Challenges Of Merging With A Foreign Business Commerce Essay

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The discussion of proposed merger/ acquisition between an Indian company and a British company is in this paper, and is based on the methodology of observation. The primary purpose of this paper is to assess whether my perception of the organization culture related problems/ barriers changes due to the concepts covered in this course. This also serves as an evaluation of how much did I learn from the course. Specifically, this paper aims to explore social aspects of the different organization culture differences and to overcome with it. Moreover, this organizational analysis aims to make recommendations on how to improve the overall understanding of employees in the organization.

As a part of this research we are also looking forward with the recent acquisition of Religare Enterprises ltd (REL), a diversified financial services group with a pan-India presence and presence in multiple international locations, ("REL") offers a comprehensive suite of customer-focused financial products and services targeted at retail investors, high net worth individuals and corporate and institutional clients. With Hichens Harrison & co Plc, which is the oldest firm of independent stockbrokers in the United Kingdom. Forming Religare Hichens Harrison (RHH).

At present, the most addressed topics in the world of business is globalization. Globalisation has become a buzz word and is frequently used to refer to different aspects of internationalisation and world trade.

However, it seems that, compared with political, social and educational institutions, companies are the best adapted to the globalization. The most pronounced global actor today seems to be the company that is in industry, in finance or in the service sector. These companies seem to have passed all the obstacles in the globalization process: that of size with its multinationals, that of temporal notion with its long-term strategies, that of complexity and finally that of information and communication. (De Woot 2000, p.155).

Culture has been defined in various ways by different people. A sampling of these definitions is provided. Kluckholn (1951, p.36) described culture as patterned ways of thinking, feeling and reacting, acquired and transmitted mainly by symbols, constituting the distinctive achievements of human groups, including their embodiments in artefacts. Hofstede (1984, p.21) defined culture as the collective programming of the mind which distinguishes the members of one human group from another.

However, many people can define Organisation or Corporate Culture simply as How we do thing around here (in the organisation), with my point of view this is a Invisible powerful force that gently nudges you in compliance with how we do things around here , it is the force that get you to do things we do .


The focus here is on cross-national culture. This should be distinguished from organizational (corporate) and professional cultures. Organizational or corporate culture refers to the shared beliefs top managers in a company have about how they should manage themselves and other employees, and how they should conduct their business. (Lorsch, 1986, p.95). Furthermore, the vision is shared by most of the company's employees. Organizational or corporate culture can be reinforced through a strong organizational mission, commitment to organizational goals, and other visible symbols such as company lapel pins, and company songs, in the case of many Japanese organizations. Corporations such as IBM and Hewlett-Packard are reported to have strong corporate cultures where employees worldwide identify themselves closely with the organizational goals of the company. Strong corporate cultures can have a homogenizing effect on cross-national culture


The foregoing definitions of culture suggest that culture is a very broad concept which encompasses many and varied dimensions. The specific cultural dimensions that have a significant impact on cross-national business interactions are: (1) High-versus low-context cultures; (2) Monochronic versus Polychronic time; (3) Silent language; (4) Hofstede's five cultural dimensions; and (5) Maruyama's epistemological types. These dimensions can be used as a means of understanding and comparing cultures. Failure to take into consideration differences across cultures/nations along these dimensions can lead to misunderstanding, mistrust, conflict, and even open hostility by peoples of different nations.

Elaborating the cultural dimension in brief of

High-Versus Low Context Cultures :

When workers from high-context and low-context cultures have to work together often problems occur by the exchange of information. These problems can be categorized as differences in direction , quantity and quality . At differences in direction employees from high-context cultures like China and France adapt to their good friends, families and also to close colleagues (in-group members). They communicate with them intensively (quantity difference) and exchange specific/detailed information about many different topics. The result is that every in-group member is constantly up-to-date with the facts around the business. In comparison to high-context cultures low-context cultures like USA and Germany orientate on many people of their daily life because they don t differentiate as much as high-context cultures between in- and out-groups. So their direction of communication is orientated on personal characters and referred to situations (direction difference). They mostly communicate within their out-groups in a broad and diffuse way (quantity difference). Within communication they exchange information just to the necessary extent so that work can be done and they don t discuss or exchange information constantly in their work environment and colleagues (quality difference).

