This paper focuses on HBC a Canadian company that intends to acquire Kaufhof. Kaufhof is domiciled in Germany. Its acquisition implies that HBC will start operations in Germany. However, businesses that have ever tried to expand their operations into Germany failed. Walmart is one of the victims that sought to acquire some two companies, but the complexity of Germany's business environment compelled it to retreat. The focal point for this discussion is the expected issues that HBC will encounter after the acquisition of Kaufhof. The primary challenge is cultural and communication differences whereas the secondary issue is the organization structure that will probably be experienced in Germany. To solve these problems, the paper has suggested the following:
- Provision of cultural education to employees.
- Establishment of a participative communication system.
- Establish an administrative structure that will preserve the culture and practices of the Germans.
Additionally, there are alternative solutions that will also be implemented to solve the primary and secondary issues. Other issues covered includes impacts of the problems on the; organization, personnel, and the environment. Furthermore, the paper also covers cultural differences, political outlooks and business ethics in Germany, U.S. & Canada. It is found out that the Canadians are value shoppers, the Americans are price sensitive while the Germans tend to consider their cultural issues in the management practices as the employees tend to be de-motivated if there is no local participation.
International Business Issues that Hudson’s Bay Company Should Consider in
Developing Future Expansion Strategy
The desire to overrun the competitors compels business to pursue the option of moving to new regions irrespective of the distance barrier. Hudson Bay Company (HBC), a Canadian company going international is a good idea that can help it realize the market growth aspirations (Cole, 2015). Succeeding requires the embrasure of various efficient strategies that should go hand in hand with the quality of the products supplied or services provided.
The most common strategy used is the opening up of subsidiaries in the countries of choice. Alternatively, the company can establish the production plant in the new place. Further, there is an option of apply acquisition which is a strategy that is entirely used by HBC's to enter Germany, then the US and finally in other desired countries (Dianne, 2015). HBC acquiring Kaufhof and starting operations will probably expose to various political, economic, social and environmental issues. In developing the future strategies in Germany after the acquisition of Kaufhof, HBC ought to focus on; developing an efficient international organization structure, comply with the foreign rules and regulations, deal with the international accounting, global pricing and cost calculation strategies, currency rates, universal payment systems, and cultural differences and communication difficulties.
The primary challenge that HBC will experience
The primary challenge that HBC will probably face is the Germany market is the cultural differences and communication problems. From the Walmart case, the retail business in Germany is unpredictable, and most companies failed to withstand the challenges which forced them to retreat. Most of the opinions given about the acquisition point out that Kaufhof division will be the hard to manage and instead of generating profits it could be loss-making.
In handling the communication and cultural challenge, the management should provide cultural education to sensitize employees about the importance of diversity, cope up or learn the cultural practices of Germany. The provision of education ensures employees work as a team and promotes a culture of commitment and wellness among the employees. It should also develop efficient communication systems that enhance precise and faster flow of information from one department to the other. The communication systems should encourage workers participation in the management to create the image of employee ownership of the company. Giving the opportunity to everyone in the organization will help the management to spot pitfalls before they adversely affect the performance of the business. Effective communication channel enhances the continual flow of information hence proper coordination of activities that ultimately results in success.
HBC will also experience administrative problems. The management structure that has worked extremely well in Canada may not apply in Germany. Walmart acquired Werkauf and Interspar and maintained the organization chart that was successfully used in the U.S, but it never worked in Germany. The Company structure determines organization group dynamics, culture, employee management practices and work processes. Upon acquisition of Kaufhof, the management should establish an administrative structure that will preserve the culture and practices of the Germans. HBC should retain the hardworking employees, and during the hiring process, the organization should consider attributes such as educational qualification, work experience, creativeness and innovative skills, and critical thinking skills. Changing the system will apparently discourage commitments of local employees in the running of the business. In the long run, the HBC will probably lack the competitive edge which will result in failure (Jervell and Mahadevan, 2015).
Implication on the organization performance
Obviously, cultural, communication and organization structure significantly influences the performance of the business. Improper handling of these issues creates problems that contribute to the failure of the firm. Efficient strategic measures must be formulated to handle every issue separately. These attributes hinder the smooth execution of roles at the organization level. For instance, the impact of communication and cultural differences were reflected in the Walmart case. Its sales and overall profits plummeted within the shortest time which forced it close all the branches in Germany. With this knowledge, HBC can refer to these challenges and adopt an operational program that can assist to overcome the challenges (Dianne, 2015). Effective communication is needed right away from the planning, implementation and the evaluation stage. For this case, communication problems will be catalyzed by the language barrier and poor relationship among employees that are led by cultural differences. Similarly, cultural difference influences individual’s behavior in the company. HBC should not restructure the administration system. For example, it should not retrench employees since doing that can create cultural conflicts. Doing contrary to the suggestions can reduce profit margins. In the long run, the Kaufhofs branch may be forced to be closed or sold to another investor who can appropriately fix the problems.
