Strategic International Business Management and Organizational Behavior

Posted: November 14, 2016

International Enterprises (MNEs) can be defined as business organizations which have international commerce or which operate on an international level. This is a traditional term referring to organizations undertaking their activities or operations in places far away from their home countries or mother countries. Multinational Enterprises can be divided into three main categories: Global MNEs (transitional), International MNEs, and Multinational MNEs. Even though these terms are being used interchangeably, there are differences between their descriptions. Transitional/Global MNEs are business organizations with percentage sales over 50%. Such types of organizations also have employees outside their mother countries and usually operate in many countries with decentralized activities of marketing and operations, centralized policies. This is to mean marketing and operations are localized within a particular country (Tarique et al., 2015).

Multinational and International MNEs, on the other hand, are organizations with international operations. These operations are however not as advanced and developed as in transitional or global MNEs. All in all, Multinational Enterprises operates in many countries if not several. MNEs can, therefore, be defined as organizations doing business outside their home/mother countries. There are more than 60,000 MNEs globally, employing, directly and indirectly, more than 75 billion people worldwide. The rate of MNEs in terms or increase in numbers and growth is high, and this is also increasing the number of people employed by these MNEs. Internalization of business comes with many challenges and consequences especially to leadership and human resource management (Goleman, 2000).  Various human resource concerns and issues are affected by business internalization including labor relations, executive development, staffing, and compensation among others. Leadership and human resources have since become complicated and crucial due to employment policies in different countries, labor relations, and employee availability among others. 

An organization operating in multiple countries deals with employees from different cultural and social backgrounds. Cultural diversity is another important Leadership and HRM issue multinational organizations faces. It is a situation that becomes worse if people from different cultural and social background are pulled in the same situation to work together. This has become a major problem especially with MNEs in the manufacturing sector. Therefore, it is important to understand challenges affecting multinational enterprises' leadership and human resources as it is important towards arming MNEs leaders with appropriate tools for them to achieve business success (Walker & Collins, 2006).

Because of the number of organizations operating in a multinational environment today, someone can easily assume that cultural differences would disappear or diminish as a result of globalization or corporations. It is important to note that cultural barriers often go up as economic borders come down. In a multinational environment, effective leadership can be achieved when the following leadership styles are employed:

  • Vision- this is where people are mobilized towards change
  • Serving- this requires leaders to build an emotional bond between employees and leaders and between employees themselves.
  • Leaders should be role models. They should build others to greatness by developing them for responsibilities of the future.

The principles mentioned above are considered to have a positive impact on an organization. Leaders should consider the limitation of the cultural norms of an individual in a multinational environment. A leader willing to accept and adapt to the host country's culture recognize their own cultural norms limitations will have their most positive influence.

In this period of rapid globalization requiring leaders to work in a foreign environment, it is important for global/multinational enterprises to organizations to support people in developing competencies and appreciate difficulties faced by leaders. International business is expanding at a high rate, and sales made by Multinational Enterprises are growing more than domestic sales (Frederick, 1992). It is important to know the difference between leadership competencies in the mono-cultural environment as opposed to international environment. Even with the recent leadership scholarship proliferation, the definition of global leadership is still highly ambiguous. There are critiques and questioning ongoing based on multi-cultural practices of leadership encouraged by research into needs of various social and cultural settings on leadership issues (Bossidly et al., 2011).

Multinational Enterprises are encouraged to build up and enact instruments as well as policies like universal LCM in different domains in order promote growth, corporate culture and drive global success. In a survey conducted in 2007 to identify global business priorities, 900 executives were interviewed based on barriers effective to building a global enterprise. The executives were from some of the largest companies in the world based in Germany, US, China, Italy, France, Japan, Spain, and China among others. 52 percent of the executives said the ability to create a common corporate culture. 44 percent suggested ways of doing business and ability to understand local customs as their main challenge. Less than 55% of the respondents believed their organizations had the capacity to create leaders inherent ability to adapt to new learning and rapid change (Accenture, 2007).

Many organizations are struggling with management and implementation of streamlined leadership competencies. Because of inadequacy in capabilities of global leadership, many organizations, for example, US organizations must develop LCMs which recognizes cultural contingencies as well as considering a perspective for transferring international leaders and modern global business. According to GLOBE project, leadership refers to a person’s ability to influence, motivate and render others capable of contributing to the effectiveness and success of the instruction in which they are directly or indirectly employed in. This definition becomes very complex upon application within a global environment. In global business management, insights and understanding from intercultural studies have become important. Even though there is the rising use of intercultural intelligence in multinational enterprises, empirical cross-cultural research is being utilized by only a few educators to shape the requirements of leadership in an international environment (Reuber & Fischer, 1997).

