Multinational Corporations and Multiculturalism - Assignment Example

MNCs and Multiculturalism inserts his/her Inserts Globalization and its associated cultural dynamics have immense importance for contemporary management practices (of MNCs) which are dynamic and not static. However, it goes far beyond the traditional management practices that were limited to planning, organizing, staffing and controlling. The strong relationship between the two issues has given birth to the concept of cross-culturalism. Thus, multinationals today are increasingly concerned with how best to align and adapt their management practices to various cultural styles. It is argued that MNCs’ expansion into foreign markets mostly results in failure owing to factors highlighted in this paper. For the purpose of analysis, the notion of cross-culturalism is explored with Hofstede’s dimensions with discussion of the cases of Wal-Mart and Google to reach to the conclusion that expansion in foreign markets is almost never in the long run interest of multinationals. Research bears witness to the fact that differences in cultures across countries account for differences in management and leadership styles of MNCs today (Gerstner & Day, 1994). In today’s globalized world, it is imperative for MNCs to appreciate and adapt to diversity in cultures and mould their management styles accordingly in terms of cognitive information processing and emotional, behavioral and motivational mechanisms (Earley, 2006). Considering the fact that many developed (western) nations are setting up businesses (as MNCs) in the less-developed (Asian/ Eastern) societies, it is increasingly important for managers to appreciate and understand the differences that exist between the eastern and western societies. Research by Hofstede (1980, 1991, and 2001) identifies key dimensions that account for variation between the Eastern and Western cultures, including masculinity, power distance beliefs, uncertainty avoidance and long term orientation. On one end of the continuum are the Eastern societies that rank high in terms of high power distance beliefs, collectivism, long term orientation and conformity. On the other end lie the Western societies that are more work-oriented, have low power-distance beliefs and are inherently individualistic in nature. Furthermore, increased influence of multinational corporations has given rise to the need for interaction amongst employees and managers of different cultures (Adler, 1983). This has given birth to the concept of cross-culturalism which attempts to examine the attitudes, behavior and relationships across managers (and people in general) of different cultures (Adler, 1983). Cross-cultural management is defined as adaptation to foreign context, efficacy and ability to accomplish tasks in a foreign setting, successful intercultural communication (verbal and non verbal) and meta-cognition (Thomas, 2008). The need to interact with people of different cultures and understand their behavior has become a critical aspect of international management which greatly concerns MNCs. Let us take the example of a Hungarian employee’s encounter with an Austrian supervisor (Fink et al., 2007). The disgruntled employee complained of the “manner” in which his female Austrian supervisor delegated him work (Fink et al., 2007). According to the employee, there was absolutely no problem with the work that was assigned to him. However, the supervisor failed to address her employee in an appropriate manner which offended him (Fink et al., 2007). Such apparently trivial instances of conflict between the manager and employee are a commonplace today and present a strong case of the difficulties MNCs encounter when entering into foreign markets. Paradoxically, such issues are not easy to understand. Hence, the cultural dimensions need to be accurately defined along a particular scale against which the behavior can be measured. In order to overcome these shortcomings, the “cultural standard method” was introduced by Leung et al., which identifies and examines the differences in perception, understanding, thinking and judging across a multitude of cultures (Fink & Meierewert, 2001). MNCs need to employ these tools in order to overcome these cultural differences. However, as it is evident from the cases of Wal-Mart and Google, it is simplistic to assume that companies use these methods to overcome cultural barriers in hindsight. Contrary to the popular belief that MNCs may find these methods useful to make themselves prepared for cultural shocks, they usually end up ignoring this analysis before entering foreign markets because they do not attach much significance to it. Managers often come across various such situations in life where they make decision that comes into conflict with their value system. Consider this case. A young, female manager walks towards her office in order to meet an employee. On her way, she encounters her close acquaintances who have to make the upcoming presentation to their boss and who seek the support of that manager in this regard (Fink et al., 2007). The question now arises as to what approach the manager should take. How should she react to the situation? Should she come to assist her friends and become late for her scheduled appointment with her employee? Or should she continue with her meeting at the cost of her friendship? (Fink et al., 2007). Such dilemmas, although common, are very difficult to deal with. The decision involves making a choice between discipline and friendship. The choice that the manager would make, however, would depend on a multitude of factors, most importantly culture. As mentioned earlier, culture is a complex product of cultural dimensions, personality traits and the cultural standard method. Thus, how the young female manager responds would be determined by factors such as in-group bias, whether she is a collectivist or an individualist, power-distance beliefs, personality traits as well as her cultural standards( how does she “usually or normally” handle such situations?) (Fink et al., 2007). Another argument in favor of MNCs not entering into foreign markets is that modes of communication tend to vary across cultures. This