Learning Outcomes
- Explain the dimensions of cultural difference.
- Identify effects of cultural differences on global business.
Cultural Differences and Global Business
When considering going into international business, managers need to realize that conditions they take for granted may be different in other countries. For example, Wal-Mart’s first international expansion was into Mexico. It modeled the Wal-Mart stores in Mexico after its stores in the United States, with a stand-alone store surrounded by large parking lots. But it soon realized this was a problem. Many of the customers rode on buses to the store. This meant customers had to walk through the parking lot to get to the store and could only buy what they could carry back to the bus. To address this, Wal-Mart added shuttle buses that took customers to and from the store.
Difficulties like those faced by Wal-Mart are easy to identify and often are easy to fix. Cultural differences, however, also concern deeply held beliefs, values, and customs that are more difficult to identify. Understanding cultural differences is particularly important for managers, because managers must understand their employees to motivate and lead them. Geert Hofstede, a Dutch management researcher, conducted a multiyear, multicountry study to identify ways to describe differences in national cultures. His research included more than 100,000 employees of a global corporation in 40 countries. A later study, called the GLOBE project, included 170,000 managers in 162 countries. These studies identified nine dimensions that describe differences in national cultures.
These dimensions are power distance, uncertainty avoidance, performance orientation, assertiveness, future orientation, humane orientation, institutional collectivism, in-group collectivism, and gender egalitarianism. Let’s look at each in more detail.
- Power Distance. Power distance is the degree to which people accept an unequal distribution of power and status privileges. In high power distance countries, there is respect for age and titles, people are expected to follow rules, and there is more tolerance for concentrated power. India, Mexico, and the Philippines have high power distance. The United States, Australia, and Israel have low power distance.
- Uncertainty Avoidance. The degree to which people are uncomfortable with risk, change, and ambiguity is called uncertainty avoidance. In high uncertainty avoidance countries, there is a greater emphasis on rules, structure, order, and predictability. France, Japan, and Costa Rica, for example, are countries with high uncertainty avoidance. The United States, India, and Sweden have low uncertainty avoidance.
- Performance Orientation. Performance orientation is the degree to which innovation, high standards, and excellent performance are encouraged and rewarded. Countries with high performance orientation value materialism and competitiveness, and they expect to invest in training to promote performance improvements. The United States and European countries have high performance orientations; Argentina, Russia, and Greece have low performance orientations.
- Assertiveness. Assertiveness is the degree to which individuals are forceful, confrontational, and aggressive, as opposed to cooperative and compassionate. In high assertiveness countries such as the United States, Germany, and Mexico, communication is direct and unambiguous. Individual initiative is encouraged, and relationships are likely to be competitive. Countries with low assertiveness rankings are Switzerland and New Zealand. Managers in these countries are more likely to look for consensus and cooperative decision making.
- Future Orientation. The degree to which delayed gratification and planning for the future are valued over short-term gains is called future orientation. Countries with high future orientation encourage investments for future payoffs over immediate consumption. It is similar to the ability of individuals to delay gratification. Canada, Switzerland, and Malaysia have high future orientation; Poland, Argentina, and Russia have low future orientation.
- Humane Orientation. The degree to which fairness, altruism, generosity, and kindness are encouraged and valued is a measure of a country’s humane orientation. In nations with high humane orientation, individuals are responsible for promoting the well-being of others as opposed to the state providing social and economic support. The Philippines, Ireland, and Egypt have high humane orientation; France, Germany, and Singapore have low humane orientation.
- Institutional Collectivism. Institutional collectivism is the degree to which organizational and societal institutions encourage individuals to be integrated into groups and organizations. In high institutional collectivism countries, collective distribution of resources and collective action are encouraged. Group loyalty is encouraged, even if it undermines the pursuit of individual goals. Sweden, Japan, and Singapore are examples of countries that have high institutional collectivism; Germany, Argentina, and Italy have low institutional collectivism. In the United States, low institutional collectivism has resulted in debates on appropriate work-life balance.
- In-Group Collectivism. In-group collectivism is the degree to which individuals express pride, loyalty, and cohesiveness in their organizations or families. In countries with high institutional collectivism, individuals identify with their families or organizations and duties and obligations determine behaviors. A strong distinction is made between individuals who are in a group and those who are not. India, Egypt, and China are examples of countries that have high institutional collectivism; Sweden, New Zealand, and Finland have low institutional collectivism.
