Chapter 3

Chapter 3
IHRM: Sustaining
International Business
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Chapter objectives
The previous two chapters concentrated on the global
environment and organizational contexts. We now focus on
the ‘managing people’ aspect. The aim is to establish the role
of HRM in sustaining international business operations and
growth. We cover the following:
 issues relating to the various approaches to staffing
foreign operations
 the reasons for using international assignments:
position filling, management development and
organizational development
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Chapter objectives (cont.)
 the various types of international assignments: short-
term, extended and longer-term; and non-standard
arrangements: commuter, rotator, contractual and
 the role of expatriates and non-expatriates
(international business travellers) in supporting
international business activities
 the role of the corporate HR function.
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Approaches to staffing
 Factors affecting approaches to staffing
 General staffing policy on key positions at
headquarters and subsidiaries
Constraints placed by host government
Staff availability
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 Strategic decisions are made at headquarters
 Limited subsidiary autonomy
 Key positions in domestic and foreign
operations are held by headquarters’
personnel; PCNs manage subsidiaries
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 Each subsidiary is a distinct national entity
with some decision-making autonomy
 HCNs manage subsidiaries who are seldom
promoted to HQ positions
 PCNs rarely transferred to subsidiary
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 A global approach - worldwide integration
 View that each part of the organization makes
a unique contribution
 Nationality ignored in favour of ability:
Best person for the job
Colour of passport does not matter when it
comes to rewards, promotion and
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Figure 3-1: Geocentric staffing requirements
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 Reflects a regional strategy and structure
 Regional autonomy in decision making
 Staff move within the designated region,
rather than globally
Staff transfers between regions are rare
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Table 3-1: The advantages and disadvantages of using PCNs,
TCNs and HCNs
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Figure 3-2: Determinants of IHRM approaches and activities
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Reasons for international
 Position filling
 Eg. Skills gap, launch of new endeavour, technology
 Management development
 Training and development purposes, assisting in
developing common corporate values
 Organizational development
 Need for control, transfer of knowledge, competence,
procedures and practices
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Types of international assignments
 Short term
Up to 3 months
 Extended
Up to 1 year
 Long term
Varies from 1 to 5 years
The traditional expatriate assignment
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Non-standard assignments
 Commuter assignments
 Rotational assignments
 Contractual assignments
 Virtual assignments
Some of these arrangements assist in overcoming the
high cost of international assignments but are not
always effective substitutes for the traditional
expatriate assignment
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Figure 3-3: Factors influencing virtual assignments
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Roles of an expatriate
 Agent of direct control
 Agent of socialization
 Network builder
 Boundary spanner
 Language node
 Transfer of competence and knowledge
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Figure 3-4: The roles of an expatriate
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The role of non-expatriates
 People who travel internationally yet are not
considered expatriates as they do not
relocate to another country
Road warriors, globetrotters, frequent fliers
 Much of international business involves visits
to foreign locations, eg.
Sales staff attending trade fairs
Periodic visits to foreign operations
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A glamorous life?
 International business travelers cite the
positives as:
Excitement and thrills of conducting business
deals in foreign locations
Life style (top hotels, duty-free shopping,
business class travel)
General exotic nature
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But a high level of stress!
 Home and family issues – frequent absences
 Work arrangements – domestic side of
position still has to be attended to
 Travel logistics – waiting in airports, etc.
 Health concerns – poor diet, lack of sleep,
 Host culture issues – limited cultural training
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Table 3-2: Various roles of corporate HR
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The role of the corporate HR
 Can we manage our people like a global
product? The feasibility of:
The concept of a global internal labour market
Standardization of work practices and HR
 What HR matters require central control and
what can be decentralized?
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Chapter summary
This chapter has expanded on the role of IHRM in sustaining
international business operations. We have:
 Looked at the various approaches to staffing
international operations – ethnocentric, polycentric,
geocentric and regiocentric – examining their
advantages and disadvantages and factors that may
determine the choice of these options.
 Considered the reasons for using international
assignments: position filling, management
development and organization development.
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Chapter summary (cont.)
 Discussed the various types of international assignments:
short, extended and long-term (traditional); and nonstandard forms such as commuter, rotational, contractual
and virtual assignments.
 Examined the various roles of the expatriate: as an agent
for direct control, as an agent for socialization, as network
builders, as boundary spanners and as language nodes.
These various roles of the expatriate help to explain why
expatriates are utilized and illustrates why international
assignments continue to be an important aspect of
international business from the organization’s
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Chapter summary (cont.)
 Recognized that non-expatriates are also critical to
international business operations. International
business travelers present their own challenges, such
as the effect of frequent absences on family and home
life, the possible negative health effects and other stress
factors. The management of such individuals, however,
does not appear to fall within the domain of the HR
 Looked at the role of the corporate HR function as the
firm grows internationally, building on sections from
Chapters 1 and 2.
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