Topic: Analyzing the impact of five cultural dimensions as presented by G. Hofstede
on global business management.
INTRODUCTION
Nowadays, globalization trend in business has lead people from different countries
interacting more frequently. However, this has created many problems or
misunderstandings in international business management because of variety of norms,
values, rituals and beliefs among those nations. Thus, it is important to understand and
adapt to different cultures to enhance and perform business successful in today’s world.
This assignment will utilize the impact of five cultural dimensions presented by G.
HOFSTEDE (2005) on global business management. Analysis is based on the review of
literature through research articles and reference books related to the topic. The data
bases on Hofstede’s research (cultural dimension scores) and case study about influence
of cultural dimensions on business management in some countries such as America,
Indonesia, Denmark, Viet Nam, and Thailand. From this, we will have an overview about
the importance of culture in performance management in any organization especially in
multinational and international companies. The first section of this paper will review the
literature on five cultural dimensions presented by Hofstede. The second part of this will
analyze effects of those dimensions on basic international business management
activities.
Keywords: leadership styles, cross cultural leadership, power distance,
Individualism–collectivism, Uncertainty avoidance, Masculinity–femininity, Long-term
orientation.
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LITERATURE REVIEW
Geert Hofstede’s dimensional model of national culture has been applied to various
business areas. The Hofstede model (Geert Hofstede & Gert Jan Hofstede 2005)
distinguishes cultures according to five dimensions: power distance,
individualism/collectivism, masculinity/femininity, uncertainty avoidance, and
long-/short-term orientation. The model provides scales from 0 to 100 for 76 countries
for each dimension, and each country has a position on each scale or index which give us
insights into other cultures so that we can manage international business effectively.

1.3 Masculinity and Femininity
Masculinity indicates the extent to which the dominant values of a society are
"masculine" (e.g., assertive and competitive). Masculinity pertains to societies in which
social gender roles are clearly distinct (i.e., men are supposed to be assertive, tough, and
focused on material success whereas women are supposed to be more modest, tender, and
concerned with the quality of life. Femininity pertains to societies in which social gender
roles overlap i.e., both men and women are supposed to be modest, tender, and concerned
with the quality of life. (Geer Hofstede, Gert Jan Hofstede 2005, p.120).
1.4 Uncertainty avoidance
Uncertainty avoidance can be defined as the extent to which the members of a
culture feel threatened by uncertain or unknown situations and try to avoid such
situations. This feeling is, among other things, expressed through nervous stress and in a
need for predictability: a need for written and unwritten rules. (Geer Hofstede, Gert Jan
Hofstede 2005, p.167).
1.5 Long –term orientation (LTO)
Long –term orientation stands for the fostering of virtues oriented towards future
rewards, in particular perseverance and thrift. It’s opposite pole, Short Term Orientation,
stands for the fostering of virtues related to the past and present, in particular, respect for
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tradition, preservation of ‘face’ and fulfilling social obligations.” (Geer Hofstede, Gert
Jan Hofstede 2005, p.210).
DISCUSSION
I. The impact of five cultural dimensions on global business management
1. Leadership style
In global business world, it is very important to understand the concept of
leadership styles and behavior which are applicable and present in different cultural and
national contexts. This is one of the essential tools to help multinational companies can
understand how and why these cultural factors influence organizational behavior. From
this, they can manage their companies better in different countries. Generally, dimensions
mentioned by Hofstese have been used in various cross cultural leadership style.

