Background of the Industry
Describe about the Cross Cultural Management for Global Expansion Process.
The merger and acquisition is one of the most significant strategies that the business corporations undertake during the global expansion process. Most of the multinational corporations use this strategy in order to diversify, consolidate or expand their business entities in the international market (Tellis 2012). It is evident that the merger and acquisition process has the significant impacts on the cross cultural management process. Cross cultural management process is one of the major aspects of merger and acquisition process. It is observed that the considerable amount of management researches is pointing out several potential challenges faced by the business entities due to the merger and acquisition process. It is in fact noticed that the clashes found between diversified cultural people are significantly affecting the business activities. According to Li (2013), the internationalised merger and acquisition process does not only deal with the cross border aspects, it has the clear connection with the cross cultural management as well.
The experienced business personnel have presented different definitions about the cross cultural aspects. The effects of cross cultural communication are much visible in the society (Bird and Orozco 2014). For example, it is quite difficult to cooperate with the people who belong to diverse cultures, as their perceptions and languages are different. The language barrier is thus one of the major concerns. However, the study will analyse the case scenario of acquisition process of Nokia by Microsoft. Concentrating on the case study analysis, it is necessary to understand the underlying issues faced during such acquisition process. It is observed that the major issues are created due to the cross cultural management aspects. The barriers signified by the business personnel while sharing ideas and values are the major sources for the situational conflicts (Wang, Hedman and Tuunainen 2016). The companies ought to face several potential challenges due to such underlying cross cultural management issues. The study will thus present the in-depth description of the possible challenges and consequences due to such acquisition process. The literature based study will present the identified cultural dilemmas that may affect the business functionalities. The associated theoretical analysis will also be presented in this study. Depending on such identified challenges and issues, the preferable recommendations will be presented accordingly.
The mobile industry is the fastest growing sector in the world of communication in this current time. It is noted that in this recent scenario, internet is the most preferable and usable media for people worldwide (Williams 2014). In fact, the business companies have become much dependable on the internet privileges currently. The cell phone or the mobile phone industry is generally involved with the manufacturing process of mobile phone handsets. However, in this current business scenario, it is noted that the mobile phone industry has been largely concentrating on developing the technological tools and innovative communication services (Giachetti and Marchi 2016). This fastest growing industry has become much focused on implementing innovative business process and efficient technologies. The progress of the ‘smart-phones’ has brought the drastic changes in this current business world of mobile industry.
The cell phone industry has begun to develop since 1994. The increased amount of the users has made the improvised version of the smart phones that are much demanding in this current era. In today’s time, the usage of the mobile phone has reached up to 182 million in US. The companies like Samsung and HTC started offering the larger-screen smart phones in the recent years in US. On the other hand, it is noted that Apple iPhone started offering the 4.7-5.5 inches screen smart phone, which is known as ‘phablets’. It is important to mention that the market entry of Apple iPhone 6s and iPhone 6s plus has increased the momentum to their favour. It is also observed that these Apple products have now made up overwhelming revenues of 84% in the market of US (Adler and Graham 2016). In spite of the cultural differences, the uses of smart phones have been increasing in every corner of the world in this recent time.
Another most popular smart phone company is Nokia, which has gathered maximum of the customers’ supports in the world of mobile communication. However, it is noticed that Nokia has been facing several potential challenges in their business orientation. In fact, it is seen that Nokia is burning cash. In one year’s time, the company went down with almost 24% of loss (Giachetti and Marchi 2016). In order to mend this loss, Nokia was acquainted by Microsoft Corporation that provided the company a proper support platform (Flood, West and Wheadon 2013). However, it has been noted that the operational costs of Nokia has already consumed almost $1.15bn, which is one of the important fraction of $6.4bn net cash of the company (Adler and Graham 2016). Apart from this consequence, it is also noted that this acquisition process included many other recognisable challenges with the cross cultural factors. This study will be concentrating on such cross cultural factors that have been creating significant challenges for the business. In fact, the recognition of the potential challenges and possible consequences will be determined for suggesting the suitable recommendations in the future business prospects.
