Please click here to access the new HRM Failures case associated with this chapter. HRM
Failures features real-life situations in which an HR conflict ended up in court. Each case
includes a discussion questions and possible answers for easy use in the classroom. HRM
Failures are not included in the text so that you can provide your students with additional
real-life content that helps engrain chapter concepts.
Chapter Summary
The chapter opens with a discussion of the recent forces that have increased expansion of firms
into international markets. The chapter then discusses the role of HRM in different cultural
contexts and the dimensions along which cultures may differ. Categories of international
employees and levels of international involvement are defined. Finally, the chapter presents
issues regarding the management of international employees.
Learning Objectives
After studying this chapter, the student should be able to:
1. Identify the recent changes that have caused companies to expand into international markets.
2. Discuss the four factors that most strongly influence HRM in international markets.
3. List the different categories of international employees.
4. Identify the four levels of global participation and the HRM issues faced within each level.
5. Discuss the ways companies attempt to select, train, compensate, and reintegrate expatriate
managers.
Extended Chapter Outline
Note: Key terms appear in boldface and are listed in the “Chapter Vocabulary” section.
Opening Vignette:
Smithfield Goes to China
This vignette, which talks about the acquisition of Virginia based Smithfield Food, the world’s
largest pork producer, by Chinese meat producer Shaunghui Group, illustrates how pervasive
globalization is in business today. The Luter family, who founded the company, commented
about how even a business that was family founded and operated is worth more in an
organization with an international vision that remaining a stand-alone company.
Discussion Question
1. Even for a well-known and highly admired domestic food production company, what are
the implications for the fact that acquisition of a domestic company by an international
firm is becoming increasingly more about access to markets and supply chain
opportunities and less about “staying local/domestic”?
The implications of Smithfield’s acquisition signaling the decreasing emphasis on
keeping business domestic are the rationale for such, including the fact that it portends
They will need to understand how to manage a workforce that is global, and they will
I. Introduction—Organizations now function in a global economy. U.S. businesses are
entering international markets, and at the same time, foreign companies are entering the
U.S. market
A. International expansion can provide a competitive advantage.
l. Entering different countries may provide large numbers of potential
customers.
2. Building production facilities in countries with low-cost labor may prove
cost-efficient. Maquiladora plants (foreign-owned plants located in
Mexico that employ Mexican laborers) provide low-skilled labor below
the cost in the United States.
3. The rapid increase in telecommunications and information technology
enables work to be done more rapidly, efficiently, and effectively around
the globe.
B. A number of key factors must be addressed in order to strategically manage HR in
an international context.
II. Current Global Changes—Recent social and political changes have accelerated the
movement towards international competition.
A. European Economic Community—The EEC is a confederation of most of the
European nations that agree to engage in free trade with one another, with
commerce regulated by the European Commission (EC).
B. North American Free Trade Agreement (NAFTA)—This agreement is between
Canada, the United States, and Mexico provides an even larger free market than
the EEC. Given Mexico’s low wage rates, this agreement has attracted many U.S.
low-skill jobs. However, it has also increased the employment opportunities for
Americans with higher-level skills.
C. The Growth of Asia—Asia provides a growth market for many firms. Japan,
China, Singapore, Hong Kong, and Malaysia are significant economic forces.
China presents a tremendous potential market for goods.
D. General Agreement on Tariffs and Trade (GATT)—GATT is an international
framework of rules and principles for reducing trade barriers across countries
around the world. It consists of over 100 member nations.
III. Factors Affecting HRM in Global Markets—Companies that enter global markets must
recognize that these markets are not simply mirror images of their home country. These
differences may have a particularly strong impact on the HRM function (see Text Figure
15.1).
A. Culture—The most important factor influencing international HRM. It is defined
as the set of important assumptions (often unstated) that members of a community
share.
1. Culture is important to HRM for two reasons:
a. It often determines laws, education, and economic systems
affecting HRM in global markets.
b. It often determines the effectiveness of various HRM practices.
