This report aims at understanding the challenges that managers and organisations face in going international, and will offer some recommendations and possible solutions that can be considered by the organisations. The number of corporations that are going international is on a steady increase, as the world is opening up for foreign firms and there is more opportunity to expand to new destinations across the globe. Most times, multinational companies operating abroad face much more difficult tasks than before, due to high competition. A lot of companies form partnerships with foreign distributors in order to expand internationally, but they might not have the necessary resources and international experience it takes to sustain an international presence as the whole process can be a very demanding task, especially on the part of the managers
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Countries of the world are now interacting more rapidly in the globalized business environment of today. Thus the problems involved in managing across diverse cultures affects not only the multinational corporations, but also domestic companies, as a large number of domestic corporations also face multi-cultural environments because they seem to be constantly selling their good or making purchases in the international markets. Some domestic corporations also employ a lot of staff and management who are from different cultures. Thus when managers fail to fully appreciate and deal with the resulting differences in behavior, attitudes and values of those with whom they work or interact, especially in international business transactions, then that would be a major source of difficulties. According to Charles Perrow
“ Interactive complexity is the measure of the degree to which we cannot foresee all the ways things can go wrong. This may be because there are just too many interactions to keep track of. More likely, it is because our various theories are simply not up to the task of modeling socio-technical interactions. Second, coupling is a measure of the degree to which we cannot stop an impending disaster once it starts.” (Perrow, C 2000)
This might be as a result of managers not having ample time, or maybe because it is not physically possible, or due to a lack of experience. The capacity of managers to prevent any surprises that may arise from doing business on an international scale diminishes as the interactive complexity increases. Therefore, as the level of interactive coupling and interactive complexity continues to increase in a corporation. Then the whole system can be seen as an accident waiting to occur. This is what Charles Perrow refers to as “ normal accident” in the sense that errors of operation will merely serve to trigger the events. Therefore, the management techniques and strategies employed to resolve international business problems have to differ from the management techniques for resolving local and domestic problems.
As such mangers are to improve upon their managerial capacity to prevent unanticipated interactions and components, the system has to be firstly simplified, then there has to be and effort to increase the capacity to handle international problems, building in longer response times, and decoupling of major components. Apart from convergent problems which are problems which show promise for solution, multicultural corporations also face divergent problems. Divergent problems don’t promise a solution and tend to lead to more differences. According to Tylor (1977)
“ Culture is complex whole which includes knowledge, beliefs, art, morals, laws, customs and any other capabilities and habits acquired by man as a member of society”. According to this definition, it is easy to know that every nation has different cultural preferences, national tastes and value standards. These factors impact on every part of management in multinational companies, especially on marketing management, human resource management and alliances management. (Tylor, 1977)
Thus, it is very essential for international companies to closely consider the inherent issues of cross-cultural difference before beginning to run multinational businesses
Some of the problems John Terwilick faces, and which most managers of multinational corporations also face, include the fact that he may have a tough time recruiting the right specialists who possess the right skills (including language skills) because of the fierce competition in the private sector and its bonus culture.
Secondly, he might have a big struggle if he tries to turn the technocrats and other related specialists in the company into decision makers.
The international staff may tend not to generate the type of enthusiasm that leads to an adoring followership from the staff. So that even without the specialization factor, the overall people challenges faced are quite similar. The challenges are also intensified by the multicultural mix that is inherent in most international corporations and it is quite tasking to manage and motivate this kind of cultural and multinational creed mix effectively, as change does not come easily within a short period of time. The only way, then to effect change in these organizations is to strongly apply pressure to any institutions in which there is some progress made.
