Analysis of Cultural Challenges Faced by Multinational Corporations

This report delves into the cultural challenges encountered by multinational corporations (MNCs) in the context of globalization. It explores key theories related to cultural differences, such as Hofstede's universal values of individualism and the impact of common understandings of behavior within cultures. The report analyzes a case study of a company facing communication gaps, ego clashes, and quality issues due to cultural differences. It proposes a five-point plan to address these challenges, including virtual leadership, regular meetings, embracing cultural differences, implementing proper incentives, and establishing amicable dispute settlement mechanisms. The report emphasizes the importance of understanding and adapting to diverse cultural landscapes for effective international business operations, drawing on references that support the analysis of cultural challenges in international business.

Running head: CULTURAL CHALLENGES FACED BY MNCs
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1CULTURAL CHALLENGES FACED BY MNCs
Table of Contents
Theories related to cultural challenges faced MNCs:................................................................2
Relation with ‘No Name’:..........................................................................................................2
Solution of the problem:.............................................................................................................3
References:.................................................................................................................................5

2CULTURAL CHALLENGES FACED BY MNCs
Theories related to cultural challenges faced MNCs:
Due to the advent of globalisation multinational corporations have embraced skilled
workers from all over the globe. Culture, today affects the way things, happen in a
multinational corporations. The growing complexities and communication gaps have started
increasing in recent times, which is a serious threat to any multinational corporation. The
challenges of cultural differences is one of the most disturbing elements, faced by today’s
Multinational corporations. The main theories are provided below. Universal values of
individualisms is one of the most important theories behind cultural difference. According to
Hofstede’s universal values of individualism and egocentricity is one of the reasons for the
gap existing in terms of culture. Secondly, people from same culture have a common
understanding of acceptable behaviour, inappropriate behaviour and right and wrong
(McFarlin & Sweeney, 2014). When these people work in different business organisations of
different countries, the managers face the tough task of dealing with diverse cultural
landscapes. Thirdly, application of robust ethics assessment, absence of adequate
motivational incentives and transparent communication procedures are necessary for
overcoming cultural challenges in the business. Fourthly, adoption of opportune individual
style and managerial competence is the basis for facing the menace of cultural challenges.
Relation with ‘No Name’:
In the case of ‘No home’, the company has been facing the risk of deplorable
communication gap between the headquarters and the foreign subsidiaries. The teams are
suffering from the problems of ego clashes and individualism. The team friction, lack of
professional integrity has impacted ‘No home’s overall aircraft quality. The team has set low
targets and are suffering from lethargy due to lack of motivational measures Moran, R. T.,
Abramson, N. R., & Moran, S. V. (2014). The reputation has also suffered among the

3CULTURAL CHALLENGES FACED BY MNCs
suppliers because of the company’s failure to provide consistently better quality aircrafts. The
foreign companies of China and Vietnam are not able to understand the problems of the
Australian management, failure of ethics assessment and transparent communication have
also taken place. As a result of which, the teams are receiving inadequate instructions and the
aircraft quality are being affected.
Solution of the problem:
‘No Name’ must implement a five point plan to solve the problems of cultural
challenges, which are given below:
 Virtual Leadership: Adoption of virtual teams and virtual leaders must be
initiated to ensure a proper, transparent and comprehensive way of
communication between the headquarters and the subsidiaries.
 Regular Meetings: Initiating of workshops, meetings and frequent virtual
meets for knowing the culture, ethos, and certain key phrases for
understanding the inherent problems of the foreign subsidiaries.
 Embracing Cultural Differences: ‘No Name’ should embrace the promotion
of cultural differences. The company must tailor the policies of the company
in accordance with the culture of the foreign countries. Celebrating Chinese or
Vietnamese festivals like Quingming or the Chinese New Year may be the
way. Coinciding the incentives payments with the traditional festival dates of
the foreign countries is also a good way to showcase cultural acceptance.
 Proper Incentives: ‘No Name’ must also initiate a robust incentive structure
for all its foreign employees, so that they may feel at home and are not
differentiated on the basis of their cultural differences.

4CULTURAL CHALLENGES FACED BY MNCs
 Amicable dispute settlement: ‘No Name’ must also organise meet ups of the
team leaders of the various team leaders, which must be done in the presence
of the managers, for smooth and effective settlement of disputes and
differences.

5CULTURAL CHALLENGES FACED BY MNCs
References:
McFarlin, D., & Sweeney, P. D. (2014). International management: strategic opportunities &
cultural challenges. Routledge.
Moran, R. T., Abramson, N. R., & Moran, S. V. (2014). Managing cultural differences.
Routledge.
Staff, (2018). Overcoming Cultural Barriers in Negotiations and the Importance of
Communication in International Business Deals - PON - Program on Negotiation at
Harvard Law School. Retrieved from
https://www.pon.harvard.edu/daily/international-negotiation-daily/bridging-the-
cultural-divide-in-international-business-negotiations/
THE TOP TEN WAYS THAT CULTURE CAN AFFECT INTERNATIONAL
NEGOTIATIONS •. (2018). Retrieved from
https://iveybusinessjournal.com/publication/the-top-ten-ways-that-culture-can-affect-
international-negotiations/