People from all parts of the world behave differently towards different situations and conditions. In today’s world of continuous internationalization and globalization, there is an increasing need for people to do business across cultures.
Many business experts and academicians have attempted to define frameworks within which individuals and organizations from different nationalities and backgrounds can do business without facing cultural challenges. One of the best known models for cross cultural comparative analysis in the business context is Geert Hofstede’s Cultural Dimensions (Gouveia & Ros, 2000)
This research paper focuses on how to recognize and analyse dilemmas resulting from different business cultures. It attempts to apply this to real-life management and business issues in the cultural setting of two countries: Italy and Australia.
Culture
Culture is “the complex whole which includes knowledge, belief, art, morals, customs and any other capabilities and habits acquired by man as a member of society” (McCort & Malhotra, 1993).
Culture is seen as the body of information, character and traits that a person acquires as a member of a group. Although individuals are different in our perceptions and aspirations, there are some tendencies, inclinations and preference that individuals develop whilst they live amongst social groups. The sum total of these common traits that individuals share collectively in a group defines the culture of the group.
“Culture is a powerful factor in shaping how people think, communicate and behave…” (Salacuse, 1993, p. 199). Culture is a very strong and potent force that determines the lives of individuals who belong to a group.
Every human being has basic physiological needs – the needs to survive (Maslow, 1954). However, as the basic need to stay alive is attained, human beings desire to identify with a group or a society. This means that individuals would have to conform to certain values and norms that are shared by members of the group or society in question. These values form a framework for the formation of individual personalities in the group.
Hofstede (1997) argues that the values of a given culture affect the practices of the people in the culture. In other words, the norms and ethics of a group affect the way members behave. The main intervention points of the values of a given culture include rituals, heroes and symbols (Hofstede, 1997).
Values determine why a particular individual wants to follow a particular course of action over another. (Hofstede, 1997).
Shalom Schwartz identified ten value types that affect individuals (Schwartz, 1992). Schwartz conducted a survey of more than 60,000 people to ascertain the principles that direct their lives. He concluded by identifying these ten values that affects the lives of most people. These values define the core of the cultures of these people. They include:
Power: social status and prestige.
Achievement: Attaining goals and objectives.
Hedonism: Seeking pleasure ahead of all other things.
Stimulation: Seeking thrills and excitement
Self direction: Seeking independence and freedom from the control and manipulation of other people.
Universalism: Seeking social justice and progress for all people on earth.
Benevolence: Giving, the idea of seeking the general welfare of people.
Tradition: Honoring the customs of the society.
Conformity: seeking obedience of the rules and regulations of the society.
Security: seeking continuous health and safety.
The culture of a given society will affect and be affected by these ten values as identified by Schwartz. The culture of a given nation will determine the definition of these ten values. The values that the people uphold will on a collective level, determine the culture of the people.
The culture and values of the broader society affects the way organizations do their things. The values of the broader society influence various components of organizations and determine the lifestyles and traits of individual members of organizations.
Therefore in the business context, when one understands the values, rituals, heroes and symbols of a given society, he can transact business with organizations and individuals in the society efficiently and effectively. On the other hand, if a person is ignorant of the values and culture of a given people, it is likely that he would attempt to do business with the people based on the cultural setting he might be familiar with. Such a business transactions are prone to conflict and are likely to be unsuccessful.
Hofstede’s Dimensions of Culture
Professor Geert Hofstede attempted to define a model for the analysis of the characteristics of a given culture (Soares et al, 2007). He measured the values of subjects in a given sample and made inferences on the cultural characteristics of the larger society based on the aggregation of the findings (Soares et al, 2007).
Hofstede defined five dimensions that determines the culture of a given group or society (Hofstede, 2001). These dimensions varied based on the uniqueness of a group of people or society. The elements of Hofstede’s cultural dimensions include:
Power Distance (PDI)
Individualism/Collectivism (IDV)
Masculinity/Femininity (MAS)
Uncertainty Avoidance (UAI) &
Long-Term Orientation (LTO)
Hofstede’s cultural dimensions sets the framework for which communities can be assessed based on these five variables. In his assessments, he places groups on a scale of 0 to 120 based on these five variables, with zero being the lowest and 120 being the highest.
Power Distance Index (PDI)
Power distance (PDI) refers to “the extent to which the less powerful members of institutions and organizations within a country expect and accept that power is distributed unequally.” (Hofstede, 1991 p. 28)
Nations with low PDI tend to expect subordinates and their superiors to be treated somewhat equally. However cultures with high PDIs have authoritarian systems where people in authority must be distinguished from their subordinates. In the business context, one can use this index to determine the organizational structure, distribution of power in the organization and remuneration of employees in a given cultural setting.
Individualism/Collectivism (IDV)
Individualism/Collectivism (IDV) attempts to define the extent to which individuals are connected to social groups in a given culture. Individualism ” pertains to societies in which ties between individuals are loose: everyone is expected to look after himself or herself and his or her immediate family” (Hofstede, 1991, p 51).
