Management of Business in an International Context

Introduction

Numerous companies have, in recent years, started to operate internationally, more than ever before. High levels of consumption, world-wide, and additional competition from new economies, have led companies to build an international presence, to be in a better position to fight competition by ensuring product availability in different markets; and to increase their production levels, in order to meet demand. The advent of globalization has lowered international barriers even more, making the world one big market place.

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The development of the internet has been crucial for globalization, as it has provided companies with the opportunity to market their products and services in international markets, at lower costs; furthermore, it has provided consumers with the possibility to research and compare various products, easily and quickly. Current market conditions have rendered trading activities more difficult to carry out. Nowadays, there are a number of factors that a company has to constantly consider and deal with, such as:

  • High level of competition in both domestic and international markets.
  • Tough market conditions, due to sluggish economy and a number of industries having reached the maturity stage in their lifecycle.
  • And finally, more ‘choosy’ and powerful consumers.

Operating in a global context is, therefore, proving to be increasingly challenging for companies. Even more so, when additional challenges stem from cultural diversity. The company operating globally has to face challenges relating to each individual local market, which include: different cultures; different languages and different ways of thinking. Consequently, companies need to set up strategies that will ensure sound cross-cultural management. Culture is defined as a system of values and beliefs pertaining to a certain group and it’s the very basic thing that multinational companies need to comprehend, in order to allow business to flourish in an international context. The MNC, which will be analysed in this paper, is the American multinational company, General Electric (GE). Company background – General Electric is a $152 billion, diversified company operating in many different areas, such as: financial services; technology; industrial (e.g. plastics; aircraft engines); medical equipment; electrical appliances and media (e.g. CNBC; Superchannel). GE has global operations in over 100 countries, employing more than 300,000 people and has consistently being voted ‘the most admired company in the world’.[1]

It was Thomas A. Edison, inventor of the light bulb, to have founded General Electric. GE was formed following a merger between Edison General Electric Company and Thomson-Houston Electric Company. Some of the company’s product offer is still based on the original set-up: e.g. lighting and industrial products. General Electric has been managed by some of the world’s finest leaders, among which, Jack F. Welch. General Electric was one of the first companies to implement Six Sigma – the quality assessment program that originated from Motorola. It’s a system that helps measure the ‘defects’ in a process and subsequently, to build a solution in order to rectify them. It is mainly customer-oriented. Most of GE employees are systematically trained on it and it’s one of the fundamental elements that characterise GE today. As General Electric claim, “today’s competitive environment leaves no room for error. We must delight our customers and relentlessly look for new ways to exceed their expectations.” In addition, GE employees all over the world work according to four basic company values, which are ‘imagine; solve; build and lead.’

It means that:

  1. new ideas are fundamental to make the business prosper;
  2. the Company is there to meet customers’ demands;
  3. to keep growing is essential; 4.to maintain leadership in all markets.

In every country, GE operates these four values are scrupulously followed. General Electric is one of the first companies to have managed to develop a truly successful international and global workforce. Apart from GE’s basic four value and Six Sigma, General Electric is renowned for sound leadership and management, domestically and globally. These three elements constitute General Electric’s ‘commitment to excellence’. Cultural management The culture of an organization describes how the organization operates within its environment: what the organizations’ focus is; its structure; its values and how people run the company, basically its management style. The culture was defined previously, as being a system of values and beliefs. Therefore, culture management encompasses all of the organization’s values; beliefs; processes, and people. An organization will tend to develop various cultural systems but eventually, a predominant culture will be developed (Gray and Densten, 2005) Quinn and Rohrbough devised a method or framework that allows to assess and define types of organizational cultures. This methodology is called ‘Competing Values Framework’. Gray and Densten write that “the Competing Values Framework clarifies the complex nature of organizational culture according to two dimensions: internal/external focus; stability/flexibility structure”. The Competing Values Framework can be described as follows (please refer to appendix 1): the framework is divided into four quadrants, each identifying a specific cultural model and management style. The two bipolar dimensions are plotted on the graph: internal versus external; flexibility versus stability and control. The internal and external dimensions define the organization’s focus: its people (internal) and the organization (external) and their respective functions and development. The second dimension, instead, represents the structure of the organization: flexible or stable. The four cultural management models represented on each of the quadrants are as follows:

  1. The Human Relations Model: a firm operating at this level tends toward flexibility; its focus is mostly ‘internal;’ – employee-oriented. Human resources development; high levels of ‘morale and cohesion’ and playing a role in the decision-making process are important at this level.
  2. Another model represented by the framework is the ‘Open System Model’. This model focuses greatly on the organization itself. Its focus is external and it’s represented by a flexible structure. It’s a dynamic type of culture whereby ‘readiness’; growth and innovation are emphasized.
  3. In the third quadrant, we find the ‘Rational Goal Model’. In this model, proper strategic planning and clear goals are important. It has an external focus and tends toward a more stable structure. Productivity; efficiency and competition are the main drivers in this type of organizational culture.
  4. The last cultural management model is called the ‘Internal Process Model’. It is evident that this model presents an internal focus and, stability and control form its structure. Emphasis is on information and communication.

