BBSB4103

CROSS CULTURAL
MANAGEMENT
Topic 6 Global Organization
LEARNING OUTCOMES
1. Explain how global organizations exist by
adjusting to the local environment;
2. Analyze the importance of cultural
differences and the competitive advantage
created by these differences;
3. Assess nine ways of reducing cultural
differences; and
4. Formulate cross-cultural management best
practices for global organizations.
INTRODUCTION
DEFINITION OF GLOBAL
ORGANIZATION
A multinational corporation (MNC) is a business enterprise
with manufacturing, sales or service subsidiaries in one or
more foreign countries.
These corporations originated in the early 20th century and
proliferated after World War II.
Typically, a multinational corporation develops new products
in its native country and manufactures them abroad, often in
Third World nations, thus gaining trade advantages and
economies of labor and materials.
Almost all the large multinational firms are American,
Japanese or West European.
Such corporations have worldwide influence over other
business entities and even over governments, many of which
have imposed controls on them.
STRATEGIES FOR MANAGING
CULTURAL DIFFERENCES
The following are strategies used in managing cultural
differences:
(a) Ignore the cultural differences
(b) Minimize the cultural differences
(c) Utilize the cultural differences.
However, it is not really easy to find a company which
uses cultural differences to create competitive advantage.
The ignore, minimize and fully utilize have implications
for relationships between headquarters and subsidiaries
as well as for managing conflicting demands for global
integration, local responsiveness and organizational
innovation.
IGNORING CULTURAL
DIFFERENCES
Companies assume that policies and practices developed in
the home country are readily transferable.
The host country subsidiaries feel that they have to maintain
product quality to uphold customer service and technological
standards, and ensure that the corporate culture is shared by
all employees.
Such companies might even create their own training centers
or universities to inculcate the necessary management
practices and behavior, core beliefs and values.
some companies prefer to bring their work culture and ethics
to other countries without considering the cultural
differences.
They will practice their own culture although it goes against
the local culture, hoping that their employees in the said
countries will follow their way.
IGNORING CULTURAL
DIFFERENCES
As you may realize, this ignorance towards cultural differences
may lead the management to implement standardized
procedures in all host countries.
Indeed, there are multinational companies which succeed
although they do not pay much attention to cultural differences.
In fact, their competitive advantage is derived from this
standardized way of operating worldwide.
This may be particularly true in industries which are
engineering-driven, such as oil or construction, or rely on high
technology such as telecommunications.
You need to realize that sensitivity towards cultural differences
and willingness to solve related problems are only considered
important for the purpose of improving communication among
one another.
WAYS TO REDUCE CULTURAL DIFFERENCES
Create a corporate culture
Assign senior management from the parent
company
Provide intensive training to local workers
Implement the polycentric approach between the
headquarters and subsidiaries
Use standardized systems and procedures
Create regional headquarters
Produce global products
Encourage global cooperation through structural
mechanism
UTILISING CULTURAL
DIFFERENCES
The best model to understand how international firms
fully utilize cultural differences is through strategic
alliances and joint ventures.
Each company retains its ownership in the venture,
allows firms to combine their competitive advantage and
seeks alliances to accomplish difficult or expensive
assignments.
Thus, companies retain a local identity by avoiding anti-
trust regulations, and keeping political ties and the
facility to raise capital.
In creating this alliance, one of the most important tasks
to accomplish is to make clear to each partner the
benefits of cooperating.
UTILISING CULTURAL
DIFFERENCES
Boundaries between sectors and nations are
becoming less distinct.
Companies can engage in joint ventures or
strategic alliances with other companies
worldwide, sometimes even with rival
companies.
Both joint ventures and strategic alliances will
result in a new entity, which will make use of
the best cultural aspect from all parent
companies to create its own organizational
culture.
 THANK YOU
"A happy person is not a person in a
certain set of circumstances, but rather
a person with a certain set of attitudes."

Hugh Downs