Companies often encounter boundaries when it comes to creating efficient business processes whether in the form of distance or differences in business culture, however, by overcoming such boundaries better business operations can be attained.
As indicated by Piercy (2006) in order for any company to continue to be competitive within the present day global market place it is necessary for it to be highly responsive to changes, receptive to new developments within its market, highly creative as well as espouses actions of innovation and continued increases in efficiency (ex: Six Sigma) (Piercy, 2006: 3).
Such aspects though are dependent on the employees of a company wherein through the use of proper management practices a company is able to create stable internal procedures to ensure proper operations and product development which would inevitably result in a successful company.
The purpose of this project is to explain the advantages and disadvantages to working across boundaries, in this case distance and a diversified workforce. Through such a method of examination, it is expected that a greater understanding of today’s globalized business environment will be developed resulting in the promotion of the appropriate management practices to overcome such boundaries.
This paper is divided into 2 primary sections; the first section discusses the boundary of distance as exemplified by the outsourcing industry. The second section deals primarily with the diversified workforces that have come about as a direct result of the present day orientation of multinational companies to expand into different markets.
Through both sections, a clear idea can be developed regarding both the advantages and disadvantages of working across boundaries. It is the assumption of the researcher that, proper management practices can help to overcome boundaries such as distance and a diverse workforce thereby creating effective business operations.
What is Outsourcing?
As explained by Marchington et al. (2005), corporate executives are under pressure to improve the competitiveness of their companies through cost reduction, increased efficiency as well as the improvement of various services. It is due to this that they have been turning towards outsourcing as of late in order to resolve such issues (Marchington et al., 2005: 4).
The term “outsourcing” actually refers to the practice wherein a company contracts another company to perform a particular business function for them at a reduced cost as compared to the main company doing it themselves (Young Bong & Gurbaxani, 2012: 1043).
Outsourcing can take the form of manufacturing, accounting, customer services and a variety of other practices that can be done in another location. The main purpose of outsourcing is to reduce the inherent cost of operations by leveraging aspects related to cheaper workforce costs or reduced utilities expenses found in other location.
(Young Bong & Gurbaxani, 2012: 1043) Through globalization, the internet and the process of outsourcing and off shoring, technology/manufacturing teams are no longer isolated to merely being within the same building, state or country, rather, they are scattered across a wide breadth of countries, cultures and business environments which management practices of contemporary technology intensive enterprises need to take into consideration (Allen et al., 2005: 301).
For example, as indicated by Dey, Houseman & Polivka (2012) when it comes to doing business within the U.S., the costs encountered by mosts businesses are often taxes, employee salaries and benefits as well as utilities (Dey, Houseman & Polivka, 2012: 533). The problem with such factors is that they in effect increase the cost of doing business within a particular country.
It is due to this that outsourcing various aspects of a company’s operations becomes more attractive since locations such as China, India and the Philippines enable a company to gain significant cost savings (i.e. lower tax rates, salaries, benefits expenses etc. (Whitaker, Mithas and Krishnan, 2010: 11).
For example, within China alone the sheer cost of doing business is so low that companies have been outsourcing their manufacturing departments to the country since the late 1990s (Whitaker, Mithas and Krishnan, 2010: 11). This can also be seen in the case of India and the Philippines wherein outsourcing has become a $100 billion a year industry (Magtibay-Ramos et al., 2008: 41).
The main reason behind working across the boundary of distance are the cost savings involved in hiring a local within the Philippines, China or India for example as compared to hiring someone from the U.S., U.K. or Canada to do the exact same type of job (Marion & Friar, 2012: 44).
Minimum wage requirements, taxation and other costs related to doing business are simply far lower in various places in Asia as compared to countries in the “West” and, with the integration of global financial markets and supply chains due to globalization, it has now become more practical to simply have certain aspects of a company’s operations (usually manufacturing and customer service) to be located in other countries with lower business costs (Yang, Wacker & Sheu, 2012: 4462).
Companies do not even need to manufacture their own products. This can be seen in the case of Apple, Sony and Microsoft wherein the Apple iPad, the Sony Playstation 3 and Microsoft’s Xbox 360 have all been manufactured by the same outsourcing company, namely Foxconn (Ngai & Chan, 2012: 383).
Problems with Distance
It should be noted that Marchington et al. (2005) also explains that outsourcing should not be considered the “go to” solution when it comes to reducing corporate expenses. Utilizing the example of Railtrack and the faulty maintenance procedures that resulted from outsourcing aspects of the company’s operations, it can be seen that by not keeping things “in-house” this actually exposes the company to a multitude of possible problems related to mismanagement and improper operational practices that would not have occurred if they had been done by the main company instead of an outsourced firm (Marchington et al., 2005: 6).
