iBooyah.com Investment Matters

Major U.S companies such as Motorola, Microsoft, Dell and IBM are already well established in China and India.  In fact, most of the growth today is occurring not in the U.S, but in Asia.  For example, in January 2006, Dell announced plans to hire 5,000 new positions on top of the already 10,000 employees currently employed in India (Rai, 2006).  In an effort to take advantage of the low cost of labor, this hiring trend is similar among other large U.S. technology companies.  Furthermore, companies that are unable to establish a physical presence in India or China are choosing to outsource their Information Technology functions through a third party (Basu, 2006).

While globalization and Information Technology has brought new opportunities, new challenges have also risen. Looking towards the future, several challenges stand out.  As a software company with offices in the U.S, India and China, it is imperative to recognize the changing business landscape. The purpose of this paper is to outline two specific challenges and offer strategies in which management can deploy in order to effectively compete as globalization becomes a normal part of business.  While there are many issues Multi-National Corporation (MNC) must prepare for, political instability and cultural differences are the two we will explore.

Political Instability

As stated, one of the main challenges Multi-National Corporation must contend with is political instability.  While China and India appears relatively stable, reports by the National Intelligence Council points to a growing gap between the “have” and “have not”.  This gap is expected to remain large despite continued economic progress.  The relatively low number of middle class could potentially lead to political unrest.   Furthermore, the threat of Terrorism is now a worldwide problem and will continue to remain a factor.  These threats, if left unchecked has the potential to slow the progression towards a true open market (NIC, 2004).

 Despite the recent open market activities and foreign direct investment, China remains a communist country with vastly different ideology from the West.  A change in China’s leadership or political policy can easily cause tension between Asia and the West.  For example, the recognition of Taiwan as a sovereign nation by the West is not recognized by China.

While India is an established democratic society, it is situated in a region of the world with a long history of conflict, particularly with its neighbor, Pakistan and Kashmir.  The emergence of radical leaders that are unfriendly to the West or its neighbors could also lead to political unrest.  Moreover, radical Terrorist Organization that does not answer to any legitimate political parties could pose a greater risk given their history of unprovoked attacks.

 According to the NIC report, “India and Pakistan appear to understand the likely prices to be paid by triggering a conflict.  But nationalistic feelings run high and are not likely to abate.  Under plausible scenarios Pakistan might use nuclear weapons to counter success by the larger Indian conventional forces, particularly given Pakistan’s lack of strategic depth” (NIC, 2004).

While geopolitical issues are largely outside the control of MNC, it is a matter which requires constant monitoring. Proper strategy must be created to deal with a sudden change in geopolitical policy.

In crafting a relevant strategy to deal with international business issues, companies must ask the following three questions.  Where are we now? - Seeks answers to the ins and outs of the company’s present situation, it market standing, how appealing its products or services are to customers, the competitive pressures it confronts, its strengths and weaknesses, and its current performance. Where do we want to go? - Deals with the direction in which management believes the company should be headed in terms of growing the business and strengthening the company’s market standing and financial performance in the years ahead. How will we get there? - Concerns crafting and executing a strategy to get the company from where it is to where it wants to go (Thompson, Strickland and Gamble, 2005).  Finding answers to these three fundamental questions is necessary in order to craft a successful strategy. 

To craft a strategy for continuous operation in the software business, each regional manager must access their region’s situation on their ability to continue their respective function if there is an emergency, including political instability. Can another group take over the project and continue the work? How fast can another group take over the project? Are the projects documented to the point where someone else can easily resume? How can the company get foreign employees out of the country, if their presence poses a danger? These are some of the questions managers must address when analyzing their current situation.

Once managers are able to grasp the current situation, the next logical step is to envision an ideal continuous operational goal, basically answering the question of where the company desires to be. The ideal situation should include having groups of resources available outside the affected countries that can resume the project as soon as humanly possible.

Getting into the specifics, software companies must focus on redundancy not only with technology, but with human resources.  To ensure redundancy of data, I foresee a game plan where the software code is uploaded to a centralize database in real time and backed up in several parts of the world. Securing the integrity of the data is only the start. Companies need to also have familiarity with the software code in order to continue.  To address this problem, several Software Engineers must be assigned to specific areas of expertise. For instance, an Engineer who specializes in designing the user interface will be assign a counterpart that acts as a backup in another part of the world. The backup Engineer will play a support role during the development cycle, but should be ready to take on the project in the event of emergency.  The detail process in achieving such human redundancy must be detailed by regional management.

