Managing in Multinational Companies Term Paper
Managing in Multinational Companies
In the context of globalization and market liberalization, the structure of working teams changes. The current project assesses the features of the homogenous teams and the heterogeneous teams, understood as teams in one location, or teams formed from individuals in different global regions. It is concluded that in the management of international projects, the heterogeneous teams are preferred.
The forces of globalization and market liberalization have intensified significantly throughout the past recent decades, generating countless changes within the business climate. Competition for instance has increased at compound rates, forcing the economic agents to place more emphasis on marketing tools and techniques. The technologic development has characterized the recent period through a process of easier access to technologies, which raise both challenges as well as opportunities for the firms.
In the context of globalization and market liberalization, a noteworthy aspect is represented by the increased ability of countries to exploit the comparative advantage of other regions. The theory of the comparative advantage was coined by economist David Ricardo in 1817 and it states that each global region is characterized by specific traits which give it advantages and disadvantages. Based on the advantages possessed, the countries should create respective products and then exchange them within the global market place for products which they would normally produce is less efficient conditions (Maneschi, 1998). Some examples of comparative advantages relevant in today’s climate include cost effective labor force, technologies or natural resources.
The exploitation of the comparative advantage has been highly obvious at the level of the cheaper labor force, which has sat at the basis on plants being opened across the globe. In other words, economic agents have transcended boundaries and launched operations into foreign countries, with the intent of generating cost efficiencies, but also with the possibility of accessing wider customer markets.
The act of management as such evolved from a stance where it incorporated local and national strategies and models, to a point at which it integrates international aspects, company internal elements and macro environmental challenges. One notable challenge in terms of managing the multinational corporations is represented by the usage of teams. At this level then, a question is being posed relative to the usage of homogenous teams within the same country vs. The usage of heterogeneous teams from several states.
2. Management in multinational companies
As the global environment became more dynamic and more open to international affairs, the multinational corporations also became more complex and demanding. In other words, the practice of management has also changed to become more dynamic and more comprehensive.
On the one hand, the multinational managers have to develop and implement the strategic business models that ensure that the company is able to attain its pre-established business objectives. On the other hand however, they have to ensure that they develop and implement these strategies in an adequate international context. This virtually means that the multinational management challenges include the preservation of corporate unity across various countries, the integration of local differences in culture or legislation, intercultural communication and so on.
Within the specialized literature, the approaches to multinational management vary based on the angle of analysis implemented by the author. Paula M. Caligiuri and Linda K. Stroh (1995) for instance assessed the issue from the standpoint of human resource management. The authors analyzed four different types of international business strategies, namely the ethnocentric model, the regiocentric model, the polycentric model and the geocentric model.
They found that the human resource policies developed and implemented by the multinational corporations revealed a direct relationship with the business model implemented. The least successful business model was represented by the ethnocentric one, which means that the employees respond less favorable to strategies based on ethnics. The regiocentric model, the polycentric model and the geocentric model were better able to combine business and local features and support the company in attaining its pre-established objectives.
Based on the findings of Caligiuri and Stroh (1995), it is concluded that it is imperative for multinational management to integrate and reflect the particularities of the local area in which the firm operates. The global management strategy should as such be customized to the features of the local environment in order to ensure sustainable business success.
A different approach to multinational management is taken by Bhagwan Chowdhry and Jonathan T.B. Howe (1999), who look at the corporate risks of international management. The authors believe that the economic agents who engage in international operations have to — at some point — modify their business model in order to respond to the risks of the global market place. Still, Chowdhry and Howe are more rigid about the adaptation of the business practices to the features of the local environment, and argue that companies will normally seek to employ the same models. Changes will nevertheless be integrated when the company faces financial risks, namely when there exist uncertainties pegged to the exchange rates between the currencies of the countries, as well as uncertainties pegged to the level of demand expected for the firm.
