Cultural Diversity in Organizations: Globalization & Advantage

Introduction: Globalization and Cultural Diversity

Today, globalization is a widespread phenomenon that is making boundaries between countries fade away. It has a great impact on organizations and consumers because it provides the means for all countries to work within one large network instead of separate smaller ones. In this large network, competition becomes tighter, technology diffusion becomes faster, learning curves grow shorter, manufacturing costs trend downward, consumer demands expand, and workforce mobility increases. On the social side, multinational enterprises (MNEs) face numerous challenges due to globalization, because they are forced to learn how to deal with cultural diversity. Global organizations must reach a point at which understanding and respecting different cultures, mentalities, values, and norms is a prerequisite for survival.

Cultural diversity has a strong impact on organizational communication processes. The fact that individuals communicating with each other come from different places implies that they perceive facts and words differently, regardless of whether the communication flows between different hierarchical levels or similar ones.

On the positive side, diversity-oriented working environments have been shown to stimulate innovation and effective learning. Innovation and learning translate into a knowledge advantage, and the organization's profits increase proportionally.

To take even greater advantage of workplace diversity, some organizations design their marketing strategies for specific ethnic groups, drawing on the fact that specific ethnic knowledge is embedded in their people. In some instances these strategies target fast-growing minorities, which attract increasing interest as their average incomes rise and they represent higher sales potential for those organizations.

This paper discusses the increasing impact of cultural diversity on the internal activity of organizations and the corresponding change in organizational attitude toward the customer and the market.

About Globalization

The phenomenon of globalization has been defined in several ways, covering a wide range of domains from cultural differences between nations to foreign exchange risk:

Definition 1: "It describes the process by which events, decisions, and activities in one part of the world can come to have significant consequences for individuals and communities in quite distant parts of the globe" (McGrew, 1992, p. 23).

Definition 2: "Globalization is defined here as a set of economic and political structures and processes deriving from the changing character of the goods and assets that comprise the base of the international political economy — in particular, the increasing structural differentiation of those goods and assets" (Lawrence, 1996, p. 8).

Definition 3: "Globalization is first of all a political and only in the second place a business location strategy: a company following a strategy of globalization will localize activities abroad (1) only if the company otherwise risks being treated as an 'outsider' or being hit by trade or investment barriers thus losing market share, and (2) to the extent that the company can exert more control over its host governments than vice versa" (Ruigrok & van Tulder, 1995, p. 179).

Definition 4: "Globalization refers to a world in which, after allowing for exchange rate and default risk, there is a single international rate of interest" (Brittan, 1996).

Definition 5: "Globalization is, in essence, a process that creates opportunities for faster growth and more rapid poverty reduction in those poor countries in which the domestic economic and political environment is conducive" (Srinivasan, 2002, p. 3).

The editors of Strategic Communication Management magazine (2001) discussed how three successful multinationals — Reebok, Barclay Global Investors (BGI), and Ericsson — managed to rise to the challenge brought by globalization. Reebok made all strategic decisions around the communication process. The sportswear marketer focused on designing a global communication strategy and a consistent global brand that reflected local cultures, combined global and local priorities, and recognized human rights as part of its social responsibility actions. A key success factor in BGI's globalization effort was a strong and consistent communication strategy. The organization's managers understood that their employees needed to connect with each other worldwide, and in order to smooth internal communication, the organization made intensive use of technology. Ericsson, one of the largest players in telecommunications, also used communication as a key factor in managing its globalization challenges. The organization's managers believed it was essential to have a globally integrated communication process in order to generate as much value as possible for their stakeholders. The study notes that relations between media and investors are increasingly close, so organizations must be careful to send consistent messages across different countries.

The same editors of Strategic Communication Management identified five interconnected cultural dimensions that heavily influence multinationals in their internationalization process. Those dimensions are:

Corporate level — all cultures within the organization; National level — all internal and external cultures, including the external environment in which the organization operates; Industrial — the culture of the industry in which the organization is active; Functional — the culture of professional and vocational groups within the organization; Ethnic — ethnic cultures in the organization's external environment.

A case study by Strategic Communication Management (2000) on Royal Energy Corp pointed out how important it is to have a positive attitude toward change when defining a global corporate strategy. The authors noted that although diversity is a great challenge for all multinationals, it is also a valuable asset, serving as a live source of new ideas and methods suited to local cultures.

There is good reason why globalization is one of the most popular phenomena among economic researchers today. As better technologies are discovered every day, the phenomenon becomes more present throughout the world. Economically and socially, this fact impacts organizations heavily. Both external and internal environments grow more complex. The external environment expands and competition intensifies as more organizations gain access to the same markets and consumers. The internal environment increases in complexity because people and processes must shift from national to international levels, spanning different cultures and mentalities, making organizational communication an important tool for a successful corporate strategy.

Globalization has a considerable impact on diverse workplaces, the relationship being one of mutual cause and effect. Multinational companies must learn how to manage workplaces with increasing diversity, especially as many authors suggest that globalization is a process that slowly homogenizes cultures and mentalities — which also implies that it is slowly reducing diversity. However, the current situation has not yet reached that level. Diversity is increasing as companies become more "global." Perhaps there is a learning curve associated with globalization: in the beginning, diversity increases as organizations learn how to become globally efficient, and decreases later on as they learn to deal with it more effectively.

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