Intercultural issues in offshoring of Hyundai to the U.S
SHORING of HYUNDAI to the U.S.
Intercultural issues in offshoring of Hyundai to the U.S.
Off-shoring is a business practice that has taken root with the light of technological innovations and globalization of the world’s economies. Globalization of the economy has seen leading multinational corporations stem and establish themselves as conquering empires in the economic sector. Several inbuilt and small organized corporations have been able to expand and venture into new worlds, which they would, otherwise have not managed in the previous times (Matthews & Thakkar, 2012). The companies and business establishments that used to operate within the local markets has been able to engage in the vast world economies; by expanding their operations to other physical locations of the world. Most off shoring practices as observed from the practical perspective starting with outsourcing; which involves the relocation of a simple part of the whole operation to another physical location, usually away from the local point of operations. The transition in the form of moving parts of operations is meant to test the waters on the selected market points. Several factors are considered before establishing a part of the operation in the selected location.
From the global market analysis, off shoring requires intense and calculated examination of the probability of managing to establish the venture and grow as projected from the plan. For this reason, most manufacturing, and other business institutions and corporations; before off shoring a part of their operations consider some factors (Matthews & Thakkar, 2012). These are the factors that work to facilitate the whole process. To positively and effectively offshore, the labor is an imperative aspect to the country to which the company is off shoring its operations. It is obvious that the company should not move its operations to another country and begin to outsource labor from the outside. The labor should emanate from the society in which it has relocated. Therefore, the considerations for labor cost and the labor competitiveness are imperative (Rhodri, 2004). The company, therefore, considers the availability of labor in that country. The quality of labor available and also the cost of that labor is also an indispensable aspect to consider. The company, since it is beginning new operations in the production process, it is considered as a starting venture. Hence, the cost of labor should be affordable on its side to prevent overspending, and hence destroy the chances of success and profitability.
Secondly, the availability of market for the products of the company or business venture and the competition of the market in the location of off shoring of the company should be considered. For a manufacturing company or even any other company for that case to move its operations successfully, there needs to be a ready and competitive market (Matthews & Thakkar, 2012). Therefore, before moving the operations, it is necessary for the company to evaluate the market for their sales in the country they are relocating part of their operations. A company cannot move operations to a place where it sees clearly that its operations will not profit them. The growth rate of the market in that country where the operations are relocated should be positive; hence providing an expansion opportunity for the company (Kersnar, 2006). They need to assure that the place of location of the manufacturing and production processes is viable for their line of business. The market hence determines the profitability of the step of moving to that country for the company.
Additionally, the country needs to consider the Infrastructure of the country to which the new branch of operations will be situated. The infrastructure determines the viability of the venture as well as the possibility of the business succeeding. To achieve maximum results and goals, the infrastructure should be standard at the least and should allow the off shoring company to pick well with the trends in the country and market (Pyndt & Pedersen, 2006). There needs to be infrastructure that is adaptable to the current and usual operation procedures of the company. This is to minimize the extra costs incurred, and times that will be spend while the company is re-establishing itself (Kersnar, 2006). The technology involved is also fundamental to the success of off shoring venture. The place of relocation should have the quality and stable technological sting and knowhow so that they can guarantee the absence of retrogression in the activities of the company. Moving from a place with better technology than the place of location of the firm to manufacture can pose a challenge to the adaptability of the company to the new status of working environment.
Technology determines the productivity of the business and the rate at which the new business will cope with the market trends. It is significantly useful in projecting the expected trends while venturing into the new working environment. Therefore, technology plays a key task in the pace at which the company will adapt to the new working status and environment. Moreover, there are constant rules or laws that administrate the way things happen in every place that people lives (Kersnar, 2006). These are referred to as the state policies when dealing with business ventures and foreign matters. The state policies dictate the expected conduct while in the state at which one is operating. Therefore, these state policies are a key determinant of whether a movement to a country of choice would be possible.
