Cross Cultural Management in International Business - Research Paper Example

DIVERSITY IS A MUST HAVE FOR COMPANIES AS A STRATEGY TO BUSINESSES Table of Contents Table of Contents 2 Introduction 3 The cause or stimuli for diversity 3 Diversity in a multicultural workforce 5 Implementing diversity through employee training 6 Celebration of cultural values at workplace 7 Case study of MNCs 7 Rattan Tata of Tata Group 7 Aspects of diversity in workplace 7 Transition of diversity to a strategy 9 The case of Carlos Ghosn of Nissan Renault 9 Aspects of diversity in the workplace 10 Critical analysis of the Organizational Culture and Organizational Change 11 A comparative analysis of the Organizational Culture and Organizational Change 11 Recommendation 12 Conclusion 13 Reference List 14 Introduction The Multinational Companies (MNCs) are big organisations that have subsidiaries in different parts of the globe. These organisations traverse diverse demography and cultural areas. Such organisations must embrace the concept of diversity in their managerial approach to improving their strategic approach to doing business in the areas of operation (PwC Saratoga, 2011; Harter et al. 2010). Diversity involves taking every member of the working force onboard in MNCs irrespective of their culture and other difference that may occur (Brewster et al., 2004). From a MNCs’s perspective, there are different aspects of diversity, with each playing a critical role. The management plays a critical role in entrenching diverse in the system. The MNCs are a good example of organisations that must embrace diversity in their organisational structure. These organisations employ most of their staff from a different cultural background (because the top manager may come from their headquarters) hence the need for considering diversity. For that reason, diversity is a critical component for the survival of organisations (e.g. MNCs). The essay will assess the importance of diversity in the workforce, how diversity influences the success of MNCs using the case of Carlos Ghosn of Nissan Renault and Rattan Tata of Tata Group, two phenomenon individuals who transformed their MNCs. Besides, the paper will present how the MNCs transition to embracing diversity. The cause or stimuli for diversity The markets have become so diverse that organisations must find diverse approaches to penetrating such markets and satisfy their consumer demands (Makela, et al., 2011). The MNCs are of particular interest because they have a network of branches that interacts with customers from different cultural backgrounds. The diversity of employees brings the advantage of different employees from cultures to devise appropriate ways of remaining relevant (Harter et al. 2010; PwC Saratoga, 2010). The global market has become so competitive that organisations must devise novel ways of competing to access certain markets (Makela, et al., 2011; PwC Saratoga, 2011). When organisations are making entry into a diverse cultural market, they must have a strategy of incorporating the concept of diversity to gain access and respond to the customers’ demands while remaining competitive (Caldwell, 2003; Doremus et al., 1998). Therefore, the concept of diversity seems pivotal in leveraging the competitive advantage (Ariely et al., 2005). Organisations that have diverse workforce bring in new innovative ideas that help in building the competitive advantage of the organisation (Makela, et al., 2011). The expansion of businesses especially the MNCs requires that they cross-geographical boarders (Kostova, et al., 2008). Such organisations utilise employees from different communities with diverse culture and languages hence the need to put in place measure of implementing diversity (PwC Saratoga, 2011; Harter et al. 2010). However, diversity benefits a lot from the rise of education across the globe. Different regions have embraced the need to improving the education standards, therefore, when MNCs are making entry into different markets, it is likely that such organisations will succeed within a shorter period (Kostova, et al., 2008). These MNCs have become global. It is likely that MNCs will acquire other organisations from different countries. When acquisition and merger take place, there are high chances that two organisations will have employees from different cultures hence the need of inclusivity. The concept of globalisation means that organisations should use diversity as an advantage to doing their business rather than being an impediment (Gupta and Govindarajan, 2000; Gupta and Govindarajan, 1991). Such organisations must employee the locals hence the need for the diverse managerial approach. Perhaps the concept of innovation and creativity is the most important aspect of the MNCs and other organisations operating in a diverse environment (Kostova, et al., 2008). The market segment has become so dynamic that most organisations would need employees who can embrace creativity and innovative ideas to devise products and services that meet the customer demands (Ivarsson and Alvstam, 2005). Countries like the USA and UK have succeeded in ensuring MNCs follow these stipulations (Kostova, et al., 2008). These factors show that the need for diversity is no longer an option but rather a must have strategy. Although, most studies have studied the demerits and merits of diversity in environments with different barriers like language, organisations that use the challenges as advantage have succeeded in their mandate when they consider diversity in their management practices (Tony, 2010; Tony and Miao, 2008). Such organisations open the ground for innovative thinking hence the development of alternative products and services that meets the increasing and dynamic demands of the customers from different cultural preferences (Ivarsson and Alvstam, 2005). Diversity in a multicultural workforce The need for a cultural diversity in any multicultural workforce is no longer ‘a need to have, but a must have.’ Studies show that organisations with bicultural perspectives are more flexible in the way they devise their management structures. The organisations give the employees an opportunity to think critically and, therefore, improve their operations (Ivarsson and Alvstam, 2005). For instance, employees from different cultures will have an opportunity to bringing new ideas onboard that the top management may not be privy about because of their cultural values. In fact, interaction with the employees from different cultures provides an opportunity for the organisation to learn the existing differences and use that as an advantage in improving their strategies for providing services and superior products (Minbaeva, 2007). Adoption of diversity by the MNC requires that the top managerial team take decisive measures in bringing a change to the structural aspects of the organisation. The management must understand the varying needs of their workforce prior to coming up with such strategies (Gupta and Govindarajan, 2000; Gupta and Govindarajan, 1991). The main challenge to such organisation is the detachment from the locals and the community who may form the main market for their produce. For instance, a French MNC with a subsidiary plant in Japan must have strategies that leads to comprehension of cultural differences among the employees of the two backgrounds because most of the labour force will come from the Japanese people, even though, the top management may originate from the main headquarters in France. Implementing diversity through employee training When an MNC from the Western gets into the Eastern market either as production subsidiary, acquisition or in the provision of services, the top management must take into account the cultural difference to avert any possibility of cultural clashes. Therefore, the MNC must have a cultural sensitivity of the eastern people so that its operation continues in the new environment. Training of the employees from the Western and Eastern is one aspect of the implementation process. One can only be sensitised of the new cultural values through training. The training will provide the needed awareness of the cultural values across the divide. The management must devise strategies for training the employees of the virtues of respecting the diverse cultures (Tony, 2010; Tony and Miao, 2008). These approaches encourage the employees to respect other cultures and may even motivate them to learn the different cultures. The training practice gives the employee an opportunity to understand their needs and appreciate the different cultures of their fellow workforce. It offers them an opportunity to avoid generalisation of the members from a particular country with a different culture (Pudelko and Harzing, 2007). The employees from Eastern culture with previous challenging experiences in the hands of employers from the Eastern will have an opportunity to avoid generalising such employers. Celebration of cultural values at workplace There are many ways of recognising the culture of a community. Other than training the workforce to be sensitive to the cultural values, it is important that MNCs devise ways that send a message both to their customers and the employees that culture is a must have component. When organisations put aside some funds to enable employees celebrate their cultural values, the employees would feel respected and celebrated as well, hence creating a sense of cultural union within the organisation (Minbaeva, 2007). When employees from different cultures participate in such cultural practices, they learn values and virtues from the locals and the community at large hence enhancing the awareness of diversity among the employees and the appreciation of the cultural mix (Marginson and Gugielmo, 2010). These strategies lay the ground to enable the organisation strengthen its competitive edge in the new environment (Yadong, 2005). It would be able to survive competitors in that market segment as well as future tough times because it will have a sound understanding of the culture and the demand of the market. Employees will have a sense of belonging when they view their seniors participating in their cultural festivities. The lesson learned from such events is not only important for the organisation in leveraging their approach to their consumer demands, but also instilling a sense of belonging among the employees (Marginson and Gugielmo, 2010). Case study of MNCs Rattan Tata of Tata Group Aspects of diversity in workplace The Rattan Tata is another individual with multicultural perspective. He is an Indian chief executive officer for the Tata Group, a conglomerate multi company (Phani-Madhav and Dakshi, 2004). Although he was born in India, he gained his university education in Cornell and Harvard. Rattan Tata is credited for taking the company to a global outlook by changing the perspective from being an Indian centric company to a global one (Thakur and Sharma, 2010). These global managers undertook the complexities of managing organisations across cultures. Their approach to management involves dealing with barriers across the cultures. Most organisations