CROSS CULTURE ISSUES IN MANAGING EXPARTRIATES IN MNC: AN

EMPERICAL STUDY

 

Introduction

In recent years, business operations have become increasingly internationalized.

This phenomenon has resulted in a greater number of managers being sent abroad. In

fact, it is estimated that over 100,000 expatriates are relocated to work in the United

States alone each year. From the company’s perspective, the importance of a manager’s

successful performance overseas cannot be underestimated.

Nowadays, corporate earnings generated abroad account for more than 40% of

company revenues. As global operations become strategically more important, so does

the role of the managers in charge of these operations abroad. Now more than ever, there

is a need to hire the most qualified and talented managerial staff to occupy international

job posts.

The growing internationalization of business operations has not been

accompanied by an equally proportionate number of male and females occupying global

positions. In fact, women continue to be grossly underrepresented in management

positions abroad. In the late 1980’s, women occupied less than 3% of international

management positions.

The situation seems to have improved at least moderately so in the past decade. A

study of 225 expatriates from a variety of countries revealed that 11% of the respondents

were female. More recently, Tung’s (1997) study of 409 U.S. expatriates found that

13.9% of respondents Suplemento / Supplement were female. Despite these moderate

improvements in the number of women occupying managerial posts abroad, there still

exists a significant lack of female managers overseas.

Indeed, the poor representation of expatriate women managers stand in marked

contrast to the gains made by women in obtaining management positions in the domestic

arena. A recent study conducted by the Families and Work Institute, a New York

nonprofit consulting and research group, discovered that 39% of women in the U.S. hold

executive, administrative and managerial positions, up 12% from 1977.

The under-representation of women in international managerial positions is

significant in three important regards. First, it is highly unethical to exclude women from

consideration for international posts based on one’s own perception that they might not

be interested. Adler’s (1986) study of one thousand graduating MBA’s from top schools

in the U.S. proved that this perception is in fact erroneous. Her results indicated that male

and female MBA’s displayed equal interest in pursuing international careers.

As India is developing nation and has tremendous potential to grow, many MNCs

are trying their best to enter in Indian market. And hence many expatriates come in India

these days. They bring FDI into the nation, which is better to the nation. We should

welcome it by open hands. But indeed, there are many problems faced by foreign

expatriate, who come long way from their home to work in India. And especially women

expatriate, in this research project we are trying to trace that this problem do exist or not,

and if yes to what extent. It is really difficult to overcome the problems faced in new

country, along with home-sickness. With this research we will identify and try to provide

solution for the same.

Background

International human resource management

MNCs operate in a complex and uncertain environment, which creates a unique

set of organisational, co-ordination and managerial issues for managers in MNCs and as a

result the significance of people management are becoming more and more realized by

managers in multinational firms, given that it may ensure profitability and capability of

the business operations to succeed.

The Role of Expatriates

Human resources play an important part in developing and sustaining competitive

advantage and expatriates are used in both short and long-term assignments. Expatriates

are defined as people who live and work away from their home country, and are citizens

of the counry where multinational corporations is headquartered. The tasks of the

expatriates may be to acquire and transfer technology, manage a foreign subsidiary, fill a

staffing need, maintaining communication and developglobal leadership competence.

The Expatriation Cycle

An important part of the IHRM approach is the decision of whether to use an

expatriate for international assignment or employ a local. If the decision is to send an

axpatriate, there are several steps that are significant and in need of discussion before the

expatriate is sent to his or her mission. The stages constitute cycle and are shown below.

RATIONALE OF THE STUDY

             The internationalization of human resource management has increased the scope

of traditional HRM. Today, HR practitioners not only manage people from their home

country, but one that involve managing many diverse nationalities, with which the culture

of staff and employees are already well-known or predicted. Companies start business

within their country of origin and staff are hired from within that country. However, with

the arrival of globalization and the shift from industrial to information technology, a new

problem for HR practitioners emerged as employees become more diversified and hard to

manage. Companies expand to other countries, or moreover participate in joint ventures

or mergers and acquisitions. This move has many implications including the limited

choice of hiring employees from the country which the company expanded. Basically,

this gives HR practitioners a new challenge as they are faced with a diverse cross-cultural

workforce that they are not yet familiar with. For instance, a UK or an American

company expanded or having joint ventures in China would have to integrate their own

HR practice in that country. However, the Chinese and Western managers have different

beliefs and practices in terms of managing employees. Thus, a cross-cultural conflict

might arise, which could affect the productivity and culture of the company as a whole,

most especially in the branch they invested in China. Western expatriates might not be

able to adapt with the Chinese way of working or any Asian way of working for that

matter if they don't have proper training or knowledge about them. This gives the HR

team a huge responsibility in making sure that cross-cultural relationship within the

company is going well. An HRM expatriate might have problems having the best local

staff when they do not have enough knowledge about the foreign culture. Furthermore,

productivity might also be affected if their way of human management is not compatible

with the working nature of the local staff.

 

OBJECTIVES OF THE STUDY

           The study will address the following three key objectives:

           

1.      To determine the different cross-cultural training strategies of multinational

companies in the UK that employs expatriates from other countries.

2.      To determine the advantages and disadvantages of their cross-cultural

training programmes and determine which approaches are highly

recommendable.

3.      To build theories of effective cross-cultural training programmes for

international human resource managers.

 

 

CONTRIBUTION OF EXISTING LITERATURES

 Human Resource Management

 Human resource management (HRM) is known and accepted in the broadest sense of the

term, as a form of management that includes "all management decisions and actions that

affect the nature of the relationship between the organization and the employees – its

human resources" (Beer et al., 1984, p. 1). It is defined as the process of coordinating an

organization's human resources, or employees, to meet organizational goals. As can be

observed based on the definition, the tasks of those belonging in HRM can be complex as

it involves all issues that encompasses employee and firm relationship. Believing that the

most important asset of a business is the people in order to achieve sustained business

success is the core philosophy of human resource management (HRM). Realizing this

leads to a strategic management of people within the organization. Its philosophy is based

on the simple belief that human resources are the most important asset in achieving and

sustaining business success. This realization became the driving force behind the creation

of human resource management resulting in organizations taking a strategic approach to

the management of their people.

