What are the Hofstede’s cultural dimension?

Use Hofstede’s research on Sweden and

China (See figure below) to critically identify potential issues that IKEA might encounter in
China.
Hofstede’s Cultural Dimension
1. Power Distance Index (high versus low).
2. Individualism versus Collectivism.
3. Masculinity versus Femininity.
4. Uncertainty Avoidance Index (high versus low).
5. Long- Versus Short-Term Orientation.
6. Indulgence versus Restraint.
China comparison with Sweden

Power Distance
This component deals with the fact that not everyone in a society is equal it displays the
culture's attitude toward inequalities among us. The extent to which less powerful members
of institutions and organizations within a society expect and accept unequal power
distribution is characterized as power distance.
China has a PDI of 80, indicating that it is a society that believes inequities among people are
acceptable. The subordinate-superior relationship is polarized, and there is no safeguard
against superiors abusing their power. Formal authority and consequences have an impact
on people, and they are generally enthusiastic about people's ability to lead and take
initiative. People should not aspire to positions higher than their own.
Sweden has a low score on this dimension (31), indicating that the Swedish style is as
follows: Being self-sufficient, having a hierarchy for the sake of convenience, equal rights,
superiors who are accessible, coaching leaders, and management that facilitates and
empowers. Managers rely on the experience of their team members because power is
decentralised. Employees expect to be consulted on a regular basis. Control is despised, and
supervisors are addressed by their first names alone. Direct and participatory
communication is used.
Individualism
The degree of interconnectedness that a society maintains among its members is the key
issue addressed by this dimension. It has to do with whether people describe their self-
image as "I" or "We." Individualist civilizations expect people to look after only themselves
and their immediate family. People in collectivist cultures are members of 'in groups' that
look after them in exchange for their loyalty.
With a score of 20, China is a strongly collectivist culture in which people act in the group's
best interests rather than their own. Hiring and promotion decisions are influenced by in-
group considerations, with closer in-groups (such as family) receiving preferential
treatment. Employee loyalty to the company (but not necessarily to the individuals inside it)
is low. In-group interactions are cooperative, whereas out-group ties are frigid or even
antagonistic. Tasks and companies take a back seat to personal relationships.
With a score of 71, Sweden is classified as an individualist society. This indicates a strong
preference for a loosely-knit social structure in which people are solely expected to care for
themselves and their immediate family. Individualist cultures are characterised by shame
and a loss of self-esteem, a contract between an employer and an employee based on
mutual benefit, hiring and promotion decisions based only on merit, and management as
the management of individuals.
MASCULINITY
A high score on this dimension (Masculine) indicates that competition, achievement, and
success will drive society, with success defined by the winner / best in field - a value system
that begins in school and continues throughout organizational life.
A low score (Feminine) on the dimension indicates that caring for others and quality of life
are the prevailing values in society. In a Feminine society, living a good life is a sign of
success, and standing out from the norm is frowned upon. The primary question here is
whether people are motivated by a desire to be the best (masculine) or by a desire to enjoy
what they do (Feminine).
At 66, China is a Masculine society, with a strong focus on success. The need to achieve
success is reflected by the fact that many Chinese will put work ahead of family and
pleasure. People who supply services (such as hairdressers) will work until quite late at
night. Leisure time isn't as crucial as it once was. In order to get better work and
compensation in the city, migrant farm workers will leave their families behind in faraway
areas. Another example is that Chinese students place a high value on their exam scores and
rankings, as this is the primary criterion for determining whether or not they will succeed.
Sweden receives a 5 on this scale, indicating that it is a Feminine society. It is critical in
Feminine countries to maintain a work/life balance, and you must ensure that everyone is
included. A good manager is supportive of his or her employees, and decision-making is
accomplished through participation. People seek equality, solidarity, and excellence in their
work lives, and managers aim for consensus. Compromise and negotiation are used to
overcome conflicts, and Swedes are notorious for holding lengthy debates until a consensus
is reached. Free time and flexible work hours and location are preferred incentives.
UNCERTAINTY AVOIDANCE
Uncertainty Avoidance is a dimension that deals with how a society deals with the reality
that the future cannot be predicted: should we strive to control it or just let it happen? This
ambiguity causes anxiety, which different societies have learned to cope with in different
ways. The score on Uncertainty Avoidance reflects the extent to which individuals of a
culture feel frightened by ambiguous or unclear events and have constructed beliefs and
institutions to try to avoid them.
