International Management Behaviour - Research Paper Example

INTERNATIONAL MANAGEMENT BEHAVIOR Contents Sr. # Topic Page 2 2. Introduction 3 2 Brief Background 4 3. Cross Cultural Management 53.1. Case Study: AusFert 6 4. Literature Review 7 5. Managerial Challenges 10 6. Key Competencies 12 7. Cross Cultural Leadership Competency Model 14 References 16 I List of Figures 17 a. Cross Cultural Competency Model for Organizations 14 b. Cross Cultural Competency Model for Expats 15 c. Asia Pacific Consensus Forecast 17 d. Cross Cultural Training Activities and Types of Learning 17 “It is abundantly clear that firms are going to not only survive but prosper are the ones that adopt worlds best practice in developing international business. Modern firms and in particular, senior management, must have a clear appreciation of the benefits and costs of expanding business internationally”. - Yuwa Wei, 20001. 1. Abstract The business environment of present times is representative of highly dynamic and global corporate activities. The rapid emergence of multi million dollar multinational organizations and joint ventures bears testimony to the fact, that business is going global. The desire to explore newer territories is being increasingly felt by organizations world wide and hence has led to the shrinking geographical boundaries. The evolution of such global corporate culture however, has translated into a number of issues related to cross cultural management. As companies transcend boundaries and venture into foreign territories in search of newer business avenues as a means of increasing their revenue inflows, the organizations are increasingly becoming cross cultural. The emergence of Asian economy, particularly China, has further fuelled the need for international organizations to shift base and invest in such emerging economies to tap the resources and expanding markets and gain early mover advantage. This paper deals with the various challenges that expatriate managers encounter in foreign territories, the manner in which they overcome them, the key competencies required and various other aspects related to cross cultural organizational management and leadership. For the purpose of this study, the perspective of Australian expatriates is being examined in terms of joint ventures and wholly owned subsidiaries in China. 2. Introduction The recent rise in the Asian economies has brought countries such as China, India and other Asian giants into the forefront and put them on the corporate map. Increasingly several international organizations are vying to capture the potential of these emerging economies. The burgeoning Chinese markets are progressively becoming the most top rated corporate destinations for international firms for making significant investments and avail the wide range of benefits offered by it in terms of easy availability of resources, cost effective labor, and a large pool of untapped yet skilled human resource. According to China Daily2, the Foreign Direct Investments in China saw a significant rise by a total of 23.58% p.a. in 2008, totaling an astonishing US$ 92.4 billion. Similar reports were presented by the United Nations Conference on Trade and Development3 (UNCTAD) whereby China and India were ranked as the top two favorite destinations for TNCs (Transnational Organizations). 2.1. Brief Background Several multi national organizations including those in Australia are hence, transferring their employees to China on international projects with a view to facilitate unswerving business practices across the organization. Australia has become one of China’s biggest trading partners and one of its top ten investors4. According to ACBC (Australia China Business Council) China is among Victorias fastest growing tourism market, and is Australias third largest tourism market after New Zealand5. These corporate executives, managers, employees or supervisors, deported to foreign locations; commonly known as expatriates, are employed in overseas projects for management and responsibility, of the tasks assigned to them, utilizing their technical expertise, their understanding of products and to grant international experience to key employees for the purpose of facilitating development and growth6. Such international assignments, however, always brings along several setbacks and obstacles that hinder the organization’s progress towards growth and development and abstain it from achieving its corporate missions. Organizations, thus, must invest in offering adequate training for such expatriates working in cross cultural settings, so as to avoid the common obstacles that the managers face and ensure smooth functioning of organizational activities. This paper discusses in detail the various challenges faced by managers in cross cultural environmental setting, particularly by Australian managers in China; the manner in which such obstacles can be overcome, the key competencies the managers must possess and most importantly, the need for cross cultural corporate training. 