International Human
Resources Strategy
Lidija Dzanic
Tua Lindholm
Lea Wakolbinger
Mirjam Zerjav
VK Internationale Unternehmensführung
WS 2004/05
Agenda
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Business strategies
Staffing approaches
Different types of managers
Expatriation vs. inpatriation
Case study
Conclusion
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Introduction
 Nowadays globalization is more present
 Requires globally competent managers
 IHRM is becoming more important
 IHRM is major determinant of success or failure
in international business
 Global integration is neccesary in HRM
 Core competency – local adaptation
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Business strategies (1)
Domestic
 New products or services for the domestic market
 Foreign markets and international managerial skills
largely irrelevant
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Business strategies (2)
International
 Competition increases
 Companies expand internationally
 Hierarchical structure
 Structural and cultural dominance
 First home country managers abroad as
expatriates
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Business strategies (3)
Multinational
 Least-cost and standardized products and services
 Worldwide lines of business
 Decisions made by people from a wider range of
cultures
 Values of the headquarter’s national culture
dominate
 Senior managers need to understand the world
business environment
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Business strategies (4)
Transnational
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Global competition
Identical products are distributed worldwide
Research and development
Firms become less hierarchically structured
Transnational human resource strategies are being
developed
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Characteristics of effective
IHRM
 Transnational scope
Geographical context within which all major
decision are made
 Transnational representation
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Multinational composition of the managers and
executives
 Transnational process
 Firm’s ability to include representatives and ideas
from many countries
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Ethnocentric approach (1)
 Parent country nationals (PCNs) take all key
positions in a multinational company
 In the early stages of internationalization
 Reasons for pursuing this policy:
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Lack of qualified host country nationals (HCNs)
Ability of the parent country nationals (PCNs)
to coordinate subsidiary
Transferring Know-how
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Ethnocentric approach (2)
 Problems that may occur:
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Adaptation of PCNs to a host country may take
a long time
Promotion opportunities of local managers are
limited
PCNs’ lack of sensitivity
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Polycentric approach (1)
 Companies following this staffing policy use HCNs
in their subsidiaries and PCNs in corporate
headquarters
 Advantages:
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No more language barriers and adjustment
problems of expatriates
The employment of HCNs is less expensive
Morale and career opportunities of local stuff
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Polycentric approach (2)
 Disadvantages:
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Weak links between the independent national
units and headquarters
Lack of experience of both HCNs & PCNs is a
liability in an increasingly competitive
international environment
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Geocentric approach (1)
 Best people get key jobs, nationality is not
important
 Advantages:
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A pool of senior international managers is
developed
Tendency of national identification of managers
with subsidiary units is reduced
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Geocentric approach (2)
 Disadvantages:
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Immigration laws which require the employment
of local nationals are used by many host
countries
Difficult to implement because of increased
training, compensation and relocation costs
Longer lead times and more centralized control
of the staffing process are required
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Regional approach
 Staffing strategy with emphasis on different
regional markets
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Factors for staffing decisions:
 Need of area expertise
 Need of product expertise
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Managerial mindset
 4 typical mindsets
 Closely associated
 From the least global to the most global mindset
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Defender
Explorer
Controller
Integrator
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Defender
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Internally focused
Oriented to the domestic market
Satisfied with domestic operations
Uninterested in making foreign actions
Almost no international element
Foreign elements in domestic market are
unwanted
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Explorer
 Aware of business opportunities in
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foreign markets
Perceives foreign markets
as not dangerous
Treats international forays with
a lot of caution
Prefers strategies of exporting and
franchising
Domestic business is larger than
international, is predominant
Foreign operations are managed from the
head office located in the home country
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Controller
 More externally oriented than the explorer
 Dominates in foreign markets with procedures
which were successful in domestic market
 Understands the nature of cultures
 Important: controller’s head office spends time
on controlling and less on coordinating
 Approval and sanction needed from the head
office
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Integrator
 Global perspective
 Knowledge and skills
 Understands, is aware, is competent
 Able to manage differences
between people, values and cultures
 Coordinates more than controls
 Critical function is creating mechanisms for
knowledge flow and transferring it from one
part of the global system to another
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Good international manager
Ability to develop
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Effective local strategies
Local government relations
Cultural leadership skills
Social networking skills
Teamwork skills
Good understanding of business environment
Insightful local social knowledge
(Harvey et al.)
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Dimensions of IHRM
 Knowledge-based view of the firm (Harvey et al.)
 Tangible vs. intangible dimensions of HRM
 Development of a common knowledge basis (Grant)
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Expatriation vs. inpatriation (1)
1) Harvey et al.
Decision factors
 Value of tacit local knowledge
 Cultural and economic distance
 Equivocality of subsidiary goals
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Expatriation vs. inpatriation (2)
2) Torbiörn
Decision factors
 Openness of economic region
 Political instability
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Low
Level of Economic Development
High
Expatriation vs. inpatriation (3)
Low
Cultural Distance
High
Equivocality
Social
Knowledge
Low
Social
Knowledge
High
Social
Knowledge
Low
Social Knowledge
High
Low
Expatriate
Inpatriate
Inpatriate (P)
Expatriate (S)
Inpatriate (P)
Expatriate (S)
High
Expatriate
Inpatriate
Inpatriate (P)
Expatriate (S)
Inpatriate
Low
Expatriate
Inpatriate
Inpatriate
Inpatriate
High
Inpatriate
Inpatriate
Inpatriate
Inpatriate
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Advantages of inpatriate use
 Effective „boundary spanners“
 Advice with HR practices
 Satisfaction with HR strategy in foreign
subsidiaries
 More acceptance on return
(Harvey et al.)
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Mergers and acquisitions
 Double-staffing strategy
 Inpatriates  communication
 Expatriates  coordination
(Torbiörn)
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Expatriation
 Overall increasing trend in expatriation
(especially UK)
 British view IHRM as essential contributor to
strategic management
 US: more inpatriation due to high expatriate
failures
(Scullion)
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Expatriate failure
 Direct and indirect costs
 Main reasons:
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Inability of spouse to adjust
Poor performance
(Scullion)
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Training, selection and
repatriation
 Selection: not only technical, but also personal skills
(Scullion)
 Cross-cultural training approach (Mendenhall and
Oddou)
 Information
 Affection
 Immersion
 Effective repatriation programs (Scullion, Dessler)
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Case study
 319 000 employees
 170 countries
 advanced information technologies:
computer systems, software, storage
systems, microelectronics
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 Beginning in 1888
 Incorporated in 1911
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1300 employees
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 1914 Thomas J. Watson
 Revenues doubled and business expanded
 The base for the strong organizational culture
today
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 Interview
 Dr. Haberl, manager of Media Relations
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 Local workforce
 Inpatriates not typical
 Expatriation – not mainly knowledge transfer
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Expatriation at IBM a part of a manager‘s
career
No loss of control
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 Strong organizational culture
„myth of Watson“
 Helpful in the long run
 Social tacit knowledge
 Explicit knowledge
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 Locals are no locals anymore after entering
IBM
 IBMer
 Same rules all over the world
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 Training opportunities
Internal technological structure
 Helping institutions
 „Buddy-system“
 Other training opportunities
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Conclusions
 HR strategy must match with corporate
strategy
 Decision factors that matter in the context of
the company’s IHRM strategy should be
defined before entering emerging markets
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THE END
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