Dangote Group Nigeria Plc: Internationalization into China - Iloka Benneth Chiemelie

Author: Iloka Benneth Chiemelie
Published: 21-November-2013

EXECUTIVE SUMMARY

This report paper is designed to analyse the impact of cross-cultural differences in international organisation. Dangote Group (Nigerian born brand) is the chosen organisation and China is the chosen market for penetration. This report is divided into 4 different chapters.

Chapter 1: this chapter provide an in-depth study into Dangote's Group's business background ranging from their history, product and service lines, management style, core values and cultures to current achievements. The rational for internationalizing Dangote Group is also discussed in this chapter.

Chatper 2: the chosen market (China) is the talking point in this chapter, as this chapter provide rationales for internationalizing into China. The rationales are the country's growing economy, availability of raw material and affordable workforce. This chapter also provides an analysis of China's cultural profile.

Chapter 3: haven chosen the organisation to internationalize and market to penetrate, the next step was to unveil the cross-cultural challenges and barriers Dangote Group will face in China. This was discussed in this chapter, and a recommendation was also proposed for each highlighted challenges and barriers.

Chapter 4: this is the concluding section of this report. The chapter 4 presents a recap on all main points discussed throughout the overall report.

CHAPTER 1

BACKGROUND ANALYSIS AND BRIEF HISTORY

Established in 1981 as a trading company with cement as their core business, the group went on diversify into conglomerate trading cement, sugar, flour, salt and fish over the years. By early 1990s, Dangote group had grown into one of the biggest trading industry in Nigeria. By 1999 with the transition from military rule to civil rule, and a visit to Brazil to study the emerging manufacturing sector; the group focused its mean operation into the manufacturing industry (Dangote Group, 2011). In a country where importation constitutes majority of consumed products, being able to manufacture these products would set a huge gap between them and their competitors.

Taking all these into consideration, the group embarked into a huge construction and manufacturing programme. By 2000, Dangote group acquired the Benue cement industry from the government of Nigeria, and by 2003 commissioned the largest cement plant in sub-Saharan Africa (Obajana Cement plant).  Now one of the largest manufacturing and Construction Company in Africa, Dangote group continues its expansion into their core business sectors and acquiring of new companies across Africa as they aim to become the biggest conglomerate in Africa (Dangote Group, 2011).

COMPANY OVERVIEW

Dangote group is one of the most successful and diversified business conglomerates in Africa, with a strong reputation for excellence business and quality services. It is headquartered in Lagos, Nigeria in West Africa. Dangote Group businesses and industries includes as listed below:

Table 1: Dangote Group's business and industry lines

Manufacturing	Refining	Milling	Port management and haulage	Other
Cement Sugar Pasta Noodles	Salt	Flour and Samolina	Logistics	Real estate Dangote foundation

 MANAGEMENT TEAM

Tabke 2: Dangote Group's main management team

Name	Position
Aliko Dangote	President/ CEO He is the founder of Dangote group and BA in Business Administration holder from Al-Azahar University, Cairo Egypt.
Sani Dangote	Vice President
Kunt Ulvmoen	Group Executive Director
Olakunle Alake	Chief Operating Office
Kuzhyii Ravindran	Chief Financial Officer
Paramjit Pabby	Chief Human Resource Officer

COMPANY VISION

To be world-class enterprise that is passionate about the standard of living of the general populace and high returns to stakeholders.

COMPANY MISSION

Touch the lives of people by providing their basic need

CORE VALUES

Customer service: being a world-class organisation, Dangote group understands that they exist to serve and satisfy their customers. Indeed, their customer orientation reflects intimacy, learning and integrity.

Entrepreneurship: another core value of the group is entrepreneurship, and this is behind their constant development of new business ventures, while deploying innovative strategies to maintain their market leaderships.

Excellence: as a big group working together to satisfy their customers and return high values on investment, Dangote group demonstrates teamwork, respect and meritocracy as their third core value.

