MGT 466-Sevgi Ozdemir Final Paper

Running Head: Relationship between National and Organizational Culture in an International Alliance

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Seidman College of Business

MGT-466 International Management and Multinational Corporations

Final Project

Sevgi Ozdemir

Grand Valley State University


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Relationship Between National and Organizational Cultures in an International Strategic Alliance

Product-market success in a quickly globalizing market, characterized by rapid adoption of

innovative technologies, increasing fixed costs, and excess production capacity, is frequently

determined not only by the service offerings and the product quality alone but also by the quality

of the business collaborations (Parkhe, 1991). Organizations, which work independently without

alliances, experience problems such as scarcity in both human and raw materials, lack of

operational efficiency, and incapacity to pool business risks. Hence, there is an increase in the

realization of the importance of the strategic alliances. Therefore, there is an increase in the

number of international strategic alliances in the world.

Tayeb (1997) defines national culture as work-related values and behaviors of individuals

within a country. However, there is not a commonly accepted definition of organizational culture

since organizations are open systems in constant interaction with their environments. Schein

(1992) claims that the term organizational culture not only captures the unconscious but

deliberate elementary assumptions and convictions shared by group members (subgroups,

occupational units, hierarchical layers and geographically dispersed segments). Organizational

culture also describes the beliefs of group members about the organization and its broader

environment. Therefore, we can conclude that national culture influences beliefs and the

behaviors in an international strategic alliance partnership. Nevertheless, beliefs and behaviors are

also influenced by the complex interrelationships between compatibility and relational constructs

such as trust, commitment, cooperation, dependence, and communication. Furthermore,

compatibility is not only influenced by national culture but also by the business activity and size

and how the organization is incorporated.

Studies prove that the lack of alignment in the beliefs and behaviors of international

strategic alliance partners is more damaging to the business than financial, product or market

mismatch, as a cultural mismatch can escalate financial, product or market risks (Schein, 1992;

Sirmon & Lane, 2004). Therefore, in order to achieve joint success in an international strategic

alliance, the effect of the national culture should be minimized. The effort of creating a joint

organizational culture should be maximized. Hence, partner organizations have to be aware of the


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efficient causes of the organizational culture in order to create a powerful international strategic

alliance. For the purpose of our paper, we will examine every efficient cause of the organizational

culture and come up with applicable practices.

Compatibility

1. The size of the company: National culture substantially influences organizational

culture when the organization is small and the owners and senior managers (who

are usually family members) actively participate in the day-to-day business. We can

give Chinese and Turkish Family businesses as examples. Thus, the size of the

potential partner should be an important consideration when forming an

international strategic alliance. For instance; a corporate American company should

not work with a small size, family-owned Chinese or Turkish firm in an international

strategic alliance in order to create an efficient organizational culture.

2. Business activity: Doing business in small sizes and with social relationships

demonstrates that the organization’s culture is considerably affected by the

national culture. Therefore, it is important to look at business relations and the

activity level of the potential partner before forming the international strategic

alliance.

3. Mode of the incorporation: Mode of the incorporation is another important part to

consider when building a joint-enterprise since it influences company partners’

beliefs and work attitudes. Since public listed companies have greater

accountability and reporting requirements than family enterprises, their

organizational culture is not significantly affected by the national culture.

Therefore, creating a joint organizational culture becomes easier.

Trust

Inter-organizational trust is fostered and sustained when partners inspire confidence

regarding their reliability and integrity (Morgan & Hunt, 1994). Therefore, in order to build trust

with the partner company;


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Managers should be selected carefully; they should have a perfectly clear

background. There should not be any doubt about their integrity.

Partners should be confident about the managers’ actions which will lead to

beneficial outcomes. For this reason, successful and experienced managers should

be selected.

Partners should not take any unexpected actions that will result in detrimental

outcomes such as buying shares of the joint-venture for a hostile take-over or

doing business with the primary competitor of the partner firm.

