Cross-Cultural Issues in International Business - Coursework Example

Cross-Cultural Issues in International Business Relating to IKEA Introduction IKEA is renowned manufacturer of furniture and a specialized retailer all over the world with knockdown components of furniture that would satisfy avid clientele. It has a retail chain equipped with flags featured in yellow and blue colors as an embodiment of the flag of Sweden and located in major cities on their outskirts. This has been planned for enticing various shoppers based on the aspects of their looking avidly for various designs ushering in modernity in décor. It should be noted that the value also should look good. There are certain cross sections of people who may be looking for premium brand furniture at good values. The operations at low costs are dependent on various buyers who have the comfort with automobiles for carrying on the non-assembled furniture in attractive kits of packages and enable them to assemble at home. The objective of purchase of a European company for meeting the needs of expansion and bringing about operation economies of mergers and acquisitions it is essential to understand the culture of Europe that can be strategically adopted in management practices. Within the broad framework of strategic management the aspects of culture blended with ethics coverage of group meetings on assessment of networks as well as their results including the modality of improvement vis-à-vis competitors. It is essential to understand and keep track of competitors’ measures for the purposes of ensuring formulation of policies that would be able to generate more market for the company’s products. In this treatise the analysis is based on a United States of America company taking over an European based company and willing to operate in both the countries and also export all over the world (Johansson, 2008). Cross Sections of Culture Prevalent in the International Business of IKEA The acquired knowledge that people use to interpret experience and to generate social behavior is known as culture. It is shared by members of a group, organization, and society. Attitudes and values are formed which shape the individual and group behavior. It is learned through experience and education. It is passed from one generation to another. It constantly undergoes change as people adapt to new environments. Managers, therefore, must understand the cultures of other countries and learn to balance them in order to be successful in international business. They must learn to broaden their perspectives, understand and adapt to other cultures and take decisions that reflect the needs and desires of these cultures. They should primarily fight against the belief that one’s way of doing things if it is good and speedier should also be adopted and be proud of the culture that the company follows based on employee satisfaction, motivation as well as constant enrichment of results. It is essential that the culture prevalent after analysis, thought as well as based on deliberations and discussions and finally implemented is desirable to be followed. A word of caution is that new entrants in the company who have enjoyed multinational cultures will take sometime and will also appreciate the culture being followed that is conducive and healthy (Mitchell, 2000). Culture can be best understood after examining its elements i.e. language, religion, value and attitudes, customers and manners, material goods, aesthetics and education. Language is the primary means used to transmit and interpret information and ideas. The knowledge of the local language helps in three ways. It permits a clearer understanding of the situation. It provides direct access to local people, who are frequently more open in their communications while dealing with someone who speaks their language. An understanding of the local language allows the person to pick up nuances, tacit meanings and other information that is otherwise not stated outright. The value of languages helps in knowing the meaning of everyday idioms and clinches. For example, In United Kingdom, tabling a proposal means taking action on the proposal, while in the United States of America it means delaying a decision on the matter. There should be discussions with American people to understand their modality enabling completion of decision making earlier than they normally do for speeding up business proposals in United States of America. Hence, such discussions should be made at the level of president and above and also coordination based on their choice is required for implementation of proposals effectively for the good of the IKEA Company. In this context the matter of culture should be understood from the experts at the top and an understanding is advisable (Aswathappa, 2010). There are four cross cultural dimensions in the management. They are power distance, uncertainty avoidance, individualism, and masculinity. Power distance is the degree to which less powerful members of organizations and institutions accept the fact that power is not distributed equally. People in societies where authority is obeyed without question, line in a high power distance culture. Countries with high power distance, managers make autocratic decisions and the subordinates do as they are told. Business structures have close controlled operations and a fairly weak work ethic. Organization structures tend to be tall and managers have relatively few subordinates reporting directly to them. Countries with moderate to low power distance, people put a high value on independence, managers consult with subordinates before decision making, and there is a strong work ethic. Here organizations structures tend to be flat and managers directly supervise more subordinates than do their counterparts in high power distance enterprises. Countries with high uncertainty avoidance try to reduce risk and develop systems and methods for dealing with ambiguity. Individualism is the tendency of people to look after themselves and their immediate family only. Economically advanced countries tend to place greater emphasis on individualism, than poorer countries do. Masculinity is assigned to success, money and things, which are held as the dominant values of society. For becoming successful power distance should be maintained but cordial and enabling communication of employees should be maintained to develop a sense of belonging to the IKEA Company and create an opportunity of growth (Mead, 2005). Culture influences strategic management in a number of ways from the management style that is used in dealing with international employees to the type of work attitudes that the personnel exhibit to the way in which people manage their time. It also explains the reasons for those behaviors which are considered unethical in one country and are socially acceptable in another. Mergers and acquisitions involve companies from two different cultures; however this leads to a misunderstanding of how things should be done. Both the national and organizational culture of the acquirer that influences the way, it tries to manage the purchased firm. In the process, the acquired, often tries to use its management style to run things and this creates a clash with the managers in the acquired company who are accustomed to do things differently. Culture also influences strategic management in the way its impact on work attitudes is held. Work attitudes are essential to multinational enterprises because these attitudes influence both the quality and quantity of employee output. In many Asian countries, job attendance is viewed as a major responsibility and every one comes to work every day. Another essential aspect of work attitude is organizational commitment. International research reveals that work is important to several people. Interesting work on an average is the most important objective. People want interesting work. Motivation is the desire to accomplish