The Role of Globalization in HR Policy and Practice

1. The Role of Globalization in HR Policy and Practice 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

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

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

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

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

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

8. Unique Challengesin 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 546-557. Reprinted with permission

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

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

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

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