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© 2010 South-Western, a part of Cengage Learning All rights reserved.
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Chapter Objectives After studying this chapter, you should be able to
X Chapter Objectives After studying this chapter, you should be able to Identify the types of organizational forms used for competing internationally. Explain the economic, political-legal, and cultural factors in different countries that HR managers need to consider. Explain how domestic and international HRM differ. Discuss the staffing process for individuals working internationally. Identify the unique training needs for international assignees and their employees © 2010 South-Western, a part of Cengage Learning. All rights reserved.
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X Chapter Objectives (cont’d) After studying this chapter, you should be able to Identify the characteristics of a good international compensation plan. Reconcile the difficulties of home- and host-country performance appraisals. Explain how labor relations differ around the world. © 2010 South-Western, a part of Cengage Learning. All rights reserved.
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Managing Across Borders
International corporation Domestic firm that uses its existing capabilities to move into overseas markets. Stays domestic based Multinational or multidomestic corporation (MNC) Firm with autonomous business units operating in multiple countries. Produce and sell tailored products primarily in host country Resources obtained locally Global corporation Firm that has integrated worldwide operations through a centralized home office. SBUs interdependent, supply each other Produce and sell where HQ says Products are same for all customers (treats world market as a whole) Transnational corporation Firm that attempts to balance local responsiveness and global scale via a network of specialized operating units. Procure anywhere, produce anywhere, sell anywhere © 2010 South-Western, a part of Cengage Learning. All rights reserved.
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Types of Organizations
FIGURE 15.1 Types of Organizations © 2010 South-Western, a part of Cengage Learning. All rights reserved.
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Increasing Importance of Understanding Global Human Resources Management
International Mergers and Acquisitions Global Human Resources Management Foreign Human Resources Global Competition Market Access Opportunities Most HR professionals expect their companies international business to grow in the future. © 2010 South-Western, a part of Cengage Learning. All rights reserved.
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How International Companies Affect the World Economy
Their production and distribution extend beyond national boundaries, making it easier to transfer technology. They have direct investments in many countries, affecting the balance of payments. They have a political impact that leads to cooperation among countries and to the breaking down of barriers of nationalism. © 2010 South-Western, a part of Cengage Learning. All rights reserved.
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How Does the Global Environment Influence Management?
Unified Economies Closely partnered nations such as the European Union (EU) have developed into strong competitors. Promotes job growth in trading nations. Cultural Environment The communication patterns, religion, values and ideologies, education, and social structure of a host country influence how HR is conducted in that country. Strategies, structures, and management styles in one area of the world may be inappropriate in another. Geography and Relatively Open Borders Make Good International Trading Partners NAFTA—USA, Canada, Mexico European Union with 27 countries in close proximity ASEAN © 2010 South-Western, a part of Cengage Learning. All rights reserved.
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Cultural Environment of International Business
FIGURE 15.3 Cultural Environment of International Business © 2010 South-Western, a part of Cengage Learning. All rights reserved.
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Domestic versus International HRM
Issues in international HRM in helping employees adapt to a new and different environment outside their own country: Relocation Orientation Translation services © 2010 South-Western, a part of Cengage Learning. All rights reserved.
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International Staffing
Expatriates, or Home-country Nationals Employees from the home country who are on international assignment. Host-country Nationals Employees who are natives of the host country (foreign country where an international business is operating). Third-country Nationals Employees who are natives of a country other than the home country or the host country. © 2010 South-Western, a part of Cengage Learning. All rights reserved.
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Changes in International Staffing over Time
FIGURE 15.4 Changes in International Staffing over Time © 2010 South-Western, a part of Cengage Learning. All rights reserved.
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Hiring Host-Country Nationals
Advantages: Hiring local citizens is generally less costly than relocating expatriates. Since local governments usually want good jobs for their citizens, foreign employers may be required to hire locally. Most customers want to do business with companies they perceive to be local versus foreign. © 2010 South-Western, a part of Cengage Learning. All rights reserved.
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Recruiting Internationally
Work Permit, or Visa Government document granting a foreign individual the right to seek employment. Guest Workers Foreign workers invited to perform needed labor. Apprenticeships Vocational training programs in skilled trades. Transnational Teams Teams composed of members of multiple nationalities working on projects that span multiple countries. © 2010 South-Western, a part of Cengage Learning. All rights reserved.
