Cross-Cultural Management in International Expansion - Essay Example

Cross-Cultural Management in International Expansion Abstract International trade and expansion of business activities overseas are regarded as the most effective means of increasing revenue for a business unit. While increasing span of a business unit internationally, some of the common issues seen to exist are; different business practices, remote headquarters, difference in labour and tax laws and cultural variations. Amongst these, cross-cultural difference is seen to be the strongest factor effecting globalized business firms. Cultural factors include the difference in governance, social thinking, attitude, value system and behaviour. Employees of multinational organizations are required to consistently interact with individuals from other cultures in order to conduct business. The cultural dissonance makes it difficult for employees to communicate effectively. The difference in perception due to the cultural differences may give rise to conflicts and other managerial issues in the organization. The study incorporates analyzing different theories pertaining to cultural difference in organizations. It also includes a comparative study of organizational cultures of the UK, China and Brazil. Introduction Globalization has paved way for business firms to expand their business into different nations. This feature helps organizations and nations to share their resources. So, a global platform is created in respect of exchanging goods and services. Economies of different nations interact here with each other, creating greater opportunities for growth. Although international business expansion brings in several advantages for a firm, it is not an easy venture. International firms are required to study political and economical conditions of the host nation before expansion and select suitable business strategies for setting up business. One of the major challenges in international business expansion is the aspect of cross-cultural difference. Most modern organizations are multicultural that widen organizational dynamics in respect of employees, clients and customers. A business organization that is located in more than a single nation is culturally dynamic. Cultural differences include language, education levels, technology background, lifestyle and attitude. Adjusting with such aspects, an international business is required to function and communicate, compressing time and space across the globe (Thomas, 2002). The purpose of this study is to identify different factors involved in international expansion of a business. The study analyses the international expansion strategy, in terms of culture of a UK based business, for entering developing nations such as China, Nigeria and Brazil. The shift from domestic to international business requires managers to understand the paradigms of transitional business activities. Such activities involve a proper analysis of the procedure of cross-cultural management as well as ability to function effectively in a multicultural setting. Technical skills alone are not sufficient for a multinational firm to operate globally. The complex global environment drives organizations to develop the ability to support different cultural backgrounds. Managers should have adequate competencies towards accepting cultural differences and interpreting information that is delivered in different methods, thereby taking decisions that are not dependent on one’s own assumptions alone. Transitional business activities include developing different cultural interconnections, balancing different contradictions and maintaining integrity and flexibility (Holden, 2002). Theoretical exploration Hofstede theory The different dimensions of organizational culture existing in different countries can be studied with the help of Hofstede’s cultural dimension theory. The study focuses upon comparing organizational culture existing in the UK with that of China. Figure 1: Hofstede’s culture comparison model (Source: The Hofstede Centre, 2014) Power distance This dimension states that individuals are not equal in terms of their capabilities and knowledge, leading to different levels of power. Power distance refers to unequal distribution of power amongst different individuals of the society. In the UK, power distance is low indicating that leaders of such organization disseminate greater power in the hands of their subordinates. The work culture in the UK gives adequate importance to individual work rather than group effort. In this respect, it becomes important to provide individual employees with greater power over their work and related responsibilities (Soderberg and Holden, 2002). Contrarily, there is a high degree of power distance existing in organizations of China. Organizations in China, therefore, have a class of managers and administrators who are leaders, followed by their subordinate employees. The power given to lower level employees in terms of decision making is low as compared to those in the UK organizations (Tsui, Nifadkar and Ou, 2007). Individualism Employees of UK are expected to rely on themselves when it comes to performing their work and fulfilling responsibilities. They are motivated to take initiative and decisions for themselves. In an individualistic approach, employees are seen to focus upon themselves and work that they are required to perform (Bhagat, et al., 2002). Organizations in China believe in collective approach. This aspect motivates employees to achieve organizational targets collectively. They believe that individual efforts are lesser effective compared to team effort. Hence, collective working and team building is promoted highly in these kind of organizations (Chevrier, 2003). Masculinity A masculine organization appears to concentrate more upon achieving corporate goals and is driven by competition. Europeans give high importance to work and succeeding in the same. They like to display their achievements. Many assessment methods in Europe are based upon set targets against which employee performance is measured (Schaffer and Riordan, 2003). As a result, there is a high degree of conflict amongst employees for achieving greater success. On the other hand, a feminine work culture assigns a greater level of importance to quality of life and cares