adopt promotion of the employees based on their seniorities. However, the transition means that employees at Tata group have embraced the cultural change of accepting compensation and promotion based on merits, which defines a global perspective. The Rattan realised the importance ensuring the existence of diversity based on global imperative (Thadamalla and Hotchandani, 2007). They both achieved these by attracting and motivating individuals with the high value to improve their service and interaction with the customer. According to Hall (1976), communication between the low context and the high context cultural diversity is an important virtue for the MNCs. Hall (1998) asserts that messages in the high context communication are in person, and little part is vested in codes, while the low context is purely in codes. The Indian culture is considered a high context as opposed to the low context USA culture (Kostova, et al., 2008). The cultural differences between the organisations in the USA and India require that when such MNCs from either country contemplating an entry must lay strategies to ensure diversity becomes a positive factor rather than a curse. For instance, a MNC organisation setting up a manufacturing plant from India is likely to draw most of its workforce from the new location. However, the differences in language, culture, and interaction may act as the main barriers to the development of such organisations. Strategies for communicating and interaction between the two societies differs hence the need to put in place procedures for integration (Pudelko and Harzing, 2007). The differences in the interaction between the people from the Eastern and Western create an environment that would need the effective managerial strategy to ensuring efficiency. Transition of diversity to a strategy The management can assist in ensuring diversity in the workplace by avoiding biases. When all employees are treated equally irrespective of their cultural background, it improves their turnover rate. Avoiding biases will involve devising all-inclusive methods of appreciating employees who perform and attain their objectives. For instance, organisations may devise ways of rewarding and recognising employees with excellent performance during the celebration of certain cultural days. Recognition of cultural values by making the day special through awards and developments for the employees will increase their satisfaction. Dissatisfied workforce is likely to have high attrition rate, which is likely to have a negative impact on the performance of the organisation. Diversity assists the MNCs to improve their performance through the efforts of empowering and appreciating the diverse cultures of the society and the employees (Gupta and Govindarajan, 2000; Gupta and Govindarajan, 1991). Organisations must move forward with the community, they should give back to the society through their corporate social responsibilities (CSR) (Caldwell, 2003; Doremus et al., 1998). When organisations help the community, it forms the bond between the partners (community and the organisation) hence building a sense of belonging. Such measures play a pivotal role in giving the organisation sustainability and the longevity to operate in the market. The case of Carlos Ghosn of Nissan Renault Carlos Ghosn was born in Brazil but got his education in France (Dutta and Subhadra, 2003; Chester, 2012). He played important role in revolutionalizing Nissan, the Japan Company dealing with automobiles. Taking charge of the company since 2005, his cross-cultural approach played a significant role in helping to attain the results. For instance, he is fluent in a number of languages like Japanese, Portuguese, English, Arabic, and French, a fact that helped in creating ideas that could be accommodated across the cultural divides (Dutta and Subhadra, 2003; Chester, 2012; Manzoni et al., 2003; Milliken and Fu, 2003). His previous experience in organisations like Michelin where he rose to the chief executive post, he later moved to Nissan Company (Milliken and Fu, 2003). Aspects of diversity in the workplace These individuals are credited for their approach in maintaining the best features associated with the existing culture and enhancing the adoption of cultural revolution. For instance, Nissan and Renault are symbolic of Japanese and French cultures, therefore, shared norms between the two could be enhanced through education and building employee interaction (Dutta and Subhadra, 2003; Chester, 2012). The management played a critical role in maintain the values without an act of destruction. In 1999 when Renault acquired 36.8 percent stake in Nissan, many people were sceptical because they expected a clash between the Japanese and French cultures (Chester, 2012; Manzoni et al., 2003). However the management realise the importance of espprit de corps; which highlights the importance of employees possessing collaborative and motivation toward the course of the institution. The company did not adopt acquire and absorb approach, because such models are associated with cultural crash (Chester, 2012; Manzoni et al., 2003). The company aimed at implementing the alliance rather than absorbing and that created a successful environment. The management used a tactical approach of ensuring that the acquired sectors remained with their cultural values intact, brand identity, and corporate cultures, which made the employees, have the confidence in the management and propel the organisation to success (Dutta and Subhadra, 2003; Chester, 2012). The Renault and Nissan