Leadership: as Dangote group thrives to being leaders in their business, markets and customers, another focus is on continuous improvement, partnership and professionalism which have made the Group a credible leader.

RECENT ACHIEVEMENTS

• Best African initial Public Offer for 2007 as awarded by African investors' index series.
• Presidential merit award for the best quoted company in the Food and Beverage sector 2007 as awarded by the Nigerian Stock Exchange.
• Presidential merit award for the best quoted company in the Food and Beverage sector 2008 as awarded by the Nigerian Stock Exchange.
• International quality award in mining sector 2009, as awarded by renowned Business Initiative Directions – Madrid, Spain.

RATIONALS FOR INTERNATIONALIZING

Internationalization has been considered to be the process by which firms move from operating solely in its domestic market to foreign markets (Rasheed, 2005). It is principally based on firm's ability to isolate, decide best market to penetrate, and develop entry mode for the selected market (Driffield and Love, 2007; Dunning, 2000). They have been numerous studies over the years on factors that influence internationalisation and best ways to select new international market for penetration (Moen et al., 2004; Johanson and Wiedersheim-Paul, 1975; Johanson and Vahlne, 1977). Based on some of the factors highlighted in academic research, we then propose the reasons for internationalization to be as discussed below.

Increases market shares: Dangote Group will be able to increase their market shares through internationalization and new market penetrations.  This is because, compared to their present sales and market size, they can attract new customers from new markets when they penetrate these international markets; thus, generate more sales and increase their market shares. This is one of the main rational why internationalisation is considered essential for Dangote group.

Gain competitive advantage: through internationalization, Dangote group can increase their competitive edge by satisfying more customers. This is because, compared to their domestic competitors, they can generate more revenue through internationalisation and divert these revenues into new product development and marketing, which will in turn increase their competitive advantage both in domestic and international markets. On the other hand, it can increase their international reputation which will indirectly or directly influence consumers purchasing decision as they seek for high value brands.

Improve supplier and distributor networks: the company can improve their networks of suppliers and distributors through internationalization. The main concept of business revolves through availability of raw materials and ability to get the finished products to the final consumers. Internationalization makes this concept much easier and Dangote group can benefit from it. Through internationalization, the company will have broader and more productive networks of distributors and suppliers to enhance their business process and generate more profits.  

CHAPTER 2

CHOSEN COUNTRY TO PENETRATE INTO

China

RATIONALS FOR INTERNATIONALIZING INTO CHINA

Stable economic growth: China has been the fastest growing economy in the world for over 30 years, expanding at 10% per annum in real terms. As a result, in 2005 their real GDP was already about 12 times the level it was in 1978, when Deng XiaoPing launched China on the platform of economic reform (National Bureau of Statistics of China 2006, 24). China is presently the world's third-largest economy after the European Union and United States of America. Given this stunning economic growth, it can clearly be seen that an expansion into China will likely yield profitable business because their economic growth offers citizens and residents alike high purchasing power.

Availability of raw materials: Virtually all arable land is used for agricultural purposes in China. China is the world's largest producer of rice and is among the principal sources of wheat, corn (maize), tobacco, soybeans, potatoes, sorghum, peanuts, tea, millet, barley, oilseed, pork, and fish. Major non-food crops, including cotton, other fibers, and oilseeds, are also produced in China. (National Bureau of Statistics of China 2006, 24).

Another rational for proposing internationalisation into China is due to the high availability of raw materials in the country. Since Dangote Group is mainly agricultural product based, they will have less difficult with making available all the raw materials they need. This will reduce the importation costs for the raw materials needed as well as other accruable expenses, such as overhead.

Affordable labour: just like its Vietnamese counterpart, labour are affordable in China and this is one of the reasons why American based companies are internationalising into the country (Economist, 2010). This is another rational while Dangote Group should internationalize into China as they will increase profits through reduced production cost, and they can enhance their production rate as well by producing more for less cost.

