We are dwelling in times of widespread and thriving globalization bringing nations together in terms of trade, commerce, education, and cultures. However, globalization is not always as uncomplicated as it may seem on the surface. The positive outcomes of globalization that we celebrate only reflect the tip of the iceberg and what remains hidden is the complexity of making globalization a successful development.
To elaborate, let us try to analyze this in terms of how a multinational corporation would face several challenges and complexities while entering a new country that is culturally very different from the country of origin. For instance, IBM is a globally renowned American company dominating the global technology market. However, when IBM would have expanded to Asian countries like Japan, the challenges would have surely been fierce and complicated.
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The bottom line is that when businesses have multinational workforces and operations, large differences in cultural dimensions can affect business plans. Having said that, these cultural differences need to be understood well and accounted for. When that is done successfully, businesses can plan and manage their expansion into culturally different countries in a more worthwhile manner.
For that, Hofstede’s Cultural Dimensions, proposed by Dr. Geert Hofstede in the 1970s are perceived as part of an internationally recognized methodology to comprehend cultural differences between nations. This article delves deep into each of the six cultural dimensions defined by Dr. Geert Hofstede.
Delineation of Hofstede’s Cultural Dimensions
Scenario: Let us try to understand each dimension of the Hofstede Framework taking into consideration a realistic scenario for greater clarity and understanding. The scenario is that one of the leading grocery retail companies headquartered in the US wants to expand its selling operations in Japan. Since the two nations are culturally very distinct, there would be major differences in language, lifestyles, cultural preferences, and socio-political structures of the two nations. Now to hire people in Japan for its stores and acquire a large number of customers to make this expansion successful, it is vital for the top management of the retail company to understand in detail how the Japanese culture varies from the American culture. For that, they can move through the following dimensions of the Hofstede Framework for effective understanding.
Power Distance Index
Power Distance Index (PDI) is an imperative cultural dimension that evaluates the degree of acceptance for the distribution of power, authority, and wealth in a society. In simpler terms, it is a quantifiable measure of how much the general population in a society or country accepts or resents the hierarchical structure of authority.
To substantiate further, PDI has a substantial impact on the corporate sector in a country as the hierarchy of power directly influences policies and regulations in a country. To further explain, the PDI is lower in countries where those in power work in collaboration with the general public and the corporate sector. On the contrary, the PDI is high in countries where there is a large degree of authoritarianism and rigidity in the power structure.
To elucidate further, given below are the key features of countries with a low PDI followed by features of nations with a high PDI.
Features of society with low PDI and implications for businesses
Low corruption: In societies with low PDI, corruption is rare and hence red-tapism is also low which is a positive sign for businesses as they would not have to oblige corrupt practices to thrive. In low corruption societies, it is easier for businesses to function and grow.
Inclusive decision making: In low PDI societies, ethical decision-making is inclusive of all organizational members. In the context of enterprises, it offers greater perspectives into understanding cultural differences and resolving ethical issues.
Greater freedom: In the power structure within a low PDI nation, individuals have greater liberty to disagree with those in power and denounce actions that are unethical in nature. Hence, in a low PDI society, businesses can operate and flourish in a business environment influenced rarely by unethical actions
Features of a society with high PDI and implications for businesses
Frequent corruption: In nations or societies where the power distance index is high, corruption is deep-rooted and very frequent. That would require businesses to pay large amounts of bribes to deal with red-tapism.
Opaque decision making: The decision-making is opaque and authority for conclusive decision making lies majorly with powerful people. Hence, there is limited scope for resolving ethical problems.
Greater rigidity: Individuals have to oblige unethical practices and actions by superiors as they have limited or no freedom to counter their superiors.
Now, if we look at it in the context of our US-Japan scenario, the United States has a PDI of 40 while Japan’s PDI is 54 as per the Power Distance Index List. So, the US retail company will be moving to a country with higher PDI. So, it is possible that the US retailer will have to face problems like corruption, red-tapism, and unethical influences in the business environment. Also, the decision-making with respect to resolving ethical issues will be slightly more rigid as ethical decision-making power will majorly rest with the powerful authorities. For businesses, that would imply greater expenses and challenges to operate. Workers of the US retail company moving to Japan as a part of the expansion will find it quite difficult to work in Japan. The US workers working in Japan will need to acknowledge the power of the local leaders and will be answerable to the top authorities for their actions and choices.
So, the top management of the American retail company will have to find ways to approach the local leadership in Japan and lure authorities with undue benefits and advances to incline influence in their favor.
