International Business and Cultural Diversity - Case Study Example

Name: University: Course: Tutor: Date: International Business and Cultural Diversity Introduction The management of different sorts of people from different backgrounds is one major challenge facing majority of top manager all over the world today. Merchant, 2003 in his research on international business states that it is not as easy as it may seem for an individual to accommodate the whole social trend of diversity and value at the same time. He also states that diversity is one of the major factors in today’s expanding business world that impacts on both leaders and employees in companies towards being more sophisticated. It is therefore essential for managers to understand it in order to be able to contribute sustainably to their organizations in this competitive business world. Christian, et al., 2006 research indicates that most businesses are today going globally to seek for more profit. An international business is a business conducting transactions globally. These transactions are in the nature of goods, services, technology, managerial knowledge and capital. Therefore international businesses involve both importations and exportation of the above mentioned business transactions. Business Culture and Diversity Culture refers to a set of believes, values and behaviors practiced in a particular society (Brickson, 2000). In business organizations however, culture is defined as a system in which the staffs share values and beliefs that are connected to the organization’s people, structure and control system to produce behavioral norms (Gonzales, 2009). There are four organizational culture types namely market, clan, adhocracy and bureaucratic hierarchy. Each of this four culture types is characterized by a certain set of shared believes. Taking a global approach, studies indicate that national and ethnic cultures have got influence on organizations and employees well being. However, organizational leaders have noted the importance of having businesses in a global economy. This is following the discovery by more than a third worldwide CEOs who viewed foreign competition as a major contributor to the organizational success (Horwitz, 2005). For this reason, most businesses are going globally. Effective plans have therefore been put in place by different organizations to ensure that they meet the global perspective on human and organizational performance (Christian, 2006). Due to stiff competition in the business field, it is expected by experts that only those businesses, firms, industries and whole societies that meet the international business expectations in the world economy can survive to prosperity. To successfully manage the workforce from different backgrounds, organizations are expected to first of all put to consideration the planning of the human side of the organization which should consist of staff from a multicultural workforce (Shinbu, 2012). This staff panel must be trained to thoroughly understand the group cultures they are supposed to lead as well as organizational cultures (Alderfer, 2008). There are two major classifications that can help organizational top managers to understand diversity and its effects to organizations. These include the information and decision making perspective and the social organization perspective. Information and Decision Making perspective Diversity in an organization increases the level of creativity and decision making process (Ely, 2001). This is as a result of a conclusion reached upon after Ely’s research observing a number of team types which included flight crew and virtual teams. This though observed simply on teams, there is an assumption that an organization is made up of several departmental teams of which if affected the entire organization can be said to be affected in the same manner. According to Horwitz, (2005) cultural diversity would impact on six direct organizational aspects. This includes the ability to attract human resources, cost, innovation, creativity and problem solving, marketing advantages of a diverse work force and organizational flexibility. The creativity and innovation organizational aspects are liable to increase the organizational ability to come up with new products or services that have never existed while diversity creates a rich ground for problem-solving arguments that ends with reaching a better decision (Shinbu, 2012). Studies also indicate that the flexible arguments presented within a diverse society in an international business demands for multicultural management practices. Social Organizational Perspective The social organizational perspective alternative bases its definition for diversity on the similarity and attraction paradigm (Bunderson, 2002). This view point for diversity suggests that people of a common culture are likely to work together more effectively and therefore the theory gives social categories more focus as a means of accessing external networks and a reason for conflict between individuals within a social group (Roman, 2005). The social categories considered in the social organizational perspective are age, race, and ethnicity among others. This theory also recognizes the alignment of individuals along social identity lines to other likely sources of conflicts within an organization (Mullen, 1994). This is because the management is likely to socially treat different social groups differently within an organization. This can replicate to considerable conflict which can lead to a certain degree of tension within the organization and thus loss of efficiency in the organizational procedures (Gonzales, 2009). With tension, employees are likely to create temporary gaps and collective fences which bring out situations in organizations that suggest that diversity is less important in organizational performances. Worse of all, this gaps can go as far as causing individuals and some management personalities to boycott participating in organizational