Analysis of Cross Cultural Management of Ericsson Company - Assignment Example

Analysis of Cross Cultural Management Introduction With the growth of the economy, the boundaries in the economy have disappeared. The companies around the world are operating in the different countries giving rise to the concept of Multi-National Companies (MNC). The MNCs have opened their operations in the various countries to increase the scope of their business. The different countries provide the companies with a newer market segment to work on and a scope to increase their sales. Therefore, it has become imperative for the companies to take account of the cultures of the different countries in the world. The different countries have different beliefs, traditions and religions giving rise to a wide array of the cultures. The management of the companies have grown keeping in view with the culture of the different countries giving rise to the cross-cultural management. It has become a prime concept in the context of the modern business environment for the development of the business. The corporate culture today is involved in understanding the essence of the different cultures of the countries. It has become important for the companies to understand the cultures of the countries they operate and influence the operations of the companies. The companies in the different countries employ the people of the country who are influenced by the domestic culture. It is important to understand the culture to understand the operations and the activity of the employees in the countries. The management has to get a hold over the culture to influence the change in the organization and to look into the development of it. It has become an integral part of the organizations in the world over and it is not merely an “add on”. (Lakomski, 2005, P. 42; Tjosvold & Leung, 2003, P. 156) The paper will deal in the case study of Ericsson, a Swedish company, which set up operations in India and the problems faced by the management in implementing the changes. The activities of the management regarding the cultural differences are to be analyzed which will help in forming the conclusions and the recommendations. Business Case The paper will deal with the business case of Ericsson. Ericsson is a Swedish telecommunications company and a firm in the industry that can offer end-to-end solutions in the sector. The company has been successful in its operations in the world over and India, as a market held a good proposition for the country. In fact, about 40% of the total calls made in the world are routed through the networks of Ericsson. This underlines the size of the company and the prospect, which the company possesses. In the case of India, Ericsson has entered the market at the start of the 20th century. The company dealt in the switches in the electric board. India, as a market of the mobile technology took a giant step in the decade of the 1990s. Before the decade the Government of India has been protecting the economy from the investments of the foreign countries. The deregulation of the economy opened up the borders for the international organizations and the market got a lift. Ericsson being one of the leaders in the market grasped the opportunity and set up operations in 1993-94 with 100 employees. At the present condition, the company employs over 3000 employees and operates from 24 offices in the country. One of the main problems encountered by the company in India was the adjustment of the cultures according to that of India. The HRM of the company was the most affected. The Swedish culture was completely different from that of India and the HRM had to adjust the Indian culture. The problem started at the stage of the incorporation of the business in the country. As the structure of the Government in India is bureaucratic, the company had to follow a lot of rules and paperwork to be incorporated in the country. Regarding the planning of the HRM, the company had a dedicated cell for the activities in India. The department in India solved all the problems relating to the employees in India. The HRM is dedicated to the staffing in the company also. The policies in the staffing in India were the same to that in Sweden. In the case of staffing, the company allowed the employees from within the ranks of the company. In addition to this, the company also conducted interviews to select the personnel for the important positions in the company. The credentials of the employees are the main criteria for the selection rather than the nationality or the culture. When the employees are selected from the foreign countries they are not given training for the cross-cultural management. Rather the seniors guide them regarding the culture of the country. In the case of the appraisal of the employees there was a marked difference regarding the behaviors of the employees in the countries of India and Sweden. The employees in India took to the individual appreciation well, which is not the case in Sweden. The compensation policy for the employees of the company was different in the case of the domestic and the foreign workers. The Indian domestic workers got the traditional compensation with the basic, DA and the fringe benefits. In the case of the foreign employees there were additional compensations like the cars and the living. In the case of India, the foreign employees were given “hardship compensation” in the beginning. Later the management discontinued it as they thought the country has progressed a lot in the last few years. The management of the company in Sweden did not felt that training was needed for the employees going to India. Instead of the training of the employees the management devised a way for the interaction of the employees with the seniors, which formed the basis for the development of the understanding of the culture. India had a distinct advantage over the other countries of the same stature because of the language. Most of the people in India understood the language and the society of India was more open as opposed to the other countries of the world. They integrated the values and the cultures of the foreign countries more often than not. Though India was a good prospect, the country was not devoid of the problems. The diversity of the Indian culture meant that the states of the country varied in stature. This proved to be great obstacle in the employment of the workers from the different states. The language barrier was not a problem for the people and the management. However, the values of the people in India were different with that of the people in Sweden. The management style in the company was distinctively Swedish and the employees faced problems to adjust to the culture in the management and vice versa. The Indian employees did not confront the managers and the supervisors like the Swedish employees and they avoided the negative responses to the management. The employees may know that the work would be out of reach for them. However, they did not avert to the negative answers. This was problematic for the management as that could harm the reputation of the company in the case of some projects. In the case of deadlines, the Indian employees did not follow them religiously like that of the Swedish employees. In the case of compensation, the Indian employees were more interested in the