CULTURAL PROFILE OF CHINA

COUNTRY SUMMARY

1. Name: People's Republic of China (Zhonghua Renmin Gonghe Guo —中华人民共和国).
2. Location and population: East Asia / 1,313,973,713 in July 2006
3. Ethnic group and religion: Based on the 2000 census, some 91.5 percent of the population was classified as Han Chinese (1.1 billion), besides the majority Han Chinese, China recognizes 55 other nationality or ethnic groups. The traditional religions of China are Confucianism, Daoism, and Buddhism (LB, 2010).
4. Official language: The official language of China is standard Chinese or Mandarin (Putonghua, which means standard speech, based on the Beijing dialect). Other major dialects are Yue (Cantonese), Wu (Shanghaiese), Minbei (Fuzhou), Minnan (Hokkien-Taiwanese), Xiang, Gan, and Hakka (Kejia) (LB, 2010).

CULTURAL VALUES OF CHINA

Harmony: the concept of harmony is based largely on Confucian, Buddhist and Maoist teachings. Total harmony is created by being in harmony with oneself, family, the entire world and nature. In order to create harmony individuals must practice moderations and avoid extremes in communication, daily life activities, food consumption and drinks, and in social interactions (Library of congress, 2006).

Duty and honour: Chinese are instilled with the value of honour, hard work and loyalty to their families from childhood. They have the ultimate obligation to carry themselves with the utmost dignity at all circumstances and not bring shame to oneself or family. Losing face (public embarrassment) dishonours one's self and family (LB, 2010). .

Respect: this is conveyed through languages and behaviours. It is the foundation of Confucian teaching at one is expected to show respect to parents at home, and to elders, teachers and those in authority outside the home. This because by showing respect individuals believe they will be treated the same when they attain these positions (LB, 2010)..

Education: this is the pillar of Chinese culture and this can be seen in their literacy rate of 95.9 percent. Education is valued over success and wealth and starts at early age from home where parents induct certain level of both formal and informal education into their children

Family: this is the cornerstone of the Chinese society. Unlike the American society, the Chinese society is built upon allegiance to family members and values. These members can stretch to extended family such as parents of wife and husband, their cousins and other extended siblings. Chinese are taught from childhood to dedicated utmost commitment and sacrifice at all cost to ensure that the family is well taken care of and united (LB, 2010)..

Communication: the cultural practices of harmony and modesty are well reserved in the communication and speech mannerism of the Chinese society. Children are taught to carefully think before speaking. This is because they believe that useless and excessive verbal expressions can have dire consequences and insinuate discord and animosity (LB, 2010)..

CHINA'S CULTURAL VALUE INTEGRATED INTO HOFSTEDE'S CROSS-CULTURAL MODEL

Individualism – vs – collectivism: China is a collectivist society as investigations have shown (Schulte and Wang, 2005; Ardichivili et al., 2006). This can easily be seen in their cultural value of allegiance to the family and doing whatever it takes to save face, and contribute the general public as discussed in the cultural values above. The figure (1) below presents clear analyses of Hofstede's model in comparison between Chinese and American cultures.

Table 1: Vietnamese culture – vs – American culture

Country	PDI	IDV	MAS	UAI	LTO
USA	40	91	62	46	29
Vietnam	78	10	50	37	97

Source: Adapted from: www.geert-hofstede.com

The Table (1) above provide a detailed analyses of China's culture in comparison with American culture as a high power distance (PDI) - which is part of the cultural value to respect elders and people in power, high collectivism, equal gender based (MAS), low uncertainty avoidance (UAI) – which is part of their cultural value of duty and honour that teaches the society to be dedicated to work and not bring shame to family due to poor performance, and high long-term orientation (LTO) or Confucian dynamism culture.

 CHAPTER 3

CROSS-CULTURAL BARRIERS AND CHALLENGES DANGOTE GROUP WILL FACE IN CHINA

Language and communication

Knowledge creation and sharing with organisations is an essential challenge in today's business environment (Kogut and Zander, 1992), mainly attributed to globalization. It has been argued that knowledge sharing leads to improved performance due to improved decision making and better coordination (Zarraga and Bonache, 2003). However, knowledge sharing still remains a big challenged in internationalized organisations (Szulanski, 1996; Argote et al., 2000), and organisation's cognitive resource remains underutilized if knowledge is not shared (Argote, 1999; Cabrera and Cabrera, 2005). Linguistic differences have been attributed great with low organisational knowledge sharing because it creates barriers to communication and understanding (Hambrick et al., 1998; Von Glinow et al., 2004).

