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The University of Texas at Dallas

Germany and South Africa: A Cross Cultural Analysis of


Business Practices and Values

Jason Harris
Raymond Lou
International Business
Professor Carraher

Extended Abstract
Purpose. This study examines the values of Germans and South Africans and how their
cultural differences affect the business practices in each country. The values observed will relate
to Schwartzs Value Model while Hofstedes Model will show the cultural differences between
Germany and South Africa and how they relate to business styles in each region.
Design/Methodology/Approach. The data within has been extrapolated from a variety
of journals and articles; the data acquired in the journal was gathered from a variety of samples
within each region via methods such as interviews, questionnaires, and firsthand experiences.
Findings. The findings indicate that both the differences in values and culture have a
substantial effect on management methods, business structures, and practices. Through the
examination of long-term orientation, indulgence, and uncertainty avoidance aspects of each
culture, it is possible to correlate many differences in culture. Additionally, the similarities
between the two countries in relation to individualism and masculinity show that, despite the vast
cultural differences, both countries seem to share a few social values. Finally, the differences in
power distance indicate the effects of respective political climates.
Originality/Value/Contribution. This study is original in that it uses multiple methods
of data collection in tandem with well-known cultural and value models to portray how different
countries carry out similar functions and how they manage employees. This analysis will help
develop strong logical skills and will improve understanding of international cultures.
Furthermore, the results can be used in consideration of other countries and similar trends can be
discovered.

Introduction
Germany is widely considered the most successful European country in regards to
business and is the subject of numerous business studies. Its largest bank, Deustsche Bank, is
ranked 7 worldwide and manages $384.1 billion in assets. Germanys success is often explained
by its national culture and work ethic. As such, it is valuable to assess German business acumen
through the scope of Hofstedes six dimensions of culture and Schwartzs ten values theory.

South Africa is a quickly developing country with incredible potential. As South Africa
grows, there is an increasing demand for banking services. Although it is one of Africas most
developed countries, its infrastructure and political stability make it drastically different from
other countries in the region. As a result, interesting differences in business practices have
emerged such as the strong growth of mobile banking via mobile phones.

Through careful analysis of cultural and value differences and similarities, it is possible
to identify trends. These trends are applicable towards conducting business in both countries.
Furthermore, the findings would be applicable for other countries with similar cultures and
values.

This study is designed to provide significant insight as to how informal institutions


govern firm behavior in Germany and South Africa. Managers should study and understand
cultural differences when operating in an unfamiliar location because some companies often
implement home-country practices in subsidiaries located in countries where the home-country
practices will be ineffective (Portz & Lere, 2010, p. 45). Such ineffective methods can be

avoided simply by understanding the culture and the values that influence effective work
practices in order to provide favorable results.

Literature Review
Hofstedes Model. The basis for identifying the attributes of a particular culture is
through dimensional analysis as proposed in Hofstedes Model of Cultural Differences.
Hofstedes model includes six dimensions: power distance, individualism, masculinity,
uncertainty avoidance, long-term orientation, and indulgence. Each of these dimensions will be
analyzed in relation to both Germany and South Africa for cross-cultural analysis.
Power Distance
Germany. The first dimension that will be analyzed is power distance. Geert Hofstede
defines power distance as the extent to which the less powerful members of institutions and
organizations within a country expect and accept that power is distributed unequally (Hofstede).
Germany is considered to be a low power distance country because it is relatively decentralized
and made up of a large middle class. Decisions in the German business environment are made
based on facts and validity; neither seniority nor rank have a substantial effect on how business is
conducted. Germany ranks low in terms of power distance because of a sense of equality
amongst citizens. Rather than being classified by social classes that are determined by wealth,
Germany seems to be constructed of social levels that are determined by individual
characteristics such as educational achievement, intelligence, abilities and ethical attitudes
(Kramer, 1992, p. 53). Another characteristic of German culture that supports the low power
distance claim lies within their nationwide views on government. It can be agreed upon that a
majority of Germans feel that a democratic government can be trusted and that it is necessary

