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Extending the operations of a multinational corporation in the British fashion industry to China

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Extending the operations of a multinational corporation in the British fashion industry to China

305 HRM – International HRM.

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Introduction

The role of the human resource departments is constantly changing attributing to the pressure from the external business environment. The globalisation of firms has burgeoned the demand for talent and skills and thusly creating a scarcity of the same (Kapoor, n.d.).In addition Kapoor (n.d.) and Hunter and Katz (2012) emphasize on the need for firms to invest more in human capital as opposed to financial capital because in the end human capital will be rare. The contemporary role of human resource management has therefore extended to crucial aspects of managing people of diverse cultures and language skills and employees distributed in different nations. Any multinational firm has this roles as the core of their human resource practices Kapoor (n.d.). In light of this discussion, this essay intends to analyse the issues surrounding the operations of a multinational firm from Britain in China. These are nations with different cultural connotations. As a way of achieving this, the essay discusses the apparent cultural differences between the UK and China followed by the discussion of benefits and drawbacks of having a bicultural team and of devolving the HR functions to a local team. Lastly the essay offers personal reflections of the issues under the realm of multicultural management.

Institutional and cultural differences between the UK and China

The UK and China have evident variations in cultural and institutional orientations that affect how business can be conducted between the two nations. Firstly, analysing the two nations using Hofstede’s cultural dimensions guidelines, there emerges a couple of variations. Hofstede’s framework, for starters, was accepted as a theory in culture in the 1980s after Hofstede developed it while studying cultural issues the IBM workforce in the 1960s and 1970s. The model has a five dimensions setup that can be used to measure variations in culture. These include individualism versus collectivism, uncertainty avoidance, power distance relationships, masculinity versus feminism and short-term versus long-term orientations. China, for example, is a highly collectivist country. This is in reference to the sentiments aired by Brooks (2008) in regard to societies that practice individualism and collectivism. This means that the Chinese population tends to find identity in societal groups rather than on personal stands. Guess (2011) notes that decision making in such a scenario is based on consultations with other members of the group. However, there are claims that modernization is phasing out the collectivism culture of the Chinese societies (Xu and Hamamura, 2014). On the other hand, western societies have been viewed as individualistic an in which sense people rely on themselves for identity. As Alleyne (2009) and Koch (2013) point out, western societies have been individualistic over the years. Britain specifically has been ranked as the most individualistic society in the world (Alleyne, 2009). As such, people in this societies prefer uniqueness over harmony, expression over agreement and identify themselves outside a group.

Besides individualism and collectivism, power distance emerges as a differentiating factor between social and cultural setups in the UK and Chinese cultures. Zhang (2010) quotes Hofstede in the definition of power distance by referring to it as the degree of acceptance to uneven distribution of power in the society. In the general leadership context in China, power is positively associated with benevolence, kindness, nurturance and support. However in western societies including the UK, power is negatively associated with authoritarian and domineering characteristics (Gong, 2013). Specifically, Gong (2013) notes China is a high power distance society especially because of its embrace for authoritarian leadership. The UK is identified as a low power distance because mostly the citizens of UK do not entirely consider themselves as inferior to people in leadership positions. The element of equality is present. Zhang (2010) continues to note that the western and Chinese companies are different when in matters of embracing power distance aspects. An example is the design of websites as evidenced by the study by Tian (n.d.) that sought to inquire on the power distance elements in the design of corporate websites. The findings of the study averred that the Chinese websites still traced aspects of accepted unequal distribution of power. Zhang (2010) emphasizes tha recent studies have began focusing on individual elements and according to him culturally embedded perceptions of power would account for the difference between individuals participation in teamwork between employees with a background from China and those form the UK.