Human resource professionals basically deal with such areas as employee recruitment

and selection, performance evaluation, compensation and benefits, professional

development, safety and health, forecasting, and labor relations, as well as management

of diversity, job analysis and job design (Lipiec, 2001).

 

The Internationalization of HRM

 In the current age of global economy, worldwide interdependence of resources, markets

and business competition thrives (Schermerhorn, 2001). The onset of globalisation has

prompted businesses and its leaders to think and act globally to be able to gain

competitive advantage. There are two opposing views: some view globalisation as an

opportunity for limitless growth and prosperity for both developed and developing

countries; while others see it as a threat to further the extent of inequality because of

increased competition and the dominance of market forces seen in multinational

companies (MNCs) (Johnson & Turner, 2003).

The implications of these changes in international business are far-reaching because of

the emphasis on interdependence which prompts a discussion of the different

collaborative arrangements between MNCs. As national boundaries have increasingly

been blurred, it has become imperative that MNCs take advantage of forming

collaborative arrangements or cooperative strategies which are believed to be a

productive method to promote growth. This trend has affected even companies directly

competing with each other as Hitt, Ireland & Hoskisson (2003) has given the example of

FedEx and the US Postal Service (USPS) forming an a seven-year alliance which benefits

both companies.

One of the areas of business organization that is affected by the internationalization of

business is the area of human resource management. Because business has become

internationalized, the process and factors that make up the HRM concept have also

become global. Thus, out of HRM, a new field has been formed – that is International

Human Resource Management or IHRM. The field of IHRM refers to the: "…

understanding, researching, applying and revising all human resource activities in their

internal and external contexts as they impact the process of managing human resources

in enterprises throughout the global environment to enhance the experience of multiple

stakeholders, including investors, customers, employees, partners, suppliers, environment

and society (Briscoe and Schuler, 2004, p,20).

 

Briscoe and Schuler (2004) explained that there are many forms of IHRM. These are: the

operation of parent-country firms overseas; and the operation of foreign firms in the

home country. The first one involves the situation of working as a parent-country HR

professional in the main or regional headquarters of the traditional multinational

enterprise (MNE). This may involve working as an expatriate HR manager in a foreign

subsidiary of an MNE (Briscoe and Schuler, 2004). Typical headquarters IHRM

responsibilities include selecting and preparing employees for and transferring them

between the various country locations of the firm, determining and administering

compensation and benefit packages for these international assignees, and establishing

HRM policies and practices for the firm's foreign operations (Briscoe and Schuler, 2004).

On the other hand, the second situation involves the HR manager working at home in the

foreign subsidiary of a foreign MNE (Briscoe and Schuler, 2004). The possibilities

include: working for a home-country firm that has been purchased by a foreign firm and

thus is now a foreign-owned firm; and working with a foreign headquarters (and, often,

expatriate managers sent from the foreign - now parent - company) and typically will

involve having to integrate into the local operations - the HR manager's home country - a

philosophy and organizational culture and practices that are different and/or unfamiliar

(Briscoe and Schuler, 2004).

 

The Need for Cross-Cultural Management

 The situations that IHR managers might face involve dealing with different people with

different culture. Managing culture is one of the tasks that an international human

resource manager has to deal with. Culture is defined as a set of beliefs and values widely

shared in a specific society at a particular point in time (McGuire et al, 2002).

Furthermore, culture encompasses a set of fundamental values that distinguishes one

group from another (Hofstede and Bond, 1988) and these values can act as a strong

determinant of managerial ideology that consequently affects both HR practice and

performance (Laurent, 1983).

Culture is basically a combination of shared beliefs, social norms, organizational roles

and values, emphasizing a cross-cultural socio-economic perspective in industrial and

management research (Wang, 1993). One example is that the Eastern style of

management is different from that of the West. The Chinese approach is usually based

from historical leaders and philosophical figures such as Confucius, Sun Tzu, Mencius

and Han Fei (Satow and Wang, 1994), which involves anddepends on the connections, on

circumstances, on the level of affinity (who you know and what family you come from).

Here, there is no consistent legal framework and, even within the regulations that do

exist, the exception is the rule rather than the rare occurrence. On the other hand, the

management in America is objective and driven by data and rational models. Deployment

of statistics and financial modelling is the key in decision-making and strategic planning.

These differences alone can create problems. Chinese employees may not function well

with the Western management style and vice-versa. Thus, foreign expatriates should

obviously be trained, as making themselves familiar with the new culture can help them

create the appropriate management style that will make employees in the country perform

at their best.

 

Cultural Dimensions

One of the ways to assess culture is to take heed of its value dimensions. As explained by

Hofstede (1980), there are four cultural value dimensions:

Ø      Large versus small power distance. Large power distance is the extent to which

the members of a society accept that power in institutions and organisations is

distributed unequally; while small power distance is the extent to which members

of a society or organization accept that power is distributed fairly (Adler, 1997).

Ø      Strong versus weak uncertainty avoidance. Strong uncertainty avoidance means

the degree to which the members of a society feel uncomfortable with uncertainty

and ambiguity, which leads them to support beliefs promising certainty and to

maintain institutions protecting conformity; while weak uncertainty avoidance is

the degree to which members tend to be relatively tolerant of uncertainty and

ambiguity and require considerable autonomy and lower structure (Rodriguez,

1995).

Ø      Individualism versus collectivism. Individualism is the preference for a loosely

knit social framework in society; collectivism stands for a preference for a tightly

knit social framework.

Ø      Masculinity versus femininity. Masculinity is the preference for achievement,

heroism, assertiveness and material success; whilefemininity refers to a preference

for relationships, modesty, caring for the weak and the quality of life.

