Culture Concept and Overseas Subsidiaries Term Paper

  • Length: 9 pages
  • Sources: 15
  • Subject: Business
  • Type: Term Paper
  • Paper: #11683844

Excerpt from Term Paper :

They wanted to know the best places to go after work, and expected him to help them in that regard.

Hanes finally told his Japanese trainers "he preferred not to mix business with pleasure." Within a couple days, the group requested another instructor. The critical issue here, one can quickly discern, is that Hanes did not do his homework on the Japanese business culture; if he had, he would know the Japanese are intensely committed to their work, on duty and off duty.

The "Miscue No. 2" involves Ray Lopez, top salesperson for his company who was fluent in Spanish; he was sent to Buenos Aires to make a marketing pitch to a distribution firm there. He arrived and was picked up at the airport and surprised to learn that the meeting had been postponed for two days "...so that Ray could rest after the long trip" and also have an opportunity "to see some of the local sites..."

Lopez insisted that he was fine, and wanted the meeting to go forward that afternoon, as had been scheduled. After twisting arms, Lopez got his way, and the meeting was scheduled for later that day. Once in the meeting, Lopez noticed "that the Argentinean executives never really got beyond the exchange of pleasantries." The VP in charge then set the formal meeting for the next afternoon. Lopez was frustrated with the "excruciatingly slow pace of the negotiations," because quite simply, he didn't understand that this is the cultural reality in Argentina. Business executives rarely meet a foreign visitor and sit right down to do business. There is a period of cultural interplay prior to serious business matters being attended to. He didn't do his prep work.

A study published in the Journal of American Academy of Business, Cambridge, looked into the relationships among Taiwan's overseas subsidiaries based on several factors such as "strategic roles...organizational configurations...and business performance" (Yu, 2005). The research also included focused on "...subsidiaries' cultural differences." The author explains (p. 214) that there are "four dimensions" along which managers in multinational corporations" perceive cultural differences in their subsidiaries: "power distance"; "individualism / collectivism"; uncertainty avoidance"; and "masculinity / femininity."

The research done by Dr. Ming-chu Yu - which included existing research he deemed pertinent - shows that when there are "large" cultural differences between parent company and subsidiaries "...there will be more uncertainties in decision making" and a potential "significant negative effect" on the business performance of that subsidiary. In other words, money will be lost and market positioning will be weak, when a company fails to effectively establish cultural concepts in its expansion enterprises.

Yu's hypothesis: A parent company's cultural difference has a "significant negative effect on its subsidiary's business performance"; also, the interaction of a subsidiary's "strategic role and cultural differences" has a definite influence on the business performance. These hypotheses were arrived at through data from responses of 142 valid questionnaires (out of 600 that were sent to Taiwanese MNCs). The respondents were 17.5% European and American; 23.1% South East Asian; and 54.9% Mainland Chinese.

Meanwhile the International Journal of Human Resource Management (Martin, et al., 1999) investigated the control of HRM in the U.S.-based multinational enterprise (MNE) "CASHCO," which established a subsidiary in Scotland. The company had to constantly respond to "ethnocentric control" coming from the parent company in the U.S., and in short, the case study shows that by forcing "empiricist-rational strategies" on the UK subsidiary, and using ethnocentric methods to "teach" Scottish employees "the facts of life," CASHCO failed to achieve what it had hoped to achieve.

The CASCO "ethnocentric transfer of U.S. best practice rarely worked effectively," Martin writes. That was because "the assumptions underlying these practices failed to reflect the institutional and cultural circumstances of the Scottish plant." Moreover, the parent company had a "paternalistic" attitude towards unions; and also, the failure of the parent company to understand "local plant culture" and the "flawed nature of corporate culture control" led to the Scottish plant managers' desire to develop their own strategies based on Scottish culture.

The article explains that Australian MNCs have placed a great deal of effort into coming to terms with the variables between the "subsidiary role and national cultural distance between home and host countries" (Kim, et al., 2005). Some companies, this research reveals, believe that the "need for control of foreign subsidiaries" tends to be heightened when there are greater costs related to the distance (cultural and literal) between home and the subsidiary; i.e., the greater the degree of cultural distance, "the greater the level of control" is needed because of the "greater level of uncertainty and unfamiliarity" with subsidiaries and their workers located in "culturally distant markets." However, that having been said, the Australians believe that by transferring "parent expatriates" to the subsidiary - to "indoctrinate subsidiary employees with the values, beliefs and expected behaviors of the MNC" - the company can lesson the need for "rigid" bureaucratic control. The study explains that some Australian MNCs are still struggling with the issue of whether to localize subsidiaries "to meet the needs of local people" or whether to standardize all subsidiaries to "achieve consistency."