3. Cross Cultural Management The term Cross cultural management refers to the management and training of organizational human resources, with a view to enable them to work effectively in varied environmental settings. Organizations from across the globe are increasingly experiencing the challenge faced by managers in training their staff in the wake of intense global competition. International organizations are now feeling the need to revive their traditional training approaches and shun the conventional models of management approaches as a strategic policy of moving away from the western concepts of business and adopt and incorporate the relatively new and emerging Asian cultural and business practices within their organizational framework to combat the increasing international competition. Hence, it is of utmost significance today that international organizations identify and react to the cross cultural values of all its partners or jeopardize their likelihood of success. According to Tsjosvold and Leung (2003)7, "there is no effective alternative to cross cultural management". 3.1. Cross Cultural Management: Case Study – Aus Fert In 2001 an Australian Fertilizer company employed a Chinese national in Australia to investigate the prospect of exporting to the Chinese market. The company had achieved significant success in the rest of its international markets including the U.S, Middle East and Europe, however, this undertaking failed to take off, in China. This case study reveals that the failure to succeed was on account of lack of cross cultural management knowhow which led to miscommunication and misinterpretation of messages conveyed. After all the obligatory consultations were duly completed, AusFert drafted a contract with its Chinese coalition and advanced to ascertain other aspects related to the contract such as the schedule for purchase and shipment of goods as well as a quantity estimation for the next 3 years. The setbacks began to surface when the first shipment failed to arrive on due date specified, which led AusFert to doubt the likelihood of receiving an order. The Australian company, conscious of the cultural sensitivity, employed an outside agency for guidance. ChinFert, on the other hand, on knowing about it, felt offended by this gesture and began ignoring the contract. By the time communication was established with the Chinese, both the parties to the contract were so overwhelmed with negative sentiments that the Chinese nationals assumed that AusFert lacked sympathetic approach to business and were highly ignorant of the manner in which the Chinese system worked. This case study reveals the manner and extent to which cultural disparity impacts corporate decision making, misinterpretation of emotions that are culturally relevant, the aptitude of identifying others sentiments judiciously so as to avoid a collapse in negotiation and associations and the understanding of what steps need to be taken to restore the negative feelings the parties might harbor against each other8. 4. Literature Review The necessity and significance of cross cultural expatriate training has been widely recognized in research literature. However, doubts regarding its effectiveness have been raised as well. Irrespective of several debates and discussions that take place to ascertain whether such a training actually makes a meaningful contribution in satisfying the need of corporate in developing and managing their human resource, the concept of training and development of expatriates remains widely popular. The term expatriate is defined as: “A person temporarily or permanently residing in country and culture other than that of the persons upbringing or legal residence”9 South East Asia region, particularly China, is emerging as the most favorite expatriate destination for Australian expats. The Karpin report commissioned by the Australian Government in 1992 hence stressed on the necessity to educate Australian managers in order to enable them to productively administer their businesses across such cultural diversity within this (South East Asian) region10. Research in similar fields persistently highlighted the fact that Australian managers were seen as disinclined to acclimatize to cultural differences and appeared to be oblivious of the cultural differences that exists between countries11. In another similar research carried out by Fish and Wood (1997) which aimed at assessing the cross - cultural management proficiency of Australian business enterprises in East Asia, the key areas requiring adequate training were identified. These included such aspects as: enhancing the ability of the Australian managers in order to enable them to adapt to the changing organizational approach from ethnocentric to geocentric, developing knowhow in administering and communicating with the staff in cross-cultural corporate environment, sharpening their managerial skills pertinent to promotion of the business representation as well as the development of skills which lead to achievement of the operational and strategic objective of the business enterprise in and across foreign business settings and enriching and developing adequate expertise in the native language through efficient training12. The researches carried out in the past have increasingly stressed on the need for cross cultural training. This is evident from the research findings which observed the overseas experiences of expatriates. The study revealed that past experiences of employees deployed overseas on offshore assignments hardly ease the adjustment process of such employees or managers in terms of acquainting and adapting themselves with the foreign environment13. Pre - departure training is widely recommended by researchers as being one of the most appropriate methods of imparting knowledge regarding critical information on local environment, instructive exposure to the cross cultural tuning method and concerns regarding preliminary adjustment. The conceptual foreignness of the overseas state of affairs is perceived as being restrictive in facilitating