Intercultural Management in Business

Intercultural Management in Business
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Contents
Introduction................................................................................................................................................3
Literature Review........................................................................................................................................4
Hofstede’s Cultural dimensions Theory..................................................................................................4
The importance of Hofstede’s theory.....................................................................................................4
Critical evaluation of individualism vs collectivism in an organization’s work settings.............................5
Different cultural dimensions of regularity and variability and produce frameworks to investigate the
impact of culture on international business...............................................................................................6
Evaluation of different strategies used in an international business context in managing cross-cultural
situations in the workplace........................................................................................................................7
Conclusion...................................................................................................................................................7
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References...................................................................................................................................................8
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Introduction
The aim of this literature review is to understand Hofstede's cultural dimensions theory in a practical
work setting as well as evaluate the extent to which the dimensions are displayed. To prepare the
literature review, the concepts, theories and ideas have been used to identify cultural regularity and
variability in the frameworks of international business management. Hofstede’s cultural dimensions
theory is important to recognize the cultural differences in a diverse and globalized business world.
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Literature Review
A world which is becoming more closer by day, businesses have also expanded their horizon to the
extent of creating intercontinental corporations. This raises the issues of diversified cultures, values and
beliefs prevalent in different countries and regions, which emphasizes the importance of cross-cultural
psychology more than ever. The purpose of this literature review is to have collective knowledge
regarding cross-cultural values in the international business arena. In addition to that, to find out the
management strategies which will be effective to build a cross-cultural business mindset.
Hofstede’s Cultural dimensions Theory

Hofstede’s cultural dimensions theory is a 6-D model for understanding diverse cultures in order to
develop cross-cultural behavior and mindset in the environment of organizations. According to Shahid N
Khan (2014), Hofstede developed a framework to link culture and organizational behavior and that is
considered the most useful framework for scholarly community. Also, according to Kevin Y Au (1999),
Hofstede’s cultural dimensions have allowed for rigorous cross-cultural inferences and generalization.
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Moreover, Cultural value dimensions, such as Hofstede’s and others’ (Chinese Culture Connection, 1987;
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Schwartz,1994) allow researchers to make a priori prediction concerning a managerial behavior and
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universal cultural values (Earley and Mosakowski,1996). Geert Hofstede, a Dutch psychologist,
developed the theory from a factor analysis of a survey conducted by IBM, during 1967 to 1973, on
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employee values. But in the book, “Industrial Actions and Hofstede’s cultural dimensions”, Feibo et al
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argued that the theory was formulated during 1980. Initially, Hofstede formulated a 4-D model with
individualism-collectivism, power distance, uncertainty avoidance, and masculinity and femininity. Later,
an independent research in Hong Kong made Hofstede to add long-term orientation to the model.
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Finally, during 2010, he and his fellow researchers added indulgence and restraint as the sixth
dimension, making it a 6-D model.
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The importance of Hofstede’s theory

While we are living in a globalized world, which has enabled access to foreign countries’ cultures easily.
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Yet, it is now more important to have knowledge about cultural differences for building cross-cultural
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communication. Hofstede’s cultural dimensions theory has been a significant factor for maintaining a
smooth and successful cross-cultural relation. The six dimensions of Hofstede’s theory are - Power
distance which determines the extent to which power and inequality are tolerated, from the viewpoint
of lower level employees. The high-power index indicates that the organizational system is bureaucratic
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and shows respect based on rank and authority. On the other hand, low power index says the
organizational structure is flat and decision-making is decentralized, also more participative and
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emphasizes power distribution. Individualism vs Collectivism is concerned about the extent to which
societies are integrated into groups and obligations towards groups. Individualism focuses on achieving
own aims and goals, whereas collectivism focuses on the well-being of the groups and their goals and
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visions. Uncertainty avoidance index means the extent to which uncertainty and ambiguity are tolerated.
High index refers to low tolerance of uncertainty, ambiguity and risk taking. And low index means high
tolerance for uncertainty and ambiguity. Masculinity vs Femininity considers the preference of society
regarding achievement, equality, behavior etc. Masculinity emphasizes preference for achievement,
heroism, assertiveness and material rewards. On the contrary, femininity prefers cooperation, modesty,
caring for the weak and quality of life. Long term vs short term orientation means the society’s preferred
time horizon. It says long term orientation means preferring long term success with long term planning,
whereas short term success with short term planning. Indulgence vs restraint means the tendency of
fulfilling society’s desires. Indulgence means preferring free gratification whereas restraint means
suppressing gratification to maintain social norms.
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Figure 1: Hofstede’s Cultural Dimensions; Source: Myrone and Jolene, 2010
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Critical evaluation of individualism vs collectivism

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in an organization’s work settings

