Currently, we find ourselves immersed in an era that some authors have dubbed an era of 'international realignment' at almost every level—and certainly at the business level—where the need to reconcile different national cultures is no longer merely desirable, but has become a critical factor that can be a fundamental cause, or at least a contributing factor, to the failure of companies and organizations in their international expansion. However, and incomprehensibly and certainly recklessly, intercultural factors are ignored or, even worse, dismissed in favor of legal and financial factors almost exclusively. In other words, the widespread idea that overcoming these obstacles is the end of the road is absolutely wrong. Quite the contrary. Legal and financial agreements are precisely the starting gun for the real problems in international partnerships.
Mergers, acquisitions, joint ventures, and similar strategies are increasingly used by companies and organizations for international expansion. Most experts in this field agree that of all the potential pitfalls that can arise when two or more entities decide to collaborate, the most dangerous and decisive is cultural incompatibility. This "chemistry" problem manifests itself on two closely interrelated levels: differences stemming from their respective corporate cultures, and those arising from their distinct national cultures. However, it is important to emphasize that, in reality, the predominant factor in international expansion is national culture, since corporate culture, as all research has shown, is profoundly influenced and shaped by it.
Well, five basic paths of international expansion can be distinguished (*):
– creation of new subsidiaries and branches abroad (greenfield start)
– acquisition of a foreign company (foreign takeover)
– international merger
– international joint venture (foreign joint venture)
– partial cooperation with a foreign partner
In all of these cases, intercultural relations, in the broadest sense, play an important role. However, the cultural implications differ considerably from one to another. Let's take a look.
Establishing new subsidiaries and branches abroad (greenfield start). This method of international expansion is slow but carries a low intercultural risk, and therefore has a high success rate. Many of the most established multinationals, such as IBM, have opted for this system of international growth. It typically starts from scratch, generally assigning a manager and/or team to build a kind of 'bridgehead' from which to gradually progress: they hire local staff with a high potential for adapting to the corporate culture of the founding company. In this way, the subsidiary's culture will be a combination of elements from both national cultures (values, beliefs, etc.) and corporate elements (professional practices), which usually generates few interpersonal problems.
In the second part of the article, we will see how, however, in the other methods of international expansion, intercultural risks become more acute and complicated.
(*) Hofstede, G.: Cultures and Organizations. McGraw-Hill, New York, 1997
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