#49 Cultural Awareness in International Business
Cultural awareness is key in any international business activity. Cultural divides should be accounted for in marketing, negotiations, product design, and other important decisions. One must analytically consider the best way to promote a product given the target audience. It is argued that differences among cultures can be explained according to four dimensions of culture:
1. Individualism – “I” consciousness vs. “we” consciousness
2. Power Distance – levels of equality in society
3. Uncertainty Avoidance – need for formal rules and regulations
4. Masculinity – attitude toward achievement, roles of men and women
This figure shows the cultural dimension scores of 12 countries. Japan, for instance, shows the highest Uncertainty Avoidance score and thus might be receptive to such risk-reducing marketing programs as return privileges and extended warranties. Since individualism is highly regarded in the US, promotional appeals the promise empowerment might be enticing. In Arab countries where Power Distance scores are high, consumers may respond well to promotions that imply social status.
Doing business in other countries requires cognizance of the cultural divide. An international manager must think analytically to eliminate any self-reference criterion, which is the unconscious reference to one’s own cultural values. This is the root of most international business problems.
Understanding culture requires constant monitoring of changes caused by outside events and by the business entity itself. Resisting ethnocentrism – thinking one’s own cultural is superior – is also important. One must be careful not to measure other cultures with one’s own cultural barometer.
Some times a Long-Term vs. Short Term Outlook dimension also has been considered. Asian countries score highly on this dimension, while most Western countries do not. This may help explain why the Japanese tend to evaluate marketing decisions based on long-term market share rather than on short-term profit motivations.
Re-post by permission of Prof. Michael R. Czinkota. Originally posted at: http://michaelczinkota.blogspot.com/
November 22, 2011 @ 7:24 pm
Response:
This article is the true essence of our class. The four points discussed above; Individualism, Power Distance, Uncertainty Avoidance, and Masculinity is everything we’ve covered so far.
Individualism made an interesting point about being cognitive of the “I” vs. the “We” emphasis. This is parallel of collectivistic vs. individualistic cultures. Our post this week discussed how to motivate high Uncertainty Avoidant cultures. In this article it states how Japan ranks the highest for Uncertainty Avoidance among all the other countries. Our discussion in chat this week also pointed out that Japan has very high masculinity as well. Women are in traditional roles as stay-at-home moms and care takers. Men are the dominating force in the work place and don’t have a healthy work/life balance.
This article also references ethnocentrism. This was an interesting point because I see this a lot in the United States. There is a big demographic who thinks they are entitled, proud and racist towards cultures and other countries. From my readings, Japan teaches their children that the U.S. is ‘bad,’ so stereo-types happen everywhere unfortunately. I often ponder if globalization in business could actually harmonize these challenges. I’m hopeful they could.
December 27, 2011 @ 8:16 pm
In my opinion it is important to analyze a country or a market in which a company wants to do business in. The four dimensions of Hofstede are a very helpful tool to explain foreign cultures. However, Hofstede says that only forty-nine percent can be explained by the dimensions mentioned in the article above. The other fifty-one percent remain specific to individual countries. I agree to that because humans are different. I want to give an example regarding Uncertainty Avoidance in Austria (my home country). Austria is relatively high on the Uncertainty Avoidance level. However, I know Austrian people who are really easy going (like the Americans, they live by the day and they are risk taking) but I also know some who want everything to be planned (like the Japanese, they avoid risk, worry about the future and live by rules). Therefore, one must be careful to say that the whole society is high on the uncertainty avoidance level. However, if a country tends to be high on the uncertainty avoidance level it is important to reduce the risk of buying a product. Every “p” of the marketing mix (product, price, place, promotion, people, process, physical evidence) should be adapted to the situation in the country. For example the customer should have the opportunity to exchange products or, as in the article mentioned, the company should offer warranties.
Another aspect I’d like to comment is the so called fifth dimension “Long Term Orientation” or as it is called in the article “Long-Term Outlook”. Countries which are long term oriented focus on the future. They worry about the future and like to save money. In comparison, short term orientation means focusing on the past and present. Most western countries (e.g. Germany, USA) are short-term oriented whereas Japan for example is long-term oriented. In my opinion this dimension is strongly connected to uncertainty avoidance. Countries which are high on the uncertainty avoidance level are more long-term oriented and countries which are low on the uncertainty avoidance level are short-term oriented.
December 31, 2011 @ 4:49 pm
Nowadays, we live in a global age and technology is bringing the world much closer together. Therefore, companies and people of different cultures are working together and communicating more and more. Because of this, the four cultural dimensions (power distance, individualism, uncertainty avoidance and masculinity) of Hofstede are used in order to understand the differences between several cultures. From my point of view, it is crucial that companies consider these cultural dimensions if they intend to do business abroad because every country has a unique and different culture. Sometimes the level of the dimensions even fluctuates in one country. In Canada, for instance, there is a distinct French Canadian culture that has quite a different set of norms compared to English-speaking Canada. However, companies have to figure out if the targeted country tends to have high or low dimension index and afterwards, it is crucial that companies adapt their marketing mix (4 P’s / 7 P’s) to the conditions in this country. For example, if enterprises want to do business in Japan they have to consider that the level of uncertainty avoidance is quite high and as mentioned in the blog post above companies can offer warranties and the right to return products in order to give people a sense of confidence and safety and therefore, lower the uncertainty. Furthermore, the importance of brands is very high in countries with high uncertainty because people connect brands with high quality. Due to this, the risk of making the wrong decision is shrinking and this gives the people a feeling of security. In comparison, in countries (e.g. the United States or Great Britain) with a low level of uncertainty avoidance, people are risk-taking and very flexible. Therefore, they try out different products instead of preferring one brand.
I would also like to express my opinion regarding individualism. As mentioned in the article above, the United States has a high level of individualism and due to this, it would be advantageous if companies offer customers the possibility to individualise products because people value differences and individuality. In countries with a low individualism index a marketing campaign that emphasizes benefits to the community would likely be understood and well-received. In my opinion the individualism of a country is strongly connected to the power distance of this country which means that countries with a high individualism index have a rather low power distance index. In comparison, countries which have a low level of individualism (rather more collectivistic) have a quite high power distance index. I think a reason for this could be the fact that countries which have a low level of power distance usually have higher income for people and that makes these people more individualistic.
Long-Term Orientation (Long-Term Outlook) is another dimension of Hofstede which is not mentioned as often as the other four dimensions. However, I think that this dimension is also essential and should be considered by companies which intend to do business abroad. As mentioned in the article above, countries such as Japan have a high Long-Term Orientation and due to this, such countries focus on the future and value traditions. Therefore, companies particularly have to show respect for traditions and have to consider this when creating marketing campaigns etc. In comparison, countries such as the United States or United Kingdom have a quite low level of Long-Term Orientation (Short-Term Orientation) and primarily focus on the present. Because of this, companies have to adapt to change more rapidly.
Generally, I think it is essential that companies or managers do not compare their own culture with a foreign one in order to find the better one, because cultures are different and there is no better or worse. From my point of view it would be disastrous if international managers always measure foreign cultures with their own cultural barometers because every culture is unique and of the same value. As mentioned in the blog post, it is crucial that managers resist ethnocentrism and due to this, do not think that their own culture is superior and better than other ones.
From my point of view, it is essential that companies which want to do business abroad are aware of the foreign culture because this influences the buying behaviour of the inhabitants and therefore also the success of the company which want to go abroad.