The cross cultural management is considered as the involvement of working of the teams for achieving the global purposes of internationalised business. The cross cultural management process has been focusing on the modified approaches that are useful for participating in the competitive business scenario. According to Laamanen, Lamberg and Vaara (2016), the cultural variations are much foreseen in this current organisational scenario. In majority of the cases, it is noticed that the business people cannot memorise such determinants every time while undertaking any operational functionalities. Most of the variations are seen in the manners of addressing people. Employees from different cultural background hold the diversified attitudes, beliefs, and values. Therefore, it is quite obvious that during the team work, the cultural clashes may occur accordingly. It is observed that the foreign business people tackle the mistakes in a very rude manner. The lack of patience and the huge cultural differences are prominently shown in the attitudes and behaviour. The imperatives may vary from culture to culture. Cullen and Parboteeah (2013) implied that cultural imperatives refer to the business customs and expectations, which are either conformed or avoided in order to strengthen the relationships with the associates. In fact, the successful business personnel are aware of the diversified languages, which are necessary for communicating with the people from diversified language background. The entire process is depended on the establishment of the proper interpersonal relationships. However, in spite of the benefits in assembling the people from diverse culture, some of the potential challenges are also signified that have the clear impacts on the business activities (McFarlin and Sweeney 2014).
Challenges associated with cross cultural management in international business acquisition
‘Acquisition’ is the term used for purchasing the assets or shares of other company for achieving a particular business goals or managerial influence. This acquisition process may sometimes not be a mutual agreement, but an assembling process of different cultural people. It is considerably the purchase process of one company by another company or business entity. In majority of the cases, it has been found that one company purchases the entire 100% of the assets of other company during the acquisition process. It provides the authority of ownerships and structuring the business functionalities as per the convenience of the purchaser company. Ali-Yrkkö et al. (2013) defined that the acquisition process can be specified as the ‘hybrid of two independent firms’. The acquisition is signifying the different meaning as ‘resource acquisition’ or ‘knowledge acquisition’. Furthermore, it can be inferred that the ‘acquisition’ process includes two different types of the process, such as domestic acquisition and cross-border acquisition. It is to be specified that the cross-border acquisition involves the companies, which are located in two different countries. On the contrary, the ‘domestic acquisition’ refers to the acquisition process between the companies that are located within a country. In general description, it can be stated that the acquisition process is usually taken over consents to the takeover process (Singh 2014). In many of the cases, it is noticed that the hostile acquisition includes the widespread of the places where the bigger company takes control over the smaller company without the consent.
It is to be specified that the organisations usually undertake the acquisition process for developing the new capabilities, offering the wider range of the brands, expanding their product variations, or increasing the supply and distribution channels. It is even one of the most helpful processes of reducing the costs that are invested for the operational activities (Moran, Abramson and Moran 2014). However, it is noticed that there are several potential challenges associated with the cross cultural management purposes in the international acquisition process. It is noted that during the acquisition process, one company takes the control over the other company, hence, the management functionalities and business objectives changed accordingly. In fact, in this acquisition process, the employees from different organisational collaborate with each other. The collaboration between the people from diverse culture is much recognisable in the international merger and acquisition process. While the employees of one company need to work with other employees of the parent company, the clashes between their business perspectives and values create several challenges for the business process (Minkov and Hofstede 2012). Therefore, it becomes difficult to deal with such diverse scenario. The internal management may face the significant at challenges due to the frequent conflicting scenario. The different mentality, language barriers, and diversified values and beliefs can affect the business process as well.
Due to the enormous cultural conflicts, the employees become more insecure about retaining their job. Moreover, it brings the job dissatisfaction eventually. Therefore, it becomes the significant challenge for the merged companies. Along with the negative impact, the cross cultural collaboration brings more positive influences as well. The collaboration of the diverse culture brings out the innovative business ideas, which are effective enough for the future growth opportunities. While working with the people from different cultural background, the assimilations of the new ideas and skills take place (Jain 2014). When these ideas are aligned with each other, it brings the special significance in the business growth. The international marketing process has been generating the sense of sophistications in this business world. In order to maintain such sophistications, the business companies have been looking forward to identify more innovative practices. With the help of innovative technologies, the management functionalities are restructured by the business management team. Considering such business perspectives, the managers are trying to gather maximum of business ideas. However, it is noticed that fulfilling such purposes is not the easier process (Hakala, Svensson and Vincze 2012). In order to bring the diversified ideas together, the companies end up having several potential conflicts. The mismatch of the mentalities, pattern of works, and attitudes is bringing more situational crisis.
Microsoft has the dominant position in the software service market in this current business scenario. The company provides the best software solutions with the full potentiality. On the other hand, it has been noted that Nokia also has the dominant market in the mobile phone industry. Nokia has been conducting the operational business management since 150 years. The company has already dealt with the manufacturing process of boot, car tyres, and televisions and generated the electricity services as well (Adler and Graham 2016). In the year of 1992, Nokia launched the first digital handheld GSM (Global system for mobile communication) mobile services. It is important to note that Nokia has widespread their dominance in the mobile market industry and take this industry to a symbolic platform. However, the launch of Apple iPhone and other valuable handsets threatened the market position of Nokia more significantly. Recognising such consequences, in the year of 2011, Nokia entered into an agreement with Microsoft for using the windows software exclusively to add more efficiency in the platform of the smart phones. In that year, Microsoft eventually acquainted the mobile phones of Nokia and started manufacturing the smart devices of the business units (Giachetti and Marchi 2016). It also associated the design team and operational team of Nokia. Eventually, it is noticed that such operational process included facilities related to the production sales and other management functionalities. After the acquisition process, Microsoft started manufacturing the Nokia devices under the name of Microsoft and started distributing Nokia Lumia, Nokia X, and Nokia Asha.
