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Impacts of Globalisation and Cultural Diversity on Business Performance

Introduction

Globalization can be perceived as the elimination of barriers to internation­al trade as such. Globalization implies broadening the scope of mutual relations between international economies in the quest to optimize the movement of goods and services, human and capital resources, and foreign investments.

Accordingly, the issue of culture comprises an inescapable reality in any globalized business operations. Stahl et al. (2010) defines culture as the social behavior and norms characteristic in all human societies and encompasses a wide range of elements acquired through social learning, such as language, religion, and social habits.

One way or another, both globalization and cultural diversity have significant impacts on business performance, whether individually or collectively. However, there are numerous studies on the individual contribution of globalization and cultural diversity on organizational performance as separate elements (Lynton, 2007; Yu, 2008; Zayani, 2011; Labeș, 2014; Martin, 2014; Komori, 2015).

The consequences of globalization and cultural heterogeneity on multinational companies have yet to be grasped. However, as an increased number of businesses appreciate this pattern and adopt diversity, changes are still bound to occur. In the context of international business, one can view culture as a primary determinant of success (Conversi, 2014).

Similarly, globalization trends have resulted in an exponential increase in global businesses and personnel. Therefore, thorough knowledge and recognition of various cultures in an MNC can help boost communication techniques and, eventually, improve business success.

Problem Statement

Tons of articles have been published on the difficulties, threats, and prospects that the globalization of organisations offers. Furthermore, substantial research has been carried out on the diverse implications of globalization on cultural variegation. However, to the best of the research’s knowledge, there is a very limited amount of work done on the combined effect of globalization and cultural diversity on the organizational outcome. Given this, the research will fill this lacuna by evaluating whether or not the two elements have a synergistic effect on international business outcomes.

Main Objective

To analyse the impact of globalization and a culturally variegated workforce on the performance of MNCs.

Specific Objectives

  1. To determine the effect of employee cultural backgrounds on the performance of Toyota UK.
  2. To evaluate the impact of employee language on the performance of Toyota UK.
  3. To determine the link between globalization and cultural diversity and their synergistic effect on the performance of Toyota UK.

Hypotheses

  1. Employee cultural background has no impact on the performance of Toyota UK
  2. Employee language has no impact on the performance of Toyota UK
  3. There is no link between globalization and cultural diversity, and neither do the two elements have a synergistic effect on the performance of Toyota UK.

Literature Review

Culture

As stated earlier, culture comprises the combined total of acquired behavioral patterns often common within society members. There is no doubt that the modern business environment is dynamic. The cultural environment is, in fact, one of the most difficult areas for most global marketplaces (Richard, 2010; Pieterse, Van Knippenberg, and Van Dierendonck, 2013).

To have the knowledge and influence consumers’ desires and preferences, multinational companies (MNC) need to grasp the diverse cultures. Accordingly, culture has been interpreted in many ways, conceptualizing the diversity of cultural tendencies that can be observed. According to Badal and Harter (2014), cultural elements encompass religion, language, and art, which share meanings from the distinct fingerprint of a certain society.

According to the same authors, cultural elements have a significant impact on how global businesses operate. All societies have their aspects of culture exhibited through religion, language, value systems and beliefs, habits, material aspects, education, and social environments. Appreciation of these factors by an MNC largely depends on its extent of participation in the global market. The most fundamental factor for an MNC is cultural analysis, which encompasses data that can help the firm’s employees make business decisions.

Business Culture

The United Kingdom is a country with enormous business opportunities for MNCs. However, conducting business in this county can also pose fundamental cultural challenges. The UK consists of a typical English culture that woos many individuals to experience this robust environment's heart.

However, if broadly analyzed, the UK's culture consists of a combination of EU, Asian and American culture. Pieterse, Van Knippenberg, and Van Dierendonck (2013) posit that each nation's culture is manifested via three factors, namely, cultural messages, cultural forces, and the consumer purchasing decision process.

