The Challenges Of The International Business Commerce Essay

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"International Business is the study of transactions taking place across national borders for the purpose of satisfying the needs of individuals and organizations."(Rugman and Collinson, 2006, p 5). These transactions include trade (export and imports), sales, transportation and investments.

Internationalisation can be defined as "the process of increasing involvement in international operations" (Buckley and Ghauri,1999, p 84 ).

International Business operations are enormously affected by the environmental surroundings. In order to survive and to be successful in the international markets, firms must have proper understanding of the environmental factors that influence international business (Asheghian and Ebrahimi, 1990; Matusura 1991). The main focus till now has been on cross-cultural issues and on formulating policies and strategies to create, sustain, and to develop global competitiveness, neglecting the political, economic and social factors influencing international business operations (McDonald and Burton, 2002). Religion, values, norms, attitudes, education and language are some of the important variables of culture, which have been emphasised upon, for having played an important and influential role on global business operations ( Terpestra, 1991).

Along with the understanding of the environmental factors and in addition to the fundamental functional business field, the study of International Business, by functioning within the wide framework of the world environment, draws from various other disciplines such as history, geography, politics, law, culture, sociology and anthropology ( Kahal, 1994).



Agarwal and Ramaswami (1992, p 3) state, "a firm is expected to choose the entry mode that offers the highest risk-adjusted return on investment." John Dunning's Eclectic Framework was formed to understand how international corporations decide on their specific International Entry modes based on the sets of variables mentioned by him.

A firm operating abroad incurs extra costs due to its lack of knowledge about the local conditions, differences in legal, social, cultural, political environments and higher communicating and operating costs from a distance. In order to operate successfully in a foreign country, the extra costs must be overshadowed by the revenues from operating overseas.

John Dunning developed the Eclectic Paradigm and introduced it at a presentation on a Nobel Symposium in Stockholmon on "The International Allocation of Economic Activity" to find out the factors influencing the production growth in (Dunning, 1988). According to Buckley and Casson (1976), an MNE's in any foreign country would internalise their operations if the costs of exporting were greater than the cost of internalisation. According to the Eclectic Model, a company considers three factors, while making its decision to enter a new country, which are namely ownership, location and internalisation.

Ownership or Firm Specific Advantages

According to Dunning (1977), a firm carries on overseas production in a particular country because of location advantages but ownership advantages refer to the benefits that a firm has in its home country and will later help it overcome the additional costs of operating in a new country (as cited in Dunning, 1993).

Ownership advantages refer to the firm specific advantages which give the company a competitive edge over other companies in their home country. These advantages must be transferable and strong enough to help the company overcome the barriers and extra costs for setting up business overseas. According to Dunning the ownership advantages are

Economies of scale and scope;

Managerial and marketing expertise;

Technical knowledge due to the great emphasis on research;

Differentiated products (Oxelheim, et al, 2001).

Location or country specific advantages

Locational advantages refer to the country specific advantages due to which firms carry out their operations in that particular country. According to Dunning a firm should use its ownership advantages along with its locational advantages to have a competitive edge over the rest.

Country specific advantages are mainly of three types

Economic advantages-these consist of the market structure, infrastructure, production facilities and communication convenience.

Political advantages- these refer to government policies that facilitate international trade and support Foreign Direct Investment and international relations.

Social, cultural advantages-these are the cultural differences, attitude towards foreigners, and the general attitude towards the positioning of the free enterprises.

Internalization Advantage

According to Dunning, internalization advantages are the advantages that a firm gains by relocating its ownership across national boundaries within its own firm. When an MNE enters a new market, it can select any of the entry mode choices ranging from the structure of the firm to the market segment. The main strength of an organisation lies in its core competence which gives the organisation economic rents. An organisation can earn economic rents by licensing or exporting its ownership advantage to other firms or subsidiaries in foreign countries.

Dunning 1995,1998 and 2000, has pointed out that "competitive advantage, market failure and collaboration as well as dynamic environments", should all be should all be included in one model when decisions on overseas production are made. The Eclectic Paradigm Model has been applied and used by researchers in various studies. Agarwal and Ramaswami (1992), supported this theory by practically examining a sample of service firms in America. Brouthers et al, 1999, also used this theory to explain the market entry modes of multinationals in a transition economy.

