Operations strategy and organizational performance

Operations Strategy

Cross-Cultural Considerations for an Operations Strategy

Just as organizations must have concerted, sychronised operations strategies globally to capitalize on new market opportunities, production efficiencies emanating from localized expertise (Ferdows, 2006) or the potential for greater market share based on mergers and acquisitions, they must also create strategies to enable cultural congruence and compatibility. Too often however these strategies for attaining cultural assimilation are blinded by ethnocentrically-based perspectives and processes (Hammond, Axelrod, 2006). Arguably the latter is even more critical, as for any operational strategy to succeed it must take into account the many cultural dimensions that its influences, and that influence it as well. With increased globalization it has often been argued that there is a flattening of the world's cultures, a homogenizing if you will, yet evidence suggests that strategies executed without regard to cultures very often fail. The intent of this paper is to show why it is more critical than ever to pay attention to cultural dimensions and variations between ones' own culture and those of nations where merger and acquisition candidates are location. The failure of Wal-Mart to succeed in Germany, mainly due to an ethnocentric approach to managing the acquisition of smaller German competitors and having a perceptual blind spot to how Germans shop, led to their eventual exit from the market (Christopherson, 2007). As can be seen from this example, even one of the most efficient organizations operationally, Wal-Mart, still fails in regions of the world that require the ability to fit into a region from a cross-cultural standpoint.

Hofstede's Cultural Dimensions as a Framework for Evaluating Cultural Variations

The work of Geert Hofstede at IBM which led to the development of the Cultural Dimensions Model provides a useful framework for quantifying the variations in cultures globally (Hofstede, McCrae, 2004). There were initially four accepted dimensions to Hofstede's Cultural Dimensions Model, with a fifth one added to take into account the perception of time, which is called Long-Term Orientation. The four dimensions are Power Distance, Individualism, Masculinity, and Uncertainty Avoidance. These five cultural dimensions provide insightful analysis into the wide differences between cultures, and also can be invaluable in explaining how operations management goals, objectives, and strategies for fulfillment can vary significantly across cultures that may reside on the same continent. The perception of time is significantly different in India vs. China for example, and this alone can have a major impact on the performance of operations management strategies and also influence how strategic decisions are made. The Hofstede Cultural Dimensions Model can provide insights into how variations in how one culture define its individualism vs. its collectivism, for example, or how it defines Power Distance, which is defined as the extent to which less powerful members of an organization accept power being distributed unequally (Hofstede, McCrae, 2004). In organizations that are highly hierarchical in structure and as a result have tight spans of control, Power Distance variations may be tolerated yet not accepted. The role of Individualism, Uncertainty Avoidance and Long-Term Orientation for example all could combine to completely re-order how an operations strategy is executed between two different cultures, with dramatically different effects. Mergers, acquisitions, joint ventures and other forms of corporate relationships all have as their common component the need to have a consistent strategy for managing cross-cultural factors. One example of this is the decision Hewlett-Packard made to build factories in Singapore that would focus on innovation in addition to lower costs for developing and manufacturing their inkjet printers (Ferdows, 2006). The cultural aspects of expansion of Hewlett-Packard into this region were more of a consideration than the costs of labor, according to Dr. Fedrows (2006). As the culture of Singapore values education highly, and had been graduating more engineers in mechanical engineering per capita than some areas of the United States, and given the fact the Hewlett-Packard was able to standardize their operational processes, the expansion of factories into the country was successful. Fedrows (2006) points out in his studies of how companies integrate cultural advantages with process efficiencies to gain global competitive strength matters more than chasing cost efficiencies around the world, from one low-cost labor location to another. The solution, according to this research, is to create operational strategies that allow for both cultural strengths and uniqueness to be combined with operational aspects of performance. Taken together, organizations have proven to be more successful with this hybrid approach vs. If they had adhered to a purely ethnocentrically-based strategy of operations (Christopherson, 2007). For any operations strategy to be successful it must focus on all aspects of execution, from the cultural components to those that provide for process efficiency, integration and long-term scalability.