Related Studies

 Sadri and Lees (2001) stated that there are key elements to determine a positive culture.

They are: the development of a corporate vision; the development of corporate values;

valuing and maintaining communications with employees; adaptability; and perpetuation

of the culture through tangible symbols, slogans, stories, or ceremonies that highlight

corporate values. However, these positive characteristics can be easier said than achieved

as the workplace involves different nationalities that do not share the same pattern of

beliefs. An incompatible management approach brought and implemented by foreign

expatriates can result in the development of a negative corporate culture. Expatriates who

have poor performance in their cross-country assignments cost multinational enterprises

(MNE's) billions of dollars, damage firm reputation, disrupt relationships with local

nationals (Harvey, 1996; Welch and Welch, 1994), and often precise a cost on

expatriates' psychological state (Solomon, 1996). Expatriates are proposed to gain

intercultural communication skills and, consequently, intercultural effectiveness through

a cultural learning process.

 

 Fischer and Hartel (2003) conducted a study that tries to determine comparatively how

Thai and Western managers conceptualize intercultural effectiveness and to identify the

extent to which perceptions of socio-biographical characteristics are important to Thai

managers' perceptions of the effectiveness of a Western manager and vice versa. The

qualitative study found that both considered religion, age and gender, nationality as

important; while they have different views on the importance of stereotypes, linguistic

abilities, intercultural abilities and identifying task and contextual performance.

 

Hutchings (2002) investigated the need for careful selection and in-post support of

expatriates in China and argues that expatriates should be those who possess realistic pre-

departure expectations and cultural awareness and knowledge, and  whom are provided

with in-post support, including work-related skill development, mentoring and

consultative groups. Through semi-structure interviews of Australian organizations

in China, the research found that that expatriate selection is very much ad hoc in nature

and that expatriate preparation and cross-cultural adaptability skills need to be improved

in a number of important aspects. Hutchings (2002) suggested that "there is a clear need

for expatriates to be fully briefed prior to being sent on overseas postings and that careful

selection should be balanced with goal-setting, performance expectations, and awareness

of socio-cultural limitations of operating from a business and social perspective in the

host environment" (p.46).

INTRODUCTION OF MNC

A multinational corporation (MNC) or enterprise (MNE), is a  or an

enterprise that manages production or delivers services more than

one country. It can also be referred to as an international

corporation. The International Labour Organisation (ILO) has

defined an MNC as a corporation that has its management

headquarters in one country, known as the home country, and

operates in several other countries, known as host countries.

The Dutch East India Company was the second multinational

corporation in the world (the first, the British East India Company,

was founded two years earlier) and the first company to issue stock,

and it was the largest of the early multinational companies. It was

also arguably the world's first megacorporation, possessing quasi-

governmental powers, including the ability to wage war, negotiate

treaties, coin money, and establish colonies.

Some multinational corporations are very big, with budgets that

exceed some nations' GDPs. Multinational corporations can have a

powerful influence in local economies, and even the world economy,

and play an important role in international relations and globalisation.

1. Market imperfections

It may seem strange that a corporation can decide to do business in a

different country, where it does not know the laws, local customs or

business practices. Why is it not more efficient to combine assets of

value overseas with local factors of production at lower costs by

renting or selling them to local investors?

One reason is that the use of the market for coordinating the

behaviour of agents located in different countries is less efficient than

coordinating them by a multinational enterprise as an institution. The

additional costs caused by the entrance in foreign markets are of less

interest for the local enterprise. According to Hymer, Kindleberger

and Caves, the existence of MNCs is reasoned by structural market

imperfections for final products. In Hymer's example, there are

considered two firms as monopolists in their own market and isolated

from competition by transportation costs and other tariff and non-tariff

barriers. If these costs decrease, both are forced to competition;

which will reduce their profits. The firms can maximize their joint

income by a merger or acquisition, which will lower the competition in

the shared market. Due to the transformation of two separated

companies into one MNc the pecuniary externalities are going to be

internalized. However, this does not mean that there is an

improvement for the society.

This could also be the case if there are few substitutes or limited

licenses in a foreign market.The consolidation is often established by

acquisition, merger or the vertical integration of the potential licensee

into overseas manufacturing. This makes it easy for the MNE to

enforce price discrimination schemes in various countries. Therefore

Hymer considered the emergence of multinational firms as "an

(negative) instrument for restraining competition between firms of

different nations”. Market imperfections had been considered by

Hymer as structural and caused by the deviations from perfect

competition in the final product markets. Further reasons are

originated from the control of proprietary technology and distribution

systems, scale economies, privileged access to inputs and product

differentiation. In the absence of these factors, market are fully

efficient. The transaction costs theories of MNEs had been developed

simultaneously and independently by McManus (1972), Buckley &

Casson (1976) Brown (1976) and Hennart (1977, 1982). All these

authors claimed that market imperfections are inherent conditions in

markets and MNEs are institutions that try to bypass these

imperfections. The imperfections in markets are natural as

the neoclasical assumptions like full knowledge and enforcement do

not exist in real markets.

2. International power

Tax competition

Multinational corporations are important factors in processes

of globalisation. National and local governments often compete

against one another to attract MNC facilities, with the expectation of

increased tax revenue, employment, and economic activity. To

compete, political entities may offer MNCs incentives such as tax

breaks, pledges of governmental assistance or subsidized

infrastructure, or lax international and labor regulations. These ways

of attracting foreign investment may be criticized as a race to the

bottom, a push towards greater autonomy for corporations, or both.

