Introduction
Impact of Cultural Difference on Nestle’s Business will be evaluated in this article. Globalization refers to the way in which technology, information, job, culture and products across the world and shifted, shared and most importantly the physical boarders dividing countries are gradually removed making the world smaller (Hirst, Thompson, and Bromley, 2015). Globalization has reduced the barriers between countries therefore cross-border business has developed enormously throughout the world. Cross-border businesses find out the cultures of the countries they operate business, in order to take significant steps to adapt with the cultures. Hofstede cultural dimension model is the model through which companies can recognize the intensity of different cultural dimension among the cultures of the world (Minkov et al., 2017).
A cultural model has been analysed here to demonstrate the cultural differences among different countries. The impact of cultural differences on the business activities will be also evaluated. Hofstede cultural dimension model has been analysed to show the differences among the cultures of different countries. Nestle has been selected as the example of cross- border business to evaluate the impact of national culture on their operations. The organizational culture inventory of Nestle has been also demonstrated to identify how the organizational culture of the company have fostered their success.
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Assessment of Hofstede model: Impact of Cultural Difference on Nestle’s Business
Demonstration of the dimensions of Hofstede model:
There are six dimensions in the model which as demonstrated below:
PDI (Power Distance Index): Power Distance Index is the dimension that is designed in order to measure the level of tolerance to inequality of power (Beugelsdijk, Kostova, and Roth, 2017). Inequality and power are observed from the perceptions of lower level. The nation which is influenced with high power distance index encourages bureaucracy. Saudi Arabia is the country which follows high power distance index (Harbi, Thursfield, and Bright, 2017). People of that dimension highly admire authority and rank. Whilst the nation with low power distance index encourages decentralized decision making, participative style of manage and power distribution (Kim, S., 2017). Australia has the culture of lowest power distance index among all countries with PDI 11 (Clearly Cultural, 2020). Therefore, organizational culture in Australia are flat.
IDV (Individualism vs. Collectivism): Individualism refers to the culture where people focus on their personal happiness and achievement including their immediate families (Hur, Kang, Kim, 2015). People are only concerned with achieving their personal goals and they can go to any extent in order to achieve their self-goal. Individualism culture is most prominent in the USA among all countries (Jha, and Panda, 2017). On the other hand, collectivism is the culture where people emphasize on their well-being and achievement of their group. Collectivism culture is greatly followed in Korea and people focus on their group achievements furthermore define self-image in the term ‘we’ (Lee, 2017).
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MAS (Masculinity/Femininity): The nation which emphasizes on distinct gender roles, focused on material accomplishments and wealth increasing and assertive belongs to masculinity (Bakir et al., 2015). Social norm of masculinity is ego oriented and money and things are the most important asset for the nation. Japan is the country that belongs to masculine dimension (Lee, and Herold, 2016). On the other hand, the nation which emphasizes on modest, fluid gender roles, worried about life standard are the people who fall in femininity group (Eringa et al., 2015). Social norm of feminine are relationship oriented and the nation work to maintain the standard of their life. The culture of Sweden is highly influenced by femininity dimension (Agborsangaya, and Omoregie, 2016).
UAI (Uncertainty/Avoidance Index): Uncertainty avoidance index refers to the extent to which a nation can tolerate the level of ambiguity and risk (Minkov, 2018). In this dimension, the tolerance power of a nation and how they deal with unexpected situations are identified. The countries with high uncertainty avoidance index have low tolerance for ambiguity and risk. Italy is one of those countries who have high uncertainty avoidance index and make strict rules, regulations in order to avoid risk and ambiguity (Crane, Kawashima, and Kawasaki, 2016). Whilst, low uncertainty avoidance index refers to the higher level of tolerance for ambiguity and risks; furthermore the nation with low uncertainty avoidance index flexibly accept unexpected events and face that events strongly. For instance, Singapore has low uncertainty avoidance index (Ahir, Bloom, and Furceri, 2018).
LTO (Long-Term Orientation vs. Short-Term Orientation): This dimension refers to the time consideration of nations (Beugelsdijk, and Welzel, 2018). It views the time horizon of different nations and their focus on long term or short term success. Long term orientation dimension are followed by the nations which focus on achieving long term success instead of short time achievement. These types of countries emphasize on perseverance, long-term success and persistence. For instance, China is the country who focus on long term growth for their country (Unger, 2016). On the other hand, the nations with short term orientation dimension, focuses on short term goals and concerned about their present conditions. Morocco is the country with short orientation and they do not focus on achieving long term success.