Additionally, the state policies outline the requirements of the company or business while in the country of operation. A country with state policies that do not agree with the expectations of the company which wants to offshore her production to that country do not present a good opportunity for the company to succeed (Mahajan, 2006). Therefore, the practice of the nation and the business atmosphere as well as the working settings determines the success factor of the company. In addition, the policies of the company also determine if the country of operation will allow them to pitch their operations in that country. Another consideration is the barriers to the operations that could be encountered in the ‘foreign’ land of production. The barriers are quite diverse depending on the nation and her culture. The worst of the barriers is the cultural differences between the origin nation of the company and that of the destination country. This means that people have to acclimatize with the cultural practices and expectations from the people in their country of choice. The policies could also pose a barrier to the firm. Therefore, the cultural differences among the various other factors that could pose opposition to the company should be considered before the venture (Mahajan, 2006). Nonetheless, if a company is determined to venture, all these barriers can easily be overlooked and the company ends up making an immense achievement. Such is the case observed in the off shoring process of Hyundai Motors to the United States.
From the normal actions and activities, the process of off shoring is undertaken with all factors in consideration. Thus, most companies have set their preferences of off shoring to the developing worlds, and the well established but ‘cheap’ countries (Mahajan, 2006). This is for the reasons that, most of these nations, for example, china, India, and South Africa have plenty of market with remarkably little competition. Additionally, there is availability of labor in the nations of choice for their operations and also the labor is also exceptionally cheap. Therefore, these countries present the ideal places for companies to transfer some of their operations. Nonetheless, knowing all this, and at a moment that it would have been regarded an act of business suicide, the Hyundai Motors took the step of faith to venture into a market in one of the world’s largest and complex economies.
The Hyundai group of motors was established in 1967 in the city of Seoul in South Korea. Since its establishment, the company has earned the status of a multinational corporation in the motors industry. Like many other motor companies, Hyundai deals with the manufacture and sale of automobiles, metals, stocks and engineering and steel works (Carmel & Tjia, 2005). The company has grown over the years, with the motor vehicle and vehicle parts as its principle branch of operations. This has earned the company a market throughout the world markets as there are few effective companies like Hyundai and her main competitors. However, it is imperative to acknowledge the competitiveness of the other automotive companies. Therefore, in assessing the factors of success of Hyundai since her conception; and especially her success in off shoring to the United States, these factors should be made clear. Hyundai was not operating alone. As a fact, the company was operating against some of the world’s largest and best established companies. Moreover, at the time she took the step to move off shore, the company was still young. This presented the chances of her success as near zero if not zero. However, this was not to be as the Hyundai Motors workers and management; proved that they had the capacity to survive in the world of competitiveness despite knowing the big wits of the industry.
Some of the reasons why Hyundai relocated to Alabama State of the U.S.A. include the failure that she suffered in Korea. With the influx of cheap imported cars and the violent nature of the labor unions in Korea, the company had started to suffer serious decline in profits; this necessitated the move to look for other alternatives of operation. This landed the company in the U.S. As the revolution of the manufacturing companies and industries in the country (Carmel & Tjia, 2005). This is the place that provided the utmost and best labor regulations for the company. Another significant factor is the state government’s incentive package. The incentive was very attractive to Hyundai as they could abate tax if they relocated there. This was a massive boost to the process of adaptation and profit realization. Moreover, the company was offered a site for setting their operations and a good access to the road and bridge. This was a significant incentive as it provided the perfect setting and placing for the company. Additionally, the state also promised the company to give education and training required by the job applicants in the firm. This meant that the company could save as much as $253 million; cutting costs incurred in relocating by such prodigious amounts would position the company in the superlative place to see a tremendous achievement within the near future for the company. Another incentive offered to the company is that of support in building the firm. The factor in the incentive that ensured that the company managed well in the state is the offer to create and nature a friendship between the Korean and American culture.
In off shoring, the biggest challenge is always managing the intercultural differences. The globalization of the worlds sectors has had its impact on the cross-cultural management. Like many other sectors where globalization has taken the toll, the communication sector is not an exception (Oshri, 2011). When a company relocates; and all the other factors are intact, the progression of the company is swift. However, complications arise when there is evident growth of the company. The company grows in production requirements, and consequently, the number of employees has to be increased. They rise through from a few hundred employees to thousands and hence the access to employees who have a base experience to the company’s original culture. The employees begin to express emotional tiredness and frictions begin to rise. Communication failures take effect and mixed tensions and matrix of relationships crop within the organization or firm. These are some of the challenges associated with the off shoring of a company to a region that has an utterly dissimilar culture as to that of the home place. The whole new hiring always presents a new structure that is not similar to the domestic management structure. This challenge can worsen to the extent of having retrenching exercise to vent off the workers who do not have the experience. However, this is a quick fix to the predicament as it is obviously evident that the company needs these workers (Oshri, 2011). The managerial practices are influenced by the cultural beliefs of the people. For instance, in Korea, respect and obedience for superior person is supposed to be unquestionable. This is dangerous as it eliminates chances of sourcing quality information from co-workers. For instance, in the 1990’s, due to the difference in rank gaps, several planes crashed. This is because the subordinates would not utter words that contrast the superiors’ opinion. This unwavering obedience cannot be said the same of the American people. The American decision making practice begins from the bottom to the top rank.