Another element of difference in culture is on uncertainty avoidance. According to Hopkins (2009), uncertainty avoidance refers to the element of uncertainty avoidance in a society or culture. As such, cultures with high uncertainty avoidance have preference for structured transactions and generally pay more attention to rules and regulations including the simplest rules such as keeping time. Gong (2013) relates this to experiences in China where managers are more relationship driven because they are more focused on avoiding embarrassments. Decision are made without ambiguity as to what they entail and any arrangements that could lead to risk avoidance are prioritised (Hofstede, 2011). The UK has been categorised as one of the countries with low uncertainty avoidance tendencies (Singh, 2015). This means that in the UK there is high tolerance to ambiguity and ignorance to instructions is not always an unfamiliar phenomenon.

Further, reputation and face is a matter of concern in high uncertainty avoidance nations such as China as managers would rather solve their issues personally than through public means, However, Schlägel (2011) posits that in countries with low uncertainty avoidance this is usually not the case as reputation is not as highly regarded. Sun (2009) extends this discussion but noting that besides China being a collectivist society with high power distance and low uncertainty it also stands out as a masculine society as contrasted by the UK. This means that male leaders are seen as fit for leadership in China and are accorded high respect. Similarly, the ascension of female character into leadership positions is not culturally encouraged (OD Network, 2012). In the UK the same sentiments are not true as female leaders are in top positions in many organisations. Lastly, OD Network (2012) discusses long-term orientation as a characteristic of Chinese communities. This means that hasty decisions cannot be made and time for consultations is often appreciated. This and other business behaviour can be explained by differing long term and short term orientations between the UK and China (Needle, 2010). In summary, the differences in culture and institutional practices are apparent between the UK and China and range from culturally embedded practices to institutional norms such as differing leadership styles and managerial compensation options (Edwards and Zhang, 2003: Kakabadse and Berghe, 2013).

In terms of expatriate safety in China, many studies have shown a general hardship by expatriates to cope with the lifestyles in China. Wu (2009) for example points out the fact that among the challenges of a multinational working in the Chinese economy is high failure rate of expatriates. This is attributed to mainly culture shock. Firstly, while working in a new environment which Roberts (2012) terms as hostile expatriates become home sick, confused, irritable, anxious, cofounded, depressed and even stressed. The result is that most of the expatriates underperforms on the job and are returned back to their home country. Similarly, Moxley (2012) presents a list of complains about living in China which depict the hatred for unfamiliar work conditions and norms and beliefs. Zheng (2015) adds that the number of expatriates leaving China in 2015 is twice the number that is headed there. The reasons for this are due to slowing economic growth in China, poor living conditions contributed to by environmental conditions and the general xenophobic attitude of the government towards expatriates. However their physical safety is not at any risk (Zheng, 2015).

In the political realms, the UK has been ranked often as the world’s most stable political economies. Kaletsky (2014) although predicting an unstable future for the UK economy in general notes that the present is stable enough for business. On the other hand, a report done by the BBC after a profiling of China shows that the country is not entirely stable. There are repetitive incidences of protests against the government because of disparities in the society that lead to exploitation of the poor (BBC News, 2015). The Chinese government has also possessed a long history of having exercised control over business through state corporations Wu (2009). This trend has however faded off as the economy grows and opens up to foreign direct investors.

Working in a bicultural managerial team comprising of representatives from UK and China

The internationalization of businesses has created an implicit necessity for firms to operate in more than one location. This is both for the sake of expansion and diversification and also part of contemporary competitive strategies (Hood and Vahlne, 2013). As such, a multinational firm is bound to absorb new employees into its workforce from different cultural backgrounds as is the case in this essay. A bicultural team means that the employees have a schema from both sides of the cultures, that is, they possess the understanding of the values norms and traditions the UK and China. Hong (2010) avers that working with multicultural teams can be an effective thing only if they are managed well. He notes such teams have communication challenges, cross-cultural conflicts, and coordination issues among other vices. These are beside the advantages accrued by such teams such as richness of diversity. Xu (2011) shares similar sentiments on the performance of teams noting that multicultural teams are like two sided coins, that is, there is the bad side and the good side. This means that there are positives and negative to multicultural teams. In addition to this, Maderer, Holtbrugge and Schuste (2014) exemplify the concept of multicultural managerial teams with the working of professional football teams. The imperative aspect is coordination and synchrony among team members’ aspects that can be disastrous if they lack. Bicultural managerial teams can be instrumental in tapping the potential of the aforementioned multicultural situations but they also have their disadvantages.

