The Importance Of Cultural Alignment For Multinational Companies

Defining cultural alignment for multinational companies

Question:

Discuss about the Positive And Negative Relationships Between The Success Of Multinational Companies And An Alignment To The Culture Of The Host Country.

A company that operates in several nations but is managed from the home country is known as a multi-national company. As stated by Kostova et al. (2016), these companies derive at least a quarter of their revenue from its business operations outside of its home country. The approach of going multi-national is undertaken by many organisations in order to take advantage of certain benefits that are offered in the host countries. Those countries where a particular company enter and start doing business are called the host countries. These benefits can include cheap labourers, better market opportunities or the reason could be a mere expansion of the company to create worldwide presence of the company (Deresky 2017). When a company enters the host country, the company has to align its business operation and activities to the culture of the host country because the company uses the labour of the country as well as carries out its business in that particular country. Therefore, in doing so, aligning with the culture of the host country becomes an important point of consideration.

The objective of the project can be stated below:

1. To evaluate the factors that creates a negative or positive impact on the multi-national companies when it comes to aligning its business with the culture of the host country.
2. To find out the impact of the culture of the host country on the business operation of the multinational companies.

• To recommend better ways to improve the relationship of the multinational companies with the host countries based on the culture of the host country.

The scope of the project is to find out the positive and the negative relationship between the success of the multi-national company and the alignment with the culture of the host country. The project can come up with better approaches that would benefit the multinational companies in operating in major other countries. The scope of the project is to find out the importance of the culture of a nation and to understand how the culture of a country can actually affects business of an organisation. This will create a clear image how the business activities are carried on in a multi-national organisation and how the culture of a country can actually affect the business activities of an organisation (Deresky 2017). The success of a company is always measured on the economic development of the company and its success rate in the profitability of the company. The ability to succeed in an international market is always defined on the basis of the ability of aligning the business of the organisation with the culture of the country where it operates (Zhang and Harzing 2016). Thus, this particular project gives a clear understanding on how the success of a company can be achieved if the company align its business activities keeping the cultural aspect of the country into consideration. This particular project will highlight the same aspect of the business.

The significance of cultural alignment for business success

In the journal, Kostova et al. (2016) has defined the concept of culture of a country. According to Kostova et al. (2016), culture of a country defines the way the people of the country actually do things. It is the force that is set based on certain rigid set of parameters that are expected to be adhered by the people or the organisations working in the particular country. Culture resembles the religion that is followed by the people or the taste of music or clothing. Culture is a national identity and it has vital role to play in any such activity that is related to the people or the country. If the case of the multi-national companies is taken into consideration, it has to be said that when a company operates in another country apart from its homeland, it is important to consider the culture of the people of the host country as well. It is the only way of understanding the people of the country and how well the particular company can operate in that particular business environment.

As stated by Zhang and Harzing (2016), the world has globalised and in the age of globalisation where the companies are no longer keeping themselves confined within a particular area or country but is going global. In such cases, culture of the host country plays an influencing role in an expressive form. It has to be understood that globalisation has even accelerated and intensified the flow of capital, labour as well as information. In order to homogenising the impact of the globalisation, it is important to cope up with the culture of the people of the particular hot country as well. In the article, Bücker et al. (2014) has highlighted how India and China have grown up to be the hub for hiring employees for the major multinational organisations from UK and USA. Considering the easy availability of skilled and cheap labour as well as the market size and demand, many organisations have been found to expand their business in these two countries. In doing so, these companies have definitely considered the importance and the impact of the culture of these countries. Again, Bücker et al. (2014) commented that if these companies do not abide by the culture of these host countries, the success of the companies remain in turmoil condition.

As commented by Harzing and Pudelko (2016), it has been quite a long time when the only objective of a multi-national company is just to follow the legal regulations of the host country in order to stay immune in the area of operation. There was no such scope of undertaking the importance of the culture that is followed in the host country because this factor does not fall under the consideration of making profitability of the company. When a company expands its business operation overseas or utilises the labourers those are available in the host company, it is equally important to consider the culture of the host country because the culture will have some positive or negative implications on the multi-national company. In the view point of Kostova et al. (2016), culture of a country is its intrinsic property and it definitely impact any activity that is associated with the culture of the country. The number of countries that are going global is very high. Every company or organisation is finding better ways and opportunities to expand its business that would eventually lead to greater profitability of the business (Zhang and Harzing 2016). In such activities, the companies will have to face certain challenges in its business activity; aligning with the culture of the host country is one such challenge that is often faced by many companies in its business operations.

Different motives for a company to go multinational

In order to create a positive impact of the culture of the host country over the multinational organisation, it is important to carry out a detailed investigation of the particular market or the host country and then formulate the business strategy accordingly. It would provide a better opportunity for the multinational companies to operate in the host country. In this respect, Beugelsdijk et al. (2014) added that the expansion of an organisation takes place for various reasons, but culture of a country plays a vital role in overall business activities. The importance of considering the culture of the host country becomes important if the company wants to target the population of the country as their target market. For instance, when a product based company want to expand its business in other countries considering better market opportunities, the importance of understanding the culture of the people or the country becomes very important (Froese et al. 2016). For other reasons like using the labours or the space of the country, understanding the culture of the country might not hold great importance but it help to avoid certain unnecessary problems or conflicts that can occur at later stage of the business activity (Zhang and Harzing 2016). Thus, no matter what remains the purpose of entering into a host country of a multinational company, conducting a detailed research of the market and abiding by the culture of the organisation is important.

