MNCs play crucial role in development of nations economy

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Abstract

In the present global world MNC's plays a crucial role in the development of a nation's economy. In every business marketing is the very important factor for the development of the business. Marketing is the factor which creates demand for the products of the company. Every organization should be efficient in case of marketing the employees in the marketing field should be very efficient and they should be aware of all the marketing strategies which are useful for the growth of the company. Marketing involves different functions in the organization. One of the most important components of the business organization is marketing. The needs and wants of the target markets can be identified by marketing and it helps to deliver the desired satisfaction to the consumers. The main motive of any organization is to satisfy the consumers. All the MNC's will have their branches in different regions so the company needs to adjust their cultural frame work depends on the region. Every organization should be aware about the analysis and applications of cultural dimensions. We need to discuss any two cultural dimensional frameworks and need to compare them in order to determine the consumer behavior internationally. Hofstede's and Schwartz are the two widely acclaimed cultural dimensions and these two dimensions are considered to discuss and to compare in briefly.

Introduction

Greet Hofstede's dimensions

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Hofestede's "dimensions of culture" is emerged from his external organizational anthropology this is a research which is conducted from a period of late 1970s and early 1980s. Cultural dimensions were classified in 1984 and Hofestede was the first person to classify those dimensions and he made a research with the help of different students and with the employees of IBM. When Hofested worked for IBM he made a research and collected data from many individuals. After all his research he added some information to his research and developed different cultural dimensions.

"Culture is more often a source of conflict than of synergy. Cultural differences are a nuisance at best and often a disaster." - Dr. Geert Hofstede

The different dimensions are

Power distance index (PDI)

Individualism (IDV)

Masculinity (MAS)

Uncertainty avoidance index (UAI)

Long term orientation (LTO)

Power distance index (PDI)

Power distance index is described as is defined as "the extent to which the less powerful members of institutions and organizations within a country expect and accept that power is distributed unequally". (Hofstede,1994,p.28). Power distance index is classified into two and those two are a high power distance and a low power distance and both the factors explain about the inequalities of wealth and power in the society. Power distance index suggests that the level of inequality in the society is endorsed by the followers as much as the leaders

Individualism

Individualism concentrates on the society reinforces individual or collective and interpersonal relationships. The individual rights which are paramount in the society are indicated by the high individualism and the low individualism indicates the societies of the collectivist nature which is close ties between individuals. Hofstede defines this concept as "individualism pertains to societies in which the ties between individuals are loose: everyone is expected to look after himself or herself and his or her immediate family. Collectivism as its opposite pertains to societies in which people from birth onwards are integrated into strong, cohesive in-groups, which throughout people's lifetime continue to protect them in exchange for unquestioning loyalty." (Hofstede, 1994,p. 51)

Masculinity/feminity

Both of the masculinity and feminity are equal. The nation which faces a high degree of gender variance is reflected by the high masculinity. The domination of male occupies a major place in these cultures and the females will be controlled by males. Low masculinity ranking shows the lower level of variance between the genders. Hofstede explains this dimension as "masculinity pertains to societies in which social gender roles are clearly distinct (i.e., men are supposed to be assertive, tough, and focused on material success whereas women are supposed to be more modest, tender, and concerned with the quality of life); femininity pertains to societies in which social gender roles overlap (i.e., both men and women are supposed be modest, tender, and Concerned with the quality of life)." (Hofstede, 1994, p. 82-3).

Uncertainty avoidance index

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Hofstede explained this dimension as "the extent to which the members of a culture feel threatened by uncertain or unknown situations." (Hofstede, 1994, p.113). The level of tolerance for improbability and indistinctness within the society was shown by the uncertainty and avoidance. The low tolerance of uncertainty and ambiguity of a nation was shown by the high uncertainty avoidance which creates a society that is rule oriented and it reduces the level of uncertainty. The less concern about ambiguity and uncertainty and the level of diversity of opinions was indicated by a low uncertainty. Low uncertainty avoidance takes more risks.

