Pizza Hut and GE Culture Management - Essay Example

 Case Studies GE’s Bright Idea The simplest differentiation between national and corporate culture is the difference between the cultures followed by the company from its country of origin to the national culture followed in the country where a branch or site office may be located. As discussed by Bartlett & Ghoshal (1998), the differences between national and corporate cultures can lead to conflicts between local managers and the management directives coming from the home office. The home office often wishes to recreate the corporate culture followed at their location in a country where the national culture can be significantly at odds and this can be troublesome as it was for GE. GE’s culture was based on individuals and intrinsic motivation which helps its employees seek benefits for the company while they seek benefits for themselves. As outlined by Jack Welch in his management related book Winning (2005), GE rewards those employees who are instrumental in helping GE grow and achieve the corporate vision and punishes those who are not performing to the highest level. In fact, layoffs and quarterly removal of lowest performing employees is an essential part of the management style employed at GE. The method used by GE to control the culture of their operations in Hungary was dependent upon the Hungarian acceptance of their 95 page manual on corporate culture titled Integrity: The Sprit and Letter of Our Commitment. The initial results were disastrous to say the least since bad press, negative sentiments and resentment amongst the employees was created once GE’s creed was being established in the company. However, with time, the situation subsided and the majority of employees accepted the way GE worked. The most important advantage of changing GEL’s European operations from the domestic to regional and global levels was the change in culture which came about when the employees realized they were competing in such markets. The location and availability of labor can also be expected to have played a role here since the Hungarian labor market is closer to the western countries it is supposed to cater for rather than the Russian bloc or the Asian markets where GE’s products might be seen as too expensive. While the expansion of GEL’s operation to global level worked in this particular case, there is not enough information to say whether the same process would be successful if it is applied to other GE operations around the world. There are several factors which must be considered before local operations can be asked to provide valuable input to global operations. However, given that the situation is the same as described in the case, there should be no reason why local operations can not be expanded to global levels. The initial acquisition of Tungsram and subsequent expansion of GE’s operations in Hungary appear to be based solely on opportunity and need. The opportunity for expansion was present because Tungsram was conducting sales on a regional basis and had successfully entered the market in Europe. GE needed to expand into other businesses like banking and finance since GE Capital wanted an entry point into the market through the acquisition of a bank. The establishment of GE Hungary allowed the company to present a single face to deal with governments and unions and simplified the decision making process for GE on a global level. The differentiated businesses conducted by GE are given synergy and unification largely due to the culture which is followed across the company around the world. Wherever GE operates, it injects the culture of the company into the national culture as an island which is protected by the will of the managers who have been converted to the ideals and ideas supported by GE on a global level. Therefore, regardless of the business or country GE has entered into, the basic DNA of the operations are based on a culture of commitment and are fully supported by the vision of the company. As shown in the proceeds of the case under discussion, these steps certainly caused some problems with the local culture but were eventually seen and turned out to be truly beneficial for the overall growth of the company. Pizza Hut’s Goal Given the expected growth and the positive steps taken by the Brazilian government to protect and continue on the path of growth, it does not make sense for Pizza Hut to pull out of Brazil just yet. The primary justification for this comes from the commonly accepted management guru analysis which places Brazil as the fist country in the BRIC (Brazil, Russia, India and China) group where investments are lucrative and the markets are expected to outperform those of other developing nations. Additionally, the size and population density of Brazil also make it a viable nation as far as investment and franchise opportunities are concerned. It seems that the problems being faced by Pizza Hut come from the way it is utilizing the marketing mix to promote its services because similar businesses under the same umbrella like KFC are doing comparatively better. What Pizza hut needs is a change in the style and the methods of management rather than a complete pullout from the market which can make it difficult for them to reenter the food industry if they pullout at this time. Pizza Hut has also realized the importance of local flavor and it must continue to localize their product as much as possible while keeping the American roots somewhere in the background. The majority market for pizza in Brazil has to be Brazilians themselves and backing on the presentation of ‘American’ culture and American food is never a good idea in a country where the established culture is often stronger than the imported culture. The conflict between globalization and the culture of various countries has been discussed in detail by several authors and as discussed by Edwards and Kuruvilla (2005), the local elements are important for management as well as marketed of the products being sold by a multinational company. Being multinational, Pizza Hut has to consider the value of the real as it conducts business in Brazil and the depreciation of the real against the dollar can be expected to continue as Brazil stabilises its economy. In that time, prices may continue to rise and the image of the company may need to be modified in accordance with rising prices or the product might need to be changed to reflect the change in actual price levels. The trend shown in Table 10.1 of the case study does not show stability, but it does allow the prediction to be made that stability is close even though the real may continue to fall in the near future which should be taken into account for Pizza Hut’s short and medium term goals. If the Brazilian government dollarizes its economy and gives up the real altogether, after the initial shock to the economy a period of consistent prices and lower economic inflation could be expected. However the motive to dollarize is based on the fact that economic shocks which come from global markets would not harm the Brazilian economy as much if it were based on the stronger dollar. At the same time, it must be noted that none of the shocks were enough to completely cripple the economy therefore the process could be seen as a complete waste if the economy was going towards stabilization and it was to be shocked with the dollarization process. Of course Pizza Hut might be happier if the economy is dollarized because the instable real is hurting business. The first shock to Pizza Hut came in 1997 just as the company was reformed by its owners. The Asian financial crisis compounded the effects of the Mexican peso crisis in 94/95 and the real was put under serious pressure. It was only with the intervention of the government which raised interest rates to more than 40% that the real was saved from being totally devalued. The resulting recession meant that the market at Pizza Hut dwindled completely and operations of restaurants became difficult. Just two years later, in 1999, Brazil faced another period of economic difficulties which made prices unpredictable, inflation rampant and the business operations difficult to maintain. The core reason behind this was the uncertainty behind the Brazilian government’s ability to pay off its debts and it goes to show that problems in the international arena can certainly affect the development and business process on the local levels. However strong and developed a country may be, it can not remain independent of international financial influences, nor act on its own in terms of assigning value to its currency. Similarly, if Pizza Hut is to operate in Brazil it must take into account the view from the local viewpoint rather than trying to impose an American flavour or an American taste on the Brazilian taste buds. Works Cited Bartlett, C. & Ghoshal, S. 1998. Managing Across Borders: The Transnational Solution to Managing Across Borders, 2nd ed. Hutchinson, London. Edwards, T. and Kuruvilla, S. 2005. ‘International HRM: national business systems, organizational politics and the international division of labour in MNCs’, International Journal of Human Resource Management, vol. 16, no. 1, pp1-21. Welch, Jack. 2005. Winning. HarperCollins: New York. Word Count: 1,546 Read More