Cross-Border Alliance as a

strategic Business
Imperative
Diversity Management
Grace
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Contents
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Introduction

Global economic assimilation has strengthened the interaction among communities. The
interconnectedness has also diminished the differences among the economic cultures.
Globalization has changed the way businesses are managed. In the fast paced economy, firms are
finding it difficult to successfully compete in the market place. To maintain and strengthen their
positions, businesses have to expand and grow in the new markets. Businesses have to
incorporate new technologies, produce new innovative products and combine effective human
resources to improve success (Greb, 2010). To benefit from economic opportunity and
strengthen its market position, business has to enter new markets. By doing so, a business
becomes a platform for cooperation among people across different cultures. To be successful in
its operation in an alien environment, a business must understand and respect the community in
which it operates. Understanding involves managing cultural diversity in the workplace and
creating a bridge between people and culture. It provides stability to investment environment
and boosts the economy. Essentially, managing diversity among global consumers, employees
and the stakeholders is critical and vital for business success. Businesses contribute to
intercultural understanding. Successful businesses understand the importance of responding to
global demand. Hence, to enjoy the full benefits of cross-border alliances it is imperative for
businesses to embrace the cultural diversity and convert into an asset.

This essay aims to critically evaluate the effectiveness of diversity management for an
organization in the global market. The essay also focuses on cross border alliances. The essay,
further, evaluates the diversity management and organizational culture of Ernst & Young (EY)
across globe. The essay critically evaluates the cross border alliance of Daimler-Chrysler. The
essay analyzes cross-border cultural strategies of both organizations and make recommendations
to improve the cross-border management.

Diversity Management
Diversity management can be defined as a broad set of activities that promotes several lifestyles,
and respect cultural and geographical backgrounds. It refers to those practices that support
inclusion of employees from various backgrounds into professional and formal organizational
structures. Diversity management as a concept enables recruitment and integration of employees
that belong to diverse cultures. Globalization has resulted in growth of workforce diversity. The
diversity management policies design a welcoming organizational environment to
underprivileged group that lacked access to more lucrative jobs. Globalization has contributed
resulted in establishment of multinational corporations and increasing number of foreign direct
investments. Diversity management application has also changed from within the country to the
workforce management across borders. Diversity management is classified according to the
workforce. International Diversity Management applies to the workforce in the organizational
structure of one country. It incorporates immigrants of the country working employed in the
organization. Cross-national diversity management corresponds to the management of
workforce working in the organizational capacity across different countries. This applies to any
organization that has branches in different countries. The organization manages the workforce by
establishing sound policies and training methods. Both types have to face certain challenges that
involves respecting laws and regulations of not just home country but also in other countries.
Different cultures practice different legislations regarding employee’s rights. Diversity
management needs respecting these legislations and utilizing them to enhance organizational
performance (Millikins & Martin, 1996). Cox (2001) suggests that managing diversity is
complex. To increase its potential as a resource, certain conditions have to be created so that
performance is maximized. Millikins and Martin (1996) states, that diversity management
includes managing two different groups. Firstly it refers to the discriminated group. Secondly it
refers to the dominate group. It aims at diminishing the differences and promoting the
similarities between the two groups to enhance the organizational performance.

Human Resource approach to diversity management

Human resource supports production of a homogenous workforce. Recruiting practices need to

select those employees that can co-exist with the existing workforce. New recruits should be
able to blend in the organizational culture. Therefore, diversity management, human resource
management and organizational outcomes are interconnected. Schneider and Barsoux (1997)
suggest four approaches that apply enhance the interconnection. The first approach aims at
changing organizational culture by changing the workforce composition and targets recruiting
employees from diverse backgrounds. This approach is diversity enlargement and assumes that
the presence of diverse workforce will bring a change in organizational culture. The second
approach assumes that differences will affect the performance and thus train workforce to
increase the communication process. It is called diversity sensitivity approach. It aims to support
and promote productive collaboration of the workforce. Culture Audit identifies challenges and
dilemmas faced by employees of diverse backgrounds. Culture audit focuses on conducting
surveys and focus groups to address the deficiencies through changes. Lastly, human resource
adopts strategies for achieving organizational outcomes. It assumes that diversity management
practices have to be associated with individuals and respective organizational outcomes. Hence,
it focuses on achieving organizational goals through diversity management.

