Cross Culture Management Implications for International Expansion

CROSS CULTURE
MANAGEMENT
IMPLICATIONS FOR
INTERNATIONAL
EXPANSION

EXECUTIVE SUMMARY
From this report it is found that XY Beauty should use Ethnocentric analytical tool in expanding
their business in Finland, it will benefit their company as the parent company already has the
knowledge about the culture and beliefs of their company so it will easy for them to implement
the strategies in the subsidiary company. And it will help in the success of XY Beauty.

Table of Contents
INTRODUCTION...........................................................................................................................1
COMPANY BACKGROUND........................................................................................................1
TOOL FOR NATIONAL ANALYSIS ...........................................................................................4
ETHNOCENTRIC ANALYTICAL TOOL:- .................................................................................4
POLY-CENTRIC ANALYTICAL TOOL :- .................................................................................6
HOFSTEDE MODEL (COUNTRY COMPARISON)...............................................................8
RECOMMENDATION...................................................................................................................9
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
Cross-cultural Management is a study which helps the organizations to deal cross-cultural
aspects. It helps the businesses to handle people that comes from different cultural background. It
is a need that has appeared due to diversity at workplace. Cross-cultural management includes
team management in the manner that consider differences in culture, preferences of customer's
and practices in global and international businesses. It refers to organizations efforts to enhance
the ability of their employee's to interact efficiently with colleagues that are from different
cultures and nationalities(Adekola and Sergi, 2016). It includes hiring candidates that will be
effective for the firms in cross-cultural environment, training the employees to deal with
intercultural issues like communication.
The report aims to analyze the cultural factors that will affect the parent company XY
Beauty when they would be expanding their business in Finland. The report will highlight issues
the company might face while expanding the business. The structure of the report is followed by
company background and the analytical tools that will be used by the company to show the
implications and describe about how the tool will be beneficial for expansion and what are the
issues that the company might face and recommendations will be given how the effect can be
minimized.
COMPANY BACKGROUND
In this fast growing Globalization beauty companies are racing to achieve more and more
competitive advantage globally and gain new customers worldwide. This stage will reach by
expansion of the business in various countries which will increase the productivity along with the
profits. XY Beauty Company is a beauty and cosmetic company which was founded in 1951 and
has India as its parent country. It mainly deals manufacturing and production of high quality
fragrance, skincare, beauty and cosmetic and hair-care products. Its products and services are the
mirror to the company's dedication towards serving the needs of its diversified customers of all
age group and of both men and women.
XY Beauty Company is a multinational brand with its headquarters in India. It is a Public
Company, which started its production with one product at its initial stage which was a new type
of nail paint for which two partners clubbed their resources. For developing a new process of
production and manufacturing they pooled their time, skills and money and now it is having
around 25,500 employees currently working(Barak, 2016).
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TYPE AMOUNT IN MILLION
(2018)
Revenue Rs.11.90
Operating Income Rs.2.51
Net Income Rs.1.55
Total Assets Rs.16.75
Total Equity Rs.12.92
Marketing Strategy
Its mission is to provide beauty related services and products worldwide. It is leading its
targeted market and various regions by major product and services as per the demands and needs.
For example: In India, the major demand of women is of hair-care products and by leading in
this, it can globally expand through fulfilling the needs of different regions, according to their
taste and preferences. XY Beauty Company is now focusing on development of new mulch-
cultural teams at internal and external level for developing variety of products and services to
fulfill demands of new global level market(Deresky, 2017).
Marketing Mix Strategy
The marketing mix model states the framework of policies and actions which are
implemented by the company for promotion of the products and services. The brand value of the
company is also enhanced resulting global level development.
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Illustration 1: Marketing mix 7Ps
Source: (How to use the 7Ps Marketing Mix, 2019).
 Product: XY Beauty Company basically deals in cosmetic and beauty products along
with providing a wide range of skincare, hair-care, fragrances to its targeted customers of
diversified cultures. And according to the tastes and preferences of different region, it
tries to gain advantage over the market by satisfying them, which will help in long-term
customer retention.
