“We don’t bring the product to the people. We bring the people to the product”. —Dietrich Mateschitz, Founder, Red Bull GmbH (Gschwandtner, 2004)
Introduction Red Bull GMBH was discovered in 1984 by an Austrian business man Mateschitz (Red Bull.com, 2011). It took the company three years to get an official permit from the Austrian government to start production of Red Bull GMBH in the domestic market in 1987 (Redbull.com, 2011).Today Red Bull GMBH is in 160 plus countries with a market share of 7080% and a sales volume of 4.2 billion cans sold in 2010 (Red Bull.com, 2011). The company has faced many problems from the very beginning which include permission to sell in certain countries in Europe (Gschwandtner, 2004). The company relies on nontraditional marketing and has a dedicated force of 5000 student brand managers who help promote and sell the company‘s image to its target market (Red Bull.com, 2011).
Key Global Strategic Challenges Facing Red bull GmbH Red Bull GmbH faces many challenges in the functional drink market. These Challenges can be identified with the help of a SWOT and PESTLE analysis of Red Bull GmbH‘s business environment:
Red Bull GMBH SWOT Analysis Red Bull GmbH faces many internal and external challenges which can be identified through its SWOT analysis (see appendix-1). Following is the SWOT analysis of Red Bull GmbH: Strengths Red Bull GmbH enjoys ‗market leadership‘ (Data Monitor, 2004:5) in many countries it operates with a market share of 70% in most of the countries (Data Monitor, 2004). This market leadership has transformed into Red Bull GmbH‘s biggest strength in the functional drink category having almost two third of the production in Europe (Data Monitor, 2004). Red Bull GmbH‘s marketing efforts have been one of the hallmarks of its success as it targets a segment of 18-25 (Data Monitor, 2004) .The company relies on its team of 5000 student brand managers who sell and promote the company‘s products through buzz marketing at various pubs and places were the target market socializes (RedBull.com, 2011).It is also involved in extreme sporting events such as jumping off cliffs, Para-jumping, aerobatics, formula one etc (Gschwandtner, 2004).
Red Bull GmbH has a very strong distribution which includes partnerships with key players such Cadbury Schweppes in Australia (DataMonitor, 2004).Due to this partnership Red Bull GmbH witnessed a growth in sales up to 40% during the same year (Data Monitor, 2004).On the financial aspect the company has recorded a 7.6% increase in 2010 worldwide with a total of 4.2 Billion cans sold (Red Bull.com, 2011). Weaknesses Red Bull GmbH has been hit hard when it comes to product innovation (Data Monitor, 2004). The competition has been achieving milestones by introducing such products as sports drinks were as Red Bull GMBH remains unchanged with its narrow product line (Data Monitor, 2004). The company only has four products (Redbull.com, 2011) and with such a small product line it is vulnerable to market fluctuations especially the category that it operates in is really small worldwide (Data Monitor, 2004). Red Bull GmbH‘s marketing expenses are very high as it has to invest in extreme sporting events (Gschwandtner, 2004) and requires wide-ranging efforts to promote its sales (Data Monitor, 2004).These expenses are very high when compared to its competitors such as Coca Cola (Dolan, 2005). Opportunities Red Bull GmbH can be successful if it goes for a brand extension in an existing product line and it would be more successful in the non-cola market as it has already earned a name for its self in the functional drinks category (Data Monitor, 2004).Similarly Red Bull GmbH can diversify its distribution by going to other modes of retail such as vending machines as it did in Australia (Data Monitor, 2004). Red Bull GmbH needs to penetrate into further markets which have huge profit opportunities for it (Data Monitor, 2004). Asia Pacific markets are huge profitable investments as they accounted for 50.9% of the total global trade of energy drinks (Data Monitor, 2004). Threats Red Bull GMBH faces issues related to public health concerns and has been banned or is under the scrutiny of the states classification of its product category (Data Monitor, 2004). It is banned
in Denmark and is sold as medicine in Japan and many other countries are expressing their concerns over its health implications when consumed in high quantity (Data Monitor, 2004). Although the company promises a profitable future yet it is faced by a challenge of a maturing markets were it faces tough competition from emerging brands (Data Monitor, 2004).The target market of Red Bull GmbH is maturing and is adopting to different lifestyles which requires less energy stimulation (Yaqoob, 2008). Consumers are becoming more health conscious and aware of their health related issues and now prefer to drink bottled water (Data Monitor, 2004).
