Due to globalization the international borders have opened up for business opportunities. Because of this there has been a growth in the academic research in this field. Business organisations have realised their scope and potential in the international market, however there are also several problems and challenges that are faced by the managements in order to manage and understand the dynamics of people who are from a completely different background. Globalisation has been gaining boost due to the improvement of the technological infrastructure and acceptance of diversity among the people. These are the areas that have been explored in the research studies. In this assignment Hofstede’s model of cultural dimensions are going to be discussed.
Geert Hofstede developed a model to help organisations understand cultural differences and level of compatibility by conducting a survey. He chose to survey the employees of IBM and this was to be undertaken across several countries. Developing this model was a lengthy process and several successive researches have taken place in order to develop the six dimensions which are used today.
The study will discuss the way in which each of these dimensions are conceptualised and explained by Hofstede. The six dimensions that are explained in the model are Power Distance, Uncertainty Avoidance, Individualism/Collectivism, Masculinity/Femininity, Long/Short Term Orientation and Indulgence/Restraint (Hofstede-insights.com 2018). There are 76 countries that are scored out of 100 in each of these dimensions. Information regarding this model and any of the listed countries can be easily available on the official website (Hofstede-insights.com 2018). Organisations can easily check the differences in culture before deciding upon the expansion strategy of the company.
According to Hofstede, culture can be defined as “the collective programming of the mind distinguishing the members of one group or category of people from others”. The dimensions that are described in the model represent the factors that differentiate one nation state from another.
The focus of this dimension is based on the ways in which society of the country deals with inequalities among the population. It explains the ways in that the people of a society who are comparatively less powerful than others recognize and expect that power is distributed unequally. The societies win which this dimension has higher level of score understand the importance and accepts hierarchy and there are few areas of justification in this case. Vies versa is true for the society which has a lower degree of power index. Depending on the values and the principles as well as the structure of the organisation decisions can be made based on this dimension (Hofstede-insights.com 2018).
For example, if the company already have a hierarchal form of organisation structure can be comfortable in expanding in a country where this structure is easily acceptable. At the same time if the countries have a low power distance index then there are chances for internal disturbance and issues in the country.
The nature of the social framework and the ways in which the society functions as a unit is the concept that is used in this dimension. The concern of the society for oneself and one’s family is the priority in the individualism dimension (Minkov and Hofstede 2011). The individual society is characterised by choices which are not be biased by anyone and hence there will be a chance for the emerging brands or foreign brands to make a place in the market. The focus of this dimension is how the society represents them as “I” or “WE” (Hofstede-insights.com 2018).
This dimension is also significant for an organisation trying to expand as in the individual society there are chances that the people are not opting for the new trends and are going for the lasting brands and companies in the market. At the same time if the nations are collectivism followers then there are high chances that if an individual selects the companies brand then the mass will also select that brand and that will increase the company profit in a single step. However, the same risk is also there that if a single customer has disliked the product then there are chances that the mass will also drop the product and thus the company will face a huge loss in the market (Minkov and Hofstede 2011).
The importance of assertion and recognition are the basis of this dimension. The masculine society is competitive in nature; people in the society want to be recognised as heroes and to be distinguished from another. On the other hand, a feminine society works with corporation and has a sense of care and responsibility towards others. This dimension is also known to be “Tough versus Tender”. This can represent as an extension of the dimension that has been discussed above (Hofstede-insights.com 2018).
A company while expending will like to work in a society where there is understanding, as it is essential to have a connect with the people while expansion, if people try to outshine one another there will be more chances of conflict. However, due to competitiveness, there are opportunities of achieving a higher performance form the people as well. This is because the people are mostly motivated and are driven to deliver the work (Minkov and Hofstede 2011).
Based on the acceptance of uncertainty and ambiguity, this dimension tackles the issue of the ways a society accepts the fact that the future is unknown; as well as the approach of the society to deal with the situation. The countries where there is high UAI score is observed there is very specific rules and regulations are maintained regarding people’s believe changes and unorthodox methods are discouraged in such a society. It is the opposite for a society where the degree of UAI is low. In this society practice gets precedence over principles (Hofstede-insights.com 2018).
The business in countries with strong UAI will be easier if the customers get customised with the product and have already become familiar to the product types. The countries do not tend to change their choice and tastes and thus stick to the lasting companies and brands. It is safe to trade in this company only if the company already has a position in the company. If the company has not made any benchmark in these companies then it is better to keep an alternate trade place as there can be a high risk to get rejected from these orthodox societies (Chhokar et al. 2013). Thus it can be said that the countries with low UAI is more beneficial for international trade as they readily accept new trends and business types in their culture and the companies also find a better scope for transaction. However, there are also opportunities in terms of the ways a company establishes the strategies according to this dimension (Chhokar et al. 2013).