IND (Indulgence vs. Restraint): Indulgence vs. restraint dimension refers to the level of interest of a nation to fulfil their wish (Pelau, and Pop, 2018). It seems that the dimension shows that how a nation control their wishes. Indulgence refers that a society makes flexible rules and regulations in order to enjoy life and have fun. Netherlands is the nation that fall in indulgence dimension because people of the country enjoy their life and have for the reason of the flexible rules and regulations (Koc, and Aydin, 2017). Restraint dimension is opposite of indulgence dimension. People of the restraint cultured country, fulfil their satisfaction of needs by following the social norms because of the strong rules and regulations. China is the country with restraint dimension (Lei et al., 2016).
How the Hofstede cultural dimension model was developed:
The real model of Hofstede Cultural Dimension was developed on the basis of a worldwide survey that Hofstede conducted on IBM employees in the year between 1967 and 1973 (Yacout, and Hefny, 2015). The survey was conducted on 117,000 IBM employees in 40 countries then he Hofstede prolonged the research in more 50 countries including 3 regions (Beugelsdijk, Kostova, and Roth, 2017). The original theory had four dimensions such as: individualism-collectivism, uncertainty avoidance, power distance and masculinity-femininity. After that, Hofstede conducted a self-regulating research in Hong Kong and he founded the fifth dimension named long-term orientation. Hofstede added sixth dimension named self-restraint in 2010 (Vasile, 2016). Hofstede cultural dimension model was one of the first assessable theories that was effective in observing the dissimilarities among cultures.
Criticism of Hofstede cultural dimension model
Hofstede’s cultural dimension model faced different type of criticism after it has been published. These criticisms are analysed below:
Firstly, Hofstede has researched on the IBM’s employees in order to assess different country’s culture. It is not possible to have depth knowledge about a country’s culture by conducting research on a selected company only. Williamson conducted research on the Hofstede model to show the inappropriateness of the cultural dimension and found that Hofstede observed significant dissimilarities among national culture on the basis of inappropriate factors such as: profession and sexual category (Shaiq et al., 2011). Williamson’s research decreased the acceptance of Hofstede model by proving that the model is not enough to understand cultural difference correctly because the model was developed on the basis of unrelated factors of IBM’s employees.
Secondly, Hofstede conducted research on 50 countries and 3 regions to show the cultural dissimilarities among countries but he has ignored the ethnic units of the countries (Chudzikowski et al., 2011). Ethnic units have own language and culture which is different from their own country’s culture and language. There are many countries who have different ethnic group such as: China has 56 ethnic groups in their country who have different cultures and languages but they are Chinese (Mackerras, 2015). Therefore, it is not possible to identify the main culture of China and sub-culture of china. It indicates that it is not justifiable to consider a country’s main culture by avoiding the ethnic groups as own perception which is done in Hofstede cultural dimension model.
Thirdly and finally, McSweeney has showed that Hofstede used one survey method to identify the culture of different countries which is not enough (Rinuastuti et al., 2014). He also said that using questionnaire to collect data is too narrow way therefore the data is not acceptable measure the cultural difference among countries.
Alternatives of Hofstede cultural dimension model: Impact of Cultural Difference on Nestle’s Business
Trompenaars Cultural Dimensions Model
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Trompeenars cultural dimension model is recognised as The 7 Dimensions of Culture that shows the difference between cultures around the world (Bãlan, and Vreja, 2013). These 7 dimensions are: universalism vs. Particularism, individualism vs. communitarianism, specific vs. diffuse, neutral vs. affective, achievement vs. scription, sequential time vs. synchronous time and internal vs. external direction. This model delivers better understanding of reality about the biggest differences of cultures and how these cultural differences influence an organization. Trompeenars cultural dimesion model also measures the difference of cultures as like as Hofstede cultural dimension therefore it is considered as the alternative to Hofstede model.
Globe Research: Globe research is a study of cross-cultural leadership and the research was conducted in 62 by 170 co-country investigator and more than 17,000 managers across the world participated in the Globe research (Shi, and Wang, 2011). Globe research was conducted in order to identify norms, beliefs of leaders, values of different societies. Nine dimensions has been identified through Globe research such as: performance orientation, institutional collectivism, gender egalitarianism, uncertainty avoidance, in-group collectivism, future orientation, humane orientation, assertiveness and power distance. This study is appropriate to know about the cultural dissimilarities by knowing its nine dimensions. Therefore, Globe research can be used instead of Hofstede cultural dimensions and the model is also considered the alternative of Hofstede model.
