Cross-Cultural Management:

Globalization and Localization Essay

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Updated: Oct 9th, 2021

Introduction

In the business context, the term localisation refers to carryout the production
process of commodities locally with localized labour in order to reduce
transportation and other production cost. In localisation policy, along with the
transplantation of production process in host country, the products are meant to
meet the local needs of the community. Business firm can attain positive attitude
from host country government through employing nationalized labour force,
because through this business firm increase the job opportunity for nationals.
The firm can establish good relation with local government by avoiding expatriate
workers. The recruitment and retention of local employees helps firms to reduce
labour cost. Since there are too many advantages for localisation, it suffers from
certain limitations such as barriers related to cross cultural communication and
demographical factors. These may affect the localisation strategy and then it
leads to mislocalisation.

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Impacts of localization strategy on business

Along with localisation strategy the economic utilization of local resources is

implemented and it helps to reduce cot of production. Due to better relation with
host country rulers, the conflicting issues can be easily solved. Localized labour
force is useful for improving communication with the host community and thus
the business performance can be further enhanced. The main disadvantages of
localisation policy are that, for understanding local markets opportunities it takes
much time and effort. The local labour force may create costly mistakes or
events, and it may occur outside the direct control of parent company then they
will be subjected to heavy financial burden. (Harry and Collings 2006, p.139).

Localization as a social strategy

In terms of social concern, localisation is the production of locally needed goods

and commodities through the utilization of local labour and other resources. Thus
it ensures increasing job opportunity, enhanced social conditions, and better
protection of environment through following better business policies. The firm
required to undertake supply of goods and services by promoting native labour
force, improving community standards and the economic environment. In
localisation the flow information gets affected with cross cultural communication
barriers. Then steps for effective communication has to taken for overcome these
barriers. By serving the needs of primary local consumers, with their own
resources is useful for creating a self sufficient society. By transferring the control
of firms from distant corporations to the local, better communication can be
established. Localisation is the necessary element of self sufficiency of different
communities. (Parkins 2000).

Impacts of Globalisation

Globalisation creates trade relation between different nations. Developing

countries are benefited from globalization through higher levels of foreign
investment in all levels of the economy. Large scale exports of goods and
services makes possible through it. Consumers are benefited from high quality
product at cheap rate through global competition. Flexibility is another advantage
of globalization. Firms can set off their business losses from a particular region
with profit from other regions. Through development in technology and
communication, advertising becomes so easy and thus world becomes a global
village. The global village effect created from developed communication
technology, cross- cultural barriers becomes reduced. But the threat of cultural
invasion is always with globalization. As a result of increased marketing strategy
of firms, a commodity culture has raised which point out the consumption as a
way to prosperity. (Advantages and Disadvantages of Globalization).

Business Strategy of Globalisation with Localization

The disadvantages of globalization such as entire control under few hands can
be overcome with localisation strategy. Democratic control of production process
ensures following of business ethics by firms. In the age of globalization,
understanding of local needs is critical because only a localised firm with
customer support can exist for a long term in this changing business world. Local
needs of customers have to be identified for the supply of goods that meet their
expectation.

The crucial problem of integrating local culture in the globalisation programme of

international business can be easily solved out through localisatin policy. In
localsied business cultural integration is taken place. Awareness of local culture
creates better relation with the customers and thus communication becomes
ease. Business firms can identify the needs and intentions of the customer
through effective communication.

Steps for effective localization

For a successful localisation, fixation of the target market is the primary step. The
distinct features of each society have to be analysed deeply before starting
business. Indexes such as Power distance index, individualism, long term
devotion etc can be used for the community analysis. The power distant Index
measures the equality and inequality in the distribution of income among the
society. Individualism takes the degree of reinforces of society in the individuals’
achievement. Long term orientation measures the community’s attitude of long
term devotion towards cultural and traditional values and commitments. Through
these different indexes appropriate target market can be selected for planting
business. (Globalization as Localization: A Model for Measuring Cultural
Diversity. 2004).

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Benefits of Localization in Globalisation strategy

Localisation helps to market product according to the cultural needs of customers

through the identification of their cultural diversity. Prosperity of individuals and
communities can be achieved through globalization. Economic partnership of
nations through business relation makes it possible to enhance the undeveloped
nation to get chance to rise up. Localisation can be used for overcoming
consequences of globalisation. Localisation helps to spread the benefits of
globalisation to the society’s lowest level through local production and usage of
local resources. In localisation, the participation of community in product design
and execution as well as monitoring the projects towards their benefit is assured.
Community participation must be followed by international business firms as it
helps them to reduce the restrictions of community towards their project.
(Glocalisation: Globalisation Plus Localisation. 2002).

