New Market Expansion of Euroinvestmentsltd - Case Study Example

NEW MARKET EXPANSION US cultural factors Operating within Europe has not only been a great experience but hasalso been very fascinating especially in the industry of food processing. The Euroinvestmentsltd is a modern company specializing in processing and retailing agricultural produce. The business niche has been one of its own in the region with many investors focusing on other areas such as manufacturing and service industry and almost forsaking such a key industry as agriculture. Value adding to agricultural produce is not only important to the farmers and local consumers only but it is very important for participation in agricultural global market. The company has grown to command a regional interest and have been able to open branches across the region. Having started in the early years of the 21st century, the effects of globalization have been much felt especially with competition from within as well as with rising competition from multinationals that have also interest in the industry. However, the Euroinvestmentsltd Company has had an advantage in that it has already grown to command great influence in the country and hence would be not much hit by the effect of competition. Nevertheless, changing times have seen individual countries in the region modify and impose new policies in regulating business environment within the region among which have not been very favorable to the company. This has therefore made the company to reduce scale of operations within two countries in the region, which has quite adverse effects. This pressure in specializing within one region has led to the consideration of expanding the operations to new regions such as within the United States, a move that is thought of as having potential to countering such effects that are felt in the market contraction within Europe. The target to expand operations to the US is informed by the market and business opportunities that have been established in the region with very few such operators being known there. Nevertheless, it is appreciated that the success of a business in any market and especially within a ‘new ground’ is dependent on many factors among which are the cultural factors. This paper therefore focuses on studying and reporting on the cultural factors that are at play within the United States and which has direct effects on the performance of such a company as the Euroinvestmentsltd. Special attention of the report will be on US as a country, its workforce and its common business practices as influenced by language, traditions, values and ethics. Cultural diversity exists between the United States and Europe as explained by ethics, values, traditions as well as language, which are all known to have direct influence to trading activities in a country or a region. Citizens of the two countries differ in culture, beliefs, faith practices and economic inclination. These differences make business management practices in various parts and organizations within the two regions quite different. However, it is known that the dominant language within the country is English which may not have much of influence as it would be shared between Europe and the US. It is shown that US’s proven management systems and practices may not work appropriately in Europe as a region. For instance, in a U.S based Multinational Corporation; the effectiveness of its management control system and practices would evidently differ from one state to another or even from one branch with diverse cultural inclination to another in the same country. For a company or an individual to succeed in doing business in any foreign country, having a viable business proposal is not the only guarantee. For instance, succeeding in an environment such as in US that has a vast array of cultural backgrounds; a company is required to have a thorough knowledge of the dominant cultures and styles of business here. Therefore, this study intends to study cultural inclinations of the two countries (US and Europe) and understand the implications of the differences to the expansion of a Europe based company intending to establish branches in the US. Businesses and business leaders thrive favorably when they command a great understanding of the culture dominant within the area of operation (Northouse, 2012). According to Hofstede, Culture can be defined as ‘a system of values and norms that are shared among a group of people and that when taken together constitute a design for living’ (Andler, 2007). Adam Smith, famously known as the modern economics founder, is quoted in his classical work ‘Wealth of the Nations’ to argue that the pursuit of one’s interests is not basically driven by the need to economic gain but rather to a whole range of interests. He thus developed the theory of ‘Moral Sentiments’ and acknowledged cultural values that drive the interrelations of people (Francis & Hezel, 2009). Global trade has tremendously increased in the recent past and this has probed the multinational corporations or individuals who intend to venture into the international trade to learn about international business. This is because this would aid in one understanding the modes of communication practiced there for effectiveness in business negotiations, greetings, body language, social events as well as meeting and dress etiquette. For instance, the United States and Europe are nations that regularly interact in business relations. Although they share similarities, the two countries share many differences especially culturally which definitely influence the business environment and trade practices. In the United States, the first impression matters a lot and is basic to the success of every business relationship and the Americans appreciate eye contacts and a firm handshake with business partners. As a matter of background information, the U.S is a nation of immigrants and has a vast land of resources. Mobility in the country is not prohibited and the citizens move at will from job to another and from place to another over an entire lifetime. Americans uphold cultural values and personal interests precede the interests of the group. Independence, fairness and privacy are also taken with high regard. They believe in risk-taking and thus it is always fine to try again after failure. Time and money are equal resources of economic importance. Futuristic thinking is the mode of life where focusing into the future is as good as present planning with hard work as a priority. However, although the Americans have many shared values, they are not all the same, but show diversity. Immigrants strive to assimilate to diversity, but still cling on to their heritage. Americans love of competition is great and they hold a win/win approach. They value the use into which information is put as opposed to just amassing information. In Europe for instance, there are many cultural differences, which the Euroinvestmentsltd has had to understand and put up with. German and Spanish cultures in example differ in reception of foreigners, business etiquette and in personal appearance for different occasions. French people do their business transactions more professionally and regard politeness as well as good mannerism highly. On the other hand, doing business in Italy requires one to have a very good reference from other already existing Italian companies. In Britain, all personal attributes right from own attire to the style of doing business are relatively conservative with punctuality taking high regard especially in trading processes. When we consider Belgium, the natives are known to be very polite and have a keen sense of time. They are also famous of taking their time before accenting to business partnership or proposals. Finally, the Dutch do business the old way and tolerate other people’s cultures besides being