Hofstede’s Cultural Dimensions (DP IB Business Management)

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Flashcards
Lisa Eades

Written by: Lisa Eades

Reviewed by: Steve Vorster

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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Lisa Eades

Author: Lisa Eades

Expertise: Business Content Creator

Lisa has taught A Level, GCSE, BTEC and IBDP Business for over 20 years and is a senior Examiner for Edexcel. Lisa has been a successful Head of Department in Kent and has offered private Business tuition to students across the UK. Lisa loves to create imaginative and accessible resources which engage learners and build their passion for the subject.

Steve Vorster

Author: Steve Vorster

Expertise: Economics & Business Subject Lead

Steve has taught A Level, GCSE, IGCSE Business and Economics - as well as IBDP Economics and Business Management. He is an IBDP Examiner and IGCSE textbook author. His students regularly achieve 90-100% in their final exams. Steve has been the Assistant Head of Sixth Form for a school in Devon, and Head of Economics at the world's largest International school in Singapore. He loves to create resources which speed up student learning and are easily accessible by all.