Effects of Cultural Differences on International Trade


Knowledge of cultural differences is crucial in international business. It is essential that global companies take time to appreciate the cultural differences exhibited in different countries. Studies indicate that there exist considerable differences in the attitudes that people from different countries attach to different aspects of life. These cultural differences shape the work culture that the given people attach towards what they do. For multinational companies, it is necessary to identify the cultural differences between countries; this enables avoidance of importation of a model from one country to another. The knowledge, gained from analysis of cultural difference, provides companies with crucial information on what to do to be successful in the foreign countries.

Multinational companies should foster three fundamental skills for their success in a new culture; skills for personal maintenance, skills for creating working relationships with the natives and lastly, skills for appreciation of the host environment and its social dynamics (Black, Mendenhall & Oddou, 1991). Hofstede (1984) posits that when many individuals relate to one another through origin variables such as the education system, sex and nationality, they attach similar value to their social environment and, hence, have a shared culture. Routamma and Pollari (1998) observe the significance of this subjective view of culture to the success of International Corporations as juxtaposed to the concrete infrastructure, as presented by the objective view.

In order to comprehend the varied values that different societies attach to work, Hofstede (1984) points out four key dimensions: the power distance, it points out the level of a society’s acceptance in the difference between those endowed with powers and the less privileged. Individualism establishes the compactness in the society in terms of ties developed among different people: individualism describes societies, where individuals do not care much about others. Collectiveness is the complete opposite of individualism. It exists in societies, where strong bonds describe societal members. Risk avoidance is exhibited in societies, where people fear engaging in activities if they do not know the outcome. Masculinity, on the other hand, describes societies that have well articulated gender roles. On the contrary, femininity assumes societies, in which there is frequent overlapping of social gender roles.  The aspect of cultural dimensions, as outlined by Hofstede, is crucial in explaining the difference in values witnessed in varied countries. For instance, Pakistan and other Middle East economies are the representatives of masculine and collective countries, while the United States of America stands for feminine and individualistic economy.

Literature Review

Pakistan exhibits a greater power distance and masculinity dimensions, when considered with regard to the U.S. The U.S. is a feminine and small power distance country. The Americans, unlike their Pakistan counterparts, show a remarkably small power distance between the people with powers and those without the powers. The level of interaction between people having powers and the less privileged in the U.S. is exceptionally high. In Pakistan, those in authority are almost untouchable; power is worshipped in this country. In terms of masculinity dimension, Pakistan is a masculine country; the males have the privilege of making key decisions concerning the society. This is exhibited from the family level, where the husband is in charge. This extends to the national level; the political scene is a male dominated one. Considering the level of individualism, Americans are found to be highly individualistic. The Pakistanis are less individualistic, as Muslims, they deeply embrace unity. This enhances their coexistence as a collective group, ready to share in the happiness and sorrows of one another. The degree of uncertainty avoidance is unusually high in Pakistan, when compared to the U.S. (for more information, see table 1). In the U.S., a feminine culture dispute resolution is mainly through negotiation and compromise. On the other hand, good fights describe conflict resolution in masculine cultures. The leadership in the masculine culture is unusually aggressive; deliberation over issues is not enforced. The leader considers nothing other than the facts underlying the issue. In terms of management, a feminine culture embraces consensus. The decisions, made in such a culture, should reflect the expectations of all interest groups, as opposed to the scenario in a masculine culture (Hofstede, 1991).

Pakistan is a high power distance, while the U.S. is a low one. Small-power distance countries are stronger in terms of uncertainty avoidance, when compared to their high-power distance counterparts. Hofstede (1991) compares organizations in countries with stronger uncertainty avoidance to the well-oiled machine; these are machines, which run with minimum breakdown. The organizations in such countries experience minimum interference from the authorities. Multinational businesses thrive in this culture. On the other hand, in the high power distance countries, there is extremely low uncertainty avoidance. This culture only favors family organization (Hofstede, 1991).

Table 1. Hofstede’s Cultural Dimension in the Case of Pakistan and the U.S.

Cultural dimension



Power distance

Very High








Uncertainty avoidance



Claxton and Mclntrye (1996) recognize the value of understanding cultural differences in globalization. The recent years have witnessed an increased desire to align global activities with culture (Schwartz & Ros, 1995). The ‘social programming’ model, traceable to Hofstede is a powerful tool for cultural analysis (Schwartz & Boehnke, 2004). People attach different values and attitude towards work. It is critical for international companies to carry out cultural studies in the foreign countries before investing in those countries. This will enable companies strategically position themselves in such countries. By aligning strategies with the people’s culture, the companies receive broad and quick recognition in the foreign countries.       

