Cross-Cultural Management: Tesco and Tata - Case Study Example

Cross Cultural Management Introduction As globalisation takes shape in the way companies operate and implement their strategies, it becomes clear that investing in foreign markets is an essential strategy for multinational corporations. According to Held (2004), globalisation refers to the integration of economic, social and political systems across countries. As competition of businesses across the world intensifies, multinational corporations have developed various international entry strategies to enter new foreign markets. This enables organisations to obtain competitive advantage, increase their market share, take advantage of new marketing opportunities, and utilize economies of scale. Movement of investments from one country to another is influenced by several factors, including cultural differences between the host and the home country. Hofstede’s theory of cross cultural differences indicates that there are cultural distances that separate the home and host country and cause cross cultural difficulties in management. These distances include Power Distance, femininity vs. masculinity, uncertainty avoidance, and Individualism vs. Collectivism (Hofstede, 2001). In order to overcome cultural distances in these dimensions, it is necessary for organisations to choose entry modes that will minimise the cultural distance between the host and home country. Tesco has chosen to enter the international market of India through a joint venture with Tata. This joint venture will be on a 50-50 basis. The entry of Tesco supermarket into India follows the decision of Indian government to open up its supermarket industry to foreign companies in order to boost India’s economy (Harper, 2014). This makes Tesco the first foreign supermarket to enter India. With little information about the market, and no experience of any previous foreign supermarket in the market, the business will be faced with various issues of cross cultural differences between India and UK. Therefore, Tesco needs to develop a good cross cultural management strategy to manage issues of cultural differences. 2. Implications of cultural compatibility of partners on strategic implementation 2.1. Influence of culture on strategy Culture plays a significant role in implementation of strategy. Culture is defined by Shneider and Barsoux (2003) as the solution to problems if internal integration and external adaptation. In this case, Tesco uses culture as a mechanism of adapting to the Indian market and developing its own internal competencies to win the market. External adaptation relates to the way in which an organisation responds strategically to new challenges. Therefore, culture and strategy are linked. Culture influences strategy and strategy affects culture. There are two ways in which culture influences strategy: controlling model and adapting model. Controlling model includes quantitative and subjective information that organisations use to adapt to the external environment. Adapting model includes the qualitative and subjective information obtained from colleagues and personal sources. Culture affects the strategic implementation of an organisation by determining the relationship between the organisation and the external environment. In the case of Tesco, strategic implementation of the company is determined mainly by the cultural relationship between Tesco and Tata, as well as the relationship between Tesco and various economic agents in India. Culture also affects the interpersonal relationships among various employees within the company. For instance, employees from Tata may be required to work together after the joint venture deal. The cultural differences between the two sets of employees will influence the strategic implementation of the joint venture. National culture also influences strategic implementations of organisations. According to Porter (1990), various aspects of national culture influence the corporate level and international strategy of organisations. For instance, an organisation with high pressure to reduce costs and low pressure to adapt to local conditions of the host market will emphasize on economies of scale by centralizing the corporate office and standardizing its products. In case of a joint venture like that between Tesco and Tata, the two joint ventures should understand each other from a cultural perspective and learn share in the basis of trust and cooperation. Clear strategies also need to be specified. 