CIMA E1 Official Learning System - Enterprise Operations Aug 2009

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STUDY MATERIAL E1

THE GLOBAL BUSINESS ENVIRONMENT

Most of the emphasis of globalisation relates to the ability of larger and larger multina-

tional organisations to operate globally, taking advantage of local specialisms. They may do

this, for instance, by outsourcing their IT operations to India where the expertise is as high

and the costs are signiﬁ cantly lower than in, say, the United States.

Effectively the division of labour has become global. The capacity of these corporations

to offshore has been greatly increased by the recent advances in information technology

which have made the speed of transactions so much faster, particularly in the area of ﬁ nan-

cial resources. This has led to an increase in the importance of these activities globally,

and 24-hour trading is possible since there is always a stock market open somewhere in

the world. As one market closes, another opens, and the security of transactions via the

Internet means that they are working ever closer together and at signiﬁ cantly reduced

transactions costs. Billions of dollars of assets and currencies are traded around the world

on a daily basis by electronic means at virtually no cost other than the commission.

Most people are affected by globalisation in a number of ways and are aware of global

brands either through personal experience or via the media. Thinking about what you are

doing at the moment, it is quite possible that:

●

You are reading a book written in the UK

●

Using software developed in North America

●

Which was typeset in India

●

Printed locally wherever you live

●

Bought using a credit card issued by an international bank

●

You are drinking a coffee made from Columbian beans

●

Wearing trainers made in Vietnam

●

Clothes made in China

●

Or possibly from Egyptian cotton

●

You may be listening to music recorded locally

●

But playing on equipment made in Japan

●

You may even be studying in a foreign country where you have gone to work

Exercise 1.1

How global is your world, right now?

Not all examples of globalisation relate to commercial organisations. For example, you may

decide to make a charitable donation to Médecins sans Frontières, Amnesty International

or Greenpeace, all of which are global organisations.

Since all of these elements have an impact upon the lives of people there are bound to

be serious debates about the relevance, and importance, of advancing globalisation.

The power afforded the multinationals compared to nation states is often a source of

criticism. Bill Gates, the founder of Microsoft, has a personal income from his involve-

ment in the company greater than the combined GDP of a number of African countries.

George Soros, the international ﬁ nancier, has in his ﬁ nancial trading affected the econo-

mies of a number of countries. He was one of the speculators whose dealings helped cause

Italy and the UK to leave the ERM in the 1980s. Many protestors see this as a bad thing

suggesting that the interests of ordinary people are being subsumed under the interests of

the corporations.

ENTERPRISE OPERATIONS

THE GLOBAL BUSINESS ENVIRONMENT

1.5.2 How transition economies change

As countries seek to become more competitive, they will attract investment from overseas

ﬁ rms, eager to share in the growth of the country. The investment that those companies

make is known as foreign direct investment (FDI).

The ﬁ rms that make these investments are known as multinational enterprises (MNEs),

and retain control of the entity in which they have invested. This is often met with mixed

feelings by the population, who are grateful for the creation of wealth and jobs but resent-

ful of the country being ‘bought by foreigners’. Similarly there can be resentment in coun-

tries whose ﬁ rms invest abroad, particularly when there is domestic unemployment.

The current trend to offshore call centres and computing services has been a hotly debated

issue since it began, but it is a phenomenon that has been occurring for many years. Originally

the preserve of OECD countries is now a truly global feature of the world economy.

There are two main types of FDI:

1. Acquisitions, where the MNE acquires the shares of the local company and control of

the assets and markets of the acquired ﬁ rm are transferred to the new parent. The local

form becomes a division of the new parent. Sometimes the acquiring ﬁ rm will ‘collect’

companies in adjacent countries and a cross border merger results in the production of

a whole geographical region being coordinated. Unless the acquired company was in

danger of imminent collapse, and was rescued by the new parent, there is no long term

beneﬁ t to the local economy, as all future proﬁ ts are likely to be exported to the parent

group.

2. Greenﬁ eld investment occurs where a company creates new facilities in the host coun-

try to take advantage of local conditions. These are better for the host country, since

they are likely to create jobs, productive capacity, knowledge transfer and access to the

global economy. Although the proﬁ ts that the parent makes are still exported to head

ofﬁ ce, the domestic economy should beneﬁ t from the wages earned by the workforce

and the income earned by any local ﬁ rms that supply the new facilities.