On the other hand, economist Jagdish Bhagwati has argued that in

countries with comparatively low labor costs and weak environmental

and social protection, multinationals actually bring about a 'race to the

top.' While multinationals will certainly see a low tax burden or low

labor costs as an element of comparative advantage, Bhagwati

disputes the existence of evidence suggesting that MNCs deliberately

avail themselves of lax environmental regulation or poor labor

standards. As Bhagwati has pointed out, MNC profits are tied to

operational efficiency, which includes a high degree of

standardisation. Thus, MNCs are likely to adapt production processes

in many of their operations to conform to the standards of the most

rigorous jurisdiction in which they operate (this tends to be either the

USA, Japan, or the EU). As for labor costs, while MNCs clearly pay

workers in developing countries far below levels in countries where

labor productivity is high (and accordingly, will adopt more labor-

intensive production processes), they also tend to pay a premium

over local labor rates of 10 to 100 percent. Finally, depending on the

nature of the MNC, investment in any country reflects a desire for a

medium- to long-term return, as establishing plant, training workers,

etc., can be costly. Once established in a jurisdiction, therefore,

MNCs are potentially vulnerable to arbitrary government intervention

such as expropriation, sudden contract renegotiation, the arbitrary

withdrawal or compulsory purchase of licenses, etc. Thus, both the

negotiating power of MNCs and the 'race to the bottom' critique may

be overstated, while understating the benefits (besides tax revenue)

of MNCs becoming established in a jurisdiction.

Market withdrawal

Because of their size, multinationals can have a significant impact

on government policy, primarily through the threat of market

withdrawal. For example, in an effort to reduce health care costs,

some countries have tried to force pharmaceutical companies to

license their patented drugs to local competitors  for a very low fee,

thereby artificially lowering the price. When faced with that threat,

multinational pharmaceutical firms have simply withdrawn from the

market, which often leads to limited availability of advanced drugs. In

these cases, governments have been forced to back down from their

efforts. Similar corporate and government confrontations have

occurred when governments tried to force MNCs to make

their intellectual property public in an effort to gain technology for

local entrepreneurs. When companies are faced with the option of

losing a core competitive technological advantage or withdrawing

from a national market, they may choose the latter. This withdrawal

often causes governments to change policy. Countries that have

been the most successful in this type of confrontation with

multinational corporations are large countries such as United

States and Brazil, which have viable indigenous market competitors.

Lobbying

Multinational corporate lobbying is directed at a range of issues of

interest to businesses, from tariff structures to environmental

regulations. There is no unified MNC perspective on any of these

issues. Companies that have invested heavily in pollution control

mechanisms may lobby for very tough environmental standards in an

effort to force non-compliant competitors into a weaker position.

Corporations lobby tariffs to restrict competition of foreign industries.

For every tariff category that one multinational wants to have

reduced, there is another multinational that wants the tariff raised.

Even within the U.S. auto industry, the fraction of a company's

imported components will vary, so some firms favor tighter import

restrictions, while others favor looser ones. Multinational corporations

such as Wal-mart and McDonald’sbenefit from

government zoning laws, to create barriers to entry

Many industries such as General Electric and Boeing lobby the

government to receive subsidies to preserve their monopoly.

Patents

Many multinational corporations hold patents to prevent competitors

from arising. For example, Adidas holds patents on shoe

designs,Siemens A.G. holds many patents on equipment and

infrastructure and Microsoft benefits from software patents. The

pharmaceutical companies lobby international agreements to enforce

patent laws on others.

Culture-An Important Element for Multinational corporations

Culture is the set of values and beliefs shared by a group. This includes groups as small as social groups, and as large as a whole country. Since multinational companies operate in more than one country, they are exposed to many different cultures. Each culture has its own beliefs and values. To be successful in these foreign countries, multinational companies must have a global mindset, and be able to recognize and adapt to the differences.

Different methods of communication across different cultures

Communication is the process of conveying messages. ‘’Successful communication in the international business environment requires not only an understanding of language, but also the nonverbal aspects of communication that are part of any community’’. Different countries are going to have different ways of communicating. If certain executives of a company want to do business with people from different countries, they need to understand how to communicate clearly with them, without mistakenly doing something wrong. The most obvious way of communicating with different people is with words, and therefore, some executives learn how to speak the language spoken in the foreign country. This act can show that the executive is truly dedicated to the work, and that he is willing to do anything to complete the deal. Greeting rituals are sometimes overlooked, but they shouldn’t be because they are more important in some parts of the world than others. ‘’In Japan, failure to show

respect by exchanging business cards can get negotiations off to a very bad start’’ ‘’While in France, greetings are highly personal and individual…as workers expect to be greeted individually’’(Schneider and Barsoux) Another form of communicating is through hand gestures. Often goes unnoticed, hand gestures are as important as words themselves because they too have meaning behind them. ‘’ Cultures located in southern Europe and the Middle East employ a wide variety of gestures frequently with purposefulness’’. Some hand gestures have different meanings in different countries. ‘’For example, the hand gesture where the index finger and thumb touch and create a ‘zero’ can mean different things in different places. In the US and UK, it means ok. In Russia it means zero. In Japan it refers to money. While in Brazil, it is viewed as an insult.’’  Time is another communication system. ‘’ In western cultures, people like to get to the point of the matter in business meetings and conversations. However, in other countries like Saudi Arabia and Russia, it is customary to converse first about unrelated matters before starting the business discussions for which the meeting was arranged. Barging straight into the business issue, without informal small talk at the beginning, may make them very uncomfortable and may ruin the negotiations.’’

Seven Methods of managing across cultures

(1) Hierarchy: "This refers to the way people view how much they

defer to people in authority, whether they feel entitled to express

themselves and how empowered they feel to take the initiative on

matters before them. For example, Canada believes in egalitarianism,

while nations like India, Japan, China, Germany, Mexico are highly

hierarchical."

(2) Group focus: “This refers to whether people consider that

accomplishment and responsibility are achieved through individual or

group effort, and whether they tend to identify themselves as

individuals or members of a group. Canadians are individualists while

Brazilians, Chinese, Mexicans and Japanese are group-focused.”