Nevertheless the Eclectic Theory is not a dynamic theory since it overlooks the factors and business environment around the decision maker and competitors (Zhao and Decker, 2004 ).

This theory is not applicable to small sized domestic firms. There is also a confusion that qasi-FDI's are somewhat like portfolio investments where the owner does not have full control. Lastly companies are going global irrespective of the advantages of the three variables mentioned in the theory, as asset seeking is a bigger incentive for them (Brouthers, et, all, 1999).


Entry Strategies for International Markets

Wind and Perlmutter (1977) have recognised entry modes as a frontier issue in international marketing as it has a large influence on the performance of international companies.

All companies need to develop entry strategies which will give them a competitive edge and help them survive in the global market. These strategies should combine the objectives, goals, resources and policies of the organisation so that it is able to sustain itself in the global market in the long run (Root, 1982).

Market entry modes are based upon the target market, the goals and objectives of the target market, the marketing plan and the control system used to monitor performance in the target market (Daniels, et al., 2005).

When firms expand internationally or MNCs expand their operations to a foreign country, they face challenges in selecting the "best structural arrangement". The four choices for international expansion, available to such firms are, exporting, licensing, joint ventures and wholly owned subsidiaries (Root, 1994).

What differentiates the above mode of entries are mainly their commitment towards resources, control and dissemination of risk (Maignan, et al., 2010).

Exporting: Exporting is the process through which a firm can sell its locally produced goods to international consumers directly but has least amount of control over the operations (Peng, 2009).

Licensing: Licensing is a form of contractual mode of entry between two or more partners, in which a firm gives property rights to an international firm to use its patents, company name, trademarks, technology, various business methods in return for a loyalty in the form of fees or a percentage of the sales (Osland, et al., 2001).

Joint Venture: A joint venture is an entity which is formed by two individual organisations, who contribute towards its assets and commonly share its management, ownership, risks and profits (Kogut, et al., 1988).

Wholly Owned Subsidiaries: Wholly owned subsidiaries are direct investments made in a foreign country, where the parent company has full ownership of the subsidiary company and is solely liable for the management of the firms operations (Osland, et al. 2001).


Franchising as a form of international expansion is gaining importance and has become a stable choice for expansion. In spite, the growing importance of franchising, Shane (1996) has pointed out that the whole process is still misunderstood and hasn't been studies in depth by researchers (as cited in Lindquist, 1996).

According to Anderson (1986), franchising is a form of licensing, offering medium control, where the franchisor gives incentives to the franchisee so that he abides by the firm's rules and at the same time the franchisor has all the rights to supervise the franchisee's activities.

A franchise agreement lasts for a definite or indefinite period of time in which the owner of a protected trade-mark grants to another person or firm, for some consideration, the right to operate under this trademark for the purpose of producing or distributing a product or service (Caves et al, 1976).

There are a distinct set of capabilities required by international franchises which are different from those required by domestic franchises. The distinguishing capabilities of international franchising in comparison to domestic franchising are distance management, cultural adaptability, host country policy evaluation and exchange rate management (Lindquist, 1996).

Franchising is preferred over other methods of internationalization because they minimize the risks of operating in an international market along with minimising costs for a franchisor. Thus they minimise the governance costs and in turn maximise the returns on investment for the franchisor (Kedia, et al., 1994).

Researchers have a difference in opinion regarding the decision to internationalise operations through franchising. According to Hackett (1976), franchisors, globalise their operations because they want to exploit the budding markets and according to Trankhiem (1990), franchisor internationalize with the motive of increasing sales and revenues, along with the desire to be recognised as an international chain by expanding its operations in new markets. Persinos (1987) has pointed out that international markets are attracting more and more franchisors towards itself. Along with an increase in competition amongst franchisors, there is ample scope along with big challenges present for them (Welch, 1993).

