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BH 6023 MANAGEMENT AND ORGANISATIONAL BEHAVIOUR
CASE STUDY 5:
OFFICE EQUIPMENT COMPANY (OEC)
LECTURER: PROF. DR. SYED AZIZI WAFA
NAME JESSICA RIKA ATING MOHD. DZULKARNAIN SAHIH ADELINE JEFFERY JOK
PART 1: CASE SUMMARY
MATRIX NUMBER PE20107086C PE20107087C PE20107077C
Brett Harrison 15 years experience. replacing managing director should come from internal candidates. It manufactured their product in different country and distribute to worldwide as they did not have own manufacturing factory.1 IDENTIFYING AND DIAGNOSING THE PROBLEM List of Problems 2 .In 1997. the managing director a U.S regarding production and quality control and matters regarding accounting. recording machines.S technical team and a U. PART 2: 2. assembling and laboring. as this will contribute to minimize their cost of manufacturing. The committee found that the international operations experience is an important factor in deciding the managing director post. Francisco Cabrera a Mexican citizen and Juan Moreno 27 years old assistant managing director. However. The candidates are Tom Zimmerman a 30 years experienced as OEC’s staff. By policy. mail scales and paper shredder.S expatriate will be assigned to direct the production. finance and labor relations will be reported to managing director in Peru.S national of the Office Equipment Company (OEC) in Lima. this plant will be supervised by a U. Peru announced suddenly that he would leave the company within one month. OEC is office equipment manufactures and their products are such as copying machines. Currently OEC begin constructing their firstly manufacturing factory in Peru and will starting the operations in 1999. Carolyn Moyer have 12 years experience. OEC need to find new managing director to managing and overlooked the plant and operations accordingly. This appointed supervisor will give direct report to OEC’s headquarter in U. Since OEC constructing new plant and will commence their first production in 1999. The company needs to find a replacement to fill the vacant positions in short period. A committee had short listed 5 candidates to fulfill the positions.
what should the manager’s salary be? Should it compensate in dollars.2 To appoint a managing director that can suit and work in the Peru’s political turmoil Because of the political turmoil in Peru.5 The company has to decide on whether to run their Peru’s operations with local worker in the host nation. finance and labor relations.1.1 The managing director (a U.6 Compensation package for the managing director These are a few of the many questions OEC faces when it posts people to Peru operations. the managing director must know and can handle all this tasks. 2.S. or expatriates from the home country or a third country national Because the five short-listed candidates are consists of 3 U.S. so the company had to make a wise decision on choosing which candidates to appoint for Peru’s operations. Not only OEC have to find the replacement but OEC will also need to manage the current managing director repatriation from Peru and OEC needs to develop programs to ease repatriation frustrations.2.1. 2. national) of the office Equipment Company (OEC) in Lima. which at times has bordered on being a full-scale war.1. 1 Mexican national (third country) and 1 Peru national (host country). nationals (home country). 2. 2. the company had to find a replacement. Peru announced suddenly that he would leave within one month and OEC will need to manage this current managing director repatriation Because the managing director will leave. such as accounting. Because of this. the company had to appoint a managing director that can do the works that had been done by the current managing director which had succeed to manage the operation with good and improving sales and profitability.4 To appoint a managing director that can do multitasking The director of the plant’s construction will report to the managing director in Peru on all other matters.1. Mexican pesos or 3 .1.
1. Therefore.Peruvian new sols? Which set of fringe benefits should apply? They will run into problems in dealing with differing pay levels. 4 . OEC must craft a well-devised compensation package that lets the managing director maintain his or her standard of living. the company must control costs. it must pay people enough to generate motivation. On the one hand. reflects the responsibility of the Peru assignment and ensures that aftertax income will not fall as a result of the Peru assignment.2 Problem Statement The main problem faced by the OEC is to find a suitable candidate from the five shortlisted candidates to become Peru’s operations managing director within one month period that fulfill the criteria OEC’s needed.7 Time constraint The company had to find a replacement that meet all their requirements in just a month because the current managing director only given a sudden notice to leave in one month. 2. This makes it harder for them to make the decision because a month is not enough to choose the best replacement 2. On the other. benefits and perquisites.
