Background:
People in wealthier states celebrate their civilization by purchasing specific types of automobiles and developing advanced methods of education such as e-learning. They also participate in international business by spending money across borders. On the other hand, people in poorer states celebrate their culture through traditional dances and by preserving their natural habitat. Some even refuse to embrace technological advancements.
In this context, it is interesting to examine culture through the lens of business operations since companies that aim to internationalize must inevitably face cultural diversity. Public relations, which is one of the common tools used by both public and private organizations to communicate with a wider audience, is also an important instrument for managing cultural diversity.
Relevant Literature:
The first objective of this study is to understand how agencies and companies perceive managing cultural diversity can improve organizational strategy. Firms that operate on a global scale face a more complex and sensitive environment than domestic ones. Therefore, it is assumed that global companies can hardly influence the varied demands of the international market, and they are limited in their international efforts. However, the aftermath of globalization negates the validity of the cultural enormity of international markets (Balasubramanyam, 1985). This phenomenon is attributed to foreign direct investments (FDIs) that result from the efforts of global companies to establish their presence in individual states around the world.
Not all global companies manage cultural diversity as their international decision model. Global strategy is meant to standardize the approach to each market, while multi-domestic strategy aims to provide customized solutions to distinct market demands (Hitt, Hoskisson & Ireland, 2003). Among the models, only the multinational strategy can address cultural diversity management because it is a hybrid strategy that combines the elements of global and market-domestic strategies. Multinational companies use their global resources to respond to individual market demands. Without cultural diversity, there is no cultural clash, and hence no need to implement cultural diversity management.
Cultural clash is defined as the struggle between the facets of national civilization and organizational civilization (Majlergaard, 2006). Even though cultural diversity may seem debatable, cultural clashes are important. Culture molds the general conditions of host countries, along with politics, economy, technology, law, and the environment. If each host country has unique cultures, global companies can optimize their goals in moving internationally.
There are three motivational issues that trigger organizational interest in running abroad, namely market seeking, efficiency seeking, and knowledge seeking behaviors (Porter, 1998). As cultural differences intensify among host countries, global companies can increase their market base, acquire more price-competitive factors of production, and introduce more creative approaches. These advantages cannot be achieved when the general conditions, particularly culture, of host countries are similar.
However, there are studies that show an insignificant relationship between cultural diversity and the performance of multinational corporations (Gomez-Mejia & Palich, 1997). In addition, cultural similarity has also failed to confirm earlier findings that support the theory that homogeneous host country cultures, where global companies operate, tend to be more profitable than diversified host country cultures.
Without impacting performance, the management of cultural diversity, in particular, and culture management, in general, can minimally improve organizational strategy. On one hand, it is evident that global companies can solve the cultural diversity puzzle through dedicated strategies (e.g. over-funded advertisement campaigns to influence consumers), and the economic returns of internationalization outweigh the transaction costs of cultural barriers (e.g. economies of scale versus expensive production requirements) on the other.
The second aim of this study is to understand how public relations can be used to manage culturally-diverse stakeholders. Public relations or PR is a management function that aims to communicate the goals of the organization to the public audience, especially to highlight common interests at stake (Hall, 2007). The concept of common benefit is significant in the consideration of PR as most global companies are confronted with controversies due to their financial depth and the extent of their global influence that could lead to a weaker reputation.
They must demonstrate to the public that they are worthy of support because they satisfy certain needs and they are not just profit-seeking entities. PR increases credibility, quality perception, avoidance of price-based competition, and marketing efficiency. It supports branding for positive image and bridges the objective gap between global companies and host countries.
“Praseodymium” seems to be a typo, so assuming it was meant to be “PR” instead. Here’s the corrected text:
PR plans have elements such as press kits, media lists, press releases, webcasts, public service proclamations, press conferences, trade shows, community meetings, and annual reports (e-agency, 2007). These elements are challenged by culturally-diverse stakeholders that pose a threat to the success of global companies in host countries. As a result, PR plans are doubted in their effectiveness and efficiency in managing cultural diversity.
But there are improvements in the international scene as global multi-stakeholder networks shed light on the deepening complexity of PR to understand the needs of stakeholders on a global scale. The establishment of Transparency International, Forest Stewardship Council, Global Water Partnership, Micro-Credit Summit Campaign, United Nations (UN) organizations, and trade associations such as ASEAN, OECD, and OPEC set the general standards for setting the framework in which PR plans of global companies must be focused (Waddell, 2006). The standards revolve around protecting the public good.
However, if cultural clashes exist that may influence organizational strategies, there is also stakeholder conflict that may influence PR plans. The latter conflict can be limitedly addressed by global multi-stakeholder networks because stakeholders include the public at large. The latter does not have a structured and organized association which makes global initiatives standardized.
The public at large can be the most difficult stakeholder because they can have various roles with global companies such as being a customer, supplier, investor, voluntary groups, experts, change agents, institutions, and the like. When these roles are portrayed through distinct host country cultures, the complexity of managing cultural diversity multiplies. PR plans, therefore, can lose value when they fail to address even a single standard which is important to certain stakeholders mainly because they fail to demonstrate common interest.
International public relations as well as multicultural public relations are concepts that can address the challenge of increasing cultural complexity faced by global companies (George, 2003). They cater to the needs of global companies in effectively targeting the public and customers of another country. One important concept of international PR is finding the similarities of the organization it speaks for and the audience that it targets. Another is the impact of information and communication technology as the role of media is at the heart of PR plans.
