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Term Project
MGT 4478: Managing in a Global Environment
Troy University
Section Four; Setting Up Shop:
Setting Up Shop:
Assume your organization is going forward with entering into the country you discussed in your country
study. They are now in the process of determining the more specific details of setting up business in that
country.
They have asked you to write a report on your recommendations as to how they should enter the
country, staff the operation, the type of international strategy they should use, and the marketing and
distribution strategy.
You are to use at least three additional sources to complete this assignment. PLEASE remember to cite
all your sources; proper citation of your sources is a requirement for this course. This assignment is to be
a minimum of 2 – 4 pages typed, font 12, double-spaced.
Please support all recommendations with sound reasoning and research.
You report must cover but not limited the following areas:



Mode of Entry
o Pick the most appropriate mode of entry
o Discuss the pros and cons
o Support your decision with research
Human Resources
o Staffing Needs
 Management
 Lower-Level employees
o Staffing Approach
 Ethnocentric, Polycentric, or Geocentric
o Pay and Compensation
o Training and Development
o Union Concerns
Marketing
o Target Market & Market Segmentation
o Pricing
o Advertising

 Cultural Concerns & Barriers
 How will you address them
o Competitor Marketing Analysis
Distribution
o Distribution Strategy
o Suppliers
 Use local, home country or a mix?
o Production facilities (if needed)
o Will you use outsourcing
International Business
10e
By Charles W.L. Hill
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
Chapter 19
Global Human
Resource Management
What Is Human
Resource Management?
Human resource management (HRM) – the
activities an organization carries out to utilize its
human resources effectively
 These activities include






determining human resource strategy
staffing
performance evaluation
management development
compensation
labor relations
 Firms need to ensure there is a fit between their
human resources practices and strategy
19-3
What Is the Strategic Role of
HRM in International Firms?
 HRM can help the firm reduce the costs of
value creation and add value by better
serving customer needs
 more complex in an international business
 differences between countries in labor
markets, culture, legal systems, economic
systems, etc.
19-4
What Is the Strategic Role of
HRM in International Firms?
 HRM must also determine when to use
expatriate managers
 citizens of one country working abroad
 who should be sent on foreign
assignments
 how they should be compensated
 how they should be trained
 how they should be reoriented when they
return home
19-5
What Is the Strategic Role of
HRM in International Firms?
The Role of Human Resources in Shaping Organizational Architecture
19-6
What Is a Staffing Policy?
 Staffing policy is concerned with the
selection of employees who have the
skills required to perform a particular job
 can be a tool for developing an promoting
the firm’s corporate culture
 the organization’s norms and value
system
 a strong corporate culture can help the firm
implement its strategy
19-7
What Is a Staffing Policy?
 Three main approaches to staffing policy:
1. The ethnocentric approach – fill key
management positions with parent-country
nationals
2. The polycentric approach – recruit host-country
nationals to manage subsidiaries in their own
country, and parent-country nationals for
positions at headquarters
3. The geocentric approach – seek the best
people, regardless of nationality, for key jobs
19-8
Why Choose an Ethnocentric
Staffing Policy?
 Firms that pursue an ethnocentric policy believe that
 there is a lack of qualified individuals in the host
country to fill senior management positions
 it is the best way to maintain a unified corporate
culture
 value can be created by transferring core
competencies to a foreign operation via parent
country nationals
 it makes sense with an international strategy
 But
 it limits advancement opportunities for host country
nationals
 it can lead to “cultural myopia”
19-9
Why Choose a Polycentric
Staffing Policy?
 The polycentric approach
 makes sense for firms pursuing a localization
strategy
 can minimize cultural myopia
 may be less expensive to implement than an
ethnocentric policy
 But
 host-country nationals have limited opportunities to
gain experience outside their own country and so
cannot progress beyond senior positions in their own
subsidiaries
 a gap can form between host-country managers and
parent-country managers
19-10
Why Choose a Geocentric
Staffing Policy?
