Business Question

Written Assignment

Share the three main approaches that companies use to staff international operations. What are the advantages and disadvantages of each? Make sure to provide examples.

Written Work Requirements

• All graded assignments must be typewritten, as designated by the professor of record for the course.
• All referenced materials must be presented according to the Publication Manual of the American Psychological Association (APA) based upon the most current published edition. (current, 7th edition).
• All written and graded assignments are considered the property of the College of Adult and Professional Studies and should be returned to the appropriate professor of record for the related course.

15
CHAPTER FIFTEEN
MANAGING
INTERNATIONAL
OPERATIONS
Copyright © 2016 Pearson Education, Inc.
Chapter 15-1
Learning Objectives
1. Describe the elements to consider when formulating production
strategies.
2. Outline the issues to consider when acquiring physical resources.
3. Identify the key production matters that concern managers.
4. Explain the potential ways to finance business operations.
Copyright © 2016 Pearson Education, Inc.
Chapter 15-2
Toyota Races Ahead
Toyota Motor Corporation (
www.toyota-global.com)
Controls around 12 percent of the world
car market
 9th largest company in the world
 Annual sales of around $256 billion
 Spread its activities across the globe
 Toyota’s worldwide production
 Most are wholly owned factories
 Some are cooperative ventures
 Great deal of planning
Copyright © 2016 Pearson Education, Inc.
Chapter 15-3
Production Strategy
Important Strategic Issues
Planning for Production Capacity
Location of Facilities
Production Processes to Be Used
Layout of Facilities
Copyright © 2016 Pearson Education, Inc.
Chapter 15-4
Production Strategy
Capacity Planning
If the capacity being
used is greater than
the expected market
demand
Scale back production
If market demand is
growing
Expand capacity
Copyright © 2016 Pearson Education, Inc.
Chapter 15-5
Production Strategy
Facilities Location Planning
 Selecting the location for production facilities
 Business environment
 Customers’needs
 Supply issues
 Taking advantage of location economies
 Centralization-versus-decentralization decision
Copyright © 2016 Pearson Education, Inc.
Chapter 15-6
Production Strategy
Process Planning
Process Planning: Deciding the process that a company will use to
create its product
 Determinants
 Firm’s business-level strategy
 Availability and cost of labor in the local market
 Standardization versus adaptation
Copyright © 2016 Pearson Education, Inc.
Chapter 15-7
Production Strategy
Facilities Layout Planning
Facilities Layout Planning: Deciding the spatial arrangement of
production processes within production facilities
 Determinants
 Availability of space and cost
 Company’s business-level strategy
Copyright © 2016 Pearson Education, Inc.
Chapter 15-8
Quick Study 1
1. Assessing a firm’s ability to produce enough output to satisfy
demand is called what?
2. Location economies can arise from the optimal execution of
what?
3. What typically determines the process that a firm uses to create its
product?
Copyright © 2016 Pearson Education, Inc.
Chapter 15-9
Acquiring Physical Resources
 Managers must answer questions that include:
Will the company make or buy the components it needs in the
production process?
 What will be the sources of any required raw materials?
Will the company acquire facilities and production equipment or
build its own?
Copyright © 2016 Pearson Education, Inc.
Chapter 15-10
Make-or-Buy Decision
Reasons to Make
Make-or-Buy Decision:
Deciding whether to make a
component or to buy it from
another company
Vertical Integration:
Extension of company activities
into stages of production that
provide a firm’s inputs
(backward integration) or absorb
its output (forward integration)
Reasons to Make
Lower Costs
Greater Control
Copyright © 2016 Pearson Education, Inc.
Chapter 15-11
Make-or-Buy Decision
Reasons to Buy
Outsourcing: Practice of
buying from another company a
good or service that is part of a
company’s value-added
activities
Reasons to Buy
Lower Risk
Greater Flexibility
Market Power
Copyright © 2016 Pearson Education, Inc.
Chapter 15-12
Acquiring Physical Resources
Raw Materials
Quantity
Selection and
Acquisition of
Raw Materials
Quality
Copyright © 2016 Pearson Education, Inc.