). (Hofstede Centre 2011. Available from: http://geert-
hofstede.com/indonesia.html
In small- power distance countries, subordinates and superiors consider each other
as existentially equal; the hierarchical system is just an inequality of roles, established for
convenience; and roles may be changed, so that someone who today is my subordinates
may tomorrow be my boss. Organizations are fairly decentralized, with flat hierarchical
pyramids and limited numbers of supervisory personnel. Salary ranges between top and
bottom job are relatively small. Superiors should be accessible for subordinates, and the
ideal boss is resourceful (and therefore respected) democrat. Subordinates expect to be
consulted before a decision is made that affects their work, but they accept that the boss
is the one who finally decides (Geer Hofstede, Gert Jan Hofstede 2005, p.56).
Taking Denmark as an example, with a score of 18 points Denmark is at the very
low PDI score compared to other countries. Danes do not lead, they coach and employee
autonomy is required. In fact, Denmark ranks highest amongst the EU27 countries in
terms of employee autonomy. With a very egalitarian mindset the Danes believe in
independency, equal rights, accessible superiors and that management facilitates and
empowers. Power is decentralized and managers count on the experience of their team
members. Respect among the Danes is something which you earn by proving your hands-
on expertise. Workplaces have a very informal atmosphere with direct and involving
communication and on a first name basis. Employees expect to be consulted (Hofstede
Centre 2011
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). (Hofstede Centre 2011. Available from: http://geert-
hofstede.com/denmark.html)
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Another example for influence of power distance on behavior, Thailand is described
as a country of high power distance. It’s easy to see the differences in the height of the
‘wai” (the Thai greeting) which represents the extent of this power distance. People who
their status is high will receive a high ‘wai’ meaning finger tips to the nose or even
higher. People who have lower or equal status often receive a lower ‘wai”, finger tips

selection, training, evaluation and promotion, and remuneration.
This part will focus the impact of one of cultural dimensions (Short and long –
term orientation) dimension on human recourses management.
For countries with high score of long – term orientation, recruiting or promoting,
managers are selected based on the fit of their personal and educational characteristics, a
prospective employee’s particular skills have less importance in the hiring decision. They
often accept slow results and persist to achieve goals. Training and socialization for a
long term commitment to the organization compensate for any initial weaknesses in
work-related skills (Cullen, K. Praveen 2014).
Cullen, John B. (John Brooks) & Parboteeah, Praveen, (author.)
(2014). Multinational management: a strategic approach (Sixth edition, International
edition / John Cullen, K. Praveen Parboteeah). Australia South-Western
For example, in Viet Nam, employees are hired out of school. For them, selecting a
place to work one of the most important decisions they makes after selecting a spouse
and a university. Vietnamese people like to have a stable job. Thus, when they work in a
company, they have tendency to work in that company for a long time and hardly find
another place to work. Promotions are rather slow, may take most young people from 15
years or more. Employees want to show their loyalty and want to receive a stable job
from that company. Furthermore, performance is very infrequently evaluated, evaluation
base on a long period of time to reduce the probability that luck or misfortune influence
the evaluation. This practice results in linking rewards (such as promotions) to effective
long-term performance. The criteria for promotion are usually a combination of seniority
and merit. Also, educational background plays a role in promotion decisions; a person
who got MBA degree is easy to get promotion than another who has lower educational
background.
The differences in pay increases are very small and rewards are essentially
considered performance of group rather than individual contributions. In addition, they
also care about training for their employees; they can spend money for their employees to
get higher education and give them opportunities to rotate different position in
throughout their working life which helps employees get exposed to many different

individual wants and needs versus the needs of the group. According to this dimension in
individualistic cultures people are supposed to look after only themselves, the ties
between individuals are very loose and Work is important and employees don‟t expect
the company to care of them, whereas in collectivistic cultures people belong to groups
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that are supposed to look after them in exchange for loyalty and Relationships are
important, the ties between individuals are very tight and employees expect the company
to care of them. Individualistic societies tend to emphasize personal achievement whereas
collectivist cultures highlight group-based achievement. The collectivists rely on other
members in group chronically, they have weaker upwards mobility and underestimate
their contributions they can make for companies, in contrast, the individualists try their
best to do better and better, and finally become the best, they have strong upwards
mobility; at the same time and overestimate the importance of their work in group work.
Erez (2000) indicated that in individualistic cultures the selection procedure of new
employees is based on their personal records, whereas in collectivistic cultures an
important criterion for selecting new employees is recommendations by family members,
who already work for the company.
III. Motivation assumptions
Motivation assumptions are belief regarding how people respond to work.
Cullen and Parboteeah (2008) notes that a great challenge for international
organizations in today’s business world is the ability to retain, attract, and motivate
employees with different cultural backgrounds. When working across cultures an
understanding of needs, goals, values and expectations in different cultures is of great
importance; otherwise what has successfully motivated employees in one culture may be
demotivating and frustrating for employees in another culture. (Phatak, Bhagat &
Kashlak, 2005). For this not to happen, knowledge about what work means to people in
different cultural backgrounds are essential. This knowledge comes from answering two
basic questions: how important is work in people’s lives? And what do people value in
work? (Mikael Nilsson, cited in Cullen & Parboteeah in 2008). Cullen, John B. &
Parboteeah, K. Praveen. (2008). Multinational Management: A Strategic Approach (4th

