Benefits and problems likely to arise when operating a joint venture partnership
There are diverse accounting and business reasons why firms may opt to be involved in a joint venture. Entering into a partnership with a business entity that has flattering capabilities, competencies, and resources like vast and effective distribution channels, financial resources and technology justify the core objectives behind engaging in a joint venture (Alkhafaji, 2003). In the case of IKEA, joint ventures primarily serve the underlying core objectives including the distribution of both risks and rewards with the foreign company in collaboration, distribution of technology, joint efforts towards product and service development, and ensuring that there is compliance with the foreign government set of laws (Briscoe & Schuler, 2004).
Benefits of joint venture partnership
One of the potential benefits to IKEA for operating a joint partnership is that it serves to integrate the resources of the partnering business entities, which in turn results in production and cost efficiencies. This is to the advantage of IKEA because it will gain access to larger capital and assets and production technology. This means that minimal investment is needed when operating joint venture partnerships because the underlying technology and capital are shared among the partnering companies. Also, operating a joint venture partnership offers IKEA with an opportunity to access new capacity and skills (Dowling & Welch, 2004).
The second business advantage associated with operating a joint venture partnership for the case of IKEA is that the firm will be perceived as an insider in the target market of the host country. This comes as a business advantage for the firm when compared to other options of entry such as Foreign Direct Investment. This plays an integral role in overcoming the barriers related to the restrictions on ownership and the cultural variations in the host country. Also, this offers an opportunity through which IKEA can adjust its business-level strategies to meet the demands of the target market (Duane & Hoskisson, 2008).
Another business advantage for IKEA when operating a joint venture partnership is that the risks are shared. Also, joint venture partnerships are effective in scenarios whereby the strategic goals of the business partners are converging and their competitive goals are diverging. Currently, IKEA’s business strategy focuses more on expansion to foreign markets; therefore, the partnering company should also be having similar strategic goals. Joint venture partnerships are flexible and only tend to last for a limited duration, implying IKEA can opt to disintegrate its business with the parent company or acquire the business from its partnering companies (Haar & Bardoel, 2008).
Problems likely to arise during a joint venture partnership
Constraints that are likely to arise when engaged in a joint venture partnership in a host country is due to the lack of support from the head office because shared operations similar to the aspect of joint executive management and property rights usually tend to reduce organizational support and collaboration from the head office. There are also potential causes of mistrust relating to proprietary knowledge and cultural differences that are usually common when entering a foreign market, which can significantly impair integration and co-operation. Joint ventures also result in an imbalance of expertise and investment by the partnering companies, which are likely to affect the core objectives of the venture (Hill & Cronk, 2010).
Advisory to IKEA
Engaging in a joint venture partnership can reconstruct the business although it is a strategy for business growth in a competitor environment, implying it should be in line with the business level strategies of the firm. This implies that it is important for IKEA to review its business-level strategies before engaging in joint venture partnerships (Hill & Jones, 2007).
Typical situations where the Swedish way of managing conflicts with local national managerial styles in various countries
With the increasing trends associated with global business, it is important to take into consideration the value of cultural differences. Different cultural attributes imply different management styles across different countries. There are various ways through which the Swedish management style conflicts with most local managerial styles in various countries. It is arguably evident that the Swedish management approach is more people-oriented, based on empowerment and less hierarchical organizational structure. This means that Swedish managers achieve the goals by making use of the loose management approach compared to other management styles that focus more on control and building the relationship between the manager and their respective employees (Klarsfeld, 2010). As a result, Swedish managers are most likely to fit in dynamic business contexts, willing to risk, and ready to implement untested management approaches. This unique experimental attitude of Swedish managers implies that Swedish management relies on instincts rather than the capacity to analyze data for decision-making. Swedish management does not invest a lost time in planning head; rather, they make use of the hands-on approach for quick action that is based on practical approaches to achieve the business goals and objectives.
Swedish management style is also people-oriented, meaning that Swedish managers are mostly informal, friendly, and flexible. The Swedish management style focuses on team-oriented decision making, and tasks are performed through the enlistment of individual talents to achieve business goals and objectives, which in turn encourage autonomy in individual judgment. Leadership mainly entails helping others (Klarsfeld, 2010).
Another unique characteristic of the Swedish management style is that it does not base on persuasion and the managers do not aim to sell their ideas, and they offer information to individuals basing on a “need to know” approach instead of ensuring that every person in the organization is constantly informed.
The USA management style can be argued to be most compatible with the Swedish style of management. The American management approach deploys a loose approach and emphasizes the establishment of performance targets that are specific and can be measured. The American management model makes use of the core leadership styles including direction, participation, people empowerment, and charisma. This results in less freedom action, which is a similar characteristic of the Swedish management model that focuses on autonomy (Klarsfeld, 2010).
