TOPIC 2

THE GLOBAL
ENVIRONMENT
Learning Objectives
1. Describe the growth of international business.
2. Identify and discuss global issues in international
human resource management.
3. Discuss the human resource management function
in international business.

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4. Identify and discuss domestic issues in international
human resource management.
5. Describe the issues involved in managing
international transfers and assignments.
6. Summarize the issues in international labor
relations.
The Growth of International
Business
 During the 1950s, the U.S.
was the dominant force.
 In the 1960s, the U.S. was
challenged by other countries.

 The U.S. market downturn in 2002 had

effects on world markets.
International HR Strategy
The ethnocentric staffing model:
• Primarily uses parent country nationals to staff
higher level foreign positions.
• Is based on the assumption that home-based

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perspectives take precedence over local
perspectives and issues positions to parent
country nationals.
What Are the Staffing
Considerations?
 Polycentric staffing model: calls for heavy
use of host-country nationals throughout
the organization.
 It puts parent-country nationals, host-

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country nationals, and third-country
nationals all in the same category, with the
firm attempting always to hire
the best person available
for a position.
Understanding the Cultural Environment
 A country’s culture can be
defined as the set of values,
symbols, beliefs, and
languages that guide behavior
of the people within that
culture.

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 Managers in an international
business need to be aware of
cultural nuances and must be
especially cognizant of the
role of cultural differences
and similarities in workers
from different cultures.
Specific Human Resource Issues
in International Business
• Exporting is the process of making a product in
the firm’s domestic marketplace and then selling
it in another country.

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• Licensing involves one company granting its
permission to another company in a foreign
country to manufacture and/or market the first
company’s products in the second company’s
local market.
Specific Human Resource Issues in
International Business (cont’d)
• Direct Investment occurs when a firm
headquartered in one country builds or
purchases operating facilities or subsidiaries in a
foreign country.

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• In a Joint Venture or Strategic Alliance
two or more firms cooperate in the ownership
and/or management of an operation on an
equity basis.
Managing International Transfers
and Assignments
 Expatriates are employees who are sent by a
firm to work in another country and may be
either parent-country nationals or third-
country nationals.

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Key areas of importance are:
 Selection
 Training
 Compensation
Local Compensation Issues
 In the US, compensation assessment is based
on an individual’s performance.
 However, in other countries such as Japan, the
emphasis is based more on group work.

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Hardship Premium
 A hardship premium
(also called a foreign-
service premium) is
an additional financial

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incentive offered to
an individual to entice
them to accept a less
attractive international
assignment.