EPRG Framework

The way businesses and staff view the world is described as international management
orientations. Howard Perlmutter identified a way of classifying alternative management
orientations, which is commonly referred as Perlmutter’s EPRG model. He states that businesses
and their staff tend to operate in one of four ways:

Ethnocentric

These people or companies believe that the home country is superior. When they look to new
markets they rely on what they know and seek similarities with their own country. Overseas
subsidiaries or offices in international markets are seen as less able and less important than the
head office. Typically, these companies make few adaptations to their products and undertake
little research in the international markets.

In these companies, opportunities outside the home country are ignored. Such companies are also
sometimes referred to as domestic companies. Ethnocentric companies that do business outside
the home country can be described as international companies; they adhere to the notion that the
products that succeed in the home country are superior and can, therefore, be sold
everywhere without adaptation.

Polycentric

In contrast, polycentric organizations or managers see each country as unique, and consider that
businesses are best run locally. Polycentric management means that the head office places little
control on the activities in each market, and there is little attempt to make use of any good ideas
or best practices from other markets.

The term polycentric describes management’s often-unconscious belief or assumption that each
country in which a company does business is unique. This assumption lays the groundwork for
each subsidiary to develop its unique business and marketing strategies in order to succeed. The
term multinational company is often used to describe such a structure.
Regiocentric

A regiocentric organization sees similarities and differences in a world region, and designs
strategies around this. Often there are major differences between countries in a region. For
example, Norway and Spain are both in Europe, but are very different in climate, culture,
transport, retail distribution, and so on.

For example, a US company, which focuses on countries included in the North American Free
Trade Agreement (NAFTA)- the United States, Canada, and Mexico, has a region-centric
orientation. Similarly, if companies of ASEAN member countries focus only on South East Asia,
then they are said to have regiocentric orientation.

Geocentric

Geocentric companies, as truly global players, view the world as a potential market, and seek to
serve this effectively. Geocentric management can recognize the similarities and differences
between the home country and the international markets. It combines ethnocentric and
polycentric views; in other words, it displays the “think global, act local” ideology.

The geocentric orientation represents a synthesis of ethnocentrism and polycentricism into a

‘world view’ that sees similarities and differences in markets and countries, and seeks to create a
global strategy that is fully responsive to local needs and wants. The case of European Silicon
Structures illustrates the practice of geocentric organizations.
What is PESTLE Analysis? A Tool for Business Analysis
What is PESTLE Analysis? PESTLE analysis, which is sometimes referred as PEST
analysis, is a concept in marketing principles. Moreover, this concept is used as a tool by
companies to track the environment they’re operating in or are planning to launch a new
project/product/service etc.
PESTLE is a mnemonic which in its expanded form denotes P for Political, E for Economic, S
for Social, T for Technological, L for Legal and E for Environmental. It gives a bird’s eye view
of the whole environment from many different angles that one wants to check and keep a track of
while contemplating on a certain idea/plan.
The framework has undergone certain alterations, as gurus of Marketing have added certain
things like an E for Ethics to instill the element of demographics while utilizing the framework
while researching the market.

There are certain questions that one needs to ask while conducting this analysis, which give
them an idea of what things to keep in mind. They are:
 What is the political situation of the country and how can it affect the industry?
 What are the prevalent economic factors?
 How much importance does culture has in the market and what are its determinants?
 What technological innovations are likely to pop up and affect the market structure?
 Are there any current legislations that regulate the industry or can there be any change in
the legislations for the industry?
 What are the environmental concerns for the industry?
All the aspects of this technique are crucial for any industry a business might be in. More than
just understanding the market, this framework represents one of the vertebras of the backbone of
strategic management that not only defines what a company should do, but also accounts for an
organization’s goals and the strategies stringed to them.

It may be so, that the importance of each of the factors may be different to different kinds of
industries, but it is imperative to any strategy a company wants to develop that they conduct
the PESTLE analysis as it forms a much more comprehensive version of the SWOT analysis.
It is very critical for one to understand the complete depth of each of the letters of the PESTLE.
It is as below:
1. Political: These factors determine the extent to which a government may influence the
economy or a certain industry. [For example] a government may impose a new tax or duty
due to which entire revenue generating structures of organizations might change. Political
factors include tax policies, Fiscal policy, trade tariffs etc. that a government may levy
around the fiscal year and it may affect the business environment (economic environment)
to a great extent.
2. Economic: These factors are determinants of an economy’s performance that directly
impacts a company and have resonating long term effects. [For example] a rise in the
inflation rate of any economy would affect the way companies’ price their products and
services. Adding to that, it would affect the purchasing power of a consumer and change
demand/supply models for that economy. Economic factors include inflation rate, interest
rates, foreign exchange rates, economic growth patterns etc. It also accounts for the FDI
(foreign direct investment) depending on certain specific industries who’re undergoing this
analysis.
3. Social: These factors scrutinize the social environment of the market, and gauge
determinants like cultural trends, demographics, population analytics etc. An example for
this can be buying trends for Western countries like the US where there is high demand
during the Holiday season.
4. Technological: These factors pertain to innovations in technology that may affect the
operations of the industry and the market favorably or unfavorably. This refers to
automation, research and development and the amount of technological awareness that a
market possesses.
5. Legal: These factors have both external and internal sides. There are certain laws that
affect the business environment in a certain country while there are certain policies that
companies maintain for themselves. Legal analysis takes into account both of these angles
and then charts out the strategies in light of these legislations. For example, consumer
laws, safety standards, labor laws etc.
6. Environmental: These factors include all those that influence or are determined by the
surrounding environment. This aspect of the PESTLE is crucial for certain industries
particularly for example tourism, farming, agriculture etc. Factors of a business
environmental analysis include but are not limited to climate, weather, geographical
location, global changes in climate, environmental offsets etc.

