Corporate culture is the spiritual value and physical form that carry the characteristics of the enterprise, created in the operation and management activities, under certain social and historical conditions. In the writer's view, corporate culture comprises but not exhaustive to the following: corporate values, corporate ethics, corporate employee behavioural standards, the historical tradition of the enterprise, enterprise product, among which corporate value is the core of the corporate culture. To better understand corporate culture, we can do so from three different levels, namely, Spiritual, system and material. On the spiritual level, corporate culture is manifested in the basic belief that employees abide by, the company value standards, professional ethics and morale. On the system level, corporate culture is binding on the behaviours of the employees, in the aspects of management process, guidelines, rules and regulations and employee code of conduct. Finally, material level is what the former two levels are based on. It includes the products, corporate identity, corporate image and cultural propaganda, etc.
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Corporate culture plays an indispensable role. Firstly, it guides the thinking and behaviours of the employees to the goals of the business. Secondly, through shared common values, corporate culture unites the whole work force and gives everyone in the corporation a strong sense of cohesion and belonging, thus enhances responsibility and pride. Thirdly, by timely recognising and rewarding employee's contribution, the corporate culture acts as a motivation and incentive to the work force. Next up, corporate culture can be a form of restraint to the employees, both behaviourally and mentally, in an informal and non-coercive way. Corporate culture can also be viewed as a cushion in between the employers and the employees. It helps to resolve conflicts between them and maximize team synergies. Lastly, excellent corporate culture has a function of beautification. It not only beautifies the workplace, but also beautifies the work itself, so that the employees' eagers to learn new things and eagers to be happy are satisfied. To further illustrate the importance of corporate culture, a few case studies are discussed below.
Let us look at McDonald's first. McDonald's portraits a very clear corporate image by greeting every client with its mascot clown Ronald McDonald. Just like the smiling clown, every employee maintains a friendly smile and a good attitude towards each customer. McDonald's defines good attitude to be friendly, happy, cheerful and kind. It advocates: Happy service! Happy Culture! The corporate culture of McDonald's focuses on four aspects, namely, quality, service, clean and value. Firstly, high standard of quality is maintained throughout every outlet, meeting customers' expectations regardless which part the world that outlet is located. Secondly, McDonald's guarantees a fast and accurate service. Orders will be ready within no more than 5 minutes. Employees will always show you their friendly smile. Thirdly and very importantly, cleaniness is never compromised in the restaurants. McDonald's always uses disposable utensils, maintaining hygiene and at the same time saving workers' time and effort to tidy up. McDonald's also implement uniform prices worldwide, keeping it affordable while maintaining same high standard of quality in all of its outlets. Because McDonald's sets up a good corporate culture, and keeps its strategic development goals in line with its corporate culture, the company has gained a good reputation and people's recognition. More and more people get to know and appreciate McDonald's. With such brand image, McDonald's franchising activities and expansion in any new market are getting easier and easier.
Corporate culture, on the other hand, if portraited wrongly to its employees and customers, may have a destructive effect on the company. For example, China tainted milk manufacturer San Lu did not implement the culture well in the aspect of quality of product. Failure to do so has caused babies who consumed their milk products suffering from severe medical conditions. For such an enterprise, it was in their culture to maximize profit however not in their priority to take care of quality, safety and even corporate social responsibility, in the end, not only harming their customers, but also terminating its own business life. On the contrary, another baby dairy product company MEIJI from Japan chooses to have a culture not only focusing on profitability. They advocate that they present delicacy, joy and happiness to the customers through their milk products. They promised food safety by committing their production of milk going through sampling by the State General Administration of Quality Supervision. At the time this article is written, Sanlu has declared bankruptcy, however, MEIJI has gained trust and appreciation from more and more people.
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Corporate culture is of vital importance to the survival of the company. How do we disseminate the concept and implement corporate culture in the enterprise? Enterprises with different corporate cultures disseminate and implement their corporate cultures differently. Generally, it is seen that companies disseminate and implement their corporate cultures in 5 different ways. Firstly, through media, companies can use channels such as commercials, internet, television and telephone. This is most direct and visual method to make customers know about their corporate culture. As mentioned before, MEIJI uses this method to publicize its culture to customers. Secondly, many companies disseminate their cultures to employees by implementing code of conducts and rules and regulations. IBM has a company pledge of "Stop talking, Start doing." to get their employees to understand and integrate into its culture. Companies also choose to disseminate their corporate culture by ways of company symbol, such as McDonald's using the mascot clown figure and KFC using the figure Colonel Sanders. Such kind of symbols immediately resembles the company and reminds people of their company cultures. Fourthly, publication materials like brochures, photos, etc. is also one of the favourite ways companies use. A distinct corporate image is also used by companies to disseminate corporate cultures. Singapore airlines use a specially designed flight attendant uniform to leave a deep and special impression to their passengers.