avoidance are reflected by strong security motivation. (Mikael Nilsson, cited in Phatak
etal 2005).
4. Masculinity – Femininity
In highly masculine societies, the feeling of competition acts as a motivator. In
contrast, the boundaries between work role and non-work role are more flexible in
feminine societies. This make accommodating work schedules, such as flextime, part-
time, and shift work, as well as jobs that nurture quality of life to act as motivators.
(Mikael Nilsson, cited in Phatak etal 2005).
5. Long-Term versus Short-Term orientation
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The differences in time orientation that is emphasized in cultures should reflect
compensation schemes and reward systems in order to enhance motivation, job
satisfaction and organizational commitment. (Mikael Nilsson, cited in Phatak etal 2005).
IV. Strategies
1. Negotiation Strategy
In international business, negotiation is an essential condition to help head office
and regional subsidies which have different culture reach an agreement. The dimensions
of culture examined previously are important to properly understand of cultural
background of each country, but also determine which biases may be inherent in them. In
international business, negotiation focuses on the relationship between behavior and
culture.
Culture with high masculinity (assertive and competitive behavior) seek distributive
outcomes and have great difficulty with a synergistic negotiation process. Culture with
high uncertainty avoidance and power distance will be less likely to be comfortable with
a synergistic negotiation process. This impact of culture through the influence of
cognitive bias creates a challenge to negotiation strategy and avoids which seeks a model
that can be predict and obtain integrative outcomes (Paul Drnevich 2004, p 7). (Paul
Drnevich 2004, ‘The role of cultural distance in international negotiation’.Available
from: />One example of cultural differences in business is between the Middle Eastern
countries and the Western countries, especially the United States. When negotiating in

In promotion case, one of the first scholars to demonstrate this was Gordon Miracle
(1987). In individualistic cultures, advertising must persuade, whereas in collectivistic
cultures, the purpose is to build relationships and trust between seller and buyer. For
example, Japanese advertising focuses on inducing positive feelings rather than providing
information. The different purposes are reflected in the difference in timing and
frequency of verbal or visual mention of the brand name in television commercials
(Miracle et al. 1992). In a typical Japanese television commercial, the first identification
of a brand, company name, or product occurs later than in a typical US television
commercial. In Chinese commercials, brand acknowledgement appears later than in US
commercials (Zhou et al. 2005).
For example, if you want to market cars in a country where the uncertainty
avoidance is high, you should emphasize on their safety, whereas in other countries you
may base your advertisement on the social image they give you. Cell phone marketing is
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another interesting example of the application of Hofstede's model for cultural
differences: if you want to advertise cell phones in China, you may show a collective
experience whereas in the United States you may show how an individual uses it to save
time and money. The variety of application of Hofstede's abstract theory is so wide that it
has even been translated in the field of web designing in which you have to adapt to
national preferences according to cultures' values.( Amanpreet Kaur 2013), (Amanpreet
Kaur 2013, "Outsourcing Software Quality", pp. 34-35, Department of Computer and
Information Science report. Available from: Norwegian University of Science and
Technology.
[June 2013].
Taking a case study of IKEA Shanghai Company – a branch of IKEA in China
(IKEA company is known as the world’s most successful mass-market retailer, selling
Scandinavian-style home furnishings and other house goods in 230 stores in 33 countries
and hosting 410 million shoppers per year). This section is devoted to IKEA Shanghai’s
marketing performances from a cultural perspective:
- Product

person has caused you. There has not been further report on how many funds IKEA
raised from the activity but for IKEA’s Chinese customers, the company has made a good
gesture.
CONCLUSION
Understanding culture is one of the best ways which helps people solve problems
and reconciles dilemmas. Hofstede's model has proved to be a simple, practical, and
usable tool to the integration of culture into studies. If understood and applied properly,
this information will reduce misunderstanding and frustration among different cultural
countries in business management. But most important, Geert Hofstede will give you the
'edge of understanding' which translates to more successful results and forcing
international business in control.
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