What is the 'Porter Diamond '

The Porter Diamond, properly referred to as the Porter Diamond Theory of National Advantage,
is a model that is designed to help understand the competitive advantage nations or groups
possess due to certain factors available to them, and to explain how governments can act as
catalysts to improve a country's position in a globally competitive economic environment. The
model was created by Michael Porter, a recognized authority on corporate strategy and economic
competition, and founder of The Institute for Strategy and Competitiveness at the Harvard
Business School. It is a proactive economic theory, rather than one that simply
quantifies comparative advantages that a country or region may have.

BREAKING DOWN 'Porter Diamond '

Most traditional theories of global economics mention elements, or factors, that a country or
region inherently possesses, such as land, location, natural resources, labor and population size
as the primary determinants in a country's comparative economic advantage. The Porter
Diamond suggests that countries can create new factor advantages for themselves, such as a
strong technology industry, skilled labor, and government support of a country's economy.
The Importance of Factor Conditions
The Porter Diamond is visually represented by a diagram that resembles the four points of a
diamond. The four points represent four interrelated determinants that Porter theorizes as the
deciding factors of national comparative economic advantage. These four factors are firm
strategy, structure and rivalry, related supporting industries, demand conditions and factor
conditions.

Firm strategy, structure and rivalry refers to the basic fact that competition leads to businesses
finding ways to increase production and to the development of technological innovations.
Related supporting industries refers to upstream and downstream industries that facilitate
innovation through exchanging ideas. Demand conditions refer to the size and nature of the
customer base for products, which also drives innovation and product improvement. The final
determinant, and the most important one according to Porter's theory, is that of factor conditions.
Factor conditions are those elements that Porter believes a country's economy can create for
itself, such as a large pool of skilled labor, technological innovation, infrastructure and capital.

For example, Japan has developed a competitive global economic presence beyond the country's
inherent resources, in part by producing a very high number of engineers that have helped drive
technological innovation by Japanese industries.

Porter argues that the elements of factor conditions are more important in determining a
country's comparative advantage than naturally inherited factors such as land and natural
resources. He further suggests that a primary role of government in driving a nation's economy is
to encourage and challenge businesses within the country to focus on creation and development
 of the elements of factor conditions. One way for government to accomplish that goal is to
stimulate competition between domestic companies by establishing and enforcing anti-trust laws.

The Porter Diamond is also referred to as "Porter's Diamond" or the "Diamond Model".

Read more: Porter Diamond https://www.investopedia.com/terms/p/porter-

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Points of View on FDI in Emerging Markets

The entry of multinational companies in emerging markets has created a surge in economic
activity and has redefined globalization. Multinationals are no longer considered marginal to an
emerging market’s economy, instead they are seen as a source of market competition and
industrial growth. Open economies with skilled workforces and good growth prospects tend to
attract larger amounts of foreign direct investment than closed, highly regulated economies.

What is foreign direct investment? Foreign direct investment (FDI) is an investment made by a
company in a country other than that in which is it based, and are investments in the country’s
domestic goods and services. This does not include foreign investments in the domestic stock
market. Equity investments are more volatile and have a tendency to flow out of an economy at
the first sign of trouble; conversely FDIs are invariably expected to be a relatively stable longer-
term commitment on behalf of a multinational company.

What are the macro-economic determinants in attracting FDIs to an emerging economy?

 The human resources of a country plays an important role in attracting foreign direct investors
to a country. In such cases the investors are lured by the prospects of a huge customer base.

 A strong correlation exists between FDI and a country’s market-size as measured by the gross
domestic product per capita, in other words, a market with good spending capabilities offer is
attractive to investors.
 The human resources of the country is strongly instrumental in attracting direct investment from
overseas. Countries like China have taken an active interest in improving the quality of their
unskilled worker force. Another dimension to the human resource determinant is the availability
of a relatively cheaper yet educated labor force. The business process outsourcing (BPO)
revolution, as well as the boom of the Information Technology companies in countries like India
is proof of the fact that the educated labor force has played an important part in attracting foreign
direct investment.

