International HRM

Module Number: 02

Module Name: International Business

International HRM

• Syllabus

➢ Cross-border Mergers and Acquisitions

➢ International Equity Joint Ventures

➢ International SMEs International Staffing Policy

➢ Recruiting and Selecting Staff for International Assignments

2
International HRM

AIM:

To train students with an understanding of the International Business

3
International HRM

Learning Objectives
.

• In today's linked global society, students must have a solid understanding of international commerce.
• Understand Cross border mergers and acquisitions
• Find out what E-Recruitment and Selection procedures mean and why they're important

4
International HRM

.
Learning Outcomes

• Explain the ideas of foreign trade and international business in international business.
• Understanding of International SMEs International staffing policy
• Learn about the benefits and cons of e-recruitment and e-selection.

5
International HRM

Table of Contents

1. Cross-border Mergers & Acquisitions

2. International Equity Joint Ventures
3. International SMEs International Staffing Policy
4. Recruiting & Selecting staff for International Assignments

6
International HRM

I. Cross-border Mergers & Acquisitions

7
International HRM

Courage is not the absence of fear. It is doing the thing you fear the most.
-Rick warren

8
International HRM

Cross-border Mergers & Acquisitions

9
International HRM

• Today's businesses must be rapidly expanding, efficient, profitable, agile, adaptable, and future-ready.

• They want to have a monopoly on the market.

• In today's global market, competing is nearly impossible.

• They collaborate with smaller businesses that have created or are creating new items.

• Some businesses concentrate on their own internal growth, leadership, and development.

• Deals that result in mergers or acquisitions are a good way to grow or expand.

10
 International HRM

• Merger - A merger is the merging of two or more independent business corporations into a single entity,
which usually involves the absorption of one or more firms by a dominating firm.
• Horizontal, vertical, and conglomerate mergers are the three types of mergers.

• Acquisition-The act of one business obtaining, directly or indirectly, shares, voting rights, assets, or control
over the management of another business is known as acquisition.

11
 International HRM

• Implementing cross-border mergers and acquisitions is an art, not a science. Each circumstance is

unique, with its own set of issues and possible answers, yet they are all feasible vehicles for

international policy. Cross Borer Alliances are partnerships between two or more companies from

different countries that are meant to benefit all parties.

• Cross Border Alliances can take two forms

a) Equity Arrangements

b) Non-Equity Arrangements

12
International HRM

• Motives Behind M&A

Mergers and acquisitions are typically carried out in the expectation of achieving financial gains.

The following are some of the potential benefits of M&As:

➢ Getting to the point of scale economics

➢ combining resources that are complementary

➢ Obtaining tax advantages and reducing inefficiency

➢ Obtaining exclusive rights to goods or services

➢ Increasing market share

➢ Expanding into new geographic regions and giving newcomer advancement chances for managers 13
International HRM

• Some other motives are:

➢ To provide improved capacity utilisation

➢ To make better procedure of the existing sales force

➢ To reduce managerial staff

➢ To gain economics of scale

➢ To smooth out seasonal trends in sales

➢ To gain access to new sellers, distributors, customers, products and creditors

➢ To gain new technology

➢ To reduce tax obligations 14

International HRM

Acquisition Strategies

15
International HRM

• The Hr Perspective Of Mergers And Acquisitions

• The key HR initiatives have included:

To create preliminary organizational designs and, as a result, identify the top three levels of management, or strategic

levels.

To analyze the key stakeholders and, as a result, allocate suitable resources in this one-of-a-kind collaboration

Retain critical personnel and, if possible, reduce unnecessary personnel

To establish a complete rewards plan for the amalgamated companies. To develop and implement a communications

strategy.

Payroll benefits and HR-IS integration

The ability to accomplish this at a faster rate. 16

International HRM

• Key Drivers Of Mergers And Acquisitions

Take appropriate action and make decisions in a fairly short amount of time which is the secret to hold onto good
people.

It is required to be candid with the employees, and always respect them and to let them know and make them
understand the benefits and importance of combined entities which will be a better and more valuable
organization.

It is always better to use ownership of the company which is represented by stock options and stock grants
whenever possible so as to direct a pull in one direction.