Also known as the pragmatic versus normative, this dimension is conceptualised based on the importance of the past, the lessons that are learnt from the past experiences allow the people of a society have different approach form the society that does not link the past with the future. A society that has a pragmatic approach is characterised by urge of learning and gathering knowledge along with values such as obligation and modesty. However on the other hand, a normative society is characterised with strong conviction, here principles and values are highly considered to be implemented on the day to day operations (Hofstede-insights.com 2018).
In societies with a high score on culture will encourage the modernization and readily accept the social changes made in the country. The company will have a high chance to enter the market and create their own place in the foreign market. They entertain development and change in the trends and brands in the society thus allowing a cross culture trade to make its market in the nation. However, there are also opportunities in the normative society as well for example; United States has a normative score according to the website scores. These countries will have a limited approach for foreign trades; however, they will make chances for businesses to trade with new countries (Minkov and Hofstede 2011).
This dimension is related to the perception that the society that allows the people to enjoy life and dive into indulgence. It is developed and conceptualized on the fact that there is basic sense of fulfillment among the people which is natural among the human beings. On the contrary the other side of Indulgence is Restraint, here the society does not recognize gratification of needs and controls it with the help of severe social standards (Hofstede-insights.com 2018).
The nation that supports indulgence will have a flexible choice and thus it will be easy for foreign trading companies to enter the market with various trends and technologies. However, these countries will have a tough competition in their market as new business will be emerging to such business every day, trying to make their own way in the country. The risk for foreign countries will be high in such cases (Hofstede 2011).
At the same time, countries with a restraint lifestyle will tend to stick to the orthodox culture a system (Eisenberg et al 2013). There are chances that the countries will not accept the foreign brands easily into their culture, however if the brands are accepted in their culture the business will be secured as they have very less variations in the choice and tends to stick their previous culture (Hofstede 2011).
Based on the above analysis it can be said that the fact that one organisation was chosen to develop the dimension makes it a very biased sample size. On the other hand there have been several changes that has taken place in the society since the model was developed, impacting some of the scores. The accuracy of the data and the analysis is also questioned by a number of experts as the timeline is different and the mode of collection of primary data is survey. There are several other limitations of collecting survey data for the purpose of research (Venaik and Brewer 2013).
Another limitation that has been observed is that culture as a whole is defined in this model. Individuals react in different ways in different situations. Some of the aspects may be similar but the fact that each person is unique. There are subcultures and religions that do not fall in the six categories that have been explained. The model is more like a guide than a concrete framework (Brewer and Venaik 2012).
Out of 195 countries in the world the model only has 76 recorded scores of countries; this limits the usage and option for a research to use this model if they are choosing to expand to a country that is not on the list (Venaik and Brewer 2013).
One of the models that can be used as an alternative to this framework is GLOBE framework. This is an extension of the Hofstede dimension as the six divisions are further divided and extended to 18. This covers some of the limitations that have been discussed above (Venaik and Brewer 2013).
Headquartered in London, UK, Burberry was established in 1856. The company is a luxury fashion brand; the company has a wide portfolio of products form apparels to fragrances to accessories and make up. The company manufactures and retails the products (Burberryplc.com 2018). Over the years the organisation has expanded in several international markets and has achieved success in the process. In the process of distribution there are several licensing and other modes used by the company. In this study the expansion of Burberry in the Indian market will be analysed (Burberryplc.com 2018).
Before strategising a joint venture the company had two stores in India with franchising strategy. However, this was change with the decision of venturing with Genesis Colors. Burberry is a company that represents the English culture; the company is popular for the patented patterns and the trench coat which is a staple wardrobe essential in the country. On the other hand, Genesis Colour is a company that has the essence of Indian culture, the company own popular ethnic designer ware in India. However, the Joint venture did not work and Burberry has some of its own stores in India (Sen 2009).
The companies both operate in the luxury industry of two different countries and therefore, the idea of expansion with the help of another company working in the same industry is feasible.
The difference in the culture according to the Hofstede model is in Individualism and Indulgence. Here are some of the factors that led to the failure of the venture:
Difference in the aspect of individualism in the culture of the two countries- The score of India in this segment is 48 which make the society partly collective and partly individualistic. There is importance to families, neighbours and friends and their opinion matters in the lives of the people, therefore the actions of the people are also influenced by these aspects. However, there is a significant focus on religion and based on various individual traditions making each people responsible for the way they lead their lives and the impact it will have upon their rebirth (Triandis 2018).
