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Running Head: CROSS- CULTURAL MANAGEMENT

Cross- Cultural Management


[Name of the Writer]
[Name of the Institution]

Cross-Cultural Management

Summary
The paper describes in detail the cross-cultural management issues when company seek to
expand their business beyond the UK. In this report we have chosen, IKEA furniture
manufacturing company starting their business in Nigeria. The purpose of this report is intending
to understand how the diverse culture impacts on the operation of the company in the global
business. Meanwhile, it is also aiming to come up with an effective solution of dealing with the
cultural differences for managing the cross national activities. As HR Director, it is important to
determine about the national culture and what is its impact on the way of doing business. In the
most general sense of national culture can be defined as a system of norms and values of life of a
people or ethnic group. As companys focus is on business initiatives that drive real value for our
customers, including adapting proven technologies and developing capabilities critical to future
success. IKEAs ability to succeed in the global marketplace requires a skilled, well-trained and
dedicated workforce; a stable fiscal, tax, and regulatory environment; and the ability to export
our products to Nigeria. IKEAs strengths are their efficient manufacturing process and low price
strategy, and their weaknesses lie with their branding strategy. Right strategy can do well to their
business as there are countless opportunities available. Thus, from analyzing the theories
presented by Holfstede and Hall, one can say that they were able to more clearly study the
similarities and differences. Their theories has analyzed in depth the various challenges faced by
the companies due to different multicultural employees, apart from the issues coming in an
organization as well.

Cross-Cultural Management

Cross-Cultural Management

Introduction
IKEA is the world's most triumphant global enterprise. According to the statistics, in
2007, IKEA had established around 300 home decorating retail stores in 35 countries. It has been
visited by around 583 million customers. IKEA's inexpensive, smartly designed products,
exhibited in huge depot stores, made sales of 21.2 billion only in the year 2008 compared to
4.4 billion in the year 1994. Although IKEA has refused to issue statistics of its profitability, the
net profit margins of IKEA were believed to be around 10% higher than an average retailer.
Ingvar Kamprad, the founder of IKEA, is believed to be one of the richest men in the world.
IKEA was founded in 1943 in Sweden by Kamprad when he was only 17 years old. The
young organization sold Christmas magazines, fish, and seeds of his family ranch. His primary
business was trading matches (Boniface, 2002, 12-23).

Research Aims and Objectives


The purpose of this report is intending to understand how the diverse culture impacts on
the operation of the company in the global business. Meanwhile, it is also aiming to come up
with an effective solution of dealing with the cultural differences for managing the cross national
activities.
The research leads to focus on studying the effectiveness of providing strong service
focus, thus as an HR director of the company, my major responsibility falls towards expanding
the business efficiently in Nigeria, Brazil, India, China. In the light of this aim, the study will
accomplish the following objectives:

Cross-Cultural Management

To highlight the challenges faced by the company


To determine the strategy of IKEA Company to choose such strategy that meets the

national requirements of in Nigeria, Brazil, India, China.


To understand the role of Human Resources in the recruitment and selection process by

IKEA

Discussion and Analysis


The company is operating in around 41 countries, and the IKEA is globally destination
store for home furniture, home accessories, kitchen, ready to assemble furniture product. It is one
of the worlds largest furniture retailers with more than 301 stores. The largest market for the
company is Germany with 44 stores. Now the company wants to expand internationally, and for
this they are ready to develop certain strategies to meet up their requirement.

Our Vision and Business Idea


The IKEA vision is to improve the lives of many. Our business idea is in line with our
vision to offer a wide range of aesthetic and functional furnishings at affordable prices to the
greatest number.

The Concept and Creation of a National Culture


As HR Director, it is important to determine about the national culture and what is its
impact on the way of doing business. In the most general sense of national culture can be defined
as a system of norms and values of life of a people or ethnic group. At the turn of the century can
say fairly stable cultural patterns prevailing in the national states and, on a larger scale, in some
regions of the planet (Heather & Sarah, 2010, pp 67-89).