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1 Global Laws and Pacts Prohibiting Discrimination
U.S. laws affecting firms conducting business outside the United States: Title VII of the Civil Rights Act of 1964 Age Discrimination in Employment Act (ADEA) Americans with Disabilities Act (ADA) International laws that require nondiscrimination in employment: European Union (EU)—Equal Pay Directive International Labour Organization (ILO)—Equal Remuneration Convention No. 100 Organization for Economic Cooperation and Development Enterprises (OECD)—Guidelines for Multinational Enterprises United Nations—Global Compact © 2010 South-Western, a part of Cengage Learning. All rights reserved.
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Selecting Global Managers
A manager equipped to run an international business Skills Categories for Global Managers Ability to seize strategic opportunities Ability to manage highly decentralized organizations Awareness of global issues Sensitivity to issues of diversity Competence in interpersonal relations Community-building skills Styles of global managers Japanese tend to be loyal to the organization Latin Americans are loyal to company and the individual boss French, German, and Italian managers tend to be autocratic Japanese managers tend to be participatory © 2010 South-Western, a part of Cengage Learning. All rights reserved.
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Comparison of Advantages in Sources of Overseas Managers
FIGURE 15.5 Comparison of Advantages in Sources of Overseas Managers © 2010 South-Western, a part of Cengage Learning. All rights reserved.
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Selecting Global Managers
Begin with self-selection. Create a candidate pool. Assess core skills. Skills considered critical to an employee’s success abroad. Assess augmented skills and attributes. Skills helpful in facilitating the efforts of expatriate managers © 2010 South-Western, a part of Cengage Learning. All rights reserved.
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2 Skills of Expatriate Managers CORE SKILLS Innovation
Experience Decision-making Resourcefulness Strategic thinking Adaptability Cultural sensitivity Change management Team building Maturity Innovation AUGMENTED SKILLS Technical skills Negotiation skills Strategic thinking Delegation skills Change management © 2010 South-Western, a part of Cengage Learning. All rights reserved.
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Expatriate Selection Criteria
FIGURE 15.6 Expatriate Selection Criteria © 2010 South-Western, a part of Cengage Learning. All rights reserved.
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Family adjustment is #1 cause of failure
FIGURE 15.7 Causes of Expatriate Assignment Failure Family adjustment is #1 cause of failure Spouse’s inability to adapt, primarily Lifestyle issues Work adjustment Bad selection Poor performance Other opportunities arise Business reasons Repatriation issues © 2010 South-Western, a part of Cengage Learning. All rights reserved.
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Training and Development
Essential training program to prepare employees to work internationally: Language training Verbal and nonverbal communication skills are big problems for expatriates and business travelers. In Chinese business negotiation language, 不方便 bù fāngbiàn “inconvenient” really means what? In Spanish, mañana “tomorrow” really means what? Cultural training Assessing and tracking career development Managing personal and family life Repatriation Culture shock Perpetual stress experienced by people who settle overseas. US leads the way in improving managerial competence. Rational analytical reasoning? Made more mistakes to learn from? © 2010 South-Western, a part of Cengage Learning. All rights reserved.
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Preparing for an International Assignment
FIGURE 15.8 Preparing for an International Assignment To prepare for an international assignment, one should become acquainted with the following aspects of the host country: Social and business etiquette History and folklore Current affairs, including relations between the host country and the United States Cultural values and priorities Geography, especially its major cities Sources of pride and great achievements of the culture Religion and the role of religion in daily life Political structure and current players Practical matters such as currency, transportation, time zones, and hours of business The language © 2010 South-Western, a part of Cengage Learning. All rights reserved.
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3 Nonverbal Communications in Different Cultures
© 2010 South-Western, a part of Cengage Learning. All rights reserved.
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Hand Gestures Mean Different Things in Different Countries
At President Bush’s inaugural parade in 2005, he flashed the Hook ‘em Horns sign to the University of Texas band, but in Norway that is a Salute to Satan. Required explanation in Norwegian newspapers.
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Hand Gestures Mean Different Things in Different Countries
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Conversations with host country natives.
Training Methods Reviewing available information about the host company: books, magazines, video tapes. Conversations with host country natives. Sensitivity training to become familiar with the customs and overcome prejudices. Temporary assignments to encourage shared learning. © 2010 South-Western, a part of Cengage Learning. All rights reserved.
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Tend to cluster around work goals, values, and job attitudes.
FIGURE 15.9 A Synthesis of Country Clusters Tend to cluster around work goals, values, and job attitudes. © 2010 South-Western, a part of Cengage Learning. All rights reserved.
