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The Biggest Challenges Facing Mncs Commerce Essay

Paper Type: Free Essay Subject: Commerce
Wordcount: 1698 words Published: 1st Jan 2015

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There are several challenges faced by MNCs while competing in the global dynamic business environment today. One of the biggest challenges today is being global while acting locally by understanding the culture of location in which they operate (Firoz, Maghrabi & Kim, 2002). It is vital for firms to understand the local culture to negotiate with local suppliers, government and other stakeholders. Furthermore understanding the moral and ethical values of targeted consumers is also essential so that companies can market the right product to the right market in the right manners. Another challenge for MNCs is economic and political condition of the country in which they operate since political instability may lead to economic instability with changing inflation rates, taxes, regulations, exchange rates etc. Another challenge is integrating marketing strategies according to the cultural values of the region in which the MNC operates so that no blunders might be committed such as the case of Nestle in Africa. Competing with local vendor is also a grave challenge since MNCs need to differentiate their products in quality and price to compete with local competition that have greater knowledge of the country and people. Since MNCs employ people from a diverse cultural background therefore the managers need to create synergy through their workforce.

Q2) Why is it useful to have an 8-step negotiation model? What are the consequences if a step is skipped?

Companies need to understand the negotiation model since they have to negotiate with several stakeholders inside and outside the organization such as suppliers, labor unions, government etc. Using the 8-step model can enforce an efficient negotiation process through which companies can avoid turning a conflict into crisis. The 8-step model provides the company with step by step solution to every kind of negotiation the company might have to consider. The characteristics of various steps in this model understand the scenario, listening to all parties, create alternative solutions, offer BATNA, reaching a final agreement, coming to a conclusion and making sure that the decision is implemented  (The Negotiation Experts, 2012). A company must go through each and every step when on a negotiation table for several reasons. First reason is that if companies miss any single step such as offering BATNA incase an agreement is decided upon then a minor conflict may turn into a crisis. Further if organizations miss an important step like looking for alternative solutions then the companies might not know what possible solutions exist which can help the company negotiate with any party while keeping the company’s interest intact. As companies follows the steps for negotiation managers can find solutions in an efficient manner.

Q3) Which of the cross-cultural theme do you feel is most vital to the success of an MNC and why?

Cross-cultural management is essential for MNCs since multi-national corporations have to deal with people from a diverse cultural background. One cross-cultural theme which companies need to incorporate in their business strategy and with prove vital for the success of the firm is creation of synergy within the workforce. MNCs tend to work across geographical boundaries and employee people from various locations and cultures. All these people are different in demographical characteristics like caste, sex, religion, color and other values. Now as human-resource is the biggest asset of a firm therefore it is essential that the workers work in a harmonious manner. There are several ways of creating synergy such as sharing a common vision and goals aligned with the company’s strategic objectives along with creation of trust, compassion and companionship in the company (Kusumowidagdo, 2011). Such methods can help firms to develop a well-integrated corporate culture so that all the departments work in unity towards achieving the strategic objectives of an organization. It is vital for an MNC to create such a corporate culture so that corporations can succeed in different countries. It is therefore vital for companies to follow this cross-cultural theme to gain the maximum advantage from a diverse workforce.

 Q4) How should an HR department evolve to match a company’s expansion overseas? Which leadership roles are most important in this scenario?

HR department needs to evolve in accordance with the company’s expansion overseas and form strategies which assist in staffing and motivating the organization’s human resource. It is important that while staffing HR department take into consideration the importance of aligning people to the corporate values of the organization. The company should make sure that HR department should conduct value-based interviewing techniques so that only those individuals who’s attitude match with the values of the organization. HR department should also incorporate talent pools which integrate strategies of selection and succession through a continuous development process. Leadership roles are also important for MNCs since a good leadership in one country might not be considered good in other country as well. Every culture has its own cultural and social standard when leadership is considered. Therefore a leader should have knowledge regarding the beliefs, ethics, customs and beliefs so that they may be able to successfully lead business in another country. There are several skills which a leader must have and which might make leaders globally successful. These skills include integrity, courage, standards, awareness, business knowledge, commitment and sensitivity towards cultural differences. A leader must be aware of good work ethics, professional and personal integrity and determination to lead.

Q5) Characterize the future of US-based companies desiring to expand overseas within the next 5 years. What political, economic, and technological challenges might those companies face and why? How can they be overcome?

US-based firms thinking of expanding globally may have to face several social, political and economic practices in the coming years due to a change in perception of United States in the developing and developed countries. Furthermore exchange rates of developing countries are being unstable across the globe due to a dynamic change in the socio-political and economic factor. The world is going through a global recession and the next 5 years might see a global change towards business practices with a massive shift towards e-business plans. The war against terror has distorted US economy and made it politically unstable with a distorted image in the Muslim world where US products have a great potential target market. However this situation might change in the next 5 years with emerging markets like Brazil, India, Russia, China and Pakistan on the globe. These countries will have a suitable working environment for US-based business with high demand for US-based high quality products as local vendors will not be able to provide such products due to lack of technology and financial resources. US-based organization can utilize this opportunity and gain maximum profit through expanding business in developing countries along with thinking of ways to reduce manufacturing cost.

Q6) Describe the relevant factors when considering localization of HR activities.

HR department needs to consider several factors when operating globally so that their activities are developed in accordance with the local cultures. HR department must organize their activities according to the cultural values, habits and requirement of business operations in the country they operate. First factor to be considered is the cultural dimensions of Hofstedes which include factors like masculinity, long-term orientation and individualism are important when considering HR strategies. For example individualism approach should be considered when developing human resource development strategies since employees from American background and Asian culture are different in their approach towards career. Asian employees are more of collectivism nature and tend to prefer working in groups whereas American employees need to be of individualistic nature and prefer working alone or not sharing their success with anyone. Further motivational factors are also different among different cultures since different cultures have different motivational drives which are to be considered when motivational strategies are developed.

Q7) Discuss the impact and implications of Hofstede’s Cultural Dimensions on MNC’s today.

Hofstede’s Cultural Dimensions have a grave impact on strategies of MNCs today since they have to deal with diverse cultures. Whenever a company works outside its local geographical boundary it comes across a different set of cultural values. Hofstede has regarded these cultural values into five cultural dimensions called power distance, individualism, uncertainty, masculinity and long-term orientation. A MNC needs to take all these cultural dimensions into consideration when making strategies to target consumers in different countries. For example when making the organizational hierarchy when establishing a foreign subsidiary the company must acknowledge the power distance cultural values in that country so that the managers can incorporate an organizational culture with accordance to the local values. Further there are certain scenarios in which a firm develops relationship with the suppliers or form a joint-venture agreement in which values like long-term approach and uncertainty must be taken into consideration. For example when forming collaboration with a local company the foreign firm must know what cultural norms such as risk taking or long-term approach embodies the local culture. All these dimensions identified by Hofstede also play a major role in the strategies for global branding and advertising strategy so that strategies are developed according to local habits and preferences (Mooij & Hofstede, 2010).


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