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International Human Resources Strategy

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Presentation on theme: "International Human Resources Strategy"— Presentation transcript:

1 International Human Resources Strategy
Lidija Dzanic Tua Lindholm Lea Wakolbinger Mirjam Zerjav VK Internationale Unternehmensführung WS 2004/05

2 Agenda Business strategies Staffing approaches
Different types of managers Expatriation vs. inpatriation Case study Conclusion

3 Introduction Nowadays globalization is more present
Requires globally competent managers IHRM is becoming more important IHRM is major determinant of success or failure in international business Global integration is neccesary in HRM Core competency – local adaptation

4 Business strategies (1)
Domestic New products or services for the domestic market Foreign markets and international managerial skills largely irrelevant

5 Business strategies (2)
International Competition increases Companies expand internationally Hierarchical structure Structural and cultural dominance First home country managers abroad as expatriates

6 Business strategies (3)
Multinational Least-cost and standardized products and services Worldwide lines of business Decisions made by people from a wider range of cultures Values of the headquarter’s national culture dominate Senior managers need to understand the world business environment

7 Business strategies (4)
Transnational Global competition Identical products are distributed worldwide Research and development Firms become less hierarchically structured Transnational human resource strategies are being developed

8 Characteristics of effective IHRM
Transnational scope Geographical context within which all major decision are made Transnational representation Multinational composition of the managers and executives Transnational process Firm’s ability to include representatives and ideas from many countries

9 Ethnocentric approach (1)
Parent country nationals (PCNs) take all key positions in a multinational company In the early stages of internationalization Reasons for pursuing this policy: Lack of qualified host country nationals (HCNs) Ability of the parent country nationals (PCNs) to coordinate subsidiary Transferring Know-how

10 Ethnocentric approach (2)
Problems that may occur: Adaptation of PCNs to a host country may take a long time Promotion opportunities of local managers are limited PCNs’ lack of sensitivity

11 Polycentric approach (1)
Companies following this staffing policy use HCNs in their subsidiaries and PCNs in corporate headquarters Advantages: No more language barriers and adjustment problems of expatriates The employment of HCNs is less expensive Morale and career opportunities of local stuff

12 Polycentric approach (2)
Disadvantages: Weak links between the independent national units and headquarters Lack of experience of both HCNs & PCNs is a liability in an increasingly competitive international environment

13 Geocentric approach (1)
Best people get key jobs, nationality is not important Advantages: A pool of senior international managers is developed Tendency of national identification of managers with subsidiary units is reduced

14 Geocentric approach (2)
Disadvantages: Immigration laws which require the employment of local nationals are used by many host countries Difficult to implement because of increased training, compensation and relocation costs Longer lead times and more centralized control of the staffing process are required

15 Regional approach Staffing strategy with emphasis on different regional markets Factors for staffing decisions: Need of area expertise Need of product expertise

16 Managerial mindset 4 typical mindsets Closely associated
From the least global to the most global mindset Defender Explorer Controller Integrator

17 Defender Internally focused Oriented to the domestic market
Satisfied with domestic operations Uninterested in making foreign actions Almost no international element Foreign elements in domestic market are unwanted

18 Explorer Aware of business opportunities in foreign markets
Perceives foreign markets as not dangerous Treats international forays with a lot of caution Prefers strategies of exporting and franchising Domestic business is larger than international, is predominant Foreign operations are managed from the head office located in the home country

19 Controller More externally oriented than the explorer
Dominates in foreign markets with procedures which were successful in domestic market Understands the nature of cultures Important: controller’s head office spends time on controlling and less on coordinating Approval and sanction needed from the head office

20 Integrator Global perspective Knowledge and skills
Understands, is aware, is competent Able to manage differences between people, values and cultures Coordinates more than controls Critical function is creating mechanisms for knowledge flow and transferring it from one part of the global system to another

21 Good international manager
Ability to develop Effective local strategies Local government relations Cultural leadership skills Social networking skills Teamwork skills Good understanding of business environment Insightful local social knowledge (Harvey et al.)

22 Dimensions of IHRM Knowledge-based view of the firm (Harvey et al.)
Tangible vs. intangible dimensions of HRM Development of a common knowledge basis (Grant)

23 Expatriation vs. inpatriation (1)
1) Harvey et al. Decision factors Value of tacit local knowledge Cultural and economic distance Equivocality of subsidiary goals

24 Expatriation vs. inpatriation (2)
2) Torbiörn Decision factors Openness of economic region Political instability

25 Expatriation vs. inpatriation (3)
Low Cultural Distance High High Equi-vocality Social Knowledge Low Social Knowledge High Low Expatriate Inpatriate Inpatriate (P) Expatriate (S) High Level of Economic Development Low

26 Advantages of inpatriate use
Effective „boundary spanners“ Advice with HR practices Satisfaction with HR strategy in foreign subsidiaries More acceptance on return (Harvey et al.)

27 Mergers and acquisitions
Double-staffing strategy Inpatriates  communication Expatriates  coordination (Torbiörn)

28 Expatriation Overall increasing trend in expatriation (especially UK)
British view IHRM as essential contributor to strategic management US: more inpatriation due to high expatriate failures (Scullion)

29 Expatriate failure Direct and indirect costs Main reasons:
Inability of spouse to adjust Poor performance (Scullion)

30 Training, selection and repatriation
Selection: not only technical, but also personal skills (Scullion) Cross-cultural training approach (Mendenhall and Oddou) Information Affection Immersion Effective repatriation programs (Scullion, Dessler)

31 Case study 319 000 employees 170 countries
advanced information technologies: computer systems, software, storage systems, microelectronics

32 Beginning in 1888 Incorporated in 1911 1300 employees

33 1914 Thomas J. Watson Revenues doubled and business expanded The base for the strong organizational culture today

34 Interview Dr. Haberl, manager of Media Relations

35 Local workforce Inpatriates not typical Expatriation – not mainly knowledge transfer Expatriation at IBM a part of a manager‘s career No loss of control

36 Strong organizational culture
„myth of Watson“ Helpful in the long run Social tacit knowledge Explicit knowledge

37 Locals are no locals anymore after entering IBM
IBMer Same rules all over the world

38 Training opportunities
Internal technological structure Helping institutions „Buddy-system“ Other training opportunities

39 Conclusions HR strategy must match with corporate strategy
Decision factors that matter in the context of the company’s IHRM strategy should be defined before entering emerging markets


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