Corporate Strategy and Intercultural Management

In essence, corporate strategy is the setting of organizational objectives followed by the establishment of a comprehensive course of action for realizing those objectives. De Wit and Meyer (1998) have averred that corporate strategy is best understood when viewed from the three dimensions of strategy process, strategy content and strategy context.

The three dimensions of strategy, taken together, are concerned with the efficient use of resources, as well as the mobilization of those resources. Accordingly, a concern of corporate strategy is the pursuit of markets with high growth potential.

According to Walker (1980), companies engaged in strategic decision making adopt the following five steps:

  1. Definition of corporate philosophy and the development of a mission statement.

  2. Scanning of environmental conditions.

  3. Evaluation of the organization's strengths and weaknesses.

  4. Development of objectives and goals.

  5. Development of action plans.

Global companies need to go beyond corporate strategy. They have to proceed to the realm of industry-level strategic design and implementation. This involves gauging trends in a company's industry, and then planning its competitive position in that industry. For instance, when BMW engages in industry-level strategizing, it analyses global trends in the automobile industry and then positions itself in relation to its competition.

After strategizing at the industry level, a global company progresses to the stage of formulating and implementing strategies at the international level. At this level, global companies evolve approaches pertaining to international trade and negotiations. The main players here are governments of countries in which they have operations.

When a global corporation operates in other countries, it often engages in country-specific corporate strategizing. This means using Walker's five-step strategic planning approach. BMW could use the Walker approach for its operations in Thailand. It would also apply the Walker approach for its operations in Switzerland. The Walker approach, or a variation of that approach, would be used at all its locations. These independent corporate strategies then need to be tied into BMW's industry-level strategizing. They also need to be aligned with BMW's international strategy formulation and implementation scheme. Additionally, many global companies including BMW have a corporate-level master strategy. A focal issue of corporate strategy within an intercultural management context is how the local and global strategies are to be reconciled.

Thus for a global corporation, there exists a dialectic between the external application and adaptation of strategy, and the internal integration of that strategy at the corporate level. The dialectic also exists in terms of all members of a global corporation worldwide first subscribing to the corporate strategy, and second, realizing that strategy through location-specific approaches. The location-specific approaches have to reflect cultural realities.

This dialectic corresponds partially to what Chakravarthy and Perlmuter (1985) term 'geocentrism'. The phrase 'think globally, but act locally' epitomizes geocentrism. An emphasis on corporate strategy formulation enables a company to have a global competitive advantage. At the same time, since a geocentric company spans the world, its success depends on its ability to respond to local cultures and markets. It may draw global managers from all over the world; but it grooms local managers to deliver at the local level.

Holt (1998) has described this dialectic. He spoke of companies simultaneously pursuing the 'national responsiveness strategy' and the 'global integration strategy'. The national responsiveness strategy focuses on local markets and competitors, while the global integration strategy focuses on broad-based markets with global competitors . Prahalad and Doz (1987) also viewed this dialectic as the need to simultaneously ensure 'global strategic co-ordination' with 'local responsiveness'. 'Strategic coordination refers to the central management of resource commitments across national boundaries in the pursuit of a strategy. Local responsiveness refers to resource commitment decisions taken autonomously by a subsidiary in response to primarily local competitive or customer demands.'

Global strategic co-ordination is facilitated through sophisticated multinational customers, the presence of multinational competitors, investment intensity, technology intensity, pressure for cost reduction, universal needs, and access to raw materials and energy. Meanwhile, pressures for local responsiveness arise from differences in customer needs, differences in distribution channels, the availability of substitutes and the need to adapt, market structure, and host government demands.

Cultural realities also play a role when a global corporation anticipates the moves of its partners and competitors around the world.

For a global corporation to strategize effectively, it should have a central core set of objectives. Achieving these objectives is then the corporate strategy for the entire global organization. This central core set of objectives should be sufficiently flexible to allow local adaptation.

