Strategies

for
International
Growth

Module - 02
 Reference
• The Global Challenges by Evans, Pucik and
Barsoux
 Contents
• Global integration
• Local responsiveness
• Joint ventures and other form of alliances
• Cross-border mergers and acquisitions
 Introduction
• There are four strategies for going
international
– Global integration (Mega National Firm)
– Local responsiveness (Multidomestic Firm)
– Joint ventures
– Alliances
 Exploiting Global Integration
• Example of Nokia – 100 year old company
– pulp and paper

• Investment made in home leveraged into

global dominance
• Global integration builds on “control”
perspective
• Different control mechanisms
• All the tools of global integration are
associated with a heavy reliance on
expatriate managers. – challenges in
managing expatriation processes
effectively.
• Global Integration – centralized control
over key resources and operations that are
strategic in the value chain
• Decisions are made from a global
perspective – the firm operates as if the
world were a single market

We know Argentina and France are different, but we treat them the
same. We sell them the same products, we use the same production
methods, we have the same corporate policies.
- Al Zeien, Former CEO, Gillette
• Global integration does not necessarily imply
selling the same product in the same way
all over the world.
• It means – decision on how to address local
customer needs or market differentiation are
made by managers who have an integrated
global point of view.
• Global integration does not mean
centralization of all aspects of a company’s
operations. P&G standardizes the formulating of products
worldwide. Packaging and advertising are
adapted to local needs
 Reasons / Advantage
• Why companies may choose to follow the
global integration route?
Economies of Scale
Value chain linkages
Serving Global Customers
Global Branding
Leveraging capabilities
World-Class standardization
Competitive Platforms
Information advantage
• Economies of Scale
– A company can lower its units costs by
centralizing critical value chain activities, such
as manufacturing or logistics
– Small number of large facilities to make
products for export
• Value chain linkages
– Competitive advantage comes from tight
linkages between value chain activities R&D,
manufacturing, and marketing
• Serving Global Customers
– Subsidiaries do not have their own stand-
alone-customers; prices, quality standards,
and delivery terms are determined globally
• Global Branding
– Coca Cola and Gillette Promote a unified brand
image around the world
– Coke standardizes its formula
• Leveraging capabilities
– Some companies expand globally by
transferring capabilities developed in the
home market.
– International expansion of Wal-Mart depends
on SCM skills
• World-Class standardization
– Key processes are standardized and centrally
controlled. Ex: Pharmaceutical Companies
• Competitive Platforms
– Tight control of local subsidiaries by central
headquarters may allow rapid response to
competitive conditions
– Ex: Japanese multinationals penetrated new
markets through price subsidization funded by
profitable operations elsewhere
• Information advantage
– Ex: Japanese trading company SOGO SHOSHA
located in every corner of the world. Through
the network of local offices, staffed primarily
by Japanese expatriates, they optimize global
business opportunities by tapping into
information.
 Tools for Global Integration
• How Global Integration is achieved?
• Enable centralized control over operations
– Centralization or personal control
– Standardization, based on control through
formalization
– Contracting, focused on control of outputs
– Socialization, built around control over norms
and values
– Mutual adjustment, or control through
informal interaction.
Managing International Transfers
• In total, global integration depends on
Expatriates

• 90% of HR professionals time spent in

addressing expatriate issues (also termed
as international transfers)
• To ensure expatriate success we have
different phases in International Transfers
 Different phases in International
Transfers

Adjusting to
Selecting the expatriate
expatriates role Compensation

Preparing and Managing the Repatriation

orienting performance
them of expatriates
• Selecting expatriates
– The traits and skills depends on the role the
expatriate is expected to assume
– Self-oriented dimension: measures the
expatriate’s personal adaptability
– Others-oriented dimension: ability to interact
effectively with host country nationals
– Perceptual dimension: ability to understand
why foreigners behave the way they do
– Cultural-toughness: cultural distance from the
home country
• Preparing for an assignment
– Training duration and kind depends on
• Cultural distance
• Duration stay
 • Adjusting to the Expatriate Role
Phase4
Phase1 Adjustment
Tourist
Adjustment