Monochronic versus Polychronic time:

The terms Monochron and Polychron have to do with our time sense: how we perceive and manage time. To a polychron, time is continuous, with no particular structure. Polychrons see time as a never-ending river, flowing from the infinite past, through the present, into the infinite future. In the workplace, polychrons prefer to keep their time unstructured, changing from one activity to another as the mood takes them. Although polychrons can meet deadlines, they need to do so in their own way. A polychron does not want detailed plans imposed upon him, nor does he want to make his own detailed plans. Polychrons prefer to work as they see fit without a strict schedule, following their internal mental processes from one minute to the next. Monochrons relate to time differently: to them, time is discrete, not continuous. Monochrons see time as being divided into fixed elements seconds, minutes, hours, days, weeks, and so on temporal blocks that can be organized, quantified and scheduled. Monochrons love to plan in detail, making lists, keeping track of their activities, and organizing their time into a daily routine.

Monochrons prefer to do one thing at a time, working on a task until it is finished, then, and only then, moving on to the next task. To a monochron, switching back and forth from one activity to another is not only wasteful and distracting, it is uncomfortable.

Polychrons are different. They love to work on more than one thing at a time. To a polychron, switching from one activity to another is both stimulating and productive and, hence, the most desirable way to work.

Silent language:

Hall has labelled the non-verbal form of communication as the silent language (1973). He identified five dimensions of the silent language : Time, space, material possessions, friendship patterns, and business agreements.

Hofstede's five cultural dimensions

Based on a study of work-related values of more than 70,000 IBM employees in 50 countries and three regions, Hofstede (1984) identified four cultural dimensions: Power distance, uncertainty avoidance, individualism versus collectivism, and masculinity versus femininity. A fifth dimension, Confucian dynamism (re-labeled long- versus short-term orientation), was

added subsequently (Hofstede and Bond, 1988).

Maruyama's epistemological types:

Maruyama (1993) attributed conflicts and misunderstandings between members of two societal cultures to differences in value priorities, behavioural patterns, and logical and epistemological structures. Epistemological structures refer to the way in which people process and interpret information. He emphasized the significance of the latter, referred to as mindscapes . Maruyama identified four epistemological types, H, I, S and G, to differentiate people on the basis of logical processes and the way in which they analyze

and synthesize information.

Furthermore, different organisation have different culture region wise. The business culture might be entirely different. In some cultures relationships are much more important than the actual contract and in others it is the opposite. For example; Americans tend to focus a lot on the contract and pay only a little attention to the development of the relationship between the people involved. In most Asian countries it is opposite. In that respect most Europeans are much closer to the Asians than to the Americans.

A company might need to establish an overseas organisation, which is much different from what they are used to. An Indian company which might want to establish a branch in UK will never succeed with a hierarchical organisation because the British are very autonomous, egalitarians and demand a high degree of individual freedom. We have seen a lot of examples where northern European companies have failed in India because they didn t change the organisation and management style to apply to the Indian norms and values. A project-based organisation just doesn t work in India.

3.1 Cultural Fit

But, what is a cultural fit? Essentially, the phrase refers to an employee or applicant who shares the employer's business attitudes, values, goals, and overall view of how the particular business should be run. Every workplace has a style that is reflected in the way its employees act and dress; how they deal with clients, customers, and each other; and how they comport themselves in the larger work world.

