Hofstede Country Analysis - Case Study Example

Hofstede Analysis Introduction Using the Geert Hofstede cultural dimensional theory I find that Mexico is not a good business proposition for countries like USA to invest in. The Hofstede theory has been discussed below. 2. Power Distance Index (PDI) a) Definition1 – The first index i.e. Power Distance Index provides outlook on the degree of acceptance of expectation and acceptance of power distribution among the various organizations of the country. The organizations and institutions include the smallest unit of the society like a family. Countries that demonstrate low power distance exhibit a more democratic and consultative form of expectation and acceptance of power relations between the organizations and institutions. Whereas in cases of countries that are marked by high power distance, the lesser powerful sections of the society are prone to expect and accept a powerful autocratic force which acts in paternalistic format and is not in favor of democratic rights of the lesser powerful. b) Ranking2 – The ranking of Mexico 81 suggests that Mexican society experiences lesser degree in distribution of power and wealth. The general mass of the society expects and accepts the superiority of few and has to live with the socio-cultural set-up of the society that has the concentration of power and wealth in few hands. c) Comparison of ranking with USA – As compared to the ranking of 81 in case of Mexico the rank of USA is 40. This is very significant difference between the two nations. d) Analysis of the difference in ranking – Over 40 ranks differentiates USA from Mexico which means that while in Mexico workplace there is a marked difference between superiors and subordinates and both consider themselves different from one another. While in USA the process of work tends to be bit more democratic and subordinates are expected to provide their views to management. 3. Individualism a. Definition3 – individualism outlines the degree of integration of groups among individuals of the society. Individualistic societies are marked by higher degree of stress put on individualistic nature and personal achievements. On the other end of individualistic societies, we find collective societies which are dominated by individuals who remain part of a common group, which are generally marked by huge extended familial ties and relations. b. Ranking4 – The ranking of Mexico 30 which clearly outlines the state of individualism in the Mexican society which is marked by higher degree of collective groups than reliance on the achievements of individuals. c. Comparison of ranking with USA – As compared to the ranking of 30 in case of Mexico the rank of USA is 91. d. Analysis of the difference in ranking – The work culture and business systems of individualistic society tend to do business on performance basis contracts whereas in collectivistic society like Mexico the business is usually carried out through family links. 4. Uncertainty Avoidance Index a. Definition5 - This defines the society’s tolerance or the lack of the same for uncertainty and ambiguity. It is reflective of the degree of extent to which the societal members are prone to reduce uncertainty. This is generally done by way of heavy incidence of rules, regulations and laws. On the contrary cultures which accept low uncertainty situations are comfortable with change in environment and are generally not in the need for higher degree of rules and regulation and therefore are more tolerant to change and innovation. b. Ranking6 - The uncertainty avoidance ranking of Mexico is 82. This indicates that Mexican culture is lesser inclined to accept uncertainty and have control through presence of high presence of rules and regulations. c. Comparison of ranking with USA – As compared to the ranking of 82 in case of Mexico the rank of USA is 46. d. Analysis of difference in ranking – The higher rank of Mexico in uncertainty avoidance indicates that Mexican society as a whole is more aggressive, emotional, and compulsive and seeks security through consistency and avoidance of change. Whereas USA culture exhibits higher incidences of controlled behavior, higher pragmatism, acceptance of personal risks, and are relatively more tolerant to change and innovation. 5. Career Success / Quality of Life a. Definition 7 - The Career Success/Quality of Life is often refereed to as Masculinity Index which refers to the degree and extent of distribution of roles between the genders of the society. Countries that place higher value on masculinity emphasize of values like higher degree of competitive attitude, ambition, power struggles, materialistic outlook, etc. On the other hand nations which are identified with feminist culture tend to favor more emotional and dramatic values. b. Ranking8 - The ranking of Masculinity Index of Mexico is 69 which indicate that the male society is the significant force in the society. The roles of feminine society are limited in scope. c. Comparison of ranking with USA - As compared to the ranking of 69 in case of Mexico the rank of USA is 62. d. Analysis of difference in ranking – Though there is not much difference in Masculinity ranking between Mexico and USA, by and large society with higher masculine cultures tend to be more decisive and are of assertive nature. In the business conditions feminine cultures use more incidences of consensus and team building. However, there is not much difference between Mexico and USA in terms of Masculinity ranking. 