An Analysis of Business Across Cultures: Hofstede Model and Beyond

This report provides a comprehensive analysis of the Hofstede model of national culture and its application to cross-border business development. It begins with an introduction to the concept of international expansion and the significance of cultural differences in shaping business strategies. The report delves into the development and core dimensions of Hofstede's model, including individualism, power distance, uncertainty avoidance, and masculinity, along with criticisms and alternative models such as Trompenaars'. The core of the report analyzes the failed merger between Tiffany & Co. and Swatch, using Hofstede's cultural dimensions to explain the impact of national culture on the organizations' actions and behaviors. The report also incorporates the Organizational Culture Index (OCI) to assess how organizational culture played a role in the venture's success or failure, providing insights into the cultural clashes that contributed to the merger's demise. The report concludes by summarizing the key findings and implications of cultural differences in international business operations.

Running head: BUSINESS ACROSS CULTURES
BUSINESS ACROSS CULTURES
Name of the Student
Name of the University
Author Note

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Table of Contents
Introduction....................................................................................................................2
Section 1.........................................................................................................................3
Development and the content of Hofstede model......................................................3
Section 2.........................................................................................................................5
Example of cross border business development........................................................5
(a) Analysis of activities of the organization.............................................................7
(b) Learning based on the organizational culture with reference to OCI...................9
Conclusion....................................................................................................................11
References....................................................................................................................12

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Introduction
International expansion is mainly based on the ways by which an organization is able
to increase the levels of its presence in different parts of the world with the help of its
services and products. The business organizations can aim to choose more than one strategies
based on international expansion in order to maintain their operations in a profitable manner
(Becker, Kraus and Rheinschmidt‐Same 2017). The proper growth of business operations is
also based on the ways by which the organizations are able to expand their operations on an
international basis. The cultural differences that exist between two countries have an impact
on the ways by which organizations can develop their strategies in an efficient manner
(Budeva and Mullen 2016).
The report will be based on the analysis of the usage of Hofstede’s cultural dimension
model in order to analyse the cultural differences that exist between two different countries.
The merger operation that has been taken into consideration for this analysis is the merger of
Tiffany & Co. With Swatch. The issues that have been faced by the organizations based on
cultural differences will be analysed in the report in detail. The Organizational Culture Index
or OCI will also be a major part of the report and the analysis that will be made as well. The
reasons that are present behind the failure of the merger will also be discussed in the report in
detail. The report will be able to provide details based on the ways by which different cultural
issues and differences are able to affect the profitability levels of the organizations and the
revenues that have been gained by them as well (Becker, Kraus and Rheinschmidt‐Same
2017).
Tiffany & Co. is an American specialty retailer and luxury jewellery based
organization that has its headquarters in New York City. The organization mainly sells
different items like, sterling silver, crystal, stationery, water bottles, fragrances, personal

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accessories and watches. Tiffany is mainly known in the market for the sales of its luxury
goods and is also famous in the industry for the diamond and silver based jewellery that is
offered to the customers (Tiffany.com 2019).
Swatch is a watchmaking organization of Swiss origin that was established in the year
1983 and was established by Nicolas Hayek. The organization is a subsidiary or part of The
Swatch Group. The product line or portfolio was mainly developed with respect to the
response that was to be provided based on the “quartz crisis” between the years 1970s to
1980s (Swatch.com 2019).
Section 1
Development and the content of Hofstede model
As discussed by Beugelsdijk, Maseland and Van Hoorn (2015), the Hofstede’s
cultural dimensions based theory is considered to be an important framework that is based on
cross cultural communication. The model was developed by Geert Hofstede and it was able
to describe the effects of the culture of the society on values that have been gained by the
members. The original model has been developed by Hofstede with the usage of the factor
analysis process in order to examine results of different surveys that were undertaken by the
researchers (De Mooij 2018).
The original model was mainly developed with respect to the four major dimensions
that include, individualism, power distance, uncertainty avoidance and masculinity. The
model was further improved with addition of two other dimensions that are indulgence and
long-term orientation. Hofstede theory was mainly developed with respect to the cross-
cultural psychology and activities that are a part of effective international business
management. The model has proved to be a major resource that has been used in the analysis
of different cross cultural issues that are faced by the organizations (Denison and Ko 2016).

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The importance of a clear understanding of the cultural environment of a country is
considered to be important for the ways by which different international business
organizations are able to operate in the industry. The different dimensions of the Hofstede
model have played a major role in the ways by which the global organizations are able to
develop the strategies on a short term and long term basis as well. However, the model that
has been developed by Hofstede has faced high levels of criticisms from many researchers.
The argument is mainly based on the factor that the dimensions that have been described by
Geert Hofstede have not been successful in providing an understanding based on
organizational culture (Fagan 2017).
According to Fisher-Borne, Cain and Martin (2015), although the study made by
Hofstede has been able to provide a detailed analysis based on levels of flexibility of the
culture of different countries in the international business context, the researchers have
recently claimed that the study is outdated in modern business environment. The structure
was also not able to accommodate different views and was only based on the analysis of data
that has been collected in a systematic manner. The sensitivity levels of people whose
opinions were collected during the research have also not been taken into consideration in the
research that was made for the development of the six dimensions (Gangaas, Kaltenborn and
Andreassen 2015).
As discussed by Guesalaga, Pierce and Scaraboto (2016), the changes that are
continuously taking place in the external environment of different countries have been able to
play a major role the six dimensions of model have started becoming ineffective in nature.
The dimensions have also not been successful in providing effective information based on the
analysis that needs to be made with respect to the challenges that are faced by the
organizations when they plan to expand their operations. The Hofstede’s model has also been
analysed based on the dependency of the results of analysis on stereotypes (Gut, Wilczewski

