In today’s global society, there are significant national culture variations, which have an impact on how people conduct business. Many functional aspects of business such as pace of business, business protocol, decision making, risk-taking, and marketing are influenced extensively by culture. Understanding the culture of the people you’re interacting with is crucial to having successful business relationships and achieving your goals. An entrepreneur’s capacity to enter a local market, build and manage commercial relationships, negotiate successful transactions, conduct sales, conduct marketing, and advertising campaigns, and engage in production and distribution will be influenced by his cultural awareness.
Individual traits such as self-esteem, functional effectiveness, mental health, and quality of life are regarded as vital for national cultural identity, and thus have direct effects on the performance of enterprises (Ayub Khan & Smith Law, 2018). Various authors have utilized various aspects to study and define national culture systems during the last few years. In this context, we will employ Geert Hofstede’s national cultural typology to examine the relationship between the five cultural dimensions (individualism-collectivism, power distance, uncertainty avoidance, masculinity-femininity, and time orientation) and business performance. The effects of the five dimensions on businesses are explained below.
It is the degree to which a society accepts or rejects unequal power distribution in organizations and society. This power includes the distribution of knowledge, wealth, resource, information, authority, and the relationship between the high-class individuals and their subordinates. Individuals in low-power distance cultures feel equal to their peers while in high-power distance cultures where there is great respect for age, status, and titles, individuals perceive themselves to be unequal to their peers. In high-power distance cultures, the superiors are usually the decision-makers, and questioning their authority is rare whilst in low-power distance cultures decision-making frequently involves further justification among members, and hierarchies are either not explicitly established or abolished entirely (Metcalf, 2022). The two power distances manifest differently within businesses.
Employees in a high-power distance business are aware of their subordinate status to their superiors, and as a result, they become more submissive and respectful to them. This in turn results in a more structured, ordered organization with well-defined duties. However, this cultural setup is not always ideal for organizations that are rooted in creativity because only the superiors are involved in decision-making. In an organization where low power distance is promoted employees have a greater degree of autonomy and influence.
This increased collaboration and communication leads to increased innovation and creativity. But, for a more effective business, this culture is only applicable in societies that uphold democratic organizations (Wei et al., 2017). Since it appears that there is no one-size-fits-all solution for determining the appropriate power distance in the workplace, it is up to the pioneering leaders to create a dynamic power distance culture that fits best with the sort of company culture that they would like to build and also the company’s objectives.
This cultural aspect assesses how much people in a certain society care about themselves against how much they care about others. Both perspectives have a significant influence on organizational leadership and management. In an individualized company, the employees’ demands are prioritized and valued. In contrast, collectivism values the group over the individual, asking members to sacrifice and contribute to the group as a whole (Morris, 2022).
For a company that promotes individualism, the distinction between managers and subordinates is blurred and ill-defined, supporting less strict organizational structures, empowering people to question present systems, and volunteering fresh ideas and innovation (Musambira & Matusitz, 2015). Increased individual attention, however, has certain unfavorable consequences. Members of such a company may experience an excessive sense of competitiveness with their coworkers, which can lead to insecurities, stress, and anxiety.
In collectivist cultures, members are required to mold their efforts, filling voids as they arise, neglecting personal accomplishments, and volunteering to contribute all resources to the group’s total success. In a collectivist environment, there is little to no competition. Hence it is for employee interactions (Trice & Beyer, 2001). However, this culture discourages individual decision-making and suppresses their values, beliefs, and motivation hence combating creativity and innovation.
Masculinity vs. femininity
This aspect assesses how individuals in a certain society are motivated by competitiveness, personal achievement, and success. From Hofstede (2001), masculinity refers to a culture in which the social gender roles of men and women are firmly defined. Men are expected to be assertive, tough, and materialistic, whereas women are expected to be humble, delicate, and concerned with the quality of life. On the contrary, femininity refers to a society in which societal gender norms are blurred: both men and women are expected to be modest, tender, and concerned about the quality of their lives.
According to a recent development program by Ergle, in masculine societies men wield more power, are paid more, and are expected to act in a more masculine manner while women are the ones who get the short end of the stick (2015). They are expected to be caregivers, are paid less, and are underrepresented in leadership roles in all fields. On the other end, female presence in most positions of power is common in feminine cultures, and quality of life and interpersonal relationships are prized over materialistic objects such as money. For an organization to be free from being set back by this cultural aspect it should work towards cultural relativism. Since men and women can exhibit the same results and accomplishments, organizations should keep a neutral position so that they won’t be confused by the different perceptions of their effectiveness.
This aspect of the national cultural system describes how members of a cultural group approach time management. The way of thinking about time is not universal. According to development by Hall (1983), people in societies where time is seen as a controllable aspect are more timely, agenda-driven, and monochromic. On the other hand, in cultures where time is associated with nature or the environment people tend to be less punctual and polychromic.
Polychromic time societies are characterized by a high level of human interaction. They place a greater emphasis on the completion of human interactions than on sticking to schedules. In monochromic time-oriented cultures, employees set goals and plan accordingly to improve job performance and satisfaction. Time management has an impact on many aspects of a person’s life, including work, family, social, and private life. It is critical for businesses to understand the values and assumptions that a culture places on time concepts to develop policies that improve employees’ effectiveness.
Uncertainty avoidance refers to how well a community or its individuals tolerate, deal with, or battle unpredictability. Countries are ranked according to their tolerance for uncertainty using the Uncertainty Avoidance Index (UAI) (Gordon, 2022). Individuals from communities with a high level of uncertainty avoidance are seen as less daring and risk-takers when making decisions. Such individuals devise effective strategies and ideas to combat or limit the occurrence of the unknown, as well as make changes and plan ahead of time to alleviate uncertainty. Conversely, individuals from communities where uncertainty avoidance is low are more likely to take big risks while making future decisions and also accept unorthodox approaches to be at ease with uncertainty.
Following an exploratory study by Ayoun and Moreo, their findings indicated that uncertainty avoidance had only a little impact on employees’ strategies, as various employees from different degrees of uncertainty avoidance displayed significant similarities across the five variables evaluated. Organizations have to adapt to the daily changes within the organization and externally in the environment. They should therefore put into place policies that govern them when problems arise. Also, good decision-making during this difficult and unpredictable journey.
It is undeniable that culture has an impact on international business management techniques and approaches. Cultural differences have a profound impact on how people live their lives and conduct themselves at work. In the text above five dimensions of national cultures have been briefly analyzed as proposed by a Dutch social psychologist Geert Hofstede.
In his book Culture’s Consequences and Cultures and Organizations he described national culture using the following five dimensions: power distance is the degree to which society’s less powerful members tolerate and expect unequal power distribution, individualism/collectivism is concerned with the relative relevance of individual vs. group interests, time concept is the proportion of persons who value a long-term perspective over a short-term one, uncertainty avoidance is the extent to which individuals of a society are uncomfortable with uncertainty, and masculinity vs femininity is the degree to which society encourages or discourages traditional masculine job roles.
The world’s cultures are becoming deeply integrated, and the corporate sector is becoming increasingly global. For businesses, this means being able to work with a wide range of people from various countries and cultural backgrounds. However, because most people are so entrenched in their own culture, they often fail to notice how it influences their thinking and behavior patterns.
To overcome this, Geert Hofstede’s five dimensions model has been used practically in the global business village to eradicate the challenge of cultural differences across borders. It has been applied in international communications, negotiations, management, and also marketing. It is therefore very clear that a study on cultural value dimensions is beneficial to any company that conducts worldwide or multicultural operations.