Cross-Cultural Management

Marketing Strategy before Entering In To the Market


IKEAs product ranges from various industries, which are based, on reliability and low
cost. It has furnishing solutions for everyone from creative to business minds. IKEAs products
are outdoor furniture, eating tables, Desks, Mirrors, childrens IKEA, cooking, Bathroom
storage, Beds & mattresses, chairs, clothes storage, Decoration, flooring, Kitchen cabinets and
appliances, Lighting, small storage, sofas and armchairs, storage furniture, Tables, Textile and
rugs, tools and fittings and TV and media furniture (Ishmael, 2005, pp 56).
Within the broad framework of strategic management the aspects of culture blended with
ethics coverage of group meetings on assessment of networks as well as their results including
the modality of improvement vis--vis competitors.

Doing Business in Other Countries


Before entering into Asian market, the company needs to deeply analyze their trends and
demand. As Research and development is one of the most important elements of any business. It
also incurs much of the cost, but effective research and development can deliver positive results.
Thus, as a HR Director of IKEA Company, my responsibility was to analyze the market situation
in prevailing in Nigeria, India, China and Brazil. As a multinational company we need to expand
our company globally and for that one must put emphasis on the laws and regulations of these
countries (Baum & McGahanm, 2004, pp 34-67).
Business strategy is concerned with creating and nourishing a competitive edge for the
products that are produced and services that are rendered. Business strategy deals with:

locating the business against competitors


predicting changes in technologies and demand

Cross-Cultural Management

manipulating the competitive nature with the help of strategic actions.


Another business strategy used by IKEA is that when a rival introduces similar

commodities into the market at a comparatively cheaper price, IKEA goes for a stripped-down
and even cheaper policy to compete with its competitors (Capron, 1987).

Profile of India: see appendix


Porters Diamond Model
Firm Strategy

Demand Conditions
Related Supporting Industries
Factor Conditions

India is worlds largest technologically advanced nation


therefore technology and innovation is highly
recommended for international firm to operate in Indian
market.
Indian customers have high demand for cheap
electronics due to high rate of poverty and low wage rate
in the country.
International technological firms supply electronics
material for the production of electronic items.
The three main factors include skilled labor, capital and
infrastructure. India is full of highly qualified and skilled
labor which usually requires low investment on labor
cost and infrastructure of electronic market is not really
good compared to other countries.

Profile of Brazil: see appendix


Porters Diamond Model
Firm Strategy
Demand Conditions
Related Supporting Industries
Factor Conditions

Profile of China: see appendix

Brazil is more dependent on its export because the


country itself is not technology oriented. The major
competitors are Chinese companies.
Brazilians have high demand and purchasing power
therefore; the company can increase their sales in
Brazilian market.
Most of the electronic companies are international
exporters therefore; the country has limited access to
technological materials.
Highly qualified labor are costly in Brazil so most of the
companies outsource their operations and infrastructure
is relatively good as compared to India.

Cross-Cultural Management

Porters Diamond Model


Firm Strategy

Demand Conditions
Related Supporting Industries
Factor Conditions

Chinese are technology oriented people and has largest


economy in the world. China has unlimited access to
technology and has variety of technologies ranging from
cheap to most expensive electronic products in the
market.
Chinese are high competitive and focused on innovative
products. Customers have high demand and low
purchasing power due to low income.
China has huge market for the local suppliers who
support local companies to produce electronic items with
cheap labor.
China has poor quality labor and has large skilled labors
that are focused on working hard for long hours. The
most attractive factor is the infrastructure of the country
and capital required for the investment is comparatively
low than other countries due to cheap factors of
production and low wage.

IKEA in Nigeria
The reason why the company choosing Nigeria to be strong manufacturing focus is that
Nigeria business culture places a great value on hierarchy. Nigeria businesses therefore follow a
strict hierarchical structure, where decisions tend to be made at the top and communication is
usually vertical. As an Hr director, I need to perceive the procedure and policies for excessively
creating a greater impact o the business.

