Literature Review Application of Hofstede s Model to Analyze Australian Business Practices and Culture. Benjamin Abwanzo 4/3/2017

Transcription

1 Literature Review 1 Literature Review Application of Hofstede s Model to Analyze Australian Business Practices and Culture Benjamin Abwanzo 4/3/2017

2 Literature Review 2 Introduction Between 1967 and 1973, Hofstede studied IBM employees to develop a cultural dimension theory. The theory describes how different cultural practices impact on the values, habits, and behavior of members of a given society (Hofstede & Hofstede, 2004; Kidane, 2017). Over the years, Hofstede s cultural dimension theory has been utilized in to determine why some societies have variable business practices. For instance, scholars and cultural economists have utilized Hofstede s concept of power distance index (PDI) to analyses why different regions of the world have different leadership structures. In a country like Australia, research has proven that their PDI is low (Leo, et al., 2005). This implies that the leadership structure in the country is not hierarchical in nature but rather decentralized. People are therefore allowed to question authority and are usually part of the major decision-making process. This trend is unlike a country like Singapore where the PDI is relatively higher than Australia (Leo, et al., 2005). Hence, the society in Singapore has a low rate of equality and power is unevenly distributed. This literature review applies Hofstede s cultural dimension to determine how Australian business practices align to each of Hofstede s dimension. Dimensions of Australian Cultures Exploring the Australian culture through Hofstede s six cultural dimensions is key to understanding the different business practices and decision-making in the country. Hence, a thorough evaluation of the business practices shall highlight some of the drivers of Australian business culture in relation to other cultures in the world.

3 Literature Review 3 Power Distance Index The power distance dimension was a concept advanced to show the levels of inequality in the society. Therefore, it highlights the attitudes that people in the society have towards the power inequalities that are prevalent among communities. Hofstede & Hofstede (2004) defined power distance as the levels of tolerance that the least powerful members of the society, business, or institution are willing to accept the prevailing issues of power distribution. This definition implies that both the leaders in the society as well as their subjects endorse the concept of inequality. As such, if no tolerance were afforded to inequality, the PDI would be zero. Australia is considered a low power dimension country. According to Hofstede (2017), Australia has a PDI of 36. Consequently, the business organizations in the country establish leadership hierarchy for convenience rather than authority. Business leaders in Australia are usually figureheads, who are highly accessible and rely on their subordinates as well as other employees for advice and expertise. Egalitarianism is common, and business managers and employees share information frequently. Therefore, business communication is often informal, and leaders encourage participative interaction. Individualism and Collectivism In the opinion of Hofstede (2011), the dimension of individualism is defined as the degree of interdependence amongst society members. Hence, it looks at whether people define themselves as individuals or as members of a collective group. Individualistic societies tend to encourage people to go after their interests, as well as the interests of their immediate family first. On the other hand, collectivism encourages a group mentality where people care for members of a group

4 Literature Review 4 in exchange for loyalty. The higher the individualism score, the higher the levels of independence and identification as an individual. Australia is a strong capitalist society that encourages individualism and self-interest. As such, its individualism score is 90 (Hofstede, 2017). This implies that business entities in the country aim to serve their best interests. The business society is closely knit, but it is expected that each business has to look after itself before other business. Employees within organizations are required to have a high degree of self-reliance and show initiative where necessary. Due to the individualistic nature of the Australian society, business activities such as recruiting, rewarding, and promoting employees are based on merit. The best-qualified employee often has an advantage over others. Masculinity Vs. Femininity The masculinity dimension refers to the tendency of society to prefer assertiveness, heroism and other factors such as materialism and achievement. A high masculinity score in a society is interpreted as a societal preference to competitiveness and success. A low score indicates a preference to femininity is defined as the tendency to accept aspects such as modesty, cooperation, quality of life, and care. Often if a society has a low masculinity score, it indicates that quality of life is preferred to success. Hence, Hofstede (2004) was of the opinion that this dimension was adopted to determine the key motivating factor in the society. Whereas some people are driven by masculinity, others are motivated by femininity. The Australian society is considered a masculine society. Hofstede (2017) awarded them a masculinity index of 61. Hence, the behavior nurtured from a young age as well as in the

