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Lecture 29 international hrm
 

Lecture 29 international hrm

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    Lecture 29 international hrm Lecture 29 international hrm Document Transcript

    • INTERNATIONAL BUSINESS MANAGEMENT LESSON 29: INTERNATIONAL HUMAN RESOURCE MANAGEMENTLearning Objectives have abundance of skilled and scientific manpower as well as• To understand the various factors affecting International unskilled and semiskilled labour. This changing trend is Human Resource Management incasing significant shift of location of business activities. Hard disk drive manufacturers are reported to be shifting their• To understand what are the various Staffing Policy production base from Singapore to cheaper locations like Determinants Malaysia, Thailand and China. While in the past unskilled and• To understand the concept of International Negotiation semiskilled labour intensive activities tended to be located in the• To analyze the stages involved in International developing countries, today sophisticated activities also find Negotiation favour with developing countries. The changing quality• To clearly define and understand the prerequisites of an attributes of human resources in the developing countries and effective negotiation process wage differentials are causing a locational shift in business activities, resulting in new trends in the global supply chain• To clearly understand what are th4 various cultural management. India is reported to be emerging as a global R&D problems involved in International Negotiation hub. India and several other developing countries are large• To understand the determinants of bargaining power sources of IT personnel. In short, the labour changing labour• To understand the concepts of IPR’s and Insurance market characteristics have been causing global restructuring of cover business processes and industries. And this causes a greatInteraction challenge for strategic HRM.International human resource management (HRM) involves Cultural Differencesascertaining the corporate strategy of the company and assessing Cultural differences cause a great challenge to HRM. Thethe corresponding human resource needs; determining the behavioral attitude of workers, the social environment, values,recruitment, staffing and organizational strategy; recruiting, beliefs, outlooks etc., are important factors, which affectinducting, training and developing and motivating the person- industrial relations, loyalty, productivity etc. There are alsonel; putting in place the performance appraisal and significant differences in aspects related to labour mobility.compensation plans and industrial relations strategy and the Cultural factors are very relevant in inter personal behaviour also.effective management of all these. “The strategic role of HRM is In some countries it is common to address the boss Mr. so andcomplex enough in a purely domestic firm, but it is more so but in countries like India addressing the boss by namecomplex in an international business, where staffing, manage- would not be welcome. In countries like India people attachment development, performance evaluation, and compensation great value to designations and hierarchical levels. This makesactivities are complicated by profound differences between delivering and organisational restructuring difficult.countries in labour markets, culture, legal systems, economic Differences in Regulatory Environmentsystems, and the like.” A firm operating in different countries is confronted withIt is not enough that the people recruited fit the skill require- different environments with respect to government policies andment, but it is equally important that they fit in to the regulations regarding labour.organizational culture and the demand of the diverse environ-ments in which the organization functions. Altitude Towards Employment The attitude of employers and employees towards employmentThe strategic HRM components and requirements will depend of people show great variations is different nations. In someon, inter alia, the organisational modes described in the countries hire and fire is the common thing whereas in a numbersubsection Organisational Modes in the chapter on Multina- of countries the ideal norm has been lifetime employment. Intional Corporations. countries like India workers generally felt that while they, haveFactors affecting International Hrm the right to change organisations, as they preferred, they had aThe following are some of the important factors, which make right to lifetime employment in the organisation they wereinternational HRM complex and challenging: employed with. In such situations it is very difficult to get rid of inefficient or surplus manpower. The situation, however, isDifferences in Labour Market Characteristics changing in many countries, including India.The skill levels, the demand and supply conditions and thebehaviour characteristics of labour vary widely between coun- Difference in Conditions of Employmenttries. While some countries experience human resource shortage Besides the tenancy of employment, there are several conditionsin certain sectors, many countries have abundance. In the past, of employment the differences of which cause significantdeveloping countries were regarded, generally, as pools of challenge to international HRM. The system of rewards,unskilled labour. Today, however, many developing countries promotion, incentives and motivation, system of labour © Copy Right: Rai University11.625.1 181
