Culture of China and Great Britain - Case Study Example

Culture and Organization Culture is relatively difficult to define because it’s very characters change from country to country and from region to region. It is not only vague and difficult to grasp but also requires a great deal of insight and understanding in order to ensure that organizations can actually use the same for their advantage. Overall importance of culture can be assessed from the fact that it is actually shaping the way various groups in society actually behave and formulate their overall opinion and way of life. The influence of culture is such an important aspect of daily and organizational life that overall success and failure largely depends upon how different organizations and groups actually view the culture.( Clegg, 2011) The above definition suggests that culture is actually set of basic assumptions which a given group can actually learn to deal with the internal as well as external problems. What is critical to note that such patterns become cultural reality because over the period of time they proved as the valid methods of dealing with such problems? Culture therefore serves as a point of validation for different beliefs and values of a group. From the perspective of the organizational culture, it signifies the organizational context of various assumptions and behaviors they people depict within their organizational roles. This therefore outlines that people and the organizations as a whole while working within a given industry tend to show certain behaviors and tendencies which can help them to develop a collective common identity. International organizations like Orange need to understand various cultural contexts in order to critically outline as to how they are going to deal with the cultural challenges. Whenever an organizations decides to move to another country, the assessment of culture becomes an important tool because without assessing the culture, it becomes strategically difficult for the organizations to manage the new environment. In a fast changing international scenario, it is important that large organizations not only invoke same cultural values across their different markets but also ensure that their global organizational culture is also adapted.( Johnson, Whittington, & Scholes, 2011).  Orange is a global organization with presence in different regions however it is still predominately a European based organization with little experience of markets outside EU region. What is also important to note that EU region has a homogenous culture and political environment therefore it becomes relatively easier for Orange to easily extend its reach in the region? However, it may face difficulties in countries like China where the overall organizational culture is radically different from any of the EU country including Britain. It is therefore important to discuss and explore both the cultures before making a decision to move into that particular market. Culture of China and Great Britain In order to understand the culture and business perspective of China and Britain, Hofstede analysis will be performed: Power Distance This identifies as to how individuals within a society are considered as equal or not. This also suggests as to up to what extent less powerful members of the organization can actually consider as to how much culture is unequally distributed within the organization. It therefore outlines that overall perception of the individuals working within an organization as to how they view themselves within a given organization. China has a higher power distance index indicating that people actually accept the inequalities and employees working within the organizations actually expect a higher degree of inequality to be prevailing. Within organizations, individuals are impressed with the authority and actually follow the authority of their superiors. A high level of power distance also indicates that Chinese employees do not hold any aspirations which are beyond their ranks. As compared to China, UK is relatively low on the rank therefore depicts a society which believes that inequalities within the society must be removed. Employees therefore believe that they have a sense of fair play and that all employees within the organization should be treated equally and given equal opportunity to actually perform within the organization. As compared to China, Britain organization seems to posse better understanding of the overall situation of power distance and how to manage it. Individualism This defines the degree of interdependence between different members of the society and how collectively society actually views itself and its members. China seems to be a highly collectivist society with people working in the interests of the groups rather than their own personal interests. UK is a highly individualistic society with people is highly individualistic and private in nature. Employees mostly work in their own interests also while at the same time also striving hard to find their unique purpose in life and how they can actually fulfill that purpose. Employees within the organizations therefore focus more on developing their unique talents and skills which can help them to advance their careers and move beyond their current level within the organization. Masculinity and Feminity Masculinity and feminity defines the overall degree of competition within the society and how actually people are driven by their ambitions are not. A High degree of masculinity identifies that people are motivated and ambitious to achieve their goals and are willing to put the necessary hard work behind this. China is a masculine society indicating that there is a greater focus on achieving objectives and remaining focused upon the ambitions and goals. Employees are willing to left their homes to pursue better and more lucrative opportunities in cities and its because of this reason that international organizations will find it easier to locate skilled labor force at really affordable cost in China. Britain is a masculine society too with people is being driven by their ambitions and sense of achieving their goals. Employees actually live in order to work and have very clear preferences for their performance of their work. Uncertainty avoidance This is