Strong Manufacturing Focus


IKEA has an intricate corporate structure, which means the company is not likely to go
public. IKEA has modern equipment and technology that enables the manufacture of high quality
furniture for customers with large volumes. While most of the designs of IKEA products are
made in Sweden, manufacturing has been outsourced to China and other Asian countries. As a
manger it is the responsibility to manage change in organizations that often seems more
complicated than their design, planning and quality control and the degree of benefit from their

Cross-Cultural Management

implementation. Changes in the company are accompanied by painful processes, which include
adaptation by the personnel (Robert, 2007, pp 56-90). In many cases, this adaptation can
successfully manage by reducing the degree of resistance to change, speeding up these processes
and getting a better return on their implementation.

Need of Human Capital


As our focus is on business initiatives that drive real value for our customers, including
adapting proven technologies and developing capabilities critical to future success. IKEAs
ability to succeed in the global marketplace requires a skilled, well-trained and dedicated
workforce; a stable fiscal, tax, and regulatory environment; and the ability to export our products
to Nigeria. IKEA and many other companies will do everything in our power to ensure that we
can continue to be leaders in advanced manufacturing that helps states and communities thrive in
furniture industry. We are aware of the fact that now people are getting more and more aware of
interesting and appealing design. Also the design and making sides of the industry are getting
increasingly professional and imaginative (Boniface, 2002, pp 12-23).
Thus, one of the main intentions of any business society is to reach a position where it is
able to invite more consumers than its challengers. To achieve such a modest benefit, Ikea is
trying to identify their different competencies. The appearances of a company's operations
purposes are vital in creative its choice of products and markets, and the basics of its competitive
strength.
Theories Related To Cultural Issues and Challenges
Dimensions of Trompenaars

Cross-Cultural Management

There are areas or cultural difference that may be the source of misunderstandings. This
is particularly the case in relation to the contract. The Universalists, whose contracts are
characterized by their completeness, consider the contract in effect as an indispensable element
of the business relationship. The particularistic them attach more importance to personal contact
and the relationship that formal contract (Cole, 2011, 90-123).
According to Trompenaars, in individualistic cultures, people often place the community
after the individual as it is contrary in the communitarian culture. He believes that people in an
efficient culture shows up three emotions and their feelings (Baum & McGahan, 2004, pp 3467). It is often analyzed that Trompenaarss system basically appeared to be more focus oriented,
and its investigation basically lies under the surface of investigation of the persons culture.

Geert Hofstede and His Theory of Cultural Dimensions


According to Hofstede (2001) culture is the software of mind or a collective
programming of the mind that differentiates people from one group to another. Hofstede theory is
based on the idea that value can be assigned to six cultural dimensions. This is power (equality
against inequality), collectivism (versus individualism), uncertainty avoidance (tolerance against
uncertainty), masculinity (versus femininity), temporal orientation and indulgence (vs.
containment).
Power distance index: According to Hofstede, power distance refers to the extent to
which the less powerful members of organizations and institutions (like the family) accept and
expect that power is distributed unequally.
Individualism against collectivism: The degree to which individuals are integrated into
groups." This dimension is of no political connotations; refers to the group rather than the

Cross-Cultural Management

10

individual. Cultures that are individualistic attach importance to the achievement of personal
goals.
Index uncertainty avoidance: A society of tolerance for uncertainty and ambiguity. This is
a dimension that measures how a society deals with unfamiliar situations, unexpected events and
stress change.
Indulgence against containment: This dimension measures the ability of a culture to meet
immediate needs and wants of its members.
Long-term orientation against short-term orientation: This dimension describes the
horizon of a society. Cultures with a short-term orientation value the traditional methods, devote
a considerable amount of time to develop relationships and generally consider time as a circular
dimension (Heather & Sarah, 2010, pp 67-89).