    • welfare and social security etc., vary significantly between 2. Subsidiary Characteristics: When the MNC establishes aINTERNATIONAL BUSINESS MANAGEMENT countries. new subsidiary or plant, it is likely to ensure that someone already very familiar with corporate culture heads the Staffing Policy operation. Thus, initially the staffing policy is likely to be With reference to the choice of the nationality of the people ethnocentric but become less so as host-country nationals are recruited for key management positions, there are three types of ‘socialized’ into corporate culture. staffing policies in international business, viz., the ethnocentric approach, the polycentric approach and the geocentric approach. 3. Parent Company Characteristics: As indicated under the The salient features of these business orientations have been sub-section Staffing Policy, the strategic predisposition of the described under the sub heading International Orientations in MNC, in terms of its EPRG (ethnocentric, the polycentric, chapter 1. regiocentric, geocentric) profile, will influence staffing policy. Ethnocentric Approach 4. Host Country Characteristics: Host country characteristics like the social environment, government policies, host Under the ethnocentric staffing policy, all key management country human resource characteristics, government policies positions in the company are filled by parent (home) country etc. also may influence the staffing policy. nationals. This approach is regarded appropriate where the organisational mode of the company is international (see the 5. Costs: The cost is also an important consideration in subsection Organisational Modes in the chapter on Multina- formulating the staffing policy when there are significant tional Corporations for explanation of the terms international, variations between nations the salary reveals. multinational, global and transnational). International Negotiation This practice was very widespread among American and In a number of cases the foreign market entry and strategy European corporations (such as Procter & Gamble and Philips) implementation involve negotiation with the government of at one time. In many Japanese and South Korean firms today, the foreign country and / or foreign firm. International such as Toyota, Matsushita, and Samsung, key positions in business plans “are always often implemented through, face-to- international operations are still often held by home-country face negotiations with business partners and customers from nationals.16 According to the Japanese Overseas Enterprise foreign countries. The sales of goods and services, the manage- Association, in 1996 only 29 per cent of foreign subsidiaries of ment of distribution channels, the contracting for marketing Japanese companies had presidents who were not Japanese. In research and advertising services, licensing and franchise contrast, 66 per cent of the Japanese subsidiaries of foreign agreements and strategic alliances all require managers from companies had Japanese presidents? different cultures to sit and talk with one another to exchange ideas and express needs and preferences. Executives must also Polycentric Approach negotiate with representatives of foreign governments who A company with a polycentric staffing policy recruits host might approve a variety of their marketing actions’ or in fact be country nationals to manage subsidiaries while parent country the actual ultimate customer for goods’ and services. In many nationals occupy the key positions at the corporate headquarters. countries governmental officials may also be joint venture This approach is regarded appropriate for multinational partners, and in some cases vendors. corporations. Successful negotiation demands threadbare analysis and Geocentric Approach evaluation of the commercial and their impressive presentation Geocentric staffing policy connotes seeking the best people and proper understanding and appreciation of the cultural from anywhere in the world for managing the organisation. nuances of the negotiating party and skillfully navigating the This strategy is regarded appropriate for global and negotiation process accordingly. It is rightly said that “negotia- transnational corporation tion is both an art and a science. The science of it requires Staffing Policy Determinants analyzing the relative bargaining strengths of each party and the As taggart and McDermott point out,18 the important factors different strategic options available to each party and assessing influencing the staffing policy are the following. how the other party might respond to various bargaining ploys. The art of negotiation incorporate interpersonal skills, the 1. The Cultural Dimension: It should be pointed out that ability to convince and be convinced, the ability to employ a given the need to co-ordinate activities world-wide, and basketful of bargaining ploys, and the wisdom to know when therefore the necessary ability of foreign subsidiary top and how to use them. In the context of international business, executives to communicate directly with corporate the art of negotiation also includes understanding the influence headquarters, MNCs from some countries (e.g., Japan, South of national norms, value systems, and culture on the approach Korea, Taiwan) may need to depend more heavily upon and likely negotiating tactics of the other party as well as home-country nationals because relatively few foreigners are sensitivity to such factors in shaping a firm’s approach to fluent in the mother tongue of the home country. In negotiations with a foreign government contrast, language is less likely to prove a major restricting influence on the staffing policies of MNCs where English is II Cs of Negotiation the mother tongue. Japanese MNCs have been accused of The negotiation process has been characterized as occurring adopting very ethnocentric staffing policies, and limiting job within the context of four Cs They are: opportunities for non-Japanese nationals. © Copy Right: Rai University 182 11.625.1
