The Seven Dimensions of Culture by Fons Trompenaars

Fons Trompenaars is the author who belongs to dutch he is one the author of cross cultural communications. Fons studied economics from free university of Amsterdam and he got hid PhD from Wharton school. Trompenaars and Charles hampden have developed a culture which have seven dimensions. Five of his dimensions covers the way in which people interact with each other. The seven dimensions of  culture by Trompenaars are explained below.

1. Universalism (vs. Particularism)

Universalism/particularism distinguishes societies based on the relative importance they place on rules and laws as opposed to personal relationships. The basic question is: “What is more important—rules or relationships?”

Members of universalistic societies focus more on rules, codes, values and standards and believe that they take precedence over the needs and claims of friends and other personal relationships; believe that rules or laws can be applied to everyone and should be used to determine what is right; use precisely defined agreements and contracts as the basis for conducting business; tend to define global standards for company policies and human resources practices; and believe that agreements and contracts should not be changed.

Members of more particularistic, sometimes referred to as pluralist, societies focus more on human friendships and personal relationships than on formal rules and laws; place emphasis on friendships and look at the situation to determine what is right or ethically acceptable; believe that deals are made based on friendships and that contracts can be adapted to satisfy new requirements in specific situations; and permit local variations of company and human resources policies to adapt to different requirements.… Read the rest

Hofstede’s Cultural Dimensions

Dr. Greet Hofsted had conducted a comprehensive study and explained how culture influences the values at the work place. He worked as a psychologist in IBM from 1967 to 1973. In the time of working in IBM he has collected the analyzed data from aver 100000 individual from more than forty different countries. To the above study he made some additions and he developed four dimensions and later on he added fifth dimension that is long term outlook. Geert Hofstede’s dimensions investigation can support the trade individual in enhance understanding the intercultural variance within regions.

“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 of the Geert hofstede are explained below they are

  1. Power distance index (PDI)
  2. Individualism (IDV)
  3. Masculinity (MAS)
  4. Uncertainty avoidance index (UAI)
  5. Long term orientation (LTO)

Power distance index (PDI)

This dimension explains about the degree of equality or inequality between the people in the society of a nation. A high power ranking shows the inequalities of power and wealth which have been allowed to grow with in the society. The societies are mostly following a caste system which does not permits upward mobility of its citizens. Power distance is defined as “the extent to which the less powerful members of institutions and organisations within a country expect and accept that power is distributed unequally”.

Individualism/collectivism (IDV)

The second dimension of hofstede is individualism/collectivism. The concept in this dimension is discussed most frequently and it is the researched concept.… Read the rest

Competitive Advantages of International Business

Competition has always been central to the agenda of firms. It has become one of the enduring themes of our times and the rising intensity of competition has continued until this day thereby spreading to more and more countries. As a result of globalization, most industries with the topics of international business and competitive advantage have received much attention from business executives, public policy makers and scholars in recent years. This; in conjunction with the rise of global competitors has helped to explain why a country’s competitive advantage can be determined by the strength of its business firms. This has resulted in numerous rankings, where industries and firms are compared on a global scale to see which are the most competitive. Most firms prefer to compete in the business environment so that it will help determine the competitive advantage of the country in which they operate. A firm’s ability to deliver the same benefits as competitors but at a lower cost or deliver benefits that exceed those of competing products, then such a firm is said to possess a competitive advantage over its rivals. Today’s development in communication, information technology and transportation technology have enabled firms to market their products and services beyond national borders. This level of involvement has contributed to the concept of firms marketing their products in international markets.

The Determinants of National Competitive Advantage

Global competitiveness occur at the cross roads between international economics and strategic management. Michael Porter, in his book ‘’The Competitive Advantage of Nations’ has introduced a model that helped to determine a nation’s international competitive advantage. Read the rest

Inventory Management Practices in Multinational Corporations

Inventory in the form of raw materials, work in process or finished goods is held;

  1. to facilitate the production process by both ensuring that supplies are at hand when needed and allowing a more even rate of production and
  2. to make certain that goods are available for delivery at the time of sale.

Although, conceptually, the inventory management problems faced by multinational firms are not unique, they may be exaggerated in the case of foreign operations. For instance, MNCs typically find it more difficult to control their overseas inventory and realize inventory turnover objectives. There are a variety of reasons: long and variable transit times if ocean transportation is used, lengthy customs proceedings, dock strikes, import controls, higher duties, supply disruption, and anticipated changes in currency values.

Advanced Inventory Purchases

In many developing countries, forward contracts for foreign currency are limited in availability or the nonexistent. In addition, restrictions often preclude free remittances, making it difficult, if not impossible, to convert excess funds into a hard currency. One means of hedging is to engage in anticipatory purchases of goods, especially imported items. The trade-off involves owning goods for which local currency prices may be increased, thereby maintaining the dollar value of the asset even devaluation occurs, versus forgoing the return on local money market investments.

Inventory Stockpiling

Because of long delivery lead times, the often limited availability of transport for economically sized shipments, and currency restrictions, the problem of supply failure is of particular importance for any firm that is dependent on foreign sources. … Read the rest

Multinational Corporations and Accounts Receivable Management

Multinational Corporations (MNC’s) grant trade credit to customers, both domestically and internationally, because they expect the investment in receivables to be profitable, either by expanding sales volume or by retaining sales that otherwise would be lost to competitors. Some companies also earn a profit on the financing charges they levy on credit sales.

The need to scrutinize credit terms is particularly important in countries experiencing rapid rates of inflation. The incentive for customers to defer payment, liquidating their debts with less valuable money in the future, is great. Furthermore, credit standards abroad are often more relaxed than in the home market, especially in countries lacking alternative sources of credit for small customers. To remain competitive, MNCs may feel compelled to loosen their own credit standards. Finally, the compensation system in many companies tends to reward higher sales more than it penalizes an increased investment in accounts receivable. Local managers frequently have an incentive to expand sales even if the MNC overall does not benefit. Two key credit decisions to be made by a firm selling abroad are the amount of credit to extend and the currency in which credit sales are to be billed.

The following five-step approach enables a firm to compare the expected benefits and costs associated with extending credit internationally:

  1. Calculate the current cost of extending credit.
  2. Calculate the cost of extending credit under the revised credit policy.
  3. Using the information from steps 1 and 2, calculate incremental credit costs under the revised credit policy.
  4. Ignoring credit costs, calculate incremental profits under the new credit policy.
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Free Trade Zones – Definition and Meaning

In simple words, free trade means free international trade. The classical economists like Adam Smith, Ricardo and others strongly favored free trade and this doctrine held the field for nearly one hundred years. How ever later, the countries all over the world began to adhere to the policy of imposing restrictions in one form or other.

History and Development of Free Trade Zones

During the last 20 years, the labor charges in developed countries have increased substantially. According to a recent estimate, the labor cost is nearly 1 USD per hour for semi-skilled workers in most European Countries, U.S and Japan. This high labor cost was due to the acute shortage of both skilled and unskilled labor in most of these countries. Countries like Germany, France, Switzerland, Sweden, Austria, Belgium and England even imported laborers from other countries. Therefore, the cost of production involving a considerable labor content has become noncompetitive in these countries. Therefore, these countries prefer to send the raw materials and components to developing countries where trained man power and skill are available at a comparatively lower cost. So that they may have finished products which they can market at competitive prices.

In order to take advantage of this situation, various developing countries which have strong labour force began to organize Free Trade Zones (FTZs) in their countries. These FTZs not only provide employment to millions of people in these under developed countries and improve their economy, but also provide an opportunity to earn foreign exchanges to the extent of the conversion costs.… Read the rest