UK scores 89 on this segment, therefore making the society independent of any other influences. Therefore there are also fewer amounts of responsibility and liability on the individuals as well (Triandis 2018). Personal fulfillment is important for the people. This aspect of the UK society makes it very different from the Indian society, the importance of individual upon oneself make them want a luxury brand. But in the Indian society there are also other responsibilities for others and people hold back while spending largely on luxury items (Minkov et al. 2013).
The idea of indulgence of luxury in between the two countries- The Indian society ranks 26 on the Hofstede model, which makes it a resistant society, this is as mentioned in the above category that the society is more responsible for others as well, which makes it important for the people to save and spent less on luxury items. According to Hofstede (1984), such a low score on the indulgence index refers to a tendency towards cynicism and pessimism. There is a sense of wrong-doing in such a low indulgence rate society.
At 69, the UK society is high at indulgence, enjoying life and having fun is important in the society hence, for a luxury company like Burberry that is originated from UK have understanding difference from the Indian society. This can be said to one of the major reasons for the failure of the venture in between the two companies (Mora 2013).
The two aspects that are discussed above indicate that there are chances for the companies to have ideological differences.
Know to be one of the most successful joint venture stories, the company focused on the needs and requirement so the customers of China as well as worked with the partners of the Joint venture Uni-President Enterprises and President Chain Store. The company has recently announced a deal with the partners where around 1300 stores are being bought by Starbucks in order to have 100 percent share. The joint Venture is a massive success as The Chinese market is the largest international market of Starbucks. The companies also further have plans on opening more stores in Chinese mainland.
Use of any kind of beverage is a part of the culture, in the Chinese culture there is an acceptance of hot beverage as Tea has been a part of the history of the country. Coffee is the prime substitute for tea and Starbucks have an array of tea as well as coffee depending upon the taste of the customers.
It is clear from the above diagram that there are major differences in several aspects like: power distance, individualism, long term orientation and indulgence. However with such differences in the cultural aspect from one country to another the venture is successful (Wang 2012).
Some of the factors that led to the success of the venture are as follows:
Market research: when the company decided to expand the market in the Chinese territory there was a lot of speculation regarding this decision as the Chinese target market are traditionally tea drinking people. However, the market survey had discovered a scope where people would like a place to meet friends and spend time along with enjoying their favourite beverage (Smith Maguire and Hu 2013).
Marketing strategies: the company did not focus on advertising on introducing the brand as a threat to the tea drinking population; rather they placed the stores strategically. The choice of ingredients in the beverages is the most important impact of cultural acceptance displayed by. The company used local ingredients to engaded the target market (Qian and Xing 2016).
Managing the people: One of the strategies that the company employee while expansion is training the people with the best baristas. This is in order to maintain the originality in the brand the company sends expert baristas to the local stores where they can look after the operations in order to maintain a global standard (Wang 2012).
Localised menu: though the company stands to follow the global footprint they have a local menu which encourages the people to explore the options. Starbucks understood the importance of this aspect and developed a menu for the Chinese market which could cater to both traditional as well as experimental people (Qian and Xing 2016).
Understanding the market: The company with the help of market research as discussed above also gathered insights regarding the way the society works in china (Qian and Xing 2016). They discovered that the market is very different form one part of the country to another. In order to deal with this complexity the company partnered with several local partners. Starbucks agreed upon a joint-venture with Beijing Mei Da coffee company to deal with the northern parts of the country (Wang 2012). Taiwan-based company Uni-President was partnered with in order to establish the eastern market and Maxim’s Caterers a Hong Kong based organisation joined the partnership to focus on the southern market (Lin 2012). It is the eastern region that the company is bought 100 shares from the partners in 2018, taking complete control over the stores that was set up in this joint venture.
Thus it can be concluded that despite having difference in the host country and the country of origin the company had strategies formulated to bridge the gap rather than focusing on what was difference, the company took the chance and ensured a successful venture (Qian and Xing 2016).
A leader is an individual who is responsible for others not only to drive them towards the collective goal but also to support and participate in the process. Understanding a person in the team and deal with the individual’s issues and grievances are the role of a leader or a manager. Managers that operate in a multinational company that encourages inclusive work culture have to maintain similar stands.