about family and friends equally or at a higher scale in respect of one’s career (Deci, et al., 2001). Such aspects drive employees to be less focused on career, giving more than adequate importance to their personal lives. Individuals are willing to sacrifice their career goals so as to meet obligations in their personal lives. Having a proper work life balance is greatly essential for employees. The above graph shows that level of masculinity in China and UK are almost similar. There is a balance between the level of masculinity and femininity existing in both these organizational cultures. The adherence towards masculinity, nonetheless, is seen to be higher (Krishna, Sahay and Walsham, 2004). Uncertainty avoidance Organizations in China are highly futuristic, signifying that they heavily emphasis upon examining aspects of future. This involves inspecting future economical conditions including technological growth, change in the patterns of conducting business and that of demand patterns. Organizations in the UK stress less upon inspecting aspects of the future and operate business considering present conditions (Hanges, et al., 2004). Although most European organizations adhere to a high degree of innovation, their actions are less focused upon fulfilling needs of the future. They consider the future to be highly uncertain and consequently concentrate less upon taking concrete decisions for future events. However, firms in China reveal a low level of uncertainty avoidance, signifying that they give adequate importance to considering and planning for their actions in future. They believe that present actions have a substantial impact upon scenario of the future. Therefore, organizational decisions are carefully taken, taking different factors into account, which are likely to arise in the future (Prasad, 2003). Pragmatism Organizations in the UK focus largely upon short-term results in comparison with long-term achievements. They measure organizational performance on a quarterly basis. This attitude reflects that Europeans strive to achieve quick results. On the contrary, it is observed that organizations of China are more inclined towards their long-term results and plans. Most of their organizational strategies are framed on the basis of long-term planning (Thorne and Saunders, 2002). Results of business operations are assessed annually on the basis of financial statements. Additionally, firms also conduct analysis relating to forecasting financial results for forthcoming financial periods. Indulgence Indulgence refers to the desire or the impulse to exhibit emotions and state viewpoints. If level of indulgence is low, then it suggests a higher degree of restrain. This implies that individuals suppress their emotions to a large extent. In figure 1, it can be seen that level of indulgence is high in UK and low in China (Luo, 2002). Threats and opportunities in the Chinese culture A UK based company which expends into China can benefit from the long term planning culture of the Chinese organizations. Firms can also benefit from the adherence towards team work. However employees shifting from the UK to China might find it difficult to adjust with low level of power given to them to take decisions. They might find it frustrating to consult with their superiors time to time for managing their work. It is therefore essential for such expatriates to be given training so that they are able to adapt the change of culture easily. The analysis above signifies that employees of organizations in the UK are more expressive of their opinions and do not restrain their thoughts relating to management of business organizations. In China, employees follow decisions of their superiors and give less opinions upon what has been suggested (Javidan, et al., 2006). In addition, organizations in China strategically focus upon developing plans directing the future course of actions. Accordingly, majority of their present actions are synchronized with that of the future (Holden, 2002). From the Chinese organizational culture, it is possible for the UK employees to develop the culture of long term decision making and adhering to analysing the risk factors that are likely to arise in the future. Cultural differences in UK and Brazil Based on the Hofstede’s model the differences between the cultural aspects of UK and Brazil can be analysed. Adapting to a Brazilian organizational culture is seen to be highly challenging. Organizations that are based in UK and expanding their activities to Brazil find the cross-cultural interactions and transitions to be difficult. The corporate sector of Brazil is marked with the existence of many multinational giants who bring in their managers and employees from the home nation. The process adaptation demands great effort from both the home and host nation employees (Ontario Regulators for Access Consortium, 2014). The Brazilian organizational culture is characterized with lack of planning and influence of personal relations upon the business environment. Brazilian employees, thus, feel threatened by the new rules and high commitment expected towards their job. Brazilian society is strongly influenced by inequality in terms of income and individuals show less dedication towards work responsibilities. Wealth and work in the Brazilian society are collaborated with exploitation, adventure, risk, failure, luck and corruption. They importance of hard work for achieving a good career is not perceived by most Brazilians. It is observed that when a UK firm undertakes operations in Brazil, employees of the Brazilian firm portray a defensive attitude towards the European culture. There is a strong distrust and lack of collaboration between the employees of UK and Brazil. This tension between both the parties is seen to exist for a significant duration. The scenario changes as employees interact consistently and understand the aspect that working together is important for accomplishing the organizational goals. Opportunities and challenges in the Brazilian culture Globalization has induced many firms at present to remain liberal towards accepting other organizational cultures. Even in respect of management style, it is observed that there a notable contrast between both the nations. There is a lot of bureaucracy involved in the Brazilian style of