China has a low Uncertainty Avoidance score of 30. Though truth is relative, there is concern
for Truth with a capital T in the immediate social circles, and rules (though not necessarily
laws) abound. Regardless, obedience to laws and standards can be flexible to fit the
occasion, and pragmatism is a reality. The Chinese are at ease with ambiguity; the Chinese
language is full of confusing connotations that Westerners may find difficult to comprehend.
Chinese people are adaptive and enterprising. At the time of writing, the bulk of Chinese
enterprises (70 percent to 80 percent) are small to medium-sized and family-owned.
Sweden has a low inclination for avoiding ambiguity, scoring 29 on this category. Low UAI
societies have a more easygoing attitude, where practise takes precedence over principles
and deviations from the norm are more easily tolerated. People in low-UAI societies believe
that there should be no more rules than are essential, and that any regulations that are
vague or do not work should be abandoned or amended. Schedules are flexible, hard work
is done when it is required but not for the pleasure of it, precision and timeliness are not
natural, and innovation is not viewed as a threat.
LONG TERM ORIENTATION
This dimension shows how, despite dealing with the issues of the present and future, every
society must maintain some ties to its own past, and cultures priorities these two existential
aims differently. Normative societies, for example, who score low on this dimension, tend to
uphold long-standing traditions and conventions while viewing societal change with
scepticism. Those with a high-scoring culture, on the other hand, take a more pragmatic
approach, encouraging thrift and investment in contemporary education as a means of
preparing for the future.
China receives an 87 on this scale, indicating that it has a pragmatic culture. People in
pragmatic civilizations believe that truth is highly dependent on situation, context, and time.
They demonstrate an ability to easily adapt traditions to changing circumstances, a strong
proclivity to save and invest, thriftiness, and tenacity in achieving goals.
Sweden has an intermediate score of 53, indicating that it does not have a distinct
preference in this area.

INDULGENCE

The degree to which little children are socialised is a difficulty that humanity faces now and
in the past. We do not become "human" without socialisation. This dimension is described
as how far people try to regulate their urges and impulses as a result of their upbringing.
"Indulgence" refers to a lack of control, while "Restraint" refers to a strong level of restraint.
As a result, cultures might be classified as either indulgent or restrained.
China has a low score of 24 on this area, indicating that it is a restrained society. Cynicism
and pessimism are common in societies with a low score on this area. In addition, unlike
Indulgent civilizations, restrained societies place less importance on leisure time and
exercise greater control over the fulfilment of their needs. People with this viewpoint
believe that their behaviors are constrained by social norms, and that indulging themselves
is unethical.
This dimension has a high score of 78, indicating that Swedish culture is indulgent. People in
communities with a high Indulgence score are more likely to follow their instincts and wants
when it comes to enjoying life and having fun. They have a positive attitude and a proclivity
for optimism. Furthermore, they place a larger value on leisure time, acting as they please
and spending money as they please.
Nowadays, understanding and managing cultural differences is a critical part. Knowing
which cluster each country belongs to, as well as the values and attitudes that each cluster
represents, makes it easier to comprehend and manage disparities between countries
(Memedovic & Ketels, 2008). Sweden is, in fact, regarded to be one of the countries that
make up the Nordic Europe cluster (Ervasti, 2008). China, on the other hand, is one of the
countries in the Confucian Asia cluster (Yoshikawa & Arai, 2013). This implies that there are
significant cultural distinctions between the two countries when it comes to national
culture.
Sweden is regarded as one of the low ethnocentric societies since (Keillor, 1999) found that
the Swedish people had a lower feeling of national identification than the Chinese. This
indicates that Swedish culture is ethnorelative, accepting the concept of cultural relativity
(Lund, 1998). People in Sweden accept that their own culture is characterized by similarly
complex and sophisticated worldviews. They appreciate different behaviors as well as
different values, ideas, and points of view in order to accept cultural differences.
Furthermore, the Swedish strive to adapt to cultural differences in terms of empathy by
honing their intercultural communication skills, and they adapt to cultural differences in
terms of pluralism by realising the importance of accepting other points of view.
Furthermore, one of the methods used by the Swedes to adapt to cultural differences is the
integration of cultural variations through constructive marginality and contextual
evaluation, as they believe that their own identity is not primarily based on one culture but
on a variety of cultures around the world (Soltani & Rahimi, 2011).
