cultural distance in international business
The cultural distance of countries in which your firm operates is one of the many explanations of
significant differences that your Australian based employees face when travelling to different affiliates
worldwide. At the present time your firm has operations in Saudi Arabia and Singapore as well as Australia.
Using the globalEDGE site and the Hofstede Resource Center, analyse the cultural dimensions of all the
countries you operate in and assess the management implications of the cultural differences of the
This paper addresses the issue of cultural distance in international business by focusing on the cultural dimensions of three countries. The three countries are Saudi Arabia, Singapore and Australia. The analysis of the cultural dimension within these countries occurs effectively through the use of global EDGE site and Hofstede Resource Center. An assessment of the implications of cultural dimensions on management also occurs consecutively.
The paper finds that there are different cultural dimensions within the three selected countries. In addition, cultural dimensions influence the decision-making process of the organization and management, as well. Therefore, the management strategies adopted by a multinational business need to have an alignment with the cultural dimensions. The paper makes use of visual aids to aid in effective analysis of the cultural dimensions.
Globalization has influenced the form of business that individuals engage in, in the current century. Business individual find it quite challenging and enriching to undertake their business operations in different systems, nations and cultures (Muritiba et al, 2010). Consequently, global businesses have to maneuver their way through differences that occur between two nations in order for them to find success in their operations. Some scholars refer to the differences as psychic distance (Muritiba et al, 2010). Comprehension of psychic distance dimension is quite complicated. Since cultural distance is intangible and the analysis occurs in a subjective manner, cultural distance appears as a complex dimension for analysis.
As such, due to the existence of cultural distance, individuals engaging in international business have to adjust their business policies in order to fit in the new business operation environment (Lee, Shenkar, &Lid, 2007). The dimensions inherent within cultural distance include culture, language and religion. Hofstede’s culture dimensions include uncertainty avoidance, individualism-collectivism, masculinity and power distance (Richard, Hosfstede, & Bond, 2007).
Business organizations and their concurrent countries, always perform an analysis that aids in market entry strategies formulation (Hyllegard, & Eckman, n.d). The market, cost, competitive advantage and government forms the globalization drivers that the country analysis basis the focus. This depicts weaknesses and strengths for a business to participate actively in the international market. Multinational business analysis, on the other hand, outlines the potentiality of the business to gain from market participation. The analysis incorporates strategic levers such as marketing, location and product, and organization analysis such as culture, people, management and structure. Figure one depicts the framework that most of the organizations make use of when strategizing on market entry.
Figure 1: Yip (1998) market entry framework for international business.
Culture is one of the factors that influence the decision making process of a business. In addition, the culture outlines the relationships, structures and communication models adopted by an organization (mead, 2005). Hofstede’s world average cultural dimensions appear as depicted in figure two (Hofstede, 2009).
Figure 2: Hofstede’s world average cultural dimensions.
According to Hofstede (2009), the cultural dimensions inherent in Saudi Arabia appear as depicted in figure 3 below.
Figure 3: Hofstede cultural dimensions for Saudi Arabia.
Saudi Arabia is a Muslim dominated monarchy located on the southwestern region of Asia. Saudi Arabia natives’ faith in Muslim religion plays a key role in their lives. The region has the characteristics of uncertainty avoidance and prolonged power distance. As such, the leaders within this region have to delegate specific and complete directives. In addition, the leaders have to keep a distance between themselves and the group for them to find acceptance in this region (Butler, 2007).
The established power distance (PDI of 80) in the region introduces a caste system, which limits upward movement of the region natives. The region has created a room for the development of inequalities of wealth and power. As such, the natives have adapted rule-oriented system characterized by controls, laws, regulations and rules, with the aim of uncertainty reduction. The uncertainty prevalent in this region and large power distance leads to the emergence of a situation characterized of leadership with authority and ultimate power. Therefore, society expects a distinction between the leaders and the society, which is not subverted upon the natives, but accepted by the community, has their inherent cultural heritage.
Saudi Arabian society has a high level of uncertainty (UAI of 68), which depicts that the society has no room for tolerating any degree of uncertainty. Any attempt towards the reduction of uncertainty results in the adoption and implementation of strict laws, rules, regulations and policies. The natives in this region aim at having maximum control of all activities in order to avoid or eliminate any chances of unexpected. Therefore, the society in this region is risk adverse and acceptance of change has a barrier, which need overcoming.
Masculinity level is an average value of 52 from Hofstede Dimension, which depicts that Saudi Arabian women have a limitation to their rights. This may have a contribution from the established Muslim religion in the region. Individualism (IDV of 38) does not occur in this region according to Hofstede Dimension. Therefore, the Saudi Arabian society has a culture established on the basis of collectivism, which is paramount.
Saudi Arabia depicts a society where there is an established power distance and inherent risk-averse nature. This calls for stipulating management strategies with maximum consultation with the established business consultants in the religion. This occurs since the management adopted is highly influenced by the cultural practices inherent in this region (At-Twaijri, & Al-Ghamdi, 1997). The management further needs to adopt bets practices measures for this region in order to achieve better results. Given that the inherent religion in this society is Muslim, there is a need of ensuring that the staffs that facilitate business transactions in this region have a background of the Muslim religion. However, in circumstances of lack of Muslim staffs, there is a need of ensuring that the personnel operating in this region needs to understand Muslim religion vividly.