Significance of Diversity Management

There are several reasons for implementing diversity management. Businesses have to adopt
diversity due to increasing pool of diverse workforce. Business can use it as a resource to gain
competitive advantage against its competitors. Businesses also have a corporate social
responsibility to promote social justice and promote moral and ethical values. Diversity
management is, therefore, a necessity for companies to survive the economic and cultural
change.

To cater to the changing demand of global economy and for better performance companies are
adopting cross-border arrangements. A change in technology and competition of financial
resources has forced companies to ally. Industry boundaries are disappearing and industries are
undergoing rapids changes to compete globally.

The cross-border alliances are essential in this age of collaboration. Cross-border alliances
ensure the gain of resources that are necessary to win in the changing global marketplace.
Earlier, business success was attributed to acquiring latest technology and international sales.
However, globalization has changed the structure of competition. Markets are global and
competitive success relies on the gain of capabilities. To gain advantage, companies have to
minimize the costs and maximize the value. Thus, an increasing number of global enterprises
recognize cross-border alliances as the strategic way to promote growth and efficiency in
productivity in a cost-effective manner.

Cross-Border Alliance

Firms exercise options such as licensing agreements and limited partnerships. These forms of
cross-border arrangements require little change in the normal operations. Joint ventures,
international acquisitions and mergers are complex form of cross-border arrangements. Firms
must learn to manage their operations in these types of arrangements. These arrangements
involve organizations interdependent on each other. Therefore, cultural diversity and cultural
differences impact the success of the organization. Managing Cultural diversity is challenging.
For example consider a case of merger or acquisition of two organizations in two countries or
joint venture of organizations across 3 countries, as the number of organizations increases in an
alliance, the level of cultural diversification increases.

Managing Cultural Diversity in Cross Border Alliance

Firstly, cultural diversity can be managed by segregating organizations in the alliance. Top
management of the organization continues to operate as it operated prior to alliance. This is
possible when one firm takes over another firm in order to expand into another business across
border. Secondly, if the organizations involved in alliance blend together and form a new
organization, culture diversity is managed by integration. Thus, members from each organization
and culture will have to adapt to each other’s organizational culture. Blending ensures strengths
are complemented and weaknesses are removed barrier (Yoshino, 1995). Managing cultural
differences and national differences is also critical when two organizations merge together to
form a new enterprise. Lastly, in a scenario of a complete takeover, the target firm may lose it
identity to the acquiring firm. Thus, there are different challenges faced for diversity
management in cross-border alliances. The challenges must be overcome to reap the benefits of a
diverse workforce. To benefit from globalization, businesses will continue to support cross-
border alliance to grow extend their operations worldwide. However, to succeed businesses must
administer culture diversity resulting from arrangements such as joint ventures, and mergers &
acquisitions. Diversity management requires overcoming the cultural gap between the alliance
partners. The optimal way to reduce gap is designing a new human resource system. This system
must ensure alignment among the formal systems. Steps must be taken to ensure that
organizational structures do not create barriers in cross-cultural collaborations. Only a competent
workforce can effectively contribute in desirable outcomes.

Diversity at Ernst & Young

Ernst & Young (EY) is a multinational audit firm. The network is widespread with members
operating as separate legal enterprises in around 150 countries. It offers services like financial
and tax auditing and consultation services. The firm headquarter is present in London, United
Kingdom. To succeed in global market, EY integrates aspects such as diversity and inclusion.
These aspects are components of the organizational culture. EY utilizes diverse teams in
problem solving. To encourage innovation, firm focuses on establishing a diverse mix of
employees. These employees are from different cultural backgrounds and bring with them the
strong commitment. To capture changing business dynamics, EY has built diversity and
inclusive leadership program. The program aims on diversity management across Middle East
and Asia. The program ensures that its targets are aligned with the cultural and legal framework
in which the firm is operating. Thus it manages the complex cultural diversity by implementing
approaches such as blending. It believes in engaging talent across the globe to attain positive
outcomes. The commitment for program comes from the diversity in the top management. The
senior level then gets involved in promoting it at regional level. At present, the firm aims to
address an increase in female representation in the workforce. The work environment at EY
embraces culture in all its diversity and uses it as a resource to meet the global demand.

