Business Across Culture: Hofstede Model, Impact and Challenges

This report provides a comprehensive analysis of cross-cultural business, focusing on the application of the Hofstede model. It begins with an introduction to cross-cultural business and the significance of cultural differences in international business operations. The report then delves into the Hofstede model, explaining its six dimensions: power distance index, individualism vs. collectivism, masculinity vs. femininity, uncertainty avoidance, long or short term orientation, and indulgence vs. restraint. Each dimension is thoroughly examined with examples to illustrate how national culture impacts business practices. The report further explores the impact of national culture on cross-border business development, including market entry strategies, and provides a case study of McDonald's to illustrate cultural challenges in international expansion. Finally, the report highlights the contribution of the Hofstede model in analyzing the success or failure of business ventures in different cultural contexts.

BUSINESS ACROSS CULTURE

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK...............................................................................................................................................1
1. Hofstede model of nation culture............................................................................................1
2. Impact of national culture on cross border business development..........................................4
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
Cross culture can be defined as efforts of business to interact with employees of different
nationalities and make them able to work together. Cultural difference is considered as one of the
major issue in international business (Reader and et.al., 2015). Changes in language, believes,
values influence the behaviour of an individual. Present study will critically examine the
Hofstede culture model. Furthermore, it will explain influence of national culture on working of
employees. Assignment will describe organisational culture inventory and will discuss the role of
organisational culture in success of business venture in international market.
TASK
1. Hofstede model of nation culture
Culture can be defined as belief of individual. In the modern era each company aims to
expand its business across the world and for that it has to face issues related to difference in
cultural aspects (Minkov, 2018). Geert Hofstede has suggested this model which explains six
dimensions of ethos. Hofstede has conducted survey on IBM employees worldwide and has
analysed that there are many issues that face by workers due to changes in national culture.
These are explained as below:
Power distance index (PID)
This dimension states that there is inequality in society, people with less power have to
adjust in certain circumstances and people those who have high power get advantage of it. For
example, India is the country which score high in PID, top-down structure is followed in society
and Indian organisations. People have unequal rights, persons those who are powerful can say
anything to their lower employees (Fang and et.al., 2016). This is the issue here that inequality is
handled in society, people those have power are at top level and rest are at lower side. This
hierarchical order shows power distance. On other hand low power distance is applied in some
countries where individual expect to get equal treatment, if there is inequality then they raise
questions against authorities. They always want to get involved in decision making process.UK
is the country where low power distance exist, here individual or employees want equal
treatment. They do not accept top down structure, they want clarity in their responsibilities and
rights (Beugelsdijk, Kostova and Roth, 2017).
Individualism vs Collectivism (IDV)
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It is another dimension which explains the integration among people in society. If there is
high individualism, then people think about own self rather than group interest. They just take
care of themselves or their near family members. In such kind of culture people pay more
attention on “I” rather than “We”. This index shows how much importance is given by person to
group members or individual is giving importance to own only. Many countries are here where
high score is given to individualism (Noort and et.al., 2016). People do not think much about
group interest. They just want to grow for themselves or their near family members. Hence here
loosely- knit social frameworks is followed. On other hand collectivist is the approach in which
person thinks for group members and work in such manner so that other also get benefit of it. In
such kind of societies people live in group and they take care of each group members. This raises
loyalty among them and give common benefit to all. For example, India is the country where
collectivism trait is followed. Society members get influenced by wordings of their family
members, friends and other near people (Najm, 2015). But India also have individualism culture
as many time one religion is dominated by other regional believes. They interact with each other
for some specific reason, hence Indian society has intermediate score. On other hand United
Kingdom follows collectivism approach, people work together and take care of group interest.
There is high score of collectivism. USA is the individualistic country because self-image is the
main concern of individuals.
Masculinity Vs Femininity
It is another dimension of national culture, this states that how much values are given to
particular person as compare to other individual. Masculine index states that achievements,
assertiveness and heroism are given more importance. Femininity states that society gives more
value to care, modesty, cooperation and quality of life. Femininity index is more consensus
oriented whereas masculinity is much more competitive. It can be defined as tough or tender
culture in organisations (Beugelsdijk, Kostova and Roth, 2017). Many organisations give value
to material benefits whereas some gives importance to work quality. Japan is the great example
where masculine culture is followed, every Japanese company pays more attention on work
performed by person and how much person has achieved. On other hand Scandinavian countries
follows feminine culture, Sweden always emphases on employee’s corporation in business unit
more than assertiveness. High score shows masculine culture whereas low score reflects
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feminine dimension. India has 56 score that means India has Masculine society (Palacios Fenech
and Tellis, 2016).