broadminded. They also uphold modesty in their business dealings. According to Hamme, in order to succeed in business in the Europe, it is necessary that one understands such aspects as discussed above and hiring professional assistance from culture professionals may be necessary for a company of individual intending to venture into business there (Hamme, 2010). An earlier research conducted by Hofstede found that culture differs in the following aspects; power distance, gender, individual versus collectivism and uncertainty avoidance (Andler, 2007). Three regions and fifty countries were used in the analysis although his taxonomy added another aspect that was used to analyze twenty-three nations and this is Confucian dynamism. Hofstede found out that those cultural differences has numerous implications to the effectiveness of a management system in every business in all nations. Countries with cultures often referred to as the small power distance countries are associated with participative decision-making and decentralization whereas large power countries are normally associated with less participative decision making and centralization. This implies that different control management systems will suit a country based on their mode of decision-making. For instance, in a decentralized organization, management remains at low organizational levels while in a centralized system, management control system is at high organizational levels. On the dimension of individualist or collectiveness, individuals tend to act on their best interests in the individualistic cultures. This means that policies are to be designed in such a way that individual interests coincide with organizations interests. On the other hand, management to collectiveness organizations may be prompted to encourage cohesiveness and group work. The policies designed should thus focus on the collective wellbeing to both the organization and the workers as units (Lere & Portz, 2005). Other countries and regions define themselves as being either masculine or feminine. In feminine cultures, work is considered low in priority to life unlike the case with masculine cultures. On the other hand, assertiveness, material possession and heroism are all basic characteristics of a masculine culture who believe that work is important to life. Financial rewards are a great motivator in management in masculine culture while vacations and time offs, are key management issues in feminine cultures. Unfamiliar situations and discomfort are major characteristics of these cultures. Management practices here are then dominated by many formal and informal rules and this limits decision making by managers. Differences are evident in short-term orientation as well as in long-term orientation cultures, which explains Confucian dynamism. The short-term oriented cultures tend to concentrate highly on profits and hence are performance oriented. In long-term oriented cultures, however, rewards and promotions dominate. There are many factors to consider while designing management control systems for different countries and countries with diverse employee cultures like US and they include: a. Cultural differences can affect the effectiveness of the policies employed by a management control system. Policies that are very efficient in the Europe are unlikely to be effective in countries with different cultures such as in US hence the need for the necessary adjustments. b. A company culture ought to be considered while bench marking because a culture can adversely affect the effectiveness of any policy employed in a management control system. In responding to cultural differences, a number of studies have been carried out and their findings put forward on the different ways multinational corporations have adopted to overcome the effects of the cultural differences. Some companies have modified their indigenous cultures to reflect and accommodate the subsidiary cultures prevalent in the country of operation. Others have adopted a mechanism where their managers are selected based on compatibility with the new culture. Nevertheless, the following key considerations have to be put forward in order to modify or design a management policy that will suit the diverse cultures in US for the processing company. In other cases, non-financial rewards may be more meaningful than financial rewards in the US, which has a direct impact on policy formulation and enforcement while operating within the country. In many instances, less external incentives are needed in collectivism (as is characteristic to US). Policies designed to work in high power countries such as the Europe are little fit to function in low power cultures like in US. In feminine cultures, rewards to target life comfort are relatively more effective than financial rewards as is common practice in the United States. In collectivism countries, policies that are relatively more inclined to individual working are less effective as the culture predominantly advocates for collective responsibility. Delegation to individuals is common in the US and hence highly advocated in this report. The findings are clearly portraying a need for any multinational or local company to consider cultural background of the employees as well as the management in policymaking mechanisms as not all policies, having been proved effective in one place, must be effective elsewhere. A culture has great effects on consumer behavior, local demand and buying decisions. This will therefore influence managerial decisions and the nature of business negotiations. This study therefore recommends cultural sensitivity, hard work and quality standards be maintained at a higher level in order to overcome competition. Conclusion As Hofstede postulated through his theories of power distance, countries differ in relation to cultural distance. The cultural practices upheld by a country dictate the value of cultural distance as understood within these countries. This therefore shows that multinational companies as well as other trading agents intending to advance trade relations to other countries or explore new business niches elsewhere have a sole obligation of understanding the population of the ‘new’ country in matters of cultural practices as well as their system of believes. This helps the two countries to have good relations in matters of trade and this is critical in explaining business relations between the countries. Therefore, culture and differences, though relatively difficult to observe and measure, have been seen to be very important. An understanding of the deeper-level assumptions that explain why a certain culture upholds certain practices is of paramount importance and as such, the Euroinvestmentsltd has to undertake a very thorough investigation whenever a peculiar behavior in the market is noted. Neyer and Harzing in their research ‘The Impact of Culture on Interactions’ (Neyer & Harzing, 2008) found out that those persons who are sensitive to and acknowledge other persons’ cultures are always successful. Cross-cultural behavior is worth noting in business interactions. This would enable individuals to engage in business enabling behavior and in enhancing mutual considerateness towards each other. References Andler, (2007). The impact of culture on organizations. Francis, X and Hezel, S. J (2009). The Role of Culture in Economic Development, http://www.micsem.org/pubs/counselor/frames/culture_economic_developmentfr.htm> Hamme, J. (2010), European Business Culture: Cultural awareness. Retrieved from: Lere, J.C. and Portz, K. (2005). ‘Management Control Systems in a Global Economy.’ The CPA Journal, 75, 9. Neyer, A K and Harzing, A 2008, The Impact of Culture on Interactions: FiveLessons Learned from the European Commission, Retrieved from: Northouse P. G., (2012). Leadership: Theory and Practice. SAGE publications, 2012 Read More