 Infrastructure facilities such as quality telecommunications, electricity, roads and railways play
an important part in attracting foreign direct investors to invest in a particular country.

 Other factors such as the appropriate regulatory environment and low corporate income
taxes attract FDIs. Governments of emerging markets tend to overregulate foreign companies to
protect the local industry especially the micro, small and medium enterprises (MSME).
Restrictions such as joint venture and local sourcing requirements can restrict the manner in
which the foreign companies are allowed to operate.

A recent example of FDI in India is the Indian government’s decision to allow IKEA to invest
Rupees 10,500 crore (or USD 2 billion) to set up a wholly owned single brand retail venture in
India which will provide a much needed boost to the Indian economy. The IKEA deal creatively
meets the Indian government’s requirement for single brand retailers to source 30% of the
merchandise they sell from local small enterprises and vendors. IKEA’s concern that they would
not be able to meet this requirement from Day 1 led them to seek permission to be allowed to
comply with this rule cumulatively over a 10 year period with both parties agreeing to a
compromised period of 7 years. Their primary argument was that it takes a new IKEA store three
to five years to break even.

The arrival of IKEA in India brings with it some good business practices for the local
competition. IKEA is known for innovative design of products at affordable prices. It is also
known for it’s attention to cost control and operational efficiency. IKEA’s business model is
such that it does not invest in factories, instead they work closely with furniture and furnishings
vendors to design and produce products to meet their global quality and supply standards. As a
result, while IKEA will use Indian vendors to meet their global needs, the doors will also open
for these vendors to exports through the IKEA supply chain. The global furniture industry is
estimated at over $400 billion, and presently India’s export to the furniture and furnishings
markets is negligible (with the exception of carved wood products). This venture of IKEA’s
should help in creating manufacturing jobs in the small and medium enterprise market segment.

In summary, the perceived benefits to allowing FDIs in emerging market economies

notwithstanding, there are many critics of FDIs. Most notably, criticisms are by those who
consider some FDI business models as a threat to the unique structure of the particular emerging
economy. For instance, in India the textile, garment and food industries feel threatened by the
potential impact that large supermarket chains like Walmart and Tesco might have on the
thriving local stores. The benefits are a revival of economies by raising the productivity and
output of the sectors involved, the ability to raise the local standard of living, local consumers
benefiting from the competition that FDIs bring since they enjoy a wider selection of goods and
services at lower prices and often improved quality. This leads to increased demand and creation
of new wealth. All these benefits work if the domestic infrastructure specifically roads, public
transport, power supply, and ports have the ability and capacity to support the growing demands
on the country’s resources resulting from FDI activity. These are key prerequisites for an
emerging market economy to be able to sustain its growth and evolution.

NEW DELHI: It's arguably the most iconic brand among high-performance motorcycles. And it
could soon be owned by an Indian company. Royal Enfield is understood to have been
approached to acquire Italian superbike maker Ducati, owned by Germany's
embattled Volkswagen group.

According to reports, VW, reeling under a crippling diesel emissions scandal , has tasked
investment banking boutique Evercore to evaluate possible options for a sale of Ducati. The
Italian company could fetch a valuation of about $1.5 billion euros (approximately Rs 10,500
crore), according to estimates.

Royal Enfield, a part of Eicher Motors, has been witnessing healthy growth in India even as it
expands aggressively in overseas markets across Europe, North America, and Asia. Sources said
that Eicher Motors - which is looking to attain global leadership for Royal Enfield in the middle-
engine category - is examining the terms related to the acquisition, possible asking price, and
how Ducati could fit within its own fast-growing operations.

Eicher declined to comment. "We can't talk to you on such things," Siddhartha Lal, MD & CEO
of Eicher Motors, told TOI when asked about possible acquisition plans for Ducati.

Pressed further, Lal said, "I have a general view on such things. We are always open to thoughts
and ideas. But as you know, we are the most focused and selective company... So basically,
without saying absolutely no to anything - because we never say never - we are so zeroed in on
our own opportunity that we do not want anything to distract us."
However, sources said the Indian two-wheeler major - which has a tie-up with Sweden's Volvo
for heavy commercial vehicles and American manufacturer Polaris for personal utility vehicles --
is "keen to explore" any possible acquisition effort for Ducati, "if it comes at the right value and
provides the best fit" within its own branding.

Ducati is owned by Volkswagen's premium car division, Audi, and was acquired by the German
auto major in 2012 for 860 million Euros (about Rs 6,000 crore). Its current portfolio is
dominated mainly by motorcycles powered by engines between 800cc and 1,200cc, a segment
which is completely missing in Royal Enfield's portfolio.