 The geocentric approach
 is consistent with building a strong unifying culture
and informal management network
 makes sense for firms pursuing a global or
transnational strategy
 enables the firm to make the best use of its human
resources
 builds a cadre of international executives who feel at
home working in a number of different cultures
 But
 can be limited by immigration laws
 is costly to implement
19-11
Which Staffing Policy
Is Best?
Comparison of Staffing Approaches
19-12
What Is Expatriate Failure?
 Firms using an ethnocentric or geocentric
staffing strategy will have expatriate managers
 Expatriate failure is the premature return of an
expatriate manager to the home country
 each expatriate failure can cost between $40,000
and $1 million
 between 16 and 40% of all American expatriates in
developed countries fail and almost 70% of
Americans assigned to developing countries fail
19-13
What Is the Rate of
Expatriate Failure?
Expatriate Failure Rates
19-14
Why Do Expatriate
Managers Fail?
 The main reasons for U.S. expatriate
failure are
 the inability of an expatriate’s spouse to
adapt
 the manager’s inability to adjust
 other family-related reasons
 the manager’s personal or emotional
maturity
 the manager’s inability to cope with larger
overseas responsibilities
19-15
Why Do Expatriate
Managers Fail?
 The reason for European expatriate failure is
 the inability of the manager’s spouse to adjust
 The main reasons for Japanese expatriate
failure are
 the inability to cope with larger overseas
responsibility
 difficulties with the new environment
 personal or emotional problems
 a lack of technical competence
 the inability of spouse to adjust
19-16
How Can Firms Reduce
Expatriate Failure?
 Firms can reduce expatriate failure through improved
selection procedures
 Four dimensions that predict expatriate success are
1. Self-orientation – the expatriate’s self-esteem, selfconfidence, and mental well-being
2. Others-orientation – the ability to interact effectively with
host-country nationals
3. Perceptual ability – the ability to understand why people
of other countries behave the way they do
4. Cultural toughness – the ability to adjust to the posting
19-17
Why Is a
Global Mind-set Important?
 A global mind-set may be the fundamental
attribute of a global manager
 cognitive complexity
 cosmopolitan outlook
 A global mind-set is often acquired early in life
from
 a family that is bicultural
 living in foreign countries
 learning foreign languages as a regular part of family
life
19-18
What Is Training and
Management Development?
 After selecting a manager for a position, training
and development programs should be
implemented
 Training focuses upon preparing the manager
for a specific job
 Management development is concerned with
developing the skills of the manager over time
 gives the manager a skill set and reinforces
organizational culture
 Historically, most firms focus more on training
than on management development
19-19
Why Is Training Important for
Expatriate Managers?
 Training can reduce expatriate failure
 Cultural training – fosters an appreciation for the host
country’s culture
 Language training – an exclusive reliance on English
diminishes an expatriate’s ability to interact with host
country nationals
 Practical training – helps the expatriate and her family
ease themselves into day-to-day life in the host country
 But, studies show only about 30% of managers sent on
one- to five-year expatriate assignments received
training before their departure
19-20
What Happens When
Expatriates Return Home?
 Training and development should include
preparing and developing expatriate
managers for reentry into their home
country organization
 need good programs for
 re-integrating expatriates back into work life
within their home country organization
 utilizing the knowledge they acquired while
abroad
19-21
Why Is Management Development
Important to Firm Strategy?
 Management development programs increase
the overall skill levels of managers through
 ongoing management education
 rotations of managers through jobs within the firm to
give them varied experiences
 Management development can be a strategic
tool to build a strong unifying culture and
informal management network
 support both transnational and global strategy
19-22
How Should
Expatriates Be Evaluated?
 Evaluating expatriates can be especially
complex
 typically, both host-nation managers and homeoffice managers evaluate the performance of
expatriate managers
 But, both types of managers are subject to
unintentional bias
 home-country managers tend to rely on hard data
when evaluating expatriates
 Host-country managers can be biased towards their
own frame of reference
19-23
How Can Performance
Appraisal Bias Be Reduced?
