Chapter

The Strategies for

Managing Across Culture

Lecture Provided By-

Nadia Newaz Rimi
Lecturer
Dept. of Management Studies
One of the major problems of MNCs is a natural tendency to do
things abroad the way they are done at home. This is commonly
known as globalization VS national responsiveness conflict.

Globalization refers to the shift toward a more integrated and

interdependent world economy. In other words globalization is the
production and distribution of products and services of a
homogeneous type and quality on a worldwide basis.

On the other hand national responsive is the need to understand the

different customer tastes in segmented regional markets and respond
to different regional markets and different national standards and
regulations imposed by autonomous govt. and agencies.

The strategy is explained conceptually by following diagrams-

High 1. Globalization 3. Mixed
- Price completion - Integrated prod.
- Acquisition & merger - Diff. Marketing
- Localizing global focus
Globalization 2. Mixed 4. Nat Resp.
(integration) -International - Niche market
Standardization - High product diff
- Low economics of
Low production.
Low High
National responsiveness
(Differentiation)
The vertical axis measures the need for economic integration or
globalization that generates economies of scale and which are
captured through centralizing specific activities in the value added
chain.
The horizontal axis measures the need for multinational to respond
to national responsiveness or differentiation. This suggests that
MNC must address local taste and govt. regulation.

The figure illustrates 4 basic situations. In quadrant I the need for

integration is high and for awareness of differentiation is low. This
situation leads to competitive strategy based on price competition.
Here merger and acquisitions often occur.

In quadrant 4, the need for differentiation is high but concern for

integration is low.

Quadrant 2 incorporates those cases in which, both the potential to

obtain economics of scale and the benefits of being sensitive of
differentiations are of little value.

And finally quadrant 3 is the most challenging quadrants where the

needs for integration and differentiation both are high.

Globalization Imperative
Research reveals that many MNCs are committed to a globalization
imperative which is a belief that one world wide approach to doing
business is the key to both efficiency and effectiveness.
Despite this tendency to use home country strategies many MNCs
are continuing their efforts to address local needs. By responding the
cultural needs of local operations and customers, MNC’s find that
regional strategies can be used effectively in capturing and
maintaining world wide market niches.
Factors for Developing Unique Strategies
A number of factors helping to facilitate to this need to develop
unique strategies for different cultures, including:
1. The diversity of world wide industry standards such as those in
broadcasting, where television sets must be manufactured on a
country by country basis.
2. A continual demand by local customers for differentiated
products, as in the case of consumer goods that must meet local
tastes.
3. The importance of being an insider, as in the case of customers
who prefer to “buy local”
4. The difficulty of managing global organizations, as in the case of
some local subsidiaries that want more decentralization and other
that want less.
5. The need to allow subsidiaries to use their own abilities and talents
and not be restrained by headquarters as in the case of local units
that know how to customize products for their market and
generate high return on investments with limited production
outputs.

Thomson Consumer Electronics

German Plant – High feature large TV Set
Spanish Plant – low cost small screen set.
Toothpaste – cosmetic product in Spain and Cavity-+fighter
(functional commodity) in US.
German want advertising that is factual and rational.
The French avoid reasoning or logic.
The British value laughter above all else.
Challenges for MNC to Adjust Global Strategies for Regional
Market
The need to adjust the global strategies for regional markets present
three major challenges for most MNCs. First, The MNC must stay
abreast of local market conditions and sidestep the temptation to
assume that all markets are basically same. Second, The MNC must
know the strength and weakness of its subsidiaries so that it can
provide these units with the assistance needed in addressing local
demands. Third, The MNC must give the subsidiary more autonomy
so that it can respond to the changes in the local demand.

Managing Multiculturalism & Diversity:

Both domestically and internationally, organizations find themselves leading work
forces that have a variety of cultures (and subcultures) and consist of a largely
diverse population of women, men, young and old people, blacks, whites, Latins,
Asians, Arabs, Indians and many others.

