Cross-cultural management has become an increasingly topical area due to the trend of globalization. It is important for business to understand culture in order to enhance its performance in a different country. A company may fail if it lacks considerations on culture when entering a new country. On the contrary, understanding culture enables international business to better adapt to a new market. The aim of this essay is to identify culture’s influences on international business in order to draw implication for managers.
The essay covers four key sections. The concept of culture will be introduced first in order to provide a systematic understanding of what culture is. Cultural models will be discussed critically in order to find out what culture dimensions are. Hofstede and Trompenaars’ theories will be analyzed and criticisms will be mentioned. Based on these culture theories, a discussion of how culture influence business will be carried out. And the final section of the essay is to provide implications for managers about how to manage in a cross-culture environment.
The definition of culture has never been agreed by scholars that different people have different idea of culture. Edward (1987) defined culture as knowledge, belief, art, morals, law, custom, and other capabilities acquired by man as a member of society. Similarly, Hofstede (1984) further defined culture as “the collective programming of the mind which distinguishes the members of one human group from another and it includes systems of values”. Furthermore, Tayeb (2003) demonstrates that culture is historically evolved values, attitudes and meanings that are learned and shared by the members of a community and culture influence people’s material and non-material way of life.
Therefore, it could be found that the concept of culture has a close relationship with values and attitudes. According to Lenartowicz and Roth (2001), values refer to beliefs the actions and ways are considered good or bad, acceptable or unacceptable while norms are social rules and guidelines that prescribe appropriate behaviour in particular situations. The values were strongly influenced by religious systems as well as other forces such as economy, political philosophy, education, language, social structure and technical changes and the process of internationalization (Gerhart, 2008). The rise and decline of these factors lead to an evolution of new values which eventually affect norms of behaviour; thereby these changes will influence human interaction, including business interactions (ibid).
In order to understand culture as well as its effects on cross-culture business management, scholars carried out different models and theories. Hofstede’s model is widely used in the field of cross-culture. Hofstede’s model is based on two surveys of the cultural attitudes of the employees of IBM and the model defines five major cultural dimensions (See Figure 1) (See Appendix 1).
Hofstede’s model of cultural dimensions
(Source from: French, 2010, p.54)
As it can be found in Figure 1 that Hofstede puts forward five dimensions of culture which are power distance, long-term orientation, uncertainty avoidance, masculinity/femininity and indivualism/collectivism. Power distance is connected to the willingness of a society to accept hierarchical power systems (Gooderham & Nordhaug, 2003). According to Hofstede’ survey, countries such as Malaysia and several Middle East countries are examples of countries that show high power distance while USA exhibits low power distance. In companies, the degree of centralization of authority and autocratic leadership determines power distance that in high power-distance firms, autocratic management styles focus power at the top and grant little autonomy to lower-level employees (Cavusgil et al, 2007).
Individualism indicates the extent to which people in a culture learn to act as individuals and stress their own interests and in contrast, collectivism refers to people who behave according to social norms in order to maintain social harmony (Gooderham & Nordhaug, 2003). According to Cavusgil et al (2007), countries such UK, USA prefer individualism rather than group conformity and competition for resources in the norm, and those who compete best are rewarded financially.
Uncertainty avoidance indicates the degree to which people could cope with uncertainty and changes (French, 2010). People in countries with high uncertainty avoidance create institutions that minimize risk and ensure financial security. Similarly, companies in these societies emphasize stable careers and produce many rules to regulate workers actions and minimize ambiguity (Cavusgil et al, 2007). In this kind of companies, managers may make decision slowly as they would investigate the nature and potential outcomes of several options (ibid).
The masculinity vs femininity is related to the importance attached to male values such as competiveness and performance compared with feminine values such as quality of life (French, 2010). In business, the masculinity dimension shows as self-confidence and leadership. On the contrast, in feminine cultures such as Scandinavian countries, men and women stress interdependence among people.
Long-term orientation vs short-term orientation is added after the first four dimensions and it was carried out based on a survey with Chinese (ibid). This dimension indicates the degree to which people and organizations defer gratification to achieve long-term success (Cavusgil et al, 2007). The dimension implies that the business which is long-term orientation tends to take the long view to planning and living. They focus on years and decades such as companies in Asia. By contrast, business in Western countries may emphasize a short-term orientation.
Even though Hofstede’s model is considered as a very important model in cross-culture management, it has been criticized by some scholars. For example, McSweeney (2002) claims that the findings of Hofstede based on IBM surveys can not represent national average and the data was limited into workplace that it is limited in application. Furthermore, Clegg et al (2008) question the validity of Hofstedes methodology as these scholars claim that Hofstede findings imply average Dutch person is taller than Chinese person.
