POWER DISTANCE IN INTERNATIONAL BUSINESS

VIKAS KUMAVAT

International Business: Strategy, Management, and the New Realities

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What is Culture?Culture is the sum total of beliefs, rules,

techniques, institutions, and artifacts that characterize human populationsCulture is learnedIts aspects are interrelatedCulture is shared (as opposed to individual

traits)It defines the boundaries of different groups

LO1

International Business: Strategy, Management, and the New Realities

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Components of Culture

Physicalenvironments

Education

Personalcommunication

Religion

Social structure

Manners &customs

Values &attitudes

Aesthetics

Culture

International Business: Strategy, Management, and the New Realities

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Understanding National Cultures

Hofstede’s Dimensions of CultureIndividualism versus CollectivismLarge versus Small Power DistanceStrong versus Weak Uncertainty

AvoidanceMasculinity versus Femininity

LO9

International Business: Strategy, Management, and the New Realities

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Large versus Small Power Distance

Power distance refers to the extent to which members of a society accept the unequal distribution of power among individualsIn large-power-distance societies employees

believe their supervisors are right; employees do not take any initiative in making non-routine decisions

LO9

Power Distance &Individualism vs. Collectivism

• Uncertainty avoidance refers to the degree to which members of a society feel threatened by ambiguity and are rule-oriented– Employees in high uncertainty-avoidance

cultures tend to stay with their organizations Japan, Greece, and Portugal

– Those from low uncertainty-avoidance nations are more mobile United States, Singapore, and Denmark

Strong versus Weak Uncertainty Avoidance

Power Distance & Uncertainty Avoidance

Hofstede Calculations and Matrix

Low

Pow

er D

ista

nce

Hig

h11

44

94

8 56 112Low Uncertainty AvoidanceHigh

Power Distance and Individualism Scales-

ARG ArgentinaBRA BrazilCHL ChileCOL ColumbiaGRE GreeceHOKHong KongIND IndiaIRA IranJAP JapanMEXMexicoPAK PakistanPER PeruPHI PhilippinesPOR PortugalSIN SingaporeTAI TaiwanTHA ThailandTUR TurkeyVEN VenezuelaYUG Yugoslavia

Small LargePower Distance

Indi

vidu

alis

mC

olle

ctiv

ist

12

50

30

Small power distance collectivist

Large power distance collectivist

Reprinted by permission of the author from Culture’s Consequences, published by Sage Publications. ©1990 by Gert Hofstede

•PAK •COL

•VEN•TAI•PER

•THA •SIN•CHL•POR •HO

K •YUG•MEX •PHI•GR

E •TUR •BRA•IR

A•ARG

•JAP•IND+11 +28 +44 +64 +77 +94

Power Distance and Individualism Scales

AUL AustraliaAUT AustriaBEL BelgiumCAN CanadaDEN DenmarkFIN FinlandFRA FranceGER GermanyGBR Great BritainIRE IrelandISR IsraelITA ItalyNET NetherlandsNZL New ZealandNOR NorwaySAF South AfricaSPA SpainSWE SwedenSWI SwitzerlandUSA United States

Small LargePower Distance

Indi

vidu

alis

mIn

divi

dual

ist

53

91

71

Small power distance individualist

Large power distance individualist

Reprinted by permission of the author from Culture’s Consequences, published by Sage Publications. ©1990 by Gert Hofstede

•SPA

•SAF

•FRA

•BEL•ITA

•AUT•ISR

•FIN

•GER•NOR •SWI

•SWE

•IRE•DEN

•NZL •CAN•NET•GBR

USA•

AUL•+11 +28 +44 +64 +77 +94

Hofstede’s Classification of Triad Countries

3-8

Japan North America W. Europe (Canada, USA,

Great Britain)

Northern Continent Greece

Individualism low high high high low

Power distance high low low high high

Masculinity high high low high high

Uncertainty avoidance

high low low high high

Context high low high low

Exhibit 3.4

SMALL V/S LARGE POWER DISTANCE It is small in countries where bosses and subordinates work close together and consult each

other. Subordinates and superiors consider each other as or less equal even there is a difference in education level. The hierarchical system can always change depending on the circumstances. The hierarchies are flat with a decentralized organization and a small number of supervisors who are expected to be accessible for their subordinates. Within a company the degree for unequal treatment is reduced to a low level. There is a interdependence between employer and employee. The salary range is narrow between the top and bottom in companies. Subordinates expect to be consulted within the decision-making process.

In contrast in large power distance countries the relation between boss and subordinate is strictly ruled and dependent on the decisions of the boss. In companies with larger power distance which have a very centralized organization, subordinates expect to be told what to do from their superiors because they consider each other as unequal. Inequalities are normally expected and privileges are seen as desirable by superiors. There is a large extend to centralization and the salary range is wide. People in high power distance cultures positive emotions are expressed to superiors and negative emotions to subordinates.

POWER DISTANCE INDEXEngland’s power distance is 35. This means

that England has a low power distance. The United States has a power distance of 40. In comparison England’s power distance is just a bit lower than the United States. Generally, it is much easier for international business to occur when countries have close power distance

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