Shaping global business strategy based on cultural determinants

This article is based on a research paper that I reviewed recently as included in the reference section. The focus of this article is to draw the importance of cultural influences on global strategic positioning of any company/industry. Through his research oriented paper, author Tay H. K. has done a good job in analyzing the current and emerging auto market in the global arena and gives some good advice that I think could be generalized to attain global strategic positioning for any industry that wishes to remain competitive in the global market.

The author paints the current state of auto industry in major countries such as US, Japan, Europe, China and India and tries to compare these industries to show why a particular country is a leader and how strong is the influence of culture on over all business strategic positioning within the country and globally. As as example, it is said that US has a tradition of basing NPV based methods for finance management for fast profits and quarterly results, focusing somewhat on improving stakeholder’s stock options. This was particularly noted in the auto industry and this cultural influence has severely undermined the growth potential of the industry when other countries like Japan excel. Many auto companies resorted to ‘adversarial supplier relationships, which resulted in ‘zero sum’ game. Also many opted for ‘big-bang’ ideas (eg: extensive portal based solutions) just for the sake of technology boom, which resulted in huge losses (eg: e-GM which cost huge money for GM). 

Japanese on the other hand is deep rooted on ‘collectiveness’, ‘frugality’ and ‘resourcefulness’ does not put business profit as primary target, but objectives such as ‘collective is bigger than individual benefits’, ‘life-long devotion for perfection and quality’ and frugality even in times of adversity. Their methods of ‘custodian’ leadership, ‘Kaizen’ model, and management by consensus is very effective which created very impressing results in the industry, both locally and globally. 

This strong cultural influence has lead to strong strategic positioning where Japanese automobiles are considered as one of the high quality. Basing on their strong cultural foundation, they were able to attain strong markets globally – US, Europe, China etc.  Europe is said to be centered on its cultural influence of strong affinity for engineering perfection and high quality models at high prices. Cultural factors such as shorter work periods, more generous employee benefits and worker job protection – resulted in business models with less margins and are easily affected by emerging players. 

Similar studies in China and India shows that there are emerging players and each of them base their business models on their specific cultural setups and are equally competent. But, when these players go out to establish their regimes globally, they should understand the impact of cultural setups and what changes they need to make within their own business process so that they could remain strategic.  Author lays down some good advice, which I summarize as follows – 

Company should foster a common culture, which I see should be global enough to combine and control global design, manufacture, operations and other business functions. Focus on business maturity, stability rather than on monetary advantage of stakeholders. Support value generating strategic initiatives rather than concentrating ‘quarterly financial report’. Identify world players and form world class benchmarks. eg: consider emerging players like China and India.  Follow ‘produce where you sell’ concept, which has long term impacts to fine tune value chains. Build global supplier partnerships. Proactively work with government and policy makers to influence local and global policy-making – Tough job, but is required to create a culture which gives global strategic positioning for the organization.

Reference: 

The article is based on review of paper as referred below –

(c) Tay H. K. (2007). Rethinking competition in the world auto market: cultural determinants, strategic implications and game rules. Retreived on February, 2010 from http://www.htayassociates.com/resources/Cultural+Determinants+of+the+21st+Century+Automotive+World+Order+HTAYASSOCIATES+2007.pdf