Cost of compensation 3. Local experience Cost of compensation Speak Spanish Employee relations Capable of developing and mobility International experience Weights 6 5 4 3 2 1 5 .PART 3: IDENTIFY DECISION CRITERIA The decision criteria we identified important in resolving the problem in Office Equipment Company (OEC) are: 1. International experience PART 4: WEIGHT THE CRITERIA Table 1: Criteria and Weights for Alternative Strategies 6 extremely important 5 very important 4 important 3 Somewhat important 2 not very unimportant 1 completely unimportant Criterion 1. 6. Local experience 2. 2. Capable of developing and mobility 6. 3. Employee relations 5. Speak Spanish 4. 5. 4.
therefore. Brett Harrison and Carolyn Moyer. Hence. This is because she has the best package amongst the three U. using this approach. From the Table 2. This approach can also reduce the degree of cognitive dissonance OEC face as they work internationally.S. So. or technology) that creates unique value for the firm and which is hard for rivals to imitate under the direction of these U. The method used in calculating the estimated compensation package is home-based method which bases their compensation on the salary in U. From the Table 1 in the next page.S.1 ALTERNATIVE STRATEGIES The Ethnocentric Approach An ethnocentric approach staffing policy reflects the belief that the HRM principles and practices used by the home country are intrinsically superior to those used by companies in other nations.600. in this case.PART 5: 5. given its success in the home market. Amongst the advantage of appointing her is that she’s still considerable young at the age of 37. By using this ethnocentric approach. there is no need to adapt HRM principles and practices when transferred to foreign markets. As such. the list of candidates will be narrowed to three which are Tom Zimmerman. manager who commands the hands-on knowledge that made OEC successful in the first place. market.S. 6 . strength and weaknesses. national candidates by looking at their skills. puts OEC’s core competency (special outlook. OEC will fill the managing director position with executives from the home office which is from United States. OEC will appoint Carolyn Moyer for the managing director position in Peru. capability. Relying on people familiar with proven workplace methods and labour procedures. even if only context of the U. candidates which is US$122. skill. candidates. OEC can choose the best from the three U. helps OEC cope with the stress of Peru situations.S. Carolyn Moyer also has the lowest estimated compensation package amongst the three U. Posting one of these candidates which are home country manager to Peru’s operations. unmarried which means she is more mobile than Tom Zimmerman and Brett Harrison which are both married.S.S. she has recently expressed interest in international duties because of a belief it will help her advancement and she speaks Spanish well.
She’s interested in international responsibilities as her MBA major subject based on international affairs. 3. 2. 5. 6. For 2 years. Already moved between staff and line positions of growing responsibility. Their children are grown and living with their own children in the United States. 2. 3. Considered competent by committee. He and his wife able to speak Spanish adequately and their children just beginning to study the language. His wife holds responsible marketing positions with a pharmaceuticals company. 3. Never worked abroad. 1. 3. Zimmerman currently is in charge of an operation that is about the size of that in Peru after the new factory begins operating. 2. she’s experience in OEC for 12 years after graduated her MBA from prestigious university. 5. His present position will become redundant because the operation he heads is being merged with another. 1. 6. 4. 5. ages 14 and 15. Unmarried. Will retire in 4 and half years. she was second command of a product group that size of new plant in Peru and her performance was excellent. Never abroad.S. 40 years old and had 15 years experience in OEC. 3.Table 1: Strength and Weakness of U. National Candidates Candidates Strength 1. been based Carolyn Moyer 7 . 4. Never been based abroad. Two children. 2. 2. 4. Been worked in the Latin American regional office for the last 3 years. 30 years experience in technical & sales. He and wife cannot speak Spanish. Highly competent and capable to move into upper level management level within next few years. Frequently travels to Latin American. Visited various companies’ foreign facilities. Tom Zimmerman Brett Harrison 1. Age 37. She speaks Spanish well. Weakness 1. 1.