Individualism and Collectivism
The second dimension devised by Hofstede is that of individualism. In the larger sense, this dimension evaluates whether a society promotes a sense of individualism or collectivism. The purpose of understanding this dimension is to determine how well-connected people are in a civil society.
To explain, in some cultures, individualism prevails with greater dominance while in some cultures people associate with a strong sense of collectivism. In a country with a lower score in terms of individualism versus collectivism (IDV), people have strong interpersonal connections and extend support to each other in a keen manner. On the contrary, in a society with a high IDV score, people are more concerned with their personal responsibilities and growth without showing much faith in collectivism.
To elaborate, illustrated below is the elaboration of key features of societies that function on individualism and collectivism.
Salient features of individualism
- High task priority: In individualistic societies, tasks are given much higher significance over personal connections and relationships. Hence, from a business perspective, businesses can derive greater productivity from their employees in individualistic social structures. Workers will focus more on their work commitments than personal connections and personal problems.
- High priority to individual interests: In such societies, people are self-centered and associate greater importance with their personal interests than collective interests or sharing responsibilities with others. As mentioned earlier, in such societies, workers will put greater emphasis on their personal interests and individual tasks.
- Higher accountability: In an individualistic society, there is higher accountability as individuals take personal responsibility for their actions and choices. From the business viewpoint, this is a favorable scenario as it promotes greater accountability and when people take responsibility for their decisions, they strive for greater efficiency and results.
- A high degree of meritocracy: Merit is preferred to nepotism in individualistic societies which is actually a positive trend. When merit is at the forefront of things in society, businesses can achieve greater outcomes that may otherwise be negatively affected by nepotism. To substantiate, when workers move from a more meritocratic society to a less merit-based society, they will face unprecedented challenges to navigate nepotism.
- Gifting obligations: Gifting culture is not very common in an individualistic society.
Salient features of collectivism
- Low task priority: In collectivist societies, relationships and interpersonal connections are given higher priority than tasks. Its implications for businesses may reflect in the form of lower productivity
- High priority to collective interests: People in a collective social structure share responsibilities with each other and give higher priority to group interests than individual priorities. For businesses, that could mean disruptions in workflow.
- Inferior accountability: In these societies, people avoid taking personal responsibilities for their decisions and actions, and accountability is explained in the collective sense. Lower accountability undoubtedly affects business decisions and advancement in a negative way.
- High nepotism: In collectivist societies, people support each other and share collective responsibilities which leads to high nepotism. People with higher merit are often ignored because of nepotism and that contributes to lesser efficiency. Having said that, workers moving from a nepotism-based society to a meritocratic society will face great difficulties in navigating the cultural shift.
- A thriving culture of gifting: Another key feature of collectivism is that it promotes a culture of frequent gifting and obligations.
Now, if we evaluate our scenario, the US scores 91 on the dimension of individualism while Japan’s score on individualism is 46. Clearly, the US society is largely driven by strong individualism while Japan relies on collectivism. The large difference in their scores reflects how the two nations have a wide cultural gap.
Having said that, when workers move from the US to Japan as a part of the expansion of the retail chain in our scenario, they will have to largely alter their working styles. They will have to promote greater collectivism to build strong teams and also take responsibility for the collective interests of the Japanese consumers to acquire them. Besides, they will have to embrace the culture of gifting and obliging other people to promote strong collectivism. Also, they will have to take responsibility for their team members and cultivate empathy and belongingness in team members.
These prerequisites will reflect in the planning phase of the retail company when it creates effective plans to overcome cultural barriers and create a more favorable roadmap for success in Japan. They will have to train their employees for stronger emotional intelligence, relationship-building skills, empathy, and collective accountability. They will also have to plan how they can attract consumers with additional benefits or some form of gifts.
The next on the list of Hofstede’s Cultural Dimensions is the dimension of masculinity. This dimension gauges the prevalence of masculinity or patriarchy in a civil society. It is commonly seen that in different countries, the distribution of power and wealth between genders varies largely. These differences usually reflect in terms of pay gaps, equal access to leadership roles, political representation, and so on.
The developed countries of the world promote greater equality among genders while conservative nations denounce power to women. Given that, the power-sharing arrangement between men and women in society has great implications for every sector.
Besides, gender roles are among the most imperative attributes of culture, and for businesses entering a new nation, it is important to ascertain if the society is more masculine or feminine in nature. Subsequently, they can plan their leadership roles and the demographics of the workforce they would like to create for capturing an emerging market.
