Chapter 1 Introduction The Enduring Context of IHRM

Chapter 1 Introduction: The Enduring Context of IHRM IBUS 618 Dr. Yang 1

Chapter Objectives n We will establish the scope of the textbook: Define key terms in IHRM Review expatriate management evolution Outline the differences between domestic HRM and IHRM Identify variables that moderate these differences Discover the increasing complexity and potential challenges of current IHRM, and Discuss trends and emerging challenges in the global work environment in which IHRM functions and activities are conducted IBUS 618 Dr. Yang 2

Three Approaches to IHRM n Cross-cultural management n Examine human behavior within organizations from an international perspective n Comparative HRM and Industrial Relations n Seeks to describe, compare and analyze HRM systems and IR in different countries n HRM in multinational firms n Explore how HRM is practiced in multinationals IBUS 618 Dr. Yang 3

Figure 1 -1 Interrelationships between Approaches to the Field IBUS 618 Dr. Yang 4

The General Field of HR n Major Functions and Activities n Human resource planning n Staffing n Recruitment n Selection n Placement n Performance management n Training and development n Compensation (remuneration) and benefits n Industrial relations IBUS 618 Dr. Yang 5

Whirlpool’s Globalization n Where to go among alternative markets? n n $23/hr in the U. S. including the benefits $3/hr in Mexico $1/hr in China $32/hr in Germany n Mode of entry? n Acquisition of Phillips N. V. for more than $1 billion in 1991 n Whirlpool’s total employees today: n n 23, 000 in the U. S. 45, 000 overseas IBUS 618 Dr. Yang 6

Potential Factors to Consider n Types of industry and technology n Mode of entry n n Time of entry Cost of entry n Human resources n n Types of labor Cost of labor n Proximity to the market and consumers n n Regional Global n Standardization vs. Adaptation IBUS 618 Dr. Yang 7

Whirlpools Global Network n The high-end $1, 200 model from Germany n The smaller front loaders from Mexico n n Mexican engineers, foremen and supervisors had 18 months training in Germany Top loading machines made in Ohio for Americans n Microwave ovens engineered in Sweden and made in China n Refrigerators assembled in Brazil and exported to Europe IBUS 618 Dr. Yang 8

What does IHRM add into the Traditional Framework of HRM? n Types of employees n n n Within and cross-cultural workforce diversity Coordination Communication n Human resource activities n n n Procurement Allocation Utilization of human resources n Nation/country categories where firms expand operate n n n Host country Parent country Third country IBUS 618 Dr. Yang 9

Figure 1 -2 A Model of IHRM IBUS 618 Dr. Yang 10

What is an expatriate? n An employee who is working and temporarily residing in a foreign country n n Some firms prefer to use the term “international assignees” Expatriates are PCNs from the parent country operations, TCNs transferred to either HQ or another subsidiary, and HCNs transferred into the parent country n Global flow of human resources IBUS 618 Dr. Yang 11

Figure 1 -3 International Assignments Create Expatriates: IBUS 618 Dr. Yang 12

Differences between Domestic HRM and IHRM n More HR activities n The need for a broader perspective n More involvement in employees’ personal lives n Changes in emphasis as the workforce mix of expatriates and locals varies n Risk exposure n Broader external influences IBUS 618 Dr. Yang 13

Figure 1 -4 Variables that Moderate Differences between Domestic HR and IHRM IBUS 618 Dr. Yang 14

Table 1 -1 World top ten non-financial transnational corps. , ranked by transnational index IBUS 618 Dr. Yang 15

Table 1 -2 World top ten non-financial transnational corps. , ranked only by foreign assets IBUS 618 Dr. Yang 16

Figure 1 -5 Strategic HRM in multinational enterprises IBUS 618 Dr. Yang 17

Laurent’s steps to truly international HRM 1. 2. 3. 4. 5. Recognize that one’s own HRM reflects home culture assumptions and values. Recognize that one’s own peculiar ways are neither universally better nor worse than others - just different and likely to exhibit strengths and weaknesses, particularly abroad. Recognize that organization’s foreign subsidiaries may prefer other ways to manage people – ways that are neither intrinsically better nor worse, but possibly more effective locally. Headquarters willingness to acknowledge cultural differences and steps to make them discussable and therefore usable. Build shared genuine belief that cross-cultural learning will result in more creative and effective ways of managing people. IBUS 618 Dr. Yang 18

Chapter Summary (cont. ) n We have established the scope of the textbook: n Defined IHRM and the term “expatriate”. n Discussed major differences between domestic HRM and IHRM – looking at six factors: n n n More HR activities 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 and More external influences IBUS 618 Dr. Yang 19

Chapter Summary n Identified four other variables moderating that differences between domestic and international HRM n Host-country cultural environment n Type of the industry n Reliance of the MNC on its home-country market n Attitudes of the senior management n This treatment has enabled us to provide an overview of the field of IHRM and to establish how the general environment affects IHRM. n The next chapter examines the organizational context where we explore how IHRM activities are determined by, and influence various internal changes as the firm internationalizes. IBUS 618 Dr. Yang 20

Discussion Questions 1. 2. 3. 4. 5. What are the main similarities and differences between domestic and international HRM? Define these terms: IHRM, PCN, HCN, and TCN. Discuss two HR activities in which a MNE must engage that would not be required in a domestic environment. Why is a greater degree of involvement in employees’ personal lives inevitable in many IHRM activities? Discuss at least two of the variables that moderate differences between domestic and international HR practices. IBUS 618 Dr. Yang 21