Cross Cultural Alliances - Essay Example

Introduction As a result of globalization, companies are engaging in cross-cultural alliances in order to make it in the competitive business world. Companies are forced to go global, that is operating in different parts of the world. In this case, companies have to deal with customers and employees among other shareholders of different cultures. Through cross-cultural practices, the company management should come up with the best strategies that would keep the entire fraternity of the company united. This way, all the shareholders would work towards the same goals, the main goal of the company. In addition, companies would do well in the competitive world if they are able to build collaborative relationships with other companies all over the world. This is not an easy task and as a result, the issue of cross culture comes in (Hofstede 2007). Cross culture Culture can be defined as the complex entire being of incorporating habits, capabilities, customs, morals, arts, beliefs, and knowledge acquired by members of a society. Cultural influences are related to other micro-environmental influences. Since cultural practices change with time, it is only possible to define culture as the beliefs and other practices in a certain community at a specific period in time. The culture of any society is learnt and highly influenced by educational, religious and historical factors (Silverthorne 2005). In the business world, employees are being moved to different countries to work. It is not possible to work with employees if you do not understand their cultural practices. In addition, one has to understand the common language shared by those employees in a place. This way, one would not bring in conflicts in the workplace (Reuvid & Yong 2005). This is especially for those in the managerial position for they have to understand how the employees work. Joint venture A joint venture can be defined as a business involving parties who agree to come up with a new entity with new assets by making contribution of equity. The entity is developed with a set time period. The involved parties control the newly established enterprise and share assets, expenses and revenues. A joint venture can be formed for a single project or a number of projects depending on the agreement signed (Tjosvold & Leung 2003). Joint venturing helps major corporations do business and be able to go global termed as diversification. Diversification in this case means dealing with different types of customers and businesses, and thus covering different parts of the world. Joint venturing yields the success of small corporations, which are just entering the business field. It is notable that projects have high start up costs but also with high profits. Through joint venturing, small businesses can come together and raise the required capital, and later enjoy the enormous profits made. It is possible that the companies signing a joint venture agreement are from different cultural backgrounds. In order to succeed in the partnership, they have to understand each other culturally (Hofstede 2007). IBM and Lenovo Companies IBM, International Business Machines Corporation, is a multinational technology and consulting company owned by America and headquartered in Armonk in New York. The corporation sells and manufactures computer software and hardware as well as offering consulting, hosting and infrastructure services to nanotechnology and mainframe computers. The corporation started as a merger of the Computing Scale Corporation, the International Time Recording Company, and the Tabulating Machine Company. Since its foundation, the company has been ranked the best in a number of fields. Some include being the 18th biggest firm in US, 7th most profitable in US, 31st largest in the world and the second best global brand (Rama 2012). IBM is among the most innovative companies all over the world with among the best and most popular innovations. This include ATM, SABRE airline reservation system, the Universal Product Code (UPC), the relational database, the financial swap, the magnetic stripe card, the hard disk drive, and the floppy disk among others. IBM has made it to succeed because of the many organizational changes it has made. It has spinned off firms like Lexmark in 1991, acquired firms such as SPSS in 2009 and PwC consulting in 2002 and sold product lines selling ThinkPad to Lenovo in 2005. Through cross culture, the company has succeeded globally (IBM 2011). IBM has since its inception believed in cultural diversity. This can be traced back to the year 1953 when Thomas J Watson Jnr, the CEO then, argued that the best policy in the company was that of hiring employees who had the background, talent and personality to fill a job vacancy without considering the creed, color or race of such individual. Since then, the company’s senior management and the strategic planners have in different parts of the world engaged in researches in which they want to establish the best methods to apply to maintain a positive relationship the different ethnic groups they deal with and the organizational culture in place (IBM 2012). A recent research was conducted in IBM, Australia in which the management wanted to establish the way the different ethnicities fared in the organizational culture. The management found it distressing when the employees were not satisfied with the kind of relationship among themselves. For instance, there were issues of conflicts arising from misunderstandings