Managing Operation Planning During Business Expansion - Case Study Example

 Cross Cultural Management Executive Summary Culture plays an important role in international business operations. Even for the same products different marketing strategies are required in different countries because of the political, regional, cultural and economical difference between different countries. Differences in language, religion, environment, authority, temporal concept etc will be different in different countries and hence the business concepts and principles will not be unique everywhere in the world. Moreover the consumer buying habits also will be different everywhere. It is not necessary that same product need to be moved similarly even in similar markets. Some people may be more quality conscious than the price while some others may emphasize more on the price factor rather than the quality. Management By Islam (MBI) or the styles and functioning of businesses in an Islamic country especially in Saudi Arabia is entirely different from that in another country. In Saudi Arabia everything is related to religion and business is also not an exception. Business has more divine dimensions in Islamic countries compared to other countries. Business is not motivated completely by profit making alone in Islamic countries like in other countries. Islam believes that the purpose of human life is a divine one and hence every human action must be weighed against the moral principles before implementing it. Even the same product needs different marketing strategies in different countries in order to succeed because of the difference in the market structure. Only those entrepreneurs who study these differences will succeed in their overseas projects. Introduction Globalization and Liberalization has revolutionized the international business immensely since most of the countries has liberalized the rules and regulations for the entry of foreign direct investments(FDI) in their country. The need for international co-operation for the mutual benefits is better understood in the current century and hence almost all the nations has taken measures for improving the international trade activities. Offshoring and outsourcing are some of the business tactics most of the MNC’s has undertaken in order to reduce their operating costs and to increase their profits. While operating in a foreign country the offshoring firm must custom made their strategies for the smooth operations of their business in the foreign soil. They must consider the cultural, political, legal, regional and religious differences in the foreign country in order to tailor made their business for the target country. The purpose of this report is to explore the cultural dimensions of international business. This report explores various strategies an offshoring firm should take while planning their operations in another country. The writing equipment manufacturing giant Parker Pen Company has committed the serious blunder of considering the whole market as a unique one when they formulated their marketing strategies for their global operations and forced to suffer heavy setbacks from international market. Even for the same product different marketing strategies are required in different countries and hence the entrepreneurs must be done their home work well before the implementation of ventures on foreign soil In the given case study the Market Foods Corporation, Singapore has planned to open a Hawker centre at Riyadh, Saudi Arabia. They have planned to send their Singapore mangers to Saudi Arabia for the logistics operations of their products and hence this report explores the various aspects of logistics and marketing operations needed in Saudi Arabia. This report initially tries to identify the various problems Market Foods Corporation may face in Saudi Arabia, Management issues through the perspectives of MBI frame work, Hofstede’s Cultural Dimensions and LESCANT model of cultural variables, possible solutions and recommendations for the smooth functioning of the new venture in Saudi market. Possible problems for Market Foods Corporation in Saudi Arabia A business firm which is expanding their business activities to overseas countries may face lot of problems initially for setting up the business there. For example, a Singapore company trying to establish its branches in Saudi Arabia may have to consider the political and cultural differences in these countries. In Singapore democracy is followed and hence the people are enjoying immense freedom in every aspect of their life. But in Saudi Arabia, the leadership of the country is in the hands of Saudi royal family. “Although the Saudi king is an absolute monarch in the sense that there are no formal, institutionalized checks on his authority, in practice his ability to rule effectively depends on his astuteness in creating and maintaining consensus within his very large, extended family” (Saudi Leadership, 2005) The increased influence of religion has put control on every aspect of human life in Saudi Arabia with respect to human rights and freedom of expression. Moreover the working culture in these countries is also different. Trade unions are more prevalent in America where as in a country like Saudi Arabia any agitations either at the work place or even in the social life have been prohibited. Even the freedom of public life is also restricted in Saudi Arabia. In a country like Singapore even the binge