5 Literature Review 5 business setup encourages individuals to strive for the best. Often business decisions such as hiring and promotion are based on the levels of masculinity a person portrays. Individuals who portray higher levels of masculinity are deemed ambitious enough to promote business, thus end up getting better jobs and remuneration. Uncertainty Avoidance Index Hofstede (2004) used the uncertainty avoidance dimension to refer to the way the society deals with future uncertainties. Hence, it is the measure of the extent which society members are threatened by future ambiguity and unknowns. Often societies are affected by the question of whether they can control the future or it if it is beyond their control. This ambiguity causes uncertainty and may lead to anxiety among members of society. The Australian business practices often attempt to control future situations. Hence, the country has an intermediate score of 51 (Hodstede, 2011). Concepts such as business risk management are common in Australian business institutions. This practice is common because it bids to reduce the level of loss that may arise due to future uncertainties (Laker, 2006). Business managers encourage their employees to make plans for the future in a bid to control unknown events. Long-Term Orientation This dimension looks at how societies link past events to present and future occurrences. Hofstede (2011) stated that the long-term orientation dimension looks at how the society keeps its links with its past when dealing with present and future challenges. Different societies have different ways of looking at how past issues affects their present and future. Hence, societies

6 Literature Review 6 score differently on long-term orientation scale. Societies with a low score are often conservative and prefer to utilize traditional approach in dealing with societal changes. On the other hand, societies with a high score are pragmatic. They encourage innovation to ensure that they can deal with the present and future challenges. Australia is deemed as a more conservative society. Therefore, Hofstede (2017) awarded them a long-term orientation score of 21. The society is deemed to have a normative culture, and they are strongly concerned about finding out the truth about situations. For this reason, the business sector is also impacted by the normative nature of the society. Consequently, businesses in the country maintain a strong sense of tradition (Intl Business Publication, 2015). There is a low tendency for saving for the future, and often businesses focus on achieving rapid short-term results (Cenere, et al., 2015). Indulgence The indulgence dimension focuses on the extent to which societal members attempt to control their impulses and desires in relation to upbringing. Most societies in the world are often concerned with the nature of raising children and how to socialize them. In a situation where members of the society exert too little control, Hofstede (2004) referred to this as indulgence. On the other hand, in a situation where the society exerted too much control, Hofstede (2004) was of the opinion that this is restraint. Hence, Hofstede (2004) indicated that a society could be deemed as indulgent or restrained. Australia has a high indulgent index of 71 (Hofstede, 2017). For this reason, members of the Australian society are free to act on their impulses and desires. Similarly, the business culture

7 Literature Review 7 and practices in the country are relaxed and indulgent, with most businesses in the country allowing their staff to have some fun and enjoy life at work (Cenere, et al., 2015). Business entities tend to have optimistic outlook and employees are often encouraged to take leave of absence for leisure purposes. Conclusion Hofstede developed the cultural dimensional theory to assist in the evaluation of cultural practices of different communities in the world. This reviews utilized the six dimensions provided in Hofstede cultural dimension to analyses Australian business practices. Evidently, Australia is a low distance power society that encourages individualism instead of collectivism. In addition, the results of the review showed that the country has an intermediate uncertainty score and do not overindulge in controlling future events. The country s businesses are also prone to short-termism and tend to focus on achieving short goals. Lastly, Australian business culture encourages indulgence and allows employers and employees time for leisure after work.

8 Literature Review 8 References Cenere, P., Gill, R., Lawson, C. & Lewis, M., Communication Skills for Business Professionals 7. Cambridge, Cambridge University Press. Hofstede, G., Dimensionalizing Cultures: The Hofstede Model in Context. Online Reding in Psychology and culture, 2(1), pp Hofstede, G., What About Australia. [Online] Available at: [Accessed 3 April 2017]. Hofstede, G. & Hofstede, G.,., Cultures and Organizations: Software of the Mind: Software for the Mind. 2nd ed. New York: Mcgraw-Hill. Intl Business Publication, Australia business and investment opportunities yearbook: practical information and opportunities. Alexandra, Intl Business Publication. Kidane, W. L., The Culture of International Arbitration. New York: Oxford University Press. Laker, J. F., Risk Management In Banking A Prudential Perspective. Sydney, APRA. Leo, C., Bennett, R. & Cierpicki, S., A comparison of Australian and Singaporean consumer decision-making styles. Journal of Customer Behavior, 4(1), pp