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XIII.Your Turn: IBM’s Worldwide Business and Employment Strategies and
Compensation
Summary of Case
integrated enterprise’, which he claims IBM now is, fashions its strategy, management and
operations to integrate production—and deliver value to clients—worldwide. This has been
IBM’s global operations now provide laid-off employees of North America an offer to take up
to adapt to the local environment and culture. When companies are increasingly coming up
with foreign jobs, the question is whether the average American worker is ready to think
Learning Objective
Discuss and explain how key concepts related to international pay can be applied to IBM’s
worldwide operations.
Teaching Guideline
Use this case to analyze the advantages and challenges associated with expatriate jobs,
especially foreign jobs.
Discussion of Case Questions
1. Think back to our discussion in Chapter 7 and in the current chapter regarding the
labor cost difference between employing programmers in the United States versus
overseas in locations like India and Eastern Europe. Is IBM’s growth in employment
in such countries inevitable given labor cost differences? How does this relate to Mr.
Palmisano’s comments in Exhibit 1?
IBM has aimed toward being a “globally integrated enterprise” taking and fashioning its
potential of workers in these emerging markets. At IBM, global operations has not been
more intimately with partners, suppliers and customers and, most importantly, enabling it
(although IBM leverages this cost arbitrage for its success).
2. Is the IBM offer typical of that offered to expatriates?
Companies also ensure that the compensation of expatriates is adequate. Some companies
are also providing relocation bonuses as an incentive to taking up such jobs. Some
3. What is your reaction to the critical comments made by the Alliance@IBM
spokesman, including the comment about asking employees to “offshore their
citizenship”?
Student responses will vary.
4. Review Exhibit 16.12 earlier in this chapter—The Cost of Living, Domestic
Purchasing Power, and Minutes of Working Time Required to Buy a Big Mac, Bread,
and Rice? How do the numbers for Indian cities like Delhi and Mumbai compare to
those for U.S. cities like Chicago, Los Angeles, and New York? What are the
implications of such differences?
Angeles
New York 100 100 100 13 16 8
Delhi 49 36.6 24.7 59 22 36
It can be inferred that the cost of living at the Indian cities are much lower than the U.S.
5. Exhibit 2 gives examples of people who seem to enjoy living and working in India and
also reports the opinion of an academic that this sort of move will become much more
common. Do you believe that is likely? Why or why not?
Student answers may vary.
and even hire people to do much of the household work. The opinion of the academic that
the average American worker is not yet ready to think globally holds true is questionable.
foreign countries is quite likely given the way big corporations are creating cadres of
XIV. Still Your Turn – Globalization of the Labor Market: The English Premier League
Summary of Case
Three of the top five most valuable sports teams in world are soccer teams. English
soccer, has proposed limits on the number of foreign players in the Premier League.
Learning Objective
Discuss and explain the global impact of placing player limits on the game of soccer.
Discussion of Case Questions
1. Has the globalization of the English Premier League been a good thing? Who is
better off as a result? Who is worse off? Think carefully about owners,
fans/consumers, and players. Are there others who have been affected as well?
soccer and have more of an interest in the game if some of the players are from their own
2. Consider the proposal by Mr. Dyke to limit the number of foreign players in the
English Premier League. Take the perspective of owners, players, and
fans/consumers. Who would benefit and who would lose under this proposal?
Owners could be on the losing end of this proposal by not being able to sign potential star
also lose but would be unaware they were losing. The fans would not see the absence of
3. Do players from England play in elite leagues outside of England? Does that affect
your evaluation of the proposal? If so, how?
knowing this information.
4. One concern expressed by Mr. Dyke is that the English national team may be
suffering because fewer English players can develop in the English Premier League.
Jürgen Klinsmann, coach of the U.S. National team has criticized players who play in the
Major League Soccer (MLS) league in the United States, rather than in one of the European
elite leagues, because he feels MLS does not provide strong enough competition for the U.S.
players to develop their full potential. Comment on the arguments by Mr. Dyke and Mr.
Klinsmann. What would be best for the English national team?
2014.
http://www.pewresearch.org/fact-tank/2014/06/06/where-world-cup-footballers-play-durin
g-the-regular-season/ . Accessed November 12, 2015.
Answers to Review Questions
1. Rank the factors in the global guide according to your belief in their importance for
understanding and managing compensation. How does your ranking differ from
those of your peers? From those of international peers? Discuss how the rankings
may change over time.
Refer to Exhibit 16.1.
2. Distinguish between nationwide and industrywide pay determination. How do they
compare to a business strategy-market approach?
Nationwide pay determination is a highly centralized approach with significant
When wages are set based on nationwide or industrywide patterns, compensation is not
3. Develop arguments for and against “typical” Japanese-style, “typical” German-style,
and “typical” U. S. -style approaches to pay. Using the global guide, what factors are
causing each approach to change?
Japanese pay systems tend to emphasize the following:
Employment security based on the performance of the organization and the
individual (formerly lifetime security)
The disadvantages of the Japanese approach are the high costs associated with an aging
work force, failure to encourage unique contributors, women, and younger employees. In
employers and unions negotiate different tariff agreements (pay rates and structures), for
each industrial sector. Methods for job evaluation and career progression are included in
There are several disadvantages. An aging population, low birth rates, earlier retirement
among companies within and across industries. The U.S. pay system supports
performance, with costs varying based on performance. U.S. firms encourage innovation
organizational, and individual conditions. Globalization really means that these conditions
are changing—hence international pay systems are changing as well.
4. Distinguish between global workers, expatriates, local nationals, and third-country
nationals.
Global workers or globalists are managers who operate anywhere in the world in a
borderless manner.
country where they are living and working (e.g., a German citizen working for Toshiba in
Toronto) are called third-country nationals (TCNs).
5. In the balance sheet approach to paying expats, most of total compensation is linked
to costs of living. Some argue that expatriate pay resembles a traditional Japanese
pay system. Evaluate this argument.
The premise of the expatriate pay approach is that employees on overseas assignments
Both approaches aim at increasing the flexibility of their workforce
Both approaches do not encourage women employees. Evidence shows that
only 13 percent of U.S. expats are women (yet, 49 percent of all U.S. managers and
seniority.
The expatriate pay approach ignores the aspect of external competitiveness—
matching pay with competitors—to a large extent. In the Japanese approach, pay is
consistent with competitors.