drinkers can live freely whereas in Saudi Arabia the usage of alcohol is strictly prohibited. In Singapore people can wear any kind of dresses at their will while in Saudi proper dress codes must be followed based on the cultural preferences of Saudi Arabia. Management issues Because of the entire differences in political and cultural aspects in Saudi Arabia and Singapore, the whole business processes need to be restructured or tailor made by the Market Foods corporation in order to succeed in their mission in Saudi Arabia. Most of the management issues can be analyzed in terms of Management By Islam (MBI) Framework, ISO and Halal frame works, Hofstede’s Cultural Dimensions of business, and LESCANT model of cultural framework in business. Management By Islam (MBI) Framework Islam has its own way in approaching even the business. Profit making is not the primary aim for any of the Islamic activities and business is also not an exception. Market Foods Corporation must understand this vital difference in business strategies in Singapore and Saudi Arabia. Singapore is a business hub where all the business activities are weighed against profit making alone where as in Saudi Arabia every action should go through the lenses of Islamic religion. As per the Islamic belief mankind is entitled with a divine mission, which is closely associated with moral principles rather than the business principles. The MBI building blocks are Sense of Purpose, Applying the Framework, Learning Organizational Wisdom, Accepting the Flexibility in Practice and Mastering the Process (Management By Islam, 2007) The MBI framework will analyze the purpose of every action with respect to the utility associated with it. Moreover it connects ethical principles with every aspect of business principles. The balancing between the ethical and business principles is not a recommendation, but an order as per the MBI framework. Traditional organizational principles though explain the need of business ethics in paper, in practice most of such principles will be violated in order to gain profit. For example, undercutting and spy works are common practices adopted by business organizations in order to capture projects though the business ethics prevent them from doing so. But MBI frame work demands the strict adherence of such principles in practice rather than keeping it on paper. Market Foods Corporation must well analyze this MBI framework before starting their operations in Saudi Arabia. The three major steps in adopting the MBI framework are 1) Filling out the Application of Intent, 2) Creating a Member Sustainability Assessment Profile (MSAP) and 3) Attaining the MBI Certification (Adopting the MBI Framework) As per the Saudi MBI framework organizations which follows the MBI frame work must fill out an application of intent first. These applications will be analyzed based on the history and abilities of the entrepreneur or the organization. Moreover the ability of the organization to implement the strict MBI framework will also be studied before granting permission. Once the application is approved by the MBI staff, organizations need to develop a profile called member sustainability profile. Finally the organization needs to attend a MBI certification workshop in order to understand the basic principles of MBI framework (Adopting the MBI Framework) ISO standards and Halal ISO 9000 standards which promote the development of manufacturing, trade and communication among business organizations worldwide through the development of generic standards and ISO 14000, the global series of Environmental Management System (EMS) standards, providing a framework for organizations to demonstrate their commitment to environmental responsibility (ISO Standards, n.d),are strictly administered in Saudi Arabia. The Singapore managers deputized for Saudi assignment must be well aware of these standards and its implementation at work place. Since Market Foods is engaged in hawker food business, they must evaluate the halal laws related to meat from animals. “The word 'halal' literally means permissible- and in translation it is usually used as lawful. The Halal food Authority rules for halal are based on Islamic Shari'ah. It is well known in the meat trade that Muslims consume halal meat. Now to make meat halal or permissible, an animal or poultry has to be slaughtered in a ritual way known as Zibah” (Khawaja, 2001) Muslims especially the highly religious Saudi Muslims are so particular about their food habits. Halal foods are the favorite one for them since it is closely associated with its religious beliefs. Other foods though not considered as Haram, most of the Saudis use it rarely. Hofstede’s Cultural Dimensions Gerard Hendrik Hofstede, the Dutch writer on the interactions between national cultures and organizational cultures has identified five dimensions for cultural aspects in international business; “Power Distance Index (PDI), Individualism (IDV), Masculinity (MAS), Uncertainty Avoidance Index (UAI) and Long-Term Orientation (LTO)” (Geert Hofstede Cultural Dimensions, 2009) Because of the political differences in Singapore and Saudi Arabia there will be a big gap between the power structures of organizations in these countries. The manger- subordinate relationship is also different in different countries because of the work culture differences. In some organizations autocratic methods will be implemented where as in some other countries democratic