Ultimately, the practice of multinational management is a highly intricate one as it has to respond to local and international challenges in a means in which the company maximizes its chances of attaining its business objectives. One important challenge in this sense is represented by the selection of the type of team to use in the management of an international project. In this order of ideas, the emphasis falls on the selection of either a homogenous team within the same country, or the selection of a heterogeneous team formed from members in different countries. The options would be assessed throughout the following section.
3. Homogenous and heterogeneous teams
The concepts of homogenous and heterogeneous refer to the means of constructing the teams. With the homogenous team, the members share similar interests and reveal similar features, skills and so on. Furthermore, in the context of multinational management, the homogenous team is formed from individuals who also share the same location, since they live in the same region and work within the same office.
The heterogeneous team is formed from individuals who reveal significant differences in their traits, behaviors, personality, skills, or even their ways of thinking (Rygh, 1994). Within the context of international business affairs, the heterogeneous team is understood as one in which the differences are revealed not so much in the context of the thinking and skills of the individuals, but more so in terms of their geographic positioning. In such a setting then, the heterogeneous team is formed from individuals who live in different global regions and who work from different offices. The members of a heterogeneous team might also be divided by time zones, by language barriers and by other cultural elements.
In the management of an international project, the usage of homogeneous or heterogeneous teams is characterized by a series of advantages and disadvantages. The literature in the field is virtually limited to presenting the features of the two types of teams, without presenting specific recommendations and models as to how a team balance ought to be found in the context of multinational management. This literary shortage is explained by the relative novelty of the topic, implying that the theoretical information on the subject is still being researched, gathered and developed.
3.1. Advantages of homogenous teams
As it has been stated before, the homogenous team is formed from individuals who share a series of similarities, the more important of them — in the context of international management — being that they share the same working location. This virtually means that the team members are better able to interact and communicate in an effective manner. They all work and function within the same time frame and they can easily hold face-to-face conversations. During these conversations, the project issues can be clarified in an easier and more efficient manner and the incidence of misunderstandings is decreased. At this level of communications, it has to be recognized that geographically homogenous teams will also reveal an increased ability to communicate non-verbally, since they will share more common experiences (Beck, 2012). Furthermore, the homogenous teams are more likely to quickly accept and integrate new members (Goll and Sambharya, 2001).
Then, the members in a homogenous team are united by the same goals and visions of the firm, as well as by the same expectations and leadership styles, as these are implemented in the local offices. In other words, there are high degrees of cohesion in homogenous teams, and this cohesion in turn leads to a series of advantages. For example, homogenous and cohesive teams tend to reveal high levels of productivity, which ultimately means that the company is better sustained to attain its pre-established objectives. In general then, the higher degrees of team cohesion are linked to higher performances of the team (Robles, 2009).
3.2. Disadvantages of homogenous teams
As it has been mentioned before, the homogenous teams reveal high levels of cohesion, which in turn generates positive impacts upon the team’s productivity. Still, what has to be mentioned at this state is that the productivity is increased at the level of repetitive team tasks. In other words, when the tasks of the team are less repetitive, when they are new and involve creativity, the productivity of the team decreases. This is explained by the fact that the members in a homogenous team are alike and tend to have the same reaction to a change, and this reaction can be one of resistance.
In the context of managing an international project, the team will often be confronted with the need to reshape the team tasks in order to meet changing needs and features, such as changing legislations, changing customer needs, intensifying competition and so on. All in all then, the more important disadvantage of the homogenous team is that it is more rigid.
The homogenous teams tend to be less inclined to accept change, as they prefer the status quo and seek to preserve it. And with international projects, change is a constant necessity, but the homogenous teams reveal a larger response time and a decreased ability to react to emergent needs. This eventually materializes in the weakening of the firm’s competitive position within the international market place (Ostroff and Judge, 2012).
Another disadvantage of the homogenous group within the management of the international projects is represented by the limited knowledge of the team. Specifically, all the team members possess the knowledge common within their geographical region, which may or may not be relevant in the context of the international project.
