Hofstede and Cultural Issues for Multinational Corporation - Essay Example

Doing Business in India: Cultural Issues for Vodafone Submitted by: Submitted] I. Hofstede and Cultural Issues for Multinational Corporation Entry into India Vodafone, the largest mobile telecommunications network company in the world by turnover and has headquarters in UK, agreed to acquire a controlling interest of India’s Hutch Essar Febraury 11, 2007. Hutchison Essar is a major national cellular operator in India that covers most of the country. With about 18.4 million customers, the company is one of the most reputed telecom companies in India. (Business News Online, 2007) The control of a local company by a foreign one entails with it cultural issues that Hofstede classified into five dimensions. Using these five dimensions, this study aims to identify cultural issues that may arise from the employees of Vodafone and Hutchison Essar. This study also aims to provide a critique of Hofstede’s claims to determine its applicability and reliability on assessing this kind of analysis. According to Hofstede’s study of national influences, there are five dimensions of culture: a) Power distance or the degree to which the less powerful members of society expect differences in the levels of power, b) Individualism vs. collectivism which tackles the extent to which people are expected to stand up for themselves, c) Masculinity vs. femininity which refers to the value placed on traditionally male or female values, d) Uncertainty avoidance which reflects the extent to which a society attempts to cope with anxiety by minimizing uncertainty and e) Long vs. short term orientation which describes a societys "time horizon," or the importance attached to the future versus the past and present. Based on this five dimensions, Hofstede were able to attribute a score for each dimension to a particular county though some lacked scores in the fifth dimension because this was a later addition to the original four dimensions. (Hofstede and Hofstede, 2005). We will be using the scores of both countries to help facilitate our analysis. Power Distance India has Power Distance Index (PDI) score of 77 compared to UK’s 35. The high score for India is attributed to the fact that there exist social hierarchies called castes in Indian society and the large economic gap between the different caste levels. Placing it into an organizational perspective, it can be expected that there is wider salary differentials for different levels of position in an Indian organization as compared to a British one. Managers in the UK are more probable to consult their subordinates because they have a greater sense of equality than Indians who expect that their decisions are followed with minimal questions from subordinates. Due to the great importance given to status and privilege, Vodafone should expect certain events occurring among the employees of Hutchison Essar. For example, conflicts may arise such as qualms of a higher caste person placed under the directive of a lower caste manager as pointed out in the study of Communicaid (2004). This may seem trivial to a foreign company such as Vodafone which bases its promotion to performance rather than societal status or ranking of a person. Vodafone could face employees who are unwilling to recognize a lower caste superior and these persons may sabotage the whole operation. On the other side of the coin, they may find it difficult to persuade highly qualified lower caste persons to assume higher positions because of their fear of retribution from the higher castes that the person will be governing. There is also the scenario that Vodafone may be the focus of criticism if they employ high caste persons in high ranking positions thereby lowering their appeal to consumers majority of which are from the lower castes. Trainers or managers from the United Kingdom, who are expected to handle Vodafone’s operation of Hutchison Essar especially in the integration phase, may find it difficult to deal with higher caste people as these people perceive themselves as above all. They may demand respect, higher wages, higher titles and more privileges and benefits than the ordinary. Offending them may bring upon retribution, in the form of criticism and boycott, from the populace or those belonging to their caste level. One may imagine a scenario, though this is quite extreme, where an employee slams on his desk and remark that he is from this certain high caste and should be treated as one. Individualism vs. Collectivism With regards to this criterion , India scores 48 while the United Kingdom scores 89 implying that UK employees tends to be more individualistic as compared to their Indian counterparts who places more importance to the interest of the group rather than their own self. Indian employees under UK managers may find it pleasing to feel that they are given importance individually leading to increased competitiveness and productivity among the employees. Individualism is perceivably high in Western Countries than India. However, British managers may take advantage of the Indians tendency to act more as a member of a group or organization as team building efforts may not be that intensive. Remember that corporations generally require their employees to work together as a team so that there is harmony in the workplace. People who have the necessary background and competence for the job but is very individualistic may become liabilities if they don’t know how to interact with their workmates. Indians may prove to be more cooperative with each other. However, on the negative light, higher tendency to associate one’s self with groups may cause the employee to favor working with persons who belong to the same caste. This may result to divisiveness in Hutchinson Essar. Misunderstandings that could have been resolved easily