We should always make wise decisions about the people being employed and be honest about
or them.
There should be no discrimination among the people who are intended to leave and those that continue with the
Self
organization and both should be treated with equal respect. Financial Planner17
International HRM

• Some Examples Of Mergers And Acquisitions

Hindalco merger with Novelis
Aditya Birla’s Hindalco, the leading producer of aluminium in India, in Aug 2007 took over Novelis Inc so as to
further to reach and attain new heights of success. This takeover helped Hindalco to tread the length of the
industry’s value chain. At Hindalco, the employees of Novelis were not laid off so as to maintain a healthy and
peaceful atmosphere. Instead they stopped hiring the consultants which would be costly for the organization.
Hindalco also learned to cope with sensitive post merger integration issues. For example, Alcan faced a threat
from the working culture of Hindalco to which they reassured them by deciding to retain all of Indal’s senior
managers and that they aim to acquire talent rather than just assets

18
International HRM

Tech Mahindra merger with Satyam

Tech Mahindra after the merger seemed very considerate about the employees at Satyam due to the amount of
employees as deserve to be complimented upon this issue. On this basis they had decided to let Satyam work as
an individual entity with the name of Mahindra Satyam. The main reasons for this was
Number of employees at Tech Mahindra were very less compared to that of Satyam
Technologically and talent wise, Satyam was more advanced than Tech Mahindra
Prior to the merger, many employees had already left Satyam owing to its reputation at that time.
The McKinsey Quarterly, reports that the key employee retention is necessary else they tend to depart in search
of better, fresher and newer opportunities and challenges. Their position, their pay etc must be properly defined
so as to retain them.

19
International HRM

• Where Hr Comes In---

➢ Train Managers On The Nature Of Change

➢ Technical Re- Training

➢ Family Assistance Programmes

➢ Stress Reduction Programmes

➢ Explaining New Roles

➢ Helping People Who Lost Their Jobs

➢ Post Merger Team Building

20
 International HRM

• International Equity Joint Ventures

Introduction

❖ A business arrangement in which two or more parties agree to

pool their resources for the purpose of accomplishing a specific
task. This task can be a new project or any other business activity.
❖ In a joint venture (JV), each of the participants is responsible for profits, losses and costs associated with
it.
❖ However, the venture is its own entity, separate and apart from
the participants' other business interests.
❖ A JV can be Domestic or International.

21
International HRM

Joint venture

22
 International HRM

• Joint Ventures As An Entry Strategy

• JV’S regulated by Policies and Laws governing FDI

• Two Tier Approval Mechanism for JV’S:
- Automatic Approval Route
- FIPB Approval Route
• If the Foreign Partner has entered into JV in the same field before
then NOC of the previous JV partner and approval of the Government also required

23
International HRM

• Advantage
▪ Financial Resources can be shared
Fund can be generate together for bigger investment
▪ Reduction of Business Risk
A JV allows Investor Diversification A JV reduces Local Friction
▪ Economies Of Scale
A JV can be used to reduce Fixed cost per Product
▪ Control Over Functional Activities
A JV allows for direct Management of Business Activities

24
International HRM

• Advantage

▪ Sharing Technology and Management skills

The Competitive strengths of two parties can be combined
Higher profitability
▪ Market Penetration
A local JV partner knows the market
Rapid sales growth
▪ Host Country Incentives
Economics incentives add value to JV

25
International HRM

• Disadvantage
▪ Investment risk. although initial investment in JV need not necessarily be high.
▪ JV Profits are shared
Conflict could be there in cash distribution
▪ Shared Technologies can be used beyond the JV
▪ The management Process may be fraught with difficulties and conflicts (which happen more
often in JV)
▪ Local Management of an JV can be an unknown
▪ The possibility that JV may have over estimated as a form of international business activity.

