IB Docs (2) Team
Cultural clashes (HL)
“A people without the knowledge of their past history, origin, and culture is like a tree without roots.”
- Marcus M. Garvey, (1887-1940), Jamaican entrepreneur and political leader
This section of the IB Business Management syllabus examines cultural clashes when organizations change, including but not limited to, when they grow, merge and merge, and when leadership styles change (AO3).
The business environment is dynamic in nature, with changes occurring due to both internal and external influences. A culture clash occurs when there are wide-ranging differences in the values and views held by different individuals within an organization, thereby causing potential conflict within the organization.
Consequences of culture clashes include:
Reduced staff morale and self-esteem
Lower level of motivation
Lower labour productivity
More cases of conflict in the workplace
Higher absenteeism and labour turnover
Lower profitability
Key term
A culture clash occurs when there are wide-ranging differences in the values and views held by different individuals within an organization, thereby causing potential conflict within the organization.
The IB Business Management syllabus specifies three reasons for culture clashes (which have different, but related, implications for the stakeholders of an organization):
growth
mergers, and
change in leadership styles.
When organizations grow internally (organically), there is often a disconnect between junior staff members and senior managers in very large organizations, i.e. workers may feel 'out of touch' with senior management. This might result in the beliefs and values of employees being different from those of senior managers, thereby leading to a culture clash.
Growth and evolution can disrupt the existing organizational cultures, causing uncertainties and worry for employees. For example, a new vision or mission may be formed as the firm grows or evolves, which may be met with some resistance from the workforce. This is further complicated if the organization expands in overseas markets, where the firm needs to be aware of and sensitive to cultural differences.
Case Study 1 - Examples of international cultures and etiquette
The Japanese like to slurp soup and noodles, to indicate they are enjoying their food.
In Thailand, it is illegal to step on money.
In Norway, all diners are expected to use cutlery, even if this means eating a sandwich with a knife and fork.
In Russia, it is not a good idea to give someone yellow flowers, as this signifies infidelity or the end of a relationship.
In Sri Lanka, it is regarded as rude to eat with your left hand.
Case Study 2 - Culture and Chinese business etiquette
Handshakes are common for business greetings.
The oldest person is always greeted first.
Business cards should be exchanged after initial introduction – with both hands; placing the business card into your pockets is deemed as being rude.
Fruits and food in general are great gifts to give.
- Clocks should never be given as a gift.
Gifts must be received with both hands – and should not be opened in front of the giver.
Being called “fat” (well fed) is not so offensive.
Males should refrain from wearing green hats if they want any respect!
When organizations merge or are taken over by another company, a culture clash often results.
Inorganic growth usually results in one culture being more dominant than the other, so conflict is likely to occur (at least in the short term). This is particularly the case when a hostile takeover occurs, against the wishes of the target company, or when the two organizations are from vastly different regional cultures.
However, culture is difficult to measure or manage effectively, so is often overlooked. According to The Huffington Post, there is a 70 – 90 per cent change that mergers and acquisitions fail; culture clashes are a major factor behind this.
Case Study 3 - Culture clash that killed off a $35 billion merger
In 2014, a $35 billion merger that should have resulted in the world’s largest advertising agency was abandoned due to culture clashes between US-based advertising giant Omnicom and its French equivalent Publicis. John Wren, Omnicom’s Chief Executive Officer (CEO) stated, “There are strong corporate cultures in both companies that delayed us reaching an agreement.”
Maurice Levy, CEO of Publicis, said in response that “Omnicom wanted their people to fill the CEO, CFO and general counsel jobs. I thought that went too far. I was not ready to cede on this point.”
According to Bay Pacific Group, an M&A consulting firm, approximately 65 percent of mergers fail "primarily due to lack of corporate blending".
Source: adapted from entrepreneur.com
By acknowledging and understanding differences in corporate and national cultures, and educating employees about the dynamics and dimensions of culture, organizations will be better prepared to appreciate cultural differences. This is likely to help build a stronger and more coherent organization in the long run.