Furthermore, I envision a plan where documentation is highly stressed as an important component.  Without adequate documentation, management will find it difficult to resume projects as they would have little visibility into the details.  As part of the mission, managers must clearly instill and enforce this policy. Moreover, internal policy must be created to ensure software codes are documented in a manner that other engineers can understand. Regular internal audits must also be established.

Cultural Differences

Another ongoing challenge facing MNC is ensuring corporate citizens behave in manners that are inline with corporate values despite differences in cultural belief.  Management must seek ways of steering all employees in the same direction without alienating certain groups.  An American Software Engineer working with his/her counterpart in Asia could find it difficult to communicate as Americans tend to be more direct and to the point.   Asians, however, tends to be the opposite; more reserve with ambiguous style of communication.  Such differences in how each group behaves and communicates can become a bottle neck; thus resulting in product delays. Differences in cultural values could also lead to misunderstanding on how strategy is interpreted.  For instance, a goal that states “to achieve strong bottom line results” conveys different meaning to different groups.  To Westerner, this would mean achieving above the expected financial results. However, other parts of the world which put less emphasis on beating expectation could be satisfied with simply meeting the financial objective.

The explosion of technology such as the internet has provided companies the capability to establish a presence and reach potential consumers in far regions of the world once unreachable.  The software industry is a prime example. To provide a “local presence”, MNC are turning to local resources to help build and shape products (Basu, 2006).  As a result, managers at all level will likely be managing a workforce that is vastly different from his/her background.  This trend will should continue as conducting business internationally will become part of the norm.  Proper strategy needs to be developed to ensure managers are sensitive to the needs each groups.

Dealing with cultural differences is a delicate matter which requires a sensitive solution.  Today, more than ever, great companies must craft strategies which foster cooperation and promote values that embrace cultural differences. The responsibilities for developing and promoting such strategy rest on the entire management team, from executives all the way down to operation level managers.

While there are various methods in which corporations could help employees embrace cultural differences, one obvious way is to promote cultural diversity.  For example, celebrating a famous German holiday such as “Oktoberfest” across the world can help foster cultural understanding. The same can be done for other famous events such as the “Chinese Lunar New Year” and etc.  Whatever values companies decide to promote, it is important that employees are given the opportunity to live it out; otherwise such words are meaningless.

 In some cases, simply promoting values are inadequate; companies must also seek ways to provide real life experiences.   Despite the best of tools and technology, nothing can replace spending time in places such as China or India.  Establishing a rotational program for that allows employees to work and live in other countries will provide people the ability to further cooperate and create lasting working relationship.

Conclusion

In summary, this paper touched on two challenges facing Multi-National Corporation, political instability and cultural differences. While the paper focused specifically on the Information Technology industry, these same challenges and methods of creating strategies are universal among MNC.  In short, a well crafted strategy starts with the examination of the current situation, then deciding on the path that can provide long term sustainable outcome for the company.  Once the paths have been decided, the specifics of how to go about reaching the mission can then be crafted in details (Thompson, Strickland and Gamble, 2005).

References

Globalization. (n.d).  Wikepedia.com. Retrieved on July 12, 2006 from http://en.wikipedia.org/wiki/Globalization

Mapping the Global Future. Report of the National Intelligence Council’s 2020 Project (NIC 2004).  December 2004.  Retrieved July 9, 2006 from http://www.dni.gov/nic/NIC_globaltrend2020.html

Rai, Saritha.  Dell to expand in India, hiring 5,000.  January 2006.  Retrieved July 10, 2006 from http://www.iht.com/articles/2006/01/30/business/dell.php

Thompson, A., Strickland A. J., Gamble, J. Crafting and Executing Strategy: The Quest for Competitive Advantage, (14th. Ed.). Mc-Graw Hill. 2005.

          Basu, Indrajit.  War for talent in India goes on. United Press International. July 2006. Retrieved July 8, 2006 from http://www.upi.com/Hi-Tech/view.php?StoryID=20060710-023416-1963r