objectives and attain success. The need for achievement is a learned need, largely determined by the prevailing culture. Achievement drive in the United States, Japan and European countries are very high, whereas it is not very high in Eastern Europe. In some European culture it is important to be on time, while in other culture tardiness in acceptable behavior. A culture’s view of time directly influences decision making. Japanese managers are known to take a long time to make up their minds to do something. However, once they have decided on a plan of action, implementation takes place fairly and quickly. But in western culture, decisions are often made quickly, but commitment is made much slower. The culture’s view of time influence long term strategy. Japanese companies are very long range in their planning efforts and they do not expect to generate a quick return on their investment. Japanese acquisitions are also advisable. Ethics are a set of moral principles and values that govern behavior. The way business is done one country, can be different from the way it is done in another because of the accepted standards of moral behavior. In triad nations, product piracy and counterfeiting are illegal, however in many Asian countries patents, copyrights, trademarks are not respected and the government, at best, is helpless to prevent it and, at worst, does not care. Other ethical issues in the workplace are equal opportunity and freedom from a hostile work environment. Racial discriminations, sexual harassments and sex discrimination are on the rise (Pearce, 2008). Effective cross cultural communication in International business Effective cross cultural communication is essential for successful international business management. In global scenario the activities such as leading, motivating, decision making, problem solving, information exchange and ideas depends on the ability of managers and the employees of one culture to communicate successfully with clients, colleagues and suppliers from other cultures. For the successful cross cultural communication the organization requires certain essentials which include language and culture, high and low context cultures, use of interpreters and non-verbal communication (Phatak, 2006). Process of international negotiations Negotiation is the heart of the international business. It is the process which is influenced not only by the hard facts but also by the personal values, skills, perceptions, attitudes and emotions of the parties involved. The negotiation involved seven steps. They are preparation, strategy, relationship building, exchanging information and the first offer, persuasion, concessions and agreements (Moore & Woodrow, 2010). Advice on differences between American and European corporate culture as well as Solution Differences between corporate culture of United States of America and European countries should be examined in light of the socio-economic and political issues covering both the cultures. This would be appropriate for the application in a corporate environment for achievement that cannot be belittled. The essential requirements are shrewdness and astute as well as knowledgeable discussions and understanding of the other companies’ heads in assessment of the purpose and objective of their seeking integration for the furtherance of their business prospects and turnover. It is important that an understanding of all the vital issues involving integration such as ratio of shares that would be held by each cost considerations, purchase consideration as well as the amount of goodwill that needs to be assessed valued and determined of the inclusion in purchase consideration. The arguments in favor of European culture are time consciousness in terms of meeting appointments and reaching office on time and disadvantages are only the formulations of rules and procedures. The argument in favor are the principles of management entail a blend of hands on approach as well as framing up of certain policies that would benefit the office discipline and culture that can be maintained for enjoying the benefits of both the cultures. The accent on creating the best of American culture is that giving immediate feedbacks hands on approach as well as creating an environment that would ensure performance sometimes at a break-neck speed. The essential parameters are the socio-economic decisions and the objective of attrition rate of employees depends on their performance on a constant basis. The European environment and culture also is beneficial in its own way but when blended with an American culture decisions sometimes get delayed and a policy formulation can be evolved that would benefit both the cultures. This is enabled by a blend based on rules and regulations including compensation benefits giving the people an equal opportunity to earn and make the most out of the returns of the company. In this manner they are entitled to enjoy their living standards based on their exchange rate differentials of being paid in pounds or in dollars based on their choice. The organization structure should have chairman and managing director, president, senior vice president, general manager, as well as group heads, heading managers and other workforce based on various functions. General Manager, vice president above report to the chairman and managing director or president. The managers of each function report to the group heads who in turn would report to the vice president. The workforce depending on each function would report to the concerned manager. The issues of cross culture involves an analysis and final decision making is favored for the integration with European company for ensuring global presence for the augmentation of business income and growth. The modality of the growth as well as advice favoring integration is based on an analysis that is spelling out advantages and disadvantages and offering a solution of integration. The main aspect favoring such as advice is motivation, compensation, rewards and recognition for people involved in both the cultures and by affording an opportunity to capable executives to perform and get rewards based on their performance. Hence, to some extent a policy rules and regulations of European culture should be blended with the principles and practice of American management systems. This happens to be the modality for favoring in the business report an integration of IKEA with a European company involving a cross section of cultures (Harris & McDonald, 2004). Conclusion The objective of this treatise has been fulfilled by providing an effective solution of a blend of cross cultures of Europe and United States of America. An emphasis has been given on professionalism based on a detail study of the activities pursued by both the companies including their strengths in technology, manpower management as well as expertise in creating a market edge and adopting a conciliatory form of discussions involving the essence of strategic alliance. The aspects of integration of IKEA enabled the company to maintain leadership position and ensured success and growth eventually by deriving full advantages of the merits of both the companies. References Aswathappa, K. (2010). International Business. New Delhi: Tata McGraw-Hill Harris, P. & McDonald, F. (2004). European business and marketing. CA: Sage Publications Ltd. Johansson, J.K. (2008). Global Marketing. NY: Tata McGraw-Hill Mead, R. (2005). International management: cross-cultural dimensions. MA: Wiley-Blackwell Publishing. Mitchell, C. (2000). A short course in international business culture. CA: World Trade Press, Moore, C.W. & Woodrow, P.J. (2010). Handbook of Global and Multicultural Negotiation. NJ: John Wiley and Sons Pearce, J.A. & Robinson, R.B. (2003). Strategic management: formulation, implementation, and control. NY: Tata McGraw-Hill Phatak, A.V., Bhagat, R.S. & Kashlak, R.J. (2006). International Management. NY: Tata McGraw-Hill Read More