    • • Common interests and analogies. Or it may be decided not to discuss business INTERNATIONAL BUSINESS MANAGEMENT• Conflicting interests at all if clients are distracted by other personal matters or, if the other person seems untrustworthy.”• Compromise 3. Task-Related Information Exchange: Task related• Criteria. information exchange starts after establishing a goodQuite obviously, only when there are some perceived common personal relationship. This stage involves exchanginginterests that the question of negotiating a project arises. If information in an effort to provide the background,both parties conceive substantial benefits from the proposal establish common facts, and set the contexts ofboth the parties would be keenly interested to negotiate. If the negotiations. This stage is expected to provide both themutual benefits are very unbalanced, the extent of interest of parties by each other with all the information required inthe parties would also vary. sufficient detail and clearly. However, cultural differencesThere are a number of possible areas of conflict between the often create problems. All the required information may notinterests of both the parties. These include the quantum of be divulged, deliberately or otherwise, the language andinvestment, proportion of equity participation by the two expression may create problems of understanding,parties, method of financing, choice of technology, sourcing, sometimes even feeding misunderstanding.local content/value addition, location of the project, terms and 4. Persuasion: This stage is characterized by attempts to makeconditions of sales, management and so on. the other party accept the counterparts desired set ofWhen there is conflict it will have to be resolved by a trade off exchanges. Both the parties normally try this with each other.or compromise. The trade off will be influenced by factors such “This step of negotiations is considered by many to be theas the relative importance of the project to the negotiating most important. No side wants to give away more than itparties, the alternatives available to both the parties, their relative has to, but each knows that without giving somebargaining power ete. There should also be proper criteria laid concessions, it is unlikely to reach a final agreement. Thedown for implementation and evaluation. success of the persuasion step often depends on: (1) howStages of Negotiation well the parties understand each other’s position; (2) the ability of each to identify areas of similarity and differences;A Negotiation Normally involves the Following Five (3) the ability to create new options; and (4) the willingnessStages: to work toward a solution that allows all parties to walk away feeling they have achieved their objectives.”1. Preparation: This stage involves background research, collection and analysis of data and preparation of the plan There may not be a clear separation between the third and and strategy for presentation and negotiation. forth stages as the task-related information exchange stage Understanding the cultural nuances of the negotiating party may be characterized by each side defining and refining the and the dynamics and other characteristics of the negotiating needs and preferences. team or individual is also an essential part of this stage. It is Persuasion requires a lot of tact based on a clear observed that the best negotiators are the Japanese because understanding of the organisational, cultural and personal they will spend days trying to get to know their opponents. characteristics of the negotiators. The worst are Americans because they think everything 5. Agreement: The negotiation is finally concluded if a works in foreign countries as it does in the U5A. mutually acceptable exchange is agreed upon. As indicated in2. Non-task Sounding: This refers to the time at the beginning the four Cs of negotiation, conflicts of interests would be of the negotiation meeting devoted to introduction and resolved by trade offs or compromise leading to the getting acquainted. In other words it is the time spent on agreement. interpersonal relationship building by talking subjects other Prerequisites for Effective Negotiation than the task or business, such as personal and family Cateora and Graham suggest four steps which can lead to more matters and general subjects of common interests. The efficient and effective international business negotiations. They nature of non- task sounding may be influenced by cultural are: differences, For example, the non task time is normally short in respect of the Americans who would like to get into the 1. Selection of the appropriate negotiation team. business straight