Phase3
Pulling Up Pre-
Visits

May Exit?
Phase2 Cultural Shock
Crisis

Time
• Phase 1:
– The expatriate may experience a range of positive and negative
emotions such as excitement, anxiety, fear of the unknown or a
sense of adventure
– Referred as “honeymoon” or “tourist”
• Phase 2:
– How the individual copes with the psychological adjustment at
this phase has an important outcome in terms of success or
failure
• Phase 3:
– Pulling up – comes to terms with the demands of the new
environment
• Phase 4:
– Person begins to adjust to the new environment
• Appraising expatriate performance
– What is the purpose of the appraisal?
• To assess the past performance and setting
development goals
– What criteria and standards should be used?
• Customized or standardized
– Who should conduct?
• Superiors or HR staff in home office or host office
• Expatriate Compensation
– Compensation plan is influenced by
• Cost efficiency: plan delivers intended benefits in
the most cost-effective manner
• Equity issues: plan is equitable irrespective of the
assignment location or nationality of the expatriate
• System maintenance: plan is relatively transparent
and easy to administer
• Repatriation and Reentry
– Coming home is not an easy matter
– Process of renegotiating one’s identity and
rebuilding professional networks.
– Cultural shock of coming home
 Beyond the Traditional
Expatriate Model
• Few firms launch their international
expansion without at least a small core of
expatriates.
• Women Expatriates
• Dual Career Considerations
• Younger Expatriates
• Third Country Nationals
Limitations of Global Integration
• Firm’s ability to be responsive to local
needs and demands
– Nokia
– Coca-Cola
 Becoming Locally Responsive
• To overcome the drawbacks of Global
Integration – firm’s needs to be locally
responsive
• Family Circle and McCall’s are magazines
specific to the US Market.
• Grievances
 Drivers of Local Responsiveness
• Industry Characteristics:
– Foods and small household appliances
– Cement companies – engage heavily in local
production in every country they have
entered.
– This is largely because of the shipping and
tariff costs neutralize any cost advantages of
centralized sourcing
• Customer needs
– European dining habits forced both Disney’s
and McDonald’s European franchises to
abandon no-alcohol policies applied in the
home market.
• Local Substitutes
– Competition from local products or services

– Nestle varies its infant cereal recipes

according to local raw materials.

– In Europe they are made with wheat, in Latin

America with maize and in Asia with soya
• Markets and distribution
– Packaging in order to cope with the challenges
of dust, heat or bumpy roads
• Host Government regulations
– Petrochemical firms have to build close
relationship with national authorities
controlling a resource that is critical for
economic development
– Wal-Mart: opening 7 days a week, 24 hours a
day or refunding the price difference on any
item sold for less elsewhere are illegal in
Germany
 Tool for Local Responsiveness -
Understanding Diversity
• Know yourself
• Know where you are
• Know who you talk to
• Know yourself: The Cultural Perspective
– Understand oneself before understanding
other people and their practices
– Universalist and Particularist culture
– Universalist culture: believe in guiding rules,
procedures and principles
• US – strong belief in contracts, standard operating
procedures and systems
– Particularist culture: everything depends on
the nature of the relationship and the specific
context
• Individualism or collectivism
• Power distance
• Uncertainty avoidance

To overcome these differences, companies may opt for mid-range culture

(maintain balance)
• Know where you are: The Institutional
perspective
– 38 hours a week and working more than 48
hours is downright illegal in German
– Standard appraisal practices are not allowed in
German
– Business behavior lies in the interrelationships
between economic, educational, financial,
legal and political systems.
– HRM varies significantly from one country to
another
• Development: HRM viewed as a line management
responsibility rather than a functional role
• Integration: HR tasks are closely integrated with
business activities
• Professional Mechanic
– HRM is seen as the responsibility of functional
specialists, who are however not linked to the
business processes or work of the
management team.
• Guarded Strategist:
– Policeman
– HR function has strategic influence, exercising
a high degree of centralized control over
recruitment and development as well as
evaluation
• The wild west
– HR function itself plays only a technical
support role and there are no longer-term
strategic links between strategy development
and talent development
• Pivotal or business partner
– The senior HR person is seen as a catalyst and
coordinator at the policy level, and the HR
team is small
 High

