Managing Cultural Differences in Multinational Companies
Introduction
Since the middle of the twentieth century, the number of firms that are rapidly expanding in the global markets has been growing rapidly. Firms spread their operations globally in order to expand their market share, derive economies of scale, and improve their cash flows. While companies derive a lot of advantages while operating in foreign markets, they also face a number of challenges. One of the main problems that companies face while expanding in the global markets is with regard to finding the qualified workforce. Even if companies manage to find the qualified people to work in their organization, they will find it challenging to train them in the job. One of the key reasons for the challenges faced by a firm while operating in the international markets is the difficulty in managing cultural differences. Different countries have different kinds of culture.
There are four different kinds of MNCs, viz. international companies, multinational companies, global companies, and transnational companies.
International Companies
International companies are the basic form MNCs. They are mostly involved in the importing and exporting operations. International companies mostly manufacture their goods in their home countries and never invest in other countries. However, some international companies are now outsourcing their manufacturing operations to Asian countries like China and Taiwan.
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Multinational Companies
Multinational actively invest in establishing bases in other countries. But they do not have a coordinated range of product offerings in each of the countries where they operate. Rather than developing new products for each market where they operate, they try to adopt their home country offerings to suit the requirements of the markets.
Global Companies
Global companies have their investments spread across all over the world. These kind of companies mostly focus on selling the same range of coordinated products and brands across all the markets where they operate. The focus of the management of global companies is one cost control, volume, and efficiency of operations.