Cross-Cultural Management Report: Australian Subsidiary in Indonesia

This report examines the cross-cultural management challenges faced by an Australian company operating a subsidiary in Indonesia. It analyzes cultural differences, particularly focusing on Hofstede's cultural dimensions (power distance, individualism, masculinity, uncertainty avoidance, term orientation, and indulgence) to highlight the discrepancies between Australian and Indonesian cultures. The report details how these differences lead to issues such as employee dissatisfaction and conflict. Furthermore, it provides practical recommendations for managers, emphasizing the importance of respecting Indonesian culture, building trust, fostering open communication, and adapting management styles to align with local expectations. The report concludes by underscoring the significance of understanding cultural diversity for successful international business operations, emphasizing the need for companies to adapt and value their employees' diverse cultural backgrounds.

Running head: CROSS-CULTURAL MANAGEMENT
CROSS-CULTURAL MANAGEMENT
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Executive summary
This report discusses various traits of the cultural aspect which has created problems in an
Australian subsidiary located in Australia. This report aims to compare and contrast between
the culture of Australia and Indonesia an analyses the most important factors to create
cultural gap among the employees of the organization. This report has analyzed the cross
cultural theories and discussed the ideological aspects that have shaped the culture of
Indonesia, and the challenges that the Australian firm face in doing business with these
employees. The report concludes with the recommendation that the managers need to follow
to run the business smoothly without any conflict.

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Table of Contents
Introduction................................................................................................................................3
Cultural issues faced by the company........................................................................................3
Recommendations:.....................................................................................................................6
Conclusion:................................................................................................................................7
Reference:..................................................................................................................................9

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Introduction
This report aims to discuss the various management styles need to be adopted while
the mangers from one country operate in other region. As a consequence of globalization
these cross cultural organizations of one specific country have started to operate in the market
of other countries. They do this to gain opportunity in the labor cost hence transfer the
manufacturing sector in one place and export them in another region (Coviello, 2015). For
managing such types of business effectively, cross-cultural management theories have
emerged to help these corporations to understand the prospects of the subsidiaries and
maintain effective management there. With the guidance of cross-cultural knowledge, the
managers come to know various dimension of culture which can shape the business culture
(Gelfand et al., 2017).
The issue of cross cultural conflict is inevitable in the Australian organization which
has a subsidiary in Indonesia. This is because the mangers do not agree with the fact the
culture f these two countries are completely different hence become the chief contributing
factor for encounter. The report analyses these issues from the aspect of cultural dimension
theory by Hofstede and concludes with some recommendations to mitigate issues from their
roots.
Cultural issues faced by the company
The company has opened a subsidiary in Indonesia and facing various issues
regarding the dissatisfaction of the employees. The local staffs are not satisfied with the
management as well as the policies of the company. This is due to the fact that the company
has not applied the cross cultural management system in its subsidiary in Indonesia. The
cultural difference of Australia where the company’s head quarter is situated, and its
subsidiary in Indonesia is high enough to create critical situation in the organization. in order

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to solve this problem, the managers need to first analyses the reasons of gap among the
managers and the local employees which has made the situation critical to operate effectively
(Holmes, v2018). In this context, the cultural dimension introduced by Greet Hofstede can
assist the mangers.
Power distance: in this index Indonesia scores high which means that people here follow the
strict hierarchy in the organization there is inequality among the employees and the
subordinates want to be dominated and guided by their managers the superiors are the power
holders the leaders are directive hence the managers control every aspect of the organization.
Unlike the Indonesian staff, the Australia do not want their organization to have high power
distance or inequality (Jiang, Gollan & Brooks, 2015). Therefore, the issues can creep up
between the managers and the employees. The Indonesian managers grant age along with
experience to be the most important factors hence want to be honored and respected. On the
contrary the Australian staffs do not ascribe with this view.
Individualism: from the individualism index the mangers can identify the differed between
these two cultures. The Australian society is highly individualistic where the staffs work for
personal promotion and recognition (Knight et al., 2015). They work for themselves an only
for their immediate family. Hence the relation among the staff are loosely knit. On the
contrary, the Indonesians have collective society. They put priority for all-inclusive growth of
the organization. they prefer to work in group and what they do, directly serve their group or
teams. In this context, the Australian mangers face problems when they expect an
individualistic effort for quality management, the Indonesian staffs divide the task among
themselves and form a team to accomplish the task. This attempt may offend the managers.
Masculinity: Indonesian culture directly oppose the culture of Australia in this index. This is
because the culture of Australia is highly masculine and the Indonesians score low in this

