The impact of cross-cultural differences in international organisation: a case of Dangote Group

Author: Iloka Benneth Chiemelie
Published: 29-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 Vietnam (Southeast Asia Tiger) 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 (Vietnam) is the talking point in this chapter, as this chapter provide rationales for internationalizing into Vietnam. The rationales are the country's growing economy, availability of raw material and affordable workforce. This chapter also provides an analysis of Vietnam'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 Vietnam. 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.

RATIONAL 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 VIETNAM

Vietnam

RATIONAL ON COUNTRY OF CHOICE

Economic growth: in the mid-1980s, Vietnam carried out its economic reform "Doi Moi (renovation) and the country's economy have since then been integrated into the world economy, liberalized trade and attracted foreign direct intendments (FDI). Vietnam's economy has exceeded 8 % per annum since 2005 (ITPC, 2007), and the country joined the WTO after over a decade of negotiation.

Vietnam's economic growth is the main rational for internationalizing into the Vietnamese market. The main purpose of any business operation is to generate profit, and a market such as Vietnam offers profitable atmosphere for Dangote Group. This is because, with increasing consistency in GDP, consumers have more purchasing power and thus are likely to purchase Dangote Group products.

Availability of raw materials: besides crude oil, Vietnam's successful export goods include agricultural products such as rice and coffee, aquaculture products and produces, and textile and footwear. Agriculture has been increasingly geared to exports in Vietnam (US$ 2.8 billion: as of 2002); indeed, Vietnam is currently the world's leading exporter of coffee and rice (VET, 2003).

Another rational for proposing internationalisation into Vietnam 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 Chinese counterpart, labour are affordable in Vietnam 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 Vietnam 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 VIETNAM

COUNTRY SUMMARY

• Name: Vietnam (Socialist Republic)
• Location and population: South East Asia / 86, 116,559 (July 2008 est.)
• Ethnic group and religion: Kinh (Vietnamese) 86.2% with over 10 ethnic groups. Buddhism is the most popular religion with 85% followed by Christianity at 8%.
• Official language: Vietnamese is the official language written in the French adopted Latin words (e.g. á, à, ả, ã, â, ă, ạ) and spoken in different Vietnamese dialects. English and Chinese are also spoken.

CULTURAL VALUES

Harmony: the concept of harmony is based largely on Confucian, Buddhist and Taoist 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.

Duty and honour: Vietnamese 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.

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.

Education: this is the pillar of Vietnamese culture and this can be seen in their literacy rate of 89.47 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 Vietnamese society. Unlike the American society, the Vietnamese 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. Vietnamese 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.

Communication: the cultural practices of harmony and modesty are well reserved in the communication and speech mannerism of the Vietnamese 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.

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

Although national culture has held prominent position in organisation behaviour and management research over the decades, Hofstede's model is still the most popular, and he had developed a number of cultural dimensions. These cultural dimensions are integrated into Vietnam's cultural values as described below.

Individualism – vs – collectivism: Vietnam 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 Vietnamese and American cultures.

Table 1: Vietnamese culture – vs – American culture

Country	PDI	IDV	MAS	UAI	LTO
USA	40	91	62	46	29
Vietnam	70	20	40	30	80

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

The Table (1) above provide a detailed analyses of Vietnamese 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, masculinity 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 VIETNAM

Having its foundation from Nigeria, a country more like America in terms of cultural and beliefs, it can easily be seen that Dangote Group will face numerous cultural challenges and barriers when internationalizing into Vietnam; if we base our argument on the comparison table (1) above. Some of these cultural challenges and barriers are as analysed below.

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 Vietnam. 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 Vietnam.

Profit oriented Dangote Group – vs – Confucian dynamistic Vietnamese workforce

The organisational culture of Dangote is built around profit maximization which is different from Vietnamese 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 Vietnamese 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 Vietnamese society; which is part of the cultural value of Vietnam as discussed above (yielding knowledge capital lose).

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 Vietnam. 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 Vietnamese language or a combination of Vietnamese and English.

CENTRAL ORGANISATIONAL CULTURE

Figure 1: proposed organisation culture for Dangote Group in Vietnam

(want pdf to see all the figure? contact us below)

The figure (1) above illustrates the proposed organisational culture for Dangote Group in Vietnam. It is recommended that Dangote Group should adopt a combination or their organisational culture and the Vietnamese 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 Vietnamese employees.

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 Vietnamese 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 Vietnam, an East-Asian market with no doubt presents numerous cultural differences and these differences stands as both barrier and challenges towards Dangote Group's expansion plan.

Vietnam 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 Vietnam. These recommendations are adopting common organisational language to aid communication and knowledge sharing in the organisation, adopting Vietnam'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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