Rosali Kruger
THE VIRTUE OF BUSINESS RELATIONS By Rosali Kruger 1 April 2009
Global Initiatives Symposium: “Challenges and Opportunities, the Global Economy in the Transition Phase” Theme: Find the Next Wave to Ride On — New Business Strategies in the Changing World
*Word count, excluding title page and bibliography: 1917
Rosali Kruger Introduction Regardless of technological and logistical aspects of business, the quality of human relationships affect the success of a business, therefore human relationships should be central to a business strategy. Trust, ethical behaviour, communication, honesty and transparency are essential to build relationships. In an age where knowledge and technology are easily accessible, positive relationships in a global firm between managers, employees, customers, suppliers and host governments could be what defines one company to be more successful than another. “The best strategy for a given firm is ultimately a unique construction reflecting its particular circumstances” Michael E. Porter A company strategy comprise of methods envisioned by managers to conduct operations, obtain and maintain customers, ensure growth and attainment of objectives. Thompson (2005) suggests ten principles for crafting sound business strategies, three of which are pertinent. Firstly, company actions should be aimed at developing long term competitive position, secondly prompt responses should follow developments in market conditions, new customer demands, and the availability of new technology and competitor initiatives. Thirdly, provision should be made for unfavourable market conditions. This essay argues that a global corporation‟s long term market share will be encouraged if current unfavourable market conditions are recognised and relationships nurtured. According to Thomson (2005) what distinguishes a successful strategy is how well it is adapted to external factors and internal aspects, if it creates a sustainable competitive advantage and if it improves company performance. External factors include industry conditions, customer preferences, and societal, political, technological, economic and environmental considerations. It is essential to understand the impact of these external conditions when crafting a strategy as new economic and political boundaries could develop and affect multinational enterprises functioning in a network of economies linked through the process of globalisation. The external factors will briefly be discussed in context of current events. Current Events Societal considerations, such as change in sentiment toward a country, are relevant to designing a global company‟s strategy as it could result in barriers to freedom of trade. The concept of „neo-colonialism‟ has come about as a result of the use of resources of less developed countries by foreign interests, but denying the host country similar benefits. This phenomenon is driven by increased food prices and anticipated food shortages most often by China and Middle East countries that are rich in oil but not arable land and water. GRAIN, a food security-focussed non-governmental organisation, reported in October 2008 that more than one hundred instances of „land-grabs‟ have occurred, mostly in African countries such as Zimbabwe, Nigeria, Mozambique, Uganda, Cameroon, Tanzania. For example, the South Korean company, Daewoo Logistics Corporation, purchased 1.3 million hectares of land in Madagascar which represents half of its fertile land. 70% of Madagascar‟s population suffer from malnutrition. (Ashton, 2009) Increased foreign investment by transnational companies is urgently required by developing countries, particularly in the infrastructure industry. (Ban Ki-moon, 2008) If foreign investors create a resistant market in developing countries by acting unethically, it could dramatically
Global Initiatives Symposium in Taiwan 2009
influence the profitability of global corporations planning on expansion into these emerging markets. Environmental considerations such as climate change will have far reaching effects on the way business will be conducted. It is suggested that global trade activity will decrease as carbon dioxide emissions are repriced, making local trade more favourable. (Swanepoel, 2008) Negative sentiments towards large corporations consuming large quantities of fossil fuels could develop as climate change begins to take its toll. Those companies that adopt an environmentally conscious business strategy will have a competitive advantage. Political considerations such as changes in immigration policies and xenophobic sentiments could require a change in workforce management. (Ragaven 2008) Perceived boundaries of nationality and race become more evident as resources and employment become scarce. Management strategy should provide for new human resource management challenges. The economic implications of the current financial crisis could encourage local investment and employment rather than foreign investment and employment of other nations in the global company. (Tsele, 2008) Technological considerations include the need for intricate, customerbased controls as the exploitation of sensitive information and geopolitical threats increase. (Foulon, 2007) A successful business strategy should address these current issues in order to anticipate increased economic, political or societal boundaries. It should require ongoing management analysis, allow adaptability and promote management negotiation skills. Alan Rugman proposes that a strategy should always be situation-driven, regardless of whether