Chapter 1

Introduction:
The Enduring Context of
IHRM
Three Approaches to IHRM
 Cross-cultural management
 Comparative HRM and Industrial Relations
 HRM in multinational firms
Interrelationships between
Approaches to the Field
The General Field of HR
 Major Functions and Activities
 Human resource planning
 Staffing
 Recruitment
 Selection
 Placement
 Performance management
 Training and development
 Compensation (remuneration) and benefits
 Industrial relations
What does IHRM add into the
Traditional Framework of HRM?
 Types of employees

 Human resource activities

 Nation/country categories where firms expand and

operate
A Model of IHRM
What is an expatriate?

An expatriate is an employee who is

working and temporarily residing in a
foreign country.
International Assignments Create
Expatriates:
Differences between Domestic HRM
and IHRM
 More HR activities
 The need for a broader perspective
 More involvement in employees’ personal
lives
 Changes in emphasis as the workforce mix of
expatriates and locals varies
 Risk exposure
 Broader external influences
More HR activities
 International taxation

 International relocation and orientation (arranging for pre departure

training, providing immigration and travel details, providing housing,

shopping, medical care, recreation and schooling information and
finalizing compensation details such as delivery of salary overseas,
determination of various overseas allowances and taxation
treatment) – issues of repatriation

 Administrative services for expatriates

 Host-government relations (work permit)

 Language translation services

The need for a broader perspective
 International taxation

 Expatriate premium

 Complex equity issues

More involvement in employees personal life:

 International HR services – takes care of their banking, investments

and home rental.

 Presentation of a marriage certificate before granting visa to an

accompanying spouse.

 In more remote or less hospitable assignment locations , the HR

department – even develop recreational programs.

Changes in emphasis as workforce
mix of PCN’s and HCN’s varies
 PCN’s and TCN’s decline and more trained locals become available,

resources previously allocated to expatriation will be transferred to

domestic HR functions.

Risk Exposure:
 Premature return of expatriate from international assignment

 Under performance while on international assignment.

 Direct cost (salary, training costs and travel and relocation cost) per

failure = 3 times the domestic direct cost in terms of foreign

exchange and location of assignments.

 Terrorism (1-2% of companies expenses to protect from terrorism)

Broader external influences
 Impact of host government in company policy. Eg: 1970’s in

Malaysia.

 Developed countries – high cost of labour, labour relations, taxation

and health and safety – thus takes more time.

Variables that Moderate Differences between
Domestic HR and IHRM
 The Cultural Environment
 Culture – member of a group or society share a distinct way of life with

common values, attitudes and behaviours that are transmitted over time in a
gradual , yet dynamic process

 Difference in language, food, dress, hygiene and attitude to time. Some may

enjoy, for some it may be difficult - cultural shock

 Cultural shock – leads to negative feelings about host country

 Thus in MNC’s understanding cultural differences is essential

 -etic relationship (emic – culture specific aspects, etic – culture common

aspects)

 Eg: ethic approach – US being leading industrial economy – the point of

convergence was US model

 Emic – behaviour of people within the firm, etic – structures and technologies)
 The Importance of Cultural
Awareness
 “My way is best, what works at home will works here” – international business

failure. Thus cultural awareness is necessary.

 Hiring, promotion, rewarding and dismissal – according to host country

 Eg: Australian (GM), Indonesian (HR manager). HR manager recruits his family
members in Indonesian firm, which Australian found as a negative practice
according to his value system

 Eg: Papua New Guinea drivers of earth moving vehicles chew betel nut very
commonly but the expatriate manager found it as a cause for accident. Thus he
advised to provide coffee which is new to the Papua New Guinea employees.

 Cultural environment will have influence on employee performance.

 Industry Type
 Multi-domestic Industry – competition in one country is independent of

competition in another country. Eg: retailing, distribution and insurance

 Global industry – global competition eg: commercial aircraft, IT and

semiconductors etc.

 Multi-domestic Industry – domestic HR activities. Rarely perform the role of

international HR when the company starts any foreign subsidiary

 Global Industry – International HR

 Reliance of the Multinational on its
Home-country domestic market
 Large domestic market – pushes the manager to go international.

 The “Top Ten” Multinationals

1. Rio Tinto (UK/Australia)
2. Thomson Corporation (Canada)
3. ABB (Switzerland)
4. Nestlé (Switzerland)
5. British American Tobacco (UK)
6. Electrolux (Sweden)
7. Interbrew (Belgium)
8. Anglo American (UK)
9. AstraZeneca (UK)
Source: UNCTAD Index of
10. Philips Electronics (The Netherlands) Transnationality
Factors that Influence the Global
Work Environment
Forces for Change
 Global competition
 Growth in mergers, acquisitions and
alliances
 Organization restructuring
 Advances in technology and
telecommunication
Impacts on Multinational
Management
 Need for flexibility (think global, act local)
 Local responsiveness
 Knowledge sharing
 Transfer of competence
Managerial Responses
 Developing a global “mindset”
 More weighting on informal control
mechanisms
 Fostering horizontal communication
 Using cross-border and virtual teams
 Using international assignments
 Q&A
1. IHRM requires more involvement in employee’s personal life. True/
False _______.
2. The host country is the expatriate’s country of residence. True/ False
_______.
3. HCNs only become ‘inpatriates’ when they are transferred into the
parent country operations as expatriate. True/ False _______.
4. Lotus is an Indian based company having its subsidiary units at
Australia, Japan, China, Singapore, Indonesia, London and France.
A. China based Lotus employees are called _____.
B. An American working in France Lotus Company is called
________________________.
5. Negative phenomenon or a shock in reaction to the cultures
experienced ______________(fill up).

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Match the following:

1. Expatriate a) Host country nationals

2. HCNs b) Culture Specific aspects
3. Emic c) Culture Common aspects
4. Etic d) International Assignee

Choose The following

1. In IHRM, which of the following becomes important?
A. Procurement of people
B. Allocation of people
C. Utilization of people
D. All of the above

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Choose The following
2. Comparing domestic and international HRM, the risk
involved is
A. Just the same
B. Higher in case of domestic HRM
C. Higher in case of IHRM
D. Quantum of risk depends on the situation
3. Global firms have
A. Mono cultures
B. Dual cultures
C. Multi cultures
D. All of the above

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Choose The following
4. As an international business matures, the need for
PCNs and TCNs
A. Declines
B. Doesn’t get affected
C. Increases
D. Depends
5. International HRM deals with
A. HR activities
B. Types of employees
C. Countries of operation
D. All of the above

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Choose The following
6. Expats are
A. Citizens of the country where they are working
B. Non-citizens of the country where they are working
C. Both of the above
D. None of the above
7. International HRM requires
A. More involvement in employee’s personal life
B. Less involvement in employee’s personal life
C. Detached view with respect to employee’s personal
life
D. None of the above

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IBUS 618 Dr. Yang 28