IHRM: SUSTAINING

INTERNATIONAL BUSINESS
OPERATIONS
Dony Eko Prasetyo, S.IP.
Globalization Involves Us All

We experience international
transactions daily

Imports and exports reach

even remote areas

Technology and e-biz

promote trade

Consumers and companies

pull markets closer
Globalization

Trend toward greater economic, cultural, political and

technological interdependence among national institutions
and economies

Globalization of markets Globalization of

production
Convergence in buyer
Dispersal of production
preferences in markets
activities worldwide to
around the world
minimize costs or
maximize quality
Benefits of Globalization

Globalization Globalization
of markets of production

Reduces
Reducesmarketing
marketingcosts
costs Access
Accesslower-cost
lower-costlabor
labor
New
Newmarket
marketopportunities
opportunities Access
Accesstechnical
technicalexpertise
expertise
Levels
Levelsincome
incomestream
stream Access
Accessproduction
productioninputs
inputs
Challenges to Business

Physical Digital Reputational

security security risk

Examine company Guard proprietary Require ethical and

vulnerability and information and lawful behavior from
create a disaster confidential all employees and
recovery plan communications business partners
Globalization Drivers I

Remove barriers to trade

and investment GATT

WTO

Regional trade
agreements
Trade Exceeds Output
Globalization Drivers II
Technological Innovation

Email and Internet, intranets, Transportation

videoconferencing and extranets advancements

Better Improved More efficient,

coordination communications and dependable
and control management shipping
Measuring Globalization
Globalization Then and Now

Highly mobile Fear of jobs

labor market moving abroad

Free-flowing Backlash among

capital and trade the disaffected
Global Business Environment
International Business
International Business Players

Multinational Small Businesses Born Global Firm

Corporation and Entrepreneurs
Small companies and Adopts a global
Business that has direct
individuals becoming perspective and engages
investments abroad in
increasingly active in in international business
multiple countries
international trade and from or near its inception
investment
 International Business
Defined
International business: all commercial
transactions between parties in two
or more countries
Private firms are profit-oriented.
Government organizations may or
may not be profit-oriented.
The international business
environment
is more complex and diverse than the
domestic business environment.
Fig. 1.1: International Business:

Operations and Influences

Reasons That Firms Engage in
International Business

To expand sales
Volkswagen [Germany]
Ericsson [Sweden]
Michelin [France]
Nestl [Switzerland]
IBM [USA]
Seagram [Canada]
Sony [Japan]
 To acquire resources
Products, components, services
Foreign capital
Technologies
Information

To minimize risk
Take advantage of business cycle
differences amongst countries
Diversify suppliers across countries
Counter competitors advantages
 Modes of Entry into
International Business

Merchandise exports and imports

Service exports and imports

Use of assets [licensing agreements]

