Organizations and Achieving Optimal Success - Case Study Example

?Organisation's entry into a foreign market - internationalisation process Executive Summary As number of factors, both in the macro and micro environment, could impact the organization’s entry into a foreign market and their operations there as well, in-depth study has to be done beforehand. The factors that need to be considered before the organization initiate its internationalization process is how to carry out the recruitment process and also how to aptly manage the recruited individuals, taking into consideration the local factors and with cultural sensitivity. As these factors could be influenced by local cultural, political, social and economic issues, they have to be studied in an in-depth manner before entering the foreign market, and that will be focus of this report. Introduction Organizations wanting to achieve optimal success will always want to expand their geographical and financial ‘boundaries’, thus going on the path of internationalization. That is, organizations could think of entering newer or foreign markets after achieving sizable success in their domestic markets or due to strong competition or saturation in their domestic market or importantly after seeing feasible and good opportunities in foreign market or markets particularly due globalization facilitated opportunities, etc. Thus, internationalisation is kind of becoming a happening concept used by many organizations to expand their reach globally. “As the global economy expands, as more products and services compete on a global basis and as more and more firms operate outside their countries of origin, the impact on various business functions becomes more pronounced” (Briscoe and Schuler 2004). Whatever be the motivations or objectives for the organizations to enter foreign markets, it is of crucial importance for that organization to study that foreign market in a deep and extensive manner. According to Hill (2009), if a firm wants to expand its business to overseas markets, it must evaluate the potential of country and the country specific factors. Recruitment process After the organizations make its entry, to start their operations there organizations will have to send their own employees who are working in their home operations, then will initiate the recruitment process to recruit the local qualified employees and could also bring in employees from other Third countries. This factor of recruitment is in line with the theoretical concept of recruiting the three types of employees, Parent Country nationals (PCNs) who are brought from home operations, Host country nationals (HCNs) who are local employees and finally Third Country nationals (TCNs) (Scullion & Collings 2006). Among these three groups of employees, organizations has to focus maximally on the HCNs. Entering organizations are duty bound to recruit high number of HCNs because they have to give something to the population that host their organization and also for practical purposes including low cost labour, logistical reasons, etc. Thus, when qualified at the same time low cost labour is available, entering organizations can achieve two objectives in one stroke. Peng and Meyer (2011) discusses about this recruitment process by stating how it involves “identification of suitable local employees, convincing them to apply for a job, and selecting the most suitable candidates for each job.” Management of recruited employees After recruitment process, organizations have to consider the factor of aptly managing culturally different employees. That is, as each country will have certain distinct cultural traditions, and as the local employees would have imbued those traditions, it could be visible during their functioning, thereby necessitating apt management. Like the above mentioned recruitment process, during organization functioning, it would be better for the organization to prepare and promote local employees to managerial positions. This is line with the theoretical concept that the organizations operating in foreign soils should follow polycentric approach of training and developing prospective local talents to managerial positions, instead of following Ethnocentric (where PCN personnel are developed) and Geocentric (where equipped personnel irrespective of their nationality are promoted). (Harzing and Ruysseveldt 2004). Entering organizations and in particular its Human Resources Department (HRD) should also take into account the diversity of cultures in foreign markets. That is, employees recruited from the local environment, will exhibit different traits at least in the initial stages, which will be based on the culture from which they are coming. Thus, we can see that certain characteristics of the employees are actually derived from their country’s or society’s cultures. In those cases, it is the leaders and managers, who should aptly recruit the employees, and give them cultural orientation training, so they imbue the common organizational culture. A leader coming from a country with high uncertainty avoidance index will be more inclined towards preferring an expert manager who is all knowledgeable while a leader from low uncertainty index country would consider the supervisor as arranger of resources. (Mead and Andrews 2009). Apart from culturally tuning them, the entering organizations can also try to formulate a common culture by incorporating specific local cultural elements. Thus, by culturally tuning the recruited employees and also by including apt elements of local culture, organizations can come up with an optimal common organizational culture, which will be acceptable for everyone and can provide effective results. This process is successfully followed by many organizations. For example, in its early days, the American electronics hardware company AMD in its home and in particular foreign operations wanted to adopt the American “go-getter” attitude, the West German analytical mindset and East German knack of innovation in limited resources. However, these attitudes caused conflict between the team