is the concept behind intercultural communication which emphasizes on different interpretations of verbal and non-verbal cues across cultures. A multitude of differences arise when dealing with cross-cultural communication, ranging from contextual, social, legal and ethical to nonverbal, age, gender, and religious differences (Bovee et al., 2008). High-context cultures must be separated from low-context cultures. The former refers to cultures such as those of South Korea and Taiwan where verbal communication takes a backseat and non-verbal communication conveys significant meaning (Bovee et al., 2008). The latter refers to the opposite and includes cultures such as those of U.S.A and Germany (Bovee et al., 2008). In low context cultures it becomes imperative for managers to be result and career-oriented, whereas, high context cultures place emphasis on building and maintaining relationships (Bovee et al., 2008). Thus, negotiations and trust-building are important exercises for managers as far as high-context cultures are concerned. Sometimes, differences in social interactions are also worth noting. For example, when Wal-Mart decided to expand its operations in Germany, the store personnel in Germany protested the company’s requirement of always putting up a smiling face to customers simply because it meant ‘flirting’ in their local context (Bovee et al., 2008). The way top management is addressed also differs. For example, in the U.S.A it is a common practice to address the top manager as Mr. X or Ms. Y. However, in China the same is addressed as ‘President’ or ‘Manager’ (Bovee et al., 2008). Furthermore, in the Arab states, it is considered as disrespect to exchange gifts with a man’s wife. Similarly in India it is common to visit people without taking a time in advance (Bovee et al., 2008). Non-verbal cues are also interpreted in surprisingly different ways. For example, managers in the U.S. may shake hands as a welcome gesture, whereas, in Japan a slight bowing of the head is the norm (Bovee et al., 2008). Similarly, in the U.S, an eye-to-eye contact is considered to be a sign of confidence and respect, whereas, in South Korea it is considered disrespectful and hostile (Bovee et al., 2008). The ‘OK’ sign (made with the letter “O” with the thumb and index finger) demonstrates consent in the U.S; however, the same is considered as valueless in France and vulgar in Brazil and Germany (Bovee et al., 2008). The above clearly shows that out of Eric Garner’s seven barriers to effective communication, “cultural barriers” are of blooming importance to multinationals today. Thus, managers of today ought to be aware of the cultural differences that exist across countries when dealing with people in the different belonging to diverse cultures. Furthermore, it is important to realize the fact that what we say does not always translate to what we actually mean. This is best understood by contrasting the monochronic time period (that of Anglo Saxons) with the contemporary polychronic time period. Under the former, appointments, rigid schedules and task performance assumed high importance, whereas, in the latter, flexible working hours and relationship-building is the focus. This has important implications for managers of MNCs because it makes communication of deadlines astoundingly difficult across different cultures. Consider the example of a manager who has a foreign (culturally different) team member. Such a manager has the crucial task to ‘fit’ that member into the group. In other words, he has to ensure that he is accepted by and adjusted into the team. For instance, when the team has a meeting, such a person must be made aware of the importance of time management and strict deadlines. On the other hand, if there is a foreign manager for a domestic team then it is the manager who has to fit in with the rest of the team. For instance, an Indian manager in Germany must learn to adapt to the latter’s low-context culture. On the other hand, an Indian team member in a German team must learn to be punctual. Manager of such a team must allot time frames rather than one particular time and also inculcate the realization of the importance of time management skills in the member. This task is never an easy one as it requires an understanding of the motivations, behaviors, attitudes and intentions of the other person which is highly influenced by culture. Thus, a foreign manager in a domestic team will be required to adapt, whereas, a domestic manager heading a foreign team must coach. Finally, there may be situations where a manager from U.S is required to interact with a team comprising of members from Italy, Germany, India, South Korea and Japan. This is, in essence, a multi-cultural team. Both flexibility and unity must be aimed at in this case which is not an easy task. Perhaps, members of low-context cultures may develop an in group bias against members from high-context cultures. In such cases, the manager will have to negotiate and explain to, for example, a Japanese member why the German member is more innovative or justify why ‘his’ idea was taken up rather than the Japanese member’s (Bhattacharyya, 2010). Conflict management skills will play an important role here. It is also important to “accept” the behavior of one country. Cross-cultural management, therefore, requires co operation, integration and unity of thought and direction which are mostly difficult tasks to achieve. Only when the thoughts of all members are aligned does the team move in a uniform direction. Consider another example of an American and a Chinese. The former is highly individualistic, prefers openness of thought, is task-oriented and short-sighted (has short-term focus) (Bhattacharyya, 2010). The latter is collectivistic, relies more on non-verbal cues, is relationship-oriented and far sighted (has long term focus) (Bhattacharyya, 2010). To bring the team members (comprising of both cultures’ members) at par with each other, one culture’s members need to adapt to the values and norms of another culture’s members. This is, perhaps, the most important task for any cross-cultural manager of an MNC operating in a foreign market. Finally, there is strong evidence