CULTURAL INTELLIGENCE

Cultural Intelligence

Cultural Intelligence

Introduction

This article discusses the importance of firm-level of cultural intelligence in the context of international companies such as relocation.

Aims and objectives

We recognize the recent trend towards global delivery models of offshoring as a strategic imperative for companies outsourcing partners to acquire and develop firm-level cultural intelligence. Based on Earley and Ang (2003) conceptualization of cultural intelligence and the resource based view of the business, we develop a conceptual framework on a level of cultural intelligence.

Purpose of the article

The framework comprises three dimensions of intercultural skills of the company: management, competition, and structural. We offer items to measure these three dimensions and discuss theoretical and managerial implications.

Methodology

An important part of outsourcing strategy that most papers on the subject ignore is the customer relationship that the firm hopes to maintain after outsourcing and the ways to nurture that relationship. After all, most outsourcing strategies based only in cost reduction fail. This is particularly applicable for outsourcing a service, such a call center, repairs, ordering or product installation. In some cases, the basic costumer service tasks are also outsource. The first issue that arises is whether the customer will be affected at all by the firm's outsourcing strategy. Also the firms need to evaluate their current objectives in regards to the customer satisfaction and the level of interaction the customer will have with the supplier.

Over the last decade it has become increasingly important for the strategy in the overall firm's operations to include or at least evaluate outsourcing options. Companies in the U.S. pay about $68 billion every year to other companies for outsourced services and although a major part of these contracts succeed, there is an increasing concern due to recent broken deals. A recent study shows that 80% of companies that outsource their customer based functions are failing to meet their cost savings targets. Usually companies fail to budget hidden outsourcing costs such as customer dissatisfaction that can eventually jeopardize the future of the firm. In the information and white papers on outsourcing evaluation matrix includes four main points of value influencing the success of outsourcing strategies: the firm's Comparative Advantage, Employees, Suppliers and Customers.

Every year in the United States, companies pay about $68 billion to other companies for key services or products that help them focus on their core business and delegate other functions (Thurm, 2007). The value of IT Outsourcing contracts worldwide was $119 billion in 2004 (Pai, 2007). Without a doubt, outsourcing is a major part of the business strategy that drives organizations to success. Whether at its simplest version of buying raw materials from a large supplier to its most complex variation of offshoring services, outsourcing is present in all business strategies.

However, outsourcing strategies are not always successful; therefore it is crucial to understand the factors that influence a firm's outsourcing strategy. In 2004, J.P Morgan Chase & Co. took its main technology functions to be in-house again abandoning a $5 billion agreement and Electronic Data Systems ...