5. Long term/short term orientation a. Definition9 - This index was earlier refereed to as “Confucian dynamism”, which defines the outlook f the society .ie, whether the societies outlook is long-term or short term. Long term society tend to favor decisions which are pragmatic, persistence and innovative. Short term society culture tend to favor traditional approach to work, more importance in paid on fulfilling social obligations, etc. b. Ranking 10 - The ranking of Long Term/Short Term Orientation ranking is not available so I have taken the ranking of Brazil a Latin American country with similar culture. The ranking of Brazil is 65. c. Comparison of ranking with USA - As compared to the ranking of 65 in case of Brazil the rank of USA is 25. d. Analysis of difference in ranking – The huge difference in the ranking of Brazil (taken in place of Mexico) and USA means that USA is more long term oriented and hence business decisions are perseverance for results, lesser incidence of savings, and acceptance of innovation. While Brazil and similar countries like Mexico is more prone to take decisions on the basis of short-term outlook. 6. Other dimensions: Fons Trompenaars11 dimension of cross cultural model addresses through the concept of Universalism vs. particularism, Individualism vs. collectivism, Neutral vs. emotional, Specific vs. diffuse, Achievement vs. ascription, Sequential vs. synchronic and Internal vs. external control. These seven attributes help to explain the differences in cultures through Fons Trompenaars. 7. Population Demographics Mexico having 112,336,538 of population in 2010, the most of the inhabitants use to speak Spanish. It is the most populated Spanish speaking country in the world where as the second most Spanish speaking populated country in the world is Latin America after Portuguese speaking Brazil. a. Language - The official language of the country is Spanish with the different style, variety and accents and further variation in accent as per variance in region with in the country. In 2001 the country published the Law of Linguistic Rights, which declared the 62 indigenous languages with in the Mexico only as the national language of the Mexico which used to spoken in the country. . b. Ethnic Groups – Mainly three ethnic groups have been observed in all over the Mexico that is the indigenous, Mestizo and the European which originally founded from the indigenous group. Mestizo is most populated group in Mexico which neither adopt the typical indigenous cultures, heritage and norms nor they are quite non Mexican, but they are following the community system for heritage, cultures and norms which ultimately relates with the Europeans. Indigenous group of people are the indigenous groups of people who adopt the local culture and heritage and believe on that. This is the local population of the Mexico which has been published the Law of Linguistic Rights as a national language of Spanish with the little variance in accents and style as per practice implementing in their regions. Other Ethnic Groups includes many other foreigners living in all over the Mexico including Chinese, Japanese, Lebanese, Syrian, Puebla and Yucatan. Who are living their standardized life as per their hometown origin’s culture while a little bit adopting the typical culture of the Mexico. c. Religion – According to the survey conduct in 2010, the maximum population claim to be catholic as per census records 83.9% while the only 46% of the population visit the church for prayer on Sundays. Almost 5.2% of the inhabitants claim to be protestant whereas the 2.1% classified as non-evangelical biblical, the 0.05% practicing the education of Jews and the only 2.5% living without religion. d. Genetics – The study presented by the American Society of Human Genetics, based on genes, showing that approximately there are 58.96% peoples are genetically European 35.05% of people Amerindian and 5.03% people are African genetically. The region Sonora having a largest European contribution of 70.63% and Geurrero the lowest 51.98% where the Amerindian having the 37.17% whereas the African contribution 2.8% in Sonora to 11.13% to Veracruz. Almost 80% of the Mexican population is Mestizo which defines as they are adopting the culture of some other countries. 8. Economy of Mexico a. The economy and employment continue to grow The economy grew 7.9 percent in real terms during the first quarter of the year in comparison to the same period of 1999, marking the 17th consecutive quarter of growth. Thanks to the strength of the economy, 208,578 formal jobs were created in the first quarter of 2000, while the open unemployment rate was at 2.3 percent for the same period; this is the lowest rate since this indicator started to be measured in 1985. In addition, during the first two months of the year, the average real salary in the manufacturing industry increased by an annual rate of 4.6 percent; in the maquiladora industry by 4.9 percent; in wholesale commerce by 6.5 percent and by 5.7 percent in retail sales. b. Other indicators also show the strength of the Mexican economy. During the past few years, the foundations of our economy have been strengthened. Accumulated inflation for January-April was 3.4 percent, which is the lowest for a similar period in the last six years. Thus, the annual inflation rate reached one digit (9.73 percent). In this regard, the announcement that the Bank of Mexico made on May 16th to the effect that it is increasing the withdrawal of currency in circulation from 180 to 200 million pesos, reaffirms the commitment to strengthen the downward trend of inflation. This figure is consistent with the projected inflation of 10 percent for this year. p = projected The trade deficit has been kept to moderate levels which can be financed soundly. The January-March trade deficit was 1,339 million dollars, which, although