Phases of Multicultural Development:

The effect of multiculturalism and diversity will vary depending on the stage of the
firm in its international evolution
Location of International Cross-cultural Interaction:

Phase 1 Phase 2 Phase 3 Phase 4

Domestic Internation Multinatio Global
firms al firms nal firms firms
Types of Multiculturalism
For the international management arena, there are several ways of examining
multiculturalism and diversity. One is to focus on the domestic multicultural and
diverse work force that operates in the MNCs home country. In addition to
domestic multiculturalism, there is a diverse works force in other geographic locals,
and increasingly common are the mix of domestic and overseas personnel found in
today’s MNCs. The following discussion examines both domestic and group
multiculturalism and the potential problems and strengths.

A. Domestic Multiculturalism: It is not necessary for today’s to do business in

another country to encounter people with diverse cultural backgrounds. Culturally
distinct populations can be found within organizations almost everywhere in the
world. In Singapore, for example, there are four distinct cultural and linguistic
groups: Chinese, Eurasian, Indian, and Malay. In Switzerland, there are four
distinct ethnic communities: French, German, Italian and Romansch. In Belgium
there are two linguistic groups: French and Flemish. In the United States, millions
of first generation immigrants have brought both their language and their culture.
In Los Angeles, for example, there are more Samoans than on the island of Samoa,
more Israelis than in any other city outside Israel, and more first and second
generation Mexican than in any other city except Mexico City. In Miami, over one-
half the population in Latin, and most residents speak Spanish fluently. More
Puerto Ricans live in New York City than in Puerto Rico.

B. Group Multiculturalism: There are a number of ways that diverse groups can
be categorized. Four of the most common include:

1. Homogeneous groups, which are characterized by members who share

similar backgrounds and generally perceive, interpret, and evaluate events in
similar ways. An example would be a group of male German bankers who are
forecasting the economic outlook for a foreign investment.
2. Token groups, in which all members but one have the same background. An
example would be a group of Japanese retailers and a British attorney who are
looking into the benefits and shortcomings and setting up operations in
Bermuda.
3. Bicultural groups, which have two or more members of a group, represent
each of two distinct cultures. An example would be a group of four Mexicans
and four Canadians who have formed a team to investigate the possibility of
investing in Russia.
4. Multicultural groups, in which there are individuals from three or more
different ethnic backgrounds. An example is a group of three American, three
German, three Uruguayan and three Chinese managers who are looking into
mining operation in Chile.
As the diversity of a group increases, the likelihood of all members perceiving
things in the same way decreases sharply. Attitudes, perceptions and
communication in general may be a problem. On the other hand, there also are
significant advantages associates with the effective use of multicultural, diverse
groups.

Potential Problems Associated with Diversity

1. Lack of Cohesion: Overall, diversity may cause a lack of cohesion that result in
the unit’s inability to take concerted action, be productive, and create a work
environment that is conducive to both efficiency and effectiveness. These potential
problems are rooted in people’s attitudes.

2. Mistrust: An example of an attitudinal problem in a diverse group may be the

mistrust of others.

3. Perceptual: Another potential problem may be perceptual. Unfortunately, when

culturally diverse groups come together, they often bring preconceived stereotypes
with them. In initial meetings, for example, engineers from economically advanced
countries often are perceived as more knowledgeable than those from less
advanced countries.

4. Status Related Problems: Perceptual can result in status related problems.

Because some of the groups initially are regarded as more competent than others
and likely are accorded status on the basis.

5. Time consuming for building cooperative environment: As the diverse

group work together, erroneous perceptions often are corrected, but this takes
time.

6. Inaccurate Communication: Because of Language Difference: Still another

potential problem with diverse groups is inaccurate communication, which could
occur for a number of reasons. Misunderstanding may be caused by words used by
a speaker that are not clear to other members.

7. Communication Problem: Diversity also may lead to communication

problems because of the different uses of time.

