Comparison between Saudi Germany Hospitals Group and Arabian Oud Company - Case Study Example

Comparison between Saudi Germany Hospitals Group and Arabian Oud Company Introduction Saudi Germany Hospitals Group is one of the best healthcare provider in North Africa and the Middle east region (Saudi German Hospitals Group, 2010). The group began its operations in the year 1988. The family had a unique spiritual vision based on the Quran that believed that saving a person’s life is like saving the life of the whole community. The expansion of the group’s activities has seen it adopt a new vision which aims at financing, operating and constructing thirty hospitals that are of world standards by the end of 2015. The vision of the firm is also to employ more than 50,000 employees by the year 2015. The mission of the firm is to be a leader in the delivery of reliable and quality medical care to everyone in the region. It has five hospitals which are currently in operation. Four of the hospitals are found in the Kingdom of Saudi Arabia located in Jeddah, Riyadh, Aseer and Madinah. The fifth hospital is located in Sana’a Yemen. The group also runs several projects in other countries such as United Arab Emirates, Ethiopia and Egypt. Arabian Oud Company was started in 1981 as a single Arabian Oud retail shop by Sheikh Abdul Aziz Al-Jasser (Stone and Stone-Romero, 2007). Since then the business has been transformed into a multi-billion dollar oriental perfume business. Today the company has over 550 stores located in 17 countries and has a customer base of over 600,000. The firm is among the largest retailers in the world trading in perfumes. The company was the first one to take the oriental perfumes trade to the international market from its localized Saudi Arabian market (Stubblefield, 2004). Today the firm accounts for over 30% share of the GCC oriental perfume market that is about $3.3 billion. The company is uniquely known for its lack of wholesale and distribution agencies. The firm adopted direct retail strategy to expand worldwide. Definition of culture Culture has no definite definition since it defines human social life. Culture is the way a firm exhibits assumptions, behaviours, values and artefacts. The mind of people with similar culture is usually programmed in a collective way that entails a collective phenomenon that is shared partly by people who lived or live within a certain common environment where it was learned. Culture makes it possible for people belonging to different categories to be distinct. (Stahl and Bjorkman, 2006). People have several mindsets that correspond to varied culture levels that sometimes may be conflicting. The success of a firm in attaining its goals is dependent on the roles, responsibilities, behaviour of people and the way they work. An organization culture can be created explicitly (Gupta, 2005). The ability of a firm to be culturally innovative is dependent on the leadership and top management of the firm who are responsible for building strong cultures (Bradley, 2005). Leaders are involved in the construction of the firm’s social reality that shapes the values of the company and attains its vision. Culture is used in organizations to resolve the dilemma of formal procedures which are necessary for the integrity of the business but which may also stifle innovation and autonomy. Significance of the study This paper will provide vital information concerning the impact of culture on firms operating in international arena. Consequently, the paper will shade light on importance of culture on the performance of such firms. Aim To analyse the impact of culture on various aspects of Saudi Germany Hospital group and Arabian Oud company The effect of culture on Human resources The actions of a firm’s employees are determined by the HR culture. These include the behaviour of employees regarding safety, health and environmental practice. It is also capable of boosting employee’s morale, creativity and innovation. It is also able to build solidarity within a firm and enhance sales (Epstein, 1999). To be successful firms have strong values, which express their beliefs and norms concerning what is important and appropriate valued behaviours (Andrews and Boyle, 2008). Where the values are shared, the human resource culture is strong and hence the performance of the firm is enhanced and such firms are characterized with reduced employee turnover, increased commitment to the firm, increased customer satisfaction and increased profits. Cultural differences bring diversity, which in turn brings variety in ideas since problems can be from different perspectives. Thus, the culture of human resource can contribute to external corporate identity, which enhances recruitment and retention. Cultural differences may act as barriers to communication within a firm (Aycan et al., 2000). For instance, the emergence of new capitalists in Russia has encountered communication barriers due to difficulty in communicating with counterparts from USA since some words cannot be translated into Russian language. Furthermore, difference in culture impedes cross-cultural acquisitions. Value systems of people with different cultures differs and this often lead to