Many foreign organizations also adopt a “ hands off” approach when it came to adjusting or changing the way in which they were previously led or managed. Although there is nothing wrong with a decentralized approach to these problems, international mangers should have a global HR strategy when attempting to create an alignment in a global business strategy. A one-size-fits-all approach will not be feasible in situations involving multi-cultural problems. According to Margaret French, a principal with Mercer’s health and benefits group, which is an international organization, “ culturally, what drives employees and what tools engage employees in the employment deal differs from one country to another” (Margaret French). As such, multi-national corporations must also take a close look at compliance issues in each of the countries of the world in which they have branches. The particular problems that result from differences in the culture environment are the most serious aspect of going international, or in running a multi-national business.
It is advisable to ensure that managers in a corporation engage in cross-cultural training before going abroad to manage any braches of their organisations. This is because “ these days, to climb to the top of a corporation’s headquarters, mangers require extensive cross-cultural experience, and thus, must have experience managing diverse cultures.” (Rodrigues, C. 2001. p. 422) International managers must realise that even though what they do domestically is important, it is just part of the overall target and global mission to improve their organizations
“ It takes a long time for people to let go of perceptions. And what happens is that as you push your product up market – with matching cost and price increases generally you are still actually competing in people’s minds with the cheaper alternatives NOT with the like quality brands at all.” (Hasim Deari; Viktoria Kimmel; Paola Lopez; 2008)
Thus, success tends to be slow in coming. For example, in the car industry, there have been some success stories about brands that made it to the top, but it always seems that the success came slowly and steadily.
“ When competition between players is intense, differentiation of goods increases, consumers become more and more hard-to-please, companies are forced to look for new strategic conceptions, capable of ensuring success in a highly competitive environment.” (Aaker, D. A. 2004)
In the past, corporate institutions solved their problems through analytical methods of breaking down the problems into smaller divisions, fixing components and carrying out an assessment of the expectations of familiar sequences of success or failure, and determining the loss, if any. In today’s global economy, problems of this nature are seen as tame problems. Tame problems enjoy a larger consensus, as most people in an organization reach an agreement on why a particular action should be taken, and also agree about how best to go about doing this.
In order to solve tame problems, systems are developed for gathering and analysis of data, so that a solution can be formulated and properly implemented. Some of these tame problems may not be simple, as some tame problems are still quite difficult to solve. Although these days the use of computers and other business machines have enabled multi-cultural companies and their staff to carry out international business processes faster, there are still some situations in which dramatic failure results because things have actually become more complicated than they were in the past. Managers are increasingly faced with problems of organized complexity, clusters of interdependent or inter-related challenges, or even a whole system of problems.
Some of these problems usually referred to as ‘ messes’ cannot be solved in relative isolation from each other. Messes are sorted out through a system of modeling and methods, and by concentrating on inter-disciplinary approaches and processes. Here, it is better to examine the interaction patterns among various parts, instead of simply breaking the problem down into parts and tackling the necessary components
“ We organize ourselves to sort out messes through such things as cross-functional groups, redundancy and learning organizations. Simply building more freeways doesn’t solve vehicle congestion. A primary danger in mistaking a mess for a tame problem is that it becomes even more difficult to deal with the evolving mess. However, problems persist because managers continue to believe that there are such things as unilateral causation and independent and dependent variables.” (Bradley, F. 2004)
Managers will do well to carry out a business SWOT analysis which will highlight the strengths, weaknesses and opportunities their corporations have, as well as any threats that they might be facing. The SWOT analysis is recommended because it helps managers to ascertain opportunities that can then be exploited, even with very little thinking. Also managers are enabled to eliminate any possible threats to the business by gaining an understanding of the weaknesses of their companies in an international market
In order to achieve success on an international level, mangers have to recognize the gaps that have to be addressed, and identify the strength of skills and perspective among the current leaders in the firm. It also essential to identify the factors that can impede the success of the corporation, and investigate the specific leadership skills required to ensure organizational success.
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What advantages does your company have?
What do you do better than anyone else?-
What unique or lowest-cost resources do you have access to?
What do people in your market see as your strengths?
What factors mean that you “ get the sale”?