 Promotion: In this company needs to communicate the uses, advantages, specifications,
etc. to their ultimate consumers through promotion activity. For promotion, XY Beauty
Company, has its team which works on the key areas of promotion through advertising,
personal selling, promoting sales, after sales services, etc. Advertising by the company is
done through online website, pamphlets, newspapers, radio, etc.
 Place: It has its headquarters in India and having around 55 branches all over India.
Many spa, salons, stores, along with wholesale and retail shops are being established by
XY Beauty Company. Now, it wants to expand its business on global level. E-commerce
and online shopping is also available for the customers, as in the new area customer seeks
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easy and fast access to the products and services they desire(Adekola and Sergi, 2016).
Therefore, online platform is the best option for the company to attract more and more
customers.
 Process: The process for distribution is also of vital concern. The company has appointed
highly skilled employees for distribution process. As, if the delivery will be of standard
nature and on time as per the specifications of the customer. It will be easy for the
company as well, and will save time and money both with increment in efficiency. This
will increasing the satisfaction of customer which will ultimately result in trust building
and customer retention.
 Pricing: The pricing of the products and services should be determined according to the
customers. The price which is reasonable and the ultimate customers are ready to pay for
the product they need. Along with this, they also have to take care about the mark-up to
serve the costs, overheads, margin of profits, etc. XY Beauty Company uses penetration
method for pricing, in which the price of its new product or services at initial level is
relatively set at a lower price as compared to its competitors and then increased
afterwards. Due to this practice customer tends to switch over the product with low price,
resulting in more sales(Gollnhofer and Turkina, 2015).
 Person: Having a set of right workforce is essential for effective working of an
organization. From manager to the staff each and every person put efforts in the
operations and functions of Company. The XY Beauty Company provides online training
and organises seminars for skill development and motivating the employee so that they
perform more better.
 Physical evidence: It relates to various things which attracts the customers, such as its
brand, packing of products, environment of shop and its design, etc. The XY Beauty
Company packs its products in such a way that they create a desire in customer for
purchasing, the products are are available in all sizes from micro to macro packs as per
the preference of customers.
TOOL FOR NATIONAL ANALYSIS
ETHNOCENTRIC ANALYTICAL TOOL:- Ethnocentric approach means individual's
draw conclusion about various groups that are based on the individual's cultural values,
traditions & norms. These individual make use of their ethnic groups as standard and on
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that basis judge others culture. XY Beauty is using ethnocentric approach for analysing the
cultural implications they might face while expanding business in Finland. Ethnocentric
approach means the top management of host country will be hired from the same
country(nation) where the parent company belong so that the expanded company in the
host country comply with the same vision, mission and objectives like of parent company.
Application of the Tool
So for expanding the business of XY Beauty in Finland the company will be choosing
Ethnocentric approach, the position of top management at Finland Office will be filled by hiring
employees from the parent country. They will be taking all the decisions regarding the operations
at Finland Office (Deresky, 2017). This approach is used as the employee's of India (parent
country) already know about the working, objectives of the beauty company and so it will be
easy for them to implement the same at the Finland office. And the top managers can guide
employees in Finland to work according to the set rules & procedures made by the company in
the parent country.
Critique of the Tool
Ethnocentric Approach is beneficial for XY Beauty as there would be better coordination
between the parent and host country. As the managerial position is filled by the employee's from
parent country they will have better understanding of the culture, values & beliefs of the
company and they will easily implement them in host country as well. Parent country will have
effective control on the subsidiary, as the managers will be implementing all the policies same as
the parent country they will have the control and a close watch on the operations in the host
country or the subsidiary company. But on the other hand there are various problems such due to
cultural differences the staff of the parent country might face issues in adjusting in host country.
As their difference between the cultures, values and thinking in the people of India and Finland
so it is possible that their can be conflicts. It is possible that the parent company missed the
opportunity to hire best human resource from host country (French, 2015). There can be
government restrictions that might be an disaster for the business of parent country.
