Serci Group Plc Cultural Expansion into India
The Serco Group is ranked 99th number in the stock exchange market of the UK with market capitalization of ?4,646.4m in 2011.The financial crisis of 2008 had no impact on the company and recently Serco acquired an Indian outsourcing company “Intelenet”.The paper is focusing on the use of Hofstede’s framework to assess how the cultural differences may hinder or promote the potential growth of Serco group in obtaining sustainable competitive advantage within the territory of India.
The findings suggests that it is favourable for Serco Group to carry out its operations in emerging markets such as India where culture is flexible in accepting changes.
The Serco Group plc is a service based multinational organization that was formed in 1929 in the United Kingdom and now has its subsidiaries all around the World including Europe, North America, Middle East, and the Asia Pacific. The company’s core segments include transportation, defence, science, civil government, and private sector where different types of services are provided such as information and communication, Business Process Outsourcing (BPO), home affairs, health and educational, and detention centres and prison services (Serco group, 2012). The paper aims to focus on the use of Hofstede’s theory to assess how the cultural differences may hinder or promote the potential growth of Serco group in obtaining sustainable competitive advantage within the territory of India.
2. The Process Model of Internationalization
Internationalization can be defined as “…the process of increasing involvement in international operations” (Welch and Luostarinen, 1988, p. 36). The first process model ‘Uppsala model’ so-called U-model, was formulated by Johanson and Wiedersheim-Paul (1975) which describes the “factors distributing the flows of information between firms and markets on the basis of language, culture, education, system, and industrial development” (Buckley and Ghauri, 1999, p. 29).
The model explained that it is necessary for any company to assess the target company on the basis of above stated factors in case of takeover, acquisition, or merger especially in the foreign markets. Undoubtedly, Serco has a successful experience of international investments but Indian market is different from other markets especially in terms of culture. Therefore, it is the best practice to assess Indian market using an appropriate cultural model.
3. THE IMPACT OF CULTURAL DIFFERENCES
There is no doubt that Indian market is one of the highly emerging markets in Asia but there are many cultural differences between developed (e.g. UK, USA, and Europe) and developing markets (e.g. India and China) that may hinder or promote the growth of sustainable competitive advantage within the region. Among few well-known cultural theories such as Usunier (1998) and Hofstede (1980), Geert Hofstede’s theory has great significance in the literature in terms of reviewing cross-cultural dimensions. The Hofstede cultural theory is based on five fundamental principles such as Power Distance, Individualism, Masculinity, Uncertainty avoidance, and Long-term orientation.
The power distance measures “the extent to which the less powerful members of the company accept and expect the unequal distribution of power” (Samovar et al., 2011, p. 24). India has quite high power distance index (i.e. 77) that shows the inequality of power and wealth within the region. It also indicates a centralised and bureaucratic organizational hierarchy where subordinates follow the instructions of bosses. The growth of any company depends on the spread of information throughout the hierarchy of the organization and in case of India Serco may face problems in sharing information due to a strong organizational hierarchy and bureaucratic styles which may lead to unawareness and even radical breakthroughs (Williams and McGuire, 2005). Similarly, Herbig and Dunphy (1998) and Seleim and Bontis (2009) argued that high level of power distance and bureaucracy demonstrate high level of corruption that causes to reduce creative activities and also affects the growth of the company.
India has low individualism level (i.e. 48) so-called collectivism that shows the flexibility of Indian people in joining a large group on the basis of profession, religion, and other collectivistic traits (Hofstede, 2001). Sinha (1997) pointed out that individualism exists in the Indian corporate culture due to the Western management that is resulting in to promote the Western work culture in the country. Therefore, Indian business culture has same traits and practices as Western businesses. On the basis of individualism level, it can be said that Serco group plc can get considerable success in the future whilst working in India.
India is a masculine based economy and Indian people like to be successful in terms of performance and ambition of the work. In fact, India has 3rd highest ranking in Hofstede’s dimensions (i.e. 56) against the world average 51 (LeFebvre, 2011). Shane (1993) and William and McQuire (2005) proved that masculinity has no impact on the growth of the company but Song and Parry (1993) argued that the formalised roles are important in lessening the negative practices and reducing the conflicts that results in prominent growth. However, it depends on Serco’s policies to keep balance between assertiveness and modesty.
The uncertainty avoidance index of India is not far high (40) that shows a medium or low preference to avoid uncertainty. It means that Indian people are mostly flexible in accepting imperfections and their tolerance level is high (Samovar et al., 2011). Shane (1993) and Williams McQuire (2005) explained that the growth of the company could be affected from the cultures with strong uncertainty avoidance where people are reluctant to accept changes. In contrast, it is also known that “cultures with strong uncertainty avoidance have strong tendency to defend intellectual property with patenting” (Kaasa and Vadi, 2008, p. 8). This must be understandable to Serco group’s regional managers that thought-process gap towards future is not enough between Indian and UK employees. Therefore, working together on difficult problems could be much easier for Serco management in achieving growth.
The long-term orientation level of India (61) is very high because the country follows a religious concept “Karma” which states a cause-and-effect relationship between all that has been done and all that will be done (Siddiqui, 2008). This is in fact the remarkable characteristic of Indian culture which is making grounds to attract international investments. For Serco, this must be the most critical point because establishing long-term relationship is always very important for any company in terms of achieving strategic objectives. But on the other hand, Seleim and Bontis (2009) believe that the societies with high long-term orientation score typically neglect the lack of punctuality.
Serco group plc is already providing services in Europe, North America, Middle East, and Asia but the cultural differences always matter in obtaining competitive advantages when a company invest internationally. By applying Hofstede’s framework on India, it can be said that Serco may face few challenges due to high power distance and bureaucratic styles in the organizational hierarchy of Indian corporate culture. But on the other hand, Serco may adjust themselves to carry out their operations in terms of low levels of uncertainty avoidance and individualism. In addition, the long-term orientation level of India is the strongest point for Serco in order to achieve long-term objectives and short-term goals.
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Figure 1 – Comparing India with UK and USA