management. Employees do not directly communicate with their superiors. Contrarily, a European or UK management style would involve managers to have frequent and close interactions with their subordinates. This paves way for development of transparency and easy communications. Managers encourage subordinates to present their valuable suggestions and disclose different issues without feeling threatened. Most UK expatriates working in Brazil are seen to be placed in the upper level management (SOAS University of London, 2014). They find it difficult to establish effective communication with their Brazilian subordinates who appear to be insecure and threatened by them. The table below summarizes organisational cultural differences between Brazil and the UK. Figure 2: comparison between the Brazilian and European organizational cultures (Source: The Brazil Business, 2008) The organized corporate culture of UK can therefore bring a strong sense of order and honesty in the way Brazilian’s conduct business. The Brazilian culture has been observed to be not supportive for organizational growth and development. Therefore a UK based firm when considering expanding into the Brazilian market must maintain their sore organizational cultures. They should consider giving appropriate training to the Brazilian employees so that they can adopt with the UK organizational culture easily. Cultural difference in UK and Nigeria In terms of power distance, Nigeria scores higher than UK. Much similar to China, Nigerian organizations have a high level of power concentration in the hands of the organizations superiors. It is also observed organizations in Nigeria adhere to group effort and team work largely. This however is not the case in the organizations of UK. It has also been observed that organizations in Nigeria adhere to achieving quick results rather than planning for long term. This is an aspect that is similar to the Brazilian culture. Opportunities and challenges in the Nigerian culture While considering expanding into the economy of Nigeria, it is important for an organization based in the UK to adapt to the high level of power disparity existing in the organizations. This aspect can be managed be developing a culture whereby power does not remain concentrated in the hands of few but has been delegated considerably. Also it would be important for the UK expatriates to adapt to the system of group work which is significantly present in the Nigerian organizations. It has also been observed that the level of communication between the superiors and subordinates in the Nigerian and UK cultures is seen to be significantly low. In the UK, subordinates are seen to adhere to open and unrestricted communication between the superiors and the subordinates. Expatriate employees shifting to Nigeria would generally be taking up the position of managers. It would therefore be quite challenging for them to encourage their subordinate Nigerian employees to encourage increasing their level of communication with the superiors. Practical scenario in culture dissonance The Development Model of Intercultural Sensitivity (DMIS) that was developed by Bennett suggests that there are six stages to development of intercultural competence. The theory states that cross-cultural adjustment is possible by understanding core values and beliefs of different cultures. The phases discussed in the study are largely behavioural and have been mentioned as follows (Joynt and Warner, 2002). There is a level of cultural dissonance, which arises when people from different organizations interact. Most multinational organizations are seen to establish a common organizational culture across their offices located at different nations. However before setting such organizational cultures, organizations ensure that there the cultural aspects are laid down keeping in mind the specific needs of the society. For instance if a UK based business plans expand its business to India, the company should incorporate certain cultural aspects existing in India, such as dressing style and way of greeting people and so on. Even though the culture existing at different facilities of the same organization are set as similar they may vary slightly pertaining to the differentiated culture scenarios of each region. Globalization itself has helped in collaborating different cultures across the globe and help people to adapt and adjust to different cultural aspects without much resistance. Modernization has made people and organizations function in similar ways to a large extend. This further makes lifestyle related aspects across many nations similar. It has been further observed that at present conflicts within an organization due to culture aspects are extremely low. By establishing collaboration between different cultures it is possible for organizations to minimize difference of perception. In organizations where there are people from different cultural backgrounds working under the same roof, management must take special efforts to enhance team spirit and friendliness amongst the work force. This can be done by conducting training session and conducting extra-curricular activities by which, employees can informally adapt to each other. This would help in generating team spirit and reduce cultural dissonance between employees. It is also important for multinational organizations to respect the cultural orientations existing at different nations. For meeting this requirement organization are seen to celebrate festivals and provide holidays to their employees on different occasions. Employees are encouraged to exchange greeting and wishes during different types of occasions including the festivals of both the host and home nation of the organization. Recommendations Internationalization has induced many organizations to spread business activities across the world. This helps organizations to set global platform for the exchange of goods and services. As a result, there is adequate interaction between the cultures of different organizations set up in separate nations. In order to minimize cultural dissonance, several multinational organizations are seen to develop a globalized culture applicable upon all the sub-firms. This makes it simpler for expatriates to adapt themselves at a sub-location of the same organization. Globalized organizations