Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Chapter The Role of Globalization in HR Policy and Practice 2

2-2 International Commerce  Engaging in international commerce without investing in foreign factories or facilities  exporting—the firm sells its products and services in foreign marketplaces  Intermediaries-third parties who specialize in importing and exporting.  licensing—the licensor leases the right to use its intellectual property to another firm, called the licensee, in exchange for a fee  franchising—a special form of licensing which allows an independent organization, called the franchisee, to operate a business under the name of another, called a franchisor, in return for a fee  contract manufacturing—a firm outsources the creation of its products to another country which surrenders a major amount of control over the processes  management contracts—a company sells its management (and sometimes technical) expertise to a company in another area of the world

2-3 International Commerce  Engaging in international commerce through foreign direct investment (FDI).  alliance—one firm identifies an appropriate organization with which to “partner” allowing the firm to make a direct investment very gradually while sharing its risk with a knowledgeable, experienced other party  joint ventures—partners create a new, separate company that is owned jointly by the venture partners  strategic alliance—companies agree to partner with one another, but do not set up a separate entity  sole ownership—a firm owns an operation in a foreign country in order to ensure that they have full decision-making authority and operational control

2-4 International Business Strategies  FDI management strategies:  multilocal—a business is managed as a collection of relatively independent operation organizations, each of which is focused on a particular domestic market  very decentralized; each division free to customize its own products, create its own advertising and promotion campaigns, and utilize whatever production techniques best serve their customers  export—a business views the world as a single marketplace and strives to create standardized goods or services that will meet the needs of customers everywhere  centralized; power and responsibility vested in company headquarters  global—a business which tries to combine the benefits of an export orientation and multilocal organizations to achieve global-scale efficiencies, while remaining locally responsive to their customers

2-5 Choosing an International Strategy  Factors influencing the choice of international strategy.  general environment issues  economic systems  legal systems  political systems  socio-cultural systems  language diversity  religious beliefs

2-6 Choosing an International Strategy  Factors influencing the choice of international strategy.  organization’s task environment  cost pressures  competitive rivalry  ease with which organizations may enter or leave the industry  degree of power over the company maintained by suppliers and customers  organization’s internal strengths  culture  management expertise  information systems’ amount and sophistication  ability to detect and respond to consumer trends

2-7 Domestic Versus International HR  Complexity of operating HR on an international basis.  legal issues  cultural differences  amount of foreign investment in relation to the company’s domestic investment  senior management’s attitudes toward international operations

2-8 Unique Challenges in International Joint Ventures Source: Adapted from O. Shenkar and Y. Zeira, “Human Resource management in International Joint Ventures: Directions for Research,” Academy of Management Review 12 (1987) pp Reprinted with permission

2-9 International HR Management Strategies  Four general IHRM strategies:  ethnocentric—foreign subsidiaries have little autonomy, operations are typically centralized, and major decisions are made at the corporate headquarters  key positions in management are held by parent company nationals (PCNs)  polycentric—foreign subsidiaries are treated as a distinct entity with some level of decision-making authority  initially PCNs fill strategic upper-level management positions.  host country nationals (HCNs) fill middle- and lower-level management positions, eventually training and moving upward to take over for PCNs

2-10 International HR Management Strategies  geocentric—relationships between headquarters and foreign subsidiaries tend to be extremely collaborative, with each participant contributing important information, perspective, and decision-making factors  best person is found to fill the position, regardless of what country they come from.  regiocentric—scaled-down version of the geocentric model with a strong regional headquarters that is vested with considerable power to manage its operations and operates very collaboratively and independently with the subsidiaries with the region

2-11 International Business Assignments  Use of PCNs to:  increase communication  provide expertise  maintain control  Trends in international business assignments.  higher use of third-country nationals (TCNs) and home country nationals (HCNs)  declining length of international assignments  short-term assignments  developmental assignments  strategic assignments  long-term assignments

2-12 Global Leadership  Globally competent managers and leaders—knowledgeable, effective, well-rounded individuals who could be sent anywhere on the globe to run an operation.  skills  integrators who see beyond obvious country and cultural differences  diplomats who can resolve conflicts and influence locals to accept world standards and commonalities  cross-fertilizers who recognize the best from various places and adapt it for utilization elsewhere  knowledge  in-depth understanding of world markets: their potentials and problems  thorough grasp of all elements of the global supply chains and distribution channels  skillfully embrace cultural diversity