Collectivism on the other hand “pertains to societies in which people from birth onwards are integrated into strong, cohesive in-groups which throughout people’s lifetime continue to protect them in exchange for unquestioned loyalty” (Hofstede 1991, p 51).
The Individualism/Collectivism scale, tells us how people derive their identity in a given setting. It tells us how bargaining strengths, power and authority are acquired. In nations with low IDV, people acquire their identity, power and authority based on the social network they belong to. However, in nations with high IDV, people acquire their identity as individuals. In a high IDV environment, people’s progress increases their individual self worth, however in lower IDV communities, progress means moving from one society to a higher society.
In the business context, this dimension can affect the strategic plans of businesses mainly through the marketing plan. The marketing strategy and sales plan of an entity can utilize the IDV index of a community it operates in. This is because the IDV status of a group determines many of their tastes, preferences and demand trends.
Masculinity/Femininity (MAS)
“… masculinity pertains to societies in which social gender roles are clearly distinct (ie men are supposed to be assertive, tough and focused on material success whereas women are supposed to be more modest, tender and concerned with quality of life): femininity pertains to societies in which social gender roles overlap (ie both men and women are supposed to be modest, tender and concerned with quality of life)” (Hofstede 1991 p. 82-83).
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This variable of Hofstede’s cultural dimension examines the extent to which people in society are grouped based on their sex: the condition of being male or female mainly in relation to the quantity or quality of life. In groups with high MAS indices, people are seen primarily as being male or female. Males are defined by their role of being tough, focused and making enough money. Females in these societies are mainly tender, flexible and more concerned with the quality of life. These differences are distinct and spelt out in high MAS cultures.
However, in lower MAS cultures, males and females are considered to be equal. Each individual is expected to show a blend of masculine and feminine traits. Here, a person has inclinations towards caring for people and other social tendencies.
In business, the masculinity and femininity will affect the human resource strategy of firms. Also, it will affect the research and development department of businesses because there is the need to develop products and services that meet the masculine/feminine features of the society. The financial department of a business is influenced by the masculine index of the society. If a society is highly masculine and the people value money, the finance department must have strategies that would enable the business to expand by way of paying more to individuals by way of salaries and compensations. However, if the society is feminine, the finance department must have an outlook for payments that would ensure more quality for individuals like pecks and social responsibility.
Uncertainty Avoidance Index (UAI)
This relates to how much people are willing to go to attain their goals without facing unexpected challenges. “Extreme uncertainty creates intolerable anxiety. Every human society has developed ways to alleviate this anxiety. These ways belong to the domain of technology, law and religion” (Hofstede, 1997 p. 110).
This measure tries to identify the extent to which people rely on human institution and interventions to avoid or ameliorate uncertainty. In societies with low UAIs, uncertainties are considered a normal part of life. There are few laws which are mainly general and there is greater tolerance. In nations with high UAIs, uncertainty is considered as a threat, there are precise laws and people are more conservative with risks.
In business, this can create a context within which one can negotiate or deal with other parties and organizations in different cultural settings.
Long Term Orientation (LTO)
This dimension, was included in Hofstede’s dimensions after his studies of Buddhist cultures in 2001. LTO “stands for the fostering of virtues oriented towards future rewards, in particular perseverance and thrift” (Buddhist 2001, p. 351).
It measures how people in a society consider the long-term over short-term. It tries to define how much effort a group of people are likely to forgo in order to reap benefits in the future.
Comparison of Italy & Australia Using Hofstede’s Cultural Dimensions
Italy and Australia are two nations located on two different continents. Italy is a member of the European Union and it is predominantly Catholic. Australia is also a continent located in South of Asia. (Geert Hofstede.com)
The cultures of Italy and Australia can be compared using Hofstede’s Cultural Dimensions. This can be used to assess to get an idea of how best the two nations can do business.
Based on the summary of Hofstede’s studies in the 2001 edition of his book, Culture’s Consequences, these are the rankings of Australia and Italy:
Variable
Australia
Italy
Power-Distance Index (PDI)
36
50
Individualism/Collectivism Index (IDV)
90
76
Masculinity/Feminism Index (MAS)
61
70
Uncertainty Avoidance Index (UAI)
51
75
Long-Term Orientation
31
N/A*
N/A* Hofstede’s study for LTO did not include Italy.
Power Distance Index
With Australia at 36 and Italy at 50, it suggests that Australia is a lower PDI country than Italy, which has a relatively higher PDI.
This suggests that the people of Australia are likely to see subordinates and superiors as more equal than Italy where people give credence to people in authority. In this case, it looks like in Australia, employees will expect participation in decision-making. Consumers would also expect to be given some preferences and greater care. In Italy, it can be inferred that the employees expect to be told what to do whilst their bosses expect complete obedience. Consumers would have lesser bargaining power and are more likely to accept what corporations sell to them.