(3) Relationships: “This is about whether trust and relationships are

viewed as a prerequisite for working with someone. Canadians focus

primarily on the transaction, rushing to deal, while the Chinese,

Italians, and Spaniards, for example, focus on nurturing relationships

first.”

(4) Communication styles: “This covers matters like verbal and non-

verbal expression, how directly or indirectly people speak, and

whether brevity or detail is valued in communication. Israel, Denmark,

Germany and Sweden use a direct style, while indirect

communication styles are the norm in China, United Arab Emirates,

and Japan

5) Time orientation: “This refers to the degree to which people

believe adhere to schedules. United States, Germany, Denmark and

Switzerland follow schedules while countries like Saudi Arabia, Spain,

Thailand, and the United Arab Emirates are unconcerned about

schedules and deadlines.”

(6) Change tolerance: “How people are comfortable with change,

risk-taking and innovation. Along with Australians, Canadians are the

most tolerant of change, while Saudi Arabia, Indonesia, Mexico and

Russia are change-averse.”

(7) Motivation: work/life balance: “This characteristic examines

whether people work to live or live to work. Canadians are driven by

work and the status it provides – although not as much as people in

China, Japan, and the U.S. – while in Norway, Saudi Arabia, United

Arab Emirates, India and Mexico, family-work balance is treasured.”

Advertisement in different countries

Another way for multinational companies to prove that they

understand the specific market is through advertisement. Advertising

products in different countries requires the companies to use specific

methods of advertisement that is allowed by the tradition and culture

of the country. For example, in western countries, sex appeal is used

a lot in advertising many different products. It is used to grab attention

of customers and is used to boost sales. This strategy however won’t

be successful in countries that are very religious like most Arabic

countries where the dominant religion is Islam. In those countries

people, especially girls, are mostly covered and so won’t be wearing

very revealing clothes. Therefore, ads that use sex appeal, like girls

in bikinis for example, won’t be used. One company that used proper

advertisement was Procter and Gamble. Companies adjust

advertisements to the nationality of their clients. The Japanese

prefers to buy shampoo which uses Japanese girls in its

advertisements. Russian housewives prefer washing powder that

uses Russian housewives instead of American housewives in its

advertisements.

Adaptation To Foreign Market By Multinational Corporations

Companies that adapted to foreign market successfully

Just because a large company is very successful in one country, it

doesn’t mean that it will be successful in another country, especially if

that country has a completely different culture. McDonalds is one of

the largest companies in the world. However, it has adapted to the

different cultures to make sure it is successful. In France,

‘McDonald's added tablecloths and candles to improve the ambience

at some eateries and introduced waiter service at certain outlets

because they found that most Europeans prefer leisurely rather than

fast food dining’ .In addition to space, McDonald’s has changed its

menus from one country to another, offering food that locals usually

eat: in France, a burger has mustard and ciabatta rolls instead of

regular buns. In Japan, fried egg burgers were offered.

Companies that failed to adapt to foreign culture

In many occasions, a lot of the larger companies think that because

they are a large corporation, they can succeed anywhere without

changing anything. This tactic proved wrong, as many companies

have failed and were forced to shutdown foreign branches. The

biggest example was “When Wal-Mart expanded in Germany in 1997,

it hoped that Germans, like Americans, would scoop up its low-priced

items. By July 2006, Wal-Mart had closed its German operations and

absorbed $1 billion in losses. This was because they didn’t adjust to

the German culture where people preferred frequently specialty

stores, not one-stop shops” .Another example is Daimler AG, “it failed

in its acquisition of Chrysler because its disciplined, buttoned-down

executives could never meld with their more freewheeling American

counterparts.”

Types of Multinational Corporations

Transnational Corporations

A Transnational Corporation (TNC) differs from a traditional MNC in

that it does not identify itself with one national home. Whilst traditional

MNCs are national companies with foreign subsidiaries, TNCs spread

out their operations in many countries sustaining high levels of local

responsiveness. An example of a TNC is Nestlé who employ senior

executives from many countries and try to make decisions from a

global perspective rather than from one centralised

headquarters. However, the terms TNC and MNC are often used

interchangeably. A study of Dutch multi-national corporations showed

that foreign expansions best unfold sequentionally, consistent with

the notions of organizational learning. Firms ought to diversify first

into culturally (and less so geographically) nearby countries before

they venture farther away. They do so more successfully if they also

follow a learning process by mode ( e.g, greenfield based expansion

versus acquisitions or equity joint ventures) or by level of ownership.

Micro-multinationals

Enabled by Internet based communication tools, a new breed of

multinational companies is growing in numbers. These multinationals

start operating in different countries from the very early stages. These

companies are being called micro-multinationals. What differentiates

micro-multinationals from the large MNCs is the fact that they are

small businesses. Some of these micro-multinationals, particularly

software development companies, have been hiring employees in

multiple countries from the beginning of the Internet era. But more

and more micro-multinationals are actively starting to market their

products and services in various countries. Internet tools like Google,

Yahoo, MSN, Ebay and Amazon make it easier for the micro-

multinationals to reach potential customers in other countries.

Service sector micro-multinationals, like Facebook, Alibaba etc.

started as dispersed virtual businesses with employees, clients and

resources located in various countries. Their rapid growth is a direct

result of being able to use the internet, cheaper telephony and lower

traveling costs to create unique business opportunities.

Low cost SaaS (Software As A Service) suites make it easier for

these companies to operate without a physical office.

Hal Varian, Chief Economist at Google and a professor of information

economics at U.C.Berkeley , said in April 2010, "Immigration today,

thanks to the Web, means something very different than it used to

mean. There's no longer a brain drain but brain circulation. People

now doing startups understand what opportunities are available to

them around the world and work to harness it from a distance rather

than move people from one place to another."

Role Of Multinational Corporations

Multinational corporations (MNCs) are huge industrial

organizations having a wide network of branches and

subsidiaries spread over a number of countries. The two

main characteristics of MNCs are their large size and the fact

that their worldwide activities are centrally controlled by the

parent companies. Such a company may enter into joint

venture with a company in another country. There may be

agreement among companies of different countries in

respect of division of production, market, etc. These

companies are to be found in almost all the advanced

countries, with the USA perhaps the biggest amongst them.

