Category: Germany

Importance of Cross-Cultural Competencies in Transnational Companies: Case of Tesla Factory in Germany

Posted on | by Laureen

Introduction

Multi-national companies are increasingly prevalent in today’s global market, however cross-cultural competence including communication is a core aspect. Cross-cultural competence is integral to communications and having global companies work with teams in different countries; it is about understanding one’s own culture and that of the counterparts with varied values, belief systems, attitudes and language and adjusting communication to befit each cultural interaction. In the Resetarits and Ankel article for Business Insider, the crux of the issue is cultural competence and differences being managed effectively. Should Elon Musk open the newest factory in Berlin given that there will be cross-cultural differences in communication, working conditions and economy between the United States and Germany? With previous multi-national companies such as Walmart, Amazon and Chrysler not successfully operating within Germany, it is a question of whether Tesla will approach the operations with a new factory in Berlin appropriately to foster success. This report considers the announcement by Elon Musk including exploring the cultural differences between the United States and Germany, identifying the issues such as communication styles and attributes and the different working cultures and economies. Furthermore, the report will make recommendations relating to whether it is a viable and effective decision.

Cultural Differences

Directness, Tightness, Looseness

The cultural differences between Germany and the United States are somewhat subtle but present and for Tesla to invest in a factory in Germany, the company’s Executives need to understand the similarities and differences between the cultures in order to make interactions successful. While both Germany and the US have a low power distance, which means there is less distance within the social and organisational hierarchy and more expectation of equality, they do differ when it comes to language and approach to work. “Cultural values, or a consciously and subconsciously held set of beliefs and norms that define what is right and wrong” (Yang, 20156, pg. 1079). According to Cultural Atlas (2020) for SBS, German people generally view being organised and pragmatic as important including punctuality and being direct (Cultural Atlas, 2020) while the United States’ culture is less concerned with punctuality and people are less openly direct or critical in a direct manner. The Resetarits and Ankel article for Business Insider notes that in the Daimler-Chrysler merger, the Americans found that their German counterparts were rude in their communication while the German Managers believed that were simply being direct (Resertarits & Ankel, 2019). Additionally, criticism by individuals in the US is more subtle while in Germany, German people tend to be open to criticism and praise less (Resertarits & Ankel, 2019). If Tesla was to operate a new factory in Germany, the employees of the US would be less likely to openly criticize their German counterparts and would expect more praise while German employees would be more likely to openly criticize if need be and be firm and direct in their expression of opinions and ideas. The tightness and looseness of cultures also influences multi-national companies such as Germany and the US where “tight nations are expected to have a much higher degree of situational constrain” (Gelfand et. al., 2011, pg. 1101), whereas looser cultures are expected to have less situational constraint and afford a wider range of behavior; in this case, Germany is the tighter culture of the two and expects more behavioral conformity out of its residents.

Uncertainty Avoidance-Indulgence/Restraint

German people tend to dislike uncertainty in the face of things such as organisations’ intentions and strategies while in the United States, people tend to manage uncertainty in a different way. The US scores a low score with uncertainty avoidance which reflects that they can cope with uncertainty even in business practices as aforementioned. According to Hofstede Insights (2020), Germany scores on the higher end when it comes to uncertainty avoidance as they prefer organisation and knowing what is happening at the time or in the imminent future. Take up of new technologies would therefore be slower than in the US and Germans would be less willing to adapt to new ways of operations if Tesla was to run a factory with German employees in Germany. In the global market, the success of a multi-national company is dependent on their strategies for marketing to target audiences of different cultures (Nacar & Bernaz, 2011, pg. 275). Tesla would need effective strategies to market the company in Germany in a conducive and befitting manner. Additionally, in relation to indulgence versus restraint, Germany scores high as a restrained culture with less focus on leisure time and indulgence (Hofstede Insights, 2020). However, the United States scores higher with indulgence with more value on leisure time and individuals tend to have a weaker control over their desires (Hofstede Insights, 2020). In terms of Tesla’s factory in Germany, United States counterparts would be more focused on leisure time around work than their German counterparts; German culture suggests that people would be organised, pragmatic and work hard with commitment to success while the US employees would work hard in order to reap the rewards of leisure time and value their time off.

Scheduling

German people tend to work out exactly when and where a meeting will be taking place and for how long and what will be happening. They tend to prefer strict organisation over loose details (Cultural Atlas, 2020). Conversely, in the United States, meetings might be arranged and scheduled in but may run over time and agendas may be set but discussion is more likely to skew away from the essentials of the topics. Therefore, if Elon Musk was to operate a factory in Germany, Tesla needs to be open to cultural competence within employees so that conference meetings between employees of the two countries respect each other’s attitudes towards organisation and time. “International literacy and cross-cultural understanding have become critical to a country’s cultural, technological, economic, and political health” (Derkun, 2010, pp. 74-75). It is important to have cross-cultural understanding when managing a multi-national company.

