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Global Business Today Ninth Edition Chapter 17
Global Human Resource Management
Chapter Outline
OPENING CASE: The Strategic Role of Human Resources at IBM
INTRODUCTION
THE STRATEGIC ROLE OF INTERNATIONAL HRM
STAFFING POLICY
Types of Staffing Policy
Expatriate Managers
Management Focus: Managing Expatriates at Royal Dutch/Shell
The Global Mind-Set
TRAINING AND MANAGEMENT DEVELOPMENT
Training for Expatriate Managers
Repatriation of Expatriates
Management Development and Strategy
Management Focus: Monsanto’s Repatriation Program
PERFORMANCE APPRAISAL
Performance Appraisal Problems
Guidelines for Performance Appraisal
COMPENSATION
National Differences in Compensation
Management Focus: Global Compensation Practices at McDonald’s
Expatriate Pay
INTERNATIONAL LABOR RELATIONS
The Concerns of Organized Labor
The Strategy of Organized Labor
Approaches to Labor Relations
SUMMARY
Global Business Today Ninth Edition Chapter 17
CRITICAL DISCUSSION QUESTIONS
CLOSING CASE: MMC China
Learning Objectives
1. Summarize the strategic role of human resource management in the international businesses.
2. Identify the pros and cons of different approaches to staffing policy in the international business.
3. Explain why management may fail to thrive in foreign postings.
4. Recognize how management development and training programs can increase the value of
human capital in the international business firm.
5. Explain how and why performance appraisal systems might vary across nations.
6. Understand how and why compensation systems might vary across nations.
7. Understand how organized labor can influence strategic choices in international business firms.
Chapter Summary
This chapter focuses on the challenging topic of global human resource management (HRM). The
term “expatriate manager” is introduced. The task of staffing foreign subsidiaries is discussed. In
this area, firms typically pursue either an ethnocentric, polycentric, or geocentric approach. This
section is followed with an explanation of the challenges involved in selecting expatriate
managers. Expatriate managers often fail in their overseas assignments for a variety of reasons,
ranging from the inability of their spouses to adjust to living overseas to a manager's personal or
emotional maturity. Techniques that can be used to reduce expatriate failure are presented and
discussed. The chapter also discusses a number of other HRM topics in the context of global
management. The topics of training and management development are discussed, along with
performance appraisal and compensation. The chapter concludes with a discussion of labor issues
in the international business.
Opening Case: The Strategic Role of Human Resources at IBM
Summary
The opening case explores human resources at IBM. In the early 2000s, IBM implemented a new
human resources strategy called Workforce Management Initiative (WMI). Under the WMI
strategy, IBM developed a single, integrated approach to hiring, managing, and deploying
managers. The goal was to have the right person with the right skills in the right place at the right
time. Discussion of the case can revolve around the following questions:
Global Business Today Ninth Edition Chapter 17
Suggested Discussion Questions
QUESTION 1: Reflect on the goals of IBM when it implemented its Workforce Management
Initiative (WMI). Why was the initiative so important to the overall success of IBM’s global
strategy?
QUESTION 2: IBM believes that its Workforce Management Initiative (WMI) has saved it some
$1.4 billion dollars within the first four years of being implemented. Do you see any drawbacks of
the strategy?
Lecture Note: To extend this discussion, consider
{http://www.forbes.com/sites/joshbersin/2013/01/31/ibm-launches-its-smarter-workforce-
initiative/}, {http://www.businessweek.com/articles/2014-10-20/ibm-is-in-even-worse-shape-than-
it-seemed}, and {http://www.businessweek.com/articles/2014-05-22/ibms-eps-target-unhelpful-
amid-cloud-computing-challenges}.
Teaching Tip: To learn more about IBM, go to the company’s web site at
{http://www.ibm.com/us/en/}.
Chapter Outline with Lecture Notes, Video Notes, and Teaching Tips
INTRODUCTION
A) Human resource management (HRM) refers to the activities an organization carries out to
utilize its human resources effectively. These activities include determining the firm's human
Global Business Today Ninth Edition Chapter 17
resource strategy, staffing, performance evaluation, management development, compensation, and
labor relations.
