Module 2

International HRM
• IHRM is set of organizational activities aimed at effectively managing and directing
human resources/labour towards achieving organizational goals. Typical functions
performed by HRM staff would be recruitment, selection, training and development,
performance appraisal, dismissal, managing promotions and so on.

• International Human resource management is the process of procuring allocating

and effectively utilizing the human resources in a multinational corporation. While
HR Managers in these organization have to integrate HR policies and practices across
a number of subsidiaries spread in several countries so that the organization goals
can be achieve at the same time they have to make these policies and practices
sufficiently flexible to allow significant differences in these policies in different
countries.

Definition:
IHRM can be defined as set of activities aimed managing organizational human
resources at international level to achieve organizational objectives and achieve
competitive advantage over competitors at national and international level.
• IHRM includes typical HRM functions such as recruitment,
selection, training and development, performance appraisal and
dismissal done at international level and additional activities such
as global skills management, expatriate management and so on.
Dimensions of IHRM
According to P.V. Morgan: IHRM is the interplay among 3 dimensions:
1) Broad activities of IHRM – procurement, allocation and
utilization of human resources cover all the six activities of
domestics HRM i.e, HR planning, Employees Hiring, Training and
Development, Remuneration, Performance Management and
Industrial Relations.
2) The three national or country categories involved in IHRM
activities are: - The host country where subsidiary may be
located - The home country where the company has its head
quarters and - Other countries that may be sources of labour or
finance.
3) The three types of employees of an international business are – Parent
Country Nationals (PCNs) , Host Country Nationals (HCNs) and Third Country
Nationals (TCNs). For example, IBM which employs Australian citizens in its
Australian operations, after sends US citizens to Asia Pacific countries on
assignment, and may send some of its Singaporean employees to its Japanese
operations.

In simple terms, IHRM is concerned about managing human resources at

Multinational Companies (MNC) and it involves managing 03 types of
employees namely,
1. Parent country employees- Employees belonging to home country of the
firm where the corporate head quarter is situated.
2. 2. Host country employees- Employees belonging to the nation in which
the subsidiary is situated.
3. 3. Third country employees- These are the employees who are not from
home country/host country but are employed at subsidiary or corporate
head quarters. As an example a American MNC which has a subsidiary at
India may employ a French person as the CEO to the subsidiary. The
Frenchman employed is a third country employee.
 Importance of IHRM
1. Emphasis on Core Competency: Post-liberalization, many organizations have started
focusing on their core competence and businesses are being organized around that. A core
competence is unique strength of an organization which may not be shared by others. This may
be in the form of unique financial resources (finance available at a much lower cost), manpower
resources, marketing capability, or technological capability. If the business is organized on the
basis of core competency, it is likely to generate competitive advantages. Because of this
reason, many organizations have restructured their businesses-divesting those businesses
which do not match core competence such as Tata Group divesting many businesses and
acquiring Tetley, a UK tea processing company, divestment of businesses by Voltas, Birla Group,
etc. or acquiring those businesses which fit core competence such as Reliance acquiring four
yarn/fiber manufacturing companies, Gujarat Ambuja acquiring cement companies, and so on.
The organization of business around core competence has changed the mind set and in this
change, more emphasis has been given to human factor.

2. Reorganization: Along with restructuring, there has been emphasis on reorganization too.
Many companies are restructuring their organization structure by thinning their management levels
and expanding span of control. Thus, there is emphasis on flat structure against tall structure as
followed earlier. The old concept of ―seven layers in the pyramid and seven direct subordinates
under each boss‖ which has been the historic norm for many large companies in the past is becoming
extinct. Further, departmentalization based on functional lines is being changed to strategic business
unit departmentalization to focus more sharply on products or services. This reorganization has
created need for additional skills on the part of the organizational humanNOTES resources which can
be met by appointing new managerial talents or by developing the existing human resources. The
latter course of action is preferable because of the increasing competition for human talents.
3. Competition for Human Resources: With the entry of foreign firms in the Indian industrial
scene, nature of competition for human resources has changed. Foreign firms, particularly those
operating in sector such as consultancy, merchant banking, investment banking, etc. and computer
software companies of Indian origin, have put lot of competition for acquiring managerial talents.