Hall's Theory
The work of Hal basically led to cover the issues of cultural and hegemony studies. His
point of view stets that people are producers and consumers for culture at the same time. As hall
mentions that culture is something that simple study or appreciate.
It is a fact that Hofstede's cultural dimensions are merely a framework to help assess a
particular culture and, thus, better targeting decisions. Other factors should be considered, such
as personality, family history or personal wealth (Chung & Amber, 2009, pp 45-67). The
proposed dimensions not predict individual behavior, nor take into account the personality of
each. Thus one can often say that the Trompenaars, Hall and Hofstede cultural dimensions are
more useful tool for various themes, within the organization and also for the structure of the
company while trading with other countries (John, 2009, Pp 93128). Thus, those that are

Cross-Cultural Management

11

involved in working for international business are important to know regarding the difference
between culture and countries.

Can IKEA sustain its success?


IKEA achievement in the retail commerce can be attributed to its huge expertise in the
retail market, merchandise differentiation, and cost leadership. Over all IKEA is managing
differentiation and cost leadership (Baum & McGahan, 2004). In addition, they are a cost
foremost in periods of the cost of their goods are lower in evaluation to other retailers.

Conclusion
After analyzing every situation we come to a conclusion that risk of entry by a potential
competitor and competition in the industry is low which a good thing for IKEA. Bargaining
power of suppliers is low due to the history of making wood related products. Bargaining power
of buyers is high because of the fact that real estate is considered as an investment.
One can conclude by saying that in reality Hall and Holfstese were able to study the
cultural differences Thus, analyzing from many countries, they were able to more clearly study
the similarities and differences. From their theories, we can observe that there were many
challenges because of different multicultural employees, apart from the issues coming in an
organization as well. The individual differences is one thing that can affect the entire
organization, as culture plays a strong and complicated role, it has also led to failures for many
organizations, however the ability for managing the cross culture and balance should be kept
with the company.

Cross-Cultural Management

12

Political and economic factors are in favor of starting this new trend of real estate
business because the opportunity is wide open. Social factor is also in favor of investing in
IKEAs prefabricated houses because of the changing trend in the general population.
Technology has not done any good to real estate yet because the technological process used in
real estate industry is more or less the same as it was hundred years ago. This is the first step of
evolution of this industry (Ishmael, 2005, pp 56). IKEAs strengths are their efficient
manufacturing process and low price strategy, and their weaknesses lie with their branding
strategy. Right strategy can do well to their business as there are countless opportunities
available. It is important to avail opportunity for entering into the hotel market and improve their
market strategy to make a good brand name in the industry. Although the industry is irrational,
however by using different ways of advertising and reaching out to target market can ensure a
stand in the industry (Ishmael, 2005, pp 56). In the near future, IKEAs sound expansion in the
retail business emerges as the focal point of the organization, with strategies not likely to
incorporate aggressive expansion into new markets, but would consider structuring and nurturing
in the existing market (Boniface, 2002, 12-23). Yet, certain alterations may be possible with the
introduction of information technology, which in the foreseeable future, will have unfavorable
effects on the revenues of some IKEA warehouses, but will lead to the positive effects on
revenue for the company as a whole. Therefore, this is the main illustration of the way in which
IKEA is trying to align itself in order to face the potential threat to its conventional store
(Brookhart, 2008, pp 45-67). Buyers may prefer shopping online, as IKEA has established its
reputation for quality and craftsmanship in its goods, contrasting to the current principle of IKEA
that quality of products should be felt by the buyers before the purchase.

