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Human Resource Management
Jose Rodriguez

Global HRM Exam #1 Study Guide- September 30 Ch.1 The Internationalization of Human Resource Management  International Human Resource Management- the study and application of all human resource management activities as they impact the process of managing human resources in enterprises in the global environment.  The Drivers of the International Business o Trade Agreements  Trade between countries and within regions of the world is constantly increasing on a global basis, regionally, and through bilateral trade treaties and partner-countries  Decreased trade barriers and open markets have resulted in faster-growing economies throughout the world  Local and national governments support and encourage growing cross-border trade and foreign investment  The center of global trade is moving away from the developed countries of W. Europe, NA to China, S Asia, etc. o Search for New Markets and Reduced Costs  Global competition comes from anywhere and everywhere  Competition forces organizations to search for new markets and revenues and lower costs, often best found in other countries o Rapid and Extensive Global Communication  The technological revolution has made global communication much easier, quicker, cheaper, and more varied  Enables the spread of information (on a global basis) about  How people live  What they think  What they want  Creates global expectations for an ever-increasing quality of life o Rapid Development and Transfer or New Technology  New technologies are developed around the world and are made available everywhere  New technologies make it possible to grow and manufacture products and deliver services with world-class quality and prices everywhere  Modern education and information technology allow every country to play a part in this global economy o Improving Global Education and a Global Talent Pool  Improving education around the world is enabling firms everywhere to produce world-class products and services  No country or set of countries has an overriding advantage in the global economy  There is now a global talent pool that allows firms to operate almost anywhere in the world today o Increased Travel and Migration  International travel has become easier, quicker, and cheaper  People see how others in different countries live and experience goods and services that are available, all of which may be better than what is known at home  Millions of people move to other countries to work  Relocate, usually for a limited time  Fill jobs for which there are not enough local workers o Knowledge Sharing  Firms operating internationally “export” their management philosophies and techniques to their foreign subsidiaries  Spread their knowledge and their company cultures everywhere o E-commerce  The WWW and global transportation and logistics services have made it possible for large, as well as small, firms to conduct business virtually  If a business or an individual has a website, its business is global- anyone, from anywhere in the world who has access to the web has access to that website o Homogenization of Culture and Consumer Demands  Integration of cultures and values have led to common consumer demands for some types of products and services throughout the world  Distinct differences in culture across countries remain  Firms operating internationally need to be sensitive to these local differences o The Growth and Spread of Internationalization  Internationalization vs. Globalization  Both terms refer to the ever-increasing interaction, interconnectedness, and integration of people, companies, cultures, and countries  Beginning of globalization  50 years ago, the US economy accounted for 53% of global GDP  Today the US economy accounts for less than 28% of global GDP  Different Settings of International Human Resource Management o Internationalization of HRM occurs in many different settings  HRM managers confront at least some aspects of internationalization: “No place to hide” for HRM profiles  HRM professionals must become competent in IHRM issues in almost every job setting  4 specific settings:  Headquarters of Multinationals o HRM professional work in the central or regional headquarters of the traditional MNE o This setting is most common for HR managers o Headquarters use parent company HRM policies/practices to its foreign subsidiaries or use those that are common in host countries  Home Country Subsidiaries of Foreign-Owned Firms o HR managers work in their home country but are employed by a local subsidiary of a foreign MNE o HR manager will have to integrate a local culture and organizational culture into the operations o Different communication styles, worker motivation philosophies, and organizational structures set in place by the parent company can cause major problems for the local HR manager  Domestic Firms o Confront many complexities of international business, particularly as they relate to IHRM o Referred to as “domestic multinationals” o Hiring- or recruiting- of immigrants can lead to many of the same internationalization concerns as those faced by traditional MNEs  Government Agencies and Non-Governmental Organizations o Government agencies, their embassies, and the hundreds of non-governmental organizations (NGOs) are also global in scope o Send hundreds of people from parent countries to overseas operations o Employ many local and third country people to staff their activities around the globe  Development of International Human Resource Management o HRM managers are being called upon to contribute increasing expertise to internationalization o Several IHRM-related questions need to be answered within each multinational entity o The success or failure of an enterprise is often a function of how it handles IHRM issues o International HRM vs. Domestic HRM  IHRM is responsible for more HR functions  IHRM is responsible for a broader expertise and perspective  IHRM is responsible for greater involvement in people’s lives  IHRM is responsible for dealing with and managing wider mix of employees  IHRM is responsible for more external factors and influences  IHRM is responsible for a greater level of risk o IHRM is relatively new as a profession