The Issue of Cultural Compatibility of the UK-Based Tesco and Indian Tata Group - Case Study Example

Lecturer: Introduction Internationalization of business has increased the need for cultural diversity in organizations. Managers need to leverage intercultural situations for successful foreign ventures. This can be accomplished through establishing strategies to enhance cultural competence that is necessary to accomplish a competitive advantage in the international market environment. Corporate culture needs to be flexible to allow the changes necessitated by the business environment. Organizational culture influences strategy development, goals and overall business processes. It entails symbols, principles and expectations that control the behaviour of an organization. Global markets have different national cultures that influence operations of a business. Human resources are influenced by their cultural backgrounds and come to the organization with unique values and perceptions. Corporate culture comprises the national culture within which a business operates and its organizational culture. This paper applies cross cultural models and theories to assess the importance of the issue of cultural compatibility of UK based Tesco and Indian Tata Group for the strategic implementation of the partnership project in India. Cultural Compatibility The corporate cultures of Tesco and Tata Group are likely to influence the success of the international joint venture. Tesco is a new entrant in the Indian market and the company’s corporate culture will be affected by the national culture as well as the organizational culture of Tata group that has already been successful in the Indian market. Due to this success Tata group may expect Tesco which is the new comer in the market to submit to the already established corporate culture (Tiwari and Herstatt, 2012). (Johanson and Vahlne, 2013). Schoenberg (2000) argues that the process of integrating two distinct corporate cultures is tedious and often challenging to the management of the subsequent partnership. Tesco’s human resources are mainly pooled from the UK cultural background while Tata Group employs majority Indians that are significantly influenced by the local culture. Organizational cultures that do not match in most cases result in low morale among workers that leads to skiving, high employee turnover and decreased productivity. Incompatible cultures are blamed for the failure in many contemporary mergers and acquisitions. Collision of cultures causes mismanagement as a result of poor strategy development, goal setting and general organizational operations (Stahl and Voigt, 2005). The cultural fit perspective postulates that the level of cultural compatibility is a significant determinant of the success of the resulting partnership between two organizations. The significance of culture compatibility on organizational behaviour and success cannot be overemphasized. Cultures of partnering organizations can be compatible even though different. The outcome of a partnership is significantly influenced by the pre-amalgamation cultures. Organizational cultures according to Cartwright and Cooper (1993) can be wide ranging along a scale from top to bottom based on certain aspects such as power that is the major source of individual limitation in a partnership. A new intelligible culture must develop if there is a balance of power between the partnering organizations, which is formed as a result of the partners adapting to one another’s culture. This may not be accomplished if each organization struggles to maintain its culture and eventually the partnership may not succeed. Cartwright and Cooper further emphasize the importance of the partnering organizations to possess similar or contiguous cultures such as “role and task cultures” for an effective collaboration to be achieved. An unbalanced relationship between the partners may lead to resistance among employees and integration issues as the more powerful organization tries to influence its culture on the supposedly weaker partner. However, this mainly occurs in an acquisition form of partnership whereby one organization acquires another, which is not the case between Tata and Tesco (Hewett, Money and Sharma, 2002). The acculturation perspective views partnering organizations as equal associates who are willing to give up their inherent organizational culture and combine their strengths to form a superior culture than the original one in any of them. Each of the partners owns the resulting culture as they equally participate in its formation. It is accomplished through the formation of a shared organizational language, reciprocated deliberation as well as values that enhance common benefits Jarratt and ONeill (2002). However, according to Sarkar et al. (2001), the acculturation process may also result in undesirable consequences. The level of resemblance between the two cultures determines the amount of pressure and struggles encountered in the amalgamation process. The degree to which each organization wants to maintain its individual cultural identity as well as the extent to which each partner is attracted to the other’s culture determines the acculturation approach. In case of acquisitions, the acquiring organization’s approach to acculturation is influenced by its expansion strategy and acceptance for diversity. When the acquired organization’s members strive to preserve their cultural identity in a high level of integration, there is often a likelihood of tension and unsettling culture conflicts. Positive results of an acculturation process are accomplished when reciprocity is present in the partnering organizations such that each firm is allowed to put forth its acculturation strategy (Schraeder and Self, 2003). The social constructivist viewpoint is founded on collective or moderately shared analytical patterns that are formed, replicated and progressively transformed by the people who own them. Communication and representation processes are considered to be significant while culture is viewed as a fundamentally self-motivated occurrence that becomes manifest relative to and opposing an alternative culture (Vahlne, Schweizer and Johanson, 2012). According to this perspective, conflicts resulting from a merger of two cultures can be interpreted by means of local group against foreign group bias and the need to maintain social identity in each group. The groups comprise employees of each organization in the partnership. Each group tries to assert its uniqueness while emphasizing the unlikeness of the other group in the process of developing social identity. Success of the partnership may be adversely affected if none of the group will be ready to give up its individuality (Berg and Wilderom, 2004). External orientation is an aspect of organizational culture