Consider this from an internal perspective, and from the point of view of your customers and people in your market. Be realistic: It’s far too easy to fall prey to “ not invented here syndrome”. (If you are having any difficulty with this, try writing down a list of your characteristics. Some of these will hopefully be strengths!). In looking at your strengths, think about them in relation to your competitors – for example, if all your competitors provide high quality products, then a high quality production process is not a strength in the market, it is a necessity.
What could you improve?
What should you avoid?
What are people in your market likely to see as weaknesses?
What factors lose you sales?
Again, consider this from an internal and external basis: Do other people seem to perceive weaknesses that you do not see? Are your competitors doing any better than you? It is best to be realistic now, and face any unpleasant truths as soon as possible.
Where are the good opportunities facing you?
What are the interesting trends you are aware of?
Useful opportunities can come from such things as:
Changes in technology and markets on both a broad and narrow scale
Changes in government policy related to your field.
Changes in social patterns, population profiles, lifestyle changes
A useful approach for looking at opportunities is to look at your strengths and ask yourself whether these open up any opportunities. Alternatively, look at your weaknesses and ask yourself whether you could create opportunities by eliminating them.
What obstacles do you face?
What is your competition doing that you should be worried about?
Are the required specifications for your job, products or services changing?
Is changing technology threatening your position?
Do you have bad debt or cash-flow problems?
Could any of your weaknesses seriously threaten your business?
Carrying out this analysis will often be illuminating – both in terms of pointing out what needs to be done, and in putting problems into perspective.
Strengths and weaknesses are usually from internal matters in a multi-cultural organization, while the threats and opportunities facing an organization often have to do with external factors. This is why the SWOT Analysis is also known as the Internal-External Analysis and so a SWOT Matrix can be seen as a tool for Internal-External matrix analysis. It is also possible to apply this kind of analysis to the corporation’s competitors. As mangers utilize this analysis they will be able to see where, and in what way a firm can ensure that it stays competitive
These days, most businesses are set in a global environment, and the various corporations do not just regard their primary market locations or bases, they also have to take the rest of the world into consideration. Thus, many more corporations are going into multi-national business, scattered all over numerous parts of the globe. Usually the major source of concern for multinational companies and their managers is how to maintain high quality, in an ever-changing global economy
It is quite clear that multicultural organizations and their mangers still find solutions to their multi-cultural problems despite severe bureaucracy ans staff frustration in some cases. Although multi-national corporations are aware of the management areas that require attention, they still have to decide whether to deal with the problems on a decentralized or centralized basis. Multinational companies seek the benefits of doing business on a global basis, but there are still a lot of cultural and market differences to handle. “ Various delivery systems are significantly different. One size can’t fit all. Culturally, what drives employees and what tools engage employees in the employment deal changes from one place to another.” (Towers Perrin research, 2007) It has also been pointed out that “ multi-nationals companies customize compensation and benefit packages in order to meet needs, according to the nature of the markets.” (Towers Perrin research, 2007) After researching and analyzing benefits and compensation in about 26 locations all over the world, it was discovered that the benefits approach, when regionally edited, enables corporations to improve cost-efficiency become more consistent about the compensation practices all around the world, while also maintaining competitiveness through the variation of remuneration and performance pay, based on cultural and regulatory differences.
Negotiations are also a frequent part of international business. International corporations, when involved in business negotiations, will encounter a range of problems, which must be resolved before a successful outcome can be reached. Thus, if negotiating parties are from different business cultural backgrounds, the problems encountered can get much more complicated. A corporation’s competitive advantage can be strengthened in a global market even in presence of problems associated whit the changed environment in foreign countries. The environmental problems and changes plaguing multinational corporations can be divided into four parts, namely political system problems, legal, economic and cultural environment.
These four aspects of environmental change can cause problems for companies operating internationally but the problems that arise as a result of a change in culture environment are the most important aspect of going international.