How Business Culture Can Influence An Organisation Move Toward International

1 INTRODUCTION

1.1 Culture

[Culture] generally refers to patterns of human activity and the symbolic structures that give such activity significance. Different definitions of "culture" reflect different theoretical orientations for understanding, or criteria for valuing, human activity.

(Wikipedia. 2005)

People from different countries have different cultures. People from the same country also have different families and backgrounds. Therefore their behaviours, attitudes or values, are not the same. What are the reasons for this?

Culture is a body of learned behaviours common to a society which has already developed within a community for a long time (from generation to generation). People have been influenced by their culture since they were born and that is why people (from different cultures) will have different opinion towards the same question or act.

But in management, culture has a slightly different meaning. It can be explained as

the set of policies, values, beliefs and attitudes learnt and shared by the organization's member.

(Naylor, 2004)

In this project, I am going to look at how different kinds of management cultures in managing subsidiaries which are located all over the world can influence the development and growth of an organization in the modern era of globalisation.

1.2 International Business

In the past, when people talked about international business, it only meant that they exported their products to other countries, like: exporting Irish whiskey, produced in Ireland to France where it was then sold. Nowadays, because of the development of free trade, many countries reduce their trade barriers in order to attract foreign companies in to invest to and drive their domestic economy. So now, whenever people think about international business, it is no longer only trading from one place to another - they are thinking in terms of globalisation! This means that as well as having investments, offices and businesses in their own countries, they also act similarly in different parts of the world.

These multinational enterprises often have their headquarters at their home countries and all their other offices, which may include offices in the same country but not at headquarters and those located in other countries, need to report to them on a regular basis.

Culture appears as a "side dish" to most managers irrespective of their ethnicity. Culture pervades and radiates meanings into every aspect of an enterprise.

(Baker, 2003)

Because culture is so different form one person to another, and from one country to another, when an organisation decides to open an office in a foreign country, they need to decide how they are going to manage their employees over there. Should they use the local people or their own people to do the managing? They also need to consider what kind of policies they should use.

There are four main types of multinational enterprises:

1) Ethnocentric

2) Polycentric

3) Regiocentric

4) Geocentric

2 ETHNOCENTRIC ALIGNMENT

"Ethnocentric" means the feeling of one particular group's culture is superior to others.

The ethnocentric approach is a traditional strategy, reflecting the belief that "what worked at home will work abroad".

(Leininger, 1998)

Companies following the ethnocentric approach assume the home country approach is best and that employees from other parts of the world can and should follow it.

(Treven, 2001)

These kind of enterprises makes most of their decisions at their headquarters and then give instructions to their subsidiaries to follow. They apply the same standards and policies which are used in their home country throughout their branches. Also, most (if not all) of the positions in the subsidiaries are recruited from their home countries.

2.1 Advantages:

2.1.1 Easy to control

As decisions are made by headquarters, they only need to monitor their subsidiaries and make sure they achieve the goals. Because all employees in the subsidiaries are from the parent company's home country, it helps to coordinate the international subsidiaries.

2.1.2 Better communication

As all employees use the same language as the parent company, communication between the managers in the subsidiaries won't be a problem and it can ensure that the practices of business and management are transferred easily.

2.1.3 Standardise

The same standards and policies are applied throughout the whole organisation. This makes sure that subsidiaries are all operating in the same way and keeping the same set of standards.

2.1.4 Encourage working performance

Nowadays, people like to travel or work all over the world to expand their knowledge and experience in different countries. If the company which they work for will assign employee to its subsidiaries, it motivates them to work better as they understand that if their working performance is good, they have a better chance to work in other countries and this can give them multinational orientation.

2.2 Disadvantages:

2.2.1 Problems of adaptability

Because the key persons are not from the local country, they may not understand the differences of culture and environment between their home country and local. Their judgments or decisions may not be suitable for the local employees or society and leads the organisation to have a problem of adapting to the local environment and culture.

2.2.2 Conflicts with local employees

Using expatriate employees to staff international subsidiaries can lead to an increase in the number of 'foreigners' being employed at subsidiaries. The differing cultures between the expatriates employees and local employees may cause misunderstanding. Local employees from the subsidiaries may think that parent companies don't trust them and this may have a disincentive effect on local management morale and motivations. This may lead to a high