Consequently, education, national identity, and family reflect the cultural forces. Issues of ethics and morality, and roles are reflective of cultural messages. It has also been thought that culture is also affected by conventional desires in a country and consumer trends. These cultural elements vary from country to country. As such, a foreign firm needs to critically examine ways of adapting to this cultural diversity and suppress the tension to cause reconciliation in the diversified workforce.

Cultural Diversity

As business operations worldwide continue to appreciate globalization, MNCs have the challenge of dealing with amplified cultural diversity in the context of a workforce. These developments call for business managers to know how to deal with the increased heterogeneity and introduce new policies and regulations for workers. Diversity in value systems and religious backgrounds have been known to cause squabbles in workplaces which can adversely affect the business outcome.

Labeș, (2014) maintains that the decision to participate in global business depends on the magnitude of the organization, home country market, production capability, and the financial and human resources essential for a foreign market. Companies can be categorized in the globalisation scale ranging from single domestic nation to entirely internationalize.

Furthermore, the degree to which domestic culture becomes relevant to a firm can influence business performance, albeit the administrators may not know about impact. However, according to Richard (2010), the importance of other people’s culture becomes greater for a business as it expands its operations globally.

Nevertheless, Badal and Harter (2014) consistently argue that the aspect of masculinity and femininity shows how various societies exhibit the stereotype of men-women or division of societal and cultural contributions of males and females. On the other hand, Confucian dynamism entails the latest dimension incorporated in the cross-cultural structure.

The theory relates to whether a particular culture is particularistic or universalistic. A universalistic culture contends that what is true and moral in one society can be applied in other cultures. In contrast, a particularistic culture maintains that relationships and situations carry weight when it comes to ascertaining good and moral.

Globalization

A major driver of globalisation is the necessity of multinational corporations (MCNs) to boost their profits. It is also motivated by the enthusiastic approach that different countries have to leverage the wider macroeconomic and cultural benefits associated with the increased flow of goods and services globally. However, Martin (2014) argues in his study that increased globalization comes with cultural obstacles that have to be addressed if MCNs are to achieve their objectives.

Global Market Opportunities and Business Performance

International market opportunities have been viewed as related to expansion in market capacity, trade limits and investment possibilities, and accessibility of resources due to globalisation. Advancements in information technology, elimination of trade and investment obstacles, liberalization, and privatization of trade and investment laws have offered firms looking to venture into global markets with unlimited opportunities.

These kinds of developments in the business operations help companies leverage new opportunities and reduce costs by migrating their operations and taking advantage of affordable resources globally. On the same note, market transactions have also become effective owing to the internationalization of technology. These new market prospects have led to fast growth in diverse economic sectors in several countries globally.

Factually speaking, globalisation has made it easier for companies to outsource their processes to various countries in the quest to derive locational advantages as a result of minimised trade obstacles in today’s global marketplace. Furthermore, most MNCs can reach out and serve numerous untapped markets internationally.

Free movements of financial and human resources also boost business operations. Besides, recent communication and information technology developments have also significantly reduced searching expenditure while enhancing efficiency (Meyer, 2017). Therefore, one can argue that globalization helps make the required resources available to ensure businesses’ growth.

Globalization Threats

The UK constitutes one of the strongest economies worldwide. However, as a result of the recession, there have been unprecedented impacts on this country's economic growth. Currently, there are many businesses which are now participating in global operation especially from the Asia Pacific. Meyer (2017) reports that there have been two intertwined processes one can interpret as shifts in the internationalization trends.

The first one is the change in efficiency and the second one is the change in the allocation and coordination of organizational structure. It implies that the international corporations have lost their efficiency due to decreased demand in the market and reduction in purchasing power of customers due to the economic recession that affected the UK.

Similarly, Meyer (2017) argues that notwithstanding having the trade and investment liberalization, shifting consumption and preference trend customers reduced spending on the UK the products and services, so the country has been struggling with growth and business expansion.

