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Organization Culture Challenges in Multinational Companies

Buy custom Organization Culture Challenges in Multinational Companies essay

Introduction

Because multi-national companies employ staff from a variety of national cultures they face more challenges in developing a cohesive and inclusive organizational culture than domestic companies do. This statement can be proved considering Hofstede’s cultural dimensions theory. Multinational companies are companies operating in more than one country. Companies enter international markets so that they can improve their sales hence boosting their profits, get cheaper source of raw materials and increase their market share (Ajami and Godard 2006). However, these companies face a challenge of developing a cohesive and inclusive organization culture. Organization culture refers to patterns, values and ways of coping with experiences that develop during the history of the organization and are followed by all the members of the organization (Johnston 2008). This essay shows how Hofstede’s cultural dimensions theory explains the cultural difference between staff from different nations. It later presents the argumentation on how multi-national companies face the challenge of developing cohesive and inclusive organization culture. Lastly, it gives real life examples on this issue.

Hofstede’s cultural dimensions theory shows the challenges multinational companies face in managing staff from different cultures. He conducted an IBM survey study in order to prove a comprehensive model arguing people from different cultures of the world tend to differ in six dimensions of value. These dimensions include power, collectivism, uncertainty avoidance, temporal orientation, masculinity and indulgence (Johann 2006). This theory argues that the power distance index measures the extent at which less powerful members of a multinational organization accept and expect power to be distributed to them equally. If the culture in a certain country is endorsing low power distance, then the culture of power relations in an organization is likely to be consultative and democratic (Onsurd 2007). Due to this fact, staff would relate to each other as equals regardless of their formal positions. If the culture of a country has a high power distance, then the employees in a multinational organization would accept power relations that are autocratic and paternalistic. This shows that if multi-national companies employ staff from variety of national cultures, they will face a challenge of forming a cohesive and inclusive culture due to power distance index. This theory also put the culture of a given nation on the dimension of individualism vs. collectivism. If the company is from a nation that values individualism, it will stress personal achievements and individual rights of its staff. The staff of such company is expected to choose its own affiliations (Johnston 2008). If the nation were from a collectivist society,  the staff would act as members of a cohesive group. Furthermore, this theory puts the culture of different nations in a dimension of uncertainty avoidance index. This index measures the extent at which members of the society attempt to cope with anxiety by minimizing any uneasiness that they face. If the staff is from a nation with high uncertainty avoidance, they will tend to be emotional in all their decisions (Turner and West 2010). They always try to avoid and minimize situations with unknown and unusual circumstances. In addition to this, they perform all their duties carefully, systematically, and with adequate planning, following laws and regulations of the society. If the staff were from nations with low uncertainty avoidance index, the employees would be comfortable in unstructured situations or changing environments since they only follow rules that they find suitable. In addition to this, these people tend to be pragmatic and can easily tolerate change. The last dimension of this theory is long-term orientation vs. short-term orientation. If the staff were from a nation that is long term oriented, they would concentrate more on the future rewards, saving their ability to adapt to the environment. If the staff is from a short-term oriented nation, they will concentrate on the values related to past and present such as professional steadiness and respect for company’s traditions (Peipenburg 2011). From the above illustrations of this theory, it is evident that multinational companies face more challenges in developing an organization culture since different nations have different cultures.

There are several arguments that could support the fact that since multi-national companies employ staff from a variety of national cultures, they face more challenges in developing an organization culture than domestic countries do. In multinational companies, employees interact with people from different races and nationalities. It becomes difficult to develop a form of communication that is accepted and understood by all the cultures (Burek 2010). This is because a form of communication that is accepted in one culture may be considered offensive in another culture. In addition to this, the language of communication between the staff may be different since they come from different countries. International companies can solve this problem of communication culture by training all their employees on one language that they would use for company communication (Wiseman and Shuter 1994). Another challenge that multi-national companies face due to staff originating from different countries is international management. A manager should make decisions based on a country’s customs and values (Mead 2005). The labor laws of that country may set a certain minimum wages and thus the manager cannot pay the salaries to the company’s staff that are below threshold set by the labor unions. It would also be difficult to form common policies that are acceptable by staff from different cultures. The multinational company could solve this challenge of international management by training the staff from different cultures on the management policies and practices that the company will be adopting. In addition to this, it should train the employees on different management styles in different countries so that they become culturally diverse and thus be able to work in different countries (Gooderham and Nordhaug 2003). It is also a challenge to conduct international marketing in multinational companies since the members of the staff are from different countries hence they have different cultures. This is because different nations have different methods of studying consumer behavior and conducting market research (Okazaki 2012). In addition to this, different nations target different groups of consumers and have different advertising strategies. Because of this fact, it would be difficult to conduct international marketing. Multinational companies can solve this problem by training the employees on advertising strategy that they are to adopt considering the market of the country that they are conducting their operations in (Czinkota and Ronkainen 2007).

There are several real life examples proving the challenges the multi-national companies face when they employ staff from different cultures. According to the research, in the year 1994, Peugeot Motor Group invested in Guangzhou and lost approximately $362.5 million dollars within a period of three years since they did not succeed in intercultural management between employees from China and France. This was caused by the fact the expatriate managers were not keen on knowing the culture of China (Wang 2009). The importance of knowing the cultures of different countries can be proved by the fact that Walt Disney’s Mickey Mouse has invested in Japan where it is called Tokyo Disney Land. The reason for the success of this company is that it was keen on learning the culture of the people in Japan and went ahead to implement the cultural values of the Japanese people in their operations (Miroshnik 2002). Dell Company faced difficulties in recruiting employees in India since they had different career goals and cultural values with the company (Hitt and Hoskisson 2009). Furthermore, the research showed that people in Japan would have no problem buying a shampoo product with a picture of a Japanese girl but people in Russia would have a problem buying this same shampoo with the girl. It would thus force the marketing managers in Russia to change their marketing strategies.

Conclusion

In conclusion, it is evident that because multi-national companies employ staff from a variety of cultures they face more challenges in developing a cohesive and inclusive organizational culture than domestic companies do. These challenges can be explained using Hofstede’s cultural dimensions theory. In this theory, Hofstede argued that people from different cultures of the world differ in six dimensions of value that include power, collectivism, uncertainty avoidance, temporal orientation, masculinity and indulgence. There are several arguments showing the challenges that multi-national companies face due to employing staff from different nations. These challenges include implementing cross-cultural communication, managing the international company and conducting international marketing. These problems could be solved by training the employees on different cultures of the countries that the company is conducting its operations in. Lastly, I have found life experiences on these issues. Peugeot lost a lot of money because of failure to manage cultural differences between Japan and China.

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