Cross Cultural Management Implications for International Expansion

This report discusses cross cultural management and its implications for international expansion. It provides an overview of the retail sector and Big Deal company, along with their aims and strategies. The report also includes a cultural analysis of Australia and New Zealand using Hofestede model. Practical issues that the company may face during expansion are also discussed, along with recommendations. The subject is cross cultural management and the course code is not mentioned. The course name and college/university are also not mentioned.

Cross Cultural Management
Implications for International
Expansion
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Executive Summary
Retail industry consists of many sub sectors that offer variety of products. In recent times
way of doing business is transformed. Many companies are expanding into different countries to
generate more revenue. In this report entire overview of retail sector and Big deal company is
been described. Also, aims and strategy of firm and other information is discussed in report. It
has given brief info of background of business. Moreover, cultural analysis has been done of
Australia and New Zealand by using hofestede model. In report, it has been explained about
issues that company can face and measures to solve them. At last recommendation is given that
can be followed by Big deal to expand in other countries.
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Table of Contents
Executive Summary.........................................................................................................................2
INTRODUCTION...........................................................................................................................4
COMPANY BACKGROUND........................................................................................................4
Hofestede model..............................................................................................................................6
Recommendations..........................................................................................................................11
CONCLUSION ............................................................................................................................12
REFERENCES..............................................................................................................................13
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INTRODUCTION
Cross cultural management is the management in which the manager of the company
sends their employees overseas from one culture to another in order to expand the business.
There are various formats in which multicultural team could be set up. Either organisation could
have head office in one country and managing various offices in different countries (Thomas and
Peterson, 2016). At the same time someone from another country managing someone from yet
another country. Another format of cross cultural is when employees from different countries
travelled from somewhere else work together on a single field.
For improving work efficiency and effectiveness of cross cultural management the
management of the company must identify different cultural practices and preferences of the
members of the team. Management must establish a proper communication with the employees
for the sharing of information and resources, in order to improve efficiency of cross-cultural
management.
COMPANY BACKGROUND
Retail industry is growing rapidly in Indian market. By 2020 it has been expected that total
consumption expenditure will reach nearly by US $3600 billion. It contributes in 10% of GDP
and provide employment to over 8%. In the retail industry India is the world fifth largest global
destination (Wang and et.al., 2017). Due to higher purchasing power of the upper class people
and growing exposure to national and international brands among youths the luxury market of
India is expected to take growth with time.
BIG DEAL is an Indian retail chain of supermarkets, discount department stores, grocery
stores. It has the most significant position in Indian fashion and retail sector. It also has its sub
companies of its food and fashion products. It is one of the largest and oldest chains of
supermarket, housing about 200+ stores in over 100 cities across the country. This company is
listed on the National Stock Exchange. By keeping in mind the needs of various local and
religious products BIG DEAL offers variety of goods and services. With TransMoney the
BIGDEAL has tied up so that they could provide customers to make instant payment at store.
Due to higher quality of food products, higher food safety and international look of the
product wrappers the customers liked the private label on the products than their original
international tag which are produced by several brands. This initiates BIGDEAL to create
customized packing based on the feedback of their customers and credibility of the retailer.
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This strategy of BIGDEAL has took advantage in the market by selling more items and new
stores openings where it has operations (Moore and Jennings, 2017). By focusing more on
quality and innovations of the products and enhancing the appeal of their banners the company
has gained the customers' loyalty within the years. For the long term growth, safety and quality
of products and to keep the commitment of ethics the company has the moto to keep customer
first (Paton and Johnston, 2017). In order to provide the services and to support expansion the
company has decided to hire more employees in all its stores in India.
The main aim of the company is make their customers avail with the maximum possible
products, and the products be accessible to maximum number of customers. BIG DEAL is
working regularly for the achievement of this goal everyday by improving its products and
concepts according to customers wants and expectation. With the aggressive pricing policy, and
a great marketing strategies combined with the quality products and a successful customer
loyalty program the company has gained growth in market share with this uncompromising
approach.
The company is focusing on expansion as it is operating since many years in the country,
significance of its hypermarkets has generated opportunities in various countries too. The
company is multiplying number of stores opening demonstrates the company’s focus on its
expansion.