- Gender Egalitarianism. The degree to which male and female equality is actualized is called gender egalitarianism. Countries with high gender egalitarianism provide more opportunities for women and have more women in positions of power. Sweden, Poland, and Costa Rica have high gender egalitarianism. Japan, Italy, and Egypt have low gender egalitarianism. In these countries, women generally have lower status at work and in the culture.
In the chart that follows, Germany and Poland are similar in their cultural characteristics.
Comparison of cultural characteristics of Germany and Poland using data from GLOBE 2004 study
Practice Question
Effects of Cultural Differences on Global Business
When companies decide to expand internationally, they have to be aware of cultural differences. To be effective, managers need to be attuned to their cultural surroundings. There have been many examples of advertising that included images or phrases that were culturally offensive. For example, Pepsi lost its dominant market share to Coke in Southeast Asia when Pepsi changed the color of its vending machines to light “Ice” blue. The company failed to understand that light blue is associated with death and mourning in that region.
Managers must also consider different communication practices. In some countries, direct feedback is considered impolite, and managers must be able to read subtle body language to determine if the receiver has understood and accepted the message. For example, in many cultures, telling a superior that he has made a mistake is considered disrespectful.
Different cultures also have different ideas about time. In the United States, an appointment is the time someone is expected to arrive. In some countries, an appointment is the earliest someone is expected to arrive, but he could arrive much later. Global managers must appreciate and accommodate these cultural differences.
Management expert Peter Drucker
But what about the effect of cultural differences on the basic functions of management? Are there universal theories that will hold in any culture? The answer is yes and no. Peter Drucker, the famed management expert, observed:
“Management is deeply embedded in culture. What managers do in Germany, in the United Kingdom, in the United States, in Japan, or in Brazil is exactly the same. How they do it may be quite different.”[1]
In other words, the functions of management are the same everywhere, but the functions are performed differently in different countries.
We have defined the four basic management functions as planning, organizing, leading, and controlling. Consider how the GLOBE cultural dimensions could affect these basic management functions.
- Planning. Future orientation and uncertainty avoidance have a significant impact on how businesses plan. In cultures with high future orientation, the current conditions of the organization are assessed and planning is based on changes needed to reach future goals. In a low future orientation culture, the history of the organization is considered and planning is based on preserving traditions while moving forward. In high uncertainty avoidance countries, planning will be very deliberate, and only plans with a low risk of failure and high certainty of outcomes will be considered. In low uncertainty avoidance countries, planning will be much more flexible. Plans will accept that the future is unpredictable and will assume that problems will be addressed as they occur.
- Organizing. Performance orientation and institutional collectivism both affect how firms are organized. In countries with high institutional collectivism, organizations based on teams and group efforts would likely be most effective. In countries with low institutional collectivism, more hierarchical structures with clear lines of authority and well-defined responsibilities would likely work best. In high performance orientation cultures, organizations would be based on individual achievements. Individual goals would be set and performance would not be based on meeting fixed targets but on ranking compared to others. In low performance orientation countries, cooperation and collaboration would be emphasized. Goals based on organizational outcomes would be more effective.
- Leading. Power distance and humane orientation are important considerations for leaders. In high power distance countries, people would expect leaders to be more directive, and they would expect rules and procedures to be well-defined. In low power distance countries, leadership would have to be more collaborative and people would question rules and procedures they did not agree with. Humane orientation would have an effect on motivation. In high humane orientation cultures, leaders would be expected to be nurturing and empowering. People would be motivated by the contribution they are making to the organization and others in the organization. In low humane orientation cultures, leaders would be expected to be clear in their expectations. People would be motivated by their wages and benefits and would challenge anything that threatened their well-being. Gender egalitarianism could also be a factor. In low gender egalitarianism countries, women’s leadership would not be automatically accepted and women would have to assert their authority.
- Controlling. Assertiveness and power distance affect how organizations can be controlled effectively. In high assertiveness countries, managers would be directive and authoritarian. They would exert control through close observation and punishment. In a low assertiveness country, managers would be expected to be more tolerant and to exert control through encouragement and corrections. In high power distance countries, authoritarian and directive managers would likely be more effective than participative managers.
