To make oversea expansion work, companies must have a clearly defined  strategy before moving forward and recognize that moving abroad is not only about cost saving. According to recent study, the average saving in moving operations overseas in recent years is around 7-9 percent. Therefore, expecting grand saving could result in frustration and disappointment. Other motivations besides the potential savings are efficiency, improving service level agreements and gaining access to emerging markets.

Prior to venturing into foreign land, companies need to determine if there’s sufficient and steady demand abroad (backed by purchasing power) for the service/product offered.  Is the service/product replicable abroad?  What’s the political risk?  What’s the market intensity? (Johannsen, 2006). These are some of the questions which must be addressed prior to committing in oversea investment.   

In addition to the above obstacles, cultural differences, languages, time zones and long distances are some of the major obstacles facing companies that are expanding abroad.  Fortunately, these obstacles came be overcome with proper planning.

Cultural Differences

The greatest challenge to expanding abroad is overcoming culture differences. Misunderstandings and problems stemming from cultural differences are to be expected. Fortunately, the cultural divide can be conquered by understanding what the differences are and altering processes to accommodate them. 

When business decides to expand in country such as India, China and other Asian countries, cultural differences are even more pronounced. For example, the way call center agents answer the phone, how they interpret the complaints of irate customers, and how they try to add humor to the conversation may all be driven or affected by local culture. The context of the culture as well as the buying and selling behavior must be thoroughly researched.

To help mitigate the differences in culture, companies can use the following tactics (Bower, 2004):

1.      Include native members of each culture in the engagement team. At least one pivotal member of the engagement team should be someone who is native to the culture. This can significantly reduce the number of surprises that may occur because of cultural differences. For example, in some cultures, when you say you want something 'right away', it means today. In other cultures, it may mean next week or next month.

2. Invest in programs that broaden the cultural awareness and sensitivity of all the engagement and governance team members. This training won’t make the participants cultural experts. It will, however, provide them with what they need to build openness to other perspectives, awareness of the multiple ways that their behaviors can be interpreted, and the ability to more fully leverage their differences and commonalties’.  Typical programs offered by companies like PRISM International offer a broad array of awareness and sensitivity broadening tools.  Cultural sensitivity training alone won’t make a person an expert in another person's culture, but it make a person aware that we tend to look at the world through a filter, which should make people sensitive to other people's interpretations. 

Some cultural differences can result in project implementation problems. In American culture, for example, if we ask an engineer to do something, and it's not feasible, say, because the technology just won't allow it, he will tell you that. But in other cultures, it would be rude to say that, especially to a person of authority. So the person ends up saying he'll see what he can do just to avoid a flat-out refusal.  So the project is delayed and the managers apply pressure to no avail, because that person just couldn't come right out and say what couldn't be done. By being aware of these and many other cultural differences, managers can approach these issues in an open-ended way.

3. Although nothing can replace the face to face interaction, companies should invest in electronic communication tools which allow data sharing that happens when teams are located in one place without having to resort only to travel. Web collaboration suites like Live Meeting and WebEx provide a robust array of tools that enable the creation of a meeting room environment where employees can share slides, hand-outs, and/or work together on a white board.

Language

In conjunction with the differences in culture, language is another major obstacle.  Combined with cultural differences, differences in language style, accents, and improper use of vocabulary can negatively affect the close customer relationship that companies must have with their customers. 

For example, in some non–English languages, when someone has a simple follow-up question, he or she might say, "I have a doubt about that." Imagine a customer's reaction to a call center agent who says, "Yes, I understand that you tried to import the data, but I have a doubt about the way you did it." This phrasing can send a frustrated customer over the edge. "What do you mean: You doubt the way I imported the file, or you don't believe me when I tell you what I did? Let me speak to your manager!" (Cohan, Scholl, 2003).  

To avoid language conflicts, it is important to hire the right people with excellent language skills. Companies seeking skilled workers will normally use third party agencies that are knowledgeable about the country’s language and culture. Using such agencies can significantly save a lot of time.  With companies that provide customer services such as a call center, it is also important to implement a soft skills training program as it can help break down the language barrier. Given the right strategy, training and proper tools, the language barrier can be overcome.

