- Different cultures
Both the companies are operating in their respective geographical locations and hence they had different work cultures. Integrating these cultures is really a big task which will reduce the chances of effective utilization of the resources. Implementing one company’s culture in the other will make the employees of the other company insecure about their potentiality. Hence, the effective integration requires the combination of the best processes from both the companies.
- Different management styles
The management styles are different in both the companies. Arcellor Mittal is having an aggressive style which will prompt the managers to take instant decisions but the case is different with Bharti Steel. Hence, the integration requires a better analysis of the management styles which will suit the cultures of both the companies. Also, the joint venture will be started in India and hence the standards of the Indian management should be encouraged.
- Technology differences
The technology used by both the companies is different. Arcellor is using the latest technology for the manufacturing process where as Bharti is not using the latest forging or manufacturing methods. And the employees of Bharti will take time to understand the new technological processes to get adapted to the combined work culture. This will depend on the nature of the employees even such that they are in a position to take the suggestions from the employees of Arcellor.
- Insufficient cooperation among the partners
Due to the lack of leadership in the early stages of the joint venture, there will be less cooperation between the partners. The partners will have to manage the things with lesser resources that are well aware of the processes and operations of the joint venture. This will reduce the productivity of the organization in the earlier stages and thus the company has to face losses. Also, the lack of expertise in certain areas of the joint venture will reduce the overall performance of the employees as well as the organization.
- Different mind sets of the people
Due to the cultural variations, the employees of both the organizations will have different mind sets and thus there will be chance that the employees will not cooperate with each other. The qualities of the employees like the egoism, lack of expertise, unwillingness and the non cooperation will hinder the progress of the organization.
4. Analysis of the situation
The problems that are existent in the current scenario are analyzed based upon the cultural theory proposed by Trompenaars and Hampden-Turner. This theory will highlight the problems that are hindering the growth process of the joint venture and the mindset of the employees who are responsible. The effective analysis will clearly recommend the solutions for the prevailing problems.
Universalism vs. Particularism
The joint venture is following the particularism as it is in the early stages of operations. The employees are not following the rules that are designed by the organization instead working with their own mind sets to resolve any problems. Few employees are not even cooperating with the other employees as well as the managers as they think that they are the senior people. This is hindering the output progress of the organization.
Communitarianism vs. individualism
The employees are in the mood of individualism as they are not adapted to the company’s new work culture. The employees of the joint venture are not cooperating with the other batch of people. This is due to the lack of communication and good relationship among them. Though the management is treating the employees equally based upon their talent, the employees have not come out of the mind of the individualism.
Analyzing vs. Integrating
The joint venture has given utmost priority to build relationships among the employees as well as the managers through the integration. Since the joint venture has the employees of both the organizations, the integration is needed to make the employees to interact with each other and thus maintain good relations with them. But this will take time as their cultural backgrounds are different and hence they are unable to mingle with each other.
Inner-directed vs. Outer-directed
The employees in the organization are encouraged to make use of the real time experience to implement the best possible solutions in case of dilemma. However, the managers as well as the employees are implementing their own decisions in the work place and thus this is degrading the performance of the organization. The outer directed approach will help the company as well as the employees to better the processes and thus improve the productivity. However there had been no chances of improvements until they are educated about the problems of inner directed approach.
Time as sequence vs. Time as synchronization
The employees are allowed to manage the processes in parallel rather based upon the sequential time consuming time a sequence approach. But due to the lack of the cooperation among few employees, the synchronization is not possible for the betterment of the processes. The sequential processes will consume more time to complete the processes and hence will reduce the efficiency of the company and the employees. The company should encourage the synchronization in the processes to taste short term wins of the joint venture which will increase the motivation of the people.
Achievement vs. ascription
All the employees in the joint venture are treated with equality irrespective of their culture, race or nationality. They will be promoted and given hikes according to their performance, though the seniority is also taken into consideration. The cultural differences will not be considered when the employees are promoted to the higher levels. The better performing employee will always be considered as an asset to the company. Though the company is treating the employees equally still there are variations due to the managerial partiality.