about dealing with how the society actually has to deal with the uncertain future and indicates the overall level of preparedness of the society in terms of their future orientation. This also outlines the degree to which the members of the society feel threatened by the unknown and uncertain future. China has a relatively low level of uncertainty avoidance indicating that employees may not readily prepare for the change. Implementation of change can be a daunting task for any organization to implement because employees may be less prepared for an uncertain future. It is also important to note that adherence to law in China may be subject to change is largely dependent upon the overall actual situation. UK has a low uncertainty avoidance level too indicating that employees are comfortable with their future and show less level of anxiety towards the changes which may take place suddenly. This can often lead to the fact that employees have relatively higher level of opportunities available to pursue in different organizations. Long term orientation Long term orientation actually deals with the society’s overall struggle in finding its virtues and finding deeper truths. China is a highly long term oriented society with persistence and perseverance as the key for the members of the society. It also indicates the employees tend to invest in long term investments and willing to work with one employer over the period of time. UK on the other hand however is a short term oriented society with focus on the short and quick results. What is critical to understand that British businesses are focused on achieving short term goals and set their overall horizon also short in order to ensure that instant gratification is achieved in quick manner? This tendency of the firms as well as the employees may not offer them a great strategic advantage because in pursuing short term goals, employees as well as organizations may lose sight of what needs to be done in the long term. Focus on future therefore is considered as necessary in order to achieve lasting and durable change during course of organization’s life. The above discussion therefore suggests that if Orange has to make its way in China, it has to actually look for ways to improve its overall cultural orientation in the region. It needs to ensure that its global managers to be position in China need to be more aware of the overall cultural orientation of the employees, what they expect from their managers and how they perceive themselves within the organization. Orange’s global managers therefore first need to combine their global culture with that of their local culture in order to achieve better mix of results. Combining local as well as global culture will help to achieve better cohesion between the two cultures. Bowman’s Clock Diagram for Orange High Low The above diagram indicates that for differentiation strategy, Orange and 3 are in the same position. Both the firms seem to have developed strong focus on the effective customer services backed up excellent technology backbone to support their services. It is critical to note that Orange offers a portal of services to its customers which is provided free of cost. This portal of services is provided along with the regular phone services of Orange thus helping to it make itself as a company with strong focus on delivering more value for its customers. Orange’s differentiation lies in its ability to offer bundled services which not only combine its traditional telephony services but other services also. These services range from music and video streaming as well as fast data services which provide a distinctive competitive advantage to the firm over other players in the market. 3 also offer services which are similar to the services offered by Orange however, they are offered at relatively lower scale. For hybrid strategies where firm offers other services such as telephony as well as content management and media services, it has been in the same category as that of Vodafone. Both the firms are pursuing strategies which are helping them to actually tap into different segments of the market and are not just limited to the overall core business of the firm. These hybrid strategies such as offering bundled internet services for desktop computers and mobile handsets indicate that the firm is actually attempting to capture different segments of the market at once. It is critical to note that Orange also pursues its hybrid strategies by combining some of its cutting edge strategies. It has combined those strategies which offer it competitive advantage with that of other strategies to provide a comprehensive range of services. Financial performance In Millions of EUR (except for per share items) As of 2011-12-31 Cash & Equivalents 6,733.00 Short Term Investments 948.00 Cash and Short Term Investments 8,992.00 Accounts Receivable - Trade, Net 4,905.00 Receivables - Other - Total Receivables, Net 6,070.00 Total Inventory 631.00 Prepaid Expenses 368.00 Other Current Assets, Total 2,474.00 Total Current Assets 18,535.00 Property/Plant/Equipment, Total - Gross 85,468.00 Accumulated Depreciation, Total -61,834.00 Goodwill, Net 27,340.00 Intangibles, Net 11,343.00 Long Term Investments 10,075.00 Other Long Term Assets, Total 4,162.00 Total Assets 96,083.00 Accounts Payable 8,151.00 Accrued Expenses - Notes Payable/Short Term Debt 0.00 Current Port. of LT Debt/Capital Leases 7,459.00 Other Current liabilities, Total 10,562.00 Total Current Liabilities 26,172.00 Long Term Debt 34,192.00 Capital Lease Obligations - Total Long Term Debt 34,192.00 Total Debt 41,651.00 Deferred Income Tax 1,264.00 Minority Interest 2,019.00 Other Liabilities, Total 4,863.00 Total Liabilities 68,510.00 Redeemable Preferred Stock, Total - Preferred Stock - Non Redeemable, Net - Common Stock, Total 10,596.00 Additional Paid-In Capital 15,731.00 Retained Earnings (Accumulated Deficit) 1,246.00 Treasury Stock - Common - Other Equity, Total - Total Equity 27,573.00 Total Liabilities & Shareholders Equity 96,083.00 Shares Outs - Common Stock Primary Issue - Total Common Shares Outstanding 2,633.43 Source: http://www.google.com/finance?fstype=ii&q=NYSE:FTE Current Ratio = (18535)/(26172) = 0.70 : 1 Current ratio of the parent company of the firm is less than 1 suggesting