One of the central questions in the literature based on multinational companies (MNCs) is the extent to which the subsidiaries act in accordance with the parent company verses the level to which they behave like a local firm. Many MNC subsidiaries in host countries are performing specific value created activities that are fundamentally embedded in the host country's knowledge development systems (Rugman and Verbeke 2001). This essentially means that every subsidiary of a multinational company molds itself in accordance with its environment. It is a known fact that when entering a specific market, a company has to adjust to the norms and beliefs of the market (BDC, 2020). It is also important to remember that such adjustments depend on the employees as well, who are also hired from the host country. However, the extent of these adjustments and the extent to which the structure is governed by the parent company depends on various factors like the scale of the company, the country, the market and other related factors. This essay will be focusing on the subsidiaries of Rip Curl International, a multinational corporation and an analysis of how they function in regards to various cultures.
Rip Curl International (also known as Broadwear) is a company that designs, manufactures and retails surfing sportswear and accompanying products (Rip Curl, 2020). This organization was founded in 1969 and running well in various parts of the world very well. Rip Curl is currently one of the biggest names in the surfing industry and has nine different subsidiaries in countries like the USA, France, and Japan.
When looking into an MNC like Rip Curl International, it is essential to remember that such services and products are utilized by the people solely and thus have to be designed and shaped accordingly. According to Frei (2008), when a business such as this one is being established, the first thing it has to do is effectively meet the needs and desires of the customers. Along with this, not only customers, but the requirements of the local employees also have to be met by this organization. The employees should feel comfortable in the company and develop a feeling of oneness with it. However, this process can become a little difficult if the subsidiary is made to function exactly like the parent company. The culture of the parent company set in a country may be different or contradictory to the country in which the subsidiary is present (Puck et al. 2016).
According to Hofstede’s Cultural Framework (2001), it can be understood that there are high probabilities of cross-cultural tensions that can arise in a managerial environment. Hofstede formulates certain cultural dimensions that can help in understanding an area’s culture and behavior accordingly. The entire model is based on analyzing the culture of the place before a management strategy is formulated. This practice essentially concludes that the extent of localization or adherence to the principals of the parent company depends solely on the culture of the host country (Hofstede, 2001). As a sector, the surfing sector has a comparatively similar culture throughout most of the countries. Thus, it was possible for Rip Curl to provide a consistent design and centralize certain key elements (Bourg, 2020) along with a set of principles, values, code of conduct, rules and regulations that run the company (Rip Curl, 2020). Having said that, the management styles do differ depending on the culture of the subsidiary, but steps are taken to ensure clear communication and coordination amongst the employees of the entire organization.
An article by Myloni, Harzing and Mirza (2004) assesses the transfer of the Human Resource Management practices to their overseas subsidiaries. The article states that most subsidiaries adapt their HRM practices to an extent; though some practices are more localized than the others. Every area has its own management practices that cannot be isolated from a particular environment. The article also shows a low rate of transfer as people find it difficult to adapt to other cultures (Myloni et al. 2004). In most cases, the HRM practices of a subsidiary are impacted upon by the culture of the area and thus it is difficult to impose standardization of such practices. This was witnessed in Rip Curl’s management practices as well. Rip Curl operates over 170 branded retail stores and 9 different subsidiaries, and though the brand has implemented standardization of the logo and designs of the equipment, the management styles had posed various challenges in the beginning (McNickel 2017). However, these challenges very slowly overcome using effective management techniques.
Another article states that the transmission of organizational culture from the headquarters to the subsidiaries can be important in the workings of the organization (Moroshnik and Basu, 2014). The entire paper supports the statement that core values should be passed on from the parent unit to the various subsidiaries. The article argues that multinational companies should build their own organizational culture that is inculcated in all the parts of the organization (Moroshnik and Basu, 2014). That is exactly what Rip Curls has strived to achieve. Though minor management differences remain within each subsidiary, the brand has strived to establish certain cultures and practices that are common in all the subsidiaries through the years in order to establish a global standard.
An article by Barera (2010), analyses the process of cross-cultural competence in an organization which consists of employees becoming less defensive and opening their minds to a new set of ideas. The article further outlines the importance of cultural awareness, skill development, planning and strategizing in order to have a stable environment (Barera, 2010). This article can be highly insightful when looking for specific information regarding cross-cultural barriers in organizations like Rip Curl. It focuses primarily on employee training in order to establish certain regularizations and consistencies among the entire company.
Culture is a complicated concept that cannot be generalized. However, the concept of culture is applicable in some sectors more than others. There are certain sections of the society (like food, clothing, etc.) that are governed massively by the culture of a particular area whereas there are other sections (like monsoon gear, footwear, etc.) that are lesser governed by culture. Thus, the extent to which a subsidiary is localized or globalized depends not only on the cultural barrier but also on the extent to which the sector depends on culture. Rip Curl is one of the very few companies who have to face lesser challenges when establishing standardization. The use of various software and technologies also made the entire process easier. In short, an organization needs to balance the localization and standardization according to its personal situations and come up with a plan that is most effective for the organization.
Barrera, Carlos. 2010. An examination of cross cultural competence in international business: The case of the subsidiaries. International Business & Economics Research Journal (IBER), pp.1-10.
Basu, D. R., and Miroshnik, V. 2014. Evolving relationship between the parent and subsidiaries in multinational companies. Advances in Management,7(2), pp. 1–15.
BDC. 2020. 6 steps to create a winning market entry strategy. Available at https://www.bdc.ca/en/articles-tools/marketing-sales-export/exportation/pages/winning-market-entry-strategy.aspx [Accessed on 06/08/2020]
Bourg, P. 2020. RIP CURL Case study. Available at http://www.e-scm.eu/en/rip-curl-case-study/
Frei, F. 2008. The four things a service business must get right. Available at https://hbr.org/2008/04/the-four-things-a-service-business-must-get-right [Accessed on 06/08/2020]
Hofstede, G. 2001. Culture’s consequences: Comparing values, behaviors and institutions across nations. CA: Sage Publications
McNickel, M. 2017. Switched on CEO: Surf’s (Still) Up! Stephen Kay, Rip Curl. Available at https://istart.com.au/feature-article/switched-on-ceo-surfs-still-up-stephen-kay-rip-curl/
Myloni, B., Harzing, A. K., and Mirza, H. 2004. Host country specific factors and the transfer of human resource management practices in multinational companies. International Journal of Manpower, 25(6), pp. 518–534.
Puck, J., Hödl, M.K., Filatotchev, I. et al. 2016. Ownership mode, cultural distance, and the extent of parent firms’ strategic control over subsidiaries in the PRC. Asia Pacific Journal of Management, 33, pp. 1075–1105
Rip Curl. 2020. Going International | Rip Curl Asia. Available at https://www.ripcurl.asia/en/company/history/international.html
Rip Curl. 2020. Social compliance. Available at: https://www.ripcurl.com/us/explore/social-compliance.html
Rugman, A. M., and Verbeke, A. 2001.Subsidiary-specific advantages in multinational enterprises. Strategic Management Journal, 22(3), pp. 237–250.
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