The increasing commodity prices in the market make it necessary to strong up

the local production of commodities. Together with this companies can reduce
the transportation cost at a greater level. For exploiting the availability of cheap
labour in developing nations developed country firms have transferred their
production process in such countries. Thus in developing countries, more
employment opportunity becomes generated and hence economic prosperity
could be resulted. The reduced labour cost makes it possible to produce
products at cheap cost and thus the commodity prices can be minimised. By
decreasing the production cost with comparatively low cost of transport, final
production cost also can be reduced. Thus availability of quality products at
cheap rate reduces the global market inflation. (From Globalization to
Localization. 2008).

Globalisation and localisation have same purpose. They are interconnected and
interdependent. By globalisation, economic and cultural integration between
nations takes place. It helps companies to locate their products and services in
multiple countries and thus economic dispersion takes place between nations. In
localisation, production of goods and services are carried out nearer to end users
and thus the transportation and other external costs of globalisation can be
reduced.. The target market in localisation policy is single community occupying
specific cultural needs. The production process is carried on by integrating the
cultural needs of the community. Hence close relation with the community can be
ensured by business firms. In internationalization product marketing is carried on
with target of an international community. Thus there is no specific attention for a
particular community and hence cultural integration takes place. Localisation is
the marketing targeted to a specific region. For the production process, the
resources from such region like human resources, is employed. Economic
prosperity of specific community can be achieved through localisation. (Dadhich
2006).

Cross Cultural communication theories: Cross cultural communication is built

under the concept that communication is distinctive within each culture. The
existing cultural differences and similarities across communities can be explained
with the dimensions of the cultural variability. One of the major dimensions is
individualism-collectivism. In individualism, individual goals are more highlight
than group goals, whereas in collectivistic culture the group goals are more
emphasized. These different dimensions have influence on the communication
process.

Cross cultural communication process: Cross cultural communication is

important due to the fact that individuals of different community have limited
common information. Frequency of communication skills and knowledge among
different community affects the communication process. Language is another
major constraint in cross cultural communication. To overcome this barrier a
common language may be used.

Cross cultural communication in the age of

globalization

New business world is characterized by innovative technology and integrated

markets. In globalization, the general trend is that products are based on
generalization of dominant culture. This creates invasion of dominant culture
towards less powerful cultures. Globalize business firms design their products
and services on a standardized way. This put limit on their customer relations. In
this context, localisation is a useful method of doing business internationally with
better customer relations. The cultural differences across different nations can be
solved out through localisation. In Localisation understanding of the community
culture for which the business is targeted, is the first step for starting business. It
is reverse process of globalization where the local needs and ideas are collected
through proper communication strategies. (Panetta 2001, p.50-51).

“Within the business context, cross cultural communication refers to interpersonal

communication and interaction across different cultures. Effective cross cultural
communication is concerned with overcoming cultural differences across
nationality, religion, borders, culture and behaviour.” (Cross Cultural
Communication Needs).
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Cross cultural communication is the basic ingredient of globalization strategy. In

order to get customer acceptance on a global ways business firms has required
supplying product and service that meet the needs and expectations of different
customer groups. Success of any business depends of the integration of
feedback from customer to the products and services. For understanding the
needs and cultural background of different communities across different nations,
proper communication is necessary. In cross-cultural communication, the main
barriers are diversity in culture and social conditions. To get entry in the
competitive global market, and attain successful growth, interaction with different
communities and creation of good customer relation is necessary. Effective cross
cultural communication involves better understanding of cultural diversity and
acquisition of local language. (Cross Cultural Communication Needs).

Cross -cultural communication is necessary factor in the age of globalisation.

Effective cross-cultural communication can be met through localisation policy. All
communications are cultural in nature. There will always chance for
miscommunication when communications becomes cross-cultural.

Barriers of Cross cultural communication

Significant cultural differences between the communicators often act as

communication barrier. For avoiding such barriers better understanding of
cultural features of different community is necessary. A cultural awareness can
be met through localisation of business. The main barriers to effective cross
cultural communications are time and space constraints, fate and personal
responsibility, face and face saving etc. Time and space act as separating factor
of cultures. Communication barriers across different cultural groups are affected
by fate and personal responsibility of individuals in particular communities. The
nonverbal communication has an important role in cross cultural communication
as it helps in communicating ideas through a common understandable language.

Steps to overcome cross cultural communication

barriers

Cultural awareness is the key element of effective cross cultural communication.

