Expatriates

Expatriates can be defined as the employees of business and government organizations who are sent by their organization to a related unit in a country which is difficult from their own, to accomplish a job or organization related goal for a pre-designated temporary time.
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 STAFFING POLICIES Staffing policy is the process by which the company assigns the most appropriate candidate to a particular job.

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 The Ethnocentric Approach An ethnocentric staffing approach fills all key management positions with home-country nationals. People transferred from headquarters are more likely to have a thorough understanding of the companys core competencies and values. This approach can, however, lead the company to adopt a narrow perspective in foreign markets and blinds the company to the benefit of exposure to different, and possibly better, ways of doing things. The leading reasons to staff foreign operations with expatriates include maintaining command and control consistent with headquarters policy, filling local talent gaps, using international assignments as a mechanism for social integration, safeguarding intellectual property in joint ventures, transferring best practices from other locations, counteracting high turnover among local employees, and as a management development tool to help managers develop a global outlook
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 The Polycentric Approach A polycentric staffing policy uses host-country nationals to manage local subsidiaries and helps local motivation and morale. This approach can, however, result in problems of accountability and allegiance if a gap develops between headquarters and local operations. A polycentric approach is used to control costs, to cater to host-country nationalism, to develop local management talent, to boost employee morale, to counteract high expatriate failure rates, and to maximize local adaptations for particular products
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 The Geocentric Approach A geocentric staffing policy seeks the best people for key jobs throughout the organization, regardless of their nationality. This policy is instrumental to companies pursuing a global and, especially, a transnational strategy. This approach is hard to develop, costly to maintain, and can be complicated by economic factors, decision making routines, and legal contingencies. In some cases, such an approach may be practically impossible due to immigration laws and/or workplace regulations that push MNEs toward local staffing.
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 EXPATRIATE SELECTION EXPATRIATES are employees that are noncitizens of the country in which they are working What criteria should be used to identify the appropriate home-country and foreign national managers for a country transfer?

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The Expatriate Assignment Life Cycle

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Expat Selection
Step I:Identification of Potential
Expatriate Pool of Candidates.

Step II: Assignment to See competencies of

Expatriate Candidates.

Step III: Determination of Learning styles

of Expatriate Candidates.
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Expat Selection Cont

Step IV: Determine of Thinking styles of
Potential Expatriate Candidates.

Step V: Determination of Assignment Task

and its Environments (Internal/External).

Step VI: Assignment of Family

Characteristics.
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Expat Selection Cont

Step VII: Development of Repatriation
Program prior to Expatriation.

Step VIII: Selection of Expatriate

Candidates and Assignments.

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A.Technical Competence Technical competence (usually indicated by past performance) is a significant determinant of success in foreign assignments. The foreign subsidiary manager must understand both the technical necessities of a position and also how to adapt to foreign conditions, such as scaled-down plant and equipment, varying productivity standards and less efficient national infrastructure. B. Adaptiveness Three types of adaptive characteristics influence an expatriates success when entering a new culture: (i) those needed for self-maintenance, (ii) those related to the development of satisfactory relationships with host nationals and (iii) cognitive skills and sensitivities that help one accurately perceive what is happening within the host society. The adaptation of a managers family is also crucial to the success of an overseas assignment. C. Leadership Ability Leadership ability is increasingly seen as a key to an expatriates success since expatriates often assume a greater breadth and depth of leadership responsibility on a foreign assignment than they likely would in the home country. Communication skills, motivation, self-reliance, courage, risk-taking, and diplomacy become essential qualities for success. Skills and attitudes such as optimism, drive, adaptability, foresight, experience, resilience, sensitivity, and organization are necessary for expatriates to be successful.

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Criteria for Expat Selection

Willingness and Motivation Performance (Previous) Technical abilities Relational skills Cross cultural adoptability Open mindedness Individual Criteria

Stress adoption skills

Administrative skills Communication skills Leadership traits Right Person for Expatriation

Marital status
Willingness and Motivation to become a trailing spouse

Spouses adjustability
Give up jobs and career prospects Marriage stability Childrens education
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Family Support

 EXATRIATE FAILURE Expatriate failure is when a manager returns home from a foreign assignment prematurely due to poor job performance and is very expensive for the MNE. In the 1980s, research reported that between 16-40% of Americans sent abroad to developed countries returned early, while nearly 70% sent to less developed countries returned home early. Expatriate failure reflects a failure of the MNEs selection policies to find the right individual for the job. Companies may try to avoid expatriate failure by expanding through acquisitions and thereby instantly acquiring foreign personnel. MNEs also try to reduce failure rates through improved training and better selection procedures. The leading cause of expatriate failure is the inability of a spouse to adapt to the host nation. Foreign assignments are usually more stressful for the expatriates family than for the expatriate.

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 EXPATRIATE PREPARATION AND DEVELOPMENT Training and pre departure preparations can lower the probability of expatriate failure and include general country orientation, cultural sensitivity, and practical advice.

