The paper 'Cross-cultural Management' is a wonderful example of a Management Case Study. The challenge of cross-cultural management has seen many of the world’ s most prolific multinationals fail in internationalization attempts. The failure of Wal-Mart to make it’ s South Korean investment success is discussed as an example of failure due to poor cross-cultural management practices. Wal-Mart and Carrefour imported western marketing strategies to South Korea instead of developing marketing strategies suited to the Korean context. Consequently, the two giant retailers failed as they could not cater for the country’ s tastes and preferences. This paper analyzes the reasons for the failure of the expatriate managers to perform exceptionally in international markets.
It notes that the differences in culture pose serious challenges to the management of employee and customer relationships. Communication is a major issue as managers are required to effectively communicate with people of different English language skills. In these contexts, the manager is tasked with ensuring that his staff understands him and he also understands them. This paper also discusses the preference of different management styles in different cultural environments.
It also discussed the influence of culture on the behaviors, perceptions, and dispositions of a country’ s nationals. It also gives an example of how uncertainty avoidance influences the perception of the relationship between price and quality in the US and South Korean culture. Wal-Mart in South Korea In 2006, the World's largest retailer Wal-Mart announced it was withdrawing from the South Korean market. Wal-Mart announced it would be selling its 16 outlets to local retailer Shinsege after recording a loss of US $9.9 billion (Sung-Hun 2006). Earlier, French retailer Carrefour had withdrawn from the South Korean market unable to deal with the demands of South Korean consumers.
The two retailers consist of a growing list of Multinationals whose multicultural management strategies have failed in South Korea. Most of these businesses have been accused of not understanding the culture and behavior of the Korean people. Nokia, Google, and Nestle were among multinationals whose operations in South Korea failed to impress (Sung-Hun 2006). According to one analyst, the multinationals fail to understand the tastes and preferences of the South Korean people. Therefore most industries in South Korea continue to be dominated by local businesses.
E-Mart part of the Shinsegae store and market chain remains the leading retailer in South Korea (Sung-Hun, 2006). So what went wrong for Tesco and Carrefour? According to Steenkamp (2001), failure to understand and adapt to local tastes and preferences were the main factors leading to the two retailer’ s failure in South Korea. In contrast, Tesco operations in South Korea are extremely successful as the firm has excelled in cross-cultural management. Instead of using expatriates, Tesco South Korea has relies on local managers who have an understanding of local culture, tastes, and preferences (Sung-Hun, 2006).
In effect, Tesco South Korea is the British retailer’ s biggest success in overseas operations and accounts for a third of Tesco’ s overseas sales. Wal-Mart and Carrefour’ s failure in the South Korean Market can be linked to poor cross-cultural management practices. According to Sung-Hun (2006), the two stores concentrated in electronics, clothing, and dry foods, instead of food and beverages the main attraction for South Korean shoppers. He argues that the two retailers marketing strategies were distinctly western and were not suited for the South Korean market.
Wal-Mart and Carrefour also failed to adopt store formats preferred by locals. They retained simple store designs they had successfully used in western markets. In contrast, local retailers invested in eye-catching store displays and employed clerks to hawk goods and attract customer attention through hand-clapping (Sung-Hun 2006). With their poor understanding of South Korean culture, the two retailers could not understand why such marketing strategies were necessary. Consequently, local retailers continued to dominate the market as they had what the customers wanted in a store atmosphere that attracted them. However, Wal-mart and Carrefour were not the only ones facing cross-cultural management challenges in the South Korean market.
Nokia then the leading cell phone maker was unable to make a foothold in the South Korean market (Sung-Hun 2006). Nestle had also failed to convince South Koreans to purchase its flagship baby formula milk. These firms could have succeeded if they had taken the time and effort to understand cross-cultural challenges and issues of operating in South-East Asian countries and Korea in particular. Cross-cultural management challenges According to Moran, Harris, and Moran (2011), management in a cross-cultural environment faces two broad challenges; managing customer preferences and tastes, and managing employee relationships.
Many multinational organizations have established operations in the culturally diverse Southeast Asia region (Warner 2014). This situation means western managers (expatriates) have to be sent to manage the organization’ s operation in a diverse environment. However, expatriate managers face huge challenges in the new cultural environment (Ward & Rana-Deuba, 2000). Often the task of managing in a multicultural environment is so challenging that expatriate managers ask for reassignment. Littrell and Salas (2005) report that half of the expatriates return prior to completing their assignments.
In addition, more than half of those who stay do not perform as well as they performed in management roles back at home. El-Kahal (2001) suggest cross-cultural training for expatriates prior to their appointment for roles in Southeast Asian operations. Expatriates would be better managers if they were competent in communication in cross-cultural settings. Moran, Harris, and Moran (2011) argue that effective communication is a fundamental factor for the success of management in multicultural settings. Both verbal and non-verbal communication in the organization must reflect the cultural environment.
Success in a multicultural setting can be achieved by making sure employees communicate effectively with each other. The multinational organization must understand their workforce is homogenous and thus intercultural elements must be taken into consideration in the organization’ s communication. For example, direct communication should not be used as this may lead to losing face (Fang, 2003). Expatriate managers must ensure their communication is understood and they also understand when their subordinates are communicating with them. Cultural issues and Challenges in managing in Southeast Asia Many aspects of culture are different in Western and Southeast Asian cultures.
Cultural differences can be noted in country values, norms, behavior, fashion, architecture, art, and food (Hofstede 1984). Etiquette is an important aspect of culture that expatriates in Southeast Asia must understand. In particular, the etiquette of exchanging business cards is considerably different in the Asian context (El-Kahal 2001). Asians consider business cards to be essential in establishing and maintaining business relationships. Language is also an important cross-cultural management issue in Southeast Asian countries.
Although communication in English is common in business contexts English communication skills are not fully developed in many Asian nations (Neupert et al 2005). For example, the Thailand education system pays little attention to the development of English communication skills. It is important for a manager to understand and consider the level of English communication skills that his staff has (El-Kahal 2001). Developing soft skills in cross-cultural understanding and international communication is critical for the success of managers who will increasingly seek marketing opportunities for their organization in Southeast Asian countries (Hofstede 1984).
In addition, these skills are critical in successfully managing the multicultural teams that characterize multinational workforces in Asian countries. Being sensitive to cross-cultural issues and expectations is a significant factor that underlines success in multicultural management.
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