VIII (1)
Bodolica, V., & Waxi, M. (2007). Chicago food and beverage company: The challenges of managing international assignments. Journal of the International Academy for Case Studies, 13(3), 31-42.
Please answer the following questions after reading the case study:
- Which staffing framework do you recognize in this case study? Explain its characteristics and the advantages to using this type of framework?
- Would this type of staffing framework affect Paul’s ability to get things done? Why, or why not?
- Explain if any of the other staffing frameworks would be any better? What can you recommend to the company’s headquarters in this sense?
- Why does Paul want this job? Is Paul a good candidate for this expatriate position?
- What comments can you make on expatriate management in general? And what comments can you make on the expatriate recruitment policy in particular?
- What are the different expatriate compensation methods you recognized in the text? What are the advantages and disadvantages of these different expatriate compensation methods?
- What do you suggest to the U.S. headquarters’ human resources manager in order to improve the expatriate satisfaction/compensation?
Your submission should be a minimum of three pages in length in APA style; however, a title page, a running head, and an abstract are not required. Be sure to cite and reference all quoted or paraphrased material appropriately in APA style.
MBA 6601, International Business 1
Course Learning Outcomes for Unit VIII
Upon completion of this unit, students should be able to:
10. Explore international human resource management and staffing approaches associated with
multinational enterprises (MNEs).
Reading Assignment
In order to access the following resource(s), click the link(s) below:
Khatri, N. (2000). Managing human resource for competitive advantage: A study of companies in Singapore.
International Journal of Human Resource Management, 11(2), 336–365. Retrieved from
https://libraryresources.columbiasouthern.edu/login?url=http://search.ebscohost.com/login.aspx?direc
t=true&db=bth&AN=4219940&site=ehost-live&scope=site
Overman, S. (2016). Tapping talent around the globe. HR Magazine, 61(1), 46–51. Retrieved from
https://libraryresources.columbiasouthern.edu/login?url=http://search.ebscohost.com/login.aspx?direc
t=true&db=bth&AN=112810959&site=ehost-live&scope=site
Story, J., Barbuto Jr., J., Luthans, F., & Boviard, J. (2014). Meeting the challenges of effective international
HRM: Analysis of the antecedents of global mindset. Human Resource Management, 53(1), 131–155.
Retrieved from
https://libraryresources.columbiasouthern.edu/login?url=http://search.ebscohost.com/login.aspx?direc
t=true&db=bth&AN=94063588&site=ehost-live&scope=site
Taylor, S., Beechler, S., & Napier, N. (1996). Toward an integrative model of strategic international human
resource management. The Academy of Management Review, 21(4), 959–985. Retrieved from
https://libraryresources.columbiasouthern.edu/login?url=http://search.ebscohost.com/login.aspx?direc
t=true&db=bth&AN=9704071860&site=ehost-live&scope=site
Unit Lesson
The purpose of any business organization is to create value that people want. There are numerous ways to
do that, but two ways seem to dominate business strategy.
Cost leadership: A business tries to build a product for less cost than a competitor can do it. This works well
if the product is a commodity or manufactured with a set pattern or process than can be mass-produced.
Differentiation: In this scenario, a business tries to build a product that is different or unique and that fills a
need. This type of value creation leans towards customizing a product or developing a new and different
product.
Whichever strategy businesses follow they outperform their competition by offering more value relative to the
price they charge. In their search to create more value, companies search into each business function to find
ways to improve efficiency and production. That is where the value chain comes into play.
The value chain is a list of the primary activities that a business conducts as it produces a product. It is a
value chain because each step adds value to the product produced. The purpose for breaking it down into
this format is to study each step and evaluate if the company needs it, if it can make it more productive, or if
UNIT VIII STUDY GUIDE
Managing International Operations,
Part 3: Value-Chain Management,
Human Resources, and Operations
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MBA 6601, International Business 2
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it can be outsourced. The value chain is composed of primary activities and support activities. Primary
activities include:
product design,
operations,
outbound logistics,
marketing, and
after-sales service.
If the firm has a competitive advantage—being it a special skill, capability, or technology—in any specific
primary activity, that would make it a core competency. Core competencies are actions that add the most
value to the product.
Support activities include the following:
procurement and in-bound logistics;
human resource management;
information technology systems; and
finance, accounting, and risk management.
In the Unit I lesson, access to more resources and more markets were reasons to establish international
business operations. By dispersing value-chain activities around the world, each primary activity must be
coordinated so that its value-creating output merges seamlessly with the others.
Human Resource Management (HRM)
Global HRM is the placement of people and the management of policies that add the most value to the
company. Placing people is one part of the function, but managing policies that govern their placement, such
as selection, hiring, compensation, training, promoting, and termination, make up human resources. Global
HRM goes even further by taking into account sensitivity of cultural, political, and economic variables. Many
countries restrict the use of workers from outside countries. For example, in Vietnam, foreign ownership is
restricted to 49% of all companies with a few exceptions, and foreign managers have restrictions on how long
they can work in the country (Vietnam, 2015).
There is statistical evidence that HRM adds value to the company. Human resource management drives
company productivity and strategic performance (Taylor, Beechler, & Napier, 1996). There is also evidence
that superior HRM practices add more value to companies than standard practices (Khatri, 2000). Both
studies add strength to the argument that HRM is as important as other company functions such as
manufacturing or marketing. Here we will examine two policies that global HRM must contend with that
domestic companies do not: expatriates and staffing frameworks.
Facts about Expatriates
Expatriates are company executives sent to work in countries where they are not legal residents but where
their firm has a plant, branch, or subsidiary. One type of expatriate is a home-country national where the
expatriate is a legal resident of the country in which the parent company has its headquarters. Another type of
expatriate is called a third-country national where the expatriate is neither a legal resident of the country
where the parent company is headquartered nor a legal resident of the country in which the subsidiary is
located.
The growth of globalism has strongly increased the demand for expatriates. 70% of the world’s growth will
come from emerging economies in the next decade (The world turned upside down, 2000). According to the
United Nations Conference on Trade and Development, there are 82,053 parent corporations with 807,363
international subsidiaries around the world (Number of MNCs in the world, 2010).
The main reason people accept jobs as expatriates is to grow their skill set in diverse circumstances and
learn decision-making in uncertain environments. Companies seek executives who can solve problems and
create opportunities. Exposure to different situations allows executives to find different paths that allow them
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to grow and broaden their horizons. Other reasons include better quality of life, career development, and
financial wealth (HSBC, 2015).
The cost of a full-time high-level executive is expensive for any company. Companies have adopted several
policies that still allow executives to participate as an expat. First, there is the commuter assignment. The
executive visits the foreign site for short periods while still commuting on weekends. Next, there are
assignments that seek out expats that the firm can hire as a local employee. A local employee receives
considerably less pay with less moving and travel costs.
Selection of expats depends on several variables relating to what the company needs and what the executive
needs. As key indicators on an executive’s suitability for international assignments, the company looks for
executives who have leadership expertise, flexibility and adaptability, and technical skills in what the company
produces (Brookfield Global Relocation Services, 2012).
Once a company selects an executive, preparation includes cross-cultural training, possibly language
lessons, and social etiquette. Probably the best source of preparation success is consulting with previous
expats who worked and lived in the same or similar location.
Compensation for expats depends on the reason for the assignment. If the assignment is in response to a
threat or weakness in the company’s position, the company compensates the expat for fixing the problem.
The compensation for needed or difficult assignments is higher than if the company is sending the expat just
to get experience. There are different schedules of compensation, but the most common is a base salary plus
a foreign-service premium and cost-of-living allowances. Sometimes, there are allowances for housing, taxes,
and transportation.
Repatriation of expats indicates that not all participants fared well upon returning to the parent company.
Statistics indicate about one third of expats went on to have faster promotions and new assignments worthy
of their international experience (Shaffer, Kraimer, Chen, & Bolino, 2012). It would seem that HRM emphasis
is on selection and preparation of expats without planning a repatriation process.
Expatriate failure does occur. Failure is when a firm calls an executive home due to inadequate operational
performance or the violation of some cultural etiquette that is upsetting to the resident population. The
historical failure rate is 5% of all expats with China (19%) and India (7%) being the locations with the highest
failures (Brookfield Global Relocation Services, 2012).
Staffing Frameworks
Staffing policy for a subsidiary sets the premise for the optimal ratio of local workers to expatriates. Once the
staffing policy is set, secondary policies of selection, compensation, training, and repatriation are established.
There are three different guidelines of staffing that parent companies use to select the staff for a subsidiary.
They are ethnocentric, polycentric, and geocentric.
Ethnocentric: This staffing framework frames the culture of the parent company as better than other cultures
it might encounter. Centralized companies prefer this type of staffing as it supports command and control from
the parent company. Top-level executives selected for subsidiaries will come from the parent company. Back
in Unit VI, the discussion of organizational culture mentioned Toyota’s placement of over 700 executives in
their automobile plants (Fackler, 2007). This is an example ethnocentric staffing. The advantage of this type
of staffing is to keep the core values surrounding product production in place. The disadvantage is that high-
level decision-making leaves out highly qualified executives from the subsidiary’s home country.
Polycentric: This staffing concept supports placement of staff from the country in which the subsidiary
resides. The home office recognizes that business practices differ in each country and that a local workforce
would have fewer difficulties in dealing with regulations and government bureaucracy. Decentralized
companies, such as fast food companies, prefer this method as decision-making is pushed down to the local
level. Hiring local executives is much cheaper than filling the spot with a highly paid executive from the home
office. The disadvantage is that allegiance to parent company’s values is questionable. Local executives do
not necessarily share organizational values as an expat would.
Geocentric: This staffing concept works by placing people with the best skills despite their background,
origin, or culture. Their mantra is that ideas and innovations are everywhere if one is willing to open one’s
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mind. Some evidence does suggest that this staffing concept produces the best financial performance (Barta,
Kleiner, & Neumann, 2012). The disadvantage is the difficulty in finding well-trained people who can relocate
to different countries multiple times.
Operations
The operations activity of the value chain is the “bread and butter” of any company. An operation activity is
literally the conversion of inputs into outputs. This sector makes the product that the customer buys. Do not
be confused if the product is tangible or intangible. Operations make the product or generate the service. For
example, an oil pipeline company does not provide a tangible product, but they make it possible for oil to flow
to market. The operations activity must be compatible to the company’s competitive strategy. Operations must
align with the five following factors:
1. Efficiency and cost: This explains why many companies move their manufacturing plants overseas.
They are seeking a reduction in operational costs. For the companies seeking the cost leadership
position, this is very compelling.
2. Dependability: At first, companies built their plants close to their customers so that price and delivery
were reliable. Later, as transportation became cheap and reliable, companies found they could
operate overseas and ship anywhere. This is still an important factor for those companies with only
one or two large customers.
3. Quality: The product itself must perform as promised, be reliable and functional, and the company
must offer an after-the-sale warranty on maintenance parts and service.
4. Innovation: Quite often, the operations sector is responsible for research and development (R & D). In
some companies, R & D is a support function. Worth noting is that the majority of consumer R & D
has moved overseas to emerging economies (The world turned upside down, 2000).
5. Flexibility: Operations must gear up to make different products and adjust for the volume of output.
Some food producers optimize their assembly lines to produce different products as seasons dictate
which fruits and foodstuffs are available.
Offshore manufacturing became a trend in the 1960s when companies first opened plants in Taiwan and
Singapore. When companies found they could meet the factors above in an overseas location, the push to
move operations out of the country moved quickly. Since that period, China has become the main location for
manufacturing. In 2013, China ranked first in manufacturing, up from number four in just 20 years
(Meckstroth, 2015).
Operational change is a normal part of business, but global integration and a speedup in communications
technology and transportation now give a competitive advantage to the agile company that can turn on a dime
in response to change.
References
Barta, T., Kleiner, M., & Neumann, T. (2012). Is there a payoff from top-team diversity? McKinsey Quarterly.
Retrieved from http://www.mckinsey.com/business-functions/organization/our-insights/is-there-a-
payoff-from-top-team-diversity
Brookfield Global Relocation Services. (2012). Global relocation trends: 2012 survey report. Retrieved from
http://img.en25.com/Web/BrookfieldGRS/2012_GRTS
Fackler, M. (2007, February 15). The ‘Toyota way’ is translated for a new generation of foreign managers.
New York Times. Retrieved from
www.nytimes.com/2007/02/15/business/worldbusiness/15toyota.html
HSBC. (2015). Expat explorer survey. Retrieved from www.expatexplorer.hsbc.com/survey/
Khatri, N. (2000). Managing human resource for competitive advantage: A study of MNEs in Singapore.
International Journal of Human Resource Management, 11(2), 336–365.
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Meckstroth, D. (2015). China solidifies its position as the world’s largest manufacture. Retrieved from
http://www.mapi.net/blog/2015/09/china-solidifies-its-position-world%E2%80%99s-largest-
manufacturer
Number of MNCs in the world. (2010). Retrieved from
http://www.numberof.net/number%C2%A0of%C2%A0mncs-in-the-world/
Shaffer, M., Kraimer, M., Chen, Y., & Bolino, M. (2012). Choices, challenges, and career consequences of
global work experiences: A review and future agenda. Journal of Management, 38(4), 1282–1327.
Taylor, S., Beechler, S., & Napier, N. (1996). Toward an integrative model of strategic international resource
management. The Academy of Management Review, 21(4), 959–985.
The world turned upside down. (2000). The Economist. Retrieved from
http://www.economist.com/node/15879369
Vietnam. (2015). Retrieved from
https://ustr.gov/sites/default/files/files/reports/2015/NTE/2015%20NTE%20Vietnam