Cultural peculiarity of one host country to another is seen in PR plans like interpreters involved (e.g. David Beckham and Tiger Woods because they are internationally popular), linguistic problems (e.g. failure of Chevy Nova in Latin America as “Nova” in the local language means “it does not go”), and context culture differences (e.g. Americans require direct and explicit messages compared to Asian counterparts). More importantly, low-context cultures (e.g. Americans) are considered less credible by high-context cultures (e.g. Asians).
The third objective of this study is to understand how cultural diversity can serve as a barrier or opportunity for an international business strategy. In general, writers argue that cultural diversity can make or break an organization. The opportunity lies in creating competitive advantages in areas such as cost, resource allocation, marketing, innovation, solution-generation, and flexibility (Cox & Blake, 1991). However, cultural diversity is a barrier for global businesses to achieve sound management due to the complexities involved in the process of its management.
Without sound management, the cited opportunities will lose relevance. As people issues are more difficult to address than technical issues (Harrison, 1981), cultural diversity management requires deeper attention than skills management. Furthermore, while communication is the most essential component in managing the social system, culture serves as the vehicle of communication.
This is why cultural diversity management may be included in the organizational strategy of global businesses and may also be included in PR plans. There is no other way they can communicate to host states than by understanding and resolving cultural diversity in the international market. The barrier and opportunity aspects of cultural diversity are illustrated in the study of international construction projects (Dadfar & Gustavsson, 1992).
The research showed that Swedish construction companies internationalize their operations, particularly to Middle Eastern states, due to shrinking national demand for housing and other building needs (i.e. opportunity side). On the other hand, as early as business establishment, Swedish companies are challenged by cultural diversity. Some cultural shocks that Swedish companies experienced include local workers quitting work twice a day for their prayers, clients characterized by delayed appointments, and high tribal conflicts in the worksite (i.e. barrier side). In effect, opportunities in successful market-seeking behaviors are negated by difficulties in efficiency-seeking behavior.
International business strategy is clearly restated early on as being a multinational strategy because this is where the impact of cultural diversity (e.g. either opportunity or barrier) has stronger relevance. To appreciate multinational strategy better, dissection can help wherein project management system is highlighted and a single strategic area is considered in the form of a project.
Planning, designing, implementing, and evaluating a project are influenced by and influencing internal forces (e.g. forces and work groups), external forces (e.g. legal requirements, environmental constraints), and organizational culture (e.g. authority of headquarters). Diversity of culture is present not only among these three categories of stakeholders but also within such categories (e.g. worker differences in values and religion).
Research Hypotheses
Proposed Methods
Survey questions will be distributed to global companies through their local subsidiaries for convenience purposes. Respondents will be top-level managers who have a deeper understanding and involvement in corporate-wide strategy formulation and execution. With regard to the first hypothesis, the major strata will consist of directors from a market leader and non-market leader. The second hypothesis will obtain the perception of PR directors on how time, cost, and quality should be ranked, and what factors should be considered to arrive at a valid ranking.
For the third hypothesis, local subsidiaries will be given questions that can support either market and/or efficiency validity based on their local and cross-border experience and acquaintance. Secondary data can assist in the following areas; namely, selecting local subsidiaries that are owned by a global house, market data on local subsidiary market share, major stakeholders in the local scene, major or controversial PR plans, and corporate experience in multinational operations.
Potential Key Findings
Bibliography
- Balasubramanyam, V. (1985). Foreign direct investment and the international transfer of technology. London: Macmillan.
- Cox, T., & Blake, S. (1991). Managing Cultural Diversity: Implications for Organizational Competitiveness. Academy of Management Executive, 5(3), 45-56.
- Dadfar, H., & Gustavsson, P. (1992). Competition by Effective Management of Cultural Diversity: The Case of International Construction Projects. International Studies of Management & Organization, 22(4), 81+.
- e-agency. (2007). Elements of PR. [Internet]. Available from: http://pr.e-agency.com/pdf/elementsofaPRplan.pdf
- George, A. (2003). Teaching Culture: The Challenges and Opportunities of International Public Relations. Business Communication Quarterly, 66(2), 97+.
- Gomez-Mejia, L. & Palich, L. (1997). Cultural Diversity and the Performance of Multinational Firms. Journal of International Business Studies, 28(2), 309+.
- Hall, P. (2007). The New PR. Mount Kisco, NY: Larstan Printing.
- Harrison, F. (1981). Advanced Project Management. Aldershot, UK: Gower.
- Hitt, M., Hoskisson, R., & Ireland, D. (2003). Strategic Management: Competitiveness and Globalisation, 5th ed. South Western: Thomson Learning.
- Majlergaard, F. (2006). Release the Power of Cultural Diversity in International Business. [Online]. Available from: http://www.clubofamsterdam.com/contentarticles/cross_cultural_competence/Release%20the%20power%20of%20cultural%20diversity%20in%20international%20business.pdf.
- Porter, Michael (1998). On Competition. Cambridge: Harvard Business School Press.
- Waddell, S. (2006). Multi-Stakeholder Global Networks: Emerging Systems for the Global Common Good. [Online]. Available from: http://gan-net.net/pdfs/Multi-Stakeholder_Networks.pdf.