4. Technological Changes: With the removal of restrictions on technology import and acquisition,
many organizations have opted for newer technologies. Increased use of computers has added
another dimension to technological innovation. With the result, old skills are fast becoming obsolete.
In their place, the operatives have to acquire newer skills which have increased the training needs in
such organizations, and HR departments have to be more active.

5. Need for Workforce Empowerment: Throughout the world, there has been increasing
emphasis on workforce empowerment, that is, giving them authority matching their responsibilities.
India cannot lag far behind because of the international impact. For workforce empowerment, there
has to be a change in mindset as well as there should be change in skills of workforce. The role of
HRM is crucial in both these respects. With the increasing role of human resources and their
management, organizations have accorded HRM a higher status than what it previously was.
 OBJECTIVES OF IHRM
• Remaining competitive throughout the world • Efficient
• Locally Responsive
• Flexible and adaptive
• Capable to transforming learning across their globally dispersed units

Scope of IHRM
1. Personnel aspect-This is concerned with manpower planning, recruitment,
selection, placement, transfer, promotion, training and development, layoff and
retrenchment, remuneration, incentives, productivity etc.
2. 2. Welfare aspect-It deals with working conditions and amenities such as
canteens, crèches, rest and lunch rooms, housing, transport, medical assistance,
education, health and safety, recreation facilities, etc.
3. 3. Industrial relations aspect-This covers union-management relations, joint
consultation, collective bargaining, grievance and disciplinary procedures,
settlement of disputes, etc.
 Significance of IHRM in International Business
Scullion (2001) outlined 10 major significance of IHRM in globally business
environment. This significance can categorize in 5 key areas:
1. CHALLENGE:
• Rapid growth of internalization and global competition has increased the nos. and
significances of MNCs – resulting in the increased mobility of human resources.
• Increasing no. of strategic alliances and cross border mergers and acquisitions has
increased the strategic implementation of IHRM as Global business.
2. COMMITMENT:
• World Wide recognition of management of human resources in international
business and cross cultural management.
• Business Networks and Horizontal communication and HR plays a vital role.
3. COST EFFECIVENESS:
• The performance of expatriates. (poor performance of expatriate may affect the
market share and damage to foreign relations)
• Growing Importance of Expatriates in International Business.
4. COMPETENCE:
• Global Strategy Implementation.
• Success or failure of international business based on
effectiveness of management of HR.
5. CONGRUENCE:
• Learning, knowledge acquisitions have been identified as
important potential sources of comp. advantages for MNCs.
This has also enhanced the role of IHRM to meet the key
strategic challenge of objectives.
• Knowledge management is an important source of comp.
advantage for MNCs, where IHRM is the key partner and plays
a central role.
 Major Issues in International HRM
• According to Hendry (1994), there are three main Issues in IHRM:
1. The management and development of expatriates- selection,
training, compensation and repatriation of expatriate failures.
2. The internationalization of management throughout the
organization (host country, parent country and other third countries)
3. The need to internationalize the whole organization by creating a
new corporate culture reflecting the need for greater international
experiences across the whole organization, due to the increasing
frequency of cross cultural interactions of doing business at home as
well as abroad mainly Cultural communication & gauge and Language
and communication.
 Difference between domestic and
international HRM
Differences between domestic HRM and International HRM (IHRM)
are summarized below:
 Domestic HRM is done at national level and IHRM is done at
international level.
 Domestic HRM is concerned with managing employees belonging
to one nation and IHRM is concerned with managing employees
belonging to many nations (Home country, host country and third
country employees)
 Domestic HRM is concerned with managing limited number of HRM
activities at national level and IHRM has concerned with managing
additional activities such as expatriate management.
 Domestic HRM is less complicated due to less influence from the
external environment. IHRM is very complicated as it is affected
heavily by external factors such as cultural distance and institutional
factors.
 Functions of IHRM
Globalization, the process of integrating a business's operations and strategies across a wide array of cultures,
products and ideas, is having an impact on the role of human resource managers. Once concerned with the
impact of local issues on employees, human resources must now consider the effects of workforce diversity,
legal restrictions and the interdependence between training and professional development on the organization.
As such, the five main functions of global human resource management are vital concepts to the strategic
operation of a business.