B) The role of HRM is complex enough in a purely domestic firm, but it is more complex in an
international business, where staffing, management development, performance evaluation, and
compensation activities are complicated by the profound differences between countries in labor
markets, culture, legal systems, economic systems, and the like.
C) The HRM function must also deal with a host of issues related to expatriate managers
(citizens of one country working abroad).
Teaching Tip: There are a number of private HRM firms that provide selection, training and
repatriation services for expatriate managers. An example of one of these companies can be found
at {http://www.expat-repat.com/}.
THE STRATEGIC ROLE OF INTERNATIONAL HRM
A) Success in international business requires that HRM policies be congruent with the firm’s
strategy (see Figure 17.1 in the text).
Video Note: To expand this discussion, consider the video in the International Business Library on
Pinterest (http://www.pinterest.com/mheibvideos/) Yum! To Bring First KFC to Myanmar in 2015.
STAFFING POLICY
A) Staffing policy is concerned with the selection of employees who have the skills required to
perform a particular job. Staffing policy can be viewed as a major tool for developing and
promoting a corporate culture (the organization’s norms and value systems).
Types of Staffing Polices
B) Research has identified three main approaches to staffing policy within international
businesses. These have been characterized as an ethnocentric approach, a polycentric approach
and a geocentric approach.
The Ethnocentric Approach
C) An ethnocentric approach to staffing policy is one in which key management positions in an
international business are filled by parent-country nationals. The policy makes most sense for
firms pursuing an international strategy.
D) Firms pursue an ethnocentric staffing policy for three reasons: First, the firm may believe there
is a lack of qualified individuals in the host country to fill senior management positions. Second,
the firm may see an ethnocentric staffing policy as the best way to maintain a unified corporate
culture. Third, if the firm is trying to create value by transferring core competencies to a foreign
Global Business Today Ninth Edition Chapter 17
operation, as firms pursuing an international strategy are, it may believe that the best way to do
this is to transfer parent country nationals who have knowledge of that competency to the foreign
operation.
Video Note: Some experts believe that the United States is falling behind in developing managers
with the types of skills necessary to be successful in the future. To learn more about this, consider
the videos in the International Business Library on Pinterest
(http://www.pinterest.com/mheibvideos/) High-Tech School Prepares Students for Shifting
Economy and High-tech Companies Seek to Hire More Foreign Workers.
E) Despite the rationale for pursing an ethnocentric staffing policy, the policy is now on the wane
in most international businesses. There are two reasons for this. First, an ethnocentric staffing
policy limits advancement opportunities for host country nationals. Second, an ethnocentric policy
can lead to cultural myopia (a failure to understand host-country cultural differences that require
different approaches to marketing and management).
The Polycentric Approach
F) A polycentric staffing policy is one in which host country nationals are recruited to manage
subsidiaries in their own country, while parent country nationals occupy the key positions at
corporate headquarters. While this approach may minimize the dangers of cultural myopia, it may
also help create a gap between home and host country operations. The policy is best suited to
firms pursuing a localization strategy.
G) There are two advantages of the polycentric approach. First, the firm is less likely to suffer
from cultural myopia, and second, this staffing approach may be less expensive to implement than
an ethnocentric policy. There are two important disadvantages to the polycentric staffing approach
however. First, host country nationals have limited opportunities to gain experience outside their
own country and thus cannot progress beyond senior positions in their own subsidiaries. Second, a
gap can form between host country managers and parent country managers.
The Geocentric Approach
H) A geocentric staffing policy is one in which the best people are sought for key jobs throughout
the organization, regardless of nationality. This approach is consistent with building a strong
unifying culture and informal management network. It is well suited to firms pursuing either a
global or transnational strategy. The immigration policies of national governments may limit the
ability of a firm to pursue this policy.
I) The advantages of a geocentric approach to staffing include enabling the firm to make the best
use of its human resources and build a cadre of international executives who feel at home working
in a number of different cultures. The disadvantages of geocentric approach include difficulties
with immigration laws and costs associated with implementing the strategy.
Summary
Global Business Today Ninth Edition Chapter 17
J) The advantages and disadvantages of each of the three main approaches to staffing policy are
summarized in Table 17.1 in the text.
Expatriate Managers
K) A prominent issue in the international staffing literature is expatriate failure - the premature
return of an expatriate manager to his or her home country.
