The organizational context

Figure 2-1: Management demands of international growth

The path to global status

• Causes structural responses, due to:– Strain imposed by growth and geographical

spread– Need for improved coordination and control

across business units– The constraints imposed by host-government

regulations on ownership and equity

• Evolution path common but not normative

Figure 2-2: Stages of internationalization

Stages of internationalization: Exporting

• Typically the initial stage of international operations– Usually handled by an intermediary (foreign

agent or distributor)– Role of HR department unclear at this stage

Figure 2-3: Export department

Sales subsidiary

• Replacing foreign agents/distributors with own through sales or branch offices/subsidiaries

• May be prompted by:– Problems with foreign agents– More confidence in international activities– Desire for greater control– Give greater support to exporting activities

• PCNs may be selected, leading to some HR involvement

Figure 2-4: Sales subsidiary

International division

• Creation of a separate division in which all international activities are grouped

• Resembles ‘miniature replica’ of domestic organization

• Subsidiary managers report to head of international division

• Objectives regarding foreign activities may determine approach to staffing of key positions– Expatriate management role of corporate HR

Figure 2-5: International division

Global product/area division

• Strain of sheer size may prompt structural change to either of these global approaches

• Choice typically influenced by: – The extent to which key decisions are to be

made at the parent country headquarters or at the subsidiary units (centralization versus decentralization)

– Type or form of control exerted by parent over subsidiary

Figure 2-6a: Global product division Figure 2-6b: Global area division

The matrix

• An attempt to integrate operations across more than one dimension

• Violates Fayol’s principle of unity of command

• Considered to bring into the management system a philosophy of matching the structure to the decision-making process

Figure 2-7: The matrix

Problems with the Matrix Bartlett and Ghoshal

• Dual reporting

• Proliferation of communication channels

• Overlapping responsibilities

• Barriers of distance, language, time and culture

Leads to conflict and confusion

Creates informational logjams

Produce turf battles and loss of accountability

Make it virtually impossible to resolve conflicts and clarify confusion

Control mechanisms

“Globalization brings considerable challenges which are often under-estimated….

Every morning when I wake I think about the challenges of coordinating our operations in many different countries”

Quote by Accor CEO

Figure 2-10: Control mechanisms

Mode of operation and HRM

• Not just subsidiary operations• Firms may also adopt contractual modes

– Licensing– Franchising– Management contracts– Projects

• And/or cooperative modes (such as joint ventures)

Interfirm linkages

• Alliance (strategic alliance, cooperative venture, collaborative venture or corporate linkage)

• A form of business relationship that:– Involves some measure on interfirm integration– Stops short of a full merger or acquisition

HR factors

• HR issues and activities that affect the successful functioning of international joint ventures include:– Assigning mangers to the joint venture– Evaluating their performance– Handling aspects pertaining to career path – Compensation benefits