Interpretation of Globalization, Challenges for Managers - Essay Example

Introduction – definition of globalization Globalization according to Frankel (2006) means integration through international trade of markets in goods and services, financial integration through international trade in assets, foreign direct investment, international outsourcing of services and international movement of people. Economic globalization is one of the most powerful sources to have shaped the post-war world and the two major drivers behind globalization are reduced costs in transport and communication in the private sector and reduced policy barriers to trade and investment on the part of the public sector. Lee & Tai (2006) too agree that liberal trade policies, incentives, growing foreign direct investment (FDI), advancement in information technology and communication have all stimulated the process of globalization. The major drivers of globalization according to Singer (2004) include social-demographic (regional, cultural), technological, which includes telecommunications, internet and transportation, economic factors like foreign direct investment, profit motives and market share, ecological and environmental factors like pollution and green laws, and political-legal factors like falling trade barriers, political stability and intellectual property. There is a connection between poverty and globalization and it is generally believed that without globalization inequality would have increased. Free trade would make the world prosperous and assist the poorer nations in coming up. Technological upgradation takes place in developing nations but evidence also suggests that technological change increases inequality between highly skilled workers and the unskilled workers (Singer). Trade and politics should be independent of each other. Interpretation of globalization Globalization means differently to different people. While it provides opportunities to many people, it has also caused impoverishment to many groups and societies. Globalization has led to rapid and sudden changes in information and communications, which too has advantages and pitfalls. There are conflicting stands on this issue. Globalization is the concept of moving towards single-world society. In this effort there has been rising share of economic activity in the world. The aim was to open the world market to everybody and was thought to be a solution to social and economic disorder prevailing in the world. Globalization has brought about competition, liberalization, deregulation, and privatization and opened up capital markets but at the same time it has undermined the economic prospects for millions around the world. The gap between the rich and the poor has increased. The benefits and costs of globalization are unevenly distributed across the world. Thus it is evident that globalization continues to grow in its effort for a coherent global economy previously separated by culture, geography, or nationality. Global competition, entry strategies, strategic timing and positioning, the government rules and policies, the local culture, investments, and the target market are some of the issues that confront companies wanting to expand overseas. Due to globalization, situation has altered to keep pace with the changes. Nevertheless, challenges remain and it has serious impact on the managerial practices. Managers are faced with resolving issues of cultural diversity and have to improve their understanding of different cultures because of the diversity in the new workplace. Challenges for managers Cross-functional teams Responding to global threats and opportunities is a strategic challenge in the face of globalization. Motorola had to face several issues to overcome and meet these challenges successfully. Anticipating change, innovation in technology and applying it to its global strategy is important and demands an organization-wide commitment (Cravens, Piercy & Low, 2002). Integrating functions between departments is crucial to the success of any product launch. Information has to be obtained and diagnosed from all relevant sources. Managers face the challenge to develop cross-functional teams that work together to develop an understanding of the markets, suggest Cravens et al.. Managers need to have a vision about the future trends and discontinuities. Meeting innovative challenges thus requires creating effective processes to understand the markets. Culture Despite organizations becoming global in their outlook barriers are becoming insignificant as information technology reduces the physical distance. Under these circumstances, national culture has a significant role to play in determining the practices and operations that should be applied. Culture according to Hofstede (1997, p4) is “the collective programming of the mind which distinguishes the members of one group or category of people from another” (cited by Hope & Mühlemann, 2001). Societies have developed common set of beliefs and developed a set pattern of behavior which allows them to live harmoniously. These are handed from one generation to another. Hofstede further believes that the culture in which an individual is immersed since birth is likely to have a much stronger effect on him than the organizational culture. Thus, national cultures would have no impact upon the way organization operate across boundaries. Amin Rajan however disagrees as according to him globalization brings in different categories of customers to the market place which gives rise to apprehensions whether the organizations have the workforce required to meet the needs of such customers (Powell, 2006). Corporate restructuring has also led companies to create more vibrant cultures. Diversity initiatives are market-driven prompted by the need to have an innovative workforce. To instill a