Factors Influencing

compensation
A.ISWARYA
MBA-II
Factors influencing
compensation

Internal and External Relativities
MNC
internal
environment
1.Goal orientation
2.Capacity to pay
3.Competitive strategy
4.Organizational
culture
5.Internal workplace
composition
6.Labour relations
7.Subsidiary role


















MNC External
Environment
1.Parent nationality
2.Labour market
characteristics
3.Local culture
4.Home and host
country
governments roles
5.Industry type
6.competitors
Strategies















Staffing
orientation
International compensation
strategy







MNC Internal Environment
1.Goal orientation:
Its goal orientation may be profit-making or service
provision. typical business enterprises seek profit maximization and
non-profit organizations pursue services to society as their goal.

EX: what Red cross Society or cry pays its employees
cannot be compared with the compensation paid by pepsi to its
5,00,000 employees spread across the globe.


2.capacity to pay:



The capacity of an organization is a critical internal
factor influencing compensation. All the theories and principles for paying
attractive compensation not withstanding, what finally maters is the
organizations ability to pay. Obviously, international compensation
strategy must the consideration of cost constraints on the MNCs.

3. competitive strategy:
Successful MNCs follows by these strategies,

a. Defender

b. Prospector

c. Analyzer

















a)Defender:
Where the MNC Is a defender, the approach is to seek narrow
and relatively stable product marketing domains. Compensation system
based on hierarchical positions in the organizations. Compensation is
primary driven superior /subordinate differentials.


b)Prospector:

In the Prospector strategy, an international business
continuously searches for product and market opportunities and
experiments with response to environment trends. the compensation system
then depends on expatriate performance, as opposed to his or her
hierarchical position in the organization.























c)Analyzer:
Through an analyzer strategy, the MNC seeks to operate
into types of the product are market domains one relatively stable and the
other changing.

4.organational culture:
It has on international compensation. Whether
compensation is based on seniority or the performance of the expatriate,
benefits or generally determined.

5.Internal workforce composition:

Workforce demographics such as age ,education level,
qualification and competence. along with workforce tastes and preferences
have their impact on international compensation.



6.Labour relations:

Labor relations comprising the extent unionization of the
organization and the nature of employment relationship deserve due
consideration while designing and administering internationl compensation.

7.Subsidiary role:

The strategic role of the subsidiary determines the
compensation system. If the goods and services provided by the subsidiary
contribute significantly to the achievement of the global objective of the
MNCs.








MNC EXTERNAL ENVIRONMENT

1.Parent nationality:

It as reflected in its culturally reflected attitudes and values
towards compensation policy and partices , is one such external force having
impact on expatriate compensation.

2. Labor market characteristics:

The include supply and demand, education and skill levels of
individuals, and experience of players in the labor market. Irrespective of
industry, labor market features are the determinants.

3.Local culture:
It influences international compensation strategy through the
dominant societal values, norms, attitude and beliefs concerning,
Ex: performance, seniority, family connections.


:





















4.Home country governments roles:

Government of the local countries lay-down certain norms
regarding minimum wages
ex: minimum wages act in India ,bonus payment of bones act in India.

5. Industry type:

It is crucial determining international compensation.
compensation in IT, software, and services sector pay much higher than
other industries.

6.competitors strategies:

pay packages of MNCs cannot be behind what their rivals are
paying to their employees. In fact, an international business needs to excel
its competitors if it desires to be a market leader.








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