Term Paper on "Managing in Multinational Companies"

Term Paper 13 pages (3705 words) Sources: 20

[EXCERPT] . . . .

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… READ MORE

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