Understanding Hofstede Framework Model And Its Impact On International Business, An Essay.

What is Hofstede Framework Model?

Discuss about the Case Study Of Hofstede Framework.

In this technology era, distance between countries has vanished and now people from different cultures are working together. Technology helped as a bridge to business for international platform but with these different culture aspects it creates a lot differences in the style of doing business. Today, a successful business is one that has a global recruitment strategy. A successful organization is one that hires the people from different cultural backgrounds and the hiring is done based on the technical capabilities rather than the caste and background of person (Duran et al., 2016). One of the widely used cultural model that organizations use is Hofstede cultural dimension model (Thampi, Jyotishi & Bishu, 2015). Here Hofstede collected data from 40 different countries and analysed it. With his findings, he chalked down five important aspects, but then added one more and framed a model on cultural aspects to understand impacts on business and named it as “Hofstede framework model”. These six dimensions are Power Distance, Uncertainty Avoidance, Individualism v/s Collectivism, Masculinity v/s Feminity, Long v/s short-term orientation, Indulgence v/s Restraint (Thampi, Jyotishi & Bishu, 2015).

It is believed that the ‘Hofstede framework on culture helps international businesses to understand many aspects of culture including risk-taking behaviour, innovation, team corporations, and nature of business negotiations and contract’. The objective of this paper is to discuss the other statement in current business context. The paper discusses the key dimensions of Hofstede cultural dimension and discuss few cases where this framework can be applied. The application of Hofstede cultural dimension framework would help organizations to make smart decisions in aspects like international expansion, recruitment of international employees, global expansion of organization, etc.

Following are the six dimensions of Hofstede Framework-:

1. Power Distance - Acceptance of inequality in power distribution and how many people are comfortable with upwards’ influence. Lower degree indicates that people will question the authority and tend to distribute power equally (Thampi, Jyotishi & Bishu, 2015).
2. Uncertainty Avoidance –It talks about the ability of people to accept change in the system. Low UAI states that people are more likely to accept changes which lead to a development and innovation whereas high UAI restrict changes (Valaei, Rezaei & Ismail, 2016).
3. Individualism v/s Collectivism –Here the concern is whether culture revolves around individual work or team-based work. In this, individualism is connected to his/her immediate family and collectivism lives as an extended family (Duran et al., 2016).
4. Masculinity v/s Femineity –It states the dominance of gender in society. In masculinity, men are showering the societal values and in femineity, women tend to play different roles (Valaei, Rezaei & Ismail, 2016).
5. Long v/s short-term orientation –Perspective for planning future or meeting short term goals. Long orientation index views pragmatic problem solving as a necessity. And with short term perspective index, mostly with poor countries have no economic development.
6. Indulgence v/s Restraint –It allows basic drives related gratifications, for instance enjoying live or living in strict societal norms. Indulgence index is an indicator of having fun and restraint index talks about the strict rules of society (Conforti, De Leoni, La Rosa, Van Der Aalst & Hofstede, 2015).

In Saudi Arabia, Power Distance (80) and Uncertainty Avoidance (68) have high index, which indicates that these societies follow a caste system that restrict the mobility of citizen in upward direction. They are highly rule oriented with laws. Also Society is rigid and subtle to any change. Here Masculinity Index is low as compare to the average of the world. Development in Saudi Arabia clearly stated that it’s a long term orientated culture (Duran et al., 2016).

On the other hand, UK represents low Power Distance (60) and Uncertainty Avoidance index, which means the country, is much modern and have a progressive outlook with few laws and regulations. In UK Individualism Index (89) is high as people are more likely to work as an individual rather than team work (Valaei, Rezaei & Ismail, 2016).