[Foreign investment]
Foreign direct investment
[Portfolio investment]
 Means for Conducting
International Operations
 International Business
Terminology
Strategic alliance: a collaborative
arrangement of critical importance to
one or more of the alliance partners
Multinational enterprise [MNE]: a
firm that takes a global approach to
its foreign markets and production
Multinational corporation [MNC] and
transnational company [TNC]
may be used in this same
context.
 International Business
Managers
Must understand the relevance of:
Domestic and international law
Political science
Anthropology
Sociology
Psychology
Economics
Geography
Must be knowledgeable about the competitive
dimensions of the international business
environment
Physical and Societal Influences
on International Business
Competitive Factors Affecting
International Business
 Approaches to Staffing
Factors affecting approaches to
staffing
General staffing policy on key
positions at headquarters and
subsidiaries
Constraints placed by host
government
Staff availability
Ethnocentric
Polycentric
Geocentric
 Ethnocentric
Strategic decisions are made at
headquarters;
Limited subsidiary autonomy;
Key positions in domestic and
foreign operations are held by
headquarters personnel;
PCNs manage subsidiaries.
 Ethnocentric Approach
Advantages: Disadvantages:
Limits the promotion
To ensure new
opportunities of HCNs, leading
subsidiary complies
to reduced productivity and
with overall corporate
increased turnover among the
objectives and policies
HCNs
Has the required level Longer time for PCNs to adapt
of competence to host countries, leading to
Assignments as errors and poor decisions
control being made
High cost
Considerable income gap,
high authority, and increased
standard of living may relate
to lack of sensitivity
 Polycentric
Each subsidiary is a distinct
national entity with some decision-
making autonomy;
HCNs manage subsidiaries who are
seldom promoted to HQ positions;
PCNs rarely transferred to
subsidiary positions.
 Polycentric Approach
Disadvantages:
Advantages:
Employment of HCNs
eliminates language barriers,
avoids adaptation of PCNs,
reduces the need for cultural
awareness training programs
Employment of HCNs allows a
multinational company to
take a lower profile in
sensitive political situations
Employment of HCNs is less
expensive
Employment of HCNs gives
continuity to the management
of foreign subsidiaries (lower
turnover of key managers)
Difficult to bridge the gap
between HCN subsidiary
managers and PCN managers
at headquarters ( language
barriers, conflicting national
loyalties, cultural differences)
HCN managers have limited
opportunities to gain
experience outside their own
country
PCN managers have limited
opportunities to gain
international experience
Resource allocation and
strategic decision making will
be constrained when
 Geocentric
A global approach - worldwide
integration;
View that each part of the
organization makes a unique
contribution;
Nationality is ignored in favor of
ability:
Best person for the job;
Color of passport does not matter
when it comes to rewards, promotion
 Geocentric Approach
Disadvantage:
Host government may
Advantages: use immigration
Ability of the firm to controls in order to
develop an increase HCNs
international employment
executive team Expensive to
Overcomes the implement due to
federation drawback increased training and
of the polycentric relocation costs
approach Large numbers of PCNs,
Support cooperation HCNs, and TCNs need
and resource to be sent across
sharing across units borders
Reduced independence
of subsidiary
management
Geocentric Staffing Requirements
 Regiocentric
Reflects a regional strategy and
structure;
Regional autonomy in decision
making;
Staff move within the designated
region, rather than globally;
Staff transfers between regions are
rare.
 Regiocentric Approach
Advantages:
Disadvantages:
Allow interaction
between executives
transferred to regional
headquarters from
subsidiaries in the
region and PCNs posted
to the regional
headquarters
Provide some sensitivity
to local conditions
Help the firm to move
from a purely
ethnocentric or
polycentric approach to
a geocentric approach
Produce federalism at
a regional rather than
a country basis and
constrain the firm
from taking a global
stance
Staffs career
advancement still
limited to regional
headquarters, not the
parent country
headquarters
The advantages and disadvantages of using
PCNs, TCNs and HCNs
Determinants of IHRM approaches and activities
 Reasons for international
assignments
Position filling
Eg. Skills gap, launch of new endeavour,
technology transfer
Management development
Training and development purposes, assisting
in developing common corporate values
Organizational development
Need for control, transfer of knowledge,
competence, procedures and practices
 Types of international
assignments
Short term
Up to 3 months
Extended
Up to 1 year
Long term
Varies from 1 to 5 years
The traditional expatriate assignment
 Non-standard assignments
Commuter assignments
Rotational assignments
Contractual assignments
Virtual assignments

Some of these arrangements assist in

overcoming the high cost of international
assignments but are not always effective
substitutes for the traditional expatriate
assignment
Factors influencing virtual assignments
 Roles of an expatriate
Agent of direct control
Agent of socialization
Network builder
Boundary spanner
Language node
Transfer of competence and
knowledge
The roles of an expatriate
 The role of non-expatriates
People who travel internationally yet
are not considered expatriates as
they do not relocate to another
country
Road warriors, globetrotters, frequent
fliers
Much of international business
involves visits to foreign locations,
eg.
Sales staff attending trade fairs
Periodic visits to foreign operations
 A glamorous life?
International business travelers cite
the positives as:
Excitement and thrills of conducting
business deals in foreign locations
Life style (top hotels, duty-free
shopping, business class travel)
General exotic nature
 But a high level of stress!
Home and family issues frequent
absences
Work arrangements domestic side
of position still has to be attended to
Travel logistics waiting in airports,
etc.
Health concerns poor diet, lack of
sleep, etc.
Host culture issues limited cultural
training
Various roles of corporate HR
The role of the corporate HR
function
Can we manage our people like a
global product? The feasibility of:
The concept of a global internal labour
market
Standardization of work practices and
HR activities
What HR matters require central
control and what can be
decentralized?