Guarded
Pivotal
Strategist
N S
F CH
E
Integration

Professional
Wild West
Mechanic
UK NL
I
D DK

Low

Low Development High

CH = Switzerland, D=Germany, DK=Denmark, E=Spain, F=France, I=Italy,
N=Norway, NL=Holland, S=Sweden, UK=United Kingdom
• Know who you talk to: The Network
Perspective
– Learning from friends when abroad
– Expatriates are keen to discuss the benefits or
frustrations that peers may have experienced
when implementing similar changes
– Global fashions: fashion setters server as
carriers of best practices and benchmark
information across borders
• Ex: Motorola, six sigma
 Responding to Diversity
• The internationalization sequence
• Entry mode
• HR practices
• The internationalization sequence
– Ex: IKEA, the furniture retail chain, expanded
first from Swedish base to culturally
contiguous countries, then to Holland, France,
UK and later entering Asia via Hong Kong.
– Firms moving to culturally distant countries
after establishing a presence in more
proximate countries were more successful
than those using a random expansion strategy.
• Entry mode
– Greenfield, joint ventures or acquisition
– Greenfield – starting from scratch
– Japanese firms – Greenfield
– French firms – joint ventures
– UK firms - acquisitions
• HR practices
– Challenges is to know what to adapt and what
not to adapt.
 Challenges of Localization
• Influences on long-term profitability
• In emerging countries, where skill
availability may be a serious concern
• Finding and developing local talent – “grow
their own timber”
• High turnover of local talent – training
grounds for other competitors in the
industry
• Responding to ethical diversity – financial
returns with social cost like exploitation of
labor, unemployment, environmental
damage, crime, corruption, attitudes etc.
 Managing Alliances and Joint
Ventures
• Alliances and its types
• Planning and negotiation of alliances
• Alliance learning
• Why are alliances formed?
– Cut the cost of entry
– Cut the cost of exit
– Leveraging opportunities
– Aim of acquiring knowledge of
• business conditions
• Desirable location
– Access to the distribution system
• What kind of Alliance?
• Strategic Context
– Competition versus Collaboration
• Knowledge Creation
– Low versus high knowledge creation
• Complementary alliance:
– Knowledge creation is not a prime objective
– One partner contributes technology and the
other facilitates entry into a difficult market
– Exploit each other with existing resources or
competencies
• Learning alliance
– Development of new knowledge where the
partners jointly participate in the same value
chain activities.
– Fuji-Xerox joint venture in Japan
• Resource alliance:
– Competitive pressures such as resource
constraints, political and business risks and
economies of scale may lead competitors to
join forces in a resource alliance
• Competitive alliance:
– NUMMI 50-50 joint venture between GM and
Toyota
– GM gained insights into Toyota’s
manufacturing system and Toyota learned how
to operate a US based manufacturing facility
 Planning and Negotiating
Alliances
• Successful alliances start with a strategy
not with a partner – seem obvious but it is
not always followed in practice
• HR must be involved early in exploring,
planning and negotiating alliances
• Partner selection
– HR issues to consider in partner selection
• Partner’s competencies in HRM
• How much the HR systems of the partners will
interface within the alliance
• Selecting Alliance Managers
– Flexible and adaptability
– Professional credibility

Alliance Manager
Building trust
Monitor partner contributions
Managing information flow
Assessing strategic viability
Aligning internal relationships
 Preparing for Negotiations
• Selecting the negotiation team
– Different venture requires different mixes of
entrepreneurial, analytical and political
competencies in the team
• Training for negotiations
– Cultural stereotype
 Negotiation challenges
• Equity control versus operational influence
• Board composition
• Appointing senior management
• HR policies within the alliance venture
 Implementing Alliance
• Once the partnership becomes operational
– a new set of people related issues
appears
– Managing the interfaces with the parent
– Management of people inside the venture
• Staffing alliances
• Influencing performance
• Aligning rewards
• Shaping Alliance careers
• Developing shared culture
 Supporting Alliance Learning
• Some alliances are created with knowledge
creation and learning as the focal
objectives
– Ex: canon and Ricoh aggressively attacked
Xerox market in US. Because Fuji-Xerox
competed successfully against the same
players in Japan.
– Xerox launched a massive ‘learning from
Japan’ – aimed at transferring Fuji-Xerox’s
capabilities back to the mother firm.
• Obstacles of Alliance Learning
– Defensive strategic intent
– Low priority of learning activities
– Inappropriate staffing
– Poor climate for knowledge exchange
Module-03
Searching for and obtaining potential job
candidates in sufficient numbers and quality so
that the organization can select the most
appropriate people to fill its job needs.
Process of gathering information for the
purposes of evaluating and deciding who
should be employed in particular jobs

Minimize the selection error

Staffing approach
Expatriate management
Repatriation management
It is argued that almost all employees at middle
management and more operative levels are
usually recruited locally, but this is not the case
when candidates for upper management posts
are being recruited.
The key issue is whether firm recruits internally
or externally
Approaches Ethnocentric
Polycentric
Geocentric
Re-giocentric
Philosophies of Ethnocentric predisposition
Management A nationalistic philosophy of management
whereby the values and interests of the parent
Ethnocentric company guide strategic decisions.
predisposition
Philosophies of Polycentric predisposition
Management A philosophy of management whereby
strategic decisions are tailored to suit the
Ethnocentric
cultures of the countries where the MNC
predisposition
operates.
Polycentric
predisposition
Philosophies of Regiocentric predisposition
Management A philosophy of management whereby
the firm tries to blend its own interests
Ethnocentric
with those of its subsidiaries on a
predisposition
regional basis.
Polycentric
predisposition

