Diversity and Differences in International Management

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The internationalization of businesses has remained a controversial topic among researchers. This is especially the case when some consider internationalization not to be an indicator of globalization but rather as an expression of regionalization (Apetrei, Kuresh and Horodnic, 2015). International management is increasingly becoming a fundamental theme in business practice. Research on this concept often seeks to highlight how internationalization affects businesses and how corporations adapt to different cultural backgrounds. Multinational corporations (MNCs) are often at the center of this discourse. However, it is important to appreciate that research on cultural differences and diversity touches on all firms because the modern business environment has become multicultural. Some scholars perceive that cultural diversity can be dangerous for an entity and seek to outline various negative consequences (Stahi et al., 2017). Other studies go beyond internal cultural factors to those external to the business. In international marketing management research, for example, studies examine how marketing managers adapt their practices to national cultures (Soares, Farhangmehr and Shohan, 2007). The subject of culture in corporations has, therefore, been extensively studied.

This essay examines the problems faced by management teams in international organizations and the strategies used to cope with them. Specifically, the paper explores the problem of cultural diversity and differences and elucidates how managers deal with them. While there exists literature showing that cultural diversity and differences can be good for organizations, it is argued in this paper that executives need to handle them effectively to derive benefits. A good example will be the case of IKEA in China and other Asian markets. The issues that IKEA has to deal with include the cultural differences between China and Sweden where Sweden is a classic Western country and China is an Eastern culture.

Cultural Diversity and Differences

Globalization of businesses and markets has resulted in changes in the demographic characteristics of the workforce, including some organizational members being required to work in different countries in a concept known as expatriation. These shifts have become a matter of interest among employers, academicians, and policymakers across the world (Sharma, 2016). A diverse labor force comprises employees from unique cultural backgrounds with varied aspirations, characteristics, and expectations. The management team in such a setting has to make sure that all workers feel appreciated and respected. Expatriation means that some of the management team members will be operating in countries different from their home and working with employees from cultures other than their own. Some challenges come with such a work environment for both the management and the employees.

To embark on a discussion of how culture presents a challenge to the management team, it is important to understand the concept of values. The term ethos is difficult to define because of its pervasive nature – it comprises the broadest influence on multiple dimensions of human behavior. One of the earliest definitions is that culture consists of beliefs, knowledge, art, morals, customs, and other capabilities and habits acquired by the members of society (Soares, Farhangmehr and Shohan, 2007). Cultural behaviors and patterns are deemed to be different from the religious, political, legal, linguistic, industrial, economic, and educational environment in which individuals find themselves. Regardless of how different authors have perceived the concept of culture, it is argued here that culture remains the greatest determinant of human actions. This is reflected in all the situations people get into, including the workplace. Most importantly, each societal setting has its own culture which determines how its members feel and behave in certain situations. Their attitudes and other behavioral responses will depend on their culture.

Managing cultural diversity and differences in MNCs is a particularly complex matter. Cultural differences are managed within a single establishment and across multiple operational bases in different countries. The intricacies arise from the fact that the variations in culture can be seen as an issue of equality within the workplace. Initiatives undertaken by management need to reflect the commitment in pursuing racial, ethnic, religious, and cultural equality among others (Sharma, 2016). Additionally, the differences translate into variable preferences and nature of interactions and achieving a consensus becomes a major concern. For example, some MNCs needs to adopt a multilingual model instead of a one language fits all approach to achieve the balancing act and to manage diversity better (Yanaprasart, 2016; Welch and Welch, 2015). Managing across different language has been shown by several researchers to be one of the biggest cultural challenges facing the management teams in MNCs (Tenzer and Pudelko, 2015; Tenzer and Pudelko, 2017). Deciding on the right approach to such situations for each country illustrates the extent of the complexity.

