Successful Entry of Steelcase USA in Malaysia due to Cross-Cultural Understanding - Case Study Example

The Malaysian Family-Run Business Culture; An Opportunity For Steelcase Globally, ownership of a familyin business is the most common form of business organization. For instance, in US, above 80% of all firms are controlled business or family-owned. Moreover, among the S and P 500 (Standard and Poor 500), families are present in one third of the companies. The scenario in the Far East Asian region also suggests nothing contrary. Malaysia holds the third place after Thailand and Indonesia in terms of high concentration of family control which lately increased from 57.7% to 67.2% lately. (Claessens 2000) Family businesses have now become an element of significance for the corporate economy. The reason to this may be the fact they have prevailed since long, alongside their track record of high performance. This success by family-owned firms is categorically acknowledged in literature and other studies by scholars and practitioners. To name a few, Mitsubishi, Wal-Mart and Ikea, have been one of the most competitively superior corporations in the recent decades; all owned and founded by families. (Ibrahim & Samad, 2010) Similarly in the Asian region, family owned corporations have shown high performance in Australia, Singapore, Hong Kong and Taiwan. For Malaysia, Quek Leng, Lim Goh Tong and Robert Kuok (of Kuok Brothers) are synonymous with corporate dominance in the industry (Ibrahim & Samad, 2010). Steelcase, in 2008, stood on fiscal year revenue of $3.5 billion. The corporation holds 35 manufacturing facilities present globally including the one in Malaysia which serves the Asia Pacific region. This facility in the Puchong, Malaysia is one of the three major factories. The other two are in Japan and China. But for establishing such a source of sound business, Steelcase had to dig deep down as to how the opportunity could be tapped, thus resulting in what today is 35% of the total revenue that the company generates. In essence, prior to exploring the markets in Malaysia, it was vital to have clear understanding of the family-run corporate culture that rules the scenario. The Korean Reference Confucianism is the major traditional value and philosophy followed by the Korean people and is the major influence on Korean society, family relations and work culture. The concepts taught by Confucius focus on teaching of moral values that stress on respect for old, loyalty to superiors and family, filial pity and developing harmonious interpersonal relationships. In order to create harmony, Confucius has created a hierarchical society with five different form of relationships: parent and child, ruler and subject, husband and wife, elder and younger and friend with friend This influence has lead to a Paternalistic leadership and favoritism in Korean homes and organizations. Under Paternalistic leadership, a family like environment is formed in organizations where employees are treated like family members, with the superior playing the role of a parent and the senior staff play the role of an elder brother. The subordinates on the other hand, are expected to show absolute loyalty and obedience in return for which they get protection from top management, They are not only given financial assistance during hard times like funerals but also bonuses on special occasions like New-year (Kee 9-20). The decision making, however, is only taken at the top and the lower level employees have to accept all commands and cannot question the leadership. Confucianism also leads to favoritism and to family control in Korean corporate management. The top management positions are dominated by family members .Family ties with important people lead to better career development (Kee 9-20). South Korean business is dominated by a collection of industrial groups who’s known as chaebols. In addition to strong family control and management and paternalistic leadership these ‘chaebols’ have close business-government relations which lead to a form of a crony Capitalism. The government-favored chaebol had strong relations with the government and received special favors and focused more on expansion rather than profitability. In some cases chaebol grew not because they were profitable but merely because they could borrow money and use the government as a cushion. There are roughly 50 chaebols in Korea of varying strength and size. Over 60 percent of South Koreas gross national product (GNP) comes from the largest five of these: Samsung, Hyundai, the LG Group (formally the Lucky-Goldstar Group), Daewoo, and Sunkyong. Devising the Strategy; Cultural Research, Measures and Execution a) Vitality of Introductions and Greetings A firm handshake with the Malaysian counterpart while meeting them is the most vital opening for the relationship between the parties. However, shaking hands with businesswoman here are done only when she sends a positive nod or gesture towards the action. Being prepared with a gift while meeting and greeting a royal personage is fundamental. Apart from this, acts like taking a bow with hands pressed before the chest and letting an elite member among the counterparts leave the room first are a few common actions taken in order to keep things smooth. Emphasis on these small details are primarily because of Malaysia fostering a high-context culture where greater attention is inclined towards facial expression, body language, tone of the voice and eye-contact. Since business in Malaysia is taken personally and is based on trust, building relationships, rather than initially negotiating on information and facts, is preferred (Brantley & Miller 193-198). Formality is highly maintained till a significant amount of time before the parties decide to open doors to negotiation in terms of real business. For this, local agents are kept as an intermediate for the purpose of cushion and absorption of any negation or difference in opinion among the parties which may be generated from the exchange of information (Brantley & Miller 193-198). Once the parties feel the need of lifting the barriers, a gesture of informality prevails making it an easy going scenario where negotiation and decision making would be straightforward. b) Status Orientation The statistic given by the Government of Malaysia for the distribution of equity holdings in terms of race observed that Malay ownership rose from 2.5% to above 17% from 1970 to 1985. Whereas the foreign share dropped to around 