In addition to Hofstede’s theory, Trompenaars carried out his 7-D (7 dimensions) model based on quantitative questionnaires. Trompenaars’ survey had over 50,000 participants, including over 50 countries (French, 2010). The seven dimensions are 1) universalism v particularism which deals with the relative perceived importance of rules which would be applied in all cases while those where rules are applied more flexibly and relationships are more important; 2) neutral v affective shows cultures contrast those where emotion is masked with others in which emotion is displayed openly; 3) individualism v communitarianism examines the extent to which individuals act independently while others show high degrees of loyalty within groups; 4) specific v diffuse which shows a comparison in specific culture; 5) achievement v ascription indicates that cultures differ in achievement and background; 6) internal v external control examines whether people can control their own environment and; 7) sequential v synchronic deals with time in different ways (ibid).
Trompenaars’ theory is considered very useful for mangers to consider their actual or anticipated work experiences. However, there have also been criticisms. Hofstede (1998) claims that Trompenaars’ model is carried out based on previous literatures 1950s in the USA so that the theory lacks of applicability. Also, Browaeys and Price (2008) demonstrate that Trompensaars have acknowledged the influences of Hofstede on the models, but the results show that Trompensaars’ theory contrasts of Hofstede’s theory.
As the analysis of above cross-culture models, it could be found that various dimensions consist of culture and each dimension deals with different issues which may affect businesses’ operation. Therefore, it is necessary to consider how culture affect international business and they way to implement management. Culture can influence business’ operation from different aspects such as organizational structure and its human resource. Culture’s influences on business will be discussed below based to previous cultural theories.
Both of Hofstede and Trompensaars’ models show that culture difference may affect organizational culture. Trompensaars (1997) illustrates that when people establish an organization, they always obtain the idea from the models which they are familiar with and it leads to a fact that employees will give meaning to their environment based on their own programming. French (2010) demonstrates that Trompensaars’ statement of culture’s impact business structure implies that organizational structure is important, but it is only one part of the realities of life within that organization. Similarly, Hofstede’s model shows that two of cultural dimensions influence organizational structure. They are power distance and uncertainty avoidance. For example, in a high power distance country, hierarchies contain more layers that decision-making in the company is centralized while more bureaucratization in the form of regulations appears in a high uncertainty avoidance country.
Besides organizational structure, culture can also influence a business on its human resource. More and more theories concern with gender, culture and leadership and the facts show that countries have different culture have different ideas on gender issue. For example, Ryan and Alexander (2005) illustrate that there are more women in senior public service jobs in Sweden and New Zealand. This finding could match Hofstede’s culture dimension as the theory implies women are treated equally in those country which is more femininity.
Before carrying our any implications for managers, it must be understood that international business is different from national business because countries are different which leads to different cultures. As mentioned above that culture issues concern with different factors such as language, religion, education, economic philosophy. Therefore, it is important to know that culture may change due the changes of these cultural elements.
The first implication is that the business should avoid the problem of ill-informed. This is because if the company lacks the information about target country’s culture, it may fail. As Hill (2009) indicated, doing business in different countries requires the company to adapt to value system and norms of that culture. In order to avoid ill-informed, the managers should carry out effect recruitment approaches to employ local employees to help it do business in a different culture. This is because local citizens have sufficient knowledge on local behaviour as well as regulation so that the international business could collect information on how different the culture is.
Furthermore, the mangers should consider how to connect culture with its national competitive advantages. Hill (2009) says that the costs of doing business in a different country will affect the ability of companies to establish a competitive advantage in the global marketplace. The reason for connecting culture with competitive advantage is that it can help companies to decide countries which they will locate production. For example, if a country’s education system is well-developed, the business can easily employ high skilled employees which would contribute to the business development (Jackson, 2005).
In addition, the managers must think about the company’s marketing strategy when operates in a different countries. For example, if a company wants to carry out any advertising promotion, the content of advertising must take into culture factors in to account. This is because different countries have different expectations and preference on advertising. In religious countries, the communication must respect local region. Furthermore, due to different culture, consumers may have different buying behaviour. This makes managers to think about how to design and price the products in order to correspond to local preference.
The essay systematic introduced the concept of the culture that culture is widely considered as a collective programming which concerns with values. As it could seen from the analysis above, scholars carries out different models of culture. The essay introduced Hofstede and Trompensaars’ theories. These models put forward different cultural dimensions that Hofstede carries out five dimensions of culture based on two surveys with IBM and Trompensaars provides 7-D models based on a quantitative questionnaires. Both theories could help identify the importance of culture as well as culture’s impacts on business. However, these two models also have been criticized by scholars.
Based on culture theories, the ways culture influences businesses are identified. The essay points out that culture difference may influence organizational culture according to two models of cultures. Also, as discussed above, the culture differences affect a business’ human resource. The essay stressed on gender issue which concerns with women managers. According to the culture’s impact, the essay provides implications for managers of how to manage in cross-culture environment. Three implications were mentioned. The first one is managers should carry out effect recruitment method in order to avoid ill-informed. The second one is that the mangers much connect culture with national competitive advantages in order to enhance business performance. The final implication is that the managers must think about company’s marketing strategy such as product, price and promotion in order to correspond to local buying behaviour. However, it must be understood that culture is changing with development on factors such as economy, educations. Therefore, the mangers must attach a great importance to culture and should always pay attention to these changes.
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Appendix 1: Hofstede’s findings from surveys
(Source from: Hofstede G 1998, pp. 290-91)