Benefits of Ethnocentric Tool
Ethnocentric tool is beneficial for XY Beauty as it makes sure that the subsidiary
company complies with the overall objectives & policies of parent company, as there will be
better coordination between the parent & subsidiary company. The managerial position in host
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country is hold by the employee's of parent country, they already have the knowledge about the
culture, beliefs of the holding company(parent country) so it easy for them to manage the
operations of subsidiary company. There would be effective communication and efficient
coordination as the employees has deep knowledge about how the parent country works. The
expatriates will broaden their thinking and view point towards new concepts and culture of the
foreign country as this gives a chance for growth and development of expatriates. The parent
company can have better control on the subsidiary as well as have a close monitor on the
operations of subsidiary company. The decision making process will be quick and in accordance
with the parent company(Liu and et.al., 2018) . The vision, mission and objective is set by the
top managers and they will same as they know about the know how of the parent company so it
will easy for them to implement it in the host country. Even the managers can guide the efforts of
employees of host country towards the main goal & objectives of parent company. The company
doesn't need to have well established international local market. So the company will be
benefited by applying ethnocentric approach.
POLY-CENTRIC ANALYTICAL TOOL :- Poly-centric approach means person's from
host country are employed for managerial positions to look after the operations of
subsidiary company. Rationale behind poly-centric tool is that locals of host country have
better knowledge about their culture and can more effectively and efficiently run the
organisation as compare to foreign counterpart( Lorenz, Ramsey and Richey Jr, 2018). It
will benefit the company if the local employee's hold the managerial position and work
according to themselves.
Application of the Tool
So for expanding the business of XY Beauty in Finland, company will be choosing Poly-
centric approach, individual from host country will be hired for the position of top managers as it
is said that the local people have better knowledge of culture, beliefs of the people their. They
can take decisions on the basis of employee's of the company, as they know the values and
working culture of the people. This approach is used by the parent company as they don't know
the working culture and habit of the people of Finland. So to adjust with host country culture the
company is using this tool, it will be beneficial as if the management knows how the employee's
of company is works what are their beliefs and working patterns(Tjosvold, 2017). It will be easy
for them to plan and implement the strategy for the company.
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Critique of the Tool
Poly-Centric approach is important as the difficulty in adjusting in the host country will
be eliminated, as the managerial position will be filled by the local employee's who have greater
understanding of their culture. Expatriates of home country need not to go to host country so the
point of adjusting is eliminated. On the contrary their can be lack of coordination between the
parent & host country, as their is absence of link that is developed when the expatriates of parent
country hold managerial position in the subsidiary company( Richter and et.al., 2016). The hiring
of locals or nationals of host country would be less expensive for the company as compared to
ethnocentric approach. On the other hand there can be difficulty in controlling the operations of
subsidiary company and their might be conflicts between the managers of parent and host
country as their thinking perceptions is different. There can be lack of effective communication
as their is language barrier in the staff of host country and parent country, and the personnel's
from parent country will have less knowledge about market conditions of host country.
Benefits of Poly-centric Tool
Poly-centric approach will be beneficial for XY Beauty as it eliminates the problems of
language barrier and adjustment in host country. Employee's of host country have a better
understanding of culture, value and beliefs of the people their so it will easy for them to make
plan and implement them. The products will be more competitive as the host country personnel's
knows about the trends going in their country and choices & preferences of people in Finland.
The employee's hired from host country itself will be less expensive as compared to the
expatriates from parent country. No conflict between the host and parent country. This approach
enhances moral & provides career opportunities to the local staff. When the locals are hired for
the managerial positions it gives them rights to take decisions according to themselves and build
problem solving skills so this sharpens their skills and enhance their abilities for further growth
and development(Van Hoor and Maseland, 2016). The host country supports the company and it
will easy for the locals to deal with them as they are well aware of the know how of their
country. No language barrier support from government increase the chances of success.
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HOFSTEDE MODEL (COUNTRY COMPARISON)
Illustration 1: Hofstede model
(Source: COUNTRY COMPARISON, 2019)
Power Distance :- This dimension states that every individual doesn't hold equal power
in the society. It is defined as extent where less powerful people of organizations in a country
accept expect that power is unequally distributed. Score of Finland (33) is too low so it can be
interpreted that in Finland power is decentralized & the managers take their employee's with
them and accept their decisions. So while expanding their business XY Beauty should keep in
mind this dimension that employee's don't like to be controlled.