Many countries are seeing their economy boosted by the arrival of foreign ﬁ rms, as is the

case of Russia, where growth in the domestic economy is being fuelled by the arrival of

multinational retailers who have established bases in the country. In 2005 Russia attracted

$16.7 billion of FDI, with Coca Cola acquiring a fruit juice maker, Heineken acquiring

local brewers and both Toyota and Volkswagen establishing automobile factories. Other

companies establishing factories include Carlsberg, Nestle and Whirlpool (the domestic

appliance manufacturer) in partnership with the Turkish company, Vestel Group.

FDI is often the ‘trigger’ to an economy, and can lead to rapid growth in wealth and

skills. Countries that are beginning to beneﬁ t from FDI are known as ‘transition’ econo-

mies, and they sometimes develop signiﬁ cant domestic economic infrastructure as a result.

Other transition economies are triggered into growth by offshoring, and the economic gain

can lead to the development of a local pool of highly skilled labour. Some local organisa-

tions grow, until they too are ready to enter the world stage.

1.5.3 Emerging market multinationals and international

influence

So, what are the emerging markets and changes in patterns of activity, and how are these

creating new challenges and interdependencies? Many business commentators place great

STUDY MATERIAL E1

THE GLOBAL BUSINESS ENVIRONMENT

emphasis on the four emerging world economies: Brazil, Russia, India and China (the

‘BRIC’ economies).

Although located in different regions, with different political climates, the sheer size

of the BRIC countries, combined with robust growth rates, sets them apart from other

emerging markets. All the emerging BRIC nations display one similar characteristic: they

all have large and rapid growth rates. The growth has been initiated by, and is typically

dominated by, the development of large metropolitan areas where increasing middle-class

populations are driving economic demand through increased consumer spending on a

range of domestic goods. However, all four countries also have large rural regions and pop-

ulations, where this change is slower to develop but wage rates remain low.

Consequently, all four areas have large and increasing wealth disparities between rich

and poor. As consumer habits and demand expand from the metropolitan areas into the

less developed rural areas, growth continues to expand into the longer term but drives new

and different ways to access and market products.

A second tier of emerging markets, which demonstrates some similar characteristics

to those of the BRIC nations, is Indonesia, Vietnam, Colombia and Ukraine. Economic

growth in these countries is beginning to drive consumer spending on domestic goods.

The size of their populations means there is unlikely to be any reversal of this trend.

The rise of Asian and South American economies means that economic ﬂ ows have

become increasingly complex. Hans Ulrich Maerki of IBM observed, in 2007, that both

capital and trade ﬂ ows are now increasingly multidirectional: ‘the deepening of global

trade, capital and information ﬂ ows, enabled by a ﬂ at world, is changing where and how

business value is created’.

He cites a number of examples, including:

●

Global investment banks send derivatives processing to Dublin.

●

US radiologists send X-rays to Australia for analysis.

●

Asian chipmakers use US engineers for expertise.

●

Asian clothing manufacturers outsource design to Italian designers.

●

Customer service centres in Nova Scotia handle warranty enquiries for US shoppers.

Between 2000 and 2003, foreign ﬁ rms built 60,000 manufacturing plants in China.

However, China is no longer just a recipient of FDI. FDI is now truly a global issue, with

export of capital and acquisitions now coming from the emergent BRIC nations. For exam-

ple, the acquisition of the UK’s Corus Steel by India’s Tata Group in 2006 was followed by a

move into automotives through the acquisition of UK-based Jaguar and Land Rover.

There is now a strong move in China to export capital and make foreign acquisitions,

driven in part by state-backed strategies to secure access to increasingly scarce mineral and

energy sources essential to continued growth. The involvement of Chinese state owned

organisations in the mining and reﬁ ning industry of Australia is an example of this. Much

of this trend represents the use of large capital assets by cash-rich Chinese businesses to

acquire stakes in the European and US ﬁ nancial sectors. In November 2007, for example,

China’s second-largest life assurance group paid £1.3 billion to become the top shareholder

in Fortis, the Belgian-Dutch banking and insurance group. Similarly, China holds signiﬁ -

cant deposits in American government bonds (T-bonds).

These examples indicate how much more complex and multidirectional the ﬂ ows of the

world economy have become.

