CH 3 BSAD 310 Fall 2019

Chapter 3
The Global Environment
Copyright ©2020 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

LEARNING OUTCOMES
2HR5 | CH3
Copyright © 2020 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
1. Describe the growth of international business
2. Identify and discuss the global issues in
international human resource management
3. Discuss the human resource management
function in international business
4. Identify and discuss the domestic issues in
international human resource management

3
LEARNING OUTCOMES (Continued)
HR5 | CH3
5. Describe the issues involved in managing
international transfers and assignments
6. Summarize the issues in international labor
relations

4
accessible website, in whole or in part. HR5 | CH3
Growth of International Business
• British empire was built around the
financial and business interests of the
British nobility
• Forces that shaped today’s competitive
international business environment began
to emerge after World War Two
• 1950s: The United States was by far the
dominant economic power in the world
• Late 1970s: Businesses from other countries
emerged as major players in the world economy
LO 1

5
Growth of International Business (Continued)
• By the mid-1990s, global competitiveness
seemed to have become the norm rather
than the exception
• Developments around the world have
affected the new global economy
• Economies have become highly interdependent
• Growth of regional economic alliances has
substantial effects on the global business
community
LO 1

6
Global Issues in International Human
Resource Management
• Developing an international HRM strategy
• Developing an understanding of the cultural
environment of HRM
• Developing an understanding of the
political and legal environment of HRM
LO 2

7
International HRM Strategy
• Ethnocentric staffing model
• Uses parent-country nationals (PCN’s) to staff
higher-level foreign positions
• Polycentric staffing model
• Calls for the dominant use of host-country
nationals (HCN’s) throughout the organization
• Geocentric staffing model
• Puts PCN’s, HCN’s, and third-country nationals
(TCN’s) all in the same category with the firm
attempting to always hire the best person
available for a position
LO 2

8
Understanding the Cultural Environment
• Culture: Set of values, symbols, beliefs, and
languages that guide the behavior of people
within that culture
• Cultural differences directly affect business
practices in international situations
• Language differences complicate the issues
involved in dealing with international business
• Cultural roles directly affect HRM practices
LO 2

9
Dimensions of National Culture Identified by
Geert Hofstede
• Power distance
• Individualism versus collectivism
• Masculinity versus femininity
• Uncertainty avoidance
• Long-term orientation versus short-term
orientation
• Indulgence versus restraint
LO 2

10
Dimensions of National Culture Identified by
GLOBE project
• Uncertainty avoidance
• Power distance
• Individualism versus collectivism
• Assertiveness
• In-group collectivism
• Gender egalitarianism
• Future orientation
• Performance orientation
• Humane orientation
LO 2

11
Political and Legal Issues of International
Business
• Government stability
• Ability of a given government to stay in power
against opposing factions or permanence of
government policies toward businesses
• Includes the extent of risk faced by expatriates
as a result of political instability
• Trade incentives
• Reduced interest rates on loans, construction
subsidies and tax incentives, and relaxation of
various controls on international trade
LO 2

12
Political and Legal Issues of International
Business (Continued)
• Trade controls
• Tariffs: Tax collected on goods shipped across
national boundaries
• Quotas: Limit on the number or value of goods
that can be traded
• Economic communities
• Sets of countries that agree to eliminate trade
barriers among their member nations
• Examples: The European Union (E U) and the
North American Free Trade Agreement (NAFTA)
LO 2

13
Fundamental Management Challenges in
International Business
• Avoiding discrimination in employment
• Choosing an appropriate source of
employees
• Cross-cultural training and development of
employees
• Includes training programs for both expatriates
and workers in host countries
• Working conditions, compensation, and the
cost of living
LO 3

14
Specific Human Resource Issues in
International Business
• Exporting
• Process of making a product in the firm’s
domestic marketplace and then selling it to
another country
• Licensing
• Involves one company granting its permission to
another company in a foreign country to
manufacture or market its products in its local
market
LO 3

