MODULE 2

1) Strategies for International Growth: Exploiting global integration-

2) The logic of global integration,

3) Differentiation,

4) Mastering expatriation,

5) Beyond the traditional expatriate model,

6) The limits of global integration.

7) Becoming locally responsive: The roots of responsiveness,

8) Understanding diversity,

9) Responding to diversity,

10) The challenges of localization.

11) Managing alliances and joint ventures - IHRM and International Alliances,

12) IHRM and International Joint Ventures.

Page 1
Exploiting global integration-The logic of global integration

Global Integration

 Global integration means centralized control over key resources and operations
that are strategic in value chain

Why Global Integration?

There is a need for
 International expansion with control over key resources

 Managing investment in R&D and reach economies of scale in manufacturing

 Serving global customers

 Global branding

 World class standardization

What are the Tools of global integration

 Planning systems

 Goal setting

 Accounting and budgetary systems

 IT

 Project committees

 Performance appraisals

 Five ways of exercising control

 Centralization or personal contact

 Formalized control through standardization work rules, procedures, and processes

 Output control through performance contracting

 Normative control through socialization

 Informal control through mutual adjustments

Page 2
  Implementing global integration

 Alignment

 Alignment of decision making to ensure that local decisions reflect a global

perspective, particularly through control exercised by expatriates

 Performance management

 The standardization

 Standardization of processes to achieve desired efficiencies and uniform behavior

 Socialization

 Expatriate with global orientation

Differentiation:

HR is being challenged to deliver more with less and the squeeze is tight. The only way to ensure
that people practices and investments are optimized for organizational success is to focus on the
areas of highest gain whilst maintaining the other elements of your HR function at an appropriate
level. In other words, keep Mickey engaged, but target the sweepers.

Some organizations have been operating this way for some time. For others, this is a new
concept and challenges some of the traditional ways in which HR has been both practiced and
perceived. In many instances, the driving concept behind HR is that we need to treat people
fairly and that this means treating them equally. Differentiated HR maintains the need to treat
people fairly and draws a line of distinction between fair and equal.

The more traditional view of HR needs to change if we are to meet the expectations of business
leaders and deliver on the promise of our people. The recent ―Great Recession‖ has only
accelerated the impetus and increased the urgency.

Mastering expatriation

 The purpose of expatriation

 Beyond the traditional expatriate model

 The tensions in the expatriate cycles

 Home/host tensions

 Global/local tensions

 short term/long term tensions

 Tension between cost and investment

Page 3
  Demand/supply tension

Beyond the traditional expatriate model

 Changing demographics of expatriate population

 Expatriates were earlier selected from home country alone

 Expatriate population was homogeneous

 Expatriate assignments were temporary

 Objective of assignment was to control or transfer knowledge

 Beyond the traditional expatriate model

 Woman expatriates

 Younger expatriates

 TNCs

Alternative to expatriates

 Global integration without expatriation

 Virtual expatriation

 Impartation

The limits of global integration

 Limits on ability to respond to local needs and demands

 Increased demand for coordination

 Employee perceptions about expatriates

 Becoming locally responsive

Principle and Time perspective

 Know yourself: the cultural perspective

 Cultural values shape collective thought and behavior

 Culture of mother company has an effect on international strategy and in turn on

HRM practices-Understanding self

 US-Universalistic
Page 4
  Japan and Korea-particularistic

 Understanding diversity

 Know where you are: the institutional perspective

 Business behavior in different countries lies in interrelationships, between

economic, educational, financial, political, and legal systems

 Understanding diversity

 Know who you talk to: the network perspective

 MNCs are not only influenced by their origin and norms in the countries where
they operate and they have to face the pressures of conform to international peers
or competitors

