Case Analysis: Doing Business Abroad

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Case Analysis: Doing Business Abroad

As businesses grow to the point that they operate globally, it becomes important for the personnel within the company to understand the cultural differences between the home office and the overseas operations. Every region of the world has its unique cultural idiosyncrasies. These idiosyncrasies can prove to be challenging if a manager is not prepared to deal with the cultural differences in a respectful, appropriate way. Some of the specific ways that cultural differences can affect international business relations are group mechanics, employee behavior, and norms.

Professor Geert Hofstede initially developed a model that identified four primary dimensions to assist in differentiating cultures: Power Distance index - PDI, Individualism - IDV, Masculinity - MAS, and Uncertainty Avoidance Index - UAI. Geert Hofstede later added a fifth dimension after conducting an additional international study with a survey instrument developed with Chinese employees and managers. That dimension, based on Confucian dynamism, is Long-Term Orientation – LTO. For our purposes, we will focus on three cultural dimensions: Power Distance Index's relationship to behavior and group mechanics; Individualism's relationship to group mechanics; and Masculinity's relationship to norms.

In societies that have opposing Power-Distance Indices, the manager needs to understand the effect that the Power-Distance Index (PDI) has on both group mechanics (dynamics) and individual employee behavior. Power-Distance Index refers to the inequalities of power and wealth within the society. Societies with a high PDI are more likely to follow a caste system that does not allow significant upward mobility of its citizens whereas societies with a low PDI are more likely to have equal opportunity for all its citizens. When a company conducts operations in a country with a significantly different PDI, the cross-cultural effect on group mechanics can be...
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