Understanding both Corporate and National Cultures.
Growing international business? Don’t forget the importance of understanding both corporate and national cultures.
Few organisations were left untouched by the recession. Some embarked on joint ventures, acquisitions and strategic alliances as they entered new markets.
It is important to remember, that often what is perceived as “value added” can become a tremendous strain on operations so such excursions must be approached with caution. Market entry cannot be weighed up simply in economic terms. Of course, choosing a Joint venture partner is vital. It is also equally important to assess behavioural and cultural aspects – management match, resources, corporate and national cultural assimilation.
Matching the management team is crucial. The quality of management success will be linked to the following factors: vision, ethics, expertise and experience. A company’s management style can be hierarchical, blended, collegial or autocratic. Quite often, organisations in the East can be hierarchical and formal whereas in countries like Ireland they are relatively non-hierarchical and informal. Teaming a hierarchical and non-hierarchical business is the equivalent of getting a regiment to work alongside a dot com business. Their working styles will simply clash.
Then there’s the cultural match. Firms, like countries, have a distinct culture and pairing them is crucial. Understanding a company’s culture -vision, values, accepted and non-acceptable behaviours – before an alliance takes place is essential. All sectors and individual firms also have their own unwritten rules of communication. These must be clearly understood so dialogue inside any new enterprise is based upon mutual knowledge.
When considering a joint venture, alliance, acquisition or outsourcing activity do look beyond staff savings. Try to understand the combined cultures of both companies in addition to the financial logistics of their operations. You will then be able to develop a joint set of organisational competencies that reflect both cultures.
It can also be a costly mistake to send the wrong employee to represent an organisation overseas. Even the right representative needs careful preparation to be most productive. Simply because an executive has been successful at home does not mean they will be equally successful in what can appear an alien, sometimes hostile, environment.
It is estimated that direct costs can average $150K – $250K for a western company to bring a mid-level executive home early. There is no way to estimate how much additional damage was incurred by both the company (reputation and lost business) and the individual before the decision to pull out was made.
In short, if anticipating international alliances of any description, all personnel who are not already bi-cultural by birth or with early enculturation in the country to which they have been assigned will benefit from cultural assimilation training.
The overseas living experience should be positive as well as a growth experience. This will not happen if left to chance. Research in the USA has shown that without pre-departure training, only 15-20% of a company’s successful American mid-level executives can be expected to function fairly effectively overseas, As many as 50% will fail – either functioning far below their normal efficiencies or requiring early repatriation
Understanding National Culture – What Not To Do
Entering new markets also requires understanding the culture of the country you are about to enter. So many Western firms fall into the trap of “tokenism” – hiring someone or a team from the destination country without due consideration of their bi-cultural understanding. It is important to hire people based on their bi-cultural business expertise as well as their expertise and nationality.
East- west interactions are littered with stories of spectacular misunderstandings based on somewhat naïve approaches to market entry. The recent Facebook debacle in India will probably go down as a case study on what not to do in a country where one does not understand the dynamics fully.
Facebook’s Free Basics project was an ill-conceived effort to bring Internet access to the poor in India. It originated from an idea about connecting the next 5 billion people that Zuckerberg documented in a paper titled ‘Is Connectivity a Human Right?’ The key was to make Internet access affordable by making it more efficient to deliver data and improving the efficiency of apps.
Facebook did not seem to understand that the cost of data access, which is relatively cheap, is not the issue for internet growth in India. The affordability of computers and smartphones is getting in the way. Once people have saved up to buy phones and tablets, they want to be able to surf the web as western users do. Indian farmers already access weather information on their mobiles and TV. The population expects to view Bollywood music videos, visit a broad range of websites, and download games and entertainment apps.
Facebook also did not appear to have an understanding of the India’s innate distrust of foreign corporations bearing gifts. They appeared unaware of the country’s fierce sense of independence from anything being thrust on them? Furthermore, there are hundreds of languages in India. How could Facebook possibly curate the right sites for them to visit in all of these?
Inevitably, there was a huge backlash from indigenous companies and social media in India. Facebook’s reputation was further eroded by insensitive twitter comments, followed by some damage control from Zuckerberg. Unfortunately, Facebook then resorted to a huge media campaign to convince the regulator and the public that they only had India’s best interests in mind. Overall, this was greeted with cynicism.
Facebook with its size and scale and huge user base in India will survive this strong dent to their credibility but we can all learn from this example. Plan, prepare and map every single aspect of any new venture and above all, make sure you are clear about the corporate culture/s and that you have a real cultural understanding of the countries you will be working in and with.
This article is correct at August 2020