3.3. Advantages of heterogeneous teams
As it has been mentioned before, the homogenous teams are characterized by a higher degree of productivity, which is linked to the similar skills, interests and geographic positioning of the team members. In other words, there exist high levels of cohesion within the homogenous teams. Still, while the productivity on repetitive tasks is decreased within the heterogeneous teams, these are nevertheless characterized by vaster knowledge of the team members, coupled with higher degrees of creativity.
Within the context of managing international projects, challenges occur on constant basis due to the nature of the project and the challenges of international management. This means that they require a higher degree of flexibility and creativity, and the heterogeneous teams are able to meet these requirements. According to Anne Bartel-Radic (2006), the heterogeneous teams reveal higher levels of cooperation in atypical circumstances. They are better able to recognize new threats, to address them within the team and to provide more solutions than the homogenous teams.
The heterogeneous teams are formed from individuals with different and varied skill sets, which increase the overall knowledge of the team. Additionally, they create diverse teams, and diversity can constitute a powerful competitive advantage within the international market place. Kathy Daniels and Lynda a.C. McDonald (2005) point out that diversity in teams generates broader working perspectives, creativity, innovation, the promotion of capable and skilled individuals, the absence of discrimination and the superior talent management or the higher degrees of employee motivation.
All in all, the heterogeneous teams reveal the primary feature that they are formed from different individuals across the globe, which possess different skill sets, different insights, backgrounds and abilities to understand their national context. The combination of these features means that the heterogeneous team is more suitable in the context of international project management. This finding is also supported by Anne Bartel-Radic (2006), who finds that the heterogeneous teams constitute the core of the globalization process and that they should be present in each organizational setting.
3.4. Disadvantages of heterogeneous teams
The heterogeneous teams, aside from the multitude of advantages revealed, also present a series of limitations, some of the more notable of them include a decreased productivity, poorer communication abilities, cultural barriers, or the disadvantages of diversity.
The heterogeneous teams may encounter numerous geographic challenges, such as the possibility for them to be operating in different time zones, which impedes effective and immediate communications. Solving current problems would as such imply more time consumption and larger times for solutions to be implemented. In other words, the heterogeneous teams might face delays in completing projects.
Then, in the context of international project management, the team members might belong to different cultures, which would also raise a series of disadvantages. For instance, the team members might speak different languages, meaning that they would have to find a common ground in order to be able to communicate. The multinational company could even encounter productivity delays and financial expenditures due to processes of language teaching to its foreign employees.
Then, the heterogeneous teams, however creative, innovative and flexible, are less productive since they reveal lower degrees of cohesion. The employees are not all in the same space, are unable to communicate effectively and are not united by the same vision, culture and leadership style. This creates frictions and can lead to lower levels of productivity; this productivity nevertheless refers to structured and repetitive tasks, which are better performed within homogenous teams.
The heterogeneous teams are characterized by an abundance of creative ideas, generated by people across the globe. While this feature is useful in international project management, it can also be detrimental to the internal construct of the team. For instance, it can happen for an innovative idea to be issued and for it to not be well understood by the others, due to differences in communication, as well as differences in backgrounds and skills.
In the absence of team homogeneity, the team members can become easily distanced by the differences which separate them. For instance, the people in different regions might belong to different social groups, and the appurtenance of such groups leads to their categorization by other team members. This issue represents the most powerful downside of diversity and heterogeneity within the team and it can be attributed to team conflicts, tensions, low performances, or even the possibility for the team to break up (Forsyth, 2009).
Based on the assessment conducted previously, the homogenous and heterogeneous groups both reveal challenges and opportunities in managing international projects. And the selection of the type of team to use ultimately falls in the hands of the manager, based on the particularities of the project, the individuals involved, the responsibilities, the available resources and so on. Still, in the context of the current project, it is recommended that the heterogeneous teams be used in the management of international projects, since these reveal the highest capacity to respond to the issues characteristic to the management of projects by multinational corporations.
