The Findings of Trompenaar and Hofstedes Cultural Studied - Assignment Example

Q1 - Discuss the findings of Trompenaar and Hofstede’s Cultural Studied In the face of rapid globalization and high level of cross-cultural dealings, cultural sensitivity and awareness of cultural differences has become a prerequisite for success in international business. Companies today have realized that to succeed in the global market place, a high level of awareness and a deep insight is required of the cross- cultural differences existing across the world (Broek, 2005). While there are various models and theories, which attempts to explain cross cultural differences, some well established explanations of national culture can be found in Geert Hofstede’s Indices of Work Related Values and Fons Trompenaar & Charles Hampden-Turner’s model of Seven Dimensions of Culture. As per Hofstede, culture is “collective programming of the mind which distinguishes the members of one human group from another” (Hofstede, 1984. Page 21). The four dimensions of his Value Survey Model included Power Distance, Individualism, Masculinity, and Uncertainty Avoidance. Trompannars and Hampden-Turners model which shares some parallels with Hofstede’s dimensions, consist of seven dimensions which include Universalism vs. Particularism; Neutrality vs. Affectivism; Collectivism vs. Individualism; Specific vs. Diffused; Achieved status vs. Ascribed status; Sequential time vs. Synchronal time and Internal vs. External orientation. The dimension of Power Distance is a dimension which measures the degree to which people respect authority. The differences in power distance will carry implications to international managers where the importance placed upon respect for structure and hierarchy as well as status protocols differs as per the level of power distance. American cultures are mid range while Australia and the Scandinavian cultures are low in power distance. Arabs and South Americans are very high on power distance orientation. Power distance has some common features with Trompannars dimension of Achieved status vs. Ascribed status. As per this dimension, a person’s status in the society is considered by whether it was achieved through own effort or whether it was ascribed or inherited. In an ascribing culture as Japanese culture, seniority, age, gender is important in determining the status. As per Kinichie Ohmae "there is no fast track for brilliant performers. No one reaches a senior management post before the mid-fifties, and chief executives are typically over 60." (Ohmae, 1982). In contrast cultures as American or Australians, self made people are given much recognition. Considering the implications of Uncertainty avoidance dimension, International managers will need to take this factor in to consideration in negotiations, business decisions as well as business risk assessments in cross cultural settings. Americans rate among the lowest uncertainty avoiders and seek innovation, risk taking and welcoming outsiders. Japanese is the highest uncertainty avoiding culture with an indices value of 92 (Hofstede, 2001). This dimension has parallels with Trompannars dimension of Universalism vs. Particularism. Universalism places greater importance upon the rules and procedures in the society while the particularism focus on the circumstances involved when making decisions (Trompenaar & Hampden-Turner, 1998). For example, Japanese culture which is highly governed by implicit and explicit rules will not take the situation and the circumstances in to consideration. Thus, in doing business, in executing contracts and policies, Japanese will be more rigid compared to their American counterparts (Ford & Honeycutt, 1992). Individualism vs. collectivism, which is also common to the Trompannars model, refers to the group orientation vs. the individualistic orientation. Individual cultures are more focused on the self and personal achievements while collective cultures are more concerned of the in group they belong to. These differences should be bone in mind when implementing reward systems, performance targets and design work groups and organisational structures. In Japan or Arab countries, the commitment to the organisation is high and collective decision making is commons (Cohen, 2006). USA, Australia and most of European countries are high on individualism. Masculinity vs. Feminity is the last dimension of Hofstede’s model, which sets cultures apart. Japan’s culture is rated highest in this dimension as a masculine culture while America falls in mid range. Some of the European cultures such as the Scandinavian cultures are rated highly feminine. Masculinity versus its opposite, femininity refers to “assertiveness and competitiveness versus modesty and caring” (Hofstede & Peterson, 2000, page. 401). This may affect the people vs., task orientation displayed by managers in different cultures. Neutrality vs. Affectivism as well as Specific vs. Diffused dimensions has close alignment in the Trompennar’s model. They refer to the degree to which people display their emotions and the nature of relationships. While Neutral cultures may still possess a high level of emotions their public display will be low compared to highly expressive cultures (Trompenaar & Hampden-Turner, 1998). The specific and diffused dimension gauges the nature of relationships based on the private and public spaces of a person and the relationships (Trompenaar & Hampden-Turner, 1998). The official hierarchy does not apply in other social settings. However in highly diffused cultures