Similar Different

Complementarity Success

Cultural Similarity

Strategic complementarity Failure

No cultural similarity

Strategic complementarity

Unrelated or

Similar Failure

Cultural similarity

Poor strategic complementarity Failure

No cultural similarity

Poor strategic complementarity

(Source: Allen & Siehl, "Joint Ventures and Other Alliances", 1989)

Thus according to Allen and Siehl companies should have a similar culture if they want to merge successfully. Yet if they do not have a similar culture they still can merge but have to adjust their culture towards each other. Moreover some modifications have to be made within both organisations cultures.

3.1 Need to Understand Cultural Differences

Cultural differences can affect the success or failure of international firms in a number of important ways. First, because of different preferences and tastes, consumers and customers in foreign countries may not use the same products and/or services demanded by domestic consumers and customers. Even where there is a demand, adaptations may have to be made to the product/service and/or the advertising message. Second, managing and motivating people with vastly different cultural values and attitudes require variations

in management style, systems and practices. Third, in international assignments, the use of the same criteria and training programs (as in domestic relocations) to identify candidates and prepare them for living and working in a foreign environment may doom the assignment to failure. Fourth, concepts and constructs that guide business decisions and activities may be very different across countries. Principal among these are the concepts of morality (i.e.,

what is acceptable), mind games, competitiveness, and rights. Each factor is

discussed below.

Marketing and Advertising

While Levitt (1983) and Ohmae (1987) argue for product standardization around the world, important differences in consumer tastes and preferences across countries still abound.

Managing and Motivating Employees, which I belive can be most important factor :

To understand the leadership style employed in the organization, one needs to understand the German managerial style. In general, the German style management is characterized by a consistent pattern of business-related practices built around a "competence first" principle. Building sufficient (line) competence into the primary production processes is a major preoccupation of German firms. Many people believe that the German management style is serious and tends to be, by virtue of qualification of rank, authoritative (Hill, 2003).

On the other hand, North American models of motivation generally assume that, one, certain

job characteristics and organizational dynamics affect the level of job satisfaction experienced by employees; and, two, there is a correlation between job satisfaction and productivity. Another difference is in terms of the motivational devices used to spur workers to heighten their levels of performance. In motivation literature, a distinction is made between intrinsic and extrinsic motivators. In advanced economies where employees have attained a high standard of living, an extrinsic reward such as money may be a less powerful motivator than intrinsic motivators, such as ego and self-actualization needs. In less developed countries, however, where workers are operating at the subsistence level, monetary rewards may be the single, most powerful motivating device to spur workers to higher levels of performance.

Selection and Training for International Assignments

In domestic assignments, the selection criterion to determine a candidate's suitability for a certain position can focus almost exclusively on the person's technical competence. In a similar vein, the content of training programs for domestic assignments can be devoted primarily to the development and acquisition of technical and administrative skills. In international assignments, the same does not hold true. Research (Tung, 1981) has shown that the incidence of expatriate failure among U.S. multinationals is as high as 30 percent.

The principal causes of expatriate failure are two-fold: One, inability to adjust and adapt to the foreign environment; and, two, the family situation, i.e., the spouse and/or children of the expatriate are unable to adapt to the local environment. Furthermore, these studies show that emphasis on technical competence as the sole selection criterion and the use of technically-oriented training programs alone are incapable of identifying and preparing the

right people for overseas work. These failures abroad are costly to the company in terms of money, time, and human resource. In light of these costs, an international firm should not use the same selection criteria and training programs to identify and train candidates for international assignments as it does domestic assignments.

Universality of Concepts and Constructs

Since the dominant form of mindscape varies across cultures and because of differences in value and traditions across societies, concepts and constructs which members of one country (or a block of countries) assume to be universally valid may not necessarily hold in other countries. The questionable universality of conceptual frameworks, such as that between job satisfaction and productivity, was discussed earlier. Other concepts that have an important bearing on the conduct of business across international boundaries include: Morality (i.e., what is acceptable), universality of concepts/constructs, competitiveness, and rights

4.1 Managing Cultural Differences

In light of cultural differences and the significant impact they can have upon effective management and performance abroad, the following question - then arises: How do we cope with and manage such variations across societies? There are three primary methods for managing such differences. First, to act as a change agent. Second, to choose people who are suitable for such cross-cultural encounters and train them accordingly to facilitate performance abroad. Third, to use biscapal people in multicultural management. Biscapal

people refer to those individuals who are adept in two or more cultures and hence able to bridge or transcend two or more different mindscapes. Each of these methods is discussed below.