To get deeper insights into the comparisons between masculine and feminine civil societies.
Essential features of masculine societies
- Greater inclination to ultimate truths: In a masculine society, there is a greater emphasis on formal codes of conduct as a part of an approach to address ethical issues. In the larger sense, greater faith is shown in ultimate truths. These formal codes of conduct are usually traditional and largely inspired by beliefs of patriarchy.
- Initiatives are questionable: In masculine societies, it is also commonly observed that when ethical initiatives like promoting women to leadership roles fail to add value to organizational performance, these initiatives become questionable. Patriarchal assertions are made to denounce ethical initiatives and traditional beliefs are reinforced. The merit of the ethical initiative is not valued or considered and the initiatives are discarded as being ineffective solely from the perspective of masculinity. If we look at it in the general sense, most countries of the world reflect a high degree of masculinity.
Essential features of feminine societies
- Little inclination to ultimate truths: There is little or no inclination to preconceived ultimate truths. To explain, there is very little adherence to predefined formal codes of conduct to address an ethical problem. There is rather a greater emphasis on changing the status quo of formal codes inspired by patriarchy to bring in greater inclusion and fair representation of all genders. In a feminine society, women enjoy leadership roles and bring alterations in the formal codes of conduct that have existed traditionally.
- The merit of ethical initiatives is valued In a feminine society, even if ethical initiatives do not add significant value to organizational performance, their merit is not disregarded solely on preconceived and gender-biased notions. The merit of initiatives is recognized and attempts are made to improve outcomes rather than discard the initiative.
In the context of our scenario, it is important to understand that the estimated score of masculinity for the United States is 62 while that of Japan is 95. Therefore, workers of the company will be moving from a lesser masculine society to a more masculine society when they migrate to Japan. So, they will have to face fiercer ultimate truths and their ethical initiatives may be repeatedly questioned in Japan.
Also, the company’s organizational structure in Japan will have to be designed in a way that it gives greater representation to male members and the decision-making power will majorly lie with men to satisfy the highly masculine culture of Japan. The company will have to respect the gender roles and distribution of power between genders in Japan. The company’s management will have to respect how Japan defines gender differentiation. Gender egos will largely reflect in the working culture in Japan. In accordance with these factors, the company will be planning its strategies.
Uncertainty Avoidance Index (UAI)
This index is a quantitative measure of how efficiently people in a society can deal with uncertainty. It can also be perceived as people’s ability to cope with anxiety in times of unprecedented challenges. To further explain, in countries that score high in the uncertainty avoidance index, people are more inclined to take control of things as much as possible.
On the flip side, members of a society with a low UAI score, people are more open, flexible, and eased out in terms of dealing with uncertain situations. Cited below are the characteristic features of civil societies with a sense of strong uncertainty avoidance and societies with weak uncertainty avoidance respectively.
Characteristics of societies with strong uncertainty avoidance
- Greater focus on stability: There is a large emphasis on stability in countries with a strong sense of uncertainty avoidance. To validate, stability is seen in terms of following predefined formal codes of conduct that have traditionally been relied on. In terms of organizational performance, stability is a positive attribute as stability ensures smooth functioning and minimum disruptions in the workflow. An organization can meet its strategic goals in a more systematic way and within the set frame when there is high stability.
- Empowered society: People assume great empowerment in such societies as they believe that they are in control of things and back themselves to deal with uncertainty. However, at the same time, this empowerment makes them rigid and less open to flexible solutions.
- Low scope of innovation: However, because there is great dependence on pre-defined and pre-established systems and processes, there is a clear lack of innovation in countries with strong uncertainty avoidance. There is resistance to positive changes and the idea of creative innovation is discouraged. For a business looking to establish itself as a key player in any industry, the lack of innovation is a negative attribute as innovation is certainly a critical success factor.
- Brisk adaptability: Another key feature of societies with strong uncertainty avoidance is that there is quick adaptability in times of external changes and challenges. Businesses rely on well-defined and traditional ways of doing things and hence, it optimizes the pace of decision-making and initiating adaptive actions. Businesses in such societies can adapt briskly to peculiar ethical issues.
Characteristics of societies with weak uncertainty avoidance
- High instability: There is little dependence on existing norms and hence, that can lead to a high degree of instability as things are mostly not in order. The overall emphasis is not on stability but to have a flexible approach to tackling crisis situations or uncertain times.
