Every a cultural analysis and interpretation of both

Every year many internationalbusinesses form collaborations. Due to inevitable cultural differences, conflictsbetween the two parties are highly likely. This paper starts by defining joint venturesand international collaborations in general. To help understand the concept thepaper then describes the history of Wal-Mart Stores, Inc. and BhartiEnterprises. This is followed by a description of the economic situation inIndia in 2006 and an enumeration of reasons why Wal-Mart chose an Indianpartner to merge with. The main topic of this paper is a cultural analysis andinterpretation of both countries, in order to investigate if the cultural differences have an effect on business collaborations,and if so, to what extent.

The hypothesis is whether the cultural differences have an effect onbusiness collaborations. After reading this paper, one will know about jointventures and other types of international collaborations. Additionally, it willbe clear if and which cultural differences between the United States and Indiainfluence their partnership and whether it was a success. 2.Definition of joint venture and other international collaborationsA Joint Venture is a collaboration between two or more existingcompanies. Joint ventures can occur between legally and economically independent companies which share commonbusiness interests, management values, and business ethics. Both contributecapital and experience into the new partnership which is established for acertain purpose,1 meaning to gain new marketshares in foreign regions.Other forms of international collaborations are exporting, licensing,franchising, subsidiaries and wholly owned companies.

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A common obstacle of all kinds of international cooperation to get overis the cultural barrier, and promoting teamwork successfully which enablesprofiting of each other’s knowledge.3. Who is Walmart and Bharti Enterprises?The American company Wal-Mart Stores, Inc. is largest retailer in theworld with more than 11,695 stores in 28 countries2.Walmart justifies its international success to the fact that “in every locationwe operate, we are local.”3Walmart is following its mission purpose saying “savingpeople money so they can live better”4.Before the joint venture Bharti Enterprises was a leading Indiancellphone operator who served more than 30 million customers around India.5In 2007 the partnership between Bharti and Wal-Mart was establishedaiming to create a completely new wholesale cash-and-carry business in India bybuilding up to 20 superstores across the country.

6These two companies merged together, hoping to use Bharti’s retaildistribution network and knowledge about the local market including the buyingbehavior of the middle class while Wal-Mart can provide the needed logistics, purchasingand support.7 4. Economic situation in India To understand the challenges Wal-Mart had to deal with, one first needsto know about the economic situation in India in 2006.India’s economy was extremely different to the American economy.So-called Kirana stores which are small, family-owned grocery stores play acrucial role in India’s retail sector. They are spread out all over the countryregardless if it is an urban or rural area.

Every household in India has atleast one Kirana store around the corner which makes it possible for them to dotheir grocery shopping at any time. Living in close proximity to Kirana storeswhich they go to regularly means a deep and trustful relationship between theretailer and the customer from which both parties benefit.8Infrastructure inIndia at that point was undeveloped, access to transportation in rural areasmore or less non-existent.In terms of buying power, Wal-Mart and Bharti were vastly different.

Traditions, values and various food habits and tastes of the Indian populationwere also issues Wal-Mart had to effectively address in order to develop asuccessful collaboration with Bharti.9Not only does the complexity of infrastructure mean that deliveringgroceries straight from the Wal-Mart stores to every household a big issue;Wal-Mart also has to deal with undertaking a whole change of retailing culture. 5. Opportunities for Wal-Mart in India In 2006 India was the fastest growing world economy with an annual marketgrowth of 7% between 2003 and 2006. The Indian retail sector was expected torise impressively, resulting in much – so far- unused potential for the retailmarket.

Wal-Mart had already successfully conquered the Brazilian and Chinesemarket so India with its world’s eighth largest market in 2006 and a middleclass of 300,000,000 potential customers was a truly attractive marketplace foran internationally expanding firm like Wal-Mart.10 6. Culture analysisBoth cultures of Indiaand the United States are analyzed to figure out how misunderstandings betweenthe partnership developed and how each society focuses on which values.Geert Hofstede, aDutch social psychologist, extended an existing study of cultures across modernnations.

