MULTINATIONAL CORPORATIONS

INTRODUCTION

• A multinational corporation (MNC) is a body that has an integrated philosophy encompassing domestic and global operations. The term is interchangeably used with multinational enterprise (MNE) or transnational corporation (TNC).
• A corporate culture is a learned, shared, relatively enduring, interdependent system of meanings that classify, code, prioritize, and justify activity within the organization and toward external environments it has defined as relevant.

DIFFERENCES BETWEEN CORPORATE AND NATIONAL CULTURES

Figure 1. Cultural Differences at Corporate and National Levels

• A corporate culture is different from a national culture because of the different roles played by the manifestations of culture. Culture at national level is manifest mostly in values and less in practices; culture at corporate level resides mostly in practices and less in values.

STUDY OF CORPORATE CULTURES

• Organizational symbols: Special terms that only the insiders understand
• Organizational heroes: Kind of people particularly meaningful to the organization
• Organizational rituals: Periodic meetings, behavior of the people in the meetings, events celebrated in the organization
• Organizational values: Things people would like see happening in the organization, the biggest mistake one can make, problems that keep one awake at night

WHY STUDY OF CORPORATE CULTURES?

• Simply to identify one’s organizational sub-culture.
• Testing whether the sub-culture fits the strategies set out for the future. For example, if a culture is strongly normative, a strategy for competing on customer service does not have a chance to succeed.
• Identifying the potential areas of culture conflict between partners, in case of mergers or joint-venture.
• Measuring the development of organizational culture over time. This will show whether the attempted culture has materialized, as well as cultural effects of external changes which occurred after the previous study.

MEASURE OF CORPORATE CULTURES

• Dimension 1: Process oriented Vs. Results oriented
  • It opposes a concern with means to a concern with goals. The process oriented culture people perceive themselves as avoiding risks and making only a limited effort in their jobs—each day is pretty much the same. Results oriented people perceive themselves as comfortable in unfamiliar situations—each day brings in new challenge (Hofstede, 1997).
  •  

• Dimension 2: Employee oriented Vs. Job oriented
  • It opposes a concern for people to a concern for completing the job. Employee oriented cultures people feel their personal problems are taken into account; the organization takes a responsibility for employee welfare. Job oriented cultures people experience a strong pressure to complete the job; they perceive the organization as only interested in the work the employees do (Hofstede, 1997).

• Dimension 3: Parochial Vs. Professional
  • It opposes units whose employees derive their identity largely from the organization to units in which people identify with their type of job. Members of parochial culture feel the organization’s norms cover their behavior on the job as well as their home. Members of professional cultures consider their private lives their own business (Hofstede, 1997).

• Dimension 4: Open system Vs. Closed system
  • It opposes open systems to closed systems. In open systems, members consider both the organization and its people open to newcomers and outsiders; almost anyone would fit into the organization. In closed systems, the organization and its people are felt to be closed and secretive, even among insiders (Hofstede, 1997).

• Dimension 5: Loose control Vs. Tight control
  • It refers to the amount of internal structuring in the organization. In loose control units, people think that no one is concerned about costs, meeting times are only approximate, and jokes about the organization and job are frequent. People in tight control units describe their work environment as cost conscious, specific meeting times, jokes about the company or job are rare (Hofstede, 1997).

• Dimension 6: Normative Vs. Pragmatic
  • It deals with the notion of customer orientation. Pragmatic cultures are market driven; normative cultures people perceive their task toward outside world as the implementation of some sacred rules. To normative cultures people, following organizational procedures are more important than the results. To pragmatic units people, results and meeting customer needs is more important than following the procedures (Hofstede, 1997).

POTENTIAL SUBDIVISIONS OF CORPORATE CULTURES

• A corporate culture may not be the sum of all dimension scores using the above measures; they are more than the sum (Gestalts). The complete flavor of an organizational culture, like that of the culture of a society, can only be fully understood and appreciated by the 'insiders.'

Figure 2. Possible Areas of Subculture of an Organization

• Even for insiders, it might be difficult to grasp a fuzzy concept like 'the whole is more than sum of the parts.' A study of the corporate culture may provide a framework to the members of the group to understand the complexities of the culture and identify the subcultures in one's own organization. These subdivisions may be the hierarchy of members, functional area (e.g. sales, marketing, construction),  division, location, or partnership (mergers and acquisitions).

• Possible uses of measuring corporate culture
  • Identify existing subcultures of the organization. It will at least allow the members to see their cultural map.
  • Test that the culture fits the strategies set out for future operations. If there are cultural constraints, the study will help to identify those and actions may be taken accordingly.
  • Identify potential area of cultural conflicts if the organization is considering merger or acquisitions. This will help to minimize the post-merger friction losses.
  • Envisage the development of organizational culture over time by repeating the survey. This will help the management to understand whether an attempted culture change to fit the strategies has been materialized.

POLITICAL IMPACT OF MULTINATIONAL CORPORATIONS

Goals of nations and MNCs

• The scope and objectives of a sovereign nation and an MNC may differ considerably. A country strives for autonomy and control and attempts to resist external pressure. It formulates its own goals in terms of national economic interest by increasing output, minimizing unemployment, lowering inflation, etc.
• An MNC is interested in allocating and using resources to maximize its after-tax profits on a global basis and thereby maximize the returns to the subsidiaries and system headquarters. In the process, the goal of an MNC might help the nation to meet its objectives partially. But conflicts arise in areas where goals of these two entities do not overlap.

Sources of conflict

• Outside control
  • It centers around issues of equity and control. By accepting a subsidiary of an MNC, the host country gives up some degree of control over its industrial and economic affairs. If the investment is very large, then the MNC may well control a sizable portion of local economy.
  • An MNC can evade national control more easily than a local firm.
  • An MNC can challenge the ability of the government to implement pollicies within its boundaries.
• Outside threat
  • The presence of an MNC is sometimes perceived as a threat by the host country because of its sheer size of its economic power.
  • Perceived fear of using an MNC by its home country as an instrument of interfering with the host country's economic and political pollicies.
  • An MNC, by dint of its immense economic power, may persuade the home country government to become an "instrument of the company." (Leads to corruption.)
  • An MNC may support autocratic or unpopular regimes for reasons of stability and cooperation over uncertainty.
• Cultural change
  • Impact on home country as agents of inhibiting or promoting cultural change.
  • Transmission of technological change may be viewed as a threat to established culture.

References:

Hofstede, G. (1997). Culture and organizations: Software of the mind. New York: McGraw-Hill.