What Cultural Challenges Do Multinational Corporations Face With People Management In Some Overseas - Essay Example

Cultural challenges of multinational companies Name Course Lecture Date Contents Contents 2 Introduction 3 Cultural challenges of multinational companies 4 Corporate and organizational culture differences 5 Communication, cultural norms and differences 7 Recruitment of human resources 8 Time and contracts 9 Diversification of products and services 9 Conclusion 11 Introduction Globalization has led to increased integration of the world economy from the various business activities of the immeasurable international firms. Falling barriers to investment and trade and advancement in technology are termed as the primary drivers of globalization. These two aspects have eased the manner in which companies are able to operate and manage their subsidies located in different areas of the globe. These forces have also contributed significantly to the reduction of costs of running international business thus making it more affordable. At the same time, MNCs are facing a lot of competition, and they are also compiled to respond to the various global challenges that they are facing. A great number of firms tend to pursue internationalization as a calculated move. Nonetheless, though expanding internationally can be viewed as lucrative and attractive, managing and operating international business over time has become more complicated due to various aspects such as cross-cultural challenges. Therefore, running and investing business in different oversea countries tend to involve more risk than operating domestically. Among all the risks that are associated with international businesses, cross-cultural challenges seem to be inevitable since human resource are required in almost all the departments of an organization. Therefore, there appears to be an urgent need to manage cultural challenges so as to ensure the eventual success of international organizations. These essay sets out to discuss the cultural challenges faced by multinational corporations about people management in some overseas locations. Illustrations will also be offered to provide support to the arguments made. The discussion will start will the definition of common terms that will be used in the essay such as culture, multinational corporations, people management and national differences. Cultural challenges of multinational companies Cross-cultural management is essential, and it also plays a great role in the success of any overseas operations. Based on Cullen and Parvoteeah 2008, the concept of international business is entirely inseparable from the notion of patterned behavior. This is based on the fact that, culture is usually represented with respect to the shared belief, values, norms and symbols that act as a guide to the lives of people. Thus, international managers need to adjust their strategies so as to be aligned with the culture of their country of operations. Through appropriate business strategy, managers are able to reduce possible impacts and risks associated with cultural differences (Sauvant 2008, 50). Cullen and Parvoteeah 2008 further states that, culture can be classified into three main levels that are the national culture, business culture and occupational and organizational culture. National culture is the dominant culture that exists within the political boundaries’ of an individual country. Business culture, on the other hand, is referred to as the norms, beliefs and values that are related to businesses; that is the most appropriate way of conducting business in the society. Lastly, occupational and organizational culture refers to the norms, beliefs, values and the generally accepted way of behavior of people who are in the same professional group. Organizational culture refers to the necessary understanding that is shared by organizational members (Walsh & Zhu 2007, 116). All these levels tend to affect the interaction and operations of the business and its overall performance. It is also crucial for one to be aware of the definition of MNCs. Based Shapiro 2010; a MNC is a corporation that is engaged in producing and selling of their firm’s goods and services in more than one country. In other terms, it is defined as an organization that attains about a quarter of its firm’s revenue from their operations outside their home country. Thus, MNCs consists of a parent company that is habitually situated in their home country and have other foreign subsidiaries with a high degree of strategic interactions among all the business units. Some good examples of such companies include companies such as the BP, Toyota, Sony, IBM, and coca-cola just to mention some few examples. This depicts that MNCs are made up of companies from all fields ranging from food, automotive and electronics industry (Weisert 2001, 52). MNCs are faced by a number of cultural problems as they try to move to other countries to base their operations. A great number of these problems can be termed as internal cultural problems while the others may be external in nature. With the nature of the global business environment, a high number of multinational companies will always find themselves in a situation that calls for careful decision-making. This is due to the cultural problems that are created by the global marketplace (Tsang 2004, 946). Corporate and organizational culture differences One of the significant cultural challenges that are faced by MNCs relates to the diversity of cultural perspectives that are evident within an organization. MNCs are usually faced with a difficult task and more so when it comes to the development of unified organizational culture within the organization (Dalton et al. 2002, 443). Though co-worker's awareness seems to be high, a considerable number of employees are usually skeptical towards their organizational culture. MNCs have employees who are from different areas of the globe, and this leads to various cultural perspectives in the organization. Thus, the leaders in MNCs need to create a workplace culture that all employees within the organization can adhere to (Margaret 2006, 67). Through a unified culture, the employee within an organization will feel that they can interact with each other in the group irrespective of one's cultural background. Through the unified culture, productivity is likely to improve since employees from diverse backgrounds work together to achieve set departmental and organizational goals. Additionally, concepts of unity and teamwork may have different meaning