The Role of Strategic Leadership in Building the Geocentric Culture of Global Corporations

The Role of Strategic Leadership in Building the Geocentric Culture of Global Corporations

Maria S. Plakhotnik (National Research University Higher School of Economics, Russia)
Copyright: © 2017 |Pages: 12
DOI: 10.4018/978-1-5225-1049-9.ch123
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Abstract

The purpose of the chapter is to discuss the role of strategic leadership in building and sustaining geocentric organizational culture. The geocentric organizational culture is a corporate culture of global corporations (Perlmutter, 1985). This culture has to go above and beyond different national cultures that employees bring with them and foster those beliefs and values that are “comprehensive and compelling” (Kets de Vries & Florent-Treacy, 2002, p. 299) to all employees. The chapter starts with an introduction to global companies and the geocentric culture. Then a review works around strategic leadership is followed by a discussion of the role of strategic leadership in building and sustaining the geocentric culture.
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In the global economy, strategic leaders capable of learning how to shape a firm's culture in competitively relevant ways will become a valued source of competitive advantage. (Ireland & Hitt, 1999, p. 51)

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Global Corporations

By the end of the 20th century, 500 largest multinational corporations (MNCs) were responsible for half of the world’s trade (Rugman, 2000). Economies of the top 50 MNCs were larger than those of 130 nation-states (Cohen, 1998). In the 1990s, the number of MNCs almost doubled and the number of their foreign affiliates quadrupled (Kuper, 2004). As a result, MNCs have accumulated power to change the global economic, political, and cultural landscapes. This accumulation of power has led to much criticism as illustrated in anti-globalization protests around world. One of the criticisms of MNCs is their ethnocentric or home country-oriented corporate cultures. While their operations can be located in several dozen countries, each with different national cultures, many MNCs have been approaching cultural differences as barriers to fast company growth (Warner & Joynt, 2002) and, hence, have been choosing to replicate their organizational practices in host countries’ subsidiaries (Bartlett & Ghoshal, 2000). This ethnocentric orientation might lead to a global convergence of business practices and culture toward Anglo or American business models (Gupta & Wang, 2004) and “conveys [an] aura of corporate colonialism” (Begley & Boyd, 2003, p. 357). Negativity towards the ethnocentric corporate cultures and anti-globalization feelings have made corporations address the question: “Can enterprise, which is a leading part of the problematique (political, economic, social and ecological), be also a leading part of the pragmatique, the set of practical constructive interventions that reduces future societal disorder?” (Perlmutter, 1985, p. 273).

Corporations go through four phases as they expand beyond national borders: domestic, international, multinational, and global (Adler & Bartholomew, 1992). Domestic companies operate in one country. International companies go beyond their national borders. Multinational companies operate across many nations; their services and products are standardized and they make decisions locally. Global companies operate worldwide; their services, products, and decision-making strategies are adapted to the local market. To become a leading part of this pragmatique, some MNCs moved toward the fourth phase - becoming a global company.

Global companies establish a new, win-win, form of relationships with other entities -symbiotic. The term symbiosis in biology “connotes reciprocal relations between organisms which live in close proximity, of similar and different species. The relationships are mutually advantageous, and essential to survival” (Perlmutter, 1969, p. 280). In contrast with other phases, a corporation in the global phase attempts to take “a more constructive role in society” (Perlmutter, 1985, p. 280) by valuing both profitability and public acceptance and by establishing reciprocal relationships with other societal entities. These companies attempt to play not only economic and political, but also social and ecological roles in the society.

Units of global companies mutually negotiate corporate governance. Management decisions are made in collaboration and discussion with others and target growth in both quality and quantity and balance of both efficiency and people (Perlmutter, 1985). Management create and implement policies “that reflect both global commonalities and local differences, get the best of both worlds” (Calof & Beamish, 1994, p. 107). Shared learning, economies of scale, and local responsiveness are examples of strategies used by management.

Key Terms in this Chapter

Free Exchange of Ideas: An environment that encourages employees to input and share their inquiries into problems.

Values: Assumptions that determine what is ethical, what is wright, what is desirable and provide a foundation to human behaviors.

Professional Development: A systematic approach to providing continuous learning opportunities to employees.

Global Companies: Represent a fourth phase in the internalization of a company (after domestic, regional, multinational phases). They operate worldwide; their services, products, and decision-making strategies are global and adapted to the local market.

Socialization: A process of one’s adaptation to and integration into a new environment, including a new organization, which includes learning new behaviors, values, expectations, attitudes, knowledge, skills, and establishing new relationships.

Corporate Culture: (Organizational culture) a set of values and beliefs that inform management practices as well as behaviors and expectations that are encouraged in the organization.

Geocentric Culture: A culture of a global company. This culture has to go above and beyond different national cultures that employees bring with them and foster those beliefs and values that are clear, relevant, and desirable to every employee regardless of their national, professional, educational, political, and other backgrounds.

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