ATL Activity 1 (Research and Thinking skills) - Mergers and cultures
Read this interesting article from Workhuman*, titled “6 Big Mergers That Were Killed by Culture”, and consider the possible implications of mergers on organizational culture.
To read the article, click the link here.
*Workhuman is a multinational company that provides cloud-based, human capital management software solutions.
“A business has to be involving, it has to be fun, and it has to exercise your creative instincts.”
- Sir Richard Branson (b.1950), Founder of the Virgin Group
Culture is can be described as the unseen and intangible aspects of an organization that influences employees and managers in the workplace. Corporate culture is also shaped by the people within the organization. For example, in a power culture , employees have no influence as only the senior managers or leaders have decision-making power. By contrast, organizations with a person culture rely on individuals to influence the culture of the organization. Professor Charles Handy argued such individuals see themselves as more important than organization itself, so have significant influence of the corporate culture.
The extent to which an individual exerts influence on the organizational culture depends on their position and level of skills or expertise within the firm. For example, the chief executive officer (CEO) of a large multinational company is likely to exert far more influence on organizational culture than a junior manager would.
An analogy of this is leadership in sports team. The Captain or Most Valued Player (MVP) in a team can make a huge difference in influencing the effectiveness of the group in any team sport, such as football, basketball or ice hockey.
Individuals can influence the culture (and outcomes) of a sports team
When leadership styles change, perhaps as a result of a new CEO being appointed or a new board of directors being elected, this can cause a culture clash as views, approaches, and priorities may conflict. Employees, especially the longer serving members of the workforce, can often find it difficult to adapt and conform to a different leader and the subsequent new vision for the organization.
A new leader often feels they have to prove themselves, so introduce change based on their own ideas for the organization. This established a new culture. For example, Business Insider described Tim Cook, who took over as the CEO of Apple in August 2011, as a Peacetime CEO, whereas Steve Jobs was described as a Wartime CEO of the company.
Watch this short Bloomberg video about how Tim Cook has changed Apple as the company's CEO since 2010.
Watch this short video clip of how Jeff Bezos, founder of Amazon.com, became the “king of e-commerce”:
Case Study 1 - Crisis management at the Taj Mahal Palace Hotel
On the 26th of November 2008, a group of terrorists struck a dozen targets in Mumbai, India including the iconic Taj Palace Hotel. The 26/11 attack involved a major siege at the hotel lasted two days and three nights. The event was covered extensively by international news media. However, what was unique about this event was the heroic actions of the amazing and inspirational workers at the hotel. The 600 hotel staff saved the lives of more than 1,600 people while endangering their own. Not a single employee chose to escape when they had the chance. There was no employee manual or contingency plan for their actions; just their natural instinct and selfless actions to protect their hotel guests.
Rohit Deshpande, an American economist and Professor of Marketing at Harvard Business School, describes this culture as "leadership from the below" (rather than 'leadership from the top'). The easiest thing for people to do in such a situation would be to drop everything and run (escape). Not only did the hotel staff not do this, having helped some hotel guests to escape, they voluntarily returned to the hotel to help other guests still trapped inside. Professor Deshpande's research findings with the senior management of the Taj Hotel Group concluded three key recruitment strategies that help to explain the actions of the individual workers at the hotel during the attacks:
The Taj Hotel Group did not recruit these workers from large cities, but from smaller cities where traditional cultures still hold strong. The national culture of India and the values (or beliefs) of the people played a huge role in how and why the hotel workers behaved in the way they did during the attacks.
The Taj Hotel Group recruits people based on attitudes not grades. Recruiters speak to school headmasters (principals) to find out which students were most respectful of their parents, their elders, teachers and others.
Rather than training people to be brand ambassadors of the hotel , the company teachers their employees to be ambassadors of their guests. It is about building a guest-centric culture for the organization.
For those who have not seen it, Hotel Mumbai (2019) is a brilliant movie. Dev Patel (b.1990) is an award-winning British actor. He was also a producer of the movie about the attacks at the Taj Mahal Palace Hotel in 2008. A very sad incident, but the stories of the extremely brave local people of Mumbai and their selfless actions really is worth sharing.
