Posted: September 23rd, 2022

Recall our discussion in the previous lesson about the many subcultures that may exist within a country’s broader culture—individual families, cities, states, and so on.

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How easy or difficult was it for you to define American culture and why do you think that is?
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Assignment 2 Material 1:
Societal Culture and Internal Business Culture
When discussing cultural diversity in businesses, we must consider two elements: societal culture (i.e., the external society the business operates in) and internal culture (i.e., the norms and values that drive business operations). These two elements may be completely separate from each other, or they may overlap to varying degrees. Each business must decide for itself what its internal culture is going to be relative to the culture of its external environments.
Recall our discussion in the previous lesson about the many subcultures that may exist within a country’s broader culture—individual families, cities, states, and so on. When a business exists in multiple cities, states, or countries and employs individuals who moved from another area altogether, it may have to exist in many different cultures at once. How should it handle its product in these different cultures? Will it be customized to the local populations, or will it be standardized based upon the home country preferences?
Given that there may be large differences in culture influencing the business, trying to establish a culture inside the business is no small task. You can see very large differences in business cultures even in the same country. Take, for instance, the differences between Google and McDonald’s. Google has a very open workplace with a flat structure, and workers are encouraged to take up to 20% of their work time to develop their own projects. McDonald’s, on the other hand, tracks workers’ time, has a strict hierarchy, and imposes standardization across the company. These are both successful businesses, but they have very different cultures.
The next few pages will address how companies manage the societal diversity when entering a new market and ways they can embrace cultural diversity to establish an internal culture.
Assignment 2 material 2:
Responding to Cultural Diversity in a New Market
There are four generalized ways, or dispositions, to manage the cultural diversity a business may encounter when conducting international business: ethnocentric, polycentric, regiocentric, or geocentric.
Ethnocentric
Businesses with an ethnocentric predisposition apply the cultural elements and preferences from the home country to all areas of operation. These practices may include hiring structure, business hours, marketing, and so on. This disposition is beneficial for industries and products focused on mass production because it simplifies their planning for how and where to sell the mass-produced good. It’s also good for profit-driven organizations because producing the same good in a streamlined manner can reduce overall costs of production thanks to economies of scale. And it benefits hierarchical systems because it maintains the simplicity of the chain of command between home country headquarters and management in the individual host countries.
Of course, this predisposition also has its drawbacks. Its focus on the home market preferences means there’s no local customization. Companies may have potential issues with customs and immigration. In some cases, the local industry standards across foreign markets may not align, so standardization can fail. And a lack of appreciation for diversity can stifle an organization’s innovation.
Disney is a prime example of this failed tactic. When it launched in Europe, it assumed European customers and workers would like the same experience as those in the United States. However, the company quickly learned that Europeans were not looking for the same experience, and it had to quickly adjust the model.
Polycentric
Organizations take a polycentric predisposition when they apply the culture and preferences from the host (i.e., local) culture to all areas of operation . This approach can be beneficial for establishing legitimacy among the local populations, and it makes room for customization to improve local market share.
But while a polycentric predisposition may allow for indirect benefits such as bartered deals and brand recognition, it may also lead to little or no repatriated profits—that is, the money stays in the host country. There can also be supply chain control issues with decentralized companies, as well as brand unification issues when there is a high degree of customization.
Some car manufacturers fit in this area as they have to comply with local laws as well as consumer preferences in each local market. Regiocentric
When a company takes a regiocentric predisposition, it focuses on the culture and preferences of the region of operation. This is a split of the ethnocentric and polycentric predispositions and allows for regional subsidy negotiations. Organizations can have some standardization and mass production within the region, but it’s not as narrow as it is under ethnocentric predisposition.
Regiocentrism, however, still lacks the unified brand inherent in ethnocentrism, and like polycentrism, most profits remain in the host region instead of going back home. Consider, for instance, Kit Kats. In the North American region, you will commonly only find a handful of Kit Kat flavors—mostly milk chocolate and, perhaps occasionally, some white. However, it is not uncommon in Asia to see dozens of flavors from strawberry to green tea.