As mentioned above, cultural diversity and differences can offer MNCs advantages if properly exploited. The internalization theory states that the exploitation and augmentation of a corporation’s knowledge-based assets across state boundaries are more efficiently undertaken internally through the use of market mechanisms (Verbeke and Kano, 2015; Narula et al., 2019). In other words, the internal organization of an MNC allows it to exploit and further develop the firm-specific advantaged. The management teams in the MNCs, therefore, are faced with the problem of converting cultural diversity from a problem to a firm-specific advantage that can assure them international success. An examination of how management can turn cultural differences to an advantage or how the differences affect various aspects of the company, for example, performance and innovation, can expound more on this challenge.

Several studies examine cultural diversity and its implications on a business and outline the various issues that should be managed. A study by Elia, Petruzzelli and Piscitello (2019) examines the effects of cultural diversity on innovation performance in MNCs, specifically those operating internationally through subsidiaries and joint ventures. These researchers established that innovativeness is hindered when the joint ventures and subsidiaries involve countries other than the home host countries. Whether or not this should mean consulting only with the two states in a multicultural organization is not expressed in research and, therefore, presents management with a dilemma and a challenge. Contradictory research is presented by Bouncken, Brem and Kraus (2016) reveal that cultural difference is a source of creativity and innovativeness. Additionally, this aspect is also shown to boost team performance. Their study may not be focused on the MNCs, but the idea would still apply to them. Managers in the MNCs only needs to understand how to best utilize diversity for such competitive advantages.

However, it is important to emphasize that the feeling that cultural difference is a nuisance to the management team has been expressed by several researchers. According to Stahi et al. (2017), these variations culture are widely perceived as sources of misunderstandings, conflict, and problems in the cross-cultural encounters. These authors have cited several researchers such as Geert Hofstede who argues that cultural differences “are a nuisance at best and often a disaster” (Stahi et al., 2017, p. 3). Other popular figures like Carlos Gjost who served as the CEO and President of Nissan and Renault states that “cultural differences can be viewed as either a handicap or a powerful seed for something new” (Stahi et al., 2017, p. 3). The latter statement spells optimism in that only managers can decide whether these differences are a barrier to their effectiveness and success or an opportunity to be exploited. Such a sentiment is similar to that of Bouncken et al (2016) who express that these variations are often a source of creativity within the MNCs.

Regardless of the country where the MNC is present, the management team needs to make sure there is a conducive environment for the employees to work in. They face the problem of achieving this goal in a diverse and cross-cultural workforce where the needs of each culture differ from the rest (Pavlovic, 2018). Several theoretical underpinnings of a multicultural workforce discussed by Wood and Wilberger (2015) can help address such problems. Elements such as the national culture and the various dimensions of culture: individualism versus collectivism, masculinity versus femininity, avoidance of uncertainty, and power distance are critical in managing diverse cultures. Cultural competence, skills, and intelligence among the management and the employees are seen as a necessity for successful management practices and the overall performance of the multinational (Alizadeh and Chavan, 2016; Vlajcic et al., 2019; Wang et al., 2017). There is, therefore, the question of how a management team can build cultural competence for both the management and the employees across different countries.

Another aspect of cultural challenges faced by the management team in international management controls. According to Sageder and Feldbauer-Durstmüller (2019), executing management control in host countries is critical for the MNCs. This is because the leaders have to deploy several control mechanisms intended to align the foreign operations with the broader corporate goals. When the MNCs open subsidiaries in foreign countries, they are required to adapt to the political, economic, and conditions affecting the business environment of those countries. These conditions also include the culture and it is argued here that the extent to which an MNC can exert control over all operations depends on how the new cultures in these subsidiaries perceive control. Studies examining the effectiveness of management control systems in MNCs also pay attention to the national culture and corporate culture. Such studies reveal that culture matters in MNCs who must pay attention to the cultural responses to control (Anderson and Lueg, 2017). Additionally, they express that the management control systems suffer a deficiency because they tend to focus only on one cultural aspect, for example, macro, micro, or meso.

