An Increasingly Competitive Environment Business Essay

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During the last few decades, companies have been confronted with an increasingly competitive environment. Forces facilitating globalisation, such as the liberalisation of international trade, the international integration of production, research and marketing by major MNCs, as well as the emergence of major economic regions like the European Union, have enabled companies to invest overseas in order to gain or maintain competitive advantage. It has been argued that human assets are an emerging source of competitive advantage for MNCs (Barlett and Ghoshal, 1991; Schuler and Rogovsky, 1998). HRM is evolving from being just a support function to one of strategic importance (Teagargen and Von Glinow, 1997). Barlett and Ghosal (1991) have argued that HRM policies and practices are becoming crucial they can act as mechanisms for co-ordination and control of international operation. Values and HR systems help to shape organisational culture and the people who operate within and influence that culture; and MNCs therefore attempt to transfer their HRM practices abroad. On the other hand, it has been argued that HRM constitutes a major constraint when MNCs try to implement global strategies (Adler and Bartholomew, 1992). This is mainly due to the complexities involved in employing and managing from disparate national and cultural backgrounds.

Human resource management (HRM) refers to all of the dedicated activity that an organization uses to affect the behaviours of all the people who work for it (Jackson & Schuler, 2003). Because the behaviours of employees influence profitability, customer satisfaction and variety of other important measures of organizational effectiveness, managing human resources is a key strategic challenge for all companies, and particularly so for those engaged in cross border alliances (Briscoe & Schuler, 2004). Though there are significant problems with cross border mergers and acquisitions when it's dealing with internationally. It's more complex than the domestic ones. Scholars argue that cultural differences are the primary cause of cross-border M&A failure (Yong & Tian, 2007), but the cultural difference is usually neglected by companies. In terms of the culture perspective, scholars argue that culture differences are a major cause of problems in post-merger or post-acquisition integration process. There are studies about culture clash, impact of the culture differences, the dynamics of the acculturation process an construction of various culture conceptions. Culture is often neglected by managers (Baono & Bowditch, 1989, quoted in Birkinshaw, Bresman and Hakanson, 2000).

As Carnina et al (2010) argued that, the realization of the synergy through successful integration is essential to create value. The integration process plays a vital role in the success of an acquisition. Though we can talk about a lot of cultural integration in details but we keep focus on basic integration process.

Within the domain of the study of the integration process, there are three major findings concerning integration process (Shimizu al 2004).

The culture difference imposes a challenge to integration process.

The integration process and adopted control system decide the performance of the acquisition.

Acquirer nationality decides the preference of the integration process and control system.

From the first point, we can see the importance of culture. It leads to find out how culture difference influences the integration process.

Piero Morosini and Harbir Singh carried out a survey of 400 companies in cross border acquisitions in Italy and they found out that a 'national culture-compatible' post acquisition strategy implemented by the acquiring company to interact and be coherent with the target company's national culture can significantly improve cross-border post acquisition performance. (Morosini 1994)

Zhu & Huang (2007) propose four models for cross-culture management to solve the culture differences. We can draw a picture to understand further.

Culture

Localization

It means the subsidiary of the parent company located in other nations is regarded an independent entity and it can make its own strategy and decisions according the local circumstance. The parent company respects the local culture and recruits local people to manage the subsidiary

2. Transplanting the culture of the parent company.

The acquirer appoints its own people as representative to control the target company. Through strongly supervising the target company, the buyer can transplant its culture.

3. Cultural innovation by integration.

In this situation, both the cultures of the acquirer and the target companies exist together, and the new culture is established by convergence of the two cultures. This culture innovation can maximize

the cross culture value.

4. Evasion tactics.

It happens when there is a huge cultural gap between the acquirer and the target. Then the acquirer will appoint a manager, but it is also possible that the third party will be involved in order to bridge the cultural gap and smooth out the management transition. This model is usually used in a transition period.