PESTLE Analysis for Red Bull GmbH Red Bull GmbH‘s PESTLE (See appendix-2) ranks element of its business environment. The elements assess 5 relevant marketing environments on a scale of 1-5 were 1 is the highest and 5 is the lowest. The element given the highest ranking is the legal issues. Red Bull GmbH‘s has been facing legal actions by governments and states which are ranging from approvals to bans from packaging and labeling of the product to its ingredients (Farris, 2002). The second element is joint ventures as mode of entry into new markets, since Red Bull GmbH has its production facilities in Austria and it distributes from the same place (Red Bull.com, 2011), so in order to enter into new markets it might consider Joint Ventures as certain governments require foreign firms to have local partnerships (Carter and Lee, 2009). Negative publicity and growing health awareness amongst consumers is assigned same weights because of the fact that they are interrelated. Red Bull GmbH has faced many issues related to its negative publicity as at one time it was considered that taurine, one key ingredient was made out of the Bull‘s testicles (Farris, 2002).It‘s over consumption was also banned in certain countries due to risks of deaths related to cardiovascular failure especially when mixed and over consumed with alcohol (Farris, 2002). Over the years there has been a growing concern amongst consumers regarding their health and consumers are increasingly switching over to bottled drinks in the non energy category (Data Monitor, 2004). This can be a big challenge for Red Bull GmbH as it enters into new markets (ibid). Red Bull GmbH‘s target market was the Generation Y people who were born after 1981 also known as the millennial generation (Yaqoob, 2008). Now as this population ages and their buying habits change and they become more health conscious it would be a challenge for Red
Bull GmbH to find new target markets comprising of young people (ibid). World‘s youngest population is at higher ratio in Asia and Africa which in the near future would be promising investments coupled with economic growth (prg.org, 2010). Currency fluctuations are always a challenge to organizations but are given a lower rating of 4. Currency fluctuations have great impact on economy and trade and are measuring tools for trade amongst countries (Leon, 2011). Supply and demand determine demand of a currency and relation of business between countries (ibid).However certain countries keep their exchange rate at low like China which wants the world to benefit from its cheaper labour and cost of production.(ibid). This can be a promising opportunity for Red bull GmbH to invest in China as the European economy faces many challenges with the Euro getting weaker against the Dollar in 2010 (ibid). With a total of 2.15 (See Appendix-2) Red Bull GMBH as mentioned above still has opportunities to invest in other markets especially emerging economies with a younger consumer base, stable currencies and investment friendly governments.
Cultural Challenges Company‘s face many challenges when they try to sell their products across different cultures. In global markets companies come across various cultural challenges which start from unfamiliar languages, different value systems, beliefs and behaviours of individuals and groups (Cavusgil et al., 2010). Every country has a unique set of standard of living and consumption patterns (Ibid). According to Cavusgil at etl (2010:126) ―Culture refers to the learned, shared, and enduring orientation patterns in a society. People demonstrate their culture through values, Ideas, attitudes and behaviours and symbols.‖ Hofstede in his research gave the five dimensions of culture (see appendix-10) which are used by firms as major tools to assess the challenges and future outlook in investing into such countries and markets. Red Bull GmbH currently sells in markets (See appendix-10) which have characteristics of High individualism, with stronger masculinity, low power distance, a high level of uncertainty avoidance and short term orientation.