away quickly, but people of several cultures 2. Management of preliminaries, including training, would like to have long informal time. preparations, and manipulation of negotiation settings. Non-task sounding is very useful. It helps one to 3. Management of the process of negotiations, that is, what understand the characteristics of the persons with whom to happens at the negotiation table. negotiate. “Learning about a client’s background and 4. Appropriate follow-up procedures and practices. interests also provides important cues about appropriate communication styles. There is a definite purpose to these Cultural Problems in International preliminary non-task discussions. Although most people are Negotiations Important problems in international negotiations caused by often unaware of it, such time almost always is used to size cultural differences include those pertaining to the following: up one’s clients. Depending on the results of this process, proposals and arguments are formed using different jargon © Copy Right: Rai University11.625.1 183
    • 1. Language and non-verbal behaviours of the regulations. Companies will comply when the regula-INTERNATIONAL BUSINESS MANAGEMENT 2. Values tions don’t unduly constrain their desired mode of operations, when benefits are sufficiently attractive in spite of regulations, 3. Thinking and decision making processes and when they cannot practically alter the regulations to their Some problems may arise when negotiators are not able to benefit. Companies will circumvent regulations they find properly communicate in a common language. Even when the unacceptable through loopholes, legal or illegal. Avoidance is same language is used, problems may arise due to different simply the reverse of compliance as a company decides not to meanings for the same word in different cultures or because of operate in a given locale because of its regulations.29 different connotations when used in different contexts. Bargaining view Cross-cultural differences in non-verbal communication are The bargaining school theory holds that the negotiated terms sometimes very perplexing. A particular gesture or symbol may for a foreign investor’s operations depend on how much the have quite different connotations in different cultures. For investor and host country need each other’s assets.3D If either a example, the symbol Thums up signals approval in the United company or a country has assets that the other strongly desires States, Britain and Russia, but regarded highly offensive in Iran and if there are few (or no) alternatives for acquiring them, and is considered a rude gesture in Australia. negotiated concessions may be very one-sided.31 There are also significant cross-cultural differences in values. For” example, peoples differ in their adherence to time, promises etc. Similarly, business ethics vary substantially. The bargaining relationship between companies and govern- ments depends very much on whether the parties see Culture can also have a significant impact on by whom and how agreements as zero-sum (one party’s gain equals the other decisions are made. Research has identified at least three party’s loss) or positive-sum (both parties have net benefits) fundamental aspects of decision making that differ significantly gains. In the former, relationships may conflict because the by culture. 28 Decision by consensus is characteristics of collectiv- parties think they lose by making any concessions. In the latter, ist-oriented cultures such as Japanese. Secondly, how decisions the relationship may be seen as a partnership of cooperation are made also varies by culture. One of the key factors that and interdependence. 32 influence decisions is the role of information in the decision making process. In the United States and Sweden, managers emphasize rationality and utilise quantitative information. By Determinants of Bargaining Power contrast, French, Italian, and Argentinean managers emphasise past experience and qualitative information over quantitative Negotiation is defined as “the process of bargaining with one data in making decisions. These examples further illustrate that or more parties to arrive at a solution that is acceptable to all.”33 the type of information that managers pay attention to and The relative bargaining strength would, therefore, influence the utilize in decision making can vary. Thirdly, culture also seems to terms and conditions of the agreement. playa significant role in the extent to which managers are comfortable in making decisions in uncertain environments. The important factors which determine the relative bargaining For example, managers from the United States, Germany, and power are the following: Scandinavia seem to have the highest tolerance, while managers 1. Relative Importance of the Project: If the project from Italy, Iberia, and Japan seem to have much Lower negotiated is very important for one party and not very tolerance for making decisions in circumstances of uncertainty. important for the other, the relative bargaining power of the These differences in tolerance can have a variety of implications. former would be weak. It may be noted that the importance For example, if managers from Germany and Iberia are trying may depend not only on the intrinsic value of the project to an agreement concerning a joint venture in the context of negotiated, but also on other factors such as the strategic