International Human Resources
Strategy
Lidija DzanicTua Lindholm
Lea WakolbingerMirjam Zerjav
VK Internationale Unternehmensführung WS 2004/05
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Agenda
Business strategies Staffing approaches Different types of managers Expatriation vs. inpatriation Case study Conclusion
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Introduction
Nowadays globalization is more present Requires globally competent managers IHRM is becoming more important IHRM is major determinant of success or
failure in international business Global integration is neccesary in HRM Core competency – local adaptation
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Business strategies (1)
Domestic
New products or services for the domestic market
Foreign markets and international managerial skills largely irrelevant
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Business strategies (2)
International
Competition increases Companies expand internationally Hierarchical structure Structural and cultural dominance First home country managers abroad as
expatriates
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Business strategies (3)
Multinational
Least-cost and standardized products and services
Worldwide lines of business Decisions made by people from a wider range
of cultures Values of the headquarter’s national culture
dominate Senior managers need to understand the world
business environment
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Business strategies (4)
Transnational
Global competition Identical products are distributed worldwide Research and development Firms become less hierarchically structured Transnational human resource strategies are
being developed
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Characteristics of effective IHRM
Transnational scope Geographical context within which all major
decision are made Transnational representation
Multinational composition of the managers and executives
Transnational process Firm’s ability to include representatives and
ideas from many countries
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Ethnocentric approach (1) Parent country nationals (PCNs) take all key
positions in a multinational company In the early stages of internationalization
Reasons for pursuing this policy: Lack of qualified host country nationals
(HCNs) Ability of the parent country nationals
(PCNs) to coordinate subsidiary Transferring Know-how
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Ethnocentric approach (2)
Problems that may occur: Adaptation of PCNs to a host country may
take a long time Promotion opportunities of local managers
are limited PCNs’ lack of sensitivity
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Polycentric approach (1)
Companies following this staffing policy use HCNs in their subsidiaries and PCNs in corporate headquarters
Advantages: No more language barriers and adjustment
problems of expatriates The employment of HCNs is less expensive Morale and career opportunities of local
stuff
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Polycentric approach (2)
Disadvantages: Weak links between the independent
national units and headquarters Lack of experience of both HCNs & PCNs is a
liability in an increasingly competitive international environment
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Geocentric approach (1)
Best people get key jobs, nationality is not important
Advantages: A pool of senior international managers is
developed Tendency of national identification of
managers with subsidiary units is reduced
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Geocentric approach (2)
Disadvantages: Immigration laws which require the
employment of local nationals are used by many host countries
Difficult to implement because of increased training, compensation and relocation costs
Longer lead times and more centralized control of the staffing process are required
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Regional approach
Staffing strategy with emphasis on different regional markets
Factors for staffing decisions: Need of area expertise Need of product expertise
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Managerial mindset
4 typical mindsets Closely associated From the least global to the most global
mindset Defender Explorer Controller Integrator
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Defender
Internally focused Oriented to the domestic market Satisfied with domestic operations Uninterested in making foreign actions Almost no international element Foreign elements in domestic market are
unwanted
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Explorer
Aware of business opportunities in foreign markets
Perceives foreign markets as not dangerous
Treats international forays with a lot of caution
Prefers strategies of exporting and franchising
Domestic business is larger than international, is predominant
Foreign operations are managed from the head office located in the home country
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Controller
More externally oriented than the explorer Dominates in foreign markets with
procedures which were successful in domestic market
Understands the nature of cultures Important: controller’s head office spends
time on controlling and less on coordinating Approval and sanction needed from the head
office
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Integrator
Global perspective Knowledge and skills Understands, is aware, is competent Able to manage differences
between people, values and cultures Coordinates more than controls Critical function is creating mechanisms for
knowledge flow and transferring it from one part of the global system to another
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Good international managerAbility to develop
Effective local strategies Local government relations Cultural leadership skills Social networking skills Teamwork skills Good understanding of business environment Insightful local social knowledge
(Harvey et al.)
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Dimensions of IHRM
Knowledge-based view of the firm (Harvey et al.)
Tangible vs. intangible dimensions of HRM
Development of a common knowledge basis (Grant)
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Expatriation vs. inpatriation (1)1) Harvey et al.
Decision factors
Value of tacit local knowledge
Cultural and economic distance
Equivocality of subsidiary goals
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Expatriation vs. inpatriation (2)2) Torbiörn
Decision factors
Openness of economic region
Political instability
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Expatriation vs. inpatriation (3)
Equi-vocality
Social Knowledge
Low
Social Knowledge
High
Social Knowledge
Low
Social Knowledge
High
Low Expatriate Inpatriate Inpatriate (P)Expatriate
(S)
Inpatriate (P)Expatriate (S)
High Expatriate Inpatriate Inpatriate (P)Expatriate
(S)
Inpatriate
Low Expatriate Inpatriate Inpatriate Inpatriate
High Inpatriate Inpatriate Inpatriate Inpatriate
Cultural Distance
Low High
Level of
Econ
om
ic
Develo
pm
en
t Low
Hig
h
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Advantages of inpatriate use Effective „boundary spanners“
Advice with HR practices
Satisfaction with HR strategy in foreign subsidiaries
More acceptance on return
(Harvey et al.)
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Mergers and acquisitions
Double-staffing strategy
Inpatriates communication
Expatriates coordination
(Torbiörn)
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Expatriation
Overall increasing trend in expatriation (especially UK)
British view IHRM as essential contributor to strategic management
US: more inpatriation due to high expatriate failures
(Scullion)
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Expatriate failure
Direct and indirect costs
Main reasons: Inability of spouse to adjust Poor performance
(Scullion)
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Training, selection and repatriation
Selection: not only technical, but also personal skills (Scullion)
Cross-cultural training approach (Mendenhall and Oddou) Information Affection Immersion
Effective repatriation programs (Scullion, Dessler)
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Case study
319 000 employees 170 countries
advanced information technologies:computer systems, software, storage systems, microelectronics
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Beginning in 1888
Incorporated in 1911 1300 employees
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1914 Thomas J. Watson Revenues doubled and business expanded
The base for the strong organizational culture today
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Interview
Dr. Haberl, manager of Media Relations
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Local workforce Inpatriates not typical Expatriation – not mainly knowledge
transfer Expatriation at IBM a part of a
manager‘s career No loss of control
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Strong organizational culture „myth of Watson“
Helpful in the long run Social tacit knowledge Explicit knowledge
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Locals are no locals anymore after entering IBM IBMer
Same rules all over the world
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Training opportunities Internal technological structure
Helping institutions „Buddy-system“ Other training opportunities
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Conclusions
HR strategy must match with corporate strategy
Decision factors that matter in the context of the company’s IHRM strategy should be defined before entering emerging markets
THE END
THANK YOU FOR YOUR ATTENTION
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