Posted: April 1st, 2015

Effect of Local Language Communication in Decision Making for MNC Dealing with Local Customers

Abstract

The main purpose of this research is to deal to understand the problem of local language communication in multinational company management. The cultural context in which the subsidiary firms of multinational companies operate will be a basis of understanding how local languages affect the building of business relations in MNCs. In this study, local language will be considered to be part of cultural aspects that affect subsidiary company management. The local language effect will further be narrowed to the customer communication and general relations in management of subsidiaries. This research will take the form of a qualitative study – a case study of foreign multinational companies operating in a specific country – Saudi Arabia. Probability sampling will be the major sampling method with questionnaires being the major tools of collecting data. These research methods and tools have been picked upon because they reduce chances of biasness in research. The findings of this research will be generalized and analyzed and can be used as a basis for research in related areas.

Effect of Local Language Communication in Decision Making for MNC Dealing with Local Customers

Introduction

Multinationals Corporations have increased in number and are projected to increase as business organizations continue to take advantage of globalization in enhancing trade. With Multinational corporations continuing to be significant players in international trade, the problem affecting their performance has to be addressed amicably. One of the major problems facing the management of expatriate firms in Saudi Arabia is the influence of local language in communication by multinationals. Therefore, the major aim of this research is to assess the influence and impact of local language in the administration of expatriate firms in Saudi Arabia. With firms opting more to use expatriate staff in the management of expatriate firms, language becomes a major barrier. This is common in cases where expatriates speak a different language from the one that is being spoken in the country where subsidiary firms are located. Arabic is the national language of Saudi Arabia and research has proved that it takes a minimum of one year for a non – Arab speaker to learn and effectively communicate in Arabic language. The main question in this research is: How does local language affect the communicative relationship between staffs of subsidiary firms and the local population or customers of the company?

The language vacuum between the expatriate staff and management and the local population can be a big hindrance in furthering trade goals by multinational Companies. The local population is comprised of the people who buy the products and services of the companies – customers. Multinational companies have been choosing favorable destinations for establishing their businesses by considering many factors. They have dwelt more on factors that directly relate to business establishment. This means that they have been ignoring language which is not a direct factor but carries a lot of meaning in business success. Literature review will help open up into the real challenges of local language communication by multinationals. It will expose the real management contexts of subsidiaries and how local language communication affects the management of subsidiary companies. Literature review will also help in gaining a deeper understand and exploration of the following questions under research.

• What is the effect of local language in the management of subsidiary companies of multinational corporations?
• How do Multinational corporations deal with the local language barriers?

The primary data that will be gathered in research implementation will also be critical in answering some questions. These questions are:-

• How does the local language in Saudi Arabia influence the management of multinationals that originate from outside the region?
• What role does local language communication play in promoting business in Saudi Arabia?
• What challenges do expatriate staffs face when communicating with the local customers?

Research Interest

The main reason why multinational companies expand into new destination is to expand their customer base by producing or operating in proxy to their customers. While many researchers have been focusing their studies on the management of subsidiaries by multinationals, they have failed to focus on specific issues that affect the working of multinational firms. Business operation is a difficult exercise more so when firms are operating in a new or foreign environment. Foreign cultures often affect the management of expatriate staff and the subsidiary companies at large. Adaptation to foreign language which is an aspect of foreign culture seems to pose great challenges in human resources management of subsidiary companies. It takes a lot of time for expatriate staffs to adopt the local language and use it well in communication.

Communication is a vital tool in business development and language is the most essential component of communication. Other aspects of management for instance marketing management are also negatively impacted by local language. Business in the recent world economy requires aggressive contact communication of which language is an important factor. As a result of increased completion in business, firms go for customers and not vice-versa. Therefore, the multinational companies operating in foreign environment will be required to acquire all the skills that will enable them to reach the customers in that environment. Given the fact that Arabic is the local language of Saudi Arabia, the foreign staffs of foreign companies must learn how to communicate in the local language – Arabic. They must also learn other native languages that are used in the country for then to be able to reach all potential customers in the area where they are operating. Language can be a huge barrier to company – customer communication thereby blocking the firm from wooing more customers. It can also hinder firms from developing close and sustainable relations with local customers Mababaya, PP. 272).

The rate of expatriate failure has been on the rise. One of the reasons for expatriate failure is difficulty of adapting to aspects of foreign culture language being one of them. Modern management of business organizations has to be customer focused because customers are the key determinants of the performance of a business firm. Therefore the master of language in business communication is very essential. Previous research and studies have revealed the importance of language in management at the international level. However, systematic research in the same area does not exist. Language in multinational companies will continue to be a major issue in the expatriate management of subsidiary firms. This is why more research is needed in this area so that stronger recommendations can be made and better practices adopted to ease the operation of multinational companies.