Relationship trust increases when partner behaviors are consistent, satisfactory, fair, honest,

helpful, and responsible. However, it decreases when partner behaviors are perceived as

opportunistic (Morgan & Hunt, 1994).

Communication

Trust provokes honest communication. People can talk honestly about their ideas and

beliefs regarding joint goals and problems such as satisfaction or dissatisfaction with their co-

workers, and they can jointly look for answers to these issues. In the beginning of the partnership,

it may be hard to enforce straight talking in the workplace because of the national culture

differences of the partners. However, it should be executed in time by:

Training workers about straight talking,

Training workers about short but effective presentations (i.e. reducing

unnecessarily long depictions, explaining one thing at a time simply, etc.).

Training workers about short emails and phone-calls.

Commitment

Trust and honest communication increase relationship commitment. Partners can increase

commitment by;

Increasing the desire for relationship continuity by creating a pleasant working

environment, profitable outcomes of the joint venture, etc.


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Working with solidarity in the business area

Being eager to make short-term sacrifices to achieve long-term goals

Increasing motivation and involvement in the workplace by organizing social

events, promoting teamwork, etc.

Co-operation

Trust and commitment can engender co-operation and vice versa. Organizations which

share trusting relationships willingly cooperate and postpone outcomes from strategic alliances if

their partners face temporary difficulties in meeting their obligations (Anderson & Narus, 1991).

For increasing the cooperation;

Promote learning from each other rather than enforcing training,

Create different career patterns without wiping out the competition for the

workers of the joint-venture to make sure they won’t act like rivals

Promote teamwork,

Create an incentive program which promotes mentorship between employees of

each firm.

As a summary; we can give CarrefourSA which is an international strategic alliance in

Turkey, as an example. Carrefour is a supermarket company founded in France. They first entered

the Turkish market in 1993. However, they didn’t achieve the success that they had expected since

they had so little information about the Turkish market. So, in 1996 they established a joint

venture with Sabanci Holding. Although Sabanci Holding is one of the oldest family-owned

companies in Turkey, it has not acted like a family-owned firm since the beginning of their history.

Although, Carrefour made a right decision about establishing a joint venture with Sabanci Holding

since the size, business activity and the mode of the corporation was eligible for a strategic

alliance; they failed in creating an organizational culture by being dominant, controlling every

action and using power toward partners because of the percentage of their shares rather than

building trust, commitment, cooperation, communication, and bonding. As a consequence of the

failure in creating an organizational culture, financial results were not successful and promising. In


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2013, board members of CarrefourSA from Sabanci Holding decided to quit by expressing that

they did not receive any support and contribution from their partners. Therefore, they did not

believe in the future success of the joint-venture. As a reaction to this situation, Sabanci Holding

bought shares from Carrefour and become the main partner of the joint-venture with 50.8% of

shares in 2013. Since 2013, they are creating an organizational culture and their net operating

income increases year by year.


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References

Anderson, J.C. & Narus, J.A. (1991). Partnering as a focused market strategy, California

Management Review, Spring, pp. 95-113.

Morgan, R.M. & Hunt, S.D. (1994), The commitment-trust theory of the relationship

marketing, Journal of Marketing, Vol. 58, July, pp. 20-38.

Parkhe, A. (1991), Interfirm diversity, organizational learning and longevity in global strategic

alliances, Journal of Business Studies, Fourth Quarter, pp. 579-601.

Schein, E.H. (1992), Organizational Culture and Leadership, 2nd ed., Jossey-Bass, San

Francisco, CA.

Sirmon, D.G. & Lane, P.J. (2004), A model of cultural differences and international alliance

performance, Journal of International Business Studies, Vol. 35 No. 4, pp. 306-19.

Tayeb, M. (1997), Islamic revival in Asia and human resource management, Employee

Relations, Vol. 15 No. 3, pp. 429-46.

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MGT 466-Sevgi Ozdemir Final Paper