According to Justin & Judd (1989), though franchisors need to modify their goods and services according to the local needs of the customers, it is seen that with globalisation of cultures, and with rising literacy rates along with increased individual incomes, there is an increased interest in common goods and services all over the world (as cited in Kedia, 1994).

One of the biggest challenges faced by international franchisors is to maintain the standardisation of operations across national borders. It's quite complicated a process to open outlets in different countries, maintaining a consistency in operations and in turn the costs of monitoring the functions are also higher in comparison to a firm operating a single or more plants in a different country ( Lindquist, 1995).


There are several barriers which make it more difficult for a firm to run its business in a foreign country in comparison to its home country (Alden, et al., 1992).

According to Kotler (1986), "barriers in international markets may include discriminatory legal requirements, political favouritism, cartel agreements, social and cultural biases, unfriendly distribution channels, and refusal to cooperate by both business executives and foreign governments" (as cited in Karakaya, 1993, p 8). There could also be policies suggesting that the domestic owner of a joint venture in a foreign collaboration must have more than 50% of the shares, or trade secrets should be transferred to the host countries or there could be restrictions over the total amount of profits that a foreign company could take from the host country (Karakaya, 1993).

According to Karakaya and Stahl (1991), some of the important obstacles which distinguish the domestic market from foreign markets are "cultural barriers, language, access to distribution channels, customer switching cost, government policy, product adaptation, stability of currency exchange rate, expected local and global competition, changes required in promotional activities, nationalism, political environment, economic environment, corruption and cost advantages held by local companies" (as cited in Karakaya, 1993).

The most common barriers to entry faced in a foreign market are political barriers, access to distribution channels, government policies, product adaptability and socio-cultural barriers (Kaynak and Kothari, 1984).

These barriers have further been explained below.

Political Barriers

According to Koteler (1977), the political environment of a country influences the choice of products for a buyer in a country and Schwartz (1977) has noted that the political environment needs to be considered before deciding on the strategies, plans and operations to be followed in a foreign country (as cited in Wang, et al., 1980).

According to Fayerweather (1969), while creating policies to function abroad it is important to incorporate the firms interest along with the political requirements of the home as well as foreign country.

Political factors and problems have not been given much importance in organisational theories or strategic analysis but they have been explained in more details in management of social problems and political behaviours. Nevertheless the influence of political factors on international business has still not been studies in depth (Boddewyn, et al., 1994).

The political environment does not always remain steady and amiable and that is when problems begin to happen. The reasons which bring about an inconsistency in the political scenario can be (a) drastic change in government, when a new political party comes into rule, with completely different philosophical values than the previous one (b) reaction of the government towards nationalists and self-interest groups, (c) feeble economic conditions which force government to take back its international commitments or (d) an enhancement of interest towards foreign direct investments (Cateora, 1996).

Access to Distribution Channels

In order to achieve a firms marketing target, the product must be available at a reasonable price, in the marketplace, which in turn makes distribution the biggest challenge for marketing managers. Every firm aims at developing a dependable and strong distribution channel, which will help it achieve its goals and be successful in international markets. Each market has three choices for distribution channels available (a) it could be a multifaceted , complicated, tricky and channel for novel marketers to enter in (b) in some channels middlemen could be playing an important role or (c) a channel could be a combination of conventional and new developing channels. Thus the biggest obstacle for an international firm would be to select the best option from the distribution channels available to it in a particular country (Cateora, 1996).

An example of how distribution channels become a barrier can be explained with the help of the complex distribution channel of Japan. Shimaguchi and Lazer (1979), have observed that the huge number of small and medium distributors along with the length of the distribution channel become an obstacle in the way of international business (as cited in Karakaya, 1993). Alden (1987) "reports that more than 1.7 million retailers serve Japan's population of 120 million, who live in 651 cities, 1,997 towns, and 607 villages scattered over a habitable 19% of the country's mountainous terrain" (as cited in Karakaya, 1993, p 9).

Government Policies

Government policies become a barrier to international business, when there is an instability in their policies and what separates political barriers from government policy barriers is the fact that when there is a change in the government of a country it does not essentially change the policies of a country (Miller, 1992).

