[PPT]Introduction to International Businessfaculty.haas.berkeley.edu/brchen/Introduction to... · Web viewIntroduction to International Business April 20, 2007 Brian Chen/Sanny Liao

Introduction to International Introduction to International BusinessBusiness

April 20, 2007April 20, 2007Brian Chen/Sanny LiaoBrian Chen/Sanny Liao

What is “human resource management”?What is “human resource management”?

Definition: Definition: human resource managementhuman resource management • refers to the activities and organization carries out to refers to the activities and organization carries out to

use its human resources effectivelyuse its human resources effectively These activities include: These activities include:

• determining firm’s human resource strategy, staffing, determining firm’s human resource strategy, staffing, performance evaluation, management development, performance evaluation, management development, compensation, and labor relationscompensation, and labor relations

Can you think of any instance where one of these Can you think of any instance where one of these may be different across countries?may be different across countries?

Firms may pursue different strategies in Firms may pursue different strategies in managing international businessmanaging international business

KFC serves rice congee in China KFC serves rice congee in China Localization strategyLocalization strategy

Microsoft develops most of its products in the U.S. and sells Microsoft develops most of its products in the U.S. and sells them worldwide them worldwide International strategyInternational strategy

McDonald’s standardizes its production processMcDonald’s standardizes its production process Global standardization strategyGlobal standardization strategy

Catepillar designs its products to use many identical Catepillar designs its products to use many identical components and invests in a few large-scale component components and invests in a few large-scale component manufacturing facilities to cheaply supply these manufacturing facilities to cheaply supply these components; at the same time, Catepillar set up smaller components; at the same time, Catepillar set up smaller plants in individual markets to augment the final product to plants in individual markets to augment the final product to suit particular market demandssuit particular market demands Transnational strategyTransnational strategy

Staffing policiesStaffing policies

Def: Def: staffing policystaffing policy is concerned with the is concerned with the selection of employees for particular jobs.selection of employees for particular jobs.

Types of staffing policiesTypes of staffing policies• Ethnocentric staffingEthnocentric staffing• Polycentric staffingPolycentric staffing• Geocentric staffingGeocentric staffing

Ethnocentric staffingEthnocentric staffing

All key management positions are filled by All key management positions are filled by parent-country nationalsparent-country nationals

Pros? Cons?Pros? Cons?

GoodGood BadBad

Provides quality managers Provides quality managers when talent is scarce in the when talent is scarce in the host countryhost countryMaintains a unified corporate Maintains a unified corporate culturecultureEnsures smoother transfer of Ensures smoother transfer of uncodifed knowledge (esp. core uncodifed knowledge (esp. core competencies)competencies)

Limits the advancement of Limits the advancement of host country nationals host country nationals resentmentresentmentCan lead to “cultural myopia”Can lead to “cultural myopia”

Polycentric staffingPolycentric staffing

Recruits host-country nationals to manage Recruits host-country nationals to manage subsidiaries while parent-country nationals subsidiaries while parent-country nationals occupy key positions at corporate headquartersoccupy key positions at corporate headquarters

Pros? Cons?Pros? Cons?GoodGood BadBad

firm is less likely to suffer firm is less likely to suffer from cultural myopiafrom cultural myopiaLess expensive to hire locals Less expensive to hire locals than expatriatesthan expatriates

Glass ceiling for host country Glass ceiling for host country nationals nationals resentment resentmentGap can form between host-Gap can form between host-country managers and parent-country managers and parent-country managers, the gap country managers, the gap may be perpetuated by time may be perpetuated by time

Geocentric staffingGeocentric staffing

Seeks the best people fro key jobs throughout Seeks the best people fro key jobs throughout the organization, regardless of nationality.the organization, regardless of nationality.

Pros? Cons?Pros? Cons?