REDBULL GmbH’s Product Mix Red Bull GmbH‘s Product line consists of Red Bull energy Drink, Red Bull Sugar Free, Red Bull Shots and Red Bull Cola (See Appendix-8). Red Bull GMBH however doesn‘t offer all product lines across most of its markets (Red Bull.com, 2011). Red Bull GmbH BCG Analysis The BCG Matrix is a tool which shows relationship between market growth and market share (Carter and Lee, 2009). The BCG of Red Bull GmbH (See appendix 4) shows Red bull GmbH‘s current market standing in different regions around the world against its largest competitors. Red Bull GmbH is a cash cow in North America (earthtimes.org, 2009) and in western and Eastern Europe, this is due to the fact that the energy drinks market in these regions have matured and there is intense competition between rivals and there are few competitors who share the market with Red Bull GmbH (foodproductiondaily.com,2004). Red Bull GmbH is a star in Middle East, Africa, Australia and New Zealand (See Appendix 4). It has a market share of 22.7 percent in Middle East and Africa and a market share of 13.6 percent in Australia and New Zealand (See appendix 5).Stars are profitable since they are market leaders but require huge investment for maintaining market leadership in a growing market (Jobbers, 2010). Red Bull GmbH is a question mark in Latin America and Asia excluding New Zealand and Australia (See Appendix 4). Red Bull GmbH‘s Market Share in Asia is 2.8% and 11.7% in Latin America (See Appendix 5). Asia Promises to be a profitable investment in the near future because of the largest youth population in the world (Euromonitor International, 2007). Population wise India has the highest number of 20-24 age bracket people accounting to 98 million followed by China with 82 million and Indonesia 21 million (ibid). Moreover economic growth and raise in income in these countries has increased the potential for Red Bull GmbH to invest in such economies (ibid). South American countries especially Brazil is considered to be one of the emerging economies of the world with Red Bull GmbH having a 26% growth rate in South American Countries (earthtimes.org, 2009).
Red Bull GmbH’S ANSOFF Matrix Analysis An Ansoff Matrix is a strategic analysis tool which explains future potential for a company in managing its products in relation to its markets (Carter and Lee, 2009). According to Red Bull GmbH‘s ANSOFF Matrix analysis (See appendix-6), it should go for a diversification strategy. This is based on previous analysis in this report identified through the SWOT, PESTLE and BCG Matrix Analysis tools. The company needs to go for diversification strategy because it faces challenges of a narrow product line which is an obstacle for further development in maturing markets (Data Monitor, 2004). Red Bull GmbH‘s current target market that is generation Y is maturing in most of the countries due to which Red bull GmbH has to explore new markets which have a huge youth population (Yaqoob, 2008).The income levels in developing economies and emerging markets are improving due to which people living in such countries are witnessing improved standards of living and increased purchasing power (Euromonitor international, 2007). People in the developed markets are already adopting healthy lifestyles and due their being more conscious of their health Red Bull GmbH faces an eminent threat of drop in sales unless it diversifies its product line and penetrates into new markets (Data Monitor, 2004). With above mentioned factors of aging population, narrow product line and emergence of new economic power centers Red Bull GmbH should go for a diversification strategy. Current Product Mix Strategy of Red Bull GMBH (Standardization Vs Adaptation) Red Bull GmbH has a standardized (See Appendix-7) product mix this is due to the fact that Red bull GmbH produces and distributes its products from a centralized production facility in Austria (Red Bull.com, 2011). However Red Bull GMBH had to adapt (See Appendix-7) its product mix according to different countries in accordance with their legal requirements (Farris, 2002). Red Bull GmbH was allowed to sell in France after twelve years of ban when it changed the contents of its drink removing the controversial ingredient taurine from it (Palmer, 2008). In most of the countries around the world Red Bull GmbH had to print health warning labels of not consuming the drink with alcohol (Farris, 2002). In Canada Red Bull GmbH was allowed to sell its products after the health authorities approved warning labels that quantity should not exceed 16.6 oz per day (Farris, 2002).
Why Should Red Bull GmbH go for Product Adaptation Red Bull GmbH should go for product adaptation strategy because it has in past faced many issues ranging from narrow product line to health and legal complications to controversial ingredients (See Appendix-1 and 2). Some of the advantages of adaptation (See appendix-7) which would benefit Red Bull GMBH in overcoming these issues which include approvals from governments, matching needs of the segments individually and ethical concerns etcetera. Red Bull GmbH should go for adaptation strategy because (see appendix-6) it is going to go into product diversification and this is being done to cater to the needs of new markets and with new product lines. As mentioned earlier in this section it can cater to the needs of such emerging markets as Asia, Middle East and Africa etcetera through product diversification and thus would need adaptation strategies for its product mix. Moreover since Red Bull GmbH has to face various cultural challenges as mentioned in the previous section so it has to adapt itself to such cultures and markets which would mean it would have to diversify its products and markets accordingly.