a customised or standardised product or service is delivered. This requires comprehensive study of cultures, lifestyles and market demographics. It is proposed that there are three principles underlying the success of a business strategy in the current economic and political setting. These principles are based on a humanistic approach which I believe will enhance business relations and business performance. They can be applied to all stages of strategic planning and will help the organisation to be aimed at sustainable and ethical success. As a business revolves around a workforce and customers, it follows that human relations should be central to the strategy of the business. As technology and knowledge of business models and strategic plans are becoming easily accessible to all companies, what could differentiate global firms is the loyalty of employees, customers and the relationships with host country governments. These relationships can be fostered by the three principles of comprehension, contribution and communication. Comprehension Comprehension, or understanding, of the culture and markets of countries in which a global firm operates is a key element of a business strategy. A foreign country presents new challenges regarding competitors, customers, suppliers, financial institutions and governments. Cultures treat business challenges differently as found by the MIT Sloan School of Management which observed that during economically challenging times American companies see retrenchment as acceptable, where European companies find it too expensive due to government restrictions and Japanese companies do not allow it. (Thompson, 2005) The importance of cultural research and adaptation to local preferences cannot be over emphasized. Misinterpretations of gestures could occur, such as when United Airlines
Find the Next Wave to Ride On - New Business Strategies in the Changing World
Rosali Kruger
experienced slow initial sales in Hong Kong. Later they realized that the gesture of handing out white carnation flowers was misinterpreted as Asians associate the colour white with bad luck and death. It cannot be assumed that as a result of globalisation cultural differences disappear and a product will be universally accepted. In fact most global companies, such as McDonald and Nescafe, have adjusted their products to suit local preferences. (Ricks, 1999) Intensive research must be undertaken to determine if the product is viable. Cultural diversity could be of great benefit to an employer. According to Lewis (2006) diverse teams of people allow for greater innovation and generation of alternatives, enable a global firm to respond better to cultural preferences in local markets, allow better local forecasting and critical analysis of situations. Cultural diversity could lead to more creativity, less conformity, and varying product design which could bolster sales. Global companies may come to rely more and more on marketing strengths as more companies from around the world can enter the market due to the availability of information and technology and competition increases. A small accounting college in Zambia could grow to become a popular outsourcing partner of accounting tasks, in direct competition with larger accounting firms such as KPMG that could charge greater fees. As it is situated in a landlocked country, focus on production of services and digital information rather than primary sector goods could be beneficial due to high transportation costs in Africa. (Fourie, 2009) Top managers cannot gather enough information themselves and must rely on loyalty of employees and good business relations to ensure the success of the firm. Managers should be educated as to understanding cultural differences and body language. Cross-cultural understandings, networking and understanding of geopolitical forces is central to good management (Smit 2002). A vision of a diverse workplace and an example of tolerance and acceptance should be set by top management. Employment of local people in a host country is central to catering for the market as there is no one who can give an understanding of a country as its citizens. Employers could capitalise on the individual strengths of cultures in diverse teams, such as the talkative nature of Italians, the warmth of Africans and the courtesy of Japanese and team building exercises could allow leadership qualities to surface in unfamiliar situations. It could also be beneficial if exchanges were arranged for employees to live with foreign families to gain understanding of a foreign country from a citizenâ€&#x;s perspective. Contribution Due to the bad publicity the some foreign investors have created by tapping resources of a host country without benefitting its people, it has become imperative for a global firm to assure the host country of its intention to contribute to the people. Every action of a company is interpreted as what a company stands for. Contribution can include the implementation of infrastructure, social upliftment programmes, housing, job creation or environmental rehabilitation of mining areas. It was expressed well by an executive of the Royal Dutch/Shell company who said that corporate social responsibility “is not a cosmetic; it must be rooted in our values. It must make a difference to the way we do business.â€? (Thompson, 2005) In order to counter societal and political barriers, corporate social responsibility and environmental responsibility should receive top priority to get the alliance of government and the sentiments of the people.