 Internationalization of networks

 Responding to diversity

Becoming locally responsive: The roots of responsiveness

 Communication and transport issues

 Trade barriers

 Business advantages of responsiveness

 Adjustment to local tastes

 Wider appeal

 Can overcome liability of foreignness

 Competitiveness

 Credibility

 Localization in people management

 HR is more sensitive to local context

 Cultural issues

 National regulations

Page 5
 Understanding diversity

 Cultural differences between parent company and local subsidiary, the host
environment, company‘s way of networking
Sd`eew3e``
Diversity can be defined as, ―The concept of diversity encompasses acceptance and respect. It means
understanding that each individual is unique, and recognizing our individual differences. These can be along
the dimensions of race, ethnicity, gender, sexual orientation, socio-economic status, age, physical abilities,
religious beliefs, political beliefs, or other ideologies. It is the exploration of these differences in a safe,
positive, and nurturing environment. It is about understanding each other and moving beyond simple
tolerance to embracing and celebrating the rich dimensions of diversity contained within each individual.‖ [4]

VI. CULTURAL DIVERSITY Cultural diversity can be defined as, ―Cultural diversity is when differences
in race, ethnicity, language, nationality, religion, and sexual orientation are represented within a community.
A community is said to be culturally diverse if its residents include members of different groups. The
community can be a country, region or city. Cultural diversity has become a hot-button issue when applied to
the workplace.‖ [6]

VII. REASONS FOR THE EMERGENCE OF DIVERSITY Changing demographics is the main reason for
the emergence of diversity. Women, older workers, minorities, physically challenged people, and those with
more education are entering the workforce in a record numbers. Some other factors too are responsible for
the emergence of diversity like – It can help organizations in meeting competitive pressure faced by them
globally. The pace at which the global business is expanding, it too contributes to the emergence of diversity.
Also diversity helps organizations to recognize and strive to obtain diverse view points in their decision
making processes and teams. [8] VIII. THE ADVANTAGES OF DIVERSE CULTURE IN THE WORK
FORCE A diverse culture in a workplace means the organization employs workers from a wide array of
backgrounds, including ethnicity, race, gender and religion. However, a number of other less common and
more minor distinguishing traits contribute to a culture in which employees work with others who aren't their
mirror images. 10.1 Improved Morale One benefit of a diverse workplace culture not as routinely discussed
is improved morale. However, this is an important advantage. When diversity is well-managed and
employees are trained on cultural sensitivity and awareness, the ideal result is a workplace where all people
are validated and regarded as important, regardless of differences. This affirmation of value improves

Page 6
individual worker morale and the collective positivity in the workplace. 10.2 Broader Perspectives An
advantage that is more often pointed out about a diverse workplace is broader perspectives and deeper ideas.
A collection of people with varying backgrounds and life experiences are more likely to share different
perspectives on a workplace challenge. They are also more likely to present and discuss a number of ideas.
By increasing the quantity of perspectives and ideas, the quality of the final decision or solution is typically
optimized. 10.3 Global Impact In a global world economy, having a work force that is diverse from a cultural
and country perspective can help companies establish roots and develop business in foreign markets. The
ability to communicate effectively with global business markets, to establish strong relationships with
partners and suppliers in nondomestic markets and to understand the cultural implications of doing business
in different parts of the world are key benefits. 10.4 Community Relationships As communities become more
diverse, it is important that organizations become diverse as well, for both functional and psychological
reasons. Functionally, companies need employees who speak customers' languages and understand their
needs. Psychologically, communities and customers typically prefer to do business with companies who
employ people from their own backgrounds. Thus, companies in diverse communities often make hiring for
and managing a diverse culture an important strategic element. [5] Why Culture Matters in International
Business? Effective handling of the cross-cultural interface is a critical source of a firm’s competitive
advantage. Managers need to develop not only empathy and tolerance toward cultural differences, but also
acquire a sufficient degree of factual knowledge about the beliefs and values of foreign counterparts. Cross-
cultural proficiency is paramount in many managerial tasks, including:  Developing products and services
 Communicating and interacting with foreign business partners  Screening and selecting foreign
distributors and other partners  Negotiating and structuring international business ventures  Interacting
with current and potential customers from abroad  Preparing for overseas trade fairs and exhibitions 
Preparing advertising and promotional materials Let’s consider specific examples of how cross-cultural
differences may complicate workplace issues: Teamwork Cooperating to achieve common organizational
goals is critical to business success. But what should managers do if foreign and domestic nationals don’t get
along with each other? Try to sensitize each group to differences and develop an appreciation for them? Rally
the groups around common goals? Explicitly reward joint work? Lifetime employment Workers in some
Asian countries enjoy a paternalistic relationship with their employers and work for the same firm all their
lives. The expectations that arise from such devoted relationships can complicate dealings with outside firms.
Western managers struggle with motivating employees who expect they will always have the same job
regardless of the quality of their work Pay-for-performance system In some countries, merit is often not the
primary basis for promoting employees. In China and Japan, a person’s age is the most important
Page 7
determinant in promoting workers. But how do such workers perform when Western firms evaluate them
using performance-based measures? Organizational structure Some companies prefer to delegate authority to
country managers, creating a decentralized organizational structure. Others are characterized by autocratic
structures with power concentrated at regional or corporate headquarters. Firms may be entrepreneurial or
bureaucratic. But how can you get a bureaucratic supplier to be responsive about demands for timely delivery
and performance?