Leadership as a Culturally or Universally Contingent Development

The literature of leadership and research diverges greatly on matters to do with cultural contingency versus universality, but GLOBE research states that no enough arguments are available supporting leadership views from a global organization perspective. According to various cross-cultural research that has been conducted, GLOBE project identifies that global leaders can assist Multinational Enterprises in the implementation of global/universal objectives. However, this is possible if they learn how to go beyond national cultural boundaries, practice inclusiveness, and diversity, and reconcile dilemma (Hoecklin, 1995). This is a cultural contingency recognition which requires the flexible structure of leadership and processes, LCM included. In order to understand better cultural contingency and the need to define flexible structures, a ten-year research on cross-cultural contingency was undertaken by GLOBE project in 62 countries. The aim of this research was to conceptualize, test and validate a cross-level combined theory of the connectedness between organizational and effectiveness of cultural leadership. Globe Research stated that the connection that is increasing among globalization of corporations and nations do not necessarily imply that differences in cultures are diminishing or disappearing (Parkhe, 1991). Culture may converge at some aspect when they come into contact, but their behavioral attributes will amplify. Because of the need for contingency and flexibility, a more universal and uniform leadership practices should be pushed for.

There are theorists and researchers who argue that leadership is universal regardless of culture, but GLOBE research maintains that leadership is both universal and culturally contingent. It is true that there are differences between cultures, but global technologies, common industrial logic, and institutions harmonize practices of management and structures. There is also an argument by those promoting universal leadership that increased globalization and standardization across organizations promotes cultural congruence. They also argue that situations such as strategic and technological competence as well as the size of the organization have direct effect on leadership activities than on culture (Kerr, 1983)

Bass is in support of the reasoning of leadership as a global phenomenon. He argues that a basic functional reason is fulfilled by leaders and those in complex enterprises pf organizations are very much interested in the creation of leadership (Bass, 1997; Bass & Stogdill, 1990; Peterson & Hunt, 1997). According to Bass, there are three attributes of transformational leadership closely associated with universal leadership: these attributes are a tactical imitation of your followers; charisma; and individualized follower consideration as a leader.

Contingency versus universality is confined in the characteristics of division over rates of cultural convergence and divergence. According to divergence theorists, different countries maintain their idiosyncratic behavior and differences amid globalization, but convergence advocates believe that globalization causes greater standardization in different regions (Javidan & Dastmalchian, 2009). Globe project researchers, however, argue that transformational leadership has been made a universal standard by convergence. The concurrent divergence of values in the global organization is also noted. A total of 112 universally endorsed attribute and behavioral descriptors were identified by GLOBE to impede or facilitate effective leadership. Among the characteristics associated with transformational/attractive leadership are planning ahead, honesty, and trustworthiness (House et al., 2004). Therefore, this means that multinational environment differences neglect the motive that some judgments are common and shared in different culture cluster borders.

According to Den Hartog et al. (1999), universal/global behaviors can be differently portrayed across cultures. Cultural differences cannot be precluded by universal endorsement in the enactment of an attribute of this type. After many years of research, a decade to be specific, the GLOBE project researchers have come to terms with the value and importance of leadership varies across different cultures. The decade-long research has resulted in a conclusion that leadership cannot be meaningfully analyzed away from its region or environment. Leadership has been described by many researchers as an influential process between people and their leaders and situational discourse. It is worth noting that behaviors that may be accepted, in particular cultural, setting and not be accepted in the other (Bass, 1997).

According to Eden and Levitan (1975), cited in Fernandez and Underwood (2011, p.52), the factors of leadership are in the minds of the respondents and the followers assesses the attributes and behaviors of a leader via their reference frames. The outcome will be more varied if the setting/environment is much more multicultural than a single cultural environment. A leader who is more experienced and aware can anticipate or forerun and tackle conflicts that are contingent culturally (House et al., 2004). Because of culturally unique forces, in the regions or countries that these leaders function in, the attributes, status, influence, and behaviors of leaders vary considerably (Javidan et al., 2006). Leadership which is culturally contingent like this one can be understood better based on the difference between culture-specific (emic), and culture universal or general (etic). As described by Den Hartog et al. (1999), etic behaviors can be compared across different culture, based on metrics and common definitions. On the other hand, emic analysis concentrates on content specific characters and behaviors that are unique to the individual culture. The distinction between emic and etic can only be understood from the context they derive from. The uniqueness of every unit in an emic approach is emphasized including perceptions that are culturally conditioned.

