The level of international trade and associated economic activities have expanded in recent years, hence, greatly influencing the global economy. This phenomenon is attributed to augmented transportation, communication, technological connectivity between countries, increased mobility of financial assets, and factors of production. These underlying factors are believed to have resulted in the concept of international trade and globalization. However, the latter caused the diversity issue brought forth by different backgrounds and cultures.
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Globalization is one of the main social, economic, and cultural trends of the century: it changes the way people perceive foreign societies, improves international trading, and forces cultures to combine and extend their values. The companies that operate worldwide became a place where the three points covered above must be considered and executed to make every employee and customer happiness and let the business thrive.
Cultural diversity is the most crucial because people’s languages, values, and social institutions vary in different countries. Globalized companies’ management needs to include the strategies to create an equally respectful working environment in each subsidiary, and build appropriate communication among them. This paper aims to address the importance of cultural diversity in management and discuss the challenges of globalization that occur in the modern world.
With the elimination of trade barriers across borders which existed before, companies now find it easier to go global and establish their business activities worldwide. In addition, the cost of transportation on an international scale has drastically reduced, leading to an increase in the level of trade across international borders. However, the major contributing factor to the rapid increase in globalization is arguably the emergence of the internet. Through various e-commerce and social platforms, businesses now have a higher global reach level and equal access to foreign markets. The goods’ and services’ availability influences people’s preferences worldwide, indicating a rapidly expanding market and increasing the need to meet the global market’s demands.
Global businesses differ from international counterparts mainly by mode of operation. While international companies sell their products and services worldwide, they are run only from their home countries. However, global enterprises have a tangible presence and execute major operations in foreign countries around the world. This is represented by well-established manufacturing plants, service, or distribution centers worldwide.
Some examples of successful global businesses and brands include Coca-Cola, Uber, and McDonald’s. These companies have capitalized on the growing similarities in tastes and presences of consumers around the world. Coca-Cola is based in America but its presence on the global market is immense in every measure. The company has distribution centers almost in all countries in the world making it a fully globalized company.
To understand the concept of globalization, the motivation behind it must first be established. The main reason why businesses exist is to make maximum profits from their operations. To ensure this objective is achieved, businesses must put in place growth and sustainability strategies which include expansion of existing markets, sourcing for resources, and new technology. A special focus on the American market reveals its inability to sustain the large numbers of entrepreneurs in the country despite its perceived large size. For listed companies, pressure by stakeholders to raise the level of sales and profits may force management to seek external markets. Furthermore, factors such as high production costs in home countries force companies to move to regions considered favorable.
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Running a Global Businesses
When a company opts to become the global market’s representative, it must have an expansion strategy that addresses their business values and can provide stable growth. Evaluating the industry’s current situation and crafting a plan towards a firm’s worldwide extension are the crucial steps that managers and executives must consider during the preparation. Strategic planning helps the business assess their needs, objectives, and perspectives in their market’s global arena.
It also serves as a tool to evaluate the level of readiness and commitment to foreign expansion. Besides, global operations’ effectiveness and success depend on the level of research conducted to gain sufficient knowledge on potential markets and effective management strategies specific to each market. Doing a globalized business is challenging because of its wideness and instability, thus due diligence is required.
According to the ventures’ success rates, running globalized companies is a difficult and risky course of action. Research by Hilker Klinkenberg of Etiquette International suggests that less than 25 % of U.S.-based companies succeed in foreign markets (Entrepreneur, 2021). This is highly attributed to a lack of sufficient knowledge about the industry’s situation in other countries due to the absence of detailed research before venturing into the new trading fields.
Studying the potential markets enables a business to select an appropriate entry strategy and distribution method to fit in and be competitive enough to maintain the operations. Some of the most common methods include operating through subsidiaries, establishing joint ventures with local investors, and agencies. Finally, a foreign venture’s success will depend on conforming to set regulations and establishing management strategies based on the cultural values of a particular region.
Cultural Diversity: Management Challenges
After entering an industry’s international segment, companies face multiple challenges to overcome for them to succeed as a globalized business. The rapidly changing natures of global markets, higher competition levels, and the demand to comply with multiple cultures force managers and executives to establish new benchmarks and change the regulation approaches. While globalization has influenced the cultures worldwide and humanity has already developed communication approaches that are understandable in most countries, international business requires developing more complicated strategies (Park, 2020).
Cultural diversity makes global companies attractive employers and increases their competitive advantage, therefore management must address it in all strategic and regulative implementations. Applying equal value to all cultures represented in the company requires the managers to identify the possible difficulties that could harm the diverse workplace environment.
Firstly, the communicational challenges must be addressed: management needs to develop sustainable approaches to deliver the information and regulate it in the most understandable manner (Park, 2020). The strategy can include hiring translators, require the employees to learn the basics of the company’s preferred language, or select executive foreign representatives to work in the headquarters. Secondly, globalization in business requires developing the mission and values that would not contravene multiple cultures’ diverse moralities. For example, Coca-Cola’s vision respects people’s inspiration to do their best, be responsible, and improve sustainability (Coca-Cola, 2021).
These values are clear and applicable to every culture, therefore they are suitable to support diversity in a global company. Lastly, the management might face challenges of their international employees’ attitudes and religious requirements. Cultural diversity requires the firms to treat the values respectfully, thus many globalized businesses practice days-off for local celebrations, flexible working hours, and provide the employees with special places for their religion-based duties.
Globalization in business is applicable in the current situation because its economical, social, and cultural boundaries keep expanding. Moreover, the demand for employment raises in developing countries, and international companies can provide the needed jobs. Cultural diversity is the leading concept to help the business establish new firms’ departments worldwide. The main challenges that might be faced in management are related to the communication, mission and values’ promotion, and compliance with multiple moral or religious attitudes that vary in different countries. These points, if addressed timely and properly, would create sustainable cultural diversity in the global company.
Coca-Cola. (2021). Mission, Vision & Values. Web.
Entrepreneur. (2021). How to take your company global. Web.
Park, J. S. Y. (2020). Translating culture in the global workplace: Language, communication, and diversity management. Applied Linguistics, 41(1), 109-128. Web.