to have limited rules and regulations in order to maintain a peaceful community (Kramer, 1992,
p. 53). The democratic atmosphere bridges the gap between the tax payers and the law makers.
Each and every citizen has his own voice and holds the right to be heard. Government action is
based upon constituents needs and wants; this means that the power is distributed to the people.
A major implication for an expatriate manager to draw from this analysis would be to consider
the companys culture before making any decisions. In a country like Germany, it may be more
acceptable to implement a participative/consultative decision-making style that focuses on
expert opinions rather than an authoritative style that has little to no reliance on the input of
lower-level employees (Rodrigues, 1998, p. 30). A recent study into the values of German
citizens (Figure 1-1 of Appendix) indicates a trend that social relations has increased in
importance among younger generations (Alonso, Jimenez-Lopez, Garcia-Vargas, Roales-Nieto,
2013, p. 283). As this generation matures and begins to take public office, the probability that
more social programs will be put into place will most likely increase significantly. Actions like
this on the part of the government will give citizens more power to contribute to society, thus
further decreasing the power distance.
South Africa. Relative to Germany, South Africa has a higher degree of power distance.
Although South Africa is an emerging country, it is still plagued by political instability due to its
long history of apartheid culture. Starting from the late 1940s, South Africa was racially divided
between blacks and whites. The Afrikaner dominated National Party established racial
segregation as a means to control political power. In 1948, classification of racial groups began,
placing citizens into four groups: black, white, colored, and Indian. Colored and Indian groups
were further divided into sub-groups that increased ethnic separation. In 1970, political
representation was reserved exclusively for whites while citizens of the black, colored, and

Indian groups were barred from holding political office and were limited in access to public
utilities and services (Howard & Hammond, 1985, p. 20). This continued until President Frederik
Willem de Klerk negotiated for the abolition of apartheid. Finally, in 1991, apartheid was
abolished, but not until 1994, would all apartheid laws be overturned. In the 14 years since
apartheid ended, South Africa has made strides in promoting equality and fairness both in
politics and culture. However, many stigmas and negative memories between racial groups still
remain, thus contributing towards a higher level of perceived power distance. In 2011, the South
African national census, whites made up 9.2% of South African population (), but held 81% of
all management positions (Littrell and Nkomo, 2005, p. 5). Furthermore, according to the
SAIRR/Institute for Futures Research, income per capita for whites was roughly $75,000 while
blacks made $10,000 annually per person. So while legally, there is no difference between racial
groups in South Africa, there stands a huge economic gap that serves to undermine many
business relationships. In order to lower perceived power distance, there needs to be fundamental
change in South African values towards the perception of other races.
Individualism
Germany. On the other end of the spectrum is individualism. Hofstede defines
individualism as the degree of interdependence a society maintains among its members
(Hofstede). Germany ranks high in this dimension due to the fact that the individual is of utmost
importance in this society. A typical German will focus his attention on himself and his
immediate family. A good college education is considered to be a prerequisite to professional
life. Educational achievement and intelligence are important attributes in German society. For
example, it is customary to address an individual with a doctorate as Doctor because
academic titles and background are considered to convey an individuals expertise and thorough

knowledge of their particular field (Hurn, 2007, p. 358). Ones level of education not only
corresponds with his level of intelligence, but it also carries over to social behaviors. Someone
who is courteous, and speaks proper grammar in social settings is seen as an educated,
intellectual individual who deserves respect. In their culture, courtesy is an important ingredient
of human interaction (Kramer, 1992, p. 54). In order to preserve peace, one must be courteous
and conscious of others emotions, yet this should never interfere with speaking ones mind in
the case of a disagreement. Germany is considered to be a very low-context culture; this means
that words should be taken at face value. When disagreements arise, it is important to present
facts and examine all angles before reaching a final conclusion. As previously mentioned,
another indicator of intellect is language: a person who speaks proper High German shows that
he or she had a fine education and comes from a good family (Kramer, 1992, p. 55). Cultural
norms in the German society are that anyone can build their own future; for the average
German, goal orientation, dedication and hard work are the main road to economic success and
lead to a fulfilling social life (Kramer & Herbig, 1994, p. 37). While cross-referencing
Hofstedes dimensional analysis and Schwartzs Value Model, several similarities were
discovered. The values described by Schwartzs model seem to coincide with certain dimensions
of German culture. Self-direction is described as independent thought and action choosing,
creating, exploring (Schwartz, 2012, p. 5). Germans value self-actualization and dream of being
the best in their career. Similarly, achievement is described as personal success through
demonstrating competence according to social standards (Schwartz, 2012, p. 5). Both of these
values directly relate to the individualistic nature of German culture and provides a little insight
as to what motivates the typical German citizen.