diversity; a step that can cause problems to the social foundation of an organization (Alderfer, 2008). The diversity perspective therefore calls for organizational leadership to carry out a moderating role in social identity and diversity relationships. National Cultures’ Impact on Organizational Performance Marketing National culture has got an impact on the organizational marketing process. This process is activated by different organizations by a thorough means through adoption, and implementation (Mullen, 1994). In international business, the steps to activate the marketing process are affected by five cultural factors. These factors include individualism, uncertainty avoidance; power distance, masculinity, and long term orientation affect the process either positively or negatively. Studies show that there are only two ways to activate marketing concept. These are the cognitive rationale and the intuitive behavioral (Brickson, 2000). Each of this two is associated with a particular set of organizational cultural values. Comparing the two, the cognitive rationale path of reaching the market is straighter while the intuitive behavioral path is indirect, circular and incremental (Bantel, 2009). International firms can however utilize any of the paths to reach their target market now that there has not emerged a universal approach yet. The marketing concept in organizations is however slowed down by multicultural diversity. The top managers, marketing and sales staffs are therefore expected to emphasize the need for organizational profitability if at all the organization has to survive the impact of national cultures’ (Brickson, 2000). Performance Appraisal Different national cultures view performance appraisal (PA) differently. It is therefore not necessary that PA will effect on all employees in a multicultural society (Claire, 2008). In individualist cultures, the employers regard the employee’s performance as a business transaction that can guarantee him or her chance to renew the contract (Alderfer, 2008). This way, the group is basically based on principles of feedback to ensure effective performance and at the same time evaluate the individual employee’s fulfillment with the terms within the contract (Gonzales, 2009). Individualist cultures are basically based in countries whereby the employer’s focus is competition and individual employee’s workforce accomplishments. In such countries, performance appraisal can be used to differentiate between employees and personnel decisions accordingly (Neil, 2001). On the contrary, in collective cultures, organizations offer performance appraisal to increase the employees’ loyalty to the organizations. This is meant to reduce inter employees differences and thus ensuring organizational development (Gonzales, 2009). Management’s processes and techniques are thus supposed to be designed in accordance to a country’s cultural values if at all it has to be effective. Horwitz (2005) observes that cultural differences can cause problems within organizations when it comes to matters of feedback; especially when the feedback provider and the feedback recipient are from different national cultures (Bantel, 2009). Cultural backgrounds are also likely to cause complications when it comes to performance appraisals. These are likely to cause workforce divisions within international companies (Christian, 2006). Research indicate that in case of a performance appraisal, supervisors are likely to be biased when suggesting appraisal measures to the employees. Guzzo (1996) noted that the accuracy of an appraisal by a supervisor from a different national culture towards an employee of another is likely to be lower than what it is supposed to be. This may be due to the reason that the other party may not be aware of the appraisal figures and is not likely to find out. In other words, the supervisor is likely to take advantage of the appraisee from a diverse culture other than his (Brickson, 2000). Besides intercultural organizational workforce, there is expected to be a majority of a certain culture dominating the organizational positions. It therefore follows that an appraiser from a lower power line may find it difficult to consult for an appraisee’s views on how to come up with an appraisal solution to a certain job problem (Claire, 2008). This is because the appraisee is likely to be reluctant to take part in the performance appraisal process for a feeling that it is none of his or her business to be part of the request. The appraiser’s request may also be looked upon by the apraisee as a sign of weakness (Gonzales, 2009). On the other hand, an appraiser from a dominating culture in an organization other than the appraisee may be tempted to focus on personal issues of individuals from his or her culture forgetting their team contributions. This may lead to loosing of path by the appraiser who by listening to personal roles the apraisee colleagues plays in their teams will not help in highlighting their personal achievements which are to be rewarded or not (Roman, 2005). Therefore national cultural differences can result in confusions in relation to performance appraisals and misunderstandings in organizations that can negatively influence the employee-employer relationship. This may come as a result of reactions to the appraisal system used, performances and its rating (Claire, 2008). Corporate Forces towards Intracorporate Isomorphism In multinational businesses, most companies have got mother organizations that give rise to sub-branch companies that may be placed in different geographical world regions. The born company branches however are more likely to take after the mother company’s mode of management system (Claire, 2008). This is besides the cultural influences that may be present in the new field of business; and in the case of trying to regulate its systems to suit the new national culture; the probabilities are high that there still will be significant influences from the parent company