Relation to previous studies

In the last two decades, many researches in the field of international management have been centered on how multinational corporations manage their subsidiary firms located in different parts of the world (Foss and Pedersen, 2002, Paterson and Brock, 2002, Birkinshaw and Hood, 1998). The studies have focused on diverse aspects of challenges of managing parent companies and the subsidiary companies. Mother firms of multinational companies operate within a familiar business culture or environment. They seldom face cross cultural problems which are faced in the managing of subsidiary companies. However, it is evident that one problem in the management of subsidiaries has not been given the attention that it deserves. This is the problem of language use and adaptability by the staffs managing at the global level. Multinational companies must understand that language is and important asset of business enhancement (Berger, 1998). Local language affects the working of foreign firms either directly or indirectly. Whether multinational firms realize this or not, they are still affected by local language and its usage by local populations in places where they are situated (Maclean, pp. 1374.)

Communication is very essential at any level of management. It is also reliant on shared language. However, this is not prevalent in most international business situations. This is quoted to be source of problem in international management. Many chief executive officers and managers of multinational companies have attested to this problem. They attest to this from the experiences they have had over a relatively long period of international management. Percy Barnevik, the then chief executive office of ABB observed that communication and language barrier was the genesis of operational problems for the company (Harzing and Feely, pp. 50). Many managers of multinational companies are coming to accept that language is indeed an operational problem for the subsidiary firms. While this is deeming to be a reality, the acceptance of the problem is a problem in itself. This is because it is either closing down or drawing away researchers who were interested in investigating this problem. Very minimal research has been focused on the effect of language diversity in international management (Welch, Welch and Piekkari, pp. 12, Feely and Harzing, 2003, pp. 37-52).

Subsidiary firms operate in foreign environments and foreign markets. Thriving in foreign markets need the understanding of how the markets are structured and the customer trends. Foreign markets are usually complicated for new subsidiaries. The management of subsidiaries has to understand the behavior of their customers (Marschan, Welch and Welch, 1997). Customer behavior is best understood when they are fully engaged by the firm which intends to market its goods and services to them. Unfortunately, subsidiary firms find themselves in regions where the language spoken totally differs with the parent country language. This has bee the case with Danish Multinational companies which are operating in French or western multinationals that are operating in the Arabic Region (Welch, Welch and Piekkari, 2001 pp. 193-209).

Marketing is an important aspect of business thus business firms are adopting more proactive and engaging marketing practices. The expatriate staffs are thus force to learn the local language so that they can effectively communicate with the local population (Firoz, Maghrabi and Kim, 2002). Local language communication has both a positive and negative effect on the fragmented management activities of subsidiaries. The master of local language communication by the multinational will has profound positive effects on the survival of the firms while the opposite is also true. Customers can be better brought closer to the company and its products when they can clearly read between the activities of the company. Multinationals use expatriates in management who are often non-native speakers depending on the countries in which they are situated (Piscitello and Rabbiosi, pp. 2, 2004).

Corporate communication is an important facet of business organizations. A number of multinational companies are choosing certain international languages as corporate languages. However, this cannot draw away the reality in modern business where firms are centered on customers. Firms seek to win customers in whichever places they operate. Therefore, in as far as corporate languages are chosen by firms, local language communication for multinationals more often override the corporate language. Language is an important feature or organizational communication (Segalla, Fischer and Sandner, 2000) Multinational companies move into new functional areas with many expectations on of then being to capture a new market for their product and services. Therefore they must learn how to communicate with the local population which often comprises the targeted customer (Taggart, 1997).

The liberalization of trade has result in the rise of the number of multinational companies and the expansion of their activities in different regions in the world. Different multinationals are seeking business opportunities in different countries and regions in the world. Once they identify business opportunities they do not hesitate or take more time to reflect on the possible inhibiting factors like local language (Peltokorpi, 2010). They do not consider how local language will impact on their business operations in the foreign destinations. Research shows that the adoption of corporate language by multinationals does not have a significant positive effect in eliminating communicative problems in Multinationals. Local language communication competence seems to override corporate language communication. Therefore, it is advisable for multinationals to shift their attention to foreign language when they are operating in foreign countries (Andersen and Rasmussen, pp. 231-242).

Multinationals and mode of entry into new business destinations

Multinational organizations must choose best suited strategies which will help them to smoothly enter and adapt the new business environment. There exist different modes of entry which can be adopted by the multinational companies. Whichever the mode is chosen, the culture of the new country and most importantly the local language in the new destinations must be given consideration. Failure to do these results in extended challenges which present themselves in stunted communication relations between the Multinational companies and the local customers (Harzing and Pinnington, 2009, pp. 6).

