Chapter1- IHRM
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Copyright 2004 Asia Pacific Institute of Information Technology
International Human Resource
ManagementBUS-1-08-MBChapter 1 Strategy & Structure
of Multinational Companies
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Topic & Structure of the lesson
Learning Outcomes
Understanding the differences between
domestic and multinational firms
Professionalism
Social Responsibility in business
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Learning Outcomes
At the end of this module, YOU should be able to:
Recognise the three ideal type of multinational companies
Objective of HRM in MNCs
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Main Teaching Points
Ethics in business Planning and controlling
Principles and procedures
Customer relationship
Working condition
Professionalism The need for professionalism
The advantages of professionalism
The issues in professionalism Social Responsibility in business
The role of management
Society and management
Social and green issues
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Introduction
Differences between domestic & MNC
Alder tried to identify the major differences
between domestic & MNC firms
2 factors considered of primary importance indifferentiating between domestic & MNC:
multiculturalism : the presence of people from two or
more cultural backgrounds within an organisation
Geographic dispersion : location of various sub-units
of the parent firm in different countries
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Potential benefits of
multiculturalism &
geographic dispersion
Increasing creativity & innovation
Demonstrating more sensitivity in dealing
with foreign customers
Being able to get the best personnel from
everywhere
Taking a global perspective
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Creating a super organisational culture
Greater flexibility with the organisation both toadopt a wider range of environments and to
change within those environments
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Strategic Objective
Barlett & Ghoshal (2000) discuss 3
different strategic objectives:1) Global efficiency can be enhanced both by
increasing revenues and lowering costs
2) Multinational flexibilitythe ability of a company
to manage the risks and exploit the opportunities
that arise from the diversity & volatility of the
global environment
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Barlett & Ghoshal identified 4 sources of
diversity & volatility that can offer both
risks & opportunities
macro-economic factors e.g interest rates
policy actions of national governments
responses of competitors in the hostmarket
resources like natural, financial & HR
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Structuring Multinational Companies
Strategy & Structure: Early Studies
1) expansion of volume
2) geographic dispersion
3) vertical integration
4) product diversification
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The International Division Structure creates a number ofproblems:
It tends to underplay the importance of internationalactivities
It underestimates the diversity that be inherent ininternational operations
The isolation of domestic & international activities maycreate duplication of efforts & limit the transfer ofknowledge in the company
Because of structural separation, there is lack of co-ordination between domestic & foreign operations
International Division
Structure
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1) Multi-domestic organisational model:
It gives importance to national
responsivenessFor eg branded packaged product industry
2) International Organisational model:
* It involves sequential diffusion ofinnovations that were originally developed
in the home market
Strategy & Structure: Recent
Developments
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For eg. Int. industry is telecomm switching
3) Global organisational model
standardised consumer needs & scale efficiencies
make centralisation & integration profitable
A firms competitive position in one country is
significantly influenced by its position in other
countries eg. Consumer electronics
4) Transnational organisational model
Orgn structure very flexible
Expertise is spread throughout the orgn
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Typology elements:
1) Organisational design
The orgn structure of the global companyis centralised & globally scaled & the main
role of subsidiaries is to implement parent
company strategies, that is: act aspipelines of products & strategies.
An Empirical Test of
Typologies of MNC
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Typology Elements
2) Interdependence
- Indicates the extent to which various units
of a MNC are dependant on each other &
hence gives an impression of the level of
the integration within the MNC as a whole.
- Distinguish 3 levels of interdependence
a) interdependence that is the subsidiary
is not or hardly dependant on HQ
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Typology Elements
b) dependence, that is the subsidiary ismainly dependant on HQ
c) interdependence, the subsidiary HQ &
other subsidiaries form part of aninterdependant network, they are alldependant on each other
3) Local responsiveness is defined as theextent to which subsidiaries respond tolocal differences in customer preferences
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Typology Element
4) Control mechanisms can be defined
as the instruments that are used to make
sure that all units of the organisation strive
towards common organisational goals.
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Quick Review Question
1)Describe the key characteristics of multidomestic,
international, global and transnational companies.
Would you agree that it would be best for most
companies to follow the transnational model?
2) Take a multinational company of your choice and
describe its organisational model. Do you feel this
is effective, given the companys product/market?
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Follow Up Assignment
Barlett, C A Ghoshall, S. (1989) Managing Across
Borders, The Transnational Solution
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Q & A
Question and Answer Session
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