Watch the trailer of Hotel Mumbai here:
Case Study 2 - Indra Nooyi and PepsiCo.
"The world is full of ideas today. If we don't do it, somebody else is going to do it."
- Indra Nooyi, former CEO of PepsiCo.
Indra Nooyi was born on October 28, 1955, in Madras (now known as Chennai) in India. She has been consistently ranked amongst the world’s 100 most powerful women. In 2015, Forbes named Nooyi as the world’s second most powerful woman, and in 2018 she was named as one of the “Best CEOs in The World” by the CEOWORLD magazine, having successfully led PepsiCo as the company’s chief executive officer (CEO) for over a decade.
Click the icon below to read more about Indra Nooyi and how leaders (such as Indra Nooyi) can influence corporate culture (PepsiCo. in this case).
Case Study - Indra Nooyi (How individual leaders can influence organizational cultures)
Introduction
Indra Nooyi was born on October 28, 1955, in Madras (now known as Chennai) in India. She has been consistently ranked amongst the world’s 100 most powerful women. In 2015, Forbes named Nooyi as the world’s second most powerful woman, and in 2018 she was named as one of the “Best CEOs in The World” by the CEOWORLD magazine, having successfully led PepsiCo as the company’s chief executive officer (CEO) for over a decade.
The early years
She was never an ordinary girl. Born and brought up in an Indian conservative middle-class family, Nooyi never accepted what was considered to be the norm. Born in an era in which it was difficult for women to express and exert themselves, she took full charge of her own decisions. Her actions were based on her own choices.
In school, Nooyi joined the girl's cricket team and she played guitar in an all-female rock band while studying at college. She completed her studies in India and the USA, having joined Yale School of Management in 1978 and earning her Master’s degree in Public and Private Management in 1980.
Starting her career in India, Indra Nooyi held management positions at Johnson & Johnson, Boston Consulting Group, Motorola, Inc, and Asea Brown Boveri (now ABB). However, she is perhaps best known for her time at PepsiCo, the company she joined in 1994 as Senior Vice President of Strategy and went on to become the Chief Financial Officer in 2000 and then as Chief Executive Officer (CEO) of the company in 2006.
Having served as CEO for 12 years (from 2006 to 2018) and chairman of the board of directors (from 2007 to 2019), Indra Nooyi moved on to join Amazon’s board of directors.
The PepsiCo years
Indra Nooyi made significant contributions at PepsiCo and added immense value to the company. Her business knowledge and leadership qualities pushed her to be one of the leading figures in the global food and beverage industry. Although PepsiCo is perhaps best known for its Pepsi Cola drinks, the company owns a broad product portfolio (see Box 1).
Under Nooyi’s astute leadership, PepsiCo’s revenue doubled in 12 years to reach $63.5 billion, more than half of which came from the healthier product categories. During her 12-year tenure as CEO, the net revenue of PepsiCo grew at an annualized rate of 5.5%. This level of financial success required a significant strategic leadership and commitment. Nooyi worked tirelessly and took calculated risks to elevate the profile and success of the organisation.
Box 1 - Brands owned by PepsiCo.
Did you know that PepsiCo make more than just Pepsi Cola? The company also owns these well-known and successful businesses and brands:
Aquafina bottled water
Cheetos cheese puff snacks
Doritos tortilla chips
Gatorade sports/energy drinks
Lay’s potato chips (crisps)
Mountain Dew carbonated soft drinks
Naked fruit juices and smoothies
Quaker food conglomerate business
7Up carbonated soft drinks
Tropicana fruit-based beverages
Walkers crisps (potato chips)
Performance with a Purpose
In 2006, Nooyi developed what became known as the “Performance with a Purpose” principle that drove PepsiCo’s corporate culture, and not just its strategy. This philosophy was PepsiCo’s recognition that the company’s success is inextricably linked to society’s success. She could foresee the need for sustainable change in the business.
