Background of the Company

There are a number of aspects regarding the HRM of an organisation that it needs to evaluate before venturing into an international market. The HRM concerns that need special attention are- staffing policies, evaluation of cultural differences and human resources management in an international context. For all of these aforementioned aspects, the Human Resources division of an organisation is to pay minute attention to. Staffing policy and evaluation of cultural differences are intricately related to the strategies for the organisation in order to successfully venture into a new market. The following report aims at inquiring into the issues that might arise for Cafe Bella, in relation to the company’s expansion in Shanghai and Beijing. The report aims to assess the cultural differences between the company’s home region and China. The report will also recommend strategies of international human resources management in relation to the company’s expansion in the Chinese market.

Cafe Bella is an Italian Coffee bar chain that specialises in organic coffee and pastries. The business is headquartered in Italy and has planned on expanding its business operations to the Asian market in Shanghai and Beijing, China. There are a few things for the company to consider before proceeding with the venture into a new market. The cultural differences strategies for mitigating future issues that may arise are some of the essential considerations for the company.

The cultural context assumes great importance with respect to an international business expansion. Cafe Bella’s expansion in China might encounter a few issues related to human resources. These issues are closely related to cultural differences in the country. The national culture also has a greater impact on international business (Shenkar et al., 2020). Italy and China are situated on completely different continents and take into consideration the socio-cultural differences while forging an HRM plan for the international expansion of a business. The key differences in culture have a hugely significant impact on HRM as well as managerial practices. Cultural differences and their analysis assume a significantly important place in human resources management in an international context. In this context, Hofstede’s theory of cultural dimensions can be cited. The theory categorically identifies the separate variables that contribute to the variations in a nation’s cultural aspects (Jackson, 2020). According to Hofstede’s theory of cultural dimensions, there can be six categories or dimensions that have an influence over the national culture.

 

Figure 1: Hofstede’s Cultural Dimensions

The Cultural Context in International Expansion

(Source: Hofstede, 1991, p.28)

From the figure above, it can be analysed that the six dimensions constitute the characteristics of a country. The analysis of the characteristic traits of these cultural dimensions is valuable in terms of considering the cultural differences between two countries. Lower in the power distance index, a country is more democratic and has little inequity. In this scenario, an organisation can effectively use decentralised decision-making inside the company’s operations. A country that is high on the collectivism dimension is more likely to accept an organisation or its products that approach the nation and its citizens as a whole (Lazarova et al., 2021). A low uncertainty avoidance index indicates a stricter approach in abiding by the laws regarding taxes and recruitment, which is exactly the scenario for Cafe Bella, venturing into the market of China. High on femininity index indicates the perseverance of quality of life over the more material attractions related to jobs. This is also true in the context of China. The collectivist outlook of Chinese society gives more importance to work-life balance and reaching a more amicable environment for collaborative efforts.Key Cultural differences and their impact on HRM and managerial practices

Understanding the key cultural differences between Italy (the birthplace of the Cafe Bella) and China can positively contribute to the formation of strategic human resources plans. By analysing the culture of China with the help of the theory propounded by Trompenaars, it can be identified that China is a highly particularistic country. The country’s organisational environment demands that the managers pay more minute attention to the individual workers’ situations and form the company’s rules accordingly. Keeping this in mind Cafe Belle needs to form the HRM practices that address the cultural preconceptions of the nation. According to Carolina (2019), the cross-cultural dimensions in relation to the strategy formation of international human resources practices hugely depend on the managerial level understanding of the accurate needs of the employees. On the neutral vs emotional dimension according to Trompenaars, China and Italy are in the same place. However, the company’s human resources officers should keep an open mind for learning the differences in people’s ideas. In the dimension of concern vs committed, Italy and China lie in very different places. Chinese work culture indicates that people who work together generally socialise together. This information regarding the Chinese culture is important for the managerial practices in Cafe Bella. The difference in attitude towards the organisational environment between Italy and China is also important for HRM practices in Cafe Bella (Szyd?o & Grze?-Buk?aho, 2020). The human resources managers’ practices regarding employee management should include considerations regarding flexibility. It is important to note that according to Trompenaars, every nation’s culture and the issues arising in relation to cultural differences have different solutions. In this particular context, Cafe Belle would have to pay attention to the specific preferences of the employees in Beijing and Shanghai. In this way, the company will effectively reduce the chances of issues arising from mismanagement of talent and employee retention. Apart from recruitment and talent management, the HRM of Cafe Bella is also responsible for the overall welfare of the employees. It is very important that the human resources professionals understand the specific expectations of the employees in Shanghai and Beijing. A greater understanding of the local or regional culture will give the HR professionals the benefit of strategizing the other plans such as rewards and recognition programs and regular employee feedback.