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These two countries can do business by varying the way they view superior-subordinate relationships. The Australians must accept the fact that Italians give more respect to people in authority and they believe that people in power have more control and thus ‘know better’. Any Australian business move in Italy should focus more in creating an authoritarian entity than an egalitarian one. On the other hand, any Italian business transaction in Australia must be more egalitarian; negotiated with some more concern for subordinates than it would normally be done in Italy.
Individualism/Collectivism (IDV)
At a scale of 90, Australia appears to be a very individualistic nation. People in Australia are encouraged to speak their minds. Independent media is the source of information to people and people are more interested in what they can do rather than who they are linked to. Italy has a relatively lower index of 76. This implies that in Italy, an individual is defined more by the social network he belongs to. Being a predominantly Catholic nation, people are expected to join the Catholic social system right at birth. Their achievement determines their social standing in the Catholic system. Australia, although a Christian nation, has links to Protestant movements and organizations (Geert-Hofstede.com) which promotes individualism.
For business to prevail in these two nations there is the need for each of the nations to understand the culture of the other nation. Australians must understand that in Italy, a person is defined by the social group he or she belongs to. Therefore, if they seek to establish businesses in Italy, they would have to draw a strategic plan that would recognize individuals as part of social groupings. This will enable them to build more successful marketing plans and research structures. Italian businesses also need to appreciate the fact that individuals are seen as independent entities in Australia. They should therefore draw strategies that would target individuals and not spend too many resources on reaching individuals through their social groupings.
Masculinity/Femininity (MAS)
Australia is seen as a marginally less masculine society than Italy. Both nations stand at 61 and 70 respectively on the MAS index. This suggests that the people of Australia expect people of both sexes to be equally concerned with quality of life and quantity of life. In other words, in Australia, people accept that men and women can play roles that are traditionally associated to the opposite sex. It is generally accepted for men to be concerned with the quality of their lives whilst women can easily become high wage earners.
In Italy, which is a more masculine culture, people are expected to stick to the roles generally played by their sexes. Men are expected to make money and stay tough whilst women concentrate on the quality of life and care for other people.
In business, the Australian who seeks to do business in Italy must organize things to be able to target one sex at a time. They should conceptualize and accept the fact that men are identified by masculine traits in Italy whilst women are identified by feminine traits. For Italians that seek to do business in Australia, they should position themselves to treat men and women equally. This kind of mindset will enable them to win the hearts and minds of consumers and other stakeholders in practice.
Uncertainty Avoidance Index (UAI)
Australia stands at 51 whilst Italy stands at 75. This means that Italy is a very high UAI culture. This implies that the people of Italy do not perceive uncertainty to be a part of their culture. They make every effort to eliminate uncertainty. If ambiguous situations crop up, the average Italian shows aggression and emotions. They do more to ensure that unfamiliar risks are eliminated. They fall on religion, technology and law to ensure that uncertainties and unfamiliar risks are prevented.
On the other hand, an index of 51 indicates that the Australian business culture is more tolerant of uncertainty. People are not prone to showing aggression and emotions in ambiguous situations as is the case with the Italians. The laws are less precise and there are fewer rules (religious or legal) to keep out uncertainties.
In doing business, an organization from any of these settings should be mindful of what they do in another nation. First of all, it appears that Australian Legal, Technological and Religious organizations can do well in Italy if they decide to open branches in the country. Secondly, if any business wants to move from Australia to Italy, it needs to understand the need to be highly precise and fulfill promises they make. This is because any failures and ambiguities are not likely to be taken lightly in Italy as it would in Australia. An Italian business seeking to do business in Australia must be prepared to tolerate a degree of uncertainty and ambiguity and it must get an understanding of the Australia setting before drawing up its strategic plans.
Long Term Orientation (LTO)
Australia scores a point of 31 on this scale. This should suggest to the average Italian going to do business in Australia that the long-term orientation is quite low, especially if it is compared to Japan which has a high ranking of 80. This indicates that the Australian business climate favors a high level of short-termism and there is relatively less concerns for the next generation. However, it must be noted that because Hofstede made no ratings for Italy on the LTO scale, it is possible that Australia is more of a longer-term looking culture than Italy.
Limitations
Hofstede’s research studied samples of given nations and communities. It therefore lacks the general ability to predict the lifestyle of the whole of Australia or Italy.
Conclusion
It is evident that Hofstede’s Cultural Dimension sets the stage for analysis of various cultures around the globe. It gives individuals and organizations an understanding of areas of social lives that can vary across nations namely Power Distance, Individualism, Masculinity, Uncertainty Avoidance and Long Term Orientation. This set up can be used to predict and direct businesses in terms of formulating their strategies in foreign cultures. Since Hofstede’s model seeks to examine human behavior, it affects areas of businesses’ strategies like Management, Human Resource, Marketing, Finance, Operations and Research and Development. The model can be used to a high degree of certainty to assess the business cultures of two nations: Australia and Italy based on the indices they scored for the various variables in Hofstede’s studies. The limitation of the model is that it was carved based on surveys conducted on a small section of the nations around the globe. Thus generalizations might not be appropriate.
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