Cross-Cultural Management

13

References

Baum, J. & McGahan, A. (2004), Business Strategy over the Industry Lifecycle, JAI Press,
Oxford, pp 34-67
Boniface, Ahunwan, (2002), Corporate Governance in Nigeria. Journal of Business Ethics, pp
12-23
Brookhart, Susan M. (2008)."Portfolio Assessment." , 21st Century Education: A Reference
Handbook. SAGE Publications, pp 45-67
Byars, L. (1991) Strategic Management, Formulation and Implementation Concepts and Cases,
New York: HarperCollins, pp 12-45
Capron, N. and Glazer, R. (1987), Marketing and technology: a strategic co alignment, Journal
of Marketing, Vol. 51 Issue 3, pp.10-21.
Chung A. & Amber L. (2009), Establishing Organizational Ethical Climates: How Do
Managerial Practices Work? Journal of Business Ethics, pp 45-67
Cole, G A. and Kelly, P, (2011), 'Management Theory and Practice', Ed. 7 Cengage EMEA, Pp
90-123
Heather S. & Sarah J. Freeman, (2010), Corporate Social Performance and Attractiveness as an
Employer to Different Job Seeking Populations, Journal of Business Ethics, pp 67-89
Ishmael P. (2005). Differences in Research Ethics Judgments between Male and Female
Marketing Professionals, Journal of Business Ethics, pp 56
James A. & David C, (1999), Ethical Work Climate Dimensions in a Not-for-Profit
Organization: An Empirical Study, pp 112-145

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14

John. Barlto, (2009), Business Ethics: A manual for managing a responsible business enterprise
in emerging market economies, Pp 93128
Judith A, (2009), Dignity in the Workplace Can Work Be Delineated? Journal of Business Ethics
Koehn, D. (2008), Ethical Issues in Human Resources, In N. E. Bowie (Ed.), The Blackwell
guide to business ethics, Oxford: Blackwell ISBN 0-631-22123-9, pp 225243
Pinnington, A. H. and Lafferty, G, (2002), Human Resource Management, Melbourne: Oxford
University Press ISBN 0-19-551477-7, pp 223-245
Robert C. Solomon, (2007), Ethics and Excellence: Cooperation and Integrity In Business, ISBN
Number: 0195087119, pp 56-90

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Appendix

Profile of India
PESTEL

Political
The political relationship of
Japan with India has always
been strong and friendly
since Indias independence.
There are many Japanese
companies including Honda,
Sony and other big
companies, have
manufacturing facilities in
India. With the steady
growth of Indian economy,
India has become an
opportunity for many
Japanese firms.
During the year 2006, the
Indian Prime Minister signed
an agreement called Joint
Statement Towards JapanIndia Strategic and Global
Partnership. Other than that,
Japan has funded and
finances the infrastructure
projects in India and the year
2007 has been the time of
India-Japan Friendship Year.
Economic
According to CIA Factbook,
the GDP (Purchasing Power
Parity) of India during the
year 2011 was $4.421
trillion.
Now a day, Indias economy
is booming up and people are
getting more opportunities in
Indian market and now, it is
one of the leading economies
of the world.
The concept of globalization
took place in 1990, which let

Euro money
Country
Risk
ECR of India
in the year
2011 is 58.6
and is ranked
52nd state
among 186
countries in
the world.
It has been
estimated that
the year
2012, Indias
ECR has been
decreased to
52.95.

Economic
Rating &
Currency
Exchange
Exchange rate:
46.67
Debt: $287.5
billion
Unemployment
Rate: 10.5%
Credit Rating:
BBB- Negative
Ease of Doing
Business: 132
Starting a
business: 173
Getting credit:
23
Protecting
Investors: 49
Trading Across
Borders: 127
Enforcing
Contracts: 184
Paying Taxes:
152
(http://www.doi
ngbusiness.org)

Cultural Aspects
Hofstede

ONDD

Entry
Strategies

Power Distance
India has achieved 77,
the highest score in this
dimension revealing that
people encourage the
hierarchy structure of
organization.

Export
Transaction
Political Risk

Employees are highly


dependent on the higher
authority or manager for
direction, guidance and
supervision of work.