Key Cultural Differences and their Impact on HRM and Managerial Practices

Differences in attitude to the work environment is an active element that influences the managerial practices of an organisation. The application of the GLOBE project’s nine dimensions can help in identifying the needs of specific leadership qualities to be able to effectively manage employees in a foreign country (Canestrino et al., 2020). The managerial practices need to be tailor-made according to the specific mindsets of the Chinese employees. The company intends to take a general manager from Italy to China, however, the company will need a lot more staff in other positions to run the business successfully. The staffing strategy and related models will be discussed separately. The present concern of the effects of cultural differences on managerial practices gives the opportunity to discuss the specific behavioural differences between the people in Italy and China. Issues could arise from managers oversimplifying situations or stereotyping employees for their cultural differences (Lavelle, 2018). To mitigate these issues, the company needs to thoroughly study the behavioural difference in the Chinese culture. The most important aspect of a manager’s duty is to remember that organisational culture is not monolithic and also that national culture, although it influences the organisational culture, is not the whole of it. According to Oludayo et al. (2018), less authoritative managerial practices and democratic leadership that fosters a creative environment positively impact employees’ performance. That, in turn, positively impacts the company with a positive result in terms of competitive advantage in the market (Simeonov, 2021). Gaining a competitive advantage in the Chinese market will be an important objective for the company, and in this endeavour, the company can utilise democratic and creative managerial practices in employee management. The key cultural differences and the proper understanding of those can effectively help the company in designing the employee benefits for the new operations opening in China. The differences in social outlook also influence the specific needs and expectations of the employees, global or local.

In order to form an effective IHRM staffing strategy, Cafe Bella needs to take into consideration a few key concepts. The key concepts that assume great importance in IHRM staffing strategy are- standardisation/customisation according to the situation of the particular country cost reduction/local responsiveness. Strategic integration and local responsiveness in the area of operations in a foreign country assume increased importance. Cafe Belle intends to keep their product line intact in order to maintain the authenticity of the company’s products. Two of the most important pressures a company can face in international operations management are- cost reduction and local responsiveness (Fatehi & Choi, 2019). Cafe Bella can face cost reduction issues in terms of raw material export and also the costs of labour charge. Cafe Bella can also face issues with regard to increment in production cost. As the Chinese consumers will have a difference in taste from the consumers in Italy, that may increase the production cost for the company. Local responsiveness creates pressures in the areas of infrastructure, specific preferences and also in issues in distribution channels. These pressures have an extensive influence on the HRM practices of the company in China. The company will have to standardise its HRM practices in recruiting more local people to be able to cater to the specific needs of the Chinese consumers (Chung, 2018). The potential costs of operations are different for different geographic locations, keeping that in mind, Cafe Bella should standardise its products and HRM practices accordingly.

The Importance of Tailored Managerial Practices in International Human Resources Management

The appropriate HRM staffing strategy depends on the business environment and also on the other factors that already have been discussed. Three foundational aspects of human resources management are- recruitment and selection, training and development and performance management. One important aspect here to note is the intricate connection between the company’s business goals/objectives and its staffing strategies (AL-Husan et al., 2021). The talent management of the company should be in alignment with the company’s business goals. The formation of a staffing policy is the first step for Cafe Bella. For the purpose of its expansion of business in China, the coffee bar chain needs to recruit talented baristas and employees for other posts. With regard to staffing policy, Cafe Bella can abide by the Geocentric Approach. According to the geocentric approach for staffing, the emphasis is put on the acquisition of the best fit talents for the positions of the company. The approach ensures the best implementation of the management network and also maximises local responsiveness. The geocentric approach also helps increase the company’s brand value as an institution in a foreign country by creating flexible employment opportunities. Although in this situation geocentric approach is the best fitting staffing strategy for the company, the approach has a few disadvantages. The geocentric approach requires the company to relocate some of the managers to new locations which can be costly for the company. Performance assessment is one of the most important duties of the HR professionals in the company (Widarni & Bawono, 2020). In the case of Cafe Bella, the company should adopt the standard causal model in terms of performance management. The model substantiates the interrelation between HRM practices and organisational performances (Cheng & Hackett, 2021).

 

Figure 2: Standard Causal Model of HRM

(Source: Boselie et al., 2005)

Talent management and employee engagement need revision in terms of its implementation in a new location. The company has to adapt its HRM policies regarding employment terms and conditions according to the local employees’ needs (Crane & Hartwell, 2019). The establishment of effective communication between the HR professionals and the employees is important in order to utilise the employee performance to the fullest. The company should also pay attention to turning its HRM strategies more rooted in the current situation, rather than it being fixated on old theoretical knowledge.