and Mexico in which the company also has operations.500 US$70. Many human resource managers. respond by hiring locals.500) US$75.Table 2: Estimated Compensation Package for the three U. knowing the language (Spanish).000 19.750 12.500 33.S. the feeling is that people native to the host country which is Peru will not have problems with culture shock.000 US$122.000 15.000 28.000 22.S.500 21. training. This saves OEC’s money associated with recruiting. By appointing Juan Moreno.250) Tom Zimmerman Brett Harrison Carolyn Moyer 5.750) US$65.S.500 60. realizing and adhering to the local customs. values.100 (16. income taxes Company-Paid Costs Schooling allowance Peru income taxes Working spouse allowance Total US$137. weaknesses and estimated compensation package for him to be managing director: 8 .000 (18. facing growing pressure to control the cost of expatriate assignments.500 22. here are the strengths.750 15.600 19.000 US$228.000 (17.000 18. Candidates Compensation Direct Compensation Costs Base salary Foreign service premium Cost of living Housing allowance U. and being effective immediately instead of after a learning process has taken place. Juan Moreno will be appointed for the managing director of Peru operations because he is of Peru national. and attitudes.000 22. and transferring expatriates from other countries which are from U. The polycentric approach is the belief that managers and employees in a foreign operation should be from the host country. Using this approach. Key positions in the foreign operation are filled with host country nationals (Peru).2 The Polycentric Approach Using this approach.000 21.
Age 27.S. 9 . Juan Moreno Table 4: Estimated Compensation Package for Juan Moreno Compensation Direct Compensation Costs Base salary Foreign service premium Cost of living Housing allowance Company-Paid Costs Schooling allowance Peru income taxes Working spouse allowance Total US$43.000 10. 4.600 (9. OEC scans the five short-listed candidates looking for the best people for the managing director post in Peru. 2. he is assistant managing director in Peru. Unmarried. unlike the ethnocentric and polycentric variations.100 Juan Moreno 5. 1. OEC decision to appoint managing director is not tied to U.000) US$30.500 12. national or Peru national. Weakness Lack of experience. Rather. Successful in increasing sales because he is well connected with local families in Peru. 3.Table 3: Strength and Weakness of Juan Moreno Candidate Strength 1. Four years experienced in OEC after college graduations.3 The Geocentric Approach With geocentric approach.
3. 5. Carolyn Moyer Francisco Cabrera 1. Holds MBA from Mexican university. 2. Will head Mexican present . she was second command of a product group that size of new plant in Peru. He speaks English. 3. Two children. 3. 3.regardless of their nationality. Table 5 in the next page shows the strengths and weaknesses of each candidates and OEC will choose the best candidate from this table. Been worked in the Latin American regional office for 3 years. He is married with four children (ages 2 to 7) 3. 1. Age 35. 4. 2. Their children are grown and living with their own children in the United States. She speaks Spanish well. Tom Zimmerman Brett Harrison 1. 2. 2. 5. Currently in charge of an operation that is about the size of that in Peru after the new factory begins operating. he is assistant managing director in Mexican operation. His wife does not speak English. 4. Unmarried. Never been based abroad. Considered competent by committee. He and wife cannot speak Spanish. For 2 years. His wife holds responsible marketing positions with a pharmaceuticals company. 2. MBA from prestigious university. ages 14 and 15. 4. Frequently travels to Latin American. 30 years experience in technical & sales. Will retire in 4 and half years. 1. Experience in OEC for 12 years 2. Never been based abroad. are just beginning to study the language. 1. 6. 3. Age 40 with 15 years experience in OEC. Table 5: Strength and Weakness of Each Candidate Candidates Strength 1. Never worked abroad. Visited various companies’ foreign facilities. 5. 1. She interested in international business as her MBA major subject based on international affairs. Mexican citizen. 10 Weakness 1. 4. 4. He and his wife able to speak Spanish adequately. Considered competent and capable to move into upper level management level within next few years. 3. 2. Experienced in OEC for 12 years.