1) Recruitment :
Attracting, hiring and retaining a skilled workforce is perhaps the most basic of the human resources
functions. There are several elements to this task including developing a job description, interviewing
candidates, making offers and negotiating salaries and benefits.
Companies that recognize the value of their people place a significant amount of stock in the recruitment
function of HR. There is good reason for this -- having a solid team of employees can raise the company's
profile, help it to achieve profitability and keep it running effectively and efficiently.

2) Training:
Even when an organization hires skilled employees, there is normally some level of on- the-job training
that the human resources department is responsible for providing. This is because every organization performs
tasks in a slightly different way. One company might use computer software differently from another, or it may
have a different timekeeping method. Whatever the specific processes of the organization, human resources
has a main function in providing this training to the staff. The training function is amplified when the
organization is running global operations in a number of different locations. Having streamlined processes
across those locations makes communication and the sharing of resources a much more manageable task.
Types of training and development depend on a number of factors:
 The degree to which management is centralized.
 The types of workers employed in subsidiaries or joint ventures.
 The importance of branding, and the extent to which employees are expected to reflect the brand.
The cultural expectations of training.

In a global company, the training will be centralized so that suppliers, employees and distributors are
aware of the brand image that needs to be communicated. For example Ford set up centralized
training programs and then translated and delivered to all main suppliers, subsidiaries and
distributors. However, if more polycentric approach is taken, then the training may well be far more
local, and more in line with the local culture.
Cross cultural training is also vital in order to prevent problems that arise with teamworking. In a
cross-cultural context, it is not only the personality types that have to be taken into account, but also
the very real cultural differences and approaches between team members. Therefore attempts at
cross-cultural team training are becoming increasingly prominent in MNEs.
Many MNEs run extensive training programmes for employees going overseas, designed to provide
individuals with information and experience related to local customs, cultures and work habits so that
they can interact and work more effectively with local colleagues. Also such programs may run for
spouses and children to ensure that employees send abroad are fully immersed in the foreign culture.
Some of the training programs involve
1. Environmental briefing regarding geography, climate, housing and schools
2. Cultural orientation designed to familiarize the individual with cultural institutions and value systems of the host
country
3. Cultural assimilations to provide participants with inter-cultural encounters
4. Language training
5. Sensitivity training designed to help develop attitudinal flexibility
6. Filed experience which sends the participants to the country of assignment to get them used to the emotional
stress of living and working with people of different culture.

3) Professional Development:
Closely related to training is HR's function in professional development. But whereas training needs are centered
around the organization's processes and procedures, professional development is about providing employees with
opportunities for growth and education on an individual basis. Many human resource departments offer professional
development opportunities to their employees by sponsoring them to visit conferences, external skills training days or
trade shows. The result is a win-win: it helps the employee feel like she is a vital and cared-for part of the team and the
organization benefits from the employee's added skill set and motivation.
4) Benefits and Compensation :
The way in which an organization seeks to reward its employees may be critical to its success. Due to the global
competition, organization are demanding and encouraging its staff to engage in high performance work practices or go
beyond the minimum expectations. Compensation includes the efforts of the multinational to distribute wages and
salaries, incentives such as bonuses, and benefits such as retirement contributions. Compensation is also a critical aspect
of what human resource management policies companies use to motivate their employees. There are many factors that
will be considered before drawing a compensation package for employees. The most commonly used method for
designing a compensation package is ‗Balance Sheet’ approach . Balance Sheet approach is system designed to
equalize the purchasing power of employees at comparable position levels living overseas and in the home country, and
to provide incentives to offset qualitative differences between assignment locations. In order to achieve such ‗balance‘
the organization must take into account a number of factors when sending employees to a different country.
 International HR Models
• International Human Resources models help to
explain the role of HR in the business. There are 5
most practical HR models. These models enable us to
explain what HR’s role is, how HR adds value to the
business, and how the business influences HR.
• The 5 HR models that we will discuss are:
• The Standard Causal Model of HRM
• The 8-box model by Paul Boselie
• The HR value chain
• The HR Value Chain Advanced
• The Harvard Framework for HR
• 1. The Standard Causal Model of HRM
The best-known HR model is the Standard Causal Model of HRM. The model is derived
from many similar models published throughout the 90’s and early 2000’s. The model shows a
causal chain that starts with the business strategy and ends, through the HR processes, with
(improved) financial performance.
• The model thus shows how HR activities that are aligned with organizational strategy lead to
business performance. According to this model, HR will only be effective if its strategy is aligned
with business strategy (in line with the best-fit theory). HR strategy is thus derived from the
overall strategy.