Influence of the national cultural difference in a cross-border business: Nestle
Introducing the company: Nestle
Nestle is a food and drink processing corporation of Switzerland but provides services across the world. Headquarter of the company is situated in Vevey, Switzerland. Nestle is the largest food company of the world on the basis of revenue and other factors (Cable News Network, 2018). It has more than 2000 brands and Nescafe is the global icon of the company (Nestle: 1, 2020). Products of the company are medical food, baby food, breakfast, bottled water, dairy products, ice cream, different types of drinks and many more foods. Nestle has business in 190 countries across the world and have 308,000 employees globally (Nestle: 1, 2020). The company have generate revenue of CHF91.43 billion in 2018 (Nestle, 2018).
In this part of the report, the challenges Nestle faced because of the national culture has been analysed with the outcome of the challenges and how Hofstede cultural dimension model helped the company in their operations has been also analysed. The way how the organizational cultural inventory of Nestle fostered the company’s success has been demonstrated.
How national culture influences the behaviours and actions of Nestle: Impact of Cultural Difference on Nestle’s Business
Influences of national culture in Nestlé’s actions and behaviours has been analysed below:
Nestle faces different Power Distance in different countries: Nestle faced different power distance in different countries. Hofstede model has identified the distance of power that helps Nestle to understand the difference of power and they can interact with the challenge in better way. The country with high power index, encourages unethical behaviour within the organization of Nestle and top management dominates the lower level employees greatly. It makes the lower level employees demotivated and they do not give better performance that reduces the effectiveness of Nestle operations. On the other hand, low power index encourages employees of Nestle to enhance their skills because they get the support of their top management. For instance, Australia has the lowest power index therefore employees of Nestle get full support of their top management and it brings outstanding outcome for the company (Sorayaei, and Hasanzadeh, 2012).
The company faces individualism and collectivism perspective of employees: Nestle faces difficulties while executing business in the countries with individualism culture. For instance, people of USA are the most individualistic and they focus on their own achievement except team achievement (Ocran, 2011). Therefore, Nestle faces conflicting behaviour among teams in the USA. Whilst, countries with collectivism culture influences the operations of Nestle positively. Employees focus on their team achievement instead of own achievement and try to adjust with one another. The employees share good bond with each other and help one another that enhance the quality of the output of Nestle in that country. Hofstede showed the impact of individualism and collectivism culture on Nestle and the company become capable of taking effective steps to handle the impact of individualism and utilize collectivism to ensure better result.
Influences of Masculinity and Femininity on Nestle: Nestle faces the masculinity and femininity culture of host countries and Hofstede models help them to now about the cultures of the host countries. Therefore, Nestle can make better plan to handle the influences of the cultures. For instance, Japan follows masculinity culture and the male employees are likely to underestimate the female employees and they do not get any chance to prove their abilities (Williams, 2015). As a result, Nestle avoids better effort of female employees that may bring more effective outcome for the company. Whilst, femininity cultured countries bring outstanding income for Nestle because both female and male employees work cooperatively. Male employees do not dominate female and all of them give their best to ensure effective actions.
Nestle faces different Uncertainty avoidance index among countries: Uncertainty avoidance power of nations are different from one another and Nestle become aware about the different tolerance power of risk and ambiguity through Hofstede model (Olawepo, and Ibojo, 2015). The country with low tolerance for risk creates problems for Nestle and employees cannot handle unforeseen events efficiently because of frail mentality about handling risks. Whilst, countries with high tolerance power for risks ensures better result from Nestle operations because they have the courage of facing different type of risks. The employees find out effective solutions to reduce the impact of the risks on Nestle that ensures great outcome from the country’s business. For instance, people of Singapore have higher tolerance for risks and the employees of the country can minimize the impact of different type of complexities and ensure outstanding outcome.
Impact of Long-term and short-term orientation of countries in Nestle: Nestle can get clear idea about time horizon of the countries they execute business because of Hofstede model (Miah et al., 2015). Employees of the short-term orientation countries, cannot focus on durable success of Nestle and focus on the present condition which slow down the growth of the company. Morocco falls in the category and Nestle takes significant steps to make the employees of the country long term success chaser. On the other hand, the employees of long-term orientation countries such as: China focus on achieving continuous growth of Nestle. As a result, Nestle does not need to give much effort for the Chinese employees because they work proactively to attain long term growth for the company.