This shows how problems can occur in numerous areas of a company’s operations as a direct result of outsourcing which can have dire consequences for consumers and businesses alike. Working across boundaries such as distance and business culture is advantageous for any company due to access to a greater talent pool and product markets, however, the fact remains that along with such advantages comes distinct disadvantages in the form of ill-suited management practices in dealing with a diversified global workforce and the potential for problems in a company’s supply chain due to lax standards on the part of their international partners (Wee & Wee, 2010: 2081).
Management practices in some of today’s technology oriented organizations need to facilitate better collaboration and communication between global teams despite the distances and diverse cultural differences involved. There are distinct problems related to this particular model of doing business in the form of lax product quality standards, unethical worker treatment as well as issues related to proper communication in between various outsourced departments (Tambe & Hitt, 2010:62).
For example Microsoft, which is one of the world’s largest software manufacturers, has development teams scattered around the world working on different aspects of the operating systems that it produces. The inherent problem with this situation is that different methods of coding procedure combined with a variety of problems related to time difference, business culture and the sheer distance involved invites problems in all stages of OS (Operating System) development (Ulanoff, 2007: 74).
The software “Windows Vista” for instance (which was largely considered one of Microsoft’s worst operating systems) had problems not only during its development but also during its sale and promotion. Such problems were attributed to ineffective management practices in helping to consolidate efforts across different borders and cultures (i.e. between different technology teams within the company’s software development divisions in the U.S. and India) (Ulanoff, 2007: 74).
This situation is not limited to the development of software but rather also includes the production processes of certain electronic goods. For example, lax management practices in the form of insufficient quality control procedures as well as improper sales and repair procedures were blamed for one of Dell corporations recent fiascos (occurred in 2006) wherein faulty components within several of its laptops that were sourced from foreign partners were seen actually leaking some sort of fluid during normal operational processes and had the potential to burst into flames (Mullins & Weiss, 2006: 6).
Another issue in this case was that Dell knowingly resold such units despite the identification of the inherent flaws which is indicative of a failure of management practices from not only a production point of view but from an ethical sales perspective.
Other companies such as Apple and IBM have been highly criticized due to falling product standards as a result of lax quality control checks with their overseas factories. Apple, Microsoft and Sony have also been criticized for contributing towards the continued unethical treatment of workers within the factories of Foxconn which has severely damaged the image of these companies in the eyes of the general public (Ngai & Chan, 2012: 383).
Studies such as Holweg & Pil (2012) that issues related to proper communication (i.e. English and non English speaking) between various overseas operational departments have resulted in problems related to shipping delays, erroneous inventory requests and an assortment of related problems that have resulted in increased costs for companies (Holweg & Pil, 2012:98).
Such a situation necessitates the implementation of new methods of cooperation through team exchanges (members of one team visiting the other), implementing methods of open communication and conceptualization between teams located within the U.S. and those within off-shored development/manufacturing facilities and facilitating better cooperative practices through the development of cultural understanding regarding how particular business cultures work over diverse locations (Young Bong & Gurbaxani, 2012: 1043).
Utilizing such a strategy, effective practices can be implemented which result in the characteristics mentioned earlier that are deemed necessary for a technology oriented company to survive and to thrive.
A Diversified Workforce
As explained by Marchington et al. (2005), organizations within the past few years have become increasing stratified an diversified as a direct result of not only the need to expand into new markets but the changing face of how people are employed within various companies today (i.e. in-house, contracted, part time etc.) ((Marchington et al., 2005: 11).
This also due to the fact that companies have become more “networked” in that exchanges have become more horizontal rather than vertical due to the way in which the boundaries between companies/ organizations have become weakened as a direct result of new collaborative arrangements in the form of strategic partnerships, industrial networks etc. ((Marchington et al., 2005: 13).
Since globalization and multiculturalism have become synonymous aspects of the global market place, companies tend to respond to the diverse consumer and cultural demographics to which they sell their products and services to stay relevant by also diversifying their methods of operation to match the needs of such markets (Jones, 2012:207).
A company that limits itself in terms of diverse employee demographics runs the risk of being unable to understand the quirks and cultural norms in certain ethnic and racial markets resulting in the creation of an ill-equipped marketing and sales strategy which very likely will result in adverse consequences for the company in terms of the number of products sold and the degree of market penetration.
Most modern day companies attempt a certain degree of racial, gender and cultural diversity in the employees they hire, especially when it comes to attempts to access new markets in foreign locations. This enables the creation of unique product concepts, sales strategies and marketing mixes based on the views and backgrounds of this diversified workforce within that particular country resulting in a greater likelihood of a successful market penetration (Jones, 2012: 207).
Other benefits derived from workforce diversity come in the form of greater employee retention due to a company culture that supports equality and racial acceptance rather than discrimination and divisiveness. Multiethnic and multi-gender companies tended to have higher rates of productivity due to greater employee satisfaction over the company’s policies which results in better overall profits for the company due to increased productivity (Grey, 2009: 44).