BIG DEAL is promoting a responsible business as it has dedicated in sustainable
development from several years (Pecotich and Shultz, 2016).
BIG DEALs objective is to integrate a “sustainable development” by enhancing the quality
of life of its people and to contribute maximum possible at its level in everyday practices of its
employees.
The priorities of BIGDEAL is to set a benchmark by each of its stores in retailing among
other companies of retail sector. It stores provides world-class facilities such as convenience
benefits, broad selection of the products and some products with variety of different brands and
prices under one roof.
Hofestede model
In order to gain knowledge of various cultural practices within various territories, cultural
analysis is done. Cultural analysis is basically qualitative research method on various factors of
the society such as arts, humanities and social sciences in order to collect data on various cultural
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phenomena and to represent and compare different culture and their practices. For the expansion
in Australia and New Zealand the cultural analysis of both the countries is as follows.
Power Distance.
This fundamental dimension decries power each individual possess in the society. It also
reflects the inequalities to which powerful people dominate less powerful ones (Pekerti and Arli,
2017). This means that there is unequal distribution of power within the society.
Australia has score high on the dimension of power distance i.e. 36 compared to New
Zealand which has power distance of 22. Within organizations of Australia, for convenience
hierarchy are formed and managers take decision with employees and on their expertise terms.
Along with it, there are different ways of communication.
Individualism
Degree of independence maintained by the people of the society is describes as the
dimension of fundamental issue individualism. Whether “I” or ”we” is used by the people to
show the self-image of them is described by this issue (Halligan, 2017). This type collective
society people belongs to in group and in exchange for loyalty they care of themselves.
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On individualism dimension Australia has the count of 90 while New Zealand has score
79. This states that people live independently and with their families as well. It is always
expected that in this business world the employees must be self-dependent and must show
display their initiation. And promotion is always done based on merits and evidences of what
employee have done and can do.
Masculinity
This dimension is the score based on what motivates people to be best and to be liked by
all others (Bush, Bell and Middlewood, 2019). a masculine or high count in this fundamental
issue describes success, achievement and competition of the society will be gained . “Winner”
means success in this term. It continues through an individual's life both in leisure and work
pursuits.
A feminine or a low count on this dimension states dominant value in society, i.e., what is
the quality of life people have and how care of others is done. (Wang and Collins, 2016). This
type of low count society on the scale masculinity focuses more on life quality on an individual
which is the signature of success and it is unacceptable to stand out from the other people of the
society.
On masculinity dimension Australia has 61% score compared to New Zealand which has
58% score.
Uncertainty avoidance
The uncertainty avoidance is a score that reflects level to which the public of the culture
feels threatened by ambitious or unknown conditions and created institutions and belief that to
make sure to avoid these issues. Both Australia and New Zealand shows a transitional count on
the fundamental terms or uncertainty avoidance is 51 and 49 respectively for Australia and New
Zealand.
Long term orientation
It describes that while dealing with the challenges of present and future of society along
with maintaining links with the past (Gelfand, and et.al., 2017). Priorities of these two goals are
different for the different society. The low count on long term dimension orientation shows that
normative societies will see the societal change suspiciously while giving the preference to keep
time-honored traditions and norms.
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Both Australia and New Zealand shows a very low score on this fundamental factor of
cultural analysis i.e. 21 and 33 respectively. This shows it is a normative country. Public of such
normative countries has much faith on establishing complete truth, and they are normative with
their thoughts. They are having a great respect for their cultural practices, and they focus more
on quick results of earning rather than depending on savings for their future needs.
Indulgence
How people were raised in their family and what level they control their dreams and
impulses is defined by this fundamental issue. A strong control on people relatively is called
restraints and weak control of people are called indulgence. The level to which small children are
socialized but now it is one challenge that confronts humanity then in the past. Without
socialization of an individual they can't become a human being (Cooke, Veen and Wood, 2017).
71 and 75 are the scores of indulgence which is a fundamental factor of cultural issues in
Australia and New Zealand respectively. This score shows indulgence is very high in both the
countries and people of these countries spend more money on their luxury lifestyle and have
higher degree of importance on their leisure time. People of the countries having such score of
indulgence shows they spend more on having fun and enjoying life at the fullest.