26
International HRM

Joint Venture Risks

• Risks for an International JV may be classified as

▪Partner Risks
▪Venture Risks

27
International HRM

Partner Risks

*Compatibility
*Functional skills and resources
*Managerial resource
*Facilities and administrative support
*Governmental relations
*Financial resources
*Reputation in the market

28
International HRM

Venture Risks

29
 International HRM

• International SMEs International Staffing Policy

➢Approaches of staffing
➢Recruitment and Selection Procedures of Expatriates
➢Expatriate’s Success and failure factors
➢Women Expatriate
➢Non – expatriates their roles
➢Issues in staff selection

30
 International HRM

• International Managers
• An expatriate is an employee who works and reside in a foreign country
• Expatriate managers are mainly of two types
• PCNs (Parent country nationals)
• A national of a country of MNC’s headquarters
• TCNs (Third country nationals)
• A national of a country other than the MNCs home country or the country of
subsidiary
• Apart from the above another type of manager works for MNCs as international
managers
• HCNs( Host Country Nationals)
• A national of country of subsidiary
31
International HRM

• Approaches to staffing

➢ Ethnocentric policy

➢ Polycentric policy

➢ Geocentric policy

➢ Regiocentric policy

32
International HRM

• Ethnocentric approach

➢ Home country’s culture is to be imposed on subsidiaries” MNC’s exports its HR Policy from Home
country to foreign location.

➢ Strategic decisions are made at headquarters

➢ Key positions in domestic and foreign operations are hold by headquarters’ personnel

33
 International HRM

• Three factors are to be considered in the staff

➢ Should be able to adjust in family, cultures and personality problems to avoid failure.
➢ To succeed, should enjoy local entertainment, develop local relationships and communicate with locals.
➢ To achieve success, expatriates to have open attitude and take training towards host – country.

Under ethno centric, lines of communication are one

– directional, i.e. advice from headquarters. In fact, home country attitude and culture dominates.

34
International HRM

• Polycentric
“MNC’s seeks to adapt subsidiaries ”- to the local cultural needs of

➢ Each subsidiary is a distinct national entity with some decision-making autonomy

➢ Host-country nationals manage subsidiaries who are seldom promoted to HQ

positions

➢ Parent company nationals hold key headquarter positions

35
International HRM

For example, in international manufacturing and processing facilities in Mexico,

companies recruit with a sign announcing job openings outside the facility or by
employees introducing family members who are looking for jobs.

Another example is Hungary, where government attempts to combat unemployment have

led to the requirement that an organization must get permission from the Ministry of
Labor before hiring an expatriate

36
International HRM

• Geocentric

➢ A global approach - worldwide integration

➢ View that each part of the organization makes a unique contribution

➢ Nationality is ignored in favor of ability:

✓ Best person for the job
✓ Color of passport does not matter when it comes to rewards, promotion and development.

37
International HRM

• Regiocentric

➢ Reflects a regional strategy and structure;

➢ Regional autonomy in decision making;

➢ Staff move within the designated region, rather than globally.

38
International HRM

Nationals Advantages Disadvantages

PCN Org. control and coordination are The promotional opportunities of

maintained & facilitated Promising HCNs are limited.
managers are given international Adaptation to host country may take a
Exp long time.

HCN Language and other barriers are Control and coordination of HQ

eliminated. Hiring costs are reduced may be
and no work permit is required impeded
HCNs have limited career opportunity
outside the subsidiary

TCN Salary and benefits requirements Transfer must consider possible

may be lower than for PCNs. TCNs national animosities (e.g. India and
may be better informed than PCNs Pakistan) The host government may
about the host country environment. Present hiring of TCNs.

39
International HRM

40
International HRM

• Selection criteria for International Staffing

International selection is a two way process between the individual and the organization. A prospective
candidate may reject the expatriate assignment either for personal reasons, such as family considerations, or
for situational factors.

However, after an extensive review of literatures on the selection of expats, the researcher identified 18
variables and grouped them into four categories

•Technical Competency
•Relational Skills
•Ability to cope with variables and
•Family Situation

41
International HRM

42
International HRM

43
International HRM

• Self-Assessment Questions
• An acquisition is the same thing as:
a. an amalgamation
b. a spin-off
c. a merger
d. a takeover.
Answer. d

44
International HRM

• Self-Assessment Questions (cont….)

• The ways in which mergers and acquisitions (M&As) occur do not include:
a. conglomerate takeover
b. diversification
c. horizontal integration
d. vertical integration
Answer. b

45
International HRM

• Self-Assessment Questions (cont….)

