Cross Culture Management at Airbus Consortium - Case Study Example

Student Name: Tutor: Title: Cross culture management Course: Cross culture management Introduction Cross-border knowledge transfer is important due to increased international business across national and cultural boundaries. Airbus consortium is one of the companies that have demonstrated sophisticated integration of manufacturing functions that has enabled design and production to be a function of components from different locations in Europe, Asia, and North America. Airbus SAS formation has shown the challenge of knowledge transfer without adequate communication among parties involved. Thorough investigations have to be done to establish the differences and similarities in the cultural practices and values of different settings prior to initiating transfer of knowledge (Kumar, 2002). The GLOBE project findings provide a clear guide on how to approach the challenge of knowledge transfer in case on international business in case of mergers, acquisitions, direct investments, and takeovers. Cultural dimensions advanced by GLOBE include power distance, institutional collectivism, in-group collectivism, uncertainty avoidance, assertiveness, gender egalitarianism, future orientation, performance orientation, and human orientation. These aspects of culture score differently in different culture settings (Mead & Andrews, 2009). The Airbus consortium provides a good case of application GLOBE project findings in cross-border business. This study explores the challenge that Airbus SAS had to go through due to engagement in cross-border manufacturing while at comparing with the findings of GLOBE project and how they can be applied in current world. Background to Airbus consortium case Airbus consortium had challenges relating to cross-cultural aspects that affected is Globe projects. The consortium has its subsidiaries in several countries. The company started as a European consortium in 1970 with the objective of gaining a share percentage of the aircraft construction market which was hitherto dominated by the United States. It started as a consortium of German and French companies and was later joined by British and Spanish companies. The company has some aircrafts that have been very successful. However, the company is faced with challenges since the aircraft parts are developed in different countries with different cultures. In order to develop sophisticated aircrafts, the company required reorganization to reduce cost of production, improve coordination, and reduce the time between creation of the planes and there introduction into the market. The French, British, Spanish, and German partners, who had previously operated independently, merged their assets of plane-making in the year 2001 to come up with Airbus SAS. The cross-cultural differences that exist among the partners were the main cause of delay in aircraft production and delay in launching (Hofstede, 1998). The objectives of the consortium to overcome national divides, share development costs, collaborate in the interests of the wider market share, and coming to an agreement on a common set of measurement and common language (Hofstede, 2006). Achieving transfer of knowledge among people from different nationalities is a challenging task. There were many problems in bringing A380 to the market. There was a delay of two years in launching the plane and this resulted into loss of profits of 2billion pounds. This forced the company to make drastic cuts in the workforce size, outsource many aircraft parts, and to close parts. Economic patriotism was a big challenge. Economic patriotism was a major reason that resulted into the problems surrounding Airbus production of aircrafts. It is economic nationalism in which case governments interfere with private transactions among economic actors through discriminating against foreigners in the name of national interest (Haghirian, 2010). The job cuts of about ten thousand people had to be shared between Germany, Spain, UK, and France. The workforce at the aircraft manufacturer was traditionally geographically distributed in relation to the ownership stakes of each country. Achieving congruence is not easy owing to differences in culture and values possessed by different nationalities. Economic motives of each country include employment preservation or attraction of economic activity to a particular area. Strategic motives comprised of attempts to get hold of rents abroad in monopolistic markets or national security. This patriotic approach is ineffective owing to conflicts with economic efficiency (Smith, 2006). Nevertheless, its endurance is derived from protection of interest of local lobbies. The damage attributed to economic nationalism includes poor corporate governance and inefficiency. A deeper understanding of the Airbus SAS case can be gained by the exploring the work of GLOBE project. Global Leadership and Organizational Behavior Effectiveness (GLOBE) is a project research compromising of sixty two societies from around the world. Above one hundred and sixty management scholars and social scientists representing key regions of the world took part in the programmatic series of cross-cultural leadership studies (De Mooij, 2010). The findings by this GLOBE project provide deep insight into perceptions of cultural values and practices across many countries. Practices were measured using survey items examining “what are” or “what is” institutional practices and common behaviors in society. They outlined how things were currently done in a certain culture (Brewer & Venik, 2010). The values were presented in response to the same item in the questionnaire in the form of judgment of “what should be done”. Culture is defined by GLOBE as values, motives, values, identities, and meanings or interpretations of significant events that