Page 52 - DMGT548_GLOBAL_HRM

Unit 3: Global Status and Control Mechanism in MNCs

Notes
Figure 3.4: International Division

Managing

Production Marketing Finance Human Resource

Domestic Domestic
International
Division Division
(Paint) (Tools) Division

Subsidiary Italy Subsidiary Japan Subsidiary Australia

Production Marketing Finance Human Resource

Source: Dowling et al. (2001) International Resource Management (p. 38)
The role of corporate HR staff is primarily concerned with expatriate management though there
will be some monitoring of the subsidiary HR function-formally through the head of the
International Division. Expatriate managers perform a major role: identifying employees who
can direct the daily operations of the foreign subsidiaries, supervising transfer of managerial
and technical know-how, communicating corporate policies, and keeping corporate HQ informed.
As the firm expands its foreign production or service facilities into other countries, increasing
the size of its foreign workforce, accompanied by a growth in the number of expatriates, more
formal HR policies become necessary.
3.1.4 Global Product

As the firm moves from the early foreign production stage into a phase of growth through
production or service, standardisation, and diversification, the strain of sheer size creates problem
and the international division becomes overstretched making effective communication and
efficiency of operation difficult. So, corporate top managers become concerned that the
international division for its autonomy and independence from the domestic operations to the
extent that it operates as a separate unit.

Conflicts between the parent company (headquarters) and its subsidiaries arises due to the need
for national responsiveness at the subsidiary unit and global integration imperatives at the
parent headquarters. The demand for national responsiveness at the subsidiary unit develops
because of factors such as differences in market structures, distribution channels, customer
needs, local culture, and pressure from the host government. The need for more centralised
global integration by the headquarters comes from having multinational customers, global
competitors, and the increasingly rapid flow of information and technology and from the quest
for large volume for economies of scale. As a result of these various forces for change, the
multinational confronts two major issues of structure:
1. The extent to which key decisions are to be made at parent headquarter or at the subsidiary
units (centralisation vs. decentralisation), and

2. The type of control exerted by the parent over the subsidiary unit (bureaucratic control vs.
normative).

LOVELY PROFESSIONAL UNIVERSITY 47