that the firm may not be able to pay its current debts. A ratio of 1:1 is considered as ideal because it outlines that firm has atleast $1 available in current assets to pay off its current liabilities. The current ratio is less than 1 suggesting that the firm may not have adequate current assets to pay off its current liabilities. Profit Margin = 3895 / 45277 = 8.60% Profit margin is 8.60% which may be considered as healthy as the firm is operating in a business where competition is relatively high and there are few but very large players. The overall capital expenditure in this industry is high therefore firm has to continue to upgrade its technology infrastructure in order to ensure that it deliver value to its customers. It may because of this reason that the firm’s net profit is in this band. Total Debt to Total Equity = 41651 / 27573 = 151% Overall debt to equity of the firm is higher as debt as a total percentage of equity is higher. This may also suggest that firm uses larger amount of debt as compared to its equity to finance the operations of its business. This may also include the financing of the asset purchase of the firm also. Since firm has to continue to upgrade its technology, it may therefore be quite plausible to finance the expansion with the debt. Further, since it is also a public limited company with government of France as its major shareholder therefore it may be easier for firm to get more debt. Origins of Orange and its Culture Orange is a French company working in the telecommunication sector and is brand name of France Telecom. France Telecom is the largest telecommunication services provider in the world operating its multiple businesses across the globe. Over the period of time, it has been able to engage itself into different markets outside EU and has carried forward its traditional technological superiority to offer excellent and diversified range of products. The overall range of services offered by Orange is a diversified range of services which is not just limited to offer traditional telephony services but other allied services also. French Telecom is a publically owned organization with strong presence in France. With government of France as majority shareholder, it has grew in size over the period of time from a mere landline service provider to a larger network of telephony and other services provider.( Reuters , 2000)  The overall cultural values of the company are diverse in nature and focus on creating value for its stakeholders. Over the period of time, firm has made efforts to actually develop a culture based upon core values which address to different concerns of all the stakeholders and provide them a platform where they can actually achieve their overall individual objectives also. One of the key aspects of Orange’s culture is its focus on people and providing them higher level of job satisfaction. Employees are mostly happy about the overall work environment within the organization. This indicates that the overall culture of Orange is focused on the employees and taking care of their needs. It has been the organizational philosophy of Orange that before customers it focuses on making its employees happy because a happy employee actually delivers high class customer services. The overall culture is therefore driven towards encouraging employees to be more proactive and innovative in their response to customer needs. One of the key changes in last five years is the redefining of the overall brand identity of the parent company of Orange. Orange is now the single brand of France Telecom since 2006 suggesting that the firm has gone through brand consolidation and has radically changed the way. It now operates its businesses including internet, telephony, television and other corporate services with the same name. Apart from this, the firm has actually gone through strong consolidation phase where it has acquired various businesses. This merger and acquisition activity has been global in nature with firm focused on expanding itself into different related markets. Though there has been no major strategic drift however it seems that the firm is now focused upon acquiring those businesses which are not directly related with the core business activity of the firm. It has recently acquired the firms and businesses which are related with live music streaming on the phone thus expanding its overall base of services offered across different markets but which are related with each other due to rapidly changing nature of the business. Ansoff’s Matrix Ansoff Matrix is a market planning tool for the firms to determine what course of actions they need to take in order to become success in new and existing markets. For the purpose of analysis, this matrix can provide an important insight into how the firm has actually made progress over the period of time and what strategies it has adapted to grow in its existing and new markets. Considering the overall strategies of the firm and its operations in different markets of the world, following Ansoff Matrix is possible. Market Penetration Firm has been acquiring different businesses and expanding its overall range of services offered to its existing customers. It has recently acquired Daily Motion – a video sharing website along with Deezer – a premium service for music streaming. These services are offered as bundled services to the existing customers in markets like UK and other countries of EU and are considered as important steps towards penetrating into the market. It is also important to actually understand the overall dynamics of the industry and how it has changed recently. The introduction of smartphones has radically changed the way firms operate therefore the range of services offered has increased. The competition in the existing markets has intensified to a point where firms are compelled to take on innovative approach to penetrate into the market. This penetration has been due to the acquisitions of different products and services which are not only diversified in nature but are also unique. It has acquired services like hotel and restaurant reviews for local business, music streaming as well as video sharing sites. These acquisitions suggest that firm, rather than going into price war with its rivals, has focused on acquiring new