Observing the global trend of declining demand for junk foods and sugary drinks, Nooyi decided to take on this threat. Increased health awareness and positive trends towards healthier alternatives attracted her to include wiser options in PepsiCo’s product portfolio. She realised that the drinks segment was losing its charm and the growing popularity of healthy snacks as alternative would command higher prices, thereby raising profit margins. Hence, Nooyi initiated a shift in PepsiCo’s focus towards healthier items in its portfolio.
These included a range of baked crisps, hummus, probiotic beverages, and Naked juice drinks. As a visionary, she directed a large amount of corporate funds from junk food products towards healthier alternative options. She reclassified the company’s product offering into three different options:
‘Fun For you’, such as regular carbonated soft drinks and standard crisps (potato chips)
‘Better For You’, such as low-fat versions of snack items and fizzy drinks, and
‘Good For You’, such as oatmeal and fruit juices.
Nooyi ensured that customers would be provided with detailed information about the foods they bought and consumed and that their choices should be based on the content of this information. These healthier alternative options were well received by consumers, with “Better For You” and “Good For You” products accounting for 50% of PepsiCo’s sales in 2017 compared to only 38% in 2006.
To further enhance the company’s social responsibilities towards its customers and to gain the support of fitness groups, PepsiCo also pledged to help reduce obesity rates. Product modifications were made. The sizes of its soft drink bottles and packets of crisps were reduced for the ‘Fun For You’ product range. The amount of salt, sugar, and fat content was also reduced. New products were included, such as Pepsi Zero Sugar (a zero-calorie, sugar-free version of the best-selling Pepsi cola drink) and crisps without any artificial preservatives.
Unlike many other CEOs of rivals in the industry, Nooyi also ensured that the ‘Better for You’ product range was marketed as aggressively as traditional items in PepsiCo’s portfolio. She ensured complete transparency in advertising and focused on specific consumer segments. For example, Gatorade was primarily targeted at athletes and not as a recreational beverage for the mass market.
Nooyi used this approach (of performance with a purpose) to drive the company forward, realising that scarcity of resources, the impact on consumers’ health, as well as the impact of business activity on climate change meant that PepsiCo could no longer continue ‘business as usual’. The company pledged to cut sugar, salt, and saturated fat levels in its food products. The company set a goal of 67% sugar reduction by 2025. As of 2019, the company had reached a 47% reduction rate.
Nooyi’s philosophy of performance with a purpose was instrumental to her rise as CEO of the company. She had played a key role in PepsiCo’s acquisition of Tropicana in 1998 for $3.3 billion. This was a big move and placed Pepsi in direct competition with Coca-Cola, which had Minute Maid beverages in the non-fizzy drinks market.
The trend continued with PepsiCo also acquiring Quaker Oats for $13.8 billion in 2001. The purchase price was significantly high, which was questioned by many stakeholders. However, Nooyi was clear about the opportunities due the company’s stake in brands such as Quaker and Gatorade that she could clearly see had good profit quality. Nooyi also completed several other acquisitions of health food brands including Kevita (a probiotic drink maker) in 2016.
Global growth
Along with product developments and adaptations to suit changing market needs, Nooyi was keen on expanding PepsiCo’s presence in global markets. She prioritized expansion in new segments and markets as well as further penetrating in existing ones. For example, in 2014, she signed a groundbreaking deal in Myanmar to build a separate Pepsi Cola production plant to cater for the local market. This not only increased market growth opportunities for PepsiCo but also created employment possibilities in Myanmar. This enabled PepsiCo to gain government support and strengthen its brand reputation. These steps taken in Myanmar are consistent with PepsiCo’s commitment to Performance with Purpose.
For instance, in 2012, PepsiCo set up a partnership with the United Nations Educational, Scientific and Cultural Organization (UNESCO) to develop vocational training initiatives in Myanmar, with the support of the Myanmar Ministry of Education. This was the first public-private partnership of its kind in Myanmar, providing training and business skills to help young people enter the labour market in Myanmar.