between staff members and line managers. By identifying the issues, the management came up with ways of solving them. This is a good move for an international corporation to ensure that it relates well with its stakeholders (IBM 2011). IBM believes that valuing cultural diversity is very beneficial to the corporation. Cultural diversity helps in uncovering new perspectives, generating innovative methods, suggestions and ideas, as well as tapping different experiences and knowledge from different cultures. This is achieved through three pillars that are used in all IBM centers. These strategies include creating a balance between work and life, advancing women, and integrating disabled people (IBM 2012). Lenovo Group Limited is a Chinese multinational company dealing with development, manufacture and marketing of IT management software, storage drives, servers, workstations, notebook and desktop computers and other related products. The main operations of the company are in Singapore, China, Beijing, North Carolina and Morrisville. The global headquarters of the company are in Morrisville in North Carolina. The corporation has managed to do business in different parts of the world through partnering with other companies to do its distribution. The company operates a traditional headquartered model and this way, it is able to focus on the excellent centers all over the world. The company uses its resources effectively and creates high quality products (Lenovo 2012). Just like IBM, Lenovo has been regarded among the best in a number of fields. It is the second largest maker of PCs all over the world. In addition, it extensively markets the ThinkCentre desktops and the ThinkPad notebook PCs. These brands have helped the company do well in business and it is notable that they developed after acquiring the personal computer business line from IBM in 2005. In order to succeed in business, the company markets all its products directly to large enterprises, both medium and small sized businesses, main technology vendors and distributors, chain retailers, company-owned stores, as well as to individuals (Lenovo 1995). Through its dispersed structure, Lenovo is always close to its customers. It gathers information from the market the soonest it arrives and reacts to it the quickest it can. By keeping close to its customers, Lenovo is able to react to customers’ complains and this makes customers maintain loyalty to the company. Consequently, maintained loyalty leads to increased sales and hence increased revenues as well (Theage 2004). Lenovo has succeeded from a number of acquisitions, joint ventures and mergers. It acquired the personal computer business from IBM in order to open its business in America. In order to maintain a good relationship with the continent, it kept the IBM staff it acquired with the line of business in North Carolina. In 2008, Lenovo sold its mobile line business in order to major in the personal computer business it had acquired. Later in 2009, after making the development the company wanted, it acquired back its mobile line business at a very a high price of $200 million. Acquiring back this line of business was meant to help the company major in mobile internet devices including tablet computers and smart phones (Lenovo 1995). Lenovo went into a mutual venture with NEC, with a PC maker based in Japan, in 2011 and established a new company, Lenovo NEC Holdings B.V., in order to help Lenovo in expanding its business to Japan, as it is major personal computer market. In 2011 still, Lenovo announced that it wanted to acquire a German Electronic maker, Medion, to help in doubling its share of computer market in German. This acquisition would make it the third largest company after Hewlett-Packard and Acer in sales. If the deal succeeds, it would be in the books of records as it would be the first time a major Germany company is brought down by a Chinese one (Lenovo 2012). Just like IBM, Lenovo believes that it can succeed by treating its stakeholders equally irrespective of their cultural backgrounds. By doing business, globally, the company has to relate well with its employees from all over the world. It believes that employees from the country of interest would understand the citizens in that country in the best way. The best example in this case is when the company retained its American employees in North Carolina after acquiring the personal computer line of business. They knew that the Americans would understand each other better and so this was an opportunity to establish and develop business in America. The motivation and the relation between IBM and Lenovo IBM and Lenovo are both multinational companies with branches in several countries all over the world. This makes the two companies alike in several attributes. Even though both companies are in a similar line of business, they respect each other and struggle to make it in business their own way. Each has well established policies to help it make it in the global world. The selling of the personal computer line of business by IBM to Lenovo without considering that this can make the former lose market in its America market evidences their respect for one another (Hagedoorn & Narula 2006). The positive relationship between IBM and Lenovo makes many people think that the two are the same company. The two companies are from very different countries and continents, however, they have engaged in lifetime alliances that are beneficial to each of them. The acquiring of IBM personal