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International Business on Multinationals

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This report explains Hofstede model, types of economic & social inequalities on multinationals

4 Pages 899 Words 2387 Downloads


International business means when company carries out its activities outside the boundary of home/ parent country (Dunning, 2012). This project will explain Hofstede model, types of economic systems and its effect on society and social inequalities, and what implication does social inequalities have for multinationals.


Reasons of globalisation

Improved transport, making global travel easier.
For improving technology which makes it easier to communicate and share information around the world.
Reduced tariff barriers
For raising mobility of capital and labour.

Benefits of free Trade

Free trade means when organisations are doing import and export without any tariff barrier. It helps to all countries because-

It usually boosts the quality of life for a nation because it provides more options or opportunities to consumers.
It develops innovation because the flow of trade circulates new ideas.
It minimizes the corruption in country.

Features of Cultures High on Power Distance

In this people are dependent on person who have strong power.
Society doesn't question the decision of leader and there is no close relationship between people and leaders who only want to earn more money.
In society, there are inequalities among people and unequal distribution of power (Minkov and Hofstede, 2011).

Management Implications with Cultures

They are similar in some respect and different in others. Dimensions can be grouped in following way-

Society selects that way to cope with the inherent uncertainty of living. In this Hofstede identifies three dimensions like masculinity, uncertainty avoidance and power distance.
Hofstede differentiates between a long-term versus short-term orientation (Folsom and,

Globe Cultural Framework

Globe means “Global Leadership and Organisational Behaviour Effectiveness”. It is research programme extended Hofstede 's work by investing cross cultural leadership behaviour to help the manager. This framework is different from Hofstede framework in the following manner-

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Hofstede model has only six dimensions while in GLOBE nine dimensions are exist.
Hofstede is used in information technological; sector while Globe is used financial and telecommunication sector (Hofstede, 2011).


Types of economic system

An economic system is a system of production, resource allocation and dissemination of goods and services. There are four types of it which are as follows-

Traditional- In this, new generation retains the economic position of their parents and grandparents. They rely on historic success of social customs.

Market- This system is based on consumers and their buying decisions rather than under government control.

Command- In this, government controls and directs all economic activity. For example- Communism. In this, market has no role.

Mixed- In this, there are combination of market quality and command system into one. In this no one can only control the country and here some resources are allocated by government and some are allocated by market.

Effects of economic system on organisation

An economic system affects an organisation structure. If there is command system then company has to work according to the government direction and government will watch the operation of company time to time (Altaf, 2011).

In mixed economy, business and government will work together. There is less control of government etc. Then business can be run easily.

Social Inequalities

When in the society, there are inequalities or difference in opportunities and rewards then it is known as social inequalities. In other terms it can be said that when there are unequal opportunities provided and prize for different social positions or status within group then it can be termed as social inequalities.

If there is implication of inequalities in an organisation then employees will be demotivated and may leave the company and may not work accordingly (Minkov and Hofstede, 2011).

Difference Between Teleological and Deontology Theory

Deontology is also known as duty based ethics while teleology is known as result-oriented ethics.
Teleology evaluates past experience for predicting the result of present action while deontology follows what is morally right based on the values that are inspires each person (Difference Between Deontology and Teleology. 2017).


From the above study it is concluded that globalization has many benefits like improvement in transportation etc. There are many types of economic systems like mixed economy, market system, command system etc. Free trade encourages people to do more import and export that will help in the development of country.


  • Dunning, J.H., 2012. International Production and the Multinational Enterprise (RLE International Business). Routledge.
  • Folsom, R.H. And, 2012. International business transactions: a problem-oriented coursebook.
  • Hofstede, G., 2011. Dimensionalizing cultures: The Hofstede model in context. Online readings in psychology and culture.
  • Minkov, M. and Hofstede, G., 2011. The evolution of Hofstede's doctrine. Cross Cultural Management: An International Journal.
  • Altaf, A., 2011. The Impact of Organizational Culture on Organizational Effectiveness: Implication of Hofstede Cultural Model as Organizational Effectiveness Model. International Journal of Interdisciplinary Social Sciences.
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