International Human

Resources Strategy

Lidija Dzanic
Tua Lindholm
Lea Wakolbinger
Mirjam Zerjav

VK Internationale Unternehmensführung WS 2004/05

Agenda

 Business strategies
 Staffing approaches
 Different types of managers
 Expatriation vs. inpatriation
 Case study
 Conclusion

2
Introduction

 Nowadays globalization is more present

 Requires globally competent managers
 IHRM is becoming more important
 IHRM is major determinant of success or failure
in international business
 Global integration is neccesary in HRM
 Core competency – local adaptation

3
Business strategies (1)
Domestic

 New products or services for the domestic market

 Foreign markets and international managerial skills

largely irrelevant

4
Business strategies (2)
International

 Competition increases
 Companies expand internationally
 Hierarchical structure
 Structural and cultural dominance
 First home country managers abroad as
expatriates

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Business strategies (3)
Multinational

 Least-cost and standardized products and services

 Worldwide lines of business
 Decisions made by people from a wider range of
cultures
 Values of the headquarter’s national culture
dominate
 Senior managers need to understand the world
business environment

6
Business strategies (4)
Transnational

 Global competition
 Identical products are distributed worldwide
 Research and development
 Firms become less hierarchically structured
 Transnational human resource strategies are being
developed

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Characteristics of effective
IHRM

 Transnational scope
Geographical context within which all major
decision are made
 Transnational representation
 Multinational composition of the managers and
executives
 Transnational process
 Firm’s ability to include representatives and ideas
from many countries

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Ethnocentric approach (1)
 Parent country nationals (PCNs) take all key
positions in a multinational company
 In the early stages of internationalization

 Reasons for pursuing this policy:

 Lack of qualified host country nationals (HCNs)
 Ability of the parent country nationals (PCNs)
to coordinate subsidiary
 Transferring Know-how

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Ethnocentric approach (2)

 Problems that may occur:

 Adaptation of PCNs to a host country may take
a long time
 Promotion opportunities of local managers are
limited
 PCNs’ lack of sensitivity

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Polycentric approach (1)
 Companies following this staffing policy use HCNs
in their subsidiaries and PCNs in corporate
headquarters

 Advantages:
 No more language barriers and adjustment
problems of expatriates
 The employment of HCNs is less expensive
 Morale and career opportunities of local stuff

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Polycentric approach (2)

 Disadvantages:
 Weak links between the independent national
units and headquarters
 Lack of experience of both HCNs & PCNs is a
liability in an increasingly competitive
international environment

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Geocentric approach (1)
 Best people get key jobs, nationality is not
important

 Advantages:
 A pool of senior international managers is
developed
 Tendency of national identification of managers
with subsidiary units is reduced

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Geocentric approach (2)
 Disadvantages:
 Immigration laws which require the employment
of local nationals are used by many host
countries
 Difficult to implement because of increased
training, compensation and relocation costs
 Longer lead times and more centralized control
of the staffing process are required

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Regional approach
 Staffing strategy with emphasis on different
regional markets

 Factors for staffing decisions:

 Need of area expertise

 Need of product expertise

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Managerial mindset

 4 typical mindsets
 Closely associated
 From the least global to the most global mindset
 Defender
 Explorer
 Controller
 Integrator

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Defender

 Internally focused
 Oriented to the domestic market
 Satisfied with domestic operations
 Uninterested in making foreign actions
 Almost no international element
 Foreign elements in domestic market are
unwanted

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Explorer
 Aware of business opportunities in
foreign markets
 Perceives foreign markets
as not dangerous
 Treats international forays with
a lot of caution
 Prefers strategies of exporting and franchising
 Domestic business is larger than international,
is predominant
 Foreign operations are managed from the head
office located in the home country

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Controller

 More externally oriented than the explorer

 Dominates in foreign markets with procedures
which were successful in domestic market
 Understands the nature of cultures
 Important: controller’s head office spends time
on controlling and less on coordinating
 Approval and sanction needed from the head
office

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Integrator

 Global perspective
 Knowledge and skills
 Understands, is aware, is competent
 Able to manage differences
between people, values and cultures
 Coordinates more than controls
 Critical function is creating mechanisms for
knowledge flow and transferring it from one
part of the global system to another
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Good international manager
Ability to develop

 Effective local strategies

 Local government relations
 Cultural leadership skills
 Social networking skills
 Teamwork skills
 Good understanding of business environment
 Insightful local social knowledge

(Harvey et al.)
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Dimensions of IHRM
 Knowledge-based view of the firm (Harvey et al.)

 Tangible vs. intangible dimensions of HRM

 Development of a common knowledge basis (Grant)

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Expatriation vs. inpatriation (1)
1) Harvey et al.

Decision factors

 Value of tacit local knowledge

 Cultural and economic distance

 Equivocality of subsidiary goals

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Expatriation vs. inpatriation (2)
2) Torbiörn

Decision factors

 Openness of economic region

 Political instability

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 Expatriation vs. inpatriation (3)
Low Cultural Distance High
Level of Economic Development High

Equi- Social Social Social Social Knowledge

vocality Knowledge Knowledge Knowledge High
Low High Low

Low Expatriate Inpatriate Inpatriate (P) Inpatriate (P)

Expatriate (S) Expatriate (S)

High Expatriate Inpatriate Inpatriate (P) Inpatriate

Expatriate (S)

Low Expatriate Inpatriate Inpatriate Inpatriate

High Inpatriate Inpatriate Inpatriate Inpatriate

Low

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Advantages of inpatriate use
 Effective „boundary spanners“

 Advice with HR practices

 Satisfaction with HR strategy in foreign

subsidiaries

 More acceptance on return

(Harvey et al.)

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Mergers and acquisitions

 Double-staffing strategy

 Inpatriates  communication

 Expatriates  coordination

(Torbiörn)

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Expatriation
 Overall increasing trend in expatriation
(especially UK)

 British view IHRM as essential contributor to

strategic management

 US: more inpatriation due to high expatriate

failures

(Scullion)

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 Expatriate failure
 Direct and indirect costs

 Main reasons:
 Inability of spouse to adjust
 Poor performance

(Scullion)

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 Training, selection and
repatriation
 Selection: not only technical, but also personal skills
(Scullion)

 Cross-cultural training approach (Mendenhall and

Oddou)
 Information
 Affection
 Immersion

 Effective repatriation programs (Scullion, Dessler)

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 Case study

 319 000 employees

 170 countries

 advanced information technologies:

computer systems, software, storage
systems, microelectronics

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 Beginning in 1888

 Incorporated in 1911
 1300 employees

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 1914 Thomas J. Watson
 Revenues doubled and business expanded

 The base for the strong organizational culture

today

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 Interview

 Dr. Haberl, manager of Media Relations

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 Local workforce
 Inpatriates not typical
 Expatriation – not mainly knowledge transfer
 Expatriation at IBM a part of a manager‘s
career
 No loss of control

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 Strong organizational culture
„myth of Watson“
 Helpful in the long run
 Social tacit knowledge
 Explicit knowledge

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 Locals are no locals anymore after entering
IBM
 IBMer

 Same rules all over the world

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 Training opportunities
 Internal technological structure
 Helping institutions
 „Buddy-system“
 Other training opportunities

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Conclusions

 HR strategy must match with corporate

strategy

 Decision factors that matter in the context of

the company’s IHRM strategy should be
defined before entering emerging markets

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 THE END

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