Language and Communication

Language is an obvious difference between Germany and the US with most of Germany speaking Hoch Deutsch or High Deutsch (German) and the United States being an English-speaking country. Since all communication is cultural, when a message is sent it needs to be decoded by the recipient who understands it in the context of their culture. Therefore, the directness of German culture means that communication will be direct and clear, with a purpose and intention while counterparts in the US might interpret this as arrogant or discourteous. To manage cross-cultural communication, strategies for success include avoiding stereotyping, actively listening to what the other is trying to express and asking questions to determine whether one has comprehended the communication correctly. Translation of communications also can be difficult as grammar and vocabulary are different therefore translations will not be exact word for word; this can be means for miscommunication and misunderstanding between the two parties if they come from two different cultures and speak two different languages.

A PESTLE Analysis

A PESTLE analysis shows that socio-culturally, Germany and the US are quite diverse; the worldometer (2020) and the United States Census Bureau report vast differences of more than two hundred thousand in population and its growth in the years. The power distance is low and Germans tend to value egalitarianism over hierarchies as do people generally in the United States. According to Cultural Atlas (2020) for SBS, privacy is extremely valued by German people and they tend to keep personal information to themselves including socio-political views when they first meet people and they tend to keep a distinction between their work and personal lives, rarely mixing the two (Cultural Atlas, 2020). The culture of the United States tends to be less focused on privacy and people do often share personal information more readily and mix professional and personal lives such as socializing with colleagues. Another socio-cultural aspect is masculinity and femininity and the roles which genders face: German women are perceived as having greater flexibility to fill traditionally male-dominated roles while in the United States, post-war, many women returned to domestic duties yet many women have embraced feminism and the right to equality when it comes to employment (Wilde & Diekman, 2005, pg. 194). Social organisation of the countries’ males and females can influence the way a multi-national recruits and trains employees and the way they are perceived in the particular roles.

The Economies

Economic attributes such as unemployment is roughly the same in 2019-2020 for both Germany and the US with Germany being three-point-two percent and the US at three-point-five percent (Trading Economics, 2020). As Germany is a more restrained culture than the US which tends to be more indulgent, technological diffusion is slower in Germany than it is in the United States. Germans are slower to respond to innovation while the US is quite rapid to absorb new innovative technologies and changes. In addition, as per the Resertarits & Ankel (2019) article, German laws and regulations are quite strong when it comes to labor hire and working conditions with Germany being more strong in focus on “working on Sundays, holiday entitlements, and sick leave” (Resertarits & Ankel, 2019). The article seems to convey that the labor union is more on top of working conditions for labor hire and have more stringent guidelines to follow than in the US.

Recommendations

Cross-cultural Communication

Given the cross-cultural communication difficulties that can occur based on cultural differences, one might question whether Elon Musk’s announcement of Tesla heading a new factory in Berlin is a wise move. “Organisational cultures (private, public, non-profit, government organizations)” (Zlomislic, 2016, pg. 435) are one aspect of culture and Tesla would need to develop an organisational culture, one in which the US and German employees understood one another and operated within the same “culture” with shared mission statements and values. Given that Germany and the United States are both low-context cultures and have similar power distance, similar understanding of communications and hierarchies exist yet there remains the language difference. Translation can be difficult when it’s not exactly what one articulated but if Tesla utilizes German people who speak English as a second language, this could help the situation but would not necessarily be perfect as their English might not be Advanced or fluent. Both being individualist and low context cultures rather than collectivist and high context means there is less implied meaning or understanding of shared values which can cause miscommunication among employees of Tesla between the United States and the German factory. “Cross-cultural communication is more relevant in today’s heterogeneous world of social order, which is impacted by globalization and the rising cross-cultural nature of business negotiations and business communication in multinational businesses. Thus, cross-cultural communication enables people to effectively communicate and appreciate other cultures, and this is critically important in international management practice” (Abugre, 2018, pg. 173).

Working Conditions

Tesla would additionally need to take into account the labor hire and working conditions and pay employees accordingly otherwise they may face the same fate as Walmart and Amazon with the former company criticized for its working conditions of employees and the latter pulling out of Germany. Yet the question of whether Tesla should invest in a new factory in Berlin remains and it is my recommendation that they cannot achieve this even with careful scrutiny and mindfulness of the various aspects discussed surrounding language barriers and communications, labor hire and working conditions. It was reported in the article in Business Insider that Elon Musk has a background in poor working conditions for the Gigafactory in Nevada which has seen employees working seventy-hour weeks and production in tents (Resertarits & Ankel, 2019). This would not be permissible in Germany and the labor union would likely be called in to assess the situation. If they are the working conditions in Nevada, then it is highly unlikely that Tesla can be successful with hiring German employees and catering for German requirements.

