How Can MNCs Become Better Managers of Cultural Diversity - Research Paper Example

How can MNCs become better managers of cultural diversity? [Name] [Professor Name] [Course] [Date] Table of Contents Table of Contents 1 Introduction 2 Theoretical Review 3 Organizational examples 7 Managing Power Distance across functions and activities 7 Providing job security and stability to minimise Uncertainty Avoidance 8 Give rewards in accordance to Individualism Versus Collectivism 8 Compliance with masculinity versus femininity perspective 9 Manage diversities through teamwork and involvement 10 Management of adaptation to cultural differences 10 Strengthening cross-cultural training 11 Discussion 12 Suggestions 13 Conclusion 14 References 15 Introduction The maturity of economic globalisation has meant that more multinational corporations (MNCs) emerge into prominence. At the same time, cross-culture operation has also emerged as an enormous impediment to growth (Crowley-Henry 2005). Hence, with the globalisation of the world trade, varied businesses have recognised the fact that it is crucial to harness the skills and expertise of a diverse workforce in order to compete effectively in the global economy. Indeed, within the context of knowledge-based economy, human resource has transformed into the most critical strategies resource for businesses on an international scope. Employees from different cultures have differing priorities and values once they make and execute decisions. Such differences have great influence on how the managers need to handle human resource management in virtually all spheres of work (Chen 2005). Still, employees are expected to become greatly efficient in improvement of own capabilities and in taking part in the management system of a company. Still, research data shows that most MNCs fail when it comes to cross-cultural communication among the personnel from a range of cultures (Crowley-Henry 2005; Pongpayaklert & Atikomtrirat 2011). Based on this backdrop, this paper explores how multinationals companies (MNCs) manage cultural diversity within the context of Tesco and Sainsbury, two leading UK retail chains and their expansion to Asia. Theoretical Review Several definitions have been assigned to the word culture. According to Hofstede (1983), culture refers to a collective programming of the mind that tells between individuals of an organisation from another, and comprises the system of values and views. From the definition, it is easy to conclude that a culture may be learned since it is not intrinsic or natural, and that individuals within a specific culture behave predictably and uniformly. As a result, in a single cultural group that certain habits may exist, the views and behaviours are distinctive to all members (Pongpayaklert & Atikomtrirat 2011). As stated by Crowley-Henry (2005), individuals learn from the culture while establishing themselves into becoming members of the group. Still, they will only get disposed to experience the insightful impact of the values of communities and beliefs once they get to communicate with individuals from other cultures. Due to this, culture is specific in one group although it is still learned. In the increasingly globalised economy, Chen (2013) suggests that culture can be determined based on the context, such as particular social, economic and political environment. Hence, the international cross-cultural management has to be approached from three different perspectives. These include Cross-national comparison (CNC), Intercultural interaction perspective (IIP), and Multiple cultures perspective (MCP). In CNC, the key idea of the concept is that a nation is in itself a culture. The theory was initially used to refer to the political aims after the Second World War in 1945, at the time when the United States became the ultimate world super power and increasingly spread its ideologies into other parts of the world (Chen 2013). For instance, within the context of British retail chain Sainsbury, the manager’s key task in Singapore would be to describe and identify the divergent cultures that are stable variables. Essentially, therefore, regional and national clusters that affect the culture, and which can be categorised and researched, exist. In the concept of IIP, the key driving force is globalisation, which in this case is the creation and expansion of MNCs. In retrospect, the definition of culture is assigned at the organisational level and is based within the context of national cultures (Chen 2013). In the case of Sainsbury, despite being headquartered in Britain, where British cultures dominate, the company operates in other countries, such as Singapore and China. Hence, there are many nationalities within Sainsbury. To this end, intercultural interactions will tend to emerge in all spheres of work. To this end, IIP emphasises the need for intercultural communication. In such situations, Ghemawat and Reiche (2011) suggest that individuals with divergent cultural background will tend to construct socially a new organisational-level culture. Therefore, the approach is focused on the extent to which intercultural interaction will affect Sainsbury’s operation in its overseas operations. On the other hand, the MCP concept is espoused as a paradigmatic change for cultural issues, due to the changes within the new workplace realities. To this end, Chen (2013) suggests that the internet has accelerated globalisation and created multinational teams that work for 