Under Nooyi’s strategic direction, the business took conscious attempts to expand PepsiCo’s distribution channel. New segments and niche markets were targeted in different regions of the world including Asia and Africa. The additional channels of distribution ensured that approximately a fifth of PepsiCo’s net revenues came from Asia, North Africa, the Middle East, and Latin America. Before stepping down as CEO of the company, Nooyi had developed plans to penetrate more emerging markets and to establish a stronger presence in India, the country from where she was born. The company had invested $5.5 billion in India by 2020, extending its manufacturing capacity and becoming one of the largest multinational food and beverage businesses in the country.
Nooyi’s vision for PepsiCo’s growth also meant that she successfully avoided a demerger bid between PepsiCo and Frito Lay in 2014. This was a bold step and she argued that these strategic business units should stay together under the company’s broad product portfolio in order to ensure PepsiCo’s competitiveness over other food manufacturers. She argued against the wishes of some influential investors and shareholders that the two businesses staying together would strengthen the company’s brand, diversify risks, and provide opportunities for cross-promotional strategies.
Cultivating corporate culture
For Indra Nooyi, a core value that she has stuck by throughout her leadership journey is what she calls “compass”. To Nooyi, it is important to follow a moral compass, otherwise leaders will fail to succeed. Her decisions are always based on consideration of the ethical implications of corporate strategy (which aligns well with her philosophy of Performance with Purpose).
Integrity, according to Nooyi, should be central to cultivating any corporate culture in a sustainable manner, otherwise “everything comes crashing down.” PepsiCo is no longer associated with (only) soft drinks, having adapted to change in the face of the threat of obesity issues across the world. Under Nooyi’s leadership, the brand has a strong sense of social responsibility, including providing a broader range of healthier alternatives.
Innovation and change are also keys to success and leaders must provide opportunities to spark creativity. Nooyi employed innovation experts to extend creativity within PepsiCo. This must not be a one-off exercise, but part of the organisational culture. Great leaders must also create other leaders and help them to develop an attitude that embraces change. As Nooyi said, “I was more worried about my legacy (after leaving PepsiCo) than I was about my performance as CEO. If the company collapsed after I left, it meant I did not build a company with a solid foundation and a solid team.”
Similarly, Nooyi believed in developing a corporate culture that embraces continuous improvements. In 2015, she said “We ought to keep pushing the boundaries to get to flawless execution. Flawless is the ultimate goal.” Success should be welcomed after success, i.e. it is a part of the journey and not the final destination.
Leading by example, Nooyi emphasised that leaders should be the ones whom people look up to and wish to follow. Leadership is more about action (doing) than words (saying). Leaders are the ones who build organisational culture. PepsiCo’s culture believes in the strengths of its people. The business continuously strives to support its workforce in an attempt to maintain high-performance culture which is essential to sustain in a competitive environment.
In summary, Nooyi believed in developing a culture that emphasised purpose (a passion to do what is right), performance (the drive to exceed expectations), and people (the desire to help others succeed). She believed this approach would stimulate long-term growth for Pepsico, along with a positive impact on the environment and the society.
Conclusions
Indra Nooyi’s leadership at PepsiCo speaks for itself, with the company’s revenue growing from $35 billion in 2006 (when she stepped up as CEO) to $63.5 billion in 2017 (prior to her departure from the company). At the end of 2017, PepsiCo shareholder enjoyed a return of 162 percent during Nooyi’s tenure as the company’s CEO. Her Performance with Purpose initiative drove the company’s long-term growth while leaving a positive stamp on society and the natural environment in a sustainable way.
According to Nooyi’s philosophy, success is not just measured by numbers; it is also measured by and with purpose. Her approach to leadership is while focusing on the business and its goals, the leader must always make a positive difference to society and the environment. Nooyi went as far as emphasising the importance of feeling gratitude and thanking people as a leader. She suggested that the employees and their parents should be thanked for the contributions made to the company.
Nooyi also emphasised the importance of leaders engaging in lifelong learning. As she said “you can never delegate strategy”, and it is through an enormous amount of research and study that enables leaders to formulate effective corporate strategies.