The Benefits

Wyer, Hong and Chiu (2009) put forth an important discussion on the benefits of culturally diverse teams and identify two main advantages as adaptability and boundary spanning. Adaptability is defined as the ability to manoeuvre the actions of a firm in order to reach the needs of a particular cultural group while boundary spanning means is the ability to act as a conduit between two cultural groups. This can be extrapolated to mean that working with a culturally diverse workforce enables a multinational to effectively respond to the needs of a certain culture in regard to the products of the firm. This can be attributed to the fact that an employee native to China, for example, has a better understanding of the local market as opposed to a UK employee working in China. Spanning this situation to a bicultural management team, it means that a bicultural employee may perform effectively in regard to transcending the cultures on both sides. According to Hong (2010) bicultural individuals are often overlooked whereas they are fundamental in effecting decisions such as entry into new markets with differing cultural orientations.

Friedman et al. (2012) conducted an extensive research as to the importance of having individuals that possess multicultural dexterity. The study was conducted in Taiwan – a region that is largely influenced by the Chinese culture and at the same time well positioned for world level businesses. Having studied individuals that have gotten education from the western nations and those that have acquired it locally, Friedman et al. (2012) suggest that through interaction with different cultures, biculturals outperform their colleagues. Friedman (et al., 2012) goes ahead to exemplify this by noting that a Taiwanese manager in the case of a business transaction with individuals from the western side has the ability to respond in ways that are appropriate to the western culture. Similarly, the same situation can be replicated in the case of an interaction with Taiwanese businessmen. Extending this concept to the case of China and the UK would mean that negotiations with either of the two cultures will be much easier.

In addition, besides unbiased decision making, conflict management falls under the realm of competent leaders. According to Wyer, Hong and Chiu (2009) bicultural management teams are effective in leadership because they have no biased decisions as influenced by their culture, value and other cultural based judgments. Secondly, they are excellent at conflict management because they understand the elements between both sides of the conflict. This sentiments are also shared in Hong’s (2010) work where he notes that bicultural management teams are generally more effective in internal handling of employees. This is attributing to their culture-specific knowledge coupled with cultural metacognition skills that wholesomely translate to unparalleled cultural understanding. The net effect of this is better performing multicultural teams.

The drawbacks

Bicultural leadership evidently accrues a number of benefits to a multinational firm and is even advocated for. However, there are also downsides to enhanced bicultural leadership adaptation by firms. Wyer, Hong and Chiu (2009) note for example bicultural leadership can be seen as a advocating for favouritism. A case scenario is a bicultural Chinese manager working for a UK multinational firm based in China. The American culture does not implicitly embrace authoritarian and domineering leadership styles. As such the Chinese manager will tend to be lenient to the American employees as per the position advocated for by biculturalism. The same manager shall treat a Chinese employee authoritative and once the two employees discover this then they will tag it as favouritism.

Friedman et al. (2012) addresses the drawbacks of having a management team full of bicultural individuals by noting that there embrace of such teams by local cultures can be hard and would only be viable for large corporations where there is dire need to transcend culture. The same concept is addressed by Wyer, Hong and Chiu (2009) who believe that ‘cultural chameleons’ are not appreciated much. Further, Friedman et al. (2012) elaborates that as much as bicultural management teams are effective they may face issues that to normal managers are norms. For example a bicultural manager may be stuck with the dilemma of whether to make a presentation in English or Chinese or whether to offer guests Chinese or western food. Additionally as posited by Wyer, Hong and Chiu (2009), such decisions may be lengthy to make – including significant decisions in management – as the bicultural manager will have to incorporate opinions of several parties. The implication of these is that there will always be difficult in making urgent decisions. Moreover, whichever path is chosen, there will be some cultural norms that will be violated.