15
Specific Human Resource Issues in
International Business (Continued)
• Direct foreign investment
• Occurs when a firm headquartered in one
country builds or purchases operating facilities
in a foreign nation
• Joint venture (strategic alliance)
• Two or more firms cooperate in the ownership
or management of an operation on an equity
basis
LO 3

16
Domestic Issues in International Human
Resource Management
• Local recruiting and selection issues
• Local training issues
• Local compensation issues
LO 4

17
Expatriates
• Employees sent by a firm to work in
another country
• May be either PCN’s or TCN’s
• Threats revolve around opportunistic
behavior and information asymmetry
• Knowledge contracts can ensure information
symmetry by systematically debriefing
expatriate managers
• International strategies firms can adopt
- Global, international, transnational, and
multidomestic
LO 5

18
Selecting Expatriates
• HR manager must define skills and abilities
required to do the job and work in a foreign
location
• Sources of experienced managers
• Firm itself
• Other organizations
- Headhunters help businesses recruit qualified
managers and other professionals for higher-
level positions in an organization
• Colleges
LO 5

19
Selecting Expatriates (Continued)
• Criteria for selection
• Managerial competence
• Language training
• Adaptability to new situations
LO 5

20
Assessing Success or Failure
• Earlier views
• Measure depended upon whether or not the
expatriate remained on assignment for the full
time assigned
- Adjustment was found to be a good indicator
of success later
• Newer approaches
• Measure should be directly tied to the strategic
goals the assignment was to accomplish
• Success or failure should be assessed relative to
the knowledge that was successfully transferred
LO 5

21
Assessing Success or Failure (Continued)
- Knowledge that expatriates were to disperse
to subsidiary operations and that they were
to gain and bring back to the headquarters
• Contributing factors
• Inability of the manager or the manager’s
spouse and family to adjust to a new location
• Perspective of an international manager’s
motivation for and real interest in a foreign
assignment
• Personality and international experience
• Ethnocentric attitudes of HCN’s
LO 5

22
Training for Expatriate Managers
• May include the following:
• Language training
• Classroom training regarding the history of and
the daily living conditions in a country
• Training on social manners and issues involved
in social exchanges
• Cultural Assimilator
• Complex training program built around short
case studies and critical incidents
• Asks how a manager would react to different
situations and then provides detailed feedback
LO 5

23
Compensating Expatriates
• Jointly determined by:
• Labor-market forces
• Professional licensing requirements
• Standard of living
• Occupational status
• Government regulations
• Differential compensation
• Provided to make up for differences in currency
valuation, standards of living, and lifestyle
norms
LO 5

24
Compensating Expatriates (Continued)
• Hardship premium: Additional financial
incentive offered to employees to entice
them to accept less attractive international
assignments
• Also called a foreign service premium
• Other measures
• Tax-equalization systems
• Benefits: Housing, education, club memberships,
travel to home country, and medical treatment
• Job-location assistance for spouses
LO 5

25
Repatriation
• Requires adjustment on professional and
personal levels
• Professional levels: Being out of sight for a while
may lead to some loss of status in the firm
• Personal levels: Expatriates will have to get
reaccustomed to home-country practices
• Companies must stay in touch with their
expatriates so that they can maintain their
social and network ties within the company
• Some type of career counseling at the time
of repatriation may be helpful
LO 5

26
International Labor Relations
• Labor relations
• Processes of dealing with employees who are
organized into labor unions
• Heavily regulated by law
• Norms regarding the relationship between
unions and management vary from nation
to nation
LO 6

KEY TERMS
27HR5 | CH3
• Ethnocentric staffing
model
• Polycentric staffing
model
• Geocentric staffing
model
• Culture
• Exporting
• Licensing
• Direct foreign
investment
• Joint venture
(strategic alliance)
• Expatriates
• Hardship premium
(foreign service
premium)

SUMMARY
28HR5 | CH3
• Forces that shaped today’s competitive
international business environment began
to emerge after World War Two
• International HRM must address various
global issues and manage expatriates well
• International firms must confront local
recruiting and selection, local training, and
local compensation
• Knowledge of international labor relations
is very important for HRM

CH 3 BSAD 310 Fall 2019

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