Zooming in a little, let us discuss how corporate culture specifically affects the strategy management of a company. Many governments and companies have to adjust their development strategies to adapt to the new economic tide of globalization. Without a good corporate culture, it is difficult for an enterprise to exist in this world market place. The corporate culture must go in line with the company strategy to establish a competitive edge for the enterprise. There is no good or bad in the corporate culture itself. It is a means to obtain a competitive advantage, rather than an end.
Corporate culture affects the strategy management in three aspects. First of all, a good corporate culture is a prerequisite of the success of a corporate strategy. A good corporate culture differentiates the enterprise from other businesses; it helps form common shared values of the company members. A distinctive corporate culture helps the enterprise develop unique strategy to defeat its enemies. For example, Air France positions itself to be customer-centric. The company is renowned for its excellent services provided. That is the main reason customers trust the Airline thus making the business sustainable. Moreover, corporate culture is an important means of implementing the corporate strategy. After the formulation of the corporate strategy, it needs active and effective implementation by all members. As corporate culture guides, constraints, unites and motivates, enthusiasm from all the staff is stimulated, thus making every staff strives towards the final goal. For example, Apple is a fast paced technology company. It has number of updates or improvements to its products every year in the past 13 years. These frequent changes require a large number of talented employees to accomplish. That is why the company has developed a company culture to focus on staff training, person improvement and employee welfare. That has proven to be one of the key factors to keep Apple going. Finally, corporate culture and corporate strategy must be coordinated to adapt to each other. After developing the corporate strategy, corporate culture shall be changed with the new strategy. However, once a certain corporate culture is formed, it is very difficult to make changes. In another word, corporate culture is to a certain extend rigid and continuous, strengthening itself gradually in the course of the development of the enterprise. Therefore corporate culture serves to help the implementation of corporate strategy, but at the same time, constrains it. In summary, when analysing the strategy management, an enterprise must give adequate attention to its corporate culture. The enterprise can progress in a favourable direction only when corporate culture and corporate strategy work together. To sum up, in the future global competition, it is vital for enterprises to establish an excellent corporate culture. The establishment of corporate culture must be thoroughly thought through; must be coordinated well with other issues; most importantly must be in line with the corporate strategy.
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Now let us discuss another aspect of how corporate culture affects the corporate strategic decision.
First, let us look at two examples. Apple has a corporate culture of flexibility and individuality. On the contrary, Nokia's corporate culture is based on stability and control. They make very different strategic choices. Apple culture of individuality makes it have a high degree of product identification. Its products are made extremely difficult to imitate. This brings a strong competitive edge for the business. Apple's flexibility results in more efficient and rapid communications within apple. It allows such a rapidly changing company to promote exchange of information fast and effectively. This really enables Apple to respond faster and adapt better to the fast growing technology world. On the contrary, Nokia's culture of stability and control focus on stable operation. Stable operation has been paying off for it until 2001 where the speed of changing in technologies became unprecedented. Its stability and control has since then driven it out of the game after leading 15 years in the industry.
To further discuss this point, we must first understand the key elements in corporate strategic decision. Corporate strategic decision is something that every enterprise must face. There are 3 elements, namely, strategic choices, strategic position and strategy in action. We will focus on how corporate culture affects strategic choices and strategy in action respectively.
Firstly, corporate culture affects strategic choices by affecting respectively three of its comprising sub-elements. They are Bases of competitive strategy, Strategy directions and Methods for pursuing strategies.
Bases of competitive strategy is basically the choices as to how an organisation positions itself in relation to competitors. In other word, it is how the organisation is to compete in a market.
Generally it is seen that businesses compete in two aspects, price or differentiation. This point can be well illustrated by the case study between Apple and ZTE, a mobile phone manufacturer in China. ZTE's corporate culture is to control cost, so that it can make really affordable phones by the low income consumers. Its mobile phone products cost an average of about 400 Yuan, equivalent to about 80 Singapore dollars. Its culture naturally makes the company compete price with its competitors. People buy ZTE phones because they are cheap. These customers do not need the phones to be geared with high-tech gadgets. As a result, ZTE has gained a considerable amount of market share in China. Apple, on the other hand, competes on differentiation. Iphone catches people who pursue high quality, artistic design and numerous features. These consumers are will to even queue overnight just to get their hands on an iphone even though it is priced easily 10 times as much as a ZTE phone. Of course, it is because of Apple's creative culture that enables it to earn a higher profit.