The risk adverse element in this region calls for an effective product entry strategy into the region. As such, there is a need of conducting market research on the region for analysis of the customer perception on products. The masculinity nature that exists in the society calls for the adoption of a management structures that meet the societal culture. This will aid in preventing the emergence of unwanted conflict with cultural practices, which may impair the effectiveness of the business operations widely. Therefore, the management has to consider the leadership styles, the marketing strategies and staff training effectively with regard to this society.
According to Hofstede (2009), the cultural dimensions for Singapore appear as depicted in figure four.
Figure 4: Hofstede’s cultural dimensions for Singapore.
Buddhism is the main religion in Singapore with a percentage of 70 (Hofstede, 2009). The power distance index for Singapore is 70. This depicts that the society has an inherent hierarchical relationship, which results from Confucian teaching. The society has the belief that people have different ranks and the interactions between the parties are quite limited (Qiang, n.d). The low individualism index (15) indicates that Singapore society operates as a collective society than an individualistic society. There are prolonged family ties among the family trees that exist in this region.
The main religion in Singapore is Buddhism; therefore, the management structure adopted for this region needs to ensure that the staff either have a Buddhism background or understand Buddhism religion vividly (Hofstede, 2009). This will aid in creating an environment for conducting business operations in an effective manner. Singapore also demonstrates a high power distance (PDI of 70); as such, the strategies formulated for operating in this region need to have a linkage with the established power structures in the region. This aids in preventing situations of conflict rising while conducting the business operations in the region. The region exhibits a minimal level of uncertainty avoidance (Hafiz, 1986). This indicates that marketing strategies adopted may not be impaired negatively. However, there is a need of preventing situations of resulting into price dumping in the region.
The society depicts average levels of masculinity and long-term orientation. These affect the management in that the management will have to ensure that the measures adopted are in line with upholding the masculinity nature of the society. The long-term orientation challenges the management to focus on innovation on the products to ensure that the nature of the society to focus on future endeavors occurs throughout.
Hofstede (2009) represents Australian cultural dimensions as depicted in figure five.
Figure 5: Hofstede cultural dimensions for Australia.
Geert Hofstede analysis on the Australian world depicts a high level of individualism (IDV of 90). As such, there is a need of taking into consideration of the aspect of individualism while doing business and travelling into this country. This occurs since privacy is valued as a cultural norm in this society (Hofstede, 2009). Power distance (PDI of 36) is quite low. This depicts that there exists a high level of equality within families, societal levels, organizations and government. In addition, Australia society is more into using the principles of rules oriented control than personal oriented control (Luger, 2002). The predominant religion in Australia is Christianity (with a percentage of 50%).
In contrast to the other two regions, Australia appears to be an individualistic society with an individualism index of 90. Therefore, the management needs to strategize measures that ensure individual needs are met in all situations. In addition, the management should adopt strategizes that maximize on individual interaction than collective interaction for an effective business operation. The inherent religion in this region is Christianity. This calls for the management to ensure that the staff operating within the region have a background of Christian religion, or understand the religion effectively. This creates a conducive environment for ease in the interaction of the parties.
The society appears to have sensitivity to the masculinity nature and risks. Therefore, the management needs to adopt strategies, which are in line with these factors to eliminate culture conflict. As such, market research by the management is essential for analysis of the marketing strategies that need adoption in the region. This depicts that the management style adopted has to align itself with the societal culture (Albaum, 2003).
Power distance index (PDI) depicts inequality that exists in a given society. This inequality results from the leaders and followers in a given society. Inequality and power are two elements, which exists as inseparable elements. As such, when conducting an international business, one needs to recognize that societies have no common equality. Individualism (IDV) depicts a society, which is loose in its operation structure (Triandis, 1995). In such a society, every individual takes care of himself or herself. Therefore, an individual operating an international business needs to understand the individualism of the society clearly in order to strategize effectively on how to achieve success in the business (Francais, 2005).
Uncertainty avoidance index (UAI) depicts that the societies have a different perception of being risk adverse. This revelation is crucial for an international businessperson, for it aids in the formulation of the most effective strategies to earn success in the business. Masculinity index (MAS) analysis effectively the role of different genders in a given society (Hofstede, 1998). Long-term orientation illustrates the perception of the society in terms of the future for both shorter and long periods (Assignment Help Experts, 2011).
Cultural dimensions aid in comprehending the different cultures found in different regions, in the universe (Hofstede, 1984). As such, for one to strategize management ensures that need for adoption in a given country there is a need of comprehending empathy and knowledge existing in the local environment. This is because people in other countries may depict different actions, thinking capacity and feelings towards societal problems (The Executive Fast Track, 2011). This confronts the tendency of human beings to act, feel and think based on personal experiences at the instant of working internationally. Culture has a myriad of dynamics; therefore, predicting the effect of culture on behavior is quite impossible (mead, 2005). This depicts that there are situations in which culture has an insignificant influence in the decision making process, and there are times that decision-making process is quite reliable on the cultural systems established in a given region. Moreover, cultural dimensions affect the management processes for organizations effectively. The processes affected include training, leadership styles, and promotion methods among others.
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