are occasioned by common experiences of members of collectives and are subsequently transmitted across age generations (Mead & Andrews, 2009). GLOBE Dimensions According to GLOBE, on each dimension a society is positioned in regard to its cultural values (“Should Be”-scores) and its cultural practices (“As Is”-scores). Cultural practices data indicate something concerning the prevailing perceptions of each culture. The cultural values harness the feelings of the respondents concerning their cultural perceptions and the direction the respondents desire their culture to advance to in future (Hofstede & McCrae, 2004). The “Should Be” scores can be applied in estimating the cultural visions and the desire for change in a culture. When two cultures possess different cultural practices (As Is), but have similar values (Should be), the latter agreement can make transfer of knowledge easier than the other way round. Focusing on similarities in cultural values is a crucial as a managerial strategy of minimizing the possibility of negative consequences of the “As Is” differences for knowledge transfer success (Minkov & Blagoev, 2012). The problems witnessed in the Airbus SAS case could be resolved if the common or similar values between cultures of different nations were identified and consequently merged. GLOBE project came up with nine cultural dimensions that need to be considered during transfer of knowledge across different cultures. These dimensions include power distance, institutional collectivism, in-group collectivism, uncertainty avoidance, assertiveness, gender egalitarianism, future orientation, performance orientation, and human orientation (Hofstede, Hofstede & Minkov, 2010). Power distance is the level to which people can be separated by prestige, power, and authority. Institutional collectivism is the level to which people are encouraged by institutions to be integrated into broader entities of cooperation and harmony as important principles at the expanse of individual freedom and autonomy. In-group collectivism is the extent to which individuals in a culture feel loyal and take pride in their organizations, employers, and families. Future orientation is the extent to which individuals in a culture are willing to postpone immediate gratification for future use or benefit (Gupta & Govindarajan, 2000). Uncertainty avoidance is the extent at which people in a culture seek consistency, structure, and orderliness. Assertiveness is the level at which people in a particular culture are aggressive, confrontational, and assertive. Gender egalitarianism is the level to which individuals in certain culture support gender equality. Human orientation is the extent to which people are altruistic, generous, fair, kind, and caring towards others. Finally, performance orientation is the level at which people encourage and reward people for their performance. All these dimensions of culture advanced by GLOBE project have to be considered when thinking about mergers, acquisitions, and generally extending business across borders. Different culture show or depicts different dimensions of culture as proposed by GLOBE (Javidan et al, 2005). The points of integration or common grounds have to be discovered before thinking about knowledge transfer or synchronization of functions. Airbus Company had to understand these dimensions of culture before embarking on merging its partners to form one single company. One main cause of delay in the production of the A380 was its design of the aircraft complex wiring system. Wiring is very critical and planes release was delayed up to years following problems in wiring. A wiring system includes one thousand two hundred functions for controlling the plane, which takes 40,000 connectors and 98,000 wires. The digital design system possesses five hundred thousand models, and they have to be kept in sync by mismatched computer design systems from different countries. Developing the systems in different cultures was the biggest challenge faced by Airbus SAS consortium. Fuselages were built in Germany, nose sections in France, tails in Spain, and wings in Great Britain. Airbus’ A380 aircraft sections would be transported from Hamburg (Germany), Broughton (UK), St. Nazaire (France), and Puerto Real (Spain) for final assembling in Toulouse (France). Engineers in Spain and Germany used the much older V4 version of the CAD program in designing the wiring while engineers in England and France used the newer V5 version. Challenges at airbus consortium Regardless of the compatibility of the two versions, data was reported to be lost during the transfer of files from one system to another. The French were very familiar with the software while Germans possessed little experience concerning it. It this brought about many complications when it came to transfer of knowledge from one country to another (Maseland & van Hoorn, 2010). Owing to compatibility issues concerning wiring design software, problems came up during the incorporation of wiring changes in Germany in the fuselage sections. This was termed as failure of execution by a German analyst. Airbus has its head office in Toulouse, France and operates from above 160 international locations, comprising of sixteen main manufacturing and development sites in Germany, Spain, the UK, and France and other three wholly owned subsidiaries located in China (Browaeys & Price, 2011). This is a good case to be used by the GLOBE project in the understanding of cultural practices and values. The study of different member countries forming the Airbus SAS had to be thoroughly analyzed and pointed of integration arrived at in order to avoid confusion in the development of different parts of the aircrafts. The wiring problems with the A380 were a representation of the manner in which the Airbus Company was organized in spite of the merger of its