Individualism :- This dimension identified the issue of interdependence of society on its
members. It is defined as what people think, like whether they believe in "I" or "We". In
individualist society people tend to think about themselves and on the other hand collectivist
society tend to think for group(Stahl and et.al., 2017) Finland has a score of 63 that is majority of
people believe in individualism, so when establishing a subsidiary in Finland the managers has to
keep in mind that they have guide people efforts towards collectivism.
Masculinity :- This refers to the aspect that society is driven by success, competition and
achievement. Finland's score is 26 considered as a Feminine society. In these countries, focus is
on on works in order to live. Conflicts are solved by simply compromising and negotiating.
Uncertainty Avoidance :- This dimension states that future is uncertain and their is a
possibility of uncertainties. Finland's score is 59 that means that people tend to avoid the chances
of uncertainties that may occur in future. People feel threatened about the uncertainties or
unknown situations and have build the belief to avoid such things. So while expanding the
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business in Finland XY Beauty has to make sure employee's doesn't fear from accepting changes
and keep on changing with the new concepts and accept cultural differences.
Long Term Orientation :- This dimensions states that the society should maintain links
with past experiences, so it helps in dealing with challenges that came in present and might occur
in future. Finland has a low score of 38 that means they don't keep up with the past performance.
So while expanding business in Finland the company must keep in mind that they need to keep
in mind the changes in the past so they can successfully work in future(Thomas and Peterson,
2016).
`Indulgence :- This dimension states the behaviour of people towards controlling their
desires and urge. Finland has a high score that is 57 which means people have controlling power,
they control their desires and urge.
So XY Beauty should use ethnocentric analytical tool to as the personnels of parent
company will have better understanding of the beliefs, values and goals of the company. So they
have more chances of achieving success and in addition the expatriates of home country will get
a chance to open of new culture diversity this will give them the opportunity to grow and
develop.
RECOMMENDATION
From the above study it is advised to XY Beauty Company that for expanding globally it
is important to understands the various aspects of culture and the differences as well. It has to
focus on the taste and preferences of multi cultural regions. For this, they have to make strategy
and set up team consisting of multi cultural employee, which will help in working efficiently.
For expansion of business in Finland the company needs to overcome the drawback of
Individualism, which is prevailing there. As in individualist society, the people are not
concerned over the group as a whole but keep them limited to themselves only. But, in India this
practice is not followed and here work is done on group basis or mutually which is also known as
Collectively. If Finland will not cooperate with India in setting aside of issues, it will be difficult
to prosper there. Therefore, XY Beauty Company should put efforts to remove individualism
through creating a amicable and hormonal environment and relation, which will help in trust
building and handling things at mutual level(Meyer and Peng, 2016).
People of Finland are more threatened with the Uncertain Situations, due to which they
try to avoid them most of the times which is not a good practice. Here, in this type of culture XY
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Beauty Company has to create a feeling of need of rules for them. If the people their will follow
the rules and policies set for any uncertain event then in that case they will not back off, and will
certainly face that and overcome the same.
Cultural Differences may arise while expanding the business at global level. Therefore,
by learning the culture of the host country and cooperating with the same will help XY Beauty
Company in overcoming the issues related to culture(Mittal and Elias, 2016). This can be done
by grasping and putting effort in learning the culture which will be appreciated by the Finland
and may result in better opportunities for business. They can learn the marketing practices,
customs, preferences through online available information of the host country, that is, Finland.
Sometimes, being Limited within the own cultures and practices and not adopting the
new practices of host country can create a problem and result in declining of share of market. By
trying new things new skills are developed and also the company can get a idea of the
environment and through its study it can take further decision. Adopting and accepting the
culture of host country will be appreciated which will result in creating strong bonding between
them. The ultimate idea is to make a flyover and deal positively with issues, instead of creating
boundaries between each others culture.
As the ultimate Decision Making is done by the parent Company and applies on the host
country as well, in this case the perception of the higher level management is different of XY
Beauty Company as compared to that of Finland(Pieterse, 2019). Therefore, it should keep in
mind all the issues and aspects which can create barriers and result in loopholes. Planning and
setting policies should be done with keeping in mind, both the parent as well as host company,
so that there is no chance of rejection from the other country.
