The path to global status
• Causes structural responses, due to:– Strain imposed by growth and geographical
spread– Need for improved coordination and control
across business units– The constraints imposed by host-government
regulations on ownership and equity
• Evolution path common but not normative
Stages of internationalization: Exporting
• Typically the initial stage of international operations– Usually handled by an intermediary (foreign
agent or distributor)– Role of HR department unclear at this stage
Sales subsidiary
• Replacing foreign agents/distributors with own through sales or branch offices/subsidiaries
• May be prompted by:– Problems with foreign agents– More confidence in international activities– Desire for greater control– Give greater support to exporting activities
• PCNs may be selected, leading to some HR involvement
International division
• Creation of a separate division in which all international activities are grouped
• Resembles ‘miniature replica’ of domestic organization
• Subsidiary managers report to head of international division
• Objectives regarding foreign activities may determine approach to staffing of key positions– Expatriate management role of corporate HR
Global product/area division
• Strain of sheer size may prompt structural change to either of these global approaches
• Choice typically influenced by: – The extent to which key decisions are to be
made at the parent country headquarters or at the subsidiary units (centralization versus decentralization)
– Type or form of control exerted by parent over subsidiary
The matrix
• An attempt to integrate operations across more than one dimension
• Violates Fayol’s principle of unity of command
• Considered to bring into the management system a philosophy of matching the structure to the decision-making process
Problems with the Matrix Bartlett and Ghoshal
• Dual reporting
• Proliferation of communication channels
• Overlapping responsibilities
• Barriers of distance, language, time and culture
Leads to conflict and confusion
Creates informational logjams
Produce turf battles and loss of accountability
Make it virtually impossible to resolve conflicts and clarify confusion
Control mechanisms
“Globalization brings considerable challenges which are often under-estimated….
Every morning when I wake I think about the challenges of coordinating our operations in many different countries”
Quote by Accor CEO
Mode of operation and HRM
• Not just subsidiary operations• Firms may also adopt contractual modes
– Licensing– Franchising– Management contracts– Projects
• And/or cooperative modes (such as joint ventures)
Interfirm linkages
• Alliance (strategic alliance, cooperative venture, collaborative venture or corporate linkage)
• A form of business relationship that:– Involves some measure on interfirm integration– Stops short of a full merger or acquisition
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