monetary affairs rather than the challenge of work. This led to the high turnovers in the company. The employees left the company for another one, which provided them better compensation. The Indian employees did not report the problems or the conflicts with the management in the early stages. This led to the increase of the intensity of the problems in most of the cases. These were the different issues the company faced due to the difference in culture of Sweden and India. The management of the company referred to various methods for solving this problem. (Maki & Soudakova, 2008, Pp. 34-38) The kind of situation, which was seen in the case of Ericsson in India, is a phenomenon that has been increasingly seen in the case of different countries and companies worldwide. With the increase of the globalization in business and the deregulation of the economy, the companies are opening up in different countries and the difference in culture has been widely viewed. This problem is widely seen in the case of the mergers and acquisitions in different countries. A company when it acquires another company in a different country will face the problems because of the presence of the workers in the country. In 2009, Ericsson made forays into the North American market by buying Nortel. The company had presence in the market earlier and it increased the market share by buying Nortel. It increased the customer base because of the acquisition. In this case, there would be a definite cultural clash as the employees of Nortel are used to the American style of management. With Ericsson at helm the management style will change to the European style. Though the cultures of the developed countries of Sweden and USA are more similar than that in India, there will be some cultural issues. (Brodkin, 9th December 2009). In the case of the acquisitions in the country itself, the scope of the problem is smaller. In the case of the domestic companies, the main problem lies with the management style. In the case of the acquisition of You Tube by Google, the effect of the cultural mismatch will not be distinct like that in the case of Ericsson. (Arrington, 9th October, 2006). Though there are problems, the managements of the different companies have realized that the acquisitions and the mergers are the future in the industry. Therefore, the management of the companies all over the world is giving more importance to the cross-cultural management. Conceptual framework The difference of the cultures in the business world has become evident with the development of the economy. With the growth in the economy, the companies from the different countries are making forays into the other countries. It is therefore, important for the companies to understand the culture of the other countries to develop the business. In the case of Saudi Arabia, the management style is different to that of the most modern business world. In the business organizations in Saudi Arabia, the leader of the company is the prime person in the case of all the decisions. In most cases, the employees are not taking part in the decision making process. The leaders are expected to take all the decisions and the workers are to follow. The status of the leaders in the companies is directly related to the status of their families in the society. In the case of the Japanese style of management, the leaders and the managers operate to provide a good working environment in the company. In the case of the management, the top-level managers are interested in the information flow from the peak to the base of the hierarchy. Most of the developmental policies in the organization are originated in the middle tier of management. The upper level of management functions quite differently from that in Saudi Arabia. Therefore, it is evident from the two examples the difference in the style of the management of two countries. A foreign company making forays in Japan or Saudi Arabia has to be aware of the differences in the management. The management of the company must understand the workers in the country are used to the style of leadership and should integrate with the culture there. The Hofstede’s five dimensions can explain the importance of the cultural discourse in the international business management. (Japanese management style, n.d.; Saudi Arabian management style, n.d.; Higgs, n.d.) Geert Hofstede used the five dimensions to stress on the importance of the difference in the culture of various countries in the world. The five dimensions can be expressed as follows: Power Distance Index (PDI): It is the measurement of the power and inequality in the society. It is measured how open are the companies and the organizations in the countries in accepting the inequality in the power in the society. Some countries like the USA are small in the case of the PDI because the society accepts the freedom in the expression of the feelings. Individualism (INV): In the case of the INV, it is measured to what extent are the people in the society related to the individualism or collectivism. In the case of the individualism, the individuals place greater importance to the freedom and the individualistic ideas while in the case of the collectivism the people face greater stress in the families and the institutions of the society. Masculinity (MAS): In the case of the masculinity index, the level of the freedom of the women is different in different countries. The role of the men in describing the status of the women in the society is important. In the case of the more assertive role of the men in the society, the status of the women is subdued. In the case of the caring character of the men, the status of the women is in the upper position in the society. In the case of the Middle East countries, the position of the women in the society is subdued. Uncertainty Avoidance Index (UAI): In the case of the uncertainties arising in the various countries, the role of the Government becomes important. The uncertainty in the countries may occur due to the wars, calamities etc. The societies, which are closed to accepting the uncertainties, develop laws and principles in avoiding the uncertainty. The people in this type of culture do not accept the ideas of the other countries or the companies from the other regions. In the case of the more open countries, the people are more open to the different cultures and the ideas of the foreign entities. Long-term orientation (LTO): This part is compared with the short-term orientation in the different cultures. In the case of the LTO, the values are based on the perseverance. In the case of the short-term orientation, the values are the respect for the culture and the tradition and the completion of the social obligations. In the case of the LTO, the people in the society are more aware of the ideas and the views of the foreign cultures and are ready to accept it. In the case study, the Swedish major has entered in India. Therefore, it will be helpful in finding out the factors in case of India. (Geert Hofstede cultural dimensions, n.d.; Longatan, 26th December 2008; Hofstede’s cultural dimensions, n.d.) The PDI of India is 77, which are much higher than the average in the world. This indicates that there is high inequality in the society of the country regarding the distribution of power. In the case of LTO, Indian society is