Pestle Analysis and Hofstede to Compare USA and Saudi Arabia (Essay Sample)

INTERNATIONAL MANAGEMENT
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 TOC \o "1-3" \h \z \u HYPERLINK \l "_Toc471851900"Introduction  PAGEREF _Toc471851900 \h
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HYPERLINK \l "_Toc471851901"Macro Level Facts of the US and Saudi Arabia  PAGEREF _Toc471851901 \h
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HYPERLINK \l "_Toc471851902"Geert Hofstede’s Cultural Dimensions  PAGEREF _Toc471851902 \h
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HYPERLINK \l "_Toc471851903"Criticism of the Geert Hofstede  PAGEREF _Toc471851903 \h
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HYPERLINK \l "_Toc471851904"Analysis of Culture  PAGEREF _Toc471851904 \h
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HYPERLINK \l "_Toc471851905"Conclusion  PAGEREF _Toc471851905 \h
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HYPERLINK \l "_Toc471851906"References  PAGEREF _Toc471851906 \h
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International Management
Introduction
Today, some companies have become disillusioned with sales in their local marketplaces as many players come in with the intention of increasing their marker shares. Some enterprises that face shrinking prospects in the local markets have managed to achieve significant economic growth and profitability by venturing into the global market. In the process, such changes have led to globalization and made the world highly connected village. From a business perspective, globalisation refers to the worldwide drift towards financial, economic, communication, trade, and social integration (Lynda 2012). While operating in the world market, enterprises must understand that every country has a unique culture that influences how workers and consumers go about their everyday activities. The aim of this report is to provide a detailed analysis of the cultural aspects of the USA and Saudi Arabia to help the executive team working at Vocalink work in harmony and help the organisation realise short-term and long-term goals in the global market.
Macro Level Facts of the US and Saudi Arabia


Figure  SEQ Figure \* ARABIC 1: Location of the USA and Saudi Arabia
PESTLE Analysis
PESTLE analysis is a strategic management tool that organisations and managers use to scan the environment to determine factors that may affect their activities and ability to achieve success (Henry, 2011).The tool identifies and analysis the macro-environmental issues and factors that can influence market growth or decline, opportunities, and business position.
Political factors
The United States boasts of a robust, efficient and democratic set up that supports the rule of law. The nation enjoys significant economic and political influence over local, regional, and global policy development and implementations. According to Jolibert, Mühlbacher & Flores (2012), the US is a leading super power in the globe that wields significant influence on global politics. Despite this being the case, some people criticise the country for its interventionist principles and policies on terrorism. The political environment in Saudi Arabia is also stable. The country is led by the royal family and uses Sharia laws to promote peace and harmony in the society.
Economic
The United States remains the largest economy in the world. The nation has a well-developed financial system that gets its primary strengths from the manufacturing and service industries. Like any other developed economy, the US is prone to recession. During the 2009 financial crises, the nation witnessed a negative economic downturn characterised by reduced earnings and soaring unemployment rates (Wolf, 2017). Fortunately, the administration put in place measures that helped the world's largest economy recover from the crisis (Wolf, 2017). Saudi Arabia is one of the leading producers of oil. The country has a strong economy that significantly depends on its petroleum resources. It is also worth noting that the United States boasts of the highest GDP in the world. In 2016, the country had a GDP of US$ 18 trillion compared to Saudi Arabia’s US$ 646 billion (World Bank, 2016a; World Bank, 2016b).
Social factors
Like most developed countries, the United States faces the challenge of an ageing population that threatens the supply of labour and can lead to a rise in tax rates in the years to come. Despite this being the case, the country boasts of a well-established healthcare and education systems. Saudi Arabia is predominantly an Islamic nation governed by Sharia laws (Geert Hofstede, 2016). Despite this being the case, western practices are slowly creeping into the country’s tourism, restaurant, financial and sports sectors.
Technological factors
Technology and innovation are the cornerstones and building blocks of the US economy. Over the years, the US has cut a niche for itself as a world leader when it comes to the development and adoption of new technology (Geert Hofstede, 2016). Although other countries are working hard to catch up, the US still reigns supreme when it comes to technological advancements and innovation. Saudi Arabia is also a technologically advanced nation. IT use in Saudi Arabia has increased in last decade making it one of the most advanced countries in the Gulf region.
Legal
The US has both codified and un-codified laws that define its constitutions and influences how citizens go about their everyday life and activities. The Congress often comes up with regulations and policies that touch on various areas of the economy such as foreign relations, education, manufacturing, healthcare, and international trade (Hinrichsen et al., 2010). Saudi Arabia, in contrast, relies on Islamic Sharia laws. However, some people accuse the Gulf state of injustices and malpractices that go against international laws.
Environmental factors
Regarding environmental factors, the US has rules and regulations that aim at protecting the environment and promoting sustainability. Despite this being the case, population from industries and transport systems remains a major issue of concern for the government (Muller, 2011). Saudi Arabia, on the other hand, is a desert country that works hard to get the best from its natural resources.
Geert Hofstede’s Cultural Dimensions
Prof. Geert Hofstede carried out one of the most efficient and comprehensive studies to determine how culture influences workplace values. Hofstede defined culture as a programmed mindset that differentiates members of a particular group from the rest of the world or community (Hofstede, Hofstede and Minkov 2010, p. 6). From the results of the study, Hofstede came up with a cultural model that compares members of different cultural groups. Figure 2 below gives a comparison of the cultural elements and orientation in the USA and Saudi Arabia.


