Cultural analysis by MuhammadSaeed27

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									 Cultural analysis of Serco Group plc in
   obtaining competitive advantage
Identify the company's most recent international expansion and use relevant
frameworks in assessing how cultural differences may hinder the growth of
sustainable competitive advantage within that region.




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                                        TABLE OF CONTENTS


     ABSTRACT --------------------------------------------------------------------------------------------   2

1.   INTRODUCTION ------------------------------------------------------------------------------------       3

2.   THE PROCESS MODEL OF INTERNATIONALIZATION --------------------------------------                        3

3.   THE IMPACT OF CULTURAL DIFFERENCES ---------------------------------------------------                  3

4.   CONCLUSION ----------------------------------------------------------------------------------------     5

     REFERENCES -----------------------------------------------------------------------------------------    6

     APPENDIX I

     FIGURE1: COMPARING INDIA WITH UK AND USA -----------------------------------------                      8




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                                       ABSTRACT



The Serco Group is ranked 99th number in the stock exchange market of the UK with

market capitalization of £4,646.4m in 2011. The financial crisis of 2008 had no impact on

the company and recently Serco acquired an Indian outsourcing company “Intelenet”.

The paper is focusing on the use of Hofstede’s framework to assess how the cultural

differences may hinder or promote the potential growth of Serco group in obtaining

sustainable competitive advantage within the territory of India. The findings suggests that

it is favourable for Serco Group to carry out its operations in emerging markets such as

India where culture is flexible in accepting changes.




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1. INTRODUCTION

The Serco Group plc is a service based multinational organization that was formed in
1929 in the United Kingdom and now has its subsidiaries all around the World including
Europe, North America, Middle East, and the Asia Pacific. The company’s core segments
include transportation, defence, science, civil government, and private sector where
different types of services are provided such as information and communication, Business
Process Outsourcing (BPO), home affairs, health and educational, and detention centres
and prison services (Serco group, 2012). The paper aims to focus on the use of Hofstede’s
theory to assess how the cultural differences may hinder or promote the potential growth
of Serco group in obtaining sustainable competitive advantage within the territory of
India.

2. THE PROCESS MODEL OF INTERNATIONALIZATION

Internationalization can be defined as “...the process of increasing involvement in
international operations” (Welch and Luostarinen, 1988, p. 36). The first process model
‘Uppsala model’ so-called U-model, was formulated by Johanson and Wiedersheim-Paul
(1975) which describes the “factors distributing the flows of information between firms
and markets on the basis of language, culture, education, system, and industrial
development” (Buckley and Ghauri, 1999, p. 29).

The model explained that it is necessary for any company to assess the target company on
the basis of above stated factors in case of takeover, acquisition, or merger especially in
the foreign markets. Undoubtedly, Serco has a successful experience of international
investments but Indian market is different from other markets especially in terms of
culture. Therefore, it is the best practice to assess Indian market using an appropriate
cultural model.

3. THE IMPACT OF CULTURAL DIFFERENCES

There is no doubt that Indian market is one of the highly emerging markets in Asia but
there are many cultural differences between developed (e.g. UK, USA, and Europe) and
developing markets (e.g. India and China) that may hinder or promote the growth of
sustainable competitive advantage within the region. Among few well-known cultural
theories such as Usunier (1998) and Hofstede (1980), Geert Hofstede’s theory has great

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significance in the literature in terms of reviewing cross-cultural dimensions. The
Hofstede cultural theory is based on five fundamental principles such as Power Distance,
Individualism, Masculinity, Uncertainty avoidance, and Long-term orientation.

The power distance measures “the extent to which the less powerful members of the
company accept and expect the unequal distribution of power” (Samovar et al., 2011, p.
24). India has quite high power distance index (i.e. 77) that shows the inequality of power
and wealth within the region. It also indicates a centralised and bureaucratic
organizational hierarchy where subordinates follow the instructions of bosses. The growth
of any company depends on the spread of information throughout the hierarchy of the
organization and in case of India Serco may face problems in sharing information due to a
strong organizational hierarchy and bureaucratic styles which may lead to unawareness
and even radical breakthroughs (Williams and McGuire, 2005). Similarly, Herbig and
Dunphy (1998) and Seleim and Bontis (2009) argued that high level of power distance
and bureaucracy demonstrate high level of corruption that causes to reduce creative
activities and also affects the growth of the company.

India has low individualism level (i.e. 48) so-called collectivism that shows the flexibility
of Indian people in joining a large group on the basis of profession, religion, and other
collectivistic traits (Hofstede, 2001). Sinha (1997) pointed out that individualism exists in
the Indian corporate culture due to the Western management that is resulting in to
promote the Western work culture in the country. Therefore, Indian business culture has
same traits and practices as Western businesses. On the basis of individualism level, it can
be said that Serco group plc can get considerable success in the future whilst working in
India.

India is a masculine based economy and Indian people like to be successful in terms of
performance and ambition of the work. In fact, India has 3rd highest ranking in Hofstede’s
dimensions (i.e. 56) against the world average 51 (LeFebvre, 2011). Shane (1993) and
William and McQuire (2005) proved that masculinity has no impact on the growth of the
company but Song and Parry (1993) argued that the formalised roles are important in
lessening the negative practices and reducing the conflicts that results in prominent
growth. However, it depends on Serco’s policies to keep balance between assertiveness
and modesty.