2.2. Impact of cross cultural differences on the strategic implementation of Tesco Given the relationship between culture and strategy in both corporate and national level, it is now necessary to focus on how cultural differences can influence the strategic implementation of Tesco. Cultural compatibility and cultural differences are two related concepts. The joint venture between Tesco and Tata will definitely lead to the integration of values, mission, vision, strategies and operations. This integration will require members from the two organisations to come together and develop a strong relationship based on trust and corporation (Porter, 1990). This results in cultural diversity in the joint venture’s workplace. Therefore, Tesco needs to manage this issue of cultural diversity effectively in order to implement its strategies successfully. The national cultures of UK and India differ. This affects the strategic implementation of Tesco in India. Strategy implementation will be greatly affected because India and UK have great cultural differences in terms of national culture. For instance, Hosfstede’s cultural dimensions indicate great cultural variances between India and UK. The power distance indices of UK and India are 35 and 77 respectively. This shows that Indian organisations embrace an appreciation of hierarchy and a top-down structure (The Hofstede Centre, 2014). On the other hand, India has a bottom-up structure and integration of departments into equal power management. In the Indian organisation (Tata), employees solely depend on managers for direction while Tesco’s employees are given the chance to provide their views on decision making. Therefore, the strategic implementation of Tesco involves the contribution of employees. In Tata, the managers impose strategies on the employees. This cultural power distance therefore affects the strategic implementation of Tesco if it enters into joint venture with Tata. This is because Tata’s employees will not be free to give contributions in the strategic implementation and the managers from Tata may also not give Tesco’s employees to provide their opinions. As a result, conflicts may arise and strategic implementations may be hampered. In terms of individualism, India has a score of 48 while UK has a score of 89 (The Hofstede Centre, 2014). This shows that UK is highly individualistic while India is both a collectivist and individualistic. The collectivist aspect of India’s culture means that the contribution of an individual in Tata’s strategic implementation may be influenced by the opinions of others including family, neighbours, and other social networks. On the other hand, the decisions of Tesco’s members may not be influenced by such social networks. Therefore, the joint venture will bring together elements of collectivism and individualism. This affects the decisions of managers in relation to strategic implementation. In terms of masculinity, India and UK are considered a masculine society because they have masculinity scores of 56% and 66% respectively (The Hofstede Centre, 2014). Therefore, the two societies are driven by competition, success and achievement. Therefore, India and UK are compatible in this dimension. This makes it easier for Tesco to develop and implement strategies in its new venture with Tata. It is likely that the strategies are likely to concentrate in profitability and prosperity of the organisation rather than promoting quality of life in the community because both companies will follow masculine approaches in developing strategies, based on their masculinity scores. In terms of uncertainty avoidance scores, India scores 40 while UK scores 35; this shows that both countries have medium low preferences for uncertainty avoidance (The Hofstede Centre, 2014). Therefore, both societies accept imperfection and the belief that nothing is perfect. Therefore, Tesco and Tata both believe that things do not have to go as planned. Strategic implementation in both companies will therefore include considerations for risks. This shows that Tesco and Tata are compatible in terms of uncertainty avoidance. At the corporate level, culture also plays a crucial part in determining the strategic implementation of the company. As a result of the joint venture, the two companies will have to merge and integrate their existing values, interests, operations, vision and mission. Conceptual compatibility between Tata and Tesco in terms of organisational behaviour is low because the dimensions of organisational behaviours of the two companies differ. In this case, strategic implementation of Tesco will be affected because the company will have to drop or modify one or more of its items of organisational behaviour in order to enhance compatibility across the two cultures. Altering an item will change the construct of organisational behaviour after the two companies enter into partnership (Schneider & Barsoux, 2003). This results in development of a completely different strategic implementation that captures the organisational behaviours of both companies. The joint venture between Tesco and Tata will also lead to workforce diversity in the resulting venture. This is because the integration of the two companies will enhance shared responsibilities and cooperation as suggested by Porter (1990). As the companies integrate their operations, the composition of Tesco’s workforce will change rapidly. Workforce diversity is the mixture of people varying identities within a given social system (Seymen, 2006). Diversities in the workforce also emerge from the differing demographic backgrounds of employees. For instance, employees of Tata mainly come from India while the employees of Tesco come mainly from UK. This shows differences of Tesco’s and Tata’s employees’ in terms of race (Indians vs. Britons) and language. Implementing strategy requires an effective communication among various members of the organisation. However, the existence