Act as a Change Agent

Besides technology, pop culture as defined by the mass media on latest fads and fashions pertaining to food, music, movies, and clothing can also serve as change agents. This has a homogenizing effect and can facilitate the successful development of global products, such as the Sony Walkman, which appeal to consumers around the world. However, international firms cannot rely exclusively upon changing other cultures to manage differences across countries for this can lead to resistance from members of the host nation, and allegations of foreign exploitation or cultural imperialism. Ethnocentric tendencies are usually not well-received in host societies. For example, Euro Disney was denounced as a cultural Chernobyl by some French politicians and purists. Americans have been denounced as the ugly Americans in many places because of their tendency to insist upon the American way of doing things in foreign countries.

Selection and Training for International Assignments

To minimize costs and to promote better relationships with the host society, where possible, the international firm should try to employ local nationals in their foreign subsidiaries. Such staffing policy, however, may not serve the best interests of the firm in its globalization efforts. While promoting local responsiveness, the use of host country nationals may hinder the international firm's attempts at global integration. To facilitate global integration and to develop the international orientation of parent country nationals, it is imperative that multinational firms continue to use expatriates in their overseas operations, albeit in reduced numbers and for different purposes. Consequently, there is still a need to select expatriates who will represent adequately and efficaciously the international firm's interests, functions and activities abroad.

Use of Biscapal People in Multicultural Management

Individuals, whether parent- or host-country nationals, who are adept in two or more cultures appear to be very appropriate for bridging cultural gaps and differences that may exist between two societies. Such people have been variously referred to as members of the third culture (Useem, Useem and Donoghue, 1963) and biscapal people (Maruyama, 1993). To qualify as members of the third culture the person must meet the following two criteria: First, have a thorough understanding of the language, values, attitudes, behaviours and logical processes of the two societies under consideration; and second, have a genuine desire to bridge such gaps. Possession of the first criterion does not necessarily imply espousal of the second requirement. Maruyama (1993) coined the term biscapal people to refer to those who can operate with relative ease across two or more epistemological types. In other words, biscapal people are mindscape translators, abbreviated as transcapers. Sometimes, it is difficult to discern transcapers from mere observation because the epistemological mode less prevalent in the society in which he/she operates may be repressed. Often times, international firms equate foreign language fluency with mindscape translation. This is not so. Thus, some Indian firms have hired and elevated Indian employees to high positions in their United Kingdom subsidiary primarily on the basis of their English- language proficiency. This may be a mistake because while these Indians can communicate at ease with corporate headquarters in the India, they may not have the necessary qualifications and network necessary to serve the UK firm's operations and purpose in UK. Furthermore, some may be cultural deviants because their mindscape may not conform at all to that of the host society.


This paper has examined how organizational behaviour and practices can vary across countries. Many of these variances stem, in part, from cultural differences. Managers who seek to conduct business in the global economy have to understand these differences and be aware of their implications for effective performance abroad. The most salient dimensions of culture that can affect the conduct of business overseas were identified and discussed.

These cover a broad spectrum of values and behaviours, including the way in which people perceive, reason and process information. As Fons Trompenaars (Adler, 1995, p. 38), a leading European consultant to multinationals on cross-cultural issues, stated: Increasingly, international managers realize that they can gain competitive advantage by understanding cultural differences. Technologies can be copied quickly. Intercultural competence cannot be copied it must be learned. In short, while knowledge of cultural awareness cannot compensate for deficiencies in product and technology in gaining market entry, in its absence, however, the best products and technology may yet fail to meet with acceptance in markets around the world.