The increasing level of globalisation in the modern business environment may lead us to think the whole world is now one market, one workplace. However, it is worth noting that national/regional cultures still exist, and these may differ from the culture experienced in an organisation’s home country.
Cultural differences in different markets, countries or regions need to be considered when undertaking business there. This includes ensuring that managers know how staff in other countries expect to be treated and how to motivate them, as well as understanding how best to communicate with any partners, how to best market products and services to customers, and how to treat suppliers to ensure smooth operations.
The concept of these differences was investigated by Geert Hofstede within one globally dispersed company in the 1980s. By basing his research in one company, he avoided the challenge that any cultural differences he observed were due to different organisations having their own discrete cultures.
Hofstede identified five ‘dimensions’ where national or regional cultures may differ, using a continuous scale, from high to low, for each dimension. The dimensions represent the perceived views of a country’s population as a group, they may not be the values held by a single individual in that country.
The dimensions are; Power Distance Index, Uncertainty Avoidance Index, Motivation Towards Success and Goals, Individualism versus Collectivism and Long-term Orientation versus Short-term Orientation. The unique combination of these factors for a country forms the overall national culture that needs to be considered when trading, investing, or manufacturing in it. The dimensions will be explained further below.
Power Distance Index (PDI)
Societies which expect and accept that some members are rich while others are poor, and some members have power and some do not, are those high on the PDI scale. This approach is seen in East Asia, where a hierarchical society is accepted with little questioning and instructions from a manager will be followed.
A low PDI score indicates society members expect more equality and are likely to want to participate in the decision making within a business. Scandinavian countries, such as Sweden, exhibit this cultural style. Staff in organisations in these countries are more likely to challenge authority and may expect to be consulted and to participate in business decisions.
Uncertainty Avoidance Index (UAI)
In a society with a low UAI score, the people are happy with uncertainty, happy to take risks and try unorthodox approaches to product development. This approach is the one taken in countries such as Singapore where society is willing to accept new ideas and deal with unknown situations. Staff in these countries will not want to be too intensively managed, this feels too intrusive and may demotivate them.
France, for instance, has a high UAI culture. There is a preference for formality and bureaucracy, rules and laws, a framework of certainty for the people in the country to work within. There are rules and laws, etiquette and rituals which must be taken into consideration when conducting business in areas with this approach. If you do not, your business may be less successful.
Motivation towards achievement and success (MAS) (formerly masculinity v femininity)
Where MAS is high, competitiveness, assertiveness and material success are the elements valued in society. These traits were labelled as ‘masculine’ in the original research. This is the culture seen in the USA as well as Japan and Germany where individual success is rewarded and praised.
At the low end of this dimension, the members of society are seen to have a more caring approach to others and relationships are more valued than chasing success. Members of society will also be more accepting and supportive of equality between genders at this end of the scale. Scandinavian countries exhibit low MAS and a more harmonious approach to society.
Individualism v collectivism (IDV)
High IDV is exhibited by a country with a culture that sees its members doing what they can for themselves and their immediate family, not wider society. This trait is exhibited in the USA and most of Europe. High individualism sees a ‘live to work culture’, with workers competing for success and business rewards for themselves alone.
A low IDV score sees society caring about relationships with others and looking for a more balanced ‘work to live’ approach. In Southeast Asia and South America society is focused more on group cohesion and looking after the needs of the group before the individual.
Any incentives for staff must consider whether there is an ‘I’ or ‘we’ focus and managers must be aware of the need for a good work/life balance in low IDV scoring countries to motivate staff.
Long-term orientation v short-term orientation (LTO)
All businesses need to plan to achieve success and monitor how they are performing against expectations. The timescales used for this planning will be affected by cultural differences, as will any development or changes within the business.
Countries with a high LTO build long-term relationships and exhibit patience in developing innovations over time. They do not look for the easy ‘quick win.’ LTO can lead to new approaches being developed to meet challenges. This is a future focused approach such as that favoured in China and Japan.
A low LTO (or short-term orientation) culture focuses on immediate results and will hold onto tradition, prioritising the current ways of doing things over anything new. This is a culture looking at past and present rather than to the future. This is exhibited in the USA, the UK and Latin America.
An extra, sixth, dimension was added after further research in 2010 by Hofstede in collaboration with Michael Minkov.
Indulgence versus Restraint (IVR)
Cultures with high IVR allow personal freedom for individuals to seek self-gratification, enjoy life and have fun. Indulgent cultures include Canda, the USA and Australia. Marketing products to these cultures should include showing how the product/service adds to personal enjoyment or pleasure.
Low IVR cultures restrict personal excess with strict rules and societal expectations. These traits are exhibited in China, Japan, and Russia. Value for money and practicality will be good messages in marketing to these cultural types.
Conclusion
The overall culture of any country is a combination of all these dimensions. Some dimensions may be high in a specific country whilst others are low. For example, a country that scores highly in uncertainty avoidance may have a lower indulgence score than another country with the same uncertainty avoidance score.
When conducting business in a new country or region, consideration of how that area scores across Hofstede’s six dimensions can help with choosing the correct strategies and improve the chance of success.