Practice Question
Key Points
Deciding to engage in global business exposes companies to risks and hazards. However, when companies research conditions and plan and prepare for cultural differences, they can benefit from the advantages of globalization. In the next section we consider strategies managers can use to respond to cultural differences.
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- Peter Drucker, The Essential Drucker, New York: HarperCollins, 2001. ↵
FAQs
What are the 5 dimensions of cultural differences? ›
- Power distance.
- Uncertainty avoidance.
- Individualism-collectivism.
- Masculinity-femininity.
- Time orientation.
These studies identified nine dimensions that describe differences in national cultures. These dimensions are power distance, uncertainty avoidance, performance orientation, assertiveness, future orientation, humane orientation, institutional collectivism, in-group collectivism, and gender egalitarianism.
What are some effects of cultural differences? ›Cultural differences have many effects on communication. People with different cultural backgrounds communicate using different styles. Their language, words, gestures, and phrases may differ even in their application. Culture also shapes peoples' attitudes in times of conflict.
What are the four dimensions of cultural differences? ›The original theory proposed four dimensions along which cultural values could be analyzed: individualism-collectivism; uncertainty avoidance; power distance (strength of social hierarchy) and masculinity-femininity (task-orientation versus person-orientation).
What are the 8 main types of cultural differences? ›- Individualism vs. Collectivism. ...
- Power Distance. ...
- Uncertainty Avoidance. ...
- Gender Egalitarianism. ...
- Assertiveness (Cooperative vs. ...
- Orientation to Time. ...
- Being vs. ...
- Indulgence vs.
- Individualism-Collectivism. ...
- Power Distance. ...
- Masculinity-Femininity. ...
- Uncertaintity Avoidance. ...
- Long- and Short-Term Orientation. ...
- Indulgence Versus Restraint. ...
- Reference.
Examples of cultural difference include differences in physical appearance, beliefs, cultural mores, and landscapes.
What are major dimensions of culture diversity and explain them? ›The dimensions of diversity include gender, religious beliefs, race, martial status, ethnicity, parental status, age, education, physical and mental ability, income, sexual orientation, occupation, language, geographic location, and many more components.
Which are well known dimensions on cultural differences? ›Geert Hofstede, in his pioneer study looking at differences in culture across modern nations, identified four dimensions of cultural values: individualism-collectivism, power distance, uncertainty avoidance, and masculinity-femininity.
How do cultural differences affect society? ›Not only does cultural diversity promote peace, but it also makes our society a more interesting place to live. Different cultures have their own beliefs and interests which they can share to offer alternative ways of doing things.
What are the effects of cultural diversity? ›
Both in educational and professional environments, cultural diversity benefits everyone. It paves the way to better problem-solving, more empathy and compassion, deepened learning, and approaches the world from various perspectives.
What are the three dimensions of cultural differences? ›Drawing on the work of Hofstede (1997) and others, this model (Figure 1) divides cultural identity into three dimensions: human universals, group associations, and individual personality.
What is the dimensions of difference? ›Dimensions of Difference is designed to support your newsroom in creating better content by helping you to identify, understand and talk about your own differences internally.
What are cultural dimensions of change? ›The Change Cultural Dimension refers to how open a culture is to change and how much control they believe they have over their workplaces and general environments. In Change Averse cultures, people often prefer to maintain the status quo. Change may be seen as unnecessary or somewhat threatening.
What are 6 examples of social and cultural differences? ›- Individualism vs. Collectivism. ...
- Power Distance. In high Power Distance societies, hierarchical systems of assigned roles organise behaviour. ...
- Uncertainty Avoidance. ...
- Orientation to Time. ...
- Gender Egalitarianism. ...
- Assertiveness. ...
- Being vs. ...
- Humane Orientation.
We can also identify cultural differences in eating and drinking habits, religious beliefs, moral beliefs, rituals, time management, sanitation, greeting, gift giving, exchange, conformity, rebelliousness, sports, language, work ethic, marriage, and so on can all be cultural.
How do you explain cultural differences? ›Cultural difference involves the integrated and maintained system of socially acquired values, beliefs, and rules of conduct which impact the range of accepted behaviors distinguishable from one societal group to another [1].
What are the 8 cultural dimensions? ›In this section, we will address eight cultural variables: human nature, time, action, communication, space, power, individualism/collectivism, and competitiveness/cooperativeness.
