Differences in Cultural Values - Essay Example

number: Differences in Cultural Values Introduction Businesses operating in global scale are less affected by the production and/or market failures occurring in specific geographical locations. The primary objectives of cross-border expansion by the companies are to increase the net-sales by market expansion, explore niche markets in foreign countries, achieve economies of scale and acquire resources in other countries. However, there are unique challenges faced by the businesses which are operating across borders. Chung et al. 2014, states that merger and acquisition which is the method by which business expansion is achieved by the firms as one of the most difficult organizational changes experienced by the employees during their professional careers. Dysfunctional employee outcomes such as sceptical behaviour, job insecurity, psychological anxiety and distress which in turn results in worse health outcomes can be caused by un-planned cross-border merger and acquisition activities (Chung et al. 2014). There are three theoretical approaches for studying the employee problems associated with merger and acquisition namely, psychological, social and cultural (Marmenout, 2010). Objectives of this study are to examine the problems which can arise to a company in the UK during acquiring or merging with a Chinese company and to provide a comprehensive guideline to overcome those problems. Current study adopts literature methodology to adopt focusing on the cultural perspective which states that combining two distinct organizations with different cultures often leads to a cultural clash or collision that undermines individual employyes’ performances (Barry & Slocum, 2003; Marmenout, 2010). Cross-border merger and acquisition initiatives are considered even more challenging to the work force compared to the within country business expansion because the employees are confronted with various cultural difference at the organization level as well as nation level (Chung et al. 2014). There are language-barriers, different religions, contradicting believes, values and perceptions in the society which may obstacle from achieving the goals of cross-border merger. Current research findings reveal that productivity of the human resource component in a firm can be severely affected by the un-planned cross-border expansion (Makri, 2012) because in the new company there is an interface where the cultural values of individuals coming from the two different organizations and countries are interacted. If this interface was not carefully designed cultural clash or collision can occur disrupting the functions of the organization. As the nature of the difficulties faced during the business expansion across the borders highly depends up on specific cultures, most of the researchers have restricted to specific case studies. The current study also focuses on problems which were identified in research studies based on the cross-border merger and acquisition activities initiated by the companies in the Western part of the world and China. Chapter organization of the study can be described as follows. Part one provides an insight as to what are problems of cross-border merger and acquisition activities with a special emphasis on the differential cultural values. Part two presents recommendations to face the above challenges. Finally the summary of the research findings are presented under conclusions. Part 01 Literature Review Power Status of the Organizations involved in Cross-Culture Business Expansion Cross-border (or cross-culture) expansion of businesses often involves organizations which are characterised by status differences. Organizations which have differential power status are involved in cross-border expansion because merger and acquisition are the methods by which the cross-border expansion is achieved by the companies. Fischer et al. 2007, states that market expansion of the organizations comprises of an organization which is more economically successful or of greater size and the rest of the members in the corporate partnership anticipate this powerful member to be the dominant organization (p. 204). This differential power status can trigger psychological turmoil among the employees who have cultural backgrounds and also obstacle achieving the overall goals of the business. Research literature adopts three perspectives when studying the difficulties associated with the business expansion activities namely, psychological, social and cultural (Chung et al. 2014 and Marmenout, 2010). Cultural Perspective In cross-border company expansion, at least four sources of cultural differences can be identified. These are at organizational (the two cooperate partners) and national levels (two countries of origin). Organizational culture is defined as “the values, beliefs and attitudes which influence its employees’ behaviours” and as “the collections of unspoken rules and traditions which operate 24 hours a day.” The organizational culture is not explicit as the mission and vision statements of an organization however, is described as a significant factor which can determine the quality of the organizations’ outcomes. Modern research literature shows that significant strategic and structural realignment cannot be successfully implemented in an organization if those changes do not comply with the accepted norms and values of organization’s culture (Barry and Slocum, 2003). Moreover, the organizations’ culture closely associates with the leadership pattern practiced. Therefore, creation, management, and sometimes the destruction of organizations’ culture are identified as important functions performed by the organization’s leadership. Characteristics of the Western Organizational Culture vs Chinese Management systems practiced in the western parts of the world such as UK and the USA are characterized by liberalism, individualism and capitalism. Management systems in the rest of the world specifically in the East such as China comprises of significant differences to the above. Organizational culture in China is highly linked to the traditional Confucianism and socialism which encourages confining into collective behaviour and harmony. The flexibility and the diplomatic nature in the Western management style can trigger sceptical behaviour and role ambiguity among the Chinese employees. In a situation where they are forced to adapt to the Western management system and are compelled to deal with the characteristic differences in the organizational culture Chinese employees develop negative attitudes towards work (Du and Choi, 2010) which in turn can decrease the employee productivity and increase the job turn