Culture and Corporate Strategy - Case Study Example

Culture and Corporate Strategy Introduction In the past century, the impact of technological advancement provided the trend for organizations to transcend challenges posed by the environment. As enterprises gained competitive advantage over time, their classifications continue to diversify enabling the emergence of global organizations in contemporary times. With the complexity of factors that global organizations contend with, one element which remain to be of crucial importance is culture. The critical role that culture takes in global organizations need to be closely examined especially in developed countries where globalization grows. Taking another perspective, it is likewise relevant to look into the effects of globalization on culture. Several studies have indicated that globalization actually destroys cultural identities of specific nations it pervades. Business practitioners say that globalization creates and promotes cultural identities. So, these issues indicate the complexity of globalization as a process as it involves influencing and affecting various sectors of the targeted markets, including the global economy, social structures, political systems, the physical environment, and the national, organizational and global culture it ultimately reaches. In this regard, the essay aims to address the main cultural challenges that a company might encounter when operating globally and determine ways and means to overcome them. This research would be made possible through a close examination of relevant literatures on globalization, organizational culture, and the impact of culture of globalization strategies, prior to determining and addressing cultural challenges that organizations encounter when operating globally. A. Definition of Terms Prior to delving into the importance of culture and the challenges that face global organizations, there is a need to clarify relevant terms that would be used throughout the essay. These terms are global organizations, culture and corporate study. 1. Global Organizations Agreement between cultures is a critical and necessary element for the global organizations. A close awareness of traditions, values and practices within specific cultures enable global corporations to inculcate critical cultural elements in their strategy. This definition is more comprehensive in identifying sharing of resources from one country to another with the objective of maximizing revenues by minimization of costs. Mazrui (2001, p.1) defined globalization as consisting of systems and operating processes aiming to ultimately be interrelated with global protocols on a continuously growing exchange of transactions among diverse countries and regions. Dictionary sources simply define global organizations as “an international alliance involving many different countries” (Free Dictionary, 2010, par. 1). It fails to mention the relevant elements differentiating it from multinational corporations; and making it synonymous to international or world organizations. 2. Culture The impact of culture on global organizations is so relevant and deep that it cannot be discounted in its unique attributes. In an article entitled Organizational Culture and Leadership written by Edgar H. Schein (1997), culture was viewed as a distinct model of beliefs deemed to be shared by people as they adapt and adjust to dilemmas post by internal and external factors (par. 6). Culture has been experienced as evolving and ever changing. There are ways to determine the extent of global involvement in cultural awareness. The article on Culture (n.d., par. 10) proffered that global organizations do not necessarily require exactly equal degrees of awareness of cultural orientations. The illustration indicated as Figure 1 cited in the article entitled Culture (n.d., p. 1) shows how companies can understand the extent to which cultures at various levels interact and get involved globally. In addition, it indicates that as an organization moves farther from core business in the host company, the more it should have an understanding of diversity in culture. As companies move out and step into another axis, more awareness is well-known towards a greater understanding of diverse cultural orientations. Figure 1. Cultural Awareness and Extent of Global Involvement Reference: Hofstede, G. (1997). Cultures and Organizations: Software of the mind. New York: McGraw Hill. Cited in the article entitled Culture, n.d., p. 1 3. Corporate Strategy Global organizations implement a design or strategy to ensure that their operations in the international markets would be successful. Therefore, before defining global strategy, it would be important to determine the meaning of strategy, as used by business organizations, in general. Corporate strategy is defined as “the direction an organization takes with the objective of achieving business success in the long term” (Venture Line, n.d, p.1). A global strategy therefore is an organization’s detailed and comprehensive design to compete successfully in the global market. Cultural Importance and Challenges A. Importance of Culture in Global Organizations As learned in the course module, the importance of culture to business organizations are summarized as follows: (1) culture integrates individuals into teams; (2) culture promotes values, cooperation and efficiency; (3) culture prepares a group in facing external threats and gives them the capacity to use opportunities to their advantage and to survive; and (4) culture could be used to promote selfish interests of powerful individuals. In addition, the importance of culture emerges in learning cultural concepts according to the four dimensions in Hofstede’s onion diagram (1997): symbols, heroes, rituals and values. In the diagram, it was explained that values are manifested the deepest, with symbols being manifested in culture the least. By learning cultural values of other countries, managers of global corporations are given a