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and Gorbaniuk 2017). The model is based on the assumption that people who belong to a
particular country have similar cultural values. The cultures have been distinguished by Geert
Hofstede based on the division of national borders. The fragmented cultures within a single
country has not been taken into consideration in the analysis that has been made with the help
of six dimensions of Hofstede (Hook et al. 2017).
Hofstede’s cultural dimension model can be compared to another model that is able to
provide details based on the cultural factors of the organizations. Trompenaars’ model is able
to describe seven different dimensions that are helpful for understanding the cultural
differences between two countries (Kandogan 2016). The seven dimensions of Trompenaars’
model mainly include, universalism vs. particularism, specific vs. diffuse cultures,
achievement vs. ascription cultures, individualism vs. communitarianism, affective vs. neutral
cultures, time sequence vs. time as synchronization and inner-directed vs. outer directed (Ishii
et al. 2017).
The model is able to provide a more detailed and relevant information based on the
ways by which cultural differences can be analysed. The efficiency levels of the information
are considered to be highly important for the organizations in order to maintain their
profitable operations in the respective industries. On the other hand, he criticisms that have
been made based on Trompenaars’ model is related to the lack of proper database based on
which the culture analysis can be made (Kemmelmeier 2016).
Section 2
Example of cross border business development
Tiffany & Co. had announced a joint venture with Swatch watches in the year 2007.
The main objective behind this joint venture was based on usage of the unparalleled
distribution based facilities in order to develop products that can be offered in the luxury

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watch segment. Tiffany had announced that it aimed to return to world of the luxury watches
segment that the company had lost for the last few years (LeVine 2018). However, in the year
2011 the things had started turning sour as Tiffany announced that Swatch had failed to
provide growth based opportunities to the organization with the help of its distribution based
facilities. The products that had been developed by the organizations jointly had failed to gain
a ground and to provide revenues to the organization as well. The break-off of the deal had
further led to the legal issues that had been faced by Tiffany (Mercon-Vargas, Poelker and
Tudge 2018).
Tiffany was in a bad position in the year 2007 as the sales of the organization had
started declining in a huge manner. The holiday sales of Tiffany had increased slightly which
in turn did not have any impact on the overall position of the organization. The company had
thereby planned to solve the issues based on lagging sales that were faced in the operations
and processes. The organization had planned to enter the watch development market in order
to improve the sales and profitability. More than 80% of the total revenues of Tiffany’s had
been gained from the sales of luxury jewellery (Namenwirth and Weber 2016).
The organization had not been able to maintain its revenues in the industry only with
the sales of luxury jewellery. Tiffany’s thereby aimed at increasing the revenues that were
being gained by the company with the help of proper joint development of watches. The
luxury watch segment of the organization was being targeted in order to increase the revenue
levels in the industry. The issues that were faced by the two organizations had become
evident after the economic downturn that had taken place in the year 2011 (Shiraev and Levy
2016).
The two organizations started blaming each other for not displaying the jointly
developed products in an adequate manner. Tiffany’s blamed Swatch for not letting them to

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use the distribution facilities in an adequate manner. On the other hand, Swatch had blamed
Tiffany’s for not displaying the watches in the showrooms in an adequate manner. The
cultural differences were quite significant in this case based on the impact that it had on the
decisions that had been taken by different members of the management (Thomas and
Peterson 2017).
(a) Analysis of activities of the organization
Hofstede’s six cultural dimensions based model can be used in order to analyse the
failure of the merger that had taken place between the US based Tiffany’s and Spanish watch
maker Swatch.
Power distance – The power distance based score of the Spanish society is 57 that is
able to depict that the organizations in the country have developed a hierarchical structure.
The score of the US society in this dimension is 40. This depicts that the individuals who are
a part of this society are able to provide major levels of support based on the ways by which
different hierarchies in the organizations are developed with respect to requirements and
convenience (Hofstede-insights.com 2019).
Individualism – The individualism based score of Spain is 51, which shows that the
society in the country is collectivist in nature. The Individualist score of Spanish society is 91
which depicts that a highly individualist culture has culture has been developed in the country
in an effective manner (Hofstede-insights.com 2019).
Masculinity – The score of Spanish society in the third dimension is 42 and is able to
depict that the society is feminine in nature. US has received a score of 62 in this dimension
based on high levels of masculinity that exists among the individuals (Hofstede-insights.com
2019).