Union-Management relationships In Germany, union bosses hold the same status as top-level managers and
are required to sit on corporate boards. In general, European firms have evolved a business culture in which
workers enjoy a more equal status with managers. This approach can reduce the flexibility of company
operations if union representatives resist change. Attitudes toward ambiguity In each country, nationals
possess a unique capacity to tolerate ambiguity. For example, some bosses give exact and detailed
instructions on work to be performed, whereas others give ambiguous and incomplete instructions. If you are
not comfortable working with minimum guidance or taking independent action, then you may have difficulty
fitting into some cultures. To gain a more practical perspective on culture’s role in business, let’s take the
example of doing business in Japan. In the West, ―the customer is king,‖ but in Japan, ―the customer is
God.‖ Whenever customers enter retail stores in Japan, they are greeted with vigorous cries of ―Welcome‖
and several choruses of ―Thank you very much‖ when they leave. [1] Managing Culturally Diverse
Workforce When an organization tries to expand its operation geographically to more than one country, it
tends to become a multicultural organization. The biggest challenge to be faced by the organizations then will
be blending employees from different cultural backgrounds. When employees from two or more cultures
interact with each other on a regular basis, it results into multiculturalism. The employees entering to another
nation needs to adjust their leadership styles, communication patterns and various other practices to fit with
the styles of the host nation. Sometimes the employees from the parent country nationals from the nation in
which the home office is located and sometimes they belongs to a third country. Both of these categories of
employees are called expatriates, as they belong to other countries. What the organization wants is the fusion
of cultures of these employees so that greater productivity is ensured. Barriers to Cultural Adaptations There
are a number of barriers to cultural adaptations, some of them areParochialism The international operations
of expanding organizations are conducted in such an environment whose social system is different from the
one in which the organization is based. This new social system affects the responses of all persons involved.
The employees posted to a new country exhibit a variety of behaviors’ which is often true to their citizens
and country. They may fail to recognize key differences between their own and other cultures. Even if they
Page 8
do, they tend to conclude that the impact of those differences is insignificant. In effect, they are assuming that
the two cultures are more similar than they actually are. Individualism Some of the workforce may be
relatively individualistic, means that they place greater emphasis on their personal needs and welfare. At the
extreme, individualism suggests that their action should be guided by the motto, ―look out for themselves
before being concerned about others. Ethnocentrism This is another potential barrier to easy adaptation to
another culture. It occurs when people are predisposed to believe that their homeland conditions are the best.
This predisposition is known as the self reference criterion, or ethnocentrism. Even though this type of
thinking is natural, it interferes with understanding human behavior in other cultures and obtaining
productivity from local employees. In order to integrate the imported and local social systems, international
workforces need cultural understanding of local conditions. Even with this understanding, they must then
adaptable enough to integrate the community of the interest of the two or more cultures involved.

