Cross Cultural Issues in International Business - Essay Example

? CROSS CULTURAL ISSUES AFFECTING BMW COPORATION IN BRAZIL By Presented to (City, State) (Date) Introduction Bavarian Motors works (BMW) is a German automobile company founded in 1917, with its headquarters located in Munich. The parent company is Roll-Royce cars, but it produces both cars and motorcycle. Initially the company engaged in the manufacture of fast cars such as the formula one sports car and later engaged in the production of fancy cars. The production and demand for the BMW cars has been increasing over the last decade as a result of the increasing demand on the fancy cars as a result of the changes in the consumer market. The expansion of the company to Brazil and other country has been affected by the financial crisis witnessed in the 2008, which affected the sales of fancy cars due to decline in revenues and personal wealth. The 2008 was a notable year for the company due to the success achieved in Formula One competition thus, improving the brand visibility (Ferrell and Hartline, 2010). The company targets the high end market associated with quality, style and performance of the product. Internationalization and cultural practices influence the operation of business essentially making them vital in the process of business expansion and acquisition. Different countries have a different approach to issues in business and marketing. The culture of the countries differs significantly especially when interested in venturing into countries in the Latin America. The historical and socio-cultural difference must be factored in during the process, to facilitate the faster understanding of the negotiation, thus, making it possible for a win -win solution. The key to successful communication between different cultures is knowledge. The understanding of the problems affecting cross cultural communication and working towards overcoming the problems will ensure the successful business acquisition and management. BMW Corporate culture BMW culture is based on the principles of offering quality product targeting the high end market segment. The BMW corporate culture involves the use of various approaches in the various approaches in the market. The increase in product range facilitates customer preference and increase brand affinity and affiliations. The company’s corporate structure entails production and performance efficiency while also increasing the quality of the cars produced by the company. The culture encourages customer satisfaction and improved market performance of the cars. The production of high end vehicles facilitates brand loyalty while also encouraging the development of success and understanding of the target market. The production process improvement and welfare of the employees are values included in the corporate culture of BMW. BMW internal environment Product quality One of the company’s core values is quality and is vividly reflected in the products presented by the company in the market. Product quality has led to quality advantages to the company (Beverly and Thomson, 2011). The company has not experienced model recalls as compared to other companies. For example, Toyota has been forced to recall some of the product models due to failure in breaking and acceleration. Such recalls create consumer confidence related problem thereby affecting the sales of the product. The majority of the company’s products have exhibited satisfactory performance in the market leading to the increased consumer confidence. Excellent buying experience The opening of several subsidiaries in countries such as Saudi Arabia, Dubai and other countries has been a plus for the company. The expansion has increased product visibility, as well as provide over 300 state-of-the-art show rooms with trained customer care and sales executive leading to an improved buying experience for the customers (Bowdin, 2010, p. 89). The association of the company with the higher social class led to the development of quality staff in the showrooms, thus; improving the customers buying experience in the showrooms across the cities in the world. Quality After sales service The quality in the manufacturing unit of the cars is reflected in the quality after sales service exhibited by the individual units. The company provides the quality spare parts for the after sales service thus ensuring that only quality parts are added to the vehicles during the after sales service. The result of this approach is immense; it increased the customer confidence in the brand thus creating brand loyalty in the process. Brand visibility Product sales are affected by the availability of the product readily in the market. With the acquisition of the subsidiaries, the product availability in the market has been increasing significantly thus increasing the sales of the company’s products (Halliwell & Morley, 2008). The diversity of the products offered is also the strength of the company. It deals with motorcycles and cars, therefore, offering the much needed diversity. BMW External Factors Political factors Politics influence the development of policies and business environment. Brazil’s politics is vital because it has a direct impact on the country’s economy and in turn influences how businesses must operate. The failure to address political issues will lead to serious problems for BMW in Brazil. However, the country is faced with the problem of corruption prevalent even in government administration. The development of policies will influence the creation and maintenance of business operations. Political stability is vital for the company to register success in its operation. Currently, Brazil has a stable political environment making business possible in the long run. According to Armstrong, Cool and Sadler, the political lobbying in a country can lead to