Lecture Note: The Mercer Human Resource Consulting group conducts studies on a variety of
issues related to expatriate managers. For example, consider
{http://www.mercer.com/newsroom/ten-resolutions-for-managing-globally-mobile-talent-in-
2014.html} and {http://www.mercer.com/events/webcasts/local-plus-assignments.html}.
Expatriate Failure Rates
L) The costs of expatriate failure can be substantial. According to a study by Rosalie Tung, the
main reasons for expatriate failure among U.S. firms seem to be 1) an inability of an expatriate's
spouse to adapt to a foreign culture, 2) an inability of the employee to adjust, 3) other family-
related reasons, 4) the manager’s personal or emotional maturity, and 5) an inability to cope with
larger overseas responsibilities (see Table 17.2 in the text).
M) Managers of European firms gave only one reason consistently to explain expatriate failure: the
inability of the manager’s spouse to adjust to a new environment. For Japanese firms, the reasons
for failure, in descending order of importance, were an inability to cope with larger overseas
responsibility, difficulties with new environment, personal or emotional problems, a lack of
technical competence, and the inability of a spouse to adjust.
Management Focus: Managing Expatriates at Royal Dutch/Shell
Summary
This feature examines how Royal Dutch/Shell, a global petroleum company employing over
100,000 people manages its some 5,500 expatriates. The international mobility of its workforce is
an important part of Shell’s overall philosophy. However, in the early 1990s, the company found
that it was having an increasingly difficult time recruiting personnel for foreign postings.
Discussion of the feature can begin with the following questions:
Suggested Discussion Questions
1. Shell’s commitment to the success of its foreign assignments is demonstrated by its efforts to
uncover expatriate concerns. Discuss the results of Shell’s survey to its present and past expatriates
and families. How do these results compare to the results of other studies exploring expatriate
failure?
© 2016 by McGraw-Hill Education.
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330
2. Shell has implemented several changes to its expatriate program including providing education
assistance to families with children, and establishing a Spouse Employment Center to help locate
employment opportunities. In your opinion, will these programs “solve” Shell’s problems, or is
there still more to be done?
Teaching Tip: To learn more about Shell, go to the company’s web site at
{http://www.shell.com}.
Expatriate Selection
N) One way of reducing expatriate failure rates is through improved selection procedures.
Mendenhall and Oddou identified four dimensions that seem to predict success in a foreign
posting: self-orientation, others-orientation, perceptual ability, and cultural toughness.
O) Self-orientation attributes strengthen the expatriate's self-esteem, self-confidence, and mental
well-being. Others orientation refers to how the attributes of this dimension enhance the
expatriate’s ability to interact effectively with host-country nationals. Perceptual ability refers to
the ability to understand why people of other countries behave the way they do. Cultural toughness
refers to the fact that how well an expatriate adjusts to a particular posting tends to be related to the
country of assignment.
The Global Mindset
P) A global mindset, one that is characterized by cognitive complexity and a cosmopolitan
outlook, may be the fundamental attribute of a global manager. Managers with a global mindset
can deal with high levels of complexity and ambiguity and are open to the world.
Q) Most firms fail to test employees for the attributes that have been shown to improve expatriate
success, and instead select expatriate managers primarily on the basis of technical expertise.
Global Business Today Ninth Edition Chapter 17
TRAINING AND MANAGEMENT DEVELOPMENT
A) Selection is just the first step in matching a manager with a job. The next step involves training
the manager to do the job. Training begins where selection ends and it focuses upon preparing the
manager for a specific job.
B) Management development is a broader concept. Management development is concerned with
developing the skills of the manager, reinforcing the firm’s culture, and facilitating the creation of
an informal network for knowledge sharing within the organization.
Lecture Note: To see what is important for managers to work in Asia, consider
{http://www.businessweek.com/globalbiz/content/jun2011/gb20110627_398836.htm}.
Training for Expatriate Managers
C) Cultural training, language training, and practical training all seem to reduce expatriate failure.
However, according to one study only about 30 percent of managers sent on one- to five-year
expatriate assignments received training before their departure.