as Japanese culture the work and private life is entwines (Broek, 2005). Trompennar’s model also addresses the cultural differences involved in perceiving time as Sequential vs. Synchronal manner. Some cultures tend to comprehend time a sequential and linear perspective where sequential perceptions place importance on punctuality, sequence of operations and speedy actions (Trompenaar & Hampden-Turner, 1998). However those cultures which interpret time in secular, seasonal perspective sees possibility of attending to multi tasks at the same time and retaining past and present linked to future. Internal vs. External orientation refers to the perception towards nature where fatalism vs. ability to control nature is differentiated. Some cultures believe in nature of things while other cultures want to alter the nature of things. These differences may be reflected in the large scale projects undertaken by some countries to control and overcome natural obstacles than giving in to them. While the knowledge and understanding of cross cultural differences can be a source of advantage to manage cross cultural relationships, work forces and business dealings, the implications of these dimensions have their own inherent limitations. Hofsted’s and Trompennar’s studies were done almost 2 decades back and many scholars have indicated towards evidence of cultural congruence and shift of values. This is greatly facilitated by the process of globalization. For instance, more and more collectivist societies are now embracing capitalism and individualism. Similarly, we see companies such as Google promoting team work than individual achievement in Western societies. Hence, the applicability of such cultural demarcations may vanish over time. In conclusion, cross-cultural dimension models offer a useful lens to view of different cultures, which can be converted in to a source of competitive advantage if understood and exploited to the company’s advantage. As culture is a key factor in gaining an insight in to how people behave in different countries, their preferences, attitudes, values and beliefs, it is important to understand the underlying national cultures which shape each nation’s interrelations including business dealings. Q 2 - The complex global business environment poses many challenges to an International Manager. Using an Open Systems Model approach, discuss the complexities of internationalization facing an International Manager. Use examples to support discussion Internationalization is a process which is wide spread in today’s globalized business environment where imperative of scale, many businesses are engaged in international business. Businesses that conduct international trade or engage in international investments are considered international businesses and managers of such firms face complexities and managerial challenges which are different from that of managing a domestic firm. At the root cause of such complexities lies the simple fact that countries are different in terms of social, cultural, political, economic and legal aspects (Hill, 2003). In addition to these factors affecting international business, managing international business also has decisions which are particularly relevant to international business. For instance, international managers must seek out locations that offer cost advantages, strategic advantages and best value addition. The markets and production decisions as well as operational decisions are other important aspects warranting the attention of the international managers. These decisions need to be taken in view of dynamic changes within the global environment and not constrained to the internal environment of the organisational. The managers handling international business should therefore embrace an open system approach where there is a continuous interaction, feedbacks and modifications of business activities in view of the environmental changes outside the boundary of the organisation (Heil, 2010). An open system model is derived from the systems theory which differentiates between a closed and open system. In the case of a closed system, there is no interaction between what is within the system boundary and what is in the outside environment. An open system on the other hand, continuously interacts with its environment. When it comes to business management context, this interaction is mainly in the form of information although, it can be energy or material transfer between a system and its environment , depending upon whether it is a biological, social or mechanical system in question. Considering the key factors in global business environment which impinges upon international business, political differences is one of the main concerns. When it comes to political differences, it can be in terms of the political ideologies which are prevailing in a country as well as the political stability of the country. In some countries, there is a capitalist political stance while in others, socialist or communist political orientations are present. Foreign business investments are largely affected by the political factors within a country. For example, when Saudi Arabia remained a non-member of the WTO and remained a closed economy, there was little interest in increasing FDI to this country. But with the joining of the WTO in 2005, Saudi Arabia had changed its political views of the process of internationalization and open economies. Today it is one of the most popular FDI locations in the entire world, commanding a total inbound FDI investment of over US$ 35.5 