File photo of a Ducati Monster bike during an exhibition in Jaipur. (TOI)

Ducati had sales of 593 million Euros in 2016 (Rs 4,196 crore). Other suitors may include global
companies such as Suzuki, Honda, Polaris and Harley Davidson, as per reports.

The Italian company sold 55,451 units last year (at a growth of 1.2%), and enjoys a cult branding
across the world with a healthy network in many developed markets.

Royal Enfield will hope to gain from Ducati's iconic branding, technology prowess, heavy-bikes
portfolio, and a good network in developed markets.

On its part, Eicher Motors has been witnessing one of the best periods in its history with the
Royal Enfield brand. Its motorcycle sales grew 31% last fiscal and touched all-time-best sales
numbers of 6.66 lakh units against 5 lakh units in 2015-16.

Lal said the company is eyeing "global leadership" in the middle-engine range - from 250cc to
750cc category - as it works on new global platforms beyond its current portfolio of vehicles
such as Bullet (350cc and 500cc), Thunderbird (350cc and 500cc), Classic (350cc and 500cc),
Himalayan (410cc), and Continental GT (535cc). These are priced between Rs 1.2 lakh and Rs
2.45 lakh (on-road) in Delhi.

"We are today the most profitable motorcycle company in the world... We want to become a
global leader in motorcycles, we want to become the number one in middle-weight markets
around the world... Anything which de-focuses us from our idea, we will not do," Lal said.

Apart from experiencing robust growth in demand, Royal Enfield's success has also meant that
Eicher Motors is in the list of most profitable auto companies. Its reserves at the end of fiscal
2016-17 were over Rs 3,500 crore, growing by nearly Rs 600 crore over the past six months.
he theory of Hofstede’s cultural dimensions constitutes a framework revolving around cross-
cultural communication, which was devised by Geert Hofstede. The dimensions collectively
portray the impact of the culture ingrained in society on the values of the members of that
society. They also describe the relationship between these values and behavior, with the help of a
structure based on factor analysis. In other words, this theory studies significant aspects of
culture and provides them a rating on a comparison scale.
So far as international business is concerned, the dimensions of culture form an important facet.
Knowledge of the manner in which different features of a business are viewed in different
cultures, can help a manager in understanding and sailing successfully across the international
business market.

In
this article, we discuss the topic of Hofstede cultural dimensions by exploring 1)
an introduction; 2) the six cultural dimensions of Hofstede framework, and using those
dimensions to better understand cultures and people based on 3) a case study of cultural
differences; 4) the urgency of managing cultural difference as part of human resources
management; and 5) conclusion.
INTRODUCTION TO HOFSTEDE’S CULTURAL DIMENSIONS
The original model of Hofstede was the outcome of factor analysis done on a global survey of
the value system of employees at IBM between the years 1967 and 1973. This theory was one of
the initial ones which could quantify cultural differences.
The original theory that Hofstede proposed talked of four dimensions, namely power distance,
uncertainty avoidance, individualism vs. collectivism and masculinity vs. femininity. After
conducting independent studies in Hong Kong, Hofstede included a fifth dimension, known as
long-term vs. short-term orientation, to describe value aspects that were not a part of his original
 theory. Again in 2010, Hofstede devised another dimension, the sixth one, indulgence vs. self-
restraint, in an edition of ‘Cultures and Organizations: Software of the Mind’, co-authored by
Michael Minkov.
Hofstede’s work serves as the base for other researches in cross-cultural psychology, inviting a
number of researchers to study different aspects of international business and communication.
These dimensions founded by Hofstede illustrate the deeply embedded values of diverse
cultures. These values impact not only how people with different cultural backgrounds behave,
but also the manner in which they will potentially behave when placed in a work-associated
context.
This is a brief overview of the six cultural dimensions:

1. Power Distance: This dimension explains the extent to which members who are less powerful in
a society accept and also expect that the distribution of power takes place unequally.
2. Uncertainty Avoidance: It is a dimension that describes the extent to which people in society
are not at ease with ambiguity and uncertainty.
3. Individualism vs. Collectivism: The focus of this dimension is on the question regarding
whether people have a preference for being left alone to look after themselves or want to remain
in a closely knitted network.
4. Masculinity vs. Femininity: Masculinity implies a society’s preference for assertiveness,
heroism, achievement and material reward for attaining success. On the contrary, femininity
represents a preference for modesty, cooperation, quality of life and caring for the weak.
5. Long-Term vs. Short-Term Orientation: Long-term orientation describes the inclination of a
society toward searching for virtue. Short-term orientation pertains to those societies that are
strongly inclined toward the establishment of the absolute truth.
6. Indulgence vs. Restraint: This revolves around the degree to which societies can exercise
control over their impulses and desires.
THE SIX HOFSTEDE DIMENSIONS & UNDERSTANDING COUNTRIES, CULTURE AND
PEOPLE
According to Geert Hofstede, culture is the mind’s collective programming that differentiates
between one category of people and members of one group from another. The term ‘category’
might imply nations, religions, ethnicities, regions across or within nations, genders,
organizations, or occupations.

