Multi-national companies i. e. companies having their operations across multiple nations have become pretty common in recent times. As a company grows and achieves stability, it goes in for expanding its market. In many cases the expansion plans have also happened due to cheaper labor and lesser manufacturing costs. No matter what the reasons might be or how rosy the picture looks, multi-cultural operations are always a risk. Many big organizations have either failed or have faced huge problems while starting up operations in other countries.
While going in for international expansion, care should be taken so that the operations are well thought out and planned, alternative strategies must be made and the company management should understand the culture of the newer country thoroughly before opening such a venture. This report draws attention to some such problems which have occurred with companies opening international operations, and how they succeeded in sorting the issues. Communication The most important aspect in any business is the communication across various levels.
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When people from different cultures come in contact with each other there are bound to be miscommunications. These problems are not merely due to different languages. They can be due to the body language which means different in different cultures. For instance in the eastern countries people are more deferential in front of senior people and having an eye contact with a person who is senior is considered to be rude. However, in western countries chiefly in the United States if one does not make an eye contact at the time of giving an explanation, it could be taken as a sign of being unsure of oneself or being less than honest (Bowers p.
6). Some problems also creep into the most formidable of agreements. The most famous problems of this type were faced by the US companies who were outsourcing their projects to eastern countries chiefly India. While in US an engineer can give out his opinion as to the feasibility of an idea, in India, it is considered to be rude to give out a flat out refusal. This led to many problems being delayed and the outsourcing organizations could not do anything except applying pressure which was of no use.
Many companies now insist on having a feasibility report beforehand, and ask their vendors to perform risk estimation, before awarding any projects (Bowers p. 7). Problems in communication may also occur right at the start during hiring process. For instance the personal questions consisting of seemingly common type like age, marital status, the number of children or even the profession of one’s parents are considered to be illegal in Canada (Laroche p. 21) Communication process might also mean different in terms of the scope of the information.
The number of people in the possession of a information may be only on need to know basis chiefly in European countries like Germany or it might be free flowing in countries like Canada. Hence, the information received on a particular issue might be less than what is required which could lead to problems. In such cases the only way to bridge gaps is by giving employees a cross-cultural training emphasizing on the various cultural differences. (Laroche P. 20) Business communications especially negotiations have failed many times due to the incorrect understanding of one’s body language.
In Europe, North America, Japan or China people usually maintain a certain distance while interacting, and touching is a gesture limited to only family and friends. While in South America or Middle East people like to get up close and are more voluble. A pre-gained knowledge about the new culture helps in going a long way towards establishing successful partnerships (Payne p. 11). One popular misunderstanding in body language ensued between Americans and their Indian vendors.
The Indian response to questions like “do you think we should move forward” was a head tilt to the side, when American could not understand. This was finally sorted out when Indian vendors were specifically asked to commit themselves with a yes or no. (Santana 15) However, pre-gained knowledge can be used cautiously and even gainfully while establishing cross-cultural relations. The Europeans and North Americans attach negative connotations to the concept of gift-giving between business counterparts, while in Japan and China this forms an integral part of the business protocol.
This might be because having personal relationships is seen as unhealthy and is indeed much frowned upon in the western culture, while in the East business is done only with people who have personal relations, strangers usually are not welcome (Payne p 14, 16) Organizational Structure The organizational structure which a company has in its parent nation chiefly reflects the local policies. As the companies grow into multi national organizations, this structure should also change also with a corresponding change in the HR policies.
The operations in newer companies cannot have an entirely local flavor, as this might not be agreeable to the employees working in other countries. However, the company cannot keep its original structure if the new country is very different in its culture and beliefs. The former problem is seen with the Japanese firms who were severely criticized by Asians. These firms had different policies for countries in different parts of the world. For instance, in advanced US and European countries, their attitude was gentle as compared to Asian countries like China where they were very aggressive.
This led to a set back in finding first class employees to work in their company, as the Chinese preferred to work with the American Multinationals who were only interested in the quality of candidates and work (Urakami p. 1, 2) Problems of the later kind is seen in the infamous Euro Disney venture, where the company was severely criticized by the local public for following the American culture and not understanding the European peoples’ sentiments (Harvard Business School p. 7). The job of the HR department to tackle the problem becomes very tricky.