Chapter 15-13
Acquiring Physical Resources
Fixed Assets
Acquiring or
Modifying
Existing Factories
Options
Greenfield
Investment
Copyright © 2016 Pearson Education, Inc.
Chapter 15-14
Quick Study 2
1. Vertical integration is the process by which a company extends its
control over what?
2. Why might a company make a product in-house rather than buy
it?
3. Why might a firm buy a product rather than make it in-house?
Copyright © 2016 Pearson Education, Inc.
Chapter 15-15
Key Production Concerns
Quality Improvement Efforts
Total Quality
Management
(TQM)
ISO 9000
• Company-wide commitment to meet or
exceed customer expectations through
continuous quality improvement efforts
and processes
• An international certification that
companies get when they meet the highest
quality standards in their industries
Copyright © 2016 Pearson Education, Inc.
Chapter 15-16
Key Production Concerns
Shipping and Inventory Costs
Shipping Costs
Storing Inventory
Just-in-Time (JIT) Manufacturing
Copyright © 2016 Pearson Education, Inc.
Chapter 15-17
Key Production Concerns
Reinvestment versus Divestment
REINVEST
DIVEST
 Promising outlook
 Unprofitable outlook
 Growing market
 Social unrest
 Highest return
Copyright © 2016 Pearson Education, Inc.
Chapter 15-18
Quick Study 3
1. Why might a company strive for quality improvement?
2. The international certification that a company gets when it meets
the highest quality standards in its industry is called what?
3. Under what conditions might a company reinvest earnings in its
operations?
Copyright © 2016 Pearson Education, Inc.
Chapter 15-19
Financing Business Operations
Sources of Financial Resources
Borrowing (Debt)
Issuing Equity (Stock
Ownership)
Internal Funding
Copyright © 2016 Pearson Education, Inc.
Chapter 15-20
Financing Business Operations
Borrowing
Borrowing Difficulties
Exchange-Rate Risk
Restrictions on Currency
Convertibility
Restrictions on International Capital
Flows
Copyright © 2016 Pearson Education, Inc.
Chapter 15-21
Financing Business Operations
Borrowing: Back-to-Back Loan
Back-to-Back Loan:
Loan in which a parent
company deposits
money with a hostcountry bank, which
then lends the money
to a subsidiary located
in the host country
Copyright © 2016 Pearson Education, Inc.
Chapter 15-22
Financing Business Operations
Issuing Equity
American
Depository
Receipt (ADR)
• Certificate that trades in the United States and
that represents a specific number of shares in a
non–U.S. company
Global
Depository
Receipts
(GDRs)
• Similar in principle to ADRs but are listed and
traded in London and Luxembourg
Venture
Capital
• Financing obtained from investors who believe
that the borrower will experience rapid growth
and who receive equity (part ownership) in
return
Copyright © 2016 Pearson Education, Inc.
Chapter 15-23
Issuing Equity
Emerging Stock Markets
Hot money
Emerging stock
markets
Commonly
experience
extreme volatility
Patient money
Poor market
regulation
Copyright © 2016 Pearson Education, Inc.
Chapter 15-24
Financing Business Operations
Internal Funding
 Internal equity, debt, and fees
 Obtain internal financing from parent companies
 Obtain financial capital by issuing equity
 Revenue from operations
Lifeblood of international companies and their subsidiaries
Must be sufficient to sustain day-to-day operations
Outside financing only to expand operations or to survive lean
periods
Copyright © 2016 Pearson Education, Inc.
Chapter 15-25
Financing Business Operations
Internal Funding
Copyright © 2016 Pearson Education, Inc.
Chapter 15-26
Financing Business Operations
Capital Structure
Capital Structure: Mix of equity, debt, and internally generated
funds used to finance a company’s activities
 Right balance to minimize risk and the cost of capital
 Principles do not vary from domestic to international companies
 The choice of capital structure is a highly complex decision
Copyright © 2016 Pearson Education, Inc.
Chapter 15-27
Quick Study 4
1. In general, through what source do companies obtain financial
resources?
2. A common way for non-U.S. companies to access U.S. capital
markets is to issue what?
3. A firm’s mix of equity, debt, and internally generated funds that it
uses to finance its activities is called what?