computing line of business was not a loss to either of the parties. It was to make IBM create a powerful fresh principal in PC industry. Apart from the 19,000 job vacancies created, the widest variety of PC technologies and products was provided to the world market. On the other hand, Lenovo benefited from marketing and sales support offered by IBM as well as its products being integrated into the Global Services offerings of IBM (Stanford 2010). The customers did not worry that the products they used to buy from IBM were moved to Lenovo. IBM assured the customers that it would offer leasing, financing and support options, and warranty services for the PC products acquired by Lenovo. With this assurance, Lenovo retained the customers IBM used to serve with this line of products and this is very beneficial to the company. By selling the line of business to Lenovo, IBM did not lose all its stake ownership in the business. It retained 18.9% shares and offered to purchase the PCs offered by Lenovo for its own employees. This was a guarantee that IBM believes in the quality of PCs sold by Lenovo and, thus would not purchase PC products from another company (Lenovo 1995). With IBM retaining some of its stake ownership in this line of business, Lenovo enjoys the manufacturing, design, development, and research capabilities owned by IBM for this business line. The customers were assured that they would not lose in any way and this was proved. The former IBM PC specialists though now working under Lenovo maintains a close relationship with IBM consultants and this makes PC products offered to the customers the same. Since Lenovo is also experienced in the computer world, in the long run, the PC products offered to customers would be of a higher quality than before (Theage 2004). Considering the fact that Lenovo has succeeded in doing business in China, marketing home computers in the country, this would help the company move to the global market and especially to a developed country like the US. This is considered a great benefit to Lenovo. Similarly, IBM did not lose because through Lenovo and through retaining some of its stake ownership in this line of business, it entered foreign markets through Lenovo. This was a good way of making IBM PC products known in many parts of the world by being marketed by Lenovo. This meant that the two companies have partnered to excel in doing business with companies of all sizes in all parts of the world (Lenovo 1995). The partnership formed by IBM and Lenovo should not be seen as an acquisition but rather an alliance. It is among the best alliances formed by companies that would rather be competitors, rivals in business. Almost no aspect in this line of business changed and this is usually the worry of the customers. Customers are usually worried that the quality of the product they are used to will diminish, the prices would increase, they will have to deal with different sales people, maybe harsh ones, the supplies and deliveries will not be made in time among other worries. However, this has not been the case. The customers are served to the same salespeople they are used to, they have the same quality or higher quality PCs, they have their supplies and deliveries made in time and the prices are the most considerable prices ever offered in the PC market. This makes the products sell in large numbers like before. Consequently, the PCs produced by Lenovo also get market because the customers have gained loyalty in the company. They trust Lenovo for it has honored the promises made of making no changes in the PC products they are used to (Lenovo 1995). HP and Dell rival companies are worried of this alliance and have been convincing customers to fear for their pockets before they get the worst from the alliance. However, with this alliance, they have been proved wrong are satisfied with the value they get for their money. This way, very few customers were lost to the competitors and in the recent days, they are coming back. The alliance is worrying the competitors who are getting the opposite of what they expected (Fletcher 2011). The biggest worry with this alliance on the side of the customers is that the alliance is not based on an agreement of five years. It worries every loyal customer on what to expect after the five years are over. However, the strategic planners of this agreement had all that in mind and had reason for making the agreement signed for five years. It should be noted that a five-year term in the technology world, considering the rate of technology today, is a very long period amounting to two generation of technology. After the end of the five-year term, improved PC products would be in the market and this is what Lenovo would go for so that the customers can continue enjoying the value of their money (Lenovo 1995). Culture issues between IBM and Lenovo companies As noted earlier, IBM and Lenovo belong to two distinct cultures. According to analysts, the alliance will involve merging very different cultures into one. Even though this is expected to be a great challenge in achieving the goals of the alliance, it is notable that strategic cultural training programs are in place unlike in the earlier says. In addition, this is not the first time the two companies are partnering. A similar partnership was witnessed in 1980s when Lenovo helped IBM bring its computers into the Chinese market. Having worked together before, the two companies would make it is the cross-cultural adventure (Theage 2004). Irrespective