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Chevron, David O'Reilly (Ireland) Citigroup, Vikram Pandit (India)
FIGURE 15.10 Selected Foreign-Born Executives Chevron, David O'Reilly (Ireland) Citigroup, Vikram Pandit (India) Dow Chemical, Andrew Liveris (Australia) PepsiCo, Indra Nooyi (India) Coca-Cola, Muhtar Kent (Turkey) Alcoa, Alain J. P. Belda (Morocco) Eli Lily, Sydney Taurel (Morocco) 3M, George W. Buckley (Great Britain) Eastman Kodak, Antonio Perez (Spain) COMPANY, NAME, AND COUNTRY OF ORIGIN © 2010 South-Western, a part of Cengage Learning. All rights reserved.
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Assessing and Tracking Career Development
Developmental and Career Advantages of an International Assignment: Increases the expatriate’s responsibilities and influence within the corporation Provides a set of unique experiences beneficial to both the individual and the firm Enhances understanding of the global marketplace Offers the opportunity to work on a project important to the organization Employee needs to manage their own career by finding out if foreign-service assignments will really help their career. Have others in the company benefitted? © 2010 South-Western, a part of Cengage Learning. All rights reserved.
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4 Repatriation Checklist
Repatriation is the process to help employees make the transition back home. Before they go: Make sure there is a clear need for the international assignment. Don’t send someone abroad unnecessarily. Develop a clear set of objectives and expectations and time frames in which they should be met. Make sure that your selection procedures are valid. Select the employee and also look at and involve the employee’s family. Provide (or fund) language and cultural training for the employee and the employee’s family. Offer counseling and career assistance for the spouse. Establish career planning systems that reward international assignments and lead to promotion and knowledge sharing. © 2010 South-Western, a part of Cengage Learning. All rights reserved.
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4 Repatriation Checklist While they are away:
Jointly establish a developmental plan that focuses on the goal to be achieved. Tie performance objectives to the achievement of the goal. Identify mentors who can be a liaison and support person from home. Keep communications open so that the expatriate is aware of job openings and opportunities. Arrange for frequent visits back home (for the employee and the family). Make certain they do not lose touch with friends and relatives. Disappointment and isolation put stress on expatriates. © 2010 South-Western, a part of Cengage Learning. All rights reserved.
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4 Repatriation Checklist When they come back home:
Throw a “welcome home” party and arrange for a meeting with other former expatriates. Offer counseling to ease the transition. Arrange conferences and presentations to make certain that knowledge and skills acquired away from home are identified and disseminated. Set up an expatriate database to help other employees who go abroad later. Get feedback from the employee and the family about how well the organization handled the repatriation process.. © 2010 South-Western, a part of Cengage Learning. All rights reserved.
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Global Compensation Challenges
Different countries have different norms for employee compensation: Financial (money) incentives versus nonfinancial incentives (prestige, independence, and influence) Individual rewards versus collectivist concerns for internal equity and personal needs General rule: Match the rewards to the values of the local culture—create a pay plan that supports the overall strategic intent of the organization but provides enough flexibility to customize particular policies and programs to meet the needs of employees in specific locations. Current trend among MNCs is to narrow the salary gap between host-country and expatriate managers © 2010 South-Western, a part of Cengage Learning. All rights reserved.
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Hourly Wages in Different Countries*
FIGURE 15.11 Hourly Wages in Different Countries* COUNTRY $/HOUR Norway 41.05 Denmark 35.45 Germany 34.21 Netherlands 32.34 Belgium 31.85 Sweden 31.80 Switzerland 30.67 Austria 30.46 Finland 29.90 Luxembourg 27.74 United Kingdom 27.10 Australia 26.14 Ireland 25.96 Canada 25.74 Italy 25.07 France 24.90 United States 23.82 COUNTRY $/HOUR Japan 20.20 Spain 18.83 Greece 16.10 Korea, Republic of 14.72 New Zealand 14.47 Israel 12.98 Singapore 8.55 Portugal 7.65 Czech Republic 6.77 Taiwan 6.43 Hungary 6.29 Hong Kong SAR (1) 5.78 Poland 4.99 Brazil 4.91 Mexico 2.75 Philippines 1.07 Sri Lanka 0.54 *Hourly compensation costs in U.S. dollars for production workers in manufacturing. © 2010 South-Western, a part of Cengage Learning. All rights reserved.
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Compensation of Host-Country Employees
Hourly wages can vary dramatically from country to country. Pay periods are different. Seniority may be an important factor. High pay rates can upset local compensation practices. Bonuses, profit-sharing, benefits, and paid leave may be more extensive and legally required. © 2010 South-Western, a part of Cengage Learning. All rights reserved.