The second sub-element of strategic choice is strategy directions. It is the choices of products and markets available to an organisation. That is the question, is the organisation to be very focused on just a few products and markets, or much broader in scope?
The former type of company aims to reduce product width, so as to increase the product depths in just a few lines of products, making those few lines of product best among its competitors'. The latter type aims to increase their product width to capture as much customers with different needs as it can, so as to maximize profit. Let us take Apple as an example again. It is in Apple's DNA to think different and create miracles. Steve Jobs being Apple's leader does not allow any of its products to be inferior or even mediocre. Apple's culture is always to create the best product. To achieve it, it makes sense to reduce the number of types of products in its research pipeline, so that Apple can direct its energy and resources to focus on fewer products and make them superior to its competitors'. There were 15 different products in the research pipeline before Steve Jobs finally reduced to only 4 products: iPhone, iPad, Mac and iPod. This optimization has paid off for Apple. The company now can claim that it has the best music player iPod, the best notebook Macbook, the best mobile phone iPhone and the best tablet PC iPad. Another great example to reduce product range is Mcdonald's restaurant. Mcdonald's culture is fast and good service. To make the service really fast and also to shorten the time customers spend to make order decisions, the restaurant has shrank the number of choices by giving customers combo meals. The second type of enterprise increases the product range to be able to have a product fitting customers' needs whatever the needs might be. For instance, Chanel started in the year 1910 as 'Coco' selling only millineries. Through the years, Channel has developed to have the most comprehensive range of luxury products ranging from clothing, jewelry to cosmetics and perfumes. Every line of its products is well perceived by customers. The reason for the expansion in product range is due to its corporate culture which aims to provide people with the most comprehensive and most luxurious choices of fashion products.
The third sub-element is the methods for pursuing strategies, in other words, the choices about how strategies are to be pursued. The question to ask here is the business is going to expand via organic development, acquisitions, franchising or joint ventures.
A business can develop via internal method, which refers to organic development. That means the company from the very start uses internal funds and resources to expand, rather than purchasing another business or through partnership or franchising. On the other hand, acquisition, franchising and joint venture are categorized into external methods. The leader of the business must choose whichever methods according to its corporate culture. For example, the Japanese fashion brand Comme Des Garcon, designed by ReiKawakubo, has a very unique culture that the designer does not want her designs to be affected by other people's ideas or other fashion elements. That is the reason that she has kept the company growing organically from inside. Lenovo, on the other hand, announced a US$1.25 billion worth of acquisition of IBM's global PC operation in the year 2004. The action was driven by its corporate culture of striving to build better products and improving business productivity. The acquisition gave LENOVO an improvement in technology, productivity, thus bringing more profit.
After discussing how corporate culture affects strategic choices by affecting 3 of its sub-elements, we now will talk about how corporate culture affects another part of corporate strategic decision, strategy in action.
To illustrate this point better, we have chosen two Chinese mobile phone manufacturers, who have the same strategic position. "Shanzhaiji" manufacturer, basically imitate phone or copies to the renowned phone brands, and Lenovo mobile phone unit all positioned their products to be affordable, branded and aims to make their users feel good about carrying a branded cell phone. What differs them are their corporate cultures. "Shanzhanji" manufacturers have a culture that does not take pride in their own brand and quality. Lenovo, on the other hand, is an established brand in China in PC manufacturing but not in mobile phone field. However the immaturity in branding of its mobile phone product does not make Lenovo be any less proud of its brand. Lenovo still strives to build a strong brand awareness in the mobile phone field by maintain top quality as how it developed its PC business. To realise the same product position, "Shanzhaiji" manufacturers have chosen to imitate the currently popular mobile phone brands. They do not have their own brands, so they put the brand name of which they imitate on their imitated products. Their products may look exactly the same as the original one on the outside, but costs as little as one third of the original price. The drawback is that quality is badly compromised, intellectual property issues, functions not performing well, safety hazards, etc. On the contrary, Lenovo choose not to imitate other popular brands. It strives to make its own brand a popular and renowned brand in the mobile phone field. They never comprised product quality. At the same time, they also developed many useful and creative accessories, as well as maintaining a high standard of after-sale service. With the same strategic decision but different corporate cultures, strategy in action has been very different from the two businesses, thus drastically different results.
In a nutshell, corporate culture is something that is unique to its business. They cannot be simply compared for superiority or effectiveness. Many corporate leaders fail the business by simply copying another seemingly more superior corporate culture from another enterprise. For a business to be successful, strategies must be taken according to its corporate culture and at the same time be achievable. Corporate culture and the development of the business supplement each other and cannot be seen disjointedly.