The Chinese, on the other hand, are thought to be ethnocentric, and their ethnocentric
inclinations have been shown to be influenced by personal cultural orientations such as
collectivism, which will be examined later (Kumar & Fairhurst, 2013). People in China are
indifferent to cultural differences and feel that their own culture is experienced and
perceived as important to reality. They frequently reject the existence of other civilizations
by living completely secluded within their homogeneous group and avoiding any cultural
diversity. Furthermore, the Chinese believe in dividing the world into "us and them,"
implying that they wish to be native while simultaneously disparaging and supporting other
cultures.
According to (Sinclair, 1993; Watkins, 2013; Mercadal, 2020), organisational culture is
defined as "civilisation in the workplace," which simply means that it refers to the formal
environment as well as distinctive norms and values that distinguish one organisation from
another. Furthermore, the workplace's informal behaviour and social interactions are
influenced by the organization's culture (Cancialosi, 2017). IKEA's corporate culture echoes
its Swedish roots, which are based in southern Sweden. Sweden's workers are known for
being hardworking, helpful, and down-to-earth, and they are always looking for
opportunities to interact with the natural world. All of these Swedish ideals were translated
into IKEA's fundamental values, which have become synonymous with the company's
organisational culture around the world (IKEA, 2020).
Ikea decided to join the Chinese market in 1998, but they had to switch from a cost
leadership to a differentiation approach (Wu, 2020). One of the most significant issues for
IKEA was pricing, which was suitable and affordable in North America and Europe but
significantly more in China. To address this issue, IKEA began by constructing a significant
number of factories in China in order to speed up the process of acquiring local materials. As
a result, IKEA has solved the problem of high import taxes in China. As a result, IKEA in
China generates over 540 billion RMB in sales, representing a 21 percent growth in sales and
an increase in the number of visitors (VEROT & Limo, 2013).
Pricing: IKEA has recently expanded its product line, but it still delivers good design and
function in home furnishings at a moderate cost (Grindei, Khatri, Yin, & Lu, 2010). IKEA's
typical target clients are the children of middle- and low-income families. IKEA is a Swedish
corporation, but when it comes to China, it has a completely different pricing strategy. Ikea
is famed for its inexpensive prices, however they were extremely costly and unfair to the
Chinese (Capdevielle, Li, & Nogal, 2007). When compared to ordinary quality, many of
China's middle class believe Ikea's products to be pricey.
Product: IKEA has standardised a number of goods over the world. As previously said, IKEA
caters to the middle and lower classes, as well as the upper classes. It is well-known for
creating bedroom, kitchen, and bathroom furniture, as well as home décor, lighting,
gardening, and plants (IKEA, 2020). Furthermore, IKEA's goods are suitable for a variety of
lifestyles and life stages. As previously said, IKEA in Sweden was successful in implementing
"democratic design" by achieving design, function, and low cost. In contrast, China has not
been very successful in implementing the cost leadership plan. Ikea's goods are influenced
by the Swedish way of life.
Promotion: IKEA utilizes the same promotion strategies in Sweden and China.
Place: IKEA opened four huge stores in China: Chengdu, Shanghai, Guangzhou, and Beijing.
IKEA carefully selected store locations in order to be close to the city center or downtown. It
is not the same in Sweden as it is in China. In 2016, it expands to 20 locations around the
country. Because Swedish citizens utilize their cars to go to and from IKEA stores, the stores
are positioned outside of city cores.
Some People argue that “It’s wrong for multinational enterprises to take advantage of
countries with lower environmental standards”. Critically evaluates the statement and use
example to argue the case for or against this statement.
Countries have environmental comparative advantages: Each country's legislation will be
based on its own preferences and resources. Countries with low incomes, a high tolerance
for pollution, or abundant natural resources should set low requirements to attract
pollution-intensive and resource-seeking FDI.
FDI increases the demand for environmental quality: If the demand for environmental
quality in the host country rises in tandem with rising wages, environmental damage will
eventually decrease. FDI will add to this growing environmental demand as incomes rise.
FDI is cleaner than domestic investment: Because FDI incorporates new technologies that
are cleaner than those used by native producers, boosting FDI will improve a country's
environmental performance.