South Africa. South Africa is a populous nation consisting of a myriad of diverse


cultures (Thomas, 1990, p. 111). As a result of this fragmentation, general South African social
principles value individualism. A 2009 study assessed South African individualism factor
through the use of the Five-Factor Personality Model measuring the correlation between
neuroticism, extraversion, openness to everyone, agreeableness, and conscientiousness with
individualism. Surprisingly enough, the study found that there are no significant correlations
between the five factors (Vogt, Liesl and Laher, 2009, p. 10). This seems to suggest that
personality is not a contributing factor towards individualistic tendencies. Research done at
Rhodes University profiled 37 South African business managers using Schwarzs Values Model.
The study found that 23 of the 37 managers highly valued traits under the domain of
universalism, containing traits such as respect, transparency, open-mindedness, tolerance,
understanding and appreciation(Mayer and Louw, 2012 pg. 31). The second highest score was
the conformity category containing obedience, politeness, honoring parents, sticking to norms
and orders and restraint of emotional impulses (Mayer and Louw, 2012, p. 32). These results
indicate that interpersonal relationships in South Africa are highly valued. Because of its
fragmented nature, it is vital to establish amicable business relations in South Africa (King,
Kruger and Pretorius, 2007, p. 297). Because of this focus on business professionalism, South
Africa ranks similarly to Germany in Hofstedes Model.
Masculinity
Germany. Another dimension in which Germany ranks high is masculinity. German
society is defined by competition, educational achievement, and success in all facets of life. It is
a very business oriented culture that shows little to no emphasis on femininity. The first
characteristic that truly demonstrates the masculinity of the culture is competition. Businesses

operate in a free market society built on competition that is known to contribute to higher
productivity and efficiency (Kramer & Herbig, 1994, p. 39). Only the strongest firms survive in
the cutthroat business environment of Germany. Although competition in the marketplace is
healthy and keeps organizations in line, competition within a company can prove to be
detrimental; it does not increase organizational effectiveness or efficiency in the long run and
leads to an inhospitable climate in which no one trusts anyone (Kramer, 1992, p. 54). To prove
this point, it has been noticed that although friendship is an important value in Germany, most
friendships are built for business purposes and it must be noted that business always comes first.
As noted by a recent study, the value of professional behavior is increasing in younger
generations (Alonso, et al., 2013, p.283). The increased focus on professionalism indicates that
the masculinity of the German culture will most likely continue to rise as younger generations
place more value on business practices; for a German, success on the job or success in a
professional career is a mans main purpose in life and is self-fulfilling (Kramer & Herbig,
1994, p. 37). The high degree of competition that defines the dimension of masculinity can also
be seen as the value of power. The defining goal of power is social status and prestige
(Schwartz, 2012, p. 5). Germans value power in that they are driven by competition and the
desire to be the best. Schwartz proposed a circular structure of values in which adjacent values
can be combined to describe sources of motivation in a particular society. Two important values
in Germany are power and achievement; the adjacent values have been known to indicate that
social superiority and esteem are major drivers of motivation in various societies. Some
implications for managers based on the information provided would be to encourage competition
with external competitors while encouraging teamwork and cooperation with coworkers and
other departments within the company.

South Africa. For over 40 years, South Africa was dominated by racial segregation.
Apart from racial separation, the system highly encouraged a patriarchal society. This in turn, led
to a highly masculine culture (Littrell and Nkomo, 2005, p. 9). Gender statistics presented in
2011 by Statistics South Africa show that only 40% of the workforce is comprised of women.
Despite a large portion of women in South Africa work, they are limited to unskilled and
domestic labor, 35.4% and 14.6% of working women, respectively (Pali, 2013, p. 33). This
significant gender gap can be contributed to familial obligations and burdens that are expected of
South African women (Godsell, 1982, p. 17). Many female unskilled working profession tasks
entail gathering wood, dung, and water. The disparity is increasingly apparent when considering
the racial segmentation present. Although 56.1% of white women work, only 40.2% of
Asian/Indian women and 30.8% of black women work (Pali, 2013, p. 33). South Africas
patriarchal tendencies can also be related to its past history of practicing polygamy. Women were
often married off for the purpose of political bargaining. This in turn led society to consider
women as inferior beings, even property. It wasnt until 1994 that black women could vote.
Values such as benevolence and tradition, related to feminine characteristics in Hofstedes
culture model, ranked extremely low, further supporting evidence that South Africa is a largely
masculine country. Even though South Africa has a Hofstede masculinity value similar to that of
Germany, their origins differ greatly due to inconsistencies in societal values. Instead of
supporting and valuing the aspects of masculinity as Germans do, South Africans look down
upon feminine qualities and promote musicality by proxy.
Uncertainty Avoidance
Germany. Uncertainty avoidance is defined as the extent to which the members of a
culture feel threatened by ambiguous or unknown situations and have created beliefs and