Geocentric
Businesses with a geocentric predisposition have a broad, worldwide focus and make some minor changes based on the location of operation. This approach allows for more brand unifications from a global corporations perspective but leaves some room for local customizations to cater to the local needs and market. But it can be difficult for smaller organizations to accomplish geocentrism due to the organization, management, and relational structure required.
Take McDonald’s as a prime example of the geocentric predisposition. It has a high degree of standardization, its brand is recognizable around the world, and it allows for some local customizations. A french fry tastes the same no matter what country the McDonald’s is in; however, if you want to try a Cadbury McFlurry, you will need to go to the United Kingdom. If you are interested in a McDonald’s that serves green tea or beer, you may need to head over to Japan or Germany. And depending upon where you are, the chicken McNuggets may look the same but taste a little different. In many Asian nations, the population prefers the darker thigh meat of a chicken, whereas most in the United States prefer the whiter breast meat.
Assignment 2 material #3:
Choosing the Right Strategy
The main thing for any business interested in managing a multinational offering is to keep up with research. Trends around the world are changing rapidly. The globalization of social media platforms has made it easier to follow trends in societal culture, but nothing beats good old-fashioned research using culture models like we discussed in Lesson 4 or resources like the A-Z Business World Database, which is part of this lesson’s assignment. There also exist entire marketing companies whose sole product is profiles on various foreign markets for businesses. Research can reveal a niche in some markets that could provide a unique opportunity. For instance, a restaurant that is launching franchises in a new city might find in its research that the city offers Uber Eats delivery service. Even though the restaurant has never offered delivery before, it takes the opportunity to include delivery service at its new franchise locations.
Next, it is important to find and define your company’s competitive advantage. When you are selecting strategies and making decisions, it is important to focus on what is effective, whether it’s how you’ve done it before or not. Sometimes new and different strategies are effective, and sometimes they are not. Look past mere differences to find the strategy that’s most effective for your company. Additionally, try to avoid parochialism—that is, focusing narrowly on the interests of only you or your company to the exclusion of the societal culture its operating in. Understanding your own biases with regards to culture can also come in handy. If you have never done so, try taking an ethnocentrism test to get started. Ensuring that your management team is cross-culturally literate is very important step.
Finally, take advantage of the Chinese principle of guanxi, or focusing on relationships in business, that is becoming more popular in business culture around the world. Your readings this week introduce this idea.
Assignment 2 material 4:
Defining Internal Business Culture
Now that the business has selected its strategy for embracing diversity in the various markets in which it operates, it should establish its internal culture. Internal business culture can often be described as the “feeling” of a company. However, correctly establishing business culture is important for everything from understanding roles and expectations to the environment. The common parts of business culture include
practices (anything from how birthdays are or aren’t acknowledged to supply chain to communication pipelines)
norms
ethics
feelings
language (not just the dominant language of the region, but each business’s own vernacular, phrases, or abbreviations)
rituals
customer philosophy
Businesses that operate globally should be mindful of the potential to develop multiple organizational cultures for different locations, which can be hazardous when trying to move employees between locations. Businesses should also keep in mind the perceptions of their business, both internally and externally, with respect to culture. These perceptions are often more toxic to a company than its actual culture (recall the stereotypes discussion from Lesson 4).
In new country market settings, businesses establish their internal culture either by starting from scratch in a new location or by expanding via mergers & acquisitions. The latter option requires very careful attention because the company being merged or acquired already has an established culture. Starting From Scratch
Building a company culture from scratch provides the unique opportunity to make it whatever you want instead of figuring it out as you go, and research is an important first step. In addition to the other resources we have already discussed, the Deloitte Global Human Capital Trends analysis is a great place to look. This unique research survey examines what employees feel is important from a business. The results are broken down by region and are available as an interactive web tool or as a full report. Once a business has completed the research, it should take careful account of its own priorities as a company. What values or issues does it feel are an integral part of the business? The most common issue is a clash in foreign (home) culture with national (host) culture. Take, for instance, a company that prides itself on recognizing individual workers’ efforts in monthly team meetings. While this is quite common in the home country and many employees there enjoy being recognized individually, in collectivist societies, being recognized in this manner can be considered embarrassing or insulting. The question becomes whether the home culture can succeed and overcome the host culture. Current research indicates that it cannot completely overcome the issue. Oftentimes, the best route is to find a moderate middle ground. This is where proper research, identification of competitive advantages, and knowledge of priorities can help. With these ideas in hand, a business can know where it is willing to yield to local preferences and where it wants to stand the home ground.