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Aging and Workers-to-Retirees Ratio
By 2050 aging will be a huge issue around the world Europe, Japan, and Korea will have 40% of their populations older than 60. Today 11% of China’s total 1.3 billion are older than 60, and that number will rise to more than 400 million (25%) by 2050 In the United States, today 17 percent of the population is over 60 and will increase to 26 percent by 2050 Currently, only 1.7 workers for every 1 retiree in Greece In U.S. 3.3 workers for every retiree. There will be only 2 in 2050 In China the ratio of workers to retirees will decrease from 20 to 1 in the early 1980s to 2.5 to 1 by 2020, 2 to 1 by 2035 Forecasts say Asian countries will have to import health workers to care for their elderly © 2010 South-Western, a part of Cengage Learning. All rights reserved.
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Social Systems Affect Labor and Business
Greece (international debt crisis!) Retirement age going from 58 to 65 Age 53 for many occupations Retirees receive 96% of working salary Retirement benefits go to unmarried children regardless of age if they are only surviving child of retired civil servant 52-year-old single, unmarried child gets $496 a month These kinds of exceptions and special cases are wide spread France Retirement age going from 60 to 62 Britain and Italy Retirement age climbed to 65. Britain maybe to 66. Germany and US Retirement age climbing to 67. European Union may go to 70 by 2060 © 2010 South-Western, a part of Cengage Learning. All rights reserved.
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China’s Social Systems Affect Labor and Business
The ancient tradition of xiàoshùn (孝顺), or filial piety—calling for children to care for their parents in old age out of duty and respect—conflicts with their modern goals of separate personal and professional lives Parents ask, how would I like to be treated if I were a child? Later, the adult child will ask, how would I like to be treated when I am aged and infirm? Filial piety was China’s Medicare, Social Security and long-term care, all woven into a single family value 90 million people were born under China’s strict one-child policy Married couples with kids of their own may have 4 parents living with them and no siblings to help © 2010 South-Western, a part of Cengage Learning. All rights reserved.
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China’s Social Systems Affect Labor and Business
Millions of working-age young people have left rural areas for big cities in search of better wages and career opportunities. Relocation is dispersing families. Women pursuing careers outside the home. Half of China’s urban population over 60 living on their own. 42% in 2000. Parents may not want to move to be with children in a new neighborhood or city. American-born Chinese (ABCs) have tended to choose the nuclear (rather than extended) family model because they feel it affords greater freedom and individuality Post-90s delay working; seek more individuality; not so hard-working. China’s home care industry is booming. Generating $9.8 billion in 2009, it’s expected to grow to $18.5 billion by 2010 and $71 billion by 2020. Assisted living facilities and nursing homes are not a big deal (yet???) 6-1 situation now leading to 2-5 reality. © 2010 South-Western, a part of Cengage Learning. All rights reserved.
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China With the world’s largest and perhaps fastest-aging population, China has no equivalent to Medicare or Social Security. Pension plans are spotty. Social security covers only a limited number of people. Fewer than half of older urban citizens have any savings For farmers, who earn an average RMB4,000 a year, it is even more dire China has new initiatives, including social security coverage for employees of privately owned companies and an experimental health care insurance system that now covers nearly 40 million retirees. The government has also built more than 32,000 senior centers, which provide health care and day care for more than 30 million people. Aug 2012 health plan covers 1.3B people. Only one official union Released first ever Human Resources White Paper 9/10/10 © 2010 South-Western, a part of Cengage Learning. All rights reserved.
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Compensation of Host-Country Managers
X Compensation of Host-Country Managers Global Compensation System A centralized pay system whereby host-country employees are offered a full range of training programs, benefits, and pay comparable with a firm’s domestic employees but adjusted for local differences © 2010 South-Western, a part of Cengage Learning. All rights reserved.
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Compensation of Expatriate Managers
An effective international compensation program must: Provide an incentive to leave the home country Allow for maintaining home country standard of living Provide for security in countries that are politically unstable or present personal dangers Include provisions for good health care Reimburse the foreign taxes the employee is likely to have to pay (in addition to having to pay domestic taxes) and help him or her with tax forms and filing Provide for the education of the employee’s children abroad, if necessary Allow for maintaining relationships with family, friends, and business associates via trips home and other communication technologies Facilitate the expatriate’s reentry home Be in writing © 2010 South-Western, a part of Cengage Learning. All rights reserved.
