The idea of the multicultural organization is a very generalized one. A multicultural organization can be any type of organization that contains workers or participants from a number of different cultures, even if the organization itself is relegated to a single geographic location. However, when discussing multicultural organizations in today's world, it is more common to see multicultural organizations as organizations that cross geographical boundaries, often with operations in a variety of different places. The problem with multicultural organizations is similar to the strength of multicultural organizations, in that they often require individuals of different cultures to work together: this can lead to conflict if individuals are not well-versed in cross-cultural communication, or it can lead to innovation and exploration of new ideas.
In today's world, it is becoming more and more likely that an individual working in the business world will find it necessary to work in a multicultural organization at some point during his or her tenure as a businessperson. This is because it has become more efficient and productive for organizations to expand across a multitude of different areas (Bartlett, 1982). A mulinational corporation, for instance, will often make a larger profit margin than a corporation operating in a single locale; multinational organizations can tailor their operations to the locale in which they are operating, ensuring that they make a profit based on the needs of the location they are operating within (Bartlett, 1982).
Globalization as a force has been in motion for much of modern human existence. As humanity becomes more able to move around and communicate across cultural barriers, globalization-- or the interchange of ideas, goods, services, and culture across international boundaries-- becomes more widespread (Stiglitz, 2002). The International Monetary Fund has described the forces of globalization in the modern world as having four basic qualities: trade or transactions, investment or capital movements, the spread of knowledge or ideas, and the movement of people across international borders (Stiglitz, 2002). There is some argument in the business world as to whether globalization is a positive or a negative thing for business as a whole; however, globalization as a force seems to be mostly unstoppable. Essentially, globalization is driven by these qualities; without trade, the movement of capital, the flow of people, and the spread of knowledge, globalization as a force would cease to exist.
Globalization has changed in recent years; there are many different factors that can be attributed to this change. Firstly, transportation is much quicker than it ever has been in the past, allowing for the quick and reliable movement of people around the globe (Marin et al., 2011). Secondly, there has been massive deregulation in some areas that allow people to do business across international borders with minimal red tape; a good example of this is the opening of the Chinese market (Marin et al., 2011). As people become more familiar with the global market, doing business with foreigners, utilizing foreign currency, and even buying foreign products becomes much easier and more natural than before (Marin et al., 2011).
A multinational organization that is participating in the globalized world has a number of advantages over an organization that remains local, but these organizations take on increased risk as well. Lister (2013) writes, “Operating overseas can take advantage of lower labor costs in the same way as outsourcing A multinational corporation can also benefit from reduced transportation costs. For example, a jewelry company could save money by setting up a branch in a country with gold mines, making rings locally, then shipping them to the home country for retail, rather than shipping the gold to the home country for local manufacture” (Lister, 2013). The reduction of operating and production costs is one of the driving forces for globalization in terms of multinational corporations.
Multinational corporations that have their base of productions in countries with low operating costs, for example, can take advantage of cheap labor and permissive local laws to ensure that their production costs are very low. This allows these corporations to make a higher profit on the goods that they are providing (Lister, 2013). Multinational corporations are, perhaps, the most important driving forces in the process of globalization today. In the developing world, working for a multinational corporation offers job security that other sources of revenue do not; however, in many cases, the pay is low (Lister, 2013).
In the developing world, increased involvement by multinational corporations and multicultural organizations often means an increase in revenue for the area in which the multinational corporations set up their place of business. Participation by multinational corporations in developing areas can mean an increase in tax revenue for the area in question, and a decrease in unemployment (Wild et al., 2008).
The globalized world has provided multinational corporations and multicultural organizations with the means to cut their operating costs significantly, allowing them to operate in the most efficient manner possible (Wild et al., 2008). This increased efficiency is one way that multinational corporations increase their profit margin. This is particularly true of multinational corporations that operate in developing countries and whose product is a physical, consumable product, rather than a service (Wild et al., 2008).
The concept of comparative advantage in international business is a complex issue. Comparative advantage, or the ability of a company, business, or corporation to produce a good or service at a lower marginal and opportunity cost than its competitor or competitors (Wild et al., 2008). Globalization, and the forces that drive globalization, often give certain businesses a comparative advantage in certain niches over businesses that are making attempts to function in the same niche.
There are many different factors that go in to making a decision about global business practices. For instance, certain businesses thrive in certain locales, while others do not (Wild et al., 2008). A clothing manufacturer’s base of operations will thrive in China or Southeast Asia, but a corporation that makes a product that requires more know-how and precision may not thrive there (Wild et al., 2008). Globalization allows corporations to make educated decisions about where they wish to place certain pieces of their operation around the globe, cutting operation, manufacturing, and often transportation costs for different parts of the business.