Their operations extend beyond their own countries, and

cover not only the advanced countries but also the LDCs.

Many MNCs have annual sales volume in excess of the entire

GNPs of the developing countries in which they operate.

MNCs have great impact on the development process of the

Underdeveloped countries.

Let us discuss the arguments for and against the operation

of MNCs in underdeveloped countries.

Arguments for MNCs(The positive role): The MNCs play

an important role in the economic development of

underdeveloped countries.

1. Filling Savings Gap: The first important contribution of

MNCs is its role in filling the resource gap between targeted

or desired investment and domestically mobilized savings.

For example, to achieve a 7% growth rate of national output

if the required rate of saving is 21% but if the savings that

can be domestically mobilised is only 16% then there is a

‘saving gap’ of 5%. If the country can fill this gap with

foreign direct investments from the MNCs, it will be in a

better position to achieve its target rate of economic growth.

2. Filling Trade Gap: The second contribution relates to

filling the foreign exchange or trade gap. An inflow of foreign

capital can reduce or even remove the deficit in the balance

of payments if the MNCs can generate a net positive flow of

export earnings.

3. Filling Revenue Gap: The third important role of MNCs

is filling the gap between targeted governmental tax

revenues and locally raised taxes. By taxing MNC profits,

LDC governments are able to mobilize public financial

resources for development projects.

4. Filling Management/Technological Gap: Fourthly,

Multinationals not only provide financial resources but they

also supply a “package” of needed resources including

management experience, entrepreneurial abilities, and

technological skills. These can be transferred to their local

counterparts by means of training programs and the process

of ‘learning by doing’.

Moreover, MNCs bring with them the most sophisticated

technological knowledge about production processes while

transferring modern machinery and equipment to capital

poor LDCs. Such transfers of knowledge, skills, and

technology are assumed to be both desirable and productive

for the recipient country.

5.Other Beneficial Roles: The MNCs also bring several

other benefits to the host country.

(a) The domestic labour may benefit in the form of higher

real wages.

(b) The consumers benefits by way of lower prices and

better quality products.

(c) Investments by MNCs will also induce more domestic

investment. For example, ancillary units can be set up to

‘feed’ the main industries of the MNCs

(d) MNCs expenditures on research and development(R&D),

although limited is bound to benefit the host country.

Apart from these there are indirect gains through the

realization of external economies.

 

Arguments Against MNCs(The negative role): There are several

arguments against MNCs which are discuss below.

1. Although MNCs  provide capital, they may lower domestic savings

and investment rates by stifling competition through exclusive

production agreements with the host governments. MNCs often fail to

reinvest much of their profits and also they may inhibit the expansion

of indigenous firms.

2. . Although the initial impact of MNC investment is to improve the

foreign exchange position of the recipient nation, its long-run impact

may reduce foreign exchange earnings on both current and capital

accounts. The current account may deteriorate as a result of

substantial importation of intermediate and capital goods while the

capital account may worsen because of the overseas repatriation of

profits, interest, royalties, etc.

3. While MNCs do contribute to public revenue in the form of corporate

taxes, their contribution is considerably less than it should be as a

result of liberal tax concessions, excessive investment allowances,

subsidies and tariff protection provided by the host government.

4. The management, entrepreneurial skills, technology, and overseas

contacts provided by the MNCs may have little impact on developing

local skills and resources. In fact, the development of these local skills

may be inhibited by the MNCs by stifling the growth of indigenous

entrepreneurship as a result of the MNCs dominance of local markets.

5. MNCs’ impact on development is very uneven. In many situations

MNC activities reinforce dualistic economic structures and widens

income inequalities. They tend to promote the interests of some few

modern-sector workers only. They also divert resources away from

the production of consumer goods by producing luxurious goods

demanded by the local elites.

6. MNCs typically produce inappropriate products and stimulate

inappropriate consumption patterns through advertising and their

monopolistic market power. Production is done with capital-intensive

technique which is not useful for labour surplus economies. This

would aggravate the unemployment problem in the host country.

7. The behaviour pattern of MNCs reveals that they do not engage in R

& D activities in underdeveloped countries. However, these LDCs

have to bear the bulk of their costs.

8. MNCs often use their economic power to influence government

policies in directions unfavorable to development. The host

government has to provide them special economic and political

concessions in the form of excessive protection, lower tax, subsidized

inputs, cheap provision of factory sites. As a result, the private profits

of MNCs may exceed social benefits.

9. Multinationals may damage the host countries by suppressing

domestic entrepreneurship through their superior knowledge,

worldwide contacts, and advertising skills. They drive out local

competitors and inhibit the emergence of small-scale enterprises.

 Literature Review

It is a widely commented that the rapid pace of globalisation has led to increased

global activity and global competition. This global phenomenon has ultimately

emphasized the critical importance of international human resource management (IHRM)

and its aim to enable the Multinational company (MNC) to be successful on a global

front as well as the ever-rising importance of global assignments The literature reveals

that within the globalizing nature of our times, the very notion of an international

assignment and international employee is changing and expanding, to one that looks

beyond the concept of a traditional expatriate sent on assignment by their organisation, to

a more diverse set of international employees. Collings, Scullion and Morely, (2007) call

for a more strategic approach to be taken when it comes to staffing in the international

context and they outline the new and old challenges of using traditional expatriates and

highlight the many alternatives to using them. The more contemporary difficulties with

using traditional expatriates can be seen with the emerging markets; requirements for

expatriates such as visas and permits; Career issues (dual-career) as well as the impact

that 9/11 has had on the international labour force (p 200).