Every country has different policies in regard to taxes, employment objectives, growth percentages, inflation and interest rates, which need to be considered and abided by when entering a new country (McDonald, et, al., 2002).

An international firm needs to be particularly careful about the laws, principals, rules and regulations which govern the performance of a firm in a foreign country, because neglecting them could severely damage the brand value of the company. Negotiations over amendment of certain international policies often cause disagreements between the host country government and the firm leading to an ultimate withdrawal of business from that country (Harrison, 2000).

Some of the government policies, changes in which become an obstacle for international business are namely, unexpected economic and financial changes, cost control, amendment in the degree of trade restrictions, changes in the nationalisation policies, altered state laws and changes in the distribution of earnings (Miller, 1992).

Product Adaptability

Product Adaptation refers to the process of amending a product according to the requirements and preferences of the consumers and it becomes necessary for an international firm to modify its products according to the localised customer requirements in order to get a competitive edge over the other firms (Cavusgil, et, al. 2008).

When a firm goes international, it has four ways of introducing its products and services in the new country. (1) It can sell the identical product in all the countries, like in the case of Pepsi (2) It can amend its products in different countries or with different regions of the same country according to their cultural requirements (3) establish a universal product which is acceptable all over the world (4) it could design a new product for every foreign market, like in the case of Microsoft supplies in different languages for every country (Harrison, 2000).

It is a crucial decision for the management to decide whether a product will be introduced in the international market as a customised one or whether they would use a standard product all over the world. Customisation of products in a country is influenced by the fact whether they are industrialised products or for individual consumption and a trend is noticed that products for individual consumption, require a higher degree of customisation in comparison to industrialised products (Griffin, 2005).

Socio-Cultural Barriers

The advantages of internationalisation do not come free of cost, when firms enter a new country they have to adjust to the national culture of the foreign country. (Barkema, Bell and Pennings, 1996).

Similar to Schein's (1985) definition culture has been defined as "the shared values, practices, and beliefs of the people in the organisation" (as cited in Dermott and Dell, 2001,p 77) and Hofstede defines culture as "the collective mental programming of the people in the environment." He has pointed out that culture is not a characteristic of individuals; it includes all those people who have a similar educational background and life experience (as cited in Hofstede 1980, p 43).

When a firm goes international it must be able to integrate its organisational culture with the national culture of the host country to be successful there (Mwaura et al, 1998).

Cross-cultural barriers can cause hindrance to a firm trying to internationalise. Overcoming these barriers help the organisation attain more "closeness" to the market (Swift, 1998).

It is noted that the cultural background of a country has an influence on every characteristic of international marketing. According to Lipman (1988), every commodity purchased by an individual, every trait that they admire and every principal that influences them is based on their cultures. Parameswarana (1987) has given an example that the differences in the extent of attentiveness, information, awareness, products or brands leads to a difference in choice towards alike commodities. Thus a product needs to be modified according to the cultural requirements of a society to be accepted by its citizens (as cited in Jain, 1989).

"Differences in languages, habits, conventions, standards and tastes commonly give rise to complex interrelationships and impediments and barriers to international trade unlikely to be present in domestic trade. These differences make it much more difficult for firms to penetrate foreign markets compared to their home market" (as cited in McDonald, 2002, p 36).

Culture can be studied at three levels, namely, meta (global) culture, national culture and micro culture (Jan-Benedict, et al., 2001).

Meta Culture

According to Hannerz (1990), meta or global cultures are being established because of the growing interconnectedness of diverse local cultures and due to the development of cultures without any distinct linkage to any one region. Individuals who belong to a global culture, have similar perceptions about a certain place, person or thing (Alden, et al., 1999). These people share sets of symbols like brands, experiences like travel and attitudes like a multi-ethnic outlook (Hannerz, 1990).

Micro Culture

It is observed that due to various reasons, the culture within a country is becoming heterogeneous. Thus micro culture helps preserve the vital patterns of national culture and also develops a distinctive pattern of dispositions and behaviour. Micro Cultures combine various overlapping criteria, such as, language, religion, ethnicity, social class, etc (Jan-Benedict, et al., 2001).