of the long-lived relationship between the two companies, the difference in the two corporate cultures would be a formidable obstacle. This is because while IBM is a corporate America representative, it would force the IBM managers to go back to class and learn how to use Chopsticks through Mandarin lessons. The biggest worry is how an American capitalist company would succeed in a relationship with a company that is partly owned by the state benefiting hugely from the ties it has with the government. The difficulties the two companies are likely to experience are those overseen when management team up in social meetings (Theage 2004). Companies from different cultural backgrounds have conflicting issues when it comes to ways of thinking and practices. These differences lead to surprises during social interactions and later lead to problems is inadequately addressed. There have been problems even with mergers or alliances between countries of the same social class, even though some think that they share some common attributes, and thus would be easy in partnering. A good example in this case is the partnership between US-based Chrysler and Germanys Daimler in the year 1998. It was expected that this alliance would be an easy one because both companies came from the Western countries. Surprisingly, there were huge problems that were proving the alliance impossible. It has taken the two companies many years to relate better with good understanding (Hong & Snell 2008). While Americans are used to a 24-hour economy by utilizing efficiently and effectively every free minute they have, Chinese are used to a culture in which they have to mandatory break at noon for exercise. It would be very difficult for an American employee in the same team of work with a Chinese employee to manage to work at noon. The Chinese has to compulsorily break while the American employee is committing to having the work done per schedule (Theage 2004). However, the tunnel is not too dark considering the positive partnership that has resulted from the alliance between Japans Nissan and Renault of France. The two have never done business together before but their alliance is successful. Bearing in mind that Lenovo and IBM have been together before, this is a good starting point for the two companies. The current alliance can be considered as a move of further deepening the relationship between the two companies. This will help in working together with fewer issues that are easily solvable (Hong & Snell 2008). It can be argued that there are difficult cultural issues that would arise from the alliance between IBM and Lenovo. This is because the two companies are from very diverse cultural backgrounds. However, it is expected that since the two companies have worked together before, the problems arising would be easy to solve. Additionally, there are advanced strategies of dealing with cross-cultural issues in place. The two companies would require extensive training of the employees to learn how to live with different people from different cultural backgrounds and the problem would be solved (Stanford 2010). Conclusion Managing a cross-cultural entity has been an issue of concern but not anymore. Mergers and acquisitions have been formed and failing or taking long before they can get into perspective of doing business. It has been a problem trying to put employees of different cultures into the same group in a business entity. Employees have been finding it hard to cope in the workplace simply because they share different cultural backgrounds. This is no more. This does not mean that cross-cultural differences have been completely solved but rather that, it is very easy to solve them. The alliance between IBM and Lenovo is based on the earlier relationship the two companies shared when cross-cultural issues were dreadful threats to mergers. If they managed to make it then, they should focus on the strategies they applied then and succeed in the alliance. The future relationship should be based on the huge benefits the two companies will reap from alliance. With the two companies being motivated by the benefits to be realized, the alliance would be successful. Since there are strategic cross-cultural training tactics in place, the two companies should invest in those training programs to make it in the alliance. With adequate and efficient training, the employees will learn how to relate with each other across borders and cultural differences would be easily solved. Cross-cultural training would help employees team up and this would be beneficial to the alliance. This training would as well help the managers to deal with the junior staff in the most appropriate ways. References Fletcher, O 2011, Lenovo passes Dell to become worlds No 2 PC maker. Available from: . [21 April 2012]. Hagedoorn, H & Narula, R 2006, ‘Choosing organizational modes of strategic technology partnering: international and sectoral difference’, Journal of International Business Studies, 2nd quarter, vol.3, no. 2, 7-37. Hofstede, GH 2007, International Encounters, Cultures and Organisations: Software of the mind (P207-234), The McGraw-Hill Companies Inc., New York. Hong, JFL & Snell, RS 2008, “Power Inequality in Cross-cultural Learning: The Case of Japanese Transplants in China”, Asia Pacific Business Review, vol.14, no. 2, 253. IBM 2011, Awards & Achievements. Available from: . [21 April 2012]. IBM 2012, IBMs EO Policy letter is IBMs foundation for diversity. 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