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The uncertainty avoidance index of India is not far high (40) that shows a medium or low
preference to avoid uncertainty. It means that Indian people are mostly flexible in
accepting imperfections and their tolerance level is high (Samovar et al., 2011). Shane
(1993) and Williams McQuire (2005) explained that the growth of the company could be
affected from the cultures with strong uncertainty avoidance where people are reluctant to
accept changes. In contrast, it is also known that “cultures with strong uncertainty
avoidance have strong tendency to defend intellectual property with patenting” (Kaasa
and Vadi, 2008, p. 8). This must be understandable to Serco group’s regional managers
that thought-process gap towards future is not enough between Indian and UK employees.
Therefore, working together on difficult problems could be much easier for Serco
management in achieving growth.

The long-term orientation level of India (61) is very high because the country follows a
religious concept “Karma” which states a cause-and-effect relationship between all that
has been done and all that will be done (Siddiqui, 2008). This is in fact the remarkable
characteristic of Indian culture which is making grounds to attract international
investments. For Serco, this must be the most critical point because establishing long-
term relationship is always very important for any company in terms of achieving
strategic objectives. But on the other hand, Seleim and Bontis (2009) believe that the
societies with high long-term orientation score typically neglect the lack of punctuality.

4. CONCLUSION

Serco group plc is already providing services in Europe, North America, Middle East, and
Asia but the cultural differences always matter in obtaining competitive advantages when
a company invest internationally. By applying Hofstede’s framework on India, it can be
said that Serco may face few challenges due to high power distance and bureaucratic
styles in the organizational hierarchy of Indian corporate culture. But on the other hand,
Serco may adjust themselves to carry out their operations in terms of low levels of
uncertainty avoidance and individualism. In addition, the long-term orientation level of
India is the strongest point for Serco in order to achieve long-term objectives and short-
term goals.




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REFERENCES


Buckley, P. J. and Ghauri, P. N., (1999). The internationalization of the firm, 2nd edition,
Cengage Learning EMEA


Burns, R. (1998). Doing business in Asia- a cultural perspective. Melbourne: Longman


Herbig, P., Dunphy, S. (1998). Culture and Innovation. Cross Cultural Management, 5(4), pp.
13–21


Hofstede, G., (1980). Culture’s Consequences: International Differences in Work related
Values. London: Sage Publications


Hofstede, G., (2001). Culture's consequences: comparing values, behaviors, institutions, and
organizations across nations. 2nd edition, Sage Publications


Johanson, J. and Wiedersheim-Paul, F. (1975). The Internationalization process of the firm –
for Swedish cases, Journal of Management Studies, 12(3), pp. 305 – 322


Kaasa, A. and Vadi, M., (2008). How does culture contribute to innovation? Evidence from
European countries, Master Thesis, Tartu: University of Tartu


LeFebvre, R., (2011). Cross-Cultural Comparison of Business Ethics in the U.S. and India: A
Study of Business Codes of Conduct, Journal of Emerging Knowledge on Emerging Markets,
3, pp. 391 – 409


London Stock Exchange, (2012). The key fundamentals, [online], Available from:
www.londonstockexchange.com [Accessed: 05 April 2012]


Samovar, L. A., Porter, R. E. and McDaniel, E. R., (2011). Intercultural Communication: A
Reader, 13th edition, Cengage Learning


Seleim, A. and Bontis, N., (2009). The relationship between culture and corruption: a cross-
national study, Journal of Intellectual Capital, 10(1), pp. 165 – 184



Serco group, (2012). Markets, [online], Available from: http://www.serco.com/markets/index.asp
[Accessed: 04 April 2012]


Shane, S., (1993). Cultural Influences on National Rates of Innovation, Journal of Business


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Venturing, 8, pp. 59 – 73


Siddiqui, M. H., (2008). Philosophical & Socio. India: APH Publishing


Sinha, J. (1997). Indian perspectives on leadership and power in organizations. In H. Kao & D.
Sinha (Eds.), Asian perspectives on psychology (pp. 218-235). Thousand Oaks: Sage


Song, X. M. and Parry, M. E., (1993). R&D – Marketing integration in Japanese high
technology firms: hypothesis and empirical evidence, Journal of marketing academic science,
21(2), pp. 125 – 133



Stock Challenge, (2012). The FTSE ranking, [online]. Available at:
www.stockchallenge.co.uk/ftse.php [Accessed: 05 April 2012]


Taylor, S. J., (2005). How do Hofstede's Dimensions correlate with the World's Religions?
International Business Centre, 2(1)


Usunier, J-C., (1998). International and cross-cultural management research, Sage
Publications


Welch, L. and Luostarinen, R., (1988), Internationalization: Evolution of a Concept, Journal of
General Management, 14 (2), pp. 36 – 64


Williams, L. K., McGuire, S. J. J. (2005) Effects of National Culture on Economic Creativity
and Innovation Implementation. The Institutions of Market Exchange. Conference
Proceedings, Barcelona




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APPENDIX I


             Figure 1 – Comparing India with UK and USA




                                                  Source: http://geert-hofstede.com




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