Long term orientation

Hofstede describes long-term orientation as "characterized by persistence, ordering relationships by status and observing this order, thrift, and having a sense of shame, whereas short-term orientation is characterized by personal steadiness and stability, protecting your "face", respect for tradition and reciprocation of greetings, favors, and gifts". Long term orientation shows the values of long term commitments of a nation and it also indicates the respect for tradition and it mainly indicates that the concept of long term does not reinforce and short term rewards have been expected from the people.

Limitations of Hofstede's model

Hofstede model has some limitations and some of the major limitations are

Hofstede model does not cover all the dimensions it concentrates only on 5 dimensions but there are several other elements which show influence on the cultural dimensions.

Lack of proper theory in case of classifying countries and it is limited to 70 nations only as per ranking.

Hofstede's dimensions concentrates on the qualitative scoring by which it is not able to achieve for any sort of graphical representation

Schwartz dimensions

The importance of individualism, collectivism and dichotomy has pointed out by Schwartz (1990) and Schwartz pointed out that individualism, collectivism and dichotomy had great popularity in cross cultural psychology, but simantenously those dimensions has obscured some major differences between some values which are associated with it. Schwartz proves why it is not typology he provided major critics they are

Some of the values they can also be differed because of its nature, there are some values which serve both personal interest and group it is because of its nature. This type of values share motivation to personal, family or national security.

Dichotomy is the element which is inadequate because dichotomy is that which ignores the values which realize collective goals, but they require characteristics in the group. The reason to use this values is Hui theory and Triandis theory (1988), this theories shows that collectivists shows importance to the strangers more that the individuals. "According to Schwartz (1990), if collectivism is defined in function of the in-group, then one must distinguish between in-group collectivism and universal collectivism."

Dichotomy states that both the collective and individual interest are not conflict

The theory of the structural of cultural values, it was developed by Hofstede in 1984 and after this Schwartz in the year 1994 developed a alternative theory for Hofestede theory in which cultures can be accounted by different seven basic cultural values. They are as follows

conservation

Hierarchy

Humility

Intellectual autonomy

Affective autonomy

Competency

Egalitarian compromise

Conservation

Society is a group of individuals which is purely based on the interdependent and social relations. Some of the values like traditions, conformity and security will have priority in the society. Status quo was emphasizes by these values and it tries to avoid the individual's action which traditional established order.

Hierarchy

The hierarchical ascription of roles and fixed resources are being emphasized. The culture and societies is described by the nucleus of the collectivism dimension

Intellectual autonomy

This value situate a person to achieve their own goal

Affective autonomy

This value protects the positive affective experience of a person. In case of an autonomous person these values share with the intellectual autonomy. Affective autonomy and intellectual autonomy are the both which are similar but they are oppose in collectivism

Competency

Dominance of surroundings is given priority that is through the self success. The desire of an activity is changed by the authenticity.

Harmony

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Harmonious fits with both the nature and environment. This value opposes with the changes made in the values of competency.

Egalitarian compromise

This value is positively related with intellectual and autonomy and it is negatively related with collectivism. In case of collectivist the values are less important in which identification assures for comfort.

Limitations of Schwartz theory:-

It is very long process and confusing

It is similar like qualitative classification theory

It is not affective in all aspects

Evaluation of frame works in terms targeting markets and segmenting marketing

Segmenting market

Marketing is the very essential element in every organization. Market segmentation is concept in marketing. Marketing segment is very important because there are different products and preferences in the market and it helps to identify the market segments. By considering the consumer views the market segmentation can be done and the following classifications which is done by considering consumers view also helps in market segmentation they are

Geographic segmentation - this segmentation is based on the different regional and climate

Demographic segmentation- the main variables for this segmentation is gender, age, occupation, education, income and ethnicity

Psychographic segmentation- values, attitudes and life styles are the basics of this segmentation.