The three broad approaches to company valuation do not include:
a. future earnings valuation
b. asset valuation
c. inventory valuation
d. stock market valuation
Answer: c

46
International HRM

• Case Study:
• Fortis’s Acquisition of Wockhardt Hospitals
a. Comment on Fortis’s strategy of inorganic growth in the Indian healthcare industry with
a special note on the rationale behind its acquisition of 10 Wockhardt hospitals. Critically
analyze the pros and cons of the acquisition.
b. Identify the challenges Fortis is going to face in the future, and explore strategies it can
adopt to overcome the challenges.

47
Introduction International HRM

Terminal Questions:
• What is the role of HR in managing the new culture during cross-cultural
mergers
• Explain ethnocentrism, polycentrism, regiocentrism and geocentrism
approaches and how they influence international business

48
International HRM

Summary

* Mergers and acquisitions are often carried out in the expectation of achieving financial gains. To justify a
merger or takeover, the two companies involved must be worth more combined than they were separately.

*IJVs can give small and medium-sized firms access to unique commercial prospects and new geographic
markets that they might not otherwise have access to.

*Companies should be mindful of the IJV's limitations and risks, and they should learn from some of the
unpleasant lessons acquired over the years.

*To increase the odds of success, rigorous preparation, deliberate organisation, and a willingness to stay
adaptable throughout the venture's life cycle are essential.

49
International HRM

• Assignment Questions 1
• The Adidas – Reebok Merger
Examine the circumstances that led Adidas to acquire Reebok. Was it a move driven by
compulsion or by choice? Justify your answer.

50
International HRM

• Assignment Questions 2

This assignment can be completed individually or in groups of not more than three.
Identify from newspapers, journals and magazine, articles in the past one month that talk about staffing
issues faced by an organisation. Discuss the article, and obtain as much information as you can from the
web/desk research about the organisation/industry
a. What is the nature of this organisation’s business? How does this impact the staffing issues discussed in
the article?
b. Make a proposal on how this organisation can combat the situation it faces.

51
International HRM

Topics URL Notes

Cross border merger and acquisition https://www.civilserviceindia.com/subject/Mana The link states the sources from where cross
gement/notes/cross-border-mergers-and- border mergers and acquisitions can be obtained
acquisitions.html

International Equity Joint Ventures https://www.dwt.com/insights/2012/05/internatio The link contain the international Equity Joint
nal-joint-ventures-a-practical-approach Ventures
International SMEs International Staffing Policy https://www.researchgate.net/post/Can_the_geoc Discuss the International SMEs International
entric_staffing_policy_be_applied_in_small_and Staffing Policy
_medium_enterprises

Recruiting and Selecting Staff for International http://cws.cengage.co.uk/dowling5/students/sam Analysis about Recruiting and Selecting Staff
Assignments ple%20chapters/31017_05_Ch05_p109-136.pdf for International Assignments

52
International HRM

• Video Links

Topics URL Notes

Cross border merger and acquisition https://www.youtube.com/watch?v=UGPBs Explains about cross border merger and acquisition
ZVI4Io

International Equity Joint Ventures https://www.youtube.com/watch?v=CQKuT Explain about International Equity Joint Ventures
u7sfsY

International SMEs International Staffing https://www.youtube.com/watch?v=IDOW Explain International SMEs International staffing policy
Policy K7F_3wc

Recruiting and Selecting Staff for https://www.youtube.com/watch?v=v- Explain Recruiting and Selecting Staff for International
International Assignments 84tWRzh9E Assignments

53
International HRM

• Text Books:
Gupta, S.C., International Human Resource Management, Macmillan Publishers India, 2010.
Tayeb, M., International Human Resource Management, Oxford University Press, 2005
• Reference Books:
K. Aswathappa., Sadhna Dash., International Human Resource Management, Tata McGraw Hill, 3e
Edition, 2020.
Dowling, P.J., Festing, M., and Engle, A.D., International Human Resource Management, 5th Edition,
Cengage Learning, 2012.
Edwards, T., and Rees, C., International Human Resource Management, Pearson, 2007

54