Polycentric staffing at IKEA
The choice of host country management and staff is usually referred to as polycentric staffing. There are various advantages associated with the polycentric staffing policy during global strategic expansion. Polycentric staffing policy is effective in the elimination of the cultural barriers, which plays an important role in enhancing the adaptability of the business within the host country. Host country managers usually have adequate knowledge of the local business environment compared to the home country managers (Peng, 2008). There are limited constraints associated with cultural adaptability, language barriers, and transition problems. This is because host national managers have deeper knowledge regarding how the operations of the subsidiary in the local business scene. Also, host country managers usually tend to have already formulated local connections in the business environment. This implies that there will be minimal constraints associated with the local language and adjustment to the cultures and languages of the host country when a host nation is selected.
Another potential benefit associated with the polycentric staffing policy is that it will boost the morale of the staff if a manager is selected from their country. Improved staff morale is because of the perception that there are better opportunities for promotion. This is in contrast with the case of ethnocentric staffing policy whereby adaptation to the business environment of the host country and low morale on the staff is a significant constraint because of the perception that there are limited career promotion opportunities On rare occasions, the choice of the manager for a business franchise located in a host country cannot be influenced by the primary company (Klarsfeld, 2010). This is the case whereby the immigration policies of the host country emphasize offering employment to the local nationals of the host country. There are also financial benefits associated with the selection of host country nationals because the selection of the host country management is significantly less compared to the costs associated with the selection of the home country management (Haar & Bardoel, 2008).
Despite the benefits, there are also various setbacks associated with the selection of host country management during the adoption of a polycentric staffing policy. The most notable challenge that polycentric staffing policy imposes is about relationships between the subsidiary and the head office. This presents a potential challenge associated with a conflict in the national loyalties. This can be attributed to language problems and difficulties in having and understanding the corporate culture of the IKEA, which questions the capability of the host country management to execute the orders from the head office. IKEA must be sure that it needs to control its subsidiary franchises in foreign countries before the adoption of a polycentric staffing policy. As a result, the ability of the host country management to execute orders from the head office is usually questionable.
The choice of the host country manager can also be constrained by a lack of the required international management experience in managing the business franchise situated in foreign countries. The selection of host country management is also constrained if IKEA does not have an established system used to facilitate the selection of foreign employers (Thill & Courtland, 2011).
Phases of cultural adjustment that research shows a foreign manager could encounter in such an assignment
Foreign assignments are usually met with the need for cultural adjustments by the respective managers. It is important to note that cultural adjustment is a continuing process that imposes new demands when a foreign manager undertakes his duties during the foreign assignment. According to research conducted by Gregory Trivonovitch, there are four distinct phases of cultural adjustment that are cyclic due to the fact an individual persistently encounters a period of adjustment when moving from one cultural context to another (Dowling & Welch, 2004). The four stages identified by most models of cultural adjustment for the case of foreign managers include honeymoon, cultural shock, adjustment, and mastery phase (Briscoe & Schuler, 2004).
The honeymoon phase of cultural adjustment is characterized by a positive perception of the cultural differences between the home and host cultural values. This is usually due to an increased fascination concerning the new cultural aspects such as new types of foods, types of buildings, individual habits, and the pace of life of the foreign country. This period is mainly characterized by intense discoveries, communication with identified nationals from their home country, and expressing politeness towards the foreigners. In this phase, foreign managers perceive the new culture as an endless opportunity whereby they approach the new culture with openness and increased curiosity and are more willing to accept the situation in a foreign country. A vital aspect in this phase of cultural adjustment is that judgment by the managers is most hesitant and irritations are concealed by an emphasis on positive aspects of the new culture. The managers in foreign assignments are friendly and maintain a superficial relationship with the nationals from the host country. Difficulties in language and cultural crisis soon begin to manifests themselves during the end of this stage (Briscoe & Schuler, 2004).
The phase of cultural shock is characterized by apparent differences in culture between the home and foreign country, which is likely to increase anxiety for managers in foreign assignments. In this phase, foreign managers usually maintain contact with home nationals and the head office. Uncertainty is usually created due to the feeling of unease between foreign environments. Also, foreign managers usually suffer from a lack of familiar signs used for denoting orientation and individual belonging, which only serves to worsen the levels of anxiety and frustrations. Cultural identity issues are also evident during this phase of cultural shock. Communication barriers are evident due to differences in language, values, symbols, and beliefs between the home and foreign country. Foreign undertakings are at risk of failure during this phase of cultural adjustment due to differences in interpersonal and organizational behavior (Hill & Cronk, 2010).
The adjustment phase is characterized by having respect for the foreign culture and establishing strategies that the manager can deploy to learn the new languages and adjust to the new social and cultural environment provided by the foreign country. It is at this point that foreign managers can either opt to return home or understand and appreciate the foreign culture or adjust to it. The adjustment phase is mainly noted by obtaining a greater knowledge of the local business scene and language.