Advantages of Diversity
While there are some potential problems to overcome when using culturally
diverse groups in today’s MNCs, there also are a host of benefits to be gained. In
particular, there is growing evidence that culturally diverse groups can-
Enhance creativity
↓ leads to
Better decisions and
↓ leads to
More effective and productive performance.
One main benefit of diversity is the generation of more and better ideas.
Because group members come from a host of different countries, they often are
able to create a greater number of unique solutions and recommendations.
For example, a U.S MNC recently was preparing to launch a new software
package aimed at the mass consumer market. The company hoped to capitalize on
the upcoming Christmas season with a strong advertising campaign in each of its
international markets. A meeting of the sales manager from this markets in Spain,
the Middle East and Japan helped the company to revise and better target its
marketing effort. The Spanish Manager suggested that the company focused its
campaign around the coming of the Magi (January 6) and not Christmas
(December 25), because in Latin cultures, gifts typically are exchanged on the date
that the Magi brought their gifts. The Middle East pointed out that most of his
customers were not Christians, so a Christmas campaign would not have much
meaning in this area. Instead, he suggested the company focus its sales campaign
around the value of the software and how it could be useful to customers and not
worry about getting the product shipped by early December. The Japanese
manager concurred with his Middle East colleagues, but additionally suggested that
some of the colors being proposed for the sales brochure be changed to better fit
with Japanese culture. Thanks to these ideas, the sales campaigns proved to be one
of the most effective in the company’s history.
A second major benefit is that culturally diverse group can prevent groupthink,
which is social conformity and pressures on individual members of a group to
conform and reach consensus. When this occurs, group participants believed that
their ideas and actions are correct and that those who disagree with them are either
uninformed or deliberately trying to sabotage their efforts. Multicultural diverse
groups often are able to avoid this problem, because the members do not think
similarly or feel pressure to conform. As a result, they typically question each other,
offer opinions and suggestions that are contrary to those held by others, and must
be persuaded to change their minds. Therefore unanimity is achieved only through
a careful process of deliberation. Unlike homogeneous groups, where everyone can
be “of one mind,” diverse groups may be slower in reaching a general consensus;
however, the decision may be more effective.
Building Multicultural Team Effectiveness
Multi culturally diverse teams have a great deal of potential to be either very
effective or very ineffective. In other words, diverse groups are more powerful
than single culture groups. They can hurt the organization, but if managed
effectively, they can be the best.

The following sections provide the conditions and guidelines for managing diverse
groups in today’s organization effectively.

A. Understanding the conditions for effectiveness: Multicultural teams are

most effective when they face tasks requiring innovativeness. They are far less
effective when they are assigned to routine task. In achieving the greatest amount
of effectiveness from diverse teams, activities must be determined by the stage of
team development:

1. Entry
2. Working
3. Action

1. Entry Stage: The focus should be on building trust and developing team
cohesion. This can be a difficult task for diverse teams, whose members are
accustomed to working in different ways. Contrast between task oriented and
relationship-oriented members of a diverse team may cause difficulty in creating
cohesion. To counteract this problem find experienced multicultural managers
focusing attention on the team member’s equivalent professional qualifications and
status.
2. Working Stage: In the work stage of development, attention may be directed
more toward describing and analyzing the problem or task that has been assigned.
This stage often is fairly easy for managers of multicultural teams, because they can
draw on the diversity of the members in generating ideas.
3. Action Stage: In the action stage, the focus shifts to decision-making and
implementation. This can be a difficult phase, because it often requires consensus
building among the members. In achieving this objective, experienced managers
work to help the diverse group recognize and facilitate the creation of ideas with
which everyone can agree.

B. Using the proper guidelines: Besides some overall conditions, a number of

specific guidelines for effectively managing culturally diverse groups have been
identified. Here are some of the most useful:
• Team members must be selected for their trust related abilities and not solely
based on ethnicity.
-If the task is routine homogeneous membership often is favorable,
-If the task is innovative, multicultural membership typically is best.
• Team members must recognize and be prepared to deal with their differences.
The goal is to facilitate a better understanding of cross-cultural differences and
generate a higher level of performance rapport.
• The team leader must help the group to identify and define its overall goal.
• Members must have equal power. Cultural dominance always is
counterproductive. Power distribution based on personal ability to contribute to
task.
• Members have mutual respect for each other. The managers choosing members
of equal ability, making prior accomplishments and task related skills known to
the group, minimizing early judgment based on ethnic stereotypes.
• Teams often have difficulty determining what is a good or bad idea or decision;
managers must give teams positive feedback on their process and output to help
members to see themselves as a team, to teach them to value and celebrate
diversity, recognize contribution made by the individual members, and trust the
collective judgment of group.
These guidelines can be useful in helping leaders to manage culturally diverse
teams effectively.