• The HR practices follow the HR strategy. Examples include hiring, training, appraisal, and
compensation. These HR practices lead to certain outcomes. Examples include commitment,
quality output, and engagement.

• These HRM outcomes lead in turn to improved internal performance. Examples include
productivity, innovation, and quality. These outcomes lead to financial performance (e.g. profits,
financial turnover, better margins, and ROI).

• Two interesting relationships are the unmediated HRM effect, which shows that some HR
practices can directly lead to improved internal performance. For example, a good training can
directly result in better performance, without necessarily influencing HR outcomes.

• The reversed causality in the model shows that sometimes a stronger financial performance leads
to more investments in HR practices and better HR outcomes. When performance is strong,
employees are often more engaged (an HR outcome).

• This shows that the relationships in the model are not always unidirectional. In general, however,
this Human Resources model shows how HR strategy is formulated and what the impact is of HR
on internal processes and financial outcomes of the business.
2. The 8-box model by Paul Boselie
• A different HR model that’s often used to model what we do in HR, is the 8-box model by Paul Boselie. The 8-box
model shows different external and internal factors that influence the effectiveness of what we do in HR.
• First of all, you see the external general market context, the external population market context, the external
general institutional context, and the external population institutional context. These are external forces that
influence how we do HR.
• For example, if there is a shortage of certain skills in the market, this influences how we do our sourcing, recruiting,
and hiring, compared to when there’s an abundance of qualified workers. The institutional context also changes:
legislation impacts the way we work in HR (e.g. the day-to-day impact of HR) while trade unions and work councils
limit what we can do.
• The core process in the middle starts with the configuration. The company’s history, culture and
the technology used are all factors that influence how we communicate in HR, what we want to
achieve, and how effective we are in our HR policies. All these factors influence our HR strategy.

• The HR strategy consists of six parts:

• Intended HR practices:
The intention we have with our recruitment, training, and other practices matters but this model
shows it’s only a starting point.
• Actual HR practices:
We can have great intentions but the execution of HR practices is a cooperation between HR and
the manager. When the manager decides to do things differently, the intention can be nice but
the actual practices can be very different.
• Perceived HR practices:
This is how the employee perceives what’s going on in the organization. HR and the manager can
do their absolute best but if their activities are perceived in a different way than they were
intended and actually done, the perception will not mirror the actual HR practices.
• HR outcomes:
The perceived HR practices (hopefully) lead to certain HR outcomes. These are similar to the ones
in the Standard Causal Model of HR, described above.
• HR outcomes lead to critical HR goals (i.e. cost-effectiveness, flexibility, legitimacy, and so on),
which in turn leads to ultimate business goals (i.e. profit, market share, market capitalization – all
related to the viability of the organization, and other factors that help to build a competitive
advantage).
3. The HR value chain
• The HR value chain is one of the best-known models in HR. It is based on the work of Paauwe and Richardson
(1997) and creates a nuance on the models above in regards to how HR operates.
• According to the HR value chain, everything we do (and measure) in HR can be divided into two categories: HRM
activities and HRM outcomes.
• HRM activities are day-to-day activities, including recruitment, compensation, training, and succession planning.
These activities are often measured using HR metrics. These are so-called efficiency metrics. The cheaper we hire
and the faster we train, the better.
• HRM outcomes are the goals we try to achieve with the HRM activities. We recruit, we train, and we compensate to
achieve certain goals/ outcomes. These outcomes include employee satisfaction, motivation, retention, and
presence.
• If we just focus on measuring HRM activities, we will automatically focus on reducing costs (i.e. maximizing
efficiency). However, we should instead focus on HRM outcomes as this helps to align our processes with our goals.
• For example, we would rather spend a few days longer on hiring a
new employee (time to hire, an efficiency metric) if this person
will be a better fit in the company (quality of hire, an outcome
metric). The goal should be to get the best person in the right
position, not to cut corners and hire someone as cheaply and
quickly as we can. This shows why we should focus on measuring
outcomes instead of activities.
• When HRM activities and HRM outcomes hit their marks, they
should lead to better performance. This means that when we
recruit the right people, send people to the right training
programs, and retain our key players, the company’s performance
increases.
• Literature also shows a different effect: when company
performance is higher, HRM activities increase as well. This is
because more profitable companies usually invest more in HR
programs, including HR software and learning & development
opportunities for their people.
4. The HR Value Chain Advanced
• We’ve researched a lot of the literature but we can’t find an original source for this model. This model is very
similar to the HR value chain but with two key differences.
• First, the organizational performance is defined in the balanced scorecard. The balanced scorecard contains the key
performance indicators from a financial perspective, a customer perspective, and a process perspective. These are
integrated into the HR value chain. This document helps to align and show the added value of HR to the business.
• Second, the model starts with a number of HR enablers. These enablers are key for what HR is doing in the
business. This includes HR systems, budget, capable professionals, and other key elements. The thinking is that
these enablers need to be present in order for the value chain to operate effectively.
• If HR lacks well-trained professionals, if the budget is low, or if the systems are outdated and hamper innovation,
HR will be less efficient in reaching its HR outcomes and business outcomes.
5. The Harvard Framework for HRM
• The Harvard framework for HRM is an HR model comprised of six components.
• The model starts, on the left, with stakeholder interest. These stakeholders include
shareholders, management, employee groups, government, and more. These interests define
the HRM policies.
• At the same time, situational factors influence these interests. Situational factors include
workforce characteristics, unions, and all the other factors that were also listed in the 8-box
model.
• Situational factors and stakeholder interest influence HRM policies. These include the core
HR activities, like recruitment, training, and reward systems.
• When done well, HRM policies lead to positive HRM outcomes. These include the previously
mentioned retention, cost-effectiveness, commitment, and competence.
• These positive HRM outcomes lead to long-term consequences. These can be individual,
organizational, and societal.
• The Harvard framework is an HR model that takes a more holistic approach to HR, including
different levels of outcome.
 Brewster and Bournois model of
International HRM
• The model of the European environment of HRM,first produced in 1991 by Chris Brewster
and François Bournois, emphasizes thecultural, legal, and market contexts of human
resource strategy and practice.

• Brewster says that he prefers Thomas Kochan's framework of IR (discussedabove), which, he

contends, is a more comprehensive view of the range of socialfactors influencing HRM than
other models, such as soft and hard HRM. He also proposes that the model of the European
environment of HRM is partly a responseto dissatisfaction with American HRM.26 The anti-
unionism of the Americanapproach to HRM has been more consistent in US national culture
than in somecountries within Europe which have shown greater willingness, during
some periods of their history, to work within a social partnership.

 Brewster and Bournois (1991)

• In the Brewster and Bournois model, HR strategy is only partly subservient tocorporate
strategy because HRM is influenced by behaviour and performance from both inside and
outside the organization. The organization and its human resourcestrategies and practices
interact with the environment and, at the same time, are part of it. The model shows that
HRM policy and practice are not exclusively anorganization's choice but are also influenced
by the wider environment, particularlythe national culture and the industry sector the
organization operates in (below Fig)
• In 1995 Brewster reported the results of a survey 27 covering fourteen European countries in
which three regional clusters corresponding to level of socio-economic development were
found: a Latin cluster (Spain, Italy, France); a Central European cluster (Central European
countries plus the UK and Ireland); and a Nordic cluster (Norway, Sweden, Denmark).
Brewster proposed that the survey shows Latin countries to be at the lowest stage of socio-
economic development, the UK and Ireland next, then continental Central European
countries, and finally Nordic countries at the top of the development scale.28 The Latin
culture, at the lowest stage of development, according to Brewster, is characterized by an oral
culture and political structures that create docile attitudes towards authority, whereas the
culture of the highest stage that of the Nordic countries displays a wide spread collective
orientation to management, extensive consultation between employers and workers,
documented strategies, and (perhaps this conclusion is to be expected f rom an HRM
researcher) substantial and authoritative HRM departments.