over, absenteeism and worst health outcomes in the organization. A company which is based in the UK and is interested in expanding into China, hiring labours from Chinese labour market and operating in Chinese market should consider such issues before merger. Marmenout 2010, examined how employees react to a merger announcement and investigated the relationship between culture clash potential, degree of integration, position in deal structure and employee attitudes. The study revealed that higher perceived uncertainty is associated with greater dysfunctional outcomes. Moreover, the study revealed that employee’s position in the deal structure strongly influences perceived power. In this study higher perceived power was not associated with low job uncertainty but was strongly associated with lower intention to leave and greater satisfaction. Perceived uncertainty was also found to mediate the effect of perceived cultural similarity on employee attitudes. Other Perspectives on Cross Culture Business Expansion The Social Perspective, emphasise that not only the employees in acquired firm but also in the acquiring firms are judgemental regarding the people (Tajfel and Turner, 1986). Followed by the merger and acquisition two distinct corporate partners are re-categories into one organization. Therefore, the social perspective and Social Identity framework which adopts pre-merger status of corporate partners and merger integration pattern as the important variables in predicting worker attitudes and behaviours can be used to examine the employees’ responses to cross-border merger and acquisition (Makri, 2012; Terry and O’Brien, 2001; van Dick et al., 2006). The social perspective of the cross-border market expansion problems states that employees in both acquired and acquiring firms tend to classify people based on the origin of their firms which in turn leads to in-group bias (Amiot et al. 2007; Giessner, 2011; Tajfel and Urner, 1986). Amiot et al. 2007, examined the adjustment patterns of employees in low and high status pre-merger organizations using 215 observations. Questionnaire based survey was carried out firstly, 3 months after and secondly, 2 years later the implementation of the merger. The study revealed a decreased adjustment to the merger over time in the low status group of firms. The members of the same group also perceived that the merger was implemented in a biased manner towards the acquiring firm. Members of the acquiring firm however, showed an increase in adjustment over the time, lower in-group bias and a stronger identification with the new merged organization. The above study further revealed that identification with the new merged organization i.e. intergroup merger can improve the associations between perceptions of fairness, in-group bias and adjustment over time. Giessner 2011, also examined the changes experienced during a merger which often reduce post-merger organizational identification among the workforce. The above author revealed that perceived necessity of the merger strongly influences post-merger identification, because a sense of necessity can reduce the uncertainty that typically inhibits post-merger identification. This study involved 144 observations. Another study conducted by Makri 2012, also examined the social perspective of merger and acquisition using 140 Greek employees at two merged organizations. Factors affecting the employee stress followed by merger and acquisition were examined in this study. Explanatory variables used in the model were status of pre-merger organizations, merger integration pattern and individual employee characteristics such as physical and psychological health. The study revealed that high status of pre-merger organizations related to reduced stress and better physical and psychological health. Similar to the previously described study it was revealed that individuals in the acquired firm experiencing increased stress and worse physical and psychological health compared to the other group. Economics of Business Internationalization Other challenges of operating in international markets include 1) volatile exchange rates which can increase the product price, wage rate and inputs in foreign markets which in turn affect the international consumer demand, company’s supply costs and the profit margins, 2) changing political power, domestic economic policy and attitude towards foreign goods and services in foreign countries which can obstacle business activities 3) Natural disasters which can affect the manufacturing processes, distribution channels and destroy company’s capital and 4) volatile international trade policies which can includes trade barriers such as tariffs, quotas, quality standards, and other restrictions. Countries which are involved in export substitution policies may impose such trade barriers while increase the market completion and distort comparative advantage in international market. There are also developing countries which are interested in attracting foreign direct investments and provide subsidies to the international companies operating in their countries. While operating in abroad however, the companies have to face specific regulations which are set by the foreign governments in favour of the domestic producers and consumers. These challenges can also aggravate the pressure faced by the employees in cross-border merger and acquisition. Part 02 Recommendations Changing organizational Culture Even though an organizational culture takes years to develop, it is important to provide the necessary inputs by the management to facilitate development of the new organizational culture because the two organizations of countries of origin are now integrated under one vision and mission statement. Rewards systems, leader behaviours, and organizational designs must be improved to change the company’s culture (Barry and Slocum, 2003). As the leaders play an important role in creating, changing and removing undesirable organizational culture the executives located in both UK and China branches have to take the lead in developing a new organizational culture. Barry and Slocum 2003, revealed that shared assumptions or organizational culture can be analyzed by exploring top management’s answers to the following questions: 1. How do people in this organization accomplish their work? 2. Who succeeds in this organization? Who doesn’t? 3. How and when do people interact with one another? Who participates? 4. What kinds of work styles are valued in this organization? 