using this approach. Unmarried and can speak English. but it ignores the potential growth a manager goes through when forced to deal with different situations than those in which he or she is comfortable. weaknesses and his estimated compensation package of appointing Francisco Cabrera as the managing director. Competent in employee relations Juan Moreno 4. OEC has expanded its search beyond the borders of the host country (Peru). the best candidate amongst five short-listed candidates for the managing director post for Peru’s operations is Carolyn Moyer. 2. From Table 5.5. The logic behind this hiring approach is probably sound. He is married with four children (ages 2 to 7) . Successful in increasing sales because he is well connected with local families in Peru. Age 27. Mexican citizen. 5. Experienced in OEC for 12 11 1. Table 6: Strength and Weakness of Juan Moreno Candidate Strength Weakness 1. 3. Lack of experience. Four years experienced in OEC. In this case. adequately 1. Mexico is in the same region of the host-country which is Peru. So. for geocentric approach. 5. OEC will appoint Francisco Cabrera for the replacement of the exiting managing director. His four children speaks English managing director in 7 years. The theory behind this selection process is that nationals of the region in which operations actually take place are better able to deal with language and cultural problems than are managers from outside the region. 2. Table 6 and Table 7 below show the strengths. Age 35. director in Peru. but has stopped short of seeking management personnel from its operations throughout the world. he is assistant managing 1. so. 2.4 The Regiocentric Approach A regiocentric approach to hiring selects management personnel from within a region of the world which most closely resembles that of the host country. OEC will decide to appoint Carolyn Moyer to Peru to replace the current managing director. he is assistant managing director in Mexican operation.
4. Table 7: Estimated Compensation Package for Juan Moreno Compensation Direct Compensation Costs Base salary Foreign service premium Cost of living Housing allowance Mexico income tax Company-Paid Costs Schooling allowance Peru income taxes Working spouse allowance Total US$81. 5.000) Francisco Cabrera 12 .000 12. His four children speaks English adequately 3.000 US$40. Will head Mexican present managing director in 7 years.000 20. His wife does not speak English. Holds MBA from Mexican university.000 10. 4.000 (8. 3.000 15.Francisco Cabrera years.000 12. He speaks English.
and painful than they would have been if implemented earlier 3. Establishes a pool of internationally experienced executives Disadvantages 1.5 Advantages and Disadvantages of Each Alternative Strategy Approach Table 8: Advantages and Disadvantages of Each Alternative Strategy Approach Alternative Strategy Approach Ethnocentric Approach -Carolyn Moyer appointed managing director Advantages 1. May reduce the amount of control exercised by headquarters 1. May make it difficult to recruit qualified personnel 4. May result in personal and family problems 5. Leads to high failure rate 6. Permits closer control and coordination of international subsidiaries 3. Demonstrates trust in local citizenry 3. Makes it difficult to balance local demands and global priorities 2. May involve high transfer and salary costs 4. Overcomes the federation drawback of the polycentric 13 Geocentric Approach . costly. Host government may use immigration controls in order to increase HCNs employment 2. Increases the »foreigness« of the subsidiary 3. Leads to recognition of the company as a legitimate participant in the local economy 6. Expensive to implement Polycentric Approach -Juan Moreno appointed managing director 1. Effectively represents local considerations and constraints in the decision-making process 1. Increases acceptance of the company by the local community 4. Maximizes the number of options available in the local environment 5. Ability of the firm to develop an international executive team 2. when they are more difficult.5. Cultural similarity with parent company ensures transfer of business/management practices 2. Creates problems of adaptability to foreign environment and culture 2. Leads to postponement of difficult local decisions until they are unavoidable. Has disincentive effect on local-management morale and motivation 7. Gives employees a multinational orientation through experience at parent company 4. Lower labor costs 2. May be subject to local government restrictions 1.