to support that companies that have intended to expand to foreign markets have failed. These cases were primarily those where the foreign market’s culture was entirely different to the culture of the MNC’s country of origin. One such popular example is that of Wal-Mart in Germany. The major issue with Wal-Mart was a cultural mismatch when it entered Germany. The company believed that its traditional ELDP (Everyday Low Prices) philosophy would work in Germany as well. However, in what followed, the company faced stringent government regulations and legal barriers which did not allow retailers to sell below cost (which is what Wal-Mart was trying to do) (Solomon & Schell, 2009). Furthermore, it was accused by the local authorities of exploiting workers by offering them tremendously low wages compared to the industry average in Germany (Solomon & Schell, 2009). Also, Wal-Mart was accused of providing scanty health insurance to its workers which resulted in their relying on taxpayer’s money for the same (Solomon & Schell, 2009). The problem was complicated with the language barrier which backfired on several marketing communications of the company. This issue is often termed as the “Icarus Paradox” which simply means that success becomes one’s failure. This is what exactly happened with Wal-Mart. Its failure to anticipate the cultural requirements of Germany led to its unprecedented failure. This example highlights the issue that MNCs’ entry into unrelated cultures or foreign markets requires caution and a cultural fit in hindsight. Sometimes, doing one’s homework before entering into new markets helps, sometimes it does not. In this case it clearly did not. Another case supporting the argument that MNCs should not enter unrelated foreign markets is that of Google in China. The company, under the leadership of Dr. Kal Fu Lee, decided to revamp its search engine catered specifically to the Chinese population (Weiss, 2008). However, upon successful accomplishment of this objective, the company was faced with pressures from the Chinese government to censor information which it did not want anyone to view on the search engine (Weiss, 2008). With the ensuing acceptance by Google of these terms, a chain of heated protests started in the Western part of the world which viewed this as an annihilation of the Freedom of Expression (Weiss, 2008). This case, yet again demonstrates the fact that cultural values in foreign markets can seriously undermine the MNC’s own objectives. In this case, the abortion of Freedom of Expression was set in stark contrast to Google’s philosophy of making information publicly available to everyone. In view of the above, it is important to note that there is a growing realization that management efforts will not always be successful under all business settings due to cultural barriers. Therefore, it is not a wise decision for MNCs to expand into foreign markets without conducting careful research of the culture of those markets along with training programs for the managers. Managers need to consciously address the notion of cultural differences in order to overcome it. Therefore, they need to be pro-actively aware of the significance of cross-cultural management, only then will they be able to tailor their behavior according to the culture in question. To conclude, one of the major issues confronting multinationals today is the cross-cultural adjustment required by its managers which, in a lot of ways, is hampered by fallacies such as overemphasizing the similarities across cultures while overlooking the differences. Another major issue, as highlighted in the preceding part of the paper, is the how managers come to their own perceptions of a culture as the reality even when that is not the case. Therefore, the mere realization of the fact that differences exist even within cultures is a battle half won. When differences (cross-cultural) are acknowledged, the problem is half-solved and a lot of misunderstandings and conflicts are averted. In this light, it is imperative for organizations to provide cross-cultural training to management and for management to acquire the same. Not only does this allow managers to interact confidently with people of all cultures but it also acts as a trust-building measure and throttles all barriers in the path to effective communication and business. However, this is not always sufficient and, most importantly, not given significant attention by MNCs which results in their failure in foreign markets. References Adler, N.J., 1983. Cross-Cultural Management Research:The Ostrich and the Trend. Academy of Management Review, 8(2), pp.226-32. Print. Bhattacharyya, 2010. Cross-Cultural Management: Text And Cases. Eastern Economy Edition ed. New Delhi: PHI Learning Pvt. Limited. Print. Bird, A. & Fang, T., 2009. Cross Cultural Management in the Age of Globalization. International Journal of Cross Cultural Management, 9(2), p.139–143. Print. Bovee, C.L., Thill, J.V. & Chaturvedi, M., 2008. Business Communication Today. 9th ed. New Delhi: Dorley Kindersley Pvt. Limited. Print. Earley, P.C., 2006. Leading cultural research in the future: a matter of paradigms and taste. Journal of International Business Studies, 37(6), p.922–31. Print. Fink, G. & Meierewert, S., 2001. Interkulturelles Management–Österreichische Perspektiven (Intercultural Management-Austrian Perspectives). Vienna: Springer Verlag. Print. Fink, G., Neyer, A.-K. & Kolling, M., 2007. Understanding Cross-Cultural Management Interaction. International Studies of Management and Organization, 36(4), pp.38-60. Print. Gerstner, C.R. & Day, D.V., 1994. Cross-cultural comparison. Leadership Quarterly, 5(2), p.121–34. Print. Solomon, C.M. & Schell, M.S., 2009. Managing Across Cultures. New Delhi: Tata Mc Graw-Hill. Print. Steward, J.H., 1955. Theory of Culture Change: The Methodology of Multilinear Evolution. Illinois: University of Illinois Press. Print. Thomas, D.C.e.a., 2008. Cultural intelligence : domain and assessment. International Journal of Cross Cultural Management, 8(2), p.123–143. Print. Weiss, J.W., 2008. Business Ethics: A Stakeholder and Issues Management Approach. 4th ed. Mason: South Western Cengage Learning. Print. Read More