Language affects the practice of employees of multinational companies especially so in cases where the MNC is operating in a multilingual environment (Welch and Piekkari, 2006, pp. 417-437). In such cases, multinationals choose a common corporate language in the management at the international level. While scholars of international management look at this from a positive angle, they are also weighing on the possibility of failure (Thomas, 1998, Shay and Baack, 2004). The failure of firms often come about when they do not focus on adapting to local language usage and instead center on corporate language usage. Many multinationals choose English as their corporate communication language. Therefore, when they enter the new regions, they will want to stick to this language. This works negatively for these organizations because some regions like the Arabic region heavily use the Arabic language (Fredriksson, Barner-Rasmussen and Piekkari, 2006 pp. 406-423, Zekiri, Jusuf and Angelova, 2011).

Proposed research methods

Information under investigation in this research will be obtained from different sources. These sources are the review of literature concerning the topic under study, primary sources or information from the field and also form secondary sources. All these sources of information are vital and will help provide detailed knowledge and understanding of the problem that is being investigated.

Review of literature

Information related to the topic under investigation will be obtained from reliable sources. Online publications such for instance online journals will be the key sources of information. The journals must have specific subjects which will help open up into the area being investigated in this research. The information form the online publications will be supplemented with information from other materials including textbooks, magazines and reliable websites.

Primary sources of information

Information will also be sourced using empirical case studies of ten different foreign multinational companies that are operating in Saudi Arabia. Qualitative survey techniques will be used in the empirical study of the sampled multinationals. The sampled companies must come from outside the Arabic region.

A qualitative research method will be employed in this research since it is aimed at explaining how local language affects customer communication in multinationals. Language is a qualitative phenomenon thus it will be better investigated using qualitative research tools. Qualitative case studies often give out qualitative data or outcomes which are explanatory in nature. The aim of this research will be to analyze and not just explaining the outcomes.

Questionnaires will be used in obtaining information from the sample multinationals. The questionnaires to be used will have both closed ended questions and open ended questions. More questions will be structured in a closed manner as this reduces biasness (Gillham, 2001, pp. 2). Questions used will be based on lingual aspects in managing customer relations. Marketing research questions are best suited in this case.

The data gained form the questionnaires will be analyzed using social science research analytical tools like the SPSS. The analysis will help in opening into and addressing some of the research questions. The question of how multinationals deal with local language communication barriers will be addressed in this analysis.

Qualitative studies utilize probability sampling techniques. Arriving at samples in researches that are utilizing case studies is easier (Yin, 2009, pp. 3). In this research, a stratified sampling technique will be used to separate the Arab based multinationals from the ones originating from outside the region. After this, simple random sampling will be used to pick on companies that originate from outside the region. Simple random sampling techniques have been highly applauded in research since they reduce the possibility of biasness by a very big margin. Many research techniques – probability and non-probability narrow down to simple random sampling technique when they want to arrive at the final sample (Marshall and Rossman, pp. 5 – 10, Jackson, Jackson, 2012, PP. 87).

Reflections

The effect of local language in multinationals and specifically in relation to customer relations is an area of management that has not been fully researched. This area is however sensitive and has been affecting the operations of subsidiaries either knowingly or unknowingly.

The potential impeding factors in the duration of this research are the limitation of time and the limitation to accessing all the detailed information from the sampled companies. Also, the sampled companies may have already used other means to adapt to local language communication. This is likely to influence the outcomes of this research and affect the aims of this research. Language will also be an impeding factor in the research.

The research method used is suitable for this research. However, for every research method used, there are pros and cons. It is thus the task of the researcher to ensure that he or she fully maximize on the merits of the selected research method. Questionnaires form part of the best research tools because of the privacy aspect in them (Woodside, 2010, pp. 225).However, they can still be manipulated by the researcher when making entries in readiness for analysis. This concern has been noted. The interviewees will be given room to respond to the questions the way they understand them. When the questions are wrongly decoded by the respondents of which there is a probability, the wrong responses will be given. The interpretation of questions is a notable problem thus the questions will be standardized by using a tone of language that is commonly used in marketing research (Yin, R, 2003, pp. 3, Thomas, Jack and Stephen, 2011, PP. 300).

Conclusion

This research is expected to employ qualitative research methods – case study in order to come up with recommendations that will serve as a solution and a basis for future research. It will focus on the national language as a local language in countries where the subsidiary companies of multinationals are situated. A review of literature will be carried out in this research while the main study will utilize questionnaires. Probability sampling has been chosen because it will ease the selection of a proper sample in the study. This research method will also reduce biasness in the research. I intend to undertake several pilot studies to test this proposal so as to master the challenges that will be faced and avoid them in research implementation.

This is a comprehensive research which will call for a mastery of statistic and analytical techniques of which I have to acquire. These will help in easing the implementation of this research. Since SPSS will be used in analyzing my data, I will acquire the software and learn how to use it in analyzing data prior to the implementation of the proposal. The acquiring of SPSS skills will help me make the final changes to the proposal. The research will be implemented within the set timeline so that the goals can be met.