Special transaction2

Joint Venture

Commercial Risk:
B

Wholly Owned
Subsidiary

Individualism
With the score of 48,
indicating that Indians
are more collectivist and
strive to have social
bonds with coworkers
and managers in the
workplace environment.
Indians grow up in such
a system where family
relations and belongings
are the top priority.
They take management
system lightly and ignore
the work pressure and
management practices
and thus, managers must
give them job fear in
order to make them
serious about their work
and working
environment and it
would be easier for
managers to control
them effectively.
They must also conduct
training programs,
family welfare schemes
in order to get their

Short term- 2
Medium/long
terms- 3

Direct
Investments
War risk- 3
Risk of
expropriation and
government action3
Transfer risk- 3
(http://www.ondd.b
e)

Franchising
Strategic
alliance
Licensing
Agreement

Cross-Cultural Management
many multinational
corporations to invest in the
country and thus, made it as
world outsourcing center.
Social
Indians grow up in such a
system where family
relations and belongings are
the top priority.
They take management
system lightly and ignore the
work pressure and
management practices and
thus, managers must give
them job fear in order to
make them serious about
their work and working
environment and it would be
easier for managers to
control them effectively.

attention towards their


value in the organization.
This would make them
realize that they are
committed to the
company and thus,
improve their
productivity.
Usually, Indian
companies focused more
on people friendly
management to increase
the level of motivation.
Masculinity /Feminity
India has achieved 56
score on this dimension
which shows that it is a
masculine society with
male dominated family
structure.

Technological
New technologies produce
new products and innovative
processes.

It is considered as
masculine in terms of
power and success of
men over women.

Technological advances in
India particularly upgrading
different technology based
products such as MP3
players, computer games,
LCD TVs and mobile phones
are increasingly growing in
electronic market.

Uncertainty Avoidance
India got 40 scores on
this aspect of culture and
hence, represents that it
has medium low
preference for
uncertainty avoidance.

Technology reduces costs,


enhance quality and make
the product more innovative
and attractive to end
consumers.
Environmental
Environmental factors
include weather conditions
and climate of the country.
Changes in climate have
major effect on the
performance of technological
companies and farming
activities.
With growing issues of
global warming and greater
environmental changes,

Imperfection is
acceptable for Indians as
they believe that nothing
is perfect. They accept
change and complex
situations.
Long term orientation
The score of 61 on this
dimension shows that
India has pragmatic
culture.
The most dominated
concept of Karma
dominates Hinduism
religion and it is
considered as a
philosophical thought.

16

Cross-Cultural Management
international companies need
to consider this external
factor in order to perform
more effectively in the
market.

17

According to them, time


is infinite and practiced
this concept in their daily
lives (http://geerthofstede.com).

India is considered as highly


polluted country and has
many issues concerning the
industrial and transportation
pollution that may harm
human health and his
surroundings.
Legal
Legal requirement in India
including the policies and
legislation passed by the
state government including
licensing agreement and
Trade mark act, equal
employment opportunity etc.
In India, international firms
are needed to operate
according to the legal acts
and legislation of the
government.

Profile of Brazil
PESTEL
Political
Brazil is politically stable
country.
The main focus of the
government is to improve
the economic conditions
of the country.
The government has
established strict rules and
policies regarding
controlling the inflation
rate in the state.
Economic
Brazils economy is one
of the largest economies

Euromoney
Country Risk
ECR of Brazil is
recorded as 63.22
in the year 2011
and is ranked as 41
among 186
countries.

Economic Rating &


Currency Exchange
Exchange rate:
1.6728 USD
Debt: $382.5 billion

It is estimated that
during 2012, the
ECR is recorded as
60.73.

Credit Rating: BBB


Stable

Unemployment Rate:
5.3%

Ease of Doing
Business: 130
Starting a business:
121
Getting credit: 104

Cultural Aspects
Hofstede
Power Distance
With the score of 69,
Brazilians believe in
high power distance and
encourage power and
inequalities among
people in the workplace.
The power holders have
more benefits than the
less powerful people in
the society. Also,
Brazilians tend to respect
elders and status symbol.
Individualism
Brazil has achieved a
score of 38 which shows

ONDD
Export
Transaction
Political Risk
Short term- 2
Medium/long
terms- 3
Special
transaction- 2
Commercial Risk:
C
Direct
Investments
War risk- 2

Entry
Strategies
Joint ventures
Franchising
Direct
Exporting

Cross-Cultural Management
among South American
countries.

Protecting Investors:
82

The country is running


towards global markets
and achieved tremendous
success in globalization.
Since 2003, Brazilian
government has tried to
improve the
macroeconomic stability
by creating foreign
reserves and reducing its
debt.

