“If you look at modern companies, you see that almost anything can be
copied within three months; the only thing you can't copy is the way it's done,
in other words, culture. And it takes years to build up the competencies to
deal with international culture.” (Cees Van De Heijden).
There is now abundant evidence that we are living in an `era of
internationalism' for business. By the creation of multi-country trading blocks
such as NAFTA, EU and the Asia-Pacific Economic Cooperation group, trade
barriers and tariffs are lower now than they have ever been, increasing the
extent to which goods and services are able to flow freely across countries.
Improvements in transportation, logistics and communication systems have
ensured that these trends towards globalization continue and provide
producers around the world with access to the same markets.
“Today's executives must understand that they face foreign competitors as
well as local and national ones.” (Robbins, 1997).
Therefore the number and size of multinational companies, that make and
distribute their services and products from a variety of countries has also
increased markedly.
The globalization of the business environment is also increasing the
competition faced by managers on a daily basis; in fact consumers now have
wider choices and are becoming more sophisticated in their selection of
products and services. They expect new and improved products, superior
service and lower prices.
“We are living in an Era in which we are moving from the Cold War’s
competitive forced technology to an exchange and sharing of technologies
between East and West; from simple cultural dependency to multicultural
sufficiency; from national to multinational free market economies; and from
oligopolistic industries to multiple, optional conglomerate enterprises.”
(Parhizgar, 2002).
The two major forces driving globalization have been market growth and cost
reduction initiatives. If an organization wishes to gain market share,
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expanding operations outside its national borders is one such strategy. But
many multinational organizations have also been motivated to expand
beyond their national borders in order to gain cost advantages over rivals.
The clearest examples of this strategy are the many Western multinational
companies that are manufacturing products such as electrical goods and
textiles in Southeast Asia.
In this 'globalization era', it would be difficult to find a company that is not
affected by global competitive events, considering that most companies
secure supplies and resources from foreign countries and/or sell their outputs
as finished and /or refined from foreign countries and/or sell their outputs
abroad.
Indeed, there are fewer and fewer organizations and managers who are not
influenced by what is happening outside their country and whose behavior
has no impact at all on events beyond their own country.
“Collaborative learning, knowledge sharing and institutional networking with
'others' across borders have become enormously important to policy-makers,
managers and ordinary citizens.” (Holden, 2002; Edwards & Kidd, 2003).
The problems faced by Multinational companies in coping with this process of
globalization are accompanied by an increasing necessity to find cultural
solutions to organizational problems in a world that has begun to resemble a
global village.
The heightened pace of global integration, brought about by technological
and economical forces, suggests that managers will increasingly have to deal
with counterparts from cultures quite unlike their own. Such globalization of
multinational organizations presents management with the challenge of
learning to operate in diverse cultural settings.
Therefore at the present moment it is becoming obvious to everyone that
multicultural behavior as an aspect of business is a competitive advantage: in
fact the magnitude of competitive international enterprises makes it
imperative that producers and consumers develop multicultural behavioral
skills to deal with today’s culturally diverse global market.
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But it is also clear that these skills are very difficult to develop and
understand; anthropologists, sociologists, psychologists, and economists
have documented the fact that people in different cultures, as well as people
within a specific culture, hold divergent value systems on particular issues.
The cultural orientations of a society reflects the complex interaction of
conceptions, apperceptions, beliefs, values, faith, ideology, attitudes,
motivations, expectations, adaptation, and behavioral modification displayed
by its member. (Adler, 1986)
More specifically, there are some important differences across national
boundaries on the nature of the managerial role. In fact, culture has an
impact on the way people communicate and do business with each other.
Many multinational corporations are now becoming aware of these deep
differences, especially after so many big mistakes have been committed and
after experiencing many big financial losses.
For example, Proctor and Gamble entered the Japanese market in 1973,
offering American goods and focusing on American style advertising.
However, by 1987 they had made a loss of $200 million, after failing to
consider cultural differences between the two countries.
This negative trend has been reversed through a better understanding of the
Japanese culture. In fact, they came to understand that advertising that
knocks the competition is offensive to the Japanese, who value harmony and
avoid direct conflict. They also found that product performance is a top
priority for Japanese customers, who place a lower premium on price than
customers in the U.S. Paying close attention to the Japanese culture and
market transformed P&G’s performance. In fact P&G then turned Japan into
its second biggest market with over $1 billion in sales for 1990.
Nowadays it is accepted that Multinational corporations must establish an
integrated global philosophy in which they can encompass both domestic and
international operations; they need to realize that their mission is bounded
with global sourcing, operations, marketing, and sales strategies.
They must identify how to synergize their corporations through multicultural
philosophy in order to be competitive in the international markets.
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This means that they must be prepared to accept the frustration that often
accompanies new ideas and potential cultural problems that may be
confronted in different markets.
