introduction to international business 4-20-07

8/8/2019 Introduction to International Business 4-20-07

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Introduction to InternationalIntroduction to International

BusinessBusiness

April 20, 2007April 20, 2007

Brian Chen/Sanny LiaoBrian Chen/Sanny Liao


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Firms may pursue different strategies inFirms may pursue different strategies in

managing international businessmanaging international business

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

Microsoft develops most of its products in the U.S. and sellsMicrosoft develops most of its products in the U.S. and sellsthem worldwidethem worldwide

International strategyInternational strategy

McDonalds standardizes its production processMcDonalds standardizes its production process GGlobal standardization strategylobal standardization strategy

Catepillar designs its products to use many identicalCatepillar designs its products to use many identicalcomponents and invests in a few largecomponents and invests in a few large--scale componentscale componentmanufacturing facilities to cheaply supply thesemanufacturing facilities to cheaply supply these

components; at the same time, Catepillar set up smallercomponents; at the same time, Catepillar set up smallerplants in individual markets to augment the final product toplants in individual markets to augment the final product tosuit particular market demandssuit particular market demands Transnational strategyTransnational strategy


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Staffing policiesStaffing policies

Def:Def: staffing policystaffing policy is concerned with theis concerned with theselection 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


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Ethnocentric staffingEthnocentric staffing

All key management positions are filled byAll key management positions are filled byparentparent--country nationalscountry nationals

Pros? Cons?Pros? Cons?

GoodGood BadBad

Provides quality managersProvides quality managerswhen talent is scarce in thewhen talent is scarce in thehost countryhost country

Maintains a unified corporateMaintains a unified corporatecultureculture

Ensures smoother transfer ofEnsures smoother transfer ofuncodifed knowledge (esp. coreuncodifed knowledge (esp. corecompetencies)competencies)

Limits the advancement ofLimits the advancement ofhost country nationalshost country nationals resentmentresentment

Can lead to cultural myopiaCan lead to cultural myopia


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Polycentric staffingPolycentric staffing

Recruits hostRecruits host--country nationals to managecountry nationals to managesubsidiaries while parentsubsidiaries while parent--country nationalscountry nationalsoccupy key positions at corporate headquartersoccupy key positions at corporate headquarters

Pros? Cons?Pros? Cons?GoodGood BadBad

firm is less likely to sufferfirm is less likely to sufferfrom cultural myopiafrom cultural myopia

Less expensive to hire localsLess expensive to hire localsthan expatriatesthan expatriates

Glass ceiling for host countryGlass ceiling for host countrynationalsnationals resentmentresentment

Gap can form between hostGap can form between host--country managers and parentcountry managers and parent--country managers, the gapcountry managers, the gapmay be perpetuated by timemay be perpetuated by time


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Geocentric staffingGeocentric staffing

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

Pros? Cons?Pros? Cons?

GoodGood BadBad

Enables the firm to make theEnables the firm to make thebest use of its human resourcesbest use of its human resources

Enables the firm to build aEnables the firm to build a

cadre of international executivescadre of international executiveswho feel at home working in awho feel at home working in anumber of culturesnumber of cultures can benefitcan benefitboth from local knowledge andboth from local knowledge andhardhard--toto--transfer firm coretransfer firm corecompetenciescompetencies

Governments may stipulateGovernments may stipulatethat the foreign subsidiariesthat the foreign subsidiariesonly hire local citizensonly hire local citizens

Can be very costly toCan be very costly toimplement (training andimplement (training andrelocation costs can be high)relocation costs can be high)

Placement of managers onPlacement of managers oninternational fast track mayinternational fast track maycreate resentmentcreate resentment


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Expatriate managers sufferhigh attritionExpatriate managers sufferhigh attrition

ratesrates

Why?Why? US multinationalsUS multinationals

Inability of spouse to adjustInability of spouse to adjust

Managers inability to adjustManagers inability to adjust

Other family problemsOther family problems Managers personal or emotional maturityManagers 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


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What kind of training should expatriateWhat kind of training should expatriate

managers receive?managers receive?

Cultural trainingCultural training

Language trainingLanguage training

Practical trainingPractical training

Repatriate managers should also beRepatriate managers should also betrainedtrained


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Performance AppraisalPerformance Appraisal

If you are on the board of a firm withIf you are on the board of a firm withforeign subsidiaries, what measures offoreign subsidiaries, what measures ofperformance would you use?performance would you use?

It is difficult to appraise the performanceIt is difficult to appraise the performanceof foreign managersof foreign managers HostHost--nation managers may be biased by theirnation managers may be biased by their

own cultural frame of referenceown cultural frame of reference

May be biased by distance and by their lack ofMay be biased by distance and by their lack ofexperience working abroadexperience working abroad need to rely onneed to rely onhard data alone, but that is often does nothard data alone, but that is often does notprovide a comprehensive pictureprovide a comprehensive picture


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Ways to augment performance appraisalWays to augment performance appraisal

Put more weight on onPut more weight on on--site managers appraisalsite managers appraisalthan to an offthan to an off--site managers appraisalsite managers appraisal

Be cognizant of the nationality of the appraisingBe cognizant of the nationality of the appraising

managermanager Rely on former expatriates to help reduce biasRely on former expatriates to help reduce bias

HomeHome--office managers should be consultedoffice managers should be consultedbefore foreign onbefore foreign on--site managers complete formalsite managers complete formaltermination evaluationstermination evaluations limits the bias fromlimits the bias from

cultural misunderstanding.cultural misunderstanding.


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National differences in compensationNational differences in compensation

There is a wide gap among executiveThere is a wide gap among executivecompensations 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 ofliving, education)living, education)

+ Differences in tax rates+ Differences in tax rates

+ Differences in benefits+ Differences in benefits


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International labor relationsInternational labor relations

Firms need to be cognizant aboutFirms need to be cognizant aboutdifferences in labor rules across countriesdifferences in labor rules across countries

Examples:Examples:

Working hours/weekWorking hours/week

Style of managementStyle of management

Others?Others?


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Global Human Resource ManagementGlobal Human Resource Management

ExerciseExercise

You are executive directors at WalYou are executive directors at Wal--Mart, CocaMart, Coca--Cola, and Wipro, and are planning yourCola, and Wipro, and are planning yourinternational expansion strategy into Russia,international expansion strategy into Russia,Brazil, and Southeast Asia. How will you staffBrazil, and Southeast Asia. How will you staffyour 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 areWhat staffing strategy approach would your take? What arethe 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. DraftList 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?

introduction to international business 4-20-07

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