Uncertainty Avoidance (UAI)
This type of index explains the extent to which each person in society feel cultural threats
by unknown situations. Future is unpredictable, it is very difficult to control over future
happenings. Anxiety is deal by different culture in different manner. For example India gets 40
score that express that it has medium preferences towards uncertainty avoidance. India accept
imperfections (Nguyen and Watanabe, 2017). People believes that nothing is perfect anything
can be changed any time. Tolerance for unexpected situation is very high in India. Indian people
can adjust in new situations without raising any question. Countries that has high uncertainty
avoidance have rigid codes or beliefs. Whereas countries which has low uncertainty avoidance
index have relaxed attitude and there is no need of some rules for uncertainty minimal. For
example: South American nations have high score of uncertainty avoidance.
Long or short term orientation (LTO)
This index expresses the connection with past, it is essential for each society to deal with
complex situations by using experience of past (Deephouse, Newburry and Soleimani, 2016).
Low score counties always follow traditions and norms. On other hand high scoring nations
adopts pragmatic approach, they make more efforts to make their bright future. For example:
China implements long term orientation. They continuously work for the great opportunities and
do not deal with challenges with time oriented norms. China has pragmatic approach they always
give importance to modern education system and believes that this may help in dealing with
complex situations well in the future. Whereas Morocco has low score as society members
always follow traditional values and accept societal changes (Kucharska and Bedford, 2019).
Indulgence vs restraint (IND)
This dimension explains about extent to which each person has freedom to fulfil their
desires. Indulgence culture is the norm where people do not control on their desires. Restrains is
the type of culture in which society members control on their needs or desires because of strict
social norms. For example: India has low scoring that means it has restraint dimension. People
follows the traditional norms and control over their desires (Doering, De Jong and Suresh, 2019).
In this type of society people spends less time on leisure life. Whereas United Kingdom is the
nation where Indulgence culture is follows. People live their life happy and with full freedom.
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There are many alternatives models such as world value survey, Globe research but these
are not persuasive. Hofstede culture model explains each situation with clarity and helps in
knowing the impact on nation culture on society members (Geert Hofstede, 2018).
2. Impact of national culture on cross border business development
Companies always plan to enter into new market in order to enhance their global presence
and raise their profitability. In the modern competitive environment, it is very important to
operate business across the world. It helps in making connection with foreign consumers and
increasing sales volume of business unit (Beugelsdijk, Kostova and Roth, 2017).
Mode of market entry
There are many strategies of entering into new market such as joint venture, merger or
acquisition, franchise. Each strategy has its own advantage and disadvantage. Business
development in another location is highly depended upon the strategy implemented by the firm
to enter into new market. Franchise is considered as most effective technique that helps the
business in minimising risk of failure in foreign market (Noort and et.al., 2016). For example:
Nike, Microsoft, nestle are some big companies which are operating their business globally.
McDonalds is the most popular fast food company which has faced issues related to national
cultural difference. Company sells cheeseburger, chicken items mostly but when it enters into
Indian market it has faced huge loss. Traditional values of Indian market do not allow people to
have such non vegetarian products that is why enterprise has faced huge loss initially and later on
it will have to made changes in its product range for Indian market (Palacios Fenech and Tellis,
2016).
Cultural challenges
McDonalds has faced many cultural issues which has affected business development in
foreign country. These are explained as below:
Employee perception: As McDonalds give freedom to its employees and give them authority to
take their own decisions. People of United Kingdom like to work in such environment, they
work even better when they get involved in decision making process. As low power distance
exists in United Kingdom, Employees like to get involved in decision making process.
McDonalds also give respect to workers those who work in UK branch and take their
suggestions and involve them in decision making process (Reader and et.al., 2015). But when
enterprise has entered into Indian market through franchise market entry strategy then firm has
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faced huge cultural challenges. Employees in Indian market cannot work by own, they want
instruction to perform their work. Indian culture has high power index when company has given
power to staff members then they felt unconfutable. In such condition they need top down
structure so that high authorities can instruct them. In such condition McDonalds got failed to
manage its employees well and faced huge difficulty (Noort and et.al., 2016). But later on it has
made changes in its strategies and have made tall structure which has supported in managing
people in Indian market. Hence cross border business development gets affected by national
cultural differences.
