You are on page 1of 27

Expatriates

Expatriates can be defined as the employees of business and government organizations who are sent by their organization to a related unit in a country which is difficult from their own, to accomplish a job or organization related goal for a pre-designated temporary time.
Padmavathi. K

• STAFFING POLICIES Staffing policy is the process by which the company assigns the most appropriate candidate to a particular job.

Padmavathi. K

and as a management development tool to help managers develop a global outlook Padmavathi. ways of doing things. K . This approach can. transferring best practices from other locations. counteracting high turnover among local employees.• The Ethnocentric Approach • An ethnocentric staffing approach fills all key management positions with home-country nationals. filling local talent gaps. The leading reasons to staff foreign operations with expatriates include maintaining command and control consistent with headquarters’ policy. using international assignments as a mechanism for social integration. People transferred from headquarters are more likely to have a thorough understanding of the company’s core competencies and values. lead the company to adopt a narrow perspective in foreign markets and blinds the company to the benefit of exposure to different. and possibly better. safeguarding intellectual property in joint ventures. however.

A polycentric approach is used to control costs. K . to cater to host-country nationalism. result in problems of accountability and allegiance if a gap develops between headquarters and local operations. to develop local management talent.• The Polycentric Approach • A polycentric staffing policy uses host-country nationals to manage local subsidiaries and helps local motivation and morale. This approach can. to boost employee morale. to counteract high expatriate failure rates. however. and to maximize local adaptations for particular products Padmavathi.

K . In some cases. such an approach may be practically impossible due to immigration laws and/or workplace regulations that push MNEs toward local staffing. regardless of their nationality. a transnational strategy.• The Geocentric Approach • A geocentric staffing policy seeks the best people for key jobs throughout the organization. and can be complicated by economic factors. This approach is hard to develop. This policy is instrumental to companies pursuing a global and. especially. and legal contingencies. Padmavathi. costly to maintain. decision making routines.

K .• EXPATRIATE SELECTION • EXPATRIATES are employees that are noncitizens of the country in which they are working • What criteria should be used to identify the appropriate home-country and foreign national managers for a country transfer? Padmavathi.

K .The Expatriate Assignment Life Cycle Padmavathi.

Step III: Determination of Learning styles of Expatriate Candidates. K . Padmavathi. Step II: Assignment to See competencies of Expatriate Candidates.Expat Selection Step I:Identification of Potential Expatriate Pool of Candidates.

Expat Selection Cont… Step IV: Determine of Thinking styles of Potential Expatriate Candidates. Padmavathi. K . Step V: Determination of Assignment Task and its Environments (Internal/External). Step VI: Assignment of Family Characteristics.

Expat Selection Cont… Step VII: Development of Repatriation Program prior to Expatriation. Padmavathi. K . Step VIII: Selection of Expatriate Candidates and Assignments.

C. adaptability. and organization are necessary for expatriates to be successful. such as scaled-down plant and equipment.Technical Competence Technical competence (usually indicated by past performance) is a significant determinant of success in foreign assignments. K . risk-taking. and diplomacy become essential qualities for success. (ii) those related to the development of satisfactory relationships with host nationals and (iii) cognitive skills and sensitivities that help one accurately perceive what is happening within the host society. courage. Leadership Ability Leadership ability is increasingly seen as a key to an expatriate’s success since expatriates often assume a greater breadth and depth of leadership responsibility on a foreign assignment than they likely would in the home country. varying productivity standards and less efficient national infrastructure. The foreign subsidiary manager must understand both the technical necessities of a position and also how to adapt to foreign conditions. motivation. Padmavathi. Skills and attitudes such as optimism. drive. Adaptiveness Three types of adaptive characteristics influence an expatriate’s success when entering a new culture: (i) those needed for self-maintenance. sensitivity.• • • • • • A. self-reliance. foresight. experience. The adaptation of a manager’s family is also crucial to the success of an overseas assignment. B. resilience. Communication skills.

Criteria for Expat Selection Willingness and Motivation Performance (Previous) Technical abilities Relational skills Cross cultural adoptability Open mindedness Individual Criteria Stress adoption skills Administrative skills Communication skills Leadership traits Right Person for Expatriation Marital status Willingness and Motivation to become a trailing spouse Spouse’s adjustability Give up jobs and career prospects Marriage stability Children’s education Padmavathi. K Family Support .

MNEs also try to reduce failure rates through improved training and better selection procedures. while nearly 70% sent to less developed countries returned home early. Companies may try to avoid expatriate failure by expanding through acquisitions and thereby instantly acquiring foreign personnel. Foreign assignments are usually more stressful for the expatriate’s family than for the expatriate. K .• EXATRIATE FAILURE • Expatriate failure is when a manager returns home from a foreign assignment prematurely due to poor job performance and is very expensive for the MNE. research reported that between 16-40% of Americans sent abroad to developed countries returned early. The leading cause of expatriate failure is the inability of a spouse to adapt to the host nation. In the 1980s. Expatriate failure reflects a failure of the MNE’s selection policies to find the right individual for the job. Padmavathi.