Why are cultural dimensions important? ›The dimensions collectively portray the impact of the culture ingrained in society on the values of the members of that society. They also describe the relationship between these values and behavior, with the help of a structure based on factor analysis.
What is the role of cultural dimensions? ›A cultural dimension is a pattern of values and behaviours in a culture. The concept of cultural dimensions was developed by Hofstede as a way of discussing and comparing cultures. One cultural dimension is individualism-collectivism.
What are 3 examples of cultural differences in the workplace? ›
- Religion. ...
- Ethnicity. ...
- Sexual Orientation and Gender Identity. ...
- Education. ...
- Generation. ...
- Cultural Behavior. ...
- Educational Clash. ...
- Ensure Effective Communication.
Developing your understanding of other cultures, or 'cultural awareness', lets you have more meaningful interactions with those around you. You're building your respect and empathy for other people, and celebrating your differences as well as your similarities.
Why is cultural differences a problem? ›Cultural differences cause behavioral and personality differences like body language, gestures, mindsets, communication, manners, and norms, which may lead to miscommunication. Eye contact, for example, is very important in some cultures, but rude and disrespectful in others.
What dimensions of culture have an impact on intercultural communication? ›The five dimensions along which the cultural differences are plotted are power distance, masculinity vs. femininity, long-term orientation vs. short-term thinking, individualism vs. collectivism, and uncertainty avoidance.
What is the meaning of dimensions of diversity? ›Dimensions of diversity definition
Dimensions of diversity refers to work diversity of a company and the employees who work there and have different traits, backgrounds and abilities. Diversity is important as it increases the company's potential and work flow.
To measure cultural values as conceived in Cultural Dimensions Theory, Hofstede developed a survey instrument, known as the Values Survey Module (VSM). Its first version, the VSM 80, consisted of items used in Hofstede's original 1980 study (Hofstede, 1980).
What is the difference between individualism and collectivism culture dimensions? ›Individualism indicates that there is a greater importance placed on attaining personal goals. A person's self-image in this category is defined as “I.” Collectivism indicates that there is a greater importance placed on the goals and well-being of the group. A person's self-image in this category is defined as “We.”
What are the dimension of cultural differences according to Hofstede? ›The four original dimensions of cultural difference identified by Hofstede were: power distance index, individualism versus collectivism, masculinity versus femininity and the uncertainty avoidance index.
How do cultural differences influence our personal and social life? ›While many aspects of human thought and behavior are universal, cultural differences can lead to often surprising differences in how people think, feel, and act. Some cultures, for example, might stress individualism and the importance of personal autonomy.
What is an example of cultural diversity? ›These include ethnic, national, racial, linguistic, religious and generational identities or affiliations. Differences in language, ethnicity, race, nationality, religion, social background and age can also manifest as different types of cultural diversity.
What are three effects of culture? ›
In addition to its intrinsic value, culture provides important social and economic benefits. With improved learning and health, increased tolerance, and opportunities to come together with others, culture enhances our quality of life and increases overall well-being for both individuals and communities.
How does culture affect us? ›The culture of which we are a part impacts our identity and even our beliefs about the nature of life. The type of culture either Individualistic or Collective into which a person is born affects and influences what that person believes and how that person behaves.
What is an example of cultural diversity in the United States? ›There are many examples of cultural diversity in the United States. Specific examples include the popularity of foods from different cultures such as Korean food, Chinese food, and Tex Mex.
What are the benefits of cultural diversity? ›Working across cultures can be a truly enriching experiencing, allowing others to learn about perspectives and traditions from around the world. Bonding over similarities and differences can help you to become a global citizen, abandoning prejudices or an ethnocentric world view—something that is increasingly valuable.
What is an example of diversity in culture and society? ›Usually, cultural diversity takes into account language, religion, race, sexual orientation, gender, age and ethnicity. Companies started to embrace corporate diversity in the early 2000s. This was due to many trends in demographics and a changing workforce.
What are the 7 cultural dimensions? ›Trompenaars' seven cultural dimensions are universalism versus particularism, individualism versus communitarianism, specific versus diffuse, neutral versus affective, achievement versus ascription, sequential time versus synchronous time, and internal direction versus external direction.
What are the six primary dimension of cultural diversity? ›The primary dimensions of diversity Include age, ethnic heritage, gender, mental/physical abilities and characteristics, race and sexual orientation.
