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Module 1

Definition, reasons for going global, Approaches to IHRM, Difference between IHRM and Domestic HRM, Reasons for emergence of IHRM, Models of IHRMMatching model, Harvard Model, Contextual Model, 5P Model European Model, Models of SHRM in Multinational Companies, Internationalization of HRM: Socio-cultural context, Organizational dynamics and IHRM: Role of culture in International HRM, Culture and employee management issues, Organizational Processes in IHRM, Linking HR to International expansion strategies, The Challenges of International Human Resource Management

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Utilizing and managing human resources effectively in International business 6 hr activities of HRM: Human resource planning Staffing Performance management Training & development Compensation Industrial relations

Morgan, a management philosopher presents three dimensions: 1.Broad activities [6 hr activities] of HRMprocurement, allocating and utilizing 2. Country categories involved in IHRM :  A host country where subsidiary is located  A home country where firms head quarter is located  Other countries that may be the source of labour, finance etc.

3. Employee categories of an international firm: ` Host country nationals [HCNs] ` Parent country nationals [PCNs] ` Third Country nationals [TCNs]
 Morgan

defines IHRM as interplay among these 3 dimensions; human resource activities, types of employees and countries of operation

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Expatriates- employee who is working and temporarily residing in a foreign country. Also known as international assignees. These are the employees who are transferred out of their home base into some other area of the international operations. These are the staff who are transferred out of the company PCNs are always expatriates. Inpatriate- staff who are transferred into a particular company Transpatriates- employees who are moved between subsidiaries.

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International Opportunities Reactive reasons Globalization of competitors- competition is one of the strong reasons to go international. If it does not go, someone else will capture the market. Trade barriers- restrictive trade barriers like tariff, quotas, political reasons and other trade practices can make export to foreign country expensive, hence other measures to go global are adopted Customer demand acts as a primary reason for some companies.

3. Proactive reasons  Economies of scale- Companies can achieve economies of scale by access to various regional resources by setting up huge capacities and distribution centers at low cost.  Growth opportunities- where home market is matured , new market provides place to invest surplus profit and underutilize resources.  Resource access and cost savings- access to low cost resources and better control over resources, access to inputs like raw materials and lower transportation cost.  Incentives [by government]tax exemptions, tax holidays, subsidy loans at cheaper rates, access to properties etc.

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There are 4 terms to describe MNCs approaches to managing and staffing their subsidiaries: Ethnocentric Polycentric Geocentric Regiocentric

These terms are derived from the work of Perlmutter [1969]

Ethnocentric Approach ` Subsidiaries are managed by expatriates from home country. ` Strategic decisions, key positions at domestic and foreign operations are held by management personal of headquarters. Polycentric Approach ` MNC treats each subsidiary as a distinct national entity with some decision making autonomy. ` Subsidiary are managed by local nationals ` PCNs are rarely transferred to foreign subsidiary operations.

Geocentric Approach ` MNC takes a worldwide approach to its operations, recognizing that each part makes a unique contribution with its unique competence ` PCN, HCN, TCN can be found in key positions any where including at top level at Head Quarter. Regiocentric Approach ` MNC utilizes a geocentric strategy but in a limited way ` Personnel may move outside their country but only within the particular geographic region ` Regional managers may not be promoted to HQ, but enjoy autonomy in decision making to some extent.

More HR activities ` The need for a broader perspective ` More involvement in employees personal lives ` Changes in emphasis as the workforce mix of expatriates and locals varies ` Risk exposure ` Broader external influences
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[Moderate: either diminish or accentuate] Usually we argue that complexity in operating in different countries and employing different national categories of employees is a key variable which differentiates between domestic and International HRM. But there are other variables which either reduce or increase gap/difference between Domestic and IHRM.

Globalization leads more MNCs and greater mobilization of human resources Recognition of HR management as a success factor in international business Failure in international assignments is costly and it is dependent on employees Implementation of international strategies is often challenging because its difficult to get competent people Changing organization structure. Now you have networked structure or virtual, boundary less, horizontal communication channels. HR plays significant role in such organizations Cultures are built by proactive HR policies and actions.

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Matching Model: Highlights resource aspect of HRM Emphasizes efficient utilization of human resources to meet organizational objectives Focuses a right fit between organizational strategy, organizational structure and HRM systems

2. Harvard Model:  Stresses human aspect of HRM  More concerned with the employer-employee relationship  Highlights interests of different stakeholders in organization [ shareholders, management, employees, government, community etc] and how their interests are related to objectives of management.