Devolving responsibility for managing key HR functions to a local management team in China

The globalisation of firms, as aforementioned creates the need to work with employees of culturally diverse nature. The main goal of a multinational firm is to make its employees rare, valuable, skilled, inimitable and un-substitutable just like in the case of other resources. Fan, Zhang and Zhu (2013) add that it is through the integration of internationalization with human resource strategies that the decision on whether to localise human resource approaches or maintain the parent company’s approach arises. This choice determines the success of operations in a foreign market. Elaborating further Wood et al. (2014) note the real challenge of whether or not to localise human resource functions is the uncertainty of the outcome. This is because HR practices and models are different in various parts of the world and the common practice has been to fit into the local models which most multinational corporations have not engaged before. The resultant benefits and drawbacks of localising HR functions are as discussed below.

The benefits

Edwards and Zhang (2009) in their study addressing the reasons why western firms need to localise their HRM practices in China put forth the main reason as compliance issues. Majorly as Wood et al. (2014) averred, there are notable and sometimes entire differences between HR practices of difference nations especially between the east and western nations and between developing and underdeveloped countries. As such, the labour laws governing institutions in the different nations can are not congruent. This necessitates the adoption of local hosts’ HR models a matter which Zhang and Zhu (2013) believe is the trend of multinational corporations. The main benefit here is the harmonious working with the local authorities and institutions. Smale (2008) extends this discussion to the context of the Chinese market and raises a couple of advantages. Firstly, the Chinese HRM realms have been much under the control of the local government until the recent past. However the private and public industries are still transitioning from being state controlled and thus the appointment of local managers will help as they better understand the working systems of the government and their culture. Secondly, Smale (2008) while analysing the HRM reception practice through cognitive, regulatory and normative aspect, adds that appointing local managers will help in transcending local frameworks of culture such as the embrace for high power distance, authoritarian behaviours, saving face amongst others.

Chaudhry (2013) adds a different perspective as to the advantages of the decentralising HRM from the parent company by noting that local embrace of the same will be higher. According to her, there is more chance of success in the HR models if the local personnel are in charge of it. This is in attribution to the case where the local managers fail to embrace the parent company’s model after viewing it as bureaucratic. Additionally, Chaudhry (2013) notes that decentralisation of HR practices can help motivate the management team on the ground and at the same time reduce the intrusive perspective held the local cultures. Lastly, Warner (2012) talks of internationalization through localisation of HR practices. This is due to the fact that localising HRM practices and leads to absorption of local talent and culture into the organisation. This way, the needs of the local communities can be better addressed by these employees that understand them better. Besides cultural integration, Smale (2008) also believes that the integration of local HRM frameworks can be beneficial in the case where they are stronger and more effective than the traditional frameworks used by the parent company this is described by Edwards and Zhang (2009) as ‘absorption localisation’ that could end up being used as a best practice for other subsidiaries. In what Edwards and Zhang (2009) term as ‘utilisation localisation’, they elaborate that the incorporating of a local team and HR models is a competitive strategy that is always effective against local competitors. Further, it serves as a utilisation advantage of a local labour force. This is because it is cheaper to use local labour than import from the parent country.

The drawbacks

The absorption localisation as explained by Edwards and Zhang (2009) is an important and advantages reason for localisation of HRM practices and models. However this is supposed to the case in the event that the host practices of HRM are superior to those of the parent company. As such when the converse happens then the subsidiary may end up underperforming. In addition to this, Cooke (2012) notes an advantages of internationalisation is the transfer of knowledge, techniques and skills to the host’s local economy. However, the adoption of a localised HR team and practices would compromise the process of technology transfer amongst other standards of the parent company. Fan, Zhang and Zhu (2013) extend this point by noting that multinational corporations usually have pre-planned strategies that allow them to reach international levels. These strategies are at the risk of getting hampered if they are going to be substituted by local strategies. In this case Fan, Zhang and Zhu (2013) advice that a firm operating in a different cultural context should only change those elements of HR that are not congruent with the local culture.