24 hours around the globe. Towards this end, the effect of politics is characterized by the fact that personal and regional identities grow stronger. Hence, intercultural communication is crucial for an MNC (Chen 2013). Conversely, Chen (2013) suggested the levels of culture from the national to business cultures, as well as from the business to organisational and occupational culture in consistency with Hofstede’s (2003) elaboration of the divergence in organisational and national culture. Figure 1: Levels of culture in MNS as conceptualized by (Pongpayaklert & Atikomtrirat 2011) Hofstede’s Four Dimensions theory of national cultures provides critical perspectives for understanding and analysis of cross-cultural management. Hofstede (1983) suggested four indicators that highlight national cultures’ diversity. These include Individual and Collectivism, Masculinity versus Femininity, Uncertainty Avoidance, and Power Distance. According to Hofstede (1983), the concept of power distance implies the concentration of power within organisations or the degree to which a society is willing to accept unequal distribution of power. In cultures with low uncertainty avoidance, employees tend to share the general feeling of safety, and would therefore tend to prefer relaxed attitudes towards life, as well as be encouraged to pursue some adventure. In respect to individualism versus collectivism, individualism depicts a society in which individuals tend to have loose ties, while collectivism depicts a society where people tend to keep strong communal ties. Lastly, in feminist cultures, greater emphasis is placed on pursuing high quality life and effective interrelationships (Mooij & Hofstede, 2010). Organizational examples Effective international management of MNCs calls for greater insight into the different cultures. For instance, since Tesco has expanded to Poland and China, the different cultural dimensions in these countries should be adopted. Managing Power Distance across functions and activities Soares et al (2007) suggests that Hosftede’s power distance starts off from the firm’s external boundaries, such as marketing, and moving progressively to the more internally-oriented functions (such as human resources). Indeed, organisations and marketing are critical in this sense, since they are the areas where the human culture is significant; as marketing would require deeper insight into the customers’ behaviours, while the organisations would require deeper insight into the diverse employees prevent cultures. Whether the culture is small or large power distance, Mooij and Hofstede (2010) suggest that it is bound to be reflected by how individual employees value power. This is likely to affect how British retail chains -- such as Tesco and Sainsbury – operate in China, Singapore and in Poland or Finland. Power distance in both Singapore and China is larger than that in UK, Poland and Finland. In China for instance, the Tesco and Sainsbury’s employees are likely to value high status, hence managers are likely to demand higher priorities and privileges than in Finland and Poland. Rutledge (2011) suggests that Power Distance in a company would be beneficial for Tesco and Sainsbury’s managers in organising their employees although not proper for building up a harmonious relationship between the employees and the managers, or even in promoting the creativity and learning of the employees. Hence, for the companies’ UK managers, it would be critical to shorten the power distance if the management goals have to be attained. Providing job security and stability to minimise Uncertainty Avoidance In any society, Ghemawat and Reiche (2011) suggest that individuals will tend to feel particular threats once they experience particular ambiguous or uncertain circumstances. Therefore, organisation should seek to prevent such uncertainties from happening. Different national cultures demand different ways of steering clear from uncertainty. In cultures with low uncertainty avoidance, employees tend to share the general feeling of safety and would therefore, tend to prefer relaxed attitudes towards life, as well as be encouraged to pursue some adventure. In comparison to high certainty avoidance society, employees in low uncertainty avoidance tend to have a common sense of motivation and urgency to work hard. Indeed, most Asian counties, such as Singapore, China and South Korea tend to have stronger uncertainty avoidance. In China and Japan, for instance, Tesco and Sainsbury’s employees are predisposed to prefer long-term employment opportunities, hence are likely to show extreme devotion to the companies (Beechler et al 1996). In such situations, Tesco and Sainsbury would have to provide employees with a highs sense of job security. Additionally, they would have to increase the stability of the human resources management policies to lessen uncertainties. Give rewards in accordance to Individualism Versus Collectivism In respect to Hofstede’s four dimensions of culture, Hofstede (2003) defines individualism as a society in which individuals tend to have loose ties. In such situations, Hofstede (2003) adds that each employee within an organisation is expected to look after himself, as well as his immediate family. On the other hand, collectivism depicts a society where individuals tend to integrate themselves into the larger cohesive groups, within absolute loyalties (Rudenstam 2011). Chen (2013) argues that the relationship between collectivism and