Zhu & Huang (2007) propose four models for cross-culture management

Recent research has revealed that companies in different countries differ with respect to their HRM practices and policies (Ferner 1997). It has also been noted that transferring HR policies and practices to different countries can be quite problematic (Rozenweigh and Nohria, 1994; Hofstede, 1980; Bae et al., 1998). Some of the major obstacles are closely related to the host country's cultural and institutional environment.

Although the dominance of Amarican management theory has led to the belief in universal management practices that can be applied anywhere, research has shown that managerial attitudes, values and behaviours differ across national cultures. There is no single best way to manage an organisation, since-among other factors-differences in national cultures sometimes require differences in management practices. Several management writers have adopted a cultural perspective on organisations (e.g. Hofstede, 1980; Laurent, 1983; Trompenaars, 1994; Jackson, 2002). Central to this approach is that societies/countries are different from each other and that this distinctiveness is reflected in the way that oraganisations are managed. Management and organisation cannot be isolated from their particular cultural environment.

As with most management practices, HRM practices are based on cultural beliefs that reflect the basic assumptions and values of the national culture in which organizations are embedded. This leads to the question of what happens when MNCs want to transfer some their HRM practices overseas, especially in cases when assumptions that underlie such practices to a host-country's culture can lead to negative consequences that inhibit a subsidiary's performance. Existing research provides evidence that MNCs adapt to certain degree to national cultures in which they operate (Schuler and Rogovsky, 1998; Beechler and Yang 1994; Tayeb, 1998). In addition, subsidiaries that are managed consistently with national culture expectations have been found to perform better compared to subsidiaries that are mananged otherwise (Newman and Nollen, 1996).

The above discussion notwithstanding, cultural values are not the only determinates of individual behaviour that subsequently affects management practices.

The Company 'X' is the UK's largest cash and carry operator, offering branded and private-label goods which are sold to over 459,000 customers including independent convenience stores, grocers, leisure outlets, pubs and restaurants within the UK. The company 'X' operates 32 stores in 5 countries such as Ireland, Malaysia, Sweden, Denmark and most recent in India. The Company currently lists over 18,000 lines of product, comprising an extensive range of branded and own label grocery, fresh and frozen food, beers, wines, spirits, tobacco and non-food items. In the year ended 25 March 2011, sales totalling £2.7 billion were collected by the customer from the Group's branches and sales totalling £0.9 billion were delivered by the Group to customer premises. The Company supplies approximately 326,000 catering businesses and over 78,000 independent retailers.

2.

Most of the South Asian economies (e.g. India, Pakistan and Bangladesh) have made significant economic progress in the last two decades and are well on track to becoming major regional or even world economic powerhouses. Although a number of studies have been conducted for addressing the issues related to cultural diversity of employees working for MNCs operating in South Asian countries, only a few of the studies have looked into the issues related to how culture plays a role in shaping HR practices in the South Asian context. Therefore, the purpose of this study is to explore how particular HRM practices are manifested in the South Asian cultural context. We proposed that the identification of these critical HRM practices could assist MNCs top management to better manage their workforce in Bangladesh or other South Asian countries with a similar cultural orientation.

In the recent years, many MNCs are increasingly putting more attention to the emerging Asian countries for competitive advantage. One classic example is China. With a population of more than 1.3 billion China is predicted to be the largest economy in the world by next 20 years surpassing United States (UN Report 2007). China has become the manufacturing and investment hub for many MNCs. Despite huge success for most of the MNCs, many already failed in doing business in China due to their managements‟ inability to manage their human resources appropriately (Kipling, 1996). Many Asian countries like: India, South Korea, Malaysia, Thailand, and Vietnam are also following the footsteps of China and have already made significant impacts on the world market. Taking the Chinese lead like the tiger economies in Asia, Bangladesh is also emerging as a dynamic and significant economic player in South Asia.

To gain a better understanding of the role of Bangladesh in the world economy it is useful to gain some background into this emerging economy. Bangladesh is strategically located between the emerging markets of South Asia and the fastest growing markets of Southeast Asia and the ASEAN countries. The proposed concept of the "Bay of Bengal Growth Triangle" is attracting greater attention from the investment world and has its apex in Bangladesh (BOI Handbook, 2007). This Triangle extends South-West through South India to Colombo, Sri Lanka. Its South Eastern arm extends through Myanmar and Thailand to Malaysia. Bangladesh also seen as a possible entry point for servicing the region covering Nepal, Bhutan and the seven North-East Indian states (BOI Handbook, 2007).