Before opening the company across newer national various factors like the cultural climate, people’s beliefs, exposure, political climate should be considered along with their effect on the labor laws. Core values The core values reflect the direction a company wishes to grow in and also shows the principles and values it believes in. The first thing a company should do when it decides to go in for international ventures is to fabricate its corporate principles (Torrington Hall & Taylor p. 50-53).
Most major international corporations have a set of principles which form the basis of their core values. These values remain constant regardless of the country in which the company operates. Companies like Matsushita, McDonalds, Toyota, Nestle etc. are well known for their corporate policies and the success of their international ventures. These companies also hold regular training sessions for their employees where the cross cultural issues are addressed and people are exposed to their counterparts in different countries (Leopold p.
103). In fact in Japan managers take their management training very seriously as compared to their US counterparts. In Japan expatriate managers and even the companies who wish to open future ventures get trained for at least an year in the newer culture before going out (AlkhaFaji p. 93). McDonalds too had made a very thorough study of the Indian values and culture before entering the market with the result that it is one of the fastest growing fast food chains in the country. Man Management
Management is essentially about managing people. Managing cross-cultural multi-location teams is a challenge for any manager. Any problems which occur have to be handled very artfully, as a wrong message could lead to the entire group getting restive which is not a very good sign. The problem is all the more difficult to handle when the entire team is working on time-critical projects. Motivating team members also requires art, as people from different countries respond to different incentives.
For instance in America people respond to the concept of extra income whereas in Japan people go in for honor and pride, and Indians succumb to praise and recognition. Managers should be taught the art of people management in addition to their job-related skills. The focus should be on long-term goals like efficient management of the team instead of short-term goal of just getting the job done. Conflict management Most of the international corporations have at one time or another faced major conflicts due to various reasons.
Owing to the multiple interest groups that exists within a multinational organization, the disputes faced by the companies are very complex in nature. The reasons for such conflicts also vary widely from human rights policies, labor relations, environment and technology issues, economics and finance etc. The conflict management is just as complex for such disputes. The focus of the companies while solving these disputes should be on obtaining a satisfactory outcome t the entire situations rather than just the resolution of the dispute.
For instance the Euro Disney problem should be resolved to make the venture profitable instead of just focusing on the minor problems. Conclusion Multinational corporations work across multiple cultures. This inevitably leads to problems. Many successful companies have made policies based on their experiences to minimize the risk of due to such problems. A study of such companies could provide comprehensive information on the reasons for such conflicts and the methods used for resolving them References Books AlkhaFaji A F, “Competitive Global management: Principles and Strategies”, 1995, CRC
Press Holden N J, “Cross-Cultural Management: A Knowledge Management Perspective”, 2002, Financial Times-Prentice Hall Jacob N, “Intercultural Management”, 2003, Kogan Page Limited Leopold J, “Human Resources in Organizations”, 2002, Financial Times-Prentice Hall Torrington D, Hall L, Taylor S, “Human Resource Management”, 2002, Financial Times-Prentice Hall Walter I, Murray T, “Handbook of International Management”, 1998, John Wiley and ‘ Sons Websites Bowers T, “Cross-cultural outsourcing requires planning and sensitivity”, Tech Republic,
CNEt Networks, 26th April 2004, Article accessed on 23rd June 2007, http://articles. techrepublic. com. com/5100-10878_11-5197010. html Harvard Business School, “Euro Disney: The first 100 days”, 9-693-103, 4th June 1993, Article accessed 23rd June 2007, http://portal. wsiz. rzeszow. pl/plik. aspx? id=2967 Laroche L, “Managing Cross-Cultural Differences in International Projects”, Association of Professional Engineers of Ontario, 1998, Article accessed on 23rd June 2007, http://www. itapintl. com/mngdifintproj. htm
Payne N, “Cross Cultural Negotiations”, from EZine articles, Article accessed on 23rd June 2007, http://conflict911. com/guestconflict/crossculturenegotiation. htm Santana J, “Managing Remote, Cross-Cultural Teamwork”, 9th February 2005, Article accessed on 23rd June 2007, http://www. cioupdate. com/article. php/3482071 Urakami K, “Notes on Japanese Multinational Companies - Was the “Future” we thought out 30 years ago something like this? –“, September 2003, Article accessed on 23rd June 2007, http://www2. odn. ne. jp/kurakami/japco/JP-MNC. pdf
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