Still, what has to be noted at this level is the fact that the heterogeneous teams do reveal a series of shortages, which have to be addressed. As it has been mentioned throughout the previous section, the major shortages of heterogeneous teams are represented by the decreased productivity, the poor communications, the cultural barriers and the disadvantages of diversity.
In order to address the productivity issues within heterogeneous teams, it is useful to develop the sense of the team in an open manner, in which the employees feel empowered to make and participate in decisions, and where they are rewarded for their contributions (Landskroner, ). In the context of international and heterogeneous teams, it is necessary to remember that these teams reveal lower productivity for structured tasks, yet their international management responsibilities are seldom structured and repetitive. In such a setting then, the recommendation is to use the team for creativity purposes, rather than structured and repetitive tasks; for such endeavors, the local homogenous team would be a more appropriate selection.
At the level of the poor communications among the team members in the heterogeneous team, these should be approached through the creation of a working environment focused on communications and feedback. Additionally, the teams should be maintained at small sizes in order to reduce the complexity of communications. Then, the team members should rely on e-mail as an easily accessible and cost effective means of communication, but should also seek to get the team members to communicate face-to-face, or even through teleconferences, so that the bonds between them are solidified (Schwalbe, 2008).
In terms of the cultural barriers and the disadvantages of diversity, these are best addressed through the creation of a working environment that cherishes and embraces diversity. At the level of practical impediments, these would be addressed through practical solutions. For instance, the language barriers would be overcome through the provision of language training sessions in order to ensure that all team members are able to effectively communicate in a pre-selected language. Such a measure could even be perceived as an incentive by the team members, who enjoy the development of new skills (Aamodt, 2012).
In order to further stimulate the productivity and satisfaction of the team members, it is also useful to adequately reward and recognize their efforts. In terms of recognition, it is important for the manager to assess the efforts of the employees and to celebrate their accomplishments. The managers should not belittle or neglect the results of the team members, but should praise and reward them; additionally, the accomplishments of the employees should be recognized within the team setting, in front of the other team mates, in order to increase the confidence and motivation of the team (Mullins, 2005).
At the level of the rewards, these should combine both financial and non-financial rewards. The team members should receive fixed income based on their employment contracts, so that the baseline for the collaboration is established and clear. Aside from this however, the managers should also provide their team members with additional financial rewards, based on the performances and results of the team and the individuals. In terms of the non-financial incentives to be provided to the members of a heterogeneous team, these include schedule flexibility (which would also be applicable in the context of different time zones), training programs or traveling options.
The modern day business climate suffers a series of modifications as a result of a growing global business community. In this complex setting, the firms have developed a new capability to expand globally and benefit from the comparative advantage of other countries. This operation is nevertheless challenging, and one example of the challenges faced includes the need to coordinate international projects, and the need to select a homogenous vs. A heterogeneous team to complete the task.
The current project then has assessed these types of teams in terms of their advantages and disadvantages, which are centralized in the table below.
Advantages of homogenous teams
Disadvantages of homogenous teams
Advantages of heterogeneous teams
Disadvantages of heterogeneous teams
– Effective and real time communications
– Decreased incidence of misunderstandings
– Team cohesion
– Increased productivity
– Decreased creativity
– Resistance to change
– Limited knowledge
– Creativity and flexibility
– Vast knowledge
– Cooperation in atypical circumstances
– Increased team knowledge
– Diversity as a strategic advantage
– Decreased productivity
– Poor communications
– Cultural barriers
– Diversity disadvantages
Relative to the homogenous and heterogeneous teams, it has to be mentioned that the homogenous teams reveal a series of advantages linked to structure and predictability, yet they are more disadvantageous to international projects, which raise a series of challenges, to which the homogeneous teams seem unable to respond; the homogenous teams prevent the firms from launching new products successfully, from solving international problems and from developing competitive strategies, crucial in the global market place (Ostroff and Judge, 2012).
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