Behavioral segmentation- this segmentation is based on the consumer behavior which affects usage rates, brand loyalty and benefits sought

Targeting market

Targeting marketing makes to focus on a particular or a few segments by breaking a market into segments. Targeting marketing business plays a crucial role on the success of small businesses. Targeting market helps to make the promotion and distribution of the products/service cost effective and easier. It provides focus to all the marketing activities. Different strategies are used in the targeting market they are

Single element strategy- this type of strategy is mainly helpful in small businesses because this strategy deals with one segment at one time.

Selective specialization- this strategy deals with different market segments with different marketing strategies. This strategy is mainly used for mixed products.

Product specialization- this strategy is used for a product in which the firm is specialized and catered to different market segments.

Market specialization- this strategy is used for the firm which is specialized in a particular market and it provides different products to that market.

Full market coverage- in this strategy a single product is offered to the whole market segment in the society.

The usefulness of cultural dimensions in segmenting and targeting markets and prediction of consumer behavior is explained below and India and UK are taken as examples to show the usefulness of cultures.

Useful of cultures in case of India

India is rated as highest in power distance index as per hofestede and it is ranked in 77th place when compared to a world and the average is of 56.5. The high level of power distance in India indicates the level of inequality of wealth and power within the society and only few people in India holds the power. India is placed in 61st place in case of long term orientation; the world's average place is at 48th place. In case of masculinity India has ranked in the third place, this dimension represents the gap between the male and female. The consumers in india have trust in the products which they use and the uncertainty level is very low in case of the customers. The country looks good in terms of development and economy in case of long term prospect of the nation.

As per Schwartz the factors in India are rated at different levels that are due to the difference in the system which prevails in India at rural parts. Some of the factors like mastery, harmony, hierarchy and embedness can be rated as high level and some of the other factors can be rated as moderate and those factors are Egalitarianism, intellectual and affective autonomy.

The market segmentation and prediction of consumer behavior in India can be divided into demographic and geographical segmentation in case of these two cultural dimensions. Selective specialization should be the form in Indian market because the variation in the product is mainly in between both the rural and urban areas and all the consumers cannot receive the product in the same way so the differentiation occurs. The product can be received by the consumers by considering different factors like price, place and the promotion techniques.

Considering the cultures in case of UK

In case of hofestede's dimensions, the governance system is in the proper way so the power distance in UK is low and the power is distributed uniformly and it is also low in case of uncertainty in the products. Here individualism also prevails and the growth of other factors like feminity and long term orientation looks good

UK is the nation which is developed well and it also educated well and in case of Schwartz dimensions the factors like mastery, hierarchy, embedness and intellectual autonomy are rated as high level and the market strategy is decided by the factors of individualism

By considering the above cultural dimensions in UK the market segmentation should be classified as demographic and psychographic because in this country the priority is given to opinions, attitude and eating habits. The different segments in the society will mostly accept if the target strategy is product specialized. The price of the product will mainly influence the consumer behavior

Conclusion

It is concluded that several classes of societies will follow different cultural dimensions it depends on various factors like social, technological and political factors which are being existing in the particular region. Sometimes a single product may also apply different cultural dimensions to analyze the marketing techniques.

Marketing plays an imperative role in the achievement of a business and in marketing market segmentation and target marketing are the significant factors, every organization should follow appropriate marketing methods to get a desired result of its products.

Hofstede, G (2001) Culture's Consequence: Comparing Values, Behaviours, Institutions and Organizations across Nations (2nd edition) Corwin Press, Sage Publications

Hollensen,S.(2004).'Global Marketing: A Decision-Oriented Approach' (3rd Ed.). London: Pearson Education.

Schwartz, S. H. (1990). Individualism-collectivism: Critique and proposed Refinements. Journal of Cross-Cultural Psychology, 21, 139-157.

http://assets.cambridge.org/97805217/34974/copyright/9780521734974_copyright_info.pdf

http://www.psicothema.com/pdf/395.pdf

http://www.geert-hofstede.com/hofstede_india.shtml

Hofstede, G. (1984). Culture's consequences: International differences in work-related values. Beverly Hills, CA: Sage Publications.

Schwartz, S. H. & Ros, M. (1996). Values in the West: A theoretical and empirical challenge to the individualism-collectivism cultural dimension. Wor