valuable communication with the training offered to such employees14. In view of such widespread research stressing on the significance of training and developmental aspects, the pre departure training of employees embarking on foreign assignments is regarded as significant in assisting them in adjusting and adapting quickly and efficiently to the foreign culture. Significant differences between Chinese and Western leadership practices have been observed by various researchers. According to these researches, the form of leadership in western corporate cultures is represented by individualistic approaches rather than collectivist approach. The Western societies lay comparatively more stress on follower responsibilities rather than rights, presuppose self-gratification rather than obligation to duty or philanthropic stimulus; assume centrality of work and autonomous value orientation and accentuate suppositions of prudence rather than severity, faith or fallacy (Littrell, 2000). Such differences in the two cultures make it increasingly difficult for the western expats to work and adapt to the Chinese culture which does not share any of the aforementioned characteristic traits, since they are completely western ideologies. Chinese culture is more collectivist and hence the managers or employees working or likely to work on foreign assignments in China, must be imparted efficient training in order to prevent failure and avoid the resultant consequences, arising out of it15. 5. Managerial Challenges Failure to understand and acknowledge cultural differences have often led to failure in managing international business ventures in cross cultural environmental settings. The key challenge, thus, for Australian managers lies in gaining adequate familiarity and developing effective cross cultural communication skills to be used as a foundation for the development of efficient business practices and achieve adeptness in administering and organizing the Chinese staff. Fosters Beer, an Australian brewery giant, faced disastrous consequences in the Chinese market as compared to its business skills implemented in other countries across the globe. The basic underlying cause for such a failure lies in the lack of understanding of the Chinese corporate culture and inefficient knowledge about the understanding of the Chinese consumers. According to Yuwa Wei, (2000), the Australian companies tend to overlook the fact that China is a highly diversified market and hence estimating the market size and consumer demand in such market types is highly complex. The Australian investors, must, therefore segment the market according to varied categories of consumers and then attempt to analyze the real market drivers in each of such segment. The Chinese culture is presumably one of the least studied markets within the corporate arena and hence having a deeper understanding of the markets is essential for international investors and the senior management. Thus one of the greatest challenges that the Australian managers might face in China is while negotiating with the Chinese managers. Since both of them belong to highly completely opposite cultures i.e. in terms of high context and low context. The approach and methods of negotiation also varies greatly between cultures. For instance, the Chinese system of negotiation entails large teams which are often assembled with several levels of authoritative individuals. This tactic is used with a view to transfer supremacy from one person to another in an effort to perplex the diplomats through role play. Furthermore, the Chinese society is representative of a high power distance society which means that individuals at subordinate positions congregate more with those individuals who are in governing positions rather than vice versa. These characteristics of Chinese negotiating models contrast remarkably with the features of Australian negotiations, thereby making Sino - Australian negotiations undeniably intricate task. Exchanges between two contradictory cultural groups, the group belonging to high context culture entails a clearer explanation of its representatives nonverbal gestures. Failure to do so diminishes the likelihood of a successful negotiation. Research has revealed that cultures apply substantial authority over sentiment through behavioral customs. Responsiveness to cultural disparities, hence equips the executives in working in cross cultural environments efficiently and effortlessly. For instance, in Chinese corporate culture, more weight is given to post decision emotions rather than legalities, as seen widely in Australian corporate culture. For the Chinese managers, trust is relatively of higher significance than legal obligations and hence abiding by the contract holds no relevance when compared to abiding in accordance with human emotions16. 