#1: Power Distance

Power distance stands for inequality that is defined not from above, but from below. It is, in fact,
the extent to which organizations and societies accept power differentials.
Societies with large power distance are characterized by the following features:

 Autocracy in leadership;
 Authority that is centralized;
 Paternalistic ways of management;
 A number of hierarchy levels;
 The acceptance of the privileges that come with power;
 A lot of supervisory staff;
 An expectation of power differences and inequality.
Societies that have small power distance possess the following features:

 Participative or consultative style of management;

 Decision-making responsibility and authority decentralized;
 Flat structure of organizations;
 Supervisory staff small in proportion;
 Questioning the authority and lack of acceptance;
 An inclination toward egalitarianism;
 Consciousness of rights.

#2: Uncertainty Avoidance

Uncertainty avoidance is the extent to which the members belonging to a society are capable of
coping with future uncertainty without going through stress.
Weak uncertainty avoidance comes with the following features:

 Undertaking risk;
 Flexibility;
 Tolerance toward differing opinions and behaviors.
Strong uncertainty avoidance is represented by the following aspects:

 Tendency to avoid risk;

 Organizations that have a number of standardized procedures, written rules, and clearly
delineated structures;
 Strong requirement for consensus;
 Respect for authority;
 Requirement for predictability highlighting the significance of planning;
 Minimal or no tolerance for deviants;
 Promotions depending upon age or seniority.

#3: Individualism vs. Collectivism

 Individualism set against its opposite collectivism defines the extent to which individuals are
inclined toward remaining in groups.
Individualistic cultures are characterized by:

 Fostering contractual relationships that revolve around the fundamentals of exchange. These
cultures engage in the calculation of profit and loss prior to engagement in a behavior.
 Concentration on self or at the most very near and dear ones, and concern with behavioral
relationships as well as own goals, interests, and needs.
 Emphasis on personal enjoyment, fun, and pleasure, over duties and social norms. They are a
part of a number of in-groups which hardly have any influence on their lives.
 Self-sufficiency and value independence, and placement of self-interest over collective interest.
Confrontation is accepted as an attribute.
 Stress on horizontal relationships (such as the relationship between spouse and spouse) rather
than vertical relationships (such as the relationship between parent and child).
 The notion that they hold unique beliefs.
Collectivistic cultures are characterized by:

 Behavior as per social norms that are established for maintenance of social harmony among in-
group members;
 Considering the wider collective with regards to implications of their actions;
 Sharing of resources and readiness to give up personal interest keeping in mind the collective
interest;
 Favoring some in-groups (such as friends and family);
 Being a part of a few in-groups that have an influence on their lives. Rather than being
individualistic, they have an increased inclination towards conformity;
 Increased concern regarding in-group members. They show hostility or indifference toward out-
group members;
 Emphasis on harmony and hierarchy within group;
 Regulation of behavior with the help of group norms.

#4: Masculinity vs. Femininity

Masculinity and femininity revolve around the emotional role distribution between genders,
which is again a prime issue in a number of societies.
Masculine cultures possess the following characteristics:

 Clearly distinct gender roles;

 Benevolence has little or no significance;
 Men are expected to be tough and assertive with a concentration on material achievements;
 Much value is associated with mastery of people, nature, job, and the like;
 Sense of humor, intelligence, affection, personality are considered preferred characteristic traits
of a boyfriend by the women;
 Understanding, wealth, and health are considered desirable characteristic traits of a husband by
the women.
Feminine cultures possess the following characteristics:

 Overlapping of social gender roles;

 Men, as well as women, are expected to be tender, modest, with focus on the quality of life;
 Emphasis on the non-materialistic angles of success;
 The preferred traits in boyfriends and husbands are the same.

#5: Long-Term vs. Short-Term Orientation

This is based on the Confucian dynamism. According to the teachings of Confucius, the
following aspects of life are evident:

 Unequal relationships existing between people ensure the stability of society.

 Every social organization has its prototype in the family.
 Virtuous behavior involves treatment meted out to others in a similar manner as one prefers to be
treated oneself.
 So far as tasks in life are concerned, virtue comprises acquiring skills, working hard, education,
being wise in spending as well as showing perseverance and patience.
Long-term orientation (high Confucian values) reflects the following:

 A futuristic, dynamic mentality;

 Emphasis on a relationship order depending on status, and observance of this order;
 Emphasis on persistence and perseverance;
 Stress on possessing a sense of shame;
 Stress on thrift;
 Positive association with economic growth;
 Inclination toward interrelatedness represented in sensitivity toward social contacts.
Short-term orientation (low Confucian values) is characterized by the following:

 Orientation toward past and present;

 Focus on respect for tradition;
 A comparatively static, more conventional mentality;
 Emphasis on saving face;
 Emphasis on personal steadiness;
 Focus on stability;
 Emphasis on reciprocation of gifts, favors, and greetings;
 Negative association with economic growth.

