Case Study: International Oil

A. Introduction

International Oil was a fairly new conglomerate that had grown out of the European Economic Community (EEC). Its purpose: to provide a united European competitive front against other major international producers and distributors, especially those from the United States and the Arabian Peninsula. International Oil didn’t drill or sell; its job was to identify opportunities and distribute them fairly among the major European oil companies including British Petroleum and Dutch Shell so that EEC members weren’t directly competing against one another. International Oil employed about 5,000 workers. Many of these, especially the headquarters staff in Brussels, Belgium, were “on loan” from major European government agencies and oil companies. In the field, the leadership tended to be European, while the support staff tended to be employees recruited locally.

Schwaneger figured that some of these problems were growing pains. Claus Schwaneger, head of field operations for International Oil, was receiving an increasing chorus of questions and complaints from his regional and country directors, who managed explorations and sales over a wide region that stretched from Central Africa to East Asia.

The idea was that International Oil could often put together an attractive bid on a new project by combining the resources and strengths of various European companies. Some companies were stronger on exploration, others on drilling, still others on marketing. International Oil also faced some fierce internal competition. Most of its staff had been drawn from the major existing European giants, especially Britain, Holland, Germany, and France. With reluctance on the part of some employees, English had become the company’s internal language of choice.

Business and cross-cultural communication issues are determined by Schwaneger in International Oil. Those are huge problems for the company that wants to be global company. Therefore, it is necessary to identify such problems and deriving the solution based on the experiences and the experts. The problem formulation in this paper is:

  1. What business issues does Schwaneger face? State at least 3 business issues. Why do you think these issues have arisen?
  2. What are the cross-cultural communication issues?  State at least 3 issues. Why do you think these issues have arisen?
  3. What solutions can Schwaneger apply to effectively address both the business issues and cross-cultural communication issues?

B. Discusion –> Pertanyaan dan Jawaban

a. What business issues does Schwaneger face? State at least 3 business issues. Why do you think these issues have arisen?

Business issues that Schwaneger faces are namely:

  1. Often, by the time headquarters has cut a deal with the European oil companies, some competitor has already won the bid.
  2. The bribery and corruption are still existing in the region operations as the essence of politeness
  3. Politic is a power in which how the government will make decision in influencef by the current government-political cooperation.

Each business pattern formation is also always closely linked with politics. The political culture is a set of beliefs or attitudes that give effect to policy and public administration in the country, including a pattern related to economic policy or business conduct. The government tends to produce two major political-economic layers, namely the political bureaucrats involving his family in the business sphere, as well as entrepreneurs who can develop thanks to special support from the government (the beginnings ofbribery). These two layers are dominating the economy and politics. In the development of the economic system, the government as a driving source of investment and the allocation of national wealth is only short term.

For Schwaneger, political issues is a major obstacle when penetrates to regional areas. Corruption, collusion and nepotism are things you cannot doubt it will create a business culture that is dirty. As a result, the regional director who does not understand the culture of countries that embrace the culture will feel any difficulty while doing business approach.

The influence of non-governmental circles, including from businessmen and professionals are very limited and often ignored, except for certain entrepreneurs who have direct connections with the ruling. Private economic dependence on the government raises a very unhealthy relationship between the two, which in the light of the political, business, and society at large is very detrimental.[1]

Business sees itself as a counterweight to the power in the political arena so that they believe will not survive if it does not play an active role in politics. But they did not believe that the existence of the business can influence the political process; in view of these businesses have a disproportionate influence.[2] Despite much debate whether the business can influence the political environment but if it is seen by the facts in the countries of the world many of which provide business opportunities directly involved in political discussions, introduced and contributed to the draft laws and regulations are very influential in the smooth running of the business itself.

b. What are the cross-cultural communication issues?  State at least 3 issues.

Why do you think these issues have arisen?

Schwaneger is a heald of field operations for International Oil. From his regional and country directors, Schwaneger got many complaints and questions. The complaints came to Schwaneger related to the cultural shock faced by his directors. From many complains, he categorized four major problems in each regional the directors run, namely:

  1. The staff from different countries are working against themselves and one another
  2. Company’s competitive position are being hurt by ethical policies which those against offering gifts or bribes to local decision makers.
  3. Unwillingness of staff to master the local language or adapt themselves to cultural norms

Three problems are related to cultural gaps with the local. Culture has a power to affect human actions, gestures, and speech patterns of a person encountering in a foreign business. There are many interpretations of a culture and it can make misunderstanding likely and cooperation impossible.[3] From the problems resumed by Schwaneger, it can be seen that the staffs and directors who operates in regional operations face some cultural across border and it give impact to their work achievement.

According Swierczak (1994), culture is the source of many conflicts and made a major contribution to the many failures MNC.[4] Cultural differences between foreign and domestic staffs are a major issue in the International Oil and quite possibly have an impact on labor relations in the International Oil with local business partners. Factors associated with cultural issues should be of particular concern that a good working relationship between the partners can achieve the goal of International Oil.

Those problems arose because top management of International Oil di now gave the staff training about the beliefs, customs, and taboos of foreign culture. The staffs are not prepared well to entry the foreign county as a new base of the company. Even, training and necessary for the staffs and directors by identifying the opportunity and threat in foreign countries and they can arrange a set of strategies to penetrate the cultures different from them.

Unlike the state of the economy or politics-law-as well as tariffs and government regulations-culture is an element that is not easily measured and defined. However, culture cannot be separated from multinational businesses. Culture is the unique factors of a country. Even European countries are now becoming one entity continues to have a national cultural values are deeply rooted. No wonder that many economists believe that consumers from different cultures will still have different attitudes, perceptions, tastes, preferences and values, and remain reluctant to buy foreign products (Suh and Kwon, 2002).[5]

International oil is established by a new conglomerate that had grown out of the European Economic Community (EEC). While this was fine with executives from Germany, Holland, and the Nordic countries, it created some friction with those from France and southern Europe. More important, various nationals tended to push the interests, and retain the practices, of their own respective countries. European countries will have different culture from the other countries beyond ECC countries, therefore it need a cultural understanding before the staff’s company entry the countries.

In this case Schwaneger placed the directors by geocentric orientation method. Geocentric orientation assumes that there are similarities and similarities as well as differences between an ethnic group and foreign nations. Practice and operational experience in the field cannot be equated in building an organization of companies, but the powers that exist in sections of the company is through the people who are placed on the job regardless of nationality.[6] For example, a manager from Great Britain was in charge of operations in Indonesia, traditionally a Dutch reserve, while a German woman ran the division that covered the former British colonies in Africa. This often produced strong objections from the member oil companies, which had entered the consortium reluctantly and under political pressure.

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