINATIONAL COMPANY PAGE \* MERGEFORMAT 7 Running Head: CULTURAL FACTORS IN MULTINATIONAL COMPANY Read More