national components in 2001. The different cultures existed as independent and there was no effort whatsoever to bring together similarity and values possessed by the different cultures. The French, Germans, Spaniards, and Englishmen conducted their business as before without considering that they were part of Airbus SAS. Some values had to be replicated across the board so that there is integration in the manufacturing of the aircraft parts. Following huge increase in cross-border business, the need for effective and efficient cross-border knowledge transfer is urgently needed than ever and will persist to escalate (Holden, 2002). This shows that comprehending international knowledge transfer is increasingly crucial to the success of multinational companies. Its interpretation is also critical during transfer of any work-related operations across cultural and national boundaries. The findings of GLOBE projects are important in cross-border transfer of knowledge. Airbus benefited from a unique workforce that was drawn from eighty nationalities and spoke over twenty different languages (Hofstede, 2010). This aspect presented the lifeblood and an invaluable competitive advantage for Airbus. Any kind of knowledge transfer requires high-quality, substantial communication between the parties involved (Hofstede, 2001). In cross border cases, it is challenging but important to achieve. Breakthrough After much struggle Airbus was able to achieve synchronization and compatibility among its different functions in order to operate efficiently and smoothly. An extract from ‘Airbus Way’ shows the new working environment that Airbus Company adopted after successful interfere of knowledge (Gerhart, 2008). Initially the company had struggled with incompatibility and unnecessary delay that led to the loss of billions of shillings in profits as airlines cancelled their orders for aircrafts. The company expanded its subsidiaries to China, Japan, and North America. Training centers were developed to enhance transfer of knowledge and integration of the functions of the company. The Airbus organization has been designed to fully benefit from the enormous mix of experience, creativity, and expertise available among its customers, employees, industrial suppliers, and partners. Airbus has come up with multicultural team working such as the Airbus centers of excellence which is a network of multicultural teams that encompass all the skills required to complete aircraft sections and are located across major Airbus’ production and development sites in North America and Europe. This kind of transnational approach encourages flexibility and enhances continuous improvement throughout the Airbus family in every element of production and design. Airbus understand it is people who sell, build, design, and support aircraft. There is core human talent, hard work, and vision which propel the company to the top of the industry. What began as simply as joining of forces in Europe has transformed into a global network (Early, 2006). Over fifty five thousand people have been employed from eighty different nationalities at Airbus. The cultural diversity is the core of Airbus’ success. Taking into account cultural dimensions helped Airbus to synchronize its production units. Conclusion The GLOBE project findings provide an insight into the cultural differences that affect successful knowledge transfer across national borders. The project involved 160 management scholars and social scientists around the world. The research project was carried out in sixty societies across the globe. The findings provided dimensions within which cultural practices and values can be categorized. Understanding the differences and similarities among these values provided a course through which knowledge transfer could be initiated. Managers of international organization have the responsibility of understanding the cultural setting within they work from and impart the values to the rest of staff members. Mergers, acquisitions, takeovers can be successful if the underlying cultural dimensions within a particular setting are understood and carefully blended in the existing system of operation. Successful knowledge transfer has taken place where there was effective and adequate communication among different functions prior to merging, acquisition, or takeover. Airbus consortium provides a deeper insight into what is the procedure for successful knowledge transfer to take place. Airbus consortium partners merged to form Airbus SAS. The problem associated with having different components developed from different locations with different cultures proved to be very difficult for the company. The challenge of lack of synchronization led to delay in production of aircrafts and hence of loss of money in billions due to cancellation of orders. Training centers had to be developed and enough research done to remove the setbacks in production. After common grounds were established, Airbus SAS was able to produce its aircrafts without any problem despite the fact that the production units were located in different parts in the world. Understanding GLOBE project cultural dimensions give managers a take off point in case of engaging in cross-border transactions. Points of convergence have to be established between different cultures before knowledge transfer is considered. References Javidan, M., Stahl G. K., Brodbeck, F. & Wilderom, C. P.M 2005, Cross-border transfer of knowledge: Cultural lessons from Project GLOBE, Academy of Management Executive, 19 (2). Minkov, M. & Blagoev, V 2012, What do Globe’s cultural dimensions reflect? An empirical perspective, Asia Pacific Business Review, 18 (1): 27-43 Browaeys, M-J & Price, R. 2011, Understanding cross-cultural management. 2nd ed, Harlow: Pearson. Hofstede, G., Hofstede, G. 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