25% from the 60%, the Chinese corporate of the country gained substantially by reaching a figure above 56% as compared to the previous of just ahead 34% (McVey 112). Considering this increase in Chinese family holding, there lied a vast array for Steelcase to target this elite audience which accounts for more than half of the market size in terms of number of customers. The diversity of background in terms of dialect and social groups is so wide that their road to the current economic power can’t be judged or enrooted. Several major characteristics are generally shared by these prominent business leaders of the Chinese race. Just to mention, few are as follows (McVey 148): ‘New money’ is what represents most of them as their fortunes started building up after the advent of NEP (new economic policy) The nature of business interests are driven by diversity and have made space internationally. A sense of unity and association prevails between them and the Malay allies and patrons, which paves way for them to have access to foreign capital, joint ventures and protection in various senses for that matter. Regarding the political and social involvement in their community affairs, Chinese associations and chamber of commerce have enjoyed the services of those who were China-born or China-educated. Contrary to this, English-educated leaders are strictly active in financial patronage of their own clan or dialect group thus not contributing much to the overall Chinese community directly (McVey 166). c) Avoiding Ethnocentrism Being a country of immigrants, it is critically important for the US to promote diversity of cultures and appreciate difference in heritages (Dong 245). Lacking acceptance regarding cultures leads to stereotyping towards other ethnic groups and gives birth to negative behaviors and prejudice. Psychologist Donald Campbell and his associates (Levine, Campbell 95-105) observe that all people usually have the following tendencies: Define own culture as correct or natural and vice versa Terming customs in their group as valid and positive for all others, and vice versa Favoring in-group activities Feeling pride of the group associated with self Alienation towards the out-group And there exists a consumer’s perspective also which Steelcase kept in sight. A study (Shimp, Sharma, Shin 1994) states the consumer ethnocentrism characteristics as follows: Concern and love for own culture and country and being fearful for losing control over own economic interests results from Consumer Ethnocentrism i.e. cases like imports’ negative impact on the country’s economy Attitude towards buying of foreign products being against the national morals, apart from being an economic issue In this context, aspects of culture, traditions and others festivities were to be learned thoroughly. The drill intensifies knowing the target audience is the elite of the country that is holding major ownership of what Steelcase plans to be a part of as business opportunity. d) Integration into Malaysian Culture Malaysia enjoys a vastness in cultural dimensions. Currently the country is an amalgamation of Bumiputras, Chinese, Indians, Filipinos, Indonesians and a minute chunk of indigenous groups. A staggering 61% of all population is of Muslims, followed by a near 20% Buddhists with Christians, Indians and Taoism followers figured under 30% all in all. (Cavendish 185) The country observes a number holidays. Mostly the holy days of religious and ethnic groups are kept public holidays. ‘Hari Mardeka’, the independence day of Malaysia is the widespread. Events in the Islamic calendar are all holidays whereas the Chinese New Year is also of significant importance. Despite of being a minority, the Malaysian Chinese hold stronger positions in corporate sector. As compared to the Malay, Chinese are strictly punctual. Gifting has its own culture for the Chinese. To avoid looking acquisitive, Chinese tend to decline an offering or a gift at least three times. While offering flowers as a token of appreciation, always make it an even number as odd number is thought of as bad luck. The most common gifting event is the Chinese New Year though (King 56). Conclusion Similar to the cultural mix in Malaysia, a hybrid customer relationship management strategy was required to get through the Malaysian corporate families. The strategy plan always had the Chinese businesspeople in the driving seat as they were the dominant target audience in the pool. CRM backed by a direct sales tactics was the key here to capture the majority customers (Pride 211-212). The heart of this business strategy of infiltrating into the family-controlled corporations was the effort and planning done for research of as to how to identify the opportunity. From general cultural following to the traditions specifically followed by the largest target audience segment of Chinese businesspeople, the idea was the categorize core and execute according to the forces and motivators that drive the category (Pride 211-212). References Clarice Pennebaker Brantley, Michele Goulet Miller .Effective Communication for Colleges. 11th ed. Mason: South-Western College Pub, 2011. Print. Haslindar Ibrahim, Fazilah Abdul Samad. "Family business in emerging markets: The case of Malaysia." African Journal of Business Management 4.13 (2010): 2586-2595. Print. Marshall Cavendish. World and Its Peoples: Eastern and Southern Asia, Volume 9. Singapore: Marshall Cavendish Corporation, 2007. Print. Qingwen Dong. Self, Identity, Media Use and Socialization:. Washington: Washington State University, 1995. Print. Robert A. LeVine, Donald T. Campbell . Ethnocentrism: Theories of Conflict, Ethnic Attitudes, and Group Behavior . New Jersey: John Wiley & Sons, 1972. Print. Ruth McVey. Southeast Asian Capitalists. NY: Cornell University Southeast Asia Program, 1993. Print. Stijn Claessens, Simeon Djankov, Larry H.P. Lang. "The separation of ownership and control in East Asian Corporations." Journal of Financial Economics 58.0 (2000): 81-112. Print. Subhash Sharma, Terence A. Shimp, Jeongshin Shin. "Consumer Ethnocentrism: A Test of Antecedents and Moderators." Journal of the Academy of Marketing Science Winter 23.0 (1994): 26-37. Print. T.S. Kee. "Influences of Confucianism on Korean Corporate Culture." Asian Profile 36.1 (2008): 9-20. Print. Victor King. Malaysia - Culture Smart!: the essential guide to customs & culture. Malaysia: Kuperard, 2008. Print. William M. Pride. Marketing. 16th ed. Mason: South-Western College, 2011. Print. Read More