Padmavathi.• EXPATRIATE PREPARATION AND DEVELOPMENT • Training and pre departure preparations can lower the probability of expatriate failure and include general country orientation. and practical advice. K . cultural sensitivity.

and salary distribution. Padmavathi. K . socializing. Issues such as schooling. Practical Skills This type of training attempts to familiarize the expatriate and his or her family with the routines of life in the host country. transport of goods. education. taxes. B. despite the proven effectiveness of training programs. Companies usually blame too much urgency as the reason for not investing in more training for individual employees. D. and beliefs they are likely to encounter in the host culture. attitudes. home sales. job openings after repatriation. Training Gaps and Trends Many managers don’t receive adequate training prior to an overseas assignment. C. job design. health conditions. A. climate. housing.• • • • • • • • General Country Understanding Training in general country understanding typically includes briefings on political structures. Sometimes companies struggle because of uncertainty as to whether they should emphasize country specific knowledge or general cultural sensitivity in their training programs. Foreign language competency and cultural training for spouses and families is often also included. compensation norms. and shopping are addressed. Research has shown there is no significant difference in the relative effectiveness of the two approaches. Cultural Sensitivity Cultural training tries to preempt the effects of culture shock by helping employees to take an open mind to the different ideas.

The home-based method sets compensation based on the salary of a comparable job in his or her home city. • and the host-based method bases compensation on the prevailing pay scales in the locale of the foreign assignment. There are three common methods of implementing the balance sheet compensation plan. Company practices also vary in terms of compensation for differences. Types of Compensation Plans • The most common approach to expatriate pay is the balance sheet approach. plus foreign-service premiums. Padmavathi. extraordinary allowances. which aims to develop a salary structure that equalizes purchasing power across countries so expatriates have the same standard of living in their foreign assignment as they had at home. • the headquarters-based method sets salary in terms of the salary of a comparable job in the city where the MNE has its headquarters.• EXPATRIATE COMPENSATION • The amount and type of compensation needed to entice an individual to accept a foreign assignment may vary widely by person and locale. K . and taxation compensation. • A. home-country benefits.

and workplace. A hardship allowance is paid to expatriates assigned to dangerous or especially difficult locations. 3. Allowances. dealing with a new culture.• • • • • • • • B. Padmavathi. Housing allowances can be as much as a third of the expatriates total compensation package. K . and education allowances pay for the cost of children’s schooling. Companies usually pay for differences in cost-of-living for more expensive locations so that expatriates can enjoy the same living standards abroad as they would at home. Usually falls in the same range as the base salary for the comparable job in the home country and is paid in either home-country currency or local currency. Foreign Service Premium. 2. Many firms pay 10-30% of after tax base salary as a premium. Travel allowances pay for visits back to the home country. A spouse allowance compensates for a spouse to find work and offsets the loss in income due to a spouse forsaking his or her job. This is extra pay given to the expatriate for working outside the home country which rewards expatriates for living far from family and friends. Key Aspects of Expatriate Compensation 1. language. Base Salary.

• 4. Firms typically provide the same level of medical and retirement benefits abroad as they would at home. Companies may adjust compensation even higher in high tax rate countries in order to make sure that expatriates have an equivalent after tax income in the new location. and may expand benefits to deal with local contingencies such as transferring ill employees or family members to out-of-country medical facilities or paying premiums on kidnapping insurance in high-risk countries. Padmavathi. K . the MNE generally pays the expatriate’s tax bill in the host country. • 5. In cases of double taxation. Fringe Benefits. Tax Differentials.

• C. Complications Posed by Nationality Differences • As firms employ expatriates from home and third countries. Salaries for similar jobs vary substantially across countries. There is no general consensus as to how to deal with such issues. as do the relationships of salaries within the corporate hierarchy. K . Padmavathi. compensation issues grow more complicated.

International Marketing International Marketing refers to the process of identifying the goods and service that customers outside the home country want and then providing them at the right price and place. Padmavathi. K .

Padmavathi. K . Legal. Product and Promotion. Uncountable Factor: Economics. Political and Competitive forces.International Marketing Cont… Domestic marketing faces controllable and uncontrollable forces. Countable Factor: Price.

K .International Marketing Cont… International marketing faces several uncontrollable forces originating from different countries. A firm’s marketing mix needs to be modified to conform to different environments. Padmavathi. The varying environments may rule out uniform marketing strategies across countries.

Benefits of International Marketing Survival Standard of Living Overseas Markets International Marketing Inflation and Price moderation Sales and Profits Diversification Padmavathi. K .

K . Padmavathi. The mix of 4P’s called marketing mix.Major Activities in International Marketing Market Assessment Product Decision Promotion Strategies Pricing Decisions Place or Distribution Strategies.

Padmavathi. Price. A product possesses want satisfying properties. properties in form and ideas. K . persons. Place and Promotion Price International Business can follow either standard policy. services. Place Place refers to distribution involves two issues: Decision on channels and Selecting modes of shipping. experiences events. Mix of the four elements: Product. places. two-tiered pricing or market pricing Promotion Promotion includes all efforts undertaken to enhance acceptability of the product by the potential buyers.The International Marketing Mix Product Product includes physical goods.

Marketing and other functions Operations Management Accounting Marketing Finance Padmavathi. K Human Resource Management .

International Market Assessment International Marketing starts with the identification of markets where goods & services can be profitably sold. Padmavathi. 2. Assess alternative foreign markets. Select those that hold the most potential for entry or expansion. K . 3. Evaluate the respective costs. Identification of overseas markets should follow the following steps: 1. benefits and risks of entering each market.