Globalization and Organizational Behavior: Challenges and Strategies

Introduction: The Rise of Globalization in Business

In 1984, the movie The Gods Must Be Crazy depicted a Kalahari bushman who finds a Coca-Cola bottle discarded from an airplane into the desert. The bushman does not recognize the bottle or the brand, and the situation leads to all manner of confusion among the tribe, who try to decipher its meaning. Such a story would be rather incomprehensible today — there is virtually nowhere in the world where people would not recognize a Coca-Cola bottle. Indeed, not long after the movie was made, globalization began in earnest with the Canada–U.S. Free Trade Agreement, followed by waves of other bilateral and multilateral free trade agreements, and then further by the invention of the Internet. If the era of globalization had not been officially declared before, by the time the 1999 WTO protests in Seattle occurred, globalization was a household word.

Globalization is one of the major driving forces in business. The processes by which it has occurred include technological advancements in communication, improved transportation infrastructure, and trade liberalization. Communication has improved substantially since the Internet went public in 1994, creating a world where people are increasingly interconnected. Transportation advancements have allowed for easier movement of goods and people around the globe. Trade liberalization has encouraged such movements, especially of goods and capital. The customs union in Europe, the Canada–U.S. Free Trade Agreement and its successor NAFTA, and the evolution of GATT into the WTO all spurred the era of trade liberalization.

What these forces have done is allow businesses to emerge that are truly global in nature. Prior to this era of globalization, companies tended to operate in one country or region, and few were globally powerful. Even the most powerful organizations in the world — oil companies, mining concerns, and automakers — were not truly global during this era. However, successive waves of liberalization have brought us to a point where a company can be genuinely global. Even companies that are not global themselves interact with the rest of the world as though the entire planet were a singular market. People are in constant communication with others around the world, and communications advances have given rise to an era where virtual teams, intercultural collaboration, and global business are the norm.

This trend has had significant implications for the world of business. Many industries have engaged in multiple rounds of consolidation in order to leverage economies of scale. More products are being sold all over the world, to the point where hundreds of brands are now recognized almost everywhere. Moreover, as trade barriers come down, even companies that do not wish to operate internationally find themselves facing competition from those that do.

The implications for business are considerable. Businesses must now think and act globally, and there are inherent challenges in doing so. Many companies must alter their organizational design. Most companies have organizational cultures that reflect where they are from — something that may or may not translate well in a globalized world. For business, and for the study of organizational behavior, the task is to keep pace with the forces of globalization and understand how they are affecting companies. The winners in globalization are the companies and countries best equipped to manage in a globalized world, and this paper examines what the implications of globalization are for the modern corporate organization.

Relevance to Organizational Behavior

The forces driving globalization are having a profound impact on organizational behavior in several critical ways. First, organizations must operate in a multicultural business environment. Their customer and supply chain webs spread around the world, even if their own operations do not. Companies must collaborate with partners globally, yet cultural differences still exist. Whatever effect the rise of the global corporation might have on global culture is not yet known and will take time to emerge. The reality is that these changes are already being reflected in organizational behavior. Companies have long sought to instill a common corporate culture, and this remains evident in the global business environment. The difference is that a common culture must both incorporate local cultural norms and transcend the differences between cultures. Corporations are conflicted between pushing their own cultural norms on workforces and strategic partners while simultaneously recognizing and accommodating the influence of local cultures on the mechanisms of organizational behavior.

Different cultures are, self-evidently, different. But for global organizations, part of the job is to recognize what those differences are and how much they matter. The role that hierarchy, communication styles, and organizational design play can vary considerably across countries, yet within one corporation there should be a singular structure. How to make this work is a significant dilemma for the global organization. Resolving it requires understanding the different elements of organizational behavior — motivations, negotiations, power structures, organizational design, and communication — and how each can be used to address the challenge. There is no single right answer, and most organizations are struggling to keep pace with the rapidly moving forces of globalization.

The rapid pace of change in communication has brought its own set of problems. While there are clear benefits from reducing communication barriers and democratizing knowledge, there are risks inherent in global virtual communications. Managing these risks in order to extract the benefits is one of the central tasks for managers focused on organizational behavior. The virtual work team is an emerging field of particular interest, since labor has become dispersed globally and many nations outside the West are beginning to make high-level contributions to business.

Organizational behavior therefore lies at the forefront of extracting the benefits of globalization. When organizations expand, they must build into their structures the reality that the organization contains an ever more diverse group of people with very different perspectives and norms. Communication is a huge challenge — not only because of language barriers, but because of differences in communication style. Getting people all around the world to pull in one direction is a massive undertaking. Understanding how the drivers of organizational behavior are changing in response to the globalized business environment is critical to the success of the modern global organization. This topic is therefore of utmost importance — it is arguably the most significant issue in the organizational behavior of large corporations today.

Literature Review: Globalization and Business Culture

There are two schools of thought with respect to the influence of globalization on global business culture. The prevailing wisdom, particularly during the earlier stages of globalization, held that globalization was simply a manifestation or extension of colonialism and that Western business culture was producing global homogenization. This view seems reasonable, primarily because the forces driving globalization were driven by Western interests. The West initiated the process of trade liberalization, and it was the Western agenda that shaped the first rounds of WTO negotiations. Transportation and communication advances also arose in the West. Much of globalization therefore appeared to be about allowing Western companies to pursue their interests around the world.