GE’s culture tends to fluctuate between the two top quadrants, indicating a major (internal) focus on employee’s development and organisational flexibility – despite its dimensions! Generally, firms adopt mainly (but not exclusively) one of these four culture systems. General Electric’s culture management. As described above, General Electric is present allover the world; it operates over a hundred of businesses in various segments. It’s this diversity within the company that gives GE its strength. During the past few years, GE has learned (and still learns) considerably from its ‘diversity’. The idea of learning is pivotal to GE’s culture, since the 1980s. It was with CEO Jack F. Welch’s extraordinary sense of leadership that major changes took place, within the organisation. This desires for knowledge and ideas, led people of various functions to sit together in a ‘Work-Out session’. During a work-out, a particular problem is discussed; there’s a lot of brainstorming taking place until a solution is found, and it’s quickly implemented. Since then, one of GE’s sayings is, “there are no problems, only challenges and opportunities’. GE is a ‘Boundaryless Learning Culture. This learning taking place across GE’s operating units, is what GE defines as ‘horizontal learning’. One of GE’s priorities is to train its people, in order to equip them with the right knowledge and tools necessary to take the business forward in today’s tough environment. Developing a multicultural workforce As a result of globalization and increased labour mobility, during the past few years, companies have become more open to learn about ‘cultural differences’ that are bound to exist between parties from different backgrounds.

Cultural differences can exist even between two merging companies, for instance, from the same country. One of the most common mistakes that companies have made (and still are, to some extent) is to ‘believe’ that one’s culture – hence values and beliefs – can be simply transferred. Costly errors have, time and time again, proved them wrong. This is what, in many case, happened to some American companies that approached Europe, thinking that it’s one big market, like theirs. However, once these companies arrived in Europe, realized that different languages are spoken; that mentalities tend to be very different; and each European country has its customs and traditions. As a consequence, the way of conducting business differs greatly, too. Fortunately, in the past few years, some progress has been made and people, in general, seem to be more aware and understanding of cultural diversity. When developing a multicultural workplace, the following should be considered: -the team members’ multicultural background, their values and beliefs. -language skills versus language barriers -staff training, to fill any knowledge gaps -team member’s attitude toward working in a multicultural environment. Concerning the latter, each individual team member has to possess a certain openness about working with people from different backgrounds – considering all the misunderstandings that could arise, due to “miscommunication. Dr. Skiffington describes intercultural conflict as, “the perceived or actual incompatibility of values; norms; processes and goals between two or more parties.” Therefore, it is of fundamental importance that employees are aware of cultural differences to be able to deal with conflict, in a more effective manner.

Another issue that needs to be addressed, when setting up a multicultural workplace, is the various spoken languages. Of course, companies operating in different countries adopt ‘English’ (Internally), as the main business language. However, the company needs to think about producing material in the local language, for potential customers e.g. brochures; presentations etc.. Some companies have also had material available to their employees, in their mother tongue. However, it has been proven that it’s not really necessary for two main reasons: 1-it might be difficult to make an exact translation in every language, causing misunderstandings; 2-it’s a cumbersome process and costly exercise to appoint a team to take care of translations, either internally or externally. One important factor is the organization’s ability to clearly transmit its cultural values, that will be adapted to the local needs. General Electric’s four basic values are thoroughly taught to employs around the world. GE has determined that each business must be either number 1 or number 2in each market place.[2] This belief coupled with the four values is what every national team has to concentrate on. In this context, GE’s informal culture, as described by J. Welch, has created an environment, where each team member is free to put a new idea forward; to make suggestion. Everybody’s opinion counts. AS Welch states, “That’s the value of the informal culture of GE – a culture that breeds an endless search for idea that stand or fall on their merits, rather than on the rank of their originator”. This is indeed in line with GE’s central concept of ‘learning’. In fact, Welch established a learning centre, where GE employees meet to discuss and solve problems from businesses around the world. Managing diversity in a global context. The ability of a company to manage its cross-cultural environment will determine, to a certain extent, whether the company will be able to, finally, succeed in its global operations. The element of culture is a very important factor, to learn about and manage accordingly. Cultural differences can easily create unnecessary problems between two individuals and it’s only by getting to know those differences that issues can be solved. It follows that, the company that is aware of the cultural aspects of society, and how individuals within that society function, is most likely to succeed. This is a very challenging task and today, a new characteristic a leader should have is the ability to understand and manage diversity. Diversity is defined by Kotelnikov (2001) as follows: “Diversity describes a workplace that includes: -people from various backgrounds and culture and/or -diverse businesses”. Consultant Tulenko writes[3] that, in order for a manager to be in a position to adequately lead a multicultural team, he/she needs to be aware of those cultural differences. Therefore, he suggests the following steps in order to help the manager get to know his/her people:

Step 1 – identify diversity; collect data about the workforce

Step 2 – Discover the norms; detailed information on employees’ culture

Step 3 – Discover differences

Step 4 – develop a plan;

a plan to visit offices abroad Some people will argue that diversity can give a new boost to the business because it will combine ideas stemming from different mentalities, consequently injecting new and fresh ideas and insights into the business. Stevens writes that, “an important widely overlooked principle of business success is that integrating opposites, as opposed to identifying them as inconsistencies and driving them out, unleashes power”. To help people from different backgrounds work together and to create an the environment in which they will prosper, it’s important to treat people fairly, to accept cultural differences and to value each individual based on his/her performance.[4] As previously mentioned, General Electric is a perfect example of how it has managed its diversity. GE uses its diversity to learn from it and it encourages employees, all over the world, to actively make suggestions. Everybody feels they can contribute to the company’s success and growth. It was J. Welch’s belief to ‘make everybody a participant”.[5] GE says, “it is very important for the company of the future to have a contemporary workforce that’s more diverse, more global and has more areas of personal productivity and flexibility. So that people can perform and have more choices at the same time”. GE’s management view incorporates the following aspects: -appointing a top management team, that will run the business in an entrepreneurial style while freeing the business from beaurocracy and improve communication.[6]

Conclusion

Managing a business in an international context is becoming increasingly difficult. Companies have to act fast if they want to grow and/or retain their market positions. The ‘global market place’ has charged the organization with an extra task: to identify and understand cultural differences. The workforce is getting more and more international, consequently, cross-cultural management is an essential part of the organization’s strategic plan – if they want to succeed in today’s competitive environment. General Electric serves as a good example of a company that it’s so diverse in its nature, in terms of business segments and diverse, culturally. Yet, it has shown that diversity doesn’t have to be an obstacle to organizational success but it can be integrated across all processes and benefit from it.

Bibliography

1.Cushner K.; Brislin R.W.; 1996. Intercultural interactions: a practical guide. Published Thousand Oaks: Sage

2.Taylor C. Jr; 2001. Creating a multicultural organization: a strategy for capturing the power of diversity. Published San Francisco: Jossey-Bass.

3.de Vries T.; 1998. Dynamics and modernization: European-American comparisons and perceptions. Published Amsterdam: VU University Press Reports:

4.Gray J.H.; Densten I.L.; 2005. Towards an integrated model of an organizational culture and knowledge management. The International Journal of Organisational Behaviour, Volume 9(2), 594-603

5.Prof. Petter R.; 2005. Cross-cultural management in shipping: some challenges and experiences. Amdam.

6.Kotelnikov V. Case study: General Electric (GE). Creating an extraordinary organization. www.1000venture.com

7. Kotelnikov V. Harnessing the power of diversity. Leveraging the power of integrated opposites. www.1000venture.com

8. GE. Horizontal learning. www.ge.com

9. Welch J.F.; 2000. Letter to shareowners. GE 2000 Annual Report

10.Dr. Skiffington. 2005. Cross-cultural coaching. www.1to1-coaching,com

11.Managing a multicultural workforce. www.worldroom.com

12.www.ge.com Appendix 1. The Competing Values Framework (Quinn and Rohrbough’s model) Human Relations Open System Internal Process Rational Goals Source: Report – Towards an integrative model of organizational culture and knowledge management (2005)


[1] Source: www.ge.com [2] Source: www.ge.com [3] Source: www.worldroom.com [4] Source: Case study: GE and diversity. www.1000ventures.com [5] Source: Case study: General Electric (GE): creating an extraordinary organization. www.1000ventures.com [6] Source: As above

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