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international human resource management
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Strategic ObjectivesMultinational companies need to meet the challenges of global efficiency, multinational flexibility and worldwide learning.
Global efficiency can be enhanced both by increasing revenues and by lowering costs.
Multinational flexibility is defined as ‘the ability of a company to manage the risks and exploit the opportunities of the global environment’
macro-economic factors, such as wars, interest and wage rates, exchange rates;
policy actions of national governments, such as expropriation and changes in exchange rates;
Responses of competitors in the host market;
Resources, including natural, financial and human resources.
The very presence of multinational companies in diverse national environments creates opportunities for worldwide learning.
Companies that follow a multidomestic1 strategy will give
prime importance to one of the means – national
differences – to achieve the different strategic objectives.
increasing revenues,
through differentiating their products and services to respond
to differences in consumers’ tastes and preferences and
government regulations.
Companies that follow an international strategy focus
primarily on one of the ends – worldwide learning – and use
the three different means available to achieve this end.
The drawback of this strategy is that although it is very efficient
at transferring knowledge across borders, it does not do a very
good job in achieving either global efficiency or flexibility.
For companies that follow a global strategy, meeting the
objective of global efficiency takes pride of place and all
means are used to achieve this objective. (Mean)
differences in factor costs
by locating production in low cost countries
Concentration and centralization of production and R&D activities
Companies following a transnational strategy acknowledge
that all of these different combinations of means and ends
have their own merits and might be very suitable in specific
industries.
The period between the two world wars was
characterized by a rise in nationalistic feelings.
Countries became more and more protectionist and
erected high tariff barriers.
There were large national differences in consumer
preferences and communication and logistical barriers
remained high.
Led to a decentralization of decision-making.
Family ownership had been the dominant tradition
and therefore organizational processes were built on
personal relationships and informal contacts rather
than formal structures and systems.
US companies developed new technologies and
products.
They were almost forced into the international
market by spontaneous export orders and
opportunities for licensing.
Later they started making their products in
manufacturing facilities in Western Europe and in
developing countries.
It involves sequential diffusion of innovations that
were originally developed in the home market.
Subsidiaries are dependent on the parent
company for new products, processes or ideas.
In the 1960s and 1970s the successive reductions in
tariff barriers began to have their full impact.
This was accompanied by declining international
transport costs and communication barriers.
Furthermore, new electronic technologies increased
the minimum efficient scale in many industries.
In this kind of industry, a firm’s competitive position
in one country is significantly influenced by its
position in other countries.
Rivals compete against each other on a truly
worldwide basis.
Trade barriers were erected again to limit exports and foreign direct investments were regulated by industrial policies.
Flexible manufacturing reduced the minimum efficient scale by employing robotics and CAD/CAM technologies.
The use of software became important in a growing number of industries (from telecommunications to computers and consumer electronics).
A transnational strategy would be a deliberately planned strategy to have an ‘adaptive’, ‘incremental’, ‘muddling through’ or ‘emergent’ strategy.
Assets, resources and capabilities are neither centralized nor completely decentralized.