institutions that try to avoid these (Hofstede). A study into the cost practices in Germany is a
great indicator as to what exactly makes it a culture defined by uncertainty avoidance. Education
is the first step toward a professional career and Germany and their degree programs are much
more specific than those in other countries like the United States; in Germany, young people are
trained as skilled workers for specific jobs through apprenticeships (Portz & Lere, 2010, p. 49).
In such a strong uncertainty avoidance culture, it is typical to have managers who face very little
ambiguity in their day-to-day decisions. Looking at cost practices in this country, it was
discovered that each manager is given a narrow span of control. As a result, cost center
managers are able to become very competent at managing narrowly focused operations with a
repetitive output. Such a structure tends to reduce the ambiguity that a manager faces and
consequently, this often results in a preference for focusing on accomplishing a set of tasks
(Portz & Lere, 2010, p. 49). To emphasize how this dimension effects business practices, it
would be important to note that most German managers are educated as technical experts. In
fact, over 60 percent of German manufacturing companies are run by engineers with Ph.D.
degrees (Portz & Lere, 2010, p. 49). This cultures foundation lies upon the reliance on expert
knowledge. Companies in Germany generally derive their success from collaboration of a few
experts rather than dozens of employees with general knowledge. Germany is the type of country
that tends to establish regulations [and] conceive of the ideal organization as a well-oiled
machine (Harvey, 1997, p.134). Much like the impact this dimension had on their cost
practices, Germanys high level of uncertainty avoidance is prevalent in the characteristics of
their information systems. Two characteristics of information that have been known to affect
transactions are codification, which can be described as the degree of formal representation,
and diffusion, which is known as the degree of spread throughout the population (Harvey,

1997, p.135). Germany, a culture with more of an emphasis on uncertainty avoidance, would be
much more prone to design information systems with higher degrees of codification and lower
degrees of diffusion than a country like the United States, who would design a system with the
opposite proportion of the two characteristics. One last example of this is the entire banking
industry. Banking in Germany presents the characteristic of an avoidant culture in that they have
specialized banks in their universal system ranging from retail banking to corporate banking to
asset management (Yavas, Benkenstein, Stuhldreier, 2004, p.145). The wide variety of
structures for banks not only creates niche markets within the banking industry as a whole, the
large number of institution facilitates stiff competition that fuels the masculinity of the culture
that was previously discussed. This dimension provides a crucial amount of information for an
expatriate manager to analyze. In a strong uncertainty avoidant culture, the most efficient way to
conduct business would be to implement a functional, mechanistic structure within the
organization (Rodrigues, 1998, p.30). Such a structure would best utilize employees expertise
while keeping an organized chain of communication open to facilitate the flow of information
between coworkers and departments. The most prevalent value from Schwartzs model to appear
in this dimension is security. Minimizing ambiguity for managers emphasizes this value in that
the risk is distributed across several managers, each offering an expert opinion on his specific
task. This structure maximizes security the majority of the time.
South Africa. Uncertainty avoidance is low in South Africa due to the rapid change that
the country has undergone within the past three decades. Despite the progress that South Africa
has made in terms of equality and accepting diversity, many resources are only accessible by a
small select group (Human, 1996, p. 51). For example, education is highly emphasized within
South Africa. As a country, South Africa spends close to 7% of its GDP on education, one of the

highest rates in the world (WorldBank). In particular, the Afrikaans speaking population
emphasizes education extremely heavily and as such Afrikaans speakers tend to value
uncertainty avoidance highly. They seek to ensure their future and eliminate any possible
negative outcomes. However, the non-educated population represents a larger demographic and
effectively lowers the uncertainty avoidance of the whole country. Another example of the
source of low South African uncertainty avoidance lies north of the border. Zimbabwe famously
suffered through a period of extreme inflation, so much to the point that trillion dollar notes were
printed, and money lost its value. This was the result of irrational government spending in which
the government tried to pay off its debts by printing all of its foreign debt into a single individual
bill. This served to dramatically increase inflation in an escalating and uncontrollable way. It
reflects on the low uncertainty avoidance mentality and is a widely-known example of a lack of
government foresight.
Long-term Orientation and Indulgence
Germany. The final two dimensions, in relation to German culture, can be described
based on information presented previously in this journal. Long-term orientation and indulgence
have an inverse relationship, thus it only makes since that Germany ranks extremely high in
long-term orientation while it ranks very low in indulgence. Education seems to play an
important role in many of the dimensions and long-term orientation is no different. As previously
mentioned, Germans actively prioritize a college education as a necessity and this indicates the
long-term vision of their culture. Their view on materialism transcends both dimensions. Most
German believe that life is built on mutual give and take and they believe that, because of this
fact, extreme materialistic attitudes and egotism do not help a person in the long run (Kramer,
1992, p. 54). Schwartzs value of conformity is very closely related to both of these dimensions.