cross-cultural barriers (Schumann, 2009). For instance, individualistic cultures encourage achievement of the individual, accomplishment of personal goals and encourage believe in individual rights above anything else. On the other hand, collectivistic cultures require that individuals look after one another and believe in the support of the group to which the individual belongs to as a cornerstone to success (Banfield and Kay, 2008). The performance of a firm may also be influenced by the way the culture regards gender differences. For instance, in Middle East countries, gender differences are high and women rarely receive recognition and hence men are preferred during recruitment. In addition, men are the main decision makers. Due to culture globalization employees are trained on various aspects instead of being limited specific tasks of the job. For instance, Indian corporations train their employees in many aspects of American culture, which has enabled such firms to win bids with American organizations. Effect of culture on HRM The management of a firm determines organization culture and its operational environment. When an employee of an organization understand and internalizes the culture of an organization, the employee will be in a position of choosing a strategy and behaviour, which fit with their personality and the main routines of the firm’s activities (Hollins, 2009). In order to manage effectively human resources within an organization, one has to understand how the internal and external environment affects the organization. The effect of culture on HRM occurs at three stages. The first level, organizational culture is seen as a pattern of beliefs and assumptions that are shared by management which affects the practices of HRM directly. These beliefs and assumptions are related to the employees’ tasks and elements of the firm. HRM practices are implemented on the basis of management’s assumptions concerning the nature of duties and the workers. The shaping of the assumptions are based on two cultural forces. Task driven assumptions are under the influence of culture that is at the level of institution. This is determined by the features of the enterprise such as ownership status, industry, resources availability and market competitiveness (Andrews and Boyle, 2008). For instance, public firms stress social gain while private firms emphasize profit. The type of the industry and conditions of the market can influence beliefs related to the way duties are performed. For example, in manufacturing sector emphasis is placed on the process instead of the results while in service sector and research and development units results are emphasized instead of the process. Competitiveness of the market compels firms to be more pragmatic instead of being normative in the orientation of their tasks. Assumptions related to employees are under the influence of societal level culture characteristics. Culture at the level of the society is perceived in terms of value orientations that are shared by members of particular group (Hollins, 2009). The assumptions of managers pertaining the nature and socialization of employees behaviour dependent on managers perceive the characteristics of the society concerning these values. The HRM at Saudi Germany Hospitals Group formulates policies and establishes plans, which ensure positive employer-employee relationship. It is also involved in the implementation of HR strategies, which ensure effective attraction of talented work force (De Burca, Fletcher and Brown, 2004). It also designs policies for compensating and awarding benefits for employees, which are responsive to changes in the market. Plans are made in consultation with departmental heads. It also coordinates, plans, executes, monitors and evaluates staff induction and develops training and development activities for employees. Training is carried out after needs analysis with consultation with business managers. Arabian Oud Company has HRM that is tailored to meet the special needs of the country in which it carries out its activities (Andrews and Boyle, 2008). Since it operates in countries, which have varied cultures, the HRM is located in each of these countries and meets the needs of employees based on the cultured that exists. Impact of culture on marketing Marketing analysis based on cultural framework need to be undertaken to aid in making marketing goals attainable. The framework is based on eight categories, which include language, beliefs, behaviour, aesthetics, literacy, organization of the society, technology and material culture and legal talks. Once managers understand the population’s culture that they intent to market the product, they are in better position of reacting to market uncertainties correctly and automatically (Jacko, 2008). This is because the managers know the culture and the effect of varying conditions intuitively. However, managers operating in international arena cannot be able to carry out such decisions effectively. To overcome this, they ought to understand cultural factors that exist in their country and that which exists in the foreign country. Some multinational companies such as CNN, MTV and Disney have adopted a Universalist marketing