5. What is expected of leaders in this organization? and 6. What aspects of performance are discussed most in evaluations? (p. 3019). These questions can be used as a guideline by the managers to initiate the development of a new organizational culture. After identifying the strengths and weaknesses of the organization external support can be taken to develop effective rewards systems, leader behaviours, and organizational designs. It is also recommended to organize a staff visit to the foreign branch of the company to support developing the new interactive organizational culture. Changing Management Practices Existing research literature shows the importance of changing the managing practices followed by implementing the cross-border merger. As suggested in the previous section changes in the organizational culture cannot achieve without good management practices (Chung et al. 2014). Effective management practices are often focused on communication and training programs. The management strategies should be specifically re-designed to address the psychological and social issues created by the cultural difference among the worker. Cooper et al 2001, revealed that resistance and/or unwillingness to participate in corporate practices, role-ambiguity, career uncertainty and sceptical behaviour are the most commonly prevailing psychological problems among the Chinese employees who are being forced to work in the companies which are acquired by the Western management system. Effective communication can be identified as one of the most effective solutions to over the above problems (Chung et al. 2014). Employee participation and information sharing during the process of merger and acquisition are significant factors that can increase self-efficacy and reduce the level of career uncertainty and dysfunctional outcomes among the employees (Schweiger & Denisi, 1991). External support is recommended to be hired in order to handle the specific problems and to re-design the management practices accordingly. It is important to address the power status differences among the employees and ensure that employees do not feel that merger is implemented in a biased manner. Employee participation in decision making and information sharing is vital to achieve this. Raising awareness among the employees regarding what are the new structural changes to the organizations, discussing the problems and doubts which employs may have can also support overcoming the dysfunctional outcomes among the employees (Beer, 2011). Conducting awareness programs regarding the changes which have been done to the terms and regulations of the appointments, employee benefits, transfers, promotions and allowances can increase the transparency of the management system. Improving the channels of information flow within the organization and educating the employees as to how information channels function is also important for effective communication. For example, ambiguous situations can arise to whom an operational level manger should report to in the new organizational structure because there are country level and organizational level top managers in the organization. Such issues can solve by interactive awareness programs between the employees. Clarifying the job profile and arranging for career counselling during the early periods of implementing the cross-border merger can also reduce worker resistances, negative attitudes and job uncertainty. Staff Training and Development Programs Training and development programs which are aimed at improving the task-related skills and knowledge can increase the post-change employee performances (Beer, 2011). Employees in both the countries can be sceptical regarding the new structural changes taking place in the company and the new demands of work which in turn can increase the job uncertainty and stress (Giessner, 2011). The new demands of work such as the ability to work in a foreign language and, differential time zones and cultural values can increase the job uncertainty and psychological stress level among the employees in both the countries. Therefore, it is important to identify and address the specific weaknesses among the employees in the UK, China and those who plan to work in the interface while coordinating the activities between the two countries. Before and also during the cross-border market expansion the company has to provide necessary language training programs and cultural exposure to the employees and prepare them for the new challenges. It is also important to raise awareness especially regarding the sensitive cultural values and contradictions practiced in China and the UK. Thereby much of the cross-cultural clashes can be avoided. Staff training and development programs can increase the job security and confidence among the employees as well. It is recommended to arrange a staff visit to a similar organization in the UK which is engaged in business with China. Lectures can be conducted by the professionals who have similar experiences in different operational and managerial activities in the telecommunication industry at the international level. Service from external experts can be obtained to support the employees. Conclusions There is a dearth of conceptual and empirical research studies which examines what are the problems associated with cross-border merger and acquisition and the impacts of the organizational changes associated with cross-border merger and acquisition on employees in the acquired and acquiring companies. Existing research literature adopts psychological, social and cultural perspectives to study the problems of merger and acquisition. Cultural differences among the employees however can trigger issues in the psychological arena, social arena as well as cultural arena in the organization. Cultural clashes often affect the employee efficacy and induce negative reactions such as resistance. The most effective solutions to these issues include developing effective rewards systems, leader behaviours, and organizational designs, offering employees appropriate information, promoting communication and incorporating their input in management decisions and providing task-related training facilities to meet the demands of the new work. References Amiot, C. E., Terry, D. J., & Callan, V. J. 2007. Status, equity and social identification during an intergroup merger: A longitudinal study. British Journal of Social Psychology, 46, pp.557–577. Barry, M., & Slocum, H. W., Jr. 2003. Slice of reality: Changing culture at Pizza Hut and Yum! Brands Inc. Organizational Dynamics, 32, pp.319–330. Beer, M. 2011. Developing an effective organization: Intervention method, empirical evidence and theory. In Rami Shani, A. B., Woodman, R. W., & Pasmore, W. A. (Eds.), Research in organizational change and development, 19, pp. 1–54). Chung, G. H., Du J., and Choi, J. N. 2014. 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