GoodGood BadBadEnables the firm to make the Enables the firm to make the best use of its human resourcesbest use of its human resourcesEnables the firm to build a Enables the firm to build a cadre of international executives cadre of international executives who feel at home working in a who feel at home working in a number of cultures number of cultures can can benefit both from local benefit both from local knowledge and hard-to-transfer knowledge and hard-to-transfer firm core competenciesfirm core competencies

Governments may stipulate Governments may stipulate that the foreign subsidiaries that the foreign subsidiaries only hire local citizensonly hire local citizensCan be very costly to Can be very costly to implement (training and implement (training and relocation costs can be high)relocation costs can be high)Placement of managers on Placement of managers on international “fast track” may international “fast track” may create resentmentcreate resentment

Expatriate managers suffer high attrition Expatriate managers suffer high attrition ratesrates

Why?Why?• US multinationalsUS multinationals

Inability of spouse to adjustInability of spouse to adjust Manager’s inability to adjustManager’s inability to adjust Other family problemsOther family problems Manager’s personal or emotional maturityManager’s personal or emotional maturity Inability to cope with larger overseas responsibilitiesInability to cope with larger overseas responsibilities

• Japanese multinationalsJapanese multinationals Inability to cope with larger overseas responsibilitiesInability to cope with larger overseas responsibilities Difficulties with new environmentDifficulties with new environment Personal or emotional problemsPersonal or emotional problems Lack of technical competenceLack of technical competence Inability of spouse to adjustInability of spouse to adjust

Can be alleviated by careful selection and extensive trainingCan be alleviated by careful selection and extensive training

What kind of training should expatriate What kind of training should expatriate managers receive?managers receive?

Cultural trainingCultural training Language trainingLanguage training Practical trainingPractical training Repatriate managers should also be Repatriate managers should also be

trainedtrained

Performance AppraisalPerformance Appraisal

If you are on the board of a firm with If you are on the board of a firm with foreign subsidiaries, what measures of foreign subsidiaries, what measures of performance would you use?performance would you use?

It is difficult to appraise the performance It is difficult to appraise the performance of foreign managersof foreign managers• Host-nation managers may be biased by their Host-nation managers may be biased by their

own cultural frame of referenceown cultural frame of reference• May be biased by distance and by their lack of May be biased by distance and by their lack of

experience working abroad experience working abroad need to rely on need to rely on hard data alone, but that is often does not hard data alone, but that is often does not provide a comprehensive pictureprovide a comprehensive picture

Ways to augment performance appraisalWays to augment performance appraisal

Put more weight on on-site manager’s appraisal Put more weight on on-site manager’s appraisal than to an off-site manager’s appraisalthan to an off-site manager’s appraisal

Be cognizant of the nationality of the appraising Be cognizant of the nationality of the appraising managermanager

Rely on former expatriates to help reduce biasRely on former expatriates to help reduce bias Home-office managers should be consulted Home-office managers should be consulted

before foreign on-site managers complete formal before foreign on-site managers complete formal termination evaluations termination evaluations limits the bias from limits the bias from cultural misunderstanding. cultural misunderstanding.

National differences in compensationNational differences in compensation

There is a wide gap among executive There is a wide gap among executive compensations across various countriescompensations across various countries

What is appropriate?What is appropriate?• Expatriate PayExpatriate Pay

= Base Salary= Base Salary+ Foreign Service Premium+ Foreign Service Premium+ Allowances (hardship, housing, cost of + Allowances (hardship, housing, cost of

living, education)living, education)+ Differences in tax rates+ Differences in tax rates+ Differences in benefits+ Differences in benefits

International labor relationsInternational labor relations

Firms need to be cognizant about Firms need to be cognizant about differences in labor rules across countriesdifferences in labor rules across countries

Examples:Examples:• Working hours/weekWorking hours/week• Style of managementStyle of management• Others?Others?

Global Human Resource Management Global Human Resource Management ExerciseExercise

You are executive directors at Wal-Mart, Coca-You are executive directors at Wal-Mart, Coca-Cola, and Wipro, and are planning your Cola, and Wipro, and are planning your international expansion strategy into Russia, international expansion strategy into Russia, Brazil, and Southeast Asia. How will you staff Brazil, and Southeast Asia. How will you staff your senior management positions?your senior management positions?• What strategy do you plan to take?What strategy do you plan to take?• What staffing strategy approach would your take? What are What staffing strategy approach would your take? What are

the pros and cons of the strategy that you decide upon?the pros and cons of the strategy that you decide upon?• List the qualities that you seek in your ideal candidate. Draft List the qualities that you seek in your ideal candidate. Draft

his/her resumehis/her resume• How would you propose to evaluate his/her performance?How would you propose to evaluate his/her performance?• What compensation package would you propose?What compensation package would you propose?• Would you provide any special training for the new manager?Would you provide any special training for the new manager?