International Assignment Strategy: CreativeWorkz

Going Global Maldives and Middle East (UAE)

CreativeWorkz Stationary
Undisputed market leader in stationery industry A manufacturing organization having annual 20% sales growth during last 5 years Incorporated over fifty years back with ten employees to manufacture goods by using 100% locally available raw materials. Currently Exporting to India Key suppliers from Europe & Indonesia Seek to expand operations to UAE & Maldives (Small Scale Operation) Target Market: Offices, Educational Institutes and Hotels

Factors Influencing Success of an International Assignment

Exogenous factors (External Factors) Nature of competitors, Technology available and the volatility of the industry. Political conditions, the economic conditions, Legal requirements and the socio-cultural conditions

Endogenous factors (Internal Factors) Stage of Internationalization (Domestic, International, Subsidiaries/Multinational/Joint Ventures, Transnational) Structure of the international operations of the organisation, how internationally orientated the senior Competitive strategy in place and The senior managers experience in managing international operations

(Schuler, et al., 1993)

Maldives PEST Factors

Political y Government support to minimize entry exit barriers y Continuous pressure on the government to liberalize the duty structure y Newly changed government (after 30 year) is highly concern on countries education standards. Economic y Maldives higher economic growth rate( Around 10%) y Inflation is maintained around one digit level. y Recent trade agreement between Sri Lanka and Maldives y Stationary requirements mainly depend on import. y Time required to start a business is low. y Tourism,Fishing,Agriculture,Industry are the most prominent contributors to GDP. Industry is in 4th place.

Social y The fast emerging concept of standard lifestyle, y Increasing western fondness of the younger generation

Technological y Low technology levels used by majority of manufacturers y Stationary industry is highly needed technology concentration. y Agreements signed with European countries for partnerships in order to access high technology

UAE PEST Factors

Political Politically stable government. Government support through tax reductions Government has a long term plan to increase literacy rate.(53% in 1989.Now it s around 91%.) Economic Steady growth as an emerging economy(Growth is around 3.2%) Inflation is 1.9% It is the thirty-fifth-largest economy

Social Steady growth as an emerging economy. Several nations are living in UAE such as SouthAsian,Indian, Pakistani,Bangladeshi, Chi nese,Filipino,Thai, Westerners

Technological Increase of investment in new technology Continuous focus on improving quality Reduced production complexity

Market Potential - Maldives

1. 2. 3. 4. 5. 6.

Population - 394,999 which includes approx 80,000 expats (July 2011 est.) GDP (purchasing power parity) $2.734 billion (2010 est.) GDP Per Capita $6,900 (2010 est.) Unemployment rate - 14.5% (2010 est.) Labor Force - 110,000 (2010 est.) Import partners - Singapore 24.7%, UAE 17.2%, India 8.6%, Malaysia 8.1%, Sri Lanka 5.7%, Thailand 5.7%, China 5.6% (2010)
Source: CIA World Fact Book

Market Potential - UAE

1. 2. 3. 4. 5. 6.

Population - 5,148,664 (July 2011 est.) Approx 80 % of expats GDP (purchasing power parity) $246.8 billion (2010 est.) GDP Per Capita $49,600 (2010 est.) Unemployment rate - 2.4% (2001 est.) Labor Force - 3.705 million (2010 est.) Import partners - India 17.5%, China 14%, US 7.7%, Germany 5.6%, Japan 4.8% (2010)
Source: CIA World Fact Book

Cultural Attributes - UAE

Collectivism: Group consciousness and family are the major values that guide peoples behavior. Power Distance: A belief in authority and hierarchy (high power distance). Cultures that are high on power distance accept power and hierarchy in society and are low on egalitarianism. In such cultures, less powerful citizens are accepting of unequal power distribution in society. The United Arab Emirates is high on power distance. Uncertainty Avoidance: United Arab Emirates tend to have low tolerance for uncertainty. They avoid ambiguous situations, view both conflict and competition as threatening, and value security over adventure and risk. Masculinity-Femininity: The United Arab Emirates shows a preference for masculinity. High-Low Context: UAE have close connections among group members 8

