Int. HRM Ch02

The Organizational Context
Presented by
Prof. Dr. Md. Mayenul Islam
Chapter Objectives
We learn:
• Structural responses to international growth
• Control and coordination mechanisms,
including cultural control.
• Effect of responses on human resource
management approaches and activities.
IHRM Chapter 2 2
Figure
Management demands/elements of international growth
2-1
IHRM Chapter 2 3
The path to global status
• Organizational structures change due to:
• Strain imposed by growth and geographical
spread.
• The need for improved coordination and
control across business units.
• The constraints imposed by host-government
regulations on ownership and equity.
Multinationals are not born overnight, the evolution from a
domestic to a truly global organization may involve a
long and somewhat tortuous process with many
diverse steps, as Figure 2-2. (Next Slide)
Figure
2-2
Stages of internationalization
IHRM Chapter 2 5
The path to global status (Cont.)
• Export:
• The typically is the initial stage for manufacturing firms
entering international operations. As such, it rarely
involves much organizational response until the level of
export sales reaches a critical point.
• Exporting often tends to be handled by an intermediary as
a local market knowledge is deemed critical. As, export
sales increase, however, an export manager may be
appointed to control foreign sales and actively seek new
markets. This person is commonly from the domestic
operations.
• Further growth in exporting may lead to the sales
department, as the firm become more committed to , or
dependent upon, its foreign export sales, as Figure 2-3.
• At this stage, exporting is controlled from the domestic-
based home office, through a designated export manager.
The role of the HR department is unclear, as indicated
Figure 2-3.
Figure
2-3
Export department structure
IHRM Chapter 2 7
The path to global status (contd.)
• Sales Subsidiary
• As the firm develops expertise in the foreign
markets, agents and distributiors are ofen
replaced by direct sales with the establishment
of sales subsidiaries or branch offices in the
foreign market countries. The export manager
may be given the same authority as other
functional managers, as illustrated in Figure 2-4.
• At this point, the HR department becomes
actively involved in the personnel aspects of the
firm’s international operations,
Figure
2-4
Sales subsidiary structure
IHRM Chapter 2 9
• International Division
• For some firms, it is a short step from establishment of a
sales subsidiary to a foreign production or service facility.
This step may be considered small if the firm is already
assembling the produc abroad to take advantage of cheap
labor or to save shipping costs or tariffs. Foreign
production/ service operations tend to the creation of a
separate international division in which all international
activities are grouped, as Figure 2-5 demonstrates.
• In reference to Figure 2-5, there may be contact between
the HR managers in the two country subsidiaries, and the
HR manager at corporate headquarters regarding staffing
issues.
• The role of corporate HR staff is primarily with expatriate
management: though there will be some monitoring of the
subsidiary HR functions. The export department may have
been charge of international staffing issues and instigated
required personnel responses.
Figure
2-5
International division structure
IHRM Chapter 2 11
• Global Product/ Area Division
• Over time, the firm moves from the earky foreign production
stage into a phase of growth through production, or service,
standardization and diversification. As a results of these
various forces for change, the multinational confronts two
major issues of structure:
• 1. The extent to which key decisions are to be made at the
parent-country headquarters or at the subsidiary units
(centralization versus decentralization).
• 2. The type or form of control exerted by the parent over the
subsidiary unit. The structural response, at this stage on
internationalization, can be either a product/service based
global structure or an area based structure. See Figure 2-6a
and 2-6b.
• As part of the process of accommodating subsidiary
concerns through decentralization, the MNE strive to adapt
its HRM activities to each host country’s specific
requirements. This naturally impacts on the corporate HRM
functions.
Figure
2-6a
Global product division structure
IHRM Chapter 2 13
Figure
2-6b
Global area division structure
IHRM Chapter 2 14
Figure
2-7
Global matrix structure
IHRM Chapter 2 16
International matrix structure is difficult
Matrix is all but unmanageable because of:
1. Dual reporting, which leads to conflict and confusion.
2. The proliferation of communication channels which creates
informational logjams.
3. Overlapping responsibilities, which produce turf battles and a
loss of accountability.
4. The barriers of distance, language, time and culture, which often
make it very difficult for managers to resolve conflicts and clarify
confusion.
IHRM Chapter 2 17
Figure
2-8
The networked organization
IHRM Chapter 2 19
The multi-centered networked organization
Management involves less hierarchical structure and
features 5 dimensions:
1. Delegation of decision-making authority to
appropriate units and levels.
2. Geographical dispersal of key functions across
units in different countries.
3. Delayering of organizational levels.
4. De-bureaucratization of formal procedures.
5. Differentiation of work, responsibility and
authority across the networked subsidiaries.
IHRM Chapter 2 20
The place of the HR function in structural forms
• There has been little direct investigation into

how the HR functions develops in respons
to structural changes as a consequence of
international growth. The authors found
three distinct groups that they describe as
follows:
• 1. Centralized HR Companies
• 2. Decentralized HR Companies
• 3. Transition Companies
Different Countries Take Different Paths
• MNE may develop global capabilities by

an emphasis on product diversity, leading
to worldwide product division structures, or
alternatively, by an emphasis on cultural
responsiveness, leading to regional or
area division structures,, the queston
arises as to what role does the cultural
origin of the multinational play in the path
to globalization? See Figure 2-9 for
presentation of this issue.
Figure
2-9
The role of MNE culture of origin
IHRM Chapter 2 23
Figure
2-10
Control strategies for multinational firms
IHRM Chapter 2 24

Int. HRM Ch02

Uploaded by

Copyright:

Available Formats

Int. HRM Ch02

Uploaded by

Document Information

Original Description:

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Int. HRM Ch02

Uploaded by

Copyright:

Available Formats

The Organizational Context

• There has been little direct investigation into

• MNE may develop global capabilities by

You might also like