Trading Across
Borders: 123

Recently Brazil has faced


two quarters of recession
in terms of reduction in
the demand for
commodity based exports
and external credit has
gone up.
However, Brazil is
considered as the fastest
growing economy steadily
recovered the phase of
recession.
Social
Brazilian culture is
difficult to define because
it is a melting pot of
different racial influences.
People with European,
Asian, African and
Middle Eastern
background provide an
enrichment of the
Brazilian culture without
taking the influences of
the first inhabitants of
Brazil, the Indians, to
smooth out.
Brazilians are proud of
their festivals and events
such as Carnival and
festivals in the Southern
states of Brazil. Countries
nationalities and cultural
influences contribute to
the diversity of Brazilian
culture and social life.

Enforcing Contracts:
116
Paying Taxes: 156
(http://www.doingbus
iness.org)

that the people in the


country are collective
and family oriented.
They used to live with
their extended families
and respect relationships.
This aspect is highly
practiced in the
workplace environment
as well.
In the professional
environment, the elders
who are working in
upper position are likely
to hire their young
nephew or niece for a
job.
Masculinity /
Femininity
Brazil scores 49 in this
cultural dimension. As a
matter of fact, Brazilian
society is based on both
masculine and feminine.
The culture of Brazil
highly encourages
gender equality,
compromise and has
sympathy for inferiors
who are not achievers.
Conflicts are highly
discouraged and avoided
in both social and work
environment.
Uncertainty Avoidance
Brazil scores high on
this dimension. This
shows that society needs
to create proper rules
and legal system in the
country in order to make
the proper structure of
life.
The individuals in the
state are obliged to
strictly follow these rules
and laws which are very
weak among people
especially youngsters in

Risk of
expropriation and
government
action- 3
Transfer risk- 3
(http://www.ondd.
be)

18

Cross-Cultural Management
Technological
Recently, Brazilian
market has implemented
many changes in its
technologies and
innovations.
Government is trying to
improve the living
standard of people and
making it more developed
nation in terms of
technology.
Also, the government is
highly focused on
spending heavy
investments in technology
sector for the military
field.
Environmental
Environmental factors
have exceptional
significance when it
comes to the business
performance of the
company because the
state in which a branch of
the company is located
will decide the companys
ability to sustain in the
environment, regardless
of the governmental
actions.
The company should
operate in a manner that it
must comply with the
laws of each state, not
deviating from the rules.
Legal
In todays corporate
world, every company has
to maintain its legal and
ethical requirements.
If, it does not fulfill the
requirements then the
company is questionable
for its ethical concerns.
The company is then
accountable to the state
and the public affected by

the society.
Safety is an important
aspect which must be
implemented in the
country in order to make
the environment safe
from conflicts and
violence.
Due to their high score
on this dimension,
Brazilians are passionate
and expressive as their
emotions are expressed
and shown through their
body language.
Long Term Orientation
The score of 65 has
placed Brazil in the long
term oriented society.
Like Asians, people in
Brazil are followers and
can believe more than
one truth at one time.
They are highly flexible
and understandable as
they easily accept
change in their life
(http://geerthofstede.com).

19

Cross-Cultural Management

20

its actions or policies.


Brazilian government has
not maintained their
policies and laws on
licensing and franchising
which means that the
country highly encourages
foreign investments.

Profile of China
PESTEL

Political
China is considered as a
communist society with
economic power house.
The government is spending
huge investments in product
market and expansion
throughout the country.
It is worlds largest economy
and has highest population in
the world.
Economic
Since 1970, China has been
shifted from a closed system to
the market oriented.
China is playing dominant role
in international markets around
the globe.
During the year 2010, it has
become the worlds largest
exporter.
The countrys interest rate is
relatively high about 6.5% as
compared to other developed
western nations which are
facing severe depression.
This interest rate encourages
small business loan and low
risk in repayment of loan.
Social
Lifestyle and trends keep

Euromoney
Country Risk
ECR of China is
recorded as
63.55in the year
2011 and is
ranked as 40
among 186
countries.
It is estimated
that during 2012,
the ECR is
recorded as
59.64.

