Overcoming Cultural Differences in an Overseas Subsidiary - Article Example

Overcoming Cultural Differences in an Overseas Subsidiary In the globalized world, formulating adequate strategies in establishing subsidiary in the framework of the cultural paradigm in the host nation has become a crucial aspect of the foreign policy of Multinational Corporations. International relations do not involve mere imperious implementation but pro active approach and initiative taking strategic movements too. As increasing number of markets are opening up in the international scenario, so are the industries and increase in the competition. In this scenario, strategies are adopted in taking into account different layers of parameters with the first being culture of the host nation, and subsequently situational as well as strategies pertaining to the process of centralization or decentralization. Understanding and adopting culture of the foreign subsidiary nations, current global industrial trends, pertinent values, and important principles are the contributing factors for the successful global commercial venture. Conventionally economic and management factors are considered while framing strategies for developing international business relations however research and studies have found tremendous impact of culture on establishing strong foreign relations in the form of joint ventures as well as fully owned subsidiaries. Some of the studies suggest joint venture as the most adequate strategically motivated move with the nations having vast cultural differences or vice-versa. However to achieve success, trustworthiness and reliability should be taken into consideration while reducing risks for any opportunistic tendencies. As different cultures have different levels of trustworthiness, it is equally important to weigh all the possible outcomes, opportunities as well as obstacles before forging international relations. On the one hand while masculinity will severely affect an overseas subsidiary while uncertain avoidance can initiate more such projects while dealing with foreign direct investment. As there are large differences in the culture of the nations, the need for the stronger hold on the business becomes a necessity. Klein, Frazier and Roth in 1990, and Sutcliffe and Zaheer in 1998 suggested that Multinationals Corporations would forge a new relationship with the host nation having vast cultural differences by fully utilizing its extensive knowledge (Lee, Bang, Ha & Lee, p. 3). As a CEO of UK firm, I need to take into consideration various cultural parameters if subsidiary in USA and Japan has to enter into success. There is no doubt a fact that in both the USA and UK, language is same and United Kingdom would need little of adjustment while dealing with Americans in contrast to Japan, yet for Americans this assumption puts them in the most difficult situation and less productive. As Craig Storti suggests, “Because we speak the same language, Americans think they’re not going to have any communication problems with the English,” (Doke 2004, p. 1) but in reality there is a vast difference as the language that appears to be same but have different phrases, unfamiliar terms and meanings. George Bernard Shaw, 20th century Irish playwright and a political strategist, once claimed that United States and England are the two nations having same language still they are divided. It is quite true that the major difference is in English language and its usage can cause many problems and obstacles for the Britons and Americans who are working together as for instance Americans make use of the sports metaphors quite often while having business talks which can be very difficult for us to understand. On the other hand, Britons are habitual in speaking more but with fewer words and this often become the most ordeal task for the Americans to understand (Doke 2004, p. 1). According to Doke, “Unfamiliar nuances and British attitudes about work, personal ambition, individualism, efficiency, business meetings and communications may run counter to your employees’ experiences and expectations” (2004, p. 1). The conflicts that can arouse can reduce the success of the UK assignments and effectiveness of the organization. Difference in the working styles of the two nations creates a wide gulf between the cultures of the British and Americans. According to some experts, American culture rooted in their puritan heritage can too generate more perplexing and confused conditions between both the nations. Enthusiasm and puritan work ethics are the main traits for the American workers as Foster suggests, “The American is often seen as over-the-top, pushing, putting in more hours than necessary, difficult to work with, always coming up with the solution--even if the solution hasn’t been asked for” (Doke 2004, p. 2) however British are generally seen adopting a very cautious approach while taking decision but Americans get quite frustrated with this attitude. American corporate heads want everybody to make joint contributions in making decisions during meetings while Britons prefer to remain silent while one key person speaks. In this very paradigmatic approach, one of the most crucial factors that shapes the mental framework of the people as found by Phil Harris and Frank McDonald is “conquest of the west” (2004, p. 118). It entails the people to have a certain mental framework- “a mind of frontier” (2004, p. 118), and necessitates opening up new avenues. This allows scope for any man or woman who really wants to have success in business attains the same. The traits of competition spirit, mobility, and experimentation fostered in the lives and spirit of Americans can become the most valuable asset for the UK firm like us as in our nation people are conventionally stable, more in routine and moderated. The United States has been one of the largest capitalist nations in the world and according to both Trompenaars and Hampden-Turner and Hofstede, it is also one of the most virtualized and individualistic nations whereby people have full control over their own destiny and this also holds true for UK (Pol, p. 2). This common trait to a greater extent can help in understanding the nature and culture of the United States. In both the USA and UK, Anglo Saxon system prevails like free mobility, job market, reducing the influence of trade unions and also autonomy of the manager. As a result