Legal Framework in setting up business in UAE

Federal law no. 13, of 1988 ,the commercial company law and its by laws are the governing code of conduct for setting up businesses in UAE It sets out the requirements in terms of share holders,directors,minimum capital levels and incorporation procedures Licenses for all businesses should obtained from Chamber of Commerce and Industry however there are exceptions Bank and financial institutes Central Bank UAE Insurance and related Ministry of economy and commerce Manufacturing Ministry of Finance and industry Pharmaceutical and medical products Ministry of health

Legal Framework in setting up business in Maldives

Foreign investments are governed by both laws under the companys act (10/96) and foreign investments law (25/79) which came into action in 1989 Must have one or more Maldivian national as partners whos capital share should be minimum 51% Licenses for all businesses should obtained from ministry of trade and industries and however tourism related investments are to be obtained from ministry of tourism and aviation

Starting business in Maldives

1.Possible Option to start business in Maldives: Registering a joint venture investments - 51% or more is held by a Maldivian (Applicable tax : 1.5% of gross turnover or 7.5 %of net profit)

http://www.investmaldives.org

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Starting business in UAE

1. 51% participation by UAE nationals is the general requirement for all UAE established companies 2. Available options to start a business in UAE : General partnership company Partnership-en-commendam Joint venture company Public shareholding company Private shareholding company Limited liability company Share partnership company 3. Recommended strategy : Joint Venture Company, to overcome massive investment requirements 4. Recruitment of 15% of Emiratis staff for non-important position

Source: www.worldwide-tax.com

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Entry and HR Strategy - Maldives

1.Establishment of Administrative Office in the capital Mal 2.Products Through direct export (International Operating Model)
International (Export) Operations Products and services are opened up to markets in other countries, production facilities in Sri Lanka

3. Advertising outsourced Targeting offices and Hotels 4. through existing local network initially, but later to establish own distribution network
Export From SL Outsourced Distribution Agent Customer

5. A mixture of Ethnocentric and Polycentric approaches

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Entry and HR Strategy Maldives Contd...

6. Management and administrative staff from Sri Lanka. All other levels from host Country Nationals. Parent Country Nationals (shortage of experienced local talent, sales force) 7. Sales managers to be appointed from Sri Lanka with sales team to be comprises of locals 8. Human Resource Manager and staff - Host Country Nationals 9. Sri Lankan HR lead to be established in Sri Lankan business to manage Expatriates 10. Recruitment of Host Country Nationals for distribution staff - Later during expansion of distribution network

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Entry and HR Strategy - UAE

1. 2. 3. Establish administrative office in Dubai Product strategy Direct export initially Distribution through existing local network initially, but later to establish own distribution network 4. 5. 6. A mixture of Ethnocentric, Geocentric and Polycentric approaches Higher Management level Parent country national External contacts and Customer relations Priority for host Country Nationals and others with Arabic language knowledge and middle eastern working experience 7. 8. Human Resource Manager Host country or third Arabian country Structure facilitating power distance

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Proposed Structure Maldivian Operation

Maldivian Head of Operations

Sri Lankan Expats. Manager Sales & Distribution

Sales Executives

Sales and Distribution Coordinator

Sales Staff

SL Expats.
Combination of Expats., Indian Expats And Local Talent

Warehouse & Distribution Staff

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Proposed Structure UAE Structure

CEO

Arab Nationalist Head of Operations

Sri Lankan Expat Head of Sales & Marketing

Regulations and corporate affairs

Manager HR & Admin Finance and IT

Manager Sales & Marketing

Marketing Executive 02 HR Executives IT Executive (01 Arab national, 01 Sri Lankan Expat) Sales Executive

Sales & Marketing Staff (Combination of Locals and Expats)

Sl Expats. Distributor reps Combination of Expats. And Local Talent Distributor reps

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Components of IA Policy Creativeworkz

Human Resource Planning

Repatriation Strategy

Recruitment Strategy

IA Policy
Performance Management Strategy Compensation Strategy

Change and Cultural Management

Training & Development Strategy

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Human Resource Planning

Focus on operating structure International Operation Model Required manpower based on 03 year roll out plans Identification of required level of competencies and type of employees at each level Facilitating hierarchical structure Ensuring Power Distance Cultural Dynamics