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index. This creates huge differences in the understanding as well as perceiving organizational
matters. The Australians ate more competitive hence believe in personal achievements and
recognition rather than caring for others (Moore, 2015). On the contrary, the people of
Indonesia, care for others and help other staffs in achieving their goals together. The
managers of Australian working in Indonesian subsidiary hence fail to gain competitive
advantage from their employees’ ends.
Uncertainty avoidance: in this index, both the cultures show similarities hence the
Australian managers posted in the Indonesian subsidiary do not face much problem. The
Indonesian staffs prefer to maintain relationship harmony in their workplace hence ambiguity
is not a matter for these people.
Term orientation: the culture of Indonesia, ascribe with long term orientation while dealing
with the present and future challenges but the Australian culture scores low, demonstrating a
view assigning a relatively short term culture. According to this index, Australians have a
normative culture which prefer to maintain the time honored traditions (Dalkir, 2013). They
view the societal change with suspicion. Similarly, in the organization also the Australian
staffs or the managers, have strong concern to establish the absolute truth but they try to
achieve a quick result of their actions. On the other hand, the Indonesian people believe that
the truth depends on the particular time, situation as well as context (Savage et al., 2014)
Therefore, the people of this pragmatic society can easily adapt with the changed condition.
They show great tendency to save as well as invest, perseverance to achieve the goals. In the
Indonesian subsidiary, therefore critical situation may grow if the staffs want to introduce
something new, the Australian mangers suspect them and finally prevent changes in the
organization.

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Indulgence: in this index, the Indonesian culture is much restrained than that of the
Australian culture. This cultural dimension captures the idea of pessimism prevailed in the
society which makes the people more cynic about everything. They do not put emphasis on
the leisure time or enjoying their lives. Moreover, they control and gratify their desire to do
something they want to do. The Australian society is just the opposite of this view. The
people in this society possess positive attitude and give importance to leisure (Stahl, et al.
2017) The Australian managers therefore show a casual attitude which may not accepted by
the Indonesian staffs which to dissatisfaction leading to irritation to the Australian side.
Recommendations:
In order to maintain the business running, the Australian company working in
Indonesia, needs to manage the employees in the Indonesian way. As discussed before, the
Australian organizational culture has no similarity with the culture of Indonesia. The
behavior, attitude, value and expectations are completely different between these two culture.
In operating a successful subsidiary, in Indonesia, the managers first need to respect the
Indonesian culture and know their perspectives and value system. In order to work as a team,
the trust is a crucial element which the Australian authorities need to earn from their
subordinates.
In order to manage a cross-cultural organization, the managers need to have an intense
knowledge about each of the employees which will give him insight about their skills and
knowledge. These employee teams must have unique style which the managers need to
explore while they will be able to stop imposing their own culture on these staff. The
Australian managers can easily overcome the disagreement or conflict with the Indonesian
staffs if they build personal connections. There are various methods which will help these
managers to foster individual relations and rapport with the employees of other culture.

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For any kind of organization, conflict is inevitable. Hence for this cross-cultural
organization, the mangers need to address any kind of conflict immediately. This will ensure
that the small or manageable conflicts do not take a huge dimension which is impossible to
manage. This will be only done if the leader understands the cultural perspectives of the
employees and learn the way to manage problems in a way the people in that culture do.
The communication is one of the most important factors which help the managers to
convey messages to their subordinates in one hand, and motivate them on the other. Unlike
culture the communication style of the Australians and the Indonesians is completely
different hence to maintain authority over the employees, the Australian staffs need to make
them release according to their expectations. As mentioned before, the employees of the
organization in the Indonesian subsidiary are comfortable with ambiguity and can adapt with
the changes in the organization easily. Therefore, if the mangers think that what policies they
follow in the parent company in Australia and the subsidiary in New Zealand will have the
similar response from the Indonesian subsidiary also, it is completely wrong. Hence they
must try new things and make new policies for their Indonesian subsidiary so that these
Indonesian staff find the organization more of their preference and participate in the
production process more engagingly.
As the company aims to do business in Indonesia there is no scope of
misunderstanding the staff because this will lead to problems with the customers as well as
the stakeholders. Therefore, the parent company must recognize and motivate its staff who
are working in Indonesia so that they maintain their multinational skills. This will help these
managers to feel appreciated as well as intellectually stimulated.

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Conclusion:
Therefore, it can be concluded that the proper knowledge about e difference in
organizational culture is vary much important for the organizations which aim to do a
successful business in the foreign market. Different countries have different style of
management as well as organizational norms. Some of these are very specific whereas some
are very general. The cultural difference in this case is not a subtle thing which may remain
unnoticed by the management but has taken a huge sixe that is potential to affect the
company by increasing its vulnerability. Due to this reason, the cultural dimension theory by
Hofstede can be helpful for proper understanding of the cultural gap between the parent
company of Australia and its subsidiary in Indonesia. There are cultural as well as behavioral
values which shape the perspectives of the employees and make them ready to work with
other cultures similarly from the managers’ they must follow the feedbacks of the native
employees and get an intense knowledge about their subordinates. Only building deeper bond
the Australian managers will be able to control the employee dissatisfaction in the work
place. By respecting the cultural diversity in the organization the company will get the best of
their employees.

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