From the argument above, it can be stated concretively that language and communication is a great barrier for Dangote Groups internationalization in China. Besides organisational knowledge sharing, other areas where this barrier comes to play are in advertising, product labelling, public relations and training and development. Thus, Dangote group must look into this area if they are to excel in China.

Profit oriented Dangote Group – vs – Confucian dynamistic Chinese workforce

The organisational culture of Dangote is built around profit maximization which is different from Chinese business culture of long-term relationships building (Confucianism) which was highlighted earlier on. This organisational culture presents a challenge to Dangote Group as they will have to adjust to China's culture in other to excel in the market. Adjusting to this culture can lead to issues such as high expenditure on customer relationship building and credit sales (resulting in business loses or low profit margin), while refusal to adjust can lead to issues such as workforce turnover as the staffs will quite in pursuit of a more society friendly organisations as they seek to cover their face and help the Chinese society; which is part of the cultural value of China as discussed above; thus, resulting in intellectual capital loss to the company.

 RECOMMENDATIONS FOR TACKLING THESE CULTURAL DIFFERENCES

LANGUAGE AND COMMUNICATION DIFFERENCE

Adoptions of common organisational language – multicultural organisation are widely known as multilingual organisations too (Barner-Rasmussen and Bjo¨rkman, 2007). It has been argued that introducing a common language in organisations will increase communication frequency (Triandis, 1960; Tushman and Nadler, 1978) and a common reference frame can be created (Zenger and Lawrence, 1989). From the argument above, it is recommended that English language organisational culture as the main common language in China. English language is without doubt the international lingua franca and serves as the communication link across boundaries where it allows non-native speakers to communicate with each other and with native speakers (Tietze and Dick, 2009). It is also recommended that external business activities such as advertising, product labelling and public relation should done in either China's official language or a combination with English.

CENTRAL ORGANISATIONAL CULTURE

Figure 1: proposed organisation culture for Dangote Group in China

(want full pdf with all pictures? contact us below)

 The figure (1) above illustrates the proposed organisational culture for Dangote Group in China. It is recommended that Dangote Group should adopt a combination or their organisational culture and the Chinese business culture by adopting an organisational culture that promotes business relationships but these relationships should be done in a way that profits the company. This will create a win-win situation for the company and its Chinese stakeholders.

 CHAPTER 4

CONCLUSION

The subject cross-cultural differences in international organisations have been a much attributed topic in management research. This is because cross-cultural differences such as language and communication, belief and practices can influence individual performance and the overall organisational performance. this study was critical in analysing how these issues can impact on organisation by choosing Dangote Group (a Nigerian born brand), and internationalizing it into the Chinese market to illustrates the impacts of cultural differences on international organisation.

Dangote Group is a multi-billion conglomerate and has expanded into neighbouring African countries. This has been far easy because most of these countries exhibit the same cultural phenomenon and value ad Nigeria in their business operations. Expanding into China, an East-Asian market will with no doubt presents numerous cultural differences and these differences stands as both barrier and challenges towards Dangote Group's expansion plan.

China is a market characterized with high collectivism, high power distance, low uncertainty avoidance, high long-tern orientation and masculinity. This makes their business operation of building relationship for future long-term profit different from Dangote group's organisational culture of profit maximization as fast as possible. Other cultural differences include language and communication as well as work style.

The concluding section of this study proposed recommendations that Dangote Group can adopt to excel in China. These recommendations are adopting common organisational language to aid communication and knowledge sharing in the organisation, adopting China's national language to aid communication with the market, and adopting a centralized organisational culture that promotes win-win situation between the organisation and its workforce.

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