individualism corresponds to the personal powers and rights within the society. In the case of British owned Tesco and Sainsbury, the UK is an individualism society that places emphasis on individual freedom, in addition to personal achievement. In this case, Tesco and Sainsbury would motivate employees by encouraging competitions or giving them rewards for their preferences as an effective human resource management strategy. The strategy would however, be different for both companies in Singapore and China, which are both collectivism countries that exhibit high power distance. In the case of China for instance, the society stresses on hierarchy while the Chinese give high regard to collectivism, even within the organisations (Baksh 2011). In such situations, Tesco would have to reward or give remuneration based on how hierarchy or how power is distributed based on employee seniorities and levels. Compliance with masculinity versus femininity perspective Boonghee et al (2011) argues that the prevalent socialisation pattern is where men tend to be more assertive, and where women tend to be more nurturing. In such situations, masculinity culture attempts to realise success and achievement as the priority. In feminist cultures, greater emphasis is placed on pursuing high quality life and effective interrelationships. For instance, Poland and Finland tend to have feminine society that gives high regards to moral and ethical harmony. In Japan and China however, the predominant culture is masculine (Baksh 2011). Hence, the managers would tend to make decisions while disregarding discussions and cooperation with the workers. This implies it would not be beneficial for the employees to join management efficiently. Manage diversities through teamwork and involvement Tanavut et al (2009) suggests that focusing on teamwork can build effective relationships within the department. Additionally, it can promote identity within the departments of an organisation. According to Tanavut et al (2009), organisations that have developed strong culture or involvement, where all workers are developed, encouraged, and empowered can be perceived as managing workplace diversity more effectively compared to those that have weaker involvement cultures. Still, the national cultures of countries can still affect teamwork and perception of management as established by Tanavut et al (2009). Hence, Hofstede’s Four Dimension of culture should still be applied to gain insight and manage cultural diversity. Management of adaptation to cultural differences To manage cultural diversity, organisations need to operate in ways that are congruent with their cultural contexts in order to improve business performance. Hence, MNCs should not overlook management of cultural diversity (Ghemawat & Reiche 2011). Indeed, MNCs need to vary their operating practices to fit the diverse cultures in various locations. As the MNCs pushed further variation in a range of locations and complementary strategies, such as decentralisation of decision-making, as well as indigenisation of the in-country management teams, which support the MNCs capacity to be responsive to the local situations. However, through simply diversifying practices in all its subsidiaries to maximise congruence and to push for significant decision-making authority down to the country level may not be exactly a good idea since the result may bring costly complexities. Therefore, MNCs need to become extremely localised such that it provides all the potential international synergies and to performs no better than a range of local firms. Hence, managing adaptation to the cultural differences entails finding ways of limiting the need for managing diversities (Caligiuri and Stroh 1995). Strengthening cross-cultural training Organisational training is, according to Chen (2013), an effective means of ensuring that the employees in the subsidiaries abroad to understand the corporate and local cultures in order to resolve cultural diversities. For instance, cross-culture sensibility training is a crucial way of training, particularly for the non-indigenous employees. To this end, Chen (2013) suggests three forms of cultural training: culture education, environment simulation, and cross culture study. Culture education entails training of the employees on local cultures. For instance, at Sainsbury, the company uses experts of culture education to initiate UK culture, in addition to the company’s operation system. In China, the objective of culture education is to enable Chinese employees understand clearly what they think and why they should think so. Environment simulation entails simulating Sainsbury’s operation environment. Using this strategy, the likely problems and difficulties are simulated to enable the employees to learn how to deal with such situations and difficulties while working abroad (Caligiuri and Stroh 1995). On the other hand, cross-culture study entails the processes through which Sainsbury organises its employees, as well as studies the cultures of the host country and its influences on the thinking processes of the managers, in addition to their management styles. The objective is to enable the employees understand the cultures of the host country and to improve their capacity to resolve cultural diversities. Discussion As established, divergence in national cultures is mirrored in the business values and decisions. Still, the underlying question is how the national cultures can be leveraged to