Regiocentric
predisposition
Philosophies of Geocentric predisposition
Management A philosophy of management whereby
the company tries to integrate a global
Ethnocentric systems approach to decision making.
predisposition

Polycentric
predisposition

Regiocentric
predisposition

Geocentric
predisposition
Ethnocentric
The company uses the approach developed in the
home country, and the values, attitudes, practices,
and priorities of headquarters determine the
human resources policies and practices
All key positions in a multinational being filled by
PCNs
Autonomy and strategic decisions are made at
headquarters.
Key positions in domestic and foreign operations
are held by headquarters personnel.
Advantages
Lack of qualified host-country nationals (HCNs)
Can reduce perceived high risks – good
communication, coordination and control links with
corporate headquarters
To ensure that the new subsidiary complies with
overall corporate objectives and policies or local
staff may not have the required level of
competence
Disadvantages
It limits the promotion opportunities of HCNs,
which may lead to reduced productivity and
increased turnover among that group
Adaptation of expatriate managers to host
countries often takes a long time
Compensation packages – considerable income gap
in favor of PCNs is viewed by HCNs as unjustified
Expatriates – changes may affect sensitivity to the
needs and expectations of their host-country
subordinates
Expatriates are very expensive to maintain in
overseas locations
Polycentric
HCNs are recruited to manage subsidiaries in their
own country and PCNs occupy positions at
corporate headquarters
PCNs are rarely transferred to foreign subsidiary
operations
Advantages
Eliminates language barriers
Removes the need for expensive cultural awareness
training programs
Lower profile sensitive political situations
Less expensive
Avoids the turnover of key managers
Disadvantages
Bridging gap between PCN and HCN managers –
language barriers, conflicting national loyalties and
cultural differences
HCN managers have limited opportunities to gain
experience outside their own country.
Regiocentric
Reflects the geographic strategy and structure of
the multinational
Staff may move outside their countries but only
within the particular geographic region
Enjoy greater degree of regional autonomy in
decision making
Advantages
Interaction between executives transferred to
regional headquarters
Sensitivity to local conditions
A way for a multinational to move gradually
towards geocentric
Disadvantages
It can produce federalism at a regional rather than
a country basis and constrain the organization from
taking a global stance
Staff may advance to regional headquarters but
rarely to positions at the parent headquarters
Geocentric
Utilizes the best people for the key jobs throughout
the organization, regardless of nationality
Nationality is ignored in favor of ability
Color of one’s passport does not matter when it
comes to rewards, promotion and development
Advantages
Assists in developing a global perspective and an
internal pool of labor for deployment throughout
the global organization
It supports cooperation ad resource sharing across
units
Disadvantages
Government may utilize immigration controls in
order to force HCN employment
Difficulty in obtaining a work permit for the
accompanying spouse or partner
Increased training and relocation costs.
Using Head-hunters
Cross national advertising
E-recruitment (Internet)
International graduate programme
Executive search with an average compensation
of over $100000 per year

Monsters
Newspapers and journals are used most
commonly.
Advertising has the advantage of reaching a
large audience of possible applicants.

Location specific
The kind of market they operate
Airport lounges, magazines, newspapers,
magazines and journey for works
Through internet technologies
Social medias etc.
Careers in website etc.
Many factors have been identified as predictors
of expatriate success.
Different selection criteria should be used for
different overseas job assignments.
 Technical ability

Cross-cultural
suitability

Family requirements

Country/cultural
requirements

Language

Factors involved in
expatriate selection
Technical ability
Basis of skills or competencies for the job
Cross-cultural suitability
Should include cultural empathy, adaptability,
diplomacy, language ability, emotional stability and
maturity
Family requirements
Spouse – makes the success of the overseas
assignment
County/cultural requirements
The lack of a work permit for the accompanying
spouse or partner may cause difficulties in
adjustment and even contribute to failure
Language
Ability to speak local language
The use of selection tests
Most of the selection tests have been devised in
the USA and therefore, may be culture-bound
Different pattern of usage across countries – the
use of psychological tests is very low in Germany
Most of the companies, use interview to assess
expatriate suitability
Generally Includes
Analytical
Willingness to take risk
Action-oriented
Able to look situation constructively and not
defensively
Able to deal with information from many sources
Able to delegate work and trust subordinates
Able to live with ambiguity and complexity
Why failure occurs?
Inability to adjust to the foreign culture
Spouse / partner dissatisfaction
Inability to adapt
Difficulties with family adjustment in the new
location
Difficulties associated with different management
styles
Culture and language difficulties
Issues associated with the accompanying partners
career development