Implications of the challenges on personnel
Employees are the most important pillars of an organization. They supersede other resources in the essence that, people acquires and uses other factors of production to achieve organization success. Therefore, the persistence of these challenges hurts the employee's the same way they affect the company. On the same point, any issue that hinders workers from timely realizing organization goals affects the performance of both the employees and the organization. First, cultural differences impede the formation of functional organization teams. These problems extend to influence how employees discharge their roles. Disrupted employees are de-motivated to remain motivated for achieving company objectives. Once the cultural issue is unaddressed, the employees will rarely focus on ensuring tasks are undertaken without strict supervision. Creativity and innovation between the employees will also be shattered, and further, the operation costs will keep rising. Additionally, disruption of the administration structure will demoralize the executive, managers and other employees of Kaufhof. It can trigger stress among the employees because some can fear the loss of jobs which is the primary source of income. In short, if these issues will not be appropriately addressed, the employees will be stressed up, lack commitment, relent their support, and in some cases, there will be a misunderstanding among the employees which is a direct ticket for business collapse (The Globe and Mail, 2015).
Implication on the environment
In this regard, the environmental aspect captures group formation and the relationship that will exist among the employees. The work environment will indeed be unsupportive for the creation of constructive teams. Departmental or project teams contributes to business success. It also enhances the establishment of a healthy business environment. Communication, cultural and structural challenges will negatively impact group formation which will ultimately create poor working environment. The frozen relationship between the managers and workers from Canada (HBC) and the managers in Germany (Kaufhof) can create various management challenges which can divert the focus from critical organization issues. Also, the shrinking business performance will deny the government revenue which is paid in the form taxes.
Alternative Solution to the Challenges
1. HBC should adopt the human resource management practices that are applied in Germany.
There are differences in the human resources practices that are used in different parts of the world. Copying practices that have successfully worked in Canada and the U.S could fail to work in Germany (Strauss, 2014). Therefore, the management should familiarize with human practices that are applicable in Germany. By doing this, HBC could successfully maintain the management practices that have propelled Kaufhof towards success for the past 125 years of existence.
- Assist the management to understand how to motivate employees.
- It discourages destructive workers dynamics such as go-slows, and union actions.
- It may increase operational expenses.
2. HBC should organize the management of the acquired companies as either continental or regional group.
Here is where subsidiaries that are domiciled in Europe, America, Australia and any other continent be managed differently. This system does not significantly affect the administrative structure. The reporting systems among the employees should remain which will increase the level of support from the employees.
- It enhances competition among the groups.
- It deviate the branches from working for the overall organization objectives.
- It is expensive to manage because of the differences in the budgeting systems
3. HBC should embrace a communication language that is used by the majority of the employees.
Communication language that is understood by the majority of workers should be utilized. Deliberations should be conducted in Germany language. This strategy will be implemented by the executives and managers.
- Increases the use of locals to fill most of the managerial and executive roles.
- It encourages collaboration among the employees.
- It is not suitable for non-locals
- Hinders diversity
4. HBC should embrace the positive organization culture that was used Kaufhof. s
Usually, every organization has a distinctive culture that is different from the other. Therefore, the management should encourage those cultures that promote employee commitment in discharging roles. Kaufhof performance records have not been bad. Staying in operations since the incorporation reflects some form of success. There must be a culture that has guided the company stays in operation despite the complexities caused by the volatile business environment in Germany.
- Encourages formation of teamwork
- The change in ownership doesn’t interrupt employee commitment.
- The old culture might not be in line with the new business objectives.
Apparently, communication and cultural and further management structure of the business all are equally important to consider in the international operation. Thus, it is recommendable a combination of strategies is utilized by the management to minimize their effects on the business performance. Besides the primary solutions to the challenges, HBC management should include the combination of the alternative solutions to overrun these problems. Combining the options offers the opportunity to the management to efficiently handle all the issues that may be experienced during the implementation. It enlarges the scope at which these issues can be solved. Consequently, the business will smoothly overcome internal business influences and achieve both the short and long term objectives.
Implementation of the solutions
Effective implementation of the primary and alternative solutions should be executed in phases. For this case, it should be segmented into the short term, medium term and long term, and very long term. The short term implementation will be now to the six months; the medium-term implementation will commence the sixth months from after the end of the short-term implementation. The medium term implementation will also last for six months, thereafter, the long-term implementation will commence. The long-term implementation will begin one year from now and be implemented for another full year. Finally, very long implementation will start after the end of long-term implementation and last for three years.
Notably, the implementation of one stage does not imply that after the end of the period the program will end. The phases are just meant to accord priorities to where it is deserved. The first two phases will factor the primary and secondary solutions. These solutions include; provision of cultural education to sensitize employees about the importance of diversity, learning the cultural practices of Germany, and provision of education ensures employees work as a team and promotes a culture of commitment and wellness among the employees for the short term. In the next phase, the management should establish an administrative structure that will preserve the culture and practices of the Germans. The third and fourth phase will include the implementation of the alternative solutions. The first and second option solution will be implemented in the third phase, and the 3rd and 4th alternative will be implemented last.