What are the 6 dimensions of culture? ›Hofstede's 6 cultural dimensions are: power distance index (high versus low), individualism versus collectivism, masculinity versus femininity, uncertainty avoidance index (high versus low), long versus short-term orientation and indulgence versus restraint (Mindtools, 2018).
What are the two dimensions of affect? ›These dimensions have been conceptualized in different ways: as the dimensions of positive and negative affect (Watson et al., 1999), tension and energy (Thayer, 1989), approach and withdrawal (Lang, Bradley, & Cuthbert, 1998), or valence and arousal (Russell, 1980).
What are the four types of dimensions? ›- Static Dimension: Dimensions which does not change over time. These dimensions are very easy to implement. ...
- Slowly changing dimension(SCD): Dimensions that change or can change slowly over time. ...
- Rapidly Changing Dimension: Dimensions that change or can change rapidly over time.
What are the types of 4 dimensions? ›
The dimensions of space are, length, breadth, height, and time.
How do cultural dimensions affect business? ›The influence of cultural factors on business is extensive. Culture impacts how employees are best managed based on their values and priorities. It also impacts the functional areas of marketing, sales, and distribution. It can affect a company's analysis and decision on how best to enter a new market.
Which of the following are the 5 key dimensions of culture? ›Developed by Geert Hofstede, it is a framework for understanding cultural differences across countries. Power distance, uncertainty avoidance, individualism-collectivism, masculinity-femininity, and short-vs. long-term orientation is among Hofstede's initial five key dimensions.
What are the dimensions of change in society? ›The three traditional ideas of social change—decline, cyclic change, and progress—have unquestionably influenced modern theories.
What are the 5 diversity dimensions? ›The dimensions of diversity include age, race, skills, backgrounds, sexual orientations, and other differences that make one unique.
What are the five 5 cultural aspects? ›The major elements of culture are symbols, language, norms, values, and artifacts.
What are the 5 culture values? ›Cultural value was assessed by disaggregating it into five components: aesthetic, social, symbolic, spiritual and educational value.
What is the purpose of the five cultural dimensions? ›Hofstede's cultural dimensions are used to understand and analyze differences in cultures in different countries and find ways to do business with different cultures.
What are the 4 main Hofstede dimensions to describe culture explain briefly? ›The original theory proposed four dimensions along which cultural values could be analyzed: individualism-collectivism; uncertainty avoidance; power distance (strength of social hierarchy) and masculinity-femininity (task-orientation versus person-orientation).
What are the 6 cultural dimensions theory? ›Hofstede's initial six key dimensions include power distance, uncertainty avoidance, individualism-collectivism, masculinity-femininity, and short vs. long-term orientation.
What are the 5 factors of diversity? ›
- Cultural diversity. This type of diversity is related to each person's ethnicity and it's usually the set of norms we get from the society we were raised in or our family's values. ...
- Race diversity. ...
- Religious diversity. ...
- Age diversity. ...
- Sex / Gender / Sexual orientation. ...
- Disability.
Diversity refers to the inclusion of a wide range of people from different backgrounds. Examples of diversity include gender, race, ethnicity, socioeconomic, age, cultural, religious, and political diversity. Today, diversity is highly valued because it strengthens social groups.
What are the 5 cultural flows? ›- ethnoscapes — flow of people Human migrations;
- technoscapes — flow and configurations of technology;
- financescapes — flow of money and global Business networks;
- mediascapes — flow of cultural industry networks; and.
Customs, laws, dress, architectural style, social standards, and traditions are all examples of cultural elements.
What are the 5 dimensions of cultural humility? ›The following attri- butes were discovered: openness, self-awareness, egoless, sup- portive interactions, and self-reflection and critique. Cultural humility was described as a lifelong process (Figure 1).
What is culture 5 points? ›Culture can be defined as all the ways of life including arts, beliefs and institutions of a population that are passed down from generation to generation. Culture has been called "the way of life for an entire society." As such, it includes codes of manners, dress, language, religion, rituals, art.
What is the meaning of cultural dimensions? ›Definition. Cultural dimensions summarize the extent to which cultural groups are found empirically to differ from one another in terms of psychological attributes such as values, beliefs, self- construals, personality, and behaviors.
What are the causes of cultural differences? ›Education, social standing, religion, personality, belief structure, past experience, affection shown in the home, and a myriad of other factors will affect human behavior and culture.