Scott Andrew Shane writes (in Entrepreneurship: Theory & Practice) that during the 1990s MNEs were beginning to "increase the amount of innovation" launched in their overseas subsidiaries. His research encompassed the "cultural values" of 2,769 managers from six different organizations in thirty-two countries. He posits that "all organizations," no matter what society they are in, possess two universal characteristics: specialization of labor, and a system of authority. Because of these tried and true institutions, there tends to be a resistance to innovation," he writes. But within those six companies Shane found "champions," who innovate and whose innovations tend toward three cultural values: individualism/collectivism; power distance; and "uncertainty avoidance/uncertain acceptance." He posits that the more "individualistic the [subsidiaries' local culture]" the more managers "prefer champions who violate organizational rules, norms and standard operating procedures to implement innovation."

In conclusion, a classic case in point when it comes to companies seeing the light and allowing their subsidiaries to be responsive to local cultural conditions. In this research, the roles of 104 staff members from nine European "country units" within a MNE were analyzed (Yaconi, 2001) in a cross-cultural study. The results of the research showed that there were significant differences in the way the nine country units (subsidiaries) were managed, which indicates that the parent company is not attempting to force ethnocentric values on the subsidiaries. Author Yaconi writes that "influences of local cultures and other societal forces" played a significant part in shaping the expectations of manager-employee roles. While firms face the facts of a workforce on foreign soil with "multiple cultural backgrounds," innovative managers in this instance who interact sincerely and relate well with local employees have a smoother, more effective operating structure.

Works Cited

Hult, G. Tomas M.; Cavusgil, S. Tamer; Deligonul, Seyda; Kiyak, Tunga; & Lagerstrom,

Katarina. (2007) What Drives Performance in Globally Focused Marketing Organizations? A Three-Country Study. Journal of International Marketing, 15(2), 58-85.

Keeley, Timothy Dean. 2001, International Human Resource Management in Japanese Firms: Their Greatest Challenge, New York: Palgrave Macmillan.

Kim, Youngok, Gray, Sidney J. 2005, 'Strategic factors influencing international human resource management practices: an empirical study of Australian multinational corporations', International Journal of Human Resource Management, vol. 16, no. 5, pp. 809-830.

Kuniko Ishiguro 2003, 'Context Dependent Success: International Human Resource Management in Japanese Firms,' Electronic Journal of Contemporary Japanese Studies, viewed 22 March 2008. http://www.japanesestudies.org.uk/reviews/ishiguro.html.

Martin, Graeme, Beaumont, Phil, 1999, 'Co-ordination and control of human resource management in multinational firms: the case of CASCO,' the International Journal of Human Resource Management, vol. 10, no. 1, pp. 21-42.

Schwimmer, Brian 2005, 'The Culture Concept', Department of Anthropology, University of Manitoba, viewed 21 March 2008. http://www.umanitoba.ca/faculties/ares/anthropology/courses/122/module1/concept.html.

Shane, Scot Andrew. 1993, 'Cultural Differences in Innovation Championing Strategies,' Entrepreneurship: Theory & Practice, vol. 17, no. 4, pp. 79-79.

Tylor, Edward 1920, [1871], Primitive Culture, New York: J.P. Putnam's Sons.

Yaconi, Leonardo Liberman 2001, 'Cross-Cultural Role Expectations in Nine European Country Units of a Multinational Enterprise,' Journal of Management Studies, vol. 38, no. 8, pp. 1,187-2,115.

Yu, Ming-Chu 2005, 'Taiwan Multinational Companies and the Effects Fitness Between Subsidiary Strategic Roles and Organizational Configuration on Business Performance: Moderating Cultural Differenced," the Journal of American Academy of Business, Cambridge, vol. 7, no. 1, pp. 213-218.

Wallace, Tim 2005, 'Culture Concept: Cultural Anthropology / Intercultural Communication,' North Carolina State University, Viewed 20 March, 2008.…

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