on business unit’s management systems (Horwitz, 2005). This tendency to natural uniformity by businesses in different geographical systems may be as a result of; the management of business units being coerced to have similar MCISs to make easy the management’s procedures (Brickson, 2000). Secondly, the unit managers may mimic a successful management system within the same organization. Lastly it is likely that the unit managers may find a template of the way to manage the new organization already in place. They will therefore be required to work along it a fact that will end up the management in the new region being similar to the management of the mother company. National Cultures’ Impacts on Individuals in Organizations Introduction The management of cross-cultural subsidiaries is most challenging to many organizations. For any organizational management to be able to successfully counter this challenge, it must be in a position to effectively deploy its internal management control incentive system (MCIs) to accommodate its counterpart subsidiaries from other national cultures (Alderfer, 2008). The most important factor to be considered by the employees is to perceive the management control incentive systems to be culturally appropriate. It is thus the mandate of the management to make sure that the shared values apply to the entire society in which a business unit operates. The Effects of National Culture to Management Control Incentive Systems Uncertainties There is a high chance that in inter-cultural business societies there are uncertainties caused by certain national cultural background (Shinbu, 2012). This uncertainties can be described by the way these employees feel threatened by situation they find risky to them. For this reason, studies indicate that individuals from high uncertainty avoidance background may prefer a management budgetary incentive system that adheres to evaluation of clearly specified quantitative workload targets and its compensation (Claire, 2008). These individuals are never at ease to perform in organizational backgrounds with performance-dependent compensation systems since this causes them to feel at risk especially when performance appraisals seem to them not to be formulary. Collectivism Collectivism also referred to as individualism is the tendency of certain employees within an organization developing a feeling of not being part of the company. They instead perceive themselves as individuals (Christian, 2006). This is a risky outcome of intercultural effects to employees in an organization since members affected in this trend tend to be concerned with their own personal achievements as opposed to collective organizational team work. These employees mainly focus on their individual rights and independence (Merrchant, 2003). At the organizational level collectivistic cultures group individuals in groups where they tend to see themselves first; being concerned with the welfare of their group’s harmony and equality (Guzzo, 1996). It is therefore likely that in individualistic organizational cultures members prefer individual-performance based managerial incentives. However, the performances in this society are likely to be measured up in reference to cultural backgrounds because of the interpersonal rivalries brought about by personal differences (Gonzales, 2009). In this kind of a cultural society, there is a difficulty in the acceptance of right organizational budgets since individual members are likely to view it as a constraining measures brought up by individuals (Bantel, 2009). This kind of societies, prediction could go either way and it is therefore that control is embedded in individual cultures where self interest prevails. On the other hand, in individualistic cultures the controls which come as a result of hierarchy may not be necessarily effective due to the centrality of harmony, shared values and goal congruence (Neil, 2001). Power Distance In national cultures, power distance refers to how much members in an organization are willing to accept and respect those in power (Gonzales, 2009). Power in organizations is meant to evaluate and determine performance incentives in individual employees in organizational contribution. In multicultural organizations, when the power distance is high, the lower managers are willing to accommodate greater discretionary powers exercised by their superiors in performance evaluation and incentive determination (Shinbu, 2012). Budgetary determination is also likely to be taken positively by people in high power distanced cultures. Masculinity Different cultural backgrounds perceive masculinity differently as represented in their cultural preferences. In some cultures, masculinity represents achievement, assertiveness, and material success while femininity is perceived as a means to maintain relationships, care for members and a representation of high quality life (Horwitz, 2005). In such countries, people believe that masculinity is the core resource for performance, hitting organizational budget, and effective performance evaluations (Claire, 2008). On the contrary, in feminism acceptable country cultures the emphasis of each individual is focused on performance without giving much consideration to who is responsible of what. In these countries, even the issues of monetary performance appraisal are not a big deal in relation to gender (Horwitz, 2005). The managers in such societies prioritize motivation of strong performance based pay incentive which may not be taken positively in higher masculine countries. Individual Reactions to a Management System In international businesses, the already mentioned four cultural dimensions operate simultaneously and can therefore either agree or create opposing effects on individual’s preferences in regard to the system of management in place (Roman, 2005). For instance, managers from cultures of uncertainty characteristics may not act in favor of the ambiguity associated with the discretional bonuses. The