That is a fair argument, but there is another perspective. Hooker (2012) argues that what is actually occurring is a process he terms "deglobalization." The concept makes a great deal of sense to anyone who has observed the evolution of the globalized business culture. Instead of the West running roughshod over the rest of the world, what has emerged is the rise of many other cultures in the global business milieu, with significant impacts on global business culture. A multinational corporation today bears the cultural influences of its markets and employee base — increasingly not just Anglo-American but also Chinese, Korean, Indian, Arab, and Eastern European. Traditional sources of business culture influence have been joined by new ones. A CEO can come from anywhere: India in the case of PepsiCo, Lebanon in the case of Renault-Nissan, and Brazil in the case of AB InBev. Globalization's influence on business culture is thus not about the dominance of Anglo-American or Germanic cultural values so much as it is about absorbing different cultural values from around the world and fusing them into what may one day become a singular global culture.

As Hooker notes, there will be greater influence from cultures that have comparative advantage in attributes conducive to business. Cultures with higher degrees of xenophobia or discomfort with multiculturalism — whether in parts of the United States or parts of the Middle East — will struggle in the global business environment compared with those that are better able to adapt to a multicultural setting and whose strengths lie in communication, negotiation, and cultural competence.

The most globalized nations are the best positioned for success. Consider the Globalization Index: the leading countries for economic globalization, such as Singapore, the UAE, Ireland, and Mauritius, are all experiencing strong growth, while the most globalized socially include many of the same countries alongside economic powerhouses like the UK, France, and Canada (KOF, 2015). The most globalized cities are often the world's most powerful — consider the high proportions of foreign-born residents in places like New York, Hong Kong, London, Sydney, Dubai, and Toronto, and how those cities rank in terms of global influence. There are few outliers: there is a direct correlation between the ability to manage globalization at a cultural level and the ability to manage it at an economic level.

Kale and Pedgaonkar (2007) examined the role that globalization has played in Indian culture. They note that while many people are not truly affected by globalization, those who are have experienced mutual cultural exchange. International business culture has affected Indian business culture, but there has also been exchange flowing the other way, given India's major role in the global economy — lending credence to Hooker's ideas. Expanding mindsets is a critical part of this process. Because globalization brings people around the world into greater contact with one another, there is mutual exchange of culture. In the developing world, a global mindset can reflect increasing Westernization, but Srinivas (1995) also notes that the developing world can influence global culture as it gains in economic strength. Managers need to be aware of how different cultures in the workplace affect organizational behavior, rather than simply assuming that different cultures can be easily fused into a unified corporate culture.

Markovic (2012) covers specific cultural dimensions with respect to how globalization affects business culture. She notes that gender roles are one area where different cultures can vary significantly, with interesting implications for global business. The most classic example is the female CEO traveling on business to Saudi Arabia, though most cases are less extreme. The reality is that cultural clashes around gender roles — and other cultural traits — challenge business organizations, which must strike a balance between respecting cultures and advancing business objectives.

Markovic's work is specific to the organizational behavior context. She discusses how gender roles affect many aspects of an organization, from power structures to communications. Entrepreneurial organizational culture is also addressed, as it is one of the key aspects of globalization in larger organizations — finding ways to tap into the entrepreneurial capabilities of diverse people within the organization. Females are often excluded from entrepreneurial activity in some cultures, while in others they are its primary drivers. The varying levels of empowerment and the ways women are viewed in the workplace across different cultures represent one of the most significant challenges for organizations in the era of globalization. Where male-dominated cultures can set aside differences in order to conduct business, significant friction may still arise with respect to the role of women.

Ethics are another key issue in a globalized business culture. Martin (2011) examines the differences between collectivist and individualist cultures with respect to ethics. Because different societies have different viewpoints on the role of the individual and draw upon their own unique ethical frameworks, ethics is ultimately one of the biggest challenges for the global organization. Ethics should not, as Martin notes, be viewed as the purview of one society while other societies are treated as inherently unethical. An example is the Foreign Corrupt Practices Act, which essentially imposes U.S. values regarding bribery on all American businesses in all countries, regardless of local norms. It is as easy to engage in ethical hegemony as it is to engage in ethical relativism. At some point, the global organization must strike a balance between the different ethical perspectives found around the world and work toward an ethical framework that functions as broadly as possible — or accept that the company will not have a uniform ethical code, which could prove significantly more challenging to manage.

Even the basic fundamentals of running a business have cultural elements embedded in them. Performance appraisals, for instance, which significantly influence behavior within an organization, can differ markedly across cultures because they reflect superior-subordinate relationships, workplace expectations, and norms around personal criticism. This is also an area where national culture can legitimately influence the way a company conducts business in different countries, highlighting that companies will often need to exercise discretion — choosing which elements of the business require global standardization and which can be left at a national or regional cultural level (Peretz & Fried, 2011).

The coming together of different cultures in the business setting is clearly fraught with challenges. People hold different ethical values and different perspectives on many issues, all of which are reflected in organizational behavior. The globalized organization will inevitably look quite different from how it appeared before the process of globalization began.

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