The major motives of the multination companies to go global and operate in some other countries are either to use the labours of the particular country or to expand its business in global boundaries. In both the cases, culture of the country holds great importance and the multinational companies are expected to abide by the culture of the host country in order to avoid any kind of problems or issues that might take place while operating in the particular business market. In the view point of Deresky (2017), placing culture at the heart of the business activity will promote integration in the society. The business strategy of an organisation also includes the business strategies. Organisational culture is also a part of the business strategy that helps to integrate the people or the employees of the organisation. Thus, shaping an organisational culture should remain the primary priority at the time of setting the organisational strategy. As commented by Lu et al. (2014), if an organisation operating in another country fails to adopt the culture of the host country, the company has to suffer. The reason behind this is that the employees, market and even the consumers are from the host country and so it is important to go alike with the culture of the country. Failure to this will lead to loss of uniqueness of the local culture that might lead to exclusion of the company and can even result in conflict among the companies and the communities. Thus, keeping a balance of the entire practice of setting the organisational culture by following the culture of the host country is important (Zhang and Harzing 2016).

Aligning organizational culture with the culture of the host country

In the article, Narula and Pineli (2016) have argued that it is not always necessary to align the corporate culture or abide by the culture of the country where the particular organisation works. Keeping this point under consideration, same has provided the example of how Apple Inc. Works in the market of China. It has been pointed out that the Company’s main operation in China is to manufacture the parts of the phones and other devices (Froese et al. 2016). In such cases, the company has a manufacturing hub and the process is carried on there. Thus, there is no such importance of abiding by the culture of the country as its business activities are limited to a particular operation area. However, there should always be a sense of responsibility and adaptability among the organisation in order to carry out the organisational activities in a decent and peaceful way (Beugelsdijk et al. 2014). Failing to which will lead to mismanagement and at times can lead to conflict among the employees and the organisation as well (Harzing et al. 2016). It might be difficult for an organisation to align with the dominant culture of the host country but in the age of globalisation, these problems are no longer considered to be challenging enough and that the organisations have to come up with better strategies to operate in other foreign lands.

Conclusion

The findings of the literature review have lead to the conclusion that aligning the organisation activities of a multinational company with the culture of the host country is a vital component. In fact, in order to carry out the business activities in another country, it is expected to carry out a detailed research on the host country and then aligning the business activities according to the culture of the country. If this is done by the multinational companies, there would remain better chances of survival of the company in the host country and at the same time it would be able to fulfil its business objectives as well.

References:

Beugelsdijk, S., Slangen, A., Maseland, R. and Onrust, M., 2014. The impact of home–host cultural distance on foreign affiliate sales: The moderating role of cultural variation within host countries. Journal of Business Research, 67(8), pp.1638-1646.

Bücker, J.J., Furrer, O., Poutsma, E. and Buyens, D., 2014. The impact of cultural intelligence on communication effectiveness, job satisfaction and anxiety for Chinese host country managers working for foreign multinationals. The International Journal of Human Resource Management, 25(14), pp.2068-2087.

Deresky, H., 2017. International management: Managing across borders and cultures. Pearson Education India.

Froese, F.J., Kim, K. and Eng, A., 2016. Language, cultural intelligence, and inpatriate turnover intentions: Leveraging values in multinational corporations through inpatriates. Management International Review, 56(2), pp.283-301.

Harzing, A.W. and Pudelko, M., 2016. Do we need to distance ourselves from the distance concept? Why home and host country context might matter more than (cultural) distance. Management International Review, 56(1), pp.1-34.

Harzing, A.W., Pudelko, M. and Sebastian Reiche, B., 2016. The bridging role of expatriates and inpatriates in knowledge transfer in multinational corporations. Human Resource Management, 55(4), pp.679-695.

Kostova, T., Nell, P.C. and Hoenen, A.K., 2016. Understanding agency problems in headquarters-subsidiary relationships in multinational corporations: a contextualized model. Journal of Management, p.0149206316648383.

Lu, J., Liu, X., Wright, M. and Filatotchev, I., 2014. International experience and FDI location choices of Chinese firms: The moderating effects of home country government support and host country institutions. Journal of International Business Studies, 45(4), pp.428-449.

Narula, R. and Pineli, A., 2016. Multinational Enterprises and Economic Development in Host Countries: What We Know and What We Don’t Know(No. jhd-dp2016-01). Henley Business School, Reading University.

Zhang, L.E. and Harzing, A.W., 2016. From dilemmatic struggle to legitimized indifference: Expatriates’ host country language learning and its impact on the expatriate-HCE relationship. Journal of World Business, 51(5), pp.774-786.