What are the most important steps for a Headquarter to be successful with a foreign subsidiary? Which role do cultural differences play within the integration process of HQ and subsidiary?
Wal-Mart, the world's most powerful and largest retailer, is intensifying its activities in India. After failing with a Joint Venture with an Indian company, its subsidiary Best Price Modern Wholesale is now focusing on the Indian wholesale sector, instead of the end consumers.
This topic is of relevance because Multinational Corporations (MNC) often forget to integrate their subsidiaries, especially the foreign subsidiaries. The integration is of importance because it generates a successful flow. Therefore this report will focus on Wal-Mart as the Headquarter and takes a closer look at its acceptance and integration of a foreign market. Best Price Modern Wholesale is a subsidiary of Wal-Mart and is a perfect case of how a subsidiary integration process can fail and how to manage the failure towards possible success.
Table of Contents
1. Introduction
1.1 Problem background
1.2 Problem formulation
2. Introduction to the Headquarter Wal-Mart
2.1 The case of Wal-Mart in India
3. Why change the management
3.1 Kotter's 8 stage model
3.2 Cultural differences
3.2.1 Hofstede´s cultural dimensions
3.2.2 US-American vs. Indian culture
4. Overall Analysis and findings
4.1 Hofstede's analysis of culture - impact on Wal-Mart
4.2 Kotter's 8 stage model analysis and impact on Wal-Mart
5. Conclusion
Research Objectives and Themes
This paper examines the complexities of integrating new subsidiaries into foreign markets within the context of multinational corporations (MNCs). It specifically investigates the challenges of change management and cultural differences, using Wal-Mart’s entry into the Indian market as a central case study to illustrate barriers to integration and strategic failures.
- Analysis of multinational corporation (MNC) operations and subsidiary integration.
- Evaluation of change management strategies using Kotter’s 8-stage model.
- Examination of cultural influences on business via Hofstede’s cultural dimensions.
- Comparison of US-American and Indian business culture in the retail sector.
- Investigation of resistance to change within organizational transitions.
Excerpt from the Book
3. Why change the management
Like mentioned before the integration of a new subsidiary especially into a foreign market is a long process, where many barriers could appear. The management of the Headquarter is therefore of huge importance during that process, wherefore this chapter will examine why subsidiaries resist to change.
It is expected; that any organizational change is likely to meet some resistance and that there will be resistance to change if someone feels their interests are threatened. (Child, 2005) When dealing with organizational change, some threats are involved, the threat can be real or perceived and people involved in this change may feel that, they are losing something (Lorenzi and Riley, 2000). What will happen with their jobs or simply how their routines will be affected by this change (Lorenzi and Riley, 2000) Lorenzi and Riley formulate the change management as followed “Change management is the process by which an organization gets to its future state, its vision” (Lorenzi and Riley, 2000). It is important that managers understand why people are resisting a specific change (Child, 2005).
How to manage change has been analyzed by many researchers. For example Lewin argues that the change process consists of three steps, unfreezing, change and refreezing. It means to inform people about the relevance of change and how they will be affected by this change. The second step is to change from the old state to the new one and the third one is to institutionalize the change (Child, J., 2005). Kotter (1995) suggest 8 steps model for successful implementation of change, where integration of all steps is important and should be done in the sequence suggested. (Kotter, J., 1996).
Summary of Chapters
1. Introduction: This chapter defines the scope of the study, focusing on the relationship between MNCs and their subsidiaries, while identifying resistance to change as a critical obstacle.
2. Introduction to the Headquarter Wal-Mart: This section provides a historical overview of Wal-Mart and details the specific case study of its expansion into the Indian retail market.
3. Why change the management: This chapter discusses theoretical frameworks for organizational change management, specifically Kotter’s 8-stage model and Hofstede’s cultural dimensions.
4. Overall Analysis and findings: This section applies the chosen theoretical models to evaluate Wal-Mart’s entry failures in India and discusses the impact of cultural differences.
5. Conclusion: The final chapter synthesizes findings and suggests that success in foreign markets requires headquarters to prioritize cross-cultural understanding alongside operational integration.
Keywords
Multinational Cooperation, Subsidiary Integration, Change Management, Wal-Mart, India, Hofstede, Kotter's 8-stage model, Cultural Differences, Organizational Change, Business Strategy, Global Marketplace, Resistance to Change, Retail Management, Headquarters, Foreign Market.
Frequently Asked Questions
What is the primary focus of this research paper?
The paper explores the relationship between multinational corporations and their subsidiaries, focusing specifically on how integration processes into foreign markets are affected by cultural differences and resistance to change.
Which central topics are addressed?
Key topics include multinational management, the dynamics of subsidiary integration, change management theories, cultural dimensions (Hofstede), and the strategic challenges faced by large retailers during international expansion.
What is the core research question of the study?
The research asks what the most important steps are for a headquarters to successfully integrate a foreign subsidiary and what role cultural differences play in that process.
Which scientific methodology is employed?
The study utilizes an inductive approach, relying on secondary data gathered from books, academic articles, and internet resources to develop an analysis based on the collected information.
What does the main body of the work cover?
The main body examines Wal-Mart's expansion into India, analyzes the failure of its initial strategy, and evaluates this failure through Kotter’s 8-stage change model and Hofstede’s cultural framework.
Which keywords define this work?
Important keywords include Multinational Cooperation, Subsidiary Integration, Change Management, Cultural Differences, and Strategic Management.
How does Hofstede’s model contribute to the analysis?
Hofstede’s model is used to highlight the deep cultural differences between the USA and India, explaining why standard American business models often fail when applied in an Indian context.
Why did Wal-Mart struggle with its initial entry into India?
The analysis suggests that Wal-Mart failed because it imposed a standardized "one-man-show" model that conflicted with Indian collectivist values, consumer behavior, and local business traditions.
What is the significance of "resistance to change" in this study?
Resistance is identified as a critical, natural force in any organizational transformation, which Wal-Mart failed to manage effectively due to a lack of preparation for foreign market conditions.
- Quote paper
- Henrik Fürst (Author), 2015, New management. How are subsidiaries integrated?, Munich, GRIN Verlag, https://www.hausarbeiten.de/document/353530