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One of the early dimensions formed by Hofstede was ‘Individualism vs Collectivism’ or I-C. According to
Hofstede (1991), I-C reflects the extent to which individuals are integrated within their groups. Louis P
Parkes (2000) says, Collectivists see themselves as closely linked to one or more groups and their identity
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is based on their relationship with others. They give priority to the goals of the group and are primarily
motivated by norms imposed by the group. In contrast, individualists see themselves as independent,
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different and distant from the groups in which they belong. They give priority to their own goals and are
primarily motivated by their own needs and internal standards. Different countries have different
perspectives regarding I-C. Such as, according to Hofstede- insights.com, China and South Korea have
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fairly low individualism with ratings 20 and 18 respectively. Because both of the countries are very
collectivistic and act upon their collective needs. Whereas, countries like the USA, UK and Australia have
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very high ratings like 91, 89 and 90 respectively. Again, Japan and India show both individualistic and
collectivistic traits in them. They have 46 and 48 ratings in Hofstede’s scale. That’s why, work settings in
organizations of these countries can be either individualistic and collectivistic or both of them. It should
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be mentioned that, having both cultures help the companies both in achieving short term goals and
long-term successes.
Different cultural dimensions of regularity and
variability and produce frameworks to investigate
the impact of culture on international business
According to Kevin Y Au (1999), studies based on cultural dimensions all share one common
characteristic: their hypotheses based on cultural means. The notion of using ‘National Culture’ as the
base which shapes the behavior of populations in and out of an organization is a widely accepted belief
by researchers and academics. That’s why Hofstede's theory got a lot of attention and mostly positive
reactions. However, there were also those who didn’t agree like McSweeny who opined that Hofstede’s
model is outdated and too simplistic. But there is evidence that Hofstede’s dimensions have a strong
convergent validity compared to any other on-going cultural frameworks (Magnussen et al., 2008) and
represent a replicable and predictive tool for economic outcomes (Williams and McGuire, 2010).
However, the global culture surely affects the business activities too. Such as, Japan follows a mixture of
individualism and collectivism in its management, whereas the USA is highly individualistic country,
contrarily China is highly collectivistic country. The figure given shows how the four countries have
scored on each cultural dimension producing a view to the impact of culture on international business.
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Figure 2: The overall cultural dimensions of regularity and variability on international business
framework; Source: Jug and Lee, 2020.
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Evaluation of different strategies used in an

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international business context in managing cross-

cultural situations in the workplace
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According to Hofstede & Hofstede (2005), “Culture is always a collective phenomenon. Because it is at
least partly shared with people who live or lived within the same social environment, which is where it
was learned”. Therefore, on a global perspective, a company has to be flexible, dynamic and open-
minded to build a cross-cultural mindset among the employees of the organization. According to
Diwakar (2014), the advantages of having a diverse culture is improved morale, broader perspectives,
impactful global presence and makes community relationships stronger. According to Heinz and
Englehart, managers should make the management more participative. They should make the
communication process smooth and easier. They should also groom the employees in diverse cultures.
They should work on overcoming the language barriers. The organizations should also consider the
cultural differences in their managerial activities. According to Tutar et al (2014), in management of
cultural differences, the way organization perceives these differences is very important.
Conclusion
To build a more accessible business organization, in the context of intercultural management, it is very
important to have a cross-cultural behavior prevailing in the company. This not only helps to maintain an
amiable environment in the organization, but also helps the company in achieving more profits and
success in the long run. Here, the review focused on individualism and collectivism to evaluate one
dimension of Hofstede’s theory. And it showed how each culture has shaped each country’s business
culture and success following as well. So, did the regularity and variability of different dimensions.
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References
1. Hofstede, G., 2011. Dimensionalizing cultures: The Hofstede model in context. Online readings in
psychology and culture, 2(1), pp.2307-0919.
2. Feibo Shao1, Dana J. Frederick, Dana L. Haggard, K. Stephen Haggard & Glenn R. Pace: Industrial
Actions and Hofstede’s Cultural Dimensions
3. Christopher, P. and Mosakowski, E., 2021. Cultural Intelligence. Harvard Business review.
4. Singh, Diwakar. (2014). Managing cross-cultural diversity: issues and challenges in global
organizations.
5. Au, Kevin. (1999). Intra-cultural Variation: Evidence and Implications for International Business.
Journal of International Business Studies. 30. 799-812. 10.1057/palgrave.jibs.8490840.
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7. Tutar, H., Altinöz, M., & Çakıroğlu, D. (2014). A Study on Cultural Difference Management
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Strategies at Multinational Organizations. Procedia - Social and Behavioral Sciences, 150,
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345-353.
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8. Jung, I. and Lee, J., 2020. A cross‐cultural approach to the adoption of open educational
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resources in higher education. British Journal of Educational Technology, 51(1), pp.263-280
9. https://www.hofstede-insights.com/product/compare-countries/
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10. [ CITATION Lou00 \l 1033 ]

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Intercultural Management in Business

Hofstede’s Cultural dimensions Theory

The importance of Hofstede’s theory

Critical evaluation of individualism vs collectivism

in an organization’s work settings

Evaluation of different strategies used in an

international business context in managing cross-

10. [ CITATION Lou00 \l 1033 ]

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