International Business - Case Study on Dominant Challenges Faced by Psa Psa Peugeot Citroën Group on National Cultural Differences

Topics: Automobile, Peugeot, PSA Peugeot Citroën Pages: 15 (4357 words) Published: March 1, 2013

Globalisation, defined as the process of increasing integration and interdependence between countries and societies through the movement of people, goods, service, information and communication, such that events occurred in a part of the world will affect the others (Baylis, Smith & Owens 2008; Fischer 2003; Hill, Wee & Udayasankar 2012; Robins 2000) and is linked with the theory of modernisation (Modelski 1972 and Morse 1976). To date, globalisation has itself, become a complex and in-depth subject with many different and contrasting perspectives, numerous facets of problems, challenges and relating discussions.

Fischer (2003) suggested its origins started before 1914, mainly for economic purposes. In microeconomics, Hubbard et al. (2009) explained the need for globalisation with the theory of specialisation and gains from trade between countries, where it is a win-win situation. They went on further, elaborating that globalisation was hindered by the two world wars and great depression, after which, contemporary globalisation started developing from 1980s, when low-income and developing countries realised that their high-tariffs and restricted foreign investment policies have failed miserably. Investments, exchange of capital flows and etc., took stage (Griffin & Pustay 2013). This presented an excellent opportunity for business entities, especially enterprises, where the top management are hired with the main purpose of generating profits for their stakeholders by increasing its profitability and rate of profit growth overtime (Hill, Wee & Udayasankar 2012). In other words, companies are constantly confronted by costs and need to formulate strategies in which profits are continually maximised through squeezing their bottom-line and increasing earnings. Additionally, restrictions of laws and regulations and problems such as stiff competition and saturated markets hinder growth within their home economies (Bianchi & Ostale 2006). When emerging markets became more open, firms from developed economies rushed to invest, taking advantage of factors in weak host-country businesses, further and substantial growth rates, low-cost materials and labour, seeking possible talents, enjoying tax exemptions, relaxed laws and regulatory reliefs (Bianchi & Ostale 2006; Kao 2009). They set up trans-border productions (global factories), creating the term Multinational Enterprise (MNE) (Hill, Wee & Udayasankar 2012).

Countless examples can be drawn to cite overwhelming successes of MNEs. Well-succeeded firms grew huge, generating stunning profits while creating a long list of benefits for their host countries. It is, however, also a double-edged sword as their wealth and power could threaten nation sovereignties through their undesirable interactions with their external networks and cultural influence in host countries (Baylis, Smith & Owens 2008; Hill, Wee & Udayasankar 2012). Problems surfaced can range from economical to social and to political. Naturally, in business competition, where there’s success, there’s failure too. Again, innumerable examples could be found that feature and explain a MNE’s failure.

This paper seeks to examine one of the dominant challenges faced by MNEs – national culture difference – through the study of the operations and decisions made by PSA Peugeot Citroën Group (PSA), on one of the many countries she has investments in – China. Given PSA’s active global activities, investment in Guangzhou was not the only one that failed but they provided an interesting insight on cultural challenges. First, a brief history of PSA and its global market entries will be introduced. The second section underlines the cultural issues PSA encountered in China with references to various theoretical frameworks. This is followed by existing and proposed solutions on overcoming the problems discussed previously discussed. Finally, conclusions will be drawn in respect...
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