Merger or Acquisition
Much research has gone into how best to establish culture when a business is expanding due to a merger or acquisition. This is often a tricky process as both existing companies have their own established cultures. This problem is often compounded with acquisitions as the current employees of the acquired company often fear job cuts and massive changes. Research has suggested that success in this area often comes from establishing the relationship between the new company and the existing organization, establishing a clear hierarchy or structure, and establishing a commonly held view about where the existing company fits in the overall strategic goals and plans of the organization.
Structures for Internal Cultural Diversity
Hans Trompenaar has focused much of his career on cultural research, and while he has his own cultural dimensions model, it is in fact his cultural diversity model that has proven beneficial in the realm of internal business culture. Trompenaar postulated that all corporate structures exist on two spectrums: the hierarchical to egalitarian spectrum and the personal to formal spectrum. This classification system yields organizational structures varying from what is known as task/formal to personal/informal. There are four established organizational structures that are part of his model.
Guided Missile Structure: This is an egalitarian structure that is very task/formal focused.
Benefits: This structure is oriented around large groups working together in harmony (the harmony is key to success). The job to be completed is placed over hierarchy—often, an individual will do whatever is necessary to successfully complete the job, no matter the individual’s rank. This flexible structure allows for quick adaptation within the organization, which makes it a common structure for organizations in the tech field.
Downsides: The focus is on only the jobs to be completed, so once those are complete, individuals move on to other projects. There is little personal mingling between workers to establish strong team spirit.
Incubator Structure: This is an egalitarian structure that is very personal/informal focused.
Benefits: This structure prioritizes people over job, so it’s very good for businesses that need to foster collaboration for strong creativity (entrepreneurship). Individuals in this environment often feel they are very fulfilled at their job and are able to focus on expressing their ideas.
Downsides: The intense emotional commitment of the workers can lead to burnout (often from overworking). This can lead to spontaneous change, which can be harmful to a global MNC depending upon how quickly it can adapt to the change.
Family Structure: This is a personal/informal structure with strong hierarchical tendencies.
Benefits: In this structure, leadership is very focused on the employees, which yields tight bonds. The give-and-take between leadership and employees often breeds a strong positive culture. Downsides: This strong culture can create an “in vs. out” mentality that may make it hard for new employees to join the company and enter the culture. Additionally, employees may be so dedicated to leadership that ineffective leaders and inefficient methods may become entrenched and in the organization and difficult to change.
Eiffel Tower: This is a task/formal structure with strong hierarchical tendencies.
Benefits: Employees are well-versed in their roles and jobs. They know where they fit in the overall company structure and strategic plan. This structure leads to effective coordination between employees and company divisions, which means that change has little effect on the overall operation of the company.
Downsides: The strong focus only on the job creates little personal connection between employees. Employees are often loyal to the work and not to the organization. Overall change can be difficult.
How closely does Trompenaar’s model reflect reality? In truth, very few businesses fit perfectly into one of the four distinct structures. That is why it is good to think about organizations as existing somewhere on the spectrums between formal and informal and between egalitarian and hierarchical. You should be aware of the benefits and downsides of each and select the overall structure that best fits the competitive advantage of your organization, working to maximize the benefits and mitigate the downsides. While this seems like an easy task on paper, it can be quite difficult in practice. Organizations can use structure and communication to assist in these tasks. We will be focusing on communication in the next lesson.

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