members who were supposed to run the foreign operations. Employees favoring Americans’ approach wanted brainstorming sessions in the meetings, while the others wanted prepared meetings. The company formatted the meetings by including both the styles, and coming up with a apt combination. They started the meeting with brainstorming sessions, with breaks for reflective thinking, followed by prepared presentation. This shows that “business issues should be seen as reconcilable dilemmas instead of good or evil virtues” (Bhattacharya 2010). Thus entering organizations should try to work on this premise and find middle paths in line with the transnational strategies to solve cultural conflicts favorably. As Hill (2009) states transnational strategy based on the simultaneous attainment of location, local responsiveness and global at the same time learning, can provide optimum results. So, when the employees continue to operate in a multicultural environment, they will evolve and adapt. For example, Japanese are supposed to be high context individuals. However, with exposure to MNC culture, many have adopted American working style. Conclusions and Recommendations Internationalization has forced companies to work with people from diverse cultures across the globe. This has made the companies to come up with and follow effective strategies to successfully manage their operations in those foreign markets. Other recommendations that entering organizations should take into account in its foreign operations are setting standard procedures for knowledge sharing aspect and understanding the nuances of various verbal and non-verbal cues. In some cultures, knowledge sharing is considered as a threat. Hence, the company and its HR need to define a framework of extracting knowledge from such individuals. With virtual teams, things are slightly different, as individuals can’t see each other. Technology (e.g. video conferencing) can help greatly in making them familiar and bond with each other. The cultural support for these teams has to be optimized, as they need to be constantly reinforced so that they do not drift away. Importantly, a brief training to the Parent Country Managers, who will be taking responsibilities in the foreign market, about the various cultures prevalent in those countries will help in effective management. This effective management will make the employees productive and thereby making the company’s entry into the foreign markets a successful venture. References Bhattacharya, DK., 2010. Cross-Cultural Management: Text and Cases, PHI Learning Pvt. Ltd, London. Briscoe, DR and Schuler, RS., 2004. International human resource management, Routledge, London. Harzing, AW and Ruysseveldt, JV., 2004. International Human Resource Management, Sage, London. Hill, CWL., 2009. International Business: Competing in the Global Marketplace. McGraw-Hill, New York. Peng, M and Meyer, K., 2011. International Business. Cengage, London. Mead, R and Andrews, TG., 2009. International Management, John Wiley and Sons. Scullion, H and Collings, DG., 2006. Global Staffing, Routledge, London. 2. Managers need to master the 'rules of the game' that appear to determine success or failure of alliances and acquisitions around the world. Critically discuss the key factors, which you consider are involved in reaching a strategic decision that is 'right' for an organisation. In any sector of business, strategic alliances, mergers, acquisitions, joint ventures, etc., has become a key part of organizational functioning and success. Organizations will coordinate with other equal companies or even acquire smaller companies through the above mentioned options as a kind of both expansion strategy as well as a coordinated ‘attack’ strategy. If either of the company is struggling, or if a particular company wants to optimize its reach or overtake a competitor particularly in the international sphere, or if both the companies find opportunities to tap in foreign markets if they join hands together, alliances and acquisitions could happen. (Peng and Meyer 2011). Thus, to salvage their somewhat precarious current position, survive and achieve success, companies will have alliances with companies who are also “sailing in the same boat” and are facing the same problems. Apart from being a survival strategy, alliances and acquisitions are also a successful strategy as it can help merged entity to make a strong impact, instead of fighting independently in a losing cause. “In order to stay in the game and continue to have size and scale and a competitive advantage against their competitors they have to get bigger, mergers and acquisitions will probably be the main way.” (Joelson 2000). Thus, to stay in the game, companies and its managers need to master the ‘rules of the game’ that can make the alliances and acquisitions around the world a successful affair. That is, if the managers follow and fulfil certain factors before acquisitions and alliances, they can confidently close the deal, thereby making the ‘right’ decision all the involved parties. During an acquisition process, an organization acquires another thereby establishing it as the new single owner, with the other acquired company ceasing to exist. This acquisition process can be friendly or unfriendly in nature. “In the friendly approach, the companies collaborate in negotiations while in the latter case, the target company is reluctant to be bought or the target's management has no earlier knowledge of the takeover.” (Ricadela 2009). As far as alliances are concerned, economic and logistical motives could be the prime reasons. For example, when setbacks happen at the global level like economic downturns, then organizations operating in different geographical locations could think of merging so that they can face the challenge in a combined manner. Although, there could be many motives for the companies to go for alliances and acquisitions, certain key factors have to be considered by both the involved parties to make it a success. In that direction, Hill (2009) puts forward three key success factors and