are observed to develop their culture in a manner that is acceptable in all nations where the firm operates. Adaptation, therefore, becomes easier for employees of the home and host nations. Apart from this, firms also impart training to their employees who are shifted to another location. Training is considered to be one of the effective ways of managing cultural diversity existing in a multinational firm. While imparting such training, it is necessary to identify strengths and weaknesses that arise while working with people from another culture. Employees must be trained to be able to become global managers. Additionally, cultural awareness aids in harnessing workplace diversity effectively (The George Washington University, 2003). Conclusion Diversity of culture at workplace can be properly managed by training employees to be flexible and accept other cultures. There must be adequate levels of trust and team spirit existing between the employees, irrespective of personal cultural background. Employees should appreciate and perceive the fact that every culture is unique and must be respected. In order to make culture acceptance easier, many organizations develop informal structure of communication. This further enhances ability of expatriate managers to interact with subordinates and co-workers. International organizations generally establish one language for communication within the organization. Globalization has, however, been successful at reducing culture barriers between many nations. Through business activities, it has been possible for nations to develop acceptance towards other cultures. In addition, globalized business requires individuals to work on a common platform, putting aside their culture differences and adhering to shared values and beliefs that help in achieving organizational goals effectively. Although there are significant difference of perceptions due to diverse pattern of education and lifestyle, organizations regardless of their origin strive to achieve success and deliver high quality services and products to the society. It is this aspect that unites organizations from across the globe. Reference list Bhagat, R. S., Kedia, B. L., Harveston, P. D. and Triandis, H. C., 2002. Cultural variations in the cross-border transfer of organizational knowledge: An integrative framework. Academy of Management Review, 27(2), pp. 204-221. Chevrier, S., 2003. Cross-cultural management in multinational project groups. 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Cross-national, cross-cultural organizational behavior research: Advances, gaps, and recommendations. Journal of Management, 33(3), pp. 426-478. Additional readings Aycan, Z., 2000. Cross-Cultural Industrial and Organizational Psychology Contributions, Past Developments, and Future Directions. Journal of Cross-Cultural Psychology, 31(1), pp. 110-128. Bajdo, L. M. and Dickson, M. W., 2001. Perceptions of organizational culture and women's advancement in organizations: a cross-cultural examination. Sex Roles, 45(5-6), pp. 399-414. Bennett, R., Aston, A. and Colquhoun, T., 2000. Cross‐cultural training: A critical step in ensuring the success of international assignments. Human Resource Management, 39(2‐3), pp. 239-250. Caligiuri, P. M., 2000. Selecting expatriates for personality characteristics: A moderating effect of personality on the relationship between host national contact and cross-cultural adjustment. MIR: Management International Review, pp. 61-80. Christie, P. M. J., Kwon, I. W. G., Stoeberl, P. A. and Baumhart, R., 2003. A cross-cultural comparison of ethical attitudes of business managers: India Korea and the United States. Journal of Business Ethics, 46(3), pp. 263-287. David, W. and Fahey, L., 2000. Diagnosing cultural barriers to knowledge management. The Academy of management executive, 14(4), pp. 113-127. Earley, P. C., 2002. Redefining interactions across cultures and organizations: Moving forward with cultural intelligence. Research in organizational behavior, 24(1), pp. 271-299. Helmreich, R. L. and Merritt, A. R., 2001. Culture at work in aviation and medicine: National, organizational and professional influences. Jackson, T., 2013. Management and change in Africa: A cross-cultural perspective. London: Routledge. Kirkman, B. L. and Shapiro, D. L., 2001. The impact of cultural values on job satisfaction and organizational commitment in self-managing work teams: The mediating role of employee resistance. Academy of Management Journal, 44(3), pp. 557-569. Kirkman, B. L., Chen, G., Farh, J. L., Chen, Z. X. and Lowe, K. B., 2009. Individual power distance orientation and follower reactions to transformational leaders: A cross-level, cross-cultural examination. Academy of Management Journal, 52(4), pp. 44-764. Lewis, D., 2002. Organization and Management in the Third Sector: Toward a Cross‐Cultural Research Agenda. Nonprofit Management and Leadership, 13(1), pp. 67-83. Matveev, A. V. and Nelson, P. E., 2004. Cross cultural communication competence and multicultural team performance perceptions of American and Russian managers. International Journal of Cross Cultural Management, 4(2), pp. 253-270. Meriläinen, S., Tienari, J., Thomas, R. and Davies, A., 2004. Management consultant talk: A cross-cultural comparison of normalizing discourse and resistance. Organization, 11(4), pp. 539-564. Sagie, A. and Aycan, Z., 2003. A cross-cultural analysis of participative decision-making in organizations. Human Relations, 56(4), pp. 453-473. Templer, K. J., Tay, C. and Chandrasekar, N. A., 2006. Motivational cultural intelligence, realistic job preview, realistic living conditions preview, and cross-cultural adjustment. Group & Organization Management, 31(1), pp.154-173. Thomas, D. C., 2008. Cross-cultural management: Essential concepts. California: Sage. Walsham, G., 2002. Cross-Cultural Software Production and Use: A Structurational Analysis. MIS quarterly, 26(4). Yamazaki, Y. and Kayes, D. C., 2004. An experiential approach to cross-cultural learning: A review and integration of competencies for successful expatriate adaptation. Academy of Management Learning & Education, 3(4), pp. 362-379. Yousef, D. A., 2001. Islamic work ethic–A moderator between organizational commitment and job satisfaction in a cross-cultural context. Personnel Review, 30(2), pp. 152-169. Read More