Practical issues faced by company
As BIG DEAL is operating in India and now expanding in Australia and New Zealand
they can face different types of practical issues which can impact their growth. The issues are
described below as :-
Leadership issues- this is common issue faced in cross culture as in different countries
leadership styles followed varies. It is because of lack of communication is ability to clearly
communicate with people around them is one of the most important qualities for leader. Most of
the leader feel disconnect between themselves and their team other reason for this is not able to
clearly communicate goals and expectation to their team members. It is not easy for leader to be
transparent to their employees about their plans and strategies. A leader has the quality to not
only gives the opportunities for professionally growth of the employee but also to helps them in
achieving their work goals. Good leaders doesn't mainly focus much on how their employees
must communicate either it focuses on complete organizational development. Leadership is the
practical issue faced by an organisation expanding overseas as different leader from different
countries have difference in their managing way. They might not be able to properly convey the
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message to the employee and this could lead to poor administration and company would not be
able to grow properly at the right pace.
Management issues- Management issue is common in cross culture the most common
management problems are as follows: First one is poor communication it is most common issue
in the management for a business to grow. A solid relationship must be placed in order to meet
deadlines and achieve goals and to maintain strong communication among the employees of the
firm. Poor communication is the roots of various problems within the organisation which could
result in dissatisfied customers and unmet expectations. Trust relationships between employees
and superiors results in great credibility and strong performance of the management. If an
employee has a doubt on its superior on terms of credibility then it will also not trust the
performance management matrix by its superiors. Due to lack of consistency their will be issue
with the poor performance management which could cause confusion and enmity among
employers, leading them to have no faith on their performance report.
Language and cultural issues
It is a fact that communication will always been a challenges if seller and customer
doesn’t have the same language. Though it is possible that product description could be ran on
Google translate which is a great tool in most circumstances but a company can’t completely rely
on such technology. It is always recommended that there must be at least one employee in the
team who could speak local languages. Employee from different countries speak different
languages so to convey the message the language issue in cross culture must be overcome.
Language issue could create confusion among the employee which could lead to inappropriate
growth of the company.
Local competition
Local competition is always an issue while expansion in other countries as the local
companies might be selling the same product and it is obvious that expanding company has to
deal with tariffs of the import and could face problem in dealing with the different currencies.
Local companies always has the benefit as they don't have to bear the various costs such as cost
of logistics and cost of shipment or etc. in comparison to company operating overseas. To
overcome this practical issue the BIG DEAL retail company must set business relationship with
the local companies as selling their products to their customers only. So this could help their
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business to grow. These local companies could provide various benefits if the overseas company
has good local knowledge and expertise.
Government polices and regulation
It is always a matter of concern as different countries have different government polices and
regulation operated in the country. Due to environmental issues plastic is banned in various
countries and some countries allows only renewable sources of energy. So for cross cultural
expansion of a firm the company must have prior knowledge of all the rules and regulation of the
other country.
Suggestions to overcome issues
It is necessary to solve above issues so that BIG DEAL retail can operate and expand in
both countries. Also, it supports in setting of goals and developing strategies for future. With this
company will be able to provide products and services and fulfil needs of the people. The
suggestions that can be followed by company is as follows :-
Leadership issues could be overcome by creating a proper cash flow management as
initially the owners has to spend some money to earn money. Payment terms can be negotiated
with the partners and vendors (Chudzicka-Czupała, and et.al., 2016). For the proper growth and
flourishing of the company the management must establish proper guideline to decision and
hiring the most suitable employee for the vacant posts.
Management issues in expansion of the company overseas could be overcome by creating
proper organizational structure.
Although there are facilities of telephone and internet but overcoming the physical
distance issue in expansion of the business overseas could not be better than to be present in
person there to talk to the local distribution partners of some particular products to reduce the
cost involved in shipping of the low margin products.
Language and culture is always a barrier in expansion of the business overseas. For the
BIG DEAL retail company in their overseas branch must have an employee in the team who
could speak the local language and must have good local cultural knowledge.