significant uncertainty, they may clash and differ in their importance of it. For example, a project that gives an entry to willingness to make decisions. a country may have a lot of strategic importance. Governmental Versus Company Strength 2. Alternatives: The number of alternatives available to each In Negotiat’ons party is another important factor that determines the relative In many instances government is a party in international bargaining power. If one party has several options (for business regulations. There are several governmental factors example, several other parties are keenly interested in the which are difficult to change and therefore will have to be taken project under negotiation) and the other party does not have as given. However, the relative bargaining powers can influence this advantage, the former would have a stronger bargaining the terms. power. There are two viewpoints of the governmental authority, viz., 3. Urgency: The time available for taking up and executing the the hierarchical view and the bargaining view. project is another influencing factor. If the time left for this is very short, this is likely to weaken the bargaining power of Hierarchical view the project sponsor/owner. Longer time would facilitate In a hierarchical view of governmental authority, companies exploring more alternatives and better evaluations. accept international business regulations as “givens,” in which case they comply with, circumvent, or avoid operating because © Copy Right: Rai University 184 11.625.1
    • 4. Strengths: The strengths, including reputation, is another (66 in 2001, compared with 36 in 2000). The least developed INTERNATIONAL BUSINESS MANAGEMENTfactor that influences the bargaining power. For example, a countries (LDCs) have also shown a keen interest in entering incompany, which is very resourceful and reputed, would have to BITs. A total of 23 LDCs were involved in the conclusion ofgreater bargaining power than one, which is weak on these. 51 BITs in 2001. Of these, 13 were signed among the LDCsCompany Strengths include factors such as financial soundness, themselves, 24 with the rest of the developing world, 12 withtechnological capabilities, previous experiences, particularly in the developed countries and two with economies in transition.project area considered, track records, business diversity ( for At the regional and interregional levels, the number of invest-example a host country government may prefer company in ment-related instruments continue to grow, especially in thediverse businesses, other things being equal, because of the form of free trade and investment agreements.possibility of several businesses getting benefited in different The number of bilateral treaties for the avoidance of doubleways), marketing expertise, ability to export the products from taxation (DTTs) also increased, reaching a total of 2,118 at theforeign investment and of others, etc. end of 2000 and 2,185 by the end of 2001.The Country Bargaining Power depends on factors such as There are several international arrangements for settlement ofpolitical stability, level of economic development and size of disputes. The sub-section Settlement of Disputes underthe national market, economic policies and business friendliness Regulatory Environment in chapter 1 gives some informationof the nation, the ability to act as a regional or global hub, etc. on it.International Asset Protection The WTO now is an important international organisationCompany’s investments and other assets in foreign countries seeking to protect intellectual property rights and settle interna-may face the risk of expropriation. ‘Governments are therefore tional trade disputes.concerned about the protection of the interests of their national Insurance Covercompanies in the foreign countries. The potential risk was more There are public and private insurers who provide insurancebefore the worldwide liberalisation set in the 1980s. covers against political risks associated with exports and foreignImportant protective measures in this respect include the investments. For example, the public sector Export Creditfollowing: Guarantee Corporation of India (ECGC) provides suchCoercion and Pressure insurance covers. Coverage in respect of international invest-Until the Second World War, home countries used military force ments is also available through World Bank’s Multilateraland coercion to ensure that host governments would give Investment Guarantee Agency (MIGA).foreign investors prompt, adequate, and effective compensation Protection of IPRsin cases of expropriation, under a concept known as the Protection of Intellectual Properties (see the chapter on WTOinternational standard of fair dealing. It may be noted that the for a description of Intellectual Properties) has been receivinghome countries of the companies involved were developed considerable international attention.ones and the host countries were developing nations and these The World Intellectual Property Organisation (WIPO) is anhost countries had little to say about this standard. In a two international organisation dedicated to helping to ensure thatconference held at The Hague in 1930 and at Montevideo in the rights of creators and owners of intellectual property are1933, participating developing countries got established a treaty protected worldwide and that inventors and authors are, thus,stating that “foreigners may not claim