Expansion of the Kaufhof into the U.S and Canada Markets
The acquisition of Kaufhof undoubtedly implies that their products will find the way into the U.S and Canada Markets. HBC would prefer to access a large market. Canada will be the potential starting place because the management understands better business dynamics for this region. Also, the business empire created in Canada paints a good image that can increase the demand for the products without substantial spending on marketing. Furthermore, the success history in Canada will encourage the development of many branches that can assist to meet the increasing demand. More branches will be opened depending on the market demand for the Kaufhof products. Afterward, HBC will consider expanding Kaufhof products to the U.S and consider the level of product demand to establish more branches.
Cultural differences, political outlooks and business ethics in
Germany, U.S. & Canada
Cultural and political factors, as well as ethical issues in business play a significant role in the success or failure of an HBC and the management. The cultural differences among shoppers result from two primary differentiators that include seeking out value and divided shopping experiences. The Canadian are always value customers due to the less income and the higher costs of living (Austen and Abrams, 2016). The Germany shopping culture and employee management practices differ from that of the U.S. Furthermore, using Walmart as an example, the American ethical codes may cause frustration in the Germany context, for instance reporting misconduct is acceptable in the U.S. but disregarded in the latter. Thus, there is need to pay considerable attention to the local management practices as well as the hidden motivations of the local customers. Culture influences the international venture, and it is up to the HBC to identify those that are passive and proactive. There are fewer departmental stores in Canada that compete for the shoppers as opposed to the U.S. Germany where the retail market is saturated, and most shopping is online facilitated by the dominance in e-commerce and multichannel retail expansion(Austen and Bray, 2015).
There are opportunities for growth in the departmental store market in Canada as opposed to Germany and the U.S. The Canadian packaging law compels the use of French and English as well as in the commercial arrangements which imply that the supply chain activities of HBC between the three countries may be hard. The employment regulations and laws like the minimum wage requirements are entirely different in these three countries as well as the consumer credit rules together with the rate of increasing the interest rates. Despite some similarities in the political outlooks, some differences have resulted in an increase in the operational costs and hence, closure of some stores, especially in the U.S.
Recommendations for HBC management
The HBC management has to establish mechanisms or strategies that can help them deal with the international as well as local outcomes of the political factors that mainly result from the frequent changes in the government policies. Therefore it can be easier to mitigate the risk associated with the unpredictable political environment, understand the impacts on the economy and political instability issues. Additionally, to help solve the cultural differences that mostly result in the risks of conflicts and misunderstandings, it is essential to establish the follow-up systems that can allow analyzing the mistakes and successes in accommodating the foreign country's local culture. For instance, it is good for the managers to take steps to learn the language used in that market and understand what the consumers of that region prefer and make them priorities of the firm. Henceforth, it will become easier to communicate and coordinate with all the stakeholders including the employees and the consumers.
There is need to understand the cultural values and beliefs of different nations before making a decision to venture into the international market such as Germany where the shoppers and employees have diverse cultures and ethical backgrounds concerning the retail industry. Thus, three components are crucial for HBC to consider and include communication, organizational hierarchy and work etiquette that promotes the successful operation. Furthermore, from Walmart's case, it is clear that it has been facing problems with the government of the U.S. and courts have called it a hard plaintiff and its brand has a bad reputation when it comes to ethical conducts that also contributed to its failure in Germany. Thus HBC has to ensure that it complies with the laws and regulations during acquisition of Galeria Kaufhof and afterward ensure that the management practices are as per the government policies. Furthermore, it is significant for the HBS to enhance practical business ethics within its stores to increase expansion within Germany (Hollie, 2015).
Threat from Nordstrom entry
Currently the Canadian retail market has fewer departmental stores that are competing for the shoppers, and furthermore, there are potential opportunities for HBC to have stable growth. Most Canadian shoppers are frugal, and they prefer shopping at the Nordstrom’s Seattle location in sizable amounts after assessing the value of the products and services (Loeb, 2016). Furthermore, Nordstrom seeks to expand and open six more stores in shopping malls that is most prestigious in Canada and which means that they will attract more customers. Therefore, there will be stiff competition in the retail industry and henceforth pose a significant threat to the credibility as well as the financial materiality of HBC. However, Nordstrom's growth will be limited by the Canadian packing laws that necessitate the use of English and French together with the commercial arrangements. According to Richard Baker, who is HBC's executive chairman, the entry and expansion of Nordstrom will be a significant advantage as it shall enable them to become a better company through the provision of prominent products that are appealing to the domestic customers (Austen and Abrams, 2016).
Successful Kaufhof acquisition
There is need to continue with the creation of excitement and news through merchandising that bring innovative ways into retailing thus facilitating the repeat purchasing as well as attracting more customers. Having a creative and innovative leadership will foster future growth together with sound marketing and the appraisal of all consumers. Furthermore, it is significant to ensure accelerated of HBC’s e-commerce to overcome the challenges from the logistical snags. They should make sure that there are quality shopping experiences through the provision of the right people and proper tools within the departmental stores and ensure the products and services meet their needs and expectations.