Impact of Cultural Differences on Corporate Strategies of Multinational Firms

3829 Words Apr 1st, 2013 16 Pages
Introduction

Culture is extremely powerful. The rules of the game, what behavior is ethical and accepted, the mood of the organization, and the enthusiasm of employees are all contained in the culture. So, culture can be a powerful, hidden asset or it can be a liability - a time bomb waiting to go off. If your leadership team has not pro-actively created a corporate culture to support the company's purpose, then chances are that the culture is a hidden liability.
Every business has its own character which is unique and called corporate identity. It has one major part, corporate culture, often described as the “personality of an organization”. In that case multinational firms play a major role in this, as knowing how to communicate
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Regarding the topic in question this also means that motivation and leadership have different affects to the organizational culture in different countries of the world. To understand the varieties in different cultures, Geerd H. Hofstede, a Dutch psychologist, collected and analyzed data from over 100,000 IBM Corporation employees and managers in over 64 different countries from 1967 to 1973. He developed 4 cultural dimensions. A fifth one was added years later. The following 5 dimension will show the differences between cultures; this survey also shows the different values and behavior of employees from one multinational firm in their subsidiaries worldwide.
Hofstede discusses his four original dimensions of culture: Power Distance; Uncertainty Avoidance; Individualism & Collectivism; and finally Masculinity & Femininity. We compute CD measures for each of Hofstede’s five cultural dimensions. Appendix a presents Hofstede’s definitions of the cultural dimension variables. A brief description of the dimensions follows:

Power Distance Index (PDI) that is the extent to which the less powerful members of organizations and institutions (like the family) accept and expect that power is distributed unequally. Power and inequality, of course, are extremely fundamental facts of any society and anybody with some international experience will be aware that 'all societies are unequal, but some are more unequal than others'.

Individualism (IDV) Collectivism focuses

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