Cross-Border Alliance of Daimler-Chrysler

The merger of Daimler-Benz and Chrysler in 1998 resulted in a failure (Dutta, 2001). The main
reasons behind the failure are the cultural differences and differences in the organizational
cultures of the two giant global corporations. The failure of the merger increased the importance
of embracing culture with all its diversity to reap the benefits of the global market. There was a
huge cultural gap in the merger. Daimler-Benz is a German company. Daimler focuses on
efficient and conservative policies in its operations(Dutta, 2001). On the other contrary, Chrysler
Corporation is a US enterprise that focuses on innovation, and diversification. Daimler excels at
luxury cars where as Chrysler rules American market by manufacturing creative consumer
friendly cars. The differences in organization culture that were observed in the merger were
primarily based on organizational hierarchy. Daimler works according to a top-down
management approach. There exists a clear chain of command. There is a practice of centralized
decision-making with respect for authority. Precise implementation and detailed plans are also
practiced. In the case of Chrysler a team-oriented approach is adopted with preferably flat
organizational structure. At Chrysler creativity and trial and error experimentation is encouraged.
Chrysler adopts egalitarian approach rewards its management handsomely. So the merger was
doomed to fail due to huge differences in the corporate culture. The German company wanted to
take advantage of Chrysler efficient production so work freedom was granted at first. However,
later Daimler took over administration of Chrysler to manage things its way rather than utilizing
synergy effects.

Apart from organizational cultures, differences also existed on customer valuation. Chrysler
highly values their clients and believes in quality production (Dutta, 2001). The consumers enjoy
unique designs at competitive prices. American and German management differed in cultural
values which resulted in conflict of goals and targets. Trust issues were highlighted as employees
refused to collaborate and cooperate with each other. The merger highlighted the
communication challenges due to lack of coordination and trust among the workforce. The result
was evident in light of reduced production and profits. Thus the merger ended as one of the
biggest failures in cross-border collaboration.

The main challenges in cross-border or cross culture mergers highlights that cultural differences
cannot be ignored. There is a need to develop a mutual understanding rather suppressing each
other in context of cultures and organizational change. A unanimous framework must be
developed in the case of cross-culture alliance. This framework must involve both cultures and
agreement on behalf of members to respect and compromise on each other’s behalf. In the case
of cultural discrepancies one of the major approaches that can be adopted is the cross-culture
communication strategy. The goals, norms and regulations must be precisely communicated.

Significance of Cross-Culture Communication

Active cross-culture communication ensures mutual sharing and acknowledgement. The shared
understanding enables problem solving and increase work values and norms across corporate
culture. It also cultivates a multicultural environment where brand value is created across the
globe. To enhance cultural diversity communication of ideas and information is essential. It
enables workforce ownership and accountability (Greb, 2010). Proper communication channels
encourage and support leadership recognition promotes meeting objectives and goals. Consider
an example of an immigrant in an international labor market; the immigrant worker needs to be
communicated the organizational goals for efficiency. Effectiveness of Cross-border
arrangements relies on information sharing. This may become a challenge if one party does not
anticipate and information sharing at the time of arrangement. The poor communication shall
result in compromising the agreement and failure of arrangement. The organizational culture
must establish relationship of mutual respect to drive positive outcomes.

