Global Strategic Advisory, of which Dr Rajesh Kumar is the principal, offers training programs to companies seeking to enhance their global presence. When companies expand overseas, they encounter an unfamiliar environment. The more adept and the more successful of them are both aware of the potential surprises and have developed strategies to mitigate them. But many are still confounded by the differences they have to face. This article will focus on the role of national culture and how national cultural differences can impede the efficiency and/or the effectiveness of their operations. National Culture is invisible but nevertheless extremely powerful. It can impact business relationships, your strategy execution, and your interface with the local customer. Impactful as it is, many companies/managers underestimate its role in shaping business success. Attention tends to get focused on it once there is a business or a project failure. A recent report in the Wall Street Journal (December 21, 2121) highlights the challenges LVMH Moet Hennessey is likely to face in the management of the iconic US Jeweler Tiffany’s that it has acquired recently.
Dr Kumar worked on a project for an Indian company that was expanding globally. They faced a myriad of challenges in their global expansion rooted in part to the cultural gap between collectivistic India and the individualistic West. The Indian top management did not want to delegate authority to local managers, and this created friction. The cultural difference could not be bridged effectively, and the morale in the organization became very low. WalMart the iconic US retailer exited Germany because their strategy did not dovetail with the local requirements of the culture.
If national culture can have such a transformative impact, why is it that many individuals/ companies from all cultures struggle in overcoming this barrier? What steps can individuals and companies undertake to be better able to cope with the cultural divide they are often confronted with? These are the issues which are addressed in this piece.
Culture has both subtle and profound effects. It conditions the way we think, how we interact with others, and/or the way we deal with conflict among others. Many are not even cognizant that their own perceptions and judgments are clouded by their own culture. We are so set in our own ways of thinking and behaving that often we may not even realize that the same situation can be looked at differently. Only when a problem arises do we realize the potential impact of culture. In instances where people may be conscious of their culture, they often think that their approach to doing business is the right or the most effective one. This attitude is characteristic of all cultures, although there are individual differences, and one should not underestimate them. In other words, not everyone in a particular culture will fit the national norm. But there is this general ethnocentric tendency, and it often comes in the way of strategic learning and adaptation.
How can individuals and organizations respond to the cultural challenge more effectively? Awareness of the differences is an essential first step, but it is insufficient. Individuals and/or organizations need to have a good understanding of the lay of the land to understand not just the differences but what differences matter, and under what conditions do they matter and what their potential impact might be. Culture is akin to an onion so just as you peel the onion you go through different layers the same also holds true for culture. It is not enough to have textbook knowledge. Your whole being must be immersed in the inner essence of the local reality. Even though this is a difficult task, to be truly effective you must grasp the essence. How do you go about grasping the inner essence? The answer is an immersion in the local culture. It is not a great idea to become like the locals, but it is essential to interact with them to get a sense of what their reality is like and their view of the world. Only then you can get a sense of what is feasible and how you might achieve the middle ground. This is time taking and costly but if your goal is to gain a long- term competitive advantage it is vital. Hindustan Lever, the subsidiary of Unilever has become so deeply embedded in the Indian cultural context that many do not even consider it to be a foreign company.
Another additional ingredient and an important supplement to awareness is commitment. You need to have a longer-term focus and a willingness to make the commitment in terms of both financial and managerial resources to succeed. Operating globally is not for the faint hearted. However, if you have the desire, commitment, and will to succeed it can be very rewarding. Consider Apple. It gets more than 50% of revenues from overseas. Intel derives 80% of its revenues from overseas. The growth in globalization and interdependence has indeed made it more profitable for countries and firms to cross borders, but it also requires the right mindset.
It is also important for the firms to choose managers with the right mind set to manage their overseas operations. They need to be culturally skilled and have the patience, the flexibility, and the will to succeed. Global expansion might at one level appear very challenging but if you are brave enough and committed enough you will surely succeed.