the development of new labour and environmental laws that can influence the creation and establishment of a better economy. Additionally, they may influence the development of faster understanding of changes in economy through policy changes and administration. Economic factors Economic factors in a business go beyond the influenced of the country’s economy. In recent times, globalization has influenced the economy of countries. The global financial crisis witnessed in 2008 led to serious economic challenges in many countries around the world. The main challenge of the drop in mortgage prices was the loss of earning for investors. Such changes in the global economy may lead to serious repercussions for the business especially when dealing with the issues of expansion. Changes in currency values are factors that lead to challenges in business operations. With the increasing influence of the global economy in business, it is vital for the company to address both the global and local economy. BMW expansion into Brazil can be influenced by the Brazilian economy which can be influenced by the actions of the government. Interventions such as the increase in taxation to cover government expenditure may influence the performance of the business. Businesses fail to address issues of economy because they cannot influence the government to change policies or the changes of prices in the international market. Social factors Consumer preference and demand is product of the influence of social factors on the choices of individuals. For instance, the growth of the SUVs is a consumer driven demand based on social factors. Such demand influences and change the whole process of production and new product development. The age of the population and gender balance will influence the tastes and preferences of the economy. With such changes in society, it is paramount to evaluate the impact of social factors on the demand and preferences. For the BWM expansion into Brazil, it is important to understand the market segment and the role of social controls in influencing individual choices. Individual choices are normally products of social pressure and identifications. Technological factors Change in technology is inevitable due to the continuous development of new technology through innovation. Innovations have shaped issues such as the development of fuel efficient engines, luggage space and seat capacity. These factors have shaped the process of manufacturing and in turn influence the cost of production and the price of the finished product. Technology must be monitored otherwise the company may lose its competitive advantage in the process if It does not address the issues of technological change. Changes in technology is vital because they may lead to increased efficiency and changes in price as a result of reduction in production costs. Environmental factors These factors have risen in the recent years after the understanding of the concept of environmental conservation. The current situation stipulates that companies must engage in environmental conservation which may be costly. The development of the waste recycling or collection process for the company product may be costly especially if the use and destruction of the waste product is impossible. However, in the case of the usage waste products, it is possible to create value out of the waste such as plastic and paper recycling which have gained fame. In motor vehicle industry the recycling of scrap metal and rubber is a common trend that may be employed by the company as a corporate social responsibility and the powerful environmental policy for the company. Environmental legislations can influence production positively and negatively depending on the financial implications of the legislation. Environmental Agencies are the legal institutions handling issues of environmental concern in countries. Brazil Business culture There are four factors that affect cross cultural negotiation namely; use of time, individualism versus collectivism, role orderliness and conformity, and patterns of communication. Use of time differs from culture to culture. Most of Citizens from America, Swiss, Germans and Australian are fast paced and precise with their approach to time. There is a tendency of negotiators from these countries to keep time on the planned schedules. In other countries, time keeping especially when dealing with officers holding higher ranks in the society. A delay of two months, for a project in the Latin America will be considered normal, while in Europe, it will be considered abnormal. The approach used in the employee participation in management may be collective, or individualistic depending on the cultural diversity. The use of in the representative participation is prevalent in the US while in other country scored a lower grade in the scale developed by Dutch researcher Geert HOFSTEDE. The approach in the Latin America is that of group participation. The American approach is individualistic as witnessed by American structure, which uses a prize system. In Brazil emphasis is on the group contribution to the decision making process is rife making it essential for all employees to be told the essence of the takeover. For the team to reach an agreement there must be buy-ins from all members of the negotiating team. Therefore, in the Latin America it is natural to have several members at the negotiation table. German Business culture The German business culture is different from Brazil because of several issues. The German philosophy of “oiled Machine” ensures that the employee participation in the company decision making process is increased. The delegation process in the business practice is high compared to Brazil business practice. The practice of delegation and responsibility allocation facilitate the development of innovation and facilitates