Human Resource Issues Related to Brand Internationalization Process - Case Study Example

IKEA – HR issues related to brand internationalization process: cross-culture management and communication Introduction The explanation of the strategic decisions of businesses worldwide is often a challenging activity. For example, when expanding globally a firm needs to take into consideration the cultural characteristics of the host markets (Burton et al. 2006). If these characteristics are ignored, then critical failures are expected to appear (Bouchikhi and Kimberly 2008). This paper explores the HR issues that IKEA had to face when trying to internationalize its brand in China and Russia in 2003/2004, as this theme is analyzed in the study of Chernatony and Tarnovskaya (2011). Particular reference is made to two HR issues, i.e. cross-culture management and communication, as related to the brand’s internationalization in the particular countries. The above study set a series of important questions in regard to brand internationalization and culture: a) Which are the key issues of cross-culture management that can be involved in a brand internationalization plan? b) At what level communication between employees at different organizational levels can affect the success of such plan? And c) How can managers eliminate risks in regard to cross-culture management, as part of the brand internationalization process? The review of the key case study and the related literature has led to the following assumption: when referring to brand internationalization, problems related to cross-culture management are inevitable, especially when the target country has unique cultural characteristics and background. The case of IKEA’s internationalization in China and Russia, as the specific activity is analyzed in the case study, verifies the importance of cross-culture management when attempting brand internationalization; in fact, such approach should be quite necessary for brands of all sizes, meaning that the popularity of a brand cannot lead to the avoidance of cross-culture management, as part of its internationalization strategy. 2. Cross-culture management in IKEA as related to HR The study of De Chernatony and Tarnovskaya (2011), on which this paper is based, presents the various aspects of brand internationalization with reference to ‘the case of IKEA in Russia and China in 2003-2004’ (Chernatony and Tarnovskaya 2011, p.598). The above study also shows the cross-culture management strategy used by managers, both at local and international level, for managing brand internationalization so that the successful implementation of the relevant plan is guaranteed (Chernatony and Tarnovskaya 2011, p.598). In addition, the study highlights the communication problems that can appear when attempting to implement a brand internationalization plan. 2.1 Internationalization of a brand – IKEA in Russia and China in 2003/2004 – Case study The case study emphasizes on two critical HR issues: cross-culture management and communication. These HR issues have affected the brand internationalization process in the following way: international managers had different cultural background compared to the local managers; when both these categories of managers were asked to participate in the brand internationalization process, then a series of problems has appeared. First, ‘local managers interpreted the brand differently from international managers’ (De Chernatony and Tarnovskaya 2011, p.598). As a result, brand conceptualization, as a process, could not be completed successfully; at least, the results were different from those expected by the plan’s designers. At the same time, an important communication problem appeared between international managers and local managers; the latter had not asked for the help of the former in regard to the brand conceptualization, a fact that led to severe delays in the implementation process. Of course, the brand internationalization process can be quite complex, as indicated in Figure 1 below. As a result, the difficulties and problems appeared in regard to the plan of IKEA to internationalize its brand in China and Russia can be considered as expected. Another aspect of HR management highlighted in the above case is the following: international managers of IKEA have not been aware of the culture and the skills of the firm’s local managers. This gap has made international managers incapable of identifying an effective strategy for supporting the internationalization of their brand in China and Russia. This problem can be related to the lack of cooperation between employees at different organizational levels, a HR issue that it is common in multinationals where organizational integration is difficult to be promoted. Such problems indicate that the cross-culture management strategy involved in the specific plan was totally inappropriate for covering the plan’s needs. Both the HR problems described above, i.e. the communication failures and the lack of effective cross-culture management strategy have become more intensive because of the delays appeared in the brand internationalization process. Due to these delays, the pressure by international managers on local employees for completing the implementation process on time was increased; this led to the deterioration of communication and cooperation between IKEA’s international managers and local employees/ managers (De Chernatony and Tarnovskaya 2011, p.604). Figure 1 – Brand internationalization – phases of the process (source: De Chernatony and Tarnovskaya 2011, p.603) 2.2 Cross-culture management and brand internationalization – key aspects and challenges In regard primarily to the brand internationalization Malaval (2003) had noted that the specific business activity has ‘both positive and negative aspects’ (Malaval 2003, p.246). If efforts begin for developing a brand internationalization plan, these aspects would be revealed; for this reason, the plan on which the brand internationalization process will be based should have provisions for limiting risks if severe reactions/ resistance are developed as a result of the publication of the plan’s negative aspects (Malaval 2003). Also, Christiaans (2012) explained that brand internationalization, as a process, cannot be successfully completed unless it would be followed by ‘the integration of all business activities in one system’ (Christiaans 2012, p.73). According to Guang and Trotter (2012) culture can highly affect the international business plans of multinationals. For example, culture should be taken into consideration in regard to ‘marketing decisions, advertising, business relationship and consumer behaviour’ (Guang and Trotter 2012, p.6456). Particular reference is made to cross-cultural communication, meaning the communication as an activity, for example: an online conference, or as an idea, for example the cultural values that will be incorporated in a business international marketing strategy (Guang and Trotter, 2012, p.6456). From a similar point of view, Bird and Fang (2009) have noted that cross-cultural management has to be included in all international strategies of modern organization at the level that, today, business activities need to be aligned with the principles of globalization (Bird and Fang 2009). Otherwise, it is quite difficult for a business to operate globally (Bird and Fang 2009). In regard specifically to the involvement of culture in daily business activities, Kawar (2012) has noted that within each organization extensive differences can exist in regard to the cultural background of employees (Kawar 2012). For example, reference can be made to ‘different values, different perceptions on brands and on deadlines and so on’ (Kawar 2012, p.105). These cultural differences can highly affect employee productivity, a fact that would