Red Bull GmbH’s Existing Modes of Entry into International Markets According to the Market Entry strategy (See Appendix-8) Red Bull GmbH follows the Stages model of Internationalization. The Uppsala Model in the stages model identifies basically two trends in the internationalization of a firm (Carter and Lee, 2009). Firms firstly develop markets according to an ―establishment chain‖ Carter and Lee (2009:215). This is further elaborated in the sense that firms start with zero exporting activity that is development of domestic market, then it can take up a sales subsidiary and finally an overseas production facility (Carter and Lee, 2009). Red Bull GmbH does not completely follow this theory; it has started with
domestic market
development in 1987 in Austria (Red Bull.com, 2011) which was not enough and so it started moving abroad into other countries since 1992 (fundinguniverse.com, n.d.). It gradually followed into other Markets like Western Europe, North America, Australia, Middle East and Africa (See Appendix-5). However it has kept production centralized and has not established a production facility in any other country to date (Red Bull.com, 2011).
Red Bull GmbH at the corporate level in its international business model follows the
(See appendix-8)
multi-level marketing approach. According to Carter and Lee (2009:226) ―Multi-
level marketing (MLM) refers to a marketing strategy where products are sold through a distributor structure that has many levels. The Idea behind MLM is to grow a business through word of mouth. People are encouraged to introduce others to the business. In return, they get a commission on sales made.‖ Red Bull GmbH follows this approach as it distributes its products through distributors who sometimes are wholly owned subsidiaries and also through its 5000 dedicated student brand managers (Red Bull.com, 2011) who market its products to such places which are visited by its target market and in doing so they get commission on sales and first hand work experience (Gschwandtner, 2004). In the market entry modes (See Appendix-8) Red Bull GmbH follows the direct and indirect export and Strategic Alliances approaches. It has Strategic Alliances with Cadbury Schweppes Australia to distribute its products not only through traditional channels but also through vending machines (just-drinks.com, 2003). On the other hand Red Bull GmbH imports its products through its network of wholly owned or independent subsidiaries present in different countries from its home base in Austria (Farris, 2002).
Red Bull GmbH’s Future Modes of Entry into International Markets Red bull GmbH in its process of internationalization should follow the Bargaining power approach as a choice of entry into future markets (See Appendix-8). This is due to the fact that it is difficult to do business without government support in such countries where governments have high bargaining power and as mentioned in the PESTLE (See Appendix-2), Red Bull GmbH has been facing legal complications when it comes to approval of its products in countries worldwide. An example of this was France which has already been discussed above in this report .Moreover it should follow the agency approach as it moves into future markets like China were joint ventures and strategic alliances are key factors to success of business (Carter and Lee, 2009). At the corporate level Red Bull GmbH should keep Multi-level marketing business model as it has contributed to its success in the past through Student Brand Managers and Strategic distribution alliances (Red Bull.com, 2011). It could also go for ―the Transformational Business
Model‖ Lee and Carter (2009:229) as it adapts and diversifies its products and markets in the future as proposed in the previous section of this report. In the market entry modes Red Bull GmbH should go for Joint Ventures and strategic alliances as it plans to enter new geographical regions (See Appendix-8). One of the advantages of Joint ventures is that they allow firms to avoid from making expensive risky investments on their own and at the same time help avoid competition from stronger firms (Bell et al, 2008).
Analysis of Red Bull GmbH’s Current Promotional Mix Red Bull GmbH spent $ 600 million on marketing which is 30% of its revenue in 2004 which is quite higher than the world‘s number one beverage brand Coca Cola which spent 9% (Dolan, 2005). Red Bull uses the ―Buzz Marketing Strategy‖ (Gschwandtner, 2004) by sponsoring exclusive and extreme sporting events around the globe from Formula 1 to Aero Shows, from Skiing to Climbing you name them and Red Bull GmbH does it all (ibid). Red Bull GmbH build up its pre-marketing hype in France by sponsoring Austrian air acrobat Felix Baumgartner who flew across the English Channel to France at a speed of 220 mph and flew for less than seven minutes but this event was given a free media coverage for months (Gschwandtner, 2004). This is not the end, other than sponsoring extreme sporting Red Bull GMBH uses humour as an appeal to advertise its products through humorous cartoons. It also activates its brand by targeting such places as Clubs, Pubs and Concerts etcetera through its teams of SBM (Student Brand Managers) (Redbull.com, 2011). Red Bull GmbH‘s promotional mix represents its culture which it markets across the globe which is individualistic, fun loving and energetic (Red Bull.com, 2011).