principles will be prevailed. In some cultures, people may not believe in team work and they will try to work on individual basis though team work is encouraged by organizations as far as possible. For example some people may work for their own interests and their nearest family member’s interest rather than the interests of a team formed from different cultures. The gender aspect is another dimension we have to consider while allocating the jobs to males and females. The value of males and females will be different in Saudi and Singapore. For example, female community is not much dominated in Saudi work places compared to Singapore where both male and female enjoys almost similar power and opportunities. The responses of people in unstructured incidents will be different. It is difficult to mechanize all the activities in a work place. Uncertain incidents can arise anytime in the work places and the response to such incidents will be important for the growth of the organization. Moreover some people may work for long term goals while some others may work for short term goals. These cultural differences at work place can play an important role for the smooth functioning of an organization and hence the Market Foods Managers must be well trained about these differences in cultures by the HR department before sending them to Saudi Arabia. “Culture is more often a source of conflict than of synergy. Cultural differences are a nuisance at best and often a disaster." (Geert Hofstede, 2009) Geert Hofstede's research gives us a better idea about other cultures so that we can take precautionary measures when interacting with people in other countries. In Geert Hofested’s opinion, when negotiating in Western countries, the objective is to work toward a target of mutual understanding and agreement and 'shake-hands' when that agreement is reached - a cultural signal of the end of negotiations and the start of 'working together'. But in Middle Eastern countries much negotiation takes place leading into the 'agreement', signified by shaking hands. However, the deal is not complete in the Middle Eastern culture. In fact, it is a cultural sign that 'serious' negotiations are just beginning.   In gulf countries like Saudi Arabia, the Arab people express their regards through hugging while in other countries like Singapore, hand shake may be used for the same purpose. Knowledge about all such nonverbal communication means will help the Market Foods managers immensely in their operation in Saudi Arabia. LESCANT model of cultural variables The cultural dimensions for international business activities are well defined by former professor of Eastern Michigan University, David A. Victor in his famous LESCANT model of cultural variables for business people. They are Language, Environment, Social organization, Contexting, Authority, Nonverbal behavior, and Temporal conception. (Victor, 2009) Language is an important entity in every communication process especially in international marketing. For domestic business activities in Singapore the managers need either the mother tongue or English, but for international operations, especially in Saudi, the Arabic language must be well learned by the Singapore managers for effective communication. The views and opinions of each party can be communicated properly if both the parties don’t have a language barrier. Language fluency and accent can affect a business deal. Both the parties must understand clearly what others are trying to communicate or convince for getting the maximum out of the deal. Communication often reflects the level of confidence a person have in his abilities. It is easy for people to communicate effectively in their mother tongue. But languages other than the mother tongue may be difficult for most of the people especially for the Saudi people. English knowledge is comparatively less for the Saudis and hence the deputized mangers must learn Arabic in order to communicate effectively to the Saudi people. “Whenever two parties negotiate, the entire process occurs under two umbrella contexts, environmental and immediate. The environmental context refers to forces in the environment that are beyond the control of either party involved in the negotiations. The immediate context includes such aspects as the relative power of the negotiators and the nature of their interdependence factors over which the negotiators have influence and some measure of control.” (Phatak & Habib, 1996) Environmental characteristics of Singapore and Saudi Arabia are different and hence the managers must know these differences well to conduct their business negotiation process meaningfully in Saudi Arabia. Religion is an important entity in Saudi culture compared to Singapore. The natural resources, the weather, political system, social and cultural system all will be different country to country and region to region. The working culture and environment will be different in Singapore and Saudi Arabia. Population size, technology and natural resources are also different in Singapore and Saudi which demands a change in business strategy in these countries. Every activity in Saudi Arabia is going through the powerful lenses of religion in Saudi Arabia. Most of the social organizations are culturally oriented. Social organizations are all related to the religion in Saudi Arabia. For example, in the employee hiring process, as per the Singapore culture only the academic credential will