What are the many cultural, political & geo-economic challenges faced by organisations operating in a global environment. How could they be addressed?

The major cultural challenges facing a global enterprise is understanding and adapting to local business customs and norms. In the Real World Case we saw how business in Africa tends to go on at a leisurely pace – a practice that undermines the principles of efficiency and expediency that multi-national enterprises thrive on. Understanding cultural sensibilities and adapting to them requires an open-mind and a flexible management approach. This can prove quite challenging if the top management is too engrained in their B-school trained approach. Often government bureaucracy or red tape can hinder expedient project execution. Red-tape can thus be considered both a cultural and political issue. Another political issue is the state of development. As emerging economies are mostly from the Third World, the available infrastructure can be quite rudimentary. This is a geo-economic challenge, for a majority of the population might be IT illiterate, as reflected in minimal usage of Internet and other IT-enabled services. As the experience of Forrester Research and Cadbury illustrate, the broadband speeds for Internet usage in Africa is practically unfit for business purposes. This is especially so because the existing global IT systems for these companies are technologically far superior (and possibly incompatible) to what is on offer in developing markets. Geo-economic challenges extend further. To illustrate, let us take the particular instance of the entry of foreign banks in China. Understandably, the international press and the analyst community have focused on the critical issues of

“financial transparency, adequacy of capital and loan provision, as well as the levels of non-performing loans (“NPL”s). While these remain key issues, one also has to ask whether plans are in place to address the inevitable management challenges that face banks transitioning from a unique, planned economy to a market economy.” (Yeung & Lyngaas, 2005)

The primary task of the management team in the new market is in coming up with solutions for cultural, political and geo-economic challenges identified above. Understanding local culture is mandatory so as to establish goodwill among local vendors, suppliers and clients. At the other end of the operations, cultural sensitivity is the key for attracting, retaining and expanding the consumer base. The last thing managers trained in a Western business school ethos want to acquire is a reputation for intolerance and insensitivity for people from different cultural backgrounds. Such an outcome would not only jeopardize the prospects for the company to expand globally but also undermine career progress for the individuals involved. Furthermore, the pace of change and ongoing weakness in the global economy mean that decision makers are looking for
“real-time insights on developments in overseas markets, regardless of the language in which those developments are reported. The ability to discern meaning quickly from local-language news sources or databases can spell significant competitive advantage. One has to be ready to capitalize on what is happening in emerging markets and be tuned in to identify new opportunities quickly, even if they’re not in their native language.” (Kho, 2011)

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