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Uncertainty avoidance – The score that has been gained by Spain in the fourth
dimension is 86 and the society of the country is considered the noisiest in nature as well. The
reactions that are provided by the society of the country to different unexpected situations is
not effective in nature. A score of 46 has been received by the US society in this dimension.
The individuals in this society are able to accept the changes that take place in the external
environment (Hofstede-insights.com 2019).
Long term orientation – Spain has received a score of 48 in the fifth dimension of
Hofstede model. The score is able depict that the people in Spain are not able to provide
effective resolution to the issues that are faced by the organizations. US society has gained
the score of 26 in the fifth dimension which is able to reflect that the Americans are highly
practical in nature (Hofstede-insights.com 2019).
Indulgence – The score of the Spanish society in sixth dimension is 44 which is able
to depict that the levels of cynicism among the individuals in the country are high. The
people who are a part of the society are highly restrained in nature. A score of 68 has been
gained by the US based society in this dimension. This is considered to be a normative score
that is able to affect the behaviour and attitudes of people in a huge manner (Hofstede-
insights.com 2019).
As discussed by Forbes.com (2019), the differences between societies of Spain and
the US are quite high. This will be able to affect the demands for the products that are offered
to the customers in two different countries. The two organizations and the members of the
senior management have high levels of differences in the process of effective decision
making. The major issue that had occurred after the merger based operations of Tiffany’s and
Swatch Watches was based on the major differences that exist between the cultures and the

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ways by which leaders are able to manage the operations as well (Thomas and Peterson
2017).
The development of proper operations of the two organizations has been implemented
in a huge manner by the different activities that are performed by them with respect to the
differences that exist between the cultures in the two countries. The managers of the two
organizations have also taken decisions based on the ways by which power distance is
developed (Mercon-Vargas, Poelker and Tudge 2018). The massive differences that had are
evident among the two countries have been able to play a crucial role in the ways by which
the two organizations have been able to fulfil the objectives that had been set by the two
organizations before the merger operation had taken place (Namenwirth and Weber 2016).
(b) Learning based on the organizational culture with reference to OCI
Organizational culture inventory or OCI is the most widely used tool in the world for
measuring the organizational culture in a perfect way. The cultural values that are followed in
an organization are analysed in a detailed manner with the help of the proper implementation
of OCI. The employees of the organizations who have been placed in different positions are
questioned about the different factors that have been able to affect their levels of
performances within the organizations (Vázquez, Panadero and Martín 2015).
As opined by Gut, Wilczewski and Gorbaniuk (2017), the analysis is able to provide a
solid foundation based on the achievement of successful cultural changes within the
organizations. The cultural values and environment of an organization is examined in a
detailed manner with the help of proper implementation of OCI. The employees are
considered to be the best people who are able to provide feedback based on the ways by
which organizational culture has affected the levels of their performances within the
organizations (Venaik and Brewer 2016). OCI is mainly divided into two parts that include,

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OCI – Current – This aspect is mainly implemented in order to analyse the current
organizational culture based on the behavioural norms that are followed. The success of
employees is mainly based on the OCI score that is gained by the organization based on the
cultural values (Human-synergistics.com.au 2019).
OCI – Ideal – The second aspect of OCI is based on the proper identification of the
ideal culture that has to be developed in the organization in order to continue the successful
operations. The implementation of changes in the culture of the organization is mainly based
on this aspect of organizational culture (Human-synergistics.com.au 2019).
OCI could have been used by the two organizations that have been considered in the
example namely, Tiffany’s and Swatch Watches. The organizations would be able to identify
the changes that can take place in the culture with respect to the cultural values that are
followed in the two organizations. Corporate culture of Tiffany’s was quite different from the
culture that has been developed in Swatch Watches. The employees and managers of the two
organizations have been affected in a huge manner by the existing differences between the
two countries based on the culture that is followed (Kemmelmeier 2016).
The needs of the two organizations at start of merger operations were based in the
ways by which both could have used each other’s strengths in an effective manner. However,
the failure of Swatch watches to develop the products up to the standards of premium quality
of Tiffany’s was a major issue. Tiffany’s followed a culture of premium product development
and on the other hand, Swatch aimed at fitting the products of Tiffany’s within its product
range. This had been able to depict the major levels of cultural differences that were prevalent
among the two countries (Mercon-Vargas, Poelker and Tudge 2018).
As discussed by Namenwirth and Weber (2016), the effective operations of Tiffany’s
were affected in a negative manner by the lack of premium products that can be offered to the

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loyal customers. OCI could have played a major role in providing support to both the
organizations so that they could have implemented effective strategies in order to maintain
the values in an effective manner. The failure rate of the organizations could have been
reduced by the proper usage of OCI in analysing the needs based on the culture (Denison and
Ko 2016).
Conclusion
The report can be concluded by stating that the cultural differences have an immense
effect on the ways by which the organizations are able to develop effective strategies. The
failure of the merger operations in the example could have been avoided with the
implementation of OCI in order to understand the cultural values with the help of opinions
that are provided by the employees. The employees are considered to be the most important
part of the operations that are performed by the organizations in the industry. The merger of
two organizations is also based on proper analysis of culture and the values that have been
developed.