Analysis of Red Bull GmbH’s Distribution Red Bull GmbH has a network of sales subsidiaries in 160 countries around the globe (Redbull.com, 2011). These Sales Subsidiaries import Red Bull GmbH products from Austria and Switzerland through trains, trucks and ships as logistical mechanisms for shipment (Red Bull.com, 2011). Red Bull GmbH‘s follows the intensive distribution and exclusive distribution strategies (Jobber, 2010). Example of this is the distribution of Red Bull GmbH on trade at all major retail outlets
and super stores (Farris, 2002).The example of exclusive distribution at the whole sale level is of Cadbury Schweppes which is the biggest distributor in Australia which uses vending machines, food courts and colleges as places for distribution (Just-drinks.com, 2003). It also utilizes its team of 5000 student brand managers around the globe to sell its products off-trade at selected Bars, Clubs and events etcetera (Redbull.com, 2011).
Conclusion To conclude Red Bull GmbH is a Global brand which has sales channelized across all geographical regions and has many opportunities for further development which are balanced by its strengths like its Market Leader ship, Unconventional Marketing and Financial strength. It has got a strong culture which is individualistic, masculine and sporty and truly represents the segment that it markets too. However, as the market becomes more and more saturated due intensive competition, it would be required to diversify its products and markets. Furthermore, it would be required to adapt its product lines according to new cultures and geographical regions that it plans to enter in. As it would be entering into future markets it would be facing challenges of market entry with governments and state actors having high bargaining powers. This would mean adapting according to market. It would also be requiring agency approach as some countries and their markets are well managed through agencies. Joint ventures would also be helpful in reducing costs of production and distributions especially in emerging economies which promise cheap labour and lower cost of production. However, Red Bull GmbH would still be required to keep an eye on production and distribution operations in such countries and markets to ensure same quality and product delivery which it gives from its home base Austria. There would always be legal complications haunting its business operations however its strength would remain in its marketing communication efforts. The use of off trade methods for marketing would facilitate its sales and help in stable brand activations. Its distribution strategy provides it sustainable competitive advantage, but this can also cause problems if distribution partners do not show loyalty and exclusivity and long term commitments to business. In the end with all these above mentioned factors Red Bull GmbH can still maintain its market leadership and uniqueness as compared to other brands in the market.
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Appendix SWOT Analysis Red bull (Appendix-1)
PEST Analysis Red Bull (Appendix -2)
Red Bull Energy Labelling and Packaging (Appendix-3)
Red Bull Can Labelling (Hansel, n.d.)
BCG Matrix (Appendix-4)
Adopted from Carter and Lee Figure 9.2 the BCG Matrix (Carter and Lee 2009)
Red Bull Market Share Value (Appendix-5)
Source: Euro monitor (2007) @ Euro monitor International 2007
Red Bull GMBH’s ANSOFF Matrix (Appendix-6)
Existing Products
Existing Markets
New Products
Product
Market
Development
Penetration
Market New Markets
Development
Diversification
“ ANSOFF MATRIX” (Tutor2u.net, n.d.)