culture of diversity managers must have an inclusive management style. Diversity initiatives are important but change in management or leadership can wane the interest or determination. Service sector In the case of the hospitality sector managers are faced with even greater challenges. While it is possible to globalize the back room operations as this has no direct communication with the end customers, the front office operations depend heavily upon the cultural adaptation of the service. A study of the hotel managers in Korea, Japan and Hong Kong revealed that there were significant differences between nations in the usage of the managerial practices related to the four dimensions of culture as specified by Hofstede. While there were similarities, national culture had a stronger effect than industry culture (Hope & Mühlemann). At the same time, developed nations like Australia, Europe and North America, employ a high level of immigrant labor in the hospitality industry in the front line positions. They come from diverse cultures where working autonomously from authority is a new experience. In this case, the national culture does not remain significant and it becomes even more difficult to handle the incentives and motivations to get the best out of them (Baum & Nickson, 1998). Cultural diversity Culture has a significant impact on perception, problem-solving and cognition and often leads to differences in satisfaction levels on the same product between global customers. Expectations differ. Levels of literacy differ and so do performance evaluation standards (Pizam & Eliss, 1999). Chinese customers are more price sensitive than the westerners. The Chinese are price conscious, while the western clients evaluate the quality against the price. Hence to market a service to the Chinese customer, the price, the brand name and the prestigious status are more important while to the western customer, the room size, security, proximity, and location will hold priority. As such the Chinese managers have to adapt to different customer expectations (Gilbert & Tsao, 2000). A study of the Chinese hotel managers revealed that most Chinese hotels are collectivist organizations (one of the dimensions of culture as studied by Hofstede) as the management needs to motivate the whole group of employees and not specific individuals. This may result in disharmony among the personnel (Gilbert & Tsao). The managers of hotels in China understand certain aspects of culture and have overcome the problems. Crossvergence results in convergence of two parent cultures in terms of macro-level variables. The ‘Euro Disney’ theme park development demonstrates how national cultural differences can impact the transferability of a successful service delivery system between situations (Hope & Mühlemann). While it was successful in Japan, the French national culture resisted foreign influence as it was seen as diluting the French way of life despite the organization incorporating some European characteristics and facilities. While the French management and workforce support quality and excellence in services, this was seen as American arrogance. The French applicants also lacked the team spirit to fit into Disney’s team culture. Labor schedules were rigid at the French Park while the same system had not caused any problems in USA. Another reason which affected the success of the Euro Disney in France was that the Mediterranean visitors tend to be impatient and attempted to jump the queues which upset the queuing sensitivities of the British visitors (Trigg & Trigg, 1995 cited by Hope & Mühlemann). This reveals that it is not merely the national culture but the divergence of culture due to diverse nationalities present in a particular situation. It also demonstrates that venturing into strange cultures can be a chastening experience for managers. Conclusion Thus it is evident that cultural diversity in the face of globalization is a major challenge for managerial practices. Managers have realized that they cannot escape adopting the local culture. They have also realized that varied management practices cannot be universally accepted as they are not likely to be successful in environments other than in which they were developed. Culture is a mechanism for governing rational behavior but it is changeable and amenable to managerial intervention. Unconstrained globalization has led to economic efficiencies but has posed challenges for managerial practices. References: Baum, T. & Nickson, D. (1998), Teaching human resource management in hospitality and tourism: a critique, International Journal of Contemporary Hospitality Management 10/2 [1998] 75–79 Cravens, D. W., Piercy, N. F. P., & Low, G. S., (2002), The innovation challenges of proactive Cannibalization and discontinuous technology, European Business Review, Vol. 14 No. 4 pp. 257- 267 Frankel, J., (2006), What Do Economists Mean by Globalization? 05 Oct 2007 Gilbert, D. & Tsao, J. (2000), Exploring Chinese cultural influences and hospitality marketing relationships, International Journal of Contemporary Hospitality Management 12/1 [2000] 45-53 Hope, C. A. & Mühlemann, A. O. (2001), The impact of culture on best practice production/operations management, International Journal of Management Reviews, Vol. 3 No. 3 pp. 199-217 Lee J-W & Tai S (2006), International Journal of Emerging Markets, Volume 1 Number 3 2006 pp. 212- 224 Pizam, A. & Eliss, T. (1999), Customer satisfaction and its measurement in hospitality enterprises, International Journal of Contemporary Hospitality Management, 11/7 [1999] 326-339 Powell, S., (2006), Amin Rajan: promotion of workforce diversity, HUMAN RESOURCE MANAGEMENT INTERNATIONAL DIGEST, VOL. 14 NO. 3 2006, pp. 22-25 Singer, Peter One world : The ethics of globalization, 2nd edition. New Haven : Yale University Press, 2004. Read More