be given priority along with the work experience whereas in Saudi, religion plays an important role above all those credentials in the hiring process. Business and other activities have only secondary importance in Saudi culture or social setups compared to Singapore. “Communication depends on the context in which the communication is set. The more information sender and receiver share in common, the higher the context of the communication and the less necessary to communicate through words or gestures. Communication, then, can be seen as being high or low in contexting.” (Victor, 2009) Contesting depends on the level of information possessed by the two parties. It is difficult to have two parties of different cultures with same contexting level and hence one party will act as the higher contexted and one the lower contexted in a communication process. If the Singapore managers are able to share more knowledge, values and experience between them and the people in Saudi Arabia they will be more successful. Members of same culture can have a big amount of contexting because of their large awareness between each other. “The view of authority in a given society affects communication in the business environment significantly as it shapes the view of how a message will be received based on the relative status or rank of the message's sender to its receiver”. (Victor, 2009) Authority is defined as the shared beliefs about the power or influence of an organization or an individual representing that organization. Authority and power are the two sides of the same coin. Leadership definitely needs power to execute their functions. Authority and leadership styles may be different for different people especially people of different countries. The knowledge about these styles and differences in functioning will enable managers to succeed in their overseas endeavors. Nonverbal communication is the exchange of information without oral communication. “Much of nonverbal communication may be broken down into six areas: dress; kinesics, or body language; oculesics, or eye contact; haptics, or touching behavior; proxemics, or the use of body space; and paralanguage. Any one of these areas communicates significant information nonverbally in any given culture” (Victor, 2009) In some business negotiations, the amount of nonverbal communication may exceeds the verbal communication. Our gestures, facial expressions and body language can communicate so many things to the people to whom we are dealing with. One study has shown that about 65% of a message is communicated through nonverbal communication in a business negotiation process. The appearance, eye contacts, a warm handshake or a hug has lot of meaning in a business negotiation process. Temporal conception is the understanding of time. In some part of the world the whole business processes are time bounded where as in some other parts time may not have that much importance. The concept of time can be classified into two categories; Monochronic time (M-time) and Polychronic time (P-time) (Victor, 2009). M-time is characterized by one thing at a time while P-time means several things happening at the same time. P-time put more emphasize on human relationship rather than a task or job alone. Also P- time concentrate more on long term relationship. For example, Saudi people are known to be polychromic in their dealings while monochronic in their approaches. Conclusions The Human resource department of Market Foods Corporation in Singapore must consider both Singapore and Saudi Arabia as two different markets and hence they must formulate suitable training strategies for their deputized managers based in the cultural aspects of Saudi Arabia. The difference in Language, Environment, Social organizations, Contexting, Authority, Non-verbal communications and time concepts all can influence international business activities and hence the training session of these managers must include all those aspects. Because of the domination of religion in Saudi Arabia over almost all the segments of human life the mangers must well aware of the Management By Islam (MBI) framework, Halal system etc in order to succeed in their Saudi assignment. References 1. Victor David A. (2009) Cross-Cultural/International Communication Retrieved on June 13, 2009 from http://www.enotes.com/biz-encyclopedia/cross-cultural-international-communication 2. Phatak Arvind V. , Habib Mohammed M. (1996), The Dynamics of Iinternational Business Negotiations, Retrieved on June 13, 2009 from http://findarticles.com/p/articles/mi_m1038/is_n3_v39/ai_18348264 3. Geert Hofstede, Cultural Dimensions, (2009)Retrieved on June 13, 2009 from http://www.geert-hofstede.com/ 4. Management By Islam, (2007), Retrieved on June 13, 2009 from http://www.managementbyislam.com/index.php?action=view&item=18 5. Adopting the MBI Framework, (2007), Retrieved on June 13, 2009 from http://www.managementbyislam.com/index.php?action=view&item=17 6. Saudi Leadership, (2005), Retrieved on June 13, 2009 from http://www.globalsecurity.org/military/world/gulf/sa-leader.htm 7. ISO Standards, (n,d) Retrieved on June 13, 2009 from http://www.the-saudi.net/kg/iso9000/iso_standards.htm 8. Khawaja Masood, (2001), Definition of Halal, Retrieved on June 13, 2009 from http://www.halalfoodauthority.co.uk/define.html 9. Geert Hofstede Cultural Dimensions, (2009) Retrieved on June 13, 2009 from http://www.geert-hofstede.com/hofstede_greece.shtml Read More