Conclusion

Cross-cultural competence is a necessary aspect of being a multi-national company; these type of companies require teams with cross-cultural competence, that is the understanding and the ability to understand their own culture and that of the other country’s, in this case Germany, and adapt communications to suit the cross-cultural interaction. Elon Musk’s announcement that he plans to develop a Tesla factory in Berlin is not recommended due to the cultural differences between Germany and the United States. While they both might be low context and individualistic cultures, they differ in terms of pragmatism, ways of communicating including language and forthrightness or directness and working conditions. Since Tesla is known for poor working conditions in a factory in Nevada, this would not be legal or ethical in Germany and therefore issues would arise with the German employees. The cultural differences extend naturally to language which because of the individualist and low context nature of both cultures can mean miscommunication and misunderstanding can occur as there is no shared value system or implied intention as per high context cultures. Therefore, with Germans not expected to speak perfect English to liaise with their US counterparts, miscommunication is likely. Success would be dependent on Tesla investing money in cross-cultural training to enhance cross-cultural competence among employees.

References:

  1. Abugre, J.B., 2018. Cross-cultural communication imperatives. critical perspectives on international business, 14(2/3), pp.170–187.
  2. Cliffe, S., 2015. “Companies don’t go global, people do”: the international management expert Andy Molinsky advises us to get past abstractions about cultural differences. 93(10), p.82.
  3. Cultural Atlas., 2020. German Culture. SBS. https://culturalatlas.sbs.com.au/german-culture/german-culture-core-concepts. Accessed 17/04/2020
  4. Derkun, Ch. A., Rayuskaya, T.O. & Kresovo, N.S., 2010. Cross-cultural communication. “Evropejskij Issledovatel”, 1(1), pp.74–77.
  5. Gelfand, M.J.; Raver, R.L.; Nishii, L.; Leslie, L.M.; Lun, J.; Lim, B.C.; Van de Vliert, E., 2011. Differences between tight and loose cultures: A 33-nation study. (Author abstract) (Report). Science, 332(6033), pp.1100–1104.
  6. Gusakova, N.L., Ogneva, Е.А & Boichuk, I.V., 2017. Linguo-cultural aspects of cross-cultural communication. Russian Linguistic Bulletin, (2), pp.9–11.
  7. Hofstede Insights. 2020. Country Comparison. https://www.hofstede-insights.com/country-comparison/germany,the-usa/. Accessed 18/04/2020
  8. Mazhitaeva, Sh., Ayazbayeva, B. & Rapisheva, Zh., 2012. Non-verbal Means in Cross-cultural Communication. “Evropejskij Issledovatel”, 25(7), pp.1084–1087.
  9. Nacar, R. & Burnaz, S., 2011. A cultural content analysis of multinational companies’ web sites. Qualitative Market Research: An International Journal, 14(3), pp.274–288.
  10. Resetarits, V. & Ankel, S., 2019. Elon Musk just chose Berlin as the location for Tesla’s newest factory. But the CEO might be wildly underestimating cultural differences between the US and Germany as Walmart, Amazon, and Chrysler have done before. Business Insider. https://www.businessinsider.com/german-work-culture-could-cause-trouble-teslas-new-berlin-factory-2019-11?r=AU&IR=T. Accessed 12/04/2020
  11. United States Census Bureau. (2019). Quick Facts. https://www.census.gov/quickfacts/fact/table/US/PST045218. Accessed 19/04/2020
  12. Wilde, A. & Diekman, A.B., 2005. Cross‐cultural similarities and differences in dynamic stereotypes: a comparison between Germany and the United States. Psychology of Women Quarterly, 29(2), pp.188–196.
  13. Worldometer. (2020). ‘Germany Demographics’. https://www.worldometers.info/demographics/germany-demographics/. Accessed 19/04/2020
  14. Yang, I., 2015. Cross-cultural perceptions of clan control in Korean multinational companies: a conceptual investigation of employees’ fairness monitoring based on cultural values. The International Journal of Human Resource Management, 26(8), pp.1076–1097.
  15. Zlomislic, J., Gverijeri, L. & Bugaric, E., 2016. The significance of intercultural competence in cross-cultural communication. Ekonomski Vjesnik, 29(2), pp.433–451.