Hofstede’s Cultural Dimensions (DP IB Business Management)

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Flashcards

Hofstede's Cultural Dimensions

  • Hofstede's model is a way of understanding the culture of a country based on its cultural values

    • It can help organisations improve communication and cooperation between people from different cultures

    • It provides a framework for understanding how cultural differences can affect business dealings

  • The Hofstede organisation uses surveys to generate scores for each country using six different variables

    • These scores are then accessible to businesses to use in their decision-making process

    • The tool is most useful when the scores of different countries are compared with each other

Diagram: country rankings using Hofstede's model 

A comparison of cultures using Hofstede's model
A comparison of cultures using Hofstede's model

(Source: Country Comparison Tool)

  • Six different dimensions are used for comparison

  • Each dimension is expressed on a scale that runs from 0 to 100

    • If a score is under 50, the culture scores relatively low on that scale

    • If any score is over 50, the culture scores high on that scale

An Explanation of Hofstede's Six Cultural Dimensions

Dimension

Explanation

Examples

Power Distance

  • Power Distance is defined as the extent to which the less powerful members of institutions and organisations within a country expect and accept that power is distributed unequally

  • Low-scoring countries include Australia, the USA and Finland

  • High-scoring countries include Mexico, Russia and Philippines

Individualism

  • The degree of interdependence a society maintains among its members

    • In Individualist societies people are supposed to look after themselves and their direct family only

    • In Collectivist societies people belong to 'in groups' that take care of them in exchange for loyalty

  • Low-scoring (collectivist) countries include China, Pakistan and Malaysia

  • High-scoring (individualist) countries include the UK, South Africa and Italy

Motivation Towards Success

  • A high score (Decisive) on this dimension indicates that the society will be driven by competition, achievement and success

  • A low score (Consensus-oriented) on the dimension means that the dominant values in society are caring for others and quality of life

  • Low-scoring countries include Norway, Portugal and Chile

  • High-scoring countries include Germany, Japan and Australia

Uncertainty Avoidance

  • The extent to which a society tolerates or avoids uncertainty and ambiguity

    • The extent to people feel threatened by unknown situations and have created beliefs and institutions that try to avoid these are reflected in this score

  • Low-scoring (tolerant) countries include Sweden, Tunisia and Namibia

  • High-scoring (avoiding) countries include Spain, Turkey and Ecuador

Long-term Orientation

  • The extent to which society has to maintain some links with its own past while dealing with the challenges of the present and future

    • Low score countries prefer to maintain traditions and norms

    • Those with high scores encourage modern education as a way to prepare for the future

  • Low-scoring (long-term) countries include Ukraine, Latvia and Norway

  • High-scoring (short-term) countries include Venezuela, Morocco and Saudi Arabia

Indulgence

  • The extent to which people try to control their desires and impulses based on the way they were raised

  • These are defined as restrained and indulgent societies

  • Low-scoring (restrained) countries include Poland, Indonesia and Estonia

  • High-scoring (indulgent) countries include Argentina, Ireland and New Zealand

Using Hofstede's Model

  • Hofstede's model can help businesses to make informed decisions and develop appropriate strategies when operating in international markets 

  • In particular the model can help a business to

    • Understand cultural differences across locations in which it operates

    • Focus its market research and product development

    • Tailor its promotional activities

    • Structure HR, training and team management appropriately

    • Determine suitable international expansion strategies

    • Consider approaches to corporate social responsibility

Applying Hofstede's cultural dimensions to AirBnB's international operations

  • Launched in 2008, Airbnb is a US-based company operating an online marketplace for private hosts to promote short- and long-term homestays and experiences

    • The company acts as a broker and charges a commission from each booking

    • It operates in around 220 countries around the world and generated its first profit in 2022

AirBnB Hofstede Analysis

Cultural Dimension

Explanation

Application to AirBnB

Power Distance

  • In low power countries, AirBnB considers the needs of a broad range of people whose focus is on elements of a product that make their tasks easier