Conformity is defined by the restraint of actions, inclinations, and impulses likely to upset or
harm others and violate social expectations or norms (Schwartz, 2012, p.6). The emphasis on
self-restraint directly correlates with indulgence while the underlying notion of pragmatism
influences their long-term orientation. Germans seem to place much importance on this value.
Conformity defines them in many aspects of life; their miniscule propensity for indulgence
coupled with their appreciation for long-term pragmatism in business practices proves that this
value motivates action in German society.
South Africa. According to Hofstede, indulgence is the extent to which people try to
contain their impulses. The higher the value, the less likely a culture will be able to resist their
desires. The Hofstede indulgence value is recorded based off of South Africas white
populations culture. Because of apartheid and South Africas previous history of whitedominated culture, indulgence values for South Africa are unsurprisingly high. South Africans
spend large portions of their income on leisure and generally have a more positive and optimistic
attitude towards life. Relative to Germany, whose culture emphasizes investment in the future,
South Africa is developing at such a rapid pace that its focal point is on the present (Orpen, 110).
In other words, because South Africans are optimistic about their future, they are pursuing
actions that guarantee their current generation. Long-term orientation and uncertainty avoidance
are two dimensions that distinctly separate German and South African business acumen. Much of
the basis for the difference in scores is based upon cultural values; however, there are trends that
show that their respective level of development heavily influence their scores. As a developed
country, Germany possesses solid business infrastructure and is mostly focused on the future,
therefore, long term orientation is extremely high. Likewise, because of its development,
Germany tries to mitigate any business risks, thus preferring a higher uncertainty avoidance. On

the other hand, South Africa is still a developing country. With so much growth and so many
changes occurring, South Africa is focused on the present to ensure a strong future. This leads to
low long term orientation and uncertainty avoidance scores.

Conclusions and Suggestions for Future Research


This study has analyzed the cultural characteristics and values in both Germany and
South Africa. Based on the provided examples from a variety of industries, it can be concluded
that cultural differences play a crucial role in the implementation of business strategies. These
differences govern firm behavior and have a variety of implications depending on both the
industry and the country in which the business operates.
Hofstedes analysis of South African culture was limited to the white population.
Because of the significant inequality introduced by apartheid in South Africa, the white
population was highly segregated from the black, Asian, and Indian populations until very
recently. As such, there are distinct differences in cultural values between the various
demographics. Unfortunately, because the non-recorded non-white population represents 90.1%
of South Africas population (Pali, 2013, p. 33), Hofstedes values do not accurately represent
the entirety of South Africa. Future analysis can be conducted using data for all racial groups in
South Africa in order to obtain the most accurate cultural environment possible. Once more data
has been retrieved from this region, the dimensional analysis will have more significance in
determining the proper approach to business practices. It can be predicted that, once a more
unbiased sample of data has been collected, the levels for uncertainty avoidance may decrease
along with individualism and long-term orientation, while power distance will most likely show

a drastic increase. Nonetheless, until future research has been conducted, it would seem
inappropriate to provide major implications for management at this time.
For Germany, on the other hand, there has already been extensive research on their
culture and values; therefore, several implications for expatriate managers traveling to this region
can be made. All of the dimensions previously discussed are interrelated within the German
culture and can be combined to form an efficient business strategy for businesses operating in
this region. For a company expanding into this territory, and for the expatriate manager alike, it
would be of great import to keep in mind the aforementioned cultural characteristics. The first
implication would be to create a mechanist organizational structure within that regions office or
subsidiary due to the fact that Germany has an uncertainty avoidant culture. This structure would
focus on specialization of tasks and chain of command to maintain both quality of work and
stability of environment. The chain of command, consequently, should not be strictly enforced
because Germans are more accustomed to a low level of power distance. The decision-making
style should be somewhat participative and consultative in order to conform to the individualistic
nature of their society. This means that upper level management should feel comfortable
delegating important tasks on to subordinates because they take much pride in their work and are
prone to providing favorable results when given the freedom to perform on their own. Lastly,
management must recognize the fact that Germany is a low-context culture. A major implication
for this would be to keep meetings on topic, ensure fast-paced negotiations and transactions, and
try to maintain an environment in which the focus is task oriented.

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Appendix

Figure 1-1 Obtained from study: Value Change and Post-modernism: A Preliminary Study of a
German Sample

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