approach to market their products. Saudi Germany Hospitals Group operates mainly in Muslim countries and hence marketing of its products has little or no contravention on the local religion (Andrews and Boyle, 2008). The firm is involved in several corporate responsibility activities, which promote its brand name. The firm also carries out advertisement using various media such as audio and visual media, which are acceptable to local communities. Arabian Oud Company marketing strategies are tailored to be inline with regional culture in which it operates. Even though it faces some competition, the products of the firm are widely accepted. The firm bypasses distribution and wholesale networks. The firm has also received several requests to begin selling its products in-flight on various airlines. The impact of culture on international communication, products and services Variation in literacy levels in international arena has an effect on the nature of what is being communicated and what is being used to communicate products and services of a firm. In countries with literacy levels that are low, communication is limited to radio advertisement or billboards and avoid written copy of message (Shumaker, Ockene and Riekert, 2009). In such case, issues may arise with regard to product labelling. In addition, a firm ought to alter its promotional materials and branding message to match the values and attitudes of the local community in order to pass across the message. There exists several religions globally and marketers should ensure that they portray their products in away which is not offensive to the beliefs of people to which they intent to sell their goods and services. Saudi Germany Hospitals Group has restricted its operations in MENA region, which arguably has similar culture, and hence communication across borders presents little challenge (Andrews and Boyle, 2008). Arabian Oud Company is creating a fresh brand that will enable it be accepted in the global market. Due to its Arabian origin, the company suffered from the events of 9/11 due to negative perception from western communities on Arabs in general. To allow smooth flow of communication the Arabian Oud company is contemplating opening regional offices in Far East, USA, Canada, Russia and South America. Effect of culture on strategic decision-making Firms are increasing expanding their ventures to be seen in the global arena. As they do so, they encounter different cultures that differ from the culture where the firm originated (Holt and Perren, 2009). By recognizing the local culture in which the firm operates, firms are able to successful implement the process of strategic choice (Winkelman, 2008). The strategic choice model helps organization to make decisions using a workshop approach to develop solutions that aid in moving incrementally toward a working business idea. In addition, the structure of the firm, that is, top down or bottom up, determines how decisions are made in a firm (Li & Karakowsky, 2001). A firm that encourages a culture where all decision is made by the CEO or board has other employees making no major decisions since they will be waiting for decisions to come from above. Decision making at Arabian Oud are made in top down direction (Oh and Pizam, 2008). However, employees are involved in intensive training activities to prepare them for any impending changes to be carried out. For instance, the decision to franchise the firm has seen many of its managers undergo trainings to prepare them for franchise activities. Saudi Germany Hospitals Group encourages leadership at all levels and hence decisions emanate from bottom up. This has encouraged innovation at the firm. The employees are also trained following needs analysis to enable them make sound decisions while carrying out their duties. Effect of culture on motivation, performance and appraisal Culture affects the criteria used by an organization to allocate rewards and status. Culture can be significantly affected by what is rewarded and what is punished (Nickson, 2007). If an organization ridicules new ideas and those who come up with them, people in such firms will belief that new ideas are unwanted. In such case, employees will shy away from devising new innovative ides since they may land them into trouble with either other employees or the management. A firm which encourages participative culture in decision-making process motivates its employees since they feel to be part of the decisions being implemented and hence will work hard to attain it (Tayeb, 2005). This will increase individual output and performance of the employee. Employees who have goals to attain in a firm are usually motivated when they receive feedback in terms of performance appraisal about their progress (McPhail, 2010). Many firms use bureaucratic process to carry out performance appraisal. Thus the style of management, the security of the job and structures of compensation, development of career, evaluation of performance and strategies of motivating employees that are entrenched in the organizational culture determine how employees are motivated, perform and how they are appraised (Ulrich, 2005). Saudi Germany Hospitals Group has implemented a