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The Role of Globalization in HR Policy and Practice. 2. Chapter. International Commerce. Engaging in international commerce without investing in foreign factories or facilities exporting —the firm sells its products and services in foreign marketplaces

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  1. The Role of Globalization in HR Policy and Practice 2 Chapter

  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 • licensing—one firm, called 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

  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 • polycentric—foreign subsidiaries are treated as a distinct entity with some level of decision-making authority • geocentric—relationships between headquarters and foreign subsidiaries tend to be extremely collaborative, with each participant contributing important information, perspective, and decision-making factors • 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

  10. International Business Assignments • 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

  11. 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

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