In the contemporary world of business, globalization has become dominant as companies seek to increase their presence in foreign countries. However, they are faced with challenges that hinder their penetration into their desired market. The obstacles may include harsh trade policies, ethical issues, cultural barriers, political instability, and competition from other multinationals. Notably, companies that adapt promptly to the environmental conditions are most likely to succeed compared to those with rigid structures. Even though internationalization has a positive influence in an organization's growth, it faces many challenges that pose as threats to a corporation's sustainability in the market.
United States-based multinationals face several political barriers in foreign markets. Developing countries tend to engage in political crisis regularly, which affects many organizations. For example, in most Sub-Saharan countries, legislative elections proceed violence and civil uprising. Corrupt leaders who struggle to retain power despite election outcomes cause the situation. In such conditions, organizations conducting business in the region may face closure, reduced sales, or property destruction (Bretos & Marcuello, 2017). Notably, politicians from the unstable states may encourage their supporters to boycott certain foreign businesses due to their political inclination or ideology. Therefore, the companies end up losing a significant portion of their customers, which reduces their profit margin.
Additionally, harsh trade policies in various nations affect the productivity of US-based multinationals. Many countries enact trade laws to protect their indigenous and local industries and control the market balance. Therefore, most nations impose heavy taxes on foreign companies, thus, raising their cost of operations (Bretos & Marcuello, 2017). Consequently, the companies increase their product prices above the local market price to cater for the extra costs. It is evident that consumers prefer low-priced goods to suit their economic conditions. Thus, the US-based firms attain less market share, which may affect their long-term sustainability in the specified region.
Typically, each country has its unique culture and heritage that affect consumer behavior and business operations. Communication, organization hierarchy, and work etiquette contribute to obstacles in culturally diverse enterprises. The American culture despite its immense influence in the world, some regions remain loyal to their heritage; thus the need for market adaptation (Bretos & Marcuello, 2017). For instance, various communities across the world have specific values and taboos, which all their members follow. On the other hand, most American company bases their core values on the western culture, which conflicts with local customs in foreign lands. Moreover, the communication barrier in the organization due to linguistic problems hinders information flow, thus derailing business operations.
Fourthly, ethical business practices have played a vital role in the failure or success of many MNCs. They involve areas such as environmental conservation, labor, legal compliance, product safety, and corruption. In this case, many MNCs face a bad public reputation due to indulgence in unethical practices (Bretos & Marcuello, 2017). For instance, some companies may engage in corrupt dealings to avoid competition for government tenders in host nations. If the fraudulent activities are exposed to the public, the businesses lose their reputation and market command. Noticeably, MNCs may engage in unsustainable environmental practices. For instance, they may dispose of radioactive materials into the environment recklessly causing health hazards to the residents. If international communities, such as the United Nations, discover their habits, the companies are banned from operating in the regions.
Euro Disney's Cultural Challenges in Paris
Euro Disney in Paris faced a traumatic failure in France despite the Walt Disney Company performing better in Florida, United States. The amusement park lost close to one billion dollars two years after its launch despite its four billion investments capital (Spencer, 1995). Disney Walt Company failed to research extensively on the European culture before venturing into the market. Euro Disney duplicated American culture in Europe, which led to its poor performance in the region.
Firstly, the company failed to recognize Europe's consumer culture and behavior. For example, Europeans are used to taking a glass of wine after dinner. They also regard taking alcohol as part of their leisure. On the other hand, Disney had a rule of not selling alcohol in the park, which was popular in America (Spencer, 1995). However, the Europeans were inconvenienced with the rule. Secondly, they had a different meal routine as compared to the Americans. They preferred taking their lunch at half past noon, while the firm had set the time one hour earlier. The phenomenon led to long ques in restaurants since the park did not anticipate the changes.
Thirdly, Walt Disney faced social relationship challenges since it failed to reorganize its corporate culture to accommodate the individualistic nature of their employees. The firm utilized a teamwork model similar to Disney Land Florida. However, the Europeans employees preferred working individually rather than in groups (Spencer, 1995). As a result, the company lost approximately a thousand employees three months after its launch. The workers complained of brainwashing and altered meal routines.
Fourthly, the company did not correctly identify the work and leisure patterns of the French. The enterprise anticipated Monday to have a fewer number of clients compared to Friday (Spencer, 1995). Thus, it allocated its workers accordingly. Nevertheless, the reverse proved to be the reality, which led to confusion in reorganizing duty schedules. Moreover, Europeans did not extend their vacations unlike in America. Most stayed at the park for two or three days, thus reduction on the actual revenue. Euro Disney failed to raise the planned returns on investment, unlike other American amusement parks.
Hofstede's Cultural Dimension
According to Hofstede's cultural dimension, the French have a lower indulgence versus restraint index compared to the Americans. In such a situation, individuals suppress gratification and leisure activities, which involve fun and enjoying life (Bakir, Blodgett, Vitell & Rose, 2015). Due to this, French tourists spent less time-two or three days-in the park compared to approximately five days for ordinary tourists in the US.
Secondly, France had a higher individualism versus collectivism (IDV) values compared to America. People in such communities prefer working individually compared to teamwork (Bakir et al., 2015). The high score resulted due to weak interpersonal relationships among employees, which led to a high job turnover compared to Disney Land Florida. Thirdly, France had a lower power distance index compared to the US, which demanded flatter organizations and relatively equal authority. Euro Disney did not delegate decision-making authority to many workers, which made them feel brainwashed.
Overall, US-based international businesses are faced with multiple challenges, which have a substantial influence on their long-term sustainability. Ethical practices, culture, politics, and trade barriers pose significant challenges. Many organizations fail to study their target markets sufficiently to identify cultural differences to aid them in market adaptation. As a result, most fail to achieve their goals. It is incumbent on all managers to identify all elements in the environment that affect their organization's growth.
Bakir, A., Blodgett, J. G., Vitell, S. J., & Rose, G. M. (2015). A preliminary investigation of the reliability and validity of Hofstede's cross cultural dimensions. In Proceedings of the 2000 Academy of Marketing Science (AMS) Annual Conference, 226-232.
Bretos, I., & Marcuello, C. (2017). Revisiting globalization challenges and opportunities in the development of cooperatives. Annals of Public and Cooperative Economics, 88(1), 47-73.
Spencer, E. P. (1995). Euro Disney: What Happened? What Next? Journal of International Marketing, 103-114.
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