Cultural Distance In order to predict the amount of adaptation that may be required when an employee moves
to another country, it is helpful to understand the cultural distance between the two countries. It is the amount
of difference between any two social systems, and this may range from minimal to substantial. Whatever be
the amount of cultural distance, it does affect the responses of all persons to business. Employees naturally
tends to be somewhat ethnocentric and to judge conditions in a new country according to standards of their
homeland. These problems will be magnified if the cultural distance is great. Cultural shock When
employees enter another nation they tend to suffer cultural shock, which is the insecurity and disorientation
caused by encountering a different culture. They may not know how to act, may fear losing face and self
confidence, or may become emotionally upset. Some individuals isolate themselves, while a few even decide
to return home on the next airplane. It is virtually universal. It happens even on a move from one advance
nation to another. Some of the common reasons for cultural shock are-  Different management philosophies
 language  Alternative food, dress, driving patterns, availability of goods.  Attitude towards work and
productivity  Separation from friends and colleagues  Unique currency system[3] IX. OVERCOMING
BARRIERS TO CULTURAL ADAPTATIONS In spite of the strong evident need for employees moving on
foreign assignments to understand local culture and be adaptable, they often arrive unprepared. Their
selection is typically based upon their job performance in the home country. Because of their parochial,
individualistic or ethnocentric beliefs, they might not be concerned about the fact that they will be doing
business with people whose traditional beliefs are different from their own. They may not know that local
language and might have little interest in becoming a part of the community. They may also have been
selected based on their technical knowledge by their employer. However cultural understanding is essential
Page 9
to avoid errors and misunderstandings that can be costly to the organization. There are a number of steps that
the organization can undertake to prevent cultural shock and reduce the impact of the other barriers listed
above. Some of them are given belowCareful Selection Employees can be selected who are low in
ethnocentrism and other possibly troublesome characteristics. The desire to experience other culture and live
in another nation may also be an important prerequisite attitude worth assessing. Learning the attitude of
employees spouse toward the assignment also can be important; to ensure that there is strong support for
serving in foreign country. Compatible Assignments The adjustment to new country becomes easy for the
employees especially on their first international assignment, if they are sent to the countries that are similar to
their own . Pre-departure Training Many organizations try to hasten adjustment to a host nation by
encouraging employees to learn local language. They offer training prior to assignments. It often includes
orientation to the geography, customs, culture and political environment in which the employees will be
living. Orientation and the support in the new country Adjustment is further encouraged after arrival in the
new country if there is a special effort made to help the employee and family get settled, this may include
assistance with housing, transportation and sopping. It is especially helpful if a mentor can be assigned to
ease the transition.