It is a difficult process which means in the majority of the cases, the traditions
of what has been "valued" within an organization in the past will have to be
changed and there will be many potential conflicts with new circumstances.
In a cross-cultural context, there is a strong probability that traditional
organizational and business practices, long held values and accepted truths
(organizational culture) will be challenged by those in the new environment.
For example, a new human resource management approach that reflects the
selection of staff from diverse backgrounds or the recognition of diverse
views may be suggested.
When particular approaches have not traditionally been "valued" they are
unlikely to be taken on board; and certainly will not be "valued" until such
time as the "new" practices can be seen to work, and become acceptable
procedures within the firm.
This is a difficult process and additionally Multinational corporations are
widely influenced by external non-market actors.
“Due to cultural differences, misunderstanding or ignorance of different
national conditions and because of the fear of many countries of losing their
national identity and independence, companies in foreign markets are much
more confronted with sociopolitical issues than they are in their home
countries.” (Kohls and Buller, 1994).
The key figures that can face these difficulties and provide a true competitive
advantage are the managers, more specifically the managers who
experience working in different cultural environments: expatriates.
In fact, if managing cross culturally is not easy to learn and to be accepted by
many multinationals enterprises, the expatriates are the only persons who
can experience the cultural differences and then explain and change the
attitude and the culture of an organization.
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“It is believed that substantial competitive advantages will be derived by
those managers who are able to tackle these cultural issues appropriately.”
(Lim, 2000).
A vital issue for a multinational corporation’s success in implementing its
global strategy is linked to its expatriate multicultural behavior adjustment.
One survey of 440 executives in European firms concluded that a shortage of
very well trained international managers was the most important constraint
on expansion abroad.
Furthermore, the expatriates are the only ones who can make the company
successful in their international operations, due to their understanding of the
culture of the host country; they can comprehend how to adapt to reach the
pre-established goals of the company.
Although the starting point of the multicultural training program focuses on
the cultural orientation of the host countries, the ultimate point is to return to
the home country and develop a general understanding of multiculturalism.
“The success of international business operations is frequently tied to the
success of the expatriates sent by headquarters in maintaining essential
communications between headquarters and international operations.”
(Harzing, 2001).
More managers today are spending time working outside their home country
for varying periods, to ensure that the voice of headquarters is heard and
implemented. Most international firms use expatriates in at least some of
their global business positions and may use more in the early stages of new
ventures.
Multicultural behavior and the global environments of businesses are crucial
to every manager who belongs to or leads a multinational organization.
In 1997, American multinationals had 150,000 expatriates stationed abroad,
and 83,000 employees of foreign companies worked in the United States
(Andersen Consulting, 1997).
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With the growth in global business, the success of business operations in all
geographic spheres of operation has become more critical to the success of
multinational firms.
“Since countries often have different business customs and values, this
means that the effective manager must increasingly be able to perform well
in different cultures.” (Hofstede, 1985).
This is a very difficult task; in fact, many fail, and the research literature and
the anecdotal evidence have consistently demonstrated that the failure rate
of expatriates is very high. For American expatriates the percentage of failure
is estimated at 30 to 40 per cent; for Europeans and Japanese expatriates
the failure rate is listed at about 20 per cent (Tung, 1998; Forster, 1992).
This failure can be avoided, through learning the importance of cultural
understanding, the importance of the expatriates in this process and the
difficulty that they face; the multinationals companies should select the right
people for this tough task and prepare them properly.
Interventions include selection and cross-cultural training, expatriation
preparation that teaches employees relevant cultural mental models and how
to take these into consideration in host country interactions and negotiations,
and exposure to foreign travel as part of development or business needs.
Selection systems should also incorporate assessment of candidate's
intercultural effectiveness. For example, openness to diversity (Hartel,
Douthitt, Hartel, and Douthitt, 1999), interpersonal ability, and language skills
can be assessed (Ayoko and Hartel, 2000).
“People by their very nature are not self-sufficient. They need to cooperate
with one another to fulfill their needs. If they are to survive over time, they
must develop social relations and maintain social order. Socialization is a
continuous process throughout life” (Mussen, 1963).
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1.1 The Aims
Starting from the previous considerations on the expanding commerce and
exchange of goods on a global scale, on the need of cultural knowledge and
understanding for every multinational company and on the importance of the
expatriates in this process, the aims of this paper are:
ξ To remind to the reader of the importance for the multinational enterprises
of being conscious of the existence of culture and its implications on
human behavior and therefore on management style.
ξ To consider the role played by expatriates in introducing their companies
to different markets, to underline how problematic their task can be and
the need of an effective selection and training.
ξ To remember to keep in mind the limitations of any standardization of
culture or human behavior, and therefore to stress the importance of
continuous learning and flexibility.
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