National Culture

According to Lachman (2003), national culture indicated the morals and principles of individuals which are established in their early days and carries on throughout their lives. Hofstede (1991), has also pointed out that it is extremely important to understand national culture in order to be successful in international business. National culture is not the only culture present or the totality of all cultures within a country, it simply helps differentiate the members of one nation from another based on their cultures. It has also been said that every nation has an unique culture (Yeganeh, 2000).


There are is no best way by which the cultural differences in a country can be measured, though a practical way of understanding the cultural differences would be by breaking down the socio-cultural environment into various elements and then investigating each element separately (Kahal, 1994). Cateora, 1990, has pointed out that culture is not just a set of discrete elements, but the different variables of culture are strongly interconnected. Terpestra, et al, (1985) have also pointed out that culture must be seen as an incorporated multifaceted whole. In order to understand a particular behaviour or reaction, it is not enough to understand the various aspects of culture, one needs to understand the motivations and reasons behind the particular action (as cited in Kahal, 1994). According to Parson (1951) "A systems approach to the analysis of the cultural environment is one where culture is understood as a system composed of parts that are related to other parts which mutually influence and adjust to each other, through a process of cooperation, competition, conflict and accommodation" (as cited in Kahal,1994, p33).


According to Kahal, 1994, the various elements of culture which influence international business practices significantly, are depicted in the figure given below:-


"Language is one of the defining characteristics of a culture", and every country has a distinct style of communication, be it spoken or unspoken (Hill, 2007, p 109). Language plays an important role in the way a culture is conveyed and without language there would be no culture. Language defines the way the world will be viewed, in other words, "Language is an artefact of culture that helps to form its values, attitudes, beliefs, and behavioural routines" (Chinese).

There are more than 3000 different languages and 10,000 different dialects present and there are some countries which recognise more than one culture. The use of body language also differs in all countries for example in some countries a disagreement is indicated by shaking the head from side to side, whereas in another country it could be shown by waving a hand (Jan-Bennett, et al., 2001).

Thus it is extremely important to understand the language and communication style of a country in order to do business there.


Formal education is a medium through which skills and knowledge are acquired by individuals, be it the values and norms of a society or languages, conceptual and mathematical skills. The educational system, uses both direct and indirect means to instil into students various values and norms of the society and cultural norms are usually taught indirectly through punctuality, obedience, honesty, neatness, etc (Hill, 2003).

It is essential to analyse the level of education in a country in order to understand the level of sophistication of the local citizens, the medium that should be used to advertise the product and the modifications required in order to convey the crucial information correctly. For example, if the illiteracy rate of a country is high, then more visuals should be used in advertising and vice versa (Kahal, 1994).


"Religion refers to a specific and institutionalised set of beliefs and practices generally agreed upon by a number of persons or sects". There are more than 1,00,000 religions present in this world, the most important ones being Hinduism, Christianity, Islam, Buddhism and Confucianism (Aswathappa, 2008, p 162).

Every religion has certain beliefs and principles which affect international business in various ways, and thus to succeed in a country the firm must abide by the religious beliefs of the country. For example McDonalds does not serve pork or beef products in India since it is offensive to the Hindu religion or Israeli National Airline, does not fly on Saturdays, since it's a holy day in Judaism (Daniels, et al., 2005).


Business practices which are acceptable in one country may not be acceptable in another, so when dealing internationally a company must take into consideration these differences (Hill, 2003).

Management approach towards employees differ in every country and even within the firms of the same country. Some firms encourage the workers by offering compensations and incentives whereas some firms pay the workers independent of their performances. An MNE has to run the same business differently in two countries because of the differences in the laws and policies but two firms in the same country may choose to run differently because of their different personnel management strategies (Freeman,, 2009).


"Values represent a person's judgement about what is good or bad, acceptable or unacceptable, important or unimportant, and normal or abnormal. People develop attitudes and preferences based on their values" (Cavusgil, et al., 2008, p 139).

Cultural attitude towards various components such as time, age, education, indicate the values of a society and in turn reflect the behaviour and opportunities offered to foreign firms in the given culture (Griffin, et al., 2005).

