Socio-cultural 0.926 – the 4th highest in
Socio-cultural environmentThe socio-cultural environment in business is comprised of social institutions, class structure beliefs, customs, attitudes, values, norms, symbols, and traditions.
Understanding the socio-cultural environment is of prime importance for any business looking to establish itself in another country because vast cultural differences abound even in neighboring countries. Failure to understand or, worse – neglect of the socio-cultural environment will have sure effects on the success and even survival of the business; something companies have come to learn the hard way.Demography –Germany is home to 82 million residents, making it one of the most populous countries in the EU with a population density of 232 people per sq.km. The human resource is skilled and qualified, enjoying a considerably high standard of living, as is evidenced by its HDI score of 0.926 – the 4th highest in the world. Life expectancy at birth is 81.1 years, which is in keeping with the excellent quality of health-care that is available.
From the beginning of this century, a demographic crisis has plagued Germany – with studies projecting a shrinking of the population by 2060 to about, 68-73 million people. While recent findings do show a happier picture, with fertility rates improving to 1.5 children per woman, the highest in 30 years; Germany is teetering on the edge of the fourth stage of demographic transition. The fourth stage is characterized by low birth and low death rates, which has severe implications from a labour-market perspective. Though the impact may not be immediate – as Baby Boomers are still a part of the workforce, and they will continue to be for a considerable amount of time; it is of pressing concern. The working population of today will be the dependent population of tomorrow – with fewer people to support them, due to the falling birth rates. The World Economy Institute in Hamburg (HWWI), predicts a drop in the working age group of 20-65 from 61% to 54% of the total population, which will push the dependency ratio to 1:1.
Life expectancy is also predicted to rise to 88 years for women, and 84 for men; which further worsens this problem by also creating a social burden. With fewer people to work and boost the economy and more to support through pension payments – the demographic crisis will also inevitably turn into a fiscal crisis. While aging economies, like Germany and Japan, for instance, can continue to reap benefits of increasing per capita GNI through past inventions and patents, the benefits will erode slowly and surely; leading to exhaustion – making it difficult for Germany to retain its economic prowess.A pro-active population management policy seems to be the answer here – particularly by allowing the influx of immigrants into the country. It is in fact, immigration that has helped Germany better its seemingly bleak demographic future. While fertility rates for women with German citizenship rose from 1.
42 per woman to 1.43, between 2014-15 – the rates in the same period rose from 1.86 per woman to 1.95 for women without German citizenship. Immigration also causes an inflow of people of varied cultures and skills, which may prove as an asset to businesses and industries in Germany, and could help avert the demographic crisis.
Germany has close to 100% of adult literacy, with most of the population above the age of 15 being able to read and write at least simple German. Expected years of schooling is about 17 years, which is one of the highest around the world – compare that to India, where it is only 11.7 years. It also has a primary school drop-out rate of only 3.5%, with close to all students completing basic primary education. The student-pupil ratio of 12:1, is an indication of the superior quality of education available here, which makes for a qualified labour resource market.
Speaking of equality in terms of gender, women and men are treated almost equally – as is evidenced by its GDI (Gender-Development Index) of 0.961. In comparison to other European nations, however, Germany’s performance is unsatisfactory. Sex-based discrimination is a violation of Article 3 of the Basic law, that guarantees equality.
Gender equality is also guaranteed by the Works Council Constitution Act, which prevents direct and indirect discrimination in the workplace. Women in Germany have caught up to the men in terms of educational attainment as well as employment. Women held 36.9% of the seats in Parliament in 2017, (which crosses the threshold limit of 32% ) – meaning that women are decently represented in law-making, but with a long way to go ahead.
There has been a discussion of a quota-based law to ensure equal participation of women in the private sector.As per the 2011 German Census, Christianity is the major religion in Germany – divided into majorly Catholicism, Protestantism and Evangelism. About 5% of the population follows Islam, and less than 3% are Jews, Hindus, and Buddhists. Article 4 of the Basic Law guarantees religious freedom and secularism.
About 1/3rd of the population has no religious affiliation or beliefs. The entry of the Alternative for Germany into the Bundestag poses an important implication from a religious stand-point. The AfD made a number of anti-Islam extremist statements, centering its campaign around xenophobia and racism. The AfD going from being previously unrepresented in the Bundestag in 2013, to winning 12.6% of the seats in 2017 displays a major shift in the religious landscape of Germany.
While the stigma of it’s Nazi past may or may not affect the global view of Germans; Germany is taking steps to curb this view. Display of the Swastika and other Nazi symbols has been banned in the Federal Republic of Germany Hofstede’s 6-D Cultural Dimensions Model A) Power Distance – The power distance dimension deals with the belief that all individuals in society are not equal – it is the degree to which individuals in a country accept that power is distributed unequally.Germany is a low power distance country with a score of 35. Participative management is commonplace, and direct communication with superiors is encouraged. An excellent example here is the principle of codetermination in German companies, where the supervisory board is elected by the shareholders to oversee the management board and participate in decision making.
Excessive control is disliked by Germans and challenging and questioning leaders is accepted, provided it is based on expertise and relevant knowledge.B) Individualism – The individualism dimension deals with how independent or interdependent individuals are in a society. With a score of 67, German society is an individualist one – looking after self and immediate family is of prime importance, with social unity and group loyalty taking the backseat. Nuclear families are the most common family unit. High importance has been placed by Germans on the idea of self-actualization. Keeping in terms with its individualistic culture – direct, honest and “to-the-point” communication between employer-employee and manager-subordinate is encouraged.
C) Masculinity – Germany is a masculine society – as is evidenced by its score of 66. This means German society is primarily driven by competition, achievement, and success as opposed to caring for others. Germans value high performance; placing an early importance on achievement by segregating students into different schools on the completion of primary education. Assertive and decisive management is expected. Germans also place a considerable degree of importance on status symbols.D) Uncertainty Avoidance – This dimension deals with risk aversion; how threatened do citizens feel by uncertain and ambiguous situations and how they deal with the same. Germany is high in terms of uncertainty avoidance with a score of 65.
Germans, therefore, depend largely on deductive reasoning, not making broad generalizations and focusing on details. This is reflected in the legal system as well. For managers it means adopting a “safe” approach to management, avoiding of risky situations as far as possible and ensuring all plans, projects, and policies are well-thought out and detailed.E) Long-Term Orientation – This dimension deals with whether societies focus on preserving of traditions and the past, or whether they adopt a more pragmatic approach – focusing on the present and improving the future.Germany has a very high score of 83, indicating a pragmatic, future orientation. For managers this means, being able to adapt easily to changing situations and not being caught up in the traditions of the past.
German society encourages thrift and savings. It also means building on the human capital of the organization in the long term through good training and development programmes.F) Indulgence – The indulgence dimension deals with the extent to which individuals in a society try to control their desires and impulses. Germany has a score of 40, indicating a restrained nature. It means that Germans have strong control over their desires and impulses. Germans are thus pessimistic and cynical in nature. They also do not place much importance on leisure time; indicating a workaholic nature.