Advantages and Disadvantages of Diversity to a Multinational Organization - Coursework Example

Evaluate the Advantages and Disadvantages of Diversity to a Multinational Organisation, In a Rapidly Changing Global Market Table of Contents Introduction 3 Effects of Global Diversity on MNCs 5 Advantages of Diversification for IBM 6 Disadvantages of Diversification for Wal-Mart 7 Conclusion 8 References 9 Bibliography 11 Introduction To put into account, there are no such definitions that can particularly mean the functions or characteristics of Multi National Corporations. They, as everybody know, work in numerous nations, utilising the local opportunities of the host market. Their products or services are not restricted to sales. It is widely ranged from manufacturing to research and development of the products or services rendered. These companies can range from raw material extractors to aircraft manufacturers. With such variety of products, MNCs have some common features on the global perspective. One of the significant characteristic of MNCs is that the companies do not merely tend to sell their products to the foreign market but establish a package of capital, technology and further more variables to the potential market. Even there are many companies who consume the raw materials from a foreign market. For example, the European Ford Escort includes parts imported from 15 different countries and sold in the European, German, and UK market. Therefore, the companies often follow the strategy of mergers and acquisitions to enter a new market through joint ventures. As such, diversification proves to be one of the key strategies of MNCs in the global market. Contextually, the globalisation factor has its own impulse on the operations of the MNC companies as it operates on a globalised basis for diversifying its activities (Spero & Hart, 2009). As MNCs are highly intensive to the globalisation factor, they need to follow highly flexible diversification not only on the basis of marketing but also on cultural basis. And hence the companies perceive the global diversity as a very important management criterion. National and international policies play a significant role on this matter. Despite all these consequences many companies operating worldwide have been recorded to disregard the global stakeholders, and provide multicultural training to their employees and maintain a continuous evaluation of the progress towards global diversity (Nishii & Özbilgin, 2007). Hence, there are lots of companies which turned up to be successful, while some tended towards disappointment. From the organisational point of view, what bother the MNCs most is the cultural diversification. Probably, because they need to interact with customers and work with employees all around the world, belonging to different cultures. For example, the Canadian population comprises a problem of Francophones and Anglophones within the intra-cultural dimensions while both the races fall in the group of Caucasian. This problem persists in many other nations, like Africa, Australia, and India. All these criteria demand a well managed organisation to become successful in the global market (Nishii & Özbilgin, 2007). Effects of Global Diversity on MNCs From the above stated examples and descriptions it can be fairly stated that global diversification has an immense influence on the organizational structure of a multinational company. However, company’s boost up or failure in the global market depends on its internal values and beliefs of managing the manpower. To be included, a well reputed MNC; IBM marked its victory regarding the racism issue of different cultures by creating a unique HR structure comprising eight different task forces for every separate groups, like Asians, Europeans, even men and women of different cultures (Thomas, 2004). On the contrary, despite rendering attractive products and possessing good reputation in the global market, Wal-Mart another renowned company failed to attain its goal in Germany. One of the basic reasons was ignoring the rules and regulations of German retail market. Besides the transformation of official language in higher management level from German to English also grew unacceptable for the employees. This might sound minor but the effects were obviously major to fall short for the company, Wal-Mart Germany (Knorr & Arndt, 2003). Both the above situations can occur in case of any multinational company, but the ways of overcoming those and technically speaking making it an advantage or disadvantage entirely depends upon the organisational value chain and the management skills. Certainly, if IBM did not compel different task forces for all these groups, it could have faced a cultural conflict similar to that of Wal-Mart and be forced to face a failure in the European or might be Asian market. Advantages of Diversification for IBM Certainly, as stated previously the advantages and disadvantages of MNCs depends on their management skills for which IBM generated its own advantages by developing new management styles and diversifying its internal environment as per the needs and demands of the external environment of the organisation. Likewise, the aforesaid racial or gender diversity also has certain beneficial aspects for the betterment of the organisation. According to the study of Jehn and Bezrukova, the racial diversity had a negative impact on the group and was depended on the training and diversity management while the gender diversification had a comparative positive impact on