Question

Discuss how to manage cultural risks and other factors related to a foreign operation of a multinational business. Is cultural, business, or political risk more challenging to overcome than one of the others? Why or why not? How should American standards influence multinational businesses?

Answer 1

As businesses are going global and spreading there limits through multi national divisions,internet and social media they are adding one more risk into there bucket which is Cultural risk.Cultural risk is the difference between culture of two countries,their employees and their customers.

To run the business successfully it is necessary to overcome all the risks on time and cultural risk is one of the risks which is difficult to overcome in a short span of time as culture builds as soon as a child born.Cultural risk factors can not be eliminated fully but can be managed by adapting the below point:

1.Communication:Communication between the global divisions can reduce the cultural differences between them.An open communication between the employees and clients of two globally divided business divisions will help them to understand their needs and it will reduce that risk to some extent.

2. Respect the others culture as you respect yours

3.Teamwork:Where a business has multi national divisions,teams formed globally and working together can help to reduce this risk.It will help the employees to work in a team and achieve a desired goal by understanding there work and respecting every one's culture.

4.Offsite opportunities:A person can adapt the different culture easily if he/she has the opportunity to live in that culture for some time,so its advisable for MNCs to give there employees an offsite opportunity so that they can understand it and also once back can share this with others as well.

Yes each of the above three risks has there own challenges and to overcome these challenges are difficult for every business. In a foreign operation all the three risks go hand in hand and its necessary for the businesses to reduce them rather than to avoid that as these risks have a long term impact.

A political risk can impact the business adversely if not assessed and covered on time.The political decisions,government taxes,trade barriers,unstable governments and other decisions taken by government which impact the global business are part of political risk.To manage the political risk and business risk in a foreign operation ,the business should get itself insured, have a proper communication with the employees and clients about the impact of these political factors,prepare with some other plans to manage there operations globally .
There should be some basic standard to follow when doing business globally which includes understanding the foreign laws and regulations,assessment of political and financial situation of other country,strong understanding of foreign markets, labour and material prices ,environmental factors and regulations of the other countries.

American Multinational companies have set a high benchmark for others to follow. Following standards can affect Multinationals in a positive way :

1) Punctuality - Being on time for work and meetings

2) Dress up - Dressing up properly according to the occasion

3) Open Door Policy - New age companies believe in open door policy . For instance, meeting rooms in FB offices have glass walls and the CEO's sit in open along with other employees

4) Work life balance - It' not just about work but a proper work life balance

5) Team engagement activities to encourage stronger bonds between the teams