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Globalization and Organisational Culture: One Size Does Not Fit All

Shaw Chair Professor and Associate Provost (Special Projects), Nanyang Technological University
Nov 22, 2017 10:49 AM 4 min read
Editorial

 

Globalization and Organisational Culture: One Size Does Not Fit All
Source: Freepik

In a case of one man’s meat being another’s poison, US retail giant Walmart found its best practices at home did not carry well to foreign shores.

 

In Germany, local customers viewed the friendly approach of Walmart’s American staff as flirting. This failure to adapt to German culture contributed to the demise of Walmart’s operations in the country in 2006.               

    

In Japan, Walmart acquired a stake in the supermarket operator Seiyu and tried to woo Japanese customers with its “Every Day Low Price” marketing campaign that was highly successful in the United States. But Walmart failed to attract shoppers because the Japanese regarded lower-priced products as being inferior in quality.

 

The success of companies who venture abroad hinges on how well they adapt to the local ethos and address cultural differences. Those that have a strong and distinct organisational culture have historically been more vulnerable to cultural conflicts in foreign countries.

 

Globalization Challenges

 

In terms of “cultural fit”, companies have to pay close attention to two specific aspects, research from Nanyang Business School’s Centre for Business of Culture shows.

 

Much like Walmart, British supermarket chain Tesco suffered missteps in the US and Japan. In the US, Tesco did not customize their stores to meet Americans’ demand for fast food, soft drinks, frozen food products, and strong customer service. Americans also did not take to the self-service checkouts at Tesco stores.

 

In Japan, Tesco was unable to draw customers because the Japanese, like the Americans, expected strong personal service. Tesco’s huge stores meant that it was impossible to provide close attention to customers, as labour costs in Japan were high. 

 

In contrast, Home Depot, an American hardware retailer, was unsuccessful in selling its ‘do it yourself’ products in China because customers expected fully-finished goods, given the relatively low cost of Chinese labour.

 

For companies operating overseas, this underscores the importance of adapting to the needs and culture of the host country — a key research focus of the Institute on Asian Consumer Insight at Nanyang Technological University.

 

Another aspect of “cultural fit” for companies is about managing the cultural differences between their host country and their home country in areas such as regulations, business practices, employee behavior and stakeholder expectations.

 

Building Bridges

 

Companies’ success overseas also depends on how they foster cultural harmony among local human resources and expatriates from their home country.

 

Take for example the experience of LG Display, a South Korean LCD panel maker, in Poland. Soon after starting production in the city of Wroclaw in 2007, many Polish workers resigned resulting in reduced productivity, as they were dissatisfied with the Korean work culture. The management discovered the reasons from conducting exit interviews and a survey of its workforce. 

 

The Polish workers were upset by their Korean managers’ seeming disregard for their time away from work. The managers had, for instance, invited local workers to take part in team-building exercises over weekends, which the Poles regarded as an unwelcome intrusion into their time with their families.

 

Unlike the Polish, who believed that decisions should be made based on rules and the law regardless of the people involved, the Korean approach to decision-making was considerably flexible, depending on context and the people involved. The Koreans also extended their flexibility to tasks and projects, sometimes working on several tasks simultaneously.

 

The Polish workers also differed with their Korean managers on performance evaluation. While the Poles wanted to be appraised for their individual work, the Koreans preferred to assess the workers as teams, in keeping with the Korean culture of prizing the group above the individual. This demoralized the workers and led to poor work performance.

 

Cultural Cost

 

Like LG Display, multinational companies – such as Nike, IBM and Toyota Motor – set up operations in Poland to exploit the relatively lower labour costs of the well-educated Polish workforce. Thanks to their organisational cultures that are international and flexible in practice, these firms have been able to attract and retain the top Polish talent with relatively few problems that plagued LG Display.

 

In spite of its failings, LG Display did make efforts to bridge the cultural differences between its Korean leadership and its Polish workforce, and to make its company culture more international. It paid close attention to improving communication between both sides.

 

To engender mutual trust and better motivate its workforce, LG Display introduced training programmes and sports activities, and invested time, energy and resources in making its factory in Wroclaw a “joyful company”. To this end, LG Display built gymnasiums and green walkways, and installed table tennis tables to promote bilateral interactions. It also organised Polish-Korean football competitions and other recreational activities during work hours.

 

These efforts, however, hurt the company’s profit margins. 

 

The anecdotes above show that companies face serious operational challenges if they do not adapt their organisational culture to the social and business norms of the countries that they operate in. As such, companies should aim to adopt an organisational culture that is universal in outlook and practice. That would help to better engage their foreign workers and boost productivity, increasing returns on investment.

 

Indeed, addressing the issue of “cultural fit” is important to companies not only for their organisational performance but also for meeting the demands of foreign customers.

 

Co-written with Dr Divya Bhutiani 

This article first appeared in Storm on 23rd October 2017