#6: Indulgence vs. Restraint

The dimension of indulgence vs. restraint focuses on happiness. A society that practices
indulgence makes room for the comparatively free gratification of natural and basic human
drives pertaining to indulging in fun and enjoying life. The quality of restraint describes a society
that holds back need gratification and tries to control it through stringent social norms.

International Comparison of Culture on the Basis of Hofstede’s Dimensions

With respect to national scores on a scale of 1 to 120 (1 representing the lowest and 120
representing the highest), the following international comparison has been made between
cultures:

 Arab, African, Asian and Latin countries have a higher score with regards to power distance
index while Germanic and Anglo countries possess a lower score. For instance, Guatemala has a
score of 95 while Israel scores 13 with a very low power distance, whereas the United States
stands somewhere in between with a score of 40.
 So far as the individualism index is concerned, a substantial gap exists between Eastern and less
developed countries on one hand and Western and developed countries on the other. While
Europe and North America are highly individualistic, Latin America, Africa, and Asia score very
low on the individualism index with strong collectivist values.
 Highest uncertainty avoidance scores are possessed by Latin American countries, Japan as well
as Eastern and Southern Europe. The score is lower for Chinese, Nordic, and Anglo culture
countries. For instance, Germany has a higher uncertainty avoidance index with a score of 65,
compared to Sweden, which scores only 29.
 Nordic countries exhibit low masculinity, with Sweden and Norway scoring 5 and 8 respectively.
Again, Anglo countries, Japan, and European countries such as Switzerland, Austria and
Hungary have high masculinity scores.
 Long-term orientation is high in East Asia, moderate in Western as well as Eastern Europe and
low in Latin America and Africa.
 Nordic Europe, Anglo countries, certain regions of Africa and Latin America have high
indulgence scores, while Eastern Europe and East Asia exhibit more restraint.
CASE STUDY OF CULTURAL DIFFERENCES EXPERIENCED AT A CONSTRUCTION
PROJECT IN GHANA
Developing countries often lack native engineers, so foreign engineers are often deployed
for sanitation and water systems in rural communities. This is necessary to reach the United
 Nations Millennium Development Goals (MDG) target for accessing sanitation facilities and
clean water. However, often there is a failure to manage the project effectively due to existing
cultural differences between local communities and foreign engineers. This case study of one
such project in Eastern Ghana, supervised by a British engineer and project manager, explores
some of the critical issues that can arise in a cross-cultural project. Hofstede’s four cultural
dimensions have been considered here, namely, masculinity vs. femininity, power distance
index, uncertainty avoidance index and individualism vs. collectivism.
Issues experienced:

 The engineer expected the community to express their opinions regarding the sanitation and
water project, including the procedure of the project, the design or any other facet that the
community wanted to discuss. However, it was seen that apart from the elders and the chief, the
community’s ordinary members had certain inhibitions regarding expressing their opinions.
 It was also noticed during the project that if individuals ever voiced their opinions, they preferred
not to express opinions that conflicted with what others had expressed. For instance, on a
particular occasion, the engineer asked the opinions of two women in a family. After the first
shared her opinion, the second woman, who was younger, was asked to share hers, but she
refused to do so. Instead, she said that her mother (the other woman), had already spoken.
 In another case, the engineer approached a woman, who had some problems in walking, for her
opinion. In the village, she happened to be the only lady with this problem, so her opinion was
sought in order to customize the design for water collection and sanitation systems accordingly.
However, this lady was reluctant to voice any opinion regarding this, as she felt that her own
well-being was not so much significant considering the entire group. However, when the other
women of the community were asked, one suggested a flat design so that the lady with the
walking problem could collect her water easily.
 At the start of the project, the engineer could more or less comfortably organize the work
schedule and ensure good progress. Many members of the community lent helping hands.
However, when the project was drawing to an end, the chief showed a temporary loss of interest
due to two reasons. First, his mother had died and he was arranging for the funeral. Second, he
had an affair with a girl in a neighboring village and was more inclined to meet her than perform
his duties.
 When the community members started returning to work, they seemed lethargic, and the
engineer found it very difficult to complete the project within the stipulated deadline.
Explanation of the issues based on Hofstede dimensions:

 The community is from a culture that exhibits high power distance index, wherein subordinates
are accustomed to abide by what their seniors tell them to do rather than following more
democratic ways. On the contrary, the engineer came from a culture where the power distance
index is low, with flatter power structures, wherein the authority and subordinates worked on
more or less equal terms.
 The community is more collectively oriented, whereas the engineer belonged to a culture that is
more individualistic. Therefore, the community gave preference to the group’s opinion instead of
personal opinion. Therefore, when the lady with the walking problem was asked to voice her
 opinion, she was reluctant to express her personal opinion, as the majority of the community
members did not possess her problem.
 Since low uncertainty avoidance and high power distance existed within the community, the
members were more inclined toward organizing themselves as an extended family, with the chief
being the grandfather of that family. The main authority lies with the chief, who should decide
on the best course of action.
 In contrast, the engineer’s culture was one with low power distance and low uncertainty
avoidance. Hence, when the project was drawing to an end, the engineer wanted to gather in the
other members of the community although the chief lacked interest. But since the chief was not
there, the members expressed disinterest, which the engineer interpreted as lethargy.
THE URGENCY OF MANAGING CULTURAL DIFFERENCES AS PART OF HUMAN
RESOURCES MANAGEMENT
Managers across the globe are increasingly facing the challenges thrown by the global
interdependence of markets, and the human resources department in organizations is not an
exception. When a common culture prevails, personnel management is not difficult since
everybody has a common conception of right, wrong and accepted behavior. However, when
team members come from different cultural backgrounds or the backgrounds of the manager and
the team differ, it might lead to grave misunderstandings. Below is an analysis of how culture
prevails across some of the major aspects of HR management.

 Recruiting – The definition of a good candidate differs according to cultures. Those who
express strong opinions, are outspoken and self-confident, are considered good candidates in
individualistic masculine societies. Again in collectivist feminine societies, modest and ‘well
connected’ candidates are good ones. Considering this, positioning as an employer in the USA
(high on masculinity) is quite different from doing so in Scandinavian countries and the
Netherlands (low on masculinity).
 Target Setting – In Germany, the Netherlands, the UK, the USA and other low power distance
cultures, targets are negotiated, while in high power distance cultures such as Italy, France, and
Belgium, targets are set by senior managers.
 Training – In high power distance societies, there is instructor-centric learning, while in low
power distance societies, it is more learner-centric and interactive.
 Appraisal – Most of the appraisal procedures are established in the USA or the UK, which are
countries with high individualism and low power distance. Hence, as per these countries, the
right way of performance enhancement is direct, frank feedback. However, this does not take
into consideration that in countries with high power distance and collectivistic cultures, direct
feedback is regarded as disrespectful and disgraceful.
This cycle of recruitment, target setting, training and appraisal can be successfully used to
manage people if it is culturally adapted. Relevant research and preparation is required for this.
CONCLUSION
Cultural differences do impact businesses occurring in cross-cultural contexts. A lot of problems
arise in matters of participation, communication and other relational areas. However, if business
leaders or even the staff understands issues with respect to Hofstede’s six cultural dimensions,
these problems can be analyzed through a different perspective, and necessary steps to address
these problems can be taken.

The cultural, administrative, geographic, and economic (CAGE) distance framework helps
managers identify and assess the impact of distance on various industries.

The more two countries differ across these dimensions, the riskier the target foreign market. By
contrast, similarities along these dimensions suggest great potential. Com- mon currency, for
example, boosts trade more than 300%. Also, types of distance af- fect industries differently.
Religious differ- ences, for instance, shape people’s food pref- erences but not their choices of
cement or other industrial materials.

By analyzing the possible impact of dis- tance—in all its dimensions—you sweeten the odds of
investing in profitable foreign markets.

The complete article reference is here:

Application of the CAGE framework requires managers to identify attractive locations based on
raw material costs, access to markets or consumers, or other key decision criteria. For instance, a
firm maybe most interested in markets with high consumer buying power, so it uses per capita
income as the first sorting cue. This would result in some type of ranking. Any international
expansion strategy would still need to be backed up by the specific resources and capabilities
possessed by the firm, regardless of how rosy the CAGE analysis paints the picture. Think of
international expansion as a movement along a continuum from known markets to less-known
markets; a firm can move to more CAGE-proximate neighbors before venturing into markets that
are portrayed as very different from a CAGE-framework perspective. Each dimension of CAGE
is described below.

Cultural Distance. Culture happens to be the first facet of CAGE, in terms of the acronym, but
it also can be the most practically perplexing facet for managers. Culture is sometimes referred to
as the software of the mind, in that it has a sometimes invisible but indelible influence on
people`s values and behaviors.Cultural distance, then, has to do with the possible differences
existing in relation to the way individuals from different countries observe certain values and
behaviors.

A number of researchers have identified significant cultural differences among countries.

