Global Business Today the Hofstede Study

Hofstede

Azure Sky Tea needs to determine the best choice of a home base.

A number of factors must be taken into consideration including the cultural dimensions of the different potential host nations.

Possible Combinations

There are a number of countries that Azure Sky Tea can consider. The company can take into consideration when making this decision. Hofstede identified a number of different cultural dimensions that can be examined for each potential host country. These are individualism, uncertainty avoidance, power distance and masculinity/femininity (Hofstede, 2013). Individualism reflects the importance of the individual in the culture, compared with collectivism which emphasizes a collective group. Uncertainty avoidance reflects "the degree to which the members of a society feel uncomfortable with uncertainty." Power distance reflects power roles in a society, manifested mainly in the interactions between people in different positions within the company. Masculinity emphasizes competition, assertiveness and achievement, while femininity is seen as a preference for cooperation and quality of life (MindTools, 2013).

The home country for Azure is the United States, which is an outlier among nations on many attributes. For example, it has the highest score in the world for individualism and a low score for power distance (Hofstede, 2013). The U.S. has a moderate masculinity score, but a low uncertainty avoidance, indicating a tendency towards risk-taking. The U.S. also score low for time horizon, indicating a strong cultural preference towards the short-term time horizon.

There are two ways to look at the international headquarters decision. One is that a country with a complementary culture is preferred because the lower level of conflict between the home country culture and the second-country culture. Conversely, a company that wants fresh ideas and perspectives might prefer to operate in a culture where there is more inherent conflict, so long as that conflict can be channeled properly. Thus, a reasonable approach is to find a country that has relative similarity on communication dimensions like individualism and power distance, but different perspectives on things related to problem-solving and creativity (masculinity, uncertainty avoidance and time orientation). Such a strategy would find a country where communication -- the bedrock of management is relatively smooth, but where solutions and problem-solving are different, which should relate in better innovation and more ideas

A country that makes a good candidate based on these criteria is the Netherlands. The Netherlands shares a low power distance and high individualism with the United States, so communication with head office should be smooth. However, the Netherlands has a strong tendency towards femininity, which affects problem solving and innovation, along with a much greater orientation towards long-term solutions. Thus, Dutch thinking will derive different solutions to issues than American thinking, and they will be able to communicate those ideas effectively with the American audience.

If Azure wanted to seek out opportunity in the large, hypercompetitive Asian tea market, it might consider Hong Kong as a headquarters. After years of British rule, Hong Kong has many elements of Western culture and with its British legal system makes a great option for firms looking for opportunity in the East. However, Hong Kong does not look like a good cultural fit. Power distance is much higher, which will make communication with lower-level US. employees more difficult. Furthermore, Hong Kong has a very collective mindset, so is unlikely to produce individual star employees. While the two countries are similar on the masculinity-femininity dimension, Hong Kongers avoid risk and build for the long-term to an extreme degree. The risk aversion and concentration of power, combined with a lack of urgency to make moves for the short run, is likely to make Hong Kong decision-making an ongoing source of frustration for the American managers.

In both cases, there is considerable economic opportunity. These are new markets, and gateways to even larger markets (EU and China, respectively) so having presence in these locales is strong economic motivation for Azure. There is also opportunity in bringing new knowledge and perspectives into the organization as new ideas can lead to new opportunities and greater efficiencies.

Mitigation