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Unit 3: Global Status and Control Mechanism in MNCs

manager may be appointed to control foreign sales and actively seek new markets. This person Notes
is commonly from the domestic operations. Further growth in exporting may lead to the
establishment of an export department at the same level as the domestic sales department as the
firm becomes more committed to or more dependent on, its foreign export sales.

Figure 3.2: Export Department

Managing Director

Production Finance Marketing/ HR
Manager Manager Sales Manager
Manager

Domestic Export ?
Sales Sales

Source: P L Rao, International Human Resource Management: Test and Cases, First edition, Excel Books,
2008, New Delhi.
At this stage, exporting is controlled from the domestic-based home office through a designated
export manager. The role of the HR department is unclear. Though there are HR activities
involved (such as the selection of export staff), and perhaps training of the foreign agency staff,
these activities are handled by the marketing department or exporting staff, the HR department
has little involvement with the development of policies and procedures surrounding the HR
aspects of the firm’s early international activities.

3.1.2 Initial Division Structure (Early Stages of Internationalisation)

As the firm develops expertise in foreign markets, agents and distributors are replaced by direct
sales with the establishment of branch offices in the foreign market countries and the company
creates an export division or function at the corporate home office and the export division head
directly reports to the CEO.
As international sales increase further, local governments exert pressure on these growing
markets for setting up on-site manufacturing facilities which prompts the company to set up a
subsidiary and a branch office in the concerned foreign countries. Each subsidiary is
responsible for operations within its own geographic area, and the subsidiary manager
reports directly to the export division head at the corporate office. PCNs are usually posted to
important positions because the firm has more confidence in them to implement proven home
office human resource policies and practices. This is known as the ethnocentric approach. The
decision to use PCNs leads into exportation of management issues and activities. At this point
the HR department becomes actively involved in the personnel aspects of the firm’s international
operations.

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