the group diversity. Notably, with the prominence of these elements of diversity during 1990’s gave an account that all these diversity factors together benefits the organisation by developing performances and ability to face a highly diverse customer base (Kwak, 2003, Pg. 7-8). The role of diversity to enhance the team work within different groups of employees proved to be an advantage for IBM as Lou Gerstner took the fact to be profitable for the company’s prime goal and therefore compelled eight new task forces. All these task groups had their responsibilities to gather informations about the personal perceptions of the workers and the customer market as well as interpret the informations in a way to determine the organisational objective for that specified sector and also plan a strategy to attain the organisational goals. Certainly, the belief of the company grew to be that, variety in the workplace was the only way to serve diversified customer base all around the globe. This strategy is till date followed by many other multinational companies, though in IBM the present CEO Mr. Pam Palmisano still considers the strategy by modifying it with an updated form. Therefore, for IBM the key factor that worked as an advantage was that, it accepted the paradoxical diversity as its prime objective to attain the diversity goal (Thomas, 2004). A few other advantages in the overall global perspectives are, scope for creativity and enthusiasm as many organisations demands, enhancement of problem solving quality and leadership, as well as build a productive relationship between two or more cultures (Robinson & Dechant, 1997). Disadvantages of Diversification for Wal-Mart On the same contrast, being one of the most successful US based MNCs and despite earning highest revenues in the global market, Wal-Mart Inc. suffered a downturn in the German Market in the fiscal year 2001-2002. A few of the basic reasons for its failure were its ignorance towards the cultural values and beliefs of the country. Whenever entering a new economy an MNC needs to have a flexible organisational structure to get accustomed with the diversity in the given environment. Same goes for Germany as well. The company first made a mistake by acquiring a local company which was considered to be the weakest in German market. The next mistake was to make English the official language which created a cultural gap in the organisation. Moreover, the continuous violation of German laws and regulations for an MNC and malfunctioning in serving the customers what it proposed, made the market unsuitable for the company. Certainly, the reason for its failure was not because of diverse cultural issues but its adaptation of wrong strategies in the German market (Knorr & Arndt, 2003). In this context it is crucial to consider that, there are other more disadvantages that a multinational company needs to face, such as higher turnover costs, higher absenteeism rates, and different Lawsuits. Therefore, the company needs to follow a rather flexible structure to overcome these circumstances (Robinson & Dechant, 1997). Conclusion To put into context there are even many such companies in the global market which proves to be weaker than other companies, and the only reason for all of them is that they failed to adapt to the diversification and implement appropriate strategies. The examples in this context can be given of the likes of Schneider National, the Russ Berrie & Co. and many others in the part of global diversity (Robbins & Judge, 2007, Pg. 526-532). One of the major complexities of the globalisation, rather global diversity is that the variables are quite keen to change. These changes bring about clashes in the dimensions of values on multicultural basis. Additionally, each culture has its uniquely diverging paths. But the global dimensions also have some common grounds based on individualism, or achievements. Therefore, all these aspects generate a high volume of progress for a multinational company subject to its diversified management strategies (Grove & Et. Al., 2007). Conclusively, the MNCs should adapt the global diversity and its ever changing nature as an opportunity and focus on the diversified strategies as their investment in the global market. References Grove, C. & Et. Al., 2007. Issues & Observations—Gaining a Critical Edge in Mastering Globalization. Leadership in Action. Pg. 17-20. Knorr, A. & Arndt, A., 2003. Why Did Wal-Mart Fail In Germany? Materialien des Wissenschaftsschwerpunktes “Globalisierung der Weltwirtschaft”. [Online] Available at: http://www.iwim.uni-bremen.de/publikationen/pdf/w024.pdf [Accessed November 11, 2010]. Kwak, M., 2003. The Paradoxical Effects of Diversity. MIT Sloan Management Review. Pg. 7-8. Nishii, L. & Özbilgin, M., 2007. Global Diversity Management: Towards a Conceptual Framework. International Journal of Human Resource Management, Pg. 1883-1894. Robbins. S. P. & Judge. T. A., 2007. Organisational Behaviour. Prentice-Hall India. Pg. 526-532. Robinson, G. & Dechant. K., 1997. Building a Business Case for Diversity. Academy of Management Executive. Pg. 21-31. Spero, J. M. & Hart, J. A., 2009. The Politics of International Economic Relations. Cengage Learning. Pg. 130-134. Thomas, D., 2004. Diversity as Strategy. Harvard Business Review, Pg. 98-108. Bibliography Kingsmill, D., 2009. How Experience Failed Us. Management Today. [Online] Available at: http://www.managementtoday.co.uk/news/894188/Denise-Kingsmill-experience-failed-us/?DCMP=ILC-SEARCH [Accessed November 11, 2010]. Read More