Consequently, the manufacturing sector has experienced a remarkable deterioration in the demand and excessive output, which only increases the inventory holding cost of businesses and employee salaries. Furthermore, the high attrition rate has also affected businesses' overall profitability due to the high cost of production coupled with decreased demand.

Impacts of Globalization on Cultural Diversity

As the globalization trend becomes more dominant, many businesses are forced to deal with increased cultural diversity among the employees. These developments call for MNCs' managers to learn how to handle workforce diversity and implement upgraded policies and guidelines for employees. Diversity in work ethics and religion is now the currently trending topics globally. The increased cultural heterogeneity has several benefits and challenges as businesses learn about various cultures from a management and a marketing perspective.

Many studies have indicated that cultural, religious, and ethnic heterogeneity in the global work environment calls for concerted staff training (Lynton, 2007; Woodward, Skrbis, and Bean, 2008; Zayani, 2011).

To protect their businesses and their new personnel from prejudice, business administrators have tried to adopt policies and provide requisite training to existing workers to ensure that they accept one another and coexist harmoniously. Consequently, this has resulted in a greater appreciation of foreign cultures and perspectives in some organizations while irking some staff who prefer working in a culturally homogeneous workplace.

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Methodology

Research Design

This project will utilize a descriptive study design strategy in demonstrating the impacts of globalization and cultural diversity on the business performance of Toyota UK. The research is skewed toward explaining characteristics of the study population while also ascertaining effects of a combined phenomenon; globalization and cultural diversity. Thus the descriptive approach is often meant to extract information that characterizes people and events or situations.

The Selection of the Company

The selected company is Toyota UK.

Justification of the Selected Company

First of all, Toyota Inc. is a Japanese firm with a presence in almost all parts of the world. Toyota has interests with 51 international manufacturing firms in 28 countries. Besides, Toyota's vehicles are sold in over 160 countries. It is only natural for the company to deploy some of the most brilliant Japanese workforces in the UK to run and manage its operations. Since the research deals with cultural diversity and globalization, the researcher found Toyota UK as the best fit for this case.

Study Population

The study population will comprise Toyota UK employees, dealers and customers, and the shareholders. It is important to note that the selected employees will be stratified based on cultural backgrounds and language.

Data Collection

The study will adopt a primary data collection approach using semi-structured questionnaires. Likert scale-based questions will be used to quantify the extent of impact for various parameters. The questionnaire will have three sections. The first section will consist of employees and senior management, where the questions will be further categorized into employee language and cultural background.

The second section will comprise dealers and consumers, where questions on business performance will be covered. The third category will encompass the Toyota UK shareholders that will also have questions on business performance.

Data Analysis

The researcher has chosen to incorporate descriptive and inferential data analysis techniques where descriptive statistics parameters such as percentages, frequencies, averages, and SDs will be used (Yan, 2004). Furthermore, the work will adopt multiple linear regression models to ascertain the interaction between globalization and cultural diversity, and business performance.

The multiple linear regression models can be represented as;

Where Y is the business performance of Toyota UK, α is the independent variable while β1, β2, and β3 are the slopes of the function of each attribute. X1 represents the employee's cultural background, X2, the employee language, and X3 is the combined effect of globalization and employee cultural diversity.

Data Collection and Analysis Summary

ObjectiveData collection techniqueData Analysis Method
1. Impact of employee cultural background on the performance of Toyota UKQuestionnaireDescriptive statistics and Regression analysis
2. Evaluate the impact of employee language on the performance of Toyota UK.QuestionnaireDescriptive statistics and Regression analysis

Limitations of the Study

The research methodology will be applied in the context of Toyota UK only. Besides, the researcher is aware of various employee cultural elements. However, he has chosen to narrow it down to employee language and cultural background to save time and cost.