The products, offered by such companies, meet the cultural expectations of the people; as such, wider markets for the companies’ products and services are created (Schwartz & Sagie, 2000). Concerning the work culture, Schwartz (1992) provides a rich theoretical definition and types of values as observed by different work cultures.  Vunderik and Hofstede (1998) compiled a list of values attached to work and the goals that such cultural values aim to achieve.

Achievement refers to the individual success obtained, using one’s capabilities, while embracing the set social standards that all societal members are to observe.

Benevolence is a social attribute that is concerned with the ability of being useful to others in times of need. It encompasses honesty and true friendship.

Conformity - individuals are expected to be able to restrain themselves from acting in given ways. Impulses that can result in unprecedented injuries or loses to others are to be controlled. Honoring of parents and all elders is one of the fundamental ideas of this cultural value.

Hedonism - this cultural value responds to the desire of societal members to achieve joy and pleasure. It is, indeed, common for individuals to seek activities that present them with an opportunity to achieve self-actualization. In pursuit of pleasure, individuals become restless.

Power - individuals who pursue power in a society are interested in achieving social status. It is believed that power gives an individual an opportunity to control others in the society. It is a common source of perennial conflicts in societies. In societies, where people are greedy for power, less work is done since time is spent in conflict resolution. Different types of power exist: social power, wealth as well as social identity.

Security, peaceful coexistence and societal stability are the main goals of this societal value. Positive relationships are only possible, where there is security in the society.

Self-direction, this value type is associated with an individual’s ability to independently carry out the tasks expected of him/her with minimum supervision. It is often taken as a measure of personal maturity.


Regardless of the advances in international trade, cultural inconveniences remain a challenge to this trade.


Analysis of the types of values and work values between two diverse cultures was the aim of the research. In this analysis, Hofstede’s dimensions method was chosen due to its wide applications and relevance, making it applicable to the two countries. Another tool of analysis, the long-term against short-term dimensions, was not considered due to its limited application in the two countries of concern. This analysis was carried out through the administration of questionnaires on 20 Americans and 20 Pakistanis. Irrespective of the sample taken, this would adequately represent the larger population since the participants hailed from different regions of their respective countries. A seven degree scale was used during the administration of the value questionnaires, so that the participants choose the values indicated in order of priority.

A comparison of the rankings on sub-values will be carried out. As will be noted, the value parameters, attained from the U.S. data, vary from those gotten from Pakistan. This could be attributed to cultural deviations and varying conceptual environment. A five degree questionnaire (Vunderink & Hofstede, 1998) was used in evaluating the work goals. The items listed unveil the importance of having a presentation of goals in a perfect job. In the feminine and distinct cultures, the distinctions between male and female interviewees have no significant influence. In harmonized and masculine cultures, the evaluations of the values varied even more from each other, even though the first fifteen values showed some similarity. The women’s status, however, varied.

Discussion of the results




1. Self-respect

2.Family security

2. Family security

3.True friendship

3. True friendship

4.Self respect

4. Health


5. Inner harmony


6. Freedom

7.Inner harmony

7. Loyalty

8. Loyalty

8. Honesty

Arrangement of the similarities of types of values in order of priority in the two countries



1. Enjoying life

1. Honoring of parents and elders

2. Responsibility

2. Meaning in life

3. Mature love

3. Capability

4. Equality

4. Successfulness

5. Sense of belonging

5. Cleanness

6. Independent

6. Social justice

7. Politeness

7. Helpful

Arrangement of the differences in the types of values in order of priority in the two countries

In a comparison of the samples, in each of the cultures, marked similarities were noted as shown in the first table. In the tables, the values similar in both cases were highlighted in order of priority in each country. The varying values also were arranged for each country in each column in order of increasing priority. As indicated, issues to do with health, security of the family, respect for oneself, liberty/freedom, harmony/unity and loyalty were shared in both countries. The varying values in effeminacy involved having fun, obligations, love, parity, self-sufficiency and politeness. Similarly, masculine focused cultures treasure obedience to parents and elders, purpose of life, ability, and being of help. All these fit perfectly in the personage of the cultures. The masculine culture seems to be spanned by ability and achievement in the harmonized culture group, in which achievement is more crucial compared to distinct responsibility.