 To reduce bias in performance appraisal
 more weight should be given to an on-site
manager’s appraisal than to an off-site
manager’s appraisal
 a former expatriate who has served in the
same location should be involved in the
process
 home office managers should be consulted
before an on-site manager completes a
formal termination evaluation
19-24
What Are the Key Issues in
Compensating Expatriates?
 Two key issues on compensation
1. How to adjust compensation to reflect
differences in economic circumstances
and compensation practices
2. How to pay expatriate managers
19-25
How Should National Differences
in Compensation Be Treated?
 Currently, there are substantial
differences in executive compensation
across countries
 Research shows
 a top U.S. executive made an average of
$525,923 in the 2005-2006 period, compared
to $278,697 in Japan, and $158,146 in
Taiwan
19-26
How Should National Differences
in Compensation Be Treated?
 Question: Should pay be equalized
across countries?
 Many firms have recently moved toward a
compensation structure that is based on
global standards
 especially important in firms with a
geocentric staffing policy
 But, most firms still set pay according to
the prevailing standards in each country
19-27
How Should
Expatriates Be Paid?
 Most firms use the balance sheet
approach
 equalizes purchasing power across countries
so employees have the same living standard
in their foreign posting as at home
 and adds a financial incentive to take the
position
19-28
How Should
Expatriates Be Paid?
 A compensation package has five components
1. Base salary – normally in the same range as the
base salary for a similar position in the home
country
 can be paid either in the home currency or in the
local currency
2. Foreign service premium – extra pay the
expatriate receives for working outside his
country of origin
 generally offered as an incentive to accept foreign
assignments
19-29
How Should
Expatriates Be Paid?
3. Various allowances – hardship, housing, cost-ofliving, education
4. Tax differentials – may have to pay income tax
to both the home country and the host-country
governments no reciprocal tax treaty exists
 company usually covers extra tax assessments
5. Benefits – many firms provide the same level of
medical and pension benefits abroad that
employees receive at home
19-30
Why Are International Labor
Relations Important?
 Question: Can organized labor limit the
choices available to an international
business?
 Labor unions can limit a firm’s ability to
pursue a transnational or global strategy
 HRM needs to foster harmony and minimize
conflict between management and organized
labor
19-31
What Are the Concerns of
Organized Labor?
 Organized labor is concerned that
1. Multinationals can counter union bargaining power
by threatening to move production to another
country
2. Multinationals will farm out only low-skilled jobs to
foreign plants making it easier to switch production
locations
3. Multinationals will import employment practices and
contractual agreements from their home countries
and reduce the influence of unions
19-32
How Does Organized Labor
Respond to MNC Power?
 Organized labor has responded to the
increased bargaining power of multinational
corporations by
1. Trying to set-up their own international organizations
2. Lobbying for national legislation to restrict
multinationals
3. Trying to achieve regulation of multinationals through
international organizations such as the United
Nations
 So far, these efforts have had only limited
success
19-33
How Are MNCs Responding
to Organized Labor?
 Many firms are centralizing labor relations to
enhance the bargaining power of the
multinational vis-à-vis organized labor
 in the past, labor relations were usually
decentralized to individual subsidiaries
 The way in which work is organized within a
plant can be a major source of competitive
advantage so it is important for management to
have a good relationship with labor
19-34
International Business
10e
By Charles W.L. Hill
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
Chapter 20
Accounting and Finance
in the International
Business
What Is
Financial Management?
 Financial management involves
1. Investment decisions –what to finance
2. Financing decisions –how to finance those
decisions
3. Money management decisions –how to
manage the firm’s financial resources most
efficiently
20-3
What Is Accounting?
