Page 51 - DMGT548_GLOBAL_HRM

Global HRM

Notes
Figure 3.3: Use of Subsidies during Early Internationalisation

Chief Executive Officer
Home office
departments
Production Marketing Finance Personnel

V.P. International operations
Overseas
subsidiaries

France Japan Egypt Australia Argentina

Source: International HRM (2006) S.C. Gupta (p. 136)
3.1.3 International Division

This step may be considered small if the firm already is assembling the product abroad to take
advantage of cheap labour or to save shipping costs or tariffs or is thinking to establish a sales
subsidiary to foreign production. For other firms, the transition to foreign investment is a large
and sometimes prohibitive step.

Example: An Australian firm that was successfully exporting mining equipment to Canada
began to experience problems with after-sales servicing and delivery schedules. The
establishment of its own production facility was considered a great step, so the firm entered into
a licensing agreement with a Canadian manufacturer.

Having made the decision to produce overseas, the firm may establish its own foreign production
facilities, or enter into a joint venture with a local firm, or buy a local firm. Regardless of the
method of establishment, foreign production/service operations tend to trigger the creation of
a separate international division in which all international activities are grouped.
With the spread of international activities, the firm establishes miniature replicas of the domestic
organisations in foreign subsidiaries. The subsidiary managers report to the head of the
international division, and there may be some informal reporting directly to the various
functional heads.

Example: There may be contact regarding staffing issues between the HR managers in
the two subsidiaries and the HR manager at corporate headquarters.
Many firms at this stage of internationalisation are concerned about maintaining control of the
newly established subsidiary and will place PCNs in all key position in the subsidiary. While
others decide that local employment conditions require local handling and place an HCN in
charge of the subsidiary HR function, thus making an exception to the overall ethnocentric
approach.

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