the development of new ideas and approach in business management. The transparency in recruitment and duties of employees facilitates the development of necessary personal skills and experience. The success of the whole culture of Germany is based on the success of the company in integrating the various production processes as well as the development of harmony within the working environment. Issues affecting business operations in Brazil To succeed in Brazil, a manager must understand the legislation and the culture of the Brazilians. One of the most astonishing features in Brazil is the cultural and structural barriers. The most pervasive barrier would be the “Brazil cost”. The term refers to the real extra cost of doing business in Brazil. It covers issues of corruption, government inefficiencies, legal and bureaucratic complications. Other factors that would influence the business include excessive taxations, poor infrastructure and inflation. These factors have affected and frustrated international business ventures in Brazil. Despite the complex nature, of the business landscape, Brazil offers a wide range of business opportunities for international operations. Problems resulting from cultural differences Culture clash is the main problem that can affect the development of organization structure and harmony. The failure to address issues of cultural gender differences and roles may affect the company negatively. Time management is a vital issue in Brazil culture because they do not accurately keep time as compared to the Germans. Employee improvement through training is an approach that is rarely used in Brazil because delegation is minimum managers take charge of every activity. Language difference may create a challenge in business operation especially when handle locals who understand only Portuguese while the company officials are Germans. Such situations may lead to total communication breakdown. Relationship creation and handling will influence the development of understanding within the organization. Brazilian culture encourages the development of relationships between workers while the German culture does not emphasize relationship development. The attitude of Brazilians especially on issues of delegation is different from the Germans. In Brazil managers do not delegate duties but remain in control of all activities. The junior employees do not engage in innovation and creativity but instead wait for instruction from the manager. They do not take part in the decision making process because they are not accorded the privilege. The restriction on the hierarchy of authority makes Brazil’s organizational structure rigid and hard to understand or work with. The authority is absolute as such employees wait for the communication from the leaders and cannot undertake any operation without communication from the leaders. Such rigidity leads to loss of value in because of slow response. Management style in Brazil To succeed in Brazil, the business must integrate cultural difference into the management structure will also focus on the vital issues in management such as the issues listed below. Success can be achieved only if the company is willing to integrate the differences in structure into the main focus fabric of the company. Success will be achieved in the process if, the local can associate with the company and develop allegiance. Countries in the Latin America do have massive cultural differences to countries in the Europe world (Marquis and Huston, 2009, p. 223). Participatory management is an approach that can guarantee success for the company in Brazil but will be faced with challenges during the implementation phase. The leadership structure of Brazil has not encouraged the development of participation of employees in the decision making process. The use of participatory management process will facilitate participation of employees by delegation and communication improvement. The improvement of the communication process is dependent on the communication structure employed by the organization and understanding of employees of the management structure. Management style in Germany Unlike Brazil, Germany practices participatory management style that encourages inclusiveness in decision making. The communication and organizational structure are developed in a way that encourages participation of the various levels of management. The process encourages innovation and career improvement. The participatory management approach increases employee motivation in the process leading to improved efficiency in the process. The success of the participatory management depends on the delegation of duties and responsibilities and the creation of a supportive environment leading to success and product improvement. Solution to cultural clashes The management of BMW must encourage participation of the employees in the decision making process. Participatory management ensures staffs are motivated and can contribute to the direction to be taken by the company. The communication breakdowns can be handled by multi-lingual managers who can communicate in both Portuguese and German ensuring understanding between the employees. On-job training and Mentorship will facilitate technological and cultural transfers between the two groups of employees leading to better service delivery. On-job training will be appropriate because it will ensure participation of the locals in the management process while also increasing the chance to integrate the cultures. The use of Balance Scorecard will facilitate the development of understanding of new concepts in the company management and improve efficiency of operations. Technological transfers should be backed with human resource transfer to ensure success in knowledge transfer. The expansion into Brazil must encourage technological transfer between the