businesses to further penetrate into the existing markets. Product Development Apart from market penetration Orange has also engaged into product development with introduction of new and related services. As discussed above that the firm has been able to penetrate its existing markets however it has been able to achieve this only through constant product development. This product development has been in some unrelated and new markets also such as firm has acquired a music streaming and video streaming services. This product development has been helpful for the firm to introduce new products in its existing markets. It is critical to understand that firm has focused on pursuing these two strategies extensively in its existing markets. The overall use of smartphones have increases manifolds during recent times in traditional markets of Orange therefore It was natural for the firm to actually focus on market penetration and product development in its traditional markets. Change in Strategic Direction There has been a critical change in the overall strategic direction of the firm as it has refocused itself on the acquiring of businesses which are relatively different from the core business of the business. Orange is normally famous for its mobile telephony services however; it has now started to acquire businesses and services which do not normally fall into the overall domain of the firm. This change may have been due to the external changes which have been brought about by the external factors. The introduction of smartphones as well as the expansion of other allied services and applications has actually broadened the overall base of services to be offered. Now smartphones are not used for the traditional telephony purposes however now other services are being offered too due to the overall options and technological advancement provided through new technology. This change in strategic direction therefore may be attributed to the external forces. These external factors have actually been due to changes in the overall customer preferences also. There has been an increase in the trends of entertainment on the go which has actually been forced on the firm. Open ended software innovation has opened the way for many services which has actually made it possible for many small as well as large developers to actually provide good and effective services. IPhone applications such as Spotify has been successful in providing live and offline music streaming to millions of users. As such, smartphones are not just used for the purpose of making and receiving calls. Users are taking advantage of new and innovative products being offered which require high speed internet connectivity on their smartphones also. Orange therefore is not only offering high speed internet connectivity to its mobile phone services users but also other allied services too. Mergers and Acquisition Information technology firms have increasingly become involved in the mergers and acquisition activities. It is critical to note that at global level, telecommunication industry went through strong consolidation phase with large players forming the core of the allied services offered. Many large firms globally have acquired small firms to extend the overall range of their services in order to continue to retain their customers. First, the industry went through a fundamental change where the small and medium operators, in order to survive were more than willing to offer themselves for mergers and acquisition. This has been mainly due to the fact that large firms were already consolidating themselves therefore competing with large firms may not be a wise strategic option for such players. (J. Obrien, 2010)  Most of the mergers and acquisitions at the global level are involved in increasing the overall capacity of the larger players to improve their data services. Data services are based upon offering high speed internet services as well as other support services. Increasingly, firms are looking to strengthen their data services with focus on improving other services such as high speed browsing, movie and music streaming, online games as well as social networking on the go. Global firms however are acquiring small and medium size providers of these services to help them grow. The overall range of services now on offer is diversified in nature. The recent merger and acquisition efforts of Orange are: Daily Motion Orange has acquired 49% of the stakes in this video sharing service and is now one of the major shareholders of the firm. Daily Motion is a French Video Sharing service offering global services and is one of the key competitors of You Tube- the service offered by Google. Daily Motion is a French video sharing service in which users can upload, view and share videos. It is the second largest video sharing service in the world with over 116 million unique visitors each month. Such large user base therefore offers Orange a readymade access to one of the largest user base in its developed markets. Deezer Deezer is a high quality premium music streaming service and Orange has acquired this service with 11% shareholding in the firm. Deezer is also a French based service offering music streaming services with over 22 million users.( Dillet, 2011).  Such large amount of users offer Orange an opportunity to cross sell its products and services and further solidify its position in the market. Deezer offers no advertisements and almost 7 million songs to choose from for its users offer them a range of services which can further engage the users and increase their overall retention with the company for longer period of time. Studio 37 Studio 37 is another acquisition made by the firm which supports TV Orange Cinema package to the customers of Orange. This acquisition has helped the firm to actually look for finding a suitable alternative to make an entry into movies market and also offer streaming of movies to the smartphones of the users. Studio37 has co-produced Oscar Winning film The Artist which is also considered as the first silent movie to win an Oscar after 1929. Voila It is a multi-service platform which is used by the parent company of Orange to actually manage its search engine portal and offer other services. Voila was acquired during 1990s however, French Telecom