In any case, there is a need for statements to be made on the global/universal aspects or social behavior etic; they must be done in more abstract manner. Specified behaviors or events needs to be referred to if someone would like to explain the intended ideas of the generalizations in emic or specific ways (Smith & Bond, 1993, p. 58). This is relevant to the LCMs because it indicates that the specific behaviors related to leadership attributes that are universally desirable like motivational or visionary attributes have to be assessed within a certain cultural environment/setting (House et al., 2004). Components of global LCMs stresses how they help individuals and organizations through identification and communication of necessary leadership behavior which are associated with strategic goals and directions of the business. The empirical research undertakes recently has questioned the logics and validity of behavior comparison in an environment with multiple cultures. The questions arise because specific emic behaviors cannot be compared in different cultural areas through metrics and common meanings (Den Hartog et al., 1999).

There is yet another continuing GLOBE project researching differences in behaviors across 14 different cultures. In the comparative analysis of this ongoing project, it has been observed that behavior attributes are culturally contingent and inherently complex (Waldman et al., 2006). Therefore, this implies that LCMs with high-level abstracts behaviors and attributes are suitable in a multicultural setting while LCMs having emic behaviors are seen as ethnocentric, meaning they are not transferable in different cultures. According to Hofstede (2001) and Triandis (1995), the degree to which a person, institutional and group behaviors are accepted and enacted are influenced by cultural values. Newman and Nollen (1996) stresses that the key organizing principle that influences the understanding of employees on their work and the approach they give to work as well as the way they always expect to be treated is national culture. 

Multinational Environment, Leadership, and National Culture

The globalization of corporations and increasing connection among countries has not led to the disappearance of cultural differences. As earlier mentioned, barriers go up, presenting organizations new opportunities as well as challenges (House et al., 2004). The difference between a multinational environment and the national culture of a person are well explained. The former works to adapt and embrace the diverse culture and the latter exalts itself above other cultures. A multinational leader must work towards tuning his/her strong sense of national culture norms. This should be accompanied by a mindset willing to acknowledge the limitations of a person’s cultural norms as well as accepting and adapting the host country’s culture. Working towards acquiring a multinational mindset and adjusting a firm/strong sense of national culture is focused on engaging universal principles of quality leadership. A successful leader is one who focuses on adapting national culture norms to the target culture.

A good leader serves a corporation that is functioning in a multinational setting by first trying to adapt to the host culture. Such a leader should blend multicultural mindset with universal principles of effective leadership. There will be a positive impact upon the organization because the leader is seen as the main part of the process. This is contrary to the dictatorship model of leadership. Managers in a global business should respond effectively and positively to values and practices that may not be the same to what they are adapted to; this defines the success of global business. Such managers should also be open to opinions and ideas of others (House, 2004). 

It is also very important for managers to establish a corporate and legally recognized vision and take care not to desolate their national or mother state culture (Fernandez & Underwood, 2011). Adapting the host culture is of the essence, but a leader understands that favoring cultural compliance at the expense of losing a well-known business practice is dangerous to the organization. A multinational leader should work patiently after choosing his battle and focusing majorly on changes that are necessary. Multinational managers are advised not to manage their businesses in completely different methods because they are in a foreign land. If it is China, for example, it is recommended to blend the business culture in China with the practices of the home country (Fernandez & Underwood, 2011).

A multinational leader should be patient when leading people. He is responsible for leading people to greatness with patient and humility. In a multinational environment, a leader should work with people to show sincerity in knowing their culture. Failure can be caused by aggressive styles of leadership based on arrogance. In order to serve to ensure effective leadership, multinational leaders should adapt to the host country’s culture, create a corporate and legal vision but take care not to desert their national/home country’s culture, steer citizens to greatness with patience and humility.

In conclusion, it is worth remembering that range of competencies defined greatly varies in organizations of different kinds of organizational or national culture. The architectures of leadership competencies are culturally contingent. Therefore, if these behaviors and contingencies are to resonate with leaders in multinational enterprises, they should reflect the challenges of leaders daily, be opposite for the culture of leadership in defined or specific regions and reflect the main values of prevailing corporate culture (Kotter, 2001).  

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