of cultural diversity in the workforce of the joint venture will make communication difficult (Fillis, 2002). For instance, language used to communicate is not compatible between the two companies; hence communicating strategy becomes difficult. Negotiation strategies for the two companies also differ due to the different cultural orientations of the company. This may result in conflicts within the organisation or cause failure in some of the strategies which need a lot of negotiations by the two companies. Despite the incompatibility of workforce due to diversity and cultural differences between Tata and Tesco, workforce diversity has important contributions in the success of strategic implementation of Tesco. For instance, Tesco may use employees from India to communicate with customers using their local language in order to maintain a strong customer relationship in India and meet the local needs of customers in the international market. Furthermore, workforce diversity may be used by the company to develop skills that can be used to understand the needs of clients and relate well with them. According to Seymen (2006), workforce that is made of culturally diverse individuals provides more effective solutions to business problems. Therefore, the cultural differences among Tesco’s and Tata’s employees will lead to enhanced strategic implementation in the long run. 3. Recommendations and Conclusion The first step for the two companies to enhance successful cross cultural management is to form an integration team which will integrate the different aspects of the two companies including mission, vision, objectives, strategies, operations, workforce composition and management functions. The outcome of this integration process should then be monitored and evaluated by the same integration team by using various measurement standards such as employee relationships, customer satisfaction, and financial performance. Employee relations will be established through observing them as they perform their tasks in teams. Customer satisfaction can be established through customer surveys, and financial performance can be measured using sales revenue and costs of operation. Another recommendation for Tesco and Tata is to form teams of diverse cultural compositions including managers and employees. These teams should then be given tasks to be performed by each team. The teams can then exchange ideas with each other and learn the cultural perspectives of different members of the team so that each member will understand and appreciate the interests and views of members from different cultural backgrounds (Holden, 2002). This reduces conflicts in workforce and enhances effectiveness of solutions to problems. It also strengthens the compatibility of the workforce. Cross cultural training can also be provided in order to enhance the workforce to learn different cultures and languages. This enhances better communication and cohesiveness within the workforce (Fillis, 2002). It also strengthens compatibility of the workforce and reduces uncertainties associated with the joint venture. Clearly, cultural compatibility is essential for the implementation of Tesco’s strategy after its planned joint venture deal with Tata. The cultural differences between the two companies in national and corporate level can pose a great danger to the implementation of strategy. However, with an effective cultural management the two companies will be able to integrate their objectives and strategies effectively. Hofstede’s cultural dimensions form an essential part of managing cultural differences, but the success of cross cultural management will depend on how the two companies will integrate various aspects of their businesses after the joint venture. Some recommendations to achieve that have been presented. They include formation of cross cultural teams and development of cross cultural training. References list Fillis, I., (2002), “Barriers to Internationalisation: An Investigation of the craft microenterprise,” European Journal of Marketing, vol. 36, no. 7, pp. 912-927. Harper, J., (2014), Tesco to invest in India, The Telegraph, Available at http://www.telegraph.co.uk/finance/personalfinance/expat-money/10740210/Tesco-to- invest-in-India.html, May 5, 2014. Held, D. (2004). A Globalizing World: culture, economics, politics, 2nd ed. London: Routledge. Hofstede, G., (2001), Cultures Consequences: comparing values, behaviors, institutions, and organizations across nations, 2nd ed. Thousand Oaks, CA: SAGE Publications. Holden, N., (2002), Cross-Cultural Management: A Knowledge Management Perspective, New Jersey: Prentice Hall. Porter, M., (1990), “The Competitive Advantage of Nations,” Harvard Business Review, March- April, 73-93. Seymen, O.A., (2006), “The cultural diversity phenomenon in organisations and different approaches for effective cultural diversity management: a literary review,” Cross Cultural Management: an International Journal, Vol. 13, No. 4, pp. 296-315 Schneider, S.C. & Barsoux, J., (2003), Managing Across Cultures, 2nd ed., Harlow: Pearson Education Limited. The Hofstede Centre, (2014), Cultural Tools: Country Comparison, Available at http://geert- hofstede.com/india.html, May 5, 2014. Read More