Key Dimensions of Hofstede Cultural Dimension Framework

1. Risk-taking behaviour –In Business this kind of behaviour is necessary as it aptly stated that the more the risk would be the more tendencies to gain profits, but such kind of behaviour depends on the culture of one’s country and also depend on that country’s culture where the business is going to expand. Countries with low power distance index like Germanic Countries (11 for Austria) and 18 for Denmark can take high risk decisions as the power is distributed to make decisions and on the other side in the Arab Countries distance is high and power is highly undistributed due to which decisions have made on bias basis. Also, Denmark UAI is low which means people here accept changes quickly and this made Denmark one of the happiest places to live (Thampi, Jyotishi & Bishu, 2015).
2. Innovation –Innovation requires a long term perspective with a collectivism effort and support. For innovation, intent of accepting changes is very crucial. Hofstede found that China is having highest long-term orientation index i.e. 118 followed by Hong-Kong (96) and Japan (88). As we know that China is one of the leading players in terms of showcasing innovation and opened many doors to expand business geographically like Chinese toys and firecrackers along with many items in India and other neighbouring countries (Dai & Nahata, 2016). Japan has a highest collectivism index which played an important role in Japan’s innovations. In contrast to countries with short term orientation perspective like Eastern and Western Europe could not able to give long term innovations to society.
3. Team Corporations -Team Corporations covers three aspects, those are collectivism efforts, amount of decision making power and ability to accept changes. Team corporations usually play an important role in international business as it cushions up the new changes and drives the organisation’s mission and vision collectively. India is the most apt example for the same. In India’s culture, it has fair amount of power distance, but collectivism index is above average (68) and UAI is low i.e. (40) which makes India to expand business internationally which act as an aid to foreign reserves of India. India is gaining high index on long term perspective which indicates its behaviour of commencing business collectively (Drogendijk & Slangen, 2006).
4. Nature of business negotiations and contracts – In negotiations it is important so evaluate the side of dominance and how much the other party is open to do negotiations. At times business negotiations of expanding business goes down in vein because of strict societal norms. Here gender dominancy also played an important role because if it varies on both ends then negotiations are more likely to be turn down (Shiu, Walsh, Hassan & Parry, 2015). Nations like India and China have high masculinity index which increase stances of converting business negotiations on a positive note but here China’s restraint index is a problem which restricted other nation’s opportunity to expand their business in the Chinese economy (Conforti, De Leoni, La Rosa, Van Der Aalst & Hofstede, 2015). As per cultural aspects USA have a high indulgence index which, entices the lifestyle and all the negotiations has been done in order to gain advancement to their current lifestyle.
   Business contracts refer to a legal document which states some predefined conditions to operate business. Countries with strict laws are likely to have solid contracts. For example, Saudi Arabia (Duran et al., 2016).

For example, in a negotiation between Chinese and Canadians, the Canadian negotiators may want to reach an agreement and sign a contract, whereas the Chinese negotiators may want to spend more time for non-business activities, small talks and hospitality with preferences for protocol and form in order to first establish the relationship (Beugelsdijk, Maseland, Onrust, Van Hoorn & Slangen, 2015).

Engineers in developing countries are not familiar with international benchmarks so foreign engineers have been usually deployed to resolve issues like health sanitation and water sanitation. This case study talks about one of the project in Eastern Ghana, which is under the supervision of one British engineer and one project manager. They explored some of the issues that can lead to cross cultural conflicts. Hofstede’s 6-D model considered here in order to resolve cultural issues that would go to affect business in a long run, but mainly four issues has been taken into consideration and those are individualism vs. collectivism, masculinity vs. femininity, uncertainty avoidance index and power distance index (Saleem & Larimo, 2017).

Issues Experienced

1. Engineers wished that local community should express their views about the water sanitation project, but it has been observed that lower section of community did not allow expressing their opinions (Thampi, Jyotishi & Bishu, 2015).
2. They also noticed that there is no room for expressing those opinions that conflict with what other has expressed.
3. In that particular village a woman had some problems in her leg and her opinion was to ease the method of collecting water but she was the only one with such problem in that village. However, this lady was restricted to express her opinions.
4. In starting, engineer faced issues with scheduling up the work due to lent attitude of workers and when the project came to an end, chief showed lack of interest due to his inclined attitude towards personal life.
5. Workers showed lethargic attitude and it made difficult for engineer to complete this work within stipulated deadline.