The Hofstede model is like a guide to the mangers in this case, it prepares a leader to analyses and understands the culture thereby developing an understanding of the individual’s culture and the difference that is being created. It can not only solve conflicts within the team it can also help the management of the company understand the needs and requirement of the customers. It not only helps in the expansion strategy it also guides the leaders of the organisation to focus on the difference and develop strategies to bridge the gap.
Some of the personal adaptations that are required for an individual to manage a cross cultural team successfully are:
Communication: any organisation works in the aspect of effective communication, as a cross-cultural team, there are chances that there is a gap in understanding the language. Or there is certain gestural communication that is misinterpreted as there are differences in the interpretation of the same gesture form one culture to another. These are some of the examples of the barriers in communication that might create in a cross cultural team. Therefore, it is important for a manager to understand the cultural background of each of the team members in order to avoid these issues. Promoting open communication is a solution to these issues. Generally, the workers and official s are uneasy in different work culture and environment (Pudelko, Tenzer and Harzing 2014). In MNC’s the level of communication determines the business life or death. The communication system must be open and flexible to maintain the relation between different countries and nations (Martin and Nakayama 2013).
Get to know the team members- it is important for the official heads, team leaders to know the workers and their journey so that they can manipulate , encourage and support the workers to understand the job role and motivate them to give their best in the organization. It is very important for the employees to know each other to create an understanding work system and thus maintain a balance in their work life. For example, in the case of Starbucks the company sends their experts to train the new people and also to get to know them. The employees must work mutually to improve the production quality and standard of their business (Klitmøller and Lauring 2013).
Embrace diversity- a diverse workforce included challenges like difference in culture, regions, customs, communication (Samovaret al 2014). It is extremely important to accept and embrace the difference across the business. A well-defined business system includes diversity in every aspect. It is extremely humble to open the business scope for every culture and caste and allow him or her to exchange his or her work culture and strategy with the present culture (Laukkanen et al 2013.). Promoting diversity requires a mutual effort from all the sides thus allowing all the castes to meet and confront each other at every stage.
The business must take steps to retain cultural diversity- the business must make sure that all the workers are getting equal respect and position in the work area. There will be a huge gap and crisis if the work culture has not adopted the life style culture of the native region. The cross culture business with different culture will have to adopt the culture of the trading country s the customers and employees will belong from that particular culture (McShane and Von Glinow 2013). The employees must feel free to work and communicate in the work area and hence the work quality and production level will be uplifted automatically.
Creating clear norms and maintaining them- the multicultural team with a diverse number of workers will have various issues in their work life. Thus to reduce the chances of problems and difficult in the workers life the business must adopt clear and simple rules and maintain them. The business must consider the rules equal for everyone and no discrimination should be done based on class, caste or culture (Mensah and Chen 2013). A peaceful and well-maintained working place can always enhance the work life of the employees and thus reduce the work pressure.
Work to build personal bonds- the business should work on the strategies to build good relation among the employees. Initially it would be difficult for the employees coming from different background to interact and work among each other. If the business takes up the responsibility to make the employees communicate with each other, it will be beneficial for the business and the employees. A mutual understanding and co-ordination among the employees will the help business to expand in future and a working environment in the work place(Moran, Abramson and Moran 2014.).
Creating structure for cross culture management – The business should create a special structure that treats all the culture and religions equally. They should maintain strategy that supports cross culture work system and enhances the chances of mutual work and teamwork. The business must make sure that there policy is not offending and culture or system. they should support a clear access to the resources with any misunderstandings and doubt. The business might face conflict and chaos that will affect the production quantity and quality.
There are several organisations that use the competency model in order to understand individual behavior and to manage the performance of the people. There are a number of aspects in the competency model which makes it effective at the same time complex. Management can customize the aspects in the model aligning it with the operations off the business in order to meet the requirement of the company.
Conclusion
It can be concluded form the above discussion that globalization has enabled the business environment achieve global recognition and reach out to larger target market. It has higher scope for profit and expansion. However, the business might face few issues in the work time. The above study has completed a detailed study on cross culture business. The first part of the study has defined the positive and negative impact of cross culture business with the help of Hofstede model. Two examples are used in the assignment to observe a success and failure case of cross cultural expansion. In the case of Burberry the factors that impact the failure is the nature of the products and industry being in conflict with the culture of the country. On the contrary the success of Starbucks is in the acceptance of the difference and strategizing accordingly to meet the need of the market. The last part has shown the importance of adaptation of strategies to maintain healthy and peaceful work culture in cross culture business. A business that has followed the following measures has high scope for expansion in the global business sys tem with a cross culture business.
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