Consumer-led growth in the BRIC and other emergent economies is creating power-

fully resourced organisations which are moving from being trading partners to owners of,

ENTERPRISE OPERATIONS

THE GLOBAL BUSINESS ENVIRONMENT

and investors in, major Western businesses. The Eastern economies are beginning to take

a large and direct stake in the markets and businesses of the West. This major socio-eco-

nomic shift is leading to an increasing and inexorable interdependence between business

managers and owners from different cultures.

Working with different cultures is moving from the need to have an understanding

in order to promote your business abroad to dealing with a truly global economy where

the balance of resource power is shifting and the web of relationships is becoming more

complex.

Exercise 1.2

Look at your organisation, or one with which you are familiar, and see how ‘global’ it is.

Even quite small organisations can have global aspects.

1.6 National account balances and monetary

policy

1.6.1 Fiscal policy

There will always be decisions that a government must make, and legislation they must

enact to ensure those decisions are carried through. At every level, be it local, national or

supranational, there will be a department of government which will have the unenviable

job of balancing a number of economic factors by the use of both ﬁ scal and monetary

policy. Ultimately a government is no different to you and I – we must run a balanced

budget. Just as we can spend no more than we can earn (and borrow) nor can they.

There are factors will be of importance to any company that trades with, or within, that

particular market. The factors that companies need to consider include:

●

The size and growth of the economy as a whole.

●

The rate of inﬂ ation in the market and how it compares to that of other markets.

●

The exchange rate of the currency compared to others.

●

The level of unemployment in the market.

●

The balance of payments with other trading blocs, whether this area is a net importer or

a net exporter. This might be further subdivided between manufacturing and consumer

goods (visibles) and service goods (invisibles).

These are not the only factors about a trading area that an organisation will be interested

in; there will be others depending on the speciﬁ c nature of their industry. As an example,

the Financial Services Industry will be concerned with the propensity to save and the pro-

pensity to borrow.

Governments raise revenue from individuals and businesses via a variety of taxes. The

way they spend that money can have a signiﬁ cant effect of the strength of the economy.

There are two ways we can look at taxation; we can consider taxation to be direct (in

which case it deducted from earnings, either individual or corporate), or indirect, in which

case it is levied on expenditure.

Direct tax is normally a percentage deducted from either earnings or proﬁ ts. Invariably

for businesses it is based on proﬁ ts. Not all direct tax is levied on earned income and an

individual may pay income tax on their salary but also a tax on dividends that they hold in

STUDY MATERIAL E1

THE GLOBAL BUSINESS ENVIRONMENT

a company unrelated to their work. This would be described as a tax on unearned income.

Sometimes a special tax on individuals will be designated for a particular purpose, for

instance a tax to provide for old age pensions.

Indirect taxes, sometimes called taxes on consumption, are levied on expenditure. This

means that when we buy something the cost will have been inﬂ ated by a percentage which

when the vendor receives it must be paid to the government. One of the advantages of this

type of tax for the government is that they have to collect tax from fewer sources – there

are fewer vendors in most economies than there are earners. Types of indirect tax include;

●

A value added tax – which can be levied on all goods, although a government may

decide to apply different rates to different products to encourage (or discourage) pat-

terns of consumption. For instance there is unlikely to be any VAT on this book – the

government may want to encourage study – but if you have some chocolate whilst you

are reading it that will carry VAT since it is a luxury.

●

Hydrocarbon tax – a tax on the fuel that people use in their vehicles. Again there is a

motivation for government over and above the mere raising of revenue; they may wish

to discourage the use of cars and so tax fuel heavily. We shall discuss that again when we

discuss the environment.

●

Tobacco tax – aside from the revenue raised the higher the tax the more people are dis-

couraged from smoking which will be good for the nation’s health and, possibly, reduce

the demands on the health provision in the country.

●

Import duties – again governments will use this form of taxation to encourage or dis-

courage particular patterns of consumption as we discussed earlier in the chapter.

For a government there are two further decisions to be made other than those implied in

the decisions described above.

1. Firstly they will need to decide whether the majority of the tax revenue should come

from individuals or from companies. Obviously businesses will consider the environ-

ment more favourable if there is a low level of corporate tax. If it isn’t they may decide

to relocate to a country with a more favourable tax regime. Tax havens such as the

Bahamas or Bermuda will have exceptionally low, or even no, income tax to attract for-

eign companies to set up branches there. Governments may decide to have a threshold

of income below which taxation is not paid by individuals, effectively helping the low

waged to live. In the case of companies they may have a system of tax credits for par-

ticular industries to encourage investment in those areas.

