Cultural Variation Across International Organisations

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Table of Contents

Introduction
Literature Review
Approaches in Cultural Integration
Conclusion and Recommendations
Works Cited

Introduction

International organisations usually operate in a global market. Globalization has led to the increase in the number of international organisations that have widened their scope of operations in order to allow them to better serve the ever growing market. Cross- border and cross- cultural organisations thus have a diversified human resource pool.

The paper acknowledges the fact that human resource and work force among international organisations is made up of employees from different cultural backgrounds. This cultural diversity greatly influences the functioning of the organization. There is therefore the need to evaluate the importance and impacts of workforces cultural diversity in organisations as well as the need for effective management and integration of cultural diversity in organisations as has been suggested in the paper.

It is noted that culture is a way of life for a group of people achieved through cumulative gain of knowledge, beliefs, and symbols and which is passed along generations through communication and imitation. Culture is thus the behaviour of a group of people forming a tradition that distinguishes the group from others in the community or in the world (Rondinelli 86). Culture attempts to justify a peoples way of life with each practice having a story behind it.

Critical study and analysis of culture is thus vital in understanding a peoples way of life. Recent research has shown that people in a given country have a tendency to adopt a culture that unites them as one and which they can all identify with. Organisations around the world have to acknowledge these national cultures where they occur.

The cultures represent the practices of the organizations managers and employees. Culture will thus play a great role in the determination of how various organisations operate since their activities must not interfere with the peoples norms. Activities must be carried out in a way that best reflects the way of life of the people in that particular region.

In recent past, foreign direct investment (herein referred to as FDI) has become a common phenomenon in the world of business. Large international organisations have resorted to taking up other smaller firms with the aim of increasing their scope of operations (Lubatkin and ONeil 668). These firms- both the acquirer and the acquired- hail from different cultural backgrounds and a lot of energy has to be exerted to ensure that there is a smooth transitional process as the two firms strive to form a strong single entity with the capability of competing favourably with other market players.

This paper is a report on the approaches that have been used by international firms to integrate newly acquired firms and businesses into their system. The researcher gathered information from experts and economists who have wide knowledge in the field of acquisitions and mergers.

The information was gathered using questionnaires. The purpose of the project is to device measures through which organisations can smoothly and successfully go through the process of merger and acquisition. The ideal espoused here is a merger and acquisition process that is devoid of common challenges such as cultural conflicts between the acquiring firm and the acquired business entity. The integration processes in this project will be aimed at ensuring that value is maintained in an organisation even in cases of cultural diversity.

Literature Review

Definition of National Culture

National culture is the behaviour, practice or direction taken by a country in terms of its association with foreigners. National culture defines how foreign investors are perceived in the host country. It also serves as a reference point for the host governments policies and rules governing the operation of organisations operating within the borders. It is also forms part of the norms associated with the acquisition of other firms.

The foreign firm will have to comply with the laid down rules and procedures for it to be able to carry on with its activities with minimal collision with the local authority. The individuals working in both the foreign and the local organisations must also strive to acquaint themselves with the prevailing conditions for the sake of the merger.

In the process of integration, it does not matter which firm is the acquirer and which is the acquired since efforts from members of both organisations will be vital in ensuring that the newly formed entity succeeds in its operations even in cases of varying cultures and practices.

Definition of International Mergers and Acquisitions

International mergers and acquisitions can be conceptualised as the process where a firm moves to acquire another firm or firms in a foreign country. This is the assimilation of firms from another country other than their country of operation with the aim of expanding their scope of operations in that new country.

These firms are faced with regulations and restrictions defining operations in the foreign country among them being cultural issues. In the case of foreign direct investment, a company or an organisation invests directly by acquiring or buying another firm in a foreign country.

These organisations move their operations to the foreign countries with the aim of gaining benefits associated with the cheap labour, raw materials as well as low cost of doing business (Bishop 102). Merger integration on the other hand can be viewed as the process that involves the combination of original socio-technical systems of the merging organisations into a new system that is neutral and is not biased to either of the merging organisations.