Local competition is also a critical issue in expansion of overseas. As BIG DEAL is a
retail company it can overcome local competition by finding a right partner and building a
relation with the local business (Farndale and Sanders, 2017). This could reduce the cost the
company had to bear for the products where the margin is least. For example, a commodity of
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very low cost and having a low margin of profit and is available in local market too of the
overseas country. Then BIG DEAL retail company must establish a working relationship with
the local company to reduce their shipping cost and storage cost. By building a close relationship
one can sell products to their customers too.
Even dealing in the single country, tax is always a topic of obstacle in business. But when
dealing in international market it creates more concern issues as different countries have
different tax, fees and different international trade tariffs. To overcome this, the company must
have a proper knowledge how to handle tax issues before expanding.
Before expanding the company must be 100 percent prepared for the challenges for
effectively growing and succeeding.
Recommendations
However, in Australia and New Zealand there exist several issues related to culture. This
shows various difficulties for firm to offer their products. Apart from it, organization must
identify most suitable market in which they should expand from both countries specified. This is
because it will ensure that business is able to grow. Thus, there are certain recommendations that
can be followed by BIG DEAL which are defined as below :-
The BIG DEAL retail company must expand its business in New Zealand as from 2018
retail business seems to be continuously growing. Due to country's strong economy the
performance of retailing is also increasing over the time (Chidlow and et.al., 2015). Although
increment in the population of the country could also be the reason of increasing retail market
due to high net migration at the key regions of the country i.e. Wellington, Auckland and
Christchurch.
According to the latest study it was found that New Zealand is the new booming tourism
industry as it is found to be one of the unique and safe travel destination for the tourists. Thus,
with the growth of tourism retail demands will also increase creating opportunities for the new
retail industries to establish themselves in the new up-growing market.
Recent studies showed that trends of Home ware and home furnishing are increasing
among the people. Due to luxury lifestyle showed in various popular TV shows and social media
this has largely influenced the people of New Zealand to invest more in home improvement and
gardens and home furnishing to show their life superior to others.
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BIG DEAL retail could also establish an online market in New Zealand to expand their
business overseas as New Zealand has a very high internet penetration rate. Most of the
customers nowadays prefer online purchasing, either they make final discussion of purchasing of
product or just for cross-checking of prices (Arli and Pekerti, 2017). Keeping the prices of the
commodity as less as possible could create a great business platform for Big deal retail in New
Zealand. Along with it online market also avails the customers with a wide range of product and
alternates of them.
With the advancement in technology retailers in New Zealand has started designing more
convenient store layouts which has the facility of self-checkouts i.e. to quickly get in and out of
the store and overcome their wastage of time in standing in the queue for billing. As this
technology is most common in New Zealand thus BIG DEAL retail can use this technology
which reduces employing staff for billing.
CONCLUSION
It can be concluded from report that BIG DEAL is firm operating in retail sector. They offer
variety of goods and services. The firm wants to expand in Australia and New Zealand. As
expansion to another country requires consideration of various factors including cultural and
practical issues. As communication is always major issue in cross culture management it is
sometimes difficult to convey messages when working with employee from different countries.
Practical issues that could arise in cross cultural are leadership issues, local competition, tax,
government policies etc. In order to overcome various issues, suggested strategies could be
applied by BIG DEAL in order to expand their business overseas.
As discussed, cultural and practical issues of Australia is much higher than that of New
Zealand. So BIG DEAL must expand their business in New Zealand which could serve as the
better platform for the business expansion and results in growth of the country.
REFERENCES
Books and journals
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ethics between religious and non‐religious consumers. Journal of Consumer
Behaviour.16(1), pp.82-98.
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Bush, T., Bell, L. and Middlewood, D. eds., 2019. Principles of Educational Leadership &
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Chidlow, A. and et.al.,2015. Establishing rigor in mail-survey procedures in international
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Thomas, D.C. and Peterson, M.F., 2016. Cross-cultural management: Essential concepts. Sage
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Wang, B. and Collins, F.L., 2016. Becoming cosmopolitan? Hybridity and intercultural
encounters amongst 1.5 generation Chinese migrants in New Zealand. Ethnic and Racial
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Wang, D. and et.al., 2017. Exploring cross-cultural skills for expatriate managers from Chinese
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Management. 34(1), pp.123-146.
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