• Despite the tendency of the national cultures to cluster into three regional groups, Brewster
found some trends common across most European countries. Pay determination, according
to the evidence of the survey, is becoming increasingly decentralized, and flexible pay
systems are becoming more common. Flexible working practices are increasing in European
countries (for example, a typical working; annualized hours; and temporary, casual, and fixed-
term contracts).There is, unfortunately, also continuity in lack of equal opportunities in so far
as, at senior management level, women and ethnic minorities are still underrepresented.
• However, other opportunities vary much more by country. For example, in
Greece and Spain, where women are a third of the workforce, there is
very limited childcare provision, but in Sweden and France the provision is
more extensive. Training investment is on the increase overall in the whole
of Europe, particularly for managerial and professional staff, but the level
of government intervention varies greatly by country. 29 The role of the
HR function was also found to vary according to country, HR enjoying the
greatest representation at board level in Spain and France, where 7080%
of organizations have an HR director (thus contradicting, on this point,
Brewster's ranking of the Latin cluster as the least developed), and
somewhat less in the UK, where fewer than 50% of organizations have an
HR director. European employment differs from employment in other
parts of the world in that it is comparatively more unionized, and unions
play a wider role in society and the workplace in European countries than
they do in many other countries. Brewster attributes some of the
persistence of unions in Europe to their official recognition, as social
partners, within the European Union.
 What are the challenges of HRM in
global environment
• Issues include global competition for products and services, global talent
management, risk and privacy, understanding global diversity and
cultural issues, flexible reward systems, leadership challenges, and
managing international assignments.
Problems of global research
Two Major Impediments to Effective Global Research
1. Socio-Economic Factors
2. 2. Cultural Factors
1. Socio-Economic Factors :
• Sampling
• Data Collection
• Secondary Data As economic development decreases, so does availability and
accuracy of secondary data.
2. Cultural Factors Cross Cultural Equivalencies
A. Conceptual Equivalence :cultural differences in meanings of
important concepts. Problem mainly in consumer research.
B. Functional Equivalence: Products serve different functions
in different cultures . how, when, why product is used.
c. Translation Equivalence: Words and phrases may not
translate across cultures. Languages may not accommodate
subtle differences in meaning.
D. Sample Equivalence: Samples in different cultures may not
be meaningfully comparable. Special problem with
demographic and social class groups.
E. Data Collection Equivalence: Different data collection
techniques may basis research results.
 Internationalization in business
Internalization occurs when a transaction is handled by an entity itself rather than routing it
out to someone else. Internalization can also apply to a multinational corporation. This
happens when the company decides to shift assets between its own subsidiaries in different
countries
Major factors are driving the internationalization of business
The factors include
• owner manager's international orientation,
• globalization of the firm's industry structure
•established international networks
• foreign market potential.
•Trade agreements
•Search of new markets and reduced costs
•Rapid development & transfer of new technology
•Improving global education & global talent pool
•Increased travel & migration
•Knowledge sharing
•E commerce
•Homogenization of culture & consumer demands