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Recruitment & Selection

Technical ability (eg: selling skills) Internal Candidate Selection and Internal Advertizing Cross-cultural suitability (eg: Language, exposure to middle east working conditions) Use of culture adaption tests Family requirements/conditions Country-cultural requirements Industry requirements Language Current Performance Ranking Previous Exposure External Recruiting

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Compensation Strategy
Objectives of International Compensation Strategy
Consistent with the overall strategy structure and business needs of the strategy, organization. Must work to attract and retain staff in the areas where the business has the greatest needs and opportunities, hence must be competitive and recognize factors such as incentive for foreign service, tax equalization and reimbursement for reasonable costs. Should facilitate the transfer of international employees in the most costeffective manner for the firm. Must give due consideration to equity and ease of administration.

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The Balance Sheet Approach

The basic objective is to keep the expatriate whole through maintenance of keep home-country living standard plus a financial inducement to make the package attractive.

HomeHome-country pay and benefits are the foundations of this approach Adjustments to home package to balance additional expenditure in host country

Financial incentives (e.g., expatriate/hardship premium) added to make the package attractive

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Major Categories Incorporated in the Balance Sheet Approach (cont.)

Goods and services Home-country outlays for items such as food, personal care, clothing, household furnishings, recreation, transportation, and medical care. Housing Major costs associated with housing in the Arab countries Income taxes Parent-country and host-country income taxes. Reserve Contributions to savings, payments for benefits, pension contributions, investments, education expenses, social security taxes, etc.
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Balance Sheet Creative Stationary

Home- and HostCountry Income Taxes Income Taxes Housing Goods and Services

Income Taxes

Housing Housing Goods and Services Goods and Services Host-Country Costs Paid by Company and from Salary

Home-Country Salary

Host-Country Costs

Home-Country Equivalent Purchasing Power

Additional Costs Paid by Company

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Other Allowances/IA Policies Creative Stationary

Benefit Housing Transportation Leave Medical & Insurance Vacation Holiday Expenses Spouse Education for Children Incentive Pay Cultural Development Duration UAE Allowance Allowance, Vehicle As per local regulations + Special leave Insurance Scheme 01 company paid up & down travel per annum Allowances Only for Snr. Executives Company Paid Sales Staff Facilitate host country cultural events 01 02 Years Maldives Need to provide Allowance As per local regulations + Special leave Insurance Scheme 01 company paid up & down travel per annum Actual Reimbursement limit Not allowed Not allowed Sales Staff Facilitate host country cultural events 01 02 Years
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Performance Management Model

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Performance Management Model

Semi-annual Reviews Customized objectives based on type of assignment (Eg: sales, Marketing, Regulatory) Same review criterions as per home country to safe guard equity Link to Pay, Incentives and Promotions Driven by HC HR lead line manager

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Training & Development Model

Individual Training Needs

Business Driven Training Needs

Pre Cultural Change Management Training Adjustment and Post Cultural

T&D Plan

Training Needs (eg: Language)

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Training and Development Methodology

Use of host country nationals in providing cultural based training Use of e-training and online training facilities to minimize cost Use of continuous mentoring and coaching system Major business training provided at home country (eg: New sales billing system, New ERP system)

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Disciplinary Management
Follow same disciplinary management process with required adjustments as per local legal regulations (if required). Provide awareness on process Process to be initiated and managed by local country HR with guidance from PC HR In the event of breach of country law local legal regulations/practices to be followed.

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Repatriation Process Steps

Preparation (Driven by PC HR) Develop plans for repatriation considering overall HRP,business objectives.

Physical Relocation (Driven by HC HR) Remove all duties, Checklist to monitor assignment completion along with PDP, Appoint re-pat buddy to smoothen transfer, facilitate re-location process of family providing special concern for children's education

Transition Stage (Driven by PC HR) Facilitate relocation, provide administrative support on other requirements and registrations (eg: renewal of diving license)

Re- Adjustment Stage (Driven by PC HR) Facilitate new role and duties, Training on new business setups, Appoint counsellors/mentors and periodic evaluations

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