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IBU5HRM Lecture 2 Summary
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29/7/2012
1
Master of International Business HRM in Global Economy
IBU5HRM
Semester 2, 2012
Lecture 2 Week 2
Lecturer: Dr Jerome Choy
Contact: [email protected]: 2 pm - 3 pm Wednesday
DWB 129
International Organisations (IO’s):Strategy and Structure
Lecture Outline:
o Evolution of the MNE• Degree of internationalisation
• Choice of method for entry into IO
• Global Mind-set (orientation)
o Organisational structure and design
o IHRM and global organisational design
o Research on structure and performance of the MNE
o The global learning organisation: The tie that binds
Factors contribute to the complexity of international business (IB)
oNumber of countries involved
oProtection of foreign investments
oPolitical uncertainty
oCompetitors
oOperational differences abroad
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Opportunities for IB to take
advantage of its global presence
oAdapt to local market differences
oExploit global economies of scale
oExploit economies of global scope
oTap into the best locations for
activities and resources
oMaximize knowledge and experience
transfer between locations.
Three issues central to IB strategy
1. The degree of internationalisation
and geographic scope
2. The basic choice of method for
entry into international business
3. The extent of global mind-set
(orientation) of the firm and its
executives in internationalisation
Eight forms of internationalisation
1. Internationalisation through export
2. International division or global product
division
3. Multi-country/multi-domestic strategy
4. Regionalisation
5. The global firm
6. The transnational firm
7. The born global firm
8. The globally integrated enterprise
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Export
oThe initial decision to go
international
� exporting one or two products to
one country, or
� importing one or a few products
from one country
oLittle impact on HR and the overall business of the firm
International / global product division
o International division (service-oriented)
oGlobal product division (product-
oriented)
o International responsibilities of the HR
department can expand dramatically and
become much more complex, including:
• International assignment,
• development of HRM policies, practices,
• strategic decisions for foreign operations
Multi-country/ multi-domestic strategy
o Subsidiaries in multiple countries
o Operating independently within each country
and in other countries
o Operating independently of the parent-company
HQs except finance, HRM, marketing, R&D
o A global division in parent-company HQs, or a
regional HQs, integrating & coordinating these
basic business functions
o HRM coordinates HRM activities and practices
of the subsidiaries and is responsible for
relocation, compensation, and benefits for a
large number of international assignees
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Regionalisation
oConducting an international business
on a regional basis
o In only one or two regions, e.g.,
Europe or Asia
oManage HR from a regional
headquarters
The global firm
o The world is one market – products / services marketed to customers all over
the world
o Products / services are created in countries whichever do the job best.
o Dominant HQs
o Strong organizational culture
o Global organizational branding
The transnational firm
oFinal stage of globalization (Bartlett &
Ghoshal)
oBalance of global integration, local
responsiveness and knowledge
sharing
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The born global firm
o Operate instantly around the globe
o IT focus
o HR activities in this kind of firms include
• Frequent international business travel of
key personnel
• Legal protection of intellectual property
rights (patents and trademarks)
• Hiring of key local staff
• Management of international project
teams for local client service.
The 21st Century globally integrated
enterprise
oIntegrated approach to deliver
value to employees and customers worldwide
oTalent and expertise within the MNE flow to where it creates most value
Business Forms (Entry Methods)
for entering into international business
o Licensing and sub-contracting
o Outsourcing
o Off shoring
o Wholly-owned subsidiary
o Mergers and acquisitions (M&As)
o International joint ventures (IJVs)
o Strategic alliances, partnerships (e.g.
research) and consortia
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Licensing & sub-contracting
o To take advantage of lower labour and operating costs by
� Licensing the rights to manufacture and/or
market one’s product abroad
� Sub-contracting to an overseas contractor the
manufacture or assembly of a firm’s products
o Not involving in setting up of directly
owned subsidiary
o IHR makes sure human rights of workers
and OH&S are maintained in the
productions
Outsourcing• Another form of subcontracting
• Contract out a/number of business process(es)
to overseas firms
• Reasons for reducing costs, improving quality,
freeing firm’s resources for greater focus on core
competencies
• Directly linked to business management due to
importance of the outsourced operations
• Very much involving IHR in planning, managing
and execution of international assignments,
business travel, training
Off shoring• Involving relocation of one or more business
processes of a firm’s to another country
• For lowering costs
• Offshore process is still operated by the firm’s
personnel but in an offshore location
• Same HR responsibilities as those in the parent-
firm except under different legal system and influence of other national culture
• HR mostly dealing with employee satisfaction, recruitment & retention in wake of damaged staff
morale caused by threats of off-shoring
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Wholly-owned subsidiary
o Own sale offices in foreign countries where sales are large
o Own manufacturing factories in foreign
countries to assemble and/or manufacture products
o Managed by a sales manager from parent-company
o HR in HQs involved in matters related to
international assignees and foreign employees
Mergers & Acquisitions
oA preferred entry method
oTo consolidate the scope of business activities and parent-firm’s
position in global market
oIHR input is important in:
�pre-merger due diligence
�post merger integration
International joint ventures
o Involving 2 or more firms from 2 countries to create a NEW business entity with shared
ownership and managerial responsibilities
o the NEW entity are operated by employees from both partners.
o HR needs to adopt or develop HR practices for the multi-national workforce.
o HR specifically is responsible for merger
/interaction of two or more national and corporate cultures
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Strategic alliances, partnerships (e.g. research) and consortia
o Not a replacement of other international business forms (e.g., multi-domestic,
transnational)
o Providing additional flexibility in a fast-moving global economy
o Firms adopting these forms to gain access to technology, research, laboratories
o HR issues in coordinating different workforces
and managements in different countries, thus detremental to desired edges.
Designing the organizational
structure of global firmso Integrates activities
o Coordinates policies and practices
o Organizational components
• Product lines
• Regional & home country HQs
• Country subsidiaries & alliances
• Global business functions
o Additional factors
• Firm’s stage & forms of international development
• Standardisation vs localisation
• Host government involvement in economic process
• Diversity and complexity of MNE operations
Coordination mechanisms
o Balance parent-firm HQs policies with local approaches
o Reduced size of business units
o Informal linkages
o Global networks
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IHRM and the management of
global organization structure
o Shared services model
o Linkages
o Networks
Research on structure and performance of the MNE - Empirical shortcomings
o Manufacturing industry slant
o More emphasis placed on strategy issues
rather than management and organization
issues
o Failure to capture temporal context
The global learning organization: The tie that binds - Knowledge is power
o Intellectual and social capital
o Knowledge sharing
o Facilitate learning on a global basis
o Utilise full skill sets
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Chapter 2: Guided discussion
questionso How has the MNE evolved? How have
the changes in MNEs affected HR?
o What are the various choices that MNEs have for entry into international business? How do the functions of HR vary with these various choices?
o How can IHR help to ensure the success of cross-border acquisitions and joint ventures?
o How do networks and learning organizations help to ensure an MNEs competitive advantage?