greater than that reported during the first quarter of last year, is less than the one for the first quarter of 1998 and 1994 by 22.7 and 68.8 percent, respectively. The deficit in the current account as a proportion of GDP remains moderate and congruent with the availability of long term financial resources. In 1999, foreign direct investment financed more than 80 percent of this deficit. Between January 1994 and December 1999, Mexico received more than 70 thousand million dollars in foreign direct investment and, in the first quarter of 2000, this rose to more than 3,000 million dollars, remaining one of the foremost recipients of foreign direct investment among the developing nations. c. Public finances remain sound Public finances remain sound. The public balance reported a surplus of 5,809 million pesos, which is 25.2 percent greater in real terms than the surplus of the first quarter of 1999. The positive balance is congruent with the annual goal of a public deficit equivalent to one percent of the GDP. Tax Revenue increased. The noteworthy real increase in collection of income and added value taxes of 9.3 and 8.9 percent, respectively, is a result both of the dynamism of economic activity, as well as of the fiscal reform that went into effect in 1999. Public expenditure focused on social development. 64.3 percent of the programmable budget was devoted to social development functions, which means a real increase of 12.5 percent with regard to the first quarter of the previous year. Among the main results of the Programs to Promote Social Welfare, we might note the following: Through Progresa, 2,025,000 scholarships were given out; Through the Broadened Coverage Program, health care services were given to 7,100,000 people who had little or no access to them; The Program of Direct Support to the Countryside (Procampo) provided production assistance on 1,609,000 hectares of non-irrigated crops, benefiting peasants of low resources; With the Free Tortilla Program, 1,240,000 families were benefited on a daily basis. Public sector debt. During the first three months of the year, positive results were obtained. In terms of foreign debt, we might note, on the one hand, that our nation’s long term sovereign debt has received for the first time from an international classifying agency what is known as investment grade. In terms of internal debt, for the first time fixed rate bonds for a three year period were issued, and have been well received by the investing public in all three series made available during the quarter. d. Consolidation of the Mexican Banking System Last April, the Honorable Congress of the Union approved two reforms which are basic for the consolidation of the Mexican banking system: the Mercantile Bankruptcy Law and the Fiscal Package on Credit Guarantees. The Mercantile Bankruptcy Law takes the place of the previous Bankruptcy and Suspension of Payments Law in effect since 1943, which was obsolete for the current functioning of businesses. The main objective of the new legislation is to maximize the value of the businesses facing financial difficulties, to promote their viability and, whenever possible, to keep them operating as a source of employment. This new legal framework manages to balance the rights of the debtor companies with those of their creditors so as to protect them both on an equal basis. The new law expedites the bankruptcy process and promotes the restructuring of debts according to the practices used in most countries. Likewise, companies will no longer be able declare themselves in “suspension of payment” as a precautionary measure before declaring bankruptcy. The creation of a Federal Institute of Specialists in Mercantile Bankruptcy, which will provide technical assistance, is one of the outstanding innovations of the new Law; in addition, we might note that the conciliation period has a set duration of 185 days and, in extraordinary circumstances, up to one year. In turn, the legislation on Credit Guarantees, which includes reforms to various laws and the Commercial Code, provides greater legal security both to debtors and to creditors and offers new plans for credit guarantees through the creation of an optional mechanism. The new legislation establishes two new legal figures: the asset without transferal of possession and the guarantee trust fund. In the first case, the economic agents may use as collateral any kind of asset they possess (work capital, production goods or any other one used in production and sale). However, the debtor maintains legal and physical possession of the goods offered as collateral. 9. Conclusion – The society of Mexico and USA are prominently dissimilar as per the Geert Hofstede cultural dimensions theory. The outlook of business being vastly divergent between the two nations, it is not easy for USA to do business in Mexico. The nations are divergent in a number of indexes like Personal Distance, Individualism, Uncertainty Avoidance and Long term/Short Term orientation. The differences in cultures as suitably pointed out through the rankings makes business between the two nations prone to difficulties. Hence, the Mexico would not be an easy nation to do business for USA and other nations. 10. References Geert hofstede’s model. (2003). Retrieved from http://radio-weblogs.com/0107127/stories/2003/01/16/cultureGeertHofstedesModel.html Geert hofstede™ cultural dimensions. (2009). Retrieved from http://www.geert-hofstede.com/hofstede_mexico.shtml Geert hofstede™ cultural dimensions. (2009). Retrieved fromhttp://www.geert-hofstede.com/hofstede_brazil.shtm What are fons trompenaars cultural dimensions?. (2010). 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