Incentives and Guarantees Another problem that can arise when employees transfer to another culture is that
of intensified need deficiencies. This means that their need satisfactions are not as great as those of
comparable employees who remain at home. Although a move to another nation may be an exciting
opportunity that provides news challenges, responsibilities, and recognition, an international hob assignment
may bring about financial difficulties, inconveniences, insecurities, and separation from relatives and friends.
In order to motivate such employees to accept such assignments in other nations, organizations frequently
should give them extra pay and fringe benefits to compensate for the problems they may experience. They
should also be assured for better position in the organization upon their return to the home country, which
could help them to relieve their job insecurities. Preparation for reentry Employees who return to their home
country after foreign assignment tends to suffer cultural shock in their own country. This is sometimes called
cross-cultural reentry, and may cause reverse cultural shock. After adjusting to the culture of another nation
and enjoying its uniqueness, it is difficult for employees to readjust to the surroundings of the home country.
This situation is made more difficult by the multitude of changes that have occurred since they departed. [3]
X. MANAGERIAL GUIDELINES FOR CROSS-CULTURAL SUCCESS Cross-cultural proficiency helps
managers connect with their foreign counterparts. Seasoned managers attest to the importance of a deep
knowledge of culture and language in international business. Managers can achieve effective cross-cultural
Page 10
interaction by keeping an open mind, being inquisitive, and not rushing to conclusions about others’
behaviors. Experienced managers acquire relevant facts, skills, and knowledge to avoid offensive or
unacceptable behavior when interacting with foreign cultures. They undergo cultural training that emphasizes
observational skills and human relations techniques. Skills are more important than pure information because
skills can be transferred across countries, while information tends to be country specific. Various resources
are available to managers for developing skills, including videotape courses, cross-cultural consultants, and
programs offered by governments, universities, and training institutes. Planning that combines informal
mentoring from experienced managers and formal training through seminars and simulations abroad and at
home go far in helping managers meet cross-cultural challenges. Although every culture is unique, certain
basic guidelines are appropriate for consistent cross-cultural success. Let’s review three guidelines managers
can follow in preparing for successful cross-cultural encounters. Guideline 1 Acquire factual and interpretive
knowledge about the other culture, and try to speak their language. Successful managers acquire a base of
knowledge about the values, attitudes, and lifestyles of the cultures with which they interact. Managers study
the political and economic background of target countries—their history, current national affairs, and
perceptions about other cultures. Such knowledge facilitates understanding about the partner’s mindset,
organization, and objectives. Decisions and events become substantially easier to interpret. Sincere interest in
the target culture helps establish trust and respect, laying the foundation for open and productive
relationships. Even modest attempts to speak the local language are welcome. Higher levels of language
proficiency pave the way for acquiring competitive advantages. In the long run, managers who can converse
in multiple languages are more likely to negotiate successfully and have positive business interactions than
managers who speak only one language. Guideline 2 Avoid cultural bias. Perhaps the leading cause of
culture-related problems is the ethnocentric assumptions managers may unconsciously hold. Problems arise
when managers assume that foreigners think and behave just like the folks back home. Ethnocentric
assumptions lead to poor business strategies in both planning and execution. They distort communications
with foreigners. Managers new to international business often find the behavior of a foreigner hard to
explain. They may perceive the other’s behavior as odd and perhaps improper. For example, it is easy to be
offended when our foreign counterpart does not appreciate our food, history, sports, or entertainment, or is
otherwise inconsiderate. This situation may interfere with the manager’s ability to interact effectively with
the foreigner, even leading to communication breakdown. In this way, cultural bias can be a significant
barrier to successful interpersonal communication. A person’s own culture conditions how he or she reacts to
different values, behavior, or systems. Most people unconsciously assume that people in other cultures
experience the world as they do. They view their own culture as the norm— everything else may seem
Page 11
strange. This is known as the self-reference criterion—the tendency to view other cultures through the lens of
one’s own culture. Understanding the self-reference criterion is a critical first step to avoiding cultural bias
and ethnocentric reactions. Critical incident analysis (CIA) refers to an analytical method for analyzing
awkward situations in cross-cultural interactions by developing empathy for other points of view. It is an
approach to avoiding the trap of self-reference criterion in cross-cultural encounters. Critical incident
analysis encourages a more objective reaction to cultural differences by helping managers develop empathy
for other points of view. Guideline 3 Develop cross-cultural skills. Working effectively with counterparts
from other cultures requires an investment in your professional development. Each culture has its own ways
of carrying out business transactions, negotiations, and dispute resolution. Cross-cultural proficiency is
characterized by four key personality traits: Tolerance for ambiguity—the ability to tolerate uncertainty and
apparent lack of clarity in the thinking and actions of others. Perceptiveness—the ability to closely observe
and appreciate subtle information in the speech and behavior of others. Valuing personal relationships—the
ability to recognize the importance of interpersonal relationships, which are often much more important than
achieving one-time goals or winning arguments. Flexibility and adaptability—the ability to be creative in
devising innovative solutions, to be open-minded about outcomes, and to show grace under pressure.

Responding to diversity

 Be guided by diversity

 Respect local diversity

 Entry mode

 Local adaptation-HR practices

 Capitalize on diversity

 Building cultural synergy-develop new solutions that respect each culture

 Moving jobs to people

 The challenges of localization

The challenges of localization..

Finding and developing local talent

Page 12
  Scarcity of talent

 Labor market access

Retaining local talent

 Expatriated are responsible for localization

 Select the right person
 Setting objectives
 Motivating localization
 Developing local staff
 HR marketing and recruitment
 Training and development
 Retention

IHRM and international alliances

Alliance – cooperative strategy in which firms combine resources and capabilities to create a
competitive advantage

Need for alliances?