balanced scorecard that ensures financial and nonfinancial measures are undertaken to find out whether employees meet the set target. The firm has cultivated a culture where leadership exists at all levels encouraging innovation and motivation of employees (Larsen and Lubkin, 2009). Leaders at the firm are encouraged to communicate the firm’s vision, inspire their employees, be involved in the establishment of a culture that is positive, provide a better workplace conditions, be in a position to manage change, be able to make ideas to be part of the firm’s culture and leave a better name. At Arabian Oud Company parochial leadership is encouraged which does not allow participative performance appraisal. Future suggestion Even though Arabian Oud is successful, it needs to empower its employees to be part of decision-making process Arabian Oud Company should implement a balanced scorecard to evaluate the performance of its employees. To encourage growth beyond regional level, Saudi Germany Hospitals Group needs to have R&D department to look for new avenues of investment. Conclusion The impact of culture on the running of a business cannot be understated. Local culture is vital in determining the strategy to be used by the firm to penetrate new markets. The HRM ought to know and understand the culture local people so that they can be able to attract talented work force. The Saudi Germany Hospitals Group had to change its mission and vision to be inline with the needs of the population in which it operates. The Arabian Oud company has tailored its HRM activities to be in line with the needs of different populations in different nations in which it operates. The effect of culture on standardization and adaptation Standardization of the marketing strategy of global brands enables a firm to save on its costs. This enables the company to invest more in marketing and hence it can offer competitive pricing tom its products. Standardization marketing strategy improves the brand image, quality and strength. However, standardization/adaptation is barred by cultural differences. The behaviour of consumers is influenced mainly by these cultural differences. Due to cultural differences, Arabian Oud Company has not been able to standardize its oriental perfumes. Instead the firm has adapted its products to suit the culture of local markets in which it operates. Saudi Germany Hospitals Group operates in countries which are dominated by Muslim culture. Thus most of its products are standardized. This has been enabled by almost uniform religious culture. The approach of the two companies There are three approaches that firms operating on international arena can pursue. They include ethnocentric approach, polycentric approach and geocentric approach. Ethnocentric approach is characterised by strategic decision making process being carried out at the headquarters of the firm. Under this approach, subsidiary firms located in other countries have limited autonomy. Major positions of the firm are held by personnel from the country of origin of the firm. The employment of ethnocentric approach is waning. An example of a company which employs ethnocentric approach is Wal-Mart that has major decisions being made at its headquarters in America. Of the two companies under review, Arabian Oud Company seems to employ this approach since major decisions are made in its headquarters located in Saudi Arabia. Saudi Germany Hospital group has some characteristics of ethnocentric since major positions and decisions of the firm are made at its headquarters and it relies mainly from professionals in Germany. The group’s subsidiaries in other countries have little autonomy in its operations. Polycentric approach has each subsidiary of the firm having some national identity distinction and makes some decisions. Thus subsidiaries of the firm have some autonomy in decision making process. This approach appreciates that culture varies in various countries and hence adoption of local culture is essential for the success of the firm. The two companies seem to have some characteristics of polycentric approach. Arabian Oud Company operates in many countries and their human resources is recruited from the host country to provide an approach that is appropriate for the success of the subsidiary in the host country. The Saudi Germany Hospital Group sources its staff from international labour market and the highly qualified personnel are recruited by the firm. Geocentric approach is a global approach. This approach visualizes each subsidiary as have a special contribution to the success of the firm. The country of origin is not favoured instead the best personnel is recruited for the job and rewards, promotions and development of employees is not based on race, ethnicity or country of origin but on the ability of the employee. This approach is not seen in Arabian Oud Company. However, Saudi Germany firm has some characteristics of geocentric approach since its human resource is sourced from global labour market and promotion and career development is based on results of balanced scorecard. References Andrews, M., and Boyle, J. 2008. Transcultural concepts in nursing care, 5th Ed. New York: Lippincott Williams & Wilkins. Aycan, Z., Kanungo, R., Mendonca, M., Yu,K., Deller, J., Stahl, G. and Kurshid, A. 2000. Impact of culture on human resource management practices: A 10-country comparison. Applied Psychology: An International Review, 49(1), 192-221. Available at http://www.blackwellpublishing.com/content/BPL_Images/Journal_Samples/APPS0269-994X~49~1~010/010.pdf Banfield, P. and Kay, R. 2008. Introduction to Human Resource Management. Oxford: Oxford University Press Bradley, F. 2005. International marketing strategy, 5th Ed. New York: Financial Times/Prentice Hall. De Burca, S., Fletcher, R., and Brown, L. 2004. International marketing: an SME perspective, 2nd Ed. New York: Financial Times Prentice Hall. Epstein, T. 1999. A manual for culturally-adapted social marketing: health and population. New York: SAGE Publishers. Gupta, V. 2005. International Communication: Contemporary Issues And Trends In Global Information Revolution. New York: Concept Publishing Company. Hollins, S. 2009. Religions, Culture and Healthcare: A Practical Handbook for Use in Healthcare Environments, 2nd Ed. California: Radcliffe Publishing Holt, J. and Perren, A. 2009. Media industries: history, theory, and method. New York: Wiley-Blackwell. Jacko, J. 2008. The human-computer interaction handbook: fundamentals, evolving technologies, and emerging applications, 2nd Ed. London: Lawrence Erlbaum Associates. Larsen, P., and Lubkin, I. 2009. Chronic illness: impact and intervention, 7th Ed. London: Jones & Bartlett Learning Li, J., & Karakowsky, L. 2001. Do We See Eye-to-Eye? Implications of Cultural Differences for Cross-Cultural Management Research and Practice. The Journal of Psychology, 135(5), 501-517. Available at http://www.tamu.edu/classes/cosc/choudhury/culture.html McPhail,T. 2010. Global Communication: Theories, Stakeholders, and Trends, 3rd Ed. New York: John Wiley and Sons Nickson, D. 2007. Human resource management for the hospitality and tourism industries. London: Butterworth-Heinemann. Oh, H. and Pizam, A. 2008. Handbook of Hospitality Marketing Management. London: Butterworth-Heinemann. Saudi German Hospitals Group. 2010. Welcome to Saudi German Hospital Group. Available at http://www.sghgroup.ae/ Schumann, J. 2009. 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New York: John Wiley and Sons Winkelman, M. 2008. Culture and health: applying medical anthropology. New York: John Wiley and Sons. Appendices A) Comparison of the two companies Effect of culture on: Literature Saudi Germany Hospitals Group Arabian Oud company HR Culture of a firm determines how the and when the firm develops its manpower. Training and development of manpower is encouraged mainly follows needs analysis Training and development of HR occurs when there is pending change to be implemented. Management of HR The management of HR is dependent on culture of the firm and the external environment in which it operates. HRM involves needs analysis, training and development, policy formulation, and design of policies HRM tailored to match the culture of specific countries in which it operates Marketing Marketing strategy should be in line with customer’s culture. However, standardization of products are beneficial in the global markets. Involved in CRS and other promotional activities Rebranding to match the global market needs International communication, products and services Global market has varied culture. Communication of products and services of a firm ought to be in line with the local culture for the products to be accepted in the market. Vision changed to match the culture of the population and uses different types of media to advertise its products Uses various media to communicate its products Strategic decision making Most firms make decisions centrally. However, encouraging decision making at various levels encourage innovation and motivation of employees. Leadership encouraged at all levels to encourage innovation and employee involvement in decision making process Decision making left to top management. Motivation, performance and appraisal Various employees in a firm are motivated by different things. Firms ought to understand what motivates each of its employees. Motivated employees perform better than unsatisfied employees. Appraisal of employees ought to involve all stakeholders and where underperformance is seen necessary actions ought to be taken. Have a balanced scorecard that helps in performance appraisal and motivates employees. Participation in decision making and goal setting also motivates the employees. Performance appraisal carried out by the management. Standardization/adaptation Standardization of products in global market has several advantages. However, due to cultural difference in global market firms are forced to adapt their products to local markets. Due to Muslim dominated culture in countries where it operates, most of its products are standardized. Due to cultural differences, the firm adopts its products to its local markets. Approach Three approaches are used by global firms: ethnocentric, polycentric and geocentric. All the three approaches are seen in the operations of the company. Only ethnocentric and polycentric approaches are seen with no geocentric approach. Read More