Greenway Hotel is a budget accommodation business and owns more than 60 hotels throughout the United Kingdom. These hotels are located in downtown, it is easily accessed to the public transport and it is suitable for tourist and business travellers. The chief of Greenway Hotel decided to rebrand the new hotels in Germany as the part of Greenway Hotels Group. The firm decided to use an ethnocentric approach and send their UK-based managers to Germany to guide the reopening of the hotels in four weeks.
Effectively all measures of international business activity designate that the world has become a global marketplace. This tendency toward globalization presents greater strategic challenges for most firms (Lewis & Fandt,1991). To bring a company or organization to global level it’s not that easy. The options about local adjustment and global integration apply to all sections of a basic business strategy. It can be argued that differentiation and integration represent the unexpressed strategic problem faced by the MNCs (Drahokoupil J., 2014). In here differentiation is meant by every country has different type of formality, language, goals, time orientation and culture.
The concept of multinational strategy will be focused in this report to justify the problem and causes of Greenway Hotel entering the German market. Many organisations actually ventured themselves across different countries. These companies can take different strategies on how they will manage their workers across different subsidiaries. Based on the case study, the organization would like to own 150 hotels within the next 5 years. The company have asked for what kind of multinational strategy they should adopt and to understand the benefits of the approach. The extremes are the ethnocentric strategy, where expatriates are sent out from HQ because they “know what is better and good” (about organisational policy or specific skills or practices), and the geocentric orientation, where planning for international tasks is just one part of global HRM planning (Brewster, Houldsworth ; Sparrow, 2016).
This report will cover the problems, causes faced by Greenway Hotel in the case study and recommendations will be given as a solution to solve the issues faced.
Problem 1: Ethnocentric approach is expensive
From the past years globalization procedures has been leading to development of the large multinational companies by enlarging their organizations across countries. One of the main challenges faced during the development is always to find balance between the parent company and control of the host country (Touron M., 2008). According to the case study, Greenway Hotel UK would like send their existing managers to Germany, to set up and lead the changeover of the new hotels. It might be easy to obtain or launch a new organization at a country, but there will be many extra charges and it will be expensive. If UK is sending their managers over to Germany, they have to pay high relocation costs to the managers, because of their working system differs in both countries (Jones, 2015).
Problem 2: Culture Clash
Perlmutter (1969) has stated organisations operating in an international context can adopt human resource management approaches which are; ethnocentric, polycentric, and geocentric. According to the case study, Greenway Hotel has decided to use ethnocentric approach. Ethnocentric approach is home country oriented and the knowledge from the home is seen the most important, therefore they failed to understand other’s culture. Another problem is culture clash between Germany and the UK. The culture of both countries are totally different and opposite. UK managers may have problem in adapting to the local environment and culture in Germany. According to Hosftede’s cross cultural theory, British culture is among the indulgent countries (69); people high with indulgent generally shows a willingness to desires and wants to have little enjoyment in life. Compared to German’s culture prefers to control their desires and prefers a restrained culture. This type of people does not put much time on leisure activities and feels indulging themselves is wrong. Another example would be, German is perfectionists and wants to get things right with everything they do but the British people are quick-witted (Limited, 2018).
Another culture problem is language barrier. According to the case study, none of their existing managers speak German fluently. This will be great challenge for the managers who are going over to Germany, language is an important element to communicate in any kind of situation. If this is failed to do, it will affect the working environment of the organization and there won’t be much understanding between the employees.
Cause 1: Ethnocentric is expensive
Time management is an important element to any organization, without proper time management certain goals and achievements can’t be achieved. In the case study, UK wants to rebrand their hotel in Germany in four week’s times and the hotels must be ready to open after that time. This can be a very crucial situation for German; they won’t be able to have enough time to understand the local culture of the employees or managers from UK. This approach will be not suitable for this short time of period given. The managers of Greenway Hotel should also consider the issue that’s on going between the UK and EU, Brexit. According to BBC News (2018), the UK is scheduled to leave the European Union on 29th March 2019. Ever since the Brexit started, it has affected UK’s economic situation. Inflation rose after June 2016 and unemployment rate went higher to 4.2%.
The UK and EU meets each month face to face to negotiate, and the first task is to get the rights of UK and EU expat citizens after Brexit, if this happens UK needs to pay on leaving, another term “divorce bill”(Alex.H, 2018). Overall British would like to have the same equal rights of EU and doesn’t want to have any shared decision making. This is a very clear example of being an ethnocentric.
Cause 2: Cultural factors/Working at a different culture
The human resource management involvement of management evolution in international organisations is countless. Strategically, every management from different country need to adopt the global approach and the different kinds of culture in order to gain the success (Watson. S,1991). As stated before in the problem, Germans and UK has some differences in their culture. The first difference will be their language. As we all know, Germans don’t speak fluent English, so as Greenway Hotel is entering their market to expand the business, the managers from UK should be taught adequate or some knowledge of German’s language. Secondly, the management skills of both countries differ. Culture is primarily expressed through implicit and subtle nonverbal behaviours of which individuals have limited awareness (Andersen, 1997).
Another dimension of Hofstede’s theory that can relate to UK’s culture is individualistic. Both UK and Germans are high in the score with 89 and 67; however the British people are highly self-centred and private people compared to the Germans. Germans way of communication would be direct, “honest even when it’s hurt”, they prefer to learn from mistakes.
When a country is sending a management to other countries, they need to study the background of that country in these aspects; political, economic, cultural, socially, ethnic and other aspects as well. After doing few research and studies on ethnocentric approach, Greenway Hotel shouldn’t proceed with this way. The better approach Greenway Hotel could use is through polycentric approach. Jonathan C., (2017) has defined polycentric approach is “an approach acquired when an MNE handles each subsidiary as a distinct national body. Typically the host country operation will be allowed more decision-making autonomy and will be staffed primarily by HCN”. In this approach Greenway Hotel UK must adopt to the ways of Germans; the HR practices and procedures are usually taken from the HQ so that they are more in line with requirements of the subsidiary.
When employing the HCN, the MNE eliminates the language barrier and there will be fewer problems with expatriates’ managers