that can influence success of the partnership. It affects the way an organization relates with other players in the industry. Organizations with a strong external orientation are able to communicate and cooperate with others enabling them to leverage on outward positioning rather than focusing on internal preservation (Ojala, 2009). Significant cultural difference in the manner that the two organizations position themselves externally may result in dissatisfaction and an impediment especially if only one organization is that is externally oriented. Tata group values external collaboration and continuous learning from other organizations. This has led to many partnerships with similar organizations like DuPont, business research companies as well as academia. It is viewed as a way of promoting creative thinking and innovativeness (Tata Sons Ltd, 2014). This means the partnership with Tesco is not the first or the last. On the other hand, Tesco is a leader in partnerships with local and regional businesses as well as in collaboration with global organizations such as Consumer Goods Forum (CGF), Retailers Environmental Action Programme (REAP) and IGD among other common interest industry groups (Tesco Plc, 2014). The external orientation of both companies is a pointer to a successful partnership as it demonstrates their willingness to openness through consultation rather than maintaining clandestineness with regards to internal issues. Common relationship orientation is important as it promotes coordination of departmental activities such as shared staff training and customer centred approach (Barringer, and Ireland, 2008). Autonomy among human resources is also an aspect of organizational culture that may influence success of the partnership. When employees are motivated to take part in the decision making process, they are empowered to accomplish organizational goals. Little freedom lowers the possibility of ownership of organizational goals among employees and hence they are discouraged to take responsibility. Differences in the autonomy of human resources may hamper the success of a partnership (Ruey and Kim, 2010). Tata Group Tata Group has been successful in establishing firm human resource regulations that define human resource ideals. Employees have been made to understand their scope of decision making in line with the Group’s code of ethics. However, initiative in the company is hampered by the characteristic fear of failure among Asian managers and hence minimal willingness for risk taking (Beise, 2004). On the other hand, Tesco is highly influenced by the UK culture of greater tendency to risk taking. Employees are encouraged to communicate their point of view on virtually any issue affecting organizational performance. However, even with the differences in the approach to risk taking, cultural compatibility is imminent as the partnership will help to share the risk and hence Tata’s concerns of risks will be minimal (Tesco Plc, 2014). Cultural compatibility between Tesco and Tata is important for a joint venture in India as each organization will benefit from acquisition of key competences and skills that cannot be accomplished individually (McNaughton, 2003). For example, Tesco needs to penetrate the Indian market with a variety of consumer goods and it might take significant time period for the company to attain competitiveness on its own in the foreign market. It also needs employees who understand the regional culture for its marketing strategy to be effective. This will easily be accomplished through a joint venture with Tata that already has experienced employees with regards to the consumer behaviour. Tata on the other hand will gain UK experience from Tesco expatriates who will transfer the skills to local employees. Both companies will engage in a mutual partnership whereby their absorptive capabilities will determine the success of the joint venture (Bruche, 2009). The complementary needs of partners in the joint venture will spawn synergy advantage for the companies. Absorptive capabilities are characterised by the ability to develop, bring together and assimilate knowledge and competences to the prevailing knowledge structure (Casson et al. 2006). Apart from operational relatedness, product similarity is also an important aspect contributing to successful joint ventures. They promote inter-partner knowledge transfer and common resource use including product distribution networks (Isai, 2001). It is important in developing long-standing relationships with product suppliers, consumers and government organizations hence greater productivity. Compatible goals enhance strategy development as both companies will be looking towards different approaches to solve a common problem hence greater capacity than while acting as individual firms (Hisrich, 2009). Moreover, risks are shared and reduced as a result of the collaboration. The strategies that will be applied by Tesco and Tata are likely to succeed as the joint venture is similar to that of Tesco and Lotus in Thailand. Tesco will eliminate significant expenditure that would have been incurred if the company was to establish new chain stores in India in its internationalization strategy. The savings can be used in promotion activities that will also popularize Tata brand due to product relatedness (Eyring, Johnson and Nair, 2011). Compatible culture leads to the companies in the joint venture being viewed as one by consumers as well as competitors. This gives the partners a competitive edge in the market as they capitalize on their competences (Hadjikhani. and Thilenius, 2014). They are able to offer a wide range of products to the consumers, which is important in developing a strategic marketing mix that is necessary for the maintenance of competitiveness. Competitors that may be intending to imitate products may find it difficult to effectively outdo the partnership as single innovations may be applied across an array of products thereby helping to deal with imitation in an inexpensive manner. The companies are also able to leverage on a common supply chain thereby minimizing production and distribution costs (Burt and Encinas, 2000). Conclusion Tesco’s international joint venture with Tata is likely to be influenced by the corporate cultures of the two organizations. Cultural fit emphasizes the need for compatible cultures between partnering companies. Power is a critical aspect of organizational culture that determines the success of a partnership. The acculturation perspective considers partnering organizations as equal partners. For a joint venture to be successful, it is necessary for each partner to be submissive according to this approach. Social constructivist theory emphasizes shared goals for continuous development. 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