Wood et al. (2014) on the other hand posit for multinational firms, investing in developing economies has been advantageous as operational costs are low. Specifically, the firms are not concern with the skill gap found in these economies as long as they can exploit the market. However, a problem arises in the common event of using expatriates. The managers of the subsidiaries are often overwhelmed by the need for balance in working with different cultural teams consisting of high-level expatriates and low level locals. As, discussed earlier in this essay, such as scenario brings on board the need for hiring bicultural managers. The hiring of local employees also, though a solution in some instances has its negative side. Chaudhry (2013) for example while examining the case of multinationals in Pakistan, avers that subsidiaries often get under the risk of undue cultural, social and political pressures. The explanation given is that in developing economies, only elite groups of the society get education and they often tag considerable societal and family influence. Once employed, their influence diversifies and this may be detrimental to the operational liberty of a firm. Chaudhry (2013) terms this situation as ‘weak and predatory state’.

Personal Reflection

The concept of working in a multinational firm has become a contemporary norm with the continued internationalisation of businesses. As evident in most literature on globalisation, there is bound to be a burgeon of firms that are going global and since globalisation is turning the world into a single market place then working with different cultures shall be a continued norm. I believe that as literature posits, multicultural teams are bound to have challenges since the norms, cultures and schools of thought we all ascribe to are varied. Further, the concerns of expatriate safety and political and social orientations are of concern. This in turn affects our approaches and perceptions to different situations and this is what affects workplace relationships and performance in different work environments (home and abroad). In particular, bringing on board a team to work in a multinational corporation appears a rather integrative process as it needs to involve harmonisation of different cultures for almost every subsidiary. In this case the integration of culture between the UK and China where there are considerable political, social and cultural differences.

However, there is a different approach that I believe would work and that is the hiring of teams that have global outlooks but still engraved in the local approaches. This means that such an employee understands for example the culture of the western nations such as UK and can relate to some of their behaviours. At the same time the employee, being native to China can engage the Chinese culture well. This, as in the case of biculturals, leads to lesser conflicts among the employees as they understand the inspiration behind different behaviours. The fundamental point in this case needs to be the flexibility that an employee depicts in regard to institutional and cultural variations. As seen in some of the literature, culture shock affects the working of some people and has led to more expatriates leaving china than those headed there.

Lastly, the process of working with a multicultural workforce has more benefits beyond the sacrifices. I have learnt that workforces consisting of different personalities based on variant cultures entail rich compositions of talents. As literature evidences, multicultural teams are sources of competitive advantages in that they have an understanding of different situations and such combined knowledge is beneficial. Therefore for a firm scaling international standards, a consideration needs to be given to the possibility of working with a local culture.

Conclusion

This essay intended to address the position of a British multinational firm operating in China. As evident in the analysis, China and the UK are very different in cultural orientation in areas such as those posited by Hofstede, that is, power distance, uncertainty avoidance, masculinity and feminism, collectivism and individuality among other institutional differences. This means that the structure of the HRM strategies between the two regions is different. Retaining the parent company’s framework may be an option but also as evidenced in the discussion, there are advantages and disadvantages that accrue to the same. The same scenario is evident in the case of working with multicultural teams and having bicultural managers in charge. For example, literature evidences that bicultural managers do end up lengthening the decision making processes that would otherwise be simple procedures. Further the although china has desirable investment opportunities due to its economy, the political and social environments do not entirely favour expatriates as cited by the negative attitude most of them have of the nation.

The current trends of the international markets are that it is common practice of working with the local teams as a way of achieving competitive advantage. This places more emphasis on the need for cross cultural understanding on the side of the firm whereby a balance shall be established between the integration of the local culture and institutional frameworks and the retention of the parent company’s strategic and HR framework’s intent. Thusly, it is conclusive to point out that a British multinational corporation extending operations to China entails a rigorous process of cultural integration that cannot be avoided. The imperative aspect is the maintenance of a balance between culture, organisational culture and performance (competitiveness).

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