degree of dissatisfaction for this appraisals is however dependable on the amount of respect and trust for the superiors (Roman, 2005). Thus in multicultural societies, the avoidance uncertainty and the power distance can link together to bring up either a reinforcing or opposing preference in the employees towards the management system in place (Horwitz, 2005). Researches on organizations also show that individuals with high levels of uncertainties are likely to prefer group performance over individual performance. This is because in the groups, they are likely to share the risks they feel they are faced with within the organization (Bantel, 2009). The formation of these groups will depend upon each individual’s degree of collectivism thus it is clear that national cultures are of effect to individuals preferences to a management system. Team Performances In organizations teams are made for the purposes of creativity and innovations in the process of fighting to maximize organizational profitability (Bunderson, 2002). These teams in multicultural environments are however affected by the team’s diversity in relation to the task the team is to perform. National culture plays a big role in the formation of an organizational culture through the history and the experience shared by the members of an organization and individual behaviors (Roman, 2005). It therefore follows that organizations with wide ranges of differences co-exist in a national culture with team members being more homogeneous than the national culture they represent because of the similarities in the type of education, occupation and socioeconomic sub-groups. These members may however differ in relation to religion, race, locality, and group affiliations within national cultures. In a diverse socioeconomic sub-group the differences in character by different team members explains the coexistence of different national cultural backgrounds in the group (Ely, 2001). These members besides bringing different behavioral aspects to the team, they are also likely to reflect the many other subcultures and identities from their mother nations. It is therefore important that team players should note that the multiculturalism in their groups is not limited to the diversity alone in national cultures (Bantel, 2009). According to research conducted multifaceted diversity is not necessarily a cause of negative impacts on team performances. The cultural differences do not cause team conflicts but the organizational and individual member’s response towards the cultural norms. Conclusion This paper has highlighted some of the challenges encountered by companies due to intercultural differences. The management of people of different languages, religions, cultures, complexity, traditions, gender among others under one organization is one of the most challenging moments a manager in an international business entity can ever go through (Horwitz, 2005). Besides, it requires the manager to be critical and complex in their managerial duties to be able to sail a complex group to success. This is because, different culture come with different influence which are likely to cause psychological influences on personalities which can in turn affect the business process (Christian, 2006). If not well managed, cultural issues can pose high chances of tugging war between groups and thus cause a waste of time for mass productivity and disturbed effectiveness of the working environment. The paper also discussed the difficulty encountered by cultures to accept others cultures. This can be evident through different modes employee to employee behaviors. Therefore human beings feel more comfortable around those who they share similar characteristics. This is because the human nature demands so. Moreover, individuals from different cultural backgrounds exhibit to the environment around social cultural unknowingly that may be of effect to the next person (Alderfer, 2008). Business wise, the organizational management has got a role to ensure that the strategies they use are capable of encompassing all the socio-economical aspects of the native country to allow for expansion of business. The policies that are put in place should be looked at critically to make sure that they accommodate both sides. They should always maintain the big picture of why they had the business go international i.e. it can give rise to massive returns if well managed to overcome diverse cultural differences. References Alderfer, C., & Thomas, D., 2008. ‘The Significance of Race and Ethnicity for Understanding Organizational Behavior’ In C. Cooper & I. Robertson (Eds.), International review of industrial and organizational psychology. Chichester, England: Wiley. Bantel, K., & Jackson, S., 2009. Top Management and Innovations in Banking: Does the Composition of the Team Make a Difference? Strategic Management Journal, 10, 10-24. Brickson, S., 2000. 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Crosslevel Effects of Demography and Diversity Climate on Organizational Attachment and Firm Effectiveness. Journal of Organizational Behavior, 30(1), 21-40. Guzzo, R. A., & Dickson, M. W., 1996. Teams in organizations: Recent Research on Performance and Effectiveness. Annual Review of Psychology, 47(1), 307-338. Horwitz, S. K., 2005. The compositional impact of team diversity on performance: Theoretical considerations. Human Resource Development Review Journal, 4(2), 219-245. Merchant, K, Wim, V., 2003. Management Control Systems. Harlow, England: FT Prentice Hall Mullen, B. Cooper, C., 1994. The relation between group cohesiveness and performance: An Integration. Journal of Personality and Social Psychology, 48, 1173-1190. Neil, A., 2001. Handbook of Industrial, Work and Organizational Psychology: Personnel Psychology. London: Sage Publications. Roman, L.W., & Michael, M., 2005. Handbook of Cost Management. New York: John Willey & Sons Shinbu, K., & Dov, C., 2012. Handbook of Cultural Psychology. Yulin Guangxi: Guiforce press. Read More