Global Business Strategy

What are the main advantages and disadvantages of the ethnocentric, polycentric, and geocentric approaches to staffing policy?  When is each approach appropriate?

The main advantages of the ethnocentric approach to staffing policy are the ability to ensure that the firm in question has the ability to staff its ranks with qualified individuals from the host country. These individuals will therefore share linguistic and cultural similarities with each other and offer a united front in terms of cultural values that will maintain a solid corporate culture. This approach, however, has its disadvantages. This particular method of staffing policy limits advancement opportunities for citizens of the host country and prevents the rise of local talent experienced in the operations of the company to achieve positions of power and authority. In essence, this leads to “cultural myopia”, where a single culture dominates and controls the entirety of the firm's operations through ethnic exclusion. The ethnocentric approach is appropriate when a firm seeks to form an international presence while still maintaining a united cultural front. The polycentric approach allows for the firm to recruit host country nationals to run the firm's subsidiaries in their particular region. The advantages are that local talent and cultural diversification are allowed to flourish, and that host country staff members may in fact be cheaper than foreign workers. The disadvantages, however, are that members of the local talent pool have only a few opportunities to achieve positions of power outside of their local region. Secondly, an unbridgeable gap exists between host country executives and the upper management of the parent country. The polycentric approach is appropriate when the parent firm seeks to localize and integrate with the host country. The geocentric approach is one where quality of work and merit determines who will staff key positions in the firm. The advantages include the capacity for the firm to embrace the entirety of its talent pool without concern for excluding people based on ethnic lines, and the strength of an international breed of executives and managers that are capable of interacting with different companies. The disadvantages, however, include problems with complex immigration laws and the associated costs. The geocentric approach is appropriate when firms are attempting to pursue globalization or strong transnational business model, as it allows for maximum talent acquisition across a broad swath of the firm's regions. 

Research suggests that many expatriate employees encounter problems that limit both their effectiveness in a foreign posting and their contribution to the company when they return home. What are the main causes and consequences of these problems, and how might a firm reduce the occurrence of such problems?

The main causes for the failure of expatriate employees include the inability of the individual to deal with the responsibility of overseas operations, the employee's individual lack of emotional maturity, the difficulty in adjusting to the new culture and region, and the inability of the employee's spouse to successfully fit in with the new culture of which they are now a part. European spouses, in particular, are shown to have difficulty in adjusting well to the foreign cultures they are now required to live in.  To reduce the occurrence of such problems, firms can implement harsher selection procedure and help to rate the likelihood of expatriate success on four major criteria: self-orientation, others-orientation, perceptual ability, and cultural toughness. Self-orientation is the strength of the employee's confidence, psychological well-being, and self-worth; others-orientation is the extent to which the employee can interact well and integrate with foreign cultures; perceptual ability is the capacity for the employee to understand how and why people in a foreign culture behave as they do; and cultural toughness is the level to which an employee can integrate himself and adjust to life in a foreign culture. Thus, cultural, language, and practical training are methods by which expatriate failure can be reduced. Cultural exploration and training attempts to create a sense of respect and appreciation for the foreign culture in which the employee is now a part. Language training helps to integrate expatriates into the host country, and practical training helps with the daily living of life in a foreign country. 

What is the link between an international business's strategy and its human resource management policies, particularly with regard to the use of expatriate employees and their pay scale?

Expatriate employees are usually paid on the “balance sheet approach”, which offers an adjusted pay to individuals across the various countries in which a firm operates as to ensure equal, or closely equal, standards of living in the host country as in the parent nation. Compensation, therefore, consists of a base salary, a bonus or premium for accepting a post in a foreign nation, as well as various bonuses and allowances, tax benefits, and other benefits such as extra health or retirement funds. The base salary is usually similar to the salary for the same or similar position in the parent country, the foreign service premium is the extra pay offered for service abroad, and various allowances are allocated for hardship, housing, cost-of-living, and education. Moreover, barring diplomatic procedures in the form of a tax treaty, an expatriate employee is required to pay income tax in the host country. Thus, firms often will cover the cost of this foreign income tax to induce individuals into accepting foreign postings. 

In what ways can organized labor constrain the strategic choices of an international business?  How can an international business limit these constraints?

Organized labor is critical to the effective implementation of business strategies abroad. Since a firm's capacity to conduct operations overseas can be considerably crippled by the efforts of organized labor, efforts to appease and negotiate with domestic organized labor is a primary concern of many international firms. Organized labor, therefore, maintains two primary concerns—an international firm can threaten to move production elsewhere, thereby depriving domestic labor of employment, and secondly there is a concern that international firms will attempt to borrow foreign labor practices and implement them domestically in the parent nation. Thus, organized labor can attempt to set up its own comparative international structure, it can push for government intervention to hamper efforts to move production overseas, and it can respond to international pressure by addressing its concerns to the United Nations and other international organizations of states that attempt to regulate the behavior of nations. International business, therefore, can attempt to both decentralize labor relations to a local level, thereby reducing the organizational structure of any large labor movement, as well as stressing the usefulness of implementing large scale organization efforts among workers. By organizing workers, the particular method by which an international firm structures its workers can be a powerful tool for business owners. However, the primary method of limiting the power of organized labor is to threaten to move production elsewhere and to decentralize worker unions and labor groups so that there is no powerful, transnational labor force capable of opposing the power of an international firm. 

What would be your strengths and weaknesses for an assignment in another country? What specific action steps can you take to strengthen the weakness? 

The primary concern I would have with a post in a foreign country would be the language barrier, as being placed in a nation where English is not the common tongue would make interaction with the host population difficult and frustrating. The ability to interact with foreign cultures with judgment or fear is a definite strength. However, only some international firms offer language training and practical ways to adjust to life in a foreign nation, which is an unfortunate cost-saving maneuver. Specifically, taking relevant language courses during the preparatory phase of an international posting as well as familiarizing oneself with local customs, mannerisms, and cuisine are logical and effective steps to address the language issue. 

How does the McDonald's approach help the company to take local differences into account when reviewing the performance of different country managers and awarding bonus pay? 

The McDonald's approach is effective in utilizing award bonuses to country managers and makes an honest effort to appreciate regional variations in economic and social considerations. Through this recognition, McDonald's allows for increased productivity and sales based on local area research and the ability to ensure that managers are paid equally between all regions. By equalizing pay between regions after adjusted for cost-of-living expenses and other economic factors, McDonald's does well to guarantee that country managers receive similar compensation in every subsidiary region.