Bangladesh is one of the pioneers in the region for economic liberalization. It has adopted the best policies of South Asia to attract Foreign Direct Investment (FDI). Doing business in Bangladesh is much easier than most of the developing countries. A recent report entitled "Doing Business in 2007: Creating Jobs" published jointly by World Bank and IFC placed Bangladesh in 68th position in terms of ease of doing business among 175 countries (World Bank, 2007). This places Bangladesh ahead of other countries in the region such as India (88th) and China (128th). In 2005 total FDI inflow into Bangladesh increased by 84% amounting to US$845 million. This growth is the second highest in the entire South Asia region. According to the World Investment Report 2006, Bangladesh is now ahead of India in terms of the FDI Performance Index being ranked 116 among 200 economies (BOI Handbook, 2007).

Culture in general is a broad concept, but can be generalized as consisting of patterned ways of thinking, feeling and reacting. It is acquired and transmitted mainly by symbols, constituting the distinctive achievements of human groups (Kluckhohn, 1951). The essential core of culture consists of traditional ideas and especially their attached values (Kluckhohn, 1951). Geert Hofstede (1980), one of the pioneers in the field of studying culture world-wide, defined culture as, „Culture is not a characteristic of individuals; it encompasses a number of people who were conditioned by the same education and life experience. When we speak of the culture of a group, a tribe, a geographical region, a national minority, or a nation, culture refers to the collective mental programming that is different from that of other groups, tribes, regions, minorities or majorities, or Nations (p. 12).‟

Since culture is a collective mental programming, it is often difficult to change culture if it is changeable at all (Hofstede 1980). This is because culture is shared by a group of people and is usually crystallized in the social institutions these people build as a group, such as: family structures, religious organizations, educational structures, forms of government, legal frameworks, literature and work organizations (Hofstede, 1980).

Many researchers have developed various value dimensions to assist them to conceptualize and measure culture (e.g. Hofstede 1980, House et al., 1999). Despite various shortcomings and criticisms, this dimension-based approach is common, and convenient for the purpose of this study because identified cultural dimensions show validity and establish a link between phenomena at the individual, organizational, and societal levels (Aycan, 2005). In his seminal work that started with 116,000 questionnaires completed by executives of the technology giant IBM across 40 different countries in 1980, Hofstede studied how cultures differ across nations (Hofstede 1980). Hofstede (1980) initially identified four major cross-cultural dimensions to describe the culture of a particular country. The four cross-cultural dimensions were power distance, uncertainty avoidance, individualism - collectivism and masculinity- femininity. Later Hofstede (1993) added another dimension based on further study, termed as short-long term orientation.

The culture of Bangladesh has a unique history, dating back more than 2500 years ago. The land, the rivers and the lives of the common people formed a rich heritage with both commonalities with, and differences from, neighbouring regions. It has evolved over the centuries, encompassing the cultural diversity of several social groups within Bangladesh. The culture of Bangladesh is composite, and over centuries has assimilated influences of Hinduism, Jainism, Buddhism, and Islam. The rich Bangladeshi culture combines traditions from Dravidian, Indo-Aryan, Mongol/Mughul, Arab, Persian, Turkic, and Western European cultures (Bangladesh.com). Residents of Bangladesh, about 98% of who are ethnic Bengali and speak Bangla, are called Bangladeshis. Most Bangladeshis (about 86%) are Muslims, but Hindus constitute a sizable (13%) minority (CIA Fact book, 2008).

1.

Implications of International Competition for Industry Analysis

Analyzing Competitive Advantage within an International Context

Applying the Framework

(1) International location of production

(2) Foreign market entry strategies

Multinational Strategies: Globalization versus National Differentiation

Strategy and Organization of the Multinational Corporation

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