However, the problem became recognisable when the company started facing issues with the employment procedure of the internationalised employees. In some of the cases, this process is considered as the ‘organisational fit’. It is to be indicated that the cultural formation is never considered as the random events or an action, which is completely dependent on the founders’ personalities. It is a process that is solely dependent on the reaction of the internal factors to the imperatives of external factors (Flood, West and Wheadon 2013). However, in some of the research studies, it is noted that majority of the information has been signifying the failure of the process much prominently. It has been signified that the company failed to create the significant value more specifically. Considering such problems, it is noted that the managers and leaders have been trying to avoid the merger and acquisition process as much as possible in order to accomplish the pre-determined goals.
Moreover, the cultural clashes have been affecting both the internal scenario and the operational activities of the business. The mismatches of the management procedures and lack of communicational transparency are the two most considerable factors of business determinants (Laamanen, Lamberg and Vaara 2016). It is noted that the employees have been feeling more insecure in working with the other employees of different cultural background. They are somewhat unable to establish the proper interpersonal relationship with the other employees who are culturally diverse. These significant challenges have been affecting their morale, which eventually deteriorates the performance parameters. In fact, it is seen that even though the cultural differences serve as the value creation process for improving performance parameter, it does not create any fruitful effects for the operational process.
Concentrating on such potential challenges associated with the cross cultural management of the acquisition process, it is necessary to keep the focus on the proper theoretical analysis. In such regards, the establishment of the cultural dimension model would be much beneficial for the descriptive purposes. In considering the cultural dimensions, Geert Hostede introduced a theoretical model, which has been revolving around the impact of cultural integration in the business and society. As far as the internationalised business purpose is concerned, it is noted that the cultural dimension model has become one of the most significant facet (McFarlin and Sweeney 2014). The different features associated with such dimensional model are much fruitful for the business purposes. The origin of this model was subjected to the factor analysis which was considered by the large number of population. There are six major dimensions of the cultural management, which have been creating the specific impacts n the organisational operational activities. These dimensions have been explained further:
Power Distance: This particular dimension is focusing on the absolute extent, which is less powerful. In fact, it is also noted that this dimension is also expected to be controlled by the distribution power, which has taken place unequally.
Avoidance of Uncertainties: This dimension signifies the extent to which the associated employees or people do not face much ambiguity. Moreover, they face the significant challenges during the uncertain situations.
Collectivism vs. Individualism: The major focus of this particular dimension is the preferences of the associated people who are dealing with the different consequences. The individual preferences are taken into account in such regards. They usually do not receive proper help in time of crisis. During such moments, these people seek more orientations or knitted network.
Masculinity vs. Femininity: It is noted that the masculinity is mainly accepted as the social assertiveness, achievements, heroism, and materialistic rewards for attaining success (Minkov and Hofstede 2012). The contradiction found in the description of the femininity aspects. This femininity context has been representing the cooperation, modesty, and quality of life, which is determining the cares for the weaker person.
Restraints vs. Indulgence: This dimension deals with the degree to which the focus of the controls over the desires and impulses can be measured. It generally specifies the restrictive attitudes for controlling the desires in a significant way.
Long term vs. Short-term Orientation: The final dimension is suggesting the long term vs. Short term orientation. The short term orientation depicts the strongly inclined motives for establishing the underlying truth. On the other hand, long term orientation pertain the inclination of the specific motives for searching the underlying virtues.
In order to describe the features of these dimensions, it can be inferred that the power distance is specifying the stands for inequality, which suggests the paternalistic ways of management functionalities. The autocratic leadership values are much prominent in such cases. The uncertainty avoidance is specifying the extent to which the members have been undertaking risks or flexibility in a contrasting way (Moran, Abramson and Moran 2014). In fact, it is noted that the uncertainty avoidance is also suggesting the tolerance towards the diversified opinions and behaviours. In this scenario, people tend to avoid risks. Moreover, the presence of consensus became essential.
