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Cross Culture Management- How to Do Business in Estonia

Essay by   •  July 1, 2011  •  Case Study  •  5,325 Words (22 Pages)  •  1,801 Views

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Cross Culture Management

Introduction

Global marketing presents a tremendous opportunities but it is also a challenge. Because it is necessary to understand how cultural differences between both parties affect the business. Culture is a social phenomenon which helps define people's interests, thoughts, and other behaviors. However, most countries have a very mixed population, such as, Estonia. In this article, we analyze how foreign countries doing business in Estonia.

Background

Location

Estonia is located in Eastern Europe, bordering the Baltic Sea and Gulf of Finland, between Latvia and Russia. Capital is Tallinn.

Politic

Since Estonia's returned to independence, there are multi-party politics and Western parliamentary democracy is implemented. Furthermore, the partisan also struggle into the legal system. There are a number of political parties of Estonia, including, Reform Party who the member of European Liberal Democrat, Pro Patria and Res Publica Union and Social Democratic Party.

The political situation remained stable. In Constitution Law, it identified that Estonia is an independent sovereign democratic republic. The highest power belongs to people. Independence and sovereignty is supreme and inalienable

Economy of Estonia

Estonia transformed its economy from a centrally planned system to a free market since its interdependence in 1991. Estonia's economic policies are open and flexible, which aim to create a stable and effective economic environment.

Estonia is a member of the World Trade Organization(WTO) and it is steadily moving toward a modern market economy with increasing ties to the West, including a balanced budget, a flat-rate income tax system and the pegging of its currency to the euro. It has a competitive commercial banking sector and a hospitable environment for foreign investment, including, no tax on reinvested corporate profits. Estonia have fostered exceptionally strong growth and better living standards than those of most new EU member states.

Estonia's economy benefits from strong electronics and telecommunications sectors, such as, paying by mobile phones in more than 2000 stroes, including, motels. The economy of Estonia is greatly influenced by developments in Finland, Sweden, and Germany. Finland and Sweden control some key industries of Estonia such as banking, technology-communicating. Estonia's major exports are machinery and mineral products. Moreover, their imports are transporting equipment. Industries include machinery and metal working, woodworking, electronics, food and beverage. Agriculture is stockbreeding.

History

Since 13th century to 18 century, Estonia had been ruled by Prussia, Demark, Sweden, Poland, Germany and Russia early or late, in 16th century it had been a battleground of involving Denmark, Sweden, Russia and Poland. Foreign dominations and wars have created Estonia a mixed and very complex culture.

Since the beginning of 19th century, national movement started in Europe and Estonian Republic was formed in 1918. In 1940s, the Soviet army occupied Estonia, forced a pro-Moscow puppet government on the country and illegally annexed it into Soviet Union. Nazi Germany occupied Estonia until 1944s. The renewed Soviet occupation brought another region of terror. Russian culture in Estonia is the consequence of that deliberate policy of genocide.

In 1991s, the Republic of Estonia is regaining its freedom and independence and rapidly rebuilding democratic institutions and free market economy. In 2004 Estonia joined in EU and NATO.

Language

The official language of Estonia is Estonian. Estonian is a Finno-Ugric language and is closely related to Finnish and distantly to Hungarian. It has been influenced by German, Russian, Swedish and Latvian. Beside of this, German, Russian and English, which three languages also are used by Estonians.

Religion

Estonia is not a religion dominated country. The Estonians have freedom about believing religion. One branch of Christian- Evangelical Lutheran is the main religion since the Reformation movement in sixteenth century. Other confessions include Greek Orthodox, Russian Orthodox, Baptist, Methodist and Roman Catholic.

Education

The General Education in Estonia is categorized into Basic Education-Compulsory for all children, which is divided into Pre-school and Primary education. The other three levels are Secondary, Vocationa and Higher education. Estonian Education also lays equal stress on vocational and adult education. In most of schools, the medium of instruction is local Estonian language. However there are some schools teaching Russian.

Culture

Estonia's culture has been influenced by the traditions of the neighboring area's various Finn, Balt, Slav and German as well as the cultural developments in the former dominant power Sweden and Russia. Estonian culture builds on a heritage of egalitarianism out of practical reasons and the ideas of closeness to nature and self-sufficiency. There are many private initiatives in Estonia, such as small theatres, dance groups and publishing houses. Estonians like theatre and go to see a show at least twice a year. Singing folk songs is a traditional festival.

Culture dimensions

Geert Hofstede's Framework

For those who work in international business, it is sometimes amazing how different people in other cultures behave. Therefore, if we go into another country and make decisions based on how we operate in our own home country. Geert Hofstede's research gives us insights into other cultures, so that we can be more effective when interacting with people in other cultures.

Uncertainty Avoidance

It refers to the extent to which a culture feels threatened by ambiguous situations and tries to avoid them by establishing more structure, according to Luthans. F and Doh.P.J, (2009, p105). Estonia tend to be a progressive country, such as, E-Services, E-Elections and even paying by mobile phones in 2000 stores, including, motels and beauty salons.

According to Luthans &Doh (2009, p.109), it stated that Estonia has medium uncertainty avoidance index.

On one hand, Estonians have been influenced by Eastern Europe countries, such as Russia which scores strong on uncertainty avoidance.

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