decided to involve the employees in implementing the course of the business by using a universal language to enable the organisation communicate more efficiently and to improve the growth. English was chosen and embraced as the language of communication (Dutta and Subhadra, 2003). Critical analysis of the Organizational Culture and Organizational Change The workforce communities from the two case studies have differences on the duration they take to communicate. For instance, the French take short duration when communicating unlike the high-context Japanese and Indian people; hence, the top management must come up with strategies for ensuring there is a common approach to the communication strategy (Marginson and Gugielmo, 2010). These changes cannot happen overnight but must take place within a defined duration to ensure smooth and efficient organisational change. In fact, the best approach is to develop a culture that would uniquely identify the organisation and ensure that all employees from diverse cultural backgrounds adapt to these changes. The new culture that the organisation is striving to put in place must address the essential elements of both cultures from the diverse communities in the workplace (Kostova, et al., 2008). When the organisational change cuts across the communities represented, employees will have a sense belonging to the organisation. Therefore, diversity should not be considered as a challenge but rather it is a strategic way of permeating different regions and making a difference at the organisational level and the consumer level. The stimuli for diversity vary from one region to another because different geographical regions have unique cultures and consumer preferences. However, the factors highlighted cuts across the demographics of the employees. In the absence of good management, the concept of diversity may bring down the organisation because of the conflict the employee will undergo from such differences hence the need to put in place sound measures of implementing the concept (Tony, 2010; Tony and Miao, 2008). A comparative analysis of the Organizational Culture and Organizational Change The two cases studied share some similarities, although the French belong to the low-context culture, they share most of the characteristics with both the Japanese, and unlike the Indian, whose cultural values differ significantly. As far as language is concerned the English spoken by the Nissan-Renault and the Tata Group has many similarities. However, other than the Local language itself, the Japanese who speak English has may context that is significantly different from that spoken in Eastern community like French (Yadong, 2005). Besides, there are some differences, for instance, when Japanese show approval, they can use signs. However, these signs may not mean the same message communicated, which may offend the French people. Therefore, at the organisational level, the management may ensure that the cultural groups assist other employees from different cultures in understanding the components of their culture and the message communicated. Organisations with bicultural or multicultural virtues are attractive destinations for most qualified and competent employees who seek to work in a dynamic environment that gives them an opportunity to learn and develop multifaceted skills (Yadong, 2005). Therefore, such organisations are attractive to innovative employees who can help the organisation grow through development of alternative products and services that meet the growing consumer demands Recommendation The management of MNCs must have a thoughtful, decisive, and well-structured approach to issues related to the diversity because its mismanagement may hurt the organisation (Gupta and Govindarajan, 2000; Gupta and Govindarajan, 1991). While hiring employees especially for the MNCs in new environments, they must ensure they use credible hiring firms that would help in the process of identifying competent individuals with the potential for assisting the organisation to growing. The management must also ensure they put in place measures that circumvent biases among the employees on the ground of the cultural differences. Instituting methods of recognising and rewarding the employees with best performance index will enhance integration of the employees from diverse cultural backgrounds. Besides, training of the employees to appreciate the diversity will enhance the conceptual framework that aims to achieve diversity management. The management must also have strategies to encourage and motivate employees to participate in cultural events by introducing rules that punish employees who violate such measures. Conclusion From the case of Nissan-Renault and Tata Group, it is apparent that diversity is a multifaceted phenomenon that requires the goodwill of the management to ensure organisations make appropriate use of different employees’ background. When employees from different societies represented by different languages, cultures, and interaction come together to work in an environment, the management must ensure they put in place strategies that make optimal use of these differences to improve the efficiency of the organisation. The global market has become so global, demanding, and diverse that managers must come up with the diverse strategic alternative to ensure they meet the demands of their customers. Diversity provides the opportunity to acquire and utilise talents from diverse employees with diverse training and work experiences. 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