International business is affected by attitudes and behaviour and the attitudes which are most relevant in international business are listed below.

Attitude towards time: The attitude towards time differs in every country. It can also lead to misunderstandings and embarrassments as people in one country may give a lot of importance to punctuality whereas in another it could be a regular affair to delay and postpone tasks (Harrison, et al., 2000).

Attitude towards material culture and technology: Material culture influences the total demand for products, their quality and the type of product demanded and it is made up of two components, technology and economics. The know-how of a country and the techniques used to produce goods constitute technology, whereas according to Herskovits, economics refers to the ways in which a culture uses its potential and the benefits derived from it. (as cited in Miroshnik, 2001)


Social structure or institutions is the way in which people relate with one another, it refers to a social hierarchy which establishes the role of individuals in the society and also indicates a society's social organization which reflects all the features of an acceptable norm of behaviour in that society.

Social institutions constitute a range of attitudes, suitable forms of relationships amongst family members, friends, colleagues, various marriage rituals, class structure, respect for ones nationality and country (Harrison, et al., 2000).


Each culture has a different taste towards arts, symbolisms of colors, music and forms, and every country drastically differs towards what is and what is not acceptable in their society ( Czinkota, et al., 2007).

An international company has to take into consideration the local tastes and preferences while expanding internationally. Even though a company may have a standardised policy in all countries but it needs to modify its operations to adjust with the local cultural traditions. For example, McDonald's had to redo an old building to build its outlet in Moscow ( Czinkota, et al., 2007).


Edward T. Hall (1976) put forward the concept of high and low context cultures to understand various cultural orientations. This concept is useful as it helps understand how members belonging to the same culture relate with each other in terms of social relationships, dependability, dedication, and communication, in turn making it easier to understand cultural differences (Kim, et al., 1998 ).

"A high-context communication or message is one in which more of the information is either in the physical context or internalized in the person, while very little is in the coded, explicit part of the message", whereas in low-context communication, it is just the opposite and majority of the information is present in the explicit code (Gudykunst, 1986, p 527).

In countries such as Germany and Switzerland, low-context cultures are present where communication is mostly carried on through explicit statements in text and speech, whereas in countries such as Japan and China, communication is not so straightforward and one needs to imply meaning to the use of body language and the use of silence. Thus in high-context cultures a message needs to be interpreted, through that which is not voiced like behaviours, situations and paraverbal cues (Wurtz, 2006).

Hofstede's Cultural Typology

Geert Hofsede's Cultural typology was framed to show that cultural differences between various nations can significantly be measured, and ordered along a distinct set of dimensions, signifying various answers to universal problems of human society (Hofstede, 1980). Hofstede recognised four such dimensions, namely, power distance, uncertainty avoidance, individualism-collectivism and masculinity-femininity. Hofstede (1991), added a fifth dimension , long-term versus short-term orientation. According to Kuhn (1970), "the dimensions paradigm since 1990's has become the normal science approach to cross-cultural business studies, although researchers diverge in their choice of dimensions."

The four dimensions mentioned by Hofstede have been explained below:

Power Distance: Power Distance refers to the extent to which hierarchical differences are accepted in a society and articulated in term of deference to higher and lower social and and decision levels in firms (Keegan, 2008).

Uncertainty Avoidance: This refers to the extent to which a society tolerates uncertainty and ambiguity (Hofstede, 1994). High uncertainty avoidance is reflected when a society tries to minimise risks and prefers a structure whereas low uncertainty avoidance is reflected in societies which are willing to take risks and readily accept uncertainty in various situations (Bridgewater, et al., 2002).

Individualism/Collectivism: This refers to the relation shared between individuals and their associated individuals. It is the extent to which individuals in a society are integrated into groups. It shows that some societies share a very strong bond between their members whereas in the other the bond is not that strong. An individualistic society is that which is loosely integrated whereas in a collectivistic society they are strongly integrated (Hofstede, 1983).

Masculinity/ Femininity: This refers to the extent to which strong values such as assertiveness, aggressiveness, performance, competition and success are affiliated with the position of men in society, in comparison to tender values such as quality of life, maintaining healthy relationships, concern for the feeble which are affiliated to the role played by women in the same society. Though the role played by women is different in all societies, it is observed that the differences between the two genders is vaster in a tough society in comparison to a feeble one ( Hofstede, 1993).