Teaching Tip: Numerous companies offer expatriate training services. One great example is
Kwintessential {http://www.kwintessential.co.uk/}. The company’s web site includes a wealth of
information on the expatriate process, country profiles, and even an online quiz on cultural
awareness. Consider using the site in-class, or asking students to explore it on their own.
D) Cultural training seeks to foster an appreciation for the host country's culture.
Lecture Note: To extend this discussion, consider {http://www.businessweek.com/articles/2014-
03-19/gate-b22-in-the-frankfurt-airport-offers-a-lesson-in-cultural-differences}.
Language Training
E) Despite the prevalence of English, an exclusive reliance on English diminishes an expatriate
manager's ability to interact with host country nationals.
Practical Training
F) Practical training is aimed at helping the expatriate manager and her family ease themselves
into day-to-day life in the host country.
Lecture Note: Until the advent of the Internet, expatriates often felt isolated. Today numerous
sites exist where expatriates can communicate with each other and share their experiences. One
example of this type of site is {http://www.expat.or.id/}. Students can explore the site, or it can be
an in-class activity to see some of the issues facing expatriates.
Repatriation of Expatriates
Global Business Today Ninth Edition Chapter 17
G) A largely overlooked but critically important issue in the training and development of
expatriate managers is to prepare them for reentry into their home country organization.
H) The HRM function needs to develop good program for re-integrating expatriates back into
work life within their home country organization once their foreign assignment is over, and for
utilizing the knowledge they acquired while abroad.
Lecture Note: Some companies have expressed anger over the choice of expatriates to return
home prior to schedule. To learn more, go to {http://www.businessweek.com/articles/2014-04-
23/we-gave-you-a-sweet-job-overseas-dot-then-we-brought-you-home-dot-now-you-re-quitting}
Management Development and Strategy
I) Management development programs are designed to increase the overall skill levels of managers
through a mix of ongoing management education and rotations of managers through a number of
jobs within the firm to give them varied experiences.
J) Management development is often used as a strategic tool to build a strong unifying culture and
informal management network, both of which are supportive of a transnational and global strategy
Management Focus: Monsanto's Repatriation Program
Summary
This feature describes Monsanto’s repatriation program for its expatriate managers. The program
is very sophisticated, and is designed to provide a supportive environment for the company’s
managers who are returning from overseas assignments. The feature describes the details of the
repatriation program, which is a model program for the repatriation of expatriate managers.
Discussion of the feature can begin with the following questions:
Suggested Discussion Questions
1. How does Monsanto’s repatriation program provide an incentive for high-potential managers to
accept overseas assignments?
Discussion Points: One question that managers often have when accepting a foreign assignment is
2. According to the feature, after they return home, Monsanto’s expatriate managers are given the
Global Business Today Ninth Edition Chapter 17
opportunity to showcase their experience to their peers, subordinates, and superiors, in a special
3. How does Monsanto’s repatriation program help an expatriate manager adjust his personal life
to returning home? Is this an important component of a firm’s repatriation program?
Teaching Tip: To learn more about Monsanto and its international operations, go to
{http://www.monsanto.com/whoweare/Pages/our-locations.aspx}.
PERFORMANCE APPRAISAL
A) Performance appraisal systems are used to evaluate manager performance. It can be
particularly difficult to evaluate the performance of expatriate managers.
Performance Appraisal Problems
B) Unintentional bias makes it difficult to evaluate the performance of expatriate managers
objectively. In most cases, two groups evaluate the performance of expatriate managers - host
nation managers and home office managers - and both are subject to bias.
C) Frequently home country managers must rely more on hard data when evaluating expatriates,
and host country managers can be biased towards their own frame of reference.
Guidelines for Performance Appraisal
D) There are several ways to reduce bias in performance appraisals. First, most expatriates appear
to believe more weight should be given to an on-site manager's appraisal than to an off-site
Global Business Today Ninth Edition Chapter 17
COMPENSATION
A) There are two key issues to consider regarding compensation in an international business.
First, how compensation should be adjusted to reflect national differences in economic and
compensation practices. The second issue refers to how expatriate managers should be paid.
National Differences in Compensation
B) Substantial differences exist in the compensation of executives at the same level in various
countries. These differences in compensation practices raise a perplexing question for an
international business: should the firm pay executives in different countries according to the
prevailing standards in each country, or should it equalize pay on a global basis?