2. Hofstede’s Cultural Dimensions—In research studies, five dimensions of
culture were identified (see Table 15.2 in the text for scores of various
countries and Figure 15.2).
a. Individualism/collectivism is the strength of the relation between
an individual and other individuals in the society, that is, the
degree to which people act as individuals rather than as members
of a group.
Example: In the United States, people are expected to look after
their own and their families’ interests (individualist culture). In
collectivist cultures like Japan, people are expected to put the good
of the larger community first.
b. Power distance describes how a culture deals with hierarchical
power relationships.
Example: Cultures with small power difference, such as Denmark
or Isreal, attempt to limit inequalities in power.
c. Uncertainty avoidance describes how cultures seek to deal with
the fact that the future is not perfectly predictable, and the degree
to which people in a culture prefer structured over unstructured
situations.
Example: Some cultures such as Greece socialize their people to
seek security through technology, law, and religion.
d. Masculinity-femininity describes the division of roles between
the sexes within a society.
Example: Feminine cultures such as Sweden or Norway promote
values that have traditionally been regarded as feminine, such as
valuing relationships, helping, nurturing, and caring for the
environment.
e. Long-term/short-term orientation is the tendency of a culture to
focus on long-term benefit or short-term outcomes.
Example: Many Far Eastern countries with very long histories
have a long-term orientation. The United States has a short term
orientation, in which planning looks at the near future— in
business, for instance, on a quarterly or yearly basis.
3. Implications of Culture for HRM—Cultural characteristics influence the
ways managers behave in relation to subordinates as well as the
perceptions of the appropriateness of various HRM practices.
a. Cultures differ strongly on such things as how subordinates expect
leaders to lead, how decisions are handled, and what motivates
people.
b. Cultures strongly influence the appropriateness of HRM practices.
c. Cultures may influence compensation systems.
d. Cultural differences can affect the communication and
coordination processes in organizations.
Integrity in Action:
If It Quacks like an Ethical Leader. . .
This case speaks about how Dan Amos, CEO of Aflac Insurance, and his company model
integrity. Amos has been cited as “Best CEOs in America” by Institutional Investor magazine
five times and Aflac named one of the “100 Best Companies to Work For” for 14 straight years.
All of this while concurrently growing to a $9 billion company from a $2.7 billion company over
10 short years (nearly quadrupling in size). Amos claims he is guided by his business version of
the “Golden Rule” – that is, “Give your employees everything they need to succeed, and they
will give everything they can to help the business succeed.” He also encourages risk taking
concurrent with offering job security. He also walks the walk when it comes to integrity giving
up his $13 million golden parachute and $2.8 million bonus in 2008 during the financial crisis.
Discussion Question
1. How does Dan Amos’ attitude about pay fit with the culture that exists in the U.S.?
Student responses can vary, but Amos has illustrated a bigger concern for the company and for
Evidence-Based HR
National culture is important, but there are significant differences in cultures within nations as
well. Recent research has reexamined Hofstede’s work, and the results of that work suggest that
while one cannot ignore national culture, one must not think that certain HR practices may not be
effective simply based on a regard for national culture. People tend to be drawn to organizations
whose cultures match their individual, as opposed to national, value systems.
Exercise
Break the class into sub-groups, and have each sub-group select a country from Geert Hofstede’s
website, which is http://www.geert-hofstede.com. Have each sub-group study the characteristics
and culture of their chosen country, and prepare and present a report on that culture. Facilitate as
a class a large group discussion on how class members view their own individual assessments of
themselves along the Hofstede dimensions of culture (uncertainty avoidance, power distance,
masculinity/femininity, and collectivism/individualism).
B. Education/Human Capital—A company’s potential for finding and maintaining a
qualified work force is a critical element of any decision to expand
internationally.
1. A country’s human capital is determined by a number of variables,
primarily, educational opportunity.
