The organizational context
Figure 2-1: Management demands of international growth
The path to global status
• Causes structural responses, due to:
– Strain imposed by growth and geographical
spread
– Need for improved coordination and control
across business units
– The constraints imposed by host-government
regulations on ownership and equity
• Evolution path common but not normative
Figure 2-2: Stages of internationalization
Stages of internationalization:
Exporting
• Typically the initial stage of international
operations
– Usually handled by an intermediary (foreign
agent or distributor)
– Role of HR department unclear at this stage
Figure 2-3: Export department
Sales subsidiary
• Replacing foreign agents/distributors with own
through sales or branch offices/subsidiaries
• May be prompted by:
–
–
–
–
Problems with foreign agents
More confidence in international activities
Desire for greater control
Give greater support to exporting activities
• PCNs may be selected, leading to some HR
involvement
Figure 2-4: Sales subsidiary
International division
• Creation of a separate division in which all
international activities are grouped
• Resembles ‘miniature replica’ of domestic
organization
• Subsidiary managers report to head of
international division
• Objectives regarding foreign activities may
determine approach to staffing of key positions
– Expatriate management role of corporate HR
Figure 2-5: International division
Global product/area division
• Strain of sheer size may prompt structural
change to either of these global approaches
• Choice typically influenced by:
– The extent to which key decisions are to be
made at the parent country headquarters or at
the subsidiary units (centralization versus
decentralization)
– Type or form of control exerted by parent over
subsidiary
Figure 2-6a: Global product division
Figure 2-6b: Global area division
The matrix
• An attempt to integrate operations across
more than one dimension
• Violates Fayol’s principle of unity of
command
• Considered to bring into the management
system a philosophy of matching the
structure to the decision-making process
Figure 2-7: The matrix
Problems with the Matrix
Bartlett and Ghoshal
• Dual reporting
 Leads to conflict and
confusion
• Proliferation of
 Creates informational logjams
communication
channels
 Produce turf battles and loss of
• Overlapping
accountability
responsibilities
• Barriers of distance,
 Make it virtually impossible to
language, time and
resolve conflicts and clarify
culture
confusion
Control mechanisms
“Globalization brings considerable challenges
which are often under-estimated….
Every morning when I wake I think about the
challenges of coordinating our operations in
many different countries”
Quote by Accor CEO
Figure 2-10: Control mechanisms
Mode of operation and HRM
• Not just subsidiary operations
• Firms may also adopt contractual modes
–
–
–
–
Licensing
Franchising
Management contracts
Projects
• And/or cooperative modes (such as joint
ventures)
Interfirm linkages
• Alliance (strategic alliance, cooperative
venture, collaborative venture or corporate
linkage)
• A form of business relationship that:
– Involves some measure on interfirm integration
– Stops short of a full merger or acquisition
HR factors
• HR issues and activities that affect the
successful functioning of international joint
ventures include:
–
–
–
–
Assigning mangers to the joint venture
Evaluating their performance
Handling aspects pertaining to career path
Compensation benefits