Page 13
  Tools of international growth

 Cut cost of entry

 Leveraging opportunities

 Economies of scale

Types of alliance

 Functional-R&D, manufacturing, marketing and distribution,

 Number of partners

 Contractual agreements

 Strategic framework

Planning and negotiating alliances

 HR‘s role in developing initial strategy

 Training and selection issues

 HR issues in alliance strategy plan

 Partner selection

 Desired competencies

 HR support form partner

 Assessment of HR skills ands reputation of partner

 Organizational culture

 HR issues during negotiation

 Staffing criteria

 Compensation and performance management

 Who will provide HR service support

 HR issues in alliance strategy plan

 HR activities

 Negotiation team selection

Page 14
  Negotiation training

 Alliance management training

 Quality of HR support

 Recruitment target

 Training delivered

 Skill or knowledge transfer

 Implementing alliances

 Managing the interface with parent

 Align internal processes for collaboration

 Reward systems

 Reinforcement

 Human resource tasks in managing venture

 Implementing alliances.

Staffing alliance

 Number and skill mix of employees

 Who does manpower planning

 Who will recruit

 Which positions from which partner

 Which positions for expatriates

 How to resolve staffing conflicts

 Supporting learning alliance

Supporting alliance learning

 HR planning: strategic intent not communicated, low priority to learning

activities, lack of HR involvement

 Staffing: poor staffing strategy, low quality of staff, staffing dependence on

partner

Page 15
  Training and development-lack of cross cultural competence, poor transfer

 Appraisal and rewards: short term focus, no reward for learning, not linked
to global strategy

The evolving role of alliances

Cooperative role

 Economies of scale in tangible assets (e.g., plant and equipment)

 Upstream-downstream division of labor among partners

 Fill out product line with components or end products provided by supplier

 Limit investment risk when entering new markets or uncertain technological fields via
shared resources

 Create a ―critical mass‖ to learn and develop new technologies to protect

domestic, strategic industries

 Assist short-term corporate restructurings by lowering exit barriers in mature or declining

industries

Competitive role

 Opportunity to learn new intangible skills from partner, often tacit or organization
embedded

 Accelerate diffusion of industry standards and new technologies to erect barriers to entry

 Deny technological and learning initiative to partner via outsourcing and long-term
supply arrangements

 Encircle existing competitors and preempt the rise of new competitors with alliance
partners in ―proxy wars‖ to control market access, distribution, and access to new
technologies

 Form clusters of learning among suppliers and related firms to avoid or reduce foreign
dependence for critical inputs and skills

IHRM and international joint ventures

An international joint venture (IJV) occurs when two businesses based in two or more
countries form a partnership. A company that wants to explore international trade
without taking on the full responsibilities of cross-border business transactions has the
option of forming a joint venture with a foreign partner.

Page 16
Types of Joint Ventures:

Corporate joint-ventures / equity joint-venture: it is a form of collaboration that sets up a

new entity or a new corporation. This new element is under a high rigidity and
complexity due to the different legal implications of each country.

Non-corporate joint-ventures: it is a contractual agreement that does not generate a new

entity.

All joint venture members assume the losses in an agreed proportion and its obligations
are limited to the obligations of the own joint venture.

Steps to constitute a Joint Venture

The constitution of a joint venture comprises signing stakeholder's agreements about

strategic, organizational and financial aspects. All of those must be in accordance with
the legal framework of the country where the business is set up in (tax address)

In addition, stakeholders draw up the articles of incorporation. Here, the terms of

agreements are capture in a formal fashion. We recommend the to count on the help of a
legal advisor at this stage. From now onwards, the will take some responsibilities and will
have some rights.

A Joint Venture facilitates: • Get over commercial frontiers, building new market niches
into different cultures.

• Creating new product lines.

• Improve quality.

• Isolate each stakeholder's book keeping.

• Get access to new capital and foreign funding opportunities.

• Shorten production time.

• Cost-cuts and minimize investment risks.

• Higher specialization.

Page 17