Carolyn Moyer Local Cost of Speak Employee developing relations and mobility 1 2 6 1 6 3 International experience experience compensation Spanish 5 6 6 5 6 2 1 2 6 1 6 3 14 . Support cooperation and resource sharing across units.-Carolyn Moyer appointed managing director approach 3. Provide some sensitivity to local conditions 3. Large numbers of homes-. Staff’s career advancement still limited to regional headquarters. Reduced independence of subsidiary management 1. Produce federalism at a regional rather than a country basis and constrain the firm from taking a global stance 2. and third-country nationals need to be sent across borders 4. Regiocentric Approach -Francisco Cabrera appointed managing director 1. not the parent country headquarters PART 6: ANALYZING ALTERNATIVE STRATEGIES Table 9: Assessed Values of Alternative Strategies Using Decision Criteria Capable of Alternative Strategies Ethnocentric Approach -Carolyn Moyer Polycentric Approach -Juan Moreno Geocentric Approach . Allow interaction between executives transferred to regional headquarters from subsidiaries in the region and PCNs posted to the regional headquarters 2. hosts-. Help the firm to move from a purely ethnocentric or polycentric approach to a geocentric approach due to increased training and relocation costs 3.
the weights given to the criteria. It is the best alternative and the one we will choose. OEC will appoint Juan Moreno as the replacement of current managing director that will leave within one month.Regiocentric Approach -Francisco Cabrera 3 4 6 1 1 1 Table 10: Evaluation of Alternative Strategies against Weighted Criteria Capable of Alternative Strategies Ethnocentric Approach -Carolyn Moyer Polycentric Approach -Juan Moreno Geocentric Approach . we will choose Polycentric Approach as our alternative strategy to solve the problem since it scored highest on the basis of the identified criteria. and our assessment of each alternative strategy’s ranking on the criteria. 15 . Using polycentric approach.Carolyn Moyer Regiocentric Approach -Francisco Cabrera Local Cost of Speak Employee developing International relations and mobility 6 10 24 3 12 3 58 experience Total experience compensation Spanish 30 30 24 15 12 2 113 6 10 24 3 12 3 58 18 20 24 3 2 1 68 PART 7: SELECTING THE BEST ALTERNATIVE STRATEGY From Table 3.
health conditions. Deshpande and Viswesvaran. If she does not go for the training. they will save all the costs on sending him for the Expatriate Preparation and Development Training which consists of General Country Understanding (informational briefing about the way things work in the host country-political structures. there will be so many things to be taken care of before she can move to Peru while the managing director post will be vacant in one month period. cultural. All of this will take time and it will be impossible for her to manage all of these things and make it to fill in the post of managing director within one month. failure rates are between 25 and 40 percent when the expatriate is assigned to a developed country and a whopping70 percent when the expatriate is assigned to a still-developing country (Shay and Tracey. This means that assigning Carolyn Moyer with only one month preparation will risk her assignment success. compensation norms. Caudron (1991) highlights some specific dimensions which cultural training that can help in reducing costly expatriate failure and increase the effectiveness of their assignment. values. 16 . climate. 1997). She will be needed to take care of shipping and storage of her things. Cultural Sensitivity (best preparation for dealing with the challenges of culture shock) and Practical Skills Training (familiarize the expatriate and family with the routines of life in the host country). home sale or property management fees. By appointing Juan Moreno for managing director. 1999. Other than that.The importance of developing expatriate managers for their overseas assignment through the utilization of cross-cultural training seems apparent. job openings after repatriation and salary distribution). home sales. education. pre-assignment orientation trip and destination assistance. practical and language training. For Carolyn Moyer. He might be lack in experience but he is competent in employee relations and this assures that he will be able to manage the current employees and he also has the connection in sales of OEC’s equipments. job design. Often times. 1992). if OEC appoints her. but Juan Moreno is already familiar with the local culture. Considerable research supports that cultural training can have a positive effect on cultural adjustment and expatriate performance (Frazee. this training is provided months before the expatriate actually finds themselves struggling with adjustment. attitudes and he will be effective immediately in his coming managing director post as he is already working in Peru’s operation. taxes.Carolyn Moyer might be the best amongst all of the short-listed candidates. transport of goods. his estimated compensation package is the lowest amongst all candidates and this can save cost for OEC.