Expatriates are the professionals working for Cafe Bella in China but are not citizens of the country. One of the general managers will be relocated to China from Italy initially. That general manager can be cited as an example of PCN (parent country national) (Setti et al., 2020). The manager is an Italian national and he will be initially looking after the managerial endeavours in China for Cafe Bella. Since the parent country nationals and third-country nationals are not much experienced in the culture of China, in this situation they might encounter some specific issues in adaption to the operations. Major duties of the expatriates include networking, socialisation and acting as an agent of direct control. The specific needs of expertise and capabilities in the international managers actively direct the requirement of different approaches in recruitment for managers (MALVIYA & JAIN, 2021). Flexibility, adaptation skills, strategic thinking and democratic leadership are some of the qualities that are essential in a successful international manager (Yashkova et al., 2016). Some of the problems Expatriates can face in adapting in China are issues related to conflict resolution, communication, influencing abilities and motivating the employees.

Conclusion

 

Figure 3: Explanation of types of Expatriates

(Source: e-pg pathsala)

As stated before, expatriates, that are the parent country nationals (PCN) and third-country nationals (TCN) are not much acquainted with the local culture of China, specifically Shanghai and Beijing. A certain set of capabilities is demanded from the expatriates working for the company in China. In order to identify the problems, the expatriates may face in adapting to China, the different socio-economic aspects should be taken into account. The first problem expatriates working in managerial posts can face is the problem of social adaptation. As the expatriates have less knowledge of the country’s cultural background, they can face problems in exercising their managerial duties, especially when the majority of the employees are local (Zhao et al., 2014). In this particular case, the employees on the barista level will be recruited locally and, in that situation, the expatriate managers might face problems in managing their performance. To mitigate this issue, the expatriate managers should be briefed about the cultural background of China, in order to make them equipped in handling the operations in the foreign country. The second problem expatriates can face is the language barrier. Shanghai has a regional language that is majorly spoken by the people in the region. Apart from that, there are many other languages spoken in the mainland of China. The language barrier can be a huge issue in establishing effective communication (Ramlan et al., 2018). Effective communication is a key element in fulfilling managerial duties. To handle this issue, the company should train expatriate professionals with basic knowledge of the languages widely spoken in Shanghai and Beijing. In the initial stage, the company can also recruit a local professional for translation purposes. However, the knowledge of the languages is essential for the managers in order to communicate with the rest of the employees and the customers. Health care and safety can be cited as other issues that expatriates might face in China. As the expatriate professionals are new in the country, they might face problems in arranging for insurance and other necessities. This problem should be taken care of by the company in an efficient manner (Fee & McGrath-Champ, 2017). Cafe Bella should arrange for all the basic and auxiliary necessities of the expatriates working for the company in China.

According to Haile & White (2019), successful exercise of respective duties by expatriates not only contributes to the global economic expansion of an organisation but also contributes to sustainable social development. It is to be noted that female expatriates can face some issues that are related to gender specific experiences. Research shows that female expatriates all over the world face problems in adjusting to cross-cultural situations and navigating this problem have always been the enterprise of the female expatriates themselves. Apart from the differences in cultural setup, the female expatriates often are marginalised based on their gender identities (France et al., 2019). This issue should be taken into consideration by Cafe Bella and the company should put forward efforts in making their organisational culture safer and more amicable for the women expatriates working for the company. According to Hack-Polay (2020), proper training of expatriates regarding socio-cultural adjustments can effectively help the professionals as well as the company in terms of better organisational performance.

Conclusion 

In conclusion, a few things can be rounded up. The most important aspect of the international expansion of Cafe Bella that has been highlighted throughout the report is the need to identify the differences in culture and train the professionals accordingly. The report has also focused on the company’s staffing strategy assumes greater importance in this context. The company should recruit more local people to have an upper hand in the local market. Recruiting more local employees would not only help the company in navigating through the language barrier and to understand the local cultures better but also help the company in gaining a better brand image in terms of creating employment opportunities in the regions. It has been seen throughout the report that although there is a huge amount of technological aid available in employee management and talent management, effective communication and fulfilment of the duties of the managerial professionals are essential in order to have a successful expansion of Cafe Bella in China. From the discussion of the cultural differences and the effects of the differences can be concluded by commenting that cultural differences are only hindrances when not properly understood. It has also to be kept in mind that managers and other professionals should not try to oversimplify or stereotype the cultures of the regions.

With the help of the inquiry conducted throughout the report, Cafe Bella can be recommended a few things related to HRM operations in China.

• The staffing strategy should be flexible. The company should recruit according to the geocentric model. However, the strategies should be flexible.
• Cafe Bella should pay attention to the specific needs of the local employees.
• The safety and security of the expatriate employees should be taken care of by the company.
• Apart from initial training, the company should provide other opportunities of professional growth for all employees.
• Rewards and recognition structures should be designed as per the requirements of the local employees.
• All employees should have proper representation in the company.
• Cafe Bella should provide assistance to the employees in order for them to understand the brand value and image of the company that it has in Italy.
• Talent management is important and Cafe Bella should effectively communicate with all the employees in order to maintain a good liaison between the managers and the employees.

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