C) Over the last decade, many firms have moved toward a compensation structure that is based
upon consistent global standards, with employees being evaluated by the same grading system and
having access to the same bonus pay and benefits structure irrespective of where they work.
Management Focus: Global Compensation Practices at McDonald’s
Summary
This feature explores McDonald’s efforts to develop a global compensation and performance
appraisal strategy. McDonald’s, which has over 400,000 managers and senior employees working
in 119different countries wants its new program to provide some standardization of compensation
and performance appraisal for the firm, but at the same time, allow subsidiaries to tailor the
program to local market conditions. Discussion of the feature can begin with the following
questions:
Suggested Discussion Questions
1. What does McDonald’s hope to gain from having a global compensation and performance
appraisal system in place?
2. How does the compensation and performance appraisal system introduced at McDonald’s allow
managers to take local market differences into account? Why is this type of approach important to
employees?
Teaching Tip: To learn more about McDonald’s global operations, go to
{http://www.mcdonalds.com/}.
Lecture Note: To extend the discussion of this feature, consider
{http://www.forbes.com/2007/08/07/mcdonalds-china-pay-markets-equity-
cx_jc_0807markets1.html} and
{http://www.amrc.org.hk/alu_article/wages/how_long_mcdonalds_cleaners_must_work_to_buy_a
_bigmac}.
Expatriate Pay
D) The most common approach to expatriate pay is the balance sheet approach (Exhibit 17.2).
This approach equalizes purchasing power across countries so employees can enjoy the same
standard in their foreign positing that they enjoyed at home.
E) A further component of the balance sheet approach is to provide financial incentives and
allowances to offset qualitative differences between assignment locations.
F) The components of the typical expatriate compensation package are: base salary, a foreign
service premium, allowances of various types, tax differentials, and benefits.
Base Salary
G) An expatriate’s base salary is normally in the same range as the base salary for a similar
position in the home country.
Foreign Service Premium
H) A foreign service premium is extra pay the expatriate receives for working outside his or her
country of origin. It is offered as an inducement to accept foreign postings.
Allowances
Global Business Today Ninth Edition Chapter 17
I) Four types of allowances are often included in an expatriate’s compensation package: hardship
allowances, housing allowances, cost-of-living allowances, and education allowances.
Lecture Note: Hong Kong is concerned that budget cuts at companies are affecting the housing
allowances of expatriates. To learn more, go to {http://www.businessweek.com/news/2013-10-
21/luxury-rents-fall-in-hong-kong-on-expatriate-budget-cuts}.
Taxation
J) Unless a host country has a reciprocal tax treaty with the expatriate’s home country, the
expatriate may have to pay income tax to both the home country and the host country
governments. When a reciprocal tax treaty is not in force, the firm typically pays the expatriate’s
income tax in the host country.
Benefits
K) Many firms also ensure that their expatriates receive the same level of medical and pension
benefits abroad that they received at home.
Lecture Note: Some cities are more attractive to expatriates because of the strength of the dollar in
certain locations. To extend this discussion, consider
{http://www.businessweek.com/lifestyle/overseas-cities-where-the-dollar-goes-further-for-expats-
tourists-07132011.html}.
INTERNATIONAL LABOR RELATIONS
A) A key issue in international labor relations is the degree to which organized labor is able to
limit the choices available to an international business. A firm's ability to pursue a transnational or
global strategy can be significantly constrained by the actions of labor unions.
Lecture Note: The International Labor Organization (ILO) supports worker issues throughout the
world. To see some of the issues the ILO is currently involved in, go to {http://www.ilo.org/}.
The Concerns of Organized Labor
B) A principal concern of organized labor is that the multinational can counter union bargaining
power by threatening to move production to another country. Another concern is that an
international business will keep highly skilled tasks in its home country and farm out only low-
skilled tasks to foreign plants. A third concern is that multinationals will try to import and impose
unfamiliar labor practices from other countries.
Lecture Note: Companies that have outsourced activities to India may be finding it increasingly
difficult to find workers. To learn more, consider {http://www.businessweek.com/stories/2011-
05-25/indias-scarce-talent-rising-wages-balky-clients}.
