Part 1 of the article reflected upon how people are different in different parts of the world. Hence, thinking locally is the only way to grow globally. When MNCs enter a foreign environment, there exits an inevitable conflict of culture, differences in tastes and preferences, varied habits and operating practices of local employees. However, not every company realized this. They didn’t change culturally. Therefore, they failed to grow in those markets. One example of such a company is the Walt Disney Company.
Walt Disney Company
Home to Mickey Mouse, Ariel, Donald Duck and Elsa, the Walt Disney Company has nurtured fantasies of many all over these years. ‘Disneyland(s)’, theme parks by this company have now become synonymous to a dream land. The company and its ‘Disneyland(s)’ have successfully grown all over the world. However, during this journey the organization faced various obstacles. One of these includes ‘Cultural Shock’.
After growing successfully in California, Florida and Tokyo, The Walt Disney Company decided to open up its 4th theme park in France with the name ‘Euro Disney’. The company was tapping in a new market which seemed to have a lot of potential for growth. However, the company extended its ‘Americanized’ strategies in this market which eventually resulted in the failure of this organization in France.
The intention of this plan of action was to create new customer base and benefit from a good geographical location. Although, these benefits were experienced by the company but the restraining forces subdued them. There was a cross-culture clash in this case which resulted in operational errors:
- The company extended its no alcohol policy to France. However, the people there expected a glass of wine for lunch. The company failed to recognize that alcohol is viewed as a regular beverage in the French culture. This did not please the customers.
- The company assumed that Europeans don’t take breakfast and so they downsized the restaurants. However, the opposite happened. Because of this, there were long queues outside the restaurants which resulted in a lot of mismanagement issues.
- Moreover, the company assumed that the customers would want regular French breakfast (Croissants & Coffee). However, they wanted American breakfast.
- The company issued a manual of dress code for the Disney employees called ‘the Disney Look’ which imposed an ‘all-American’ look on the French employees. The employees felt that this dress code interfered with their individualism. Later, this case was taken to the French Court.
- The vacation habits of the French people are largely different from the Americans. For instance, Americans used to take their children to amusements very frequently. However, French people preferred going during their children’s vacations. The company again misunderstood the French culture and assumed their vacations habits to be same as the Americans.
Due to the above reasons, the company drowned into losses in less than a year. It eventually failed to grow in France.
Again an American multinational company, General Electrics is known to be one of the largest electrical manufacturers of the world. It remained an exclusively electric company till 1922, however now the company has expanded and operates through various segments including Aviation, Global Research, Healthcare, Transportation, Oil and Gas and more. In 1988, the company implemented its international growth strategy which marks one of the greatest examples of cultural clash in the business world.
This case is much similar to that of the Walt Disney Company as GE’s American mindset had manifested into a cultural conflict within a French environment. General Electrics acquired a French medical supply manufacturing company called Companie General de Radiologie (CGR) in 1988. Through this, the company gained a large amount of market share in the European medical industry. This acquisition was financially sound but at the same time both the companies experienced a significant cultural shock. There were many differences in their cultures. For instance, in France it is acceptable to inbuilt ‘power inequalities’ in a social or work environment. This means it is okay to differentiate people according to the level of their power. However, this power distance behavior isn’t promoted in the US. On the other hand, in terms of ‘uncertainty avoidance’, people in France are resistant to welcome ‘change’ and are accustomed to stability. However, the Americans ranked largely opposite to the French in this criterion. The French promoted the view of working in collaboration with each other. However the Americans brought in the concept of ‘individual space’ into this French company which was highly unacceptable by the local employees.
These differences in the two cultures resulted in difficulties in cross-cultural communication. The working environment was difficult and so the process of adaptation. The relaxed, easygoing environment of CGR clashed with the strict and disciplined environment of the GE. The host company didn’t change according to the culture and therefore, this international acquisition strategy became a huge failure.
There are various other companies which moved abroad in order to grow but failed due to cultural clashes. Therefore it is essential for all the businesses to adapt to the culture of a nation in order to make their growth strategy a success. They need to, without any doubts- Think locally, grow globally.
Author | Ranu Jain