Page 49 - DMGT548_GLOBAL_HRM

Global HRM

Notes To a certain extent, how the internationalising firm copes with the HR demands of its various
foreign operations determines its ability to execute its chosen expansion strategies.

3.1 Path to Global Status

Apart from the strategic imperatives and staffing approaches, IHRM is affected by the way the
internationalisation process itself is managed. Most firms pass through several stages of
organisational development as the nature and size of their international activities grow. As they
go through these evolutionary stages, their organisational structures change, typically due to
the strain imposed by growth and geographical spread, the need for improved coordination and
control across business units and the constraints imposed by host-government regulations on
ownership and equity.

Multinationals evolving from a domestic to a truly global organisation may involve a long
process with many diverse steps. Some firms may use licensing, subcontracting, or other operation
modes, instead of establishing their own foreign production or service facilities. Others are able
to accelerate the process through acquisitions, thus leapfrogging over intermediate steps (i.e.,
move directly into foreign production through the purchase of a foreign rather than initial
exporting), followed by sales subsidiary.
Some firms can be driven by external factors such as host-government action (e.g., forced into a
joint venture) or an offer to buy a company. Others are formed expressly with the international
market in mind. The number of steps or stages, along the path to multinational status varies
from firm to firm.

Figure 3.1: Stages of Internationalisation

Network of
Subsidiaries
Foreign
Production
Sales
Subsidiary

Exporting

Licensing Subcontracting

Source: Dowling et al. (2001) International Resource Management (p. 34)
3.1.1 Export

Exporting is initial stage for the firms entering international operations. It rarely involves much
organisational response until the level of export sales reaches a critical point. Exporting may be
difficult for service companies (such as legal firms) so that they may be forced to make an early
step into foreign direct investment operations (via a branch office, or joint venture).
Exporting often tends to be handled by an intermediary (e.g., an export agent or foreign distributor
– usually an HCN, as local market knowledge is critical). As exports sales increase, an export

44 LOVELY PROFESSIONAL UNIVERSITY