Expanding Business Overseas Using Hofstede's Cultural Dimensions

Introduction

Global expansion of high-growth businesses is often pursued by default — through intuitive or even anecdotal research — rather than through careful evaluation of how a firm's core strengths and cultural values align with the cultures of target nations. Yet this is precisely what a management consultancy must do: it must look to cultural frameworks to gain insights into which nation represents the best candidate for launching its business and software application. Hong Kong, Singapore, the United States, Canada, the United Kingdom, and France have all been identified as potential foreign markets of interest. Within each of these regions there are cultural nuances and differences that defy anecdotal analysis.

What the consultancy needs to do is evaluate these nations from a cultural-fit standpoint in order to assess the relative levels of risk before committing to a full-scale market entry. The Cultural Dimensions Model developed by Geert Hofstede (1993) has been used specifically for this purpose. This model captures the broad dimensions of doing business abroad (Heijes, 2007) and can serve as a framework the consultancy uses regularly to define its global expansion strategies. For the consultancy to attain the role of trusted advisor in any of the nations it serves, it needs significant insight into cultural, individual, and societal factors that will directly influence success or failure in any new region or country (Davis, Lee, & Ruhe, 2008). This is particularly relevant in software development and engineering (Cater-Steel & Toleman, 2008), where the pace of change is rapid and intercultural communication is essential.

In evaluating which specific nations to expand into with their self-assessment software, the consultancy needs to look beyond simple cultural congruency and also seek nations that will, over time, deliver significant competitive advantage (Shriberg & Kumari, 2008). This can be accomplished through the use of cultural frameworks that include assessments of interpersonal, collaborative, and cultural factors (Tang & Koveos, 2008). The value-systems measurements embedded in Hofstede's Cultural Dimensions Model specifically address the challenge of gaining insights into national and organizational value systems (Hofstede, 1985).

Literature Review and Cultural Framework

The Hofstede Cultural Dimensions Model (Hofstede, 1983) is specifically designed to quantify differences between national cultures. Geert Hofstede created this framework to measure cultural variations between nations, originally intending to help IBM executives assimilate more quickly into cultures other than their own. The five cultural dimensions that comprise the model are the Power Distance Index (PDI), Individualism (IDV), Masculinity (MAS), Uncertainty Avoidance (UAI), and Long-Term Orientation (LTO).

The most significant dimension for the consultancy's purposes is the IDV dimension, which measures the extent to which individuals are integrated into groups rather than acting independently. This factor varies significantly across regions of the world and has been the subject of the most critical assessment of Hofstede's model in the scholarly literature (Blodgett, Bakir, & Rose, 2008). Hofstede (1983) noted that a higher IDV score reflects a stronger sense of individuality throughout a given country, while a lower score indicates a greater degree of collectivism — that is, a stronger sense of group affiliation within a nation's culture.

Hofstede's Five Cultural Dimensions Explained

This distinction is critically important for the consultancy because its self-assessment software will tend to perform better in nations with a high IDV score. As a result of the IDV metric's significant explanatory power, it is considered one of the best predictors of the level of egalitarianism present in a given nation. For the consultancy, this is also important in another respect: the broader the uptake of the self-assessment software within a given nation, the more likely word-of-mouth recommendations will spread. The consultancy must therefore seek a high level of congruence on the IDV dimension if it is to be successful over time.

Using the Five Dimensions Model to plot the values of Singapore, Hong Kong, the United States, Canada, the United Kingdom, and France produces comparative cultural profiles for each candidate nation (see Appendix A: Comparing Cultural Dimensions by Nation).

Conclusion

The Hofstede Cultural Dimensions Model (1993) is invaluable for firms such as this consultancy that seek to expand globally in the role of trusted advisor. Their core business is providing insightful guidance to clients, and in order to create the best possible conditions for earning client trust, the consultancy must remain cognizant of the five cultural dimensions defined by Hofstede and plan accordingly.