across various national boundaries. This makes it even trickier for the leaders to develop a company perspective that is unified. Thus, MNCs need to engage regularly, participate in cultural seminars, and this will help the employees irrespective of their cultural backgrounds to discuss their individual opinions and experiences about the culture and how it can be put into practice. Also, the participation of the employees is essential so as to make improvements in the organization. Thus, managers and departmental heads should always encourage the employee in becoming engaged in the development of the organizational culture. The application of wide-scale studies on various cultural values is essential in relation to the nature of organization and management in different countries (Moeran 2005, 55). These need to be regarded as good starting points for employees who are willing to work across cultures. MNCs are faced with the challenge of adapting their organizational culture to the expectations of their overseas markets. All organizations have their already established corporate culture. Irrespective of these, the organizational culture will seem to be more complex and diverse in MNCs. Thus, organizations need to have a clear and concise understanding of the labor culture in the regions that they operate in. The existence of different corporate cultures will have an influence on global communication. At the same time, different regions possess different work cultures and this, they will quickly identify with various channels and messages (Neuliep 2003, 121). MNCs need to be aware of their employee needs and understand the best way in which they can develop communication so as to motivate their staff to cultivate aspects of time management. Based on these, the managers of the corporation are able to revolve their corporate messages for them to align with the work culture so as to achieve maximum productivity. Communication, cultural norms and differences Communication and cultural standards and differences are also a major setback facing MNCs. It is essential that managers who are expected to perform on a global scene to understand and appreciate the ethical and traditional standards of other countries and most especially, the countries they plan to operate in. By doing so, they are more likely to avoid any form of conflicts or misunderstanding when conducting business (Chen 2009). For instance, in some of the Asian countries, bowing is seen as the most appropriate way of greeting as compared to shaking hands. Also, the aspect of sending a woman to do business negotiations is at times considered as disrespectful and or at times as facetiousness. Thus, in instances when the head of a department is a woman, it would be appropriate to choose a junior male to go and make the negotiations. This can be attributed to the fact that, businessmen do not socialize publically with women. An executive in a Bata shoe company shared a story wherein one of their subsidiary female workers would sit on the floor and face the wall when talking to their supervisors (Punnet, B. et al. 1997, 111). From the story, it is clearly obvious that the aspect of the correct way of communicating cannot be judged by the traditional western terms. Moreover, language seems to be essential concepts in people's socialization (Selmer 2004, 1105). The teaching of language courses have over time become more time-consuming and expensive, and a considerable number of people find it hard to learn and understand a new wording. A great number of corporations have turned into employing translators but more often than not, they usually face the problem of wrong or misleading meaning of the foreign language. For instance in the early 1920s Coca-Cola had planned to base their operations in China, and their strategy was to introduce their products with certain English pronunciations. Apparently, the pronunciation seemed to be very complicated, and it had an entirely different meaning from the intended one. Other etiquette concerns relate to eating customs when conducting business dinners, differences in dress and body language, methods of negotiation and bringing and giving of gifts (Wong & Law 1999, 27). Recruitment of human resources The other cultural challenge facing MNCs about people management in global workplaces is human resources. A significant number of multinationals usually faces cultural challenges when it comes to human resources operations and more so in recruiting new and qualified employees in an organization (Dessler 2003, 90). To succeed in the competitive business environment, MNCs are finding it essential to make efforts in attracting, hiring and retaining qualified and diverse employees. Unfortunately, some companies lose skilled and appropriate candidates in the process of hiring. This can be as a result of underestimation and also due to cultural prejudice or misunderstanding or at times the candidate decides not to continue with the interview solely because of some form of behavior that the interviewers depicted during the interview. For instance, in matters related to recruitment, human resource managers in MNCs at times find themselves trying to overcome certain cultural barriers so as to find a qualified individual for positions in overseas countries. At the same time, they may also find themselves lacking talent to fill certain positions. On the other hand, employees may not feel comfortable having to work in other countries even though they are attractive packages linked to these posts. In regard to this challenge, workers need to be trained on how to work in a diversified workplace. By doing so, the employees will have confidence when they are posted in other areas around the globe to work and will always view it as an opportunity to learn and develop their careers. Time and contracts Business people are likely to face a number of challenges in relation to time and its use when taking trips to other countries to attend meetings. Typically, Americans have a culture of arriving at meetings on time and get down to their business, and this is viewed as impersonal or rude to people from other cultures. In countries such as in the Middle East and Latin American, people usually arrive late for meeting and take some few minutes to discuss other aspects before engaging in the business of the day (Vakola & Wilson 2004, 120). This may seem like a difficult task for that business person who places a lot of value on time as money. Additionally, the American culture is also known for conducting business based on