Economic
Rating &
Currency
Exchange
Exchange rate:
6.4615 USD
Debt: US$1.66
trillion
Unemploymen
t Rate: 6.5%
Credit Rating:
A+ Stable
Ease of Doing
Business: 91
Starting a
business: 151
Getting credit:
70
Protecting
Investors: 100
Trading Across
Borders: 68
Enforcing
Contracts: 19
Paying Taxes:
122
(http://www.do
ingbusiness.or
g)

Cultural Aspects
Hofstede
Power Distance
China has achieved 80
scores in this dimension
which represents that
inequalities among
people is high acceptable
in the workplace
environment.
People who work under
authority are highly
influenced by the formal
authority and are needed
to supervise in every
field work.
Individualism
China is highly
collectivist society as its
20 scores shows that
people are likely to work
in a group or team.
Employees are not
highly committed
towards their work and
organization whereas
relationship with peers
and coworkers are the
great importance to
Chinese.
In this way, social and
personal relationships
are more important over
their job and company.
Masculinity /
Femininity

ONDD

Entry Strategies

Export
Transaction
Political Risk

Licensing

Short term- 1
Medium/long
terms- 2

Joint Ventures

Special
transaction- 1
Commercial
Risk: C
Direct
Investments
War risk- 3
Risk of
expropriation
and government
action- 4
Transfer risk- 2
(http://www.on
dd.be)

Indirect Exporting

Cross-Cultural Management
changing the consumer
attitudes towards the particular
products and brands.
Since China highly encouraged
its local investors and
businesses to participate in the
Chinese market, therefore, the
exposure of consumers
towards imported brands is
slightly lower than other
countries. People are family
oriented and more into social
gatherings within their
relatives and family friends.
Due to low wage, people
cannot afford expensive
products and their purchasing
power is relatively low than
other countries.
Technological
Access to technology is the
strength of Chinese companies
operating in the technology
sector.
The country is known for its
advanced technology and
electronics advancement and is
the largest exporter of
technology products in the
world.
Since 1985, China has started
expanding its production base
and with the steady growth in
investments, the production
processes and capacity is
technology based.
This way, Chinese companies
are able to diversify their
business in other related
products.
Environmental
China has a vast variety of
forests and has good wildlife.
The climate and natural
environment is highly affected
by industries and factories with
a waste material and products.

At the score of 66, China


is a masculine society
and a male dominated
culture.
Chinese are hard work
but less innovative and
they tend to sacrifice
their family and leisure
life for the sake of their
family earning.
Uncertainty Avoidance
Chine scores 30 on this
dimension which clearly
shows low uncertainty
avoidance.
Chinese are more
comfortable and
adjustable to complexity
and their language is the
most complex aspect of
their culture which is
difficult for others to
understand.
They are more flexible
and entrepreneurial than
others.
Majority of Chinese
companies are family
based ranging from
small to medium
enterprises.
Long term orientation
The score of 118 shows
that China is highly long
term oriented society in
which determination and
firmness are common.
Relationships are
recognized by its status.
People are more likely to
invest in long term
business and are risk
taker
(http://geerthofstede.com).

21

Cross-Cultural Management
This also affected the wildlife
and greenery of the country.
Due to technologically
advanced nation, pollution is
almost everywhere in the air
which has affected human life
as well.
Legal
The stability of China
government is moderate and
more stable because the
administration has high control
over the policies and laws of
the country.
The government imposed strict
laws against the publicity of
Chinese products on internet
and press.
However, these policies and
laws are very effective in
improving the economic
conditions of the country.
During the year 2001, Chinese
government joined World
Trade Organization which has
opened gates for foreign
companies to invest in the
Chinese market.
But still, some foreign
companies are facing many
problems in managing Chinese
in the workplace and the
diversity is low among them
which lack the innovations and
creative ideas.

22

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