Global Business Today Ninth Edition Chapter 17
Video Note: The recent decision by Toyota and General Motors to end their long-time joint
venture has left many Americans facing the prospect of unemployment. To learn more about the
effects of the demise of NUMMI on U.S. workers, consider the video in the International Business
Library on Pinterest (http://www.pinterest.com/mheibvideos/) California Braces As NUMMI Auto
Plant Nears Closing.
The Strategy of Organized Labor
C) Organized labor has responded to the increased bargaining power of multinational corporations
by taking three actions: (1) trying to set-up their own international organizations, (2) lobbying for
national legislation to restrict multinationals, and (3) trying to achieve regulations of
multinationals through international organization such as the United Nations. However, none of
these efforts have been very successful.
Lecture Note: Canada’s labor union recently expressed dismay over Ford’s decision to move
production to Mexico. To learn more, go to {http://www.businessweek.com/news/2014-10-24/canada-
union-sad-that-ford-engine-work-going-to-mexico}.
Approaches to Labor Relations
D) Traditionally, labor relations have been decentralized to individual subsidiaries within
multinationals. Now there is a trend towards greater centralization. This enhances the bargaining
power of the multinational vis-à-vis organized labor.
E) There is a growing realization that the way in which work is organized within a plant can be a
major source of competitive advantage.
Critical Discussion Questions
1. What are the main advantages and disadvantages of the ethnocentric, polycentric, and geocentric
approaches to staffing policy? When is each approach appropriate?
© 2016 by McGraw-Hill Education.
This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner.
This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
338
2. 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?
3. 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?
4. In what ways can organized labor constrain the strategic choices of an international business?
How can an international business limit these constraints?
Global Business Today Ninth Edition Chapter 17
© 2016 by McGraw-Hill Education.
This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner.
This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
339
Answer: Organized labor can significantly constrain the choices firms make with respect to
location. International firms (or domestic ones for that matter) often choose to locate new facilities
in places where labor is relatively peaceful and working relations are harmonious. Labor can raise
objections and threaten disruptive behavior if a firm decides to move some activities to other
locations - which in some cases only reinforces the need for relocating the activities. Organized
labor has also attempted to (i) set-up its own international organizations, (ii) lobby for national
legislation to restrict multinationals, and (iii) achieve regulation of multinationals through
international organization such as the United Nations. However, none of these broader efforts have
been very successful. International businesses have the advantage of being able to provide or take
away jobs, and in today's labor market that gives them considerable power. As a condition of
opening or expanding a facility, firms can negotiate favorable conditions with local unions and
force unions to compete against each other for the gains in membership.
5. Reread the Management Focus on McDonald’s global compensation practices. How does
McDonald’s approach help the company to take local differences into account when reviewing the
performance of different country managers and awarding bonus pay?
CLOSING CASE: MMC China
The closing case explores the challenges faced by the manager assigned to oversee electronics
maker MMC’s Chinese joint venture. Charged with improving the company’s performance in
China, John Ross, who has successfully complete several other foreign assignments, finds himself
struggling to find a way to explain to his boss why the policies and goals established at
headquarters were not appropriate for the company’s Chinese operations. Discussion of the case
can revolve around the following questions:
Suggested Discussion Questions
QUESTION 1: Is it right for MMC to hold Ross to the same performance goals as managers of
units in other countries? What other approach might it adopt?
© 2016 by McGraw-Hill Education.
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This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
340
QUESTION 2: Why had bringing in specialists from the United States not worked at MMC? Why
did Ross’s strategy of sending Chinese employees over to the United States for training produce
better results? What are the lessons here?
QUESTION 3: What changes could the HR department at MMC make to improve its utilization of
human capital and facilitate knowledge transfers within the company?
11042011.html/}. To extend this discussion, consider
{http://www.businessweek.com/managing/content/sep2010/ca20100921_155964.htm}
Continuous Case Concept
French automaker Renault’s Dacia plant in Romania is a study in contrasts. The plant, which
currently operates at near capacity, produces Europe’s cheapest car and fastest growing brand. Yet
Global Business Today Ninth Edition Chapter 17
despite its positive outlook, changes may be coming. Renault is currently in negotiations with
union workers at the Romanian plant. Renault wants to cut wages or shift production to Morocco.