Equality vs. Hierarchy
The employees who are performing well will be given additional responsibilities and they will be promoted according to their level of expertise. Whether an employee is at the manufacturing unit or in the managerial role, he or she will be given the same priority if performing well. The hierarchy won’t be considered when they are promoted. Some loopholes exist in the system because of the partial managers who are giving priority to their own group of people.
PESTEL Analysis
Political factors
The government of India is giving the full support to this joint venture and is providing the company with free amenities like the land, electricity etc. The only condition the Government has imposed is to provide the 40 % of the employment to the local citizens. The VAT has been exempted for a period of 10 years so that the joint venture can sell the finished goods in India without tax. The rail line will be built by the government to improve the transport standards in the organization.
Economic Factors
Indian economy is growing at a faster phase and is one of the fastest emerging countries in the world. The high exchange rates are affecting the business of the organization and the export is becoming costlier. The interest rates for the business loans are very less in India and this will fetch the company with easy processing loans. The lower wages will enhance the company to reduce the operation costs.
Social Factors
There is no retirement age for the people in the private sector in India and this will help the organization to effectively utilize the experience of the senior most executives. The company will have to provide the amenities to the employees but the sheltered accommodation will be cheaper in India. Along with that the medical insurance premiums, cost of the education for the children of the employees are cheaper when compared to the other countries.
Technological factors
The new technologies are not available in India and hence the cost of the operations will be increased due to the unavailability. Since the implementation of the technology requires longer duration, the company has to reduce the productivity of the organization for a shorter period. However if the new technology was implemented in the processes, then the costs will be reduced and the quality will be improved.
Environmental factors
The climate is very much suitable for starting a joint venture. The processes that are followed by the joint venture are environmental friendly and are giving out less poison gas. Due to the unavailability of the latest technology, the processes may release harmful gas into the atmosphere in the earlier stages. This will create hazardous damage to the employees as well as the people around the joint venture place. Hence, the company has to take steps to implement the environmental awareness among the employees and thus make them work for the cause of the better work place.
Legal Factors
The company is abiding to the rules of the minimum wages to the employees. The employees are not discriminated based upon their religion or the nationality or the culture. The minimum age for the work proposed is 18 and the company is very strict about these rules. The company wants to provide a better working place which will be away from all the illegal ways of recruiting and deploying the employees in the work.
5. Recommendations
Based upon the problems that are faced by the organization, I have given the following recommendations which can be implementable in the organization.
The company can go for the better technical implementation so as to reduce the pollution levels and thus improve the productivity. The employees should be given right choice to work in their interested fields so that they will perform their full performance. The managers should be given strict rules such that they should not encourage few employees based upon their race, religion or culture. The employees should be treated equally based upon their talent and performance. The company employees are in the mood of individualism and hence the collectivism should be motivated among the employees for the increased cooperation in the work place as well as the personal life. Employees should practice universalism to improve the efficiency of the processes in case of any defects. All the employees should be treated with equality and the seniority should be taken out of the company’s work culture.
6. Forecasts and outcomes
The equality among the employees will reduce the individualism and thus enable the employees to work for the better productivity of the company. The collectivism will improve the knowledge transfer among the employees without any cultural barriers. The main motivational factor for the employees is the recognition in the organization. Due to the implementation of the collectivism and the universalism, the employees are treated as single and they will be given priority in the work place. The sequential processes will be replaced by the synchronized parallel processes so as to increase the productivity of the organization in the time span of next one year.
References
[1] Linda Longfellow Blodgett, Research notes and communications factors in the instability of international joint ventures: An event history analysis, , , Pages 475 – 481, 2006
[2] Jeffrey J. Reuer, Strategic alliances: theory and evidence, Oxford University Press, New York, 2004
[3] Alfons Trompenaars, Charles Hampden-Turner, Riding the waves of culture: understanding cultural diversity in global business, ISBN 0786311258 McGraw Hill, 1998
[4] Ian Worthington, Chris Britton, Andy Rees, Economics for business: blending theory and practice, Ashford Colour Press Ltd, Gospot, 2005
[5] Claire Capon, Understanding the Business Environment, Pearson Education Limited, 2009