Cultural Challenges in Overseas Multinationals - Coursework Example

Cultural Challenges in Overseas Multinationals Introduction The liberalization of economies across the worldhas led to the emergence of companies that are global citizens, having operational units in different countries across the globe. Such multinationals are operating in an environment that is unique and different from the domestic business environment, a situation that presents a number of challenges (Jackson, Low & Zhao, 2013). The success in a new overseas market is influenced by a number of factors which the management must attempt to address in the context in they arise. From the United States to German, japan to Brazil and Netherlands to South Africa, cultures are distinct and this influence the way people relate with each other. Employees in china behave in a way that is influenced by the inherent culture within the country and the same is true for managers and country representatives working for a company like Microsoft in Bahamas. To succeed, a company must identify the cultural issues that may affect the normal operations of the business unit and develop country-based solutions within the context that they emerged. International human resource management is a branch of HRM that attempts to address the emerging people management issues in a different environment such as overseas market. The most common challenge faced by companies operating in such an environment is cultural difference, an issue that must be considered for coherence and understanding to prevail. Each country and region has a culture that affects the behavior of employee and the management approaches adopted towards addressing their issues. Cultural differences are one of the common challenges faced by human resource managers within an overseas context. The paper shall address the various cultural based issues that arise in international human resource management and how they can be tackled to ensure the smooth running of the multinational. Multinationals in foreign markets The abolition of trade restrictions by several countries across the globe has led to the increase in companies that operate on an international scale beyond the confines of the domestic market. Such organizations have high cost investments in both the domestic and global markets as a way of increasing the level of market control and productivity. The concept of internationalization has emerged due to the high competition within the domestic market which affects the success of such companies, forcing them to seek new markets in other countries. Companies such as Apple, Microsoft, Samsung, and Total and British petroleum operate in different countries across the world including Asia, Africa, South America and major European economies (Chitakornkijsil, 2010). Though internationalization increases the level of sales and international presence of such companies, they have been faced with different cultural based challenges. A country like South Korea has a completely different set of cultural behaviors as compared to western countries like the United States and developing economies in Africa and Asia (Fatima, 2013). However, Samsung, a South Korean based company has entered markets in most of these regions and it continues to expand into new areas as a way of improving its dominance and expansion beyond the domestic market. The entry of Apple into China forces the company to engage a majority of the locals in various work engagements and assignments that may arise within Apple china. Though such a move will endear the company to the locals and improve its overall rating and acceptance, the management of the people is a serious challenge due to cultural differences. China and the United States are two different economies with varying values, practices and approach to emerging situations at the workplace. While the American labor market is liberal with a high presence of labor organizations and worker unions, the Chinese labor situation is based on the Mao ideologies that still exist in the country. Such cultural differences are also common in other countries across the world and influence the performance of the organizations as people management is an integral role of every organization. Culture and people management in multinationals Culture is the societal forces that have implications in the values, beliefs and even the actions of employees in an organization especially those working for multinational corporations. Multinationals from other countries of the world have distinct cultural values, practices and approach to human resource issues that are not identifiable with those of the oversea market in which they operate (Fatima, 2013). In the process of ensuring coherence and a common organizational culture, multinationals face multiple challenges within a new oversea market context, which must adequately be addressed in order to succeed. Such challenge may range from promotion issues, impact of culture on communication, training and promotion opportunities that may arise within the organization. Most companies import expatriates from their home countries to manage high positions within the organization and to introduce the home culture into the subsidiary that is opened. This acts as the source of cultural conflicts as the expatriate will be faced with issues associated with the inability to work together with people from a completely different culture (Ghost & Chaudhuri, 2009). Geert Hofstede developed a framework that can be adopted in the process of evaluating how cultural differences affect human resources management in multinationals operating in overseas markets. In his research of IBM workers in over 53 countries across the world, Hofstede noted the impact of culture on the management of human resources and developed a five dimension that can be adopted in determining how cultural differences will impact on the success of the multinational (Aguzzoli & Geary, 2014). The first dimension is the power distance, which describes the inequality that exists within nations and how it affects the attitude of its people and their perception of different situations. In his analysis, Hofstede compared Germany and the United States to evaluate how multinationals from the two countries performed on each other’s market and how culture affected the process of human resource management (Chitakornkijsil, 2010). Germany and the United States have a small power distance, which limits the cultural differences and challenges that multinationals operating in these countries face as far as people management is concerned. However, multinationals from the United States are likely to face significant