- Greater scope of innovation: Given the flexible approach of people and their massive open-mindedness in a society with a low UAI score, there is a wide scope of innovation. There is a large degree of creative liberty promoting people to embrace innovation and find new approaches to dealing with unprecedented situations. This can be a positive trend for businesses given the significance of innovation.
- Little or no sense of urgency: In these societies, there is no sense of urgency in the face of challenges or uncertain encounters. Things are approached with patience and time is invested in innovative ideas rather than bypassing innovation with established norms to do things in haste. However, in the context of businesses, this could imply delays in decision-making and slow adaptability in times of immediate solutions to ethical problems.
In continuation to our scenario, it is vital to compare the US and Japan on the basis of their UAI scores. The uncertainty avoidance score in the US is approximately 46 as per the estimates while that of Japan is 92. Clearly, workers of the retail company will be migrating to a society with much stronger uncertainty avoidance in comparison to the United States.
Therefore, the scope of innovation will be bleak, they will lay more emphasis on stability than flexibility and formal codes of conduct will define business strategies. The company will have to clearly define its vision, mission, values, and the key performance indicators that will measure the success of the company’s strategic plans in Japan. Also, the top management needs to realize that there may be some intangible values, set norms, and anticipations that they need to recognize and respect. At last, the adaptability of ethical issues ought to be quick and for a positive perception, the company needs to have better control of new developments and changes. A systematic change management process will be needed by the company to define changes and execute them with great efficiency.
Long-term orientation and short-term orientation
The fifth dimension in Hofstede’s framework is short-term orientation versus long-term orientation. If we look at the traditional setup of Hofstede’s framework, this dimension was originally called Pragmatic versus Normative. To elaborate, some nations have a long-term orientation or a more pragmatic orientation in terms of learning and planning the future course of action. On the other hand, some nations embrace short-term orientation in terms of how they want to evolve as a society and the principles they wish to follow.
These differences in countries based on their pragmatic or normative orientations also have implications for the corporate world as these orientations form a key feature of any culture. To further elaborate on how these orientations impact business planning and decision making, listed below are the attributes of societies with short-term and long-term orientation respectively.
Significant features of societies with a short-term orientation
- Universal guidelines: The distinction between right and wrong is made purely on the basis of universally accepted guidelines and distinctions between ethical and unethical behaviors.
- Strong willpower: In normative societies, people have high conviction and their strong willpower can be a positive for the corporate culture. Strong willpower can imply greater commitment to boost individual productivity and add to organizational performance.
- High pride: People in these societies take great pride in their country and culture and nationalist sentiments may override other perspectives and assertions. Strong nationalistic values can also mean that people will support local businesses more than foreign companies and that can be a negative development for multinational corporations.
- Emphasis on values and rights: There is an incredible emphasis on the values and rights of individuals or groups. People assert themselves strongly by the virtue of their values and rights.
Significant features of societies with a long-term orientation
- No adherence to universal guidelines: The merit of right and wrong does not follow universal guidelines. The idea of righteousness is rather examined subject to circumstances and the situation at hand. There is subjectivity in terms of defining right and wrong in a pragmatic society.
- Openness to learning: People are open to learning from the cultures and ethnic practices of other countries and socio-cultural backgrounds. For multinational companies, this is a positive trend as they will find greater acceptance for their culture in a foreign nation. People will not be rigid and conservative about adapting to other countries’ cultures and using products commonly used in foreign nations. Education, in general, is a very strong virtue in these societies.
- Need for adaptation: In such societies, ethical individuals need to adapt to the local circumstances and learn to embrace local practices. The actions and decisions have to be in alignment with the regional circumstances. So, if a foreign company enters a nation with a pragmatic orientation, the workers of the company will need to adapt to the local circumstances.
- Promotion of modesty: A salient feature of countries with pragmatic orientation is the modesty of citizens. There is ample modesty and acceptance for different cultures and nations. People in these societies are quite modest in the treatment of foreign nationals.
- Emphasis on obligations: While the larger emphasis in normative societies is on rights, in countries with a long-term orientation, the greater focus is on obligations. In pragmatic societies, people tend to oblige others in different ways.
Further building on our scenario, the United States’ estimated score on long-term orientation is 26 while in Japan, the estimated score in the domain of long-term orientation is 88. Evidently, Japan’s society is a lot more pragmatic than that of the United States. This to a great extent creates a favorable scenario for the US-based retail company looking to expand in Japan. People of Japan are more open to learning about other nations and their cultural practices which will benefit the company’s workers in Japan to find greater acceptance. Also, there will be greater acceptance for an international brand in the retail sector. Moreover, in Japan, workers from the US will not be subjected to the differentiation between right and wrong based on universal guidelines. Japanese society is less judgemental and is modest, being a pragmatic nation with a long-term orientation.