There are chances of High rates of Failure when internationalizing the business, it will
be difficult for XY Beauty Company to survive at the initial level of business in Finland as there
may arise various differences. They can be regarding the taste and needs of customers, practices
followed for promotion and marketing by the company and the criteria through which customers
get satisfied also differs from country to country. For overcoming this situation the parent
company has to do proper research and development practices. So that, it can get familiar with
the environment and offers those products and services which are preferred by the targeted
customers. By following this procedure they will not fail and instead will create a strong market
base.
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To remove the problems of Effectively Guiding the Employee of Finland because of
various differences, XY Beauty Company should organise online training seminars and classes.
So that, the employees along with better understanding of the actual scenario of the strategies
and policies adopted for growth develops the skills and knowledge accordingly(Thomas and
Peterson, 2016).
CONCLUSION
This report highlights the various aspects of managing the issues arising out of cross
culture of countries. The marketing strategies, that is, 7Ps for marketing mix, their application in
relation to gaining competitive advantage in the global market are also mentioned. The issues
and hurdles in expansion procedure of XY Beauty Company at global level related to differences
in policies, norms, cultures, etc. are also mentioned.
Along with this, Ethnocentric approach is applied according to the size, industry type for
the recruitment process of the host country. It also comes with both advantages and
disadvantages which can be easily overcome by the company by putting efforts. Moreover, this
report also briefly brings up the issues and problems coming in globalizing the business. The
recommendations are also given which can help the company in resolving the problems and
hurdles coming in smoothly carrying the business at global level. This will eventually result in
higher productivity and profit for XY Beauty Company in both parent and host country.
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REFERENCES
Books & Journals
Adekola, A. and Sergi, B. S. 2016. Global business management: A cross-cultural perspective.
Routledge.
Barak, M. E. M. 2016. Managing diversity: Toward a globally inclusive workplace. Sage
Publications.
Deresky, H. 2017. International management: Managing across borders and cultures. Pearson
Education India.
French, R., 2015. Cross-cultural management in work organisations. Kogan Page Publishers.
Gollnhofer, J. F. and Turkina, E. 2015. Cultural distance and entry modes: implications for
global expansion strategy. Cross cultural management. 22(1). pp.21-41.
Liu, Y., and et.al., 2018. Brand management in mergers and acquisitions: emerging market
multinationals venturing into advanced economies. International Marketing Review. 35(5).
pp.710-732.
Lorenz, M.P., Ramsey, J.R. and Richey Jr, R.G., 2018. Expatriates’ international opportunity
recognition and innovativeness: The role of metacognitive and cognitive cultural
intelligence. Journal of World Business. 53(2). pp.222-236.
Meyer, K. and Peng, M. W. 2016. International business. Cengage Learning.
Mittal, R. and Elias, S. M. 2016. Social power and leadership in cross-cultural context. Journal
of Management Development. 35(1). pp.58-74.
Pieterse, J. N. 2019. Globalization and culture: Global mélange. Rowman & Littlefield
Publishers.
Richter, N.F., and et.al., 2016. Using cultural archetypes in cross-cultural management
studies. Journal of International Management. 22(1). pp.63-83.
Stahl, G.K., and et.al., 2017. The upside of cultural differences: Towards a more balanced
treatment of culture in cross-cultural management research. Cross Cultural & Strategic
Management. 24(1). pp.2-12.
Thomas, D. C. and Peterson, M. F. 2016. Cross-cultural management: Essential concepts. Sage
Publications.
Tjosvold, D., 2017. Cross-cultural management: foundations and future. Routledge.
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Van Hoorn, A. and Maseland, R., 2016. How institutions matter for international business:
Institutional distance effects vs institutional profile effects. Journal of International
Business Studies. 47(3). pp.374-381.
Online
COUNTRY COMPARISON, 2019 [online] Available through <https://www.hofstede-
insights.com/country-comparison/finland,india/>
How to use the 7Ps Marketing Mix. 2019. Online Available
Through:<https://www.smartinsights.com/marketing-planning/marketing-models/how-
to-use-the-7ps-marketing-mix/>.
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