Copyright © 2016 Pearson Education, Inc.
Chapter 15-28
MAMOUN BENMAMOUN
ASSISTANT PROF OF INTERNATIONAL BUSINESS
BOEING INSTITUTE OF INTERNATIONAL
BUSINESS
JOHN COOK SCHOOL OF BUSINESS
SAINT LOUIS UNIVERSITY
Copyright © 2016 Pearson Education, Inc.
Copyright © 2016 Pearson Education, Inc.
Chapter 15-30
16
CHAPTER SIXTEEN
HIRING AND MANAGING
EMPLOYEES
Copyright © 2016 Pearson Education, Inc.
Chapter 16-1
Learning Objectives
1. Explain the three types of staffing policies that companies use.
2. Describe the key human resource recruitment and selection issues.
3. Summarize the main training and development programs that
firms use.
4. Explain how companies compensate managers and workers.
5. Describe the importance of labor–management relations.
Copyright © 2016 Pearson Education, Inc.
Chapter 16-2
Leaping Cultures
Intel (www.intel.com)
Annual revenue is $53 billion
75 percent of its annual revenue is
earned outside the United States
Nearly 108,000 employees
worldwide
Issues of recruitment, selection,
salary, and so on
All employees take part in cultural
training
Copyright © 2016 Pearson Education, Inc.
Chapter 16-3
International HRM
Human Resource
Management (HRM): Process
of staffing a company and
ensuring that employees are as
productive as possible
International HRM differs
considerably from HRM in a
domestic setting because of
differences in national business
environments.
Employment
of expatriates
Local practices
Training and
development
programs
Hiring laws
Recruitment
and selection
practices
Local customs
Copyright © 2016 Pearson Education, Inc.
Chapter 16-4
International Staffing Policies
Ethnocentric Staffing
 Ethnocentric Staffing: Staffing
policy in which individuals from
the home country manage
operations abroad.
 Advantages
Locally qualified people not
always available
 Tight control over subsidiaries
Ease the transfer of special
know-how
Guard a company from
industrial espionage
 Disadvantages
Relocations are expensive
Can give the business a
“foreign” image
Copyright © 2016 Pearson Education, Inc.
Chapter 16-5
International Staffing Policies
Polycentric Staffing
Polycentric Staffing: Staffing policy in which individuals from the
host country manage operations abroad.
 Advantages
 Responsibility on those knowing local business
 Avoid expensive relocations from other nations
 Disadvantages
 May resemble a collection of national entities
 Can potentially harm performance
Copyright © 2016 Pearson Education, Inc.
Chapter 16-6
International Staffing Policies
Geocentric Staffing
Geocentric Staffing: Staffing policy in which the best-qualified
individuals, regardless of nationality, manage operations abroad
 Advantages
 Managers who can adjust anywhere
 Break down nationalistic barriers
 Disadvantages
 These individuals command high salaries
Copyright © 2016 Pearson Education, Inc.
Chapter 16-7
Quick Study 1
1. A firm that staffs its operations abroad with home-country
nationals uses a staffing policy called what?
2. Polycentric staffing is when a company staffs its operations with
people from where?
3. Geocentric staffing is typically reserved for whom?
Copyright © 2016 Pearson Education, Inc.
Chapter 16-8
Recruiting and Selecting Human Resources
Human Resource Planning
Human Resource Planning: Process of forecasting a company’s
human resource needs and its supply
Phase 1
Phase 2
• Take inventory
of current
human resources
• Estimate firm’s
future human
resource needs
Copyright © 2016 Pearson Education, Inc.
Phase 3
• Develop plan to
recruit and
select people for
vacant and
anticipated new
positions
Chapter 16-9
Recruiting and Selecting Human Resources
Recruiting Human Resources
Recruitment: Process of identifying and attracting a qualified pool
of applicants for vacant positions
 Current employees
 Recent college graduates
 Local managerial talent
 Nonmanagerial workers
Copyright © 2016 Pearson Education, Inc.
Chapter 16-10
Recruiting and Selecting Human Resources
Selecting Human Resources
Selection: Process of screening and hiring the best-qualified
applicants with the greatest performance potential
 Ability to bridge cultural differences is key
 Expatriates must adapt to new ways of life
 Assess cultural sensitivity of job candidates
Copyright © 2016 Pearson Education, Inc.