Nestle faces Indulgence and Restraint culture in host countries: Hofstede model assists Nestle to recognize the indulgence and restraint culture of countries and the company can make proper planning to keep employees motivating by controlling their desires. Employees of indulgence culture such as: Netherlands are fun loving and they are not dedicated as the employees of restraint culture (Balasubramanian, Gopal, and Reefana, 2016). Therefore, Nestle have to give more effort in the indulgence countries to keep them motivated in order to bring better outcome from their performance and it is a great challenge for the company to make the serious toward their work. The employees belong to restraint culture are highly dedicated to their work and give their best performance. It seems that restraint culture have positive influence on the operations of Nestle by ensuring employee dedication hundred percent to their work.
How organizational cultural inventory and role of the cultural inventory in the success or failure of Nestle:
Organizational cultural inventory of Nestle:
It refers to the behavioural standards of an organization. The organizational cultural inventory of Nestle are stated below:
Culture of integrity: Nestle enables integrity in all operations of their business (Nestle: 2, 2020). The culture of enhancing integrity strengthen the mind-set of employees to do fair with fair policies. Leaders of the company act through integrity and employees follows also act through integrity after following their leaders. As a result, the business and operations becomes sustainable.
The culture of training employees: Nestle has made training as a part of its culture and it increases the capabilities of their employees. These training help on covering 10 topics such as: every type of harassment, fraud and conflicts (Nestle: 2, 2020). Nestle also arranges training for the refreshers after every three or four years. All of these training activities make the employees in excellent shape to make outstanding performance.
Respecting human rights: Nestle have collaboration with Fair Labour Association, International Cocoa Initiative, Verite Issara Institute and other to identify the challenges in protecting human rights (Nestle: 3, 2020). Nestle makes sure of respecting human right across their value chain. They ensure safeguard of all the people who work for the company and help them to build sustainable supply chain.
Equal Opportunities: Nestle has the culture of providing equal opportunities to their employees (Nestle: 4, 2020). Employees of Nestle are allowed to express their opinion and the company pay them living wage. All these steps assist the company to increase employee retention that increases their productivity.
How the organizational cultural inventory of Nestle fostered their success
Enhanced integrity increases customers’ gratification that increases revenue: By increasing integrity in all operations, Nestle increases customers’ gratification (Elena, 2013). Customers realize that Nestle takes care of their demand and does not try to take their advantage. Therefore, customers stay loyal toward Nestle and it increases revenue of the company.
Training programmes increases employee engagement that results financial gain: Training programmes enhances they capabilities of employees and they become highly motivated to give their best performance. Though, employees work proactively it helps Nestle to reduce their operational costs and it increases the profit level of the company (Ashtiani, 2015). After training, employees give their full effort and it increases the products quality of Nestle that increases sales of nestle products. As a result, the profit of the company increases greatly.
Protecting human rights help Nestle to build sustainable supply chain: Nestle protects human right throughout their supply chain that assists the company to invent new products and services that creates more customers for them (Sule, and Amuni, 2014). Sustainable supply chain ensures good relation with suppliers therefore the suppliers understand the vision of Nestle and they suggest changes of products and services that help companies to innovate new products. As a result, Nestle become capable of fulfilling the demand of global customers.
Equal opportunity increases employee retention in Nestle: Nestle provides equal opportunity for all employees that results better work environment, increased productivity and employee retention (Nestle: 4, 2020). Employees remain gratified toward Nestle and do not switch to other company. Employee retention saves the replacement cost of the company that increases profit of the company. Though employees remain in Nestle for many years, it increases their experience that makes the company more productive.
Conclusion:
Multinationals operate business in many countries across the world therefore they need to stay aware about the cultures of host countries. In that case, Hofstede model helps companies to identify the cultural differences among countries and companies can find out better solutions to minimize the effect of the cultures on their operations (Laitinen, and Suvas, 2016). As a result, companies will be able to ensure better outcome from every country. They will be able to ensure longer growth from all countries’ operations by finding out greater ways of interacting with the culture of that countries. Nestle also faces a range of cultural barriers throughout the world. Hofstede model of cultural dimension has helped the company to understand the cultural differences among the countries.