cultural challenges during the management of people if the multinational is based in Russia, china or even France. China and Russia have autocratic management approach that is borrowed from the national leadership structure and inbuilt in the Russians and the Chinese unlike in most American companies. Multinationals from china and Russia are likely to face a number of challenges as the liberal American culture may affect the operation of the companies and reduce the success rates. American based multinational such as Apple has succeeded in china by adopting an approach, which encourages the localization of the company, and allowing the locals to take part in all aspects of company’s management (Aguzzoli & Geary, 2014). Hofstede also identified how individualism affects the behavior of employees in different countries and how such approaches may influence the performance of multinationals in different countries. Individualism describes whether people in a given country prefer to act as a group or an individual during the process of achieving different goals and assignments that the management has put forward. Multinationals from countries where people tend to be more individualistic may face significant challenges operating in a less individualistic environment as the approach adopted by the locals differ (Story et al. 2014). For example, the United States and other western countries have high individualism rating as compared to most countries in Asia and the Middle East. People in Asia find it easy to work in groups and to be assigned responsibilities based on teams formed within the organization as opposed to working as an individual. The United States on the other hand has a high individualism rating with its people preferring to work as individuals and meeting individual goals as opposed to group work. Such a situation presents massive people management challenges for companies such as Microsoft that opens a branch in Singapore or even Malaysia. While the company prefers to assign individual responsibility borrowing from its culture in the United States, the approach may be unpopular among the Malaysian, thus affecting the success of the organization. Multinationals have thus faced challenges associated with collective action as compared to strict individualism which demands for a change in the people management model and job assignment (Chitakornkijsil, 2010). The prevalence of masculine and feminine values also differs from country to country and this is likely to affect the people management approach that a multinational may be forced to adopt. Most Asian and Middle East countries practice masculine values, which are assertive, performance oriented and highly competitive as compared to the feminine values, which are guided by the desire to improve quality of life, develop open and close relationship with employees among others (Zheng, 2010). Most multinationals operating in japan has been faced with a high masculine environment where the people expect high pressure and assertiveness in accomplishing their goals. A Netherlands based multinationals will be faced with masculine and feminine based people management challenges when operating in japan because the country is highly feminine (Fang, 2010). Assignment of roles to women in most of the Asian countries may face massive resistance as compared to other countries with a more feminine index. Such issues have forced most multinationals from feminine cultures like Netherlands and the United States to recall their expatriates posted to countries like japan and Saudi Arabia as the level of inheritance and disobedience. The understanding and the adoption of effective cross-cultural human resource management approaches enables an organization to increase the development of global mind-set among its employees (Pauleen, 2007). Having a global mind-set allows employees to think and act with the international market and dynamics in mind thus leading to the development of universally accepted goods and services. Global mind-set begins with the human resource managers in an organisation thus leading to the ability of the business to develop policies that can be implemented across organizations, cross cultural and functional boundaries. Developing this positive tool of growth in global business can be enhanced by the adoption of international recruitment and selection processes, which results into the hiring of more qualified and positive employees. Learning programs that are aimed at improving the understanding of cross cultural business environments also helps in the development of global mind-sets (Zheng, 2010). In most organizations, cultural differences are considered after mergers and acquisition has been completed, thus increasing the failure index of such activities. The human resource management unit has a significant role in developing cultural integration and cohesion not just within management levels but also among the employees (Zheng, 2010). There is need for employee understanding and respect which arises if cultural relativism is improved through integration, learning and training processes (Fang, 2010). The level of uncertainty avoidance in countries based on Hofstede analysis also differs and this affects the process of people management for multinationals operating in overseas market. Uncertainty avoidance is the level of preference for structure or unstructured job environments, which affects the way information is communicated through the organization (Corey, Folk & Payne, 2014). Countries that have well-structured systems have well-organized systems which are faced with few chaotic management situations that are likely to affect the performance and success of a multinational in an overseas market. In structured countries, rules are developed which define how employees interact with one another, their bosses and how information is communicated vertically and horizontally. More conservative countries such as japan, Russia and France are high on the uncertainty avoidance level as compared to the liberal states such as Hong Kong and the United States. Japan and France are highly resistant to change and believe in the traditional approaches of doing things, a situation that may present a number of challenges of various multinationals that operating in these countries. Organizational change is the basis of continuity in every organization and must be bolstered in order for such a company to maintain its competitiveness and success (Horwitz, 2011). Companies from liberal markets with low uncertainty avoidance index such as the United States face multiple people management challenges in countries such as France and Russia. The success of Samsung