He proposed that culture can be characterized into different nationalvalues so-called dimensions which are mentioned below.11Using Hofstede’scultural analysis, the following dimensions are examined: high versus low powerdistance, individualism versus collectivism, masculinity versus femininity,high versus low uncertainty avoidance, long-term versus short-term orientationand indulgence versus restraint.6.1 Analysis of India and the United States Figure 112Figure 1 shows thatthe two countries vary in some points like Power Distance, Individualism and Indulgence.India has ahigh-power distance meaning that Indian employees strive for a clear hierarchyin a company with a top down communication. Staff are notempowered.

They will execute what they are being told without criticizing beingunder permanent control. It is a belief that people in positions of authorityshould have considerable power compared to their subordinates13.Workers in the UnitedStates have a lower power distance meaning that management and theirsubordinates communicate on the same level and creativity as well as one’s owninitiative is encouraged. Employees work independently and unless a processgoes wrong or does not led to the desired outcome then input from management isnot required.In a collectivisticculture like India, people are more focused on the well-being of a group, andthey have a high preference for belonging to one. Decisions at work willtherefore be taken for the well-being of the majority even though the decisionmay not be the most profitable for the company.The United States, incontrast, have a highly individualistic society.

Individual interests are moresignificant than group interests. People put their own needs and desires abovethe group wishes and they are not empathetic to others in the process.An indulgent societyit is all about showing desires and impulses. Americans are more likely to doso and give leisure time and gratification an important role in their lives,they do not focus on social norms and the suppression of needs as Indians do. 6.2 InterpretationIndia’s high-powerdistance derives from the caste system. People do not complain or try to breakout of the social class that they born into. The employees who worked at theWal-Mart stores in India did notice that some processes went wrong but as they are used to strictlyexecuting processes handed down from management without question, they did notpoint these problems out to their superiors.

Another significantcultural difference between the two analyzed countries which affected the dailybusiness heavily in the Wal-Mart-Bharti partnership is the fact that Americansupervisors expected Indian employees to visually show their happiness bysmiling at the customers continually. Indian consumers whoare not used to being shown feelings that obvious felt like this behavior wasartificial and became uncomfortable while shopping at the cash-and-carry shops.14The Americansuperiors did not know how a collectivistic society behaves.In India people carefor each other and the well-being of the group is more important than theindividual. As every family knows the owner and his family of the Kirana shopone can see that Indians are used to individual and personal relations to thesebusinesses.

Even if a familycannot afford the groceries they need, the Kirana store owner will provide thegoods to the family on a credited basis without any concern. They will puttheir customers’ needs above their own, making sure the family has enough toeat is more important for the business owner than receiving their incomeimmediately.15 When Wal-Mart triedto establish the big retail shops in India people could not identify themselveswith the idea not having their familiar grocer.         7. Conclusion The clash of American and Indian culture led to a breakup of the jointventure in 2013.16Wal-Mart with relatively successful establishment of new stores in manycountries across the globe underestimated the strong-willed Indian culture.Indians were not able to adapt to that many changes in their lives atthe same time. Forcing people not to behave in the way they are used to leads then tofeelings out of their comfort zone.

Indian employees felt unnatural andartificial when smiling at the customers all day long. Feeling uncomfortable atwork results in lower work productivity which in return leads to less profitfor the company on the long-term. This process Wal-Marts initiated unknowinglycreated a multitude of new problems.Had Indian people been used to acting as empowered employees andinformed their supervisors, then these would have been aware of the problemsand could have attempted to find solutions.They falsely assumed that they had sufficient international experienceto merge with an Indian company. They should have carried out a detailedanalysis of the Indian market they entered. This was their downfall.That example proves the hypothesis started at the beginning of thispaper that international collaborations are affected by interculturaldifferences.One of the results here can serve as advice for businesses planning onestablishing any kind of international collaboration is that retail is a localbusiness, every country and even every city in a country have culturaldifferences.


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