Introduction to International Business

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Introduction to International Business

• April 20, 2007
• Brian Chen/Sanny Liao

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What is human resource management?

• Definition human resource management
• refers to the activities and organization carries
  out to use its human resources effectively
• These activities include
• determining firms human resource strategy,
  staffing, performance evaluation, management
  development, compensation, and labor relations
• Can you think of any instance where one of these
  may be different across countries?

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Firms may pursue different strategies in managing
international business

• KFC serves rice congee in China
• ? Localization strategy
• Microsoft develops most of its products in the
  U.S. and sells them worldwide
• ? International strategy
• McDonalds standardizes its production process
• ? Global standardization strategy
• Catepillar designs its products to use many
  identical components and invests in a few
  large-scale component manufacturing facilities to
  cheaply supply these components at the same
  time, Catepillar sets up smaller plants in
  individual markets to augment the final product
  to suit particular market demands
• ? Transnational strategy

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The Four Strategies
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Staffing policies

• Def staffing policy is concerned with the
  selection of employees for particular jobs.
• Types of staffing policies
• Ethnocentric staffing
• Polycentric staffing
• Geocentric staffing

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Ethnocentric staffing

• All key management positions are filled by
  parent-country nationals
• Pros? Cons?

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Polycentric staffing

• Recruits host-country nationals to manage
  subsidiaries while parent-country nationals
  occupy key positions at corporate headquarters
• Pros? Cons?

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Geocentric staffing

• Seeks the best people fro key jobs throughout the
  organization, regardless of nationality.
• Pros? Cons?

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Expatriate managers suffer high attrition rates

• Why?
• US multinationals
• Inability of spouse to adjust
• Managers inability to adjust
• Other family problems
• Managers personal or emotional maturity
• Inability to cope with larger overseas
  responsibilities
• Japanese multinationals
• Inability to cope with larger overseas
  responsibilities
• Difficulties with new environment
• Personal or emotional problems
• Lack of technical competence
• Inability of spouse to adjust
• Can be alleviated by careful selection and
  extensive training

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What kind of training should expatriate managers
receive?

• Cultural training
• Language training
• Practical training
• Repatriate managers should also be trained

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Performance Appraisal

• If you are on the board of a firm with foreign
  subsidiaries, what measures of performance would
  you use?
• It is difficult to appraise the performance of
  foreign managers
• Host-nation managers may be biased by their own
  cultural frame of reference
• May be biased by distance and by their lack of
  experience working abroad ? need to rely on hard
  data alone, but that often does not provide a
  comprehensive picture

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Ways to augment performance appraisal

• Put more weight on on-site managers appraisal
  than to an off-site managers appraisal
• Be cognizant of the nationality of the appraising
  manager
• Rely on former expatriates to help reduce bias
• Home-office managers should be consulted before
  foreign on-site managers complete formal
  termination evaluations ? limits the bias from
  cultural misunderstanding.

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National differences in compensation

• There is a wide gap among executive compensations
  across various countries
• What is the norm?
• Expatriate Pay
• Base Salary
• Foreign Service Premium
• Allowances (hardship, housing, cost of living,
  education)
• Differences in tax rates
• Differences in benefits

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International labor relations

• Firms need to be cognizant about differences in
  labor rules across countries
• Examples
• Working hours/week
• Style of management
• Others?

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Global Human Resource Management Exercise

• You are executive directors at Wal-Mart,
  Coca-Cola, and Wipro, and are planning your
  international expansion strategy into Russia,
  Brazil, and Southeast Asia, respectively. How
  will you staff your senior management positions?
• What strategy do you plan to take?
• What staffing strategy approach would your take?
  What are the pros and cons of the strategy that
  you decide upon?
• List the qualities that you seek in your ideal
  candidate. Draft his/her resume
• How would you propose to evaluate his/her
  performance?
• What compensation package would you propose?
• Would you provide any special training for the
  new manager?