Discussion of International Mergers and Acquisitions

From the study conducted, it was noted that the trend of mergers and acquisitions in the world of business has been on the rise for the past two decades with international firms coming up with strategies to acquire other organisations in and outside their mother country.

This has been greatly associated with the need for organisations to expand their scope of operation in order to satisfy the needs of the ever increasing number of customers and subscribers (Koveos 74). It is for this reason that there is a need for sound integration measures that require organisations to seriously assess the situation at hand before integrating its system of operations with the newly acquired organisation. Caution was found to be a crucial aspect in ensuring the success of the merging process.

It was felt that the integration process should be gradual to provide for a smooth transition. Wide ranging and thorough consultations with key stakeholders was also recommended to ensure that neither of the two organisations participating in the merger feels left out in the process of decision making. It was felt that consultations will also bring about trust among the organisations since all parties will feel part of the decision making process (Lubatkin and ONeil 668).

Consultation was also viewed as the best way to incorporate cultural considerations affecting each of the two organisations involved in the merger. A balance should be struck taking into consideration how best the two organisations can coordinate their activities. This is to ensure that personal and collective considerations affecting employees from both organisations are carefully looked into.

The process of Foreign Direct Investment was noted to be affected by the means and capabilities of interested parties and organisations undertaking international mergers and acquisitions. The issue of cultural differences thus arises with the organisations being faced with the issue of deciding how best to integrate the ways of life of the members from the two merging organisations and still maintaining goodwill among employees.

The probability that an organisation operating in a region will have employees from a single national culture was found to be high. This is because organisations find it cheaper and easier to hire human capital from their mother country rather than importing human capital from other nations (Koveos 74).

In the event of an international merger, the single entity formed will thus be comprised of individuals from two distinct cultures. It is the responsibility of the new management to ensure that all the individuals that are working under the newly formed organisation are accommodated in the activities of the entity and that none of the national cultures seem to be dominant over the others.

Acknowledging the importance of culture in the success of international mergers and acquisitions has thus led to the need for organisations to devise measures on how to effect a smooth transitional process while at the same time ensuring that the cultures of the individuals involved in the operations of the two organisations are least affected.

Cultural conflict is eminent and the new management has to act urgently to prevent this from taking place. If this does not happen, it may lead to a decline in the organisations profitability and performance. It is also noted that international mergers and acquisitions that start off poorly are at a higher risk of failing in their mandate.

For the sake of smooth transition and ease of operations, it was noted that various governments have come up with measures to guide the process of merging and acquisition with the aim of ensuring that their local industries are cushioned from negative effects likely to be associated with the foreign companies or organisations that are yearning to establish themselves locally (Rondinelli 86).

Among the countries found to have well defined intercultural integration mechanisms are France and the United States of America. The two countries were noted to have devised mechanisms as well as created checks and controls. Diversity in cultures among the two organisations brought about the need for organisations to be restrained for them not to overstep the existing rules.

From the two national systems, two cultural integration mechanisms can be devised. These approaches are outlined in detail in subsequent sections of this report.

Approaches in Cultural Integration

Measuring the Cultural Distance

It was noted that not all cultures vary with the same intensity. Some cultures are actually considered to be more distant from each other when compared to others (Koveos 74). Cultures in organisations from neighbouring nations are likely to be closely associated to each other as compared to those from distant nations.

This means that for mergers and acquisitions to be fully operational in distant countries, more time will be required for the individuals and members of staff to be fully adapted to the new system as compared to those between closely related or neighbouring nations. It was thus felt that members of the management team who are spearheading the integration process should be keen to determine how closely related or distant the two cultures are.

At the end of the research, time was found to be the most crucial factor influencing the approach. This is because the success of the mergers will be measured on the basis of the time allocated to the integration process based on the nature of the mergers and how close the two cultures are from each other (Bishop 102).

An integration plan will thus be devised in a manner that ensures the participation of all members of staff in the newly formed organisation. The pace of integration will be greatly affected by the rate at which the members of staff and individuals involved are able to adapt to the cultural changes. It was found that the integration process involving distant cultures was more likely to be slow and the changes would actually be overwhelming for the members of staff to get used to.