It can be seen that a single aspect of the MNCs can spell problems for the entire international management team. The element of cultural diversity and differences requires the management team to make the necessary adjustments. It has been explained that this team can perceive cultural differences as a hindrance or as an opportunity. It is important to explain, however, that diversity management and equal opportunities differ from each other and are often two distinct terms. Even though human resources are seen as having the major responsibility in managing people, other managers who interact with personnel face the same challenges. The HR team can effect strategies such as inclusion to achieve the aspect of equal opportunities. Diversity management, however, entails more complex issues such as nurturing participation, teamwork, and cohesiveness. According to Sharma (2016), the major challenge in cultural diversity management is that there is a legal requirement to address these issues. The point being made here is that culture is a single concept and yet presents multiple challenges for the management teams in the MNCs.

Coping Strategies

Many of the cultural problems faced by the management team in MNCs can be solved by achieving cultural competence among the managers. The concept of cultural competence, skills, and intelligence has been shown above to be a critical requirement for the success of the international management (Alizadeh and Chavan, 2016; Vlajcic et al., 2019; Wang et al., 2017). Even though there is no agreed universal definition of the term cultural competence, the basic tenet is that the international management team has to be aware of the cultural needs of the employees and customers in the different countries that that MNCs operate in. This is because the managers have to offer services and products that reflect cultural congruence. For the argument presented in this paper, cultural competence reflects itself in the form of cultural awareness, skills, and knowledge. Managers, therefore, have to understand the different cultures, their expectations and aspirations to effectively work with them.

As stated above, IKEA in China and other Asian countries will be used as an example of how international managers deal with the problems of cultural diversity and differences. A case study presented by Mehta (2018) perfectly explains cultural competence at IKEA and how it has helped with the Chinese and Indian markets. The researcher argues that for businesses to thrive in controlled economies like China and India, cultural competence becomes the deciding factor determining the survival or failure in such a market. India is a culturally diverse nation which makes survival for IKEA trickier than other Asian countries, for example, China. Cultural integration has been proposed by some Indian leaders and personalities for over 125 years. The integration as proposed by these individuals was intended to allow the Indian cultures to work together for the prosperity of the nation. According to Mehta (2018), IKEA needs to listen to these words from these personalities as doing so increases the chances of success.

Language has also been expressed as one of the major cultural issues that international management has to address. Coping strategies explained above include the implementation of multilingual frameworks within the MNCs as opposed to one language fits all (Yanaprasart, 2016; Welch and Welch, 2015). IKEA’s operations in Chinese markets may require such frameworks to be installed because of the massive language barriers between Sweden and China. It is not possible to state conclusively for now what language is used at IKEA for international operations but it is assumed that, as with most multinationals, English is the primary language. Chinese consumers are not necessarily well-versed with the language meaning that other efforts are needed to make the communication flawless. For example, IKEA has adapted the language in advertising across linguacultures as explained by House and Kadar (2020). These researchers also support the assumption that English is the lingua franca in international businesses. MNCs have to undertake language translations and language changes across the markets even when the message being conveyed remain the same. The choice of expressions and translational choices can affect the effectiveness of international communication.

Cross-cultural management is an area that is receiving more attention among the researchers. The discourse will outline several other coping strategies, but the main focus is cultural skills and competency among international management. According to Boussebaa (2020), cross-cultural management is part of the wider international business discipline. Such studies are also aligned with behavioral theories such as organizational behavior theory and organizational psychology (Gelfand et al., 2017). Most importantly, the research claims that cross-cultural differences are factors to be embraced and accepted because of their implications on the organization. IKEA, for example, understand that its international business environment is faced with these cross-cultural challenges and adaptation is the best coping mechanism.


International management teams face multiple challenges all arising from the broader problem of cultural diversity and differences. Operating in multiple countries requires this team to be aware of the cultural background of the host country to better handle both the employees and the customers. Cultural diversity, as explained in this paper, could be perceived both as an opportunity and as a barrier. However, the legal requirements for corporations to address issues in cultural differences lean the international management team without many options. The case of IKEA in Asian markets such as China and India present the perfect example of how international management deals with the cultural differences.

Reference List

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