At the same time, the company will also have to ensure that its employees act with the utmost modesty in Japan and employees should also be open to learning about the culture and values of Japan wholeheartedly. Also, the company will need to find ways to oblige the local leaders and people of Japan in different ways to get the backing of local people and hence, acquire a large customer base. The company should first educate its employees to learn about the key features and salient ethical practices in Japan so that they can respect them and understand the key differences in the cultures of the two nations.
The last dimension among Hofstede’s cultural dimensions is that of indulgence. Basically, the dimension aims to determine how indulged and engrossed people are in their personal life, happiness and feelings. To measure the same, the indicator used is the Indulgence Versus Restrained (IVR) score.
To elaborate, in countries with a high IVR score, people embrace the idea of expressing their happiness, pleasure, and emotions. To add, they are open to different ways of enjoying life, controlling their happiness, and celebrating the little joys of life. On the other hand, in nations with a low IVR score, people are more inclined to suppress their feelings or not express much. Besides, they have some restraints in expressing themselves, enjoying the little delights in life, and manifesting their happiness.
Since people’s inclination to indulgence or restraint defines a lot about consumer behaviors in different countries, it reflects an important segment of culture. It hence becomes vital for businesses to assess this cultural dimension while penetrating new markets.
To substantiate, there is further elaboration on traits of countries with indulgent societies followed by attributes of restrained societies.
Imperative features of indulgent societies
- Perception: The overriding perception in indulgent societies is that people strongly believe that they control their own destinies. There is a strong perception among people that they should control their personal life and happiness by making positive choices.
- Primary concern: In countries that are indulgent, the primary concern for people is to embrace their freedom of speech and expression. People have strong virtues about their liberty to express their emotions and feelings via speech. They believe in the manifestation of their emotional states. Therefore, people have a greater willingness to engage in debates and discussions. From the business perspective, in indulgent societies, organizations need to promote open discussions and constructive debates for making crucial discussions taking different stakeholders into account.
- High optimism: People in indulgent societies have progressive mindsets and are also highly optimistic. Because of this optimism, they strongly believe in learning and receptiveness to feedback. Having said that, in countries with high indulgence in cultures, organizations need to lay emphasis on mentoring, coaching, creating feedback mechanisms, and flexible work arrangements.
- Resentment to unethical decisions: Besides, indulgent societies encourage and empower their people to resent unethical practices. Having said that, businesses have to comply with ethical principles to sustain themselves and flourish in indulgent societies.
Imperative features of restrained societies
- Perception: The perception of people in restrained societies is inspired by fatalism. People believe that they have no control over their personal life and they are helpless in controlling external factors disrupting their happiness and peace. Hence, it can be concluded that people in these societies are pessimists and dwell in despair.
- Rigid behavior: In restrained societies, people have rigid behaviors and follow a set pattern of doing things. To add, people are conservative and stick to set guidelines rather than being more open and flexible in the pursuit of their happiness and personal choices.
- Less resentment to unethical decisions: Restrained societies hold their people back from expressing anguish and disappointment over unethical practices. Unethical decisions find less resentment and public anger in these societies.
As per the scenario that we have considered since the beginning, it is crucial to look at the IVR scores of the United States and Japan. In the United States, the indulgence score is 68 while in Japan, the indulgence score is 42.
This clearly explains that when the retail company will be entering Japan, their workers will be moving from a highly indulgent society to a country that is relatively a lot more restrained. To adjust to the restrained environment, the workers have to be very professional in their conduct and avoid engaging in sarcasm or jargon. The conduct of workers needs to be highly formal. In a restrained society, people are quite rigid in their perceptions and the company will have to be cautious about that. On the strategic planning front, the company needs to plan its marketing strategies in a way that they can influence people with rigid behaviors and promote the idea of trying new products and brands among them. The retail company should understand the features and objections in a restrained society and look to help people overcome them through their brand.
To encapsulate, Hofstede’s Cultural Dimensions framework is highly useful for businesses to understand all aspects related to the culture of a nation. Based on the conclusions and insights offered by successful analysis of these dimensions, businesses can undertake effective planning. This planning will look into what new skills and knowledge employees need when they move to a new country with the idea of growing the brand. Moreover, it will look into other key components of culture including power-sharing, gender roles, expressions of people, and cultural orientations.