Case analysis of Penwick El Pais

Penwick el-Pais

In deciding a course of action for El-Pais, Penwick must take a number of factors into consideration. These include economic factors, cultural factors, and a variety of factors directly related to the conduct of business in a Latin country. This essay will discuss these different factors in turn, analyzing each for its potential impact on Penwick and providing recommendations with respect to the behavior and tactics of Penwick managers if the decision to enter El-Pais is made.

The first major consideration is the with respect to the economic environment. Whereas the United States has an open capitalist economy designed along liberalist philosophical lines, the economy of El-Pais is more socialistic in nature. This implies a stronger influence of the central government, including the risk of nationalization. It is difficult to do much in El-Pais without the support and cooperation of various levels of government, so more emphasis must be paid to government relations on the part of Penwick management.

There are also significant cultural differences between the two societies. In Latin countries like El-Pais, business deals are conducted on a more personal scale than they are in the U.S. The person with whom Penwick is dealing will need to develop a comfort level with the U.S. managers, and cannot be expected to sign a detailed contract right away. This is because of the Latin tendency for low levels of individualism -- being part of an established group is critical. There are other interpersonal issues as well that are worth noting. The first is with respect to personal space. Latin cultures have less personal space than do Americans. They are also more likely to ask personal questions, as a means of getting to know their business partners. That said, depending on the culture, they may avoid eye contact, which can be disconcerting for Americans unaccustomed to the practice; it should be noted that this does not imply any lack of honesty, but is simply an element of their culture.

There is a higher power distance in Latin cultures, compared to the U.S. Negotiations therefore must be undertaken with top managers and executives. Middle and lower-level managers are not equipped to handle negotiations effectively, and will typically defer any major decisions. In addition, managers in El-Pais can be expected to be more responsive to male managers than female, as they have a higher level of machismo in their culture. The culture in general is more conservative. Organizational change in more difficult in Latin cultures, so if the business deal requires such changes from Latin partners, expect the process to take longer than expected. Interpersonal conflict, however, can expect quick resolution. Latins are more direct with respect to conflict, which places substantial pressure on the American manager to maintain calm. This reflects the Latin tendency towards eliminating unexpected risk -- potential problems are dealt with right away as they make most Latin people uncomfortable.

These cultural elements are also reflected in the ability or lack thereof to modernize the plant in El-Pais. The influence of socialism -- Latin cultures are highly collective - means that labor unions are more involved in the process of organizational change. Shutdowns and walkouts are more common, as labor activism is rife in Latin America. Thus, the unions need to be more involved in the process of modernizing the El-Pais plants, in order for the change process to go smoothly and have strong support from union leadership.

Inventory management and logistics will also need to be addressed. Transportation and communication infrastructure, for example, are not up to U.S. standards. Thus, some consideration needs to be given to working with the government of El-Pais to improve this infrastructure to the point where it can support our larger facility. The team in El-Pais is able to handle, conceptually, what we need in terms of inventory management but it will require some shifts in the corporate culture in our operations in that country. Effort will need to be made to communicate our expectations of corporate culture to the staff and management in El-Pais.

Sales and marketing efforts should be country-specific. There are often significant differences between the sales function in one country and another, and that is the case here. Selling in El-Pais is more based on personal relationships than on product attributes. Thus, the focus is going to be a long-term relationship building rather than on the initial sale. In addition, personal contacts are essential to building a network in Latin countries. Knowing that, it is important to utilize a local sales staff that already has these contacts and fully understands what it takes to build a strong customer network in Latin America.

The high degree of power distance should benefit Penwick with respect to managing the parent-subsidiary relationship. Penwick needs to assert its position as the parent company early, in order to establish its position vis-a-vis the local subsidiary. This is especially important given that the local subsidiary is expected to take on a more significant role in the future as the result of this expansion. For Penwick, the chain of command and communication needs to be established early. This will help to define the relationship between Penwick and its El-Pais subsidiary; it will also help to define the roles of Penwick corporate managers in the management structure of the subsidiary company. The relationship that Penwick wants with its El-Pais subsidiary should be formalized in writing, so that there is no misunderstanding between the different parties as to Penwick's expectations of the relationship.