two companies and address issues of employee support and education. The whole process must be appealing to the local employees. Conclusion Internationalization of businesses is affected by culture. Cultural differences can influence business performance. Brazil’s culture is different from Germany which in turn affects business culture. Transparency is a value practiced in Germany, but in Brazil corruption mars the value of transparency (Marquis and Huston, 2009). Team building in Brazil depends on the creation of relationships, but in Germany the situation is a different team can operate without developing interpersonal relationships. In addition, dressing, etiquette and orderliness can affect business operation if misunderstood. Cultural diversity must be incorporated in the management system to facilitate the development of harmony. International operation will be facilitated by the development of integrated culture that will encourage participation of the locals in business management. Leadership and management training of the organization leadership must be inclusive of the Brazilian culture to facilitate organizational management. Bibliography Amabile, T., Conti, R., Coon, H., Lazenby, J., and Herron, M., 1996., Assessing the work environment for creativity . Academy of management Journal, 1154-1184. Armstrong, S., Cools, E., and Sadler-Smith, E., 2011., Role of cognitive styles in business and management: reviewing 40 years of research. International Journal of Management reviews, 1-25. Bowdin, G., 2010., Events Management. London: Routledge. Cacioppe, R. 2000., Creating spirit at work: re-visioning organization development and leadership – Part II. Leadership and Organization Development Journal, 110-119. Halliwell, M., and Morley, C., 2008., American Thought and Culture in the 21st Century. Edinburgh: Edinburgh University Press. Ferrell, C., and Hartline, M., 2010. Marketing strategy. Learning: Cengage Learning. 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New Jersey: Prentice Hall. Thompson, J., 2010., Strategic Management. London: Cengage learning EMEA. My Reflection My experience in working with the cultural groups was fun. The major challenge was in maintaining effective communication due to a different understanding of the synonyms. The major challenge of the whole process was the integration of the cultural difference to develop an inclusive and good working environment. The cultural diversity helped in controlling and influencing the development of a complex working environment with the focus being on the management and communication between the groups. To solve the problem, several approaches have been employed in the process leading to varying results. Despite the varied results, ethics is the fundamental issue highlighted by the employee. Morality can be described as the work of opinions, decisions and actions that can be classified into what people think is acceptable or right. Therefore in defining ethics, it is vital to state; ethics does not have a manual for with methods, expected rules and guides. It is seeking the right kind of morality. Ethics can be further divided into descriptive and prescriptive. Descriptive ethics focuses on the evaluation and description of the existing morality. Normative ethics deals with the judging of morality, which relies on the use of value judgments. Ethical theories rely on the definitions and understanding of values, norms and values. Values can be defined as convictions or matters that are worth striving for. Values can be intrinsic or instrumental. Intrinsic value is the value itself while instrumental values are a contributory value resulting in an intrinsic value. Moral norms are rules that define the actions required, allowed and prohibited. Norms are always derived from the values. The difference between the two is values are ideals that people want to achieve, while norms are the way of achieving them. Moral virtues are character traits vital in the moulding a person in to a good life. They are similar to values with the main difference being values are things strived for while virtues are inherent characters that one must have. In spite of understanding of values and ethics, the society has a way of developing social controls that influence decisions of individuals. The depicting of orientations in view of right or inappropriate creates isolation and psychological isolation. The fear to intermingle with people of different sexual orientation is created by the social controls developed by the society through the use of media. Media influences how people relate and the perception of the society on issues such as sex, gender and race. Despite the negatives that Media has allowed to grow, the positives associated with media cannot be understated. According to the interviewee, the media has played a significant role in the change of attitude of the society on certain issues such as sexual orientation. The media highlights the challenges faced by the people thus allowing the society to accept the changes in society When handling sexual orientation it was noted that the culture played a vital role in the creation of perception a positive and negative perception cannot be ignored. The success of cultural integration depends on the ability to integrate the different cultures in the workplace with absolute unity as the main focus of the combination. The major challenge witnessed in the integration of culture was the acceptance of the different sexual orientations in the work place. The major problem was from the conservative cultures that do not accept diversity and change. Some members of the group from the Middle East were not happy with the acceptance of the new sexual orientation but were later able to accept to the changes in the society. It was hard but the group finally achieved harmony within itself. Read More