If concentrated on the western nations, the cultural differences are quite difficult to recognise. However, there are still some of the cultural differences found among Americans and Finns. People from Finland are considerably more reserved whereas the Americans represent the stereotypically confident (Adler and Graham 2016). The differences in the economic structure of these two countries are also much visible. However, in case of the acquisition process between Microsoft and Nokia, it is noted that the companies faced the real challenges due to the cross cultural factors. In this deal, Microsoft purchased Nokia by spending €5.4 billion (Giachetti and Marchi 2016). The senior management of both the companies declared this purchase. The process was the initial stage of removing Nokia from the handset markets. The entry of Apple and Samsung handset smashed the dominant market of Nokia handsets. However, the motto of Microsoft is to evaluate the innovative software in Nokia handsets for participating in competition against Samsung and Apple. After this acquisition process, many of the internationalised employees were appointed for the further operational functionalities (Moran, Abramson and Moran 2014). However, during the collaboration of the diversified cultures, it is noticed that the organisational performance stated deteriorating instead of growing further. In spite of implementing the innovative ideas, these companies faced the huge loss due to the internal conflicts and inefficient work performance. The cultural clashes in the business idea implementation are thus considered as one of the major reasons for business failure.
Concentrating on the above issues and potential challenges, it can be signified that the companies need to focus on several specific recommendations. The following recommendations will thus be preferable enough for eliminating the hazardous situations formulated due to the cross cultural setting.
Establishment of Communication Transparency
The lack of communication is the source of most of the situational conflicts. It is noted that creating the communicational transparency is essential for each of the business leaders. The leaders or the managerial figures need to take the responsibility to look after the concerns of the associated employees of the organisation. It is observed that during the acquisition process, the employees of Nokia and Microsoft were assimilated to perform the business functionalities. Due to such collaboration, they needed to communicate with each other to share the business ideas. However, due to the language barriers and cross cultural traits, the employees face difficulties to cope with each other. It creates the major obstacles in understanding the business requirements, performing the operational functionalities, and accomplishing the business goals. Moreover, due to the lack of communication transparency, the employees cannot even raise their concerns, which often lead them towards job dissatisfaction. Hence, it is necessary to promote the interpersonal relationship by establishing the communicational transparency.
Undertaking the effective leadership Style
The leaders are the major responsible figures for driving the organisational functionalities for accomplishing some certain goals. The effective leadership style helps in gathering the employees together and motivating them to bring the best performance outcome. The assimilation of their fruitful efforts would be much helpful in ensuring the achievement of the organisational goals. Keeping focus on such aspect, it can be recommended that the establishment of the transformational leadership style would be much helpful for strengthening the performance attributes of the associated employees. The transformational leadership style is much helpful in developing the professional and personal skills of the employees as a whole. The leaders need to take the responsibility of making the associated employees aware of the benefits of cultural diversity. Moreover, the leaders need to deal with the employees more efficiently. Especially, when the people from different cultural background collaborate, it is helpful for gathering innovative ideas and values.
It is noted that most of the employees have been feeling insecure regarding their job stability. The internal conflicts are increased more significantly due to such acquisition process. The employees are simply losing their confident, which affects their morale in a significant manner. It can be specified that the efficient efforts and initiatives of the skilful leaders would be much helpful in determining the establishment of the employees’ motivational factors. The leaders need to keep their focus on the situational conflicts, job security aspects, proper monetary benefits, and rewards and recognition programmes. It would be much helpful for the employees to motivate their self-confidence and ensure the capabilities of sustaining in a competitive business environment.
The entire study has been focusing on the evaluation of the cross cultural management process during the acquisition process of Microsoft and Nokia. It has been observed that the Microsoft took control over Nokia for strengthening the competitive position in this recent business scenario. The cell phone or the mobile phone industry is generally involved with the manufacturing process of mobile phone handsets. The emergence of smart phone products by Samsung and Apple smashed the dominant market of Nokia in a significant way. Therefore, it was essential to keep the focus on the particular business strategy that could be beneficial for sustaining in this competitive environment. However, it is noticed that such acquisition process brought the employees of different background together. Even though the collaboration of the culturally diversified employees is bringing the innovative ideas for business innovations, it has become the biggest threat for this acquisition process.
It is noticed that the employees are unable to cope with the other people who are culturally diverse. Moreover, it has been creating the significant impact on the employees’ performance attributes, which are the loss for the business. The lack of proper leadership style and communicational transparency were the major reason behind such uncertainties. The autocratic leadership values are much prominent in such cases. The uncertainty avoidance is specifying the extent to which the members have been undertaking risks or flexibility in a contrasting way. However, the recommended strategy has been concentrating on improving such errors and establishing the proper leadership strategies for the business benefits. Accordingly, it would be beneficial for the company to strengthen their organisational position for achieving the pre-determined goals.
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