seen as a long-term society and is ready to accept the ideas of the other cultures. The MAs in India is below the world average and stand at 51, which indicates that the women in the society are well positioned. In the case of the UAI, India ranks low which underlines the fact that the policies in the country are unstructured. In the field of the INV, the country ranks very low and that states the importance of the family in the culture and society in the country. (ITIM International, n.d.; India, n.d.) Analysis of the situation Corporate strategy The strategy of Ericsson, the world over has been to lead the market in the telecommunication sector. In the case of India, the company has been performing well in the field of the telecommunication sector. The company has been able to bag orders fro the leading operator in India – Bharti Airtel to develop the network in 15 centers all over India. This has been instrumental in developing the company’s reputation as a leading player in the Indian market. The Ericsson department of India and Sri Lanka is controlled from the center at Gurgaon and the segment is doing well in spite of the global downturn in the economy. One of the major reasons for the good performance of the company has been the market in India. The Indian telecom market has been the fastest growing segment in the world and it is tipped to be the largest one in the coming years. The growth rate of the market in India attracted a large number of mobile operators in the country. With the entry of the large number of operators in the country the need for the infrastructure was felt and the company being in the region from the early part of the growth of the industry cashed in. The reputation of the company the world over also helped its cause. Therefore, the difference in the culture did not affect the performance of the company and the company is performing more efficiently in the country. (Ericsson wins $1.3 bn deal from Bharti Airtel, 31st March, 2010; Clendenin, 13th April, 2007; Opportunities and overview of mobile industry in India, October, 2006) HRM One of the major problems for the company in the case of opening up its operations in the country has been the HRM related issue. The growth of the country as a growing market has made the matters difficult for the company. With the rise of the MNCs, the labor turnover has increased. In the case of the problem solutions, too, the HRM faced problems due to the differences in the culture of the countries. The company has opened up an wing of the HRM in India due to the labor related problems in the country. This is due to the differences in the culture of Sweden and India. Team working In the case of the team working, the Indian workers are not accustomed to the idea. They are more comfortable in the individual works. This is in contrast to the Swedish view of the management where the emphasis is on the teamwork. This has been problematic for the management, as they had to adjust to the culture of the country or vice versa. Leadership In the case of the leadership in India, the employees do not avert the views of the leaders and follow the leaders. They do not discuss the problems openly. This is in contrast to the styles of the Swedish management where the workers oppose the views of the leaders if they find anything is wrong. This has been a problem for the management of Ericsson, as the workers do not discuss the problems in the earlier stages. This increases the intensity of the problems. Marketing The conditions in India have not affected the marketing of the firm. India is more open to the views and the expressions of the foreign vulture as described by the LTO analysis in the previous section. Ericsson has started its process of evolution and innovation in its products. The company has started the Tower Tube Radio Base station and that has been one of the high points of the marketing in the company. The company has evolved into Ericsson India Private Ltd with the mergers of its divisions of Ericsson Telecommunications Ltd. and Ericsson Communications Ltd. This has increased the stature of the company in the society. The company is growing and evolving in the market of India. (Ericsson Launches Wind-Powered Base Stations for Indian Rural Market, 20th March, 2010; ERICSSON TELE BECOMES ERICSSON INDIA PVT LTD, 3rd January, 2002) Solutions In the case of Ericsson in India, the managers have responded to the difficulties by developing certain programs. Ericsson is an international company functioning in India and it is evident that there will be difference in the culture between the management and the employees of the organization. The company has analyzed the situation and recommended different steps in the process of integration: Cross-cultural training: The cross-cultural training is an important method by which the people of the different cultures are integrated. In the case of Ericsson, the management does not provide the employees any kind of training. The company provides a mentor to the employees to guide them about the conditions in India. Manager training: The managers are expected to develop the process of integration of the different cultures. In the case of Ericsson, the company does not provide the managers any kind of training. However, they expend a significant amount of time in the choice of the managers. The chosen ones are the best in the industry and they mostly help to integrate the differences in the culture. Third Culture: In the case of Ericsson in India, the management has been trying to adapt to the culture in India, In the case of the workers in India, they are trying to adapt to the management style of the company. This has given rise to the rise of the third culture in the company with the traits of the culture from both the sides. (Maki & Soudakova, 2008; Pp 44-45). Conclusions and Recommendations Ericsson is a Swedish company, which has opened its operation in India. As this is a foreign company, it was natural that there were differences in the style of the management and the culture of the country. Ericsson has been trying hard to integrate its style of management according to the culture of India. The management has evaluated the difference and the problems faced by the management. The management expects the managers to take care of the situation. The management depends on the efficiency of the individuals for the solution to the problem. However, it has to be stated that there should be a definite method in the process. The training and development to the employees should be provided in the field of the cross-cultural management. In the case of the managers also a training regime should be there to integrate the differences of culture. In the case of the employees in India, the financial compensation should be at par with that of the international employees as the Indians value the monetary compensation more than the other things. This will decrease the turnover of the employees. This will help in the development of the company and will act as the step to becoming the largest service provider in the telecom infrastructure industry. References: 1. Lakomski, G. (2005). Managing without leadership. Elsevier. 2. Maki, D and Soudakova, V. (2008). MNC’s management of human resources in India. Lulea University of Technology. 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