Managing in the Multi-National Companies

Introduction

Multinational companies portend with a lot of challenges in terms of management than is the case with national or local companies. These companies spread across different international boundaries, establishing their subsidiaries in nations situated in either one or several continents. One big challenge for these companies and their management emanates from the fact that they exist in communities with different cultures and ways of life. As such, it becomes difficult for the headquarters to apply uniform policies across board because they could easily affect performance due to there being a clash with the cultures. Additionally, different countries pursue different legal frameworks and structures which imply that the company has to readjust its operations so as to be able to run their activities legally. This paper seeks to discuss the management of multinational corporations, and in particular analyze the numerous existing challenges.

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Culture

Multinational corporations often establish operations in alien countries for different reasons but the main reason remains to be business expansion through acquisition of new markets. The establishing of subsidiaries in foreign countries presents managers with a very vital challenge of how to deal with new cultures. All organizations have their own philosophies and cultures upon which they establish their performance frameworks and structures. In their research work, Thomas et al. ( 2012) point out that such organizational cultures tend to shape the manner in which organizations are run, including hiring, training means and methods, decision making, as well as firing and promotion of staff. Managers use such existing organizational cultures and policies in determining what course of action they would take when a given scenario arises. But once organizations cross their national boarders and extend to other countries, the aspect of relying on organizational cultures and philosophy in decision making and overall management becomes less effective.

In the same breath organizations have their own cultures and overall ways of doing things, different countries also have their own unique ways through which they deal with issues. Managers of multinational corporations, therefore, need to study carefully a particular country’s culture and determine whether the organization’s philosophy and culture can fit within the country’s culture. National cultures cannot be overlooked because there is a high possibility of the company failing to achieve its targeted growth performance. For instance, most Islamic countries in the Middle East, such as Saudi Arabia and the United Arab Emirates, do not believe in offering equal employment opportunities for both genders. In these countries, women workers are very few and hardly any of them hold management or leadership positions. A multinational corporation that seeks to establish a subsidiary in any of these countries, and which has a policy on equal employment opportunities will thus have to reschedule such a policy in order to align its practices with the host nation’s culture.

As a manager, the issue of culture does not merely mean changing tact and adopting a system that is acceptable with the host nation. The major hurdle is on restructuring the organization and adopting new arrangements that have hitherto not been part of the company. This will affect performance because the new system being adopted does not comply with what the organization’s norms and practices are. Even for the managers, it will have to take some time before the readjustments finally click and enable the organization to take off as anticipated. It is worth noting, thus, that as a manager in a multinational corporation, the individual is supposed to employ leadership in chatting the organization’s way forward. Systems must be adopted through which the management should be able to implement the structural changes without necessarily harming the company’s interests (Marković, 2008).

Global business strategy

The manner in which a global company can be managed would vary greatly depending on numerous factors. Tung and Punnet (1993) suggest that managers face a challenging task in developing a global strategy due to the conflicting demands created by the global environment. As the international companies attempt to optimize their response abilities to the host country’s needs, a conflicting demand arises. A manager has to think about how the subsidiaries will maintain their attachment to the headquarters. The threat or challenge is brought about by the fact that too much autonomy of the subsidiaries could imply less integration on the part of the multinational company. On the other hand, maintaining tight controls from the headquarters could end up denying the subsidiaries room to function effectively as per the business environment of the host nation.

Although different management strategies for multinational companies exist, it is not an easy task for the manager to choose one and adopt it as the best one for his corporation. This is because different strategies work differently for companies (Isfahani, Aghdaie & Homaei 2011).

The most important thing for a manager to put first is the interest of his or her company. An ethnocentric strategy could appear the best for a given global company so that the headquarters could manage to integrate closely the subsidiaries. However, the business environment of the host nation could be such that the subsidiary is allowed the chance and room to make its own decisions that favor the local market. On the other hand, a polycentric or regiocentric strategy could also appear to be the best for the organization yet the less integration could possibly dissuade the subsidiary from attaching to the headquarters and instead pursue an own independent strategy.