 Accounting is the language of business
 it is the way firms communicate their financial
positions
 Accounting is more complex for international
firms because of differences in accounting
standards from country to country
 differences make it difficult for investors, creditors,
and governments to evaluate firms
 It is difficult to compare financial reports from
country to country because of national
differences in accounting and auditing
standards
20-4
What Determines National
Accounting Standards?
 Several variables influence the
development of a country’s accounting
system including
 the relationship between business and the
providers of capital
 political and economic ties with other
countries
 the level of inflation
 the level of a country’s economic
development
 the prevailing culture in a country
20-5
How Do Providers of Capital
Influence Accounting?
 A country’s accounting system reflects the
relative importance of each constituency
as a provider of capital
 accounting systems in the U.S. and Great
Britain are oriented toward individual
investors
 Switzerland and Germany focus on providing
information to banks
20-6
How Do Political and Economic
Ties Influence Accounting?
 Similarities in accounting systems across
countries can reflect political or economic
ties
 the U.S. accounting system influences the
systems in the Philippines
 in the European Union, countries are moving
toward common standards
 the British system of accounting is used by
many former colonies
20-7
How Do Levels of Development
Influence Accounting?
 Developed nations tend to have more
sophisticated accounting systems than
developing countries
 larger, more complex firms create accounting
challenges
 providers of capital require detailed reports
 Many developing nations have accounting
systems that were inherited from former colonial
powers
 lack of trained accountants
20-8
What Are Accounting and
Auditing Standards?
 Accounting standards are rules for
preparing financial statements
 they define useful accounting information
 Auditing standards specify the rules for
performing an audit
 the technical process by which an
independent person gathers evidence for
determining if financial accounts conform to
required accounting standards and if they are
also reliable
20-9
Why Are International
Accounting Standards Important?
 The growth of transnational financing and
transnational investment has created a need for
transnational financial reporting
 many companies obtain capital from foreign
providers who are demanding greater consistency
 Standardization of accounting practices across
national borders is probably in the best interests
of the world economy
 will facilitate the development of global capital
markets
20-10
Why Are International
Accounting Standards Important?
 The International Accounting Standards Board
(IASB) is a major proponent of standardization
of accounting standards
 most IASB standards are consistent with standards
already in place in the U.S.
 by 2012, 100 nations had adopted IASB standards
or permitted their use in reporting financial results
 the EU has mandated harmonization of accounting
principles for members
 there soon could be only two major accounting
bodies with substantial influence on global reporting
 FASB in the U.S. and IASB elsewhere
20-11
How Does Accounting
Influence Control Systems?
 The control process in most firms is
usually conducted annually and involves
three steps
1. Subunit goals are jointly determined by the
head office and subunit management
2. The head office monitors subunit
performance throughout the year
3. The head office intervenes if the subsidiary
fails to achieve its goal, and takes corrective
actions if necessary
20-12
How Do Exchange Rates
Influence Control?
 Budgets and performance data are
usually expressed in the corporate
currency
 normally the home currency
 facilitates comparisons between
subsidiaries
 but, can create distortions in financial
statements
20-13
How Do Exchange Rates
Influence Control?
 The Lessard-Lorange Model
 firms can deal with the problems of exchange
rates and control in three ways
1. The initial rate
 the spot exchange rate when the budget is adopted
2. The projected rate
 the spot exchange rate forecast for the end of the
budget picture
3. The ending rate
 the spot exchange rate when the budget and
performance are being compared
20-14
What Is the
Lessard-Lorange Model?
Possible Combinations of Exchange Rates in the Control Process
20-15
Why Separate Subsidiary and
Managerial Performance?
 Subsidiaries operate in different
environments which influence profitability
 the evaluation of a subsidiary should be kept
separate from the evaluation of its manager
 A manager’s evaluation should
 consider the country’s environment for
business
 take place after making allowances for those
items over which managers have no control
20-16
What Is
Financial Management?
 Good financial management can create a
competitive advantage
 reduces the costs of creating value and adds
value by improving customer service
 Decisions are more complex in
international business
 different currencies, tax regimes, regulations
on capi …
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