Issues explained via Hofstede Dimensions

1. The community has high power distance index and engineer’s native nation have low power index due to which such cultural issues has been raised. It can be resolved by setting up the working conditions that is favorable to both cultures (Valaei, Rezaei & Ismail, 2016).
2. This community seems to be more collectively and engineer on the other hand, believed in individualistic opinions. Here Engineer has to make some compromises and have to execute project as per the majority’s opinion.
3. Since UAI is low and PD is high which indicates the nature of people living like an extended family and main authority lies with the chief, so it is necessary to take chief into the confidence (Pudelko, Tenzer & Harzing, 2014).

Conclusion

Hofstede believed that different societies have different values and organizations formed their culture according to their societal norms. The practices and values can be exercise at both level that is at the organizational level and societal level. And this can also create some dilemma while comparing any two. Business have definitely influence by the occurrence of cross cultural context. Many business problems can be resolved if business leaders or even the staff could be able to understand Hofstede 6-D framework and analyses the problems accordingly. With the above discussion it can be said that Hofstede cultural dimension model is a powerful model that businesses can use to understand many aspects of culture including risk-taking behavior, innovation, team corporations, and nature of business negotiations and contract. It is important that businesses must do a comparative analysis of host country and the home country. This comparative analysis would help the organizations to develop specific market entry strategy.

References

Beugelsdijk, S., Maseland, R., Onrust, M., Van Hoorn, A., & Slangen, A. (2015). Cultural distance in international business and management: From mean-based to variance-based measures. The International Journal of Human Resource Management, 26(2), 165-191.

Conforti, R., De Leoni, M., La Rosa, M., Van Der Aalst, W. M., & Hofstede, A. H. (2015). A recommendation system for predicting risks across multiple business process instances. Decision Support Systems, 69, 1-19.

Dai, N., & Nahata, R. (2016). Cultural differences and cross-border venture capital syndication. Journal of International Business Studies, 47(2), 140-169.

Drogendijk, R., & Slangen, A. (2006). Hofstede, Schwartz, or managerial perceptions? The effects of different cultural distance measures on establishment mode choices by multinational enterprises. International business review, 15(4), 361-380.

Duran, M., Irfan, S., Sipoche, D., Blough, D., Turner, D., Nguyen, P., & Steinberg, H. (2016, January). Customer service & hofstede's cultural dimensions among arabs, australians, canadians, greek, jamaicans, pakistani, singaporian, & american accounting information personnel. In Allied Academies International Conference. Academy of Accounting and Financial Studies. Proceedings (Vol. 21, No. 1, 6 – 8

Pudelko, M., Tenzer, H., & Harzing, A. W. (2014). Cross-cultural management and language studies within international business research: past and present paradigms and suggestions for future research. Routledge Companion to Cross-Cultural Management . 34 – 78

Saleem, S., & Larimo, J. (2017). Hofstede cultural framework and advertising research: An assessment of the literature. In Advances in Advertising Research (Vol. VII) 247-263.

Shiu, E., Walsh, G., Hassan, L. M., & Parry, S. (2015). The direct and moderating influences of individual-level cultural values within web engagement: A multi-country analysis of a public information website. Journal of Business Research, 68(3), 534-541.

Thampi, P. P., Jyotishi, A., & Bishu, R. (2015). Cultural characteristics of small business entrepreneurs in India: examining the adequacy of Hofstede's framework. International Journal of Business and Globalisation, 15(4), 475-495.

Valaei, N., Rezaei, S., Ismail, W. K. W., & Oh, Y. M. (2016). The effect of culture on attitude towards online advertising and online brands: applying Hofstede's cultural factors to internet marketing. International Journal of Internet Marketing and Advertising, 10(4), 270-301.