Communication: It is another challenge which is faced by companies when enter into global
market. Culture difference creates language barriers and make changes in preference of person as
well. Society members of India like to follow traditional norms whereas United Kingdom
emphases on dealing future issues by using modern approaches. Indulgence culture is followed
in United Kingdom and employees like to work with freedom. Furthermore, material benefits are
given importance in organizations (Palacios Fenech and Tellis, 2016). Many companies are
facing communication issues because of hiring diverse culture people. It becomes hectic task for
employees to understand belief, value and thoughts of each other. Most of the firm is facing
issues related to communication that gives rise to conflict. For making relationship better
between employees and organization effective interaction between them is essential. It can only
be possible when they understand culture of each other better. Like for example Microsoft has
also gone through this issue as they have hire people of diverse culture. But company has taken
initiative to overcome this problem. In this company lays focus on having an open
communication with workers. It is because so that they can analyse problems through which
employees are going through (Nguyen and Watanabe, 2017).
Contribution of Hofstede model in analysing success or failure of business
There is strong relationship between PEST analyses and Hofstede culture model.
Whenever company enters into new location it has to understand the culture of that place,
furthermore, they have to face issues related to political situation, economic social conditions etc.
Hofstede model helps in understanding the score of culture in different dimensions so that
company can get to know actual situation of that place and can make strategies accordingly. But
it is also fact that Hofstede culture is unable to understand the organisational culture in most
effective manner (Deephouse, Newburry and Soleimani, 2016). This approach considered the
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population of particular country as homogenous therefore, on many aspects it fails to pay
emphases on ethnic minorities. This approach is helpful in analysing actual view point and
working pattern of particular country’s population by understanding their cultural aspects. This
gives better visual and quantify information that helps the organisation in gaining success in new
location (Najm, 2015). But sometimes it gives more general results, as each individual has its
own personality, if company consider view point of each person from national culture then it
would get negative outcome and firm may get fail to establish in new location successfully.
Organisation culture inventory (OCI)
OCI can be defined as most commonly tool to analyses culture of particular business.
Each firm is required to create healthy workplace culture so that employees feel comfortable and
their need can be meet. This tool aids in analysing the impact or culture of organisation on
motivation, job satisfaction of workers.
OCI initially measures actual current culture of business unit by emphases more on
behaviour norms of employees (Reader and et.al., 2015). This measures actual perception of
workers about working environment of workplace whether they are happy or not. It helps in
measuring actual behaviour that need to be adopted by leaders in order to maximise profitability
of business unit. Culture of any business is highly depended upon the team behaviour, shared
values and satisfaction level of each staff members. OCI compare the idea culture with the actual
workplace culture and analyses the gap and improvement areas. this helps in making necessary
changes in existing organisational culture so that goal of firm can be obtained (Fang and et.al.,
2016).
Organisation culture inventory is very helpful application, as it supports business unit in
analysing the success or failure of venture in international market. By using this tool firms can
evaluate cultural transformation and can make proper strategies to work effectively in different
nation. This is also helpful in identifying cultural barriers and finding ways to overcome these
challenges. Corporate culture plays significant role in success or failure of venture. McDonalds
is the great example of it. When company enters into Indian market it had to face many
difficulties, as cultural changes have created difficulties in managing employees well. People of
India like to get instruction, they can only work under close supervision. Whereas in UK country
workers like to get freedom (Nguyen and Watanabe, 2017). When it enters into this market,
cultural changes were the major problem. But later on company understand the culture and have
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modified its actual workplace culture as per the perception and working pattern of Indian people.
This has helped the enterprise in retaining staff members and raising their working performance.