Global Initiatives Symposium in Taiwan 2009
Vodacom, a leading South African cellular company in has seen dramatic increase in revenue, mostly driven by operations outside South Africa, such as Mozambique, Lesotho, Tanzania and the Democratic Republic of Congo. (Mochiko, 2009) If one drives through Mozambique it is common to find informal settlements with Vodacom billboards forming part of the houses, so that it seems that the whole town is blue. (Fourie, 2009) Vodacom is an example of a company that has been integrated into the lifestyle and culture of their clients. Their success lies in the fact that they are contributing socially as well as providing a service. By emphasizing the contribution that a company can make to a host country, good customer relations can exist. An ethical strategy will build customer trust and loyalty and will encourage long term market share. Good leadership should set an example of commitment to integrity and this should be communicated to employees. Communication In order to win the sentiments of the host countryâ€&#x;s people and the global companyâ€&#x;s workforce communication must receive precedence. Good communication will win support of people and break down resistance or perceive barriers. (Thompson 2005) Communicating to a different culture in a foreign language presents challenges, but once again it is important to employ and win the trust of local employees. Communication with employees about diversity issues, provision of peer support, and employment of a cultural advisor and the recognition of development of diversity skills should be incorporated into a global companyâ€&#x;s strategy. Communications with customers could be enhanced by having a direct call in line on which customers could voice their needs and requests for products. This could give a company innovative ideas and the opportunity to directly address the needs of the people. It should also be communicated that the global firm is not there to reap short term benefits, but to make a long term investment which would foster trust and customer support. Conclusion Human relationships remain the cornerstone of successful global company, regardless of technological sophistication of its systems. By obtaining an understanding of the cultural differences of host countries, communicating respect for diversity and a willingness to contribute to their country, a sustainable market share can be maintained.
Find the Next Wave to Ride On - New Business Strategies in the Changing World
Rosali Kruger
Resources Books
Brevis, T., Vrba, M.J., De Klerk, A. 2002. Management Principles: A contemporary Edition for Africa. Juta: Lansdowne. Thompson, A.A., Strickland A.J., Gamble J.E. 2005. Crafting and Executing Strategy, McGraw- Hill/Irwin, New York. CIMA: Management Accounting – Business Strategy. 2008. BPP Learning Media Ltd, London. Clegg, S.R, Ibarra-Colado, E., Bueno-Rodriquez, L. 1999. Global Management, Sage Publications, London. Rugman, A. 2001. The end of Globalization, Amacon, United States of America Nelson, C.A. 1999. International Business, Thomson Business Press, London. Lewis, R.D. 2006. When Cultures Collide, Nicholas Brealey Publishing, USA. Ricks D.A. 1999. Blunders in International Business, Blackwell Publishers Ltd, Oxford.
Journals Foulon, M., Padilla C.A, In Pursuit of Security and Prosperity: Technology Controls for a New Era, The Washington Quarterly, Volume 30, Number 2, Spring 2007, pp. 83-90 Newspaper Articles Ashton, G. 2009. New colonists scramble for Africa, Cape Argus, 27 January 2009, Page 13. Interview Mr Johan Fourie, Lecturer at the Economics Department of the University of Stellenbosch, 20 January 2009 Websites Swanepoel, E., Business Report, Energy deficit may deglobalise world as it did Rome, 12 November 2008. Available at <http://www.busrep.co.za/index.php?fSectionId=558&fArticleId=4708578>. Ragaven, C.R., Pumbazuka News, South Africa: Xenophobia is a Global Phenomenon, 17 July 2008. Available at <http://allafrica.com/stories/200807171124.html>. Tsele, L., „We have entered different times’ - President Motlanthe on the economy, 3 December 2008. Available at <http://www.sowetan.co.za/Sport/Columnists/Article.aspx?id=897352> Ban Ki-moon, World Investment Report, July 2008. Available at <http://www.unctad.org/en/docs/wir2008_en.pdf>
Global Initiatives Symposium in Taiwan 2009