The population would prefer the income tax levels to be low since they would prefer to

keep the majority of their earnings to use as they see ﬁ t. Too high a level of taxation will

not encourage people to work harder to raise their income levels.

2. Secondly they will need to decide whether how much they wish to raise by taxing earn-

ings compared to the amount the wish to raise via indirect taxation.

1.6.2 International trade

Since Adam Smith published The Wealth of Nations, there have been many important devel-

opments that have brought us to the present position. It is now possible to obtain goods that

have been produced in many parts of the world and are purchased and used after travelling

thousands of miles. This allows people in the UK to enjoy tuna from the Seychelles in the

Indian Ocean, pineapples from Africa and clothing from Bangladesh and China.

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THE GLOBAL BUSINESS ENVIRONMENT

Industrial production began in Europe. In many instances, the other parts of the world

supplied the raw materials that enabled European industries to add value and although

most of the ﬁ nished products would be consumed in Europe, the ﬁ nished products were

sometimes exported back to the colonies.

The spectacular success of the USA meant that, by the beginning of the twentieth cen-

tury, it was the largest participant in world trade. With a large population and without any

major conﬂ icts at home, the US ﬂ ourished and dominated both world trade and foreign

direct investment, with American ﬁ rms becoming multinational organisations with invest-

ments in plants in many countries around the world.

An estimate of the value of the exports of merchandise has been produced by the World

Trade Organisation. In 2007, the total value was $13,618 billion. The value of the main

elements and share of the total trade were:

Value ($ billion) Share of world merchandise trade (%)

Agriculture 1128 8.3

Fuels 2038 15.0

Mining 621 4.5

Manufactures 9500 69.8

Other 331 2.4

Some of the major developments that have allowed international trade to expand and

dominate the economic lives of most people are:

●

The development of industrial production processes has been affected by the introduc-

tion of machines and this has decreased the importance of labour as the prime source of

skills and expertise.

●

Transportation systems, especially rail, shipping and air travel have improved and the

goods can now be moved relatively easily and quickly from where they have been pro-

duced to the place where the products are consumed. In particular, the introduction

of cold storage facilities and handling has made a signiﬁ cant difference to the extent of

international trade.

●

The efﬁ cient and safe transfer of funds from the buyer to the seller was essential and so

improvements in the ﬁ nancial systems have been important in developing international

trade. In addition, the growth of international ﬁ nancial institutions has enabled capital to

be obtained in the cheapest markets and this would enable large projects to be undertaken

in most countries and enable the countries to exploit their natural resources and skills.

●

Advances in technology over the period have contributed greatly to the development of

international trade as it is possible for people to communicate with each other instanta-

neously and meet regularly, despite living and working in different parts of the world.

1.6.3 Monetary policy

Whereas ﬁ scal policy relates to the level of taxation and spending that a government

decides, monetary policy relates to the supply and price of money. By varying the price of

money, a government or central bank can have a signiﬁ cant effect on the spending habits

of companies and individuals. The price of money only relates to borrowed money – the

price is the interest we have to pay on it. Since the government is normally known as the

‘lender of last resort’ it is the primary source of funds in a country.

STUDY MATERIAL E1

THE GLOBAL BUSINESS ENVIRONMENT

When you go to the bank to borrow money with an overdraft that bank will have bor-

rowed money from another lender who, after a number of other intermediaries will have

borrowed money from the government. At each stage from the central bank onwards the

interest rate will have increased. If the central bank wish to encourage businesses, or even

consumers, to spend more money they will reduce the rate of interest they charge so that

the bank will, hopefully, charge you a lower rate of interest for your overdraft. Not all of

the money that the bank have available to lend is borrowed from the central bank in this

way. It is quite possible that whilst you are in the bank borrowing money, someone else is

in there investing their money and expecting interest to be paid to them. Naturally, they

will be concerned about the interest rate, but they will want it to move in a different direc-

tion to you! So, the central bank can encourage people to save by raising the interest rates,

but run the risk of discouraging companies from borrowing money to invest in the future.

When we talk about the money supply we need to consider not only the amount of

money in the system but also the speed with which the money moves around. The cycle

of money at its simplest level is as follows; a consumer draws money from their current

account at the bank, they spend it with a retailer who pays it into the bank. If the central

bank decides to restrict the money supply by destroying more notes than it prints then we

might expect the level of spending to go down, but that is not necessarily the case. If the

central bank is running short of money they may ask retailers to deposit their takings for

the day a bit sooner (not every retailer makes deposits every day). Effectively the money is

going around faster.