However, workers at the Romanian plant make only one-third of what workers at Renault’s French
plant make. Even so, the Romanian workers are among the highest paid workers in their country.
• Discuss the negotiations between Renault and the workers at the Dacia plant. What are the
strengths and weakness of both sides? Who is likely to be the winner in the negotiations?
Why? Is it fair to ask the Dacia workers to accept lower compensation?
• Next, ask students to consider what new challenges come from producing in foreign
locations. How should wage rates be determined? What about other parts of a
compensation plan such as vacation days and health care packages? Should companies
participate in labor unions?
• Finally, ask students to consider whether expatriates who manage the foreign operations
should be paid according to their home country levels, or according to host country rates.
Suppose a plant has two vice presidents, one hired locally, and one sent from headquarters.
How should their compensation packages be determined?
The second two questions of this exercise can be an interesting introduction to international human
resource management. Most students have probably not thought of many of the issues before, and
they can provide the basis for an interesting discussion. The questions can be revisited after the
material in the chapter has been presented.
Video Note: High cost labor has proved to be a huge liability to General Motors as its attempts to
succeed in a highly competitive global market place. The videos in the International Business
Library on Pinterest (http://www.pinterest.com/mheibvideos/) Autoworkers, GM Continue Talks
during Strike and GM Offers Employee Buyouts After $38.7 Billion in Losses explore how the
company is coping with the problem.
globalEDGE Exercises
The resources for each exercise can be easily located by using the search box at the top of the
globalEDGE website at http://globalEDGE.msu.edu
Exercise 1
Search phrase: labor statistics
Resource Name: International Labour Organization (ILO): Labor Statistics Database
Website: http://www.ilo.org/ilostat
globalEDGE Category: Statistical Data Sources
Additional Info:
Global Business Today Ninth Edition Chapter 17
ILOSTAT is a database of labour statistics, providing annual labor market statistics for over 100
indicators and over 200 countries, areas and territories. It includes data on labor costs,
occupational injuries, strikes and lockouts, union activity, and many other labor related data.
Exercise 2
Search phrase: Expat Explorer
Resource Name: HSBC Expat Zone
Website: http://www.expat.hsbc.com/1/2/hsbc-expat/expat-experience
globalEDGE Category: Travel/Living Abroad
Additional Info:
HSBC’s website dedicated to providing resources to Expats. The Expat Explorer tool is under the
Destinations section and allows users to compare countries based on rankings by real expats. One
of the tools under the Expat Explorer allows the user to directly compare two countries based on a
large number of criteria important for expatriates.
Additional Readings and Sources of Information
Foreign Executives Trapped in Mongolia
http://www.businessweek.com/articles/2014-04-17/mongolia-foreign-executives-detained
Management Skills for International Business
http://executive-education.insead.edu/international_management
Volkswagen’s Lesson for Labor After UAW’s Chattanooga Loss
http://www.businessweek.com/articles/2014-02-20/volkswagens-lesson-for-labor-after-uaws-
chattanooga-loss
As Union Moves in Volkswagen Will Build Its SUV in Tennessee
http://www.businessweek.com/articles/2014-07-14/as-union-moves-in-volkswagen-will-build-its-
suv-in-tennessee
When Leading with Your Head Isn’t Enough
http://www.businessweek.com/managing/content/mar2010/ca2010034_723039.htm#p1
Why Leadership Teams Must Be Global
http://www.businessweek.com/globalbiz/content/feb2010/gb2010028_949458.htm
U.S. Labor Takes its Case to European Bosses
http://www.businessweek.com/globalbiz/content/jan2010/gb20100122_716025.htm
Is Nike's Flyknit the Swoosh of the Future?
http://www.businessweek.com/articles/2012-03-15/is-nikes-flyknit-the-swoosh-of-the-future
Global Business Today Ninth Edition Chapter 17
Australia's Latest Import: U.S. Electricians
http://www.businessweek.com/articles/2012-08-06/australias-latest-import-u-dot-s-dot-
electricians#r=lr-fst
The Surprising Global Shortage of Skilled Workers
http://www.businessweek.com/articles/2012-05-29/the-surprising-global-shortage-in-skilled-
workers