Schneider and Barsoux (1997) argue that managers from different cultures articulate strategy differently. According to these researchers, individuals trained in the US tradition tend to view strategy formulation and implementation as a rational and analytic process viewed similarly by all intelligent managers. Muslim managers accord importance to emotions and sentiment in addition to logic and rationality. Traditional Japanese managers maintain a long-term perspective in their strategic thinking, which could be as much as 250 years. The long-term perspective is then divided into manageable segments of a few years . Latin European managers tend to collect strategic information through personal contacts and from the grapevine . This makes the database by which they strategize subjective and open to interpretation. Nordic managers tend to view strategizing as the purview of top management. After top management has formulated corporate strategy, it is expected to state this corporate strategy clearly to the rest of the organization. In Germany, banks exert considerable influence over corporate strategy. In France, it is the government that is supposed to wield comparable influence.

Thus, ethnic culture plays a role in the definition and formulation of strategy for a company. The industry culture also exerts an influence. So does corporate culture. Corporate strategy, like other dimensions of organizational behaviour, juxtaposes corporate culture and ethnic culture. The trick is to ensure that the juxtaposition is of corporate culture with ethnic culture, rather than corporate culture against ethnic culture. To avoid a conflict of interests, corporate culture must be superordinate. Corporate strategy must be guided primarily by corporate culture and only secondarily by ethnic culture.

At the international level, strategizing becomes complicated when two or more organizations transact business with each other. There may not be a common corporate culture that influences joint strategizing. Likewise, complications arise when companies engage in transnational mergers and acquisitions. An ever-present issue is how different approaches to strategizing can be brought together.

Prima facie it appears that cultural similarity between collaborative organizations would lead to a common or similar approach to strategizing. However, there is no empirical evidence in support of this. Cartwright and Cooper (2000) suggest various ways by which organizations can achieve transnational collaboration. One is that the partners achieve a workable integration of their separate strategic approaches. A second is that the strategic approach of the dominant partner is adopted for the collaboration. The success of this type of collaboration hinges on the extent to which the dependent partner accepts and adopts the strategies of the dominant partner. There must thus exist a recognizable difference in the power balance between the partners.

A third possibility is that the dominant partner allows its dependent partner to pursue its own strategies, provided it also achieves the dominant partner's objectives. As long as the secondary partner achieves the objectives according to predetermined criteria, they can both live with differences in their strategizing approaches.

A final possibility is that the partners have a long-term relationship based on equality. Both partners perceive the collaboration as mutually beneficial. They view their different strategic approaches as complementary. This permits them to integrate their separate strategic approaches. The partners create a 'best of both worlds ' strategic approach for their collaborative endeavour. They learn from each other. Their success in integrating their strategic approaches hinges on the managerial capabilities of their senior managers.

Two factors determine the extent to which the secondary partner can adopt the dominant partner's approach painlessly. The first factor is the extent to which the subordinate partner views the dominant partner's culture and strategic orientation as attractive. The second factor is the extent to which the subordinate partner is dissatisfied with its own culture and strategy. When both factors are conducive, cultural and strategic assimilation can occur. Such assimilation is encouraged when the culture of the dominant partner favours participation and employee satisfaction.

According to Cartwright and Cooper (2000), for the British, US managers are the most compatible strategic partner; for the French, US managers are the most compatible strategic partner; for the Germans, US managers are the most compatible strategic partner; for US managers, the British are the most compatible strategic partner; for the Dutch, the Germans are the most compatible strategic partner; for the Swedish, the Germans are the most compatible strategic partner; and for the Danish, the British are the most compatible strategic partner. Cartwright and Cooper further aver that the least preferred collaboration partners are the Japanese, the Italians and the Spaniards. This suggests that collaborative partners need to understand the cultural underpinnings of the other's strategic orientation before actually entering into a collaborative arrangement.

Intercultural Management
Intercultural Management: MBA Masterclass (MBA Masterclass Series)
ISBN: 0749435828
EAN: 2147483647
Year: 2002
Pages: 98
Authors: Nina Jacob

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