Ethical Considerations

The researcher perceives the issue of ethical considerations as one of the most critical areas of this research. Furthermore, the author recognizes that issues related to cultural backgrounds and language are sensitive. The privacy of the research respondents will be guaranteed. Besides, participants will be entitled to rights to pull off from the study at any study phases without explanation.

However, the project will obtain full consent from the interviewees before the study commences since he understands the criticality of individuals' voluntary involvement. According to Khanlou and Peter (2005), the philosophy of informed consent entails researchers giving adequate information and guarantees about participating to enable respondents to understand the impacts of their involvement and to reach a fully informed and freely made decision with whether or not to participate with any form of manipulation or coercion on the part of the researcher. Lastly, there will be no use of offensive or otherwise discriminatory language in the formulation of questionnaires.

References

Badal, S. and Harter, J. K. (2014) ‘Gender Diversity, Business-Unit Engagement, and

Performance’, Journal of Leadership and Organizational Studies, 21(4), pp. 354–365. doi: 10.1177/1548051813504460.

Conversi, D. (2014) ‘Between the hammer of globalization and the anvil of nationalism: Is

Europe’s complex diversity under threat?’, Ethnicities, 14(1), pp. 25–49. doi:

10.1177/1468796813487727.

Khanlou, N. and Peter, E. (2005) ‘Participatory action research: considerations for ethical

review’, Social Science & Medicine, 60(10), pp. 2333–2340. doi:

10.1016/j.socscimed.2004.10.004.

Komori, N. (2015) ‘Beneath the globalization paradox: Towards the sustainability of cultural

diversity in accounting research’, Critical Perspectives on Accounting, 26, pp. 141–156.

doi: 10.1016/j.cpa.2014.09.005.

Labeș, S. A. (2014) ‘Globalization and Cultural Identity Dilemmas’, CES working papers, 6(1),

  1. 87–96. doi: 10.1007/978-1-4419-7988-9_13.

Lynton, M. (2007) Globalization and Cultural Diversity, Wall Street Journal - Eastern Edition.

doi: 10.1177/001139294042002006.

Martin, G. (2014) ‘The effects of cultural diversity in the workplace’, Journal of Diversity

Management (JDM), 9(2), pp. 89–92.

Meyer, K. E. (2017) ‘International business in an era of anti-globalization’, Multinational

Business Review, 25(2), pp. 78–90. doi: 10.1108/MBR-03-2017-0017.

Pieterse, A. N., Van Knippenberg, D. and Van Dierendonck, D. (2013) ‘Cultural diversity and

team performance: The role of team member goal orientation’, Academy of Management

Journal, 56(3), pp. 782–804. doi: 10.5465/amj.2010.0992.

Richard, O. C. (2010) ‘Racial Diversity , Business Strategy , and Firm a Resource-Based

Performance : View’, The Academy of Management Journal, 43(2), pp. 164–177.

Stahl, G. K. et al. (2010) ‘Unraveling the effects of cultural diversity in teams: A meta-analysis

of research on multicultural work groups’, Journal of International Business Studies,

41(4), pp. 690–709. doi: 10.1057/jibs.2009.85.

Woodward, I., Skrbis, Z. and Bean, C. (2008) ‘Attitudes towards globalization and

cosmopolitanism: Cultural diversity, personal consumption and the national economy’, British Journal of Sociology, 59(2), pp. 207–226. doi: 10.1111/j.1468-4446.2008.00190.x.

Yan, J. (2004) ‘Survival Analysis: Techniques for Censored and Truncated Data’, Journal of the

American Statistical Association, 99(467), pp. 900–901. doi: 10.1198/jasa.2004.s348.

Yu, W. (2008) ‘Globalization and cultural identity’, in Globalization and Education, pp. 159–

  1. doi: 10.1515/9783110207019.

Zayani, M. (2011) ‘Media, cultural diversity and globalization: challenges and opportunities.’,

Journal of cultural diversity, 18(2), pp. 48–54. doi: 10.1007/978-3-658-06984-1.

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