ensure organisational development and better decision-making. In answering the questions, Chen (2013) suggests that improvement of the congruence or alignment between the cultural contexts and the management practices generates concrete business benefits. In the present-day globalised economy, social values have changed into diversity, uncertainty, and individualism. This also implies that employees within Sainsbury would be less influenced by their national cultures. In fact, data from Sainsbury shows that employees at the company tend to be open to the new opportunities to working collaboratively in order to create new cultures (Ghemawat & Reiche 2011). This approach permits the transformation into the non-national cultural groupings that develop at the business, functional, regional, and organisational level. Caligiuri and Stroh (1995) argue that such a range of cultures at several levels means that employees would have partial identities. To this end, an employee of British origin deployed to work at Sainsbury’s subsidiary in China is likely to encounter paradoxical and conflicting cultures (Campbell 2014). According to Hofstede’s (2010), national cultures relate to the deeply rooted values. In his view, the national cultures are learned at the outset, deeply rooted and transform slowly through generations. Still, Hofstede (2010) points out that the divergence between the national cultures is chiefly established in the deeply rooted values of the individual cultures. On the other hand, Hofstede (2010) posits that organisational cultures are made up of the broad guidelines that are deeply rooted in organisational practices learned on the job. To this end, such cultural values are likely to shape how individuals within Chinese subsidiaries of Tesco or Sainsbury expect their organisations to operate, as well as how the leaders in the Tesco or Sainsbury’s subsidiaries should behave (AbouElgheit 2013). Hence, while hiring individuals from different backgrounds in China or Singapore, Tesco or Sainsbury are likely to gain advantage from establishing definite organisational cultures (Campbell 2014). Since the national cultures characterise the values of a range of cultures, it is possible to argue that the organisational culture are inherent in the practices between different companies. For this reason, the organisational cultures of Tesco or Sainsbury are likely to be uniform across the UK borders, even as the deeply rooted values of the diverse employees in different countries, the companies operate, would still exist. To conclude, the employees from other national cultures, in this case UK, Singapore and China, should be assimilated into the prevalent organisational cultures of Tesco or Sainsbury. Suggestions Based on the implications of Hofstede’s four dimensions, several suggestions are made to manage the adaptations to cultural differences. Hence, for MNCs with headquarters in UK, it would be critical to shorten the power distance if the management goals have to be attained in Asian market. Nations with low power distance tend to have higher innovation capacities that may influence an organisation’s thinking regarding alternative locations for work that require high levels of innovation. In this case, MNCs would have to manage their marketing and product development in order to influence national cultures on the products preferred by the consumers. In expanding to countries with low stronger uncertainty avoidance, UK companies would have to provide employees with a highs sense of job security. Additionally, they would have to increase the stability of the human resources management policies to lessen uncertainties. UK is an individualism society and companies expanding to collectivism societies would have to reward or give remuneration based on how hierarchy or how power is distributed based on employee seniorities and levels. In expanding to countries with high masculine cultures, the managers of UK subsidiaries would tend to make decisions while disregarding discussions and cooperation with the workers. Conclusion As established, divergence in national cultures is mirrored in the business values and decisions. Still, the underlying question is how the national cultures can be leveraged to ensure organisational development and better decision-making. In this regard, the congruence of alignment between the cultural contexts and the management practices should be established to generate concrete business benefits. MNCs should therefore initiate participative management to improve the profitability in the low distance cultures and worsening it in the high power distance culture. Making quick fixes to improve an MNC’s profitability in the more short-lived oriented cultures, although worsening it in the more long-term oriented cultures, would be critical. Further, use of merit-based reward and remuneration policies to improve profitability in the greatly masculine cultures and reducing it in the more feminine cultures is also crucial. On the other hand, stressing on individual contributions to improve profitability in cultures that are more individualistic and worsening it in more collectivist cultures is also critical. References AbouElgheit, E 2013, Tesco: Losing Ground In The UK Case Analysis, ISM - International School of Management Angouri, J 2009, "Managing Cultural Difference and Struggle in the context of the Multinational Corporate Workplace: Solution or Symptom?" 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