It cannot be stated though that the implementation of a racial, cultural and gender diverse workforce will automatically result in better company performance. Grey (2009) states “there must be a distinct benefit derived from the implementation of a diverse workforce otherwise it doesn’t make sense for a company to implement a hiring strategy that focuses on it” (Grey, 2009: 44).
Disadvantages of Workforce Diversity
One of the inherent challenges involving workplace diversity is in creating sufficient channels of communication within an organization. Channels of communication are one of the cornerstones of any successful business when it comes to having a diverse workplace environment since it entails the use of added practices so as to sufficiently relay messages across different ethnicities and cultures (Pardo and Martinez, 2003:148).
People from different cultures and ethnicities tend to perceive messages in many different ways due to the unique quirks of their method of understanding. Some messages are at times interpreted as insulting and vice-versa and, as such, it is important to implement methods of communication that take this into consideration so as to reduce possible misinterpretations (Joslin, Waters and Dudgeon, 2010: 22).
Another challenge to take into consideration are factors related to cultural bias and prejudice that affect the ability of workers to work harmoniously at their respective jobs. Companies that have various branches and teams spread across several international markets have noted that there are instances that occur involving cultural bias or even prejudice resulting in work related conflict as well as instances of intentional discrimination resulting in not only substantial reductions in performance but the loss of certain operational capacities (Wu et al., 2012: 178).
Companies that want to be able to take advantage of a diversified workforce need to implement measures to reduce cultural bias and prejudice. This comes in the form of team building exercises, company sponsored behavioral training or even joint vacations all of which should help necessitate proper communication and collaboration between members of different cultural and ethnic backgrounds.
The final challenge that companies should take into consideration is the concept of corporate assimilation and how this affect an individual’s productivity. As noted byDam (2008) assimilation is a way in which a worker is negatively affected by an organization’s business and corporate culture wherein they are unable to sufficiently express themselves utilizing their ethnic and cultural backgrounds due to constraining rules and regulations at their work environment (Dam, 2008: 313).
As a result, this impacts not only the effectiveness of management decisions (in the case of managers) but productivity and responsiveness (in the case of employees. An example of this is seen in the case of a manager from the U.S. being placed in charge of a new outsourced branch of the company (i.e. in China, India, or the Philippines) or in instances where a local company is taken over by a foreign multinational corporation.
It is based on this that companies need to take into consideration implementing new business culture practices that enable people to express themselves based on their cultural and ethnic background so as to encourage positive employee productivity rather than negative employee performance due constraining factors on their ability to express themselves (Hilton and Whiteford, 2010: 435).
Benefits of Workforce Diversity
With the global financial downturn affecting not only the U.S. economy but the global economy, this necessitates the need for creativity and innovation in being able to access new markets in order to sell particular products and services. Workforce diversity through international expansion actually enables a company to utilize a pool of individuals that come from different backgrounds, cultures and ethnicities.
This enables a company to relate with and understand the needs of consumers within markets the company is attempting to penetrate (Allen et al., 2005: 301). The original marketing and sale strategies that had been implemented by a company within its original market should not be considered as effective when applied to new markets and, as such, calls for views and opinions of people that either belong to that particular consumer segment or understand it to an extent in order to implement sufficient strategies for sales and market penetration (Allen et al., 2005: 301).
For example, when Coca Cola tried to enter the Chinese market their marketing campaign consisted of merely translating their slogan of “We bring you to life” into Chinese and using that in their marketing and print ads (McDonald, 1996: 5). Unfortunately, its translation wound up as “we bring your dead relatives to life” and, as such, wound up costing the company millions in changes to its original slogan (McDonald, 1996: 5).
Another example of failures in marketing and sales came when Gerber expanded into Africa and did not take into account the predilections of local companies to place a picture of what was inside a product on a product label due to many Africans not knowing how to read (McDonald, 1996: 6). This of course resulted in a rather embarrassing recall by Gerber due to Africans perceiving each product by Gerber as containing babies.
These examples show how having a diversified workforce with multiple viewpoints and different levels of understanding is important for any company. A diverse workforce enables better methods of problem solving, allows the company to successfully market itself to different international consumer groups, helps to promote innovation and furthermore creates a good corporate image due to its practice of creating a multicultural and multiethnic workforce (Vithessonthi & Schwaninger, 2008: 141).
As seen in the paper, there are numerous advantages and disadvantages when it comes to working across boundaries. In the case of distance and workforce diversity this can often entail problems related to communication, proper cooperation, the implementation of effective management practices and culture shock.
Working across boundaries can result in cost reductions for a company, the ability to access new markets as well as the creation of a diversified workforce that would expand a company’s knowledge base.
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