contracts. A number of business associates and clients are called upon to sign the binding documents after customers have gathered. On the other hand, there exist cultures which believe in conducting of business based on close-knit networks of family relation and friends. Therefore, in these instances, contracts do not signify or hold a lot of importance as they did earlier (Jandt 2007, 67). This can be a challenging aspect for the American business people since they are incapable of making partnerships in other cultures that have slowly cultivated these relationships for an extended period. In other cultures, contracts are loosely written, and they just offer an easy way out in instances when certain events take place. In instances, when contracts are respected, the integrity and reputation of the business ties are held in high regard (Zhang & Xu 2007). Diversification of products and services Another significant cultural challenge relates to the goods and services offered to the target market. In regard to this, numerous studies have been conducted in relation to purchasing behavior and consumer demand for various goods and services provided by multinational corporations. In international marketing, companies need to make decisions related to one or more variables of the marketing mix. Interestingly the ideas of product adaptation and standardization are not new in relation to global marketing strategies (Noe et al. 2006, 45). Based on Doole and Lowe 2008, product standardization policies is seen as the uniform representation of almost all aspect of a product such as quality, product name, materials and of packaging regardless of the location around the globe. On the contrary, product adaptation refers to when changes and other special modifications are made so as to adjust to each of the markets around the world (Tian 2007, 189). Over the decades, most companies have extended their product offering across boundaries and cultures respectively. Researchers have also noted that in a bid to maintain a favorable market share with the thriving competition in markets and for them to realize profits, MNCs usually faces the challenge of remaining economically afloat. More precisely when deciding the product strategy to use as they venture and strive to survive in new international markets (Taura 2005, 205). It is inevitable to note that, though global marketing may be seen as the only applicable solution in generation of profits at lower costs of production, cultures all over the globe are very diverse and so are the consumer preferences for certain products and services (McGraw & Harley 2003, 89). For example, as Xu 2007 noted, products must in a way differ from the original in various ways. Since culture also differs, suggesting that differences in religion, language, material culture, education are aspects that motivates MNCs to make adjustment in their marketing mix and more precisely to their products. MNCs also encounter problems in trying to develop products and market them in manners that seem to be appealing to a broad range of people in the globe. MMNCs may run the risks of at times developing products and strategies that appear to be contrary to the cultural norms of the customers to whom they intend to market their products to (Hill 2005, 110). Thus, they are faced with the challenge of developing goods and services that have a global appeal. A good example of a company that makes modifications to their products based on location is IKEA. IKEA offers similar product range in almost all the countries they have based their operations. But it is crucial to note that the company adapts the presentation of the goods, layout, home solution and prices based on the cultural and national economic conditions of a country. For instance in China, the store layout mainly reflects the plan attributed to a considerable number of Chinese apartments. Since a considerable number of Chinese rooms have balconies, the stores that IKEA have made have balconies thus making it easier for their customers to associate with the stores at a more personal level. IKEA is also able to alter its products so as to meet the need of their Chinese consumers. When IKEA based their operation in China, they used to sell beds that were Hong Kong sized which seemed to be shorter as compared to the standard sized beds in other areas. After time, they realized that the beds appeared to be shorter for other parts of China, and thus they switched and started selling standard sized beds (Solomon & Schell 2009, 99). MNCs need to make some adjustments in products and services for them to fit well into the market and adhere to the cultural practices as demonstrated by the case of IKEA in China. Conclusion Based on the above discussion, it is clearly evident that MNCs are faced by a number of cultural challenges ranging from recruitment of human resource, diversification of products and services to suit overseas markets, communication, cultural norms and differences and cultural diversity in modern workplaces. MNCs managers need to put measures in place to solve these challenges so ensure the profitability and continuity of their business operations in other overseas countries. In regard to these, they need to choose the best strategy when introducing products in particular markets in that they need to choose between adaptation or standardization or a combination of both. It would be essential to make use of adjustment when people are very sensitive to their culture. In relation to communication, cultural norms, and differences, MNCs need to ensure that they have studied their operation and known the accepted forms of communication and the cultural norms. This will enable them in selling and providing products and services that are in line with the cultural aspect of the distinct society. For MNCs to survive and at the same time thrive in the cross-cultural business environment, they need to respect and acknowledge the culture of their subsidiary and mother countries. If the aspect is violated, the organization may face numerous challenges and issues that may be beyond their rich. When all these challenges are solved, MNCs will have fair grounds to compete with the domestic companies, and this will ultimately lead to higher level of profits for their corporations. References Chen, G 2009, Intercultural communication research, Higher Education Press, Beijing. Cullen, J & Parvoteeah, K 2008, Multinational management: a strategic approach, South Western Publisher, USA. 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