  • In high power countries, AirBnB focuses on meeting the needs of key decision makers by emphasising their products benefit the whole family or company and how products can make their leadership a success

  • In Australia AirBnB's promotional activities focus on the convenience and ease of booking/paying for stays in properties

  • Mexican promotional activity focuses on financial returns for property owners and possible cost savings for users of the platform

Individualism

  • In countries with high individualism AirBnB's recruitment and selection processes emphasise the personal success that recruits could achieve by working within the business

  • In low individualism countries, AirBnB emphasises the social and collective aspects of working for the business 

  • Advertisements for senior roles in AirBnB's London office emphasise the performance-related pay and bonus rewards the business offers

  • Host recruitment policies in Malaysia emphasise the wealth that groups of AirBnB properties in areas that lack hotels can generate for communities

Motivation Towards Success

  • In decisive societies, AirBnB has set challenging targets for growth into new markets

  • AirBnB's approach in consensus-oriented societies' is less target-driven, emphasising quality and the minimisation of negative impacts of short-term lets on populations

  • In the US AirBnB has established regional sales headquarters in major cities which operate independently and compete to attract large volumes of hosts and bookings

  • In Norway AirBnB has developed its Airbnb Plus and Beyond by Airbnb schemes which focus on encouraging hosts to offer high-quality, premium priced properties

Uncertainty Avoidance

  • In countries with high tolerance to uncertainty, the AirBnB market tests many of its new services and encourage hosts to make more unusual properties available to rent

  • In countries with low tolerance to uncertainty, the range of properties available for rent is relative narrow and standardised

  • In Sweden AirBnB lettings include a former military hut, a lighthouse and several treehouses!

  • In Spain all AirBnB hosts are encouraged to provide standard facilities in their properties such as a private entrance

Long-term Orientation

  • In long-term outlook countries, AirBnB may emphasise its commitment to social responsibility by encouraging its hosts to adopt environmentally friendly practices in its properties

  • In short-term outlook countries, AirBnB's focus is more profit- or sales-focused 

  • In Latvia AirBnB hosts receive extensive guidance and practical support on achieving carbon neutral status for their rental properties

  • In Chile the availability of low-cost housing has significantly worsened since AirBnB's successful marketing campaigns to recruit hosts in major cities

Indulgence

  • In restrained societies, products may be designed to appeal on the basis of logic, common sense or good value

  • In indulgent societies, AirBnB encourages its hosts to offer aspirational properties that appeal to people's desire to 'treat themselves'

  • Polish citizens take fewer holidays than their European counterparts - AirBnB's properties in Poland tend to be large and are aimed at longer family stays 

  • In New Zealand AirBnB has a growing selection of very short-term, super-luxury 'experience' properties

Evaluating Hofstede's Model

  • Whilst Hofstede's model can help businesses make better decisions, it has been criticised as outdated and for leading to confirmation bias

An Evaluation of Hofstede's Cultural Dimensions Model

Strengths

Weaknesses

  • Structured framework makes comparison easy 

    • It is a structured framework for understanding and comparing cultures, which improves awareness

  • Generalisation

    • Culture is complex and dynamic - reducing it to a set of dimensions can reinforce stereotypes

  • Credible model

    • Research into the model involved thousands of respondents from different countries 

  • Lack of nuance

    • It treats a country as if all its people share the same characteristics - this is often not the case, especially in very large countries such as the US

  • Clear and simple

    • The small number of dimensions makes the model  accessible and easy to apply

  • Ethnocentrism

    • Hofstede's model is rooted in Western cultural values so may not capture the true nature of non-Western cultures

  • Practical application

    • Understanding cultural dimensions can help with adapting strategies and communication so they are effective in different countries

  • Changes over time

    • Cultures shift due to various factors, including globalisation and generational shifts

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