Other areas of concern according to Collings et al (2007) are the limited

participation of women in international management, repatriation issues and weak

international talent management systems (p.200-202). The paradoxical nature of this is

twofold; even though there is a shortage of international managers there is still a shortage

of women in international management and these shortages exist despite the evidence in

recent research that indicates that female managers are successful in their global

assignments (Tung, 2004). Given that the success of women on global assignments has

been highlighted, Janssens, Cappellen and Zanoni (2006) point out that there continues to

be a lack of research in this area and argue that there should be more academic research

conducted illustrating female success on a

global front.

Methodology:-

The aim of the study is to learn about the professional women who live and work

in India as opposed to building or testing theory. In attempting to better understand that

influences female expatriates to take on international work experience, how their

experiences effects the nature of their career concept and the extent to any issues of

discrimination thy may face. Due to shortage of literature in this area an exploratory

approach was considered most appropriate.

Research Design

In adherence to the research philosophy and theoretical framework, the design of

this project will be qualitative rather than quantitative in nature. Studies of this sort may

have been enriched if conducted as longitudinal inquiry, however, neither time,

circumstance nor financial resources allowed for longitudinal approach.

Research Purpose

The purpose of research is to find out the different types of difficulties faced by

women expatriates in India. Compared with their male counterparts living in same

country. And also comparing it with other nations that similar problems exist there or not.

Firstly to find that such kind of problems do exist or mere a thought. After identifying

problem trying to identify solutions to the problems. Such as making aware people about

the negative consequences of it to the nation.

Research Approach

Research approach has been to select randomly few expatriates, male and female

both. To know about their experience in India, how far did they succeeded to

accommodate with the cultural and other different changes. Tried to identify their views

regarding women expatriate’s position in India. Then comparing the extent to which

women have been comfortable with cultural and different aspects of India.

Research Strategy

Framing questionnaire in such a format that more precise views could be fetched

with less number of questions. Different types of questions so as to identify their

experience in India. Thereafter to identify the crux of the research problem. Research

questionnaire was in combined form with objective and subjective questions to be filled,

and to trace the missed out points covered in subjective questions and to get the their

views towards how they have been treated in India. And how women’s experience has

been different.

Data Collection

Data has been randomly collected by expatriates working with different

organisations, from different countries. Because of their different background country

there has been different in their approach in accommodating.

Sampling Strategy

The sampling strategy adopted in this study aimed to gain an insight into a

particular population within a specific location. The sample was gathered through a

combination of sampling techniques that represent a non-probability, purposeful

sampling strategy and does not claim to be representative of the total population of

female manager expatriates.

Major Findings:

Amazed with the mixed response from different nationals working in India.

Though, able to fetch the by observing and considering what relatively majority of

expatriates think regarding the topic.

Women expatriates face bit of problems and treated as celebrities while on other

hand teased because of the same reason. But gradually with more and more women

expatriates heading towards assignment in India. It is becoming common for Indians to

resist the change and accept them as part of the society. As they are working hard to

accommodate to Indian culture, likewise Indians are too slowly and gradually adopting

them and have reduced responding surprisingly excited.

Question wise analysis,

1. 60% of people think women expatriates does not face more difficulties than their

male counterparts in India.

2. 60% of people think women are given less priority in management decisions.

3. 60% of people think women are not the best managers in the world.

4. Majority of people agree that men India does not want to be ruled by female

bosses.

5. In India, society is more concerned if women expatriates live single.

6. In India, people respect women more.

7. In India, people are more helpful and supportive for female expatriates.

8. In India, people enjoy living and working in India.

9. Most of them accommodated with the cultural differences in India.

10. All of them enjoy cultural festivals in India.

11. Culturally women adjust better than male counterparts in India.

12. Males find it bit difficult to adjust in interaction with Indians whereas women are

much better in creating repo.

13. In personal adjustment too males find it bit difficult to adjust as compared to

female expatriates

14. Sample people believe that success of women expatriates depend on the personal

attitude to adjust and accommodate with cultural and other changes rather than

country they are working.

15. People believe India is favourable for women expatriates. As women are given

respect and appreciation for their work. They believe India as overall favourable

country as lot of expatriates enjoy their life here. But it more depends on the

personal attitude towards adaptation and adjusting with Indian culture.

METHODOLOGY

The research design to be used is the descriptive approach. This type of research presents

facts concerning the nature and status of a situation, as it exists at the time of the study

(Creswell, 1994). This also believes that the relationships and practices that exist, beliefs

and processes that are ongoing, effects that are being felt, or trends that are developing.

(Best, 1970) Furthermore, such approach tries to describe present conditions, events or

systems based on the impressions or reactions of the respondents of the research

(Creswell, 1994).

 

Quantitative approach will be used in collecting data. Quantitative method is compatible

with the study because it allows the research problem to be conducted in a very specific

and set terms (Frankfort-Nachmias and Nachmias, 1992). Besides, a quantitative research

plainly and distinctively specifies both the independent and the dependent variables under

investigation (Matveev, 2002). It also follows resolutely the original set of research goals,

arriving at more objective conclusions, testing hypothesis, determining the issues of

causality and eliminates or minimises subjectivity of judgment (Kealey and Protheroe,

1996). Further, this method allows for longitudinal measures of subsequent performance

of research subjects (Matveev, 2002). Finally, it provides achieving high levels of

reliability of gathered data due to i.e. controlled observations, laboratory experiments,

mass surveys, or other form of research manipulations (Balsley, 1970).

 

Data Collection

 The data for the study will be collected through survey. Survey is the chosen method to

collect data because its function is to generalize results from a sample to a larger

population. (Commonwealth of Learning, 2000) The primary purpose and advantage of

surveys is generalization of the results (Commonwealth of Learning, 2000). Usually,

surveys are interested in gathering data from many than in obtaining intensive, detailed

information from a few individuals; therefore, it is seldom for a survey to consist of one

or very few individuals (Commonwealth of Learning, 2000). Consequently, in designing

a survey research study, one has to take into consideration the sample and the sampling

procedure: the sample size should be adequate to allow generalization of the results, and

the sampling procedure should also be such that small sub-groups within the population

(such as landless farmers) are properly represented in the sample (Commonwealth of

Learning, 2000). This is because errors in sampling procedures may not justify

generalization of the results, thus lowering the value of the survey

(Commonwealth of Learning, 2000).

