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Need for Localization: Foreign Company’s Obligations to Local Essay

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This paper gives a detailed analysis of the local culture and customs that the foreign companies would have to adjust to in order to remove the social and psychological barriers which they would inevitably have to come up against during their overseas operation. The paper lays emphasis on the flexibility approach and localization as the main aspect for foreign companies in order to succeed.

The study reveals that although the impact of globalization has brought greater degree of homogenization in commercial procedures, it still remains a distant dream when different cultures mingle making it imperative for these companies to accept heterogeneity as the only way to enter foreign markets. Customs and norms are die hard behavioral habits and have been ingrained in the society over a long period of time and not easily removable or made to overlook. This is especially so while operating in foreign soils and in many instances this has been seen as one of the biggest hurdles facing companies.

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Rules of law and government rules and regulations may exist but assuming that all businesses are managed by people and for the people, interaction between people is inevitable for its success. Some parent companies may of course have lesser amount of interaction due to the nature of their products or services yet on the whole it is generally seen that whatever be the business norms of the foreign company it has to make discernible changes when it goes into business in a foreign soil.

Franchises and branches are actually an extension of the parent company that has been grounded and molded in a foreign soil by a larger participation of the local community within the internal and external environment of the organization. It is also seen that the cultural differences may be slight, marginal or make very great impact on the business due to the cultural difference that exists between the organization’s country of origin and the foreign soil.

Thus, it is quite imperative on the part of the foreign company to make some structural changes which should include a changed human resource practice and a changed view of the organization as a whole in certain aspects of beliefs, assumptions and behaviors and above all understanding the positive sides of other cultures. In case the foreign company is hell bent on imposing the customs and assumptions of its own country of origin stating them to be its organizational culture then it would sooner or later find itself out of business.

Hence, being indifferent and unmindful of the local customs can be very catastrophic if it doesn’t allow a certain degree of flexibility in bases that are situated on the foreign land. Areas of Conflicts A foreign company while setting its operational bases in another country invites certain risks from conflicts that it not quite seen in the home country. Firstly, the company if it happens to be a Western one inevitably tries to go about its business taking for granted that globalization has brought in a greater degree of flexibility and that the English language is the only internationally accepted language of the world population.

This may sound quite okay within cultures that are a part or partake of Westernized conducts and behavioral patterns yet when such a company tries to place its foot on say Africa, the Middle East and the Asian countries then it is a different story altogether. For one there is greater degree of difference between the two cultures which if not properly understood and practiced may prove to be disastrous for the company.

For instance, it is the standard procedure in the Western business to make an agreement that after a fruitful negotiation followed with signing of documents and shaking of hands which indicates that the agreement has been done as per the unanimous consent of the parties involved. However, this doesn’t hold well in the Middle East where coming to a formal agreement would mean that the beginning of several serious negotiations is on the way. In other oriental cultures the start of any business transaction is preceded by a ritualistic performance, the majority being religious based as well after ascertaining the stars on the almanac.

In China there are three traditional philosophies namely the Confucianism, Taoism and Buddhism and are generally considered as the foremost philosophies for facilitating social interaction. A foreign company trying to open its branch in China would indeed be in conflict with the local customs and beliefs and hence do very poorly if it doesn’t understand the situation. This is more so with the Chinese mostly preferring a Chinese person as a mediator for any negotiation. In India too there are various religious and cultural festivals which form an integral part of the existence of the native person.

In areas of human resource this is more pronounced and the foreign company must make allowance for the same by giving holidays and even be expected to participate by handing over of gifts, involving in the cultural events as well as make contributions to enhance their image with the local participants. Therefore, it is generally seen that the foreign company increases its business substantially while conforming to traditional beliefs and customs of the local people than they would otherwise.

Multiculturalism and Cultural Assimilation There is growing evidence that the transnational organizations are adopting a policy of recruiting workforce from various cultures from across the world as it is by far the best way to expand overseas and also to understand and integrate better with the markets in these regions. Multinational companies should therefore make note of the fact that in their home ground things were a lot different than what they are likely to experience across the borders.

Globalization as seen in the present does not imply homogenization, but the reverse as this means one has to deal with difference directly instead of from a distance as was earlier the case (Nolan, 1999). In multiculturalism, organization readily accepts the presence of varied cultural groups within its own larger cultural base. In the case of cultural assimilation the organizations by its policies prepares to assimilate those cultures of local communities and tries to effectively integrate them into its organizational culture.

It is also true that both diversity and internationalization are needed to create diverse learning environment within companies in order to make them adaptive to local customs and hence remain competitive. For this the foreign company should have well laid out policies of manpower learning and understanding of the various cultures that would arise in the event of transfer of personnel. According to authors Stehle and Ernee, transfers are more likely to succeed when employees of the transfer coalition hold positive attitudes and trust towards the parent company (2007).

An effective ethical principle is thus evolved in this way and the organization needn’t fear of any future uncertainties and confusion while carrying on its business in soils alien to its own customs and practices. By the process of assimilation the organization has send out the right message to the local communities. Attitudes towards ethics are rooted in culture and business practice and the term international business conduct and morals refer to the foreign company’s relationships with individuals and entities (Mahapatra and Kumar, 2009).

Further those companies who are having certain degree of confusion to start operations in an alien soil can take other routes in the form of joint ventures and franchisees. The uses of joint venture can mitigate problems associated with lack of knowledge in norms, values and assumptions that are the foundation of organizational and individual behavior (Ang and Michailova, 2008). Conclusion Thus it is imperative for the foreign company to have an obligation to the local customs, languages, behavior, religion and cultural assumptions in order to consistently perform well and profitably.

Once the company forms a distinctive identity with the local population with its overtures, responses and publicity campaigns the company can benefit both in its image and carry out future expansion programs. There have been several instances of the whole company’s leadership position even that of the parent company being entrusted in the hands of persons belonging to the local community with the target market which in this case means the local market too large enough to avoid or forego.

The case of PepsiCo is an example as its leader is a woman of Indian origin and it is quite likely that she would be able to understand the cultural and religious sentiments of the people much better than those not native to the soil. Reference List Ang Siah Hwee and Michailova Snejina (2008). Institutional Exploration of Cross- Border alliance Modes: The Case of Emerging Economies Firm. Normative Pillars of Institutions. Management International Review. Mahapatra S N and Kumar Jitender (2009).

Transnational Corporations and Marketing Ethics in Global Market in Post Globalization. International Business Ethics and Global Marketing. Abhigyan. Nolan W. Riall Communicating and Adopting Across Cultures: Living and Working In the Global Village. Cultural Basis of Difference. 1, 1. Westport, CT. Bargin & Garvey. Stehle Wolfgang and Ernee Ronel (2007). Transfer of Human Resource Practices from German Multinational Enterprises to Asian Subsidiaries. Research and Practice in Human Resource Management.

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