Economic, social, and environmental development trends
In the absence of market failures, economic theory shows that increasing investment and
trade will boost global welfare. Due to a more efficient utilization of comparative
advantages in each country, which are traditionally established by the distribution of factors
of production, trade intensification improves the wellbeing of all nations involved (land,
labour, capital). Increased foreign investment benefits countries by boosting their total
productive potential. FDI can also help a country thrive by "crowding in" other investments,
resulting in a rise in total (domestic + foreign) investment, as well as favourable "spillover
effects" from the transfer of technology, knowledge, and skills into domestic enterprises. It
can also boost economic growth by encouraging competitiveness, innovation, and the
export performance of a country.
Environment deterioration has intensified in the last 25 years: the WWF estimates that
global freshwater ecosystems have degraded by 50%, marine ecosystems have deteriorated
by 30%, and forest cover has decreased by 10% - considerably more in tropical areas12.
Over the same time period, worldwide energy consumption climbed by more than 70%,
resulting in increasing greenhouse gas emissions and shifting weather patterns.
Environmental problems have exacerbated, resulting in an extraordinary rise in
environmental disasters: natural disasters accounted for 58 percent of total refugee flows in
1999, including those resulting from conflict.
Foreign direct investment (FDI) is becoming increasingly vital for economic growth. Both
donor countries and beneficiaries have a clear expectation that private capital will be the
primary driver of development in the future. Increased reliance on foreign investment, on
the other hand, has serious implications for long-term development and the laws and
regulations that regulate investment flows.
Environmental Advantage and Policy Failures
The price associated with the use of natural resources in any country will be determined by
three elements: the resource's endowments, social preferences for the resource, and the
amount to which state regulation accounts for the first two factors. A country's resources
will be used efficiently if societal preferences are adequately reflected in regulation. These
prerequisites, however, are rarely realized as a result of market and governmental failures.
The majority of market failures are the result of institutions' inability to define and establish
property rights in incomplete markets. Companies, for example, do not own the air or water
that they pollute. A "negative externality" is a classic example of an imperfect market. These
happen when one person's or company's consumption or production actions have a
negative impact on another person's or companies utility or production without them
having to compensate. A company that pumps garbage into a river, for example, diminishes
the satisfaction of downstream swimmers; a company that clear-cuts a forest, on the other
hand, may reduce many tangible and intangible advantages from local villagers. Externalities
can also be global: sulphur dioxide emissions from the UK create acid rain, which has
harmed forests in Germany and Norway; forest fires in Indonesia, which are frequently
sparked by palm oil exporters, regularly blanket a large swath of Southeast Asia in
dangerous haze.
Market failures are ubiquitous in the global economy, resulting in over consumption of
natural resources and pollutant creation. Environmental products and services are
discounted or viewed as free, causing economic incentives to be distorted and economic
agents to overuse them (producers and consumers).
Increased international commerce and investment exacerbates the inefficient allocation of
scarce natural resources under such conditions. This could lead to situations where the
overall welfare implications of greater FDI, particularly in the natural resource sector, are
unclear. Increased economic output from FDI may be accompanied with net natural capital
disinvestment or excessive environmental and social costs, implying that the investment has
no net economic value. Because most governments provide economic incentives for FDI, an
imperfect assessment of economic costs is likely to lead to ineffective policy actions.
FDI liberalization is a hot topic of discussion. The legitimate use of a country's environmental
advantages to attract investors is frequently not distinguished from the existence of national
policy failures. The level of regulation is described as primarily the responsibility of the
government of the host country. However, home countries – largely OECD countries – have
actively encouraged liberalization, and as a result, they must share part of the expenses
associated with economic expansion.
Surprisingly, despite the abundance of literature on FDI and the environment, few studies
account for the entire welfare costs of liberalization and their effects on a country's
prospects for long-term development. Most studies show that environmental externalities
are not effectively internalized and resources are underpriced when they exist. These
failures harm host country residents and future generations' development opportunities
while lowering costs for investors and consumers.
Increased trade and investment movements may exacerbate the inefficient distribution of
scarce natural resources that already exists. This means that economic advantages will be
accompanied with environmental and social costs, particularly for the poorest, and that the
long-term welfare implications of greater FDI, particularly in ecologically sensitive sectors,
are sometimes equivocal.
When FDI flows between countries at different stages of development and regulation, the
scale or intensity of production of foreign firms (which are typically larger than domestic
firms with more advanced technology and skills) may overwhelm weak government
controls, resulting in irreversible environmental effects.