A semi-structured questionnaire will be used to collect data.     This survey-questionnaire

will have two sections. The first part will intend to acquire the demographic profile of the

respondents, while the other section will contain a set of attitude statements. The purpose

of the set of attitude statements is to determine the level of agreement or disagreement

using a five-point Likert scale. In the Likert technique, the degree of agreement or

disagreement) is given a numerical value ranging from one to five, thus a total numerical

value can be calculated from all the responses. (Underwood, 2004) The equivalent

weights for the answers will be:

 

Range                                                            Interpretation

            4.50 – 5.00                                                    Strongly Disagree

            3.50 – 4.00                                                    Disagree

            2.50 – 3.49                                                    Uncertain

            1.50 – 2.49                                                    Agree  

            0.00 – 1.49                                                    Strongly Agree

 

Sampling

 The respondents to be surveyed are MNCs in the UK that have joint ventures or direct

investments in Asian countries such as China,Japan, or Southeast Asian nations. Potential

respondents will be first chosen from the DTI list of MNCs, and then emails will be sent

for their approval on the survey. Questionnaires will also be submitted through emails

and will also be returned to the researcher through emails.

The formula suggested by Saunders, Lewis and Thornhill (2003) will be used to

determine the actual sample size required in the study. First, the total population of a

particular online MBA school and a traditional MBA school will be acquired. The

estimated total response rate will be estimated with the formula that was suggested:

            Total response rate   =              Total No. of Responses

                                                        Total No. in Sample ineligible

              Then, the actual sample size will be calculated with the following formula:

nª =           n X 100

                                                       Re%

 In the formula, nª is the actual sample size required; n is the minimum sample size, and;

re% is the estimated response rate expressed as a percentage.

Systematic sampling will be used to calculate the valid number of respondents needed. A

probability sampling approach was chosen to avoid the bias of non-probability sampling.

 

Data Analysis

 Data will be analyzed through percentage and mean analysis. SPSS software will be used

to compute the data gathered. Determining the mean and percentage on the level of

response of the respondents on the items in the Likert-type questionnaire will statistically

show the relationship between lack of cross-cultural training and learning, and poor

performance of the HRM expatriate.

Potential Limitations

The study is limited only to MNC's headquartered in Europe that has expansions in

mainland China. However, persuading companies to participate in the study may be

difficult because it will involve setting up appointments with the managers of the

company.

 Another potential limitation of the study is that respondents may not take the

questionnaires seriously since it is only structured; meaning answer choices are already

provided. So, in order to promote participation among respondents, the study's purpose

will be clearly explained on the survey questionnaire.

TIMEFRAME

 

 

5-

April

15-

May 1-June

25-

July 10-Aug 25-Sept 5-Oct 25-Nov

PROPOSAL                

INTRODUCTORY

CHAPTER                

LITERATURE

REVIEW                

RESEARCH

DESIGN                

SURVEY-

QUESTIONNAIRE                

CONDUCTING

THE SURVEY                

CONDUCTING

INTERVIEW                

DATA

COLLECTION                

PRELIMINARY

ANALYSIS                

 

FINAL ANALYSIS                

SUBMISSION OF

PROJECT                

Table 1: Timetable

Conclusion

Hereby, the research problem has proved that yes, there are many problems faced

by women, still they are performing better than their male counterparts. And if we can

remove those problems gradually by introducing more campaigns such as promoted by

Amir Khan, for Stop teasing women tourist visiting India and helping to grow our GDP.

Because there are only few people who decrease the prestige of the country. And in

future women expatriate would be hesitated to enter in the nation. Hence, the research

study recommends to promote more advertisement campaign, create the welcome

approach for them and be helpful to them. And make India a better place to work for

anyone independently.

Questionnaire

(Information collected will not be disclosed and used only for academics)

Please answer the following questions:

Personal Details:-

First Name:- ...................... Last Name......................Middle

Name...................

HCN PCN TCN

Age:- Below 20 20-27 28-35 35-45 Above 45

Gender:- M F Marital Status:- Single Married

Nationality:-

British French Swedish US Dutch Italian

Other Please Specify........................

Specialization:-....................................

Position:- CEO Manager Non-managerial

Designation:- .............................

Work Orientation:- Income Career

Organization Details:-

Organization Name:-...............................

Headquarters:-.........................................

Type:- Branch Joint Venture

Wholly owned subsidiary Representative Office

1. Do you believe expatriates face more difficulties in international

assignment than male counterparts in India?

Yes No

2. Did you ever experienced that woman are given less priority in

managerial decisions?

Yes No

3. Do you believe women are the best managers in the world?

Yes No

For below Statements Rating scale is (1-Strongly agree, 2-Agree,

3-neutral, 4-Disagree, 5- Strongly Disagree)

In India, men do not want to be ruled by female bosses. 1 2 3 4 5

4. In India, society is more concerned if women expatriate lives single.

1 2 3 4 5

5. In India, people respect women more.

1 2 3 4 5

6. In India, people are supportive and helpful for female expatriates.

1 2 3 4 5

7. You enjoy living & working in India?

1 2 3 4 5

8. You easily accommodated with the cultural differences in India.

1 2 3 4 5

9. You enjoy cultural festivals celebrated in India.

1 2 3 4 5

10.Cultural Adjustment

1 2 3 4 5

11.Interaction Adjustment

1 2 3 4 5

12.Personal Adjustment

1 2 3 4 5

13.Do you believe success of women expatriates depend on the country

they are assigned to? Why? Yes No

expatriates

Do you believe India is favorable for Women expatriates? Why

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