This approach is rather concerned with the welfare of the members of staff as well as ensuring that they are adequately accommodated in the newly formed business entity (Lubatkin and ONeil 668). Time is identified as a major factor affecting the integration process. It was observed that the main objective of the approach was to ensure that the members of staff were integrated into the new system rather than having the system imposed on them.

It was also found that the management team exercises a great deal of patience with the members of staff to make them feel part of the organisation. The comfort of the members of staff with the new system is taken as the first consideration rather than putting the organisations performance and productivity ahead.

This approach is of great importance since the needs of the members of staff are put at the forefront. It was observed that the members of staff among organisations that prefer to adopt this approach find it easy to carry on with their responsibility with minimal pressure thus increasing their productivity (Koveos 74). The approach may however encourage laxity among staff members since the management is not willing to push them or prod them along.

Measuring Success or Failure

It was found that this approach was more concerned with the effect of the outcomes to the organisation. The cultural integration process in this approach is aimed at ensuring that the newly formed system upon effecting the mergers is in favour of the organisations performance (Pritchett 61).

It was also learnt that the management was less concerned with the welfare of those likely to be affected by the expected changes. The staff members of an organisation adopting this approach therefore go through a hard time trying to cope with the changes being implemented in the organisation.

In such a case, the management is rather impulsive and makes decisions affecting individuals without seeking their opinion on the matter at hand (Koveos 74). The members of staff live in a state of uncertainty since the management can make any decision concerning cultural issues in the organisation as long as they suit the entitys goals and objectives.

Decision making in such a forum was found to be centralised with the minorities imposing policies on the greater majority. Only financially viable ideas are implemented to ensure the success of the organisation.

The approach has merit since decisions made and which concern cultures in the merging organisations are for the good of the entity. Only viable ideas are taken into consideration (Rondinelli 86). The approach was seen to have the performance of the organisation as its first priority.

This way, quality and performance in an organisation is guaranteed. The culture of the members of staff and other affected parties is modified to be in line with the laid down rules and regulations while at the same time ensuring that the cultures adopted increase the productivity and the efficiency of the organisation.

The major disadvantage associated with this approach is the failure by the management to consider the welfare of the members of staff. Decisions concerning cultural matters are imposed on the members of staff by the management rather than the latter seeking the opinion of the staff members and other concerned parties (Koveos 74).

It was found that there was a higher possibility to experience cultural conflict in organisations implementing such an integration mechanism since decision making is centralised and there is little or no consultation with individuals serving in the lower ranks of the organisation.

The approach is however highly recommended since decisions made in the organisation are aimed at maintaining its efficiency. Decision making is swift since it only involves a few people. Decisions made are highly reliable and can be relied upon for the success of the organisation (Koveos 74).

Conclusion and Recommendations

International mergers and acquisitions have become a common feature of international commerce in the world today. Giant organisations intending to increase their operations venture into foreign markets where they acquire other already established firms. Cultural differences are always eminent in such circumstances given that the two firms are drawn from two different cultural backgrounds.

As such, the need to integrate the cultures in the two organisations becomes vital and critical to the success of the merger. In this report, the researcher addressed some of the issues associated with cultural variation among international organisations. International organisations in this case are entities such as multi-national corporations formed through the merger of two or more business firms operating in two or more different countries.

Works Cited

Bishop, Matthew. Essential Economics. The Economist. 2004: 102. Print.

Koveos, Park. International Mergers and Acquisitions: A Review of Some Current Issues. Managerial Finance 23.1 (2003): 72-76. Print.

Lubatkin, Mark and Hail, ONeil. Merger Strategies and Capital Market Risk. Academy of Management Journal 30.4 (2003): 665-684. Print.

Pritchett, Price. Making Mergers Work: A Guide to Managing Mergers and Acquisitions. New York: Pritchett Press, 2001. Print.

Rondinelli, Black. Multinational Strategic Alliances and Acquisitions in Central and Eastern Europe: Partnerships in Privatization. Academy of Management Executive 14.4 (2000): 8598. Print.

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