CASE 3 THE CULTURAL ENVIRONMENT OF INTERNATIONAL BUSINESS - Essay Example

The cultural environment of international business The 9.3 billion dollars deal between Applied Materials and Tokyo Electron in September 2013 saw the merger of two companies with distinctly diverse cultural environments. The merger stands to benefit both companies whereby, Applied Materials’ stockholders will retain 68% ownership of the new company. Conversely, the merge will boost Tokyo Electron’s stock value by 6% and its stockholders will receive an additional 3.25 shares for each of the shares they own in the new company (Johnson, 2013).

Amidst the benefits, lies the problem of distinctly diverse business cultures between the two companies. Explored in this essay is the biggest challenge facing the merged companies pertaining to cross-cultural management and recommendations that will aid in the mitigation of the challenge. Applied Materials has a diverse workforce comprising of individuals from different ethnic backgrounds whereas Tokyo Electron’s workforce predominantly consists of Japanese nationals. The former’s business culture; therefore, takes into consideration the diversity of its workforce in all aspects of the organizations operations.

As a result, the company would find it easier to accommodate the Japanese nationals from Tokyo Electron. Conversely, Tokyo Electron might face significant problems enmeshing the diverse workforce with their relatively mono-cultural workforce. However, the most significant challenge arises from both companies outlook on risk. More often than not, US based companies do not shy away from risks and the reverse holds true for Japanese organizations. Granted, the risks taken by US based companies are calculated with high probabilities of success.

They use unsuccessful ventures as learning experiences, which enlighten future decisions. This is not the case for Japanese organizations, as they thrive in risk adverse cultures. Japanese culture shuns failure; therefore, top-level management only undertakes projects that they are sure will result in successful outcomes (Johnson, 2013). Applied Materials’ ability to take risks has contributed to its rapid expansion. In 2011, the company acquired Varain, a telecommunications equipment, which cemented its position in the industry.

In less than three years, the company has now sought the merger with Tokyo Electron, a decision that endorses the company’s standing as a leader in the telecommunications industry. The conservative Japanese management styles adopted by Tokyo Electron ensure that the company avoids risks. As a result, the company has been mark timing at the same level unlike its US based competitor. The 2013 merger with Applied Materials sought to enhance the company’s standing, as it allowed it to keep up with its international, risk-oriented competitors.

According to Tetsuro Higashi, Tokyo Electron’s Chief Executive, the merger would prevent the company from falling prey to more aggressive companies (Negishi, 2013). Ensuring there is equal representation of members on the board and the decision to base the new company’s headquarters in Netherlands functions to mitigate challenges arising from diverse cultural environments (Materials & Electron, 2013). All parties have a fair chance of voicing their concerns. In addition, a non-biased setting creates a platform for proponents to lobby for their risky decisions; hence, garner their opponents support.

In conclusion, cultural diversity in the business environment is integral for organizations success. Heterogeneous cultures analyze situations from different perspectives, which explore all alternatives in order to find the best one. References Johnson, S. (2013, September 09). Applied Materials to merge with Tokyo Electron in $9.39 billion deal. Retrieved from Mercury News: http://www.mercurynews.com/business/ci_24164465/applied-materials-merge-tokyo-electron Applied Materials., & Tokyo Electron, (2013).

Creating a New Global Innovator. New York. Negishi, M. (2013, September 25). Deal-Shy Tokyo Electron Chief Pushed for Sale to Applied Materials. The Wall Street Journal.