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A company that operates in numerous different countries but is managed by an HQ in one home country is a multinational company. In general, any company or group that derives a part of its revenue from operations outside of its home country is considered to be a multinational company.
The multinational company can be divided into four categories: (1) a multinational, decentralized company with strong home country existence, (2) a global, centralized company that acquires cost advantage through centralized production wherever cheaper resources are available, (3) an international company that builds on the parent companies technology or R&D, (4) a global enterprise that combines the previous three approaches.
Apple is one of many famous multinational companies. It is an American multinational company which designs and manufactures electronics, computer software, and personal computer. The best-known products of this company are Macintosh computers and laptops and the iPod, the iPhone and the iPad. Since 1977 until now, Apple Incorporation has employed more then 75,000 people worldwide. Most employees have been staying in the United States. However, Apple has significant manufacturing, sales, marketing, and support organizations around the world such as in Paris and Tokyo and its headquarters is located in Silicon Valley, California.
Today the whole world has become a very huge global market, which changes rapidly, and as a part of this global market Multinational companies face a number of different problems. Many of those problems are internal cultural problems, because multinational companies hire staff not only from the home or host country but brings in people from all around the world in accordance to the skill required for the job and given the nature of the global environment, multinational companies will increasingly find themselves having to make decisions that are based on cultural problems created by the global market.
Following are the Hofstede's value dimensions that give an outline that how different countries culture perceive one thing.
Power Distance- It is the degree to which the subordinates of the company accept unequal distribution of power. High power distance is when subordinates accept the boss's authority and follow the chain of command. For example: Malaysia. In places where people display low power distance is where superiors and subordinates consider each other as an equal. For example: Denmark.
Individualism- it is the tendency of an individual to think for themselves as well as their families. Countries that value individualism such as United States, achievement and individual plan is extremely valued. Countries where low individualism exists such as Pakistan depend on collectivism. They find tight social framework and are dependent on belonging to the organisation.
Masculinity- In a masculine society the various roles for men and women are differentiated visibly whereas in a feminine culture the roles can be identical in which exists more equality. Masculine cultures are for example seen in Japan and Italy whereas feminine cultures are seen in Finland and Sweden.
Uncertainty Avoidance- It is the degree to which individuals in a culture sense endangered by unsure situation. Country with high level of uncertainty avoidance has set regulations, procedures and laws such as Japan. Such cultures have a low-risk decision-making and employees show very little aggressiveness. Countries with low level of uncertainty avoidance show more aggressiveness, are risk-takers and less formal such as Great Britain.
Cultural challenges faced by MNC'S: following are some of the key challenges the multinational company faces due to having employees belonging to different cultures.
One of the main cultural challenges faced by multinational companies is the diversity of cultural perspectives found within the organization. This can cause many problems regarding management and policy development, because it makes it very difficult for the organization to make introduce a policy for everyone without considering all the cultures represented by the employees. In short, as companies move forward in the global environment, too much diversity may create problems.â€¨â€¨
Multinational companies also face the difficult task of developing a united organizational culture. Because of the different cultural perception of the employees, company leaders generally face the difficult task of having to create a workplace environment that adapts all the cultures and the employees can easily adjust in it as one. Concepts of teamwork and unity may have different meanings across the national boundaries, making it far more difficult to develop a united company perception. â€¨â€¨
Multinational companies will also face problems when it comes to human resources operations. For example, when it comes to recruiting new employees, human resources managers may find themselves having to triumph over cultural barriers to find qualified candidates for positions available abroad. In some cases, management professionals may even find themselves facing a shortage of skilled people to fill important job positions that require advanced degrees and training. Finding employees in home country who are qualified or willing to fill such positions in a context outside of their home country may also prove to be problematic. Some employees may simply reject to work in certain parts of the world. â€¨â€¨
Communication and Cultural Norms
Within the company it is very difficult to communicate as for each employee is from a different culture and a sentence said may have different meaning for each person and he or her may also perceive a given task differently. And people of some cultures may also prefer to keep to themselves and not open up so much or only socialize with people who belong to the same culture.
Etiquette and Customs
As there are so many employees belonging to many different cultures it is very problematic for Multinational companies when it comes to their beliefs, cultural practices and customs. Companies need to respect every cultures beliefs and practices so they need to create an environment with out any racism, which allows employees of each culture to practice their culture with out any problem. â€¨
Following are some recommendations, which can help out multinational companies to overcome cultural challenges.
One way to solve the cultural challenges is to provide all the staff with cross-cultural training in the organization. This will not only help the managers but also the employees to develop cultural awareness and sensitivity towards other cultures. They will be able to understand the cultural difference in attitudes and behaviors at work (Terry 2007).
Managers need to understand the difference in time orientation among different cultures. For example Russian cultures are close to monochronic while Philippine culture is polychronic. The Filipino employee's have a relaxed attitude towards time and failure to meet strict deadlines could be due to cultural factors. The manager could establish some strict rules regarding deadlines and schedules and encourage planning in order to meet deadlines. Keeping a system of black points for every late assignment could discourage the employee to submit late work bringing everyone to an equal level of attitude towards time (Behfar, K et all 2006).
Managers would also have to address the communications problems faced at the workplace. For example if you take Russians they are formal and reserved while dealing with their managers and coworkers. The manager would have to find ways to develop a high level of trust in order to encourage the Russian employee to open up and share their ideas (Terry 2007). Managers can also adopt a paternalistic style of leadership. It refers to an approach in which the manager provides support and guidance to the subordinates and tries to develop intrapersonal relationships with them. This will help in building the trust level and in turn could affect the productivities of the employees. This kind of leadership style is hierarchical where the manager provides guidance and protection and the employees show their loyalty to the manager. Managers can also built teams which include employees from different cultures, this would help each employee to expand his or her social circle and interact with employees belonging to other cultures rather then just their own or none.
A multi-national company employs people from a various different cultures, and compared to a domestic business they face a lot of problems regarding culture but it also gives a competitive edge over its domestic competition because they can bring the best skilled person to fill a position from an where in the world. Multi National Companies have evolved and have come to realize that in order to overcome the problems of developing a cohesive and inclusive organizational culture they need to better understand the different cultures and design policies which satisfies all the needs of employees from different cultures and also brings them to an equal ground among one another. How ever the challenges can also be overwhelming for the firms that have just started to diversify its work force. Its managers must be prepared and should have procedures, policies and practices planned out to overcome the problems.