Understanding of limitations in communication and adjustments is necessary for
good cross cultural communication. Intermediaries will be helpful for better
communication as they familiar with both cultures. But negative effects of
intermediaries like more time usage may affect communication process.
(Lebaron 2003).

Cross cultural communication suffers from communication barriers resulting from

cultural differences. The differences in communication styles of countries, a
global firm required to select proper advertising strategy which includes selection
of message and medium for local community level. For the selection of the media
through which the idea of the business is transferred to customers, the
understanding of cultural differences and variance in pattern of behavior is very
crucial. Cultural differences of communities influence the attitude of individuals in
the community towards their markets. Culture influence the way people respond
to advertisement of business firms. (Fang).

Globalisation is the reshaping of business towards global market. For this,

strategies for overcoming cultural changes between nations have to be followed.
Along with national cultures, regional cultures and organisational culture have to
be identified for proper marketing of products. Traditional values of different
cultures are playing important role in reshaping the projects of Multinational
companies. Due to the intermixing of different cultures there may be loss of
cultural identity between nations. This contradictory movement of cultures
through globalisation can be reduced through localisation. Emerging global
culture across nations’ boundaries can be avoided through transplanting the
production of commodity in local level. Thus local culture and indigenous culture
values can be maintained. (Cross-Cultural Communication Strategies. 1998).

Case Study: Application of Localisation in

Globalisation Strategy by McDonald’s Corporation

Mc Donald’s Corporation is a multinational food marketing company operating in

119 countries. In each of the operating countries, the company adopts
localization strategy for ensuring customer satisfaction. Thus along with core Mc
Donald’s menu, localized food products also included in their local menu.
Examples of their product localization strategy are supply of Croque McDo in
France and Chicken Maharaja Mac in India. Both of them are prepared by taking
into account the local taste needs whereas the basic ingredients are same.

For providing adequate managerial training to the human resource of the

McDonald’s Corporation, they organized the Hamburger University in Illinois. It
conducts adequate training programs to all of the managerial personnel in the
group. Localized managerial talent is also developed through these training
programmes. Its branches have opened in other countries for empowering the
managerial development of the entire business group. McDonald group is
concentrating on maintaining standardized and quality products and services on
its global operation. Together with global standards, supplying locally demanded
food products which meet the local food safety regulations are included in their
localization strategy. For supporting inter-communication between different
regional business units, language services are provided by the group. The entire
reports of the business group are published in different languages. Adoption of
globalization management system (GMS), within the business system is also
supportive for its localization process in various countries. Organizational
communication becomes effective through the language services. Training
programs to the managerial persons are delivered in 40 languages and this
facilitates their local and cross-cultural communication in their business areas.

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In India Mc Donald’s is organized as a locally owned company under the name,

McDonald’s India. As a part of the localization strategy McDonald’s has
developed a special product menu for the Indian market involving vegetarian
items only. They do not include any beef or pork items in their Indian menu as it
is against the cultural ethics of Indian population. McDonald India always
concentrating on adding local flavor in their food products and this will be helpful
for appealing the native palate. In the preparation of vegetarian food products,
stringent precautions are followed such as only vegetarian ingredients are used
for production with pure vegetable oil as cooking medium. Localized product
naming is another crucial strategy. This helps them to attain market acceptance
at its entire business region without changing the ingredients. For example the
Big Mac food in America is renamed as Maharaja Burger in India.

Application of localization in McDonald’s globalization strategy helps the group to

attain global market acceptance with profitable growth. Through localization
strategy, customer satisfaction is assured by them in their product. The local
language service of the group is effective for better cross cultural communication
in the operating areas. Through they attain business enhancement in entire
operating countries.

Conclusion
Multinational companies adopt the localisation for exploiting the benefit of local
firms by starting their subsidiary firms in local level. In their business
undertakings, the resemblance of global firms often felt. It is the challenge faced
by MNCs to keep a balance between the community needs by keeping global
standards. Localisation of human resources, especially managerial labours are
required to be selected from local pool for creating better relation with the host
community. However the demographic features of specific community restricts
the availability of efficient and skilled labour in managerial field. For this firms
may take care to support the local personnel to develop their personnel skills by
giving on the job training and other support. But communication barriers across
different culture also affect the training programme. Understanding of the host
community and creating awareness about their culture will help to overcome
these challenges. Localisation of human resources in the top managerial level is
necessary for creating a mutually beneficial, long-term human relation with the
organization and the host community. The local workers seem to be more
reliable for a long-term. The business firms can positively influence the economic
condition of local community and thus create goodwill among the community as a
whole.

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