 Attainments in terms of respect for oneself are the most esteemed values among the masculine and harmonized cultures. Another value of equal importance is conformity with respect to parents and elders. Family safety, wellness and cleanliness are also highly valued, implying that security is treated with utmost urgency in a highly harmonized culture. Moreover, the purpose of life, friendship, solidarity and freedom/liberty were also included. For instance, the placement of respect for one’s self and capability, both associated with attainment in the table may be linked to the masculine civilization, in which power and efficiency are upheld. In a distinct culture, one’s wellbeing, self-reliance, and liberty to some extent are viewed to be more important as compared to a communal culture. Single sub-values, honest friendship and family wellbeing are treated in equal importance in the two cultures. This could be attributed to collectivism as well as feminism. In feminine and distinctive cultures, having fun is the most characteristic culture based value. This is not valued remarkably in the masculine culture as per the respondents.



1.Adequate time for personal life

1.Optimal integration of skills and abilities

2.Optimal integration of skills and abilities

2.Performance rewards

3.Handling of challenging chores

3.Active participation in the company’s prosperity

4.Maintaining a positive work relationship

4.Capacity for promotions

A comparison of the work values in the two countries

The above table indicates comparison of work values in effeminacy; individual culture carries two variations in the table which include ‘challenging chores to fulfill’ and ‘maintaining a good working relationship with cooperative individuals’. On the contrary, ‘appropriate rewards for good work’, ‘active participation in a company’s success’ and ‘capacity for promotions’ are more related to masculine and collective culture. In comparison, for feminine and individual culture, time allocation for personal life is of utmost importance, whereas in masculine culture, it is of least importance. Therefore, as it can be seen, there are marked differences in the way people of different cultures relate to work. These variations are either inclined to masculine, collective cultures, or feminine, individual cultures.


The findings of this study are a confirmation of the previous studies, which consented to the statement that there are inconveniences to international trade because the culture should be evaluated and corrective measures taken. The study also unravels the level of conformity within some members of the society in relation to their values. It shows how committed the members are to their values and gives out clear-cut differences in the levels of commitment in different values. It highlights the shared values on either side of the cultures. The most cherished values among the masculine collective culture were identified as respect for oneself, capability, attainment and respect for parents and elders. Of similar importance are inner solidarity and purpose of life, safety of the family, social order, health and permissible coexistence. Feminine and individual culture, on the other hand, valued having fun in life, mature love, honest friendship, family safety, liberty, self-reliance and to some level a spiritually rich coexistence.

As can be derived from the two cultures, the masculine culture is more centered on the outward appearance, demanding and depicting dominance. The feminine culture, on the other hand, is centered on the inner self, relying on the emotional security. The masculine, collective culture is associated with application of skills and capabilities in the workstation. People from this culture were also associated with pursuing recognition in their jobs and participation in the success of the company. All these should be accompanied by aggressiveness, a character associated with masculinity. This aggressiveness in pursuing recognition as well as success of the company is more often accompanied by promotions. Therefore, to succeed in international business, the businessperson is required to appreciate these intercultural differences. The person should understand those values appreciated in both cultures such as maintaining a proper working relationship with not only the supervisor but also with the rest of the workmates. The businessperson is supposed to be able to arrange these values in order of priority, so as to be able to address them systematically in establishing a good working relationship with the customers.

 Lack of proper understanding of the individual’s values can be met by immature decisions such as recruitment of unqualified expatriates in the international trade business. In setting goals for the feminine and individual cultures, adequate time for recreation should be factored in the schedule. This can also be accompanied by including challenging tasks in achieving goals than dealing with straightforward challenges. This serves as a motivation to these people to focus more on finding solutions to the problems. A manager employed to foresee the running of the company as foreign culture requires appropriate induction into the process through trainings on the different cultures. These trainings should be tailored towards the culture, in which the manager is going to operate. If he is going to deal with masculine, collective culture, the training should be focused on making it a task-oriented. For a feminine culture, implying a benevolence and self-direction, the training should focus more on human orientation.

Consequently, using either of the managers to the different circumstances of operation is almost impossible. Therefore, managers in the feminine, individual culture would find it hard to run a masculine, collective culture and vice versa. These results reflect the situation on the ground. This is because in the interview method, used in the data collection, firsthand information was obtained. Discrepancies in the information given were clearly elaborated, and it was easy to judge the integrity of the information given.  Concerning this topic, further studies should be focused on the cultural diversity in terms of the personality of the individuals (Routamaa & Rautiainen, 2002). The global business world in all perspectives is a multicultural environment. It is, therefore, important that managers and other related parties get to know the dimensions of these cultures, which are always a challenge.

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