'Confucian Dynamism' was a fifth dimension introduced by Hofstede, following the criticisms faced by him over biasness towards western culture (Hofstede and Bond, 1988). This dimension is also known as the 'short-term versus long term orientation' (as cited in Hofstede 1994). It is related to the eastern culture which shows evidence of both orientations, where long-term orientation is related to value perseverance, sense of indignity and thrift and short-term orientation is related to respect towards ones traditions, stability in relations and reciprocation of gifts. Long-term orientation takes into consideration the future whereas short-term orientation is all about the present (Bridgewater, et al., 2002).

Though Hofstede's model is extremely useful, due to various reasons it has been criticised. Firstly, Hofstede has taken into consideration only four to five dimensions which are quite inadequate to analyse the culture of a country, missing out on several important dimensions (Terlutter, et al., 2006). His typology has been criticised for its limited ability to extend the dominant values present within a multinational to represent cultural values of a country (Hunt, 1983). There is insufficient precision in definition across categories (Chow, et al., 1999) and there is a limited scope in methodology and measurement (Yeh, 1988).

Inspite the criticism, there are various reasons due to which his dimensions are accepted. Firstly, Hofstede was the first person to bring together fragmented parts of the literature and form a rational framework for classifying different cultures. His dimensions are straight forward and easy to understand. Lastly, Hofstede has offered an instrument to evaluate values (Chanchani, et al., 2009).

Thus Hofstede's Cultural typology is extremely useful to understand the cultures of different nations and to compare them based on various dimensions.


The GLOBE project is a major cross-cultural research project, formulated by Robert J. House in 1991 (Hofstede, 2006). "GLOBE (Global Leadership and Organisational Behaviour Effectiveness) is a multi phase, multi-method project in which investigators spanning the world are examining the interrelationships between societal culture, organisational culture and organisational leadership." Its objective is to investigate the different cultural beliefs, values and practices in various countries, and to recognize their effects on organisational practices and leadership attributes. (House, et al., 2002, p 4).

According to Triandis (1993) "There is a need for leadership and organisational theories that transcend cultures to understand what works and what does not work in different cultural settings." whereas Dorfman, (1996), says that concentration on cross-cultural problems helps researchers to include a bigger range of variables such as language, significance of religion, ethnic background, history etc, in various leadership theories. Lammers, et al., (1979) have said that various components of culture such as traditions, values, beliefs, ideologies and norms, which vastly differ in every society, have a direct impact on the leadership styles (as cited in House, et al., 2002, p 3).

The nine dimensions of culture according to the GLOBE project are given below:

Assertiveness: It refers to the extent to which members of a society are assertive, intimidating, aggressive and frank (Terlutter, et al., 2006).

Gender differentiation: It is the degree to which inequality amongst genders is avoided in a society.

Uncertainty Avoidance: It is the extent to which a society relies on social norms and procedures to avoid any uncertainty in a given situation and the members show an inclination towards order, structure and formalities (Rugman, et al., 2006).

Power Distance: It is the degree to which members of a society believe that power should be distributed equally amongst themselves.

Institutional collectivism: It is the extent to which collective and active participation is encouraged in social institutions and organisations.

In group/family collectivism: It refers to the extent to which members of the society take pride in closeness of relationships and the existence of loyalty, concern and care towards the members of their family and organisations.

Future Orientation: It is the extent to which members of a society give importance to future oriented activities such as planning and investing.

Performance orientation: It is the extent to which members of a society promote and reward group members for brilliance and enhancement of their performances (House, et al., 2002).

Humane orientation: It is the extent to which members of a society give emphasis to fairness, kindness, humanity, selflessness, friendliness and generosity (Rugman, et al., 2006).

From the dimensions given above, we see that, the first six correspond with the cultural dimensions mentioned in Hofstede's typology.

Thus with the help of the dimensions mentioned by Hofstede and the GLOBE project we can compare the national culture of various countries.