Hofstede Analysis Canada Canada is the top country in the world for an American business to expand because of its very similar culture to the United States. Geert Hofsted a prominent psychologist has studied the Canadian way of life and has set up a ranking system that proves why Canada is so ideal for American businesses to operate. Hofstede’s ranking system is based on analyzing 5 dimensions that target key aspects of a country’s society. These dimensions are power distance, individualism, uncertainty avoidance, career success and planning for the long term horizon.
Power Distance This dimension measures the rigidity or flexibility of a country in terms of how its organizations structure their management and subordinate relationships. If a country has a high power distance, management structures seem to be more rigid or hierarchal and a chain of command system is in place. Rarely will an employee bypass his supervisor for it may be considered an act of insubordination. On the other hand, a country with a low power distance may have a management structure that is more flexible or flat.
In this case it would be a cultural norm for an employee to go around his supervisor if it was the best way to accomplish his work (Adler, and Gundersen, 2008). Looking at Hofstede’s ranking system, Canada has a score of 39 out of 53. On this scale 1 is a very high power distance and 50 is a very low power distance. The United States has a score of 38 and therefore almost identical to Canada. The reasons why Canada’s power distance is so low has something to do with how open Canadians are with each other. Like the United States the government allows freedom of speech which gives its citizens more say in how they would like to be governed.
This government style is also seen in the private sector where managers and subordinates communicate very openly in discussing how their businesses should operate. This business environment is very attractive to American businesses since they are already accustomed to the same organizational structure. Individualism This dimension measures societies view on how important it is for an individual to rely on himself as opposed to relying on a collective group or organization. Countries whose societies are very individualistic primarily act in a way that will benefit themselves and their immediate families.
Countries that are on the opposite extreme are very collective and individuals act in a way that will benefit the group of which they belong (Adler, and Gundersen, 2008). Hofstede’s ranking system puts Canada with a score between 4 and 5 out of 50. 1 is being very individualistic and 53 being very collective. Compared to the United States, Canada is in the same category. The United States however is ranked #1 and therefore more individualistic than Canada. The main reason why Canada is close to the Unites States in individualism has something to do with the mix of French and British influences in the region.
Looking at the ranking for France they are between 10 and 11 and the British are at a 3. These numbers clearly explain why Canada fits right in the middle. As an American business operating in Canada, it will not have any trouble motivating its employees since Canadians like Americans enjoy very similar goals that focus on individual wealth and prosperity (“Individualism in canada-historical”). Uncertainty Avoidance This dimension measures the behaviors of a society in terms of how it will avoid risk. Countries with high uncertainty avoidance dislike ambiguity and will not make decisions unless outcomes are highly certain and predictable.
Those countries with low uncertainty avoidance take a lot of risk and make decisions based on the ones that will bring the greatest reward (Adler, and Gundersen, 2008). Canada is ranked between 41 and 42 and the United States is ranked 43 so both those countries have low uncertainty avoidance. 1 is considered the highest uncertainty avoidance and 53 is the lowest uncertainly avoidance. According to Hofstede, Canada is only marginally more conservative to risk then the United States. This ranking system is about 10 years old and the gap of risk between the countries could be a little wider.
Looking at the banking industry in particular there has never been a bank failure in Canada since the Great Depression. On the contrary, the Unites States has had over 71 bank failures in 2011 alone (“2011 list of,” 2011). Clearly Canadians understand the importance of financial stability and profitability and for that reason it makes it very appealing for American businesses to invest their money in Canada. Career Success/ Quality of Life This dimension compares two types of societies that either focus on the acquisition of money and material possessions or the emphasis on relationships and the overall quality of life.
Career oriented countries have more defined roles for men and women while quality of life countries provide more flexibility. For example, some countries who are career driven want their women to stay at home while others who enjoy a quality of life expect their women to work outside the home and therefore offer long periods of maternity leave (Adler, and Gundersen, 2008). Canada’s rank on the system for this dimension puts it at 24, which is very balanced on the scale. 1 is considered very career orientated and 53 is more quality of life orientated. The United States is ranked #15 and is therefore more career oriented compared to Canada.
Canada is considered a well balance society because of its hybrid economy. It is considered partly socialistic and partly capitalistic. As an American business looking to operate in Canada it can definitely profit from this type of system. Canadians are hard working individuals who work a typical 40 hours a week. The government provides socialized medicine so an American company won’t have to pay for employee health coverage. Since the cost of medical insurance in America has been going up 9% percent each year it may be practical to close an American business and completely operate out of Canada.
Long-term/Short-Term The last dimension has to do with how a society views its time horizon. Countries that have long term horizons cultivate values of thrift, perseverance and long term sacrifice. Short-term countries have the opposite orientation. Their values are focused on the past and present, like steadiness, tradition and reciprocation (“Hofstede: long”). The ranking system for this dimension is out of 34 with 1 being long-term and 34 being short-term. Canada is found closer to the short-term spectrum with a score of 30; a bit more short-term than the United States with a score of 27.
Canadians are very much like Americans in this dimension since they like to spend their money and not save a whole lot. Individuals make many of their decisions on tradition which stems down to the British influence in the area. Overall Americans selling products in Canada would find this cultural environment very attractive. Like Americans, Canadians are big consumers and will buy anything that matches their tastes and preferences. Increasing production in Canada will open up greater economies of scale since Canadians make more money than Americans and spend just as much.
In conclusion, Canada is a prime location for an American firm looking to expand business outside the United States. By looking at Hofstede’s dimensions, almost all of them except quality of life are very similar to the United States. Since theses dimension are quite common, American businesses won’t find it hard to relate to Canadians and adapt to their business environment. By being accustomed to the similar language and culture, Americans will have no difficulty managing and motivating Canadian employees to be productive.
Although Canadians focus a little more on quality of life than Americans, it can still be an advantage to American businesses. The fact that the Canadian government pays for the health costs of its citizens, it thereby eliminates the costs of American businesses paying for health insurance. As a result of these advantages and many others, Canada is overall the most compatible country for American businesses to expand than any other country in the world. Given the similar business environment and cultural way of life, Americans will be able to operate efficiently and a make substantial amount of profit.
Bibliography Adler, A. J. , & Gundersen, A. (2008). International dimensions of organizational behavior. (5 ed. , pp. 51-60). Mason,OH: South-Western Pub. Individualism in canada-historical sources. (n. d. ). Retrieved from http://internationalbusiness. wikia. com/wiki/Individualism_in_Canada-Historical_Sources 2011 list of failed banks. (2011, August 15). Retrieved from http://www. bankrate. com/finance/savings/2011-list-of-failed-banks. aspx Hofstede: long term / short term. (n. d. ). Retrieved from http://www. andrews. edu/~tidwell/HofstedeLongTerm. html