For financial success of enterprise cross-border communication strategies are critical. Enterprises
seek potential opportunities in foreign countries. Cultural variances and language barriers may
result in communicational challenges and make it difficult to reap the benefits of foreign
markets. Therefore, most of the global enterprises train their employees to become fluent in
foreign languages or to be flexible in adopting foreign cultures. The multilingual and
multicultural skills enable better management of operation in these countries. The only challenge
to cross-border arrangements are the cultural differences and enterprises should seek to develop a
knowhow of culture in order for the successful operation. Employees who are well trained and
well informed in another culture or have knowledge of different foreign languages will
understand more about the dynamics of a business situation when they involved with other
cultures. Their knowledge may make the differences between success and failure in a
competitive or collaborative situation.

In cross cultural circumstances the processes of alliance building remain applicable, but the
managers who are recruited should be guided to become expert not only in communications,
positive response, and facing challenges, but also in the additional obstacles caused by cultural
differences. It is vital to understand the problem of cultural dissimilarities and language
communication in developing an international arrangement (Cornelius, 2004). It is also essential
to be well rehearsed in the migratory and entrenched knowledge. The capability of organization
in this regard plays a significant role in a cross-cultural scenario. Most of the firms chiefly rely
on the migratory knowledge rather than valuing the embedded, and this often leads to a failed
alliance.

Recommendations

Bridging the cultural gap in the cross border alliance can improve business performance through
diversity management. Thus, it is imperative for global enterprises to focus on cultural
differences. Variations and differences can be minimized by extending similarities. This means
that focusing on extending operations in more similar culture and business environments. The
similarities can also be enhanced in strategic manner. Decentralized decision-making or
employing top management of home country enhances the potential international synergies.
Moreover, cultural adaptation by workforce makes a firm more responsive to local conditions.
The firms shall also focus on reducing cost of adapting to local cultures. Cost minimization is
best possible in adopting approaches such as joint ventures. Entering into partnership with local
firm will enhance the cultural understanding and shall remove communication barrier (Yoshino,
1995). It is both costly and time consuming for a foreign firm to adapt to culture effectively.
However, partnering with a local firm provides a platform to gain access to local knowledge and
networks. It allows cross-culture capability to manage business operation efficiently in foreign
markets. Promoting corporate culture can also minimize differences barrier (Yoshino, 1995). An
effective human resource system can contribute in attracting and cultivating workforce who
value the corporate culture. In this regard, however, steps should be taken to ensure that culture
values are not overpowered by corporate values. Cultural diversification shall be promoted in the
recruiting process. Building a diverse workforce can strengthen the adaptation flexibility.
Moreover, improving the workforce capabilities can mitigate the cultural differences. To
enhance the capabilities and flexibilities of the employees training system and work rotation
system shall be supported. Participation in international trainee programs in exposure to foreign
cultures can enhance the understanding and experience. Increasing the diversity of management
teams can also ensure high growth rates in foreign markets. Promoting internationalized
leadership teams can be highly productive. Moreover leadership shall focus on extent of
adaptation of the cultural environment. Business that sells directly to consumers is not impacted
by cultural differences as much as businesses that bank on sales through outsourcing. Moreover
service industry is more prone to cultural differences and is negativity affected by failures of
managing diversification. Also, businesses must spent on research and development and invest in
marketing conditions that are aligned with organizational objectives. Lastly, communication of
organizational goals avoids confusion and misunderstanding. To avoid, uncertainty among
employees and unpleasant working environment, the planned changes and common shared vision
must be properly communicated from top to bottom. The objectives and goals shall be carefully
planned. The targets shall have reasonable time-frames and involve all relevant stakeholders of
the organization. Planning involves not only setting up targets but also establishing an
implementation system.

Conclusion

For multinational corporations, cultural differences present a consistent challenge. Firms that
adapt the changes and bridge the gap effectively are able to maximize the gains from cross-
border alliances and diversity management. Cross-culture communication is essential for
achieving congruence in the cultures and effective adaptation. Communication works as an
essential tool in bridging the cultural differences. Culture Diversity is an advantage provided by
increasing globalization. Therefore, firms should utilize the advantage for their financial gains
and productive organizational outcomes.
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