that include partner selection, alliance structure and the selected management of the alliance. When an organization in an alliance or acquisition mode goes in search of a perfect partner, they need to look for certain crucial aspects in them. Firstly, an optimal partner or partnering organization will be the one who has the complete trust and willingness to back the organization in its pursuit of strategic goals. Secondly, an apt partner should be the one who has all the resources and capabilities, which are lacking in the other organization. This is particularly visible, when organizations go into alliances with other companies, which have strong resources in certain geographical areas, where the former has no base. For example, Mobil’s merger with Exxon, which led to the formation of world’s largest private petroleum company, gave Exxon the access to Mobil’s petroleum production facilities in Africa (Nigeria) and in the CIS republics (Caspian Sea). In both these regions, Exxon did not have a strong foothold and also downstream operations, and so with this alliance, the new group was able to increase its worldwide refining capacity immediately after the merger by about 60 %. (APS Review Oil Market Trends 1999). Apart from focusing on the above mentioned criteria while selecting a partner, both the organizations have to look at the financial data of each other in an in-depth manner. This is because the authenticity as well as quality of the historical and current financial information is the key factor which can make the highest impact on the sale process of alliances and acquisitions, as well as on the functioning and success of the process. When the managers of both the involved parties have access to professionally prepared solid and authentic financial information, including aptly reviewed and audited financial statements, they can take the ‘right’ decision. Importantly, sections of this financial information should not be secretive, hiding under laws of the involved countries. That is, companies of particular countries should come up with reports, which have a pan-global tag. As Financial Statement Analysis (FSA) during alliances and acquisitions “allows the analyst to assess historical financial statements and build creditable forecasts based on historical trends and ratios”, it can give the managers optimal inputs about the current position of the partner, their vitality, their future feasibility, etc, thus enabling them to come up with ‘right’ decision. (Hunt 2009). On the other hand, poorly prepared FSA by both or either of the involved parties can not only make other party wary, but also could cause obstacles in getting quicker financing, if the buyer needs it. Importantly, if the company that wants to be sold, or even the weaker of the two involved parties, prepare these inadequate FSA, then the buyer or stronger company can withdraw their offer totally or make a lower offer by pointing out how there are higher perceived risks than originally anticipated. Thus, it is clear that managers need to access accurate financial information to close the deal. Hill’s (2009) second and third success factors of alliance structure and management of alliance also needs to be given prominence to make the alliance or acquisition a winner. In that direction, common and feasible alliance structure and thereby organizational structure of the combined entity has to the formulated, taking into consideration both the companies’ key players. The key issue that may arise during the integration and operational part of alliances and acquisitions are the ones related to cultural aspects. Without a common organizational culture within which to operate, the merged entity would find it difficult to achieve its targeted goals. Thus, it is of crucial importance for the involved parties to actualize a common organizational environment taking into consideration not only the organizational culture of both the organizations, but also the culture of the countries from which the organization comes from. Importantly, a good partner should be fully motivated to actualize a cordial as well as non-competitive environment between the two organizations, without having any ulterior motives. (Hill 2009). For that integration specific teams have to be formulated, so all the work regarding alliances as well as organizational structure, and the related organizational culture are done before-hand. Prior discussion about these issues could give rise to many commonalities as well as dissimilar issues, focusing on which, gives the opportunity for the managers, to sense the feasibility of the merger and thereby take the right decision. From the above analysis, it is clear that although alliances and acquisitions are followed by companies around the world with various motivations, there are certain key factors, which if followed before the actual alliance or acquisition, can enable the mangers to take the right decision. These factors followed in the pre-alliance and pre-acquisition phase, can provide good inputs for the managers to take the Right decision, whether to proceed with the alliances or not, thereby deciding or forecasting the success or failure of the alliance or acquisition as a whole before-hand. References APS Review Downstream Trends., 2000. Strategic Planning Common Themes. [Online] Available from: http://www.highbeam.com/doc/1G1-65844798.html(Accessed on December 12, 2012) Hill, CWL., 2009. International Business: Competing in the Global Marketplace. McGraw-Hill, New York. Hunt, PA., 2009. Structuring Mergers & Acquisitions: A Guide to Creating Shareholder. Value Aspen Publishers Online, New York. Joelson, D,. 2000. Oil companies see M&A as only way. [Online] Available from: http://findarticles.com/p/articles/mi_qa3715/is_200002/ai_n8897658/(Accessed on December 12, 2012) Peng, M and Meyer, K., 2011. International Business. Cengage, London. Ricadela, A., 2009. IBM Deal Could Spark M&A, Business Week. [Online] Available from: http://www.businessweek.com/technology/content/jul2009/tc20090728_59813 6.htm(Accessed on December 12, 2012) Read More