There are certain experts that disagree with this analysis of globalization and comparative advantage, however. Joseph Stiglitz (2002) suggests, for instance:
I became convinced that the advanced industrial countries, through international organizations like the International Monetary Fund (IMF), the World Trade Organization (WTO), and the World Bank, were not only not doing all that they could to help these [developing] countries but were sometimes making their life more difficult. IMF programs had clearly worsened the East Asian crisis (Stiglitz, 2002)
While many economists suggest that globalization is doing good in the developing world and in the developed world, Stiglitz (2002) disagrees from a political and economic standpoint. He suggests that globalization is a force that cannot be stopped, but must be contained and controlled for the good of humanity as a whole (Stiglitz, 2002).
Similarly, Stiglitz suggests that any comparative advantage secured by a corporation when that corporation tries to take advantage of the forces of globalization is quickly nullified by the forces of globalization themselves (Stiglitz, 2002). Stiglitz (2002) argues that when a corporation operates in a developing country, part of their production process can comply with standards set in that country. However, when the products that are produced in that country are moved elsewhere, often to countries like the United States, Canada, or anywhere in the European Union, there are more stringent standards that must be met (Stiglitz, 2002). Therefore, the comparative advantage of the production cycle is effectively nullified, as corporations must conform to the standards set by the nations that contain the primary consumers of their products.
There are other risks involved in participating in globalization in this way, such as potential vulnerability to political upheaval and unrest, or the corruption of whatever government whose jurisdiction the corporation has set up within (Wild et al., 2008). The potential for government involvement is a very real risk and can be very costly for corporations who set their base of operations in politically unstable or corrupt places; there may be advantages to setting up operations in places with low taxation levels and cheap labor, but there are also serious risks that are taken by the corporation when operating on a global scale.
There are different strategies that are employed by management when it comes to being a multinational organization versus a transnational organization, or merely a national organization (Methodframeworks.com, 2012). The difficulties that can arise through working with people of a variety of different cultures are nothing in comparison to the potential positives of working in a multicultural organization; however, as a manager, it is important to learn to communicate effectively with people from a wide array of backgrounds, with a wide range of different ideas, ideals, and cultures.
Perhaps one of the most difficult times for a multicultural organization is the beginning of the shift to multi-cultural organization. Many individuals in management believe that the shift will be easy and painless, but there is a lot to learn about managing people from different cultures. Method Frameworks (2012), a firm that specializes in multicultural organization management, writes: “being a multinational organization changes things. Once companies have the economic power to venture into emerging markets in foreign lands, they face new dilemmas and challenges related to organizing the business structure and adjusting corporate strategy to accommodate a global business model. Companies new to the multinational status can no longer rely upon a singular strategic approach and expect it to work well across far-flung business operations” (Methodframeworks.com, 2012). Essentially, there is a new need for flexibility and understanding in management when an organization makes the shift into a global business model.
One strategy that is often suggested for management when management is dealing with a multinational organization is to localize the organization as much as possible (Methodframeworks.com, 2012). It can be difficult for people who are inexperienced with cross-cultural communication to work outside their cultural framework, and if their job has never asked them to do so before, it can be an unfair request from management (Methodframeworks.com, 2012). Instead, managers should create a space that allows individuals within the company to work within their own, comfortable local framework until they can be trained on how to properly communicate in a cross-cultural setting. This also allows employees within the multicultural organization to feel as though their actions have more of an impact on the organization or corporation as a whole (Methodframeworks.com, 2012).
Organizing a multicultural organization in a geographical manner is not always the best solution, however. If the organization specializes in some type of product or service that requires development, having a multitude of different insights and thought processes make attempts to change the product for the better can be a very positive thing for the corporation or organization as a whole (Methodframeworks.com, 2012).
Globalization is a powerful force, and it cannot be stopped by any actions taken in the near future. Indeed, it is a force that has been unstoppable, arguably since the dawn of humanity; today, humanity is facing the ever-increasing speed of globalization, and it is important for managers to try to implement strategies that help the process of globalization work to the advantage of their respective multicultural organization.
References
Bartlett, C. A. (1982) "HOW MULTINATIONAL ORGANIZATIONS EVOLVE", Journal of Business Strategy, Vol. 3 Iss: 1, pp.20 - 32
Laurent, A. (2006). The cross-cultural puzzle of international human resource management. Human Resource Management, 25 (1), pp. 91-102.
Lister, J. (2013). The Advantages of Multinational Organizations. Houston Chronicle.
Marin, D. and Rousová, L. (2011). The Organization of European Multinationals. Deutsche Forschungsgemeinschaft.
Methodframeworks.com (2012). Corporate Strategy: Multinational Organizations. [online] Retrieved from: http://www.methodframeworks.com/blog/2012/corporate-strategy-multinational-organizations/index.html [Accessed: 29 Jun 2013].
Stiglitz, J. (2002). Globalization and its discontents. New York: W.W. Norton.
Wild, J., Wild, K. and Han, J. (2008). International business. Upper Saddle River, N.J.: Pearson Prentice Hall.