in a British Vodafone workplace may become amplified by the formation of groups defending and supporting their beleaguered caste member. Despite gradual changes in societal values, respect for age, loyalty to ones family, community or group, and practice of certain religious rituals are still observed in Indian work-settings, in varying degrees so that the UK manager must stress that they must learn to value the company as they value their social groups. Uncertainty Avoidance Indias score for Uncertainty Avoidance is 40, compared to UK’s 35. In this criterion, we see that there is not much difference between the two countries. According to Hofstede, cultures that scored high in uncertainty avoidance prefer rules (e.g. about religion and food) and structured circumstances, and employees tend to remain longer with their present employer. A low score means that the culture is flexible and is open to new ideas. With the difference at a minimum, the British should find their Indian counterparts more agreeable and easier to work with. However, there is a negative side of low Uncertainty Avoidance score. According to Hofstede, this criterion is also related to the length of time an employee wants to stay in the company. However, since both nationalities are similar in this respect, Vodafone should be able to handle this in the same way they handle their British employees. Long Term Orientation In long term oriented societies, thrift and perseverance are valued more. In short term oriented societies, respect for tradition and reciprocation of gifts and favors are valued more. India scored especially high here with a score of 61 compared with UK’s 29. The British may find the Indians a very eager and productive populace willing to strive for the best and willing to rise from the ranks. Not placing much importance in the reciprocation of gifts implies that the Indian is less corruptible and are more honest in their dealings. Indians, however, may find the British luxurious and relaxed. This could lead to them being alienated and wary of the spending abilities of the British. Masculinity India has Masculinity 56 while the UK has 66. The British and Indian people both value masculine characteristics such as competitiveness, assertiveness, ambition and the accumulation of wealth and material possessions as indicated by their high scores. This works for Vodafone as they can expect an Indian workforce which is as dedicated as the British one. Summary All in all, we see that the British tends to be more autonomous and flexible in their work as compared to a collective and stringent working environment in India. Nonetheless, both are enterprising and very dedicated to their work. Some compromise and toleration must be observed by both sides. II. Reflect critically on the cultural ideas you have introduced and used in your answer in part 1. The question now that concerns us is whether Hofstede’s analysis holds water. Or does it have inconsistencies that make it unreliable. Hofstede came up with his five dimensions and scores with samples taken only from a single company – IBM (Hofstede, (1980). McSweeney (2002) points out, and I agree with him, that generalizing results from IBM employees to a global scale is unthinkable because there are no evidence-based reasons for assuming that the average IBM responses reflected ‘the’ national average. This becomes clearer with the knowledge that the respondents were mostly from the middle class and not representative of the local culture as Robinson (1983) pointed out. What could be our assurance that these respondents were not influenced by the IBM company or philosophy. Cultures also change over time (Triandis, 2004). Thus, we ask, will the claims of Hofstede which was based on surveys conducted decades ago be applicable today? Of course, one might argue that culture does not change abruptly but then again, look at what is happening to the world today. With the increased global access to information, much of the world today is experiencing changing values and norms. Globalization involves not only increased trade and an increased scope for multinational companies but also the dissemination of ideas and values. We can therefore expect that Hofstede’s claims may already be obsolete today. Furthermore, the claim that British employees tend to be more individualistic is not evident in structured, organized and team oriented Vodafone. The caste system, which is the source for the high Power Distribution of India has been declared illegal. Thus, we can expect that in the near future, India’s score in that regard will be lower. In effect, we see that Hofstede’s analysis is only suitable in gaing a bird’s eye view of the situation and should not serve as the sole basis of management planning alone. References: Communicaid Global Communication (2004). Doing Business in India: Indian Social and Business Culture. Communicaid Publishing: New York Hofstede, G. (1980). ‘Motivation, leadership, and organization: Do American theories apply abroad?’ Organizational Dynamics (Summer). Hofstede, Geert H. and Hofstede, Gert Jan(2005) Cultures and Organisations: Software of the Mind, 2nd Edition New York: McGraw-Hill McSweeney, Brendan (2002) Hofstedes model of national cultural diffrences and their consequences: A triumph of faith - a failure of analysis Human Relations, Vol. 55, (1), pg 89 Mead, Richard (2005) International management: cross-cultural dimensions Oxford: Blackwell, 2005 Robinson, Robert V (1983) Book Review Work and Occupations 1983, Vol. 10, (1), pg 110-115 Shukla, Madhukar (2006). Doing Business in India. Retrieved April 19, 2007 from www.executiveplanet.com Triandis, H. (2004). The Many Dimensions of Culture. Academy of Management Executive, 18: 1 Business News Online (2007). Vodafone Takes Over Hutch Essar. Retrieved April 20, 2007 from www.businessnews.com Read More