Figure  SEQ Figure \* ARABIC 2: Comparison of Cultural Dimensions in the USA and Saudi Arabia
Power distance
In the Hofstede's framework, this dimension focuses on the notion that people are not quality and will express a particular cultural attitude towards the power inequalities. Power is the extent to which member of a given group accepts uneven or unequal distribution of influence and power in the society. The US has a low score of 40 in the power distance element. The score shows that the country focuses more on creating equality rather than maintaining a hierarchy (Samovar, Porter & McDaniel, 2009). In the place of work, hierarchy only serves as a mechanism for achieving convenience. Furthermore, promotion and hiring is based on previous success and not seniority and age (Khatri, 2009). Saudi Arabia, in contrast, has a high score (95) in the power distance index showing that its people value and accept hierarchy. In an organisation, for example, subordinates expect their autocratic bosses to tell them what to do.
Individualism
The fundamental issue in this dimension is the extent of interdependence among community members. With an individualism dimension score of 92, the US is an ideal example of an individualist society where people concentrate on their welfare and that of their direct family members (Geert Hofstede, 2016). This trend contrasts heavily with Saudi Arabia’s low score of 25 that makes it a collectivist society where people focus on promoting the welfare of the community as a whole. In such a society, people take responsibility for fellow members.
Masculinity
This element of the Hofstede framework explains the extent to which the community emphasises on masculine orientation towards achievements, ambitions, and acquisitions over feminine traits of interpersonal harmony and nurturance. The US has a score of 62 in this parameter showing that it is a masculine society driven by achievement, success, and competition (Geert Hofstede, 2016). Saudi Arabia also has an above average score of 60 that point towards a masculine-oriented society. Thus, managers in both countries show assertiveness and focus on equity, performance, and competition.
Uncertainty Avoidance
This dimension deals with the manner in which the society deals with the unpredictability of the future. The US has a low score on this parameter (46) showing that its citizens accept change, innovation, new ideas, and technology (Geert Hofstede, 2016). In contrast, Saudi Arabia has a high score of 80 that indicates that members of the society tend to avoid uncertainty. This score explains the existence of rigid codes and rules that define everyday behaviour and ideas in the country.
Long-term orientation
This fifth element refers to the way a society strives to maintain links with the past when addressing present and future problems. The US has a...