The Mastery phase of cultural adjustment is characterized by a dual cultural identity and the manager undertaking foreign assignments feels at home in the foreign country (Briscoe & Schuler, 2004). This usually involves recognition of the fact that foreign cultures have a lot to offer, which in turn results in a sense of bi-culturalism characterized by an acceptance of the new culture and integration of the new cultural values and norms into one habit to enforce a secure feeling in the foreign assignment. This results in an understanding of the cultural differences and increased autonomy and satisfaction, implying that the foreign manager can complete the foreign mission. It is important to note that a cultural shock is likely to face managers who are returning to their home countries after long years of foreign assignments, implying that returning managers usually undergo the above stages before coming to terms with their home culture (Dowling & Welch, 2004).
Repatriation program for ‘Swedish missionaries’ returning to Sweden following several years abroad
Adjusting to a new cultural environment tends to take a lot of time depending on the flexibility of the managers and the pace of transition. The cycle of cultural shock is usually repeated when the manager returns to his/her country of origin. As such repatriation programs for Swedish missionaries returning to Sweden following several years of foreign assignments require careful planning and analysis to turn out successful. This means that the Swedish missionaries have to undertake adequate training to perform their tasks effectively when returning to the home country and have adequate knowledge to perform as required (Dowling & Welch, 2004). The re-entry of the Swedish missionaries should be treated with equal measures and strategies that are applied during foreign assignments because of the similarities regarding the magnitude of cultural adjustment. This implies that is vital to involve the Human Resources in the strategic planning of the re-entry of the home managers; the family should also be involved at an early stage and deploy strategies that can make the transition easy. Therefore, it is the mandate of the HR to organize visits to the home country, offer language and cultural awareness training programs for the manager’s family and address any issues related to dual-career for the selected manager. Continual support, planning for repatriation, and constant evaluation of the process is needed to get the managers ready to return to Sweden (Dowling & Welch, 2004).
Induction and training is a vital process when preparing the Swedish missionaries to return home. In this context, the managers are taken through an induction program whereby they have a chance to meet the employees that they will be working with when they return home. Also, they are shown the skills that they must have to work in subsidiaries that are within the reach of the head office. This means that the managers should be familiarized with the internal procedures, corporate values, and the organizational mission and vision, to serve as a guideline when working for the organization in subsidiaries that are located in the home country (Hill & Cronk, 2010). Observational learning is important during this stage to ensure that the returning managers are more informed of what is required at the organizational level before adapting to the business environment in the home country. Organizational learning and training will entail outlining the norms of behavior, the shared terminology and the reporting procedures, and dominant organizational values. This is important in drawing the boundary between what is expected from the organization and the expectations of the business environment of the home country such as government policies and regulations, cultural requirements that affect the business (Haar & Bardoel, 2008).
Studies have reported that there is a positive relationship between pre-departure preparation and overall adjustment and effectual functioning of the managers returning to their home countries. It is important to take into account during overseas assignments; the managers are not only changing jobs but also experience significant changes in their way of life. This implies that the needs of the family members should be addressed as part of the issue when preparing them to return to home countries. As such, the preparation should entail cross-cultural training, awareness, family orientation, and briefing.
A briefing program serves to provide the manager with the fundamental information that is related to the job and other issues involving the socio-cultural environment of the home country. This briefing will include the company’s home transfer policy, benefits packages, and any compensation required during the home assignment (Peng, 2008). Cross-cultural training is important in preparing the managers to undertake home assignments after long durations of foreign assignments. This is needed to help the manager gather the required skills needed to handle the cultural shock that one faces after arriving in the home country. After arrival, adjustment is always an issue of concern. This can be addressed effectively using cultural training, which plays an integral role in fostering an appreciation of the social norms and the ethical practices when conducting business in the home. This training should also include the family members of the managers to ensure they adapt quickly to the new environment after long periods of a foreign assignment.
References
Alkhafaji, A., 2003. Strategic management: formulation, implementation, and control in a dynamic environment. London: Routledge.
Briscoe, D. & Schuler, R., 2004. International Human Resource Management. London: Routledge.
Dowling, P. & Welch, D., 2004. International Human Resource Management. New York: Thomson Learning.
Duane, I. & Hoskisson, R., 2008. Understanding Business Strategy: Concepts and Cases. New York: Cengage Learning.
Haar, J. & Bardoel, A., 2008. Work-life in Australia. Asia Pacific Journal of Human Resources, 46(3), pp.258-71.
Hill, C. & Cronk, T., 2010. Global Business. New York: McGraw Hill/Irwin.
Hill, C. & Jones, G., 2007. Strategic Management: An Integrative Approach. Boston: Houghton Mifflin Co.
Klarsfeld, A., 2010. International handbook on diversity management at work: country perspectives on diversity and equal treatment. Washington, DC: Edward Elgar Publishing.
Peng, M., 2008. Global strategy. New York: Cengage Learning.
Thill, J. & Courtland, L., 2011. Excellence in Business Communication. New Jersey: Prentice Hall.