Standardization Vs Adaptation (Appendix-7)
Figure 9.2 “Standardization Vs Adaptation in international Marketing” (Lee and Carter, 2009)
Market Entry Strategy (Appendix-8) Process of Internationalization Theoretical Approach
Stages Model
Networks
Bargaining Power
Born Global
International Business Model
Corporate Level
Multi-Level
Subscription
Network Effect
Marketing
Razor and Blade
Monopoly
Auction
Disintermediation Click and Mortar
Loyalty Business
Market Entry Modes Direct Country
and
or Indirect
Market Level
Joint Venture
Franchise
Exporting Strategic Alliance
Acquisition Merger
and
FDI
Figure 7.2 “Market Entry Strategy” (Carter and Lee, 2009)
Red Bull GMBH’s Product Line (Appendix-9) Red Bull Energy Drink The basic product of Red Bull GMBH is Red Bull energy drink (Redbull.com, 2011). It has been Red Bull‘s first product in its product line which was introduced more than two decades ago (Redbull.com, 2011).The drink was for people who wanted to have a clear and focused mind, physical active life and also giving them fun and excitement (Redbull.com,2011). Its main ingredients include Caffeine, Taurine, Glucuronolactone, B- Group Vitamins, Sucrose, Glucose and Alpine Spring Water. It is available in three sizes of 8, 12 and 16 oz (Redbull.com, 2011).For product Label and Packaging (see appendix-3). Red Bull Sugar Free This is the sugar free version of the original energy drink with 3 calories per 100 ml (Redbull.com, 2011).It has the same packaging as the original variant mentioned above. Red Bull Shots Red Bull Shots is a 60 ml packaged drink with 27 calories enough to give the same energy that the original Red Bull Energy drinks gives (Red Bull.com, 2011). It is also available in sugar free variant for health conscious segment (Red bull, 2011). It is designed for occasions were body and mind wants to remain active such as parties, travelling or sports etc (Red Bull, 2011). Red Bull Cola The last product in the product line of the company is Red Bull Cola. Red Bull Cola is available in 8.4 oz and 12 oz packaging (Redbull.com, 2011).It has been the most controversial product of Red Bull GMBH to date as it has been banned partially in Germany and Taiwan over traces of cocaine found in it (Friedman-Rudovosky, 2009).However the company defends its position in the market by explaining all its ingredients are natural and listed on the cans (Red Bull.com, 2011).
Hofstede Cultural Dimension Index Analysis (Appendix – 10)
Country
PDI II
MI
UA LTO
Africa East
64
27 41
52
32
Africa West
77
20 46
54
9
Arab countries
80
38 53
68
23
Argentina
49
46 56
86
20
MI= Masculinity Index
Australia
36
90 61
51
21
UA= Uncertainty Avoidance Index
Austria
11
55 79
70
60
LTO= Long Term Orientation
Bangladesh
80
20 55
60
47
Belgium
65
75 54
94
82
Brazil
69
38 49
76
44
Bulgaria
70
30 40
85
69
Canada
39
80 52
48
36
Chile
63
23 28
86
31
China
80
20 66
30
87
Colombia
67
13 64
80
13
Croatia
73
33 40
80
58
Czech Rep
57
58 57
74
70
Denmark
18
74 16
23
35
El Salvador
66
19 40
94
20
Estonia
40
60 30
60
82
Finland
33
63 26
59
38
France
68
71 43
86
63
Germany
35
67 66
65
83
Great Britain
35
89 66
35
51
Greece
60
35 57
112 45
Hong Kong
68
25 57
29
61
Hungary
46
80 88
82
58
PDI= Power Distance Index II= Individualism Index
India
77
48 56
40
51
Indonesia
78
14 46
48
62
Iran
58
41 43
59
14
Ireland
28
70 68
35
24
Italy
50
76 70
75
61
Japan
54
46 95
92
88
Korea South
60
18 39
85
100
Latvia
44
70 9
63
69
Lithuania
42
60 19
65
82
Luxembourg
40
60 50
70
64
Malaysia
104
26 50
36
41
Malta
56
59 47
96
47
Mexico
81
30 69
82
24
Morocco
70
46 53
68
14
Netherlands
38
80 14
53
67
New Zealand
22
79 58
49
33
Norway
31
69 8
50
35
Pakistan
55
14 50
70
50
Peru
64
16 42
87
25
Philippines
94
32 64
44
27
Poland
68
60 64
93
38
Portugal
63
27 31
104 28
Romania
90
30 42
90
52
Russia
93
39 36
95
81
Serbia
86
25 43
92
52
Singapore
74
20 48
8
72
Slovak Rep
104
52 110 51
77
Slovenia
71
27 19
88
49
Spain
57
51 42
86
48
Sweden
31
71 5
29
53
Switzerland
34
68 70
58
74
Taiwan
58
17 45
69
93
Thailand
64
20 34
64
32
Trinidad
and 47
16 58
55
13
Turkey
66
37 45
85
46
U.S.A.