This assumes that the money supply is a closed system which, of course, it isn’t. There

are a number of ways in which the money supply can be increased, only some of which are

under the control of the central bank.

●

The consumer uses some of their savings.

●

Foreign currency is changed into the local currency. This might happen because a tourist

visits or because a company has exported goods or services.

●

Businesses or individuals borrow money to invest and keep their free cash for consumption.

●

The government itself may release reserves into the economy by spending money by

building roads, hospitals or other aspects of the country’s infrastructure. Or it may just

employ more civil servants.

Similarly there are a number of ways in which the money supply can be reduced, or money

can ‘leak’ out of the system:

●

Consumers decide not to buy but to save.

●

People make investments using cash, shares in companies or even government savings

bonds.

●

Goods are imported, or people go on foreign holidays, and money leaves the country.

●

People pay tax to the government.

So a central bank cannot control the money supply completely. We might ask why they

would want to. The central bank (and other bodies) will have the responsibility for main-

taining the monetary stability and ﬁ nancial stability of a country and its currency.

The integrity and value of a currency are important to the economy as whole, since it

means there will be sustained and steady growth without signiﬁ cant price inﬂ ation. This

will be another balancing act for the central bank since, as we mentioned earlier, if inter-

est rates (for instance) are set at just the ‘right’ level they will encourage people to spend in

such a way that demand matches supply.

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THE GLOBAL BUSINESS ENVIRONMENT

If the interest rates are too low then there will be too much money in the system and peo-

ple will borrow money cheaply to buy many of the things that could not ordinarily afford.

If the productive capacity of the country cannot match that demand then the vendors

will put up their prices and we will see price inﬂ ation.

If the interest rates are too high then there will be no encouragement for people to buy

and production will slow down to match the reduced demand. Ideally governments will

want to achieve non-inﬂ ationary growth since it means there will be real growth in the

economy as a whole.

Real growth can be deﬁ ned as the rate of increase in the economy’s output minus the

prevailing rate of inﬂ ation over the same period. This tends to be measured by two ﬁ gures:

1. The Gross Domestic Product. The concept of the total economic activity of a coun-

try. It can be measured as incomes earned, as expenditures made or as the level of

production.

2. The Gross National Product. This is the gross domestic product plus any net overseas

earnings. As such it is a better reﬂ ection of the wealth of a developed nation since, as we

shall see shortly, when we talk about foreign direct investment, a number of countries

earn a lot of money from their investments abroad.

1.6.4 Impact on business and markets

Even if you have only the vaguest interest in World event, you cannot have failed to notice

the current (2009) global recession. To what extent this situation is a consequence of gov-

ernment economic policy is debateable, but regardless of cause the impact of macroeco-

nomic variables on the environment of organisations can clearly be seen.

Exercise 1.3

Read some reviews, in a good business newspaper, of world economic affairs.

1.7 Cross-cultural management

1.7.1 Managing across cultures

In a twenty-ﬁ rst century economy, intercultural awareness is the key to international busi-

ness success. It is estimated that international trade has increased from $136 billion in

1960 to approximately $9 trillion at the beginning of this century.

Increasing migration and more business opportunities have also produced greater inter-

action across cultures. In a world where global brands dominate all retail environments,

it is very evident that we now live in a global economy. Any visitor to an African city

is greeted by the sight of people wearing English football shirts, billboards advertising

European designer-label fashions, people driving Japanese or Korean cars and local families

queuing up for a McDonalds meal. The global economy has become one not only of trade

but also one where cultures and identities are merging.

Managers are increasingly exposed to working with, or within, many different busi-

ness cultures. This involves working in other countries, working in organisations that have

operations in other cultural environments, or working with colleagues from a wide range

of cultures.

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THE GLOBAL BUSINESS ENVIRONMENT

This presents three key interdependent challenges for managers:

●

The need to become more inter-culturally competent in order to operate in an increas-

ingly diversiﬁ ed business world.

●

The need to understand and develop business models that will be suitable to this chang-

ing context.

●

The need to create organisational models and structures which will reﬂ ect the new cir-

cumstances and gain maximum beneﬁ t and opportunity.

David Foster writes about what constitutes cross-cultural management:

“It is a shorthand term which summarises a number of different elements. First, it

describes the range of organisational behaviour which exists within both countries and

cultures. Second, it compares and contrasts organisational behaviour across countries and

cultures. Third, it seeks to understand to understand and improve the interaction of co-

workers, clients, suppliers and partners from different countries and cultures.”