However, for most managers the underlying factor often is the performance that each organization will eventually register under a given strategy. Reilly, Scott and Mangematin (2012) point out that the highly dynamic nature of the business environment further compounds this decision making exercise for the managers. A given strategy could turn out to be the best in the beginning but soon changes in the macroeconomic environment could render it difficult and less appropriate. Since the future is so difficult to determine, managers must, therefore, look for a kind of hybrid strategy that will not be rigid to constrain the organization’s performance but rather be flexible enough for maneuvering especially when conditions turn out to be less favorable (Kurtzman, & Yago, 2007).

Legal frameworks

Every country has its own legal structure and framework. There are instances where particular countries have most of their laws almost looking similar to each other. For instance, most countries which are commonwealth member states have their national constitution fashioned like that of the United Kingdom. To such countries, managing a multinational company might not really prove to be difficult. However, a majority of the countries have adopted their own unique legal systems which make it easier to for the running of own domestic affairs.

For multinational companies, these laws and rules could actually curtail their smooth performance and operations. The original company structures are usually formulated in accordance to the laws of the home country. Thus, managers must look into the local laws of the host country and see whether the organizational structures actually align to the existing legal framework. Where differences exist, it is upon the manager to restructure them such that they can be realigned properly. This may call for the involvement of legal experts but the manager must spearhead the program in order to ensure that the company interests are not affected in the long run.

Once this is put into effect, the manner in which the subsidiary relates with the head office will also need to be revised. In planning for job placements, the manager will have to ensure that the age limits for workers meet the legal requirements of the host country and not the company’s country of origin. If, for instance, the organization had a policy on recruitment age, the legal requirements of the host country on the same matter would take precedence (Maitland & Sammartino, 2012).

Expatriates

Expatriates are qualified personnel dispatched because of their high skills to go and work in subsidiaries for purposes of improving their business performance. In deciding to dispatch expatriates, a number of issues occur which the manager has to look into critically and ensure they work as expected. The organizational strategy often ranges first in this respect. For global companies that are adopting a decentralized system of governance, dispatching expatriates often becomes challenging because of the varied systems that each of the subsidiary is adopting. Such expatriates could have been performing extremely well in their previous work stations but the same success could prove difficult to transfer to a different country. Thus, managers must ensure that such expatriates acquire the right experience about the country before being fully given the responsibility to operate in the country (Collings et al. 2010).

Employee diversity

Managers of multinational corporations are in charge of a diversified workforce. Most multinationals employ people from different countries who bring on board their varied cultures, language, and general way of life. According to Rao (2012), achieving organizational objective with such a varied community of workers is a bit difficult for the manager unless he or she manages to build harmony among the different communities of workers. With such a highly integrated group of workers, several challenges are likely to occur. For instance, some workers might feel they are more superior to others because of their race or culture. Others, because of their cultural backgrounds, might resort to gender violence and discrimination. Thus, managers in multinational corporations must be able to realize harmony between workgroups because it is the key determinant to better performance. Because the organizations operate in different countries, it is important that members from the represented countries are offered a chance to work for the organization as well. However, no worker, because of his nationality, creed, gender, or racial orientation, should hold others in low esteem. The manager should build the team spirit among the workers such that it would be easier for the organization to attain its targeted goals and objectives (Hill & Scott, 1992).

Conclusion

Managing multinational organizations effectively is a highly challenging undertaking which requires that the manager adheres to a number of requirements. These companies straddle international boundaries and therefore imply that managers deal with different cultures in these countries. This might call for the restructuring of the organization so that each country subsidiary may be able to appeal to the culture of the host country. Global companies also often employ workers from different cultural backgrounds. This variety could hamper overall performance if harmony is not achieved. It is the responsibility of the manager to ensure that the workforce operates as a unit despite their integration. This will help in averting discrimination problems which might arise because one race or gender feels they are more important than another. Global strategies to be implemented also portend a challenge to managers. They must choose a particular strategy that sustains the organization’s interests, but which also fits into the host country’s system perfectly.