rights other or more recognized and rewarded for their ingenuity. The number ofextensive than nationals.” member States belonging to WIPO in 2002 was 179, which is aAlthough military action or coercion of the old style are not reflection of the crucial importance and relevance attached to themuch appreciated today, developed countries still use pressure work of the Organisation.of one or other sort to make developing countries to fall in line The roots of the World Intellectual Property Organisation go, such as trade pressures, aid, and influence with international back to Paris Convention of 1883, which gave birth to the firstlending agencies. Further, as the dependencia theory holds, major international treaty designed to help the people of onedeveloping economies have practically no power as host country obtain protection in other countries for their intellectualcountries when dei1ling with MNEs. Their assets are of little creations in the form of industrial property rights, known as:importance in bargaining. Again, MNEs can enlist the loyalties inventions (patents); trademarks; industrial designs. The Parisof their home governments local elites to maintain their power. Convention entered into force in 1884 with 14 member States,Bilateral and Multilateral Agreements etc. which set up an International Bureau to carry out administrativeThere are a number of Bilateral and Multilateral Agreements, tasks, such as organizing meetings of the member States. InConventions, Treaties ete. between nations which seek to 1886, copyright entered the international arena with the Berneprotect international assets and rights and to settle disputes. Convention for the Protection of Literary and Artistic Works.There has in fact been a spurt in the investment treaties (BITs). The aim of this Convention was to help nationals of itsThe number of BITs quintupled during the 1990s reaching a member States obtain international protection of their right tototal of 1,941 by end-2000 and shooting up to 2,099 by the end control, and receive payment for, the use of their creative worksof 2001. In recent years, the developing countries constituted such as: novels, short stories, poems, plays; songs, operas,the largest number involved in the new BITs. They have also musicals, sonatas; and drawings, paintings, sculptures, architec-intensified the practice of concluding BIT among themselves tural works. like the Paris Convention, the Berne Convention © Copy Right: Rai University11.625.1 185
    • set up an International Bureau to carry out administrative tasks. As pointed out in the chapter on WTO intellectual property isINTERNATIONAL BUSINESS MANAGEMENT In 1893, these two small bureaus united to form an interna- an important concern of the WTO. tional organisation called the United International Bureau for Summary the Protection of Intellectual Property (best known by its Operations ‘management is becoming increasingly global in its French acronym BIRP!). Based in Berne, Switzerland, this small scope. Operations management involves a number of strategic organisation was the predecessor of the World Intellectual decisions such as make or buy?; if buy, from where to buy?; to Property Organisation of today. go for partnering or not?; in which country and place to locate As the importance of intellectual property grew, the structure the manufacturing or other facilities; logistical factors and so on. and form of the Organisation changed as well. In 1960, BIRPI The business system involves the integration and management moved from Berne to Geneva to be closer to the United of diverse activities. On the one extreme, a firm may undertake Nations and other international organisations in that city. A all of these different activities, carrying on the whole production decade later, following the entry into force of the Convention process and doing all the other operations encompassing the Establishing the World Intellectual Property Organisation, business system. On the other extreme, a firm can outsource BIRPI became WIPO, undergoing structural and administrative most of these. reforms and acquiring a secretariat answerable to the member Operations management, in fact, is, to a very large extent, States. In 1974, WIPO became a specialized agency of the supply chain management. “A company’s supply chain encom- United Nations system of organisations, with a mandate to passes the coordination of materials, information, and funds administer intellectual property matters recognized by the from the initial raw material supplier to the ultimate.” “The member States of the UN. ultimate objective is to deliver products to market with variety, WIPO expanded its role and further demonstrated the responsiveness, timeliness and efficiency. Corporate strategy importance of intellectual property rights in the management must include organizing, coordinating and executing the of globalize trade in 1996 by entering into a cooperation process of product flow as a competitive necessity and as a agreement with the World Trade Organisation (WTO). source of potential competitive advantage. The strategic In 1898, BIRPI administered only four international treaties. requirements of international business determine the extent, Today its successor, WIPO, administers 23 treaties (two of characteristics and strategic direction of the supply chain.” those jointly with other international organisations) and carries One of the critical