As a result of poor infrastructure and environmental legislation to control the rapid
development and unplanned industrialization through migration, urbanization, and
accompanying development in the Maquiladora zone on the US-Mexico border, the area
has experienced major environmental concerns. In another case, P&O (a UK shipping
corporation) wanted to establish a big container port in India on a protected region.
Construction and future development, according to an internal P&O analysis, would have
caused "irreversible environmental damage to the adjacent shoreline." Fortunately, this
development was eventually halted thanks to the efforts of local people aided by WWF.
Even if foreign enterprises are able to make environmental improvements, the external
costs associated with the massive size at which they are permitted to operate typically
outweigh them. Although banana growers in Central America have made improvements in
recent years, their large-scale operations and use of chemically intensive monocultural
cropping patterns continue to have significant social, health, and environmental costs (local
and global air pollution, surface and groundwater pollution, soil erosion, and deforestation).
Large Investment Projects' Distributional Effects
The cost distribution of large-scale investment projects, which are frequently funded by FDI,
is frequently skewed. Poor individuals live in 'pollution zones,' where enterprises perform
poorly and regulation is missing or not well enforced31. This, according to policymakers, is
due to social preferences. These communities, on the other hand, are rarely informed about
these "options" and often do not profit from the investment.
Land and water are becoming increasingly competitive. Crop land has been lost to industry
and urban expansion at a pace of 1% per year in some Asian countries. Irrigation has
accounted for more than half of the growth in world food production since the mid-1960s,
although soil degradation is a problem on around 20% of irrigated land (50 million hectares).
Agriculture consumes 86.8% of water in poor countries, compared to only 46.1 percent in
developed countries. Industrial and home use will expand as countries develop, while more
irrigated land will be required to feed growing populations. Given that people consume over
half of the world's freshwater resources, shortages and conflicts across usage are
unavoidable unless resource efficiency improves. NGO's and other civil society organizations
can play a critical role in articulating the voices of the marginalized and dispossessed, who
often bear the brunt of large-scale investment's negative environmental consequences. This
necessitates improved transparency in public and private investment decision-making
processes, as well as expanded access to justice on a national and worldwide level.

The Environmental Quality of FDI

FDI benefits countries by growing their productive capacity, obtaining "spillover effects" (for
example, technology transfer, training, and skills to domestic enterprises), and developing
their export industry. Countries are justified in offering incentives to attract foreign
investment in order to get these benefits. With the increased competitiveness for
investment, fears of costly "bidding wars" between countries to entice potential investors
have arisen. These "wars" could manifest themselves as an upward spiral in investment
incentives (financial or fiscal) or downward pressure on labour and/or environmental
standards. In terms of economics, providing incentives is the same as providing tax breaks
for domestic savings or domestic training and R&D investment.
In other circumstances, a firm may have already established itself in a foreign country, and
while environmental rules may not have been a primary concern at the time, they can and
do exert pressure on the host government to reduce or eliminate regulations. Oil extraction
and drilling in Nigeria, as well as mining by Freeport in Southeast Asia, are examples. Foreign
investors' ability to move production or capital across countries provides them more
leverage in negotiating post-establishment concessions, albeit this leverage is diminished if
the investment has substantial sunk costs. The EU put enormous pressure on Namibia's
government in 1990 to allow EU fishing vessels access to their hake supply, threatening to
halt the payment of European Development money. Spain has threatened to block South
Africa's partial admission to the Lomé IV convention unless it signed a fisheries deal with the
EU.
Environmental degradation will increase as global economic activity expands. Companies
will bear a portion of these expenses, and pressure to account for environmental costs in
location decisions is likely to increase. Environmental standards have been lowered or not
enforced as a result of the competition for FDI. The danger of disinvestment, according to
evidence, is absolutely chilling the emergence of high standards. Because many
"environmental subsidies" are indirect and difficult to evaluate, the effect is likely to be
bigger than projected. Firms interact with regulators at national, subnational, and local
levels in the political economy of environment and investment. The prospect of
disinvestment or relocation at any point might push authorities to make considerable
environmental concessions, the costs of which are rarely calculated.
Through enhanced legislation, technology transfer, and management, FDI might become a
constructive catalyst for improving environmental governance of both international and
native enterprises.