and academic area  2 largest HR professional associations  Chartered institute for personnel and development in UK  Society for HRM in US Ch. 2 Strategic International Human Resource Management  Strategic International Human Resource Management o SIHRM focuses on creating and implementing IHRM policies and practices that help achieve an MNE’s international strategy o Involves the strategic management of the IHR function and department itself  Evolution of the Multinational Enterprise o As a firm internationalizes, it moves through stages o In each stage it must make a choice of methods for market entry o With each stage, the degree of international activity increases and IHRM responsibilities become increasingly complex  Internationalization Process and Methods for Market Entry within the Five Stages o Stage 1  Portfolio investment  Simplest level of involvement  Firms may decide to make financial investments in foreign firms  Firms may begin to export products or services to foreign markets through direct sales or foreign distributors o Stage 2  Sales subsidiary/local sales office  Assign responsibility for international sales to a sales manager and/or purchasing agent o Stage 3  Licensing  Locate foreign firms that have the experience to manufacture, and sometimes market, their products  Franchising  Firms create package of key ingredients for success and franchises to overseas investors  Contracting/sub-contracting  Firms increasingly sub-contract all, or most, of their manufacturing to firms abroad o Stage 4  Wholly-owned subsidiaries  Subsidiaries can be developed in a number of ways  Greenfield project involves acquiring an open field in order to build subsidiary from scratch  Brownfield project involves purchasing existing facilities for development of subsidiary  Maquiladora  Form of subsidiary with special characteristics favorable to the foreign parents  Consists of “twin plants” with one located in the US and one in Mexico o Stage 5  International joint ventures  Two or more firms create a new business entity  International mergers and acquisitions  One of the preferred market entry methods in both developed and emerging markets  International alliances, partnerships, and consortia  Informal of formal partnerships or agreements that do not result in a independent legal entity  Auxiliary Methods of Internationalization o Outsourcing (subcontracting)  Firms contract out business processes to other firms in their home country and in other countries o Off-shoring  Differs from outsourcing in that it involves the relocation of one or more aspects of a firm’s business processes to a location in another country for the purpose of lowering costs o The Born-Global Firm  Frequently IT based, it almost immediately operates in key global markets due to the nature of its products, global networking, and possible partnering on projects  MNE Business Strategy o Provides a direction for managing various subsidiaries  Primarily guided by the extent of integration and/or local responsiveness required by the firm to manage its worldwide operations o Integration  Defined as the extent to which the subsidiaries and the headquarters develop a unified whole o Local responsiveness  Defined as the extent to which subsidiaries respond to local differences  Types of strategic business approaches o Global o Transnational o Unified strategy o implemented for all o Maximizes countries regardless of responsiveness and their cultural and integration by being national differences global and multi-domestic at the same time o International o Multi-Domestic o Simplest business o strategy, requiring o Responds to the high limited local needs, values, and responsiveness and demands of a local limited integration market  The Orientation of Senior Executives o Ethnocentrism  Managers use a home-country standard as a reference in managing international activities o Polycentrism or region-centrism  Host-country cultures and practices assume increased salience for managers o Geo-centrism  Managers outlook is one of creating a global network among various elements of the global organization  IHRM strategy o IHRM strategy formulation  Central trade-off pits pressures for centralization against the need for decentralization  Centralization is very similar to the notion of integration  Decentralization is similar to the notion of local responsiveness o Convergence  Use of parent-company policies and procedures throughout a firm’s global operations o Divergence  Cultural and institutional differences play a role in the matter  IHRM Strategies and MNE Business Strategies o The overall effectiveness of an IHRM strategy is contingent on the context in which it is used o An IHRM strategy’s effect on organizational effectiveness is always dependent on how well the IHRM strategy fits with, and supports, a MNE’s business strategy  Research of SIHRM o Existing research on SIHRM  Local culture and national managerial orientation influence the nature of HR practice  The degree of global mindset influences the nature of an MNE’s global strategy  Global strategy influences the degree of global focus in the HR strategy  Appropriate global HR practices are associated with better organizational performance  Models/Frameworks for Understanding SIHRM o In an effort to understand the role of IHRM in MNEs, scholars and researchers have suggested several SIHRM models or frameworks  5 parts  Strategic MNE components  Exogenous factors  Endogenous factors  IHRM issues, functions, and policies and practices  MNE concerns and goals Ch. 3 Design and Structure of the Multinational Enterprise  International Organizational Design and Structure: An Introduction o International organizations need appropriate structure in order to effectively conduct business in the chaotic and interconnected global economy o The traditional needs for control and integration when applied across national borders in the highly complex global economy make the problems of organizational design especially difficult o Organizational Structure  Formalized arrangement of organizational components o Organization design  Process used by management to arrange the various components o Resulting factors  The firms forms and
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