Distinct cultural differences are observed around the following dimensions: power distance (the
extent to which individuals accept the existence of inequalities between subordinates and
superiors within a hierarchical structure); uncertainty avoidance (individuals` willingness to
coexist with uncertainty about the future); individualism (how the individuals in a society value
individualistic behaviors as opposed to collective ones); predominant values (regarding quantity
or quality of life, that is, whether more importance is given to material aspects or a stronger
emphasis is laid on interpersonal relationships); and long-term or short-term orientation (the
focus on future rewards or the concern about the maintenance of the stability related to the past
and the present).

Administrative Distance. Administrative distance reflects the historical and present political
and legal associations between trading partners; for example, colonial ties between trading
partners, or participation in common trading blocs. This facet of CAGE asks you to examine
whether there are historical or current political factors that might favor or impede a business
relationship between a company and a new country market. NAFTA, for instance, decreased the
administrative distance between U.S. firms and Mexico and Canada. Similarly, historical
political hostilities between the United States and Cuba make it virtually impossible (and illegal)
for most U.S. firms to do business there. Trade practices between countries can be significantly
affected by laws and regulations enacted at the national or international level. Because they
affect fundamental business practices, they often affect the competitive position of firms as well.

Geographic Distance. How far apart are trading partners in physical terms: the size of the
country, differences in climates, and nature of transportation and information networks? You can
think of geographic distance as absolute, in terms of the miles or kilometers that separate a firm
from another market or supplier. Technology and the Internet, however, has shrunk distance in
terms of transportation time, and now with digital products and services, almost entirely
eliminated geographic distance as a constraint of trade between some markets.

Economic Distance. Finally, economic distance captures fundamental differences relating to

income, the distribution of wealth, and the relative purchasing power of segments of a
geographic market. This has been one of the biggest barriers, for instance, in the way of U.S.
firms` success selling products in emerging markets. In global terms, this is the four billion
people who live on less than $2 per day. The phrase “bottom of the pyramid” is used in particular
by people developing new models of doing business that deliberately target that market, typically
using new technology. An example of a product that is designed with the needs of the very poor
in mind is that of a shampoo that works best with cold water. Such a product is marketed by
Hindustan Lever (part of the Unilever family of firms).

Is it a bird, is it a plane?
There are a number of ways of looking at the WTO. It’s an organization for liberalizing trade. It’s a forum for governments to negotiate trade agreements.
It’s a place for them to settle trade disputes. It operates a system of trade rules. (But it’s not Superman, just in case anyone thought it could solve — or
cause — all the world’s problems!)
Above all, it’s a negotiating forum … Essentially, the WTO is a place where member governments go, to try to sort out the trade problems they face with
each other. The first step is to talk. The WTO was born out of negotiations, and everything the WTO does is the result of negotiations. The bulk of the
WTO's current work comes from the 1986-94 negotiations called the Uruguay Round and earlier negotiations under the General Agreement on Tariffs and
Trade (GATT). The WTO is currently the host to new negotiations, under the “Doha Development Agenda” launched in 2001.
Where countries have faced trade barriers and wanted them lowered, the negotiations have helped to liberalize trade. But the WTO is not just about
liberalizing trade, and in some circumstances its rules support maintaining trade barriers — for example to protect consumers or prevent the spread of
disease.
It’s a set of rules … At its heart are the WTO agreements, negotiated and signed by the bulk of the world’s trading nations. These documents provide the
legal ground-rules for international commerce. They are essentially contracts, binding governments to keep their trade policies within agreed limits.
Although negotiated and signed by governments, the goal is to help producers of goods and services, exporters, and importers conduct their business, while
allowing governments to meet social and environmental objectives.
The system’s overriding purpose is to help trade flow as freely as possible — so long as there are no undesirable side-effects — because this is important
for economic development and well-being. That partly means removing obstacles. It also means ensuring that individuals, companies and governments
know what the trade rules are around the world, and giving them the confidence that there will be no sudden changes of policy. In other words, the rules
have to be “transparent” and predictable.
And it helps to settle disputes … This is a third important side to the WTO’s work. Trade relations often involve conflicting interests. Agreements,
including those painstakingly negotiated in the WTO system, often need interpreting. The most harmonious way to settle these differences is through some
neutral procedure based on an agreed legal foundation. That is the purpose behind the dispute settlement process written into the WTO agreements.

Born in 1995, but not so youngback to top

The WTO began life on 1 January 1995, but its trading system is half a century older. Since 1948, the General Agreement on Tariffs and Trade (GATT)
had provided the rules for the system. (The second WTO ministerial meeting, held in Geneva in May 1998, included a celebration of the 50th anniversary
of the system.)
It did not take long for the General Agreement to give birth to an unofficial, de factointernational organization, also known informally as GATT. Over the
years GATT evolved through several rounds of negotiations.
The last and largest GATT round, was the Uruguay Round which lasted from 1986 to 1994 and led to the WTO’s creation. Whereas GATT had mainly
dealt with trade in goods, the WTO and its agreements now cover trade in services, and in traded inventions, creations and designs (intellectual property).