The purposes of cross-cultural education and training are threefold:

1. It is designed to encourage people to study and evaluate the components of their own

culture so that they become more aware of their own hidden cultural assumptions

which interfere with effective intercultural action.

2. It seeks to expand people’s repertoire of culturally appropriate behaviours so that they

can operate more effectively in cross-cultural encounters in the workplace.

3. It tries to evaluate the impact of cultural factors on job performance. It can be argued

that cultural traits and differences are so ingrained that it is hard for individuals even

to understand they are there or that they have an inﬂ uence on behaviour. There is a

large body of opinion supporting the idea that different cultural traits between coun-

tries can be understood to play a part in the behaviours and ways of working prevalent

among individual managers. These traits inﬂ uence individual action, how relationships

are formed and maintained, how products are perceived and located in markets and the

success of communication.

1.7.2 Hofstede

This theory is very examinable – make sure that you understand it, and have

plenty of examples to illustrate Hofstede’s arguments.

Geert Hofstede researched the role of national culture within the organisation and iden-

tiﬁ ed ﬁ ve dimensions which he argued largely accounted for cross-cultural differences in

people’s belief systems and values. These he termed ‘uncertainty avoidance’, ‘masculinity’,

‘individualism’, ‘power-distance’ and ‘Confucian dynamism’.

Individualism versus collectivism

(Examples: Individualistic⫽U

nited States, Great Britain; Collectivistic⫽Pakistan, Taiwan)

Is the individual the basis of society or does society give meaning to the individual? The

United States is the best example of a society in which individualistic traits are most pro-

nounced. For example, differences are admired and the cult of individuals prospers most.

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THE GLOBAL BUSINESS ENVIRONMENT

Perhaps in direct contrast is the Chinese culture, where society’s rights and responsibili-

ties are dominant and individual needs are subservient. Here conformity is generally con-

sidered the norm.

Masculinity versus femininity

(Examples: Masculine⫽J

apan, Italy; Feminine⫽Denmark, Sweden)

Masculine cultures emphasise ‘assertiveness’ compared to ‘nurturance’ for feminine cultures.

High masculine societies, whether individualistic like United States or collectivist like

Japan, provide weaker people with, on average, less support whether from within the

organisation or from society at large. People learn to admire the strong and to have a rela-

tively negative view of the weak and dependent.

Power-distance

(Examples: Low⫽D

enmar

k, Austria; High⫽France, India)

Measures the extent to which individuals (society) tolerate an unequal distribution of

power in organisations and in society as a whole. In high power-distance organisations, supe-

riors display their power and exercise it. Subordinates expect this behaviour and feel uncom-

fortable if they do not personally experience their superiors displaying their status and power.

In high power-distance cultures, subordinates feel separated from one another: it is not

easy to talk with higher-ranking people and real power tends to be concentrated at the

top. In low power-distance societies, members of organisations, and of society, tend to feel

equal and relatively close to each other at work. Power is much more likely to be delegated

in low power-distance cultures.

Uncertainty avoidance

(Examples: Low⫽D

enmar

k, Sweden; High⫽Japan, France)

Measures the extent to which people tend to feel threatened by uncertain, ambiguous,

risky or undeﬁ ned situations.

In cultures where uncertainty avoidance is high, organisations promote stable careers

and produce rules and procedures, which staff must follow (and which staff ﬁ nd comfort-

ing to follow). Hofstede argues that uncertainty avoidance is about reducing ambiguity

and should not be confused with risk avoidance.

Confucian dynamism

(Examples: Low⫽U

nited S

tates, Australia; High⫽China, Japan)

Measures the extent to which conformity according to ‘position’ is stable and elicits pre-

dictable behaviour between individuals.

Behavioural attributes that are valued highly include obedience, deference, maintaining

the status quo within organisational and social hierarchies and trouble-free social relations.

Where you are in an organisational hierarchy predetermines the way you are expected to

treat others and in turn the way you should be treated. Behaviour is much more predict-

able in Confucian cultures that exhibit high levels of Confucian dynamism.

1.7.3 Other models

Trompenaars, and subsequently writing with Hamden-Turner, follows a functional

approach, like Hofstede, in which the premise is that culture can systematically cause dif-

ferences in behaviour between people from different countries.