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General Country Understanding Training in general country understanding typically includes briefings on political structures, job design, compensation norms, housing, climate, education, health conditions, home sales, taxes, transport of goods, job openings after repatriation, and salary distribution. B. Cultural Sensitivity Cultural training tries to preempt the effects of culture shock by helping employees to take an open mind to the different ideas, attitudes, and beliefs they are likely to encounter in the host culture. Foreign language competency and cultural training for spouses and families is often also included. C. Practical Skills This type of training attempts to familiarize the expatriate and his or her family with the routines of life in the host country. Issues such as schooling, socializing, and shopping are addressed. D. Training Gaps and Trends Many managers dont receive adequate training prior to an overseas assignment, despite the proven effectiveness of training programs. Companies usually blame too much urgency as the reason for not investing in more training for individual employees. Sometimes companies struggle because of uncertainty as to whether they should emphasize country specific knowledge or general cultural sensitivity in their training programs. Research has shown there is no significant difference in the relative effectiveness of the two approaches.
A.

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 EXPATRIATE COMPENSATION The amount and type of compensation needed to entice an individual to accept a foreign assignment may vary widely by person and locale. Company practices also vary in terms of compensation for differences. A. Types of Compensation Plans The most common approach to expatriate pay is the balance sheet approach, which aims to develop a salary structure that equalizes purchasing power across countries so expatriates have the same standard of living in their foreign assignment as they had at home. There are three common methods of implementing the balance sheet compensation plan. The home-based method sets compensation based on the salary of a comparable job in his or her home city, the headquarters-based method sets salary in terms of the salary of a comparable job in the city where the MNE has its headquarters, and the host-based method bases compensation on the prevailing pay scales in the locale of the foreign assignment, plus foreign-service premiums, extraordinary allowances, home-country benefits, and taxation compensation.

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B. Key Aspects of Expatriate Compensation 1. Base Salary. Usually falls in the same range as the base salary for the comparable job in the home country and is paid in either home-country currency or local currency. 2. Foreign Service Premium. This is extra pay given to the expatriate for working outside the home country which rewards expatriates for living far from family and friends, dealing with a new culture, language, and workplace. Many firms pay 10-30% of after tax base salary as a premium. 3. Allowances. Companies usually pay for differences in cost-of-living for more expensive locations so that expatriates can enjoy the same living standards abroad as they would at home. Housing allowances can be as much as a third of the expatriates total compensation package. A spouse allowance compensates for a spouse to find work and offsets the loss in income due to a spouse forsaking his or her job. A hardship allowance is paid to expatriates assigned to dangerous or especially difficult locations. Travel allowances pay for visits back to the home country, and education allowances pay for the cost of childrens schooling.

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 4. Fringe Benefits. Firms typically provide the same level of medical and retirement benefits abroad as they would at home, and may expand benefits to deal with local contingencies such as transferring ill employees or family members to out-of-country medical facilities or paying premiums on kidnapping insurance in high-risk countries. 5. Tax Differentials. Companies may adjust compensation even higher in high tax rate countries in order to make sure that expatriates have an equivalent after tax income in the new location. In cases of double taxation, the MNE generally pays the expatriates tax bill in the host country.
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 C. Complications Posed by Nationality Differences As firms employ expatriates from home and third countries, compensation issues grow more complicated. Salaries for similar jobs vary substantially across countries, as do the relationships of salaries within the corporate hierarchy. There is no general consensus as to how to deal with such issues.
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International Marketing
International Marketing refers to the process of identifying the goods and service that customers outside the home country want and then providing them at the right price and place.

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International Marketing Cont

Domestic marketing faces controllable and uncontrollable forces. Countable Factor: Price, Product and Promotion. Uncountable Factor: Economics, Legal, Political and Competitive forces.

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International Marketing Cont

International marketing faces several uncontrollable forces originating from different countries. A firms marketing mix needs to be modified to conform to different environments. The varying environments may rule out uniform marketing strategies across countries.

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Benefits of International Marketing

Survival

Standard of Living

Overseas Markets

International Marketing

Inflation and Price moderation

Sales and Profits

Diversification

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Major Activities in International Marketing

Market Assessment Product Decision Promotion Strategies Pricing Decisions Place or Distribution Strategies. The mix of 4Ps called marketing mix.
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The International Marketing Mix

Product
Product includes physical goods, services, experiences events, persons, places, properties in form and ideas. A product possesses want satisfying properties.

Place
Place refers to distribution involves two issues: Decision on channels and Selecting modes of shipping.

Mix of the four elements: Product, Price, Place and Promotion

Price
International Business can follow either standard policy, two-tiered pricing or market pricing

Promotion
Promotion includes all efforts undertaken to enhance acceptability of the product by the potential buyers.
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Marketing and other functions

Operations Management Accounting

Marketing

Finance
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Human Resource Management

International Market Assessment

International Marketing starts with the identification of markets where goods & services can be profitably sold. Identification of overseas markets should follow the following steps: 1. Assess alternative foreign markets.
2. Evaluate the respective costs, benefits and risks of entering each market. 3. Select those that hold the most potential for entry or expansion.
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