2. Countries with low human capital attract facilities that require low skills
and low-wage levels.
Example: U.S. companies have located low-skill, low-wage jobs in
Mexican maquiladoras.
3. Countries with high human capital are attractive sites for direct foreign
investment that creates high-skill jobs.
Example: Ireland’s economy does not provide enough jobs for its highly
educated labor force. U.S. companies are locating there to take advantage
of high skills. The Met Life Insurance Company set up a facility for Irish
workers to analyze medical insurance claims.
Competing Through Technology:
Brazil Becomes the Social Media Capital
This case discusses the rising popularity of social media such as Facebook, YouTube and Twitter
in Brazil. Facebook has 65 million users registered in Brazil – 2nd only to the U.S. – and also is
the second biggest market for unique visitors for YouTube. These statistics, coupled with the fact
that while average time spent on Facebook recently dropped by 2%, use in Brazil grew 208%
making Brazil an important social media market. This has caught the attention of many
companies who are working to increase their capacity in the country as well.
Discussion Question
1. How has social media impacted education/human capital and economies around the
globe?
Of course, student responses may vary. Suggestions for the direction of the discussion
however could be pointed towards issues like availability of information about
Competing Through Globalization:
Apple Returns to the U.S.
This case discusses the recent changes in focus on production locations by Apple. Throughout
the 1990’s, Apple began shifting production to Asia due to the lure of lower wages, resulting in
plant closures in the U.S., but continually increasing wages in China has other supply chain
issues in the region have caused Apple to begin to revisit their decisions. Recent announcements
by Apple to invest upwards of $100 million in production facilities in the U.S. may signal better
times ahead for U.S. based manufacturing, but other issues such as shortages of specific skills
among US workers (such as tool and die makers) continues to be an impediment.
Discussion Question
1. How has the economic system and education/human capital impacted Apple’s decision to
restart some manufacturing in the U.S.?
According to the evidence outlined in the vignette, although world economic conditions
C. Political/Legal System—This system often dictates the requirements of certain
HRM practices, such as training, compensation, hiring, firing, and layoffs. The
legal system is an outgrowth of the culture, reflecting societal norms.
1. The United States has led the world in eliminating discrimination in the
workplace. Additionally, federal regulations control the process of labor
management negotiations.
2. Germany has provided employees with a legal right to “codetermination”
in the workplace. At the plant level, work councils influence HRM
policies on issues such as working hours, pay methods, and hiring.
3. The EEC’s Community Charter of December 9, 1989, provides for the
fundamental social rights of workers: freedom of movement, freedom to
choose one’s occupation and be fairly compensated, and so forth.
D. Economic System—A country’s culture is integrally tied to its economic system,
which provides many of the incentives for developing its human capital.
1. Under socialist economies, there is little economic incentive to develop
human capital, but ample opportunity because education is free.
2. In capitalist systems, the opposite situation exists, with higher tuitions at
state universities but with economic incentives through individual salary
differences (see Figure 15.2).
IV. Managing Employees in a Global Context
A. Types of International Employees
1. A parent country is the country in which the company’s corporate
headquarters is located.
2. A host country is the country in which the parent country organization
seeks to locate (or has already located) a facility.
3. A third country is a country other than the host country or parent country.
4. An expatriate is an employee sent by a company in one country to
manage operations in a different country.
5. Parent-country nationals (PCNs) are employees who were born and live
in a parent country.Host-country nationals (HCNs) are those employees
who were born and raised in the host country, as opposed to the parent
country.
6. Third-country nationals (TCNs) are employees born in a country other
than the parent country or host country but who work in the host country.
B. Levels of Global Participation (see text Figure 15.3).
1. Domestic – Most companies begin by operating within a domestic
marketplace. These companies face an environment with very similar
cultural, human capital, political/legal systems, and economic systems,
although some variation might be observed across states and geographic
areas.