In the case of Hyundai motors, all the other factors in America were conducive for the success. The labor, market, policies and technology acquisition among others were all in place for the company to pick easily. The worry came with the factor of the cultural differences between the two societies. Before relocating to the U.S., Hyundai had been in Canada and, therefore, was not strange to establishing effective managerial and communication practices (Oshri, 2011). The factors that facilitated the easy manner in which the company overcame these cultural management issues that would arise include; the support that she got from the, local state, government. Education is imperative for survival in this ever changing world. Therefore, when the Alabama state offered to provide basic work training for the applicants of the job in the company’s firm, this was a significant boost. The people could adapt to the traditional approach of management from the Korean managers easily.
Secondly, the intercultural differences between the American and the Korean people are diverse. Therefore, there needed to be stern action plan to deal with the communication, and culture acceptance between the two groups of people (S. Kahai, Sara & P. Kahai, 2011). However, in addressing the issue, the problem between Hyundai and American people was not as large as it was expected. This is due to the history that existed. South Korea, Japan and china, are originally from the same geographical region. Historically, they also share a lot in common as they are considered to have a common origin, differing in minor ways from each other. Therefore, this means that their management systems are not different; neither is the structure of the language for both nations. The practice in these cultures calls for strict observance of hierarchy and hence the unquestionable obedience to the superiors. On the contrary, the western people that are the Americans are people who are liberal in thinking, hence individualistic. This means that the two groups would conflict due to these differences in the cultural practices (Kahai et al., 2011). This conflict was evaded and solved by the fact that Japan had already established her culture in the United States market. Therefore, the people had a sample behavior of what to expect mostly from the Korean people (Lansbury et al., 2007). The similarity in the japans and Korean cultures, and language structure enabled a fast adaptation process for the two groups in the process of settling in America. Additionally, the multicultural differences that occur in other situations were, therefore, easily evaded. The harmonic relations between the superiors and the subordinate staff are a practice that has stringently infiltrated the Korean culture and is hard to manipulate. Their managements always expect natural obedience and, therefore, knowing this fact, the American population working in the firm was assured of their jobs as long as they behaved in manner r that pleases the managers and supervisors.
Communication is a basic success factor for any venture or organization. Automotive industry equally relies on communication to manage its resources and the daily activities (Tejera 2012). Moreover, communication is useful in attending to the customers; therefore, Hyundai needed an effective strategic communication channel developments. To avoid miscommunications, cultural awareness is another feature that Hyundai invested maximally in development (Jo, & You, 2011). This ensured there was a well established communication across cultures. Consequently, the establishment of this communication advantage ensured that less time and resources were wasted in dealing with the communication issues that may arise. This allowed the company workforce to focus solely on the production and sales process; hence the reason Hyundai managed to establish itself in America easily. To tackle the awareness, Hyundai organizes a three-month duty assignment for employees to go and work from oversees. For instance, it sends the team to other countries and places to go and work as they observe from a different cultural setting. This expands the awareness on multicultural challenges management. Cultural awareness eliminates chances of misinterpretation and misunderstanding of information or a message.
The Hyundai motors company has continued to develop itself in the world markets. The global coverage of Hyundai has expanded to all potential markets across the world, with sales going global. The company focuses on the essential aspect of quality improvement and innovation (Tejera, 2012). For a company to achieve such international coverage, an effective communication strategy is necessary. There are many cultural and other communication barriers to overcome. The Hyundai motors has established that tackling intercultural differences requires adaptation of new organizational polices to fit in the context of the setting in which the business is operating. The focus of Hyundai is on effective management that is proactive in communication with the workforce and the customers. The customers are always the priority in all areas of business operation.
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