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Expatriate Compensation Systems
Home-Based Pay Pay based on an expatriate’s home country’s compensation practices Balance-Sheet Approach A compensation system designed to match the purchasing power in a person’s home country Calculate base pay Figure cost-of-living allowance (COLA) Add incentive premiums Add assistance programs © 2010 South-Western, a part of Cengage Learning. All rights reserved.
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Expatriate Compensation Systems
Split Pay A system whereby expatriates are given a portion of their pay in the local currency to cover their day-to-day expenses and a portion of their pay in their home currency to safeguard their earnings from changes in inflation or foreign exchange rates Host-Based Pay Expatriate pay is comparable to that earned by employees in a host country to which the expatriate is assigned. © 2010 South-Western, a part of Cengage Learning. All rights reserved.
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Expatriate Compensation Systems
Localization Adapting pay and other compensation benefits to match that of a particular country Reduces resentment among local staff members if they are earning significantly less. Other Issues Adequacy of medical care Personal security Compensation policies of competitors © 2010 South-Western, a part of Cengage Learning. All rights reserved.
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Performance Appraisal of International Managers
Who Should Appraise Performance? Home-country evaluations Host-country evaluations Adjusting Performance Criteria Augmenting job duties Individual learning Organizational learning Providing Feedback Debriefing interview © 2010 South-Western, a part of Cengage Learning. All rights reserved.
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The Labor Environment Worldwide
International Differences in Unions: The level at which bargaining takes place (national, industry, or workplace) The degree of centralization of union- management relations The scope of bargaining (parties and issues) The degree to which government intervenes The degree of unionization and union strength The political affiliations of unions © 2010 South-Western, a part of Cengage Learning. All rights reserved.
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balance sheet approach codetermination core skills
augmented skills balance sheet approach codetermination core skills cultural environment culture shock expatriates, or home-country nationals failure rate global compensation system global corporation global manager guest workers home-based pay host-based pay host country host-country nationals international corporation localization multinational corporation (MNC) repatriation split pay third-country nationals transnational corporation transnational teams work permit, or visa © 2010 South-Western, a part of Cengage Learning. All rights reserved.
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Chinese condoms too small for South Africans
A South African court has blocked the government from buying 11 million Chinese condoms, saying they are too small, a newspaper reported Friday. The finance ministry had awarded a contract to a firm called Siqamba Medical, which planned to buy the Phoenurse condoms from China, the Beeld newspaper said. A rival firm, Sekunjalo Investments Corporation, turned to the High Court in Pretoria after losing the bid, arguing that their condoms were 20 percent larger than the Chinese ones. Judge Sulet Potterill blocked the deal with Siqamba, ruling that the condoms were too small, made from the wrong material, and were not approved by the World Health Organisation, the paper said. South Africa has more HIV infections than any country in the world, with 5.38 million of its 50 million people carrying the virus. Relaxnews–Fri, Sep 16, 2011
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Chinese condoms too small—The Rest of the Story
But the problem is not what you might expect — the condoms in this case are for women. The Chinese female condoms, with the brand name "Phoenurse," have not been approved by the World Health Organization, the U.S. Food and Drug Administration Agency, or the South African Bureau of Standards, and are 20 percent smaller than the approved product, South Africa's Beeld newspaper reports. As well, the Chinese condoms are made from polyurethane, instead of nitrile like the approved condoms. The judge ruled that female condom supply was an urgent matter because it affects the spread of HIV/AIDS. South Africa has more HIV/AIDS infections than any other country in the world. Cape Town company Sekunjalo Investments Corporation will now supply the female condoms, which are manufactured by Female Health Company (FHC) and approved by the WHO, FDA, and SABS.
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Discussion Questions (page 695)
#1 What major HR issues must be addressed as a organization moves to full international form? #2 What effects are international M&A having on HRM? #4 How does cultural environment affect HRM for intl firm? #5 Should Starbucks use host-country or expatriate managers? #6 What difficulties do expatriate managers face in host countries? © 2010 South-Western, a part of Cengage Learning. All rights reserved.
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Discussion Questions #7 What can companies do to help children and spouses of expatriate managers/workers? #9 How should expatriate pay be calculated for a country where the cost of living is lower than the home country? #10 How can grooming an international manager for greater corporate responsibility be worked into performance appraisal? How would that manager be evaluated? © 2010 South-Western, a part of Cengage Learning. All rights reserved.
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Page 697 #1, International HRM at Molex
Case Studies Page 697 #1, International HRM at Molex Page 699 #2, How Deloitte Builds Global Expertise © 2010 South-Western, a part of Cengage Learning. All rights reserved.
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Team Assignment None © 2010 South-Western, a part of Cengage Learning. All rights reserved.
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