is not only a shareholder in the firm. Cityvox Cityvox is another set of services which are offered by Orange. Cityvox is a collection of services which offers reviews and information about the restaurants and other small local businesses. Cityvox is a service like Yelp which help customers to review the local businesses and offer their honest opinion about the overall quality of different features. This service is relatively versatile in nature. Cityvox is a French service also. The above acquisitions suggest that firm has been actively engaged into the merge and acquisition strategy and has been focusing on acquiring services which can actually help it to retain the customers for longer. Most of these services seem to be focused on existing customers of Orange a range of services which they can enjoy while using core services of Orange. The overall M&A strategy of the firm seem focused on acquiring services which can help it to retain the existing customers. The above acquisitions indicate that Orange has been quite active in terms of choosing the businesses and synergize them with the existing product portfolio of services. Since the overall switching cost is low in this industry therefore firms have to continue to focus on retaining the customers. Retaining and locking customers through fixed contracts and then offering them value added services improves the overall experience of the users to remain engaged. Strategic Alliance A strategic alliance lies between merger and acquisition and the organic growth pursued by the firm. A strategic alliance outlines a relationship between two or more parties to actually pursue a common goal without actually going into the ownership transactions. It therefore provides a better alternative for firms to actually tap into the strengths of those firms which have better and more efficient technology and efficiency and can help the organization to grow faster. ( Campbell, Edgar, & Stonehouse, 2011).  Strategic alliances can be of various types and can be performed at the global as well as at the local level. It critically depends upon the overall strategic objectives of both the firms to actually determine as into what areas they are looking for to improve their presence and can utilize the strengths of each other. It is also important to note that the strategic alliances are mainly manifested through the formation of joint ventures. Joint ventures are temporary business arrangements where two firms decide to pursue a common objective and become actively involved in the overall achievement of those goals. Firms can enter into equity strategic alliances also where firms actually agree to own part of the alliance and contribute their equity towards it. This is often done in order to combine the resources of the organizations to work towards the achievement of competitive advantage. Non-equity alliances can also be formulated by the organizations in order to achieve their strategic objectives in different markets at the local as well as global level. It is important to note that telecommunication industry is a really diversified industry with different firms involved at different levels of the market. Considering the nature of the industry, it is the strong rivalry among the competitors which can be one of the critical factors for the firm to manage. FT should continue to focus its efforts to beat the competitors by improving its technology as well as create better experience for its consumers. Users are mostly concerned about the quality of voice and internet facilities they receive therefore FT must focus on upgrading its technology to improve the customer experience in order to successfully negotiate with the competition. It has been suggested that overall level of involvement of different players is changing as the market boundaries are changing in the telecommunication sector. Firms are forming strategic alliances to share their bandwidths, telephony networks, data streaming services etc. for example, in UK; Orange has formulated strategic alliance with 3 and T-Mobile to use their network where Orange is not providing services. As such where Orange does not have the services or transmission towers installed, it can use the network of 3 and T-Mobile in order to offer better services to its customers.( Meyer, 2010)  Formation of strategic alliances therefore is one of the business requirements of the industry as in the absence of alliances; no single player in the market may be able to dominate the market for long. Considering the overall complexity of the nature and operations of the industry, strategic alliances are necessary. This industry therefore has a long history of mergers and acquisitions where it has been able to grow itself organically, through mergers and acquisitions as well as through formation of strategic alliances. These strategic alliances however were mainly based upon sharing the technological side of the players where firms have actually shared their technology with each other in order to take advantage of technical sophistication. References: 1. Campbell, D. J., Edgar, D., & Stonehouse, G. (2011). Business Strategy: An Introduction. Houndsmills, Basingstoke, Hampshire, Palgrave Macmillan. 2. Clegg, S. (2011). Strategy: Theory & Practice. Los Angeles, Sage. 3. Dillet, R. (2011) French Music Startup Deezer Gets $130M Fourth Round, Led By Warner Music Group’s Owner Access Industries | TechCrunch. [online] Available at: http://techcrunch.com/2012/10/06/deezer-raises-130-million-series-d-round-led-by-warner-music-groups-owner-access-industries/ [Accessed: 15 Jan 2013]. 4. J. Obrien, K. (2010) Telecom Industry Ripe for Consolidation. [online] Available at: http://www.nytimes.com/2010/03/29/technology/companies/29iht-telco.html?pagewanted=all&_r=0 [Accessed: 15 Jan 2013]. 5. Johnson, G., Whittington, R., & Scholes, K. (2011). Exploring Strategy: Text & Cases. Harlow, Financial Times Prentice Hall. 6. Meyer, D. (2010) Orange To Join T-Mobile-3 Network Share | Zdnet. [Online] Available At: Http://Www.Zdnet.Com/Orange-To-Join-T-Mobile-3-Network-Share-4010018527/ [Accessed: 15 Jan 2013]. 7. Reuters (2000) France Telecom buys Orange for $37 bn. [online] Available at: http://www.financialexpress.com/old/fe/daily/20000531/fco31032.html [Accessed: 15 Jan 2013]. Read More