3. Contextual Model:  Organizations may follow different pathways in order to achieve same results  This is because there is a linkage between external environment context [socio-economic, technological, political legal, competitive] and internal organizational context [culture, structure, leadership etc]  These linkages directly form the strategies of HRM

4. 5 P Model:  5 HR elements [philosophies, policies, programs, practices and processes] melding with strategic needs  This model shows how each are interrelated and explains their importance in achieving organizations needs.

5. European Model:  Based on argument that European organizations are constrained at both international [European Union] and national level by national culture and legislation.  They also consider patterns of ownership at organizational level and trade unions involvement and consultative arrangements at HRM level.  These constraints need to be accommodated while forming HRM model in the company.

SHRM means process of developing HRM practices, programmes and policies that help to achieve organizational goals

HR strategic movement process involves actions on seven areas:  Understand the environment  Formulate strategies  Indentify competitive advantages  Define organizations capabilities  Indentify HR practices that matches with organizational capabilities  Link HR strategy with business strategy  Implement strategies
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Firm strategy

Institutional / political Forces

Resource based view of firm

HRM Practices

Resource Dependence

HR Capital Pool [Skills, Abilities]

Cybernetic Agency/Trans action costs

Behavioural Approach

HR Behaviour

Firm Level outcomes

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Various internal and external factors of the company influences human resource management. One of the major external factors is the socio-cultural context/ environment within which company operates. Culture: customs, beliefs, norms and values that guide the behaviour of the people in a society and that are passed from one generation to the next. Levels of culture: dominant culture, sub culture, organizational culture and occupational culture Multiculturalism: people from different culture interact regularly

National Culture

Contingent Variables

Institutions

National HRM practices & practices

Dynamic Business Environment Organizational Strategies & policies Industrial Sector

4 approaches & role of culture 1. Ethnocentricism: home countrys culture is imposed on subsidiaries 2. Polycentricism: Subsidiary adopts local culture 3. Regiocentricism: subsidiary adopts that regions culture

4. Geocentricism:  where talents can be hired from any place  MNC becomes cosmopolitan  Global managers are able to adjust any business environment  Adjust to cultural differences  But in this case additional training cost should be invested on that Inpatriate and compensation may be higher than its own employees

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Assertiveness Future orientation Performance orientation Human orientation Gender orientation In group collectivism Societal collectivism Power distance Uncertainty avoidance

Attitude to power and authority ` Tolerance for ambiguity & attitude to risk ` Interpersonal trust ` Individualism and collectivism ` Preference for certain leadership behaviours
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International Division structure


Home office Departments CEO

Production

Marketing

Finance

Personnel

Overseas subsidiaries

VP International Operations

France

Japan

Egypt

Functional structure]

CEO

Production

Marketing

Finance

Personnel

Plant A Germany

Plant B Brazil

Geographic Structure
CEO

Europe Latin America Division

N. America and Pacific Division

UK

Venez uela

Italy

US Japan

Canada

Manufact uring Marketing Finance

Product Structure

CEO

Product Division A

Product Division B

Product Division C

Europe

Australia

Far East

UK

Germany Manufact uring Marketing

Spain

Finance

Matrix structure
CEO

Global Marketing Global Product Manager A Global Product Manager B Global Product Manager C

Global Finance

Global Operation s

Global HR

International expansion strategies ` New set up ` Alliances or joint venture ` Global integration- mega national firm ` Multi domestic firm strategy ` M&A

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Composition of new board Who will occupy which job? Culture assessment Creating a new culture Effective communication Retaining talent Aligning per evaluation and reward systems Managing transition [transformation process]

The extent of HR involvement in the acquisition process depends on the strategy behind the acquisition
Strategies for post merger outcome

High Degree of change in acquired company

Absorption: acquired company confirms to acquire- cultural assimilation Best of both: additive from both the sidesCultural integration Preservation: Acquired company retains its independencecultural autonomy

Transformation: both companies find new ways of operatingcultural transformation

Low

Reverse merger: unusual case of acquired company dictating terms-cultural assimilation High

Degree of change in acquiring company

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High failure rates of expatriation and repatriation Deployment- getting the right mix of skills in the organization regardless of geographical location Knowledge and innovation dissemination- managing critical knowledge and speed of information flow Talent identification and development- identify capable people who are able to function effectively Barriers to women in IHRM- gender differentiation International ethics language [spoken, written, body] Different labour laws and different political climate Different values and attitudes e.g., time, achievement, risk taking Roles of religion- sacred objects, prayer, taboos, holidays Education level attained

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