6. Key Competencies For overseas assignments to be successful, expatriate executives must widen their understanding of certain key cultural aspects that are relevant to the Chinese business environment. Research implies that almost 16 - 40 % of expatriate managers end their overseas projects in advance than previously programmed and further 50% of the remaining groups operate at a low level of efficiencies17. Thus in order to avoid such fallacies managers posted in foreign locations must be suitably well trained and adequately efficient in approaching such issues and overcoming such setbacks. There exist numerous well-known observations in research literature concerning the various issues that are regarded as most successful in enhancing managerial efficiency in cross cultural contexts. With the advancement of the emotional intelligence index for ascertaining global managerial leadership competencies, it was found that, almost 90% of the variation between average and remarkably efficient managers is on account of emotional intelligence rather than cognitive abilities. The key competency factors which together form the framework of emotional intelligence index include: self responsiveness, self regulation, enthusiasm, compassion as well as other societal expertise. Managers who possess such satisfactory characteristics in each of these areas are regarded as potentially efficient leaders, appropriate for overseas deployment18. However, studies have also shown that although adequate knowledge about Chinese cultural environment and business ethics does not always lead to successful business ventures, but the absence of such knowledge does guarantee failure in establishing successful relationships with the Chinese staff19. 7. Cross Cultural Competency Model All multinational organizations are increasingly becoming aware of their cross cultural competency position and are aggressively participating in the development of such models with a view to succeed in their overseas businesses. These models or frameworks serve as a guiding force for exploring the structural, behavioral and cultural aspects that encourage organizational performance as it relates to diversity management20. Figure 1: Cross Cultural Competency Model21 The various issues and challenges surrounding deployment of employees in overseas locations provide interesting insights about the type of challenges faced, the methods required to combat such challenges, significance of training and development of expatriates while embarking on projects in a cross cultural environmental setting etc. Failure to deal with such concerns might lead to disastrous consequences resulting in immense financial setbacks to both, individuals and organizations as well as upset the very foundation of the social order as well as nations’ altogether. Hence it is of utmost significance for firms to develop and implement appropriate models to deal with cross cultural challenges and ensure successful business practices across the globe. Figure 2: Cross Cultural Competency Model for Expats22 In conclusion, the study of cross cultural management and the various experiences and References Wei, Y., (2000). Investing in China, Federation Press, Pp. 14 ChinaDaily (2009). Chinas FDI up 23.86% in 2008, viewed: April 8, 2008 from: UNCTAD (2009). Expansion of FDI Flows through 2009 anticipated by Transnational Corporations, viewed: April 8, 2009 from: ACBC (2009). Victorias China Links Deliver Healthy Results, viewed: April 9, 2009,from: Romero, E.J. (2002). The effect of expatriate training on expatriate effectiveness, Journal of management research, Vol. 2 (2), pp.73-77 Tjosvold, D., Leung, K., (2003). Cross-Cultural Management, Ashgate Publishing Ltd., Pp. 2 Härtel, E. J. C., Zerbe, W. J., Ashkanasy, N. M., (2005). Emotions in Organizational Behavior, Routledge, Pp. 168 Messner, W., (2008). Working with India: The Softer Aspects of a Successful Collaboration, Springer, Pp. 149 Karpin, D., (1995). Enterprising Nation: Renewing Australias Managers to Meet the Challenges of the Asia - Pacific Century, Report of the Industry Task Force on Leadership and Managmenent Skills, Canberra, A.G.P.S. Dawkins, P., Savery, L., Mazzorol, T., (1995). Enterprising Nation: Renewing Australias Managers to Meet the Challenges of the Asia Pacific Century: Customer Views on Australian Management, Asian - Pacific Viewpoints, Canberra, A.G.P.S., Pp. 37 Fish, A., Wood, J., (1997). Cross Cultural Management Competence in Australian Business Enterprises, Asia Pacific Journal of Human Resources, Vol. 35, Pp. 47, 48. Black, J. S., Medenhall, M. E., Oddou, G., (1991).Towards a Comprehensive Model of International Adjustment: An Integration of Multiple Theoretical Perspectives, Academy of Management Review, 16(2), Pp. 294 Selmer, J., Torbiornn, I., de Leon, C. T., (1998). Sequential Cross - Cultural Training for Expatriate Business Managers: Pre - Departure and Post Arrival, International Journal of Human Resource Managmenet, 9(5), Pp. 831 - 840 Littrell, R. F., (2002). Desirable Leadership Behaviors of Multi - Cultural Managers in China, Journal of Management Development, 21 (1), Pp. 50 - 74 Kaye, M., Taylor, W. G., (1997). Expatriate culture shock in China: A Study in the Beijing Hotel Industry, Journal of Management Psychology, 12 (8), Pp. 496 - 510 Coleman, D., (2000). Leadership that Gets Results, Harvard Business Review, Pp. 78 - 90 Tung, R. L, Yeung, I., (1998). Confucian Connections in China, International Management in China: Cross Cultural Issues, Routledge, Pp. 197 - 206 Donald, B., Liu, W. M., Toporek, R. L., (2003). Handbook of Multicultural Competencies in Couseling and Psychology, SAGE Publishing, Pp. 335 Harvey, M. G., Novicevic, M., Speier, C., (2000). An Innovative Global Management Staffing System: A Competency Based Perspective, Human Resource Management, 39, Pp. 381 - 394 Jassawalla, A., Connolly, T., and Slojkowski, L., (2004). Issues of Effective Repatriation: A Model and Managerial Implications, Advanced Management Journal, 69 (2), Pp. 38 – 39 Appendices Figure 1: Asia Pacific Consensus Forecast, 2008 Source: Consensus Economics (2009). Foreign Direct Investment Forecasts, viewed: April 8, 2009 from: Figure 2: Cross Cultural Training Activities and Types of Learning Read More