Corporate and Cross-cultural Evolution: Domain Expertise and Language Skills Required

The characteristics of managers who succeed in a domestic corporation are very different from those in a global corporation. Management techniques that are expected to achieve results in one cultural context will not necessarily produce positive results in another. The reasons for this shift are many and rooted in the vast differences in company structure and orientation that come about when a company’s orientation moves from a domestic to international, international to multinational, and, finally, multinational to global enterprise (Gibson, Ivancevich, and Donnelly, 1994).

In Phase One, the domestic stage, the primary orientation of the company is toward production through centralized divisions and delivery of the product or service within one country. The product is new and often features proprietary technology. The product is marketed in a niche within the context of local competition, if any. Profit margins are high and provide for high expenditures for research and development. Production and marketing goals are achieved within an mono-cultural context, and management largely ignores cultural factors.

In Phase Two, the international stage, the company is oriented toward production through functional, but decentralized divisions with an international division to deliver products/service outside the primary country. The product is less unique than in Phase One and more standardized, and takes advantage of shared technology. The product is marketed to a large market in several countries and faces some competition. As profit margins tighten, lower spending for R&D results. Sensitivity to cultural issues, especially those of clients, is an important consideration at this stage.

In Phase Three, the multinational stage, the company produces outputs through multinational locations under centralized control to deliver products in many countries. The product has reached a commodity status and the technology factors are generally available to potential competitors. The product is delivered to many countries through separate business enterprises within the context of many competitors. The cost pressures of competing in a commodity business keep profit margins low as well as restrict investment in research and development. Cultural issues in production and marketing are less of a concern than in Phase Two because products are often produced and delivered in the same country – acquiring the human factors within the local population and local management are key issues.

In Phase Four, the global stage, the company produces in the least cost country through coordinated, decentralized activities and through global alliances. Products are customized in myriad of ways by workers in several countries for uses in the various regional applications by rapidly changing technology. The company faces competition of significant size in each of its market and product lines. Revenues fluctuate rapidly as new products are introduced in customized form – initially high margins fund the typically higher research and development costs. The global emphasis on product and marketing makes cultural sensitivity to issues of employees, clients and management a central theme at this stage.

A significant factor in management success in a cross-cultural environment is the existence of broad experience and training for flexibility. Managers with strong domain expertise and language skills have an advantage in this environment. As a corporation evolves, the demands of marketing in several environments and the rigors of producing products into these markets makes rapid and broad change the rule and not the exception. Each culture has different distinguishing characteristics that require precise adjustments in obtaining the various factors of production and producing products for the marketplace. If they are to succeed, managers and expatriate managers must be aware of the challenges in adapting the corporation to specific cultural settings.

Reference

Gibson, J.L., Invancevich, J.M., & Donnelly, J.H., Jr. (1994). Organizations: Behavior, structure, processes (8th ed.). Boston, MA: Irwin.