Global Staffing and Strategic Alliances
Stages of Staffing in Multinational Enterprises (MNEs)
Phase I: Domestic
Focuses on the home market and export.
Phase II: International
Focuses on local responsiveness and transfer of learning.
Phase III: Multinational
Focuses on global strategy, low cost, and price competition.
Phase IV: Global
Focuses on both local responsiveness and global integration.
Reasons for Assigning Expatriates
The main reasons firms hire expatriates include entering new markets, meeting new demands from customers and investors, getting businesses off the ground, importing managerial talent and experience, and training recent hires.
Challenges: Expatriates often face difficulties adjusting to life in their new country, leading to a high rate of failure.
Expatriate Compensation Packages
Goals: Attract and retain qualified employees, facilitate transfer between headquarters and affiliates, create consistency and equity in compensation, and maintain competitiveness.
Elements: Salary, housing, services allowances and premiums, and tax equalization.
Approaches to Adjusting Compensation
- Home Country-Based: Advantages and disadvantages.
- Host-Based: Advantages and disadvantages.
- Hybrid: Advantages and disadvantages.
Working in Wholly Owned Subsidiaries (WOS) vs. International Joint Ventures (IJVs)
Both WOS and IJVs involve staffing friction, with an advantage for expatriates in senior positions.
IJV Challenges: Blocked promotions, split loyalty, blocked communication, screening of information, and unfamiliarity.
Global Strategic Alliances (GSAs)
Reasons for Choosing GSAs
- Global expansion
- Improved competitive advantages
- Synergy through complementary resources and capabilities
Risks of GSAs
- Cross-cultural differences
- Diverging strategic expectations
- Incongruent organizational structures
Types of GSAs
Equity Joint Ventures (EJVs)
Legally and economically separate entities created by two or more parent organizations with collective investment.
Non-Equity Joint Ventures (Non-EJVs)
Contractual agreements with assigned profits and responsibilities.
Partner Selection for International Joint Ventures
Criteria
- Compatibility of goals
- Complementarity of resources
- Cooperative culture
- Commitment
- Capability
Negotiation Issues
- Joint venture name and legal nature
- Scope and scale of operations
- Investment amount and currency
- Equity distribution policies
- Forms of contribution
- Responsibilities of each partner
- Technology or knowledge transfer
- Marketing issues
- Board of directors composition
- Management responsibilities
- Labor management
- Accounting, finance, and tax issues
- Duration and asset disposal
- Contract amendments and alterations
- Liabilities and dispute settlement
Ownership Level in Equity Joint Ventures
The 50/50 split is common but requires consensus-based decisions, potentially leading to deadlocks.
Importance of equity ownership varies depending on strategic goals, control requirements, resource dependence, experience, and bargaining power.
Nurturing Inter-Partner Cooperation
Successful cooperation requires organizational commitments, including personal attachment and conflict resolution.
Personal Attachment
Refers to personal relations between senior GSA managers during exchange activities.
Conflict Resolution
Conflict is inevitable due to diverse capabilities, cultures, and interests. Establishing conflict resolution mechanisms from the outset is crucial.
Termination of GSAs
- Acquisition: One partner acquires the other’s stake.
- Dissolution: Both partners withdraw from the alliance.
- Redefinition: Partners restructure their original agreement.