During her time as CEO at PepsiCo, Nooyi changed PepsiCo’s ICT system, backed up by the knowledge she gained from reading books, speaking with key professionals, and ensuring that she learned why change was needed. She could have chosen to delegate the task to someone else, but she made it a priority to learn and unlearn. This helps to reassure and convince employees of the strategy as it is fully understood and driven by the leader.
Today, Indra Nooyi serves on the board of directors of Amazon and is a member of the company’s Audit Committee. She also serves as a member of the board of directors of the International Cricket Council, the world governing body of cricket, enabling her to relive her childhood passion and memories of being in her school’s cricket team. However, it is the legacy she left behind at PepsiCo that she is best known for; a legacy that encourages PepsiCo to do what is right for the business by being responsive to the needs of the world.
Watch and listen to Indra Nooyi talk about her 5 Cs model of leadership, which has shaped the way in which she has led businesses including Johnson & Johnson, Boston Consulting Group, Motorola, PepsiCo, and Amazon.
ATL Activity 2 (Research and Thinking skills)
Research the impact of culture on the use of brand names in different parts of the world.
For example, investigate why Diet Coke is branded as Coca-Cola Light in many parts of the world. Or why do some brands not translate well in other parts of the world?
Some examples, as a point of reference are shown below (click on the icon to access these).
Possible suggestions/ideas for further investigation
In Quebec, Canada’s French-speaking province, KFC is known as PFK (Poulet Frit Kentucky).
Burger King is known as Hungry Jack’s in Australia, as an existing business had already registered the BK brand name.
Lay’s crisps, owned by PepsiCo, is known as Walkers in the UK, Smith’s in Australia, Sabritas in Mexico, Chipsy in Egypt, and Elma Chips in Brazil.
The best-selling Mars chocolate bar in the UK is called Mars, but known as MilkyWay in the USA. Confusingly, the MilkyWay bar in the UK is called 3Musketeers in the USA.
Poland’s candy brand Fart Bar translates to ‘lucky bar’.
Ghana’s popular Pee Cola translates to ‘very good cola’.
Norwegian meat processing company Gilde produces a brand of canned meat called Bog (which, in other cultures, means a wet, decaying swamp or is slang for ‘toilet’).
Looza is a brand of soft drink found in Luxembourg.
Theory of Knowledge (TOK)
Giving the ever-presence of conflict and cultural clashes in the workplace, how do we know what is ethically right in the business world?
How does knowledge affect our understanding about what is right across different cultures in different parts of the world?
Business Management Toolkit - Hofstede's cultural dimensions
Hofstede's cultural dimensions in action
This ATL activity has been suggested by Catherine Brandt
Professor Geert Hofstede was a famous social psychologist who proposed that there are different "Cultural Dimensions" within organizations and countries. Hofstede argued that understanding the different dimensions of culture will help facilitate better understanding and communication between cultures. This is important for both international diplomacy and international business.
Investigate how cultures differ in two different countries of your choice. Spend10 mins investigating. Information about the cultural dimensions in different countries can be found here.
Take a look at the three questions below and respond based on your understanding of Hofstede’s cultural dimensions.
You are a cultural psychologist who works for a large multinational company in Denmark. One of your colleagues has never travelled outside of his country but is about to move to South Korea for a promoted post in the company. In South Korea, he will be working as the senior manager of his division. What advice can you give him based on what we know about the dimensions of South Korean culture?
Max is Russian. He is coming to you as he and his colleague, who is from Thailand, are having difficulties working together. You wonder if there could be a cultural basis to their difficulties. What questions might you ask them based on what you know about their respective cultures (you will need to do some research on the cultural differences in Russia and Thailand).
An experienced Czech businesswoman has been offered the opportunity to work with one of three international businesses located in the centre of Prague. She is undecided about whether to accept the job offers from the American, French, or Russian companies. Based on her national cultural background, which business environment do you suggest that she would most easily adjust to? Be able to justify your recommendation.