Failure rates for overseas posting can be reduce by appointing Juan Moreno and he does not have to go through local adaptations as he is Peru national.1 IMPLEMENTATION Short-Term Implementation: In short term implementation. so we will still choose polycentric approach as our final decision and Juan Moreno will be appointed as managing director effective in one month after the current managing director leave OEC’s operation in Peru. Accountability issues might emerge when Peru’s operations evolve into quasi-autonomous operations that depend less and less on the U. All the decision justification will be presented in the committee’s meeting as why Juan Moreno is the best candidate for the managing director. Juan Moreno interprets local conditions better than Carolyn Moyer. Local Peru employees will like local-controlled operations rather than foreign-like operations and they likely put local interests ahead of the company’s global objectives. PART 8: 8. It might also reduce incentive to engage international perspective. office for resources. he might be advantages in speaking Spanish. how to make it done and so on and so forth. but he has four children (ages 2-7) and he’s married which means that he is not mobile to be transfer to the Peru’s operation. The last thing is to move his things to the managing director’s office.For Francisco Cabrera. OEC will have to agree on suitable 17 . then they will need to find other candidates. OEC will transfer responsibility and authority to Peru national to run their Peru’s operations and problems arise on issues of accountability and allegiance. the only thing left for preparing him for the managing director post is to get information briefing from the current managing director of what works need to be done. they might be some drawbacks by appointing him. Using polycentric approach. the first step in implementing the alternative strategy is to announce their decision of which candidates that will be appointed for the managing director for OEC operation in Peru which is Juan Moreno. Even though appointing Juan Moreno has lots of advantages and benefits for the company. He is also considered to be likely a candidate to head the Mexican operation when the present managing director retires in seven years and if Francisco assigned to be the managing director in Peru.S. then when the director of Mexican operation retires in seven years. Each approach has its own advantages and drawbacks. Because Juan Moreno is already working in Peru’s operation.
Compensation can determine the success or failure of work assignments. the company must have succession planning. say.. (3) Secondly. During these visits. real or perceived pay inequities among U. three months. OEC can decide together with Moreno on his training needs. which is two times of Juan Moreno base salary. Peru and third-country employees might erode his motivation. when similar case happens. OEC can send him to visit various company’s foreign facilities as part of sales teams.2 (1) Long-Term Implementation: First. to lead people. they already have someone who is trained and ready to take the position. 8. He must perform up to the expectation of who a managing director is. So.S. (5) For long-term. (2) Of all.000 (S57. This value is not costly as compared to the other candidates from U. OEC can do periodically evaluate effectiveness and problem areas emerge from Peru’s operations. OEC needs to increase his base salary from $30.S. He must set a personal goal for him to achieve within a period of time. OEC must pay Juan Moreno enough to generate motivation in doing his job.S. he must show them that he worth the position. These can prevent potentially conflicting loyalties of Juan Moreno and to make sure that their Peru’s operation primary allegiance is still towards U. Moreno can learn and gain experience on how other facilities run their operations. OEC also must agree on career development resulting from the assignment as managing director. Over time. Florida. (4) OEC could provide headquarter mentor for contact/support and get regular feedback to assess the development and support needs of Peru’s operations. It is important as to identify and develop internal people with the potential to fill key leadership positions in the company. 18 . as Juan is lack in experience. headquarter.000 (S95. 000). 000) to $50. Planning ahead will increase the availability of experienced and capable employees that are prepared to assume these roles as they become available. He also can gain experience during reporting to their Latin American regional office located in Coral Gables. EOC must have a succession planning. As for Juan Moreno.financial and support package to maintain Juan Moreno in his post. one must gain the credibility.
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