manager is given freedom to respond to a dynamic competitive environment whereby less importance is given to the job security. However here too there is a sharp contrast between the two as in UK there can be seen impact of the trade unions and industrial relations in HRM decision making while in the USA social attitudes conducive to the laws precede over the other issues in the daily HRM functioning. This could create a hurdle but if utilized could become a great opportunity for the growth of our subsidiary plans in the United States as their work ethics and societal attitudes can result in positive outcomes and strengthen the bonds between the two nations (Needle 2006, p. 555) Both the nations’ culture parameters are determined by what Hofstede defines four axes, which are- “Masculinity/Femininity”, “Uncertainty Avoidance Index”, “Individualism /Collectivism”, “Power Distance Index” (Pol, p. 2). These four dimensions define how culturally foreign subsidiary is construed and established. In the Hofstede’s model, UK and other European nations are more masculine in nature as compared to United States which shows that the US is more prone towards equality and balance in a paradigm of work environment. Americans are more goal oriented and hard workers. These two differences in the aptitude can cause barrier in following the common goal but on the other hand if understood and taught to the UK employees working in United States can become the most profitable for the company. Hofstede too adopted fifth approach which is known as “Long Term Orientation” referring to long term societal values in contrast to short term conventional values and stands. According to Hofstede, people of both the nations, UK as well as USA, have lower LTO scores- this shows that you can see lot more creativity and innovativeness among the people (Mind Tools 2011). This model proves the fact that in both the USA and UK, people don’t have value for their traditions and therefore tend to be willing to help you in many ways. Now if we have to go to Japan, we have to perceive in depth their culture in the light of universal tendencies and perfect truth. Buruma had opined, “Japanese culture is affected by a number of religions, from the indigenous Shinto to the imported Buddhism and Confucianism” (International Comparative Management 2005, p. 4). Buruma and Cleary have conversed on many stories that originated from their religions and relied on the quest for the “Way”, to make us understand in depth different facets of what makes culture of Japan and how we can best utilize to achieve our aim. If we look into their emotions, gestures, and dress, we would find great similarities that prevail between the two cultures and their manner which show that both the Japanese and British enjoy restraining themselves and act in the most formal way. This too shows that both the nations have due respect for each other and can set up common ground on the way to carry on their work, but there are many differences too in all the paradigms of Hofstede’s concept. In the power distance, masculinity, uncertainty avoidance, orientation, and in confusion dynamism, Japanese are stronger while UK scores low. Japanese adhere stricter hierarchical system in contrast to UK, are more masculine in nature in other words they try to exert their macho image and they truly believe in Confucian teachings. These behavior patterns being shown by the Japanese are the greatest curtailing factors and hurdles to establish subsidiary in Japan and besides language also poses the biggest hurdle. Hofstede and Bond also discussed Confucian teachings, “which enforce the honoring of unequal relationships and emphasize the needs of the group in their daily activities” (International Comparative Management 2005, p. 8). This to the greater extent enable us to understand collective behavior and strict hierarchy of the Japanese and even though UK scores low, it to certain extent has some traits of Confucian Dynamism which makes them similar to Japan, as they adopt formal behavior while dealing with their Japanese counterparts. These traits of hard work and enduring strength among Japanese increase opportunities for the UK managers to exploit their skills to their advantage and make business a great success. While establishing subsidiary in UK and Japan, culturally both the nations have to be seen from two angles as there is a wide difference between the cultures of USA and Japan. UK feels closer to USA in terms of the culture but far away to Japan as their religion, dress, language, behavior and attitudes towards their work and food habits are very different to either UK or USA. In USA though there is a slight difference in English language yet representatives from our nation will not have difficulty in understanding the same and this could be big advantage for us; secondly their food habits, living style, thoughts and work ethics are too similar as like us they are also individualistic and give more preference to work ethics rather than to the conventional or traditional norms. However on the other hand there is vast difference between both the work ethics and culture between the Japan and UK yet their attitude towards hard work, hospitality, masculine nature and following of Confucius Dynamism makes the greater scope for us to set up our subsidiary and gain profits for our company. Reference List Doke, DE, 2004, ‘Perfect strangers: cultural and linguistic differences between U.S. and U.K. workers necessitate training for expatriates’, HR Magazine, viewed 9 March 2011, Harris, P, McDonald, F, 2004, European business and marketing, 2nd edn, Sage Publications, London. International Comparative Management, 2005, How would business negotiations between delegations from the two countries be affected, and how would you advise a UK team to prepare for the negotiations. Document. Lee, C, Bang, H, Ha, JW & Lee, JY, ‘An analysis of cultural impact on international business performance via foreign market entry mode: case of South Korean MNCs’, Journal of Management and Marketing Research, pp. 1-8, viewed 9 March 2011, Mind Tools, 2011, Hofstedes Cultural Dimensions-Understanding workplace values around the world, viewed 9 March 2011, Needle, D, 2006, Business in context: an introduction to business and its environment, 4th edn, Thomson learning, London. Pol, B, The connection between culture and climate change, viewed 9 March 2011, Read More