Time Zones

Depending on the country and location, time differences can affect service in mild to extreme ways. Time zones in India and the eastern U.S. can differ by more than nine hours, while the time in Brazil or Mexico may differ by as little as an hour from that of the U.S. caller. It becomes challenging to hold real-time meetings when large time differences exist. Finding times that work for both sides can be difficult, especially if one or two people from both sides are required in the meeting. A 9 a.m. meeting in New York is a 6 p.m. meeting in Bombay. In NY, they're just starting their day and haven't necessarily had time to begin business. In Bombay, it's the end of the day (Bianciella, 2003).

Although time zone differences are an obstacle, there are ways to minimize the negatives impact such as scheduling meetings as far ahead as possible. Other methods for dealing with time differences might include online message boards, web sites for posting reports and results, email, and voice mail. One good thing about time differences is that if you ask a question through email before leaving work, you may receive your answer by the time you arrive in the morning.

Long-Distance

Spurred by developments like the internet some observers have proclaimed the demise of distance.  It is sometimes true with advance technology; the impact of distance has been reduced. Nonetheless, managing people and operations half the world a way is a challenging task.

As every executive would agree, reliable information is the lifeblood of economic decisions.   Even in this day and age, reliable information is acquired more readily and more reliably locally than from afar.  This partly explains reasons companies tend to cluster close to others in their industry (Bakry, 2001).

To lessen the impact of distance, companies have turned to technology. Example includes using desktop video to emulate the face-to-face discussion without having to resort to travel. Being able to see the person we are talking to is a key component of effective communication, especially when we need more information to supplement the gaps resulting from differences in language and culture.  Face-to-face-communication is in fact known to increase understanding, especially when there are cultural differences involved (Bianciella, 2003).

No technology can replace the advantages of being there in person. Therefore, it is important to budget for travel.  Management will requires some amount of travel. Any expectation of no travel as a result of using technology is unrealistic. At best technology will enrich the communication that occurs between traveling, but it will not totally replace the need to visit and share ideas while sitting in one physical location from time to time. 

Summary

Clearly, the rise of globalization is indeed exciting as the future for MNC in some emerging economies is bright.  To fully take advantage of these opportunities, companies must be aware of the possible pitfalls.  The pitfalls highlighted here are simply a glimpse, but are important nonetheless.

Even in our increasingly digital and global economy, national language and cultural affinity are still a crucial determinant of trade and investment decisions.  National culture and borders are also significant as it can shape economic policies. For example, economic organization in Japan still seems to favor products that are made in the Japan (Johansson, 2006).  Companies that cross national borders tend to face sharp discontinuities and those that disregard or fail to anticipate these obstacles are likely to see successful home-grown strategies meet a poor reception abroad.

In view of the these obstacles, it makes sense to expand regionally before entering more distant markets; to head for familiar markets before unfamiliar ones.  Companies that respect national borders and cultures are more likely to win back respect from employees, suppliers, customers, and national authorities.  This means placing added emphasis on being both local and global.  Companies that embrace this strategy will more likely be rewarded with profitable growth.

Finally, as with any strategy,  success will requires careful planning, setting realistic objectives, developing knowledge and training, utilizing technology, redesigning business processes and regulations to accommodate culture differences, language, time zones and distance. 

References

Bianciella, Anthony (July 2003) “Offshore Outsourcing: Making it work”. Retrieved from http://www.informit.com/articles/article.asp?p=98153&seqNum=7 on August 12, 2005.

S. Chohan, J. Roberts, R. Scholl (April 2003) "Backlash Will Not Stop Offshore BPOTrend,". Retrieved from http://www.gartner.com/Init on August 15, 2005.

Bower, Toni (April 2004). Cross-cultural outsourcing requires planning and sensitivity. Retrieved from http://www.businessweek.com/magazine/content/05_34/b3948401.htm on August 20, 2005

Bakry, Saad Haj and Fahed Haj Bakry (2001), “A strategic view for the development of E-Busiiness,” International Journal of Network Management, 11, 103-112.

Rangan, Subramanian (November 1999). “Seven myths to ponder before going global”. Retrieved from http://faculty.insead.edu/rangan/ftmast.htm on August 20, 2005