billion (National Competitiveness Council, 2010). Economic factors also pose challenging environment to decision makers. Some countries has less developed poorly supported and highly fluctuating economies and associated weak currencies. The forecasts can be affected adversely with unforeseen currency fluctuations while economic risk through high inflation can also affect international business dealings. Doing business in Russia, Turkey and few of the African countries such as Nigeria was deemed highly risky for international ventures, in the past decade (Hill, 2003). International managers need to constantly be alert to economic trends, currency fluctuations and incorporate the information received from the business environment into the decision making process. Some forms of currency buffers and hedging may be required when large scale transactions are involved. Social & Cultural factors are one of the most critical implications which international managers need to manage. The cultural literacy will consist of the awareness of cultural difference, and the ability to appreciate how such differences would impact the organization’s own operations. With such understanding, the managers could modify, localize or culturally adapt to the required scenario. Such a high level of cultural literacy is a core competency in successful international managers and specially those who are deployed as expatriates to manage foreign location operations and provide leadership to a workforce of a different culture (House et. al., 2004; Javidan and Carl, 2004). Finally, the legal environment of the foreign locations, with which the international managers interact with also pose a set of complexities and challenges which needs to be dealt with. There are different labour laws, corporate laws, investment laws, financial laws etc. and the entire business operation and its linkages should be put in perception before decisions to locate production facilities or to enter markets is made. For example, in the 1970’s, when the Indian government issued a law which required all foreign investments to have a local joint venture partner, companies such as IBM and Coca Cola exited this market as they felt the copy write and intellectual property protection was lacking in the country (Hill, 2003). Similarly, in some countries, the labour laws are highly stringent while in most of the third world countries, the labour laws are lenient enough to facilitate deriving production cost advantages. When it comes to financial laws, some countries have very strict foreign currency repatriation policies and laws. By choosing FDI destinations which allow for full repatriation of profits and tax holidays, the value addition and profitability of ventures can be increased. Considering all the issues and complexities faced by international managers, it is obvious that a high level of dynamism and openness to change needs to be maintained to absorb the changing conditions and differences in various business destinations across the world. From the strength of money market to the working practices of the employees and the laws governing business, there are vast differences among different countries. Hence, it is critical that managers engaging in international businesses stay attuned to the global business environment and recognize these differences and the implications they carry for their business. References: Broek, V. V. (2005) The Affects of National Culture on Business-to-Business Relationships Available from: http://alexandria.tue.nl/extra2/afstversl/tm/vbroek2005.pdf. [29.11.2010] Cohen, A. (2006). The relationship between multiple commitments and organizational citizenship behavior in Arab and Jewish culture. Journal of Vocational Behavior, 69, 105-11 Ford, J.B. & Honeycutt, E. D. Jr. (1992) Japanese national culture as a basis for understanding Japanese business practices. Available from: http://www.findarticles.com/p/articles/mi_m1038/is_n6_v35/ai_13246882 [29.11.2010] Hofstede, G. & Peterson, M.F. (2000)” National values and organizational practices in N. M. Ashkanasy”, C. P. M. Wilderom & M. F. Peterson (Eds.) op. cit., 401-405. Hofstede, G. (1984). “Culture's consequences: international differences in work-related values”, Beverly Hills CA: Sage Publications. 1984. Hofstede, G. (2001) “Cultures Consequence: Comparing Values, Behaviours, Institutions and Organisations across nations”. London: Sage Publications Ltd. Heil, K. (2010) Open And Closed Systems. Http://Www.Enotes.Com/Management-Encyclopedia/Open-Closed-Systems. [30.11.2010] Hill, C.W.L. (2003), “International Business: Competing in the Global Market Plac”, 4th ed. New York: McGraw-Hill Publishing Company Ltd. National Competitiveness Council. (2010). Annual report of FDI Saudi Arabia 2010. Available from: http://www.saudincc.org.sa/Information/Download-NCC-reports/Annual-Report-of-FDI-SAUDI-ARABIA-2010.aspx [29.11.2010] Ohmae, K. (1982) The Mind of the Strategist. Middlesex: Penguin Books Ltd. Trompannars, F. & Hampden-Turner, C. (1998) “Riding the Wave of Culture: Understanding Diversity in Global Business”. 2nd ed. New York: McGraw Hill Companies. Validity of multidimensional model of commitment in Europe. Journal of Cross-Cultural Psychology, 32 JAVIDAN, M., AND D. CARL. ( June 2004) ‘East Meets West: Searching for the Etic in Leadership’. Journal of Management Studies Vol 41, no 4, pp665–691. HOUSE, J. R., HANGES J. P., MANSOUR, J., DORFMAN, J. P., & GUPTA, V. (2004) Culture, Leadership, and Organizations, Illustrative Examples of GLOBE Findings, VoL 3, No 1, pp51. Read More