Human resource management gaining a competitive advantage 2014 chapter 15

Factors Affecting HRM in International Markets Human Resource Management Culture Political-Legal System Education -Human Capital Economic System... Education/Human Capital• Countries dif

• Organizations now function in a global

economy.

• International expansion can provide a

competitive advantage:

– Entering different countries may provide

large numbers of potential customers.

– Building production facilities in countries with low-cost labor may prove cost-efficient

• Maquiladora plants

– The rapid increase in telecommunications

and information technology enables work to

be done more rapidly, efficiently, and effectively around the globe.

Current Global Changes

• European Economic

Community

• North American Free Trade

Agreement

• The Growth of Asia

– Japan, China, Singapore,

Hong Kong, and Malaysia are significant economic forces

• General Agreement on

Tariffs and Trade (GATT)

Factors Affecting HRM in

International Markets

Human Resource Management Culture

Political-Legal

System

Education -Human Capital

Economic

System

Hofstede’s Cultural Dimensions

• Individualism/collectivism - the degree to

which people act as individuals rather than as members of a group.

• Power distance - how a culture deals with

hierarchical power relationships.

• Uncertainty avoidance - how cultures deal

with the fact that the future is not perfectly

predictable.

• Masculinity-femininity describes the division

of roles between the sexes within a society.

• Long-term/short-term orientation - the

tendency of a culture to focus on long-term

benefit or short-term outcomes.

Implications of Culture for HRM

• Cultures differ on such things as leadership, decision-making, and motivation

• Cultures influence the appropriateness of HRM practices.

• Cultures may influence compensation systems.

• Cultural differences can affect the communication and coordination processes in organizations.

Education/Human Capital

• Countries differ in their levels of human capital

• A country's human capital is determined

by a number of variables, primarily,

educational opportunity.

• Countries with low human capital attract facilities that require low skills and

low-wage levels.

• Countries with high human capital are

attractive sites for direct foreign

investment that creates high-skill jobs.

Political/Legal System

• Dictates the requirements of certain HRM

practices, such as training, compensation,

hiring, firing, and layoffs

• The legal system is an outgrowth of the culture, reflecting societal norms.

– United States has led the world in eliminating

discrimination in the workplace and controlling the process of labor management negotiations – Germany has provided employees with a legal right to "codetermination" in the workplace.

– The EEC provides for the fundamental social

rights of workers: freedom of movement and freedom to choose one's occupation and be fairly compensated.

Economic System

• Under socialist economies, there

is little economic incentive to

develop human capital, but

ample opportunity exists

because education is free

• In capitalist systems, the

opposite situation exists, with

higher tuition at state universities

but economic incentives exist

through individual salaries

Types of International Employees

• A parent country is the country in which

the company's corporate headquarters is

located

• A host country is the country in which the

parent country organization seeks to locate (or has already located) a facility

• A third country is a country other than the

host country or parent country

• An expatriate is an employee sent by a

company in one country to manage

operations in a different country

Types of International Employees

• Parent-country nationals (PCNs) are

employees who were born and live in a

parent country

• Host-country nationals (HCNs) are those

employees who were born and raised in the host country, as opposed to the parent

country

• Third-country nationals (TCNs) are

employees born in a country other than the parent country or host country but who work

in the host country

Levels of Global Participation

Increasing Participation in Global Markets

Parent

Country

Host

Country

Domestic International Multinational Global

Foreign subsidiary

Corporate headquarters

Corporate headquarters

Corporate headquarters

Corporate headquarters

Foreign subsidiary

Foreign subsidiary

Foreign subsidiary

Foreign subsidiary

Global Organizations

• Global organizations compete on

state-of-the-art, top-quality products and services

with the lowest possible costs

– Transnational scope refers to the fact that HR

decisions must be made from a global rather than a national or regional perspective

– Transnational representation reflects the

multinational composition of a company's

managers.

– Transnational process refers to the extent to

which the company's planning and decision-making processes include representatives and ideas from a variety of cultures.

Selection of Expatriate Managers

• Successful expatriates have the following

skills or abilities:

– Technical competence

– Ability to adjust to, and be sensitive to, a new culture Three dimensions include:

• the self dimension

• the relationship dimension

• the perception dimension

• Use of women in expatriate assignments

has proven beneficial for companies; recent evidence disproves the notion that women are not successful managers in foreign

Compensation of Expatriates

• Total pay packages have four

components:

– Base Salary—Annual salary,

unadjusted.

– Tax Equalization allowances—

Payments for higher tax rates of other countries.

– Benefits—Continuation of, or

substitute for, home benefits.

– Allowances—Cost-of-living,

housing, education, and relocation payments.

Reacculturation of Expatriates

• Reentry to the home organization may

result in culture shock

– According to some sources, 60 to 70 percent

of expatriates do not know what their position will be upon their return.

• Transition process necessitates

communication of corporate changes while the expatriate is overseas and validation of the importance of the expatriate's

international work