40
91 62
46
26
Uruguay
61
36 38
100 26
Venezuela
81
12 73
76
16
Vietnam
70
20 40
30
57
Tobago
Table Adopted from “Dimension Data Matrix” (Hofstede et al, 2010)
Asia
Bangladesh China
Long Term Orientation
Power Distance Index 120 100 80 60 40 20 0
Hong Kong India Indonesia Iran Individualism Index
Japan Korea South Malaysia Pakistan Philippines
Uncertainity Avoidance Index
Russia Masculanity Index
Singapore Taiwan Thailand Turkey Vietnam
Africa and Middle East
Long Term Orientation
Power Distance Index 80 70 60 50 40 30 20 10 0
Individualism Index
Africa East Africa West Arab countries Morocco
Uncertainity Avoidance Index
Masculanity Index
Europe
Austria Belgium Bulgaria Croatia Czech Rep
Power Distance Index 120
Denmark El Salvador
100
Estonia
80 60 Long Term Orientation
40
Finland Individualism Index
20
France Germany
0
Great Britain Greece Hungary Ireland
Uncertainity Avoidance Index
Masculanity Index
Italy Latvia Lithuania Luxembourg Malta Netherlands Norway
North America
Long Term Orientation
Uncertainity Avoidance Index
Power Distance Index 100 90 80 70 60 50 40 30 20 10 0
Individualism Index Canada U.S.A.
Masculanity Index
South America
Long Term Orientation
Power Distance Index 100 90 80 70 60 50 40 30 20 10 0
Argentina Brazil Chile Individualism Index
Colombia Czech Rep El Salvador Mexico Peru
Uncertainity Avoidance Index
Masculanity Index
Trinidad and Tobago Uruguay Venezuela
Australia and Newzealand
Power Distance Index 100 80 60 Long Term Orientation
40 20
Individualism Index Australia
0
Uncertainity Avoidance Index
New Zealand
Masculanity Index
Explanation of Hofstede Dimensions of Culture The Hofstede Cultural Dimensions is an ―applicable framework for classifying cultural patterns‖ Carter and Lee (2009:122). He identified five dimensions to compare cultures of different countries these are known as power distance, uncertainty avoidance, individualism and Long term Orientation (Carter and Lee, 2009). These are explained as follows: Power Distance (PD) Power distance represents the way societies treat humans on unfairness (Carter and Lee, 2009). ―Collectivist Countries‖ Carter and Lee (2009:123) have high power distance as compared with ―individualistic societies‖ (ibid). Almost all developing countries have a higher rating on collectivism and power distance (Carter and Lee, 2009).It is also the culture of organizations were few individuals make decisions about their functioning (ibid) were as it is the vice versa in low Power distance countries. Uncertainty Avoidance (UA) This relates to future uncertainties and how do societies try to overcome while dealing with them (Lee and Carter, 2009). Countries with High Uncertainty Avoidance are risk takers and not hard working (Carter and Lee, 2009). A high Uncertainty Avoidance transforms into an identity for a society and its norms which result in avoidance of risk taking (ibid).Thus companies have to put in their efforts into marketing and creating a positive perception of a brand or product Carter and Lee (2009:124). Individualism (IDV) Individualism means what value a society gives to individual efforts and achievements in relation to people living around that particular individual (Carter and Lee, 2009). Countries that show high individualism score show that the rights and freedom of individuals are respected (ibid). Such people are good in building relationships with people but these relationships are often characterized as being weak (Hofstede et al, 2010). Low individualism score means more collectivism and strong families (ibid).
Masculinity (MAS) It basically explains the roles of male and female members in a society where there is stereo typical difference (Carter and Lee, 2009). It explains whether societies re-enforce this role of male as being a dominant member as against females or not (Hofstede et al, 2010). High Masculinity means high gender differentiation and low masculinity means the opposite (ibid). Long Term Orientation (LTO) This is the fifth dimension in the model (Carter and Lee, 2004). This dimension was added to explain the difference of thinking between the eastern and western societies (ibid). The influence of the teachings of Confucius on the eastern value system was used as a classification for this orientation (ibid). A long term orientation would mean having determination, carefulness, to give prominence to relations in an orderly manner and finally having a sense of embarrassment (Hofstede et al, 2010). Short term orientation means stability in personality, saving grace, respecting traditions and exchanging gifts (ibid).