threaten organizational performance. On the other hand, Tian and Borges (2011) explain that when referring to cross-cultural communication emphasis is given to the exchange of views/ information between employees but also the provision of information in regard to the progress of business activities. In other words, cross-cultural management cannot be effectively developed unless a proactive communication is established between the international managers and local managers/ employees. From this point of view, business activities are considered as closely related to humans, at the level that humans are the key business units. If employees do not work at all, then production will not be secured (Tian and Borges 2011). In regard specifically to multinationals, Rufei, H. and Jianchao (2010) noted that the firms of this size should not try ‘to impose to their subsidiaries the communication practices of the parent company’ (Rufei an Jianchao 2010, p.17) on the basis that the communication strategies of the parent company may be fully inappropriate for its subsidiaries, especially if the latter are established in regions the cultural environment/ ethics of which is totally different from the culture of the parent company (Rufei an Jianchao 2010, p.17). Trying to impose to its units worldwide the communication practices used in the parent company can lead to severe organizational problems since the communication techniques used in the parent company have been designed in regard to a particular social/ cultural environment; when having to deal with a different social/ cultural environment, the managers of multinationals should adopt communication practices that have been tested as of their performance and their implications (Rufei an Jianchao 2010, p.17) in cultural environments similar to that of the host/ target market. In addition, negotiations should be available at any time for making improvements/ alterations on existing cross-cultural communication strategy; this approach would help to avoid resistance at the level that employees would be given the chance to state their concerns/ views in regard to the cross-cultural management strategy of the particular organization (Clausen 2007). 2.3 Cross – culture management and communication in IKEA – Recommendations In IKEA the internationalization of its brand in China and Russia has been based on the organization’s existing rules and culture. In any case, the brand internationalization process has been initiated and monitored by managers at high levels of the organizational hierarchy while cooperation and communication have not been given adequate attention. In other words, IKEA tried to introduce a model of cross-culture management different from that commonly used by firms worldwide. Probably the firm’s top managers thought that the whole project could be based on the firm’s homogeneity, i.e. that changes on the firm’s brand internationalization strategy could be avoided. Still, this target was not achieved. The firm had to review carefully the characteristics of the Chinese market and to alternate its entry strategies according to local culture. The review of the case study reveals that the failures that appeared in regard to the brand internationalization process have been primarily related to the lack of effective cross-culture management strategy, as combined with extensive communication problems. Of course, such problems would be expected to exist since, through its brand internationalization, the company aimed to expand in two markets that are highly different in regard to their culture from the culture of the country of origin. Moreover, it would be quite important for local managers to be given the chance to state their view in the whole process, as such strategy should be part of the firm’s cross-culture management framework. Indeed, it has been proved that when attempting the expansion in new markets increased power should be given to line managers, who are full aware of their unit and who are able to make appropriate suggestions in regard to the approaches used for attracting local consumers (Tsui and Lai 2009). Under these terms, IKEA’s internationalization in China and Russia had the following implication for current HR practice: it proved that effective cross-culture management can be achieved not just by following strategies that have been verified through the practice and the theory, as indicatively presented above, or just by emphasizing on the firm’s usual practices. Rather, a strategy that has been aligned with the culture of the market and the market common practices should be adopted. In other words, the case study referring to IKEA’s internationalization in China and Russia has verified the primary role of culture in brand internationalization. According to the issues discussed above, the international managers of IKEA would be able to significantly improve the firm’s cross-cultural management and communication by adopting the following strategies: a) the communication schemes chosen should be aligned with the cultural characteristics of the Chinese and Russian markets, b) local managers should be given the power to take initiatives when implementing the brand locally; local managers are fully aware of the cultural characteristics of local market and can propose ideas for increasing the attractiveness of the brand locally, c) training programs and seminars should be introduced in the firm’s units in the foreign markets, so that local managers are informed on the cultural characteristics of the parent company; in this way, the communication between international managers and local managers would be highly improved and d) the cultural characteristics of the local market should be taken into consideration when assigning tasks to local managers; the style of management introduced, in all its aspects, should be a combination of the cultural characteristics of the country of origin and those of the local market. 3. Conclusion The development of an effective cross-culture strategy is related to various factors: reference can be made, as an example, to the skills of the individuals who design the relevant strategy, the market conditions, the resources available and so on. At the same time, organizational culture in regard to HR practice is critical for developing HR plans that could respond to the needs of each organization. In the specific case, the differences between the country of origin and the host country are significant; in this context, the failures initially appeared in regard to IKEA’s cross-culture management scheme should be regarded as a normal condition. Furthermore, the case of IKEA’s internationalization in China and Russia revealed the following fact: a firm’s HR plans cannot be equally successful worldwide. Rather these plans can be highly affected by local culture. In the case of IKEA the culture of local employees, which was highly differentiated from the culture of international managers, was not taken into consideration when developing the organization’s brand internationalization strategy for China and Russia. This problem was related to the following fact: IKEA has been highly based on homogeneity, meaning that its strategies, including those referring to HRM, are similar in its units internationally. However, the case studies proved that such practice cannot be applied in regions that are highly differentiated, as of their culture, from the culture of the country of origin, where the firm’s key strategies have been developed. If the above problem is ignored then critical HR issues, such as those appeared in the case studies reviewed for this paper, would be unavoidable. 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Professional Practices of Human Resource Management in Hong Kong: Linking HRM to Organizational Success. Hong Kong: Hong Kong University Press. Read More