Globalization is defined as the interdependence of transport, marketing, communication, and economic infrastructures of different countries. This global efficiency requires certain positive steps of the organization claiming to be the leader (Earley, 2006, p. 922-931). The emergence of a global civilization is worthy of serious attention, and in order to understand at a first glance the chaotic nature of the globalized world, three long-term trends should be considered:
- The forces of globalization prevail over the factors restraining it;
- The emergence of a global civilization created many paradoxes in terms of the mixing of cultures – there is hybridization of norms and standards;
- The global nature of the impending change requires transformation of most of the existing institutions, from states to the corporations.
Theodore Levitt believes that a truly global market regularly called to the life the corporation of a new type. According to him, the company replaced the global multinational corporate structure as the best competitor of international scope. The difference between them lies in the fact that a multinational company makes business in different countries, “adjusting” products and management practices to local conditions and market specifics. Global company also avoids the relatively high costs of multinational businesses, offering standardized products for the integrated world market (Levitt, 1983, p. 68-69). New challenges are associated with the management of the new global strategies and approaches to disparate human resources. The global market makes it necessary to take into account the specifics of hundreds of countries and thousands of cultures. Current management history is replete with examples of how companies find themselves unable to find their way to foreign markets, or simply fail. The main reason is intercultural and international incompetence in managing joint ventures and groups of companies.
The deepening of the internationalization of economic life is accompanied by the involvement and the expansion of the participating countries in international economic relations, number of which in the last 25 years has increased by 4 times. This leads, respectively, to an increase in geometric progression of economic relations, as well as the complexity and increase of the diversity of their implementation.
The item of a management practice means a transfer in host economies organizational forms of direct investment, the diffusion and erosion of intra-and inter-firm organizational structures and institutional mechanisms. And in a broader sense – rapprochement and interpenetration of a national business and corporate cultures, which is not without conflicts. It is also recognized is the impact of the national business culture on the process of transfer of foreign innovation in the economy and their perception of the partner in the host country, the effect of the parameters of national cultures in the creation of new market products and marketing practices by a country.
Managing a global company requires the development of these fundamental aspects of the business:
- The introduction of a global mindset, which involves understanding of global political, economic, social, cultural, demographic, scientific, technological, medical and environmental factors and processes;
- Global business competence – knowledge of new opportunities in the era of hyperconcentration, recurring global excess of production capacity, changes in the value system of consumers, the continuous development of international business ethics, as well as the elimination of boundaries between sectors of the global economy, leading to new business paradigms;
- Global intercultural competence – the creation of new forms of associations (in particular electronic), including cultural “hybrids” with the sellers, wholesalers, competitors, customers, and the emergence of the “third sector” of the economy, which is responsive to the needs of customers in all parts of the globe.
The emergence of a global civilization does not mean instant erasure of borders and certain over-culture. In a world composed of about two hundred states and tens of thousands of cultural differences, the companies can build a home which strong enough for the global civilization and which is just based on the cross-cultural and transnational competence.
Cross-cultural analysis subsystem management certainly deserves special attention. Specialists of Group of Management Consulting Nay Associates of Philadelphia proposed to hold it in the context of three organizational microcultures (Hofstede, 2005, p. 172-174):
- Bureaucratic culture usually thrives in companies operating in protected or stable markets (France, Japan). It is characterized by out-personal style and it focuses on standards and tightly regulated process. Such culture is maintained by strictly pyramidal and centralized hierarchy with a very low degree of internal competition. Topping type of a manager – “organization man”.
- Management culture is geographically typical for companies which are opened for competition (the Netherlands, Switzerland). Conceptually – for companies operating in highly competitive and innovative industries. It is supported by a flexible and adaptive organization, which is the patrimony of the “business managers”.
- Technical culture is the characteristic of the countries with long technological traditions (Germany, the UK). This type of culture is most often found in companies operating in stable and traditional industries. It is specified by paternalistic leadership style and relies heavily on the technical know-how.. Functional “generals” are trying to build an empire around their know-how, leading to fierce competition between the departments. Recognition and sovereignty are in the hands of “mechanics”.
These are the basic subsystems that are worth of analyzing top managers and specialists of the company seeking to enter new markets. For business people oriented to achieve success in a foreign culture, the presence or absence of serious cross-cultural analysis is the equivalent to difference between success and failure.
Speaking of cross-cultural management, we should also mention the phenomenon of cross-cultural management incompetence.
Modern research allows identifying nine factors that adversely affects cross-cultural competence management (Peterson, 2004, p. 90-95):
Related to the conditions of the market:
- The inability to find the right market niche (the main problem is to find a suitable area for the competition. Struggling with a local company, that has a strong position in the market – not the best way.
- Reluctance to change to adapt to new conditions.
- Lack of original products (local buyers do not consider products of the company as unique and having a high added value).
Related to the skills and methods of control:
- Uncertainty of the position (often called the limited time resources. For example, too much time is required for training on how to work in such countries as Japan. This oscillating position slows the learning of local environment).
- Appointment of non-compliant candidates (selection of a suitable candidate is a priori challenging task, the wrong solution of which leads to failure, since it has the direct impact on the selection of the team).
- Wrong choice of partners (success depends on the choice of reliable and experienced contractors, as well as the development of relationships based on common interests, mutual benefit and trust).
- The inability to establish relationships with stakeholders. In this case, it means incompetence in partnering contacts with local authorities, trade unions, educational institutions, public and political organizations (movements) that can significantly affect the performance of the subsidiary.
Related to the work of headquarter:
- The growth of mutual distrust and disrespect between the head office and a subsidiary on the various levels of management.
- Failure to use the experience and ideas gained in one country in other markets.
Absolute convince of the correctness of the approach of the American Academy of Management statistics: 55% of international alliances, and 78% of mergers and acquisitions fall within the first three years (Reynolds & Valentine, 2011, p. 19). Does it mean that the organizers of these transactions (among them there are even major players of international business) are poorly able to calculate or make economically unjustified decisions? Of course, it does not. The problems here are not in the purely economic sphere, but in the cultural divergence of groups, in the organizational complexity of buildings of distributed organizational structures from the people: first, with a different mentality (usually due to national), and second, with different (because of the practice of management) strategic approach to business; in short – in a cross-cultural interaction.
Cultural illiteracy, and most importantly, unwillingness to compromise, and cross-cultural denial of the necessity of information enrichment in international relations – all this leads to many mutual misunderstandings and frustrations with cooperation. The result is not the one that they had expected, and often they did not take out the lessons that can later play a bad trick on them.
The process of creating an effective and balanced dialogue for both sides is called the cross-cultural communication. The science, which studies the characteristics of the process – is cross-cultural management, comparative and international management. Cross-cultural communication and cross-cultural management at present come to the exceptional position.
Their role in the organization of business processes without exaggeration can be called one of the most important in the proper approach to the implementation of foreign economic activity. Taking into account many nuances and aspects of the national culture of the partner country in the process of planning and direct participation in business cooperation provides a distinct advantage over competitors and eliminates unnecessary risks. Tolerance demonstrates wisdom and can provide further privileged position of the company and its employees.