If there is soft culture, people share their views with each other and have healthy or
friendly relationship then employees feel good (Palacios Fenech and Tellis, 2016). In such
conditions they like to work in organisation and contribute well in success of business unit. But
if there is poor culture then enterprise fails to raise its operational efficiency because skilled
employees do not perform well. Cross cultural issues always create such kind of issues of
McDonalds. But McDonald has always tried to make changes in its workplace culture asper the
national culture norms. Which always encourage the firm in satisfying its staff members and
enhancing their contribution in business success. This is the reason that McDonalds now has
become the leading fast food firm globally (Deephouse, Newburry and Soleimani, 2016). Its
stores across the world are able to generate high amount of revenues. Organisational culture
plays significant role in success and failure of venture. As McDonalds have entered in new
countries by using franchise market entry strategies. It has made changes in its HR policies,
administration practices asper the national culture. By this way it has become able to create
healthy organisational culture and establishing its branch in foreign countries significantly.
One of the most essential element of corporate culture is effective communication, if
there is strong coordination between employees and management then it always helps in gaining
success and developing the business (Kucharska and Bedford, 2019). McDonalds always
emphasis on making clear communication between all departments, this supports in raising
clarity in responsibilities and completing the task on time. If there is improper communication,
then people will fail to understand their role and this might increase chances of mistakes or
confusion at workplace. Corporate culture of McDonald is very friendly, there are high level
employee engagement Mangers involve people in decision making process which raises their
commitment towards the organisation. Furthermore, enterprise gives flexibility to its staff
members so that they can make balance between their personal and professional live. This is
beneficial in making people positive towards the brand. Otherwise they will be negative and will
not support in decisions of higher authorities (Geert Hofstede, 2018). When company enters into
new market then it has to make many modifications so that it can sustain in that market
significantly. Effective corporate culture helps in minimising resistance of workers and
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enhancing contribution of staff members. Hence corporate culture is always helpful in success of
business venture (Doering, De Jong and Suresh, 2019).
CONCLUSION
From the above study it can be concluded that believes, values of each nation is different
from others. In order to expand business in international market firms are required to understand
cultural believes of particular region and have to make changes in management and
organisational cultures in such manner so that enterprise can establish itself in that market.
McDonald is operating its business globally; it has faced many cultural issues such as changes in
perception of employees, language or communication problems etc. All these difficulties create
problem for business to run its operations in foreign market successfully. Companies have to
create healthy corporate culture that would help in gaining success and developing business
venture successfully.
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REFERENCES
Books and Journals
Beugelsdijk, S., Kostova, T. and Roth, K., 2017. An overview of Hofstede-inspired country-level
culture research in international business since 2006. Journal of International Business
Studies. 48(1). pp.30-47.
Deephouse, D. L., Newburry, W. and Soleimani, A., 2016. The effects of institutional
development and national culture on cross-national differences in corporate
reputation. Journal of World Business. 51(3). pp.463-473.
Doering, T., De Jong, J. and Suresh, N., 2019. Performance effects of supply chain integration:
The relative impacts of two competing national culture frameworks. Cogent Business &
Management, (just-accepted). pp.1610213.
Fang, Z. and et.al., 2016. National culture, creativity, and productivity: What’s the relationship
with student achievement?. Creativity Research Journal, 28(4), pp.395-406.
Kucharska, W. and Bedford, D. A., 2019. Knowledge Sharing and Organizational Culture
Dimensions: Does Job Satisfaction Matter?. Electronic Journal of Knowledge
Management. 17(1).
Minkov, M., 2018. A revision of Hofstede’s model of national culture: old evidence and new
data from 56 countries. Cross Cultural & Strategic Management. 25(2). pp.231-256.
Najm, N. A., 2015. Arab culture dimensions in the International and Arab models. American
Journal of Business, Economics and Management. 3(6). pp.423.
Nguyen, L. and Watanabe, T., 2017. The impact of project organizational culture on the
performance of construction projects. Sustainability. 9(5). pp.781.
Noort, M. C. and et.al., 2016. The relationship between national culture and safety culture:
Implications for international safety culture assessments. Journal of occupational and
organizational psychology. 89(3). pp.515-538.
Palacios Fenech, J. and Tellis, G. J., 2016. The dive and disruption of successful current
products: Measures, global patterns, and predictive model. Journal of Product Innovation
Management. 33(1). pp.53-68.
Reader, T. W. and et.al., 2015. Safety sans frontières: An international safety culture model. Risk
analysis. 35(5). pp.770-789.
Online
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Geert Hofstede. 2018. [Online]. Available through < https://geerthofstede.com/culture-geert-
hofstede-gert-jan-hofstede/6d-model-of-national-culture/ >
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