The growth & spread of internationalization

• Integration of markets
• Reaching the world faster, farther, cheaper, deeper
• Interaction, interconnectedness, integration of people
• International business growth
• FDI
• UN-2010-82000 large MNE-810000 companies employ 77 million worldwide
• BRIC countries- major emerging markets
• Not only large companies of developed countries are contributing to global trade
• World is becoming flat
• Everyone competing with everyone from everywhere for everything.
 Role of Human Resource Managers in
Internationalization of Business
•Managing human resources effectively in companies that do business globally requires cultural
awareness and the ability to respond quickly in dynamic environments. 
•Human resource professionals typically handle the recruiting, interviewing, hiring, training and
developing of employees that businesses need to achieve their business goals. They also establish the
policies and procedures designed to ensure a fair, safe and productive work facility.
• Managing individuals in international settings requires motivating and inspiring employees to
work collaboratively, even when they don't reside in the same location.
1. Providing Training
Human resource professionals maintain a productive environment by ensuring that employees
have the skills and knowledge to accomplish job tasks. They make arrangements for training
courses that enable employees to get the proper credentials for performing their function. This
also ensures that companies adhere to all government regulations.
2. Fostering Global Collaboration
As companies become more international, human resource professionals have become more
generalist. They tend to know less about day-to-day, internal operations and focus more on
ensuring personnel work effectively together as teams. They care about competitive advantage,
profitability and economic survival during tough financial times. Their role may have been
restricted to hiring employees, managing benefits and handling disciplinary action in the past,
but human resource professionals now deal with controlling health care costs, reducing
employee attrition and participating in the community, as well.
3. Working with Managers
Years ago, human resource professionals in traditional small business settings focused on completing
administrative tasks, such as recruiting and hiring personnel, often without input from department
managers. As companies become more global, human resource professionals act as business partners to
interview and orient new employees to the workplace. A complex business operation typically requires
specialized personnel, so human resource professionals must work cooperatively with managers on the
production lines.
4. Building Teams
Human resource professionals who support international business operations typically must to ensure
that diverse teams work well together. By conducting team-building workshops, promoting acceptance of
cultural diversity and motivating employees to achieve strategic goals, they help their company build
strong teams. By recognizing that in some countries individual recognition plays a larger role than others,
human resource professionals can create awareness about how teams can function effectively across
borders to maintain company profitability.
 Types of global business
• Global business refers to international trade whereas a global business is a company doing
business across the world. The exchange of goods over great distances goes back a very long
time. Anthropologists have already established long-distance trading in Europe in the Stone
Age. Sea-borne trading was commonplace in many regions of the world in times predating
Greek civilization. Such trade, of course, was not by definition "global" but had the same
characteristics. In the 16th century all of the continents came to be routinely linked by
ocean-based communications. Trading activity in the modern sense rapidly followed at the
beginning of the 17th century; it might be more accurate to say that it "returned" again
because trading of such character had taken place in Roman times as well.
• It is not intended here to discuss another and related subject covered separately in this
volume: globalization. Globalization is a long-standing program advocated by the
economically advanced nations to free up international trade across the globe through
treaties. It has also come to mean the relocation of production or service activities to places
that have much lower labor costs. Global business in the past—or currently—does not
require what advocates of globalization seek, namely a so-called level playing field.
International trade has always had a mixed character in which national organizations and
private enterprises have both participated, in which monopolies have been imposed,
frequently defended by armed forces, in which all manner of restraints and tariffs have been
common and participants have made all sorts of efforts to counter such interference or to
profit from it.
1. Importing & exporting
Imports: a good or service brought into one country from another.
Exports: a good or service produced in one country then get marketed to other country.
Import-export is the most fundamental and the largest international business activity, and it is often the
first choice when the businesses decide to expand abroad as it is the easiest way to enter the market
with a small outlay of capital.

2. Licensing
Licensing is one of other ways to expand the business internationally. Licensing is the arrangement
between a firm, called licensor, allows another one to use its intellectual property such as brand name,
copy right, patent, technology, trademark and so on for a specific period of time. The licensor gets
benefits in term of the royalty. The company may choose to sell the products under the licensing when
the domestic production costs are too high, strict government regulations, or the company wants to sell
and produce standardized products everywhere.

 3. Franchising
Franchising is closely related to licensing. Franchising is  a parent company (franchiser) gives right to
another company (franchisee) to do business using the franchiser’s name and products in a prescribed
manner. Franchising is different from the licensing in terms of the franchisees have to follow much
stricter guidelines. Moreover, licensing is more about the manufacturers while franchising is more
popular with restaurants, hotels, and rental services. For example, McDonald, KFC, Pizza Hut and so on.
4. strategic partnetships & Joint venture
A strategic partnership or alliance is a positive aspect of the cooperation of two or more companies in
different countries are joined together for mutual gain. A joint venture is a special type of strategic
alliance, where the partners across globe collectively found a company to product goods and services.
The cooperation between the companies allow them to share the production cost, technologies,
development, and sales networks. The resources will be pooled to mutual advantages and put the
companies in win-win situations. For example, Motorola and Toshiba joined a strategic partnership to
develop manufacturing processes for microprocessors.
 
5. foreign direct investment (fdi)
Foreign direct investment is a company’s physical investment such as into the building and facilities in
the foreign country, and acts as a domestic business with a full scale of activity. Companies practice FDI
to get benefits from cheaper labor costs, tax exemptions, and other privileges in that foreign country. The
host country will get benefits by the introduction of new products, services, technologies and managerial
skills.  Also, FDI helps facilitate progressive internal policy reforms of the host country, and enhance the
economic situation. For example, Intel, which is United States based company, has made the FDI in many
countries in Southeast Asian.