and Panasonic in the United States and other less rigid economies across the world is attributable to the few challenges that the companies have faced in these countries. Low score on the uncertainty avoidance index increase the level of innovation and allow employees to freely try new ideas and ways of doing things (Fang, 2010). Differences in long-term orientation between countries also contribute to the level of commitment of employees to different initiatives introduced by the multinationals (Maher, 2009). Commitment to long term goals according to Hofstede analysis also differ in different countries and influence the people management approaches that can be adopted. Countries with high index of long-term orientation develop extensive strategic plans and work towards achieving such plans with the support of their employees. Countries such as china and Hong Kong have high term orientation score, which indicate the level of patience among the people as compared to other countries such as Russia, the United States and France (Corey, Folk & Payne, 2014). Companies in the United States and France adopt short-term goals and work towards achieving them, an approach that may be unfamiliar in an overseas environment where the country has a high score towards long term orientation. Communication in cross-cultural environment The language, channels, tools and approaches adopted during communication differ from one culture to another and this has a significant implication on the success of a multinational. Though language barrier is the common challenge that multinationals moving into a new work environment may expect to face, communication is multifaceted and have significant consequence on the way the people relate to management issues from the organization (Dixon, Day, & Brewster, 2014). Miscommunication is one of the common sources of challenges faced by the multinationals operating in a new overseas environment and this has a massive impact on the success and performance of an organization. Miscommunication arises from different scenario within a multinational organization and must be addressed in order to improve people management processes within the company. Body language, gesture and nonverbal cues differ from one culture to another and this affects the level of communication for multinational opening operations in a new business environment (Corey, Folk & Payne, 2014). Gestures that are used by the management and the employees in a new cultural environment may have different meaning and thus impact on the accuracy of the information passed on either way (Pauleen, 2007). Lack of understanding between the management and the people due to communication barrier is likely to have an implication on the management of the organization and increase the level of failure in organizations from different countries (Horwitz, 2012). The context of communication within a country has also been attributed to people management problems that are faced by multinationals operating in overseas markets. While some countries are low context communicators, others have been categorized as high context communication countries, a fact that contribute to cross cultural communication challenges (Beer, 2012). In high context communication cultures, the level of interdependence with each other is high and this enable information within organizations in such states to be shared highly. However, people in low context countries have level of individualism and this affects their communication and interaction processes due to the high level of fragmentation and alienation. The two contexts adopt different communication models in efforts aimed at increasing the success of the communication processes (Dixon, Day, & Brewster, 2014). Communication plays an integral role in the success of any organization in the domestic and global market. The growth and emergence of international businesses has resulted into the fusion of different language cultures that significantly influences the success of international human resource management practices (Beer, 2012). Mergers of companies located within different cultural settings create significant fusion of two culturally different organizations and this increases the challenges of language barrier. Constant communication and the transfer of information within an organizational hierarchy influence the success of different policies adopted by the organization. This makes effective communication an essential of part of human resource management, which makes it an important concern for researchers in international business, and human resource management (Rhein, 2013). The development of international human resource management practices must consider the impacts of communication and language of use within cross-cultural setting. Samsung develop policies that are implemented by its subsidiaries in different parts of the world. As a company with its head office in South Korea, the original language of these policies is Korean, but is translated to different languages before being passed to different heads of the subsidiaries within the global arena. This approach of multi-lingual communication of policies by multinationals as adopted by Samsung was borrowed from Colgate Palmolive, a household goods manufacturer (Haghirian, 2012). After developing a framework for employee behaviour and conduct for all its subsidiaries within the global market, Colgate Palmolive translated the documents to over 10 languages and this gave the company a positive international image and rating. As a foreign entity struggling to set its base in a foreign market with different cultural practices, the need to build trust and create a positive working relation is essential. This can only be achieved through the understanding of the cultural differences that exist and these affect employee behaviour and relationship. Trust and understanding can be achieved affectively using common communication channels, thus eliminating any incidences of misunderstanding among employees (Zayani, 2011). Conclusion The operation of multinationals in a cross-cultural oversea environment is affected by different factors, which influence the chances of success and integration into the new environment. Apart from the legal and political challenges, culture is of great concern to international human resource managers who are tasked with ensuring the success of multinationals in different cultural environments. Geert Hofstede conducted a cultural evaluation of the operation of IBM in over 50 countries across the world and demonstrated that culture affects the processes of human resource management. 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