Chapter 16-11
Recruiting and Selecting Human Resources
Culture Shock
Culture
Shock
• Psychological process affecting
people living abroad that is
characterized by homesickness,
irritability, confusion, aggravation,
and depression
Expatriate
Failure
• The early return by an employee from
an international assignment because
of inadequate job performance
Copyright © 2016 Pearson Education, Inc.
Chapter 16-12
Recruiting and Selecting Human Resources
Reverse Culture Shock
Reverse
Culture
Shock
• Psychological process of
readapting to one’s home
culture
Dealing
with
Reverse
Culture
Shock
• Home-culture reorientation
programs
• Career-counseling sessions
• Career-development program
Copyright © 2016 Pearson Education, Inc.
Chapter 16-13
Quick Study 2
1. The process of forecasting a company’s human resource needs
and its supply is called what?
2. When recruiting employees, from where can companies attract
qualified applicants?
3. Culture shock is a psychological process that affects people who
live where?
Copyright © 2016 Pearson Education, Inc.
Chapter 16-14
Training and Development
Methods of Cultural Training
Copyright © 2016 Pearson Education, Inc.
Chapter 16-15
Training and Development
Compiling a Cultural Profile
CultureGrams
• Published by ProQuest, this guide can be found in
the reference section of many libraries.
Country Studies
Area Handbooks
• This series explains how politics, economics,
society, and national security issues are related to
one another and are shaped by culture in more than
70 countries.
Background
Notes
• These notes contain much relevant factual
information on human rights and related issues in
various countries.
Other Sources
• Embassies, people with firsthand knowledge,
specific books, and films
Copyright © 2016 Pearson Education, Inc.
Chapter 16-16
Training and Development
Nonmanagerial Worker Training
 Basic-skills training
 Developing and newly industrialized countries
 Emerging markets
 Training and apprenticeship programs for nonmanagerial workers
 Cooperation between national governments and businesses
Copyright © 2016 Pearson Education, Inc.
Chapter 16-17
Quick Study 3
1. What constitutes the most basic level of cultural training?
2. What type of training is said to get one “into the mind” of the
local people?
Copyright © 2016 Pearson Education, Inc.
Chapter 16-18
Employee Compensation
Factors Influencing Employee Compensation
Managerial Employees
Nonmanagerial Workers
Cost-of-living effects
 Greater cross-border investment
Bonus and tax incentives
 Labor mobility in some markets
Cultural and social contributors
to cost
Copyright © 2016 Pearson Education, Inc.
Chapter 16-19
Quick Study 4
1. A manager who goes to work in an unstable country might receive
a bonus called what?
2. Some factors that contribute to the compensation of expatriate
managers include what?
Copyright © 2016 Pearson Education, Inc.
Chapter 16-20
Labor–Management Relations
Labor–Management Relations:
Positive or negative condition of
relations between a company’s
management and its workers
Intertwined nature
Rooted in local culture
Often affected by political
movements
Copyright © 2016 Pearson Education, Inc.
Chapter 16-21
Labor–Management Relations
Labor Unions
 Selection of a Location
International Labor
Movements
The strength of labor unions
Progress in improving
Cooperative atmosphere
treatment of workers and
between company
reducing child labor
management and labor
unions
Efforts of separate national
unions to increase their
cooperation are somewhat
less successful
Copyright © 2016 Pearson Education, Inc.
Chapter 16-22
Quick Study 5
1. Because labor–management relations are human relations they are
rooted in what?
2. German workers have a direct say in the strategies and policies of
their employers under a plan called what?
Copyright © 2016 Pearson Education, Inc.
Chapter 16-23
MAMOUN BENMAMOUN
ASSISTANT PROF OF INTERNATIONAL BUSINESS
BOEING INSTITUTE OF INTERNATIONAL
BUSINESS
JOHN COOK SCHOOL OF BUSINESS
SAINT LOUIS UNIVERSITY
Copyright © 2016 Pearson Education, Inc.
Copyright © 2016 Pearson Education, Inc.
Chapter 16-25