ATL Activity 3 (Thinking skills) - Are you an "I" or a "We"?
Hofstede's cultural dimensions is a theoretical framework for cross-cultural communication and understanding. It was developed by Professor Geert Hofstede (1928 - 2020), a Dutch social psychologist.
One of Hofstede's six cultural dimensions is individualism versus collectivism.
Watch this short video and consider whether you tend to fall into the category of individualism or collectivism.
What about your school? What evidence is there to back your answer?
ATL Activity 4 (Research and Thinking skills)
Watch this fascinating review video which features Erin Meyer, author of the best-selling book The Culture Map, who talks about the future of management and the meaning of being an effective leader in the context of understanding organizational and national cultures.
One of the (many) examples she uses is the concept of kuki yomenai (or KY for short), which refers to people who cannot "read the air” (intuitively understand a given situation and behave accordingly), which is a highly valued skill in Japanese culture.
What other examples from the video resonate with you and your cultural quotient?
Finally, watch this excellent video to recap your understanding of corporate culture.
Consider how elements of growth, mergers, and a change in leadership styles can cause cultural clashes in the workplace.
Exam Practice Question - STC Manufacturing (HL Only)
STC Manufacturing is a medium-sized company based in Austria that makes ball bearings for other producers such as bicyle manufacturers. The company was established in 2009. It has a loyal workforce of 70 full-time workers, who are described to be happy in their job roles.
Rhys Thomas, the founder and CEO, is a paternalistic leader, which has strived to make STC Manufacturing successful by providing job security and making his employees feel part of the STC family.
STC Manufacturing seeks to grow organically. During the past few years, the company has relied on a combination of retained profits, loan capital and issuing of new shares in order to finance its growth strategy.
(a) | Define the term organic growth. | [2 marks] |
(b) | Outline two ways in which the market size of the ball bearings industry in Austria might be measured. | [4 marks] |
(c) | Describe how STC’s organizational culture might impact on the level of employee motivation. | [4 marks] |
Answers
(a) Define the term organic growth. [2 marks]
Organic growth occurs when a business expands internally by using its own resources to increase the size of its operations. For example, STC Manufacturing has used a combination of retained profits, loan capital and issuing of new shares to finance its internal growth, rather than relying on external methods such as a merger, takeover, joint venture or strategic alliance with another manufacturer.
Award [1 mark] for a definition that shows some understanding of organic growth.
Award [2 marks] for a definition that shows good understanding of organic growth, similar to the example above.
(b) Outline two ways in which the market size of the ball bearings industry in Austria might be measured. [4 marks]
Possible measures of market size could include:
The total value of sales revenue of the ball bearings industry in Austria
The number of employees who work in the ball bearings industry in Austria
The overall profits earned by all ball bearings companies in the country
The market capitalization (the market value) of all companies in the ball bearings industry
The rate of growth in any of the above factors/measures
Accept any other relevant measure of market size that is outlined in the context of the case study.
Award [1 mark] for each valid measure of market size that is identified, and [1 mark] for a description of each of these, up to the maximum of [4 marks].
(c) Describe how STC’s organizational culture might impact on the level of employee motivation. [4 marks]
Organizational culture describes the norms and the traditions within an organization. Factors affecting the corporate culture at STC might include:
Employee demographics – There is a loyal workforce, with most employees being ‘happy' at STC Manufacturing.
Leadership style – Rhys Thomas is a paternalistic leader, which has shaped the corporate culture at STC Manufacturing by making workers feel part of the (corporate) family. Employees would feel safe and secure in their jobs, so there will be a high degree of employee loyalty.
Award [1 – 2 marks] if the there is some understanding of the link between organizational culture and employee motivation. The answer lacks clear application to the case study.
Award [3 – 4 marks] if the answer shows a clear understanding of the link between organizational culture and employee motivation. There is good use of business management terminology throughout the response, with appropriate application to the case study.
Return to the Unit 2.5 - Organizational culture (HL only) homepage
Return to the Unit 2 - Human resource management homepage
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