competitive advantage in terms of awareness of values, preferences, and practices in the national culture of markets targeted by these global corporations. Furthermore, the impact of culture on leadership and on the people being managed is incredible. This concept has been acknowledged by the leaders themselves who operate with due consideration for cultural elements and orientations of their personnel and other stakeholders. Leadership behavior, for example, has been guided by dimensions in culture in specific location by which the leader, as well of his followers work. This behavior is likewise motivated by factors that induce distinct philosophies and procedures of the leaders in the organization. The cultural influence must therefore be evaluated in terms of the symbiotic relationship between leaders and followers in the workplace in order to come up with strategic decisions which would be applicable in global markets. B. Risks inherent in Global Organizations 1. Political Risks Due to the operations of global organizations in international markets, there is a need to study the political nature of the countries where these home organizations plan to operate. Political risk is defined as “a change or transformation in political factors which cause the outcomes and values to be different from expected and thereby affects the attainment of originally defined corporate goals” (PricewaterhouseCoopers 2009). As indicated by Gryphon (2002), business organizations in Western countries recognized that countries which have unstable political governments have greater financial potentials. As such, these organizations learn to use awareness in political risks and accept some limitations in managing them. Thus, global organizations even seek professional institutions to assist them in managing political risks due to the large expected returns that they project to generate despite the threats and costs of managing them. 2. Economic Risks Harvey (2009) defines a country’s economic risk as a nation’s developmental status in terms of factors affecting its economy and impacts transactions with international organizations. For example, global organizations must be aware that doing business in the specific countries exposes them to both economic and political risks. C. Cultural Challenges 1. Language One of the most important elements that need to be considered in examining culture is language. Language is verbal communication relaying messages through words. Industrialized nations have been considered home to various migrants of diverse descent from all over the world. So, most migrants have assimilated into the developed nations’ traditions and ways of life. Although conventional cultural values and beliefs have been preserved by the originating migrants, their children have completely adapted and adjusted to Western culture. Language is one of the factors in national culture that need to be closely examined by global organizations as a challenged that need to be addressed. So, if global organizations want to succeed in expanding operations into foreign markets, their managers must familiarize themselves with the local language to avoid confusion and miscommunication. Language barriers need to be addressed through an understanding of both verbal and nonverbal means to communicate messages which differ according to cultural orientation. However, the ways of communication using traditional verbal means are often insufficient to transcend cultural barriers. There is always this tendency to misinterpret messages due to cultural variances. 2. Values, Preferences, Practices Value, preferences and practices are the elements of shared behavior defined in culture. Therefore, global organizations must be aware of the host organization’s cultural values and preferences so that their strategies and decisions could be designed in ways that are consistent with the values and norms of the countries they operate in. Any contrasting policies or strategies to the nation’s cultural preferences would cause problems in implementation. A study conducted by Hofstede (1997) revealed that the presence of cultural dimensions which proffer behavior of people from diverse locations. Managers of global organizations must be aware of these cultural dimensions to enable them to determine their specific influence and effect to the business operations, in general. Hofstede actually distinguishes national culture by defining it as a “collective programming of the mind which distinguishes the members of one group or category of people from another” (Hofstede, 1997, p.5). The main thrust is that culture encompasses a particular nation or country and became the basis for his research on the dimensions of culture. 3. Diversities on home and host countries The impact of culture on global strategies is critical and relevant in terms of making host organizations aware and successful in applying strategic measures towards the achievement of organizational goals. Global organizations need to examine cultural orientations and diversity in applications of preferences in the foreign markets they plan to operate. Greenberg (2006) defines diversity in the workplace as “the variety of differences between people in an organization. Diversity encompasses race, gender, ethnic group, age, personality, cognitive style, tenure, organizational function, education, background and more” (Greenberg, 2006, par. 1). In another research, Green, Lopez, Wysocki & Kepner (2009) provided a definition of diversity as “acknowledging, understanding, accepting, valuing, and celebrating differences among people with respect to age, class, ethnicity, gender, physical and mental ability, race, sexual orientation, spiritual practice, and public assistance status” (Green, et.al. cited in Esty, et al., 1995, par. 4). Despite the obvious and well-known advantages of openly supporting a diverse workforce, there still remain several challenges on diversity for organizations, such as: (1) communication issues, (2) resistance for any changes or transformation, (3) carrying out of policies incorporating cultural diversity, and (4) managing diversity in the workplace (Greenberg, 2006). To address this challenge, global organizations must encourage open-communication, innovativeness and active participation from diverse cultural background of all personnel. Managing diversity in the workplace likewise requires education and training on cultural orientations for the foreign markets where the global organizations operate. Examples of Organizations Dealing with Challenges From the abovementioned cultural challenges, there were studies that revealed companies addressing them to cope in the global market. One global organization is Nestle whose marketing for a certain babies’ milk in Africa was seen as imposing and threatening the local market. Further, as revealed by Economics Notes (2010), “Nestlé was pushing the product on people when it was likely to cause harm to babies. A code of conduct on marketing the product to countries in Africa was being ignored according to a study in the British Medical Journal in 2003” (Economic Notes, 2010, par. 3). There were literatures which revealed that global organizations need to contend with the challenges of developing the skills of personnel in the foreign markets. Although these training are perceived to be beneficial to the people being trained, the costs of training including professional experts to do these tasks are tremendous. Gerschenberg (1987) averred that in a scenario experienced by a global organization in Kenya, the training efforts and costs were definitely carried out more by these organizations compared to local companies. However, the benefits, in the long run, for both the global organization and for the economy of the foreign country are greater and noteworthy. Another company which addressed cultural challenges was General Motors when it operated in Australia. The study conducted by Brash (1966) indicated that due to General Motor’s entry, more products were readily made available in Australia increasing competitive pressures from local manufacturers. The repercussions were decrease in the products’ prices and resentment from local producers. However, the positive result was manifested in improved quality and more effective services that were eventually made available by both foreign and local producers in the Australian economy. Finally, Lewis, et.al. (2006) revealed that Nokia creates an innovative culture by acknowledging that there is a need to apply diversity in products to be offered to various clients from different cultural orientations. By focusing on innovation and incorporating culture in their product design and services, Nokia is able to address challenges and competition in the global market (Lewis, et.al, 2006, 344). Conclusion Society is becoming more aware and demanding of the significance of being aware of the concepts in culture and corporate strategy in global organizations’ operations. Those firms who are perceived to operate under high standards of ethical and cultural values have the capacity to increase profits. Organizations that are committed to incorporate policies on diversity in culture have been proven to be successful in their endeavors. In this regard, the essay was successful in achieving in identifying the main cultural challenges that global organizations encounter when operating in foreign markets: language, values, preferences and practices, and diversity in the workplace. The ways to address them were likewise discussed including educating and training the managers and personnel directly involved in operating in foreign markets. Communication and eliminating language barriers are important factors to enhance understanding between cultures. Finally, with the increase of organizations going global, business schools must recognize the importance of incorporating ethical and cultural dimensions in their curriculum to prepare professionals in the field in the practical applications of these concepts to the needs of their organizations, especially of global companies. Also, by being aware of these cultural challenges, global organizations can prepare to address and overcome them, as required to ensure success in their endeavor. Reference List Brash, DT 1966. American Investment in Australian Industry. Cambridge, Mass., Harvard University Press. Culture n.d., [Online]. 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Greenberg, J 2006. Workplace Diversity: Benefits, Challenges and Solutions, [Online]. Available at: http://www.diversityworking.com/employerZone/diversityManagement/?id=9 [Accessed 24 November 2010]. Gryphon, P 2002. Can political risks be managed? [Online]. Available at: http://www.bloorresearch.com/analysis/3334/can-political-risks-be-managed.html [Accessed 24 November 2010]. Harvey, CR 2009. Definition of Country Economic Risk. Hypertextual Finance Glossary, [Online]. Available at: http://dictionary.babylon.com/Country_economic_risk [Accessed 24 November 2010]. Hofstede, G 1980. Cultures consequences: International differences in work-related values. Beverly Hills: Sage. Hofstede, G 1997. Cultures and Organizations: Software of the mind. New York: McGraw Hill. Lewis, PS, Goodman, SH, Fandt, PM & Michlitsch, JF 2006. Management: challenges for tomorrow’s leaders. Cengage Learning. Mazrui, AA 2001. “Globalization: Origins and Scope.” The University of Georgia Series on Globalization and Global Understanding, 1-8. PricewaterhouseCoopers 2009. How managing political risk helps improve business Performance, [Online]. Available at: http://www.pwc.com/gx/en/political-risk-consulting-services/index.jhtml [Accessed 21 November 2010]. Schein, EH 1997. Organizational Culture and Leadership, [Online]. Available at: http://www.tnellen.com/ted/tc/schein.html [Accessed 10 December 2010]. Venture Line. N.d. Corporate Strategy Definition, [Online]. Available at: http://www.ventureline.com/accounting-glossary/C/corporate-strategy-definition/ [Accessed 24 November 2010]. Read More