considerations in the supply chain manage- out a rich and varied program of work, through its member ment is make or buy. Globalisation, having increased the scope States and secretariat, that seeks to: of sourcing, has made the make or buy question more relevant. • Harmonize national intellectual property legislation and The make or buy decision is influenced by a number of factors procedures such as organisational, technological, cost, supply etc. Buy • Provide services for international applications for industrial strategy is greatly benefited by the opportunities for global property rights sourcing. • Exchange intellectual property information Buyer-supplier relationship known as partnering / relationship marketing which is “is a process where a customer firm and • Provide legal and technical assistance to developing and other supplier firm form strong and extensive social, economic, countries service, and technical ties over time, with the intent of lowering • Facilitate the resolution of private intellectual property total costs and/or increasing value, thereby achieving mutual disputes benefit,” is emerging as a very important strategic element in • Marshal information technology as a tool for storing, industrial marketing. In other words, the conventional win-lose accessing, and using valuable intellectual property approach is giving way to a dynamic and enduring win-win information. mind set. The most successful and widely used of these treaties is the Logistics is a very important component of operations Patent used of these treaties is the patent cooperation treaty management. Logistics encompasses the total movement (PCT), which implements the concept of a single international concept, covering the entire range of operations concerned with patent application which has legal effect in the countries which the movement of materials and products to, through, and out are bound by the treaty and which are designated by the of the firm to the consumer. It includes a variety of activities applicant. Once such an application is filed, an applicant receives such as inventory management, warehousing and storage, valuable information about the potential patent ability of his transportation’s, materials handling, order processing, distribu- invention (through the international search report and the tion, communications, packaging, salvage and scrap disposal, optional international preliminary examinations report) and returned goods handling, customer service etc. has more time than under the traditional patent system to Location of the manufacturing facilities is one of the most decide in which of the designated countries to continue with important of the global operations management decisions. The the application. Thus, the PCT system consolidates and success of a global manufacturing strategy depends on four key streamlines patenting procedures and reduces costs, providing factors: compatibility, configuration, coordination, and control. applicants with a solid basis for important decision-making. Compatibility in this context is the degree of consistency between the foreign investment decision and the company’s © Copy Right: Rai University 186 11.625.1
    • completive strategy. Manufacturing Configuration refers to the challenge to international HRM. The system of rewards, INTERNATIONAL BUSINESS MANAGEMENTstrategy of centralization or dispersion of manufacturing promotion, incentives and motivation, system labour welfarefacilities. There are broadly three broad categories of manufac- and social security etc., vary significantly between countriesturing configuration, viz., centralized facility, regional facilities, With reference to the choice of the rationality or the peopleand multi-domestic facilities. The choice of the configuration recruited for key management positions, there are three types ofstrategy is influenced by several factors such as scale economies, staffing policies in international business, viz., the ethnocentricnature of technology and skill requirements, firm strategies such approach, the polycentric approach and the geocentric approach.as internalization or externalization, international orientation Under the ethnocentric staffing policy, all key managementand the organisational mode of the company, foreign market positions in the company are filled by parent (home) countryprospects and other characteristics etc. Coordination and nationals. A company with a polycentric staffing policy recruitsControl which are two sides of the same coin, refer to the host country nationals to manage subsidiaries while parentintegration, monitoring and taking of required actions to country nationals occupy the key positions at the corporateensure that the implementation of he plans progress as headquarters. Geocentric staffing policy connotes seeking theenvisaged. best people from anywhere in the world for managing theThe location of production facilities of a global corporation organisation.may be influenced by a number of factors such as the nature of The staffing policy is influenced by several factors such asorganisation, cost, exchange rate variations, availability and cost cultural factors, subsidiary characteristics, parent companyof inputs (including land and infrastructure), logistical factors, characteristics, host country characteristics and cost.product life cycle and pattern of demand, nature of product, In a number of cases the foreign market entry and strategygovernment policies and regulations, social and political factors implementation involve negotiation with the government ofetc. the foreign country and / or foreign firm. Successful negotiationThe selection of the foreign market(s) to do business is demands threadbare analysis and evaluation of the commercialinfluenced by a number of firm- related and the market-related and their impressive presentation and proper understandingfactors. Firm related factors include the international marketing and appreciation of the cultural nuances of the negotiatingobjective, resources, mission and international orientation of party and skillfully navigating the negotiation process accord-the firm. The’ market related factors may be broadly grouped ingly.into general factors and specific factors. General factors are The negotiation process has been characterised as occurringfactors general to the market as a whole (macro environment) within the context of four Cs, viz., common interests, conflict-whereas the specific factors are factors which are specific to the ing interests, compromise and criteria.industry concerned ( mostly micro environment). A negotiation normally involves five stages, namely, prepara-One of the challenging areas of international human manage- tion, non-task sounding, task related information exchange,ment is the international human resource management (HRM). persuasion and agreement. Important problems in interna-International HRM involves ascertaining the corporate strategy tional negotiations caused by cultural differences include thoseof the company and assessing the corresponding human pertaining to language and non-verbal behaviours, values, andresource needs; determining the recruitment, staffing and thinking and decision making processes.organisational strategy; recruiting, inducting, training &developing and motivating the personnel; putting in place the In many instances government is a party in internationalperformance appraisal and compensation plans and industrial business negotiations. There are several- governmental factorsrelations strategy and the effective management of all these. It is which are difficult to change and therefore will have to be takennot enough that the people recruited fit the skill requirement, as given. However, the relative bargaining powers can influencebut it is equally important that they fit in to the organisational the terms.culture and the demand of the diverse environments in which There are two viewpoints of the governmental authority, vs.,the organisation functions. the hierarchical view and the bargaining view. In a hierarchicalThere are several important factors which make international view of governmental authority, companies accept internationalHRM complex and challenging. The skill levels, the demand and business regulations as “givens,” in which case they complysupply conditions and the behaviour characteristics of labour with, circumvent, or avoid operating because of the regulations.vary widely between countries. Cultural differences cause a great The bargaining school theory holds that the negotiated termschallenge to HRM. The behavioral attitude of workers, the for a foreign investor’s operations depend on how much thesocial environment, values, beliefs, outlooks etc., are important investor and host country need each other’s assets.factors, which affect industrial relations, loyalty, productivity etc. The important factors which determine the relative bargainingA firm operating in different countries is confronted with power are the relative importance of the project to each party,different environments with respect to government policies and the number of alternatives available to each party, time availableregulations regarding labour. for taking up and executing the project, and the relativeThe attitude of employers and employees to towards employ- strengths. Company strengths include factors such as financialment of people show great variations among different nations. soundness, technological capabilities, previous experiences,Besides the tenancy of employment, there are several conditions particularly in the project area considered, track records, businessof employment the differences of which cause significant diversity ( for example a host country government may prefer © Copy Right: Rai University11.625.1 187
    • company in diverse businesses, other things being equal,INTERNATIONAL BUSINESS MANAGEMENT because of the possibility of several businesses getting ben- efited in different ways), marketing expertise, ability to export the products from foreign investment and of others, etc. The bargaining power of a country depends on factors such as political stability, level of economic development and size of the national market, economic policies and business friendliness of the